FEDERAL
REALTY
2015
ANNUAL
REPORT
DEAR
SHAREHOLDERS,
A few months back, I was struggling
to find a way to articulate our business
strategy and talk about the many
initiatives and projects that we had
underway in 2015. As a company,
we’ve been around for more than
50 years and are keenly aware that
commercial real estate is prone to
the same ups and downs and other
cyclicality as the overall U.S. economy.
When market conditions are not kind to the acquisition
market, development often looks better; when leasing is
weak in one area of the country, it’s often strong in another—
and so on. It’s why we’ve always worked hard to balance
our business plan in every possible respect so as to get
through the inevitable cycles with less volatility than we would
otherwise be subject to. But how to articulate that? And then
it hit me: baseball!
I’ve loved the game since I was a kid and always marveled
at how a few guys could do it all. They had the core athletic
skills to hit for both power and batting average. They had
great defensive fielding ability and arm strength. And of
course they had elite speed. Baseball scouts and others in
the game refer to a player who has exceptional abilities in
all five of those core skill areas as a “five-tool player.” In the
history of baseball, there are only a handful of players who
FEDERAL REALTY | ANNUAL REPORT 2015 And fifth and finally, the refinement of our balance sheet
over many years (to ensure low leverage through regular,
right-sized equity issuances, unsecured borrowings and
well-laddered maturities lead to the maximum flexibility)
afforded the strongest balance sheet in our sector—and
one of only three (out of 198) public REITs with an “A” credit
rating by both Moody’s and Standard & Poor’s.
We stumble a bit now and then (as did Willie and Griffey),
but our constant striving to be the strongest five-tool player
keeps us all very focused on our craft. In 2015, the net
result of that concentration was an increase to the declared
dividends per share to our shareholders for the 48th
consecutive year in a row (no other REIT can say that),
a 7.7% increase in funds from operations (FFO) per share
(excluding debt prepayment costs), and hundreds of millions
of dollars of capital investment in real estate that should
continue to stoke the fire of earnings and value creation for
many years to come.
The consistency, stability and balance of our business plan
is a relentless pursuit for our team, which is made up of the
most dedicated and talented real estate professionals in the
industry, governed by a Board of Trustees solidly focused on
shareholders’ interests.
We’re truly a family of colleagues at work, constantly
pushing and challenging one another and making the
necessary judgment calls that are hardly ever black and
white. On behalf of each of us, thank you for the privilege
of managing your Company, and we look forward to being
part of your investment portfolio for the long term.
Sincerely,
Donald C. Wood
President & CEO
can legitimately be considered big-league five-tool players.
Willie Mays is one of them, Ken Griffey Jr. is another.
It is this exceptional balance and level of competence to
which Federal Realty aspires. It is the completeness of the
business plan—the determination not to be dependent on
any one mode of growth—that we’re most proud of, and that
was most evident in 2015. So, what are our five tools?
“IT IS THE COMPLETENESS OF THE
BUSINESS PLAN—THE DETERMINATION
TO NOT BE DEPENDENT ON ANY
ONE MODE OF GROWTH—THAT WE
ARE MOST PROUD OF.”
First, the diversity of our core portfolio in terms of retail
format, geography and tenant base, all in the highest-quality
locations in the country. That real estate portfolio produces
a formidable core foundation on which to grow (one
that produced same-store growth of more than 3.5% for the
fourth year in a row).
Second is the skill set built and honed over many years
to re-develop those centers. The teamwork and
collaboration to pull off these large and small tactical
re-developments necessitate the industry’s most creative
and innovative leasing, development and management
personnel—and as I write this, we have more than a dozen
such re-developments underway.
Third, we have pioneered and refined our unique knowledge
and skill set to create vibrant and enduring mixed-use
communities through a mixed-use development
organization that is second to none. Renowned names
like Santana Row and Bethesda Row are being followed
with tomorrow’s great communities like Pike & Rose and
Assembly Row. More than $170 million was invested in
these initiatives in 2015 alone, over $1.5 billion cumulatively.
Fourth is not only our ability to acquire shopping centers
(anybody can do that), but our focus and refinement of an
acquisition approach that sees opportunities in real estate
acquisitions that others don’t see, in terms of finding
re-development opportunities that refill our re-development
and development coffers. Our acquisitions in 2015 of
San Antonio Center, CocoWalk and Sunset Place are
prime examples.
A STRONG
RECORD OF
SUCCESS.
REAL ESTATE ASSETS
(at cost, in millions)
(as of December 31)
RENTAL INCOME
(in millions)
PROPERTY
OPERATING INCOME (1)
(in millions)
Note: (1) See discussion of calculation in item 6 “Selected Financial Data” in our Form 10-K
Annualized Total Return Comparison (through December 31, 2015)
Federal Realty Investment Trust
FTSE NAREIT Equity REIT Index
S&P 500 Index
NASDAQ Composite Index
Sources: Bloomberg | Assumes reinvestment of dividends
1 year
2 years
3 years
5 years
10 years
20 years
12.35%
23.25%
15.09%
16.64%
12.71%
15.39%
2.83%
1.38%
14.74%
10.63%
11.90%
7.36%
15.13%
12.56%
7.12%
10.89%
19.89%
15.00%
7.37%
7.30%
9.78%
10.87%
8.18%
8.99%
FEDERAL REALTY | ANNUAL REPORT 2015*Annualized Dividends 10-K
FORM 10-K
The Form 10-K includes the Section 302
certifications filed with the SEC. Certain
exhibits to the Form 10-K are not reproduced
here, but the Trust will provide them to you
upon request, addressed to Federal Realty
Investment Trust, 1626 East Jefferson Street,
Rockville, MD 20852, Attention: Leah Andress,
and payment of a fee covering the Trust’s
reasonable expenses for copying and mailing.
FEDERAL REALTY | ANNUAL REPORT 2015 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO THE SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-07533
FEDERAL REALTY INVESTMENT TRUST
(Exact Name of Registrant as Specified in its Declaration of Trust)
Maryland
(State of Organization)
1626 East Jefferson Street, Rockville, Maryland
(Address of Principal Executive Offices)
52-0782497
(IRS Employer Identification No.)
20852
(Zip Code)
(301) 998-8100
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Shares of Beneficial Interest, $.01 par value per
share, with associated Common Share Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
Name of Each Exchange On Which Registered
New York Stock Exchange
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
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
No
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
(Do not check if a smaller reporting company) Smaller reporting company
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
The aggregate market value of the Registrant's common shares held by non-affiliates of the Registrant, based upon the closing
sales price of the Registrant's common shares on June 30, 2015 was $8.9 billion.
The number of Registrant’s common shares outstanding on February 5, 2016 was 69,669,864.
FEDERAL REALTY | ANNUAL REPORT 2015 FEDERAL REALTY INVESTMENT TRUST
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 2015
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission for the Registrant’s 2015
annual meeting of shareholders to be held in May 2016 will be incorporated by reference into Part III hereof.
TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Business...........................................................................................................................................................
Risk Factors .....................................................................................................................................................
Unresolved Staff Comments............................................................................................................................
Properties.........................................................................................................................................................
Legal Proceedings ...........................................................................................................................................
Mine Safety Disclosures..................................................................................................................................
Market for Our Common Equity and Related Shareholder Matters and Issuer Purchases of Equity
Securities .........................................................................................................................................................
Selected Financial Data ...................................................................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of Operations..........................
Quantitative and Qualitative Disclosures about Market Risk .........................................................................
Financial Statements and Supplementary Data ...............................................................................................
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure .........................
Controls and Procedures..................................................................................................................................
Other Information............................................................................................................................................
Trustees, Executive Officers and Corporate Governance................................................................................
Executive Compensation .................................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters .......
Certain Relationships and Related Transactions, and Trustee Independence..................................................
Principal Accountant Fees and Services..........................................................................................................
3
7
15
16
23
23
24
27
29
49
50
50
50
52
53
53
53
53
53
Exhibits and Financial Statement Schedules...................................................................................................
53
SIGNATURES .........................................................................................................................................................................
54
2
PART I
ITEM 1. BUSINESS
References to “we,” “us,” “our” or the “Trust” refer to Federal Realty Investment Trust and our business and operations
conducted through our directly or indirectly owned subsidiaries.
General
We are an equity real estate investment trust (“REIT”) specializing in the ownership, management, and redevelopment of high
quality retail and mixed-use properties located primarily in densely populated and affluent communities in strategically selected
metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as in California and South Florida.
As of December 31, 2015, we owned or had a majority interest in community and neighborhood shopping centers and mixed-
use properties which are operated as 90 predominantly retail real estate projects comprising approximately 21.4 million square
feet. In total, the real estate projects were 94.3% leased and 93.5% occupied at December 31, 2015. A joint venture in which we
owned a 30% interest owned six retail real estate projects totaling approximately 0.8 million square feet as of December 31,
2015. In total, the joint venture properties in which we owned an interest were 93.6% leased and 85.3% occupied at
December 31, 2015. On January 13, 2016, we acquired our partner's 70% interest in the joint venture and subsequently own
100% of the related properties. We have paid quarterly dividends to our shareholders continuously since our founding in 1962
and have increased our dividends per common share for 48 consecutive years.
We were founded in 1962 as a REIT under the laws of the District of Columbia and re-formed as a REIT in the state of
Maryland in 1999. We operate in a manner intended to qualify as a REIT for tax purposes pursuant to provisions of the Internal
Revenue Code of 1986, as amended (the “Code”). Our principal executive offices are located at 1626 East Jefferson Street,
Rockville, Maryland 20852. Our telephone number is (301) 998-8100. Our website address is www.federalrealty.com. The
information contained on our website is not a part of this report and is not incorporated herein by reference.
Business Objectives and Strategies
Our primary business objective is to own, manage, acquire and redevelop a portfolio of high quality retail focused properties
that will:
•
•
•
•
provide increasing cash flow for distribution to shareholders;
generate higher internal growth than the shopping center industry;
provide potential for capital appreciation; and
protect investor capital.
Our portfolio includes, and we continue to acquire and redevelop, high quality retail in many formats ranging from regional,
community and neighborhood shopping centers that often are anchored by grocery stores to mixed-use properties that are
typically centered around a retail component but also include office, residential and/or hotel components.
Operating Strategies
Our core operating strategy is to actively manage our properties to maximize rents and maintain occupancy levels by attracting
and retaining a strong and diverse base of tenants and replacing less relevant, weaker, underperforming tenants with stronger
ones. Our properties are generally located in some of the most densely populated and affluent areas of the country. These strong
demographics help our tenants generate higher sales, which has enabled us to maintain higher occupancy rates, charge higher
rental rates, and maintain steady rent growth, all of which increase the value of our portfolio. Our operating strategies also
include:
•
increasing rental rates through the renewal of expiring leases or the leasing of space to new tenants at higher rental
rates while limiting vacancy and down-time;
• maintaining a diversified tenant base, thereby limiting exposure to any one tenant’s financial or operating difficulties;
• monitoring the merchandising mix of our tenant base to achieve a balance of strong national and regional tenants with
local specialty tenants;
• minimizing overhead and operating costs;
• monitoring the physical appearance of our properties and the construction quality, condition and design of the
buildings and other improvements located on our properties to maximize our ability to attract customers and thereby
generate higher rents and occupancy rates;
3
FEDERAL REALTY | ANNUAL REPORT 2015 •
•
•
•
developing local and regional market expertise in order to capitalize on market and retailing trends;
leveraging the contacts and experience of our management team to build and maintain long-term relationships with
tenants, investors and financing sources;
providing exceptional customer service; and
creating an experience at many of our properties that is identifiable, unique and serves the surrounding communities to
help insulate these properties and the tenants at these properties from the impact of on-line retailing.
Investing Strategies
Our investment strategy is to deploy capital at risk-adjusted rates of return that exceed our long-term weighted average cost of
capital in projects that have potential for future income growth and increased value. Our investments primarily fall into one of
the following four categories:
•
•
•
•
renovating, expanding, reconfiguring and/or retenanting our existing properties to take advantage of under-utilized
land or existing square footage to increase revenue;
renovating or expanding tenant spaces for tenants capable of producing higher sales, and therefore, paying higher
rents;
acquiring quality retail and mixed-use properties located in densely populated and/or affluent areas where barriers to
entry for further development are high, and that have possibilities for enhancing operating performance and creating
value through renovation, expansion, reconfiguration and/or retenanting; and
developing the retail portions of mixed-use properties and developing or otherwise investing in non-retail portions of
mixed-use properties we already own in order to capitalize on the overall value created in these properties.
Investment Criteria
When we evaluate potential redevelopment, retenanting, expansion, acquisition and development opportunities, we consider
such factors as:
•
•
•
•
•
•
•
•
•
•
the expected returns in relation to our short and long-term cost of capital as well as the anticipated risk we will face in
achieving the expected returns;
the anticipated growth rate of operating income generated by the property;
the ability to increase the long-term value of the property through redevelopment and retenanting;
the tenant mix at the property, tenant sales performance and the creditworthiness of those tenants;
the geographic area in which the property is located, including the population density and household incomes, as well
as the population and income trends in that geographic area;
competitive conditions in the vicinity of the property, including competition for tenants and the ability of others to
create competing properties through redevelopment, new construction or renovation;
access to and visibility of the property from existing roadways and the potential for new, widened or realigned,
roadways within the property’s trade area, which may affect access and commuting and shopping patterns;
the level and success of our existing investments in the market area;
the current market value of the land, buildings and other improvements and the potential for increasing those market
values; and
the physical condition of the land, buildings and other improvements, including the structural and environmental
condition.
Financing Strategies
Our financing strategies are designed to enable us to maintain an investment grade balance sheet while retaining sufficient
flexibility to fund our operating and investing activities in the most cost-efficient way possible. Our financing strategies
include:
• maintaining a prudent level of overall leverage and an appropriate pool of unencumbered properties that is sufficient
to support our unsecured borrowings;
• managing our exposure to variable-rate debt;
• maintaining an available line of credit to fund operating and investing needs on a short-term basis;
•
taking advantage of market opportunities to refinance existing debt, reduce interest costs and manage our debt
maturity schedule so that a significant portion of our debt does not mature in any one year;
selling properties that have limited growth potential or are not a strategic fit within our overall portfolio and
redeploying the proceeds to redevelop, renovate, retenant and/or expand our existing properties, acquire new
properties or reduce debt; and
utilizing the most advantageous long-term source of capital available to us to finance redevelopment and acquisition
opportunities, which may include:
•
•
4
the sale of our equity or debt securities through public offerings, including our at-the-market ("ATM") equity
program in which we may from time to time offer and sell common shares, or private placements,
the incurrence of indebtedness through unsecured or secured borrowings,
the issuance of operating partnership units in a new or existing “downREIT partnership” that is controlled
and consolidated by us (generally operating partnership units in a “downREIT” partnership are issued in
exchange for a tax deferred contribution of property; these units receive the same distributions as our
common shares and the holders of these units have the right to exchange their units for cash or the same
number of our common shares, at our option), or
the use of joint venture arrangements.
Employees
At February 5, 2016, we had 299 full-time employees and 137 part-time employees. None of our employees are represented by
a collective bargaining unit. We believe that our relationship with our employees is good.
Tax Status
We elected to be taxed as a REIT under the federal income tax laws when we filed our 1962 tax return. As a REIT, we are
generally not subject to federal income tax on taxable income that we distribute to our shareholders. Under the Code, REITs are
subject to numerous organizational and operational requirements, including the requirement to generally distribute at least 90%
of taxable income each year. We will be subject to federal income tax on our taxable income (including any applicable
alternative minimum tax) at regular corporate rates if we fail to qualify as a REIT for tax purposes in any taxable year, or to the
extent we distribute less than 100% of our taxable income. We will also generally not qualify for treatment as a REIT for
federal income tax purposes for four years following the year during which qualification is lost. Even if we qualify as a REIT
for federal income tax purposes, we may be subject to certain state and local income and franchise taxes and to federal income
and excise taxes on our undistributed taxable income.
We have elected to treat certain of our subsidiaries as taxable REIT subsidiaries, which we refer to as a TRS. In general, a TRS
may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Code. A
TRS is subject to federal and state income taxes. Our TRS activities have not been material.
Governmental Regulations Affecting Our Properties
We and our properties are subject to a variety of federal, state and local environmental, health, safety and similar laws,
including without limitation:
•
•
•
•
•
•
•
the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, which we refer
to as CERCLA;
the Resource Conservation & Recovery Act;
the Federal Clean Water Act;
the Federal Clean Air Act;
the Toxic Substances Control Act;
the Occupational Safety & Health Act; and
the Americans with Disabilities Act.
The application of these laws to a specific property that we own depends on a variety of property-specific circumstances,
including the current and former uses of the property, the building materials used at the property and the physical layout of the
property. Under certain environmental laws, principally CERCLA, we, as the owner or operator of properties currently or
previously owned, may be required to investigate and clean up certain hazardous or toxic substances, asbestos-containing
materials, or petroleum product releases at the property. We may also be held liable to a governmental entity or third parties for
property damage and for investigation and clean up costs incurred in connection with the contamination, whether or not we
knew of, or were responsible for, such contamination. In addition, some environmental laws create a lien on the contaminated
site in favor of the government for damages and costs it incurs in connection with the contamination. As the owner or operator
of real estate, we also may be liable under common law to third parties for damages and injuries resulting from environmental
contamination emanating from the real estate. Such costs or liabilities could exceed the value of the affected real estate. The
presence of contamination or the failure to remediate contamination may adversely affect our ability to sell or lease real estate
or to borrow using the real estate as collateral.
Neither existing environmental, health, safety and similar laws nor the costs of our compliance with these laws has had a
material adverse effect on our financial condition or results of operations, and management does not believe they will in the
future. In addition, we have not incurred, and do not expect to incur, any material costs or liabilities due to environmental
contamination at properties we currently own or have owned in the past. However, we cannot predict the impact of new or
5
FEDERAL REALTY | ANNUAL REPORT 2015 changed laws or regulations on properties we currently own or may acquire in the future. We have no current plans for
substantial capital expenditures with respect to compliance with environmental, health, safety and similar laws and we carry
environmental insurance which covers a number of environmental risks for most of our properties.
Competition
Numerous commercial developers and real estate companies compete with us with respect to the leasing and the acquisition of
properties. Some of these competitors may possess greater capital resources than we do, although we do not believe that any
single competitor or group of competitors in any of the primary markets where our properties are located are dominant in that
market. This competition may:
•
•
•
•
reduce the number of properties available for acquisition;
increase the cost of properties available for acquisition;
interfere with our ability to attract and retain tenants, leading to increased vacancy rates and/or reduced rents; and
adversely affect our ability to minimize expenses of operation.
Retailers at our properties also face increasing competition from online retailers, outlet stores, discount shopping clubs,
superstores, and other forms of sales and marketing of goods and services, such as direct mail. This competition could
contribute to lease defaults and insolvency of tenants.
Available Information
Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange
Act”) are available free of charge through the Investors section of our website at www.federalrealty.com as soon as reasonably
practicable after we electronically file the material with, or furnish the material to, the Securities and Exchange Commission, or
the SEC.
Our Corporate Governance Guidelines, Code of Business Conduct, Code of Ethics applicable to our Chief Executive Officer
and senior financial officers, Whistleblower Policy, organizational documents and the charters of our audit committee,
compensation committee and nominating and corporate governance committee are all available in the Corporate Governance
section of the Investors section of our website.
Amendments to the Code of Ethics or Code of Business Conduct or waivers that apply to any of our executive officers or our
senior financial officers will be disclosed in that section of our website as well.
You may obtain a printed copy of any of the foregoing materials from us by writing to us at Investor Relations, Federal Realty
Investment Trust, 1626 East Jefferson Street, Rockville, Maryland 20852.
6
changed laws or regulations on properties we currently own or may acquire in the future. We have no current plans for
substantial capital expenditures with respect to compliance with environmental, health, safety and similar laws and we carry
environmental insurance which covers a number of environmental risks for most of our properties.
Competition
•
•
•
•
Numerous commercial developers and real estate companies compete with us with respect to the leasing and the acquisition of
properties. Some of these competitors may possess greater capital resources than we do, although we do not believe that any
single competitor or group of competitors in any of the primary markets where our properties are located are dominant in that
market. This competition may:
reduce the number of properties available for acquisition;
increase the cost of properties available for acquisition;
interfere with our ability to attract and retain tenants, leading to increased vacancy rates and/or reduced rents; and
adversely affect our ability to minimize expenses of operation.
Retailers at our properties also face increasing competition from online retailers, outlet stores, discount shopping clubs,
superstores, and other forms of sales and marketing of goods and services, such as direct mail. This competition could
contribute to lease defaults and insolvency of tenants.
Available Information
the SEC.
Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange
Act”) are available free of charge through the Investors section of our website at www.federalrealty.com as soon as reasonably
practicable after we electronically file the material with, or furnish the material to, the Securities and Exchange Commission, or
Our Corporate Governance Guidelines, Code of Business Conduct, Code of Ethics applicable to our Chief Executive Officer
and senior financial officers, Whistleblower Policy, organizational documents and the charters of our audit committee,
compensation committee and nominating and corporate governance committee are all available in the Corporate Governance
section of the Investors section of our website.
Amendments to the Code of Ethics or Code of Business Conduct or waivers that apply to any of our executive officers or our
senior financial officers will be disclosed in that section of our website as well.
You may obtain a printed copy of any of the foregoing materials from us by writing to us at Investor Relations, Federal Realty
Investment Trust, 1626 East Jefferson Street, Rockville, Maryland 20852.
ITEM 1A. RISK FACTORS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. Also, documents that
we “incorporate by reference” into this Annual Report on Form 10-K, including documents that we subsequently file with the
SEC will contain forward-looking statements. When we refer to forward-looking statements or information, sometimes we use
words such as “may,” “will,” “could,” “should,” “plans,” “intends,” “expects,” “believes,” “estimates,” “anticipates” and
“continues.” In particular, the below risk factors describe forward-looking information. The risk factors describe risks that may
affect these statements but are not all-inclusive, particularly with respect to possible future events. Many things can happen that
can cause actual results to be different from those we describe. These factors include, but are not limited to the following:
Revenue from our properties may be reduced or limited if the retail operations of our tenants are not successful.
Revenue from our properties depends primarily on the ability of our tenants to pay the full amount of rent and other charges
due under their leases on a timely basis. Some of our leases provide for the payment, in addition to base rent, of additional rent
above the base amount according to a specified percentage of the gross sales generated by the tenants and generally provide for
reimbursement of real estate taxes and expenses of operating the property. Economic and/or competitive conditions may impact
the success of our tenants’ retail operations and therefore the amount of rent and expense reimbursements we receive from our
tenants. While demand for our retail spaces has been strong, there can be no assurance that this will continue. Any reduction in
our tenants’ abilities to pay base rent, percentage rent or other charges on a timely basis, including the filing by any of our
tenants for bankruptcy protection, will adversely affect our financial condition and results of operations. In the event of default
by a tenant, we may experience delays and unexpected costs in enforcing our rights as landlord under lease terms, which may
also adversely affect our financial condition and results of operations.
Our net income depends on the success and continued presence of our “anchor” tenants.
Our net income could be adversely affected in the event of a downturn in the business, or the bankruptcy or insolvency, of any
anchor store or anchor tenant. Anchor tenants generally occupy large amounts of square footage, pay a significant portion of the
total rents at a property and contribute to the success of other tenants by drawing significant numbers of customers to a
property. The closing of one or more anchor stores at a property could adversely affect that property and result in lease
terminations by, or reductions in rent from, other tenants whose leases may permit termination or rent reduction in those
circumstances or whose own operations may suffer as a result. While our anchor tenant space is currently 96.1% occupied, we
have seen an overall decrease in the number of tenants available to fill anchor spaces. Therefore, tenant demand for certain of
our anchor spaces may decrease and as a result, we may see an increase in vacancy and/or a decrease in rents for those spaces
that could have a negative impact to our net income.
We may be unable to collect balances due from tenants that file for bankruptcy protection.
If a tenant or lease guarantor files for bankruptcy, we may not be able to collect all pre-petition amounts owed by that party. In
addition, a tenant that files for bankruptcy protection may terminate our lease in which event we would have a general
unsecured claim that would likely be for less than the full amount owed to us for the remainder of the lease term, which could
adversely affect our financial condition and results of operations.
We may experience difficulty or delay in renewing leases or re-leasing space.
We derive most of our revenue directly or indirectly from rent received from our tenants. We are subject to the risks that, upon
expiration or termination of leases, whether by their terms, as a result of a tenant bankruptcy, general economic conditions or
otherwise, leases for space in our properties may not be renewed, space may not be re-leased, or the terms of renewal or re-
lease, including the cost of required renovations or concessions to tenants, may be less favorable than current lease terms and
may include decreases in rental rates. As a result, our net income could be reduced.
The amount of debt we have and the restrictions imposed by that debt could adversely affect our business and financial
condition.
As of December 31, 2015, we had approximately $2.6 billion of debt outstanding. Of that outstanding debt, approximately
$482.8 million was secured by all or a portion of nine of our real estate projects and approximately $71.6 million represented
capital lease obligations on four of our properties. In addition, we owned a 30% interest in a joint venture that had $34.4
million of debt secured by two properties as of December 31, 2015. On January 13, 2016, we acquired our partner's 70%
interest in the joint venture, and assumed 100% of the related debt. Approximately $2.6 billion (97.6%) of our debt as of
December 31, 2015 is fixed rate debt, which includes all of our property secured debt, our capital lease obligations and our
$275.0 million term loan as the rate is effectively fixed by two interest rate swap agreements. Our joint venture’s debt of $34.4
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FEDERAL REALTY | ANNUAL REPORT 2015 million, which is unconsolidated as of December 31, 2015, is also fixed rate debt. Our organizational documents do not limit
the level or amount of debt that we may incur. The amount of our debt outstanding from time to time could have important
consequences to our shareholders. For example, it could:
require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing
funds available for operations, property acquisitions, redevelopments and other appropriate business opportunities that
may arise in the future;
limit our ability to make distributions on our outstanding common shares and preferred shares;
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require us to dedicate increased amounts of our cash flow from operations to payments on debt upon refinancing or on
our variable rate, unhedged debt, if interest rates rise;
limit our flexibility in planning for, or reacting to, changes in our business and the factors that affect the profitability of
our business;
limit our ability to obtain any additional debt or equity financing we may need in the future for working capital, debt
refinancing, capital expenditures, acquisitions, redevelopments or other general corporate purposes or to obtain such
financing on favorable terms; and/or
limit our flexibility in conducting our business, which may place us at a disadvantage compared to competitors with
less debt or debt with less restrictive terms.
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Our ability to make scheduled principal payments of, to pay interest on, or to refinance our indebtedness will depend primarily
on our future performance, which to a certain extent is subject to economic, financial, competitive and other factors beyond our
control. There can be no assurance that our business will continue to generate sufficient cash flow from operations in the future
to service our debt or meet our other cash needs. If we are unable to generate this cash flow from our business, we may be
required to refinance all or a portion of our existing debt, sell assets or obtain additional financing to meet our debt obligations
and other cash needs, including the payment of dividends required to maintain our status as a real estate investment trust. We
cannot assure you that any such refinancing, sale of assets or additional financing would be possible on terms that we would
find acceptable.
We are obligated to comply with financial and other covenants pursuant to our debt obligations that could restrict our
operating activities, and the failure to comply with such covenants could result in defaults that accelerate payment
under our debt agreements.
Our revolving credit facility, term loan and certain series of notes include financial covenants that may limit our operating
activities in the future. We are also required to comply with additional covenants that include, among other things, provisions:
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relating to the maintenance of property securing a mortgage;
restricting our ability to pledge assets or create liens;
restricting our ability to incur additional debt;
restricting our ability to amend or modify existing leases at properties securing a mortgage;
restricting our ability to enter into transactions with affiliates; and
restricting our ability to consolidate, merge or sell all or substantially all of our assets.
As of December 31, 2015, we were in compliance with all of our financial covenants. If we were to breach any of our debt
covenants, including the covenants listed above, and did not cure the breach within any applicable cure period, our lenders
could require us to repay the debt immediately, and, if the debt is secured, could immediately begin proceedings to take
possession of the property securing the loan. Many of our debt arrangements, including our public notes, term loan and our
revolving credit facility, are cross-defaulted, which means that the lenders under those debt arrangements can put us in default
and require immediate repayment of their debt if we breach and fail to cure a default under certain of our other debt obligations.
As a result, any default under our debt covenants could have an adverse effect on our financial condition, our results of
operations, our ability to meet our obligations and the market value of our shares.
Our development activities have inherent risks.
The ground-up development of improvements on real property, as opposed to the renovation and redevelopment of existing
improvements, presents substantial risks. We generally do not look to acquire raw land for future development; however, we do
intend to complete the development and construction of future phases of projects we already own, such as Assembly Row in
Somerville, Massachusetts and Pike & Rose in North Bethesda, Maryland. We may undertake development of these and other
projects on our own or bring in third parties if it is justifiable on a risk-adjusted return basis. We may also choose to delay
completion of a project if market conditions do not allow an appropriate return. If conditions arise and we are not able or decide
not to complete a project or if the expected cash flows of our project do not exceed the book value, an impairment of the project
may be required. If additional phases of any of our existing projects or if any new projects are not successful, it may adversely
affect our financial condition and results of operations.
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million, which is unconsolidated as of December 31, 2015, is also fixed rate debt. Our organizational documents do not limit
the level or amount of debt that we may incur. The amount of our debt outstanding from time to time could have important
consequences to our shareholders. For example, it could:
require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing
funds available for operations, property acquisitions, redevelopments and other appropriate business opportunities that
may arise in the future;
limit our ability to make distributions on our outstanding common shares and preferred shares;
• make it difficult to satisfy our debt service requirements;
require us to dedicate increased amounts of our cash flow from operations to payments on debt upon refinancing or on
our variable rate, unhedged debt, if interest rates rise;
limit our flexibility in planning for, or reacting to, changes in our business and the factors that affect the profitability of
our business;
limit our ability to obtain any additional debt or equity financing we may need in the future for working capital, debt
refinancing, capital expenditures, acquisitions, redevelopments or other general corporate purposes or to obtain such
financing on favorable terms; and/or
less debt or debt with less restrictive terms.
limit our flexibility in conducting our business, which may place us at a disadvantage compared to competitors with
Our ability to make scheduled principal payments of, to pay interest on, or to refinance our indebtedness will depend primarily
on our future performance, which to a certain extent is subject to economic, financial, competitive and other factors beyond our
control. There can be no assurance that our business will continue to generate sufficient cash flow from operations in the future
to service our debt or meet our other cash needs. If we are unable to generate this cash flow from our business, we may be
required to refinance all or a portion of our existing debt, sell assets or obtain additional financing to meet our debt obligations
and other cash needs, including the payment of dividends required to maintain our status as a real estate investment trust. We
cannot assure you that any such refinancing, sale of assets or additional financing would be possible on terms that we would
find acceptable.
We are obligated to comply with financial and other covenants pursuant to our debt obligations that could restrict our
operating activities, and the failure to comply with such covenants could result in defaults that accelerate payment
under our debt agreements.
Our revolving credit facility, term loan and certain series of notes include financial covenants that may limit our operating
activities in the future. We are also required to comply with additional covenants that include, among other things, provisions:
relating to the maintenance of property securing a mortgage;
restricting our ability to pledge assets or create liens;
restricting our ability to incur additional debt;
restricting our ability to amend or modify existing leases at properties securing a mortgage;
restricting our ability to enter into transactions with affiliates; and
restricting our ability to consolidate, merge or sell all or substantially all of our assets.
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As of December 31, 2015, we were in compliance with all of our financial covenants. If we were to breach any of our debt
covenants, including the covenants listed above, and did not cure the breach within any applicable cure period, our lenders
could require us to repay the debt immediately, and, if the debt is secured, could immediately begin proceedings to take
possession of the property securing the loan. Many of our debt arrangements, including our public notes, term loan and our
revolving credit facility, are cross-defaulted, which means that the lenders under those debt arrangements can put us in default
and require immediate repayment of their debt if we breach and fail to cure a default under certain of our other debt obligations.
As a result, any default under our debt covenants could have an adverse effect on our financial condition, our results of
operations, our ability to meet our obligations and the market value of our shares.
Our development activities have inherent risks.
The ground-up development of improvements on real property, as opposed to the renovation and redevelopment of existing
improvements, presents substantial risks. We generally do not look to acquire raw land for future development; however, we do
intend to complete the development and construction of future phases of projects we already own, such as Assembly Row in
Somerville, Massachusetts and Pike & Rose in North Bethesda, Maryland. We may undertake development of these and other
projects on our own or bring in third parties if it is justifiable on a risk-adjusted return basis. We may also choose to delay
completion of a project if market conditions do not allow an appropriate return. If conditions arise and we are not able or decide
not to complete a project or if the expected cash flows of our project do not exceed the book value, an impairment of the project
may be required. If additional phases of any of our existing projects or if any new projects are not successful, it may adversely
affect our financial condition and results of operations.
During 2015, construction commenced on the development of Phase II at both Assembly Row and Pike & Rose. At Santana
Row, we continue our on-going redevelopment efforts, and are constructing a new 234,500 square foot office building, which
has been fully leased to one tenant. A further discussion of these projects, expected costs, and current status can be found in
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the "Outlook" subsection.
In addition to the risks associated with real estate investment in general, as described elsewhere and the specific risks above,
the risks associated with our remaining development activities include:
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contractor changes may delay the completion of development projects and increase overall costs;
significant time lag between commencement and stabilization subjects us to greater risks due to fluctuations in the
general economy;
delivery of residential product (both rental units and for sale condominium units) into uncertain residential
environments may result in lower rents or sale prices than underwritten;
substantial amount of our investment is related to infrastructure, the value of which may be negatively impacted if we
do not complete subsequent phases;
failure or inability to obtain construction or permanent financing on favorable terms;
failure or inability to obtain public funding from governmental agencies to fund infrastructure projects, including
expected public funding in connection with our development at Assembly Row;
expenditure of money and time on projects that may never be completed;
failure or inability of partners to perform on hotel joint ventures;
the third-party developer of office or other buildings may not deliver or may encounter delays in delivering space as
planned;
difficulty securing key anchor or other tenants may impact occupancy rates and projected revenue;
inability to achieve projected rental rates or anticipated pace of lease-up;
higher than estimated construction or operating costs, including labor and material costs; and
possible delay in completion of a project because of a number of factors, including weather, labor disruptions,
construction delays or delays in receipt of zoning or other regulatory approvals, acts of terror or other acts of violence,
or acts of God (such as fires, earthquakes or floods).
Redevelopments and acquisitions may fail to perform as expected.
Our investment strategy includes the redevelopment and acquisition of high quality, retail focused properties in densely
populated areas with high average household incomes and significant barriers to adding competitive retail supply. The
redevelopment and acquisition of properties entail risks that include the following, any of which could adversely affect our
results of operations and our ability to meet our obligations:
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our estimate of the costs to improve, reposition or redevelop a property may prove to be too low, or the time we
estimate to complete the improvement, repositioning or redevelopment may be too short. As a result, the property may
fail to achieve the returns we have projected, either temporarily or for a longer time;
we may not be able to identify suitable properties to acquire or may be unable to complete the acquisition of the
properties we identify;
we may not be able to integrate an acquisition into our existing operations successfully;
properties we redevelop or acquire may fail to achieve the occupancy or rental rates we project, within the time frames
we project, at the time we make the decision to invest, which may result in the properties’ failure to achieve the returns
we projected;
our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or
identify necessary repairs until after the property is acquired, which could significantly increase our total acquisition
costs or decrease cash flow from the property; and
our investigation of a property or building prior to our acquisition, and any representations we may receive from the
seller of such building or property, may fail to reveal various liabilities, which could reduce the cash flow from the
property or increase our acquisition cost.
Our ability to grow will be limited if we cannot obtain additional capital.
Our growth strategy is focused on the redevelopment of properties we already own and the acquisition of additional properties.
We believe that it will be difficult to fund our expected growth with cash from operating activities because, in addition to other
requirements, we are generally required to distribute to our shareholders at least 90% of our taxable income each year to
continue to qualify as a REIT for federal income tax purposes. As a result, we must rely primarily upon the availability of debt
or equity capital, which may or may not be available on favorable terms or at all. Debt could include the sale of debt securities
and mortgage loans from third parties. If economic conditions and conditions in the capital markets are not favorable at the
time we need to raise capital, we may need to obtain capital on less favorable terms. Additionally, we cannot guarantee that
additional financing, refinancing or other capital will be available in the amounts we desire or on favorable terms. Our access to
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FEDERAL REALTY | ANNUAL REPORT 2015 debt or equity capital depends on a number of factors, including the market’s perception of our growth potential and risk
profile, our ability to pay dividends, and our current and potential future earnings. Depending on the outcome of these factors
as well as the impact of the economic environment, we could experience delay or difficulty in implementing our growth
strategy on satisfactory terms, or be unable to implement this strategy.
Rising interest rates could adversely affect our cash flow and the market price of our outstanding debt and preferred
shares.
Of our approximately $2.6 billion of debt outstanding as of December 31, 2015, approximately $337.9 million bears interest at
variable rates of which $275.0 million is effectively fixed through two interest rate swap agreements. We have a $600.0 million
revolving credit facility, on which $53.5 million is outstanding at December 31, 2015, that bears interest at LIBOR plus 90
basis points. We may borrow additional funds at variable interest rates in the future. Increases in interest rates would increase
the interest expense on our variable rate debt and reduce our cash flow, which could adversely affect our ability to service our
debt and meet our other obligations and also could reduce the amount we are able to distribute to our shareholders. The interest
rate on our $275.0 million term loan is currently fixed at 2.62% as a result of two interest rate swap agreements. We may enter
into this type of hedging arrangements or other transactions for all or a portion of our variable rate debt to limit our exposure to
rising interest rates. However, the amounts we are required to pay under the term loan and any other variable rate debt to which
hedging or similar arrangements relate may increase in the event of non-performance by the counterparties to any of our
hedging arrangements. In addition, an increase in market interest rates may lead purchasers of our debt securities and preferred
shares to demand a higher annual yield, which could adversely affect the market price of our outstanding debt securities and
preferred shares and the cost and/or timing of refinancing or issuing additional debt securities or preferred shares.
The market value of our debt and equity securities is subject to various factors that may cause significant fluctuations
or volatility.
As with other publicly traded securities, the market price of our debt and equity securities depends on various factors, which
may change from time to time and/or may be unrelated to our financial condition, operating performance or prospects that may
cause significant fluctuations or volatility in such prices. These factors include, among others:
general economic and financial market conditions;
level and trend of interest rates;
our ability to access the capital markets to raise additional capital;
the issuance of additional equity or debt securities;
changes in our funds from operations (“FFO”) or earnings estimates;
changes in our debt or analyst ratings;
our financial condition and performance;
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• market perception of our business compared to other REITs; and
• market perception of REITs, in general, compared to other investment alternatives.
Loss of our key management could adversely affect performance and the value of our common shares.
We are dependent on the efforts of our key management. Although we believe qualified replacements could be found for any
departures of key executives, the loss of their services could adversely affect our performance and the value of our common
shares.
Our performance and value are subject to general risks associated with the real estate industry.
Our economic performance and the value of our real estate assets, and, consequently, the value of our investments, are subject
to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and
capital expenditures, our cash flow and ability to pay distributions to our shareholders will be adversely affected. As a real
estate company, we are susceptible to the following real estate industry risks:
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economic downturns in general, or in the areas where our properties are located;
adverse changes in local real estate market conditions, such as an oversupply or reduction in demand;
changes in tenant preferences that reduce the attractiveness of our properties to tenants;
zoning or regulatory restrictions;
decreases in market rental rates;
weather conditions that may increase or decrease energy costs and other weather-related expenses;
costs associated with the need to periodically repair, renovate and re-lease space; and
increases in the cost of adequate maintenance, insurance and other operating costs, including real estate taxes,
associated with one or more properties, which may occur even when circumstances such as market factors and
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competition cause a reduction in revenues from one or more properties, although real estate taxes typically do not
increase upon a reduction in such revenues.
Each of these risks could result in decreases in market rental rates and increases in vacancy rates, which could adversely affect
our financial condition and results of operation.
Many real estate costs are fixed, even if income from our properties decreases.
Our financial results depend primarily on leasing space in our properties to tenants on terms favorable to us. Costs associated
with real estate investment, such as real estate taxes, insurance and maintenance costs, generally are not reduced even when a
property is not fully occupied, rental rates decrease, or other circumstances cause a reduction in income from the property. As a
result, cash flow from the operations of our properties may be reduced if a tenant does not pay its rent or we are unable to rent
our properties on favorable terms. Under those circumstances, we might not be able to enforce our rights as landlord without
delays and may incur substantial legal costs. Additionally, new properties that we may acquire or redevelop may not produce
any significant revenue immediately, and the cash flow from existing operations may be insufficient to pay the operating
expenses and debt service associated with such new properties until they are fully occupied.
Competition may limit our ability to purchase new properties and generate sufficient income from tenants.
Numerous commercial developers and real estate companies compete with us in seeking tenants for our existing properties and
properties for acquisition. This competition may:
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reduce properties available for acquisition;
increase the cost of properties available for acquisition;
reduce rents payable to us;
interfere with our ability to attract and retain tenants;
lead to increased vacancy rates at our properties; and
adversely affect our ability to minimize expenses of operation.
Retailers at our properties also face increasing competition from online retailers, outlet stores, discount shopping clubs and
other forms of sales and marketing of goods, such as direct mail. This competition could contribute to lease defaults and
insolvency of tenants. If we are unable to continue to attract appropriate retail tenants to our properties, or to purchase new
properties in our geographic markets, it could materially affect our ability to generate net income, service our debt and make
distributions to our shareholders.
We may be unable to sell properties when appropriate because real estate investments are illiquid.
Real estate investments generally cannot be sold quickly. In addition, there are some limitations under federal income tax laws
applicable to real estate and to REITs in particular that may limit our ability to sell our assets. We may not be able to alter our
portfolio promptly in response to changes in economic or other conditions including being unable to sell a property at a return
we believe is appropriate due to the economic environment. Our inability to respond quickly to adverse changes in the
performance of our investments could have an adverse effect on our ability to meet our obligations and make distributions to
our shareholders.
Our insurance coverage on our properties may be inadequate.
We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire, flood, earthquake,
environmental matters, rental loss and acts of terrorism. All of these policies contain coverage limitations. We believe these
coverages are of the types and amounts customarily obtained for or by an owner of similar types of real property assets located
in the areas where our properties are located. We intend to obtain similar insurance coverage on subsequently acquired
properties.
The availability of insurance coverage may decrease and the prices for insurance may increase as a consequence of significant
losses incurred by the insurance industry and other factors outside our control. As a result, we may be unable to renew or
duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance companies may no
longer offer coverage against certain types of losses, such as losses due to terrorist acts and toxic mold, or, if offered, the
expense of obtaining these types of insurance may not be justified. We therefore may cease to have insurance coverage against
certain types of losses and/or there may be decreases in the limits of insurance available. If an uninsured loss or a loss in excess
of our insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the
anticipated future revenue from the property, but still remain obligated for any mortgage debt or other financial obligations
related to the property. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If
any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result
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FEDERAL REALTY | ANNUAL REPORT 2015 in large expenses to repair or rebuild the property. Also, due to inflation, changes in codes and ordinances, environmental
considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been
damaged or destroyed. Further, we may be unable to collect insurance proceeds if our insurers are unable to pay or contest a
claim. Events such as these could adversely affect our results of operations and our ability to meet our obligations, including
distributions to our shareholders.
We may have limited flexibility in dealing with our jointly owned investments.
Our organizational documents do not limit the amount of funds that we may invest in properties and assets owned jointly with
other persons or entities. As of December 31, 2015, we held nine predominantly retail real estate projects jointly with other
persons in addition to our joint venture with affiliates of a discretionary fund created and advised by Clarion Partners
(“Clarion”) and properties owned in a “downREIT” structure. Additionally, we have entered into a joint venture agreement
related to the hotel component of Phase II of our Pike & Rose development project. We may make additional joint investments
in the future. Our existing and future joint investments may subject us to special risks, including the possibility that our partners
or co-investors might become bankrupt, that those partners or co-investors might have economic or other business interests or
goals which are unlike or incompatible with our business interests or goals, that those partners or co-investors might be in a
position to take action contrary to our suggestions or instructions, or in opposition to our policies or objectives, and that
disputes may develop with our joint venture partners over decisions affecting the property or the joint venture, which may
result in litigation or arbitration or some other form of dispute resolution. Although as of December 31, 2015, we held the
controlling interests in all of our existing co-investments (except the Clarion and hotel investments discussed above), we
generally must obtain the consent of the co-investor or meet defined criteria to sell or to finance these properties. Joint
ownership gives a third party the opportunity to influence the return we can achieve on some of our investments and may
adversely affect our ability to make distributions to our shareholders. We may also be liable for the actions of our co-investors.
On January 13, 2016 we acquired our partner's 70% interest in our Clarion joint venture, and subsequently own 100% of the
related properties.
Environmental laws and regulations could reduce the value or profitability of our properties.
All real property and the operations conducted on real property are subject to federal, state and local laws, ordinances and
regulations relating to hazardous materials, environmental protection and human health and safety. Under various federal, state
and local laws, ordinances and regulations, we and our tenants may be required to investigate and clean up certain hazardous or
toxic substances released on or in properties we own or operate, and also may be required to pay other costs relating to
hazardous or toxic substances. This liability may be imposed without regard to whether we or our tenants knew about the
release of these types of substances or were responsible for their release. The presence of contamination or the failure to
properly remediate contamination at any of our properties may adversely affect our ability to sell or lease those properties or to
borrow funds by using those properties as collateral. The costs or liabilities could exceed the value of the affected real estate.
We are not aware of any environmental condition with respect to any of our properties that management believes would have a
material adverse effect on our business, assets or results of operations taken as a whole. The uses of any of our properties prior
to our acquisition of the property and the building materials used at the property are among the property-specific factors that
will affect how the environmental laws are applied to our properties. If we are subject to any material environmental liabilities,
the liabilities could adversely affect our results of operations and our ability to meet our obligations.
We cannot predict what other environmental legislation or regulations will be enacted in the future, how existing or future laws
or regulations will be administered or interpreted or what environmental conditions may be found to exist on the properties in
the future. Compliance with existing and new laws and regulations may require us or our tenants to spend funds to remedy
environmental problems. Our tenants, like many of their competitors, have incurred, and will continue to incur, capital and
operating expenditures and other costs associated with complying with these laws and regulations, which will adversely affect
their potential profitability.
Generally, our tenants must comply with environmental laws and meet remediation requirements. Our leases typically impose
obligations on our tenants to indemnify us from any compliance costs we may incur as a result of the environmental conditions
on the property caused by the tenant. If a lease does not require compliance or if a tenant fails to or cannot comply, we could be
forced to pay these costs. If not addressed, environmental conditions could impair our ability to sell or re-lease the affected
properties in the future or result in lower sales prices or rent payments.
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The Americans with Disabilities Act of 1990 could require us to take remedial steps with respect to existing or newly
acquired properties.
Our existing properties, as well as properties we may acquire, as commercial facilities, are required to comply with Title III of
the Americans with Disabilities Act of 1990. Investigation of a property may reveal non-compliance with this Act. The
requirements of this Act, or of other federal, state or local laws or regulations, also may change in the future and restrict further
renovations of our properties with respect to access for disabled persons. Future compliance with this Act may require
expensive changes to the properties.
The revenues generated by our tenants could be negatively affected by various federal, state and local laws to which
they are subject.
We and our tenants are subject to a wide range of federal, state and local laws and regulations, such as local licensing
requirements, consumer protection laws and state and local fire, life-safety and similar requirements that affect the use of the
properties. The leases typically require that each tenant comply with all laws and regulations. Failure to comply could result in
fines by governmental authorities, awards of damages to private litigants, or restrictions on the ability to conduct business on
such properties. Non-compliance of this sort could reduce our revenues from a tenant, could require us to pay penalties or fines
relating to any non-compliance, and could adversely affect our ability to sell or lease a property.
Failure to qualify as a REIT for federal income tax purposes would cause us to be taxed as a corporation, which would
substantially reduce funds available for payment of distributions.
We believe that we are organized and qualified as a REIT for federal income tax purposes and currently intend to operate in a
manner that will allow us to continue to qualify as a REIT under the Code. However, we cannot assure you that we will remain
qualified as such in the future.
Qualification as a REIT involves the application of highly technical and complex Code provisions and applicable income tax
regulations that have been issued under the Code. Certain facts and circumstances not entirely within our control may affect our
ability to qualify as a REIT. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must be
derived from qualifying rents and certain other income. Satisfying this requirement could be difficult, for example, if defaults
by tenants were to reduce the amount of income from qualifying rents. As a REIT, we must generally make annual distributions
to shareholders of at least 90% of our taxable income. In addition, new legislation, new regulations, new administrative
interpretations or new court decisions may significantly change the tax laws with respect to qualification as a REIT or the
federal income tax consequences of such qualification. Any modification in the tax treatment of REITs could have a significant
adverse impact to our net income.
If we fail to qualify as a REIT:
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we would not be allowed a deduction for distributions to shareholders in computing taxable income;
we would be subject to federal income tax at regular corporate rates;
we could be subject to the federal alternative minimum tax;
unless we are entitled to relief under specific statutory provisions, we could not elect to be taxed as a REIT for four
taxable years following the year during which we were disqualified;
we could be required to pay significant income taxes, which would substantially reduce the funds available for
investment or for distribution to our shareholders for each year in which we failed or were not permitted to qualify;
and
we would no longer be required by law to make any distributions to our shareholders.
We may be required to incur additional debt to qualify as a REIT.
As a REIT, we must generally make annual distributions to shareholders of at least 90% of our taxable income. We are subject
to income tax on amounts of undistributed taxable income and net capital gain. In addition, we would be subject to a 4% excise
tax if we fail to distribute sufficient income to meet a minimum distribution test based on our ordinary income, capital gain and
aggregate undistributed income from prior years. We intend to make distributions to shareholders to comply with the Code’s
distribution provisions and to avoid federal income and excise tax. We may need to borrow funds to meet our distribution
requirements because:
•
•
our income may not be matched by our related expenses at the time the income is considered received for purposes of
determining taxable income; and
non-deductible capital expenditures, creation of reserves, or debt service requirements may reduce available cash but
not taxable income.
13
FEDERAL REALTY | ANNUAL REPORT 2015 In these circumstances, we might have to borrow funds on terms we might otherwise find unfavorable and we may have to
borrow funds even if our management believes the market conditions make borrowing financially unattractive. Current tax law
also allows us to pay a portion of our distributions in shares instead of cash.
To maintain our status as a REIT, we limit the amount of shares any one shareholder can own.
The Code imposes certain limitations on the ownership of the stock of a REIT. For example, not more than 50% in value of our
outstanding shares of capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code)
during the last half of any taxable year. To protect our REIT status, our declaration of trust prohibits any one shareholder from
owning (actually or constructively) more than 9.8% in value of the outstanding common shares or of any class or series of
outstanding preferred shares. The constructive ownership rules are complex. Shares of our capital stock owned, actually or
constructively, by a group of related individuals and/or entities may be treated as constructively owned by one of those
individuals or entities. As a result, the acquisition of less than 9.8% in value of the outstanding common shares and/or a class or
series of preferred shares (or the acquisition of an interest in an entity that owns common shares or preferred shares) by an
individual or entity could cause that individual or entity (or another) to own constructively more than 9.8% in value of the
outstanding capital stock. If that happened, either the transfer of ownership would be void or the shares would be transferred to
a charitable trust and then sold to someone who can own those shares without violating the 9.8% ownership limit.
The Board of Trustees may waive these restrictions on a case-by-case basis. In addition, the Board of Trustees and two-thirds of
our shareholders eligible to vote at a shareholder meeting may remove these restrictions if they determine it is no longer in our
best interests to attempt to qualify, or to continue to qualify, as a REIT. The 9.8% ownership restrictions may delay, defer or
prevent a transaction or a change of our control that might involve a premium price for the common shares or otherwise be in
the shareholders’ best interest.
We cannot assure you we will continue to pay dividends at historical rates.
Our ability to continue to pay dividends on our common shares at historical rates or to increase our common share dividend
rate, and our ability to pay preferred share dividends and service our debt securities, will depend on a number of factors,
including, among others, the following:
•
•
•
•
our financial condition and results of future operations;
the performance of lease terms by tenants;
the terms of our loan covenants; and
our ability to acquire, finance, develop or redevelop and lease additional properties at attractive rates.
If we do not maintain or increase the dividend on our common shares, it could have an adverse effect on the market price of our
common shares and other securities. Any preferred shares we may offer in the future may have a fixed dividend rate that would
not increase with any increases in the dividend rate of our common shares. Conversely, payment of dividends on our common
shares may be subject to payment in full of the dividends on any preferred shares and payment of interest on any debt securities
we may offer.
Certain tax and anti-takeover provisions of our declaration of trust and bylaws may inhibit a change of our control.
Certain provisions contained in our declaration of trust and bylaws and the Maryland General Corporation Law, as applicable to
Maryland REITs, may discourage a third party from making a tender offer or acquisition proposal to us. If this were to happen,
it could delay, deter or prevent a change in control or the removal of existing management. These provisions also may delay or
prevent the shareholders from receiving a premium for their common shares over then-prevailing market prices. These
provisions include:
•
•
•
•
•
•
the REIT ownership limit described above;
authorization of the issuance of our preferred shares with powers, preferences or rights to be determined by the Board
of Trustees;
special meetings of our shareholders may be called only by the chairman of the board, the chief executive officer, the
president, by one-third of the trustees or by shareholders possessing no less than 25% of all the votes entitled to be
cast at the meeting;
the Board of Trustees, without a shareholder vote, can classify or reclassify unissued shares of beneficial interest,
including the reclassification of common shares into preferred shares and vice-versa;
a two-thirds shareholder vote is required to approve some amendments to the declaration of trust; and
advance-notice requirements for proposals to be presented at shareholder meetings.
In addition, if we elect to be governed by it in the future, the Maryland Control Share Acquisition Law could delay or prevent a
change in control. Under Maryland law, unless a REIT elects not to be subject to this law, “control shares” acquired in a
“control share acquisition” have no voting rights except to the extent approved by shareholders by a vote of two-thirds of the
14
votes entitled to be cast on the matter, excluding shares owned by the acquirer and by officers or trustees who are employees of
the REIT. “Control shares” are voting shares that would entitle the acquirer to exercise voting power in electing trustees within
specified ranges of voting power. A “control share acquisition” means the acquisition of control shares, with some exceptions.
Our bylaws state that the Maryland control share acquisition law will not apply to any acquisition by any person of our
common shares. This bylaw provision may be repealed, in whole or in part, at any time, whether before or after an acquisition
of control shares, by a vote of a majority of the shareholders entitled to vote, and, upon such repeal, may, to the extent provided
by any successor bylaw, apply to any prior or subsequent control share acquisition.
We may amend or revise our business policies without your approval.
Our Board of Trustees may amend or revise our operating policies without shareholder approval. Our investment, financing and
borrowing policies and policies with respect to all other activities, such as growth, debt, capitalization and operations, are
determined by the Board of Trustees. The Board of Trustees may amend or revise these policies at any time and from time to
time at its discretion. A change in these policies could adversely affect our financial condition and results of operations, and the
market price of our securities.
The current business plan adopted by our Board of Trustees focuses on our investment in high quality retail based properties
that are typically neighborhood and community shopping centers or mixed-use properties, principally through redevelopments
and acquisitions. If this business plan is not successful, it could have a material adverse effect on our financial condition and
results of operations.
Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make,
including those in this Annual Report on Form 10-K. Except as may be required by law, we make no promise to update any of
the forward-looking statements as a result of new information, future events or otherwise. You should carefully review the
above risks and the risk factors.
Natural disasters and severe weather conditions could have an adverse impact on our cash flow and operating results.
Changing weather patterns and climatic conditions, such as global warming, may have added to the unpredictability and
frequency of natural disasters and severe weather conditions and created additional uncertainty as to future trends and
exposures. Our operations are located in areas that are subject to natural disasters and severe weather conditions such as
hurricanes, earthquakes, droughts, snow storms, floods and fires. The occurrence of natural disasters or severe weather
conditions can delay new development projects, increase investment costs to repair or replace damaged properties, increase
operation costs, increase future property insurance costs, and negatively impact the tenant demand for lease space. If insurance
is unavailable to us or is unavailable on acceptable terms, or if our insurance is not adequate to cover business interruption or
losses from these events, our earnings, liquidity or capital resources could be adversely affected.
We face risks relating to cybersecurity attacks that could cause loss of confidential information and other business
disruptions.
We rely extensively on computer systems to process transactions and manage our business, and our business is at risk from and
may be impacted by cybersecurity attacks. These could include attempts to gain unauthorized access to our data and computer
systems. Attacks can be both individual and/or highly organized attempts organized by very sophisticated hacking
organizations. We employ a number of measures to prevent, detect and mitigate these threats, which include password
encryption, frequent password change events, firewall detection systems, anti-virus software in-place, frequent backups, a
redundant data system for core applications and annual penetration testing; however, there is no guarantee such efforts will be
successful in preventing a cyber attack. A cybersecurity attack could compromise the confidential information of our
employees, tenants and vendors. A successful attack could disrupt and otherwise adversely affect our business operations.
Changes in accounting standards may adversely impact our financial results.
The Financial Accounting Standards Board ("FASB"), in conjunction with the SEC, has several key projects on their agenda
that could impact how we currently account for our material transactions, including lease accounting and other convergence
projects with the International Accounting Standards Board. At this time, we are unable to predict with certainty which, if any,
proposals may be passed or what level of impact any such proposal could have on the presentation of our consolidated financial
statements, our results of operations and our financial ratios required by our debt covenants.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
15
FEDERAL REALTY | ANNUAL REPORT 2015 ITEM 2. PROPERTIES
General
As of December 31, 2015, we owned or had a majority ownership interest in community and neighborhood shopping centers
and mixed-used properties which are operated as 90 predominantly retail real estate projects comprising approximately 21.4
million square feet. These properties are located primarily in densely populated and affluent communities in strategic
metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as California and South Florida.
No single property accounted for over 10% of our 2015 total revenue. We believe that our properties are adequately covered by
commercial general liability, fire, flood, earthquake, terrorism and business interruption insurance provided by reputable
companies, with commercially reasonable exclusions, deductibles and limits.
Tenant Diversification
As of December 31, 2015, we had approximately 2,700 leases, with tenants ranging from sole proprietors to major national and
international retailers. No one tenant or affiliated group of tenants accounted for more than 2.9% of our annualized base rent as
of December 31, 2015. As a result of our tenant diversification, we believe our exposure to any one bankruptcy filing in the
retail sector has not been and will not be significant, however, multiple filings by a number of retailers could have a significant
impact.
Geographic Diversification
Our 90 real estate projects are located in 12 states and the District of Columbia. The following table shows the number of
projects, the gross leasable area (“GLA”) of commercial space and the percentage of total portfolio gross leasable area of
commercial space in each state as of December 31, 2015.
State
Maryland..................................................................................................
California.................................................................................................
Virginia....................................................................................................
Pennsylvania(1) .......................................................................................
Massachusetts ..........................................................................................
New Jersey...............................................................................................
Florida......................................................................................................
New York.................................................................................................
Illinois......................................................................................................
Connecticut(1) .........................................................................................
Michigan..................................................................................................
District of Columbia ................................................................................
North Carolina .........................................................................................
Total ........................................................................................................
Number of
Projects
Gross Leasable
Area
(In square feet)
Percentage
of Gross
Leasable
Area
18
14
15
10
7
6
4
5
4
3
1
2
1
90
3,977,000
3,854,000
3,601,000
2,299,000
1,789,000
1,718,000
1,316,000
1,138,000
752,000
397,000
217,000
168,000
153,000
21,379,000
18.6 %
18.0 %
16.8 %
10.8 %
8.4 %
8.0 %
6.2 %
5.3 %
3.5 %
1.9 %
1.0 %
0.8 %
0.7 %
100.0%
(1) Additionally, we own two participating mortgages totaling approximately $29.9 million secured by multiple buildings
in Manayunk, Pennsylvania, and an $11.7 million mortgage secured by a shopping center in Norwalk, Connecticut.
Leases, Lease Terms and Lease Expirations
Our leases are classified as operating leases and typically are structured to require the monthly payment of minimum rents in
advance, subject to periodic increases during the term of the lease, percentage rents based on the level of sales achieved by
tenants, and reimbursement of a majority of on-site operating expenses and real estate taxes. These features in our leases
generally reduce our exposure to higher costs and allow us to participate in improved tenant sales.
Commercial property leases generally range from three to ten years; however, certain leases, primarily with anchor tenants,
may be longer. Many of our leases contain tenant options that enable the tenant to extend the term of the lease at expiration at
pre-established rental rates that often include fixed rent increases, consumer price index adjustments or other market rate
adjustments from the prior base rent. Leases on residential units are generally for a period of one year or less and, in 2015,
represented approximately 6.1% of total rental income.
16
The following table sets forth the schedule of lease expirations for our commercial leases in place as of December 31, 2015
for each of the 10 years beginning with 2016 and after 2025 in the aggregate assuming that none of the tenants exercise future
renewal options. Annualized base rents reflect in-place contractual rents as of December 31, 2015.
Year of Lease Expiration
2016............................................................................
2017............................................................................
2018............................................................................
2019............................................................................
2020............................................................................
2021............................................................................
2022............................................................................
2023............................................................................
2024............................................................................
2025............................................................................
Thereafter...................................................................
Total
Lease Rollovers
Leased
Square
Footage
Expiring
1,117,000
2,601,000
2,507,000
2,632,000
2,026,000
2,115,000
1,390,000
885,000
1,050,000
1,299,000
2,364,000
19,986,000
Percentage of
Leased Square
Footage
Expiring
Annualized
Base Rent
Represented by
Expiring Leases
6% $
33,337,000
13%
67,645,000
13%
63,129,000
13%
65,970,000
10%
55,177,000
11%
54,767,000
7%
34,514,000
4%
27,868,000
5%
31,088,000
6%
36,668,000
55,055,000
12%
100% $ 525,218,000
Percentage of
Annualized
Base Rent
Represented by
Expiring Leases
6%
13%
12%
13%
11%
10%
7%
5%
6%
7%
10%
100%
For 2015, we signed leases for a total of 1,593,000 square feet of retail space including 1,405,000 square feet of comparable
space leases (leases for which there was a prior tenant) at an average rental increase of 17% on a cash basis and 29% on a
straight-line basis. New leases for comparable spaces were signed for 547,000 square feet at an average rental increase of 22%
on a cash basis and 35% on a straight-line basis. Renewals for comparable spaces were signed for 859,000 square feet at an
average rental increase of 14% on a cash basis and 24% on a straight-line basis. Tenant improvements and incentives for
comparable spaces were $60.98 per square foot for new leases and $8.79 per square foot for renewals in 2015.
For 2014, we signed leases for a total of 1,765,000 square feet of retail space including 1,545,000 square feet of comparable
space leases (leases for which there was a prior tenant) at an average rental increase of 16% on a cash basis and 29% on a
straight-line basis. New leases for comparable spaces were signed for 704,000 square feet at an average rental increase of 25%
on a cash basis and 38% on a straight-line basis. Renewals for comparable spaces were signed for 840,000 square feet at an
average rental increase of 11% on a cash basis and 23% on a straight-line basis. Tenant improvements and incentives for
comparable spaces were $44.46 per square foot for new leases and $1.27 for renewal leases in 2014.
The rental increases associated with comparable spaces generally include all leases signed in arms-length transactions
reflecting market leverage between landlords and tenants during the period. The comparison between average rent for expiring
leases and new leases is determined by including minimum rent and percentage rent paid on the expiring lease and minimum
rent and in some instances, projections of first lease year percentage rent, to be paid on the new lease. In atypical
circumstances, management may exercise judgment as to how to most effectively reflect the comparability of spaces reported
in this calculation. The change in rental income on comparable space leases is impacted by numerous factors including current
market rates, location, individual tenant creditworthiness, use of space, market conditions when the expiring lease was signed,
capital investment made in the space and the specific lease structure.
The leases signed in 2015 generally become effective over the following two years though some may not become effective until
2018 and beyond. Further, there is risk that some new tenants will not ultimately take possession of their space and that tenants
for both new and renewal leases may not pay all of their contractual rent due to operating, financing or other matters. However,
these increases do provide information about the tenant/landlord relationship and the potential increase we may achieve in
rental income over time.
Historically, we have executed comparable space leases for 1.2 to 1.5 million square feet of retail space each year and expect
the volume for 2016 will be in line with our historical averages with overall positive increases in rental income. However,
changes in rental income associated with individual signed leases on comparable spaces may be positive or negative, and we
can provide no assurance that the rents on new leases will continue to increase at the above disclosed levels, if at all.
17
FEDERAL REALTY | ANNUAL REPORT 2015 Retail and Residential Properties
The following table sets forth information concerning all real estate projects in which we owned an equity interest, had a
leasehold interest, or otherwise controlled and are consolidated as of December 31, 2015. Except as otherwise noted, we are the
sole owner of our retail real estate projects. Principal tenants are the largest tenants in the project based on square feet leased or
are tenants important to a project’s success due to their ability to attract retail customers.
Property, City, State, Zip Code
California
150 Post Street
San Francisco, CA 94108
Colorado Blvd
Pasadena, CA 91103(4)
Crow Canyon Commons
San Ramon, CA 94583
Year
Completed
Year
Acquired
Square Feet(1)
/Apartment
Units
Average Rent
Per Square
Foot(2)
Percentage
Leased(3)
Principal Tenant(s)
1908, 1965
1997
105,000
$35.18
83%
H & M
1905-1988
1996/1998
69,000
$41.05
100%
1980, 1998,
2006
2005/2007
241,000
$26.44
95%
East Bay Bridge
Emeryville & Oakland, CA 94608
1994-2001,
2011, 2012
2012
438,000
$17.72
99%
Escondido Promenade
Escondido, CA 92029(5)
Hermosa Avenue
Hermosa Beach, CA 90254
Hollywood Blvd
Hollywood, CA 90028(6)
Kings Court
Los Gatos, CA 95032(4)(7)
Old Town Center
Los Gatos, CA 95030
Plaza El Segundo / The Point
El Segundo, CA 90245(5)(10)
1987
1996/2010
298,000
$24.34
98%
1922
1997
24,000
$37.64
100%
1929, 1991
1999
180,000
$33.56
91%
1960
1962, 1998
1998
1997
80,000
95,000
$31.46
$38.55
100%
97%
2006-2007
2011/2015
450,000
$41.63
98%
Santana Row
San Jose, CA 95128
2002, 2009
1997
651,000
$50.13
98%
Santana Row Residential
San Jose, CA 95128
San Antonio Center
Mountain View, CA 94040 (4)(7)
2003-2006,
2011, 2014
1958,
1964-1965,
1974-1975,
1995-1997
1997, 2012
662 units
N/A
2015
376,000
$12.67
95%
96%
Third Street Promenade
Santa Monica, CA 90401
Westgate Center
San Jose, CA 95129
1888-2000
1996-2000
209,000
$71.00
99%
1960-1966
2004
638,000
$17.38
98%
18
Pottery Barn
Banana Republic
Sprouts
Rite Aid
Sports Authority
Orchard Supply Hardware
Home Depot
Michaels
Pak-N-Save
Target
Nordstrom Rack
Sports Authority
TJ Maxx
Toys R Us
Dick's Sporting Goods
Ross Dress For Less
Marshalls
La La Land
DSW
L.A. Fitness
Lunardi’s Supermarket
CVS
Gap
Banana Republic
Anthropologie
H&M
Anthropologie
Best Buy
HomeGoods
Whole Foods
Dick's Sporting Goods
Container Store
H&M
Crate & Barrel
Container Store
Best Buy
CineArts Theatre
Hotel Valencia
Kohl's
Walmart
Trader Joe's
24 Hour Fitness
Jo-Ann Stores
Abercrombie & Fitch
J. Crew
Old Navy
Banana Republic
Nike Factory
Target
Walmart Neighborhood
Market
Burlington Coat Factory
Ross Dress For Less
Michaels
Nordstrom Rack
J. Crew
Gap Factory Store
Property, City, State, Zip Code
Connecticut
Bristol Plaza
Bristol, CT 06010
Darien
Darien, CT 06820
Greenwich Avenue
Greenwich Avenue, CT 06830
District of Columbia
Friendship Center
Washington, DC 20015
Sam’s Park & Shop
Washington, DC 20008
Florida
CocoWalk
Coconut Grove, FL 33133 (5)(13)
Del Mar Village
Boca Raton, FL 33433
The Shops at Sunset Place
South Miami, FL 33143 (5)(10)
Tower Shops
Davie, FL 33324
Illinois
Crossroads
Highland Park, IL 60035
Finley Square
Downers Grove, IL 60515
Garden Market
Western Springs, IL 60558
North Lake Commons
Lake Zurich, IL 60047
Maryland
Bethesda Row
Bethesda, MD 20814(4)
Bethesda Row Residential
Bethesda, MD 20814
Congressional Plaza
Rockville, MD 20852(5)
Congressional Plaza Residential
Rockville, MD 20852(5)
Courthouse Center
Rockville, MD 20852
Federal Plaza
Rockville, MD 20852
Free State Shopping Center
Bowie, MD 20715(9)
Year
Completed
Year
Acquired
Square Feet(1)
/Apartment
Units
Average Rent
Per Square
Foot(2)
Percentage
Leased(3)
Principal Tenant(s)
1959
1995
266,000
1920-2009
2013
1968
1995
95,000
36,000
$13.17
$28.30
92%
97%
Stop & Shop
TJ Maxx
Stop & Shop
Equinox
$61.00
100%
Saks Fifth Avenue
1998
2001
119,000
$28.12
100%
Marshalls
DSW
Maggiano’s
Nordstrom Rack
1930
1995
49,000
$44.28
86%
Petco
1990/1994,
1922-1973
1982, 1994
& 2007
2015
216,000
$36.20
82%
2008/2014
196,000
1999
2015
515,000
$16.21
$22.53
74%
82%
1989
2011/2014
389,000
$20.14
98%
1959
1993
168,000
$22.29
91%
1974
1995
315,000
$12.49
91%
Cinepolis Theaters
Gap
Youfit Health Club
Winn Dixie
CVS
AMC Theaters
L.A. Fitness
Barnes & Noble
GameTime
Ulta
Best Buy
DSW
Old Navy
Ross Dress For Less
TJ Maxx
Trader Joe's
Golfsmith
Guitar Center
L.A. Fitness
Bed, Bath & Beyond
Petsmart
Buy Buy Baby
Michaels
Mariano's Fresh Market
Walgreens
1958
1989
1994
1994
140,000
$13.30
100%
129,000
$10.95
85%
Jewel Osco
1945-1991
2001, 2008
1993-2006
2008/2010
533,000
$49.07
98%
2008
1965
2003
1975
1970
1993
1965
1965
1997
1989
180 units
N/A
325,000
$40.10
146 units
N/A
35,000
248,000
$23.60
$34.48
95%
97%
91%
66%
99%
1970
2007
279,000
$16.61
94%
Apple Computer
Barnes & Noble
Equinox
Giant Food
Landmark Theater
Buy Buy Baby
Last Call Studio by Neiman
Marcus
Container Store
The Fresh Market
Micro Center
Ross Dress For Less
TJ Maxx
Trader Joe’s
Giant Food
TJ Maxx
Ross Dress For Less
Office Depot
19
FEDERAL REALTY | ANNUAL REPORT 2015 Property, City, State, Zip Code
Gaithersburg Square
Gaithersburg, MD 20878
Governor Plaza
Glen Burnie, MD 21961
Laurel
Laurel, MD 20707
Year
Completed
Year
Acquired
Square Feet(1)
/Apartment
Units
Average Rent
Per Square
Foot(2)
Percentage
Leased(3)
1966
1993
207,000
$26.53
92%
1963
1985
243,000
$18.95
100%
1956
1986
389,000
$22.41
80%
Montrose Crossing
Rockville, MD 20852 (5)(10)
1960-1979,
1996, 2011
2011/2013
366,000
$24.56
93%
Perring Plaza
Baltimore, MD 21134
1963
1985
395,000
$14.35
100%
Pike & Rose
North Bethesda, MD 20852 (12)
1963, 2014
1982/2007/
2012
208,000
$44.14
2014
1982/2007
389 units
N/A
1969
1975
2004
1993
96,000
$35.46
92%
CVS
267,000
$21.78
96%
96%
73%
2006-2007
2006-2007
187,000
$29.59
1960
1971
282 units
N/A
93%
95%
1997
2007
305,000
$24.24
99%
Principal Tenant(s)
Bed, Bath & Beyond
Ross Dress For Less
Ashley Furniture
HomeStore
Aldi
Dick’s Sporting Goods
L.A. Fitness
Giant Food
Marshalls
A.C. Moore
Giant Food
Sports Authority
Barnes & Noble
Marshalls
Micro Center
Burlington Coat Factory
Home Depot
Shoppers Food Warehouse
Jo-Ann Stores
iPic Theater
Gap/Gap Kids
Sport & Health
Aldi
HomeGoods
L.A. Fitness
Staples
CVS
Gold’s Gym
AMC Loews
Old Navy
Barnes & Noble
A.C. Moore
The Shoppes at Nottingham Square
Baltimore, MD 21236
2005-2006
2007
1985
1987
1958
2007
2007
1969
32,000
73,000
80,000
84,000
$48.13
100%
$31.67
98%
$21.80
96%
Giant Food
$95.44
99%
CVS
Balducci’s
Pike & Rose Residential
North Bethesda, MD 20852 (12)
Plaza Del Mercado
Silver Spring, MD 20906(9)
Quince Orchard
Gaithersburg, MD 20877(4)
Rockville Town Square
Rockville, MD 20852 (8)
Rollingwood Apartments
Silver Spring, MD 20910
9 three-story buildings(10)
THE AVENUE at White Marsh
Baltimore, MD 21236(7)(10)
White Marsh Other
Baltimore, MD 21236
White Marsh Plaza
Baltimore, MD 21236
Wildwood
Bethesda, MD 20814
Massachusetts
Assembly Row/
Assembly Square Marketplace
Somerville, MA 02145 (12)
Atlantic Plaza
North Reading, MA 01864(9)
Campus Plaza
Bridgewater, MA 02324(9)
Chelsea Commons
Chelsea, MA 02150(10)
Chelsea Commons Residential
Chelsea, MA 02150
Dedham Plaza
Dedham, MA 02026
2005, 2014
2005-2011,
2013
738,000
$22.49
100%
1960
1970
2004
2004
123,000
116,000
1962-1969,
2008
2006-2008
222,000
$15.83
$14.86
$11.43
90%
100%
100%
AMC Theatres
LEGOLAND Discovery
Center
Saks Fifth Avenue Off 5th
Nike Factory
J. Crew
Legal on the Mystic
Bed, Bath & Beyond
TJ Maxx
Stop & Shop
Roche Brothers
Burlington Coat Factory
Sav-A-Lot
Home Depot
Planet Fitness
2013
1959
2008
1993
56 units
N/A
95%
241,000
$15.90
92%
Star Market
20
Property, City, State, Zip Code
Linden Square
Wellesley, MA 02481
North Dartmouth
North Dartmouth, MA 02747
Queen Anne Plaza
Norwell, MA 02061
Saugus Plaza
Saugus, MA 01906
Michigan
Gratiot Plaza
Roseville, MI 48066
North Carolina
Eastgate
Chapel Hill, NC 27514
New Jersey
Brick Plaza
Brick Township, NJ 08723(4)
Brook 35
Sea Girt, NJ 08750(5)(7)(10)
Ellisburg
Cherry Hill, NJ 08034
Mercer Mall
Lawrenceville, NJ 08648(4)(8)
Year
Completed
1960, 2008
Year
Acquired
2006
Square Feet(1)
/Apartment
Units
Average Rent
Per Square
Foot(2)
Percentage
Leased(3)
223,000
$46.08
94%
Principal Tenant(s)
Roche Brothers
Supermarket
CVS
48,000
$15.71
100%
Stop & Shop
2004
1967
2006
1994
149,000
$16.64
100%
1976
1996
168,000
$11.99
100%
1964
1973
217,000
$11.91
99%
1963
1986
153,000
$24.06
91%
1958
1989
422,000
$19.56
74%
1986, 2004
2014
98,000
$34.79
98%
1959
1992
268,000
$15.94
1975
2003
527,000
$23.60
97%
99%
HomeGoods
TJ Maxx
Hannaford
Kmart
Super Stop & Shop
Bed, Bath & Beyond
Best Buy
Kroger
DSW
Stein Mart
Trader Joe’s
Barnes & Noble
AMC Loews
Sports Authority
Ann Taylor
Banana Republic
Coach
Williams-Sonoma
Whole Foods
Buy Buy Baby
Stein Mart
Raymour & Flanigan
Bed, Bath & Beyond
DSW
TJ Maxx
Shop Rite
Nordstrom Rack
REI
Lululemon
Brooks Brothers
Anthropologie
Pottery Barn
J. Crew
Banana Republic
Williams-Sonoma
The Grove at Shrewsbury
Shrewsbury, NJ 07702(5)(7)(10)
1988, 1993
& 2007
2014
192,000
$43.51
99%
Troy
Parsippany-Troy, NJ 07054
New York
Fresh Meadows
Queens, NY 11365
Greenlawn Plaza
Greenlawn, NY 11743(9)(10)
Hauppauge
Hauppauge, NY 11788
Huntington
Huntington, NY 11746
Huntington Square
East Northport, NY 11731(4)
Melville Mall
Huntington, NY 11747(4)
1966
1980
211,000
$27.92
67%
L.A. Fitness
1949
1997
404,000
$30.60
100%
1975, 2004
2006
106,000
1963
1998
134,000
1962
1988/2007
279,000
$17.18
$28.10
$25.92
93%
100%
100%
Island of Gold
Modell's
AMC Loews
Kohl’s
Michaels
Greenlawn Farms
Tuesday Morning
Shop Rite
A.C. Moore
Nordstrom Rack
Bed, Bath & Beyond
Buy Buy Baby
Michaels
1980, 2007
2010
74,000
$26.90
93%
Barnes & Noble
1974
2006
247,000
$24.01
73%
Dick's Sporting Goods
Marshalls
Macy's Backstage
21
FEDERAL REALTY | ANNUAL REPORT 2015 Year
Completed
Year
Acquired
Square Feet(1)
/Apartment
Units
Average Rent
Per Square
Foot(2)
Percentage
Leased(3)
Principal Tenant(s)
Property, City, State, Zip Code
Pennsylvania
Andorra
Philadelphia, PA 19128
Bala Cynwyd
Bala Cynwyd, PA 19004
Flourtown
Flourtown, PA 19031
Lancaster
Lancaster, PA 17601(8)
Langhorne Square
Levittown, PA 19056
Lawrence Park
Broomall, PA 19008
Northeast
Philadelphia, PA 19114
Town Center of New Britain
New Britain, PA 18901
Willow Grove
Willow Grove, PA 19090
Wynnewood
Wynnewood, PA 19096
Virginia
29th Place
Charlottesville, VA 22091(10)
1953
1988
265,000
$15.65
95%
1955
1993
294,000
$23.77
100%
1957
1958
1966
1980
1980
1985
156,000
127,000
$20.81
$17.73
97%
97%
219,000
$17.39
100%
1972
1980
364,000
$20.45
96%
1959
1983
288,000
$12.02
87%
1969
1953
2006
1984
124,000
$9.91
211,000
$19.51
90%
99%
1948
1996
251,000
$27.24
100%
1975-2001
2007
169,000
$17.60
98%
Barcroft Plaza
Falls Church, VA 22041(9)(10)
1963, 1972
& 1990
2006-2007
100,000
Barracks Road
Charlottesville, VA 22905
1958
1985
497,000
$24.61
$25.05
92%
99%
Falls Plaza/Falls Plaza—East
Falls Church, VA 22046
Graham Park Plaza
Fairfax, VA 22042
Idylwood Plaza
Falls Church, VA 22030
Leesburg Plaza
Leesburg, VA 20176
1960-1962
1967/1972
144,000
$34.43
97%
1971
1983
260,000
$27.77
93%
1991
1967
1994
1998
73,000
$46.59
100%
236,000
$23.04
94%
Mount Vernon/South Valley/
7770 Richmond Hwy
Alexandria, VA 22306(4)(7)
1966,
1972,1987
& 2001
2003/2006
569,000
$17.14
97%
Old Keene Mill
Springfield, VA 22152
1968
1976
92,000
$41.19
84%
22
Acme Markets
Kohl’s
Staples
L.A. Fitness
Acme Markets
Lord & Taylor
Michaels
L.A. Fitness
Giant Food
Movie Tavern
Giant Food
Michaels
Marshalls
Redner’s Warehouse
Market
Acme Markets
TJ Maxx
HomeGoods
Virginia College
Burlington Coat Factory
Home Gallery
Marshalls
Giant Food
Rite Aid
Home Goods
Marshalls
Barnes & Noble
DSW
Bed, Bath & Beyond
Giant Food
Old Navy
HomeGoods
DSW
Stein Mart
Staples
Harris Teeter
Bank of America
Anthropologie
Bed, Bath & Beyond
Harris Teeter
Kroger
Barnes & Noble
Old Navy
Michaels
Ulta
Giant Food
CVS
Staples
Stein Mart
Giant Food
L.A. Fitness
Whole Foods
Giant Food
Pier 1 Imports
Office Depot
Petsmart
Shoppers Food Warehouse
Bed, Bath & Beyond
Michaels
Home Depot
TJ Maxx
Gold’s Gym
Staples
DSW
Whole Foods
Walgreens
Property, City, State, Zip Code
Pan Am
Fairfax, VA 22031
Pentagon Row
Arlington, VA 22202
Pike 7 Plaza
Vienna, VA 22180
Tower Shopping Center
Springfield, VA 22150
Tyson’s Station
Falls Church, VA 22043
Village at Shirlington
Arlington, VA 22206(8)
Willow Lawn
Richmond, VA 23230
Total All Regions—Retail(11)
Total All Regions—Residential
_____________________
Year
Completed
Year
Acquired
Square Feet(1)
/Apartment
Units
Average Rent
Per Square
Foot(2)
Percentage
Leased(3)
1979
1993
227,000
$22.37
98%
2001-2002
1998/2010
299,000
$38.63
78%
1968
1997/2015
164,000
$42.75
99%
1960
1998
112,000
$24.38
92%
Principal Tenant(s)
Michaels
Micro Center
Safeway
Harris Teeter
Bed, Bath & Beyond
DSW
DSW
Staples
TJ Maxx
Talbots
L.A. Mart
Total Wine & More
49,000
$43.20
92%
Trader Joe's
1954
1940,
2006-2009
1978
1995
265,000
$36.17
88%
1957
1983
445,000
$17.91
93%
21,379,000
1,715 units
$26.28
94%
90%
AMC Loews
Carlyle Grand Café
Harris Teeter
Kroger
Old Navy
Ross Dress For Less
Staples
(1) Represents the GLA of the commercial portion of the property. Some of our properties include office space which is included in this square footage
but is not material in total.
(2) Average base rent is calculated as the aggregate, annualized in-place contractual (defined as cash basis including adjustments for concessions)
minimum rent for all occupied spaces divided by the aggregate GLA of all occupied spaces.
(3) Percentage leased is expressed as a percentage of rentable commercial square feet occupied or subject to a lease. Residential percentage leased is
expressed as a percentage of units occupied or subject to a lease.
(4) All or a portion of this property is owned pursuant to a ground lease.
(5) We own the controlling interest in this center.
(6) We own a 90% general and limited partnership interest in these buildings.
(7) We own all or a portion of this property in a “downREIT” partnership, of which a wholly owned subsidiary of the Trust is the sole general partner,
with third party partners holding operating partnership units.
(8) All or a portion of this property is subject to a capital lease obligation.
(9) Properties acquired through a joint venture arrangement with affiliates of a discretionary fund created and advised by Clarion Partners. On January
13, 2016, we acquired Clarion's 70% interest in these properties.
(10) All or a portion of this property is encumbered by a mortgage loan.
(11) Aggregate information is calculated on a GLA weighted-average basis, excluding properties owned through a joint venture arrangement with
affiliates of a discretionary fund created and advised by Clarion Partners.
(12) Portion of property is currently under development. See further discussion in Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
(13) This property includes partial interests in eight buildings in addition to our initial acquisition. See further discussion in Note 3 to the Financial
Statements.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
23
FEDERAL REALTY | ANNUAL REPORT 2015 PART II
ITEM 5. MARKET FOR OUR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Our common shares trade on the New York Stock Exchange under the symbol “FRT.” Listed below are the high and low
closing prices of our common shares as reported on the New York Stock Exchange and the dividends declared for each of the
periods indicated.
2015.......................................................................................................................
Fourth quarter................................................................................................. $
Third quarter .................................................................................................. $
Second quarter ............................................................................................... $
First quarter.................................................................................................... $
2014.......................................................................................................................
Fourth quarter................................................................................................. $
Third quarter .................................................................................................. $
Second quarter ............................................................................................... $
First quarter.................................................................................................... $
On February 5, 2016, there were 2,840 holders of record of our common shares.
Price Per Share
High
Low
Dividends
Declared
Per Share
149.96
139.05
149.20
150.27
137.18
125.80
123.11
114.72
$
$
$
$
$
$
$
$
135.60
124.96
127.84
135.74
118.28
117.12
112.07
100.90
$
$
$
$
$
$
$
$
0.940
0.940
0.870
0.870
0.870
0.870
0.780
0.780
Our ongoing operations generally will not be subject to federal income taxes as long as we maintain our REIT status and
distribute to shareholders at least 100% of our taxable income. Under the Code, REITs are subject to numerous organizational
and operational requirements, including the requirement to generally distribute at least 90% of taxable income.
Future distributions will be at the discretion of our Board of Trustees and will depend on our actual net income available for
common shareholders, financial condition, capital requirements, the annual distribution requirements under the REIT
provisions of the Code and such other factors as the Board of Trustees deems relevant. We have paid quarterly dividends to our
shareholders continuously since our founding in 1962 and have increased our regular annual dividend rate for 48 consecutive
years.
Our total annual dividends paid per common share for 2015 and 2014 were $3.55 per share and $3.21 per share, respectively.
The annual dividend amounts are different from dividends as calculated for federal income tax purposes. Distributions to the
extent of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to a
shareholder as ordinary dividend income. Distributions in excess of current and accumulated earnings and profits will be
treated as a nontaxable reduction of the shareholder’s basis in such shareholder’s shares, to the extent thereof, and thereafter as
taxable capital gain. Distributions that are treated as a reduction of the shareholder’s basis in its shares will have the effect of
increasing the amount of gain, or reducing the amount of loss, recognized upon the sale of the shareholder’s shares. No
assurances can be given regarding what portion, if any, of distributions in 2016 or subsequent years will constitute a return of
capital for federal income tax purposes. During a year in which a REIT earns a net long-term capital gain, the REIT can elect
under Section 857(b)(3) of the Code to designate a portion of dividends paid to shareholders as capital gain dividends. If this
election is made, then the capital gain dividends are generally taxable to the shareholder as long-term capital gains.
The following table reflects the income tax status of distributions per share paid to common shareholders:
Ordinary dividend........................................................................................................................... $
Capital gain.....................................................................................................................................
$
Year Ended
December 31,
2015
2014
3.515
0.035
3.550
$
$
3.178
0.032
3.210
Distributions on our 5.417% Series 1 Cumulative Convertible Preferred Shares were paid at the rate of $1.354 per share per
annum commencing on the issuance date of March 8, 2007. We do not believe that the preferential rights available to the
holders of our preferred shares or the financial covenants contained in our debt agreements had or will have an adverse effect
24
on our ability to pay dividends in the normal course of business to our common shareholders or to distribute amounts necessary
to maintain our qualification as a REIT.
Total Stockholder Return Performance
The following performance graph compares the cumulative total shareholder return on Federal Realty's common shares with
the S&P 500 Index and the index of equity real estate investment trusts prepared by the National Association of Real Estate
Investment Trusts ("NAREIT") for the five fiscal years commencing December 31, 2010, and ending December 31, 2015,
assuming an investment of $100 and the reinvestment of all dividends into additional common shares during the holding
period. Equity real estate investment trusts are defined as those that derive more than 75% of their income from equity
investments in real estate assets. The FTSE NAREIT Equity REIT Total Return Index includes all tax qualified real estate
investment trusts listed on the NYSE, NYSE Amex (formerly known as the American Stock Exchange), or the NASDAQ
National Market. Stock performance for the past five years is not necessarily indicative of future results.
Recent Sales of Unregistered Shares
Under the terms of various operating partnership agreements of certain of our affiliated limited partnerships, the interest of
limited partners in those limited partnerships may be redeemed, subject to certain conditions, for cash or an equivalent number
of our common shares, at our option. During the three months ended December 31, 2015, there were no redemptions of
operating partnership units. All other equity securities sold by us during 2015 that were not registered have been previously
reported in a Quarterly Report on Form 10-Q.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During 2015, 9,915 restricted common shares were forfeited by former employees.
The following information describes stock repurchases during the fourth quarter of the fiscal year ended December 31, 2015:
25
FEDERAL REALTY | ANNUAL REPORT 2015 Period
Total number of shares
purchased (1)
Average price
paid per share
Total number of shares
purchased as part of
publicly announced plans
or programs
Maximum number or
approximate dollar amount
of shares that may yet be
purchased under the plans
or programs
October 1, 2015 - October 31, 2015
29,064
$
142.05
—
$
—
(1) Represents shares delivered in payment of withholding taxes in connection with restricted stock vesting by participants.
26
ITEM 6. SELECTED FINANCIAL DATA
The following table includes certain financial information on a consolidated historical basis. You should read this section in
conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item
8. Financial Statements and Supplementary Data.”
Year Ended December 31,
2015
2014
2013
2012
2011
(In thousands, except per share data and ratios)
Operating Data:
Rental income ...................................................... $ 727,812 $ 666,322 $ 620,089 $ 580,114 $ 536,749
Property operating income(1) .............................. $ 510,595 $ 474,167 $ 446,959 $ 426,721 $ 381,335
Income from continuing operations ..................... $ 190,094 $ 167,888 $ 137,811 $ 142,972 $ 130,319
Gain on sale of real estate .................................... $
15,075
28,330 $
Net income ........................................................... $ 218,424 $ 172,289 $ 167,608 $ 156,232 $ 149,612
Net income attributable to the Trust..................... $ 210,219 $ 164,535 $ 162,681 $ 151,925 $ 143,917
Net income available for common shareholders.. $ 209,678 $ 163,994 $ 162,140 $ 151,384 $ 143,376
Net cash provided by operating activities............ $ 359,835 $ 346,130 $ 314,498 $ 296,633 $ 244,711
Net cash used in investing activities .................... $ (353,763)
$ (196,369)
Net cash (used in) provided by financing
activities ............................................................... $ (32,977)
3,667
Dividends declared on common shares................ $ 250,388 $ 224,190 $ 198,965 $ 182,813 $ 171,335
Weighted average number of common shares
outstanding:
11,860 $
28,855 $
$ (53,893)
$ (396,150)
$ (345,198)
$ (273,558)
4,401 $
82,639
9,044
$
$
$
Basic .............................................................
Diluted ..........................................................
68,797
68,981
67,322
67,492
65,331
65,483
63,881
64,056
62,438
62,603
Earnings per common share, basic:
Continuing operations................................... $
Discontinued operations ...............................
Gain on sale of real estate.............................
Total.............................................................. $
2.63 $
2.35 $
2.01 $
2.15 $
—
0.41
—
0.07
0.38
0.08
0.02
0.19
3.04 $
2.42 $
2.47 $
2.36 $
Earnings per common share, diluted:
Continuing operations................................... $
Discontinued operations ...............................
2.62 $
2.34 $
2.00 $
2.14 $
—
—
0.38
0.02
1.98
0.31
—
2.29
1.97
0.31
0.08
0.07
0.41
3.03 $
Gain on sale of real estate.............................
Total.............................................................. $
Dividends declared per common share ................ $
Other Data:
Funds from operations available to common
shareholders(2)..................................................... $ 352,857 $ 327,597 $ 289,938 $ 277,237 $ 251,576
EBITDA(3) .......................................................... $ 504,696 $ 447,495 $ 446,555 $ 410,918 $ 374,131
Adjusted EBITDA(3)........................................... $ 476,366 $ 443,094 $ 417,700 $ 399,058 $ 357,030
Ratio of EBITDA to combined fixed charges
and preferred share dividends(3)(4).....................
3.02 $
3.30 $
3.62 $
2.84 $
2.35 $
2.41 $
2.46 $
0.19
2.72
2.28
—
3.3 x
3.9 x
3.5 x
3.3 x
3.5 x
Ratio of Adjusted EBITDA to combined fixed
charges and preferred share dividends(3)(4)........
3.6 x
3.5 x
3.1 x
3.2 x
3.3 x
27
FEDERAL REALTY | ANNUAL REPORT 2015 2015
2014
2013
2012
2011
As of December 31,
(In thousands)
Balance Sheet Data:
Real estate, at cost.............................................. $ 6,064,406
Total assets......................................................... $ 4,911,709
Mortgages payable and capital lease
554,442
obligations.......................................................... $
Notes payable..................................................... $
343,600
Senior notes and debentures............................... $ 1,744,324
9,997
Preferred shares.................................................. $
$ 1,781,931
Shareholders’ equity
69,493
Number of common shares outstanding ............
$ 5,608,998
$ 4,546,870
$ 5,149,463
$ 4,219,294
$ 4,779,674
$ 3,898,565
$ 4,426,444
$ 3,666,210
635,345
$
$
290,519
$ 1,483,813
9,997
$
$ 1,692,556
68,606
660,127
$
$
300,822
$ 1,360,913
9,997
$
$ 1,471,297
66,701
832,482
$
$
299,575
$ 1,076,545
9,997
$
$ 1,310,593
64,815
810,616
$
$
295,159
$ 1,004,635
9,997
$
$ 1,240,604
63,544
(1) Property operating income is a non-GAAP measure that consists of rental income, other property income and mortgage
interest income, less rental expenses and real estate taxes. This measure is used internally to evaluate the performance of
property operations and we consider it to be a significant measure. Property operating income should not be considered an
alternative measure of operating results or cash flow from operations as determined in accordance with GAAP.
The reconciliation of operating income to property operating income is as follows:
2015
2014
2013
2012
2011
Operating income ..................................................... $ 300,154
35,645
General and administrative.......................................
Depreciation and amortization .................................
174,796
Property operating income ....................................... $ 510,595
$ 271,037
32,316
170,814
$ 474,167
(In thousands)
$ 254,161
31,970
160,828
$ 446,959
$ 253,862
31,158
141,701
$ 426,721
$
$
226,462
28,985
125,888
381,335
(2) Funds from operations ("FFO") is a supplemental non-GAAP financial measure of real estate companies’ operating
performances. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as follows: net
income, computed in accordance with U.S. GAAP, plus real estate related depreciation and amortization and excluding
extraordinary items and gains on the sale of real estate. We compute FFO in accordance with the NAREIT definition, and
we have historically reported our FFO available for common shareholders in addition to our net income.
We consider FFO available for common shareholders a meaningful, additional measure of operating performance primarily
because it excludes the assumption that the value of the real estate assets diminishes predictably over time, as implied by
the historical cost convention of GAAP and the recording of depreciation. We use FFO primarily as one of several means
of assessing our operating performance in comparison with other REITs. Comparison of our presentation of FFO to
similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application
of the NAREIT definition used by such REITs. Additional information regarding our calculation of FFO is contained in
“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The reconciliation of net income to FFO available for common shareholders is as follows:
Net income ................................................................... $ 218,424
$ 172,289
$ 167,608
$ 156,232
$ 149,612
Net income attributable to noncontrolling interests.....
Gain on sale of real estate ............................................
Gain on deconsolidation of VIE ..................................
Depreciation and amortization of real estate assets .....
Amortization of initial direct costs of leases................
Depreciation of joint venture real estate assets............
Dividends on preferred shares .....................................
Income attributable to operating partnership units ......
Income attributable to unvested shares ........................
Funds from operations available for common
2015
2014
2013
2012
2011
(In thousands)
(8,205)
(28,330)
—
152,888
15,026
1,344
(541)
3,398
(1,147)
(7,754)
(4,401)
—
152,505
12,391
1,555
(541)
3,027
(1,474)
(4,927)
(28,855)
—
144,873
10,694
1,504
(4,307)
(11,860)
—
125,611
10,935
1,513
(5,695)
(15,075)
(2,026)
113,188
10,432
1,771
(541)
888
(541)
943
(541)
981
(1,306)
(1,289)
(1,071)
Funds from operations .................................................
351,147
326,585
290,897
278,124
252,207
shareholders ................................................................. $ 352,857
$ 327,597
$ 289,938
$ 277,237
$ 251,576
(3) The SEC has stated that EBITDA is a non-GAAP measure as calculated in the table below. Adjusted EBITDA is a non-
GAAP measure that means net income or loss plus net interest expense, income taxes, depreciation and amortization, gain
or loss on sale of real estate and impairments of real estate if any. Adjusted EBITDA is presented because it approximates a
key performance measure in our debt covenants, but it should not be considered an alternative measure of operating results
or cash flow from operations as determined in accordance with GAAP. Adjusted EBITDA as presented may not be
comparable to other similarly titled measures used by other REITs.
The reconciliation of net income to EBITDA and adjusted EBITDA for the periods presented is as follows:
2015
2014
2013
2012
2011
(In thousands)
Net income ............................................................... $ 218,424
$ 172,289
$ 167,608
$ 156,232
$
149,612
Depreciation and amortization .................................
174,796
170,814
Interest expense ........................................................
Early extinguishment of debt ...................................
Other interest income ...............................................
EBITDA ...................................................................
Gain on sale of real estate ........................................
Gain on deconsolidation of VIE
92,553
19,072
(149)
504,696
(28,330)
—
93,941
10,545
(94)
447,495
(4,401)
—
161,099
104,977
13,304
(433)
446,555
(28,855)
—
142,039
113,336
—
(689)
410,918
(11,860)
—
126,568
98,465
(296)
(218)
374,131
(15,075)
(2,026)
Adjusted EBITDA.................................................... $ 476,366
$ 443,094
$ 417,700
$ 399,058
$
357,030
(4) Fixed charges consist of interest on borrowed funds (including capitalized interest), amortization of debt discount/
premiums and debt costs, costs related to the early extinguishment of debt, and the portion of rent expense representing an
interest factor. Excluding the $19.1 million, $10.5 million, and $13.3 million of early extinguishment of debt charge from
fixed charges in 2015, 2014, and 2013, respectively, the ratio of EBITDA and adjusted EBITDA to combined fixed charges
and preferred share dividends is 4.5x and 4.3x, respectively, for 2015, 3.9x and 3.8x, respectively, for 2014, and 3.7x and
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
3.4x, respectively for 2013.
OPERATIONS
Forward-Looking Statements
Certain statements in this section or elsewhere in this report may be deemed “forward-looking statements”. See “Item 1A. Risk
Factors” in this report for important information regarding these forward-looking statements and certain risk and uncertainties
28
29
2015
2014
2013
2012
2011
As of December 31,
(In thousands)
Balance Sheet Data:
Real estate, at cost.............................................. $ 6,064,406
$ 5,608,998
$ 5,149,463
$ 4,779,674
$ 4,426,444
Total assets......................................................... $ 4,911,709
$ 4,546,870
$ 4,219,294
$ 3,898,565
$ 3,666,210
Mortgages payable and capital lease
obligations.......................................................... $
Notes payable..................................................... $
Senior notes and debentures............................... $ 1,744,324
$ 1,483,813
$ 1,360,913
$ 1,076,545
$ 1,004,635
Preferred shares.................................................. $
9,997
9,997
9,997
9,997
9,997
Shareholders’ equity
$ 1,781,931
$ 1,692,556
$ 1,471,297
$ 1,310,593
$ 1,240,604
Number of common shares outstanding ............
69,493
68,606
66,701
64,815
63,544
554,442
343,600
635,345
290,519
660,127
300,822
832,482
299,575
810,616
295,159
$
$
$
$
$
$
$
$
$
$
$
$
(1) Property operating income is a non-GAAP measure that consists of rental income, other property income and mortgage
interest income, less rental expenses and real estate taxes. This measure is used internally to evaluate the performance of
property operations and we consider it to be a significant measure. Property operating income should not be considered an
alternative measure of operating results or cash flow from operations as determined in accordance with GAAP.
The reconciliation of operating income to property operating income is as follows:
2015
2014
2013
2012
2011
(In thousands)
Operating income ..................................................... $ 300,154
$ 271,037
$ 254,161
$ 253,862
$
226,462
General and administrative.......................................
Depreciation and amortization .................................
35,645
174,796
32,316
170,814
31,970
160,828
31,158
141,701
28,985
125,888
Property operating income ....................................... $ 510,595
$ 474,167
$ 446,959
$ 426,721
$
381,335
(2) Funds from operations ("FFO") is a supplemental non-GAAP financial measure of real estate companies’ operating
performances. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as follows: net
income, computed in accordance with U.S. GAAP, plus real estate related depreciation and amortization and excluding
extraordinary items and gains on the sale of real estate. We compute FFO in accordance with the NAREIT definition, and
we have historically reported our FFO available for common shareholders in addition to our net income.
We consider FFO available for common shareholders a meaningful, additional measure of operating performance primarily
because it excludes the assumption that the value of the real estate assets diminishes predictably over time, as implied by
the historical cost convention of GAAP and the recording of depreciation. We use FFO primarily as one of several means
of assessing our operating performance in comparison with other REITs. Comparison of our presentation of FFO to
similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application
of the NAREIT definition used by such REITs. Additional information regarding our calculation of FFO is contained in
“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The reconciliation of net income to FFO available for common shareholders is as follows:
2015
2014
2013
2012
2011
Gain on sale of real estate ............................................
Gain on deconsolidation of VIE ..................................
Depreciation and amortization of real estate assets .....
Net income ................................................................... $ 218,424
Net income attributable to noncontrolling interests.....
(8,205)
(28,330)
—
152,888
15,026
1,344
351,147
(541)
3,398
(1,147)
Funds from operations .................................................
Dividends on preferred shares .....................................
Income attributable to operating partnership units ......
Amortization of initial direct costs of leases................
Depreciation of joint venture real estate assets............
Income attributable to unvested shares ........................
Funds from operations available for common
shareholders ................................................................. $ 352,857
$ 172,289
(7,754)
(4,401)
—
152,505
12,391
1,555
326,585
(541)
3,027
(1,474)
(In thousands)
$ 167,608
(4,927)
(28,855)
—
144,873
10,694
1,504
290,897
(541)
888
(1,306)
$ 156,232
(4,307)
(11,860)
—
125,611
10,935
1,513
278,124
(541)
943
(1,289)
$ 149,612
(5,695)
(15,075)
(2,026)
113,188
10,432
1,771
252,207
(541)
981
(1,071)
$ 327,597
$ 289,938
$ 277,237
$ 251,576
(3) The SEC has stated that EBITDA is a non-GAAP measure as calculated in the table below. Adjusted EBITDA is a non-
GAAP measure that means net income or loss plus net interest expense, income taxes, depreciation and amortization, gain
or loss on sale of real estate and impairments of real estate if any. Adjusted EBITDA is presented because it approximates a
key performance measure in our debt covenants, but it should not be considered an alternative measure of operating results
or cash flow from operations as determined in accordance with GAAP. Adjusted EBITDA as presented may not be
comparable to other similarly titled measures used by other REITs.
The reconciliation of net income to EBITDA and adjusted EBITDA for the periods presented is as follows:
2015
2014
2013
2012
2011
Net income ............................................................... $ 218,424
174,796
Depreciation and amortization .................................
92,553
Interest expense ........................................................
19,072
Early extinguishment of debt ...................................
(149)
Other interest income ...............................................
504,696
EBITDA ...................................................................
(28,330)
Gain on sale of real estate ........................................
—
Gain on deconsolidation of VIE
Adjusted EBITDA.................................................... $ 476,366
$ 172,289
170,814
93,941
10,545
(94)
447,495
(4,401)
—
$ 443,094
(In thousands)
$ 167,608
161,099
104,977
13,304
(433)
446,555
(28,855)
—
$ 417,700
$ 156,232
142,039
113,336
—
(689)
410,918
(11,860)
—
$ 399,058
$
$
149,612
126,568
98,465
(296)
(218)
374,131
(15,075)
(2,026)
357,030
(4) Fixed charges consist of interest on borrowed funds (including capitalized interest), amortization of debt discount/
premiums and debt costs, costs related to the early extinguishment of debt, and the portion of rent expense representing an
interest factor. Excluding the $19.1 million, $10.5 million, and $13.3 million of early extinguishment of debt charge from
fixed charges in 2015, 2014, and 2013, respectively, the ratio of EBITDA and adjusted EBITDA to combined fixed charges
and preferred share dividends is 4.5x and 4.3x, respectively, for 2015, 3.9x and 3.8x, respectively, for 2014, and 3.7x and
3.4x, respectively for 2013.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking Statements
Certain statements in this section or elsewhere in this report may be deemed “forward-looking statements”. See “Item 1A. Risk
Factors” in this report for important information regarding these forward-looking statements and certain risk and uncertainties
28
29
FEDERAL REALTY | ANNUAL REPORT 2015 that may affect us. The following discussion should be read in conjunction with the consolidated financial statements and notes
thereto appearing in “Item 8. Financial Statements and Supplementary Data” of this report.
Overview
We are an equity real estate investment trust (“REIT”) specializing in the ownership, management, and redevelopment of high
quality retail and mixed-use properties located primarily in densely populated and affluent communities in strategically selected
metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as in California and South Florida.
As of December 31, 2015, we owned or had a majority interest in community and neighborhood shopping centers and mixed-
use properties which are operated as 90 predominantly retail real estate projects comprising approximately 21.4 million square
feet. In total, the real estate projects were 94.3% leased and 93.5% occupied at December 31, 2015. A joint venture in which we
owned a 30% interest owned six retail real estate projects totaling approximately 0.8 million square feet as of December 31,
2015. In total, the joint venture properties in which we owned a 30% interest were 93.6% leased and 85.3% occupied at
December 31, 2015. On January 13, 2016, we acquired our partner's 70% interest in the joint venture and subsequently own
100% of the related properties. We have paid quarterly dividends to our shareholders continuously since our founding in 1962
and have increased our dividends per common share for 48 consecutive years.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America, referred to as “GAAP”, requires management to make estimates and assumptions that in certain circumstances affect
the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These
estimates are prepared using management’s best judgment, after considering past and current events and economic conditions.
In addition, information relied upon by management in preparing such estimates includes internally generated financial and
operating information, external market information, when available, and when necessary, information obtained from
consultations with third party experts. Actual results could differ from these estimates. A discussion of possible risks which may
affect these estimates is included in “Item 1A. Risk Factors” of this report. Management considers an accounting estimate to be
critical if changes in the estimate could have a material impact on our consolidated results of operations or financial condition.
Our significant accounting policies are more fully described in Note 2 to the consolidated financial statements; however, the
most critical accounting policies, which involve the use of estimates and assumptions as to future uncertainties and, therefore,
may result in actual amounts that differ from estimates, are as follows:
Revenue Recognition and Accounts Receivable
Our leases with tenants are classified as operating leases. Substantially all such leases contain fixed escalations which occur at
specified times during the term of the lease. Base rents are recognized on a straight-line basis from when the tenant controls the
space through the term of the related lease, net of valuation adjustments, based on management’s assessment of credit,
collection and other business risk. Percentage rents, which represent additional rents based upon the level of sales achieved by
certain tenants, are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved
and the percentage rents are collectible. Real estate tax and other cost reimbursements are recognized on an accrual basis over
the periods in which the related expenditures are incurred. For a tenant to terminate its lease agreement prior to the end of the
agreed term, we may require that they pay a fee to cancel the lease agreement. Lease termination fees for which the tenant has
relinquished control of the space are generally recognized on the termination date. When a lease is terminated early but the
tenant continues to control the space under a modified lease agreement, the lease termination fee is generally recognized evenly
over the remaining term of the modified lease agreement.
Current accounts receivable from tenants primarily relate to contractual minimum rent and percentage rent as well as real estate
tax and other cost reimbursements. Accounts receivable from straight-line rent is typically longer term in nature and relates to
the cumulative amount by which straight-line rental income recorded to date exceeds cash rents billed to date under the
contractual lease agreement.
We make estimates of the collectability of our current accounts receivable and straight-line rents receivable which requires
significant judgment by management. The collectability of receivables is affected by numerous factors including current
economic conditions, bankruptcies, and the ability of the tenant to perform under the terms of their lease agreement. While we
make estimates of potentially uncollectible amounts and provide an allowance for them through bad debt expense, actual
collectability could differ from those estimates which could affect our net income. With respect to the allowance for current
uncollectible tenant receivables, we assess the collectability of outstanding receivables by evaluating such factors as nature and
age of the receivable, past history and current financial condition of the specific tenant including our assessment of the tenant’s
ability to meet its contractual lease obligations, and the status of any pending disputes or lease negotiations with the tenant. At
December 31, 2015 and 2014, our allowance for doubtful accounts was $11.7 million and $12.4 million, respectively.
30
Historically, we have recognized bad debt expense between 0.3% and 1.3% of rental income and it was 0.2% in 2015 reflecting
positive economic changes and their impact to our tenants. A change in the estimate of collectability of a receivable would
result in a change to our allowance for doubtful accounts and correspondingly bad debt expense and net income. For example,
in the event our estimates were not accurate and we were required to increase our allowance by 1% of rental income, our bad
debt expense would have increased and our net income would have decreased by $7.3 million.
Due to the nature of the accounts receivable from straight-line rents, the collection period of these amounts typically extends
beyond one year. Our experience relative to unbilled straight-line rents is that a portion of the amounts otherwise recognizable
as revenue is never billed to or collected from tenants due to early lease terminations, lease modifications, bankruptcies and
other factors. Accordingly, the extended collection period for straight-line rents along with our evaluation of tenant credit risk
may result in the nonrecognition of a portion of straight-line rental income until the collection of such income is reasonably
assured. If our evaluation of tenant credit risk changes indicating more straight-line revenue is reasonably collectible than
previously estimated and realized, the additional straight-line rental income is recognized as revenue. If our evaluation of tenant
credit risk changes indicating a portion of realized straight-line rental income is no longer collectible, a reserve and bad debt
expense is recorded. At December 31, 2015 and 2014, accounts receivable includes approximately $72.7 million and $66.1
million, respectively, related to straight-line rents. Correspondingly, these estimates of collectability have a direct impact on our
net income.
Real Estate
The nature of our business as an owner, redeveloper and operator of retail shopping centers and mixed-use properties means
that we invest significant amounts of capital. Depreciation and maintenance costs relating to our properties constitute
substantial costs for us as well as the industry as a whole. We capitalize real estate investments and depreciate them on a
straight-line basis in accordance with GAAP and consistent with industry standards based on our best estimates of the assets’
physical and economic useful lives. We periodically review the estimated lives of our assets and implement changes, as
necessary, to these estimates and, therefore, to our depreciation rates. These reviews may take into account such factors as the
historical retirement and replacement of our assets, expected redevelopments, and general economic and real estate factors.
Certain events, such as unforeseen competition or changes in customer shopping habits, could substantially alter our
assumptions regarding our ability to realize the expected return on investment in the property and therefore reduce the
economic life of the asset and affect the amount of depreciation expense to be charged against both the current and future
revenues. These assessments have a direct impact on our net income. The longer the economic useful life, the lower the
depreciation expense will be for that asset in a fiscal period, which in turn will increase our net income. Similarly, having a
shorter economic useful life would increase the depreciation for a fiscal period and decrease our net income.
Land, buildings and real estate under development are recorded at cost. We compute depreciation using the straight-line method
with useful lives ranging generally from 35 years to a maximum of 50 years on buildings and major improvements.
Maintenance and repair costs are charged to operations as incurred. Tenant work and other major improvements, which
improve or extend the life of the asset, are capitalized and depreciated over the life of the lease or the estimated useful life of
the improvements, whichever is shorter. Minor improvements, furniture and equipment are capitalized and depreciated over
useful lives ranging from 2 to 20 years.
Capitalized costs associated with leases are depreciated or amortized over the base term of the lease. Unamortized leasing costs
are charged to expense if the applicable tenant vacates before the expiration of its lease. Undepreciated tenant work is written-
off if the applicable tenant vacates and the tenant work is replaced or has no future value. Additionally, we make estimates as to
the probability of certain development and redevelopment projects being completed. If we determine the redevelopment is no
longer probable of completion, we immediately expense all capitalized costs which are not recoverable.
Interest costs on developments and major redevelopments are capitalized as part of developments and redevelopments not yet
placed in service. Capitalization of interest commences when development activities and expenditures begin and end upon
completion, which is when the asset is ready for its intended use. Generally, rental property is considered substantially
complete and ready for its intended use upon completion of tenant improvements, but no later than one year from completion of
major construction activity. We make judgments as to the time period over which to capitalize such costs and these assumptions
have a direct impact on net income because capitalized costs are not subtracted in calculating net income. If the time period for
capitalizing interest is extended, more interest is capitalized, thereby decreasing interest expense and increasing net income
during that period.
Certain external and internal costs directly related to the development, redevelopment and leasing of real estate, including pre-
construction costs, real estate taxes, insurance, construction costs and salaries and related costs of personnel directly involved,
are capitalized. We capitalized external and internal costs related to both development and redevelopment activities of $232
million and $8 million, respectively, for 2015 and $277 million and $7 million, respectively, for 2014. We capitalized external
31
FEDERAL REALTY | ANNUAL REPORT 2015 and internal costs related to other property improvements of $42 million and $2 million, respectively, for 2015 and $45 million
and $2 million, respectively, for 2014. We capitalized external and internal costs related to leasing activities of $17 million and
$6 million, respectively, for 2015 and $29 million and $7 million, respectively, for 2014. The amount of capitalized internal
costs for salaries and related benefits for development and redevelopment activities, other property improvements, and leasing
activities were $7 million, $1 million, and $6 million, for both 2015 and 2014. Total capitalized costs were $307 million and
$367 million for 2015 and 2014, respectively.
When applicable, as lessee, we classify our leases of land and building as operating or capital leases. We are required to use
judgment and make estimates in determining the lease term, the estimated economic life of the property and the interest rate to
be used in determining whether or not the lease meets the qualification of a capital lease and is recorded as an asset.
Real Estate Acquisitions
Upon acquisition of operating real estate properties, we estimate the fair value of assets and liabilities acquired including land,
building, improvements, leasing costs, intangibles such as in-place leases, assumed debt, and current assets and liabilities, if
any. Based on these estimates, we allocate the purchase price to the applicable assets and liabilities. We utilize methods similar
to those used by independent appraisers in estimating the fair value of acquired assets and liabilities. The value allocated to in-
place leases is amortized over the related lease term and reflected as rental income in the statement of operations. We consider
qualitative and quantitative factors in evaluating the likelihood of a tenant exercising a below market renewal option and
include such renewal options in the calculation of in-place lease value when we consider these to be bargain renewal options. If
the value of below market lease intangibles includes renewal option periods, we include such renewal periods in the
amortization period utilized. If a tenant vacates its space prior to contractual termination of its lease, the unamortized balance of
any in-place lease value is written off to rental income.
Long-Lived Assets and Impairment
There are estimates and assumptions made by management in preparing the consolidated financial statements for which the
actual results will be determined over long periods of time. This includes the recoverability of long-lived assets, including our
properties that have been acquired or redeveloped and our investment in certain joint ventures. Management’s evaluation of
impairment includes review for possible indicators of impairment as well as, in certain circumstances, undiscounted and
discounted cash flow analysis. Since most of our investments in real estate are wholly-owned or controlled assets which are
held for use, a property with impairment indicators is first tested for impairment by comparing the undiscounted cash flows,
including residual value, to the current net book value of the property. If the undiscounted cash flows are less than the net book
value, the property is written down to expected fair value.
The calculation of both discounted and undiscounted cash flows requires management to make estimates of future cash flows
including revenues, operating expenses, required maintenance and development expenditures, market conditions, demand for
space by tenants and rental rates over long periods. Because our properties typically have a long life, the assumptions used to
estimate the future recoverability of book value requires significant management judgment. Actual results could be
significantly different from the estimates. These estimates have a direct impact on net income, because recording an impairment
charge results in a negative adjustment to net income.
Contingencies
We are sometimes involved in lawsuits, warranty claims, and environmental matters arising in the ordinary course of business.
Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these
matters. We accrue a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably
estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate
within the range; however, if no amount within the range is a better estimate than any other amount, the minimum within the
range is accrued. Any difference between our estimate of a potential loss and the actual outcome would result in an increase or
decrease to net income.
In addition, we reserve for estimated losses, if any, associated with warranties given to a buyer at the time an asset is sold or
other potential liabilities relating to that sale, taking any insurance policies into account. These warranties may extend up to ten
years and the calculation of potential liability requires significant judgment. If changes in facts and circumstances indicate that
warranty reserves are understated, we will accrue additional reserves at such time a liability has been incurred and the costs can
be reasonably estimated. Warranty reserves are released once the legal liability period has expired or all related work has been
substantially completed. Any changes to our estimated warranty losses would result in an increase or decrease in net income.
32
Self-Insurance
We are self-insured for general liability costs up to predetermined retained amounts per claim, and we believe that we maintain
adequate accruals to cover our retained liability. We currently do not maintain third party stop-loss insurance policies to cover
liability costs in excess of predetermined retained amounts. Our accrual for self-insurance liability is determined by
management and is based on claims filed and an estimate of claims projected to be incurred but not yet reported. Management
considers a number of factors, including third-party actuarial analysis, previous experience in our portfolio, and future increases
in costs of claims, when making these determinations. If our liability costs differ from these accruals, it will increase or
decrease our net income.
Recently Adopted and Recently Issued Accounting Pronouncements
See Note 2 to the consolidated financial statements.
2015 Significant Property Acquisitions and Dispositions
In January 2015, we acquired a controlling interest in San Antonio Center, a 376,000 square foot shopping center in Mountain
View, California based on a total value of $62.2 million. Our effective interest approximates 80% and was funded by the
assumption of our share of $18.7 million of mortgage debt, 58,000 downREIT operating partnership units, and $27 million of
cash. A portion of the land is controlled under a long-term ground lease. Approximately $8.1 million of assets acquired were
allocated to lease intangibles and included within other assets. Approximately $19.1 million was allocated to lease intangibles
primarily related to "below market leases," and is included within other liabilities. Additionally, $16.3 million was allocated to
noncontrolling interests. We incurred $1.8 million of acquisition costs, of which $1.1 million were incurred in 2015, and
included in "general and administrative expense" in 2015 and 2014.
On February 25, 2015, we acquired the interest of one of the noncontrolling interest holders in The Grove at Shrewsbury for
$8.8 million. As this noncontrolling interest was mandatorily redeemable, it was classified as a liability and was included in
"other liabilities and deferred credits" on the accompanying December 31, 2014 consolidated balance sheet.
On April 24, 2015, we sold our Houston Street property in San Antonio, Texas for a sales price of $46.1 million, resulting in a
gain of $11.5 million.
On May 4, 2015, we acquired CocoWalk, a 198,000 square foot retail property located in the Coconut Grove neighborhood of
Miami, Florida for $87.5 million. The acquisition was completed through a newly formed entity ("CocoWalk LLC") for which
we own a preferred interest and an 80% common interest. Approximately $1.5 million and $4.3 million of net assets acquired
were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively.
Additionally, approximately $6.9 million was allocated to noncontrolling interests. On July 1, 2015 and December 16, 2015, we
acquired partial interests in eight buildings in the Coconut Grove neighborhood of Miami, Florida for $7.8 million through our
CocoWalk LLC entity. In total, we incurred $1.1 million in acquisition costs which are included in "general and administrative
expenses" in 2015.
On July 8, 2015 we acquired a parcel of land adjacent to our Pike 7 Plaza property for $5.0 million.
On October 1, 2015, we acquired The Shops at Sunset Place, a 515,000 square foot mixed-use property located in South
Miami, Florida based on a gross value of $110.2 million. The acquisition was completed through a newly formed entity for
which we own an 85% interest. Approximately $4.8 million and $6.6 million of net assets acquired were allocated to other
assets for "above market leases," and other liabilities for "below market leases," respectively. Additionally, approximately $6.3
million was allocated to noncontrolling interests. We incurred $0.9 million of acquisition costs, which are included in "general
and administrative expenses" in 2015. The transaction includes the assumption of an existing $70.8 million mortgage loan.
On November 19, 2015, we sold our Courtyard Shops property in Wellington, Florida for a sales price of $52.8 million,
resulting in a gain of $16.8 million.
Subsequent Event - 2016 Property Acquisition
On January 13, 2016, we acquired our partner's 70% equity interest in our joint venture arrangement with affiliates of a
discretionary fund created and advised by Clarion Partners (“Clarion”), for $153.7 million, which includes $130 million of cash
and the assumption of three interest only mortgage loans with a total principal balance of $34.4 million. With the acquisition,
we gained control of the six underlying properties, which will be consolidated as of the acquisition date.
33
FEDERAL REALTY | ANNUAL REPORT 2015 2015 Significant Debt and Equity Transactions
In connection with the acquisition of San Antonio Center in January 2015, we assumed a mortgage loan with a face amount of
$18.7 million and a fair value of $19.3 million. The mortgage loan bore interest at 5.27%, and had an original maturity date of
January 1, 2016. On November 2, 2015, we repaid the mortgage loan at par for $18.1 million.
On March 16, 2015, we issued $200.0 million aggregate principal amount of 4.50% senior unsecured notes due December 1,
2044. The notes were offered at 105.38% of the principal amount with a yield to maturity of 4.18%. The notes have the same
terms and are of the same series as the $250.0 million senior notes issued on November 14, 2014. Our net proceeds from the
March note offering after issuance premium, underwriting fees and other costs were $208.6 million. The proceeds were used on
April 11, 2015 to repay our $200.0 million 6.20% notes prior to the original maturity date of January 15, 2017. The redemption
price of $222.2 million included a make-whole premium of $19.2 million and accrued but unpaid interest of $3.0 million. The
make-whole premium is included in "early extinguishment of debt" in 2015.
On August 3, 2015 we repaid the following mortgage loans, which had a weighted average interest rate of 7.9%, at par prior to
their maturity date of November 1, 2015:
Barracks Road
Brick Plaza
Wynnewood
Lawrence Park
Wildwood
Hauppauge
Principal Payoff Amount
(In millions)
$
$
35.3
25.9
25.5
25.0
22.0
13.3
147.0
On September 28, 2015, we issued $250.0 million of fixed rate senior notes that mature on January 15, 2021 and bear interest
at 2.55%. The net proceeds from this note offering after issuance discounts, underwriting fees, and other costs were
approximately $247.5 million.
In connection with the acquisition of The Shops at Sunset Place on October 1, 2015, we assumed a mortgage loan with a face
amount of $70.8 million and a fair value of $76.5 million. The mortgage loan bears interest at 5.62% and has a maturity date of
September 1, 2020.
On May 11, 2015 we replaced our existing at the market (“ATM”) equity program with a new ATM equity program in which
we may from time to time offer and sell common shares having an aggregate offering price of up to $300.0 million. We intend
to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay
amounts of outstanding under our revolving credit facility and/or for general corporate purposes. For the three months ended
December 31, 2015, we issued 63,007 common shares at a weighted average price per share of $144.54 for net cash proceeds
of $9.0 million and paid $0.1 million in commissions and less than $0.1 million in additional offering expenses related to the
sales of these common shares. For the year ended December 31, 2015, we issued 813,414 common shares at a weighted
average price per share of $135.01 for net cash proceeds of $108.5 million and paid $1.1 million in commissions and $0.2
million in additional offering expenses related to the sales of these common shares. As of December 31, 2015, we had the
capacity to issue up to $190.2 million in common shares under our ATM equity program.
Outlook
We seek growth in earnings, funds from operations, and cash flows primarily through a combination of the following:
•
•
•
growth in our same-center portfolio,
growth in our portfolio from property development and redevelopments, and
expansion of our portfolio through property acquisitions.
Our same-center growth is primarily driven by increases in rental rates on new leases and lease renewals and changes in
portfolio occupancy. Over the long-term, the infill nature and strong demographics of our properties provide a strategic
advantage allowing us to maintain relatively high occupancy and increase rental rates. We have generally continued to see an
encouraging operating environment for many of our tenants as well as strong levels of interest from prospective tenants for our
retail spaces. While there can be no assurance that these conditions will continue, we believe the locations of our centers and
diverse tenant base partially mitigates any negative changes in the economic environment. However, any significant reduction
in our tenants' abilities to pay base rent, percentage rent or other charges, will adversely affect our financial condition and
34
2015 Significant Debt and Equity Transactions
In connection with the acquisition of San Antonio Center in January 2015, we assumed a mortgage loan with a face amount of
$18.7 million and a fair value of $19.3 million. The mortgage loan bore interest at 5.27%, and had an original maturity date of
January 1, 2016. On November 2, 2015, we repaid the mortgage loan at par for $18.1 million.
On March 16, 2015, we issued $200.0 million aggregate principal amount of 4.50% senior unsecured notes due December 1,
2044. The notes were offered at 105.38% of the principal amount with a yield to maturity of 4.18%. The notes have the same
terms and are of the same series as the $250.0 million senior notes issued on November 14, 2014. Our net proceeds from the
March note offering after issuance premium, underwriting fees and other costs were $208.6 million. The proceeds were used on
April 11, 2015 to repay our $200.0 million 6.20% notes prior to the original maturity date of January 15, 2017. The redemption
price of $222.2 million included a make-whole premium of $19.2 million and accrued but unpaid interest of $3.0 million. The
make-whole premium is included in "early extinguishment of debt" in 2015.
On August 3, 2015 we repaid the following mortgage loans, which had a weighted average interest rate of 7.9%, at par prior to
their maturity date of November 1, 2015:
Barracks Road
Brick Plaza
Wynnewood
Lawrence Park
Wildwood
Hauppauge
Principal Payoff Amount
(In millions)
$
$
35.3
25.9
25.5
25.0
22.0
13.3
147.0
On September 28, 2015, we issued $250.0 million of fixed rate senior notes that mature on January 15, 2021 and bear interest
at 2.55%. The net proceeds from this note offering after issuance discounts, underwriting fees, and other costs were
approximately $247.5 million.
September 1, 2020.
In connection with the acquisition of The Shops at Sunset Place on October 1, 2015, we assumed a mortgage loan with a face
amount of $70.8 million and a fair value of $76.5 million. The mortgage loan bears interest at 5.62% and has a maturity date of
On May 11, 2015 we replaced our existing at the market (“ATM”) equity program with a new ATM equity program in which
we may from time to time offer and sell common shares having an aggregate offering price of up to $300.0 million. We intend
to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay
amounts of outstanding under our revolving credit facility and/or for general corporate purposes. For the three months ended
December 31, 2015, we issued 63,007 common shares at a weighted average price per share of $144.54 for net cash proceeds
of $9.0 million and paid $0.1 million in commissions and less than $0.1 million in additional offering expenses related to the
sales of these common shares. For the year ended December 31, 2015, we issued 813,414 common shares at a weighted
average price per share of $135.01 for net cash proceeds of $108.5 million and paid $1.1 million in commissions and $0.2
million in additional offering expenses related to the sales of these common shares. As of December 31, 2015, we had the
capacity to issue up to $190.2 million in common shares under our ATM equity program.
Outlook
We seek growth in earnings, funds from operations, and cash flows primarily through a combination of the following:
•
•
•
growth in our same-center portfolio,
growth in our portfolio from property development and redevelopments, and
expansion of our portfolio through property acquisitions.
Our same-center growth is primarily driven by increases in rental rates on new leases and lease renewals and changes in
portfolio occupancy. Over the long-term, the infill nature and strong demographics of our properties provide a strategic
advantage allowing us to maintain relatively high occupancy and increase rental rates. We have generally continued to see an
encouraging operating environment for many of our tenants as well as strong levels of interest from prospective tenants for our
retail spaces. While there can be no assurance that these conditions will continue, we believe the locations of our centers and
diverse tenant base partially mitigates any negative changes in the economic environment. However, any significant reduction
in our tenants' abilities to pay base rent, percentage rent or other charges, will adversely affect our financial condition and
results of operations. We seek to maintain a mix of strong national, regional, and local retailers. At December 31, 2015, no
single tenant accounted for more than 2.9% of annualized base rent.
Our properties are located primarily in densely populated and/or affluent areas with high barriers to entry which allow us to
take advantage of redevelopment opportunities that enhance our operating performance through renovation, expansion,
reconfiguration, and/or retenanting. We evaluate our properties on an ongoing basis to identify these types of opportunities. In
2016, we expect to have redevelopment projects stabilizing with projected costs of approximately $154 million.
We continue our ongoing redevelopment efforts at Santana Row, and are currently proceeding with our next phase of
redevelopment which is a six story building with 234,500 square feet of office space and 670 parking spaces. During the third
quarter 2015, we executed a lease with Splunk Inc. for the entire building. The building is expected to cost between $110 and
$115 million and stabilize in 2017. After current phases, we have approximately 9 acres remaining for further redevelopment
and entitlements in place for an additional 395 residential units and 634,000 square feet of commercial space. Additionally, we
control an additional 12 acres of land adjacent to Santana Row.
We continue to invest in the development at Assembly Row which is a long-term multi-phased mixed-use development project
we expect to be involved in over the coming years. The carrying value of the development portion of this project at
December 31, 2015 is approximately $395 million. The project currently has zoning entitlements to build 3.4 million square
feet of commercial-use buildings, 1,843 residential units, and a 170 room hotel. The first phase consists of approximately
331,000 square feet of retail space and 98,000 square feet of office space (both owned by the Trust) and 445 residential units
owned by AvalonBay Communities. The Massachusetts Bay Transit Authority (MBTA) constructed the new orange line T-Stop
at the property, which opened in September 2014. Minimal amounts of construction remain to be completed on the first phase.
The retail space in Phase I opened during 2014 and currently is 100% leased. Additionally, as of December 31, 2015, 74,000
square feet of office space is open, and we expect the remainder to open through the first half of 2016. Phase I is expected to
stabilize in 2016. Total expected costs for Phase I of Assembly Row, net of reimbursements expected, range from $194 million
to $196 million, of which $193 million has been incurred to date.
We are also proceeding with development of Phase II of Assembly Row which will include 167,000 square feet of retail space,
a 160 room boutique hotel and 447 residential units. The hotel will be owned and operated by a joint venture in which we will
be a partner. Total expected costs range from $270 million to $285 million and stabilization is expected in 2018/2019.
Construction commenced on Phase II in July 2015. Phase II is also expected to include 134 for-sale condominium units with an
expected total cost of $70 million to $75 million. Additionally, as part of the second phase, we entered into a ground lease
agreement with Partners HealthCare to bring more than 700,000 square feet of office space to Assembly Row. The ground lease
agreement includes a purchase option. Partners HealthCare commenced construction on this new building in September 2014
and plans to relocate over 4,500 employees to Assembly Row starting in 2016.
We invested $41 million in Assembly Row in 2015 and expect to invest between $100 million and $125 million in Assembly
Row in 2016.
Our Pike & Rose project in North Bethesda, MD, a long-term multi-phased mixed-use development project, currently has
zoning entitlements to build 1.6 million square feet of commercial-use buildings and 1,605 residential units. Phase I of Pike &
Rose includes 493 residential units, 157,000 square feet of retail space and 79,000 square feet of office space. In late June 2014,
our 174 unit residential building opened and achieved stabilized occupancy in the 1st quarter 2015. As of December 31, 2015,
132,000 square feet of the retail space and 45,000 square feet of the office space in Phase I is open, and in July the first tenants
moved into our 319 unit residential building. We expect the remaining retail, office and 319 unit residential building to open in
early 2016, and expect Phase I to stabilize in 2016. Total expected costs for Phase I of Pike & Rose range from $265 million to
$270 million of which $259 million has been incurred to date.
Additionally, we are proceeding with development of Phase II of Pike & Rose and building construction has commenced.
Phase II will include approximately 190,000 square feet of retail space, a 177 room select-service hotel and 272 residential
units, as well as a pre-leased auto dealership building. Total expected costs range from $200 million to $207 million and
stabilization is expected in 2018/2019. The hotel will be owned and operated by a joint venture in which we will be a partner.
Phase II is also expected to include 104 for-sale condominium units with an expected cost of $53 million to $58 million. We
invested $88 million in Pike & Rose in 2015 and expect to invest between $105 million and $130 million in Pike & Rose in
2016.
The development of future phases of Assembly Row, Pike & Rose and Santana Row will be pursued opportunistically based
on, among other things, market conditions, tenant demand, and our evaluation of whether those phases will generate an
appropriate financial return.
34
35
FEDERAL REALTY | ANNUAL REPORT 2015 We continue to review acquisition opportunities in our primary markets that complement our portfolio and provide long-term
growth opportunities. Initially, some of our acquisitions do not contribute significantly to earnings growth; however, we believe
they provide long-term re-leasing growth, redevelopment opportunities, and other strategic opportunities. Any growth from
acquisitions is contingent on our ability to find properties that meet our qualitative standards at prices that meet our financial
hurdles. Changes in interest rates may affect our success in achieving earnings growth through acquisitions by affecting both
the price that must be paid to acquire a property, as well as our ability to economically finance the property acquisition.
Generally, our acquisitions are initially financed by available cash and/or borrowings under our revolving credit facility which
may be repaid later with funds raised through the issuance of new equity or new long-term debt. We may also finance our
acquisitions through the issuance of common shares, preferred shares, or downREIT units as well as through new or assumed
mortgages.
At December 31, 2015, the leasable square feet in our properties was 93.5% occupied and 94.3% leased. The leased rate is
higher than the occupied rate due to leased spaces that are being redeveloped or improved or that are awaiting permits and,
therefore, are not yet ready to be occupied. Our occupancy and leased rates are subject to variability over time due to factors
including acquisitions, the timing of the start and stabilization of our redevelopment projects, lease expirations and tenant
bankruptcies.
Same-Center
Throughout this section, we have provided certain information on a “same-center” basis. Information provided on a same-
center basis includes the results of properties that we owned and operated for the entirety of both periods being compared
except for properties for which significant redevelopment or expansion occurred during either of the periods being compared
and properties classified as discontinued operations. For the year ended December 31, 2015 and the comparison of 2015 and
2014, all or a portion of 77 properties were considered same-center and fourteen properties were considered redevelopment or
expansion. For the year ended December 31, 2015, three properties were moved from acquisition to same-center, three
properties were moved from same-center to redevelopment, two properties were removed from same-center as they were sold
during 2015, and one property was moved from redevelopment to same-center, compared to the designations as of
December 31, 2014. For the year ended December 31, 2014 and the comparison of 2014 and 2013, all or a portion of 78
properties were considered same-center and thirteen properties were considered redevelopment or expansion. For the year
ended December 31, 2014, two properties were moved from same-center to redevelopment, one property was moved from
redevelopment to same-center, and one property was moved from redevelopment as it was vacant and was demolished in 2014,
compared to the designations as of December 31, 2013. While there is judgment surrounding changes in designations, we
typically move redevelopment properties to same-center once they have stabilized, which is typically considered 95%
occupancy or when the growth expected from the redevelopment has been included in the comparable periods. We typically
remove properties from same center when the redevelopment has or is expected to have a significant impact to property
operating income within the calendar year. Acquisitions are moved to same-center once we have owned the property for the
entirety of comparable periods and the property is not under significant redevelopment or expansion.
36
YEAR ENDED DECEMBER 31, 2015 COMPARED TO YEAR ENDED DECEMBER 31, 2014
2015
2014
Dollars
%
(Dollar amounts in thousands)
Change
Rental income ................................................................................... $
Other property income......................................................................
Mortgage interest income .................................................................
Total property revenue...............................................................
Rental expenses ................................................................................
Real estate taxes................................................................................
Total property expenses.............................................................
Property operating income................................................................
Other interest income........................................................................
Income from real estate partnerships................................................
Interest expense ................................................................................
Early extinguishment of debt............................................................
General and administrative expense .................................................
Depreciation and amortization..........................................................
Total other, net...........................................................................
Income from continuing operations..................................................
Gain on sale of real estate.................................................................
Net income.................................................................................
Net income attributable to noncontrolling interests..........................
Net income attributable to the Trust ................................................. $
727,812
$
666,322
$
11,810
4,390
744,012
147,593
85,824
233,417
510,595
149
1,416
(92,553)
(19,072)
(35,645)
(174,796)
(320,501)
190,094
28,330
218,424
(8,205)
210,219
$
14,758
5,010
686,090
135,417
76,506
211,923
474,167
94
1,243
(93,941)
(10,545)
(32,316)
(170,814)
(306,279)
167,888
4,401
172,289
(7,754)
164,535
$
61,490
(2,948)
(620)
57,922
12,176
9,318
21,494
36,428
55
173
1,388
(8,527)
(3,329)
(3,982)
(14,222)
22,206
23,929
46,135
(451)
45,684
9.2 %
(20.0)%
(12.4)%
8.4 %
9.0 %
12.2 %
10.1 %
7.7 %
58.5 %
13.9 %
(1.5)%
80.9 %
10.3 %
2.3 %
4.6 %
13.2 %
543.7 %
26.8 %
5.8 %
27.8 %
Property Revenues
Total property revenue increased $57.9 million, or 8.4%, to $744.0 million in 2015 compared to $686.1 million in 2014. The
percentage occupied at our shopping centers decreased to 93.5% at December 31, 2015 compared to 94.7% at December 31,
2014. Changes in the components of property revenue are discussed below.
Rental Income
Rental income consists primarily of minimum rent, cost reimbursements from tenants and percentage rent. Rental income
increased $61.5 million, or 9.2%, to $727.8 million in 2015 compared to $666.3 million in 2014 due primarily to the following:
•
•
•
•
an increase of $22.1 million from Assembly Row and Pike & Rose as portions of both projects opened
beginning in second quarter 2014 through 2015,
an increase of $16.6 million attributable to properties acquired in 2015 and 2014,
an increase of $15.7 million at same-center properties due primarily to higher rental rates of
approximately $10.0 million, a $4.0 million increase in recovery income (primarily the result of
reimbursements for higher real estate taxes and other tenant reimbursables), and occupancy impacts of
approximately $0.8 million, and
an increase of $10.4 million at redevelopment properties due primarily to the lease-up of our new 212
unit residential building at Santana Row and the lease-up of four of our retail redevelopments,
partially offset by,
•
a decrease of $3.8 million due to the sale of our Houston Street and Courtyard Shops properties in April
2015 and November 2015, respectively.
37
FEDERAL REALTY | ANNUAL REPORT 2015 Other Property Income
Other property income decreased $2.9 million, or 20.0%, to $11.8 million in 2015 compared to $14.8 million in 2014. Included
in other property income are items which, although recurring, inherently tend to fluctuate more than rental income from period
to period, such as lease termination fees. This decrease is primarily due to lower lease termination and other fees at our same-
center and redevelopment properties.
Property Expenses
Total property expenses increased $21.5 million, or 10.1%, to $233.4 million in 2015 compared to $211.9 million in 2014.
Changes in the components of property expenses are discussed below.
Rental Expenses
Rental expenses increased $12.2 million, or 9.0%, to $147.6 million in 2015 compared to $135.4 million in 2014. This increase
is primarily due to the following:
•
•
•
•
an increase of $5.3 million related to properties acquired in 2015 and 2014,
an increase of $4.3 million related to Assembly Row and Pike & Rose, as portions of these projects
opened beginning in second quarter 2014,
an increase of $3.2 million in repairs and maintenance expenses at same-center and redevelopment
properties primarily due to higher snow removal costs, and
an increase of $0.6 million in utilities at our same-center properties,
partially offset by
•
a decrease of $1.2 million due to the sale of our Houston Street and Courtyard Shops properties in April
2015 and November 2015, respectively.
As a result of the changes in rental income and rental expenses as discussed above, rental expenses as a percentage of rental
income plus other property income increased to 20.0% for the year ended December 31, 2015 from 19.9% for the year ended
December 31, 2014.
Real Estate Taxes
Real estate tax expense increased $9.3 million, or 12.2% to $85.8 million in 2015 compared to $76.5 million in 2014 due
primarily to Assembly Row and Pike & Rose, higher assessments at our same-center and redevelopment properties, and
properties acquired in 2015 and 2014, partially offset by the sale of our Houston Street and Courtyard Shops properties in April
2015 and November 2015, respectively.
Property Operating Income
Property operating income increased $36.4 million, or 7.7%, to $510.6 million in 2015 compared to $474.2 million in 2014.
This increase is primarily due to portions of Assembly Row and Pike & Rose opening beginning in second quarter 2014,
growth in earnings at same-center and redevelopment properties, and properties acquired in 2015 and 2014, partially offset by
the sale of our Houston Street and Courtyard Shops properties in April 2015 and November 2015, respectively.
Other
Interest Expense
Interest expense decreased $1.4 million, or 1.5%, to $92.6 million in 2015 compared to $93.9 million in 2014. This decrease is
due primarily to the following:
•
a decrease of $12.2 million due to a lower overall weighted average borrowing rate, and
partially offset by
•
•
an increase of $8.1 million due to higher borrowings.
a decrease of $2.8 million in capitalized interest due primarily to Phase I of Assembly Row and Pike &
Rose, as portions of both projects opened beginning second quarter 2014.
Gross interest costs were $110.7 million and $114.9 million in 2015 and 2014, respectively. Capitalized interest was $18.1
million and $21.0 million in 2015 and 2014, respectively.
38
Early Extinguishment of Debt
The $19.1 million early extinguishment of debt in 2015 relates to the make-whole premium paid as part of the early redemption
of our 6.20% senior notes, partially offset by the related net write-off of unamortized premium and debt fees.
The $10.5 million early extinguishment of debt in 2014 relates to the make-whole premium paid as part of the early redemption
of our 5.65% senior notes, the prepayment premium on our East Bay Bridge mortgage loan, and the related write-off of
unamortized debt fees and mortgage premium balance.
General and Administrative Expense
General and administrative expense increased $3.3 million, or 10.3%, to $35.6 million in 2015 from $32.3 million in 2014.
This increase is primarily due to higher personnel related costs and higher transaction costs.
Depreciation and Amortization
Depreciation and amortization expense increased $4.0 million, or 2.3%, to $174.8 million in 2015 from $170.8 million in 2014.
This increase is due primarily to depreciation on Assembly Row and Pike & Rose and properties acquired in 2015, partially
offset by accelerated depreciation in 2014 due to the change in use of a redevelopment property.
Gain on Sale of Real Estate
The $28.3 million gain on sale of real estate for 2015 is due to the sale of our Houston Street property in April 2015 and the
sale of our Courtyard Shops property in November 2015.
The $4.4 million gain on sale of real estate for 2014 is due to our portion of the gain resulting from the Partnership's sale of the
fee interest in Pleasant Shops in Weymouth, Massachusetts.
39
FEDERAL REALTY | ANNUAL REPORT 2015 YEAR ENDED DECEMBER 31, 2014 COMPARED TO YEAR ENDED DECEMBER 31, 2013
2014
2013
Dollars
%
(Dollar amounts in thousands)
Change
Rental income................................................................................... $
Other property income .....................................................................
Mortgage interest income.................................................................
Total property revenue ..............................................................
Rental expenses ................................................................................
Real estate taxes ...............................................................................
Total property expenses.............................................................
Property operating income ...............................................................
Other interest income .......................................................................
Income from real estate partnership .................................................
Interest expense ................................................................................
Early extinguishment of debt ...........................................................
General and administrative expense.................................................
Depreciation and amortization .........................................................
Total other, net...........................................................................
Income from continuing operations .................................................
Discontinued operations - income....................................................
Discontinued operations - gain on sale of real estate .......................
Gain on sale of real estate ................................................................
Net income ................................................................................
Net income attributable to noncontrolling interests .........................
Net income attributable to the Trust................................................. $
666,322
$
620,089
$
14,758
5,010
686,090
135,417
76,506
211,923
474,167
94
1,243
(93,941)
(10,545)
(32,316)
(170,814)
(306,279)
167,888
—
—
4,401
172,289
(7,754)
164,535
$
12,169
5,155
637,413
118,695
71,759
190,454
446,959
433
1,498
(104,977)
(13,304)
(31,970)
(160,828)
(309,148)
137,811
942
23,861
4,994
167,608
(4,927)
162,681
$
46,233
2,589
(145)
48,677
16,722
4,747
21,469
27,208
(339)
(255)
11,036
2,759
(346)
(9,986)
2,869
30,077
(942)
(23,861)
(593)
4,681
(2,827)
1,854
7.5 %
21.3 %
(2.8)%
7.6 %
14.1 %
6.6 %
11.3 %
6.1 %
(78.3)%
(17.0)%
(10.5)%
(20.7)%
1.1 %
6.2 %
(0.9)%
21.8 %
(100.0)%
100.0 %
(11.9)%
2.8 %
57.4 %
1.1 %
Property Revenues
Total property revenue increased $48.7 million, or 7.6%, to $686.1 million in 2014 compared to $637.4 million in 2013. The
percentage occupied at our shopping centers decreased to 94.7% at December 31, 2014 compared to 95.1% at December 31,
2013. Changes in the components of property revenue are discussed below.
Rental Income
Rental income consists primarily of minimum rent, cost reimbursements from tenants and percentage rent. Rental income
increased $46.2 million, or 7.5%, to $666.3 million in 2014 compared to $620.1 million in 2013 due primarily to the following:
•
•
•
•
an increase of $17.7 million at same-center properties due primarily to higher rental rates of
approximately $9.4 million and a $7.4 million increase in recovery income (largely the result of
reimbursements for higher snow removal costs),
an increase of $16.6 million attributable to properties acquired in 2014 and 2013,
an increase of $8.0 million at redevelopment properties due primarily to the lease-up of our new 212
unit residential building at Santana Row and the net impact of other redevelopment properties, and
an increase of $6.4 million from Assembly Row and Pike &Rose as portions of both projects opened in
2014,
partially offset by,
•
a decrease of $1.9 million from Mid-Pike Plaza as the property was demolished in 2014 for the future
development of Pike & Rose.
40
Other Property Income
Other property income increased $2.6 million, or 21.3%, to $14.8 million in 2014 compared to $12.2 million in 2013. Included
in other property income are items which, although recurring, inherently tend to fluctuate more than rental income from period
to period, such as lease termination fees. This increase is primarily due an increase in lease termination fees at same-center
properties.
Property Expenses
Total property expenses increased $21.5 million, or 11.3%, to $211.9 million in 2014 compared to $190.5 million in 2013.
Changes in the components of property expenses are discussed below.
Rental Expenses
Rental expenses increased $16.7 million, or 14.1%, to $135.4 million in 2014 compared to $118.7 million in 2013. This
increase is primarily due to the following:
•
•
•
•
•
an increase of $5.6 million in repairs and maintenance expenses at same-center and redevelopment
properties primarily due to higher snow removal costs,
an increase of $5.4 million related to Assembly Row and Pike & Rose, as portions of these projects
opened in 2014,
an increase of $3.2 million related to properties acquired in 2014 and 2013,
an increase of $1.6 million in bad debt expense at same-center properties, and
an increase of $0.8 million in utilities at our same-center and redevelopment properties primarily due to
higher electric costs and usage as a result of the harsh winter.
As a result of the changes in rental income and rental expenses as discussed above, rental expenses as a percentage of rental
income plus other property income increased to 19.9% for the year ended December 31, 2014 from 18.8% for the year ended
December 31, 2013.
Real Estate Taxes
Real estate tax expense increased $4.7 million, or 6.6% to $76.5 million in 2014 compared to $71.8 million in 2013 due
primarily to higher assessments and lower refunds at our same-center and redevelopment properties and real estate taxes on
properties acquired in 2014 and 2013.
Property Operating Income
Property operating income increased $27.2 million, or 6.1%, to $474.2 million in 2014 compared to $447.0 million in 2013.
This increase is primarily due to growth in earnings at same-center properties, properties acquired in 2014 and 2013, and
earnings from our redevelopment properties, partially offset by a decline in earnings at Mid-Pike Plaza, which was demolished
in 2014.
Other
Interest Expense
Interest expense decreased $11.0 million, or 10.5%, to $93.9 million in 2014 compared to $105.0 million in 2013. This
decrease is due primarily to the following:
•
•
a decrease of $12.0 million due to a lower overall weighted average borrowing rate, and
an increase of $4.8 million in capitalized interest due primarily to our ongoing development projects at
Assembly Row and Pike & Rose,
partially offset by
•
an increase of $5.6 million due to higher borrowings.
Gross interest costs were $114.9 million and $121.2 million in 2014 and 2013, respectively. Capitalized interest was $21.0
million and $16.2 million in 2014 and 2013, respectively.
41
FEDERAL REALTY | ANNUAL REPORT 2015 Early Extinguishment of Debt
The $10.5 million early extinguishment of debt in 2014 relates to the make-whole premium paid as part of the early redemption
of our 5.65% senior notes, the prepayment premium on our East Bay Bridge mortgage loan, and the related write-off of
unamortized debt fees and mortgage premium balance.
The $13.3 million early extinguishment of debt in 2013 relates to the make-whole premiums paid as part of the early
redemption of our 5.40% senior notes and 5.95% senior notes, the prepayment premium on our 7.5% mortgage loans, and the
related write-off of unamortized debt fees.
Depreciation and Amortization
Depreciation and amortization expense increased $10.0 million, or 6.2%, to $170.8 million in 2014 from $160.8 million in
2013. This increase is due primarily to 2014 acquisitions and redevelopment projects placed in service during 2014, partially
offset by accelerated depreciation in 2013 due to the change in use of a redevelopment property.
Discontinued Operations— Income
Income from discontinued operations represents the operating income of properties that were disposed prior to January 1, 2014,
which were required to be reported separately from results of ongoing operations. The reported operating income of $0.9
million for 2013 primarily represents the operating income for the period during which we owned properties sold in 2013.
Discontinued Operations—Gain on Sale of Real Estate
The $23.9 million gain on sale of real estate from discontinued operations for 2013 is due to the sale of the fee interest in our
final building at Fifth Avenue on July 22, 2013 and the sale of the fee interest in our building in Forest Hills on September 10,
2013.
Gain on Sale of Real Estate
The $4.4 million gain on sale of real estate for 2014 is due to our portion of the gain resulting from the Partnership's sale of the
fee interest in Pleasant Shops in Weymouth, Massachusetts.
The $5.0 million gain on sale of real estate for 2013 is primarily due to the sale of the fee interest in the land under an office
building at our Village of Shirlington property in Arlington, Virginia, that was subject to a long term ground lease. The ground
lease included an option for the tenant to purchase the fee interest.
Liquidity and Capital Resources
Due to the nature of our business and strategy, we typically generate significant amounts of cash from operations. The cash
generated from operations is primarily paid to our common and preferred shareholders in the form of dividends. As a REIT, we
must generally make annual distributions to shareholders of at least 90% of our taxable income.
Our short-term liquidity requirements consist primarily of normal recurring operating expenses, obligations under our capital
and operating leases, regular debt service requirements (including debt service relating to additional or replacement debt, as
well as scheduled debt maturities), recurring expenditures, non-recurring expenditures (such as tenant improvements and
redevelopments) and dividends to common and preferred shareholders. Our long-term capital requirements consist primarily of
maturities under our long-term debt agreements, development and redevelopment costs and potential acquisitions.
We intend to operate with and maintain a conservative capital structure that will allow us to maintain strong debt service
coverage and fixed-charge coverage ratios as part of our commitment to investment-grade debt ratings. In the short and long
term, we may seek to obtain funds through the issuance of additional equity, unsecured and/or secured debt financings, joint
venture relationships relating to existing properties or new acquisitions, and property dispositions that are consistent with this
conservative structure.
At December 31, 2015, we had $21.0 million of cash and cash equivalents and $53.5 million borrowings outstanding on our
$600.0 million revolving credit facility that matures on April 21, 2017, subject to a one-year extension at our option. In
addition, we have an option (subject to bank approval) to increase the credit facility through an accordion feature to $1.0
billion. Our $275.0 million unsecured term loan that matures on November 21, 2018, subject to a one-year extension at our
option, also has an option (subject to bank approval) to increase the term loan through an accordion feature to $350.0 million.
As of December 31, 2015, we had the capacity to issue up to $190.2 million in common shares under our ATM equity program.
For 2015, the maximum amount of borrowings outstanding under our revolving credit facility was $324.0 million, the weighted
average amount of borrowings outstanding was $109.7 million and the weighted average interest rate, before amortization of
42
debt fees, was 1.1%. During 2015, we accessed the public debt markets twice, issuing $200 million of 4.50% senior notes in
March 2015, that mature on December 1, 2044 and in September 2015, issuing $250 million of 2.55% senior notes that mature
on January 15, 2021. The net proceeds of these two offerings after net issuance premium, underwriting fees, and other costs
were approximately $456.2 million. We used the net proceeds from these transactions to redeem our 6.20% senior notes prior to
their original maturity date of January 15, 2017, and repay $147 million of mortgage debt that had a weighted average interest
rate of 7.9%. During 2016, we have only $9.4 million of debt maturing.
We currently believe that cash flows from operations, cash on hand, our ATM equity program, our revolving credit facility and
our general ability to access the capital markets will be sufficient to finance our operations and fund our debt service
requirements and capital expenditures.
Our overall capital requirements during 2016 will depend upon acquisition opportunities, the level of improvements and
redevelopments on existing properties and the timing and cost of development of Assembly Row, Pike & Rose and future
phases of Santana Row. While the amount of future expenditures will depend on numerous factors, we expect to continue to see
higher levels of capital investments in our properties under development and redevelopment which is the result of construction
on Phase II at both Assembly Row and Pike & Rose and construction of the 234,500 square foot office building at Santana
Row. With respect to other capital investments related to our existing properties, we expect to incur levels consistent with prior
years. Our capital investments will be funded on a short-term basis with cash flow from operations, cash on hand and/or our
revolving credit facility, and on a long-term basis, with long-term debt or equity including shares issued under our ATM equity
program. If necessary, we may access the debt or equity capital markets to finance significant acquisitions. Given our past
ability to access the capital markets, we expect debt or equity to be available to us. Although there is no intent at this time, if
market conditions deteriorate, we may also delay the timing of certain development and redevelopment projects as well as limit
future acquisitions, reduce our operating expenditures, or re-evaluate our dividend policy.
In addition to conditions in the capital markets which could affect our ability to access those markets, the following factors
could affect our ability to meet our liquidity requirements:
•
•
restrictions in our debt instruments or preferred shares may limit us from incurring debt or issuing
equity at all, or on acceptable terms under then-prevailing market conditions; and
we may be unable to service additional or replacement debt due to increases in interest rates or a decline
in our operating performance.
Summary of Cash Flows
Cash provided by operating activities............................................................................................ $
Cash used in investing activities ....................................................................................................
Cash (used in) provided by financing activities.............................................................................
Decrease in cash and cash equivalents...........................................................................................
Cash and cash equivalents, beginning of year ...............................................................................
Cash and cash equivalents, end of year ......................................................................................... $
Year Ended December 31,
2015
2014
(In thousands)
$
359,835
(353,763)
(32,977)
(26,905)
47,951
346,130
(396,150)
9,044
(40,976)
88,927
21,046
$
47,951
Net cash provided by operating activities increased $13.7 million to $359.8 million during 2015 from $346.1 million during
2014. The increase was primarily attributable to higher net income before certain non-cash items, partially offset by the timing
of interest payments and other operating costs.
Net cash used in investing activities decreased $42.4 million to $353.8 million during 2015 from $396.2 million during 2014.
The decrease in net cash used was primarily attributable to:
•
•
•
•
$91.3 million decrease in capital investments and leasing costs,
$87.0 million increase in proceeds from the sale of real estate, as we sold both Houston Street and
Courtyard Shops in 2015,
$5.3 million increase in repayment of mortgage and other notes receivable, and
$3.9 million decrease in contributions to real estate partnerships,
43
FEDERAL REALTY | ANNUAL REPORT 2015 partially offset by
•
$145.2 million increase in acquisitions of real estate.
Net cash provided by financing activities decreased $42.0 million to $33.0 million used during 2015 from $9.0 million
provided in 2014. The decrease was primarily attributable to:
•
•
•
•
$105.3 million decrease in net proceeds from the issuance of common shares due primarily to the sale
of 0.8 million shares under our ATM equity program at a weighted average price of $135.01 during
2015 compared to 1.8 million shares at a weighted average price of $122.09 during 2014,
$86.9 million increase in repayment of mortgages, capital leases and notes payable primarily due to the
payoff of seven mortgages totaling $165.1 million in 2015 compared to the repayment of two mortgages
totaling $84.3 million in 2014,
$85.0 million increase due to the redemption of $200.0 million of senior notes with a make-whole
premium of $19.2 million in 2015, as compared to the redemption of $125.0 million of senior notes
with a make-whole premium of $9.2 million in 2014, and
$28.1 million increase in dividends paid to shareholders due to an increase in the dividend rate and
increased number of shares outstanding,
partially offset by
•
•
$211.6 million increase from net proceeds on senior note issuances due to $456.2 million from the re-
opening of our 4.5% senior notes in March 2015 and the issuance of 2.55% notes in September 2015 as
compared to $244.6 million from our 4.50% senior notes issued in November 2014, and
$53.5 million increase in net borrowings on our revolving credit facility.
Contractual Commitments
The following table provides a summary of our fixed, noncancelable obligations as of December 31, 2015:
Commitments Due by Period
Total
Less Than
1 Year
1-3 Years
3-5 Years
After 5
Years
Fixed rate debt (principal and interest)(1) ......... $ 3,536,531
Fixed rate debt - unconsolidated real estate
partnership (principal and interest)(2)
10,674
Capital lease obligations (principal and
interest) ..............................................................
Variable rate debt (principal only)(3).................
Operating leases .................................................
Real estate commitments ...................................
Development, redevelopment, and capital
380,682
improvement obligations ...................................
Contractual operating obligations ......................
40,610
415
Hotel joint venture obligations (4).....................
Total contractual obligations.............................. $ 4,454,356
183,395
62,900
171,649
67,500
_____________________
$
105,776
(In thousands)
696,128
$
$
389,996
$ 2,344,631
10,674
—
—
—
5,788
9,400
2,750
—
259,254
20,535
291
414,468
$
$
11,597
53,500
5,586
—
121,423
15,666
124
904,024
11,600
—
5,989
—
154,410
—
157,324
67,500
5
4,349
—
411,939
—
60
—
$ 2,723,925
$
(1) Fixed rate debt includes our $275.0 million term loan as the rate is effectively fixed by two interest rate swap
agreements.
(2) Amounts reflect our share, as of December 31, 2015, of principal and interest payments on our unconsolidated joint
venture's fixed rate debt. On January 13, 2016, we acquired our partner's 70% equity interest in the joint venture. Our
2016 obligation after this transaction is $35.6 million.
(3) Variable rate debt includes a $9.4 million bond that had an interest rate of 0.03% at December 31, 2015 and our
revolving credit facility, which currently has $53.5 million outstanding and bears interest at LIBOR plus 0.90%.
(4) Amounts include our share of our hotel joint venture related obligations.
44
In addition to the amounts set forth in the table above and other liquidity requirements previously discussed, the following
potential commitments exist:
(a) Under the terms of the Congressional Plaza partnership agreement, from and after January 1, 1986, an unaffiliated
third party has the right to require us and the other minority partner to purchase its 29.47% interest in Congressional Plaza at
the interest’s then-current fair market value. If the other minority partner defaults in their obligation, we must purchase the full
interest. Based on management’s current estimate of fair market value as of December 31, 2015, our estimated liability upon
exercise of the put option would range from approximately $78 million to $82 million.
(b) Under the terms of a partnership which owns a project in southern California, if certain leasing and revenue levels are
obtained for the property owned by the partnership, the other partner may require us to purchase their 10% partnership interest
at a formula price based upon property operating income. The purchase price for the partnership interest will be paid using our
common shares or, subject to certain conditions, cash. If the other partner does not redeem their interest, we may choose to
purchase the partnership interest upon the same terms.
(c) Under the terms of various other partnership agreements, the partners have the right to exchange their operating
partnership units for cash or the same number of our common shares, at our option. As of December 31, 2015, a total of
934,405 operating partnership units are outstanding.
(d) The other member in Montrose Crossing has the right to require us to purchase all of its 10.1% interest in Montrose
Crossing at the interest's then-current fair market value. If the other member fails to exercise its put option, we have the right to
purchase its interest on or after December 27, 2021 at fair market value. Based on management’s current estimate of fair
market value as of December 31, 2015, our estimated maximum liability upon exercise of the put option would range from
approximately $8 million to $9 million.
(e) Two of the members in Plaza El Segundo have the right to require us to purchase their 10.0% and 11.8% ownership
interests at the interests' then-current fair market value. If the members fail to exercise their put options, we have the right to
purchase each of their interests on or after December 30, 2026 at fair market value. Based on management’s current estimate of
fair market value as of December 31, 2015, our estimated maximum liability upon exercise of the put option would range from
approximately $21 million to $24 million. Also, between January 1, 2017 and February 1, 2017, we have an option to purchase
the preferred interest of another member in Plaza El Segundo. The purchase price will be the lesser of fair value or the $4.9
million stated value of the preferred interest plus any accrued and unpaid preferred returns.
(f) Effective January 1, 2017, the other member in The Grove at Shrewsbury and Brook 35 has the right to require us to
purchase all of its approximately 4.8% interest in The Grove at Shrewsbury and approximately 8.8% interest in Brook 35 at the
interests' then-current fair market value. Based on management's current estimate of fair market value as of December 31,
2015, our estimated maximum liability upon exercise of the put option would range from $9 million to $10 million.
(g) At December 31, 2015, we had letters of credit outstanding of approximately $13.0 million which are collateral for
existing indebtedness and other obligations of the Trust.
Off-Balance Sheet Arrangements
At December 31, 2015, we had a joint venture arrangement (the “Partnership”) with affiliates of a discretionary fund created
and advised by Clarion Partners (“Clarion”). We owned 30% of the equity in the Partnership and Clarion owned 70%. We held
a general partnership interest, however, Clarion also held a general partnership interest and had substantive participating rights.
We could not make significant decisions without Clarion’s approval. Accordingly, we accounted for our interest in the
Partnership using the equity method. As of December 31, 2015, the Partnership owned six retail real estate properties. We were
the manager of the Partnership and its properties, earning fees for acquisitions, management, leasing and financing. We also
had the opportunity to receive performance-based earnings through our Partnership interest. Accounting policies for the
Partnership were similar to accounting policies followed by the Trust. At December 31, 2015, our investment in the Partnership
was $31.7 million and the Partnership had $34.4 million of mortgages payable outstanding.
On January 13, 2016, we acquired Clarion's 70% interest and assumed the related mortgage obligations.
Other than the joint venture described above and items disclosed in the Contractual Commitments Table, we have no off-
balance sheet arrangements as of December 31, 2015 that are reasonably likely to have a current or future material effect on our
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
45
FEDERAL REALTY | ANNUAL REPORT 2015 Debt Financing Arrangements
The following is a summary of our total debt outstanding as of December 31, 2015:
Description of Debt
Mortgages payable (1)
Secured fixed rate
Plaza El Segundo ...............................................
The Grove at Shrewsbury (East)........................
The Grove at Shrewsbury (West).......................
Rollingwood Apartments ...................................
The Shops at Sunset Place .................................
29th Place...........................................................
THE AVENUE at White Marsh.........................
Montrose Crossing .............................................
Brook 35.............................................................
Chelsea...............................................................
Subtotal ......................................................
Net unamortized premium ....................
Total mortgages payable ............................
Notes payable
Unsecured fixed rate
Term Loan (2) ....................................................
Various...............................................................
Unsecured variable rate
Escondido (municipal bonds) (3).......................
Revolving credit facility (4)...............................
Total notes payable ....................................
Senior notes and debentures
Unsecured fixed rate
5.90% notes........................................................
2.55% notes........................................................
3.00% notes........................................................
2.75% notes........................................................
3.95% notes........................................................
7.48% debentures...............................................
6.82% medium term notes .................................
4.50% notes........................................................
Subtotal ......................................................
Net unamortized premium ....................
Total senior notes and debentures..............
Capital lease obligations
Various..........................................................
Total debt and capital lease obligations
_____________________
Original
Debt
Issued
Principal Balance
as of December 31,
2015
(Dollars in thousands)
Stated Interest Rate
as of December 31,
2015
Maturity Date
$
Acquired
Acquired
Acquired
24,050
Acquired
Acquired
52,705
80,000
11,500
Acquired
275,000
7,239
9,400
600,000
150,000
250,000
250,000
275,000
300,000
50,000
40,000
450,000
$
175,000
43,557
11,024
21,716
70,542
4,753
52,705
74,329
11,500
6,868
471,994
10,828
482,822
275,000
5,700
9,400
53,500
343,600
150,000
250,000
250,000
275,000
300,000
29,200
40,000
450,000
1,744,200
124
1,744,324
71,620
2,642,366
6.33%
5.82%
6.38%
5.54%
5.62%
5.91%
3.35%
4.20%
4.65%
5.36%
August 5, 2017
October 1, 2017
March 1, 2018
May 1, 2019
September 1, 2020
January 31, 2021
January 1, 2022
January 10, 2022
July 1, 2029
January 15, 2031
LIBOR + 0.90%
11.31%
November 21, 2018
Various through 2028
0.03%
LIBOR + 0.90%
October 1, 2016
April 21, 2017
5.90%
2.55%
3.00%
2.75%
3.95%
7.48%
6.82%
4.50%
April 1, 2020
January 15, 2021
August 1, 2022
June 1, 2023
January 15, 2024
August 15, 2026
August 1, 2027
December 1, 2044
Various
Various through 2106
1)
2)
3)
4)
Mortgages payable do not include our 30% share ($10.3 million) of the $34.4 million debt of the partnership with a
discretionary fund created and advised by Clarion Partners. On January 13, 2016, we acquired Clarion's 70% joint
venture interest and assumed 100% of the related debt.
We entered into two interest rate swap agreements that fix the LIBOR portion of the interest rate on the term loan at
1.72%. The spread on the term loan is 90 basis points resulting in a fixed rate of 2.62%.
The bonds require monthly interest only payments through maturity. The bonds bear interest at a variable rate
determined weekly, which would enable the bonds to be remarketed at 100% of their principal amount. The Escondido
Promenade property is not encumbered by a lien.
The maximum amount drawn under our revolving credit facility during 2015 was $324.0 million and the weighted
average effective interest rate on borrowings under our revolving credit facility, before amortization of debt fees, was
1.09%.
46
Our revolving credit facility, term loan and other debt agreements include financial and other covenants that may limit our
operating activities in the future. As of December 31, 2015, we were in compliance with all of the financial and other
covenants. If we were to breach any of our debt covenants and did not cure the breach within an applicable cure period, our
lenders could require us to repay the debt immediately and, if the debt is secured, could immediately begin proceedings to take
possession of the property securing the loan. Many of our debt arrangements, including our public notes, term loan and our
revolving credit facility, are cross-defaulted, which means that the lenders under those debt arrangements can put us in default
and require immediate repayment of their debt if we breach and fail to cure a default under certain of our other debt obligations.
As a result, any default under our debt covenants could have an adverse effect on our financial condition, our results of
operations, our ability to meet our obligations and the market value of our shares. Our organizational documents do not limit
the level or amount of debt that we may incur.
The following is a summary of our scheduled principal repayments as of December 31, 2015:
Unsecured
Secured
Capital Lease
Total
(In thousands)
2016............................................................................... $
2017
9,812
$
5,665
$
53,957 (1)
222,469
2018...............................................................................
2019
2020...............................................................................
Thereafter
275,507
561
150,623
1,597,340
15,477
25,006
64,687
138,690
34
34
37
42
46
$
15,511
276,460
291,021
25,609
215,356
71,427
1,807,457
$ 2,087,800
$
471,994
$
71,620
$ 2,631,414 (2)
_____________________
1)
2)
Our $600.0 million revolving credit facility matures on April 21, 2017, subject to a one-year extension at our option.
As of December 31, 2015, there was $53.5 million outstanding under this credit facility.
The total debt maturities differs from the total reported on the consolidated balance sheet due to the unamortized net
premium or discount on certain mortgage loans and senior notes as of December 31, 2015.
Interest Rate Hedging
We may use derivative instruments to manage exposure to variable interest rate risk. We generally enter into interest rate swaps
to manage our exposure to variable interest rate risk and treasury locks to manage the risk of interest rates rising prior to the
issuance of debt. We enter into derivative instruments that qualify as cash flow hedges and do not enter into derivative
instruments for speculative purposes.
The interest rate swaps associated with our cash flow hedges are recorded at fair value on a recurring basis. We assess
effectiveness of our cash flow hedges both at inception and on an ongoing basis. The effective portion of changes in fair value
of the interest rate swaps associated with our cash flow hedges is recorded in other comprehensive (loss) income which is
included in accumulated other comprehensive loss on our consolidated balance sheet and our consolidated statement of
shareholders' equity. Our cash flow hedges become ineffective if critical terms of the hedging instrument and the debt
instrument do not perfectly match such as notional amounts, settlement dates, reset dates, calculation period and LIBOR rate.
In addition, we evaluate the default risk of the counterparty by monitoring the credit worthiness of the counterparty which
includes reviewing debt ratings and financial performance. However, management does not anticipate non-performance by the
counterparty. If a cash flow hedge is deemed ineffective, the ineffective portion of changes in fair value of the interest rate
swaps associated with our cash flow hedges is recognized in earnings in the period affected.
As of December 31, 2015, we are party to two interest rate swap agreements that effectively fixed the rate on the term loan at
2.62%. Both swaps were designated and qualified as cash flow hedges and were recorded at fair value. Hedge ineffectiveness
has not impacted earnings in 2015, 2014 and 2013, and we do not anticipate it will have a significant effect in the future.
REIT Qualification
We intend to maintain our qualification as a REIT under Section 856(c) of the Code. As a REIT, we generally will not be
subject to corporate federal income taxes on income we distribute to our shareholders as long as we satisfy certain technical
requirements of the Code, including the requirement to distribute at least 90% of our taxable income to our shareholders.
47
FEDERAL REALTY | ANNUAL REPORT 2015 Funds From Operations
Funds from operations (“FFO”) is a supplemental non-GAAP financial measure of real estate companies’ operating
performance. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as follows: net income,
computed in accordance with the U.S. GAAP, plus real estate related depreciation and amortization and excluding
extraordinary items and gains and losses on the sale of real estate. We compute FFO in accordance with the NAREIT
definition, and we have historically reported our FFO available for common shareholders in addition to our net income and net
cash provided by operating activities. It should be noted that FFO:
•
•
•
does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO,
generally reflects all cash effects of transactions and other events in the determination of net income);
should not be considered an alternative to net income as an indication of our performance; and
is not necessarily indicative of cash flow as a measure of liquidity or ability to fund cash needs,
including the payment of dividends.
We consider FFO available for common shareholders a meaningful, additional measure of operating performance primarily
because it excludes the assumption that the value of the real estate assets diminishes predictably over time, as implied by the
historical cost convention of GAAP and the recording of depreciation. We use FFO primarily as one of several means of
assessing our operating performance in comparison with other REITs. Comparison of our presentation of FFO to similarly titled
measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT
definition used by such REITs.
An increase or decrease in FFO available for common shareholders does not necessarily result in an increase or decrease in
aggregate distributions because our Board of Trustees is not required to increase distributions on a quarterly basis unless
necessary for us to maintain REIT status. However, we must distribute at least 90% of our taxable income to remain qualified
as a REIT. Therefore, a significant increase in FFO will generally require an increase in distributions to shareholders although
not necessarily on a proportionate basis.
In addition to FFO, we have also included FFO excluding the "early extinguishment of debt" charges in 2015, 2014, and 2013
which relate to the early redemption of our 6.20% senior notes in 2015, our 5.65% senior notes and East Bay Bridge mortgage
loan in 2014, and our 5.40% senior notes, 5.95% senior notes, and 7.50% mortgages loans in 2013. We believe the unusual
nature of these charges, being make-whole payments on the remaining principal and interest on the redeemed notes/mortgages,
is worthy of separate evaluation and consequently have provided both relevant metrics.
48
The reconciliation of net income to FFO available for common shareholders and to FFO available for common shareholders
excluding early extinguishment of debt is as follows:
Net income ............................................................................................................ $
Net income attributable to noncontrolling interests ..............................................
Gain on sale of real estate .....................................................................................
Depreciation and amortization of real estate assets ..............................................
Amortization of initial direct costs of leases.........................................................
Depreciation of joint venture real estate assets .....................................................
Funds from operations ...................................................................................
Dividends on preferred shares...............................................................................
Income attributable to operating partnership units................................................
Income attributable to unvested shares .................................................................
Funds from operations available for common shareholders ..........................
Early extinguishment of debt, net of allocation to unvested shares......................
Year Ended December 31,
2015
2014
2013
(In thousands, except per share data)
$
218,424
(8,205)
(28,330)
152,888
15,026
1,344
351,147
(541)
3,398
(1,147)
352,857
19,006
$
172,289
(7,754)
(4,401)
152,505
12,391
1,555
326,585
(541)
3,027
(1,474)
327,597
10,498
167,608
(4,927)
(28,855)
144,873
10,694
1,504
290,897
(541)
888
(1,306)
289,938
13,244
Funds from operations available for common shareholders excluding early
extinguishment of debt................................................................................... $
371,863
$
338,095
$
303,182
Weighted average number of common shares, diluted (1)....................................
69,920
68,410
65,778
Funds from operations available for common shareholders, per diluted share..... $
5.05
$
4.79
$
4.41
Funds from operations available for common shareholders excluding early
extinguishment of debt, per diluted share ............................................................. $
_____________________
5.32
$
4.94
$
4.61
(1)
The weighted average common shares used to compute FFO per diluted common share includes operating partnership
units that were excluded from the computation of diluted EPS. Conversion of these operating partnership units is
dilutive in the computation of FFO per diluted common share but is anti-dilutive for the computation of diluted EPS
for the periods presented.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our use of financial instruments, such as debt instruments, subjects us to market risk which may affect our future earnings and
cash flows, as well as the fair value of our assets. Market risk generally refers to the risk of loss from changes in interest rates
and market prices. We manage our market risk by attempting to match anticipated inflow of cash from our operating, investing
and financing activities with anticipated outflow of cash to fund debt payments, dividends to common and preferred
shareholders, investments, capital expenditures and other cash requirements.
We may enter into certain types of derivative financial instruments to further reduce interest rate risk. We use interest rate
protection and swap agreements, for example, to convert some of our variable rate debt to a fixed-rate basis or to hedge
anticipated financing transactions. We use derivatives for hedging purposes rather than speculation and do not enter into
financial instruments for trading purposes. As of December 31, 2015, we were party to two interest rate swap agreements that
effectively fix the rate on the $275.0 million term loan at 2.62%.
Interest Rate Risk
The following discusses the effect of hypothetical changes in market rates of interest on interest expense for our variable rate
debt and on the fair value of our total outstanding debt, including our fixed-rate debt. Interest rate risk amounts were
determined by considering the impact of hypothetical interest rates on our debt. Quoted market prices were used to estimate the
fair value of our marketable senior notes and debentures and discounted cash flow analysis is generally used to estimate the fair
value of our mortgages and notes payable. Considerable judgment is necessary to estimate the fair value of financial
49
FEDERAL REALTY | ANNUAL REPORT 2015 instruments. This analysis does not purport to take into account all of the factors that may affect our debt, such as the effect that
a changing interest rate environment could have on the overall level of economic activity or the action that our management
might take to reduce our exposure to the change. This analysis assumes no change in our financial structure.
Fixed Interest Rate Debt
The majority of our outstanding debt obligations (maturing at various times through 2044 or, with respect to capital lease
obligations through 2106) have fixed interest rates which limit the risk of fluctuating interest rates. However, interest rate
fluctuations may affect the fair value of our fixed rate debt instruments. At December 31, 2015, we had $2.5 billion of fixed-
rate debt outstanding, including our $275.0 million term loan as the rate is effectively fixed by two interest rate swap
agreements; we also had capital lease obligations of $71.6 million. If market interest rates used to calculate the fair value on our
fixed-rate debt instruments at December 31, 2015 had been 1.0% higher, the fair value of those debt instruments on that date
would have decreased by approximately $157.9 million. If market interest rates used to calculate the fair value on our fixed-rate
debt instruments at December 31, 2015 had been 1.0% lower, the fair value of those debt instruments on that date would have
increased by approximately $179.5 million.
Variable Interest Rate Debt
Generally, we believe that our primary interest rate risk is due to fluctuations in interest rates on our variable rate debt. At
December 31, 2015, we had $62.9 million of variable rate debt outstanding which consisted of $53.5 million on our revolving
credit facility and $9.4 million of municipal bonds. Based upon this amount of variable rate debt and the specific terms, if
market interest rates increased 1.0%, our annual interest expense would increase by approximately $0.6 million, and our net
income and cash flows for the year would decrease by approximately $0.6 million. Conversely, if market interest rates
decreased 1.0%, our annual interest expense would decrease by approximately $0.5 million with a corresponding increase in
our net income and cash flows for the year.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements and supplementary data are included as a separate section of this Annual Report on Form
10-K commencing on page F-1 and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Quarterly Assessment
We carried out an assessment as of December 31, 2015 of the effectiveness of the design and operation of our disclosure
controls and procedures and our internal control over financial reporting. This assessment was done under the supervision and
with the participation of management, including our Chief Executive Officer and our Chief Financial Officer. Rules adopted by
the Securities and Exchange Commission ("SEC") require that we present the conclusions of our principal executive officer and
our principal financial officer about the effectiveness of our disclosure controls and procedures and the conclusions of our
management about the effectiveness of our internal control over financial reporting as of the end of the period covered by this
annual report.
Principal Executive Officer and Principal Financial Officer Certifications
Included as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K are forms of “Certification” of our principal executive
officer and our principal financial officer. The forms of Certification are required in accordance with Section 302 of the
Sarbanes-Oxley Act of 2002. This section of this Annual Report on Form 10-K that you are currently reading is the information
concerning the assessment referred to in the Section 302 certifications and this information should be read in conjunction with
the Section 302 certifications for a more complete understanding of the topics presented.
50
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to
be disclosed in our Exchange Act reports, such as this report on Form 10-K, is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to
our management, including our President and Chief Executive Officer and Executive Vice President-Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. These controls and procedures are based closely on the
definition of “disclosure controls and procedures” in Rule 13a-15(e) promulgated under the Exchange Act. Rules adopted by
the SEC require that we present the conclusions of the Chief Executive Officer and Chief Financial Officer about the
effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report.
Internal Control over Financial Reporting
Establishing and maintaining internal control over financial reporting is a process designed by, or under the supervision of, our
President and Chief Executive Officer and Executive Vice President-Chief Financial Officer, as appropriate, and effected by our
employees, including management and our Board of Trustees, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles in the United States of America. This process includes policies and procedures that:
•
•
•
pertain to the maintenance of records that accurately and fairly reflect the transactions and dispositions of our assets in
reasonable detail;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that our receipts and expenditures are made only in
accordance with the authorization procedures we have established; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of any of our assets in circumstances that could have a material adverse effect on our financial statements.
Limitations on the Effectiveness of Controls
Management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and
procedures or internal control over financial reporting will prevent all errors and fraud. In designing and evaluating our control
system, management recognized that any control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must
reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, that may affect our
operation have been or will be detected. These inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by management’s override of the control. The design of
any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls
may become inadequate because of changes in conditions that cannot be anticipated at the present time, or the degree of
compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and may not be detected.
Scope of the Evaluations
The evaluation by our Chief Executive Officer and our Chief Financial Officer of our disclosure controls and procedures and
our internal control over financial reporting included a review of our procedures and procedures performed by internal audit, as
well as discussions with our Disclosure Committee and others in our organization, as appropriate. In conducting this evaluation,
our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in the 2013 Internal Control—Integrated Framework. In the course of the evaluation, we sought to identify data
errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements,
were being undertaken. The evaluation of our disclosure controls and procedures and our internal control over financial
reporting is done on a quarterly basis, so that the conclusions concerning the effectiveness of such controls can be reported in
our Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.
Our internal control over financial reporting is also assessed on an ongoing basis by personnel in our accounting department
and by our independent auditors in connection with their audit and review activities. The overall goals of these various
evaluation activities are to monitor our disclosure controls and procedures and our internal control over financial reporting and
to make modifications as necessary. Our intent in this regard is that the disclosure controls and procedures and internal control
over financial reporting will be maintained and updated (including with improvements and corrections) as conditions warrant.
51
FEDERAL REALTY | ANNUAL REPORT 2015 Among other matters, we sought in our evaluation to determine whether there were any “significant deficiencies” or “material
weaknesses” in our internal control over financial reporting, or whether we had identified any acts of fraud involving personnel
who have a significant role in our internal control over financial reporting. This information is important both for the evaluation
generally and because the Section 302 certifications require that our Chief Executive Officer and our Chief Financial Officer
disclose that information to the Audit Committee of our Board of Trustees and our independent auditors and also require us to
report on related matters in this section of the Annual Report on Form 10-K. In the Public Company Accounting Oversight
Board’s Auditing Standard No. 5, a “deficiency” in internal control over financial reporting exists when the design or operation
of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent
or detect misstatements on a timely basis. A “significant deficiency” is a deficiency, or a combination of deficiencies, in internal
control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those
responsible for oversight of the company’s financial reporting. A “material weakness” is defined in Auditing Standard No. 5 as
a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or
detected on a timely basis. We also sought to deal with other control matters in the evaluation, and in any case in which a
problem was identified, we considered what revision, improvement and/or correction was necessary to be made in accordance
with our on-going procedures.
Periodic Evaluation and Conclusion of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that such controls and procedures were effective as of the
end of the period covered by this report and provides reasonable assurance that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding
required disclosure.
Periodic Evaluation and Conclusion of Internal Control over Financial Reporting
Our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of the design and
operation of our internal control over financial reporting as of the end of our most recent fiscal year. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that such internal control over financial reporting was
effective as of the end of our most recent fiscal year and provides reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles in the United States of America.
Statement of Our Management
Our management has issued a report on its assessment of the Trust’s internal control over financial reporting, which appears on
page F-2 of this Annual Report on Form 10-K.
Statement of Our Independent Registered Public Accounting Firm
Grant Thornton LLP, our independent registered public accounting firm that audited the financial statements included in this
Annual Report on Form 10-K, has issued an attestation report on the Trust’s internal control over financial reporting, which
appears on page F-3 of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting during our fourth fiscal quarter of 2015 that materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
52
PART III
Certain information required in Part III is omitted from this Report but is incorporated herein by reference from our Proxy
Statement for the 2016 Annual Meeting of Shareholders (as amended or supplemented, the “Proxy Statement”).
ITEM 10. TRUSTEES, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The tables and narrative in the Proxy Statement identifying our Trustees and Board committees under the caption “Election of
Trustees” and “Corporate Governance”, the sections of the Proxy Statement entitled “Executive Officers” and “Section 16(a)
Beneficial Ownership Reporting Compliance” and other information included in the Proxy Statement required by this Item 10
are incorporated herein by reference.
We have adopted a Code of Ethics, which is applicable to our Chief Executive Officer and senior financial officers. The Code
of Ethics is available in the Corporate Governance section of the Investors section of our website at www.federalrealty.com.
ITEM 11. EXECUTIVE COMPENSATION
The sections of the Proxy Statement entitled “Summary Compensation Table,” “Compensation Committee Interlocks and
Insider Participation,” “Compensation Committee Report,” “Trustee Compensation” and “Compensation Discussion and
Analysis” and other information included in the Proxy Statement required by this Item 11 are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
The sections of the Proxy Statement entitled “Share Ownership” and “Equity Compensation Plan Information” and other
information included in the Proxy Statement required by this Item 12 are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND TRUSTEE INDEPENDENCE
The sections of the Proxy Statement entitled “Certain Relationship and Related Transactions” and “Independence of Trustees”
and other information included in the Proxy Statement required by this Item 13 are incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The sections of the Proxy Statement entitled “Ratification of Independent Registered Public Accounting Firm” and
“Relationship with Independent Registered Public Accounting Firm” and other information included in the Proxy Statement
required by this Item 14 are incorporated herein by reference.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
PART IV
Our consolidated financial statements and notes thereto, together with Management’s Report on Internal Control over Financial
Reporting and Reports of Independent Registered Public Accounting Firm are included as a separate section of this Annual
Report on Form 10-K commencing on page F-1.
(2) Financial Statement Schedules
Our financial statement schedules are included in a separate section of this Annual Report on Form 10-K commencing on page
F-30.
(3) Exhibits
A list of exhibits to this Annual Report on Form 10-K is set forth on the Exhibit Index immediately preceding such exhibits and
is incorporated herein by reference.
(b) See Exhibit Index
(c) Not Applicable
53
FEDERAL REALTY | ANNUAL REPORT 2015 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized this February 9, 2016.
Federal Realty Investment Trust
By:
/S/ DONALD C. WOOD
Donald C. Wood
President, Chief Executive Officer and Trustee
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacity and on the dates indicated. Each person whose signature
appears below hereby constitutes and appoints each of Donald C. Wood and Dawn M. Becker as his or her attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her in any and all capacities, to sign any or all amendments
to this Report and to file same, with exhibits thereto and other documents in connection therewith, granting unto such attorney-
in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary in connection
with such matters and hereby ratifying and confirming all that such attorney-in-fact and agent or his or her substitutes may do
or cause to be done by virtue hereof.
Signature
Title
Date
/S/ DONALD C. WOOD
Donald C. Wood
President, Chief Executive Officer and
February 9, 2016
Trustee (Principal Executive Officer)
/S/ JAMES M. TAYLOR, JR.
James M. Taylor, Jr.
/S/ JOSEPH S. VASSALLUZZO
Joseph S. Vassalluzzo
/S/ JON E. BORTZ
Jon E. Bortz
/S/ DAVID W. FAEDER
David W. Faeder
/S/ KRISTIN GAMBLE
Kristin Gamble
/S/ GAIL P. STEINEL
Gail P. Steinel
/S/ WARREN M. THOMPSON
Warren M. Thompson
Executive Vice President-Chief Financial
February 9, 2016
Officer and Treasurer (Principal
Financial and Accounting Officer)
Non-Executive Chairman
February 9, 2016
February 9, 2016
February 9, 2016
February 9, 2016
February 9, 2016
February 9, 2016
Trustee
Trustee
Trustee
Trustee
Trustee
54
SIGNATURES
Item 8 and Item 15(a)(1) and (2)
Index to Consolidated Financial Statements and Schedules
Consolidated Financial Statements
Management Assessment Report on Internal Control over Financial Reporting ..................................................
Page No.
Report of Independent Registered Public Accounting Firm..................................................................................
Report of Independent Registered Public Accounting Firm..................................................................................
Consolidated Balance Sheets .................................................................................................................................
Consolidated Statements of Comprehensive Income ............................................................................................
Consolidated Statement of Shareholders’ Equity ..................................................................................................
Consolidated Statements of Cash Flows................................................................................................................
Notes to Consolidated Financial Statements..........................................................................................................
Financial Statement Schedules
Schedule III—Summary of Real Estate and Accumulated Depreciation ..............................................................
Schedule IV—Mortgage Loans on Real Estate .....................................................................................................
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-30
F-37
All other schedules have been omitted either because the information is not applicable, not material, or is disclosed in our
consolidated financial statements and related notes.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized this February 9, 2016.
Federal Realty Investment Trust
By:
/S/ DONALD C. WOOD
President, Chief Executive Officer and Trustee
Donald C. Wood
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacity and on the dates indicated. Each person whose signature
appears below hereby constitutes and appoints each of Donald C. Wood and Dawn M. Becker as his or her attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her in any and all capacities, to sign any or all amendments
to this Report and to file same, with exhibits thereto and other documents in connection therewith, granting unto such attorney-
in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary in connection
with such matters and hereby ratifying and confirming all that such attorney-in-fact and agent or his or her substitutes may do
or cause to be done by virtue hereof.
Signature
Title
Date
/S/ DONALD C. WOOD
Donald C. Wood
President, Chief Executive Officer and
February 9, 2016
Trustee (Principal Executive Officer)
/S/ JAMES M. TAYLOR, JR.
Executive Vice President-Chief Financial
February 9, 2016
James M. Taylor, Jr.
Officer and Treasurer (Principal
Financial and Accounting Officer)
/S/ JOSEPH S. VASSALLUZZO
Non-Executive Chairman
February 9, 2016
Joseph S. Vassalluzzo
/S/ JON E. BORTZ
Jon E. Bortz
/S/ DAVID W. FAEDER
David W. Faeder
/S/ KRISTIN GAMBLE
Kristin Gamble
/S/ GAIL P. STEINEL
Gail P. Steinel
Trustee
Trustee
Trustee
Trustee
/S/ WARREN M. THOMPSON
Trustee
Warren M. Thompson
February 9, 2016
February 9, 2016
February 9, 2016
February 9, 2016
February 9, 2016
54
F-1
FEDERAL REALTY | ANNUAL REPORT 2015 Management Assessment Report on Internal Control over Financial Reporting
The management of Federal Realty Investment Trust (the "Trust") is responsible for establishing and maintaining adequate
internal control over financial reporting. Establishing and maintaining internal control over financial reporting is a process
designed by, or under the supervision of, our President and Chief Executive Officer and Executive Vice President - Chief
Financial Officer and Treasurer, as appropriate, and effected by our employees, including management and our Board of
Trustees, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. This process includes policies
and procedures that:
•
•
•
pertain to the maintenance of records that accurately and fairly reflect the transactions and dispositions of our assets in
reasonable detail;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that our receipts and expenditures are made only in
accordance with the authorization procedures we have established; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of any of our assets in circumstances that could have a material adverse effect on our financial statements.
Management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our internal control over
financial reporting will prevent all errors and fraud. In designing and evaluating our control system, management recognized
that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of
achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource
constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, that may affect our operation have been
detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management’s override of the control. The design of any system of controls
also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future conditions.
Management conducted an assessment of the effectiveness of the Trust’s internal control over financial reporting as of
December 31, 2015. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in the 2013 Internal Control—Integrated Framework. Based on this assessment,
management concluded that our internal control over financial reporting is effective, based on those criteria, as of
December 31, 2015.
Grant Thornton LLP, the independent registered public accounting firm that audited the Trust’s consolidated financial
statements included in this Annual Report on Form 10-K, has issued an attestation report on the Trust’s internal control over
financial reporting, which appears on page F-3 of this Annual Report on Form 10-K.
F-2
Report of Independent Registered Public Accounting Firm
Trustees and Shareholders of Federal Realty Investment Trust
We have audited the internal control over financial reporting of Federal Realty Investment Trust (a Maryland real estate
investment trust) and Subsidiaries (collectively, the "Trust") as of December 31, 2015, based on criteria established in the 2013
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Trust’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management
Assessment Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Trust’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Federal Realty Investment Trust and Subsidiaries maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2015, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated financial statements of the Trust as of and for the year ended December 31, 2015 and our report dated
February 9, 2016 expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
McLean, Virginia
February 9, 2016
F-3
FEDERAL REALTY | ANNUAL REPORT 2015 Report of Independent Registered Public Accounting Firm
Trustees and Shareholders of Federal Realty Investment Trust
We have audited the accompanying consolidated balance sheets of Federal Realty Investment Trust (a Maryland real estate
investment trust) and Subsidiaries (collectively, the "Trust") as of December 31, 2015 and 2014, and the related consolidated
statements of comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period
ended December 31, 2015. Our audits of the basic consolidated financial statements included the financial statement schedules
listed in the index appearing under Item 15(a)(2). These financial statements and financial statement schedules are the
responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial
statement schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Federal Realty Investment Trust and Subsidiaries as of December 31, 2015 and 2014, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with
accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement
schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Trust’s internal control over financial reporting as of December 31, 2015, based on criteria established in the 2013 Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
and our report dated February 9, 2016 expressed an unqualified opinion.
/s/ GRANT THORNTON LLP
McLean, Virginia
February 9, 2016
F-4
Federal Realty Investment Trust
Consolidated Balance Sheets
December 31,
2015
2014
(In thousands, except share and
per share data)
ASSETS
Real estate, at cost
Operating (including $485,971 and $282,303 of consolidated variable interest entities,
respectively) ..................................................................................................................... $ 5,630,771
Construction-in-progress ..................................................................................................
433,635
$ 5,128,757
480,241
6,064,406
5,608,998
Less accumulated depreciation and amortization (including $35,782 and $26,618 of
consolidated variable interest entities, respectively)........................................................
Net real estate ..........................................................................................................................
Cash and cash equivalents .......................................................................................................
Accounts and notes receivable, net .........................................................................................
Mortgage notes receivable, net................................................................................................
Investment in real estate partnerships......................................................................................
Prepaid expenses and other assets ...........................................................................................
Debt issuance costs, net of accumulated amortization of $11,092 and $11,441, respectively
(1,574,041)
4,490,365
21,046
110,402
41,618
41,546
190,203
16,529
TOTAL ASSETS............................................................................................................................. $ 4,911,709
(1,467,050)
4,141,948
47,951
93,291
50,988
37,457
160,167
15,068
$ 4,546,870
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Mortgages payable (including $254,241 and $187,632 of consolidated variable
interest entities, respectively) ........................................................................................... $
Capital lease obligations...................................................................................................
Notes payable ...................................................................................................................
Senior notes and debentures .............................................................................................
Accounts payable and accrued expenses..........................................................................
Dividends payable ............................................................................................................
Security deposits payable .................................................................................................
Other liabilities and deferred credits ................................................................................
Total liabilities.........................................................................................................................
Commitments and contingencies (Note 9)
Redeemable noncontrolling interests
Shareholders’ equity
482,822
71,620
343,600
1,744,324
146,532
66,338
15,439
121,787
2,992,462
$
563,698
71,647
290,519
1,483,813
145,685
60,620
14,115
105,164
2,735,261
137,316
119,053
Preferred shares, authorized 15,000,000 shares, $.01 par: 5.417% Series 1 Cumulative
Convertible Preferred Shares, (stated at liquidation preference $25 per share), 399,896
shares issued and outstanding ..........................................................................................
Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized,
69,493,392 and 68,605,783 shares issued and outstanding, respectively ........................
Additional paid-in capital.................................................................................................
Accumulated dividends in excess of net income .............................................................
Accumulated other comprehensive loss ...........................................................................
Total shareholders’ equity of the Trust....................................................................................
Noncontrolling interests ...................................................................................................
Total shareholders’ equity........................................................................................................
696
2,381,867
(724,701)
(4,110)
1,663,749
118,182
1,781,931
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY......................................................... $ 4,911,709
687
2,281,223
(683,991)
(3,515)
1,604,401
88,155
1,692,556
$ 4,546,870
9,997
9,997
The accompanying notes are an integral part of these consolidated statements.
F-5
FEDERAL REALTY | ANNUAL REPORT 2015 Federal Realty Investment Trust
Consolidated Statements of Comprehensive Income
REVENUE
Rental income ................................................................................................ $
Other property income ...................................................................................
Mortgage interest income ..............................................................................
Total revenue ..........................................................................................
EXPENSES
Rental expenses..............................................................................................
Real estate taxes.............................................................................................
General and administrative ............................................................................
Depreciation and amortization.......................................................................
Total operating expenses.........................................................................
OPERATING INCOME........................................................................................
Other interest income.....................................................................................
Interest expense..............................................................................................
Early extinguishment of debt .........................................................................
Income from real estate partnerships .............................................................
INCOME FROM CONTINUING OPERATIONS...............................................
DISCONTINUED OPERATIONS
Discontinued operations - income .................................................................
Discontinued operations - gain on sale of real estate.....................................
Results from discontinued operations.....................................................
INCOME BEFORE GAIN ON SALE OF REAL ESTATE.................................
Gain on sale of real estate ..............................................................................
NET INCOME ......................................................................................................
Net income attributable to noncontrolling interests.......................................
NET INCOME ATTRIBUTABLE TO THE TRUST............................................
Dividends on preferred shares .......................................................................
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS................... $
EARNINGS PER COMMON SHARE, BASIC
Continuing operations.................................................................................... $
Discontinued operations.................................................................................
Gain on sale of real estate ..............................................................................
$
Weighted average number of common shares, basic.....................................
EARNINGS PER COMMON SHARE, DILUTED
Continuing operations.................................................................................... $
Discontinued operations.................................................................................
Gain on sale of real estate ..............................................................................
Weighted average number of common shares, diluted..................................
$
Year Ended December 31,
2015
2014
2013
(In thousands, except per share data)
727,812
11,810
4,390
744,012
147,593
85,824
35,645
174,796
443,858
300,154
149
(92,553)
(19,072)
1,416
190,094
—
—
—
190,094
28,330
218,424
(8,205)
210,219
(541)
209,678
2.63
—
0.41
3.04
68,797
2.62
—
0.41
3.03
68,981
$
$
$
$
$
$
666,322
14,758
5,010
686,090
135,417
76,506
32,316
170,814
415,053
271,037
94
(93,941)
(10,545)
1,243
167,888
—
—
—
167,888
4,401
172,289
(7,754)
164,535
(541)
163,994
2.35
—
0.07
2.42
67,322
2.34
—
0.07
2.41
67,492
$
$
$
$
$
$
620,089
12,169
5,155
637,413
118,695
71,759
31,970
160,828
383,252
254,161
433
(104,977)
(13,304)
1,498
137,811
942
23,861
24,803
162,614
4,994
167,608
(4,927)
162,681
(541)
162,140
2.01
0.38
0.08
2.47
65,331
2.00
0.38
0.08
2.46
65,483
NET INCOME ...................................................................................................... $
218,424
$
172,289
$
167,608
Other comprehensive (loss) income - change in value of interest rate
swaps..............................................................................................................
COMPREHENSIVE INCOME ............................................................................
Comprehensive income attributable to noncontrolling interests ...................
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE TRUST.................. $
(595)
217,829
(8,205)
209,624
$
(2,098)
170,191
(7,754)
162,437
$
10,971
178,579
(4,927)
173,652
The accompanying notes are an integral part of these consolidated statements.
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7
-
F
FEDERAL REALTY | ANNUAL REPORT 2015
Federal Realty Investment Trust
Consolidated Statements of Cash Flows
Year Ended December 31,
2015
2014
2013
(In thousands)
OPERATING ACTIVITIES
Net income ................................................................................................................. $ 218,424
Adjustments to reconcile net income to net cash provided by operating activities
$ 172,289
$ 167,608
Depreciation and amortization, including discontinued operations ...................
Gain on sale of real estate...................................................................................
Early extinguishment of debt..............................................................................
Income from real estate partnerships..................................................................
Other, net ............................................................................................................
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Increase in accounts receivable, net....................................................................
(Increase) decrease in prepaid expenses and other assets...................................
(Decrease) increase in accounts payable and accrued expenses.........................
Increase in security deposits and other liabilities ...............................................
Net cash provided by operating activities..................................................................
INVESTING ACTIVITIES
Acquisition of real estate ...........................................................................................
Capital expenditures - development and redevelopment ...........................................
Capital expenditures - other .......................................................................................
Proceeds from sale of real estate................................................................................
Investment in real estate partnerships ........................................................................
Distribution from real estate partnership in excess of earnings.................................
Leasing costs..............................................................................................................
Repayment of mortgage and other notes receivable, net ...........................................
Net cash used in investing activities ..........................................................................
174,796
(28,330)
19,072
(1,416)
177
(9,200)
(7,422)
(9,995)
3,729
359,835
(154,313)
(236,437)
(46,096)
97,422
(2,802)
512
(22,382)
10,333
(353,763)
FINANCING ACTIVITIES
Net borrowings (repayments) under revolving credit facility, net of costs................
Issuance of senior notes, net of costs .........................................................................
Redemption and retirement of senior notes ...............................................................
Issuance of mortgages, capital leases and notes payable, net of costs.......................
Repayment of mortgages, capital leases and notes payable ......................................
Issuance of common shares .......................................................................................
Dividends paid to common and preferred shareholders ............................................
Distributions to and redemptions of noncontrolling interests....................................
Net cash (used in) provided by financing activities...................................................
(Decrease) Increase in cash and cash equivalents.............................................................
Cash and cash equivalents at beginning of year................................................................
Cash and cash equivalents at end of year.......................................................................... $
53,500
456,151
(219,228)
—
(181,315)
110,855
(243,314)
(9,626)
(32,977)
(26,905)
47,951
21,046
$
170,814
(4,401)
10,545
(1,243)
733
(3,063)
(4,222)
4,253
425
346,130
(9,154)
(314,654)
(46,304)
10,406
(6,731)
565
(35,286)
5,008
(396,150)
—
244,579
(134,240)
—
(94,422)
216,155
(215,216)
(7,812)
9,044
(40,976)
88,927
47,951
161,099
(28,855)
13,304
(1,498)
2,704
(6,321)
69
5,325
1,063
314,498
(87,276)
(243,073)
(47,069)
42,866
—
790
(12,393)
957
(345,198)
(1,929)
564,389
(293,360)
860
(173,735)
186,548
(193,016)
(7,118)
82,639
51,939
36,988
88,927
$
The accompanying notes are an integral part of these consolidated statements.
F-8
Federal Realty Investment Trust
Notes to Consolidated Financial Statements
December 31, 2015, 2014 and 2013
NOTE 1—BUSINESS AND ORGANIZATION
Federal Realty Investment Trust (the “Trust”) is an equity real estate investment trust (“REIT”) specializing in the ownership,
management, and redevelopment of retail and mixed-use properties. Our properties are located primarily in densely populated
and affluent communities in strategically selected metropolitan markets in the Mid-Atlantic and Northeast regions of the United
States, as well as in California and South Florida. As of December 31, 2015, we owned or had a majority interest in community
and neighborhood shopping centers and mixed-use properties which are operated as 90 predominantly retail real estate projects.
We operate in a manner intended to enable us to qualify as a REIT for federal income tax purposes. A REIT that distributes at
least 90% of its taxable income to its shareholders each year and meets certain other conditions is not taxed on that portion of
its taxable income which is distributed to its shareholders.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
Our consolidated financial statements include the accounts of the Trust, its corporate subsidiaries, and all entities in which the
Trust has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity (“VIE”). The
equity interests of other investors are reflected as noncontrolling interests or redeemable noncontrolling interests. All
significant intercompany transactions and balances are eliminated in consolidation. We account for our interests in joint
ventures, which we do not control, using the equity method of accounting.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America, referred to as “GAAP,” requires management to make estimates and assumptions that in certain circumstances affect
the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These
estimates are prepared using management’s best judgment, after considering past, current and expected events and economic
conditions. Actual results could differ from these estimates.
Revenue Recognition and Accounts Receivable
Our leases with tenants are classified as operating leases. Substantially all such leases contain fixed escalations which occur at
specified times during the term of the lease. Base rents are recognized on a straight-line basis from when the tenant controls the
space through the term of the related lease, net of valuation adjustments, based on management’s assessment of credit,
collection and other business risk. Percentage rents, which represent additional rents based upon the level of sales achieved by
certain tenants, are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved
and the percentage rents are collectible. Real estate tax and other cost reimbursements are recognized on an accrual basis over
the periods in which the related expenditures are incurred. For a tenant to terminate its lease agreement prior to the end of the
agreed term, we may require that they pay a fee to cancel the lease agreement. Lease termination fees for which the tenant has
relinquished control of the space are generally recognized on the termination date. When a lease is terminated early but the
tenant continues to control the space under a modified lease agreement, the lease termination fee is generally recognized evenly
over the remaining term of the modified lease agreement.
We make estimates of the collectability of our accounts receivable related to minimum rents, straight-line rents, expense
reimbursements and other revenue. Accounts receivable is carried net of this allowance for doubtful accounts. Our
determination as to the collectability of accounts receivable and correspondingly, the adequacy of this allowance, is based
primarily upon evaluations of individual receivables, current economic conditions, historical experience and other relevant
factors. The allowance for doubtful accounts is increased or decreased through bad debt expense. Accounts receivable are
written-off when they are deemed to be uncollectible and we are no longer actively pursuing collection. At December 31, 2015
and 2014, our allowance for doubtful accounts was $11.7 million and $12.4 million, respectively.
In some cases, primarily relating to straight-line rents, the collection of accounts receivable extends beyond one year. Our
experience relative to unbilled straight-line rents is that a portion of the amounts otherwise recognizable as revenue is never
billed to or collected from tenants due to early lease terminations, lease modifications, bankruptcies and other factors.
Accordingly, the extended collection period for straight-line rents along with our evaluation of tenant credit risk may result in
the nonrecognition of a portion of straight-line rental income until the collection of such income is reasonably assured. If our
evaluation of tenant credit risk changes indicating more straight-line revenue is reasonably collectible than previously estimated
F-9
FEDERAL REALTY | ANNUAL REPORT 2015 and realized, the additional straight-line rental income is recognized as revenue. If our evaluation of tenant credit risk changes
indicating a portion of realized straight-line rental income is no longer collectible, a reserve and bad debt expense is recorded.
At December 31, 2015 and 2014, accounts receivable include approximately $72.7 million and $66.1 million, respectively,
related to straight-line rents.
Real Estate
Land, buildings and improvements are recorded at cost. Depreciation is computed using the straight-line method. Estimated
useful lives range generally from 35 years to a maximum of 50 years on buildings and major improvements. Minor
improvements, furniture and equipment are capitalized and depreciated over useful lives ranging from 2 to 20 years.
Maintenance and repairs that do not improve or extend the useful lives of the related assets are charged to operations as
incurred. Tenant improvements are capitalized and depreciated over the life of the related lease or their estimated useful life,
whichever is shorter. If a tenant vacates its space prior to contractual termination of its lease, the undepreciated balance of any
tenant improvements are written off if they are replaced or have no future value. In 2015, 2014 and 2013, real estate
depreciation expense was $156.5 million, $155.7 million and $147.7 million, respectively, including amounts from real estate
sold and assets under capital lease obligations.
Sales of real estate are recognized only when sufficient down payments have been obtained, possession and other attributes of
ownership have been transferred to the buyer and we have no significant continuing involvement. The application of these
criteria can be complex and requires us to make assumptions. We believe these criteria were met for all real estate sold during
the periods presented.
Our methodology of allocating the cost of acquisitions to assets acquired and liabilities assumed is based on estimated fair
values, replacement cost and/or appraised values. When we acquire operating real estate properties, the purchase price is
allocated to land, building, improvements, leasing costs, intangibles such as in-place leases, assumed debt, if any, and to current
assets and liabilities acquired, if any. The value allocated to in-place leases is amortized over the related lease term and
reflected as rental income in the consolidated statements of comprehensive income. We consider qualitative and quantitative
factors in evaluating the likelihood of a tenant exercising a below market renewal option and include such renewal options in
the calculation of in-place lease value when we consider these to be bargain renewal options. If the value of below market lease
intangibles includes renewal option periods, we include such renewal periods in the amortization period utilized. If a tenant
vacates its space prior to contractual termination of its lease, the unamortized balance of any in-place lease value is written off
to rental income.
Transaction costs related to the acquisition of a business, such as broker fees, transfer taxes, legal, accounting, valuation, and
other professional and consulting fees, are expensed as incurred and included in “general and administrative expenses” in our
consolidated statements of comprehensive income. The acquisition of an operating shopping center typically qualifies as a
business. For asset acquisitions not meeting the definition of a business, transaction costs are capitalized as part of the
acquisition cost.
When applicable, as lessee, we classify our leases of land and building as operating or capital leases. We are required to use
judgment and make estimates in determining the lease term, the estimated economic life of the property and the interest rate to
be used in determining whether or not the lease meets the qualification of a capital lease and is recorded as an asset.
We capitalize certain costs related to the development and redevelopment of real estate including pre-construction costs, real
estate taxes, insurance, construction costs and salaries and related costs of personnel directly involved. Additionally, we
capitalize interest costs related to development and redevelopment activities. Capitalization of these costs begin when the
activities and related expenditures commence and cease when the project is substantially complete and ready for its intended
use at which time the project is placed in service and depreciation commences. Additionally, we make estimates as to the
probability of certain development and redevelopment projects being completed. If we determine the development or
redevelopment is no longer probable of completion, we expense all capitalized costs which are not recoverable.
We review for impairment on a property by property basis. Impairment is recognized on properties held for use when the
expected undiscounted cash flows for a property are less than its carrying amount at which time the property is written-down to
fair value. Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell.
Effective January 1, 2014, we adopted ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of
Components of an Entity,” which amended the definition of a discontinued operation to include only the disposal of a
component of an entity that represents a strategic shift that has or will have a major impact on an entity's operations and
financial results. The properties we have sold subsequent to January 1, 2014 do not qualify for discontinued operations
presentation and thus, the results of those disposals are included in "income from continuing operations." Prior to January 1,
2014, the sale or disposal of a “component of an entity” was treated as discontinued operations. The operating properties sold
F-10
by us prior to January 1, 2014 typically met the definition of a component of an entity and as such the revenues and expenses
associated with sold properties were reclassified to discontinued operations for all periods presented.
Cash and Cash Equivalents
We define cash and cash equivalents as cash on hand, demand deposits with financial institutions and short term liquid
investments with an initial maturity, when purchased, under three months. Cash balances in individual banks may exceed the
federally insured limit by the Federal Deposit Insurance Corporation (the “FDIC”). At December 31, 2015, we had $18.1
million in excess of the FDIC insured limit.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets consist primarily of lease costs, prepaid property taxes and acquired above market leases.
Capitalized lease costs are direct costs incurred which were essential to originate a lease and would not have been incurred had
the leasing transaction not taken place and include third party commissions and salaries and related costs of personnel directly
related to time spent obtaining a lease. Capitalized lease costs are amortized over the life of the related lease. If a tenant vacates
its space prior to the contractual termination of its lease, the unamortized balance of any previously capitalized lease costs are
written off.
Debt Issuance Costs
Costs related to the issuance of debt instruments are capitalized and are amortized as interest expense over the estimated life of
the related issue using the straight-line method which approximates the effective interest method. If a debt instrument is paid
off prior to its original maturity date, the unamortized balance of debt issuance costs are written off to interest expense or, if
significant, included in “early extinguishment of debt.”
Derivative Instruments
At times, we may use derivative instruments to manage exposure to variable interest rate risk. We generally enter into interest
rate swaps to manage our exposure to variable interest rate risk and treasury locks to manage the risk of interest rates rising
prior to the issuance of debt. We enter into derivative instruments that qualify as cash flow hedges and do not enter into
derivative instruments for speculative purposes.
The interest rate swaps associated with our cash flow hedges are recorded at fair value on a recurring basis. We assess
effectiveness of our cash flow hedges both at inception and on an ongoing basis. The effective portion of changes in fair value
of the interest rate swaps associated with our cash flow hedges is recorded in accumulated other comprehensive loss and is
subsequently reclassified into interest expense as interest is incurred on the related variable rate debt; within the next twelve
months, we expect to reclassify an estimated $2.9 million as an increase to interest expense. Our cash flow hedges become
ineffective if critical terms of the hedging instrument and the debt instrument do not perfectly match such as notional amounts,
settlement dates, reset dates, calculation period and LIBOR rate. In addition, we evaluate the default risk of the counterparty
by monitoring the credit worthiness of the counterparty. When ineffectiveness exists, the ineffective portion of changes in fair
value of the interest rate swaps associated with our cash flow hedges is recognized in earnings in the period affected. Hedge
ineffectiveness did not impact earnings in 2015, 2014 or 2013, and we do not anticipate it will have a significant effect in the
future.
See Note 8 for additional disclosures relating to our two existing interest rate swap agreements.
Mortgage Notes Receivable
We have made certain mortgage loans that, because of their nature, qualify as loan receivables. At the time the loans were
made, we did not intend for the arrangement to be anything other than a financing and did not contemplate a real estate
investment. We evaluate each investment to determine whether the loan arrangement qualifies as a loan, joint venture or real
estate investment and the appropriate accounting thereon. Such determination affects our balance sheet classification of these
investments and the recognition of interest income derived therefrom. On some of the loans we receive additional interest,
however, we never receive in excess of 50% of the residual profit in the project, and because the borrower has either a
substantial investment in the project or has guaranteed all or a portion of our loan (or a combination thereof), the loans qualify
for loan accounting. The amounts under these arrangements are presented as mortgage notes receivable at December 31, 2015
and 2014.
F-11
FEDERAL REALTY | ANNUAL REPORT 2015 Mortgage notes receivable are recorded at cost, net of any valuation adjustments. Interest income is accrued as earned.
Mortgage notes receivable are considered past due based on the contractual terms of the note agreement. On a quarterly basis,
we evaluate the collectability of each mortgage note receivable based on various factors which may include payment history,
expected fair value of the collateral securing the loan, internal and external credit information and/or economic trends. A loan is
considered impaired when, based upon current information and events, it is probable that we will be unable to collect all
amounts due under the existing contractual terms. When a loan is considered impaired, the amount of the loss accrual is
calculated by comparing the carrying amount of the mortgage note receivable to the present value of expected future cash
flows. Since all of our loans are collateralized by either a first or second mortgage, the loans have risk characteristics similar to
the risks in owning commercial real estate.
Share Based Compensation
We grant share based compensation awards to employees and trustees typically in the form of restricted common shares,
common shares, and options. We measure stock based compensation expense based on the grant date fair value of the award
and recognize the expense ratably over the requisite service period, which is typically the vesting period. See Note 15 for
further discussion regarding our share based compensation plans and policies.
Variable Interest Entities
Certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated
financial support from other parties or in which equity investors do not have the characteristics of a controlling financial
interest qualify as VIEs. VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE
has both the power to direct the activities that most significantly impact economic performance of the VIE and the obligation to
absorb losses or the right to receive benefits that could potentially be significant to the VIE.
We have evaluated our investments in certain joint ventures including our real estate partnership with affiliates of a
discretionary fund created and advised by Clarion Partners as of December 31, 2015 and determined that these joint ventures
do not meet the requirements of a variable interest entity and, therefore, consolidation of these ventures is not required. These
investments are accounted for using the equity method. See Note 19 for additional information regarding our January 13, 2016
acquisition of Clarion's 70% interest in this partnership. We have also determined that our hotel joint venture at our Pike &
Rose project does not meet the requirement of a variable interest entity and have accounted for our related investment using the
equity method. We have evaluated our mortgage loans receivable and determined that entities obligated under the mortgage
loans are not VIEs for all periods presented. Our equity method investment balances and mortgage notes receivable are
presented separately in our consolidated balance sheets.
On October 16, 2006, we acquired the leasehold interest in Melville Mall under a 20 year master lease. Additionally, we loaned
the owner of Melville Mall $34.2 million secured by a second mortgage on the property. On June 3, 2014, we repaid the third
party mortgage loan, and effectively became the first mortgage lender on the property. We have an option to purchase the
shopping center on or after October 16, 2021 for a price of $5.0 million plus the assumption/repayment of the first and second
mortgages. If we fail to exercise our purchase option, the owner of Melville Mall has a put option which would require us to
purchase Melville Mall in 2023 for $5.0 million and the assumption of the owner’s mortgage debt. We have determined that
this property is held in a variable interest entity for which we are the primary beneficiary. Accordingly, beginning October 16,
2006, we consolidated this property and its operations. At December 31, 2015 and 2014, net real estate assets related to
Melville Mall included in our consolidated balance sheets are approximately $65.0 million and $61.9 million, respectively.
In conjunction with the acquisition of Darien Shopping Center, we entered into a Reverse Section 1031 like-kind exchange
agreement with a third party intermediary. The exchange agreement was for a maximum of 180 days and allowed us, for tax
purposes, to defer gains on sale of other properties sold within this period. From April 3, 2013 to September 10, 2013, the third
party intermediary was the legal owner of the property, although we controlled the activities that most significantly impacted
the property, retained all of the economic benefits and risks associated with the property, and were the primary beneficiary.
Accordingly, effective April 3, 2013, we consolidated Darien Shopping Center and its operations even during the period it was
held by a third party intermediary.
We determined the joint venture that owns Plaza El Segundo is a variable interest entity for which we are the primary
beneficiary. We are the managing member and own 48.2% of the entity. We control the significant operating decisions,
consequently having the power to direct the activities that most significantly impact economic performance of the VIE, and
have the obligation to absorb the majority of the losses and receive the majority of the benefits. Therefore, the entity is
consolidated in our financial statements as of December 30, 2011. As of December 31, 2015 and 2014, net real estate assets
related to Plaza El Segundo included in our consolidated balance sheets are approximately $172.2 million and $178.1 million,
F-12
respectively, and mortgages payable (net of unamortized premium) of $178.3 million and $180.3 million, respectively. Plaza El
Segundo's creditors do not have recourse to our general credit. Our maximum exposure to loss is approximately $19.5 million.
On January 1, 2014 we entered into an agreement to acquire the interest of one of the noncontrolling interest holders in The
Grove at Shrewsbury in 2015. The entity that held this interest was a variable interest entity for which we were the primary
beneficiary. As of December 31, 2014, net real estate assets related to this entity's interest in The Grove at Shrewsbury included
in our consolidated balance sheet were approximately $15.7 million, and a mortgage payable (net of unamortized premium) of
$7.4 million. On February 25, 2015, we acquired the interest of the noncontrolling interest holder for $8.8 million. As this
noncontrolling interest was mandatorily redeemable, it was classified as a liability and was included in "other liabilities and
deferred credits" on the accompanying December 31, 2014 consolidated balance sheet.
We have determined the joint venture that owns CocoWalk and other partial interests in buildings in the Coconut Grove
neighborhood of Miami, Florida, is a variable interest entity for which we are the primary beneficiary. We own an 80%
common interest of the entity, as well as a preferred interest. We control the significant operating decisions, consequently
having the power to direct the activities that most significantly impact economic performance of the entity, and have the
obligation to absorb the majority of the losses and receive the majority of the benefits. Therefore, the entity is consolidated in
our financial statements as of May 4, 2015. As of December 31, 2015, net real estate assets related to CocoWalk included in our
consolidated balance sheets are approximately $97.2 million. Our maximum exposure to loss is approximately $88.8 million.
We have determined the joint venture that owns The Shops at Sunset Place is a variable interest entity for which we are the
primary beneficiary. We own an 85% common interest of the entity. We control the significant operating decisions,
consequently having the power to direct the activities that most significantly impact economic performance of the entity, and
have the obligation to absorb the majority of the losses and receive the majority of the benefits. Therefore, the entity is
consolidated in our financial statements as of October 1, 2015. As of December 31, 2015, net real estate assets related to The
Shops at Sunset Place included in our consolidated balance sheets are approximately $115.8 million, and the entity has a
mortgage payable (net of unamortized premium) of $75.9 million. Our maximum exposure to loss is approximately $35.5
million.
Redeemable Noncontrolling Interests
We have certain noncontrolling interests that are redeemable for cash upon the occurrence of an event that is not solely in our
control and therefore are classified outside of permanent equity. We adjust the carrying amounts of these noncontrolling
interests that are currently redeemable to redemption value at the balance sheet date. Adjustments to the carrying amount to
reflect changes in redemption value are recorded as adjustments to additional paid-in capital in shareholders' equity. These
amounts are classified within the mezzanine section of the consolidated balance sheets.
The following table provides a rollforward of the redeemable noncontrolling interests:
Beginning balance.............................................................................................................................. $
Net income ....................................................................................................................................
Distributions & Redemptions........................................................................................................
Contributions.................................................................................................................................
Change in redemption value .........................................................................................................
Ending balance................................................................................................................................... $
Year Ended
December 31,
2015
2014
(In thousands)
119,053
$
104,425
3,423
(4,286)
12
19,114
3,452
(3,714)
5,858
9,032
137,316
$
119,053
Income Taxes
We operate in a manner intended to enable us to qualify as a REIT for federal income tax purposes. A REIT that distributes at
least 90% of its taxable income to its shareholders each year and meets certain other conditions is not taxed on that portion of
its taxable income which is distributed to its shareholders. Therefore, federal income taxes on our taxable income have been
and are generally expected to be immaterial. We are obligated to pay state taxes, generally consisting of franchise or gross
receipts taxes in certain states. Such state taxes also have not been material.
F-13
FEDERAL REALTY | ANNUAL REPORT 2015 We have elected to treat certain of our subsidiaries as taxable REIT subsidiaries, which we refer to as a TRS. In general, a TRS
may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Internal
Revenue Code of 1986, as amended (the “Code”). A TRS is subject to federal and state income taxes. Our TRS activities have
not been material.
With few exceptions, we are no longer subject to U.S. federal, state, and local tax examinations by tax authorities for years
before 2011. As of December 31, 2015 and 2014, we had no material unrecognized tax benefits. While we currently have no
material unrecognized tax benefits, as a policy, we recognize penalties and interest accrued related to unrecognized tax benefits
as income tax expense.
Segment Information
Our primary business is the ownership, management, and redevelopment of retail and mixed-use properties. We review
operating and financial information for each property on an individual basis and therefore, each property represents an
individual operating segment. We evaluate financial performance using property operating income, which consists of rental
income, other property income and mortgage interest income, less rental expenses and real estate taxes. No individual property
constitutes more than 10% of our revenues or property operating income and we have no operations outside of the United
States of America. Therefore, we have aggregated our properties into one reportable segment as the properties share similar
long-term economic characteristics and have other similarities including the fact that they are operated using consistent
business strategies, are typically located in major metropolitan areas, and have similar tenant mixes.
Recently Issued Accounting Pronouncements
In January 2015, the FASB issued ASU 2015-01, "Income Statement - Extraordinary and Unusual Items." ASU 2015-01
eliminates the concept, and related presentation and disclosure requirements, of an extraordinary item. The presentation and
disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include
those items that are both unusual in nature and infrequently occurring. ASU 2015-01 is effective for us in the first quarter of
2016 and is not expected to have a significant impact on our consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02, "Amendments to the Consolidation Analysis." ASU 2015-02 modifies the
evaluation of whether limited partnerships and similar legal entities are variable or voting interest entities, eliminates the
presumption that the general partner should consolidate a limited partnership, modifies the consolidation analysis for reporting
entities that are involved in variable interest entities, particularly those that have fee arrangements and related party
relationships, and provides a scope exception from consolidation guidance for reporting entities with interests in legal entities
that operate as registered money market funds. ASU 2015-02 is effective for us in the first quarter of 2016, and is not expected
to have a significant impact on our consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs." ASU 2015-03 requires
debt issuance costs related to a debt liability be presented in the balance sheet as a direct deduction from the carrying amount of
the debt liability, rather than classified as an asset. Recognition and measurement of debt issuance costs are not affected.
Subsequently, in August 2015, the FASB issued ASU 2015-15, "Presentation and Subsequent Measurement of Debt Issuance
Costs Associated with Line-of-Credit Arrangements," which allows an entity to present the costs related to securing a line-of-
credit arrangement as an asset, regardless of whether there are any outstanding borrowings. ASU 2015-03 and ASU 2015-15
are effective for us in the first quarter of 2016 and are not expected to have a significant impact on our consolidated financial
statements.
In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09, "Revenue from Contracts
with Customers," which will now be effective for us in the first quarter of 2018. We are currently assessing the impact of this
standard to our consolidated financial statements.
In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments." ASU
2015-16 requires that, if the initial accounting for the business combination is incomplete as of the end of the reporting period
in which the acquisition occurs, the acquirer records provisional amounts based on information available at the acquisition date.
The acquirer would then adjust these amounts in the current period, as it obtains more information about facts and
circumstances that existed as of the acquisition date. Under the current guidance, an acquirer must revise comparative
information on the income statement and balance sheet for any prior periods affected. ASU 2015-16 is effective for us in the
first quarter of 2016, and is not expected to have a significant impact on our consolidated financial statements.
F-14
We have elected to treat certain of our subsidiaries as taxable REIT subsidiaries, which we refer to as a TRS. In general, a TRS
may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Internal
Revenue Code of 1986, as amended (the “Code”). A TRS is subject to federal and state income taxes. Our TRS activities have
Consolidated Statements of Cash Flows—Supplemental Disclosures
The following table provides supplemental disclosures related to the Consolidated Statements of Cash Flows:
With few exceptions, we are no longer subject to U.S. federal, state, and local tax examinations by tax authorities for years
before 2011. As of December 31, 2015 and 2014, we had no material unrecognized tax benefits. While we currently have no
material unrecognized tax benefits, as a policy, we recognize penalties and interest accrued related to unrecognized tax benefits
not been material.
as income tax expense.
Segment Information
Our primary business is the ownership, management, and redevelopment of retail and mixed-use properties. We review
operating and financial information for each property on an individual basis and therefore, each property represents an
individual operating segment. We evaluate financial performance using property operating income, which consists of rental
income, other property income and mortgage interest income, less rental expenses and real estate taxes. No individual property
constitutes more than 10% of our revenues or property operating income and we have no operations outside of the United
States of America. Therefore, we have aggregated our properties into one reportable segment as the properties share similar
long-term economic characteristics and have other similarities including the fact that they are operated using consistent
business strategies, are typically located in major metropolitan areas, and have similar tenant mixes.
Recently Issued Accounting Pronouncements
In January 2015, the FASB issued ASU 2015-01, "Income Statement - Extraordinary and Unusual Items." ASU 2015-01
eliminates the concept, and related presentation and disclosure requirements, of an extraordinary item. The presentation and
disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include
those items that are both unusual in nature and infrequently occurring. ASU 2015-01 is effective for us in the first quarter of
2016 and is not expected to have a significant impact on our consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02, "Amendments to the Consolidation Analysis." ASU 2015-02 modifies the
evaluation of whether limited partnerships and similar legal entities are variable or voting interest entities, eliminates the
presumption that the general partner should consolidate a limited partnership, modifies the consolidation analysis for reporting
entities that are involved in variable interest entities, particularly those that have fee arrangements and related party
relationships, and provides a scope exception from consolidation guidance for reporting entities with interests in legal entities
that operate as registered money market funds. ASU 2015-02 is effective for us in the first quarter of 2016, and is not expected
to have a significant impact on our consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs." ASU 2015-03 requires
debt issuance costs related to a debt liability be presented in the balance sheet as a direct deduction from the carrying amount of
the debt liability, rather than classified as an asset. Recognition and measurement of debt issuance costs are not affected.
Subsequently, in August 2015, the FASB issued ASU 2015-15, "Presentation and Subsequent Measurement of Debt Issuance
Costs Associated with Line-of-Credit Arrangements," which allows an entity to present the costs related to securing a line-of-
credit arrangement as an asset, regardless of whether there are any outstanding borrowings. ASU 2015-03 and ASU 2015-15
are effective for us in the first quarter of 2016 and are not expected to have a significant impact on our consolidated financial
statements.
In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09, "Revenue from Contracts
with Customers," which will now be effective for us in the first quarter of 2018. We are currently assessing the impact of this
standard to our consolidated financial statements.
In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments." ASU
2015-16 requires that, if the initial accounting for the business combination is incomplete as of the end of the reporting period
in which the acquisition occurs, the acquirer records provisional amounts based on information available at the acquisition date.
The acquirer would then adjust these amounts in the current period, as it obtains more information about facts and
circumstances that existed as of the acquisition date. Under the current guidance, an acquirer must revise comparative
information on the income statement and balance sheet for any prior periods affected. ASU 2015-16 is effective for us in the
first quarter of 2016, and is not expected to have a significant impact on our consolidated financial statements.
Year Ended December 31,
2015
2014
2013
(In thousands)
SUPPLEMENTAL DISCLOSURES:
Total interest costs incurred ........................................................................... $
Interest capitalized .........................................................................................
Interest expense ...................................................................................... $
Cash paid for interest, net of amounts capitalized ......................................... $
Cash paid for income taxes ............................................................................ $
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Mortgage loans assumed with acquisition ..................................................... $
DownREIT operating partnership units issued with acquisition ................... $
Mortgage loans refinanced............................................................................. $
Repayment of note payable with public funding/related construction-in-
progress offset................................................................................................ $
Shares issued under dividend reinvestment plan ........................................... $
110,675
(18,122)
92,553
116,335
274
89,516
7,742
$
$
$
$
$
$
— $
— $
1,977
$
114,912
(20,971)
93,941
100,011
278
68,282
65,348
64,205
10,000
1,855
$
$
$
$
$
$
$
$
$
121,158
(16,181)
104,977
120,934
410
—
—
—
—
1,779
See Note 3 for additional disclosures relating to the San Antonio Center, CocoWalk, and The Shops at Sunset Place
acquisitions.
Capitalized lease costs are direct costs incurred which were essential to originate a lease and would not have been incurred had
the leasing transaction not taken place. These costs include third party commissions and salaries and personnel costs related to
obtaining a lease. Capitalized lease costs are amortized over the initial term of the related lease which generally ranges from
three to ten years. We view these lease costs as part of the up-front initial investment we made in order to generate a long-term
cash inflow and therefore, we classify cash outflows related to leasing costs as an investing activity in our consolidated
statements of cash flows.
NOTE 3—REAL ESTATE
A summary of our real estate investments and related encumbrances is as follows:
December 31, 2015
Retail and mixed-use properties ...................................................
Retail properties under capital leases ...........................................
Residential ....................................................................................
December 31, 2014
Retail and mixed-use properties ...................................................
Retail properties under capital leases ...........................................
Residential ....................................................................................
Cost
Accumulated
Depreciation and
Amortization
(In thousands)
Encumbrances
$
$
$
$
5,929,569
124,590
10,247
6,064,406
5,478,085
121,069
9,844
5,608,998
$
$
$
$
(1,526,934) $
(38,509)
(8,598)
(1,574,041) $
(1,423,682) $
(35,179)
(8,189)
(1,467,050) $
461,106
71,620
21,716
554,442
541,568
71,647
22,130
635,345
Retail and mixed-use properties includes the residential portion of Santana Row, Bethesda Row, Pike & Rose, Congressional
Plaza and Chelsea Commons. The residential property investment is our investment in Rollingwood Apartments.
F-14
F-15
FEDERAL REALTY | ANNUAL REPORT 2015 2015 Significant Property Acquisitions and Dispositions
In January 2015, we acquired a controlling interest in San Antonio Center, a 376,000 square foot shopping center in Mountain
View, California based on a total value of $62.2 million. Our effective interest approximates 80% and was funded by the
assumption of our share of $18.7 million of mortgage debt, 58,000 downREIT operating partnership units, and $27 million of
cash. A portion of the land is controlled under a long-term ground lease. Approximately $8.1 million of assets acquired were
allocated to lease intangibles and included within other assets. Approximately $19.1 million was allocated to lease intangibles
primarily related to "below market leases," and is included within other liabilities. Additionally, $16.3 million was allocated to
noncontrolling interests. We incurred $1.8 million of acquisition costs, of which $1.1 million were incurred in 2015, and
included in "general and administrative expense" in 2015 and 2014.
On February 25, 2015, we acquired the interest of one of the noncontrolling interest holders in The Grove at Shrewsbury for
$8.8 million. As this noncontrolling interest was mandatorily redeemable, it was classified as a liability and was included in
"other liabilities and deferred credits" on the accompanying December 31, 2014 consolidated balance sheet.
On April 24, 2015, we sold our Houston Street property in San Antonio, Texas for a sales price of $46.1 million, resulting in a
gain of $11.5 million.
On May 4, 2015, we acquired CocoWalk, a 198,000 square foot retail property located in the Coconut Grove neighborhood of
Miami, Florida for $87.5 million. The acquisition was completed through a newly formed entity ("CocoWalk LLC") for which
we own a preferred interest and an 80% common interest. Approximately $1.5 million and $4.3 million of net assets acquired
were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively.
Additionally, approximately $6.9 million was allocated to noncontrolling interests. On July 1, 2015 and December 16, 2015, we
acquired partial interests in eight buildings in the Coconut Grove neighborhood of Miami, Florida for $7.8 million through our
CocoWalk LLC entity. In total, we incurred $1.1 million in acquisition costs which are included in "general and administrative
expenses" in 2015.
On July 8, 2015 we acquired a parcel of land adjacent to our Pike 7 Plaza property for $5.0 million.
On October 1, 2015, we acquired The Shops at Sunset Place, a 515,000 square foot mixed-use property located in South
Miami, Florida based on a gross value of $110.2 million. The acquisition was completed through a newly formed entity for
which we own an 85% interest. Approximately $4.8 million and $6.6 million of net assets acquired were allocated to other
assets for "above market leases," and other liabilities for "below market leases," respectively. Additionally, approximately $6.3
million was allocated to noncontrolling interests. We incurred $0.9 million of acquisition costs, which are included in "general
and administrative expenses" in 2015. The transaction includes the assumption of an existing $70.8 million mortgage loan.
On November 19, 2015, we sold our Courtyard Shops property in Wellington, Florida for a sales price of $52.8 million,
resulting in a gain of $16.8 million.
2014 Significant Property Acquisition
Effective January 1, 2014, we acquired a controlling interest in The Grove at Shrewsbury, a 187,000 square foot shopping
center in Shrewsbury, New Jersey, and Brook 35, a 99,000 square foot shopping center in Sea Girt, New Jersey for a gross
value of $161 million. Our effective economic interest approximates 84% and was funded by the assumption of our share of
$68 million of mortgage debt, 632,000 downREIT operating partnership units, and $13 million of cash (which was in an escrow
account at December 31, 2013). Approximately $1.7 million and $2.3 million of net assets acquired were allocated to other
assets for "above market leases" and other liabilities for "below market leases," respectively. Additionally, $71.1 million was
allocated to redeemable and nonredeemable noncontrolling interests. We incurred $2.0 million of acquisition costs, of which
$1.0 million were incurred in 2014, and are included in "general and administrative expenses" in 2014 and 2013, on the
accompanying consolidated statements of comprehensive income.
NOTE 4—MORTGAGE NOTES RECEIVABLE
At December 31, 2015 and 2014, we had three and four mortgage notes receivable, respectively, with aggregate carrying
amounts of $41.6 million and $51.0 million, respectively. At December 31, 2015, all of the loans were secured by first
mortgages on retail buildings, and at December 31, 2014, $41.2 million of the loans were secured by first mortgages on retail
buildings. We have a note that matured on June 30, 2015 and is currently in default. The estimated net realizable value of the
related collateral supports the carrying amount of the note. At December 31, 2015 and 2014, our mortgages had a weighted
average interest rate of 9.0%. Under the terms of certain of these mortgages, we receive additional interest based upon the gross
income of the secured properties and upon sale, share in the appreciation of the properties.
F-16
NOTE 5—REAL ESTATE PARTNERSHIPS
As of December 31, 2015, we had a joint venture arrangement (the “Partnership”) with affiliates of a discretionary fund created
and advised by Clarion Partners (“Clarion”). We owned 30% of the equity in the Partnership and Clarion owned 70%. We held
a general partnership interest, however, Clarion also held a general partnership interest and had substantive participating rights.
We could not make significant decisions without Clarion’s approval. Accordingly, we accounted for our interest in the
Partnership using the equity method. As of December 31, 2015, the Partnership owned six retail real estate properties. We were
the manager of the Partnership and its properties, earning fees for acquisitions, dispositions, management, leasing, and
financing. Intercompany profit generated from fees was eliminated in consolidation. We also had the opportunity to receive
performance-based earnings through our Partnership interest. Accounting policies for the Partnership were similar to
accounting policies followed by the Trust. As of December 31, 2015, we made total contributions of $48.8 million and received
total distributions of $32.4 million. On January 13, 2016, we acquired Clarion's 70% interest in the partnership, as further
discussed in Note 19.
The following tables provide summarized operating results and the financial position of the Partnership:
OPERATING RESULTS
Revenue................................................................................................................. $
Expenses
Other operating expenses...............................................................................
Depreciation and amortization.......................................................................
Interest expense..............................................................................................
Total expenses.......................................................................................................
Net income before gain on sale of real estate .......................................................
Gain on sale of real estate .....................................................................................
Net income ............................................................................................................ $
Our share of net income from real estate partnership before gain on sale of real
estate...................................................................................................................... $
Our share of gain on sale of real estate ................................................................. $
Year Ended December 31,
2015
2014
2013
(In thousands)
17,405
$
18,329
$
19,209
5,992
4,974
2,062
13,028
4,377
—
4,377
1,557
$
$
— $
5,948
5,678
2,759
14,385
3,944
14,507
18,451
1,423
4,401
$
$
$
5,999
5,506
3,363
14,868
4,341
—
4,341
1,498
—
BALANCE SHEETS
Real estate, net ................................................................................................................................ $
Cash ................................................................................................................................................
Other assets.....................................................................................................................................
Total assets............................................................................................................................... $
Mortgages payable.......................................................................................................................... $
Other liabilities ...............................................................................................................................
Partners’ capital ..............................................................................................................................
Total liabilities and partners’ capital........................................................................................ $
Our share of unconsolidated debt ................................................................................................... $
Our investment in real estate partnership ....................................................................................... $
December 31,
2015
2014
(In thousands)
146,906
2,690
5,495
155,091
34,385
3,554
117,152
155,091
10,316
31,745
$
$
$
$
$
$
149,203
2,864
5,346
157,413
34,385
3,673
119,355
157,413
10,316
32,367
On June 5, 2014, the Partnership repaid an $11.9 million mortgage loan secured by one of its properties at par prior to the
original maturity date of July 5, 2014. The partners made additional capital contributions totaling $11.9 million to repay the
mortgage loan, of which our contribution was $3.6 million.
On July 24, 2014, the Partnership sold the fee interest in Pleasant Shops in Weymouth, Massachusetts for a sales price of $34.3
million, resulting in a gain on sale of $14.5 million. Our share of the gain was $4.4 million. The partners received distributions
totaling $32.8 million as a result of the sale, of which our distribution was $10.4 million.
F-17
FEDERAL REALTY | ANNUAL REPORT 2015 On September 2, 2014, the Partnership repaid a $10.5 million mortgage loan secured by one of its properties at par prior to the
original maturity date of December 1, 2014. The partners made additional capital contributions totaling $10.5 million to repay
the mortgage loan, of which our contribution was $3.2 million.
NOTE 6—ACQUIRED IN-PLACE LEASES
Acquired above market leases are included in prepaid expenses and other assets and had a balance of $39.4 million and $32.7
million and accumulated amortization of $22.9 million and $19.3 million at December 31, 2015 and 2014, respectively.
Acquired below market leases are included in other liabilities and deferred credits and had a balance of $133.4 million and
$109.8 million and accumulated amortization of $40.7 million and $37.0 million at December 31, 2015 and 2014, respectively.
The value allocated to in-place leases is amortized over the related lease term and reflected as additional rental income for
below market leases or a reduction of rental income for above market leases in the consolidated statements of comprehensive
income. Rental income included amortization from acquired above market leases of $4.4 million, $3.4 million and $2.8 million
in 2015, 2014 and 2013, respectively and amortization from acquired below market leases of $7.1 million, $5.8 million and
$5.9 million in 2015, 2014 and 2013, respectively. The remaining weighted-average amortization period as of December 31,
2015, is 4.4 years and 20.5 years for above market leases and below market leases, respectively.
The amortization for acquired in-place leases during the next five years and thereafter, assuming no early lease terminations, is
as follows:
Year ending December 31,
2016 ...........................................................................................................................
2017 ...........................................................................................................................
2018 ...........................................................................................................................
2019 ...........................................................................................................................
2020 ...........................................................................................................................
Thereafter ..................................................................................................................
Above Market
Leases
Below Market
Leases
(In thousands)
$
$
4,629
3,189
2,369
1,236
983
4,131
16,537
$
$
8,080
7,036
5,849
5,469
4,602
61,678
92,714
F-18
NOTE 7—DEBT
The following is a summary of our total debt outstanding as of December 31, 2015 and 2014:
Description of Debt
Mortgages payable
Barracks Road...................................................
Hauppauge ........................................................
Lawrence Park ..................................................
Wildwood .........................................................
Wynnewood......................................................
Brick Plaza........................................................
Plaza El Segundo ..............................................
The Grove at Shrewsbury (East) ......................
The Grove at Shrewsbury (West) .....................
Rollingwood Apartments..................................
The Shops at Sunset Place ................................
29th Place .........................................................
THE AVENUE at White Marsh........................
Montrose Crossing............................................
Brook 35 ...........................................................
Chelsea..............................................................
Subtotal.....................................................
Net unamortized premium...................
Total mortgages payable...........................
Notes payable
Escondido (municipal bonds) ...........................
Revolving credit facility ...................................
Term loan..........................................................
Various..............................................................
Total notes payable...................................
Senior notes and debentures
6.20% notes ......................................................
5.90% notes ......................................................
2.55% notes ......................................................
3.00% notes ......................................................
2.75% notes ......................................................
3.95% notes ......................................................
7.48% debentures..............................................
6.82% medium term notes ................................
4.50% notes ......................................................
Subtotal.....................................................
Net unamortized premium (discount) .
Total senior notes and debentures.............
Capital lease obligations
Principal Balance as of
December 31,
2015
2014
(Dollars in thousands)
Stated Interest Rate
as of
December 31, 2015
Stated Maturity Date
$
— $
—
—
—
—
—
175,000
43,557
11,024
21,716
70,542
4,753
52,705
74,329
11,500
6,868
471,994
10,828
482,822
9,400
53,500
275,000
5,700
343,600
—
150,000
250,000
250,000
275,000
300,000
29,200
40,000
450,000
1,744,200
124
1,744,324
35,985
13,566
25,507
22,420
25,994
26,415
175,000
44,519
11,242
22,130
—
4,941
52,705
75,867
11,500
7,074
554,865
8,833
563,698
9,400
—
275,000
6,119
290,519
200,000
150,000
—
250,000
275,000
300,000
29,200
40,000
250,000
1,494,200
(10,387)
1,483,813
7.95%
7.95%
7.95%
7.95%
7.95%
7.42%
6.33%
5.82%
6.38%
5.54%
5.62%
5.91%
3.35%
4.20%
4.65%
5.36%
November 1, 2015
November 1, 2015
November 1, 2015
November 1, 2015
November 1, 2015
November 1, 2015
August 5, 2017
October 1, 2017
March 1, 2018
May 1, 2019
September 1, 2020
January 31, 2021
January 1, 2022
January 10, 2022
July 1, 2029
January 15, 2031
0.03%
LIBOR + 0.90%
LIBOR + 0.90%
11.31%
October 1, 2016
April 21, 2017
November 21, 2018
Various through 2028
6.20%
5.90%
2.55%
3.00%
2.75%
3.95%
7.48%
6.82%
4.50%
January 15, 2017
April 1, 2020
January 15, 2021
August 1, 2022
June 1, 2023
January 15, 2024
August 15, 2026
August 1, 2027
December 1, 2044
Various.........................................................
Total debt and capital lease obligations
71,620
2,642,366
$
71,647
2,409,677
$
Various
Various through 2106
In connection with the acquisition of San Antonio Center in January 2015, we assumed a mortgage loan with a face amount of
$18.7 million and a fair value of $19.3 million. The mortgage loan had a stated interest rate of 5.27%, and had an original
maturity date of January 1, 2016. On November 2, 2015, we repaid the mortgage loan at par for $18.1 million.
On March 16, 2015, we issued $200.0 million aggregate principal amount of 4.50% senior unsecured notes due December 1,
2044. The notes were offered at 105.38% of the principal amount with a yield to maturity of 4.18%. The notes have the same
terms and are of the same series as the $250.0 million senior notes issued on November 14, 2014. Our net proceeds from the
March note offering after issuance premium, underwriting fees and other costs were $208.6 million. The proceeds were used on
April 11, 2015 to repay our $200.0 million 6.20% notes prior to the original maturity date of January 15, 2017. The redemption
F-19
FEDERAL REALTY | ANNUAL REPORT 2015 price of $222.2 million included a make-whole premium of $19.2 million and accrued but unpaid interest of $3.0 million. The
make-whole premium is included in "early extinguishment of debt" in the year ended December 31, 2015.
On August 3, 2015 we repaid the following mortgage loans, which had a weighted average interest rate of 7.9%, at par prior to
their maturity date of November 1, 2015:
Barracks Road
Brick Plaza
Wynnewood
Lawrence Park
Wildwood
Hauppauge
Principal Payoff Amount
(In millions)
$
$
35.3
25.9
25.5
25.0
22.0
13.3
147.0
On September 28, 2015, we issued $250.0 million of fixed rate senior notes that mature on January 15, 2021 and bear interest
at 2.55%. The net proceeds from this note offering after issuance discounts, underwriting fees, and other costs were
approximately $247.5 million.
In connection with the acquisition of Sunset Place on October 1, 2015, we assumed a mortgage loan with a face amount of
$70.8 million and a fair value of $76.5 million. The mortgage loan bears interest at 5.62% and has a maturity date of September
1, 2020.
During 2015, 2014 and 2013, the maximum amount of borrowings outstanding under our revolving credit facility was $324.0
million, $79.5 million and $76.0 million, respectively. The weighted average amount of borrowings outstanding was $109.7
million, $12.5 million and $10.5 million, respectively, and the weighted average interest rate, before amortization of debt fees,
was 1.1%, 1.1% and 1.3%, respectively. The revolving credit facility requires an annual facility fee of $0.9 million. At
December 31, 2015, our revolving credit facility had $53.5 million outstanding, and had no balance outstanding at
December 31, 2014.
Our revolving credit facility and certain notes require us to comply with various financial covenants, including the maintenance
of minimum shareholders’ equity and debt coverage ratios and a maximum ratio of debt to net worth. As of December 31, 2015,
we were in compliance with all loan covenants.
Scheduled principal payments on mortgages payable, notes payable, senior notes and debentures as of December 31, 2015 are
as follows:
Year ending December 31,
2016.............................................................. $
2017..............................................................
2018..............................................................
2019..............................................................
2020..............................................................
Thereafter .....................................................
$
_____________________
Mortgages
Payable
Notes
Payable
Senior Notes and
Debentures
Total
Principal
(In thousands)
5,665
222,469
15,477
25,006
64,687
138,690
471,994
$
9,812
$
— $
53,957 (1)
275,507
561
623
3,140
—
—
—
150,000
1,594,200
15,477
276,426
290,984
25,567
215,310
1,736,030
$
343,600
$
1,744,200
$
2,559,794
(2)
(1) Our $600.0 million revolving credit facility matures on April 21, 2017, subject to a one-year extension at our option.
As of December 31, 2015, there was $53.5 million outstanding under this credit facility.
(2) The total debt maturities differ from the total reported on the consolidated balance sheet as of December 31, 2015 due
to the unamortized discount or premium on certain senior notes and mortgages payable.
F-20
Future minimum lease payments and their present value for property under capital leases as of December 31, 2015, are as
follows:
(In thousands)
Year ending December 31,.......................................................................................................................................
2016.......................................................................................................................................................................... $
2017..........................................................................................................................................................................
2018..........................................................................................................................................................................
2019..........................................................................................................................................................................
2020..........................................................................................................................................................................
Thereafter .................................................................................................................................................................
Less amount representing interest ............................................................................................................................
Present value ............................................................................................................................................................ $
5,788
5,797
5,800
5,800
5,800
154,410
183,395
(111,775)
71,620
NOTE 8—FAIR VALUE OF FINANCIAL INSTRUMENTS
A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability in an
orderly transaction. The hierarchy for inputs used in measuring fair value are as follows:
1.
2.
3.
Level 1 Inputs—quoted prices in active markets for identical assets or liabilities
Level 2 Inputs—observable inputs other than quoted prices in active markets for identical assets and liabilities
Level 3 Inputs—prices or valuation techniques that require inputs that are both significant to the fair value
measurement and unobservable
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for
disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is
significant to the fair value measurement.
Except as disclosed below, the carrying amount of our financial instruments approximates their fair value. The fair value of our
mortgages payable, notes payable and senior notes and debentures is sensitive to fluctuations in interest rates. Quoted market
prices (Level 1) were used to estimate the fair value of our marketable senior notes and debentures and discounted cash flow
analysis (Level 2) is generally used to estimate the fair value of our mortgages and notes payable. Considerable judgment is
necessary to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily
indicative of the amounts that could be realized upon disposition of the financial instruments. A summary of the carrying
amount and fair value of our mortgages payable, notes payable and senior notes and debentures is as follows:
December 31, 2015
December 31, 2014
Carrying
Value
Fair Value
Carrying
Value
Fair Value
(In thousands)
Mortgages and notes payable ...................................................... $
826,422
Senior notes and debentures ........................................................ $ 1,744,324
$
833,931
$
854,217
$
880,866
$ 1,786,758
$ 1,483,813
$ 1,579,868
As of December 31, 2015, we have two interest rate swap agreements with a notional amount of $275.0 million that are
measured at fair value on a recurring basis. The interest rate swap agreements fix the variable portion of our $275.0 million
term loan at 1.72% through November 1, 2018. The fair values of the interest rate swap agreements are based on the estimated
amounts we would receive or pay to terminate the contracts at the reporting date and are determined using interest rate pricing
models and interest rate related observable inputs. The fair value of our swaps at December 31, 2015 and 2014, was a liability
of $4.1 million, and $3.5 million, respectively, and are included in "accounts payable and accrued expenses" on our
consolidated balance sheets. The value of our interest rate swaps decreased $0.6 million and $2.1 million (including $4.3
million for both years reclassified from other comprehensive loss to earnings) for 2015 and 2014, respectively. These decreases
in value are included in "accumulated other comprehensive loss." A summary of our financial liabilities that are measured at
fair value on a recurring basis, by level within the fair value hierarchy is as follows:
F-21
FEDERAL REALTY | ANNUAL REPORT 2015 December 31, 2015
December 31, 2014
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
(In thousands)
Interest rate swaps .................... $
— $ 4,110
$
— $ 4,110
$
— $
3,515
$
— $
3,515
NOTE 9—COMMITMENTS AND CONTINGENCIES
We are sometimes involved in lawsuits, warranty claims, and environmental matters arising in the ordinary course of business.
Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these
matters.
We are currently a party to various legal proceedings. We accrue a liability for litigation if an unfavorable outcome is probable
and the amount of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss
is a range, we accrue the best estimate within the range; however, if no amount within the range is a better estimate than any
other amount, the minimum within the range is accrued. Legal fees related to litigation are expensed as incurred. Other than as
described below, we do not believe that the ultimate outcome of these matters, either individually or in the aggregate, could
have a material adverse effect on our financial position or overall trends in results of operations; however, litigation is subject
to inherent uncertainties. Also under our leases, tenants are typically obligated to indemnify us from and against all liabilities,
costs and expenses imposed upon or asserted against us (1) as owner of the properties due to certain matters relating to the
operation of the properties by the tenant, and (2) where appropriate, due to certain matters relating to the ownership of the
properties prior to their acquisition by us.
We reserve for estimated losses, if any, associated with warranties given to a buyer at the time real estate is sold or other
potential liabilities relating to that sale, taking any insurance policies into account. These warranties may extend up to ten years
and require significant judgment. If changes in facts and circumstances indicate that warranty reserves are understated, we will
accrue additional reserves at such time a liability has been incurred and the costs can be reasonably estimated. Warranty
reserves are released once the legal liability period has expired or all related work has been substantially completed. Any
increases to our estimated warranty losses would usually result in a decrease in net income.
We are self-insured for general liability costs up to predetermined retained amounts per claim, and we believe that we maintain
adequate accruals to cover our retained liability. We currently do not maintain third party stop-loss insurance policies to cover
liability costs in excess of predetermined retained amounts. Our accrual for self-insurance liability is determined by
management and is based on claims filed and an estimate of claims incurred but not yet reported. Management considers a
number of factors, including third-party actuarial analysis, previous experience in our portfolio, and future increases in costs of
claims, when making these determinations. If our liability costs exceed these accruals, it will reduce our net income.
At December 31, 2015 and 2014, our reserves for warranties and general liability costs were $7.7 million and $7.2 million,
respectively, and are included in “accounts payable and accrued expenses” in our consolidated balance sheets. Any potential
losses which exceed our estimates would result in a decrease in our net income. During 2015 and 2014, we made payments
from these reserves of $1.8 million and $1.4 million, respectively. Although we consider the reserve to be adequate, there can
be no assurance that the reserve will prove to be adequate over-time to cover losses due to the difference between the
assumptions used to estimate the reserve and actual losses.
At December 31, 2015, we had letters of credit outstanding of approximately $13.0 million which are collateral for existing
indebtedness and other obligations of the Trust.
As of December 31, 2015 in connection with capital improvement, development, and redevelopment projects, the Trust has
contractual obligations of approximately $381.1 million.
F-22
We are obligated under ground lease agreements on several shopping centers requiring minimum annual payments as follows,
as of December 31, 2015:
Year ending December 31,
2016.......................................................................................................................................................................... $
2017..........................................................................................................................................................................
2018..........................................................................................................................................................................
2019..........................................................................................................................................................................
2020..........................................................................................................................................................................
Thereafter .................................................................................................................................................................
$
2,750
2,785
2,801
2,988
3,001
157,324
171,649
(In thousands)
A master lease for Mercer Mall includes a fixed purchase price option for $55 million in 2023. If we fail to exercise our
purchase option, the owner of Mercer Mall has a put option which would require us to purchase Mercer Mall for $60 million in
2025.
Under the terms of the Congressional Plaza partnership agreement, from and after January 1, 1986, an unaffiliated third party
has the right to require us and the other minority partner to purchase its 29.47% interest in Congressional Plaza at the interest’s
then-current fair market value. If the other minority partner defaults in their obligation, we must purchase the full interest.
Based on management’s current estimate of fair market value as of December 31, 2015, our estimated maximum liability upon
exercise of the put option would range from approximately $78 million to $82 million.
Under the terms of a partnership which owns a project in southern California, if certain leasing and revenue levels are obtained
for the property owned by the partnership, the other partner may require us to purchase their 10% partnership interest at a
formula price based upon property operating income. The purchase price for the partnership interest will be paid using our
common shares or, subject to certain conditions, cash. If the other partner does not redeem their interest, we may choose to
purchase the partnership interest upon the same terms.
A master lease for Melville Mall includes a fixed purchase price option in 2021 for $5 million. If we fail to exercise our
purchase option, the owner of Melville Mall has a put option which would require us to purchase Melville Mall in 2023 for $5
million.
The other member in Montrose Crossing has the right to require us to purchase all of its 10.1% interest in Montrose Crossing at
the interest's then-current fair market value. If the other member fails to exercise its put option, we have the right to purchase its
interest on or after December 27, 2021 at fair market value. Based on management’s current estimate of fair market value as of
December 31, 2015, our estimated maximum liability upon exercise of the put option would range from approximately $8
million to $9 million.
Two of the members in Plaza El Segundo have the right to require us to purchase their 10.0% and 11.8% ownership interests at
the interests' then-current fair market value. If the members fail to exercise their put options, we have the right to purchase each
of their interests on or after December 30, 2026 at fair market value. Based on management’s current estimate of fair market
value as of December 31, 2015, our estimated maximum liability upon exercise of the put option would range from
approximately $21 million to $24 million. Also, between January 1, 2017 and February 1, 2017, we have an option to purchase
the preferred interest of another member in Plaza El Segundo. The purchase price will be the lesser of fair value or the $4.9
million stated value of the preferred interest plus any accrued and unpaid preferred returns.
Effective January 1, 2017, the other member in The Grove at Shrewsbury and Brook 35 has the right to require us to purchase
all of its approximately 4.8% interest in The Grove at Shrewsbury and approximately 8.8% interest in Brook 35 at the interests'
then-current fair market value. Based on management's current estimate of fair market value as of December 31, 2015, our
estimated maximum liability upon exercise of the put option would range from $9 million to $10 million.
Under the terms of certain partnership agreements, the partners have the right to exchange their operating partnership units for
cash or the same number of our common shares, at our option. A total of 934,405 operating partnership units are outstanding
which have a total fair value of $136.5 million, based on our closing stock price on December 31, 2015.
F-23
FEDERAL REALTY | ANNUAL REPORT 2015 NOTE 10—SHAREHOLDERS’ EQUITY
We have a Dividend Reinvestment Plan (the “Plan”), whereby shareholders may use their dividends and optional cash
payments to purchase shares. In 2015, 2014 and 2013, 16,524 shares, 18,705 shares and 20,026 shares, respectively, were
issued under the Plan.
As of December 31, 2015, 2014, and 2013, we had 399,896 shares of 5.417% Series 1 Cumulative Convertible Preferred
Shares (“Series 1 Preferred Shares”) outstanding that have a liquidation preference of $25 per share and
par value $0.01 per share. The Series 1 Preferred Shares accrue dividends at a rate of 5.417% per year and are convertible at
any time by the holders to our common shares at a conversion rate of $104.69 per share. The Series 1 Preferred Shares are also
convertible under certain circumstances at our election. The holders of the Series 1 Preferred Shares have no voting rights.
On May 11, 2015, we replaced our existing at-the-market (“ATM”) equity program with a new ATM equity program in which
we may from time to time offer and sell common shares having an aggregate offering price of up to $300.0 million. We intend
to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay
amounts of outstanding under our revolving credit facility and/or for general corporate purposes. For the year ended
December 31, 2015, we issued 813,414 common shares at a weighted average price per share of $135.01 for net cash proceeds
of $108.5 million and paid $1.1 million in commissions and $0.2 million in additional offering expenses related to the sales of
these common shares. For the year ended December 31, 2014, we issued 1,768,583 common shares at a weighted average price
per share of $122.09 for net cash proceeds of $213.6 million and paid $2.2 million in commissions and $0.2 million in
additional offering expenses related to the sales of these common shares. As of December 31, 2015, we had the capacity to
issue up to $190.2 million in common shares under our ATM equity program.
NOTE 11—DIVIDENDS
The following table provides a summary of dividends declared and paid per share:
Declared
Common shares ..................................................................... $ 3.620
5.417% Series 1 Cumulative Convertible Preferred shares... $ 1.354
Paid
Declared
Paid
Declared
Paid
$ 3.550
$ 3.300
$ 3.210
$ 3.020
$ 2.970
$ 1.354
$ 1.354
$ 1.354
$ 1.354
$ 1.354
Year Ended December 31,
2015
2014
2013
A summary of the income tax status of dividends per share paid is as follows:
Common shares.....................................................................................................
Ordinary dividend .......................................................................................... $
Capital gain ....................................................................................................
$
5.417% Series 1 Cumulative Convertible Preferred shares ..................................
Ordinary dividend .......................................................................................... $
Capital gain ....................................................................................................
$
Year Ended December 31,
2015
2014
2013
3.515
0.035
3.550
1.340
0.014
1.354
$
$
$
$
3.178
0.032
3.210
1.340
0.014
1.354
$
$
$
$
2.911
0.059
2.970
1.327
0.027
1.354
On November 4, 2015, the Trustees declared a quarterly cash dividend of $0.94 per common share, payable January 15, 2016 to
common shareholders of record on January 4, 2016.
NOTE 12—OPERATING LEASES
At December 31, 2015, our 90 predominantly retail shopping center and mixed-use properties are located in 12 states and the
District of Columbia. There are approximately 2,700 leases with tenants providing a wide range of retail products and services.
These tenants range from sole proprietorships to national retailers; no one tenant or corporate group of tenants accounts for
more than 2.9% of annualized base rent.
Our leases with commercial property and residential tenants are classified as operating leases. Commercial property leases
generally range from three to ten years (certain leases with anchor tenants may be longer), and in addition to minimum rents,
F-24
may provide for percentage rents based on the tenant’s level of sales achieved and cost recoveries for the tenant’s share of
certain operating costs. Leases on apartments are generally for a period of 1 year or less.
As of December 31, 2015, minimum future commercial property rentals from noncancelable operating leases, before any
reserve for uncollectible amounts and assuming no early lease terminations, at our operating properties are as follows:
Year ending December 31,
2016.......................................................................................................................................................................... $
2017..........................................................................................................................................................................
2018..........................................................................................................................................................................
2019..........................................................................................................................................................................
2020..........................................................................................................................................................................
Thereafter .................................................................................................................................................................
518,325
470,881
406,311
348,429
288,395
1,759,140
$ 3,791,481
(In thousands)
NOTE 13—COMPONENTS OF RENTAL INCOME AND EXPENSE
The principal components of rental income are as follows:
Year Ended December 31,
2015
2014
2013
(In thousands)
Minimum rents
Retail and commercial ................................................................................... $
Residential......................................................................................................
Cost reimbursement ..............................................................................................
Percentage rent ......................................................................................................
Other......................................................................................................................
Total rental income................................................................................................ $
509,825
$
472,602
$
448,058
42,797
148,110
11,911
15,169
36,099
135,592
10,169
11,860
28,902
122,578
9,359
11,192
727,812
$
666,322
$
620,089
Minimum rents include the following:
Straight-line rents .................................................................................................. $
Net amortization of above and below market leases............................................. $
Year Ended December 31,
2015
2014
2013
(In millions)
7.6
2.7
$
$
5.1
2.4
$
$
5.4
3.1
F-25
FEDERAL REALTY | ANNUAL REPORT 2015 The principal components of rental expenses are as follows:
Repairs and maintenance ...................................................................................... $
Utilities..................................................................................................................
Management fees and costs...................................................................................
Payroll ...................................................................................................................
Marketing ..............................................................................................................
Insurance ...............................................................................................................
Ground Rent ..........................................................................................................
Bad debt expense ..................................................................................................
Other operating .....................................................................................................
Total rental expenses............................................................................................. $
Year Ended December 31,
2015
2014
2013
62,420
23,003
18,639
12,673
9,046
7,875
2,540
1,168
10,229
147,593
(In thousands)
55,444
$
20,499
17,416
11,554
9,532
6,462
1,952
2,021
10,537
135,417
$
$
$
46,600
19,219
16,250
9,237
8,664
6,811
1,916
442
9,556
118,695
NOTE 14—DISCONTINUED OPERATIONS
During 2013 and prior to our adoption of ASU 2014-08 as further discussed in Note 2, certain disposal transactions were
considered discontinued operations. A summary of the financial information for the discontinued operations is as follows:
Year Ended December 31,
2013
Revenue from discontinued operations .......................................................................................... $
Income from discontinued operations ............................................................................................ $
1.5
0.9
NOTE 15—SHARE-BASED COMPENSATION PLANS
A summary of share-based compensation expense included in net income is as follows:
Share-based compensation incurred
Grants of common shares............................................................................... $
Grants of options............................................................................................
Capitalized share-based compensation .................................................................
Share-based compensation expense ...................................................................... $
Year Ended December 31,
2015
2014
2013
(In thousands)
12,074
$
12,892
$
10,907
—
12,074
(868)
11,206
$
49
12,941
(1,188)
11,753
$
292
11,199
(1,024)
10,175
As of December 31, 2015, we have grants outstanding under two share-based compensation plans. In May 2010, our
shareholders approved the 2010 Performance Incentive Plan, as amended (“the 2010 Plan”), which authorized the grant of
share options, common shares and other share-based awards for up to 2,450,000 common shares of beneficial interest. Our
2001 Long Term Incentive Plan (the “2001 Plan”), which expired in May 2010, authorized the grant of share options, common
shares and other share-based awards of 3,250,000 common shares of beneficial interest.
Option awards under both plans are required to have an exercise price at least equal to the closing trading price of our common
shares on the date of grant. Options and restricted share awards under these plans generally vest over three to six years and
option awards typically have a ten-year contractual term. We pay dividends on unvested shares. Certain options and share
awards provide for accelerated vesting if there is a change in control. Additionally, the vesting on certain option and share
awards can accelerate in part or in full upon retirement based on the age of the retiree or upon termination without cause.
The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Expected volatilities,
term, dividend yields, employee exercises and estimated forfeitures are primarily based on historical data. The risk-free interest
rate is based on the U.S. Treasury yield curve in effect at the time of grant. The fair value of each share award is determined
F-26
based on the closing trading price of our common shares on the grant date. No options were granted in 2015, 2014 and 2013.
The following table provides a summary of option activity for 2015:
Shares
Under
Option
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual Term
Aggregate
Intrinsic
Value
(In years)
(In thousands)
Outstanding at December 31, 2014 .............................
Granted ........................................................................
Exercised .....................................................................
Forfeited or expired .....................................................
Outstanding at December 31, 2015 .............................
Exercisable at December 31, 2015 ..............................
343,742
—
(29,940)
—
313,802
313,802
$
$
$
61.55
—
68.04
—
60.93
60.93
2.5
2.5
$
$
26,726
26,726
The total cash received from options exercised during 2015, 2014 and 2013 was $2.0 million, $2.3 million and $1.0 million,
respectively. The total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was $2.1
million, $1.1 million and $0.7 million, respectively.
The following table provides a summary of restricted share activity for 2015:
Unvested at December 31, 2014.............................................................................................
Granted ...................................................................................................................................
Vested......................................................................................................................................
Forfeited..................................................................................................................................
Unvested at December 31, 2015.............................................................................................
Shares
Weighted-Average
Grant-Date Fair
Value
306,968
62,128
(181,967)
(9,915)
177,214
$
$
100.45
141.08
95.99
111.21
118.68
The weighted-average grant-date fair value of stock awarded in 2015, 2014 and 2013 was $141.08, $111.45 and $106.70,
respectively. The total vesting-date fair value of shares vested during the year ended December 31, 2015, 2014 and 2013, was
$26.1 million, $12.1 million and $10.6 million, respectively.
As of December 31, 2015, there was $11.8 million of total unrecognized compensation cost related to unvested share-based
compensation arrangements (i.e. options and unvested shares) granted under our plans. This cost is expected to be recognized
over the next 8.4 years with a weighted-average period of 2.0 years.
Subsequent to December 31, 2015, common shares were awarded under various compensation plans as follows:
Date
January 4, 2016
February 3, 2016
February 3, 2016
Award
4,622 Shares
135,063 Restricted shares
682 Options
Vesting Term
Beneficiary
Immediate
3-8 years
5 years
Trustees
Officers and key employees
Officers and key employees
NOTE 16—SAVINGS AND RETIREMENT PLANS
We have a savings and retirement plan in accordance with the provisions of Section 401(k) of the Code. Generally, employees
can elect, at their discretion, to contribute a portion of their compensation up to a maximum of $18,000 for 2015, and $17,500
for 2014 and 2013. Under the plan, we contribute 50% of each employee’s elective deferrals up to 5% of eligible earnings. In
addition, we may make discretionary contributions within the limits of deductibility set forth by the Code. Our full-time
employees are immediately eligible to become plan participants. Employees are eligible to receive matching contributions
immediately on their participation; however, these matching payments will not vest until their third anniversary of employment
for new employees who joined the Trust after December 31, 2011, and their first anniversary of employment for all other
participants. Our expense for the years ended December 31, 2015, 2014 and 2013 was approximately $504,000, $442,000 and
$384,000, respectively.
A non-qualified deferred compensation plan for our officers and certain other employees was established in 1994 that allows
the participants to defer a portion of their income. As of December 31, 2015 and 2014, we are liable to participants for
approximately $9.7 million and $10.3 million, respectively, under this plan. Although this is an unfunded plan, we have
F-27
FEDERAL REALTY | ANNUAL REPORT 2015 purchased certain investments to match this obligation. Our obligation under this plan and the related investments are both
included in the accompanying consolidated financial statements.
NOTE 17—EARNINGS PER SHARE
We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation
methodology whereby EPS for each class of common stock and participating securities is calculated according to dividends
declared and participation rights in undistributed earnings. For 2015, we had 0.2 million weighted average unvested shares
outstanding, and in 2014 and 2013, we had 0.3 million, which are considered participating securities. Therefore, we have
allocated our earnings for basic and diluted EPS between common shares and unvested shares; the portion of earnings allocated
to the unvested shares is reflected as “earnings allocated to unvested shares” in the reconciliation below.
In the dilutive EPS calculation, dilutive stock options were calculated using the treasury stock method consistent with prior
periods. There were no anti-dilutive stock options in 2015, 2014, or 2013. The conversions of downREIT operating partnership
units and 5.417% Series 1 Cumulative Convertible Preferred Shares are anti-dilutive for all periods presented and accordingly,
have been excluded from the weighted average common shares used to compute diluted EPS.
Year Ended December 31,
2015
2014
2013
(In thousands, except per share data)
NUMERATOR
Income from continuing operations .................................................................................. $ 190,094
Less: Preferred share dividends ........................................................................................
(541)
(8,205)
(797)
180,551
Income from continuing operations available for common shareholders.........................
Less: Income from continuing operations attributable to noncontrolling interests...........
Less: Earnings allocated to unvested shares .....................................................................
Results from discontinued operations attributable to the Trust.........................................
—
Gain on sale of real estate .................................................................................................
28,330
Net income available for common shareholders, basic and diluted.................................. $ 208,881
DENOMINATOR
$ 167,888
(541)
(7,754)
(1,003)
158,590
$ 137,811
(541)
(4,927)
(889)
131,454
—
4,401
24,803
4,994
$ 162,991
$ 161,251
Weighted average common shares outstanding—basic....................................................
68,797
67,322
65,331
Effect of dilutive securities:
Stock options..............................................................................................................
Weighted average common shares outstanding—diluted .................................................
EARNINGS PER COMMON SHARE, BASIC
Continuing operations ....................................................................................................... $
Discontinued operations....................................................................................................
Gain on sale of real estate .................................................................................................
EARNINGS PER COMMON SHARE, DILUTED
Continuing operations ....................................................................................................... $
Discontinued operations....................................................................................................
Gain on sale of real estate .................................................................................................
$
3.03
Income from continuing operations attributable to the Trust............................................ $ 181,889
$
F-28
184
68,981
170
67,492
152
65,483
2.63
$
2.35
$
—
0.41
3.04
2.62
—
0.41
—
0.07
2.42
2.34
—
0.07
2.41
$
$
$
$
$
$
2.01
0.38
0.08
2.47
2.00
0.38
0.08
2.46
$ 160,134
$ 132,884
NOTE 18—SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data is as follows:
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(In thousands, except per share data)
2015
Revenue ....................................................................................... $
Operating income ........................................................................ $
Net income(1).............................................................................. $
Net income attributable to the Trust(1) ....................................... $
Net income available for common shareholders(1)..................... $
Earnings per common share—basic(1) ....................................... $
Earnings per common share—diluted(1)..................................... $
184,792
72,122
48,203
46,186
46,051
0.67
0.67
$
$
$
$
$
$
$
181,461
76,201
45,673
43,632
43,497
0.63
0.63
$
$
$
$
$
$
$
185,252
75,917
54,550
52,447
52,311
0.75
0.75
First
Quarter
Second
Quarter
Third
Quarter
(In thousands, except per share data)
2014
Revenue ....................................................................................... $
Operating income ........................................................................ $
Net income(1).............................................................................. $
Net income attributable to the Trust(1) ....................................... $
Net income available for common shareholders(1)..................... $
Earnings per common share—basic(1) ....................................... $
Earnings per common share—diluted(1)..................................... $
170,828
63,444
40,545
38,753
38,618
0.58
0.57
$
$
$
$
$
$
$
167,947
68,361
45,416
43,545
43,410
0.64
0.64
$
$
$
$
$
$
$
170,938
67,622
49,049
47,075
46,939
0.69
0.69
$
$
$
$
$
$
$
$
$
$
$
$
$
$
192,507
75,914
69,998
67,954
67,819
0.98
0.97
Fourth
Quarter
176,377
71,610
37,279
35,162
35,027
0.51
0.51
(1)
Second and fourth quarter 2015 include an $11.5 million and $16.8 million gain on sale, respectively, from our
Houston Street and Courtyard Shops properties as further discussed in Note 3. Third quarter 2014 includes a $4.4
million gain on sale reflecting our share of the Partnership's sale of Pleasant Shops as further discussed in Note 5.
NOTE 19—SUBSEQUENT EVENT
On January 13, 2016, we acquired our partner's 70% equity interest in our unconsolidated real estate partnership further
discussed in Note 5, for $153.7 million, which includes $130 million of cash and the assumption of three interest only mortgage
loans with a total principal balance of $34.4 million. With the acquisition, we gained control of the six underlying properties,
which will be consolidated as of the acquisition date.
F-29
FEDERAL REALTY | ANNUAL REPORT 2015 T
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I
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
Three Years Ended December 31, 2015
Reconciliation of Total Cost
(in thousands)
Balance, December 31, 2012.................................................................................................................................... $ 4,779,674
Additions during period
Acquisitions ....................................................................................................................................................
Improvements .................................................................................................................................................
Deduction during period—dispositions and retirements of property ..................................................................
Balance, December 31, 2013....................................................................................................................................
Additions during period
Acquisitions ....................................................................................................................................................
Improvements .................................................................................................................................................
Deduction during period—dispositions and retirements of property and transfer to joint venture.....................
Balance, December 31, 2014....................................................................................................................................
Additions during period
76,359
329,522
(36,092)
5,149,463
174,328
329,674
(44,467)
5,608,998
Acquisitions ....................................................................................................................................................
Improvements .................................................................................................................................................
Deduction during period—dispositions and retirements of property ..................................................................
291,726
281,471
(117,789)
Balance, December 31, 2015.................................................................................................................................... $ 6,064,406
_____________________
(1) For Federal tax purposes, the aggregate cost basis is approximately $5.3 billion as of December 31, 2015.
F-35
FEDERAL REALTY | ANNUAL REPORT 2015 FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
Three Years Ended December 31, 2015
Reconciliation of Accumulated Depreciation and Amortization
(in thousands)
Additions during period—depreciation and amortization expense
Deductions during period—dispositions and retirements of property ................................................................
Balance, December 31, 2013....................................................................................................................................
Additions during period—depreciation and amortization expense .....................................................................
Deductions during period—dispositions and retirements of property ................................................................
Balance, December 31, 2012.................................................................................................................................... $ 1,224,295
147,730
(21,554)
1,350,471
155,662
(39,083)
1,467,050
156,513
(49,522)
Balance, December 31, 2015.................................................................................................................................... $ 1,574,041
Additions during period—depreciation and amortization expense .....................................................................
Deductions during period—dispositions and retirements of property ................................................................
Balance, December 31, 2014
F-36
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
Three Years Ended December 31, 2015
Reconciliation of Accumulated Depreciation and Amortization
(in thousands)
Additions during period—depreciation and amortization expense
Deductions during period—dispositions and retirements of property ................................................................
Balance, December 31, 2013....................................................................................................................................
1,350,471
Additions during period—depreciation and amortization expense .....................................................................
Deductions during period—dispositions and retirements of property ................................................................
Balance, December 31, 2014
Additions during period—depreciation and amortization expense .....................................................................
Deductions during period—dispositions and retirements of property ................................................................
Balance, December 31, 2015.................................................................................................................................... $ 1,574,041
147,730
(21,554)
155,662
(39,083)
1,467,050
156,513
(49,522)
Balance, December 31, 2012.................................................................................................................................... $ 1,224,295
Column A
Column B
Column C
Column D
Column E
Column F
Column G
Column H
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
Year Ended December 31, 2015
(Dollars in thousands)
Description of Lien
Mortgage on
retail buildings in
Philadelphia, PA
Mortgage on retail
buildings in
Philadelphia, PA
Mortgage on retail
building in
Norwalk, CT
May 2021
Interest Rate Maturity Date
8% or 10%
based on
timing of
draws, plus
participation
10% plus
participation
May 2021
7%
June 2015
Principal
Amount
of Loans
Subject to
delinquent
Principal
or Interest
—
$
Carrying
Amount
of Mortgages
(1)
$ 20,653
(2)
Prior
Liens
$ —
Face Amount
of Mortgages
$20,653
—
9,250
9,250
—
—
11,715
11,715
11,715
(3)
Periodic Payment
Terms
Interest only
monthly; balloon
payment due
at maturity
Interest only
monthly;
balloon
payment due
at maturity
Interest only;
balloon payment
due at maturity
_____________________
(1) For Federal tax purposes, the aggregate tax basis is approximately $41.6 million as of December 31, 2015.
(2) This mortgage is available for up to $25.0 million.
(3) This note matured on June 30, 2015, is currently in default, and we have initiated foreclosure proceedings. The estimated net realizable
value of the related collateral supports the carrying amount of the note.
$ —
$41,618
$ 41,618
$
11,715
F-36
F-37
FEDERAL REALTY | ANNUAL REPORT 2015 FEDERAL REALTY INVESTMENT TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE - CONTINUED
Three Years Ended December 31, 2015
Reconciliation of Carrying Amount
(in thousands)
Balance, December 31, 2012.................................................................................................................................... $
55,648
Deductions during period:
Collection and satisfaction of loans................................................................................................................
Amortization of discount ................................................................................................................................
Balance, December 31, 2013....................................................................................................................................
Deductions during period:
Collection and satisfaction of loans................................................................................................................
Amortization of discount ................................................................................................................................
Balance, December 31, 2014....................................................................................................................................
(1,057)
564
55,155
(4,778)
611
50,988
Additions during period:
Issuance of loans.............................................................................................................................................
368
Deductions during period:
Collection and satisfaction of loans................................................................................................................
Amortization of discount ................................................................................................................................
Balance, December 31, 2015.................................................................................................................................... $
(10,692)
954
41,618
F-38
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE - CONTINUED
Three Years Ended December 31, 2015
Reconciliation of Carrying Amount
(in thousands)
Balance, December 31, 2012.................................................................................................................................... $
55,648
Collection and satisfaction of loans................................................................................................................
Amortization of discount ................................................................................................................................
Balance, December 31, 2013....................................................................................................................................
Collection and satisfaction of loans................................................................................................................
Amortization of discount ................................................................................................................................
Balance, December 31, 2014....................................................................................................................................
(1,057)
564
55,155
(4,778)
611
50,988
Deductions during period:
Deductions during period:
Additions during period:
Deductions during period:
Issuance of loans.............................................................................................................................................
368
Collection and satisfaction of loans................................................................................................................
(10,692)
Amortization of discount ................................................................................................................................
954
Balance, December 31, 2015.................................................................................................................................... $
41,618
EXHIBIT INDEX
Exhibit
No.
3.1
3.2
4.1
4.2
4.3
4.4
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Description
Declaration of Trust of Federal Realty Investment Trust dated May 5, 1999 as amended by the Articles of
Amendment of Declaration of Trust of Federal Realty Investment Trust dated May 6, 2004, as corrected by the
Certificate of Correction of Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust
dated June 17, 2004, as amended by the Articles of Amendment of Declaration of Trust of Federal Realty
Investment Trust dated May 6, 2009 (previously filed as Exhibit 3.1 to the Trust’s Registration Statement on Form
S-3 (File No. 333-160009) and incorporated herein by reference)
Amended and Restated Bylaws of Federal Realty Investment Trust dated February 12, 2003, as amended
October 29, 2003, May 5, 2004, February 17, 2006 and May 6, 2009 (previously filed as Exhibit 3.2 to the Trust’s
Registration Statement on Form S-3 (File No. 333-160009) and incorporated herein by reference)
Specimen Common Share certificate (previously filed as Exhibit 4(i) to the Trust’s Annual Report on Form 10-K
for the year ended December 31, 1999 (File No. 1-07533) and incorporated herein by reference)
Articles Supplementary relating to the 5.417% Series 1 Cumulative Convertible Preferred Shares of Beneficial
Interest (previously filed as Exhibit 4.1 to the Trust’s Current Report on Form 8-K filed on March 13, 2007, (File
No. 1-07533) and incorporated herein by reference)
** Indenture dated December 1, 1993 related to the Trust’s 7.48% Debentures due August 15, 2026; and 6.82%
Medium Term Notes due August 1, 2027; (previously filed as Exhibit 4(a) to the Trust’s Registration Statement on
Form S-3 (File No. 33-51029), and amended on Form S-3 (File No. 33-63687), filed on December 13, 1993 and
incorporated herein by reference)
** Indenture dated September 1, 1998 related to the Trust’s 5.65% Notes due 2016; 6.20% Notes due 2017; 5.90%
Notes due 2020; 3.00% Notes due 2022; 2.75% Notes due 2023; 3.95% Notes due 2024; 4.50% Notes due 2044;
2.55% Notes due 2021 (previously filed as Exhibit 4(a) to the Trust’s Registration Statement on Form S-3 (File
No. 333-63619) filed on September 17, 1998 and incorporated herein by reference)
* Severance Agreement between the Trust and Donald C. Wood dated February 22, 1999 (previously filed as a
portion of Exhibit 10 to the Trust's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 (File No.
1-07533) (the "1999 1Q Form 10-Q") and incorporated herein by reference)
* Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 22, 1999
(previously filed as a portion of Exhibit 10 to the 1999 1Q Form 10-Q and incorporated herein by reference)
* Amendment to Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated
February 16, 2005 (previously filed as Exhibit 10.12 to the Trust’s Annual Report on Form 10-K for the year ended
December 31, 2004 (File No. 1-07533) (the “2004 Form 10-K”) and incorporated herein by reference)
2001 Long-Term Incentive Plan (previously filed as Exhibit 99.1 to the Trust’s S-8 Registration Number
333-60364 filed on May 7, 2001 and incorporated herein by reference)
* Health Coverage Continuation Agreement between Federal Realty Investment Trust and Donald C. Wood dated
February 16, 2005 (previously filed as Exhibit 10.26 to the 2004 Form 10-K and incorporated herein by reference)
* Severance Agreement between the Trust and Dawn M. Becker dated April 19, 2000 (previously filed as Exhibit
10.26 to the Trust’s 2005 2Q Form 10-Q and incorporated herein by reference)
* Amendment to Severance Agreement between the Trust and Dawn M. Becker dated February 16, 2005
(previously filed as Exhibit 10.27 to the 2004 Form 10-K and incorporated herein by reference)
Form of Restricted Share Award Agreement for awards made under the Trust’s 2003 Long-Term Incentive Award
Program for shares issued out of 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.28 to the 2004
Form 10-K and incorporated herein by reference)
Form of Restricted Share Award Agreement for long term vesting and retention awards for shares issued out of the
2010 Plan (previously filed as Exhibit 10.35 to the Trust's Annual Report on Form 10-K for the year ended
December 31, 2010 (File No. 1-07533) (the "2010 Form 10-K") and incorporated herein by reference)
10.10
Form of Option Award Agreement for awards made under the Trust’s 2003 Long-Term Incentive Award Program
for shares issued out of the 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.32 to the 2005 Form 10-
K and incorporated herein by reference)
F-38
1
FEDERAL REALTY | ANNUAL REPORT 2015 Exhibit
No.
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
Description
Amended and Restated 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.34 to the Trust’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 1-07533) and incorporated herein by
reference)
* Amendment to Severance Agreement between the Trust and Donald C. Wood dated January 1, 2009 (previously
filed as Exhibit 10.26 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No.
1-07533) (“the 2008 Form 10-K”) and incorporated herein by reference)
* Second Amendment to Executive Agreement between the Trust and Donald C. Wood dated January 1, 2009
(previously filed as Exhibit 10.27 to the Trust’s 2008 Form 10-K and incorporated herein by reference)
* Amendment to Health Coverage Continuation Agreement between the Trust and Donald C. Wood dated January
1, 2009 (previously filed as Exhibit 10.28 to the Trust’s 2008 Form 10-K and incorporated herein by reference)
* Second Amendment to Severance Agreement between the Trust and Dawn M. Becker dated January 1, 2009
(previously filed as Exhibit 10.30 to the Trust’s 2008 Form 10-K and incorporated herein by reference)
2010 Performance Incentive Plan (previously filed as Appendix A to the Trust’s Definitive Proxy Statement for the
2010 Annual Meeting of Shareholders (File No. 01-07533) and incorporated herein by reference)
Amendment to 2010 Performance Incentive Plan (“the 2010 Plan”) (previously filed as Appendix A to the Trust’s
Proxy Supplement for the 2010 Annual Meeting of Shareholders (File No. 01-07533) and incorporated herein by
reference)
* Restricted Share Award Agreement between the Trust and Donald C. Wood dated October 12, 2010 (previously
filed as Exhibit 10.36 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 (File
No. 01-07533) and incorporated herein by reference)
Form of Restricted Share Award Agreement for awards made under the Trust’s Long-Term Incentive Award
Program and the Trust’s Annual Incentive Bonus Program and basic awards with annual vesting for shares issued
out of the 2010 Plan (previously filed as Exhibit 10.34 to the Trust’s 2010 Form 10-K (File No. 1-07533) and
incorporated herein by reference)
Form of Option Award Agreement for awards made under the Trust’s Long-Term Incentive Award Program for
shares issued out of the 2010 Plan (previously filed as Exhibit 10.38 to the Trust’s 2010 Form 10-K (File No.
1-07533) and incorporated herein by reference)
Form of Option Award Agreement for front loaded awards made under the Trust’s Long-Term Incentive Award
Program for shares issued out of the 2010 Plan (previously filed as Exhibit 10.39 to the Trust’s 2010 Form 10-K
(File No. 1-07533) and incorporated herein by reference)
Form of Option Award Agreement for basic options awarded out of the 2010 Plan (previously filed as Exhibit
10.40 to the Trust’s 2010 Form 10-K (File No. 1-07533) and incorporated herein by reference)
Form of Restricted Share Award Agreement, dated as of February 10, 2011, between the Trust and Dawn M.
Becker (previously filed as Exhibit 10.41 to the Trust’s 2010 Form 10-K (File No. 1-07533) and incorporated
herein by reference)
* Severance Agreement between the Trust and James M. Taylor dated July 30, 2012 (previously filed as Exhibit
10.35 to the Trust's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 (File No. 1-07533)
and incorporated herein by reference)
Credit Agreement dated as of July 7, 2011, by and among the Trust, as Borrower, the financial institutions party
thereto and their permitted assignees under Section 12.6., as Lenders, Wells Fargo Bank, National Association, as
Administrative Agent, PNC Bank, National Association, as Syndication Agent, Wells Fargo Securities, LLC, as a
Lead Arranger and Book Manager, and PNC Capital Markets LLC, as a Lead Arranger and Book Manager
(previously filed as Exhibit 10.1 to the Trust’s Current Report on Form 8-K (File No. 1-07533), filed on July 11,
2011 and incorporated herein by reference)
Term Loan Agreement dated as of November 22, 2011, by and among the Trust, as Borrower, the financial
institutions party thereto and their permitted assignees under Section 12.6., as Lenders, PNC Bank, National
Association, as Administrative Agent, Capital One, N.A., Syndication Agent, PNC Capital Markets, LLC, as a
Lead Arranger and Book Manager, and Capital One, N.A., as a Lead Arranger and Book Manager (previously filed
as Exhibit 10.1 to the Trust's Current Report on Form 8-K (File No. 1-07533), filed on November 28, 2011 and
incorporated herein by reference)
2
Exhibit
No.
10.27
10.28
10.29
10.30
10.31
10.32
10.33
21.1
23.1
31.1
31.2
32.1
32.2
101
Description
Revised Form of Restricted Share Award Agreement for front loaded awards made under the Trust’s Long-Term
Incentive Award Program for shares issued out of the 2010 Plan (previously filed as Exhibit 10.35 to the Trust's
Annual Report on Form 10-K for the year ended December 31, 2012 (File No. 1-07533) (the "2012 Form 10-K")
and incorporated herein by reference)
Revised Form of Restricted Share Award Agreement for long-term vesting and retention awards made under the
Trust’s Long-Term Incentive Award Program for shares issued out of the 2010 Plan (previously filed as Exhibit
10.36 to the Trust's 2012 Form 10-K (File No. 1-07533) and incorporated herein by reference)
Revised Form of Performance Share Award Agreement for shares awarded out of the 2010 Plan (previously filed
as Exhibit 10.37 to the Trust's 2012 Form 10-K (File No. 1-07533) and incorporated herein by reference)
Revised Form of Restricted Share Award Agreement for awards made under the Trust’s Long-Term Incentive
Award Program and the Trust’s Annual Incentive Bonus Program and basic awards with annual vesting for shares
issued out of the 2010 Plan (previously filed as Exhibit 10.38 to the Trust's 2012 Form 10-K (File No. 1-07533)
and incorporated herein by reference)
First Amendment to the Credit Agreement, dated as of April 22, 2013, by and among Federal Realty Investment
Trust, each of the Lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent
(previously filed as Exhibit 10.1 to the Trust's Current Report on Form 8-K (File No. 1-07533), filed on April 26,
2013 and incorporated herein by reference)
First Amendment to the Term Loan Agreement, dated as of April 22, 2013, by and among Federal Realty
Investment Trust, each of the Lenders party thereto, and PNC Bank, National Association, as Administrative Agent
(previously filed as Exhibit 10.40 to the Trust's Quarterly Report on Form 10-Q for the quarter ended March 31,
2013 (File No. 1-07533) and incorporated herein by reference
Second Amendment to Term Loan Agreement, dated as of August 28, 2014, by and among Federal Realty
Investment Trust, each of the Lenders party thereto, and PNC Bank, National Association, as Administrative Agent
(previously filed as Exhibit 10.1 to the Trust's Current Report on Form 8-K (File No. 1-07533), filed on September
2, 2014 and incorporated herein by reference)
Subsidiaries of Federal Realty Investment Trust (filed herewith)
Consent of Grant Thornton LLP (filed herewith)
Rule 13a-14(a) Certification of Chief Executive Officer (filed herewith)
Rule 13a-14(a) Certification of Chief Financial Officer (filed herewith)
Section 1350 Certification of Chief Executive Officer (filed herewith)
Section 1350 Certification of Chief Financial Officer (filed herewith)
The following materials from Federal Realty Investment Trust’s Annual Report on Form 10-K for the year ended
December 31, 2015, formatted in XBRL (Extensible Business Reporting Language): (1) the Consolidated Balance
Sheets, (2) the Consolidated Statements of Comprehensive Income, (3) the Consolidated Statement of
Shareholders’ Equity, (4) the Consolidated Statements of Cash Flows, and (5) Notes to Consolidated Financial
Statements that have been detail tagged.
_____________________
* Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 15(b) of Form 10-K.
** Pursuant to Regulation S-K Item 601(b)(4)(iii), the Trust by this filing agrees, upon request, to furnish to the Securities and
Exchange Commission a copy of other instruments defining the rights of holders of long-term debt of the Trust.
3
FEDERAL REALTY | ANNUAL REPORT 2015
I, Donald C. Wood, certify that:
CERTIFICATION
Exhibit 31.1
1)
2)
3)
4)
I have reviewed this annual report on Form 10-K of Federal Realty Investment Trust;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5)
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of trustees (or
persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.
February 9, 2016
/s/ Donald C. Wood
Donald C. Wood,
President, Chief Executive Officer and Trustee
(Principal Executive Officer)
I, James M. Taylor, Jr., certify that:
CERTIFICATION
Exhibit 31.2
1)
2)
3)
4)
I have reviewed this annual report on Form 10-K of Federal Realty Investment Trust;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5)
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of trustees (or
persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.
February 9, 2016
/s/ James M. Taylor, Jr.
James M. Taylor, Jr.,
Executive Vice President -
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
FEDERAL REALTY | ANNUAL REPORT 2015 CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
The undersigned, Donald C. Wood, the President and Chief Executive Officer of Federal Realty Investment Trust (the
“Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the
Company’s Annual Report on Form 10-K for the period ended December 31, 2015 (the “Report”). The undersigned hereby
certifies, to the best of his knowledge, that:
(1)
(2)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
February 9, 2016
/s/ Donald C. Wood
Donald C. Wood,
President, Chief Executive Officer and Trustee
(Principal Executive Officer)
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
The undersigned, James M. Taylor, Jr., the Executive Vice President and Chief Financial Officer and Treasurer of Federal
Realty Investment Trust (the “Company”), has executed this certification in connection with the filing with the Securities and
Exchange Commission of the Company’s Annual Report on Form 10-K for the period ended December 31, 2015 (the
“Report”). The undersigned hereby certifies, to the best of his knowledge, that:
(1)
(2)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
February 9, 2016
/s/ James M. Taylor, Jr.
James M. Taylor, Jr.,
Executive Vice President -
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
FEDERAL REALTY | ANNUAL REPORT 2015 CORPORATE
INFORMATION
CORPORATE OFFICE
1626 East Jefferson Street
Rockville, MD 20852-4041
301.998.8100
GENERAL COUNSEL
Pillsbury Winthrop Shaw Pittman LLP
Washington, DC
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Grant Thornton LLP
McLean, VA
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
718.921.8200
800.937.5449
www.amstock.com
COMMON STOCK LISTING
New York Stock Exchange
Symbol: FRT
MEMBERSHIPS
International Council of Shopping Centers
National Association of Real Estate Investment Trusts
Urban Land Institute
ANNUAL MEETING
Federal Realty Investment Trust will hold its Annual Shareholder
Meeting at 10 a.m. on May 4, 2016, at AMP by Strathmore,
11810 Grand Park Avenue, North Bethesda, MD.
CORPORATE GOVERNANCE
The Trust’s Corporate Governance Guidelines and the charters
for the Audit Committee, the Compensation Committee, and the
Nominating and Corporate Governance Committee are available in
the Investors section of our Web site at www.federalrealty.com.
AUTOMATIC CASH INVESTMENT AND DIRECT DEPOSIT
Federal Realty offers automatic cash investment, the option to
automatically withdraw funds from a checking/savings or other bank
account to purchase additional shares of FRT on the 1st and 15th of
each month. Federal Realty also offers shareholders the option to
directly deposit their dividends. To sign up for automatic cash
investment or direct deposit, please call (800) 937-5449 or
visit www.amstock.com.
INTERNET
www.federalrealty.com
Visitors to the site can search for and download Securities and
Exchange Commission filings, review Federal Realty’s Dividend
Reinvestment Plan, obtain current stock quotes, read recent press
releases, and see a listing of our properties and the properties’
respective websites. Printed materials and e-mail news alerts can
also be requested.
INVESTOR RELATIONS CONTACT
You may communicate directly with Federal Realty’s Investor
Relations department via telephone at (800) 658-8980 or by
e-mail at IR@federalrealty.com.
FEDERAL REALTY | ANNUAL REPORT 2015 LOCATIONS
Corporate Headquarters
1626 East Jefferson Street
Rockville, MD 20852
301.998.8100
Regional Offices
BOSTON
450 Artisan Way
Suite 320
Somerville, MA 02145
617.684.1500
LOS ANGELES
710-B South Allied Way
El Segundo, CA 90245
310.414.5280
PHILADELPHIA
50 East Wynnewood Road
Suite 200
Wynnewood, PA 19096
610.896.5870
SAN JOSE
356 Santana Row
Suite 1005
San Jose, CA 95128
408.551.4600
federalrealty.com