SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: March 31, 1996
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Commission File No. 1-7533
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FEDERAL REALTY INVESTMENT TRUST
-------------------------------
(Exact name of registrant as specified in its charter)
District of Columbia 52-0782497
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4800 Hampden Lane, Suite 500, Bethesda, Maryland 20814
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(301) 652-3360
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at May 6, 1996
- ------------------------------------ --------------------------
Common Shares of Beneficial Interest 32,233,678
This report contains 17 pages.
FEDERAL REALTY INVESTMENT TRUST
S.E.C. FORM 10-Q
March 31, 1996
I N D E X
PART I. FINANCIAL INFORMATION PAGE NO.
Accountants' Report 4
Consolidated Balance Sheets 5
March 31, 1996 (unaudited) and
December 31, 1995 (audited)
Consolidated Statements of Operations (unaudited) 6
Three months ended March 31, 1996 and 1995
Consolidated Statements 7
of Shareholders' Equity (unaudited)
Three months ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows (unaudited) 8
Three months ended March 31, 1996 and 1995
Notes to Financial Statements 9-11
Management's Discussion and Analysis of 12-16
Financial Condition and Results of Operations
PART II. OTHER INFORMATION 17
2
FEDERAL REALTY INVESTMENT TRUST
S.E.C. FORM 10-Q
March 31, 1996
PART I. FINANCIAL INFORMATION
The following financial information is submitted in response to
the requirements of Form 10-Q and does not purport to be financial
statements prepared in accordance with generally accepted accounting
principles since they do not include all disclosures which might be
associated with such statements. In the opinion of management, such
information includes all adjustments, consisting only of normal
recurring accruals, necessary to a fair statement of the results for
the interim periods presented.
The balance sheet as of December 31, 1995 was audited by Grant
Thornton LLP, independent public accountants, who expressed an
unqualified opinion on it in their report dated February 9, 1996. All
other financial information presented is unaudited but has been
reviewed as of March 31, 1996 and for each of the three months ended
March 31, 1996 and 1995 by Grant Thornton LLP whose report thereon
appears on Page 4. All adjustments and disclosures proposed by them
have been reflected in the data presented.
3
Accountants' Review Report
- --------------------------
Trustees and Shareholders
Federal Realty Investment Trust
We have reviewed the accompanying consolidated balance sheet of Federal Realty
Investment Trust as of March 31, 1996 and the related consolidated statements of
operations, shareholders' equity and cash flows for the three month periods
ended March 31, 1996 and 1995. These financial statements are the
responsibility of the Trust's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1995 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year then ended (not presented herein); and in our report dated
February 9, 1996, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1995 is
stated fairly, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Grant Thornton LLP
Washington, D.C.
May 7, 1996
4
Federal Realty Investment Trust
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
------------ ------------
(in thousands)
ASSETS
Investments
Real estate, at cost $1,024,712 $1,009,682
Less accumulated depreciation and
amortization (198,910) (190,795)
---------- ----------
825,802 818,887
Mortgage notes receivable 14,077 13,561
---------- ----------
839,879 832,448
Other Assets
Cash 8,252 10,521
Investments 485 261
Notes receivable - officers 1,195 1,011
Accounts receivable 15,813 15,091
Prepaid expenses and other assets,
principally property taxes and lease
commissions 23,133 22,987
Debt issue costs (net of accumulated
amortization of $4,023,000 and
$3,918,000, respectively) 3,671 3,835
---------- ----------
$ 892,428 $ 886,154
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Obligations under capital leases $ 131,537 $ 131,829
Mortgages payable 90,171 90,488
Notes payable 66,347 49,980
Accrued expenses 17,905 19,048
Accounts payable 5,660 8,571
Dividends payable 13,213 13,191
Security deposits 3,110 3,083
Prepaid rents 1,108 787
Senior notes 165,000 165,000
5 1/4% Convertible subordinated debentures 75,289 75,289
Investors' interest in consolidated assets 1,262 1,420
Commitments and contingencies - -
Shareholders' equity
Common shares of beneficial interest, no
par or stated value, unlimited
authorization, issued 32,288,818 and
32,221,670 shares, respectively 510,313 508,870
Accumulated dividends in excess of Trust
net income (180,022) (172,835)
Allowance for unrealized loss on
marketable securities - -
---------- ----------
330,291 336,035
Less 62,386 and 61,328 common shares in
treasury-at cost, respectively, deferred
compensation and subscriptions receivable (8,465) (8,567)
---------- ----------
321,826 327,468
---------- ----------
$ 892,428 $ 886,154
========== ==========
The accompanying notes are an integral part of these statements.
5
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF OPERATIONS
(see accountants' review report)
(unaudited)
Three months ended March 31,
1996 1995
----------- -----------
(In thousands, except per share data)
Revenue
Rental income $40,747 $34,407
Interest 863 1,006
Other income 2,162 1,514
------- -------
43,772 36,927
Expenses
Rental 11,793 7,955
Real estate taxes 3,924 3,397
Interest 11,149 9,157
Administrative 1,686 1,427
Depreciation and amortization 9,332 8,369
------- -------
37,884 30,305
------- -------
Operating income before investors'
share of operations 5,888 6,622
Investors' share of operations 138 1
------- -------
Net Income $ 6,026 $ 6,623
======= =======
Weighted Average Number of Common Shares 32,265 31,658
======= =======
Earnings per share $0.19 $0.21
======= =======
The accompanying notes are an integral part of these statements.
6
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(see accountants' review report)
(unaudited)
Three months ended March 31,
1996 1995
(In thousands, except per share amounts) Shares Amount Shares Amount
---------- ---------- ---------- ----------
Common Shares of Beneficial Interest
Balance, beginning of period 32,221,670 $ 508,870 31,669,434 $ 496,958
Exercise of stock options 20,667 410 7,744 122
Shares issued under dividend reinvestment plan 46,481 1,033 50,002 1,036
---------- --------- ---------- ---------
Balance, end of period 32,288,818 $ 510,313 31,727,180 $ 498,116
========== ========= ========== =========
Common Shares of Beneficial Interest
in Treasury, Deferred Compensation and
Subscriptions Receivable
Balance, beginning of period (500,095) $ (8,567) (539,188) $ (9,130)
Amortization of deferred compensation 30,250 482 32,875 547
Purchase of shares under share purchase plan 1,250 19
Purchase of treasury shares (1,058) (24)
Increase in stock option loans (19,000) (375) (244) (5)
---------- --------- ---------- ---------
Balance, end of period (488,653) $ (8,465) (506,557) $ (8,588)
========== ========= ========== =========
Allowance for Unrealized Loss on Marketable Securities
Balance, beginning of period $ 0 $ (53)
Unrealized (loss) recovery 0 47
--------- ---------
Balance, end of period $ 0 $ (6)
========= =========
Accumulated Dividends in Excess of Trust Net Income
Balance, beginning of period $(172,835) $(144,553)
Net income 6,026 6,623
Dividends declared to shareholders (13,213) (12,508)
--------- ---------
Balance, end of period $(180,022) $(150,438)
========= =========
The accompanying notes are an integral part of these statements.
7
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF CASH FLOWS
(see accountants' review report)
(unaudited)
Three months ended March 31,
(In thousands) 1996 1995
----------- ----------
OPERATING ACTIVITIES
Net income $ 6,026 $ 6,623
Adjustments to reconcile net income
to net cash provided by operations
Depreciation and amortization 9,332 8,368
Rent abatements in lieu of leasehold
improvements, net of tenant
improvements retired (147) (454)
Imputed interest and amortization of
debt cost 187 171
Amortization of deferred compensation
and forgiveness of officers' notes 124 133
Changes in assets and liabilities
(Increase) decrease in accounts
receivable (722) 1,730
Increase in prepaid expenses and
other assets before depreciation and
amortization (1,004) (1,828)
Decrease in operating accounts
payable, security deposits and
prepaid rent (686) (1,252)
(Decrease) increase in accrued expenses (766) (2,616)
-------- --------
Net cash provided by operating activities 12,344 16,107
INVESTING ACTIVITIES
Acquisition of real estate (6,799) (2,025)
Capital expenditures (10,337) (8,627)
Net increase in notes receivable (704) (218)
Net (increase) decrease in temporary investments (224) 69
-------- --------
Net cash used in investing activities (18,064) (10,801)
FINANCING ACTIVITIES
Regular payments on mortgages, capital
leases, and notes payable (718) (540)
Balloon payments on mortgages and notes payable - (23,601)
Borrowing (repayments) of short-term debt, net 16,455 (54,745)
Proceeds from senior notes - 98,906
Dividends paid (12,546) (11,804)
Issuance of shares of beneficial interest 418 471
Decrease in minority interest (158) (29)
-------- --------
Net cash provided by financing activities 3,451 8,658
-------- --------
Increase (decrease) in cash (2,269) 13,964
Cash at beginning of period 10,521 3,995
-------- --------
Cash at end of period $ 8,252 $ 17,959
======== ========
The accompanying notes are an integral part of these statements.
8
Federal Realty Investment Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(see accountants' review report)
(unaudited)
NOTE A - ACCOUNTING POLICIES AND OTHER DATA
Reference should be made to the notes to financial statements included in
the Annual Report to shareholders for the year ended December 31, 1995 which
contain the Trust's accounting policies and other data.
NOTE B - DIVIDENDS PAYABLE
On February 16, 1996 the Trustees declared a cash dividend of $.41 per
share, payable April 15, 1996 to shareholders of record March 25, 1996.
NOTE C - REAL ESTATE
On February 28, 1996 the Trust purchased, for cash, two retail buildings
totalling 28,446 square feet in Winter Park, Florida for a cost of $6.8 million.
NOTE D - NOTES PAYABLE
The Trust has $130 million of unsecured medium term revolving credit
facilities with four banks. The facilities, which bear interest at LIBOR plus
75 to 100 basis points, require fees and have covenants requiring a minimum
shareholders' equity and a maximum ratio of debt to net worth. At March 31,
1996 there was $56.6 million borrowed under these credit facilities which was
the maximum drawn during the first quarter of 1996. The weighted average
interest rate on borrowings for the quarter ended March 31, 1996 was 6.8%.
NOTE E - SHAREHOLDERS' EQUITY
During the first three months of 1996, 20,667 shares were issued at prices
ranging from $18.00 a share to $20.875 a share as the result of the exercise of
stock options. The Trust accepted notes of $375,000 from certain of its
officers in connection with the issuance of 19,000 of these shares.
On February 16, 1996, 58,681 options at $21.125 per share were granted to
employees of the Trust. An option for 20,000 shares at $21 per share was granted
to an employee upon commencement of his employment.
9
On May 2, 1996 each of the trustees, other than the president, was awarded
2,500 options at $21.625 per share.
NOTE F - INTEREST EXPENSE
The Trust incurred interest expense totaling $11.4 million during the first
quarter of 1996 and $9.2 million during the first quarter of 1995, of which
$302,000 and $75,000, respectively, were capitalized. Interest paid was $11.5
million in the first quarter of 1996 and $6.7 million in the first quarter of
1995.
NOTE G - COMMITMENTS AND CONTINGENCIES
As previously reported, certain of the Trust's shopping centers have
some environmental contamination. The North Carolina Department of the
Environment, Health and Natural Resources ("DEHNR") issued a Notice of Violation
("NOV") against a former drycleaner tenant at Eastgate Shopping Center in Chapel
Hill, North Carolina concerning a spill at the shopping center. As owner of
the shopping center, the Trust was named in and received a copy of the NOV.
Estimates to remediate the spill range from $300,000 to $500,000. The Trust has
entered into an agreement with two previous owners of the shopping center to
share the costs to assess and remediate. In 1993 the Trust recorded a liability
of $120,000 as its estimated share of the clean up costs.
In 1992 contaminants at levels in excess of New Jersey cleanup standards
were identified at a shopping center in New Jersey. The Trust has retained an
environmental consultant to investigate the contamination. The Trust is also
evaluating whether it has insurance coverage for this matter. At this time, the
Trust has not determined what the range of remediation costs might be, but does
not believe that the costs will have a material effect upon the Trust's
financial condition. The Trust has also identified chlorinated solvent
contamination at another property. The contamination appears to be linked to the
current and/or previous dry cleaner. The Trust intends to look to the
responsible parties for any remediation effort. Evaluation of this situation is
preliminary and it is impossible, at this time, to estimate the range of
remediation costs, if any.
The Trust reserved approximately $2 million at closing in 1993 for
environmental issues associated with Gaithersburg Square Shopping Center.
Pursuant to an indemnity agreement entered into with the seller at closing, the
Trust agreed to take certain actions with respect to identified chlorinated
solvent contamination. The seller indemnified the Trust for certain third party
claims and government requirements related to contamination at adjacent
properties.
10
In connection with the purchase of Bristol Shopping Center in 1995, the
Trust agreed to perform all remedial measures necessary to obtain a final letter
of compliance from the Connecticut Commissioner of Environmental Protection with
respect to certain identified soil and ground water contamination associated
with a former dry cleaning operation. The seller established an escrow account
at closing of $187,500 to cover such remedial measures and has indemnified the
Trust in connection with the identified contamination.
Pursuant to the provisions of the respective partnership agreements, in the
event of the exercise of put options by the other partners, the Trust would be
required to purchase the 99% limited partnership interest at Loehmann's Plaza at
its then fair market value and a 22.5% interest at Congressional Plaza at its
then fair market value.
At March 31, 1996 in connection with certain redevelopment projects and
tenant improvements, the Trust is contractually obligated on contracts of
approximately $7.2 million. At March 31, 1996 the Trust is also obligated under
leases with tenants to provide up to an additional $6.5 million for
improvements.
NOTE H - COMPONENTS OF RENTAL INCOME
The components of rental income for the three months ended March 31 are as
follows:
1996 1995
(in thousands)
Retail properties
Minimum rents $31,334 $26,540
Cost reimbursements 7,471 5,650
Percentage rents 1,334 1,604
Apartments 608 613
------- -------
$40,747 $34,407
======= =======
NOTE I - SUBSEQUENT EVENTS
On April 22, 1996 the Trust made a convertible participating loan to a
partnership of $9.2 million, secured by retail properties in Manayunk,
Pennsylvania. The loan bears interest at 10% plus additional interest based
upon the gross income of the secured properties. In addition, upon sale of the
properties, the Trust will share in the appreciation of the properties. From
and after April 2006, which date may be extended to April 2008, the Trust has
the option to convert the loan into a partnership interest.
On May 6, 1996 the Trust purchased its third property in Greenwich,
Connecticut for a purchase price of $3.2 million in cash.
11
FEDERAL REALTY INVESTMENT TRUST
FORM 10-Q
MARCH 31, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Federal Realty meets its liquidity requirements through net cash provided
by operating activities, long term borrowing through debt offerings and
mortgages, medium and short term borrowing under revolving credit facilities,
and equity offerings. Because all or a significant portion of the Trust's net
cash provided by operating activities is distributed to shareholders, capital
outlays for property acquisitions, renovation projects and debt repayments
require funding from borrowing or equity offerings.
Net cash provided by operating activities decreased from $16.1 million in
the first quarter of 1995 to $12.3 million in the first quarter of 1996. The
decrease resulted primarily from a $4.4 million increase in cash used for
operating assets and liabilities. During the first quarter of 1995 cash was
provided by a $1.7 million decrease in accounts receivable and a $2.6 million
increase in accrued liabilities, primarily interest, compared to cash used in
1996 by an increase in accounts receivable of $722,000 and a $766,000 decrease
in accrued expenses. Dividends paid in cash were $12.5 million in 1996 and $11.8
million in 1995.
In February 1996 the Trust purchased two retail properties in Winter Park,
Florida for $6.8 million in cash. During the first quarter of 1996 another
$10.3 million was spent on tenant work and improvements to Trust properties;
these improvements included: (1) $900,000 on the redevelopment of Brick Plaza
which was begun in 1995; (2) $1.6 million to buy out below market leases; (3)
$1.0 million to begin the construction of an additional 30,000 square feet at
Congressional Plaza; and (4) $550,000 to begin the redevelopment and expansion
of a portion of Bethesda Row.
The Trust has available $130.0 million of unsecured medium-term revolving
credit facilities with four banks. The facilities, which require fees and have
covenants requiring a minimum shareholders' equity and a maximum ratio of debt
to net worth, are used to fund acquisitions and other cash requirements until
conditions are favorable for issuing equity or long term debt. At March 31,
1996 the Trust had borrowed $56.6 million under these facilities, the maximum
amount borrowed under these facilities during the first quarter of 1996.
Amounts advanced under these facilities bear interest at LIBOR plus 75 - 100
basis
12
points; the weighted average interest rate on borrowings during the quarter was
6.8%.
On April 22, 1996, the Trust made a loan to a partnership of $9.2 million,
secured by retail properties in Manayunk, Pennsylvania. The loan, which bears
interest at 10%, also has an additional interest component based on gross
income of the secured properties, a share in future appreciation of the retail
properties, and an option to convert the mortgage to an ownership interest in
the properties. The loan was funded by borrowings on the revolving credit
facilities.
The Trust is contractually obligated on contracts of approximately $7.2
million for redevelopment and tenant improvements and is committed under leases
for up to an additional $6.5 million in tenant work. In addition to these
committed amounts, the Trust has budgeted an additional $27 million for the
remainder of 1996 for improvements to its properties. These committed and
budgeted improvements include a 30,000 square foot expansion at Congressional
Plaza, a renovation and expansion of a portion of Bethesda Row and a retenanting
and renovation of a portion of Troy Shopping Center. These expenditures will be
funded with the revolving credit facilities pending their long term financing
with either equity or debt.
The Trust continues to seek to acquire existing retail properties, both
shopping center and main street retail buildings. In addition, the Trust is
searching for sites in its core markets to permit the Trust to build new
shopping centers.
The Trust will need additional capital in order to fund these acquisitions,
expansions and refinancings. Sources of this funding may be proceeds from the
sale of existing properties, additional debt and additional equity. The timing
and choice between additional debt or equity financing will depend upon many
factors, including the market price for the Trust's shares, interest rates and
the ratio of debt to net worth. The Trust believes that it will be able to
raise this capital as needed, based on its past success in so doing.
CONTINGENCIES
As previously reported, certain of the Trust's shopping centers have some
environmental contamination. The North Carolina Department of the Environment,
Health and Natural Resources ("DEHNR") issued a Notice of Violation ("NOV")
against a former drycleaner tenant at Eastgate Shopping Center in Chapel Hill,
North Carolina concerning a spill at the shopping center. As owner of the
shopping center, the Trust was named in and received a copy of the NOV.
Estimates to remediate the spill range from $300,000 to $500,000. The Trust has
entered into an agreement with two previous owners of the shopping center to
13
share the costs to assess and remediate. In 1993 the Trust recorded a liability
of $120,000 as its estimated share of the clean up costs.
In 1992 contaminants at levels in excess of New Jersey cleanup standards
were identified at a shopping center in New Jersey. The Trust has retained an
environmental consultant to investigate the contamination. The Trust is also
evaluating whether it has insurance coverage for this matter. At this time, the
Trust has not determined what the range of remediation costs might be, but does
not believe that the costs will have a material effect upon the Trust's
financial condition. The Trust has also identified chlorinated solvent
contamination at another property. The contamination appears to be linked to the
current and/or previous dry cleaner. The Trust intends to look to the
responsible parties for any remediation effort. Evaluation of this situation is
preliminary and it is impossible, at this time, to estimate the range of
remediation costs, if any.
The Trust reserved approximately $2 million at closing in 1993 for
environmental issues associated with Gaithersburg Square Shopping Center.
Pursuant to an indemnity agreement entered into with the seller at closing, the
Trust agreed to take certain actions with respect to identified chlorinated
solvent contamination. The seller indemnified the Trust of certain third party
claims and government requirements related to contamination at adjacent
properties.
In connection with the purchase of Bristol Shopping Center in 1995, the
Trust agreed to perform all remedial measures necessary to obtain a final letter
of compliance from the Connecticut Commissioner of Environmental Protection with
respect to certain identified soil and ground water contamination associated
with a former dry cleaning operation. The seller established an escrow account
at closing of $187,500 to cover such remedial measures and has indemnified the
Trust in connection with the identified contamination.
Pursuant to the provisions of the respective partnership agreements, in the
event of the exercise of put options by the other partners, the Trust would be
required to purchase the 99% limited partnership interest at Loehmann's Plaza at
its then fair market value and a 22.5% interest at Congressional Plaza at its
then fair market value.
Recently the unfavorable trends in the retail environment have led to a
number of retail bankruptcies. A further weakening of the retail environment
and additional bankruptcies could adversely impact the Trust, by increasing
vacancies and decreasing rents. In past difficult retail and real estate
environments, the Trust has been able to replace weak and bankrupt tenants with
stronger tenants; management believes that
14
the quality of the Trust's properties will continue to generate demand for its
retail space.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1996 AND 1995
The Trust has historically reported its funds from operations in addition
to its net income. Funds from operations is a supplemental measure of real
estate companies' operating performance which excludes historical cost
depreciation, since real estate values have historically risen and fallen with
market conditions rather than over time. Funds from operations is defined by
The National Association of Real Estate Investment Trusts ("NAREIT") in a white
paper issued during 1995, as follows: income before depreciation and
amortization of real estate assets and before extraordinary items and
significant non-recurring events less gains on sale of real estate. The Trust
complies with this definition. Funds from operations does not replace net income
as a measure of performance or net cash provided by operating activities as a
measure of liquidity. Rather, funds from operations has been adopted by real
estate investment trusts to provide a consistent supplemental measure of
operating performance in the industry.
The reconciliation of net income to funds from operations for the three
months ended March 31 is as follows:
1996 1995
(in thousands)
Net income $ 6,026 $ 6,623
Plus: depreciation and amortization
of real estate assets 8,342 7,404
amortization of initial direct
costs of leases 593 597
------- -------
Funds from operations $14,961 $14,624
======= =======
Funds from operations increased 2% to $14.9 million in the first quarter of
1996 from $14.6 million in the first quarter of 1995.
Rental income, which consists of minimum rent, percentage rent and cost
recoveries, increased 18% from $34.4 million in the first quarter of 1995 to
$40.7 million in the first quarter of 1996. If properties purchased and sold in
1995 and 1996 are excluded, rental income increased 7%.
Minimum rent increased 18% from $27.2 million in the first quarter of 1995
to $31.9 million in the first quarter of 1996. Excluding properties purchased
and sold in 1995 and 1996, minimum rent increased 5%. Forty-one percent of the
increase results
15
from rent increases at Brick Plaza, Gaithersburg Square and Congressional Plaza,
all of which have recently been renovated and retenanted.
Cost reimbursements consist of tenant reimbursements of real estate taxes
(real estate tax recovery) and common area maintenance expenses (CAM recovery).
Cost reimbursements increased 32% from $5.7 million during the first quarter of
1995 to $7.5 million during the first quarter of 1996. The increase was due to
the recent acquisitions, the partial recovery of increased CAM expenses,
primarily snow removal, and an acceleration of billing CAM capital items from
once at year end to monthly.
Other property income includes items which tend to fluctuate from period to
period, such as utility reimbursements, telephone income, merchant association
dues, lease termination fees, late fees and temporary tenant income. Other
property income increased from $1.5 million during the first quarter of 1995 to
$2.2 million during the first quarter of 1996.
Rental expenses have increased 48% in the first quarter of 1996 over the
first quarter of 1995, to $11.8 million from $8.0 million. If centers acquired
and sold during 1995 and 1996 are excluded, rental expenses increased 33%, due
to increased snow removal costs incurred during this winter's heavy snowfalls.
Real estate taxes have increased from $3.4 million during the first quarter
of 1995 to $3.9 million during the first quarter of 1996; $382,000 of the
increase was due to taxes on the 1995 and 1996 acquisitions. Depreciation and
amortization in the first quarter of 1996 was 13% greater than in the first
quarter of 1995. Excluding the effect from the 1995 and 1996 acquisitions,
depreciation and amortization increased 6% due to depreciation on recent tenant
work and property improvements.
Interest expense increased from $9.2 million during the first quarter of
1995 to $11.1 million during the first quarter of 1996, primarily due to
interest expense on the $165 million of senior notes issued during 1995. The
ratio of earnings to fixed charges was 1.47x for the first quarter of 1996 and
1.69x for the comparable period in 1995. The ratio of funds from operations to
fixed charges was 2.25x for the first quarter of 1996 and 2.53x for the first
quarter of 1995.
Administrative expenses as a percentage of total revenue have remained
constant at approximately 3.8%.
As a result of the foregoing items, net income decreased from $6.6 million
during the first quarter of 1995 to $6.0 million during the first quarter of
1996.
16
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
(27) Financial Data Schedule.......................Edgar filing only
(B) Reports on Form 8-K
A Form 8-K, dated March 21, 1996, was filed in response to Item 7.(c)
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FEDERAL REALTY INVESTMENT TRUST
-------------------------------
(Registrant)
Date: May 14, 1996 /s/ Steven J. Guttman
------------ ------------------------------
Steven J. Guttman, President
(Chief Executive Officer)
Date: May 14, 1996 /s/ Cecily A. Ward
------------ -------------------------------
Cecily A. Ward
(Principal Accounting Officer)
17