F E D E R A L R E A L T Y I N V E S T M E N T T R U S T
2020 Annual Report
Form 10-K & Proxy Statement
Dear
Shareholders,
What a punch to the gut 2020 was!
In a
business where strong contracts (leases),
diversification and conservatism are among
our most
important underlying principles,
they were no match for a global pandemic
that generated widespread behavioral change
and saw sustained state, county and local
government shutdowns that took matters out
of our (and our tenants’) hands. Our total
revenue, which had grown at a compound
annual growth rate of 6% over the last decade,
declined 11% in 2020 or $100 million. A
business plan and real estate portfolio that
had been built over more than half a century
to withstand economic swings, volatile capital
market environments and changing consumer
preferences, was dealt its biggest challenge
ever by an invisible virus that found its way to
every nook and cranny of the planet. As I
and
write
entertainment commerce in nearly all of the
jurisdictions in which we operate remains
restricted to some extent. Having said that,
optimism is growing as we can begin to see a
light at the end of the tunnel that we expect
to continue to brighten as we get deeper into
2021 and 2022. We believe the demand for
our real estate and our strong liquidity make
our prospects once emerging from the
pandemic stronger than ever.
restaurant
letter,
retail,
this
the
Keeping
pandemic.
their own, struggled mightily
no fault of
those
through
historically strong tenants open and our
centers occupied was, and is, a primary
objective. We are all
in this together!
Accordingly, we agreed to modify 1,200 of
our leases (roughly 40% of our total) in one
way or another. In some cases, we agreed to
defer some or all of the rent obligation until
some later point when those businesses could
reopen and generate meaningful sales. We
expect most tenants to be in a position to
repay those deferrals over the next couple of
years.
In other cases, we agreed to abate
(permanently forgive) all or part of the rent
obligation for a period of time and then often,
have that
tenant begin to pay rent on a
percentage of sales basis as they return to
productivity. And in some cases,
it was a
and
both
of
combination
abatements. Each deal and negotiation was
different, as we considered the specific needs
of all the surrounding tenants in a particular
shopping center as well as their ability to
ultimately pay and their prospects for a strong
post COVID recovery.
deferrals
O u r T e n a n t s
We have always paid particular attention to
the relationship between our company and
our tenants as it is our lifeblood. When the
fully understood the
pandemic hit, we
importance of a productive partnership with
our strongest tenants, particularly those small
and medium sized businesses that, through
F E D E R A L R E A L T Y | A N N U A L R E P O R T 2020
Of course, many businesses were impacted
beyond what any help from us could provide to
save them and bankruptcies, reorganizations,
flat out closures were (and still are to some
extent) commonplace. Those spaces need to be
backfilled with new tenants, and by most
measures, this is the primary source of our
optimism for the future. Because even in the
second half of 2020, at the height of the
restaurant,
pandemic, we executed retail,
entertainment and office leases
for over
400,000 square feet to new tenants (it’s over
1 million square
feet when considering
renewals of existing tenants). Think about that.
That represents over 200 organizations with
limited visibility to a post COVID environment,
that were willing
to make multi-year
commitments to take space in Federal Realty
centers at rents roughly equal to pre-pandemic
levels.
Where did that demand come from? Well, in
the case of
the renewals, certainly from
tenants that had previously secured space in
our centers who were not going to give it up
easily as they saw our real estate as giving
them the best chance for a strong recovery.
But what about
the new tenants? These
executives saw the pandemic as a chance to
improve the location of their businesses to
better real estate for one reason or another.
Maybe they were in a downtown location and
thought that our first-tier suburban locations
made more sense for them as work from
home trends took hold. Maybe they were in
an enclosed mall and felt that the open-air
nature of our centers was more agreeable to
their customers now and well into the future.
Maybe they were in a less productive open-air
center in the market and used the opportunity
to upgrade to a Federal Realty center. Or
maybe they were a new and expanding tenant
like Serena & Lilly or Blue Bottle Coffee, who
are carefully selecting the location for the
their new concept and
limited rollout of
demand the best. Whatever the reason(s), we
are strongly encouraged by the demand we
are seeing for our real estate and, accordingly,
are bullish on our post COVID growth
prospects.
B a l a n c e S h e e t
the
long
have
recognized
We wouldn’t have been in a position to be able
to share the economic pain of COVID with our
tenants, nor would we have been able to retain
our entire employee base through this crisis
had we not entered into 2020 with arguably
the strongest balance sheet among publicly
traded shopping centers and the only one “A”
rated by both Moody’s and Standard & Poor’s.
We
inherent
the real estate business and
cyclicality of
therefore
low leverage
(particularly relative to the high quality nature
of our
laddered debt
maturity schedule, and the flexibility of a
predominantly unsecured debt strategy,
is
fundamentally critical to our ability to weather
those cycles. And while we certainly never
planned for a “cycle” as severe and disruptive
as COVID,
fundamental
is precisely that
strategy that we’ve believed in over many
years that allowed us to shore up the balance
sheet even further as the shutdowns began.
real estate), a well
need
the
for
it
That began in March when we immediately
drew down the entirety of our unutilized billion
dollar credit line to insure us against the capital
markets unknown. A large, unused credit line is
invaluable in times of extreme uncertainty and
we weren’t afraid to use it. By May,
it had
become clear that the debt markets would
remain open to Federal Realty at very
competitive rates and, as such, we raised
$1.1 billion in the form of an unsecured term
loan and unsecured senior notes that, together,
carried an effective interest rate inside 3% and a
weighted average term of five and a half years.
We paid down our credit
line with those
borrowings and remain in a very strong
liquidity position as of this writing. Later in
2020, we again accessed the debt markets with
the issuance of our
“Green Bond,” a
$400.0 million unsecured note bearing interest
at 1.25% due in 2026 that is allocated to current
and future LEED silver, gold or platinum
buildings that we have and will develop. This
and other sustainability initiatives are an
important part of our company’s culture as we
look to the future in everything we do. Late in
the year, we sold three of our shopping centers
and issued common equity in amounts that
combined, generated an additional $270 million
of equity capital and debt repayment, assuring
us of entering 2021 from a position of strength.
first
F E D E R A L R E A L T Y | A N N U A L R E P O R T 2020
I N D U S T R Y - L E A D I N G C O N S I S T E N C Y
53 consecutive years
of increased dividends.
$4.24 *
$0.12 *
1967
*Annualized Dividends
T h e D i v i d e n d
One area where we could have retained more
than $50 million of capital in 2020 but chose
not to was by cutting our common dividend
to shareholders. The argument for doing so is
a simple one:
retained earnings are the
cheapest form of capital and by law, REITS are
only obligated to pay out 90% of
taxable
income. With the reduction of taxable income
caused by the pandemic, why not save the
money by retaining it in the business and not
distributing it to shareholders? Nothing wrong
with the short-term logic at all, but our Board
and our senior management team found it
lacking in long term considerations.
It starts with our strong belief in the “REIT
bargain” with its shareholders. We believe that
long-term REIT investors (the kind we search
out and are managing the company for),
expect a total investment return for which a
steady, and if possible, growing dividend is a
critical component. Currently, our dividend
yield is roughly 4%. It’s why we think that
rather than cutting the dividend at the first
available opportunity, the Board and senior
management owe it to its investors to try and
2020
maintain it. It’s why we need to explore the
availability and cost of alternative sources of
capital and consider the company’s future
prospects and recovery timeline, among other
things, in its assessment of capital allocation
and balance sheet management.
its
Federal has paid, and in fact increased,
cash dividend to common shareholders every
year since 1967. That’s 53 years in a row. It’s
one of only a small
fraction of all U.S.
companies, not just REITS, that can make such
long-term
a claim. We believe that our
investors notice. Indications like rewarding us
with a consistently higher earnings multiple,
lower borrowing costs, greater access to a
wide variety of capital markets in difficult
times, and having a long memory, come to
mind. We believe that an investment
in
Federal Realty should include the presumption
that there is a buffer that reduces the risk of
direct ownership in the real estate. A
dependable dividend yield goes a long way in
creating that buffer. The capital we could
have retained with a dividend cut represents
less than 3% of our total debt balance and less
than 1% of the total value of the assets we
manage. On balance, we decided to declare
F E D E R A L R E A L T Y | A N N U A L R E P O R T 2020
and pay that dividend and hope to continue to
do so as we work our way through this
pandemic.
cyclical event, and surely,
Of course, the pandemic is not your ordinary
economic
its
duration and ultimate impacts remain a
question mark. There may come a time when
it isn’t prudent to declare the dividend at or
above historic levels. The passage of time is
the only measure that can provide more
clarity there. But knowing that cutting the
dividend was not our knee-jerk first move and
remains a very high
that maintaining it
priority, should provide some level of comfort
to investors who value that component of
total return.
T h e T e a m a n d O u r F u t u r e
by
the
have
been most
pandemic
Restaurants, gyms, and theaters, among other
obviously
categories,
impacted
the
and
government restrictions put on them. Federal
has a strong preponderance of these tenants,
predominantly in our mixed use and lifestyle
properties, which make up about a quarter of
our company-wide portfolio. Not surprisingly,
these properties have been among our worst
performers in terms of rent collection and
other metrics this past year. To add context,
we collected roughly 84% of the retail rent
that was due to us in the fourth quarter of
2020 at these properties, yet we collected
92% of the retail rent that was due to us at the
other three quarters of our properties. Those
retail centers are far more necessity based
with a tenant mix more likely to include
grocers, drug stores, banks,
large well
capitalized national tenants and the like.
it is precisely the strategy to
Interestingly,
have acquired and built such a wide variety of
shopping center
types, along with their
locations in the first ring suburbs of major
metropolitan cities, that has long been one of
the primary strengths of our Company. While
the necessity based centers provide the
stability of our cash flows, the mixed use and
lifestyle centers and communities (including
our development pipeline), have provided the
extra juice that investors have appreciated for
their outsized growth and opportunity. It took
a global pandemic and government mandated
shutdowns to throw those properties off
track. We believe their future looks brighter
than ever.
The workload
The deep bench of professionals and support
staff on the Federal
team along with the
camaraderie and efficiency with which they go
about their business is something that takes
years to develop and, like the dividend, should
be protected and nurtured. The temptation to
cut staff as a short-term cash conservation
measure was very real in the early days of the
pandemic and was happening at companies
everywhere we looked. Thank goodness we
resisted.
associated with
negotiating,
renegotiating and documenting
leases, maintaining our properties to a high
standard, continuing our development that is
underway, managing our many constituencies
and supporting all of these functions has been
staggering and the continuing activity necessary
to regain our position in the marketplace will be
equally daunting. The Federal team performed at
a level at which I remain in awe. We put our
heads down, attacked the myriad of issues a
pandemic creates, and worked tirelessly to find
creative solutions. Such a work ethic is an
integrated part of our culture of which I am
immensely proud. It’s an impressive group of real
estate professionals.
We continue to build that team for the future
and announced the promotion of Jeff Berkes
to the newly formed position of President and
Chief Operating Officer. One of
the most
respected real estate professionals in the
business, Jeff has been with Federal for over
20 years and, with the east and west coast
support of equally impressive professionals
Wendy Seher and Jan Sweetnam, assure that
our Company is in good hands as we fight our
way through the other side of
the global
pandemic.
A F i n a l W o r d…
social,
environmental,
Strong governance and awareness of our role
in the future of our society is a responsibility
that we take with the utmost of care and
seriousness. Our published positions on all
matters
and
governance related can be found on our
website and act as a formal accounting of our
progress on these issues. But that ESG report
is not where the rubber meets the road. It is
in the day to day actions, attitudes, and
decisions that each of
team
members make in the ordinary course of their
professional and personal
lives that really
make the difference. From designing and
the Federal
F E D E R A L R E A L T Y | A N N U A L R E P O R T 2020
building the most efficient and sustainable
environments throughout
to
the country,
continued improvement
in the long term
efficient operation of our properties, to the
tolerance and understanding,
exercise of
equal opportunity, diversity and fairness with
respect
to our fellow human beings with
whom we both work and serve as customers,
to the honest and forthright dealing with
inequities head on, we are committed to
practicing what we preach. It’s that important
to all of our futures.
it
is with immense gratitude and
Further,
respect that I offer my heartfelt thanks to Joe
Vassalluzzo, Federal’s Board member since
2002 and Non Executive Chairman since 2006
and Jon Bortz, Federal’s Board member since
2005, both of whom will be retiring from the
Board effective this May. Their experience and
counsel have proven invaluable
to me
to Federal’s
personally and, by extension,
shareholders over a significant part of the last
two decades. Thanks to both of you, not only
as my mentors, but as my friends. As time
marches forward and our Company continues
I would also like to welcome
to evolve,
Ms. Nicole Y. Lamb-Hale and Mr. Anthony
Nader
to our Board and look forward to
working closely with them and the rest of this
to lead
dedicated Board as we endeavor
Federal to new heights in the months and
years to come.
Respectfully,
Donald C. Wood
Chief Executive Officer
F E D E R A L R E A L T Y | A N N U A L R E P O R T 2020
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, 2020
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)
52-0782497
(IRS Employer Identification No.)
909 Rose Avenue, Suite 200, North Bethesda, Maryland 20852
(Address of Principal Executive Offices)
(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
Depositary Shares, each representing 1/1000 of a share
of 5.00% Series C Cumulative Redeemable Preferred
Stock, $.01 par value per share
Trading Symbol
FRT
Name of Each Exchange On Which Registered
New York Stock Exchange
FRT-C
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
"emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by checkmark if the registrant has elected not use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.
☐
☐
☐
☐
☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the 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, 2020 was $6.4 billion.
The number of registrant’s common shares outstanding on February 8, 2021 was 76,747,943.
FEDERAL REALTY INVESTMENT TRUST
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 2020
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission for the Registrant’s
annual meeting of shareholders to be held in May 2021 will be incorporated by reference into Part III hereof.
TABLE OF CONTENTS
Business........................................................................................................................................................... 3
Risk Factors..................................................................................................................................................... 8
Unresolved Staff Comments............................................................................................................................ 18
Properties......................................................................................................................................................... 18
Legal Proceedings............................................................................................................................................ 27
Mine Safety Disclosures.................................................................................................................................. 27
Market for Our Common Equity and Related Shareholder Matters and Issuer Purchases of Equity
Securities.......................................................................................................................................................... 28
Selected Financial Data................................................................................................................................... 30
Management’s Discussion and Analysis of Financial Condition and Results of Operations.......................... 30
Quantitative and Qualitative Disclosures About Market Risk......................................................................... 51
Financial Statements and Supplementary Data............................................................................................... 52
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure......................... 52
Controls and Procedures.................................................................................................................................. 52
Other Information............................................................................................................................................ 53
Trustees, Executive Officers and Corporate Governance................................................................................ 54
Executive Compensation................................................................................................................................. 54
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters....... 54
Certain Relationships and Related Transactions, and Trustee Independence................................................. 54
Principal Accountant Fees and Services.......................................................................................................... 54
Exhibits and Financial Statement Schedules................................................................................................... 54
Form 10-K Summary
58
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.
Item 16.
SIGNATURES......................................................................................................................................................................... 59
2
PART I
Forward-Looking Statements
Certain statements included in this Annual Report on Form 10-K are forward-looking statements. Those statements include
statements regarding the intent, belief or current expectations of Federal Realty Investment Trust (“we” “our” or “us”) and
members of our management team, as well as the assumptions on which such statements are based, and generally are identified
by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,”
“should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking
statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to
update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes
to future operating results over time, unless required by law.
The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results
to differ materially from those presented in our forward-looking statements:
•
•
•
•
•
•
•
•
•
risks that our tenants will not pay rent, may vacate early or may file for bankruptcy or that we may be unable to renew
leases or re-let space at favorable rents as leases expire;
risks that we may not be able to proceed with or obtain necessary approvals for any redevelopment or renovation
project, and that completion of anticipated or ongoing property redevelopment or renovation projects that we do pursue
may cost more, take more time to complete or fail to perform as expected;
risk that we are investing a significant amount in ground-up development projects that may be dependent on third
parties to deliver critical aspects of certain projects, requires spending a substantial amount upfront in infrastructure,
and assumes receipt of public funding which has been committed but not entirely funded;
risks normally associated with the real estate industry, including risks that occupancy levels at our properties and the
amount of rent that we receive from our properties may be lower than expected, that new acquisitions may fail to
perform as expected, that competition for acquisitions could result in increased prices for acquisitions, that costs
associated with the periodic maintenance and repair or renovation of space, insurance and other operations may
increase, that environmental issues may develop at our properties and result in unanticipated costs, and, because real
estate is illiquid, that we may not be able to sell properties when appropriate;
risks that our growth will be limited if we cannot obtain additional capital;
risks associated with general economic conditions, including local economic conditions in our geographic markets;
risks of financing on terms which are acceptable to us, our ability to meet existing financial covenants and the
limitations imposed on our operations by those covenants, and the possibility of increases in interest rates that would
result in increased interest expense;
risks related to our status as a real estate investment trust, commonly referred to as a REIT, for federal income tax
purposes, such as the existence of complex tax regulations relating to our status as a REIT, the effect of future changes
in REIT requirements as a result of new legislation, and the adverse consequences of the failure to qualify as a REIT;
and
risks related to natural disasters, climate change and public health crises (such as the outbreak and worldwide spread of
COVID-19), and the measures that international, federal, state and local governments, agencies, law enforcement and/
or health authorities implement to address them, may precipitate or materially exacerbate one or more of the above-
mentioned risks, and may significantly disrupt or prevent us from operating our business in the ordinary course for an
extended period.
In addition, we describe risks and uncertainties that could cause actual results and events to differ materially in “Risk
Factors” (Part I, Item 1A of this Annual Report on Form 10-K), “Quantitative and Qualitative Disclosures about Market
Risk” (Part II, Item 7A), and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” (Part
II, Item 7).
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.
3
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, 2020, we owned or had a majority interest in community and neighborhood shopping centers and mixed-
use properties which are operated as 101 predominantly retail real estate projects comprising approximately 23.4 million square
feet. In total, the real estate projects were 92.2% leased and 90.2% occupied at December 31, 2020. Our revenue is primarily
generated from lease agreements with tenants. We have paid quarterly dividends to our shareholders continuously since our
founding in 1962 and have increased our dividends per common share for 53 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 909 Rose Avenue, North
Bethesda, 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
While the ongoing COVID-19 pandemic is impacting us in the short-term, our long-term focus has not changed.
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 over the long term;
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
While managing through the ongoing COVID-19 pandemic has resulted in short-term deviations, our long-term core operating
strategy has not changed. We continuously evaluate and assess our operating strategies to ensure they are effective and put us in
the best position to address changes in the market. We 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;
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;
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.
•
•
•
•
4
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:
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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, household incomes, education
levels, as well as the population and income trends in that geographic area. This may from time to time include the
evaluation of new markets;
competitive conditions in the vicinity of the property, including gross leasable area (GLA) per capita, 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. As a result of the ongoing
COVID-19 pandemic and its impact on our cash flows, we have been currently maintaining levels of cash significantly in
excess of the cash balances we have historically maintained. 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 sufficient levels of cash and available line of credit to fund operating and investing needs on a short-term
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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 relative to our size 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:
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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,
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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 typically receive the same distributions as our common
shares and the holders of these units have the right to exchange their units for cash or common shares, at our
option), or
the use of joint venture arrangements.
Human Capital
At February 8, 2021, we had 307 full-time employees and 4 part-time employees. None of our employees are represented by a
collective bargaining unit. We believe that our relationship with our employees is good.
Diversity and Inclusion
We are an Equal Opportunity/Affirmative action employer, and strive to maintain a workplace that is free from discrimination
on the basis of race, color, religion, sex, sexual orientation, nationality, disability, or protected Veteran status.
Health, Safety, and Wellness
We are committed to the health, safety, and wellness of our employees, and foster an environment that allows our people to
succeed while balancing work and life. We provide our employees with access to health and wellness programs, which includes
benefits that support both physical and mental health. In response to the COVID-19 pandemic, we implemented significant
changes that were in the best interest of our employees and to comply with government regulations. This includes having the
majority of our employees working remotely, as well as implementing additional safety measures for employees continuing to
work in our offices.
Compensation and Benefits
We provide competitive pay and benefits including health, dental, vision, short and long-term disability, life insurance and a
401(k) retirement program, as well as a generous paid time off program that includes vacation, sick, and personal leave. In
addition to our equity awards program, we also offer a quarterly recognition program, as well as rewarding employees with spot
bonuses for stellar performance or going above and beyond the base requirements of their job description.
Talent Development
Employees have access to a variety of different training courses, books, book summaries and audio books, and an array of
source materials covering a myriad of different business and soft skills training subjects. Additionally, we provide
reimbursement for tuition and professional licensures.
Community Involvement
Giving back to the community is an integral part of who we are and what we do. We provide ample ways to give back through
programs at our properties or charitable endeavors and volunteer opportunities that also serve as team building exercises for our
employees.
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, for our taxable years
ending on or prior to December 31, 2017, 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.
Impacts of COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease ("COVID-19") as a
pandemic. While we currently expect the impact to our properties is temporary in nature, the extent of the future effects of
COVID-19 on our business, operating strategies, results of operations, cash flows, and growth prospects is highly uncertain and
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will ultimately depend on future developments, none of which can be predicted with any certainty. Refer to Item 7 for further
discussion of the impacts of COVID-19 on our business.
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:
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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.
Please see Item 1A. "Risk Factors - Risk Factors Related to our REIT Status and Other Laws and Regulations" for further
discussion of potential material effects of our compliance with government regulation, including environmental regulations and
the rules governing REITS.
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
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:
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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
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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 the Corporate Governance section of our website as well.
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:
Risk Factors Related to our Real Estate Investments and Operations
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, legal, and/or competitive conditions, as
well as COVID-19, may impact the success of our tenants’ retail operations and therefore the amount of rent and expense
reimbursements we receive from our tenants. Any reduction in our tenants' abilities to pay base rent, percentage rent, or other
charges on a timely basis, including the closing of stores prior to the end of the lease term or 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. Over the past several years, we have seen higher levels of anchor
turnover and closings in some markets, which has caused an oversupply of larger retail 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. As of December 31, 2020, our anchor tenant space is 96.2%
leased and 94.1% occupied.
A shift in retail shopping from brick and mortar stores to online shopping may have an adverse impact on our cash
flow, financial condition and results of operations.
Many retailers operating brick and mortar stores have made online sales a vital piece of their business. The shift to online
shopping may cause declines in brick and mortar sales generated by certain of our tenants and may cause certain of our tenants
to reduce the size or number of their retail locations in the future. This risk is partially mitigated by our strategy of maintaining
a diverse portfolio of retail properties. The trend of retailers utilizing brick and mortar locations for ‘showroom’ and on-line
sales distribution purposes (particularly at shopping centers in densely populated areas like ours) may further mitigate this risk.
However, there can be no assurance that our shopping centers will not be further impacted by the shift to online shopping. As a
result, our cash flow, financial condition, and results of operations could be adversely affected.
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We have properties that are geographically concentrated, and adverse economic or real estate market declines in these
areas could have a material adverse effect on us.
As of December 31, 2020, our tenants operated in 11 states and the District of Columbia. Any adverse situation that
disproportionately affects the the markets where our properties are concentrated may have a magnified adverse effect on our
portfolio. Refer to “Properties” (Item 2 of this Annual Report on Form 10-K) for additional discussion of the geographic
concentration. Real estate markets are subject to economic downturns, as they have been in the past, and we cannot predict how
economic conditions will impact this market in both the short and long term.
Declines in the economy or a decline in the real estate market in these states could hurt our financial performance and the value
of our properties. Factors that may negatively affect economic conditions in these states include:
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business layoffs or downsizing;
industry slowdowns;
increased business restrictions due to health crises
relocations of businesses;
changing demographics;
increased telecommuting and use of alternative work places;
infrastructure quality;
any oversupply of, or reduced demand for, real estate;
concessions or reduced rental rates under new leases for properties where tenants defaulted; and
increased operating costs including insurance premiums and real estate taxes.
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.
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. 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.
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 into uncertain residential environments may result in lower rents or longer time periods
to reach economic stabilization;
substantial amount of our investment is related to infrastructure and the overall value of the project may be negatively
impacted if we do not complete subsequent phases;
failure or inability to obtain construction or permanent financing on favorable terms;
expenditure of money and time on projects that may never be completed;
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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 COVID-19, 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 period;
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 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
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.
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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.
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, 2020, we held 15 predominantly retail real estate projects jointly with other
persons in addition to properties owned in a “downREIT” structure. Additionally, as of December 31, 2020, we owned an
interest in the joint ventures that own the hotel components of Pike & Rose and Assembly Row. On January 4, 2021, we
acquired our partner's 20% interest in our joint venture arrangement related to the Pike & Rose hotel. 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,
2020, we held the controlling interests in all of our existing co-investments (except the hotel investments discussed above and
the investment in the La Alameda shopping center acquired in 2017), 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.
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, pandemics, 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
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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 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.
Natural disasters, climate change and health crises, including the COVID-19 pandemic, could have an adverse impact
on our cash flow and operating results.
Climate change may add to the unpredictability and frequency of natural disasters and severe weather conditions and create
additional uncertainty as to future trends and exposures. Certain of 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 impact of
climate change or the occurrence of natural disasters can delay new development projects, increase investment costs to repair or
replace damaged properties, increase operating costs, create additional investment costs to make improvements to existing
properties to comply with climate change regulations, increase future property insurance costs, and negatively impact the tenant
demand for 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.
In addition, our business is subject to risks related to the effects of public health crises, epidemics and pandemics, including the
COVID-19 pandemic. Such events could inhibit global, national and local economic activity; adversely affect trading activity
in securities markets, which could negatively impact the trading prices of our common shares and debt securities and our ability
to access the securities markets as a source of liquidity; adversely affect our tenants’ financial condition by limiting foot traffic
and staffing at their businesses, which could affect their ability to pay rent and willingness to make new leasing commitments;
reduce our cash flow, which could impact our ability to pay dividends at the current rate and in the current format or at all or to
service our debt; temporarily or permanently reduce the demand for retail or office space; interfere with our business operations
by requiring our personnel to work remotely; increase the frequency of cyber-attacks; disrupt supply chains that could be
important in our development and redevelopment activities; interfere with potential purchases and sales of properties; impact
our ability to pay dividends at the current rate and in the current format or at all; and have other direct and indirect effects that
are difficult to predict. Such risks depend upon the nature and severity of the public health concern, as well as the extent and
duration of government-mandated orders and personal decisions to limit travel, economic activity and personal interaction, none
of which can be predicted with confidence. In particular, we cannot predict the duration of stay-at-home and other government
orders instituted in response to the COVID-19 pandemic, which vary by jurisdiction, or the pandemics' short and long term
economic effects, each of which could have a material adverse effect on our business.
An increased focus on metrics and reporting related to corporate responsibility, specifically related to environmental,
social and governance ("ESG") factors, may impose additional costs and expose us to new risks.
Investors and other stakeholders have become more focused on understanding how companies address a variety of ESG factors.
Many of those investors and shareholders look to ESG rating systems that have been developed by third party groups to allow
comparisons between companies on ESG factors as they evaluate investment decisions as well as to company disclosures.
Although we participate in many of these ratings systems and generally score relatively well in those in which we do
participate, we do not participate in, and would not necessarily score well in, all of the available ratings systems. Further, the
criteria used in these ratings systems change frequently, and we cannot guaranty that we will be able to score well as criteria
change. We supplement our participation in ratings systems with corporate disclosures of our ESG activities but many investors
and stakeholders may look for specific disclosures that we do not provide. Failure to participate in certain of the third party
ratings systems, failure to score well in those ratings systems or failure to provide certain ESG disclosures could result in
reputational harm when investors or others compare us against similar companies in our industry and could cause certain
investors to be unwilling to invest in our stock which could adversely impact our ability to raise capital.
For more information about the Trust's Corporate Responsibility initiatives, see Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Corporate Responsibility."
Risk Factors Related to our Funding Strategies and Capital Structure
The amount of debt we have and the restrictions imposed by that debt could adversely affect our business and financial
condition.
12
As of December 31, 2020, we had approximately $4.3 billion of debt outstanding. Of that outstanding debt, approximately
$486.0 million was secured by all or a portion of 11 of our real estate projects. As of December 31, 2020, approximately 90.7%
of our debt is fixed rate or is fixed via interest rate swap agreements, which includes all of our property secured debt and our
unsecured senior notes. 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
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.
•
•
•
•
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, unsecured 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.
As of December 31, 2020, we were in compliance with all of our default related financial covenants. If we were to breach any
of our default related 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
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.
Adverse changes in our credit rating could affect our borrowing capacity and borrowing terms.
Our credit worthiness is rated by nationally recognized credit rating agencies. The credit ratings assigned are based on our
operating performance, liquidity and leverage ratios, financial condition and prospects, and other factors viewed by the credit
rating agencies as relevant to our industry and the economic outlook in general. Our credit rating can affect the amount of
capital we access, as well as the terms of certain existing and future financing we obtain. Since we depend on debt financing to
fund the growth of our business, an adverse change in our credit rating, including actual changes in outlook, or even the
initiation of review of our credit rating that could result in an adverse change, could have a material adverse effect on us.
13
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
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 $4.3 billion of debt outstanding as of December 31, 2020, approximately $456.5 million bears interest at a variable rate,
of which, $400.0 million is our unsecured term loan that bears interest at a variable rate of LIBOR plus 135 basis points and
$56.5 million in mortgages payable that bear interest at a variable rate of LIBOR plus 195 basis points and are effectively fixed
through two interest rate swap agreements. We also have a $1.0 billion revolving credit facility, on which no balance was
outstanding at December 31, 2020, that bears interest at LIBOR plus 77.5 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. We may enter into additional 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 variable rate debt to which hedging or similar arrangements relate may increase in the event of non-
performance by the counterparties to any such 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 phase-out of LIBOR could affect interest rates under our variable rate debt and interest rate swap arrangements.
LIBOR is used as a reference rate for our revolving credit facility, certain mortgage payables, and in our interest rate swap
arrangements. On July 27, 2017, the United Kingdom's Financial Conduct Authority announced it intends to stop compelling
banks to submit rates for the calculation of LIBOR after 2021. On November 30, 2020, the ICE Benchmark Administration
Limited announced its plan to extend the date that most U.S. LIBOR values would cease being computed and published from
December 31, 2021 to June 30, 2023. The Federal Reserve Board and the Federal Reserve Bank of New York organized the
Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate ("SOFR") as its preferred
alternative to U.S. dollar LIBOR in derivatives and other financial contracts. At this time, we can not predict the effect of any
discontinuance, modification or other reforms to LIBOR, or if SOFR, or another alternative rate reference rate, attains market
traction as a LIBOR replacement. As LIBOR phases out and ceases to exist, we will need to agree upon a benchmark
replacement index with the bank, and as such the interest rate on our revolving credit facility and certain mortgage payables
may change. The new rate may not be as favorable as those in effect prior to any LIBOR phase-out. Furthermore, the transition
process may result in delays in funding, higher interest expense, additional expenses, and increased volatility in markets for
instruments that currently rely on LIBOR, all of which could negatively impact our cash flow.
Risk Factors Related to our REIT Status and Other Laws and Regulations
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 responsible for the disposal or treatment of hazardous or
toxic substances released on or in properties we own or operate, as well as certain other potential costs relating to hazardous or
toxic substances (including governmental fines and injuries to persons and property). This liability may be imposed whether or
not we knew about, or were responsible for, the presence of hazardous or toxic substances. Further, the presence of
contamination on our properties or the failure to properly remediate contamination at any of our properties may adversely affect
14
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.
In addition, changes in government legislation and regulation on climate change could result in increased capital expenditures
to improve the energy efficiency of our existing properties and could also require us to spend more on our development or
redevelopment projects without a corresponding increase in revenues, which may adversely affect our financial condition,
results of operations and cash flows.
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:
•
•
•
•
•
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;
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.
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
15
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.
Legislative, administrative, regulatory or other actions affecting REITs, including positions taken by the IRS, could
have a material adverse effect on us and our investors.
The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process,
and by the Internal Revenue Service (“IRS”) and the U.S. Department of the Treasury (“Treasury”). Changes to the tax laws or
interpretations thereof by the IRS and the Treasury, with or without retroactive application, could materially and adversely
affect us and our investors. In particular, additional technical corrections legislation and implementing regulations may be
enacted or promulgated in response to the Tax Cuts and Job Acts of 2017 (the "Act"), and substantive legislative changes to the
Act are also possible. In response to the COVID-19 pandemic, multiple pieces of legislation have already been enacted,
including the 2020 CARES Act, and there have also been significant issuances of regulatory and other guidance, and further
legislative enactments and other IRS or Treasury action is possible. No prediction can be made as to the likelihood of passage
of new tax legislation or other provisions, or the direct or indirect effect on us and our shareholders. Accordingly, such new
legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our
ability to qualify to be taxed as a REIT and/or the U.S. federal income tax consequences to us and our investors of such
qualification.
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
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.
16
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.
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.
General Risk Factors
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 credit or analyst ratings;
our financial condition and performance;
•
•
•
•
•
•
•
• market perception of our business compared to other REITs; and
• market perception of REITs, in general, compared to other investment alternatives.
We cannot assure you we will continue to pay dividends in the current composition or 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 by our tenants under their contractual lease agreements;
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, or if we change the composition of 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.
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.
17
We may adjust our business policies without shareholder approval.
We may modify our approach to investment, financing, borrowing, and other operating strategies without shareholder approval.
A change in the approach to any of these items could adversely affect our financial condition and results of operations, and the
market price of our securities.
Our current business plan 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.
We face risks relating to cyber attacks that could cause loss of confidential information and other business disruptions.
We rely extensively on information technology systems to process transactions and manage our business, and our business is at
risk from and may be impacted by cyber attacks. These could include attempts to gain unauthorized access to our data and
computer systems as well as attacks on third party's information technology systems that we rely on to provide important
information technology services relating to key business functions, such as payroll. Attacks can be both individual and/or
highly organized attempts by very sophisticated hacking organizations. We employ a number of measures to prevent, detect and
mitigate these threats, which include password encryption, multi-factor authentication, frequent password change events,
firewall detection systems, anti-virus software in-place, frequent backups, a redundant data system for core applications and
penetration testing; however, there is no guarantee such efforts will be successful in preventing a cyber attack. A cyber attack
could compromise the confidential information of our employees, tenants and vendors. A successful attack could disrupt and
otherwise adversely affect our business operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
General
As of December 31, 2020, we owned or had a majority ownership interest in community and neighborhood shopping centers
and mixed-used properties which are operated as 101 predominantly retail real estate projects comprising approximately 23.4
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, California, and South Florida. No single
commercial or residential property accounted for over 10% of our 2020 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, 2020, we had approximately 2,800 commercial leases and 2,700 residential 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 3.6% of our annualized base rent as of December 31, 2020. 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 101 real estate projects are located in 11 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, 2020.
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State
California
Maryland(1)
Virginia
Pennsylvania(2)
Massachusetts
New Jersey
New York
Florida
Illinois
Connecticut
Michigan
District of Columbia
Total
Number of
Projects
20
20
17
10
8
7
7
3
4
3
1
1
101
Gross Leasable
Area
(In square feet)
5,496,000
4,397,000
3,726,000
2,216,000
1,988,000
1,893,000
1,374,000
799,000
798,000
357,000
215,000
119,000
23,378,000
Percentage
of Gross
Leasable
Area
23.5 %
18.8 %
15.9 %
9.5 %
8.5 %
8.1 %
6.0 %
3.4 %
3.4 %
1.5 %
0.9 %
0.5 %
100.0 %
(1) Additionally, we acquired two mortgages in September 2020 with a net carrying value of approximately $9.6 million
secured by a shopping center in Rockville, Maryland.
(2) Additionally, we own two participating mortgages with a net carrying value of approximately $30.3 million secured by
multiple buildings in Manayunk, Pennsylvania.
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 2020,
represented approximately 10.3% of total rental income.
19
The following table sets forth the schedule of lease expirations for our commercial leases in place as of December 31, 2020
for each of the 10 years beginning with 2021 and after 2030 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, 2020.
Year of Lease Expiration
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Thereafter
Total
Leased
Square
Footage
Expiring
1,490,000
2,785,000
2,288,000
3,280,000
2,465,000
1,659,000
1,457,000
1,281,000
1,334,000
1,193,000
1,857,000
21,089,000
Percentage of
Leased Square
Footage
Expiring
Annualized
Base Rent
Represented by
Expiring Leases
50,066,000
72,388,000
69,085,000
84,926,000
72,881,000
50,531,000
56,154,000
39,264,000
44,126,000
40,297,000
50,087,000
100 % $ 629,805,000
7 % $
13 %
11 %
15 %
12 %
8 %
7 %
6 %
6 %
6 %
9 %
Percentage of
Annualized
Base Rent
Represented by
Expiring Leases
8 %
11 %
11 %
14 %
12 %
8 %
9 %
6 %
7 %
6 %
8 %
100 %
During 2020, we signed leases for a total of 1,756,000 square feet of retail space including 1,666,000 square feet of comparable
space leases (leases for which there was a prior tenant) at an average rental increase of 3% on a cash basis. New leases for
comparable spaces were signed for 595,000 square feet at an average rental increase of 4% on a cash basis. Renewals for
comparable spaces were signed for 1,071,000 square feet at an average rental increase of 2% on a cash basis. Tenant
improvements and incentives for comparable spaces were $31.49 per square foot, of which, $84.12 per square foot was for new
leases and $2.25 per square foot was for renewals in 2020.
During 2019, we signed leases for a total of 1,675,000 square feet of retail space including 1,557,000 square feet of comparable
space leases (leases for which there was a prior tenant) at an average rental increase of 8% on a cash basis. New leases for
comparable spaces were signed for 793,000 square feet at an average rental increase of 11% on a cash basis. Renewals for
comparable spaces were signed for 763,000 square feet at an average rental increase of 4% on a cash basis. Tenant
improvements and incentives for comparable spaces were $42.60 per square foot, of which, $81.24 per square foot was for new
leases and $2.43 per square foot was for renewals in 2019.
The rental increases associated with comparable spaces generally include all leases signed for retail space in arms-length
transactions reflecting market leverage between landlords and tenants during the period. The comparison between annual 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. As a result of accommodations made to certain tenants to help them to stay open during and after the
COVID-19 pandemic, we have found it necessary to exercise more judgement in 2020 than in prior years in order to
appropriately reflect the comparability of spaces in the 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. Tenant
improvements and incentives include the total dollars committed for the improvement (fit out) of a space as it relates to a
specific lease and, except for redevelopments, may also include base building costs (i.e. expansion, escalators or new entrances)
which are required to make the space leasable. Incentives include amounts paid to tenants as inducement to sign a lease that do
not represent building improvements. Costs related to redevelopments require judgment by management in determining what
reflects base building costs and thus, is not included in the "tenant improvements and incentives" amount.
Historically, we have executed comparable space leases for 1.3 to 1.9 million square feet of retail space each year. We expect
some rental rates to be negatively impacted by the COVID-19 pandemic, which we started experiencing in the second quarter of
2020. We expect the volume for 2021 will be in line with, or potentially exceed our historical averages given a larger amount of
current vacancy as a result of COVID-19. Although we expect overall positive increases in annual rent for comparable spaces,
changes in annual rent for any individual lease or combinations of individual leases reported in any particular period may be
positive or negative and we can provide no assurance that the annual rents on comparable space leases will continue to increase
at historical levels, if at all.
20
The leases signed in 2020 generally become effective over the following two years though some may not become effective until
2023 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,
our historical increases in rental rates do provide information about the tenant/landlord relationship and the potential increase
we may achieve in rental income over time.
21
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, 2020. Except as otherwise noted, we are the
sole owner of our 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
Azalea
South Gate, CA 90280(5)(8)
Year
Completed
Year
Acquired
Square
Feet(1) /
Apartment
Units
Average Base
Rent Per
Square
Foot(2)
Percentage
Leased(3)
2014
2017
223,000
$29.15
99%
Bell Gardens
Bell Gardens, CA 90201(4)(5)(8)
1990, 2003,
2006
2017/2018
330,000
$22.77
92%
Colorado Blvd
Pasadena, CA 91103(4)
Crow Canyon Commons
San Ramon, CA 94583
East Bay Bridge
Emeryville & Oakland, CA 94608
Escondido Promenade
Escondido, CA 92029(5)
Fourth Street
Berkeley, CA 94710(5)
Freedom Plaza
Los Angeles, CA 90002(4)(5)
1905-1988
1998
42,000
$55.34
100 %
1980, 1998,
2006
1994-2001,
2011, 2012
2005/2007
243,000
$29.89
98%
2012
440,000
$19.04
99%
1987
1996/2010
298,000
$28.44
94%
1948, 1975
2017
71,000
$31.61
78%
2020
2018
100,000
$29.54
100 %
Hastings Ranch Plaza
Pasadena, CA 91107(4)
1958, 1984,
2006, 2007
2017
273,000
$7.88
100 %
Hollywood Blvd
Hollywood, CA 90028
Kings Court
Los Gatos, CA 95032(4)(6)
La Alameda
Walnut Park, CA 90255(4)(7)(8)
Old Town Center
Los Gatos, CA 95030
Olivo at Mission Hills
Mission Hills, CA 91345(5)
Plaza Del Sol
South El Monte, CA 91733(5)(8)
Plaza El Segundo / The Point
El Segundo, CA 90245(5)(8)
San Antonio Center
Mountain View, CA 94040(4)(6)
Santana Row
San Jose, CA 95128(4)(10)
Santana Row Residential
San Jose, CA 95128
1929, 1991
1999
181,000
$35.64
86%
1960
2008
1998
2017
81,000
245,000
$40.93
$26.57
100 %
88%
1962, 1998
1997
98,000
$43.07
84%
2018
2017
155,000
$31.13
94%
2009
2017
48,000
2006-2007,
2016
2011/2013
500,000
$24.01
$46.02
96%
91%
1958,
1964-1965,
1974-1975,
1995-1997
2002, 2009,
2016, 2020
2003-2006,
2011, 2014
2015/2019
211,000
$15.71
100%
1997
1,197,000
$53.60
96%
1997/2012
662 units
N/A
95%
22
Principal Tenant(s)
Marshalls
Ross Dress for Less
Ulta
Michaels
Food4Less
Marshalls
Ross Dress for Less
Bob's Discount Furniture
Banana Republic
True Food Kitchen
Sprouts
Total Wine & More
Rite Aid
Pak-N-Save
Home Depot
Target
Nordstrom Rack
TJ Maxx
Dick's Sporting Goods
Ross Dress For Less
Bob's Discount Furniture
CB2
Ingram Book Group
Bellwether Coffee
Smart & Final
Nike
Blink Fitness
Ross Dress For Less
Marshalls
HomeGoods
CVS
Sears
Target
Marshalls
L.A. Fitness
Lunardi's
CVS
Marshalls
Ross Dress For Less
CVS
Petco
Anthropologie
Banana Republic
Gap
Target
24 Hour Fitness
Ross Dress for Less
Marshalls
Whole Foods
Nordstrom Rack
HomeGoods
Dick's Sporting Goods
Multiple Restaurants
Trader Joe's
Walmart
24 Hour Fitness
Crate & Barrel
H&M
Best Buy
Splunk
Multiple Restaurants
Property, City, State, Zip Code
Sylmar Towne Center
Sylmar, CA 91342(5)(8)
Third Street Promenade
Santa Monica, CA 90401
Westgate Center
San Jose, CA 95129
Connecticut
Bristol Plaza
Bristol, CT 06010
Greenwich Avenue
Greenwich Avenue, CT 06830
The Commons at Darien
Darien, CT 06820
District of Columbia
Friendship Center
Washington, DC 20015
Florida
CocoWalk
Coconut Grove, FL 33133(5)(11)
Del Mar Village
Boca Raton, FL 33433
Tower Shops
Davie, FL 33324
Illinois
Crossroads
Highland Park, IL 60035
Finley Square
Downers Grove, IL 60515
Garden Market
Western Springs, IL 60558
Riverpoint Center
Chicago, IL 60614
Maryland
Bethesda Row
Bethesda, MD 20814(4)
Bethesda Row Residential
Bethesda, MD 20814
Congressional Plaza
Rockville, MD 20852(5)
Year
Completed
1973
Year
Acquired
2017
Square
Feet(1) /
Apartment
Units
148,000
Average Base
Rent Per
Square
Foot(2)
$16.11
Percentage
Leased(3)
93%
1888-2000
1996-2000
209,000
$85.20
1960-1966
2004
648,000
$19.78
1959
1968
1995
1995
1920-2009
2013/2018
264,000
35,000
58,000
2 Units
$14.49
$96.19
$35.70
N/A
65%
97%
82%
100 %
89%
100 %
1998
2001
119,000
$30.41
100 %
1990/1994,
1922-1973,
2018-2020
1982, 1994
& 2007
2015-2017
187,000
$38.99
87%
2008/2014
187,000
$20.56
88%
1989, 2017
2011/2014
425,000
$25.40
95%
1959
1993
168,000
$23.37
92%
1974
1995
280,000
$16.54
91%
1958
1994
139,000
$14.34
1989, 2012
2017
211,000
$21.50
99%
92%
1945-1991
2001, 2008
1993-2006/
2008/2010
529,000
$55.08
96%
2008
1965
1993
1965
180 units
N/A
323,000
$43.15
97%
85%
98%
81%
96%
Principal Tenant(s)
Food4Less
CVS
adidas
Old Navy
J. Crew
Target
Nordstrom Rack
Nike Factory
TJ Maxx
Stop & Shop
TJ Maxx
Saks Fifth Avenue
Equinox
Walgreens
Marshalls
Nordstrom Rack
DSW
Maggiano's
Cinepolis Theaters
Youfit Health Club
Planta Restaurant
Winn Dixie
CVS
L.A. Fitness
Trader Joe's
TJ Maxx
Ross Dress for Less
Best Buy
Ulta
L.A. Fitness
Ulta
Binny's
Ferguson's Bath, Kitchen, &
Lighting Gallery
Bed, Bath & Beyond
Buy Buy Baby
Michaels
Portillo's
Mariano's Fresh Market
Walgreens
Jewel Osco
Marshalls
Old Navy
Giant Food
Apple
Equinox
Anthropologie
Multiple Restaurants
The Fresh Market
Buy Buy Baby
Ulta
Barnes & Noble
Trader Joe's
TJ Maxx
Micro Center
Ross Dress for Less
Congressional Plaza Residential
Rockville, MD 20852(5)
Courthouse Center
Rockville, MD 20852
Federal Plaza
Rockville, MD 20852
2003, 2016
1965
194 units
N/A
1975
1970
1997
1989
37,000
$21.61
249,000
$39.02
23
Property, City, State, Zip Code
Gaithersburg Square
Gaithersburg, MD 20878
Governor Plaza
Glen Burnie, MD 21961
Laurel
Laurel, MD 20707
Montrose Crossing
Rockville, MD 20852(8)
Perring Plaza
Baltimore, MD 21134
Year
Completed
1966
Year
Acquired
1993
Square
Feet(1) /
Apartment
Units
208,000
Average Base
Rent Per
Square
Foot(2)
$30.13
Percentage
Leased(3)
87%
1963
1956
1985
1986
242,000
$21.26
360,000
$22.90
1960-1979,
1996, 2011
2011/2013
368,000
$32.99
79%
95%
93%
1963
1985
397,000
$15.50
87%
Pike & Rose
North Bethesda, MD 20852(10)
1963, 2014,
2018
1982/2007/
2012
525,000
$37.78
96%
Pike & Rose Residential
North Bethesda, MD 20852
Plaza Del Mercado
Silver Spring, MD 20906
Quince Orchard
Gaithersburg, MD 20877(4)
Rockville Town Square
Rockville, MD 20852(4)
Rollingwood Apartments
Silver Spring, MD 20910
THE AVENUE at White Marsh
Baltimore, MD 21236(6)(8)
2014, 2016,
2018
1982/2007
765 units
N/A
1969
2004
116,000
$32.04
97%
97%
1975
1993
268,000
$25.15
96%
2006-2007
2006/2007
187,000
$28.65
75%
1960
1997
1971
2007
282 units
N/A
315,000
$26.16
95 %
85%
The Shoppes at Nottingham Square
2005-2006
2007
32,000
$50.44
96 %
Principal Tenant(s)
Ross Dress For Less
Ashley Furniture HomeStore
CVS
Aldi
Dick's Sporting Goods
Giant Food
Marshalls
L.A. Fitness
Giant Food
Marshalls
Home Depot Design Center
Old Navy
Bob's Discount Furniture
Shoppers Food Warehouse
Home Depot
Micro Center
Burlington
iPic Theater
Porsche
Uniqlo
REI
Pinstripes
Multiple Restaurants
Aldi
CVS
L.A. Fitness
Aldi
HomeGoods
L.A. Fitness
Staples
Dawson's Market
CVS
Gold's Gym
Multiple Restaurants
AMC
Ulta
Old Navy
Barnes & Noble
Baltimore, MD 21236
Towson Residential (Flats @703)
Baltimore, MD 21236
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(10)
Assembly Row Residential
Somerville, MA 02145(10)
Campus Plaza
Bridgewater, MA 02324
Chelsea Commons
Chelsea, MA 02150(8)
Dedham Plaza
Dedham, MA 02026
Linden Square
Wellesley, MA 02481
2017
1985
1987
1958
2007
2007
2007
1969
4,000
105 units
70,000
$82.83
N/A
$32.33
100 %
97%
97%
79,000
$21.88
94%
Giant Food
88,000
$102.39
98%
Balducci's
CVS
Flower Child
2005, 2014,
2018
2005-2011/
2013
824,000
$32.45
95%
Trader Joe's
TJ Maxx
AMC
LEGOLAND Discovery Center
Multiple Restaurants
2018
2005-2011
447 units
N/A
1970
2004
114,000
$17.21
1962,1969,
2008
1959
2006-2008
222,000
$12.92
1993/2016/
2019
245,000
$16.56
91%
96%
93%
90%
1960, 2008
2006
220,000
7 Units
$50.21
N/A
90%
100 %
Roche Bros.
Burlington
Home Depot
Planet Fitness
Star Market
Planet Fitness
Roche Bros.
CVS
24
Year
Completed
2004
Year
Acquired
2006
Square
Feet(1) /
Apartment
Units
48,000
Average Base
Rent Per
Square
Foot(2)
$15.31
Percentage
Leased(3)
100 %
Principal Tenant(s)
Stop & Shop
1967
1994
149,000
$19.36
95%
1976
1996
166,000
$17.22
100 %
1964
1973
215,000
$12.80
100 %
1958
1989
408,000
$22.83
91%
1986, 2004
2014
99,000
$38.59
89%
1959
1992
261,000
$17.93
79%
1887-2006
2019/2020
171,000
129 Units
1975
2003/2017
551,000
$55.76
N/A
$26.13
92%
89%
87%
Property, City, State, Zip Code
North Dartmouth
North Dartmouth, MA 02747
Queen Anne Plaza
Norwell, MA 02061
Saugus Plaza
Saugus, MA 01906
Michigan
Gratiot Plaza
Roseville, MI 48066
New Jersey
Brick Plaza
Brick Township, NJ 08723(4)
Brook 35
Sea Grit, NJ 08750(5)(6)(8)
Ellisburg
Cherry Hill, NJ 08034
Hoboken
Hoboken, NJ 07030(5)(8)(12)
Mercer Mall
Lawrenceville, NJ 08648(4)
Greenlawn Plaza
Greenlawn, NY 11743
Hauppauge
Hauppauge, NY 11788
Huntington
Huntington, NY 11746
Huntington Square
East Northport, NY 11731(4)
Melville Mall
Huntington, NY 11747(4)
Pennsylvania
Andorra
Philadelphia, PA 19128
Bala Cynwyd
Bala Cynwyd, PA 19004
The Grove at Shrewsbury
Shrewsbury, NJ 07702(5)(6)(8)
1988, 1993
& 2007
2014
192,000
$48.35
95%
Troy Hills
Parsippany-Troy, NJ 07054
New York
Fresh Meadows
Queens, NY 11365
1966
1980
211,000
$23.21
100 %
1949
1997
409,000
$36.04
95%
Georgetowne Shopping Center
Brooklyn, NY 11234
1969, 2006,
2015
2019
147,000
$40.34
88%
1975, 2004
2006
102,000
$18.97
94%
1963
1962
1998
133,000
$34.78
74%
Shop Rite
1988/2007/
2015
266,000
$23.74
90%
1980, 2007
2010
74,000
$29.63
83%
1974
2006
243,000
$27.30
100%
1953
1988
270,000
$14.34
88%
1955
1993
294,000
$25.72
97%
25
Big Y Foods
TJ Maxx
HomeGoods
Super Stop & Shop
Floor & Decor
Kroger
Bed, Bath & Beyond
Best Buy
DSW
Trader Joe's
AMC
HomeGoods
Ulta
L.A. Fitness
Banana Republic
Gap
Williams-Sonoma
Whole Foods
Buy Buy Baby
CVS
New York Sports Club
Sephora
Multiple Restaurants
Shop Rite
Ross Dress for Less
Nordstrom Rack
Bed, Bath & Beyond
REI
Lululemon
Anthropologie
Pottery Barn
Williams-Sonoma
Target
L.A. Fitness
Michaels
Island of Gold
AMC
Kohl's
Michaels
Foodway
Five Below
IHOP
Greenlawn Farms
Tuesday Morning
Planet Fitness
Nordstrom Rack
Buy Buy Baby
Michaels
Ulta
Barnes & Noble
Uncle Giuseppe's Marketplace
Marshalls
Dick's Sporting Goods
Field & Stream
Macy's Backstage
Acme Markets
Kohl's
L.A. Fitness
Acme Markets
Lord & Taylor
Michaels
L.A. Fitness
Property, City, State, Zip Code
Bala Cynwyd Residential(13)
Bala Cynwyd, PA 19004
Flourtown
Flourtown, PA 19031
Lancaster
Lancaster, PA 17601(4)
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(8)
Barcoft Plaza
Falls Church, VA 22041
Barracks Road
Charlottesville, VA 22905
Falls Plaza
Falls Church, VA 22046
Graham Park Plaza
Fairfax, VA 22042
Idylwood Plaza
Falls Church, VA 22030
Leesburg Plaza
Leesburg, VA 20176
Year
Completed
2020
Year
Acquired
1993
Square
Feet(1) /
Apartment
Units
87 Units
Average Base
Rent Per
Square
Foot(2)
N/A
Percentage
Leased(3)
23%
Principal Tenant(s)
1957
1958
1966
1980
1980
1985
156,000
$23.61
98%
Giant Food
Movie Tavern
126,000
$19.86
81%
Giant Food
223,000
$16.69
94%
1972
1980/2017
363,000
$22.81
98%
1959
1983
227,000
$18.82
82%
1969
2006
125,000
$9.18
1953
1984
183,000
$18.44
1948
1996
249,000
9 Units
$28.81
N/A
84%
78%
93%
44%
1975-2001
2007
168,000
$18.01
92%
1963, 1972,
1990, &
2000
2006/2007/
2016
113,000
$27.15
92%
Harris Teeter
1958
1985
497,000
$26.65
90%
Redner's Warehouse Markets
Marshalls
Planet Fitness
Acme Markets
TJ Maxx
HomeGoods
Barnes & Noble
Marshalls
Ulta
Skechers
Crunch Fitness
Giant Food
Rite Aid
Dollar Tree
Marshalls
HomeGoods
Barnes & Noble
Giant Food
Bed, Bath & Beyond
Old Navy
DSW
HomeGoods
DSW
Staples
Harris Teeter
Kroger
Anthropologie
Nike
Bed, Bath & Beyond
Old Navy
Aldi
CVS
Planet Fitness
Giant Food
CVS
Staples
Giant Food
Petsmart
Office Depot
Shoppers Food Warehouse
TJ Maxx
Home Depot
Bed, Bath & Beyond
Results Fitness
Whole Foods
Walgreens
Planet Fitness
Safeway
Micro Center
CVS
Michaels
Harris Teeter
TJ Maxx
Bed, Bath & Beyond
DSW
Fairfax Junction
Fairfax, VA 22030(6)
1981, 1986,
2000
2019/2020
124,000
$25.75
99%
1960/1962
1967/1972
144,000
$36.66
92%
1971
1991
1967
1983
1994
1998
132,000
73,000
$38.42
$51.66
86%
Giant Food
100 %
Whole Foods
236,000
$23.40
83%
Mount Vernon/South Valley/
7770 Richmond Hwy
Alexandria, VA 22306(4)(6)
1966,
1972,1987
& 2001
2003/2006
564,000
$19.23
96%
Old Keene Mill
Springfield, VA 22152
Pan Am
Fairfax, VA 22031
Pentagon Row
Arlington, VA 22202
1968
1976
91,000
$36.34
95%
1979
1993
228,000
$27.75
98 %
2001-2002
1998/2010
297,000
$37.47
94%
26
Property, City, State, Zip Code
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(4)
Willow Lawn
Richmond, VA 23230
Total — Commercial (9)
Total —Residential (13)
_____________________
Year
Completed
1968
Year
Acquired
1997/2015
Square
Feet(1) /
Apartment
Units
172,000
Average Base
Rent Per
Square
Foot(2)
$49.62
Percentage
Leased(3)
91 %
1960
1998
111,000
$26.11
88%
Principal Tenant(s)
TJ Maxx
DSW
Crunch Fitness
Staples
L.A. Mart
Talbots
Total Wine & More
1954
1940,
2006-2009
1978
1995
50,000
$47.97
90%
Trader Joe's
262,000
$39.92
88%
1957
1983
464,000
$20.49
95%
23,378,000
2,782 units
$29.86
92%
95%
Harris Teeter
AMC
Carlyle Grand Café
Kroger
Old Navy
Ross Dress For Less
Gold's Gym
Dick's Sporting Goods
(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.
(2) Average base rent is calculated as the aggregate, annualized in-place contractual (defined as cash basis excluding rent abatements) minimum rent for
all occupied spaces divided by the aggregate GLA of all occupied spaces. Average base rent is for commercial spaces only.
(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 property.
(6) 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.
(7) We own a noncontrolling interest in this property.
(8) All or a portion of this property is encumbered by a mortgage loan.
(9) Aggregate information is calculated on a GLA weighted-average basis, excluding our La Alameda property, which is unconsolidated.
(10) 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.
(11) This property includes interests in five buildings in addition to our initial acquisition.
(12) This property includes 39 buildings primarily along Washington Street and 14th Street in Hoboken, New Jersey.
(13) The 87 unit residential building at Bala Cynwyd was delivered in late 2020 and is currently in the process of being leased-up for the first time.
Consequently, these units are excluded from our total residential units and percentage leased statistics. If these units were included, our total
residential units would be 2,869 and our percentage leased would be 93%.
ITEM 3. LEGAL PROCEEDINGS
We are involved from time-to-time in various legal and regulatory proceedings that arise in the ordinary course of our business,
including, but not limited to, commercial disputes, environmental matters, and litigation in connection with transactions such as
acquisitions and divestitures. We believe that our current proceedings will not have a material adverse effect on our financial
condition, liquidity or results of operations. See Note 7 to the Consolidated Financial Statements for further discussions.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
27
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 sales
prices of our common shares as reported on the New York Stock Exchange and the dividends declared for each of the periods
indicated.
2020.......................................................................................................................
Fourth quarter................................................................................................. $
Third quarter................................................................................................... $
Second quarter................................................................................................ $
First quarter.................................................................................................... $
2019.......................................................................................................................
Fourth quarter................................................................................................. $
Third quarter................................................................................................... $
Second quarter................................................................................................ $
First quarter.................................................................................................... $
On February 8, 2021, there were 2,307 holders of record of our common shares.
Price Per Share
High
Low
Dividends
Declared
Per Share
97.00
90.09
105.49
131.56
141.35
137.14
139.03
139.29
$
$
$
$
$
$
$
$
67.01
70.69
64.11
65.55
126.69
126.11
126.29
115.09
$
$
$
$
$
$
$
$
1.060
1.060
1.050
1.050
1.050
1.050
1.020
1.020
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 53 consecutive
years. The impact of COVID-19 on our cash flow may impact our ability to pay dividends at the current rate, at an increased
rate, and in the current format or at all.
Our total annual dividends paid per common share for 2020 and 2019 were $4.21 per share and $4.11 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 2021 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........................................................................................................................... $
Return of capital..............................................................................................................................
Ordinary dividend eligible for 15% rate.........................................................................................
$
Year Ended
December 31,
2020
2019
3.452
0.758
—
4.210
$
$
4.110
—
—
4.110
28
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. Distributions on our 5.0% Series C Cumulative Redeemable
Preferred Shares were paid at the rate of $1.250 per depositary share per annum, commencing on the issuance date of
September 29, 2017. We do not believe that the preferential rights available to the holders of interest in our preferred shares or
the financial covenants contained in our debt agreements had or will have an adverse effect 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, 2015, and ending December 31, 2020,
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 MKT, or the NASDAQ National Market. Stock performance for the past five years is not
necessarily indicative of future results.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
$225
$200
$175
$150
$125
$100
$75
$50
12/31/15
12/31/16
12/31/17
12/31/18
12/31/19
12/31/20
Federal Realty
Investment Trust
S&P 500
FTSE NAREIT Equity
Total REIT Index
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, 2020, we did not issue any common shares
in connection with the redemption of operating partnership units. Any equity securities sold by us during 2020 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 2020, 2,100 restricted common shares were forfeited by former employees.
29
From time to time, we could be deemed to have repurchased shares as a result of shares withheld for tax purposes upon a stock
compensation related vesting event.
ITEM 6. SELECTED FINANCIAL DATA
None.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This section generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussions
of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual
Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the Securities and Exchange Commission on
February 10, 2020.
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
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, California, and South Florida. As of
December 31, 2020, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use
properties which are operated as 101 predominantly retail real estate projects comprising approximately 23.4 million square
feet. In total, the real estate projects were 92.2% leased and 90.2% occupied at December 31, 2020. We have paid quarterly
dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for
53 consecutive years.
Summary Financial Information
The following table includes select financial information that is helpful in understanding the trends in financial condition and
the results of operations discussed throughout this Item 7. and “Item 8. Financial Statements and Supplementary Data.”
30
Operating Data:
Rental income
Property operating income(1)
Gain on sale of real estate, net of tax
Operating income
Net income available for common shareholders
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Earnings per common share, diluted:
Net income available to common shareholders
Dividends declared per common share
Other Data:
Funds from operations available to common shareholders (2)
Funds from operations available for common shareholders, per diluted share (2)
EBITDAre(3)
Ratio of EBITDAre to combined fixed charges and preferred share
dividends(3)(4)
Balance Sheet Data:
Real estate, at cost
Total assets
Total debt
Total shareholders’ equity
Number of common shares outstanding
Year Ended December 31,
2020
2019
2018
(In thousands, except per share data and ratios)
$
$
$
$
$
$
832,171 $
932,738 $
912,287
545,332 $
637,030 $
627,566
98,117 $
116,393 $
11,915
289,524 $
470,911 $
361,636
123,664 $
345,824 $
233,865
369,929 $
461,919 $
516,688
$ (368,383) $ (316,532) $ (192,247)
$
$
$
$
$
$
661,736 $ (100,105) $ (241,309)
1.62 $
4.22 $
4.61 $
4.14 $
3.18
4.04
333,849 $
4.38 $
465,819 $
6.17 $
461,777
6.23
501,813 $
599,567 $
595,558
2.7x
4.2x
4.2x
As of December 31,
2020
2019
2018
(In thousands)
$ 8,582,870
$ 7,607,624
$ 4,291,375
$ 2,548,747
76,727
$ 8,298,132
$ 6,794,992
$ 3,356,594
$ 2,636,132
75,541
$ 7,819,472
$ 6,289,644
$ 3,229,204
$ 2,467,330
74,250
(1) Property operating income is a non-GAAP measure. See "Results of Operations" in this Item 7. for further discussion.
(2) Funds from operations "FFO" is a supplemental non-GAAP measure. See "Liquidity and Capital Resources" in this Item 7.
for further discussion.
(3) EBITDA for Real Estate ("EBITDAre") is a non-GAAP measure that NAREIT defines as: net income computed in
accordance with GAAP plus net interest expense, income tax expense, depreciation and amortization, gain or loss on sale
of real estate, impairments of real estate, and adjustments to reflect the entity's share of EBITDAre of unconsolidated
affiliates. We calculate EBITDAre consistent with the NAREIT definition. As EBITDA is a widely known and understood
measure of performance, management believes EBITDAre represents an additional non-GAAP performance measure,
independent of a company's capital structure that will provide investors with a uniform basis to measure the enterprise
value of a company. EBITDAre also 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.
The reconciliation of net income to EBITDAre for the periods presented is as follows:
31
Net income
Interest expense
Other interest income
Early extinguishment of debt
(Benefit) provision for income tax
Depreciation and amortization
Gain on sale of real estate
Impairment charge
Adjustments of EBITDAre of unconsolidated affiliates
EBITDAre
2020
2019
2018
135,888
136,289
(1,894)
11,179
(194)
255,027
(98,117)
57,218
6,417
501,813
(In thousands)
360,542
$
109,623
(1,266)
—
772
239,758
(116,779)
—
6,917
599,567
$
$
$
$
$
249,026
110,154
(942)
—
1,521
244,245
(13,560)
—
5,114
595,558
(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 $11.2 million early extinguishment of debt charge from fixed charges in 2020, the ratio of
EBITDAre to combined fixed charges and preferred share dividends is 2.9x. Excluding the $11.9 million charge related to
the buyout of the Kmart lease at Assembly Square Marketplace in 2019, our ratio of EBITDAre to combined fixed charges
and preferred share dividends remained 4.2x.
Impacts of COVID-19 Pandemic
We continue to monitor and address risks related to the COVID-19 pandemic. In March 2020, the World Health Organization
characterized COVID-19 as a global pandemic and in response to the rapid spread of the virus, state, and local governments
issued orders and recommendations to attempt to reduce the further spread of the disease. Such orders included shelter-in-place
orders, travel restrictions, limitations on public gatherings, school closures, social distancing requirements and the closure of all
but critical and essential businesses and services. These orders required closure of all of our corporate offices as non-essential
businesses. Except for those employees who were critical to providing the necessary day-to-day property management functions
required to keep our properties open and operating for essential businesses such as grocery stores and drug stores, and a few
employees who were needed to carry out critical corporate functions, we transitioned our entire workforce to remote work in
March 2020. Although some of our corporate offices have reopened with capacity limitations, approximately 75% of our
workforce continues to work remotely on a regular basis. We have not laid off, furloughed, or terminated any employees nor
have we modified the compensation of any or our employees as a result of COVID-19, and the transition to a largely remote
workforce has not had any material adverse impact on our financial reporting systems, our internal controls, or disclosure
controls and procedures.
The government imposed restrictions also required a significant number of tenants who do business in our properties, but were
considered non-essential, to close their operations or to significantly limit the amount of business they are able to conduct in
their stores. These closures and restrictions have impacted the tenants’ ability to timely pay rent as required under our leases
and also caused many tenants to close their business permanently. As a result, our cash flow and results of operations in 2020
were materially adversely impacted and our vacancy increased above historical levels. Although virtually all of our leases
required the tenants to pay rent even while they were not operating, we entered into numerous agreements to abate, defer and/or
restructure tenant rent payments for varying periods of time, all with the objective of collecting as much cash as reasonably
possible and maintaining occupancy to the maximum extent. We believe those actions will position many of our tenants to be
able to return to payment of contractual rent as soon as possible after the impacts from the pandemic have subsided.
Given the impact to our cash flow caused by tenants not timely paying contractual rent, we took actions to improve our
financial position and maximize our liquidity. Those actions included raising $1.1 billion in May 2020 through a $400.0 million
term loan and the issuance of $700.0 million of senior unsecured notes, amending the covenants on our revolving credit facility
to provide us operating flexibility during the expected period during which our cash flow will be impacted, and raising an
additional $400.0 million of senior unsecured notes in October 2020. Throughout the last three quarters of 2020, we maintained
levels of cash significantly in excess of the cash balances we have historically maintained which has adversely impacted our
financial results; however, we believe that such action was prudent to position us with what we expect to be sufficient liquidity
to allow us to continue fully operating until our operating revenues return to more typical levels. As of December 31, 2020,
there is no outstanding balance on our $1.0 billion revolving credit facility, and we have cash and cash equivalents of
$798.3 million.
32
Given the adverse impact on our cash flow, we did not commence any significant new capital projects during 2020 and we
stopped, at least temporarily, portions of our capital spend that could be stopped. We did, however, continue investing in a
number of our larger projects which were in the middle of construction and could not be stopped without causing material
adverse financial impact to the company.
Additional discussion of the impact of COVID-19 on our results in 2020 and long-term operations can be found throughout
Item 7 and Item 1A. Risk Factors.
Corporate Responsibility
We actively endeavor to operate and develop our properties in a sustainable, responsible, and effective manner with the
objective being to drive long-term growth and aid in value creation for our shareholders, tenants, employees, and local
communities.
Our development activities have been heavily focused on owning, developing and operating properties that are certified under
the U.S. Green Building Council’s® (“USGBC”) Leadership in Energy and Environmental Design™ (LEED®) rating system
which serves as a third-party verification that a building or community was designed and built to mitigate its environmental
footprint. We currently have 15 LEED certified buildings and our Pike & Rose project has achieved LEED for Neighborhood
Development Stage 3 Gold certification. The COVID-19 pandemic has also increased our focus on owning, developing and
operating healthier buildings. To that end, our new corporate headquarters space at our 909 Rose Avenue building has earned a
Fitwel certification developed by the U.S. Centers for Disease Control and Prevention (CDC) together with the General
Services Administration (GSA). This certification assesses a building’s impact on seven distinct categories related to overall
health and well-being. These development efforts earned us the Sector Leader Development designation in 2020 from the
Global Real Estate Environmental Sustainability Benchmark (“GRESB”) and enabled us to issue our first green bond in 2020, a
$400.0 million offering that will be supported by certain of our LEED gold and silver certified buildings. See Note 5 to the
consolidated financial statements.
We are also committed to implementing sustainable business practices at our operating properties that focus on energy
efficiency, water conservation and waste minimization. As an example, under our solar program that we started in 2012, we
have installed on-site solar systems at 25 of our properties with a capacity of over 13 MW and we anticipate adding solar
installations at several more of our properties over the next few years to further our ability to source energy from renewable
sources. Our current capacity placed us in the top 5 among real estate companies for onsite capacity in the Solar Energy
Industry Association’s annual Solar Means Business Report. We are also actively upgrading lighting at our properties with
energy efficient LED lighting and installing electric vehicle car charging stations in numerous properties throughout our
portfolio. Currently, we are evaluating the risks presented by climate change to help us better understand potential actions we
could take to help mitigate our portfolio’s environmental footprint while protecting our long-term investments.
We are also highly committed to our employees and fostering a work environment that promotes growth, development and
personal well-being. Our four core values are accountability, excellence, innovation and integrity and we seek to attract and
retain talented professionals who embrace those values. All of our efforts with respect to corporate responsibility are overseen
by our Board of Trustees.
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 our tenants are classified as operating leases. When collection of substantially all lease payments during the
lease term is considered probable, the lease qualifies for accrual accounting. Lease payments are recognized on a straight-line
33
basis from the point in time when the tenant controls the space through the term of the related lease. Variable lease payments
relating to percentage rent are recognized at the end of the lease year or earlier if we have determined the required sales level is
achieved. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related
expenditures are incurred. 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. 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 are generally recognized on the
termination date if the tenant has relinquished control of the space. 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. Lease concessions (unrelated to the COVID-19 pandemic) are evaluated to determine
whether the concession represents a modification of the original lease contract. Modifications generally result in a reassessment
of the lease term and lease classification, and remeasurement of lease payments received. Remeasured lease payments are
recognized on a straight-line basis over the remaining term of the modified lease contract.
In April 2020, the Financial Accounting Standards Board ("FASB") issued interpretive guidance relating to the accounting for
lease concessions provided as a result of the COVID-19 pandemic that allows entities to treat the concession as if it was a part
of the existing contract instead of applying lease modification accounting. This guidance is only applicable to the COVID-19
pandemic related lease concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the
lessee. We have elected this option relating to qualifying rent deferral and rent abatement agreements. For qualifying lease
modifications with rent deferrals, this results in no change to our revenue recognition but an increase in the lease receivable
balance until the deferred rent has been repaid. For qualifying lease modifications that include rent abatement concessions, this
results in a direct reduction of rental income in the current period. As of December 31, 2020, we have entered into rent deferral
agreements and rent abatement agreements related to the COVID-19 pandemic representing approximately $36 million and $35
million, respectively, of rent otherwise owed during the year ended December 31, 2020, and continue negotiations with other
tenants.
When collection of substantially all lease payments during the lease term is not considered probable, total lease revenue is
limited to the lesser of revenue recognized under accrual accounting or cash received. Determining the probability of collection
of substantially all lease payments during a lease term requires significant judgment. This determination is impacted by
numerous factors including our assessment of the tenant’s credit worthiness, economic conditions, tenant sales productivity in
that location, historical experience with the tenant and tenants operating in the same industry, future prospects for the tenant and
the industry in which it operates, and the length of the lease term. If leases currently classified as probable are subsequently
reclassified as not probable, any outstanding lease receivables (including straight-line rent receivables) would be written-off
with a corresponding decrease in rental income. For example, in the event that our collectibility determinations were not
accurate and we were required to write off additional receivables equaling 1% of rental income, our rental income and net
income would decrease by $8.3 million. If leases currently classified as not probable are subsequently changed to probable, any
lease receivables (including straight-line rent receivables) are re-instated with a corresponding increase to rental income.
Since March 2020, federal, state, and local governments have taken various actions to mitigate the spread of COVID-19. This
includes initially ordering closures of nonessential business and ordering residents to generally stay at home, subsequent phased
re-openings, and during the fourth quarter of 2020, additional closures and capacity limitations as infection levels increased in
certain areas. These actions, along with the general concern over the spread of COVID-19, have resulted in many of our tenants
temporarily or even permanently closing their businesses, and for some, it has impacted their ability to pay rent. As a result, we
revised our collectibility assumptions for many of our tenants most significantly impacted by COVID-19. Accordingly, during
the year ended December 31, 2020, we recognized collectibility related adjustments of $106.6 million. This includes changes in
our collectibility assessments from probable to not probable, disputed rents, and any rent abatements directly related to
COVID-19, as well as the write-off of $12.7 million of straight-line rent receivables primarily related to tenants changed to a
cash basis of revenue recognition during the year ended December 31, 2020. As of December 31, 2020, the revenue from
approximately 35% of our tenants (based on total number of commercial leases) is being recognized on a cash basis. As of
December 31, 2020 and 2019, our straight-line rent receivables balance was $103.3 million and $100.3 million, respectively,
and is included in "accounts and notes receivable, net" on our consolidated balance sheet.
Other revenue recognition policies
When we enter into a transaction to sell a property or a portion of a property, we evaluate the recognition of the sale under ASC
610-20, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets." In accordance with ASC 610-20,
we apply the guidance in ASC 606, "Revenue from Contracts with Customers," to determine whether and when control
transfers and how to measure the associated gain or loss. We determine the transaction price based on the consideration we
expect to receive. Variable consideration is included in the transaction price to the extent it is probable that a significant reversal
of a gain recognized will not occur. We analyze the risk of a significant gain reversal and if necessary limit the amount of
34
variable consideration recognized in order to mitigate this risk. The estimation of variable consideration requires us to make
assumptions and apply significant judgment.
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 calculate 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, and 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
$404 million and $9 million, respectively, for 2020 and $352 million and $9 million, respectively, for 2019. We capitalized
external and internal costs related to other property improvements of $64 million and $3 million, respectively, for 2020 and $80
million and $3 million, respectively, for 2019. We capitalized external and internal costs related to leasing activities of $11
million and $2 million, respectively, for 2020 and $24 million and $2 million, respectively, for 2019. The amount of capitalized
internal costs for salaries and related benefits for development and redevelopment activities, other property improvements, and
leasing activities were $9 million, $3 million, and $2 million, respectively, for 2020 and $8 million, $3 million, and $2 million,
respectively, for 2019. Total capitalized costs were $494 million for 2020 and $471 million for 2019, respectively.
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
35
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.
Variable Interest Entities (VIEs) and Consolidation
We have 17 entities that meet the criteria of a VIE and are consolidated. Net real estate assets related to VIEs included in our
consolidated balance were approximately $1.4 billion and $1.5 billion as of December 31, 2020 and 2019, respectively, and
mortgage payables related to VIEs included in our consolidated balance sheets were approximately $413.7 million and $469.2
million, as of December 31, 2020 and 2019, respectively. In addition, we hold equity method investments in two hotel joint
ventures and one shopping center which are considered variable interests in a VIE as of December 31, 2020. On January 4,
2021, we acquired our partner's interest in the Pike & Rose hotel joint venture. See Note 15 to the consolidated financial
statements for additional details of this transaction. 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 be significant to the VIE. The
determination of the power to direct the activities that most significantly impact economic performance requires judgment and
is impacted by numerous factors including the purpose of the VIE, contractual rights and obligations of variable interest
holders, and mechanisms for the resolution of disputes among the variable interest holders.
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.
Recently Adopted and Recently Issued Accounting Pronouncements
See Note 2 to the consolidated financial statements.
2020 Property Acquisitions, Dispositions, and Impairment
Date Acquired
Property
City/State
January 10, 2020
February 12, 2020
Fairfax Junction
Hoboken (2 mixed-use buildings)
Fairfax, Virginia
Hoboken, New Jersey
Gross
Leasable
Area (GLA)
(in square feet)
49,000
12,000
Purchase Price
(in millions)
$
$
22.3 (1)
14.3 (2)
36
(1) This property is adjacent to, and will be operated as part of the property acquired in 2019. The purchase price was paid with
a combination of cash and the issuance of 163,322 downREIT operating partnership units. Approximately $0.5 million and
$0.4 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below
market leases," respectively.
(2) The purchase price includes the assumption of $8.9 million of mortgage debt, and is in addition to the 37 buildings
previously acquired in 2019, and was completed through the same joint venture. Less than $0.1 million and approximately
$3.3 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below
market leases," respectively.
On September 1, 2020, the $60.6 million non-recourse mortgage loan on The Shops at Sunset Place matured. The mortgage was
not repaid, and thus the lender declared the loan in default. We evaluated our long-term plans for the property, taking into
account current market conditions and prospective development and redevelopment returns, as well as the impact of COVID-19
on the revenue prospects for the property, and concluded we did not expect to move forward with the planned redevelopment or
repay the mortgage balance, and thus, did not expect to be long term holders of the asset. Given these expectations, we recorded
an impairment charge of $57.2 million during the third quarter of 2020.
The fair value estimate used to determine the impairment charge was determined by market comparable data and discounted
cash flow analyses. The cash flows utilized in such analyses are comprised of unobservable inputs which include forecasted
rental revenue and expenses based upon market conditions and future expectations. The capitalization rates and discount rates
utilized in such analyses are based upon unobservable rates that we believe to be within a reasonable range of current market
rates for the property. Based on these inputs, we have determined that the $57 million estimated valuation of the property is
classified within Level 3 of the fair value hierarchy.
On December 31, 2020, we sold The Shops at Sunset Place for $65.5 million and repaid the mortgage loan. The resulting gain
of $9.2 million is included in the cumulative 2020 gain of $98.1 million noted in the disposals below.
During the year ended December 31, 2020, we sold three properties (including The Shops at Sunset Place discussed above) and
one building for a total sales price of $186.1 million, which resulted in a gain of $98.1 million.
During the year ended December 31, 2020, we closed on the sale of the remaining two condominium units at our Pike & Rose
property, receiving proceeds net of closing costs of $2.1 million.
2020 Significant Debt and Equity Transactions
In connection with the two buildings we acquired in Hoboken, New Jersey on February 12, 2020, we assumed two mortgage
loans with a net face amount of $8.9 million and a fair value of $9.0 million. The mortgage loans bear interest at 4.00% and
mature on July 27, 2027.
In March 2020, in order to strengthen our financial position and balance sheet, to maximize our liquidity, and to provide
maximum financial flexibility to continue our business initiatives as the effects of COVID-19 continue to evolve, we borrowed
$990.0 million under our revolving credit facility, representing a draw-down of almost the entirety of our $1.0 billion revolving
credit facility. This amount was subsequently repaid when we entered into a $400.0 million unsecured term loan on May 6,
2020 and issued $700.0 million of fixed rate unsecured senior notes on May 11, 2020.
The unsecured term loan matures on May 6, 2021, plus one twelve month extension at our option, and bears interest at LIBOR
plus 135 basis points based on our current credit rating. Our net proceeds from this transaction after underwriting fees and other
costs were $398.7 million.
The $700.0 million of unsecured senior notes issued in May 2020 comprise a $300.0 million reopening of our 3.95% of senior
notes maturing on January 15, 2024 and a $400.0 million issuance of 3.50% senior notes maturing on June 1, 2030. The 3.95%
senior notes were offered at 103.257% of the principal amount with a yield to maturity of 2.944%, and have the same terms and
are of the same series as the $300.0 million senior notes issued on December 9, 2013. The 3.50% senior notes were offered at
98.911% of the principal amount with a yield to maturity of 3.630%. Our net proceeds from these transactions after the net
issuance premium, underwriting fees, and other costs were $700.1 million.
On September 1, 2020, the $60.6 million non-recourse mortgage loan on The Shops at Sunset Place matured and was not
repaid. The lender declared the loan in default until the non-recourse loan was repaid as part of the sale of the property on
December 31, 2020. The default did not trigger a cross default with any other indebtedness. The repayment amount including
accrued interest and fees, net of $4.5 million of escrows was $58.5 million.
On October 13, 2020, we issued $400.0 million of fixed rate senior unsecured notes that mature on February 15, 2026 and bear
interest at 1.25%. The notes were offered at 99.339% of the principal amount with a yield to maturity of 1.379%. The net
proceeds of the notes, or "green bonds," after issuance discount, underwriting fees, and other costs were approximately $394.2
37
million, and will be allocated to the financing and refinancing of recently completed and future eligible green projects, which
includes (i) investments in acquisitions of buildings; (ii) building developments or redevelopments; (iii) renovations in existing
buildings; and (iv) tenant improvement projects, in each case that have received, or are expected to receive, in the three years
prior to the issuance of the notes or during the term of the notes, a LEED Silver, Gold, or Platinum certification (or
environmentally equivalent successor standards). Net proceeds allocated to previously incurred costs associated with eligible
green projects will be available for repayment of indebtedness.
On December 15, 2020, we repaid our $250.0 million 2.55% notes prior to the original maturity date of January 15, 2021 at par.
The redemption price of $252.7 million included accrued but unpaid interest of $2.7 million.
On December 17, 2020, we acquired one of our partner's preferred and common interests in the partnership that owns our Plaza
El Segundo property for $7.3 million, bringing our ownership to approximately 78.2%.
On December 31, 2020, we repaid our $250.0 million 3.00% notes prior to the original maturity date of August 1, 2022. The
redemption price of $263.5 million included a make-whole premium of $10.4 million and accrued but unpaid interest of $3.1
million. The "early extinguishment of debt" charge in 2020 of $11.2 million includes the make-whole premium and the write
off of the unamortized discount and debt issuance fees.
On December 31, 2020, we also repaid the $3.6 million mortgage loan on 29th Place, at par, prior to its original maturity date.
We have an at-the-market (“ATM”) equity program in which we may from time to time offer and sell common shares having
an aggregate offering price of up to $400.0 million. We intend to use the net proceeds to fund potential acquisition
opportunities, fund our development and redevelopment pipeline, repay amounts outstanding under our revolving credit facility
and/or for general corporate purposes. For the year ended December 31, 2020, we sold 1,080,804 common shares at a weighted
average price per share of $92.51 for net cash proceeds of $98.8 million including paying $1.0 million in commissions and $0.1
million in additional offering expenses related to the sales of these common shares. As of December 31, 2020, we had the
capacity to issue up to $28.4 million in common shares under our ATM equity program.
2021 Transactions
On January 4, 2021, we acquired our partner's 20% interest in our joint venture arrangement related to the Pike & Rose hotel for
$2.3 million, and repaid the $31.5 million mortgage loan. As a result of the transaction, we gained control of the hotel portion
of this property, and effective January 4, 2021, we have consolidated this asset.
On February 5, 2021, we repaid the $16.2 million mortgage loan on Sylmar Town Center, at par, prior to its original maturity
date.
Outlook
We seek growth in earnings, funds from operations, and cash flows primarily through a combination of the following:
•
•
•
growth in our comparable property portfolio,
growth in our portfolio from property development and redevelopments, and
expansion of our portfolio through property acquisitions.
While the ongoing COVID-19 pandemic is impacting us in the short-term, our long-term focus has not changed. Our
comparable property growth is primarily driven by increases in rental rates on new leases and lease renewals, changes in
portfolio occupancy, and the redevelopment of those assets. 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 generally increase rental
rates. However, our occupancy levels and ability to increase rental rates will be adversely impacted in the short-term as a result
of COVID-19. We believe the locations and nature of our centers and diverse tenant base partially mitigates any potential
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, 2020, no single tenant accounted for more than 3.6% of
annualized base rent.
Since March 2020, federal, state, and local governments have taken various actions to mitigate the spread of COVID-19. This
includes initially ordering closures of nonessential business and ordering residents to generally stay at home, subsequent phased
re-openings, and during the fourth quarter of 2020, additional closures and capacity limitations as infection levels increased in
certain areas. These actions, along with the general concern over the spread of COVID-19 have resulted in many of our tenants
temporarily or even permanently closing their businesses, and for some, it has impacted their ability to pay rent. As of January
31, 2021, approximately 98% of our retail tenants were open. These economic hardships have adversely impacted our business,
and had a negative effect on our financial results during 2021. With very few exceptions, our leases require tenants to continue
38
to pay rent even while closed as a result of the pandemic, however, many tenants did not pay rents and other charges during the
second quarter of 2020. Subsequently, in the second half of 2020, a portion of our tenants have resumed paying their rent and/or
other charges as their businesses were able to reopen; however government mandated restrictions are still in order in many of
our markets. Our percentage of contractual rent collected each quarter has continued to increase since the low point in April
2020, including some tenants paying past due amounts. As of December 31, 2020, we have entered into agreements with
approximately 32% of our tenants (based on total commercial leases) to defer rent payments to later periods, largely through
2021, although some extend beyond, and negotiations with other tenants are still ongoing. While increasing cash collection
rates is a positive trend driven by government mandated restrictions gradually being lifted, we expect that our rent collections
will continue to be below our tenants’ contractual rent obligations and historical levels, which will continue to adversely impact
our results of operations. The extent of such impact will depend on future developments, which are highly uncertain and cannot
be predicted. Depending upon the duration of tenant closures, operating restrictions, and the overall economic downturn
resulting from COVID-19, we may find that even deferred rents are difficult to collect, and we may experience higher vacancy
levels. While the duration and severity of the economic impact resulting from COVID-19 is unknown, we seek to position the
Trust to participate in the resulting economic recovery.
We continue to have several development projects in process, albeit at a slower pace due to COVID-19 related restrictions,
being delivered as follows:
•
•
•
•
•
In the 1st quarter of 2020, we delivered the fully leased eight story, 301,000 square foot office building at Santana
Row.
The first phase of construction on the 12 acres of land that we control across from Santana Row includes an eight story
376,000 square foot office building, with over 1,700 parking spaces. The building is expected to cost between $250
million and $270 million with openings beginning in 2022.
Phase III of Assembly Row includes 277,000 square feet of office space (of which, 150,000 square feet is pre-leased),
56,000 square feet of retail space, 500 residential units, and over 800 additional parking spaces. The expected costs for
Phase III are between $465 million and $485 million and is projected to open beginning in 2021.
At Pike & Rose, we have continued construction on a 212,000 square foot office building (which includes 7,000
square feet of ground floor retail space), and includes over 600 additional parking spaces. The building is expected to
cost between $128 million and $135 million. At December 31, 2020, approximately 61,000 square feet of office space
has been delivered, of which approximately 45,000 square feet is our new corporate headquarters.
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. Throughout the portfolio, we currently have redevelopment projects underway with a projected total
cost of approximately $320 million that we expect to stabilize over the next several years.
The above includes our best estimates based on information currently known, however, the completion of construction, final
costs, and the timing of openings and rent starts will be dependent upon the duration of governmental restrictions and the
duration and severity of the economic impacts of COVID-19.
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.
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 assumed
mortgages and property sales.
At December 31, 2020, the leasable square feet in our properties was 92.2% leased and 90.2% occupied. 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
closings and bankruptcies.
39
Comparable Properties
Throughout this section, we have provided certain information on a “comparable property” basis. Information provided on a
comparable property basis includes the results of properties that we owned and operated for the entirety of both periods being
compared except for properties that are currently under development or are being repositioned for significant redevelopment
and investment. For the year ended December 31, 2020 and the comparison of 2020 and 2019, all or a portion of 95 properties
were considered comparable properties and seven were considered non-comparable properties. For the year ended
December 31, 2020, two properties and two portions of properties were moved from non-comparable to comparable properties,
two properties and one portion of a property were removed from comparable properties and one property was removed from
non-comparable properties as they were sold during 2020, one property was moved from acquisitions to non-comparable
properties, and one property was moved from comparable to non-comparable properties, compared to the designations as of
December 31, 2019. While there is judgment surrounding changes in designations, we typically move non-comparable
properties to comparable properties once they have stabilized, which is typically considered 90% physical occupancy or when
the growth expected from the redevelopment has been included in the comparable periods. We typically remove properties from
comparable properties when the repositioning of the asset has commenced and has or is expected to have a significant impact to
property operating income within the calendar year. Acquisitions are moved to comparable properties once we have owned the
property for the entirety of comparable periods and the property is not under development or being repositioned for significant
redevelopment and investment. Comparable property information replaces our previous same center designations.
40
YEAR ENDED DECEMBER 31, 2020 COMPARED TO YEAR ENDED DECEMBER 31, 2019
Rental income
Mortgage interest income
Total property revenue
Rental expenses
Real estate taxes
Total property expenses
Property operating income (1)
General and administrative expense
Depreciation and amortization
Impairment charge
Gain on sale of real estate, net of tax
Operating income
Other interest income
Interest expense
Early extinguishment of debt
Loss from partnerships
Total other, net
Net income
Net income attributable to noncontrolling interests
Net income attributable to the Trust
2020
2019
Dollars
%
(Dollar amounts in thousands)
$
832,171
$
932,738
$
(100,567)
(10.8)%
Change
3,323
835,494
170,920
119,242
290,162
545,332
(41,680)
(255,027)
(57,218)
98,117
289,524
1,894
3,050
935,788
187,831
110,927
298,758
637,030
(42,754)
(239,758)
273
9.0 %
(100,294)
(10.7)%
(16,911)
8,315
(8,596)
(9.0)%
7.5 %
(2.9)%
(91,698)
(14.4)%
1,074
(15,269)
(2.5)%
6.4 %
—
(57,218)
100.0 %
116,393
470,911
1,266
(18,276)
(181,387)
628
(15.7)%
(38.5)%
49.6 %
24.3 %
(136,289)
(109,623)
(26,666)
(11,179)
(8,062)
—
(11,179)
100.0 %
(2,012)
(6,050)
300.7 %
(153,636)
(110,369)
135,888
(4,182)
360,542
(6,676)
(43,267)
(224,654)
2,494
$
131,706
$
353,866
$
(222,160)
39.2 %
(62.3)%
(37.4)%
(62.8)%
(1) Property operating income is a non-GAAP measure that consists of rental 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.
Property Revenues
Total property revenue decreased $100.3 million, or 10.7%, to $835.5 million in 2020 compared to $935.8 million in 2019. The
percentage occupied at our shopping centers was 90.2% at December 31, 2020 compared to 92.5% at December 31, 2019. The
most significant driver of the decrease in property revenues is the impact of COVID-19, as many of our tenants were forced to
temporarily or in some cases permanently close their businesses, resulting in changes in our collectibility estimates and in some
cases rent abatement. 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, and is net of
collectiblity related impacts. Rental income decreased $100.6 million, or 10.8%, to $832.2 million in 2020 compared to $932.7
million in 2019 due primarily to the following:
•
•
higher collectibility related impacts including rent abatements across all properties of $102.1 million primarily
the result of COVID-19 impacts. This includes the write-off of $12.7 million of straight-line receivables
primarily related to tenants who were changed to cash basis of revenue recognition during the year ended
December 31, 2020.
a decrease of $24.6 million at comparable properties due primarily to lower average occupancy rates of
approximately $18.0 million, lower parking income and percentage rent of of $6.3 million primarily due to the
impacts from COVID-19 related closures, lower recoveries of $5.3 million primarily the result of lower snow
removal expense and utilities, and lower termination fee and legal fee income of $1.3 million, partially offset by
higher rental rates of approximately $9.3 million, and
41
•
decrease of $14.4 million from property sales,
partially offset by
•
•
and increase of $19.7 million from non comparable properties driven by the opening of our new office building
at Santana Row in early 2020 and the opening of Freedom Plaza in 2020 and
an increase of $19.5 million from acquisitions of Hoboken during the second half of 2019 and early 2020, and
Georgetowne Shopping Center in November 2019.
Property Expenses
Total property expenses decreased $8.6 million, or 2.9%, to $290.2 million in 2020 compared to $298.8 million in 2019.
Changes in the components of property expenses are discussed below.
Rental Expenses
Rental expenses decreased $16.9 million, or 9.0%, to $170.9 million in 2020 compared to $187.8 million in 2019. This decrease
is primarily due to the following:
•
•
•
an $11.9 million charge in 2019 related to the buyout of a lease at Assembly Square Marketplace,
a decrease of $9.5 million from comparable properties due to lower snow removal expenses, and lower repairs
and maintenance, management fees, and utilities primarily driven by the impact of COVID-19 partially offset
by an increase in insurance costs, and
a decrease of $2.2 million from our property sales,
partially offset by
•
•
an increase of $2.8 million from acquisitions of Hoboken during the second half of 2019 and early 2020, and
Georgetowne Shopping Center in November 2019, and
an increase of $2.5 million from non comparable properties driven by the opening of our new office building at
Santana Row in early 2020 and the opening of Freedom Plaza in 2020.
As a result of the changes in rental income and rental expenses as discussed above, rental expenses as a percentage of rental
income increased to 20.5% for the year ended December 31, 2020 from 20.1% for the year ended December 31, 2019.
Real Estate Taxes
Real estate tax expense increased $8.3 million, or 7.5% to $119.2 million in 2020 compared to $110.9 million in 2019 due
primarily to the following:
•
•
•
an increase of $3.8 million from comparable properties due to higher current year assessments, and tax refunds
recorded in 2019 from a multi-year appeal and reassessment at three of our properties,
an increase of $3.1 million from acquisitions of Hoboken during the second half of 2019 and early 2020 and
Georgetowne Shopping Center in November 2019, and
an increase of $2.3 million from non-comparable properties due primarily to the opening of our new office
building at Santana Row in early 2020,
partially offset by
•
a decrease of $0.8 million from our property sales.
Property Operating Income
Property operating income decreased $91.7 million, or 14.4%, to $545.3 million in 2020 compared to $637.0 million in 2019.
This decrease is primarily due to the impact of COVID-19, which resulted in higher collectibility related impacts, lower
percentage rent, and lower parking income; as well as the impact of property sales, partially offset by the opening of our new
office building at Santana Row in early 2020, property acquisitions, and the prior year charge related to the buyout of a lease at
Assembly Square Marketplace.
42
Other Operating
General and Administrative Expense
General and administrative expense decreased $1.1 million, or 2.5%, to $41.7 million in 2020 from $42.8 million in 2019. This
decrease is due primarily to lower personnel related costs and COVID-19 impacts including office closures and cancellations of
all non-essential business travel and company events.
Depreciation and Amortization
Depreciation and amortization expense increased $15.3 million, or 6.4%, to $255.0 million in 2020 from $239.8 million in
2019. The increase is due primarily to property acquisitions, the opening of our new office buildings at Santana Row in early
2020, and the write off of lease related assets for vacating tenants, partially offset by property sales.
Impairment Charge
The $57.2 million impairment charge for the year ended December 31, 2020 relates to The Shops at Sunset Place. See Note 3 to
the consolidated financial statements for further discussion.
Gain on Sale of Real Estate, Net of Tax
The $98.1 million gain on sale of real estate, net of tax for the year ended December 31, 2020 is due to the sale of three
properties and one building.
The $116.4 million gain on sale of real estate, net for the year ended December 31, 2019 is primarily due to the following:
•
•
•
$85.1 million related to the sale under the threat of condemnation of 11.7 acres of San Antonio Center,
$28.3 million related to the sale of three properties and one land parcel, and
$2.6 million net gain related to condominium unit sales that have closed at our Assembly Row and Pike & Rose
properties.
Operating Income
Operating income decreased $181.4 million, or 38.5%, to $289.5 million in 2020 compared to $470.9 million in 2019. This
decrease is due primarily due to the impact of COVID-19, which resulted in higher collectibility related impacts, the
impairment charge related to The Shops at Sunset Place, a lower net gain on the sale of real estate, and the impact of property
sales, lower percentage rent, and lower parking income, partially offset by the opening of our new office building at Santana
Row in early 2020, property acquisitions, the prior year charge related to the buyout of a lease at Assembly Square
Marketplace, and lower personnel related costs which were largely due to the impact of COVID-19.
Other
Interest Expense
Interest expense increased $26.7 million, or 24.3%, to $136.3 million in 2020 compared to $109.6 million in 2019. This
increase is due primarily to the following:
•
•
an increase of $20.2 million from higher borrowings in response to the COVID-19 pandemic (see further
discussions in "2020 Significant Debt and Equity Transactions" in Part II, Item 7 of the Annual Report) and
an increase of $13.0 million due to higher weighted average borrowings primarily from the $400 million
issuance of our 3.20% notes in 2019, and $106.9 million of mortgage loans associated with our Hoboken
acquisitions,
partially offset by
•
•
a decrease of $3.7 million due to a lower overall weighted average borrowing rate, and
an increase of $2.9 million in capitalized interest, primarily attributable to the development of Phase III of
Assembly Row and Pike & Rose.
Gross interest costs were $159.7 million and $130.1 million in 2020 and 2019, respectively. Capitalized interest was
$23.4 million and $20.5 million in 2020 and 2019, respectively.
43
Early Extinguishment of Debt
The $11.2 million early extinguishment of debt for the year ended December 31, 2020 relates to the make-whole premium paid
as part of the early redemption of our 3.00% senior notes on December 31, 2020 and the related write-off of the unamortized
discount and debt fees.
Loss from Partnerships
Loss from partnerships increased to $8.1 million in 2020 compared to $2.0 million in 2019. The increase is primarily due to our
share of losses from our hotel investments at Assembly Row and Pike & Rose, largely the result of COVID-19 related
reductions in travel.
Net income attributable to noncontrolling interests
Net income attributable to noncontrolling interests decreased to $4.2 million in 2020 compared to $6.7 million in 2019. The
decrease is driven by lower net income at our partnership properties primarily due to the impact of COVID-19, partially offset
by higher income attributable to our operating partnership units due to additional downREIT operating partnership units issued
in connection with the acquisition of Fairfax Junction in January 2020.
Discussions of year-to-year comparisons between 2019 and 2018 can be found in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2019 filed with the Securities and Exchange Commission on February 10, 2020.
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 (cash dividends paid in 2020
were approximately $325.4 million). Remaining cash flow from operations after dividend payments is used to fund recurring
and non-recurring capital projects (such as tenant improvements and redevelopments), and regular debt service requirements
(including debt service relating to additional or replacement debt, as well as scheduled debt maturities). In 2020, our dividends
were funded not only by cash from operations but also other sources of liquidity. We maintain a $1.0 billion revolving credit
facility to fund short term cash flow needs and also look to the public and private debt and equity markets, joint venture
relationships, and property dispositions to fund capital expenditures on a long-term basis.
We are currently experiencing lower levels of cash from operations due to lower rent collections from tenants impacted by the
COVID-19 pandemic (see further discussion under the "Outlook" section of this Item 2). While the overall economic impacts
of the pandemic are unknown, we have taken multiple steps during the last several months to strengthen our financial position,
maximize liquidity, and to provide maximum flexibility during these uncertain times. Throughout the last three quarters of
2020, we have maintained levels of cash significantly in excess of the cash balances we have historically maintained. In March
2020, we borrowed $990.0 million under our revolving credit facility, representing a draw-down of almost the entirety of our
$1.0 billion credit facility. In May 2020, we entered into a $400.0 million unsecured term loan and issued $700.0 million of
fixed rate unsecured senior notes for combined net proceeds of $1.1 billion. We subsequently repaid the outstanding balance on
our revolving credit facility and amended how certain covenants are calculated to provide us more operating flexibility.
Additionally, on October 13, 2020, we issued $400.0 million of fixed rate senior unsecured notes that mature on February 15,
2026 and bear interest at 1.25%. During the fourth quarter 2020, we raised $98.8 million under our ATM equity program after
fees and other costs. As of December 31, 2020, there is no outstanding balance on our $1.0 billion unsecured revolving credit
facility, we had cash and cash equivalents of $798.3 million, and we had the capacity to issue up to $28.4 million in common
shares under the ATM program.
For the year ended 2020, the weighted average amount of borrowings outstanding on our revolving credit facility was $138.5
million, and the weighted average interest rate, before amortization of debt fees, was 1.5%.
Subsequent to December 31, 2020, we repaid one mortgage loan, resulting in only $7.9 million of debt maturing in 2021,
excluding our $400.0 million term loan, which may be extended for an additional twelve months at our option.
Our overall capital requirements during 2021 will be impacted by the extent and duration of COVID-19 related closures,
impacts on our cash collections, and overall economic impacts including any halts to construction activities that might occur. It
will also be impacted by acquisition opportunities and the level and general timing of our redevelopment and development
activities. 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, as we continue to invest in the current phase of
44
these projects and are not expecting COVID-19 related halts in construction activities as we experienced in 2020. With respect
to other capital investments related to our existing properties, we expect to incur levels more consistent with prior years with an
overall increase compared to 2020.
We believe that the cash on our balance sheet together with rents we collect, as well as our $1.0 billion revolving credit facility
will allow us to continue to operate our business in the near-term. Given our recent ability to access capital markets, we also
expect debt or equity to be available to us. We may also further 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.
While the COVID-19 pandemic has negatively impacted our business during the year ended December 31, 2020, and we expect
it will continue to negatively impact our business in the short term, we intend to operate with and to maintain our long term
commitment to 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.
Summary of Cash Flows
Cash provided by operating activities............................................................................................ $
Cash used in investing activities....................................................................................................
Cash provided by (used in) financing activities.............................................................................
Increase in cash and cash equivalents............................................................................................
Cash, cash equivalents, and restricted cash, beginning of year......................................................
Cash, cash equivalents, and restricted cash, end of year................................................................ $
Year Ended December 31,
2020
2019
(In thousands)
369,929
(368,383)
$
661,736
663,282
153,614
461,919
(316,532)
(100,105)
45,282
108,332
816,896
$
153,614
Net cash provided by operating activities decreased $92.0 million to $369.9 million during 2020 from $461.9 million during
2019. The decrease was primarily attributable to lower net income before non-cash items and the timing of cash receipts, both
largely driven by impacts of the COVID-19 pandemic and payments of annual real estate tax recovery billings.
Net cash used in investing activities increased $51.9 million to $368.4 million during 2020 from $316.5 million during 2019.
The increase was primarily attributable to:
•
•
•
•
a $138.5 million decrease in proceeds from sales of real estate, resulting from the sale of three properties, one
building, and the two remaining condominium units at our Pike & Rose property in 2020, as compared to the
sale under the threat of condemnation of a portion of San Antonio Center and the sale of three properties, one
land parcel, and the sale of 43 condominiums at our Assembly Row and Pike & Rose properties in 2019,
a $81.6 million increase in capital expenditures and leasing costs as we continue to invest in Pike & Rose,
Assembly Row, Santana Row and other redevelopments,
$12.9 million for net costs paid in 2020 relating to the partial sale under threat of condemnation at San Antonio
Center in 2019, and
a $9.6 million acquisition of two loans secured by a shopping center in Rockville, Maryland, that is owned by a
third party,
partially offset by
•
a $194.9 million decrease in acquisitions of real estate, primarily due to the acquisitions of Georgetowne
Shopping Center, 37 mixed-use buildings in Hoboken, New Jersey, and Fairfax Junction in 2019, partially
offset by the acquisition of two additional buildings in Hoboken, New Jersey in 2020.
Net cash provided by financing activities increased $761.8 million to $661.7 million during 2020 from $100.1 million used in
during 2019. The increase was primarily attributable to:
•
a $694.4 million increase due to net proceeds of $700.1 million from the issuance of $400.0 million of 3.50%
unsecured senior notes and the $300.0 million reopening of our 3.95% unsecured senior notes in May 2020, and
$394.2 million from the issuance of $400.0 million of 1.25% unsecured senior notes in October 2020, as
compared to $399.9 million in net proceeds from the issuance of $300.0 million of 3.20% senior unsecured
notes in June 2019 and an additional $100.0 million of the same series in August 2019,
•
$398.7 million in net proceeds from our unsecured term loan in May 2020, and
45
•
a $230.8 million decrease in repayment of mortgages, finance leases, and notes payable primarily due to the
repayment of our $275.0 million unsecured term loan in June 2019 and the $20.3 million payoff of the mortgage
loan on Rollingwood Apartments in January 2019, partially offset by the $60.6 million payoff of the mortgage
loan on The Shops at Sunset Place in December 2020 and the $3.6 million payoff of the mortgage loan on 29th
Place, both in December 2020,
partially offset by
•
•
•
$510.4 million from the December 2020 redemptions of our our $250.0 million 2.55% unsecured senior notes
and our $250.0 million 3.00% unsecured senior notes, with a make-whole premium of $10.4 million,
$43.9 million decrease in net proceeds from the issuance of 1.1 million common shares under our ATM
program at a weighted average price of $92.51 during 2020, as compared to 1.1 million common shares at
weighted average price of $134.71 in 2019, and
a $10.9 million increase in dividends paid to shareholders due to an increase in the common share dividend rate
and an increase in the number of common shares outstanding.
Cash Requirements
The following table provides a summary of material cash requirements comprising our fixed, noncancelable obligations as of
December 31, 2020:
Fixed and variable rate debt (principal only) (1)........................................ $
Fixed and variable rate debt - our share of unconsolidated real estate
partnerships (principal only)(2)..................................................................
Lease obligations (minimum rental payments) (3).....................................
Redevelopments/capital expenditure contracts..........................................
Real estate commitments (4)
Total estimated cash requirements............................................................. $
_____________________
Cash Requirements by Period
Total
Next Twelve
Months
(In thousands)
Greater than
Twelve Months
4,308,505
$
428,777
3,879,728
53,341
355,687
356,068
100,100
5,173,701
$
33,943
10,877
328,548
—
802,145
$
19,398
344,810
27,520
100,100
4,371,556
(1) The weighted average interest rate on our fixed and variable rate debt is 3.32% as of December 31, 2020.
(2) The weighted average interest rate on the fixed and variable rate debt related to our unconsolidated real estate
partnerships is 4.59% as of December 31, 2020. $25.2 million of the requirements in the next twelve months was
repaid when we acquired our partners' share of the Pike & Rose hotel joint venture on January 4, 2021. See Note 15 to
the consolidated financial statements for additional information.
(3) This includes minimum rental payments related to both finance and operating leases.
(4) This includes the liability related to the sale under threat of condemnation at San Antonio Center as further discussed
in Note 3 and Note 7 to the consolidated financial statements.
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, a minority partner has the right to require us and
the other minority partner to purchase its 26.63% 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, 2020, our estimated liability upon exercise of the put option would range from
approximately $69 million to $72 million.
(b) 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, 2020, a total of
744,617 operating partnership units are outstanding.
(c) 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, 2020, our estimated maximum liability upon exercise of the put option would range from
approximately $28 million to $35 million.
46
(d) The other member in The Grove at Shrewsbury and Brook 35 has the right to require us to purchase all of its
approximately 4.1% interest in The Grove at Shrewsbury and approximately 6.5% 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, 2020, our estimated
maximum liability upon exercise of the put option would range from $6 million to $7 million.
(e) Effective September 18, 2023, the other member in Hoboken has the right to require us to purchase all of its 10%
ownership interest at the interest's then-current fair market value. Based on management's current estimate of fair market value
as of December 31, 2020, our estimated maximum liability upon exercise of the put option would range from $5 million to $6
million.
(f) At December 31, 2020, we had letters of credit outstanding of approximately $4.7 million.
Off-Balance Sheet Arrangements
At December 31, 2020, we have three real estate related equity method investments with total debt outstanding of $109.7
million, of which our share is $53.3 million. Our investment in these ventures at December 31, 2020 was $18.7 million.
Other than the items disclosed in the Cash Requirements table, we have no off-balance sheet arrangements as of December 31,
2020 that are reasonably likely to have a current or future material effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, cash requirements, or capital resources.
47
Debt Financing Arrangements
The following is a summary of our total debt outstanding as of December 31, 2020:
Description of Debt
Mortgages payable
Secured fixed rate
Original
Debt
Issued
Principal Balance as
of December 31,
2020
(Dollars in thousands)
Stated Interest Rate
as of December 31,
2020
Maturity Date
Sylmar Towne Center..............................................
Plaza Del Sol...........................................................
THE AVENUE at White Marsh..............................
Montrose Crossing...................................................
Azalea......................................................................
Bell Gardens............................................................
Plaza El Segundo.....................................................
The Grove at Shrewsbury (East).............................
Brook 35..................................................................
Hoboken (24 Buildings) (1).....................................
Various Hoboken (14 Buildings).............................
Chelsea.....................................................................
Hoboken (1 Building) (3)........................................
Subtotal............................................................
Net unamortized premium and debt
issuance costs..............................................
Total mortgages payable..................................
Acquired $
Acquired
52,705
80,000
Acquired
Acquired
125,000
43,600
11,500
56,450
Acquired
Acquired
Acquired
16,236
8,041
52,705
65,596
40,000
12,408
125,000
43,600
11,500
56,450
32,705
5,234
16,560
486,035
(1,924)
484,111
5.39 %
5.23 %
3.35 %
4.20 %
3.73 %
4.06 %
3.83 %
3.77 %
4.65 %
LIBOR + 1.95%
June 6, 2021
December 1, 2021
January 1, 2022
January 10, 2022
November 1, 2025
August 1, 2026
June 5, 2027
September 1, 2027
July 1, 2029
December 15, 2029
Various (2) Various through 2029
January 15, 2031
July 1, 2042
5.36 %
3.75 %
400,000
LIBOR + 1.35%
— LIBOR + 0.775%
May 6, 2021
January 19, 2024
11.31 % Various through 2028
Notes payable
Term Loan...............................................................
Revolving credit facility (4)....................................
Various.....................................................................
Subtotal............................................................
Net unamortized debt issuance costs..........
Total notes payable..........................................
400,000
1,000,000
7,239
Senior notes and debentures
Unsecured fixed rate
2.75% notes.............................................................
3.95% notes.............................................................
1.25% notes.............................................................
7.48% debentures.....................................................
3.25% notes.............................................................
6.82% medium term notes.......................................
3.20% notes.............................................................
3.50% notes.............................................................
4.50% notes.............................................................
3.625% notes...........................................................
Subtotal............................................................
Net unamortized discount and debt
issuance costs..............................................
Total senior notes and debentures...................
275,000
600,000
400,000
50,000
475,000
40,000
400,000
400,000
550,000
250,000
3,270
403,270
(494)
402,776
275,000
600,000
400,000
29,200
475,000
40,000
400,000
400,000
550,000
250,000
3,419,200
(14,712)
3,404,488
2.75 %
3.95 %
1.25 %
7.48 %
3.25 %
6.82 %
3.20 %
3.50 %
4.50 %
3.625 %
June 1, 2023
January 15, 2024
February 15, 2026
August 15, 2026
July 15, 2027
August 1, 2027
June 15, 2029
June 1, 2030
December 1, 2044
August 1, 2046
Total debt, net
_____________________
$
4,291,375
1)
2)
3)
4)
On November 26, 2019, we entered into two interest rate swap agreements that fix the interest rate on the mortgage
loan at 3.67%.
The interest rates on these mortgages range from 3.91% to 5.00%.
This mortgage loan has a fixed interest rate, however, the rate resets every five years until maturity. The current
interest rate is fixed until July 1, 2022, and the loan is prepayable at par anytime after this date.
The maximum amount drawn under our revolving credit facility during 2020 was $990.0 million and the weighted
average effective interest rate on borrowings under our revolving credit facility, before amortization of debt fees, was
1.5%.
48
Our revolving credit facility, unsecured term loan, and other debt agreements include financial and other covenants that may
limit our operating activities in the future. As of December 31, 2020, we were in compliance with all of the financial and other
covenants related to our revolving credit facility, term loan, and senior notes. Additionally, we were in compliance with all of
the financial and other covenants that could trigger loan default on our mortgage loans. If we were to breach any of these
financial and other 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 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, 2020:
2021
2022
2023
2024
2025
Thereafter
Unsecured
Secured
Total
(In thousands)
$
400,676 (1) $
28,101
$
428,777
751
275,765
600,656 (2)
333
2,544,289
119,706
3,549
3,688
48,033
282,958
120,457
279,314
604,344
48,366
2,827,247
$ 3,822,470
$
486,035
$ 4,308,505 (3)
_____________________
1)
2)
3)
Our $400.0 million term loan matures on May 6, 2021 plus one twelve month extension, at our option.
Our $1.0 billion revolving credit facility matures on January 19, 2024, plus two six-month extensions at our option. As
of December 31, 2020, there was no outstanding balance under this credit facility.
The total debt maturities differ from the total reported on the consolidated balance sheet due to the unamortized net
premium/discount and debt issuance costs on mortgage loans, notes payable, and senior notes as of December 31,
2020.
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.
Interest rate swaps associated with cash flow hedges are recorded at fair value on a recurring basis. Effectiveness of cash flow
hedges is assessed both at inception and on an ongoing basis. The effective portion of changes in fair value of the interest rate
swaps associated with cash flow hedges is recorded in other comprehensive income (loss) which is included in "accumulated
other comprehensive loss" on the balance sheet and statement of shareholders' equity. 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, the default risk of the counterparty is evaluated by monitoring
the credit worthiness of the counterparty which includes reviewing debt ratings and financial performance. If a cash flow hedge
is deemed ineffective, the ineffective portion of changes in fair value of the interest rate swaps associated with cash flow hedges
is recognized in earnings in the period affected.
As of December 31, 2020, we have two interest rate swap agreements that effectively fix the interest rate on a mortgage payable
associated with our Hoboken portfolio at 3.67%. Our Assembly Row hotel joint venture is also a party to two interest rate swap
agreements that effectively fix the interest rate on the joint venture's mortgage debt at 5.206%. All swaps were designated and
qualify as cash flow hedges. Hedge ineffectiveness has not impacted our earnings in 2020, 2019 and 2018.
49
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.
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 U.S. GAAP, plus real estate related depreciation and amortization, gains and losses on the sale of
real estate, and impairment write-downs of depreciable 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.
The reconciliation of net income to FFO available for common shareholders is as follows:
Year Ended December 31,
2020
2019
2018
(In thousands, except per share data)
Net income.................................................................................................................... $ 135,888
Net income attributable to noncontrolling interests......................................................
(4,182)
$ 360,542
$ 249,026
Gain on sale of real estate, net of tax............................................................................
(91,922)
(116,393)
Impairment charge, net ................................................................................................
Depreciation and amortization of real estate assets......................................................
Amortization of initial direct costs of leases................................................................
Funds from operations...........................................................................................
Dividends on preferred shares (1)................................................................................
Income attributable to operating partnership units.......................................................
50,728
228,850
20,415
339,777
(8,042)
3,151
Income attributable to unvested shares.........................................................................
(1,037)
Funds from operations available for common shareholders (2)............................ $ 333,849
76,261
Weighted average number of common shares, diluted (1)(2)(3)..................................
(6,676)
—
215,139
19,359
471,971
(7,500)
2,703
(1,355)
(7,119)
(11,915)
—
213,098
24,603
467,693
(7,500)
3,053
(1,469)
$ 465,819
$ 461,777
75,514
74,153
Funds from operations available for common shareholders, per diluted share (2)...... $
4.38
$
6.17
$
6.23
_____________________
50
(1)
(2)
(3)
For the years ended December 31, 2019 and 2018, dividends on our Series 1 preferred stock were not deducted in the
calculation of FFO available to common shareholders, as the related shares were dilutive and included in "weighted
average common shares, diluted."
For the year ended December 31, 2020, FFO available for common shareholders includes a $11.2 million charge
related to early extinguishment of debt. If this charge was excluded, our FFO available for common shareholders for
2020 would have been $345.0 million, and FFO available for common shareholders, per diluted share would have been
$4.52. For the year ended December 31, 2019, FFO available for common shareholders includes an $11.9 million
charge relating to the buyout of a lease at Assembly Square Marketplace. If this charge was excluded, our FFO
available for common shareholders for 2019 would have been $477.7 million, and FFO available for common
shareholders, per diluted share would have been $6.33.
The weighted average common shares used to compute FFO per diluted common share also 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.
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 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 2046) 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, 2020, we had $3.9 billion of fixed-rate debt outstanding, including $56.5 million in mortgage
payables that are effectively fixed by two interest rate swap agreements. If market interest rates used to calculate the fair value
on our fixed-rate debt instruments at December 31, 2020 had been 1.0% higher, the fair value of those debt instruments on that
date would have decreased by approximately $290.9 million. If market interest rates used to calculate the fair value on our
fixed-rate debt instruments at December 31, 2020 had been 1.0% lower, the fair value of those debt instruments on that date
would have increased by approximately $316.5 million.
Variable Interest Rate Debt
Generally, we believe that our primary interest rate risk is due to fluctuations in interest rates on our outstanding variable rate
debt. At December 31, 2020, we had $400.0 million of variable rate debt outstanding (the principal balance on our unsecured
term loan). 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 approximately $4.0 million with a corresponding decrease in our net income and cash
flows for the year. Conversely, if market interest rates decreased 1.0%, our annual interest expense would decrease by
approximately $4.0 million with a corresponding increase in our net income and cash flows for the year.
51
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
Management's Evaluation of Disclosure Controls and Procedures
The Trust maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to provide reasonable assurance that information
required to be disclosed in the reports that we file or submit under the Exchange Act 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 the Trust’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no
matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of
disclosure controls and procedures are met.
Our management, with the participation of the Trust’s Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the design and operation of the Trust’s disclosure controls and procedures as of December 31, 2020. Based on
that evaluation, the Trust’s Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, the
Trust’s disclosure controls and procedures were effective at a reasonable assurance level.
Internal Control over Financial Reporting
The Trust’s management is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process
designed by, or under the supervision of, the Trust’s principal executive and principal financial officers and effected by our
Board of Trustees, management and other personnel, 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 (GAAP) and includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and
disposition of our assets;
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 being made
only in accordance with authorization of management and our Trustees; 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.
Because of its inherent
internal control over financial reporting may not prevent or detect misstatements.
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.
limitations,
We assessed the effectiveness of the Trust’s internal control over financial reporting as of December 31, 2020. In making this
assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
in Internal Control-Integrated Framework (2013). Based on that assessment and criteria, management concluded that the
Trust's internal control over financial reporting was effective as of December 31, 2020.
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-2 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 2020 that materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
52
ITEM 9B. OTHER INFORMATION
None.
53
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 2021 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
PART IV
(a)(1) Financial Statements
Our consolidated financial statements and notes thereto, together with 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-32.
(3) Exhibits
(b) The following documents are filed as exhibits are filed as part of, or incorporated by reference info, this report:
54
Exhibit
No.
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
10.1
10.2
10.3
10.4
10.5
10.6
10.7
EXHIBIT INDEX
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, May 6, 2009, November 2, 2016, February 5, 2019, and April
2, 2020 (previously filed as Exhibit 3.2 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2020 (File No. 1-07533) 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 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; 3.625% Notes due 2046; 3.25% Notes due 2027;
3.20% Notes due 2029; 3.50% Notes due 2030; 1.25% Notes due 2026 (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)
Articles Supplementary relating to the 5.000% Series C Cumulative Redeemable Preferred Shares of Beneficial
Interest (previously filed as Exhibit 3.2 to the Trust's Registration Statement on Form 8-A (File No. 1-07533), filed
on September 29, 2017 and incorporated herein by reference)
Deposit Agreement, dated as of September 29, 2017, by and among Federal Realty Investment Trust, American
Stock Transfer and Trust Company, LLC, as Depositary, and all holders from time to time of Receipt (previously
filed as Exhibit 4.1 to the Trust's Registration Statement on Form 8-A (File No. 1-07533), filed on September 29,
2017 and incorporated herein by reference)
Specimen certificate relating to the 5.000% Series C Cumulative Redeemable Preferred Shares of Beneficial
Interest (previously filed as Exhibit 4.3 to the Trust's Registration Statement on Form 8-A (File No. 1-07533), filed
on September 29, 2017 and incorporated herein by reference)
Description of Securities (previously filed as Exhibit 4.8 to the Trust's Annual Report on Form 10-K for the year
ended December 31, 2019 (File No. 001-07533 and incorporated here 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)
55
Exhibit
No.
10.8
10.9
10.10
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
Description
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)
* 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 Statement 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)
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)
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)
56
Exhibit
No.
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
21.1
23.1
31.1
31.2
32.1
32.2
101
Description
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)
Second Amendment to Credit Agreement, dated as of April 20, 2016, 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 8K (File No. 1-07533), filed on April 26, 2016 and
incorporated herein by reference)
Severance Agreement between the Trust and Daniel Guglielmone dated August 15, 2016 (previously filed as
Exhibit 10.36 to the Trust's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No.
1-07533 and incorporated herein by reference)
Amended and Restated Credit Agreement, dated as of July 25, 2019, 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 July 29,
2019 and incorporated herin by reference)
2020 Performance Incentive Plan (previously filed as Appendix B to the Trust’s Definitive Proxy Statement for the
2020 Annual Meeting of Shareholders (File No. 01-07533) and incorporated herein by reference)
Term Loan Agreement dated as of May 6, 2020, 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, Regions Bank, Truist Bank, and U.S. Bank National Bank Association as Co-Syndication
Agents, PNC Capital Markets, LLC, Regions Capital Markets, Suntrust Robinson Humphrey, Inc., and U.S. Bank
National Association, as Joint Lead Arrangers and Book Managers (previously filed as Exhibit 10.1 to the Trust's
Current Report on Form 8-K (File No. 1-07533), filed on May 6, 2020 and incorporated herein by reference)
First Amendment to the Credit Agreement, dated as of May 6, 2020, 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 10.2 to the Trust's Current Report on Form 8-K (File No. 1-07533), filed on May 6,
2020, 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 2020 Plan (filed herewith)
Form of Option Award Agreement for awards made under the Trust’s Long-Term Incentive Award Program for
shares issued out of the 2020 Plan (filed herewith)
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 2020 Plan (filed herewith)
Form of Performance Share Award Agreement for shares awarded out of the 2020 Plan (filed herewith)
Form of Option Award Agreement for basic options awarded out of the 2020 Plan (filed herewith)
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, 2020, 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.
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
104
_____________________
* 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.
57
ITEM 16. FORM 10-K SUMMARY
None.
58
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 11, 2021.
Federal Realty Investment Trust
By:
/S/ DONALD C. WOOD
Donald C. Wood
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
Chief Executive Officer and Trustee
(Principal Executive Officer)
February 11, 2021
/S/ DANIEL GUGLIELMONE
Daniel Guglielmone
/S/
JOSEPH S. VASSALLUZZO
Joseph S. Vassalluzzo
/S/
JON E. BORTZ
Jon E. Bortz
/S/ DAVID W. FAEDER
David W. Faeder
/S/ ELIZABETH I. HOLLAND
Elizabeth I. Holland
/S/ NICOLE Y. LAMB-HALE
Nicole Y. Lamb-Hale
/S/ ANTHONY P. NADER, III
Anthony P. Nader, III
/S/ MARK S. ORDAN
Mark S. Ordan
/S/ GAIL P. STEINEL
Gail P. Steinel
Executive Vice President - Chief Financial
February 11, 2021
Officer and Treasurer (Principal
Financial and Accounting Officer)
Non-Executive Chairman
February 11, 2021
February 11, 2021
February 11, 2021
February 11, 2021
February 11, 2021
February 11, 2021
February 11, 2021
February 11, 2021
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
59
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Item 8 and Item 15(a)(1) and (2)
Index to Consolidated Financial Statements and Schedules
Consolidated Financial Statements
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..........................................................................................................
Page No.
Financial Statement Schedules
Schedule III—Summary of Real Estate and Accumulated Depreciation...............................................................
Schedule IV—Mortgage Loans on Real Estate......................................................................................................
F-2
F-3
F-5
F-6
F-7
F-8
F-9
F-32
F-40
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.
F-1
Report of Independent Registered Public Accounting Firm
Trustees and Shareholders
Federal Realty Investment Trust
Opinion on internal control over financial reporting
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, 2020, based on criteria established in the 2013
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
("COSO"). In our opinion, the Trust maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2020, 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)
(“PCAOB”), the consolidated financial statements of the Trust as of and for the year ended December 31, 2020, and our report
dated February 11, 2021 expressed an unqualified opinion on those financial statements.
Basis for opinion
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's Evaluation of
Disclosure Controls and Procedures. Our responsibility is to express an opinion on the Trust’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and limitations of internal control over financial reporting
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.
/s/ GRANT THORNTON LLP
New York, New York
February 11, 2021
F-2
Report of Independent Registered Public Accounting Firm
Trustees and Shareholders
Federal Realty Investment Trust
Opinion on the financial statements
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, 2020 and 2019, 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, 2020, and the related notes and financial statement schedules included under Item 15(a) (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Trust as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the
United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Trust’s internal control over financial reporting as of December 31, 2020, 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 11, 2021 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the
Trust’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required
to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Lease Collectibility Assessment
In order to recognize rental revenue on an accrual basis, the Trust must determine whether substantially all of the rents due
under a lease arrangement are collectible. If the Trust reaches the conclusion that substantially all of the rents are not collectible
for a specific lease, then rental revenue under that arrangement can only be recognized when cash payment from the tenant is
received.
Significant judgment is exercised by the Trust when making a collectibility assessment and includes the following
considerations which require challenging and subjective auditor judgment in the execution of our audit procedures:
•
•
•
Creditworthiness of the tenant.
Current economic conditions.
Historical experience with the tenant and other tenants operating in the same industry.
Our audit procedures related to the collectibility assessment included the following:
F-3
• We assessed the design and tested the operating effectiveness of internal controls relating to the collectibility
assessment process.
• We evaluated management’s accounting policies related to this assessment.
• We verified the completeness of the population of tenants that management evaluated.
• We researched recent publicly available information such as bankruptcy filings, industry journals, and periodicals, and
for any of the Trust’s tenants identified in our research we evaluated whether such information was considered in
management’s collectibility assessment.
For a sample of tenant receivables where collectibility was deemed as probable, we inspected and evaluated
management’s documentation supporting the collectibility assessment.
•
• We selected a sample of tenant receivable balances to verify they are accurately aged.
• We selected a sample of leases to evaluate the collectibility assessment conclusion reached by management and
performed the following procedures for each selection:
◦
◦
◦
Verified that management’s accounting policies related to the collectibility assessment were followed.
Obtained from management documentation such as tenant collection history and any direct correspondence
and evaluated management’s considerations supporting the collectibility assessment conclusion reached.
Researched publicly available information to independently verify the completeness and accuracy of
management’s information used to make the collectibility assessment.
/s/ GRANT THORNTON LLP
We have served as the Trust’s auditor since 2002.
New York, New York
February 11, 2021
F-4
Federal Realty Investment Trust
Consolidated Balance Sheets
ASSETS
Real estate, at cost
Operating (including $1,703,202 and $1,676,866 of consolidated variable interest
entities, respectively)
Construction-in-progress (including $44,896 and $102,583 of consolidated variable
interest entities, respectively)
Assets held for sale
Less accumulated depreciation and amortization (including $335,735 and $296,165 of
consolidated variable interest entities, respectively)
Net real estate
Cash and cash equivalents
Accounts and notes receivable
Mortgage notes receivable, net
Investment in partnerships
Operating lease right of use assets
Finance lease right of use assets
Prepaid expenses and other assets
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Mortgages payable, net (including $413,681 and $469,184 of consolidated variable
interest entities, respectively)
Notes payable, net
Senior notes and debentures, net
Accounts payable and accrued expenses
Dividends payable
Security deposits payable
Operating lease liabilities
Finance lease liabilities
Other liabilities and deferred credits
Total liabilities
Commitments and contingencies (Note 7)
Redeemable noncontrolling interests
Shareholders’ equity
Preferred shares, authorized 15,000,000 shares, $.01 par:
5.0% Series C Cumulative Redeemable Preferred Shares, (stated at liquidation
preference $25,000 per share), 6,000 shares issued and outstanding
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,
76,727,394 and 75,540,804 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
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
December 31,
2020
2019
(In thousands, except share and
per share data)
$ 7,771,981
$ 7,535,983
810,889
—
8,582,870
760,420
1,729
8,298,132
(2,357,692)
6,225,178
798,329
159,780
39,892
22,128
92,248
51,116
218,953
$ 7,607,624
(2,215,413)
6,082,719
127,432
152,572
30,429
28,604
93,774
52,402
227,060
$ 6,794,992
$
484,111
402,776
3,404,488
228,641
83,839
20,388
72,441
72,049
152,424
4,921,157
$
545,679
3,781
2,807,134
255,503
81,676
21,701
73,628
72,062
157,938
4,019,102
137,720
139,758
150,000
150,000
9,997
9,997
771
3,297,305
(988,272)
(5,644)
2,464,157
84,590
2,548,747
$ 7,607,624
759
3,166,522
(791,124)
(813)
2,535,341
100,791
2,636,132
$ 6,794,992
The accompanying notes are an integral part of these consolidated statements.
F-5
Federal Realty Investment Trust
Consolidated Statements of Comprehensive Income
REVENUE
Rental income
Mortgage interest income
Total revenue
EXPENSES
Rental expenses
Real estate taxes
General and administrative
Depreciation and amortization
Total operating expenses
Impairment charge
Gain on sale of real estate, net of tax
OPERATING INCOME
OTHER INCOME/(EXPENSE)
Other interest income
Interest expense
Early extinguishment of debt
Loss from partnerships
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
Net income available for common shareholders
Weighted average number of common shares
EARNINGS PER COMMON SHARE, DILUTED
Net income available for common shareholders
Weighted average number of common shares
NET INCOME
Other comprehensive loss - change in value of interest rate swaps
COMPREHENSIVE INCOME
Comprehensive income attributable to noncontrolling interests
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE TRUST
Year Ended December 31,
2020
2019
2018
(In thousands, except per share data)
$
$
832,171
3,323
835,494
$
932,738
3,050
935,788
912,287
3,149
915,436
170,920
119,242
41,680
255,027
586,869
(57,218)
98,117
187,831
110,927
42,754
239,758
581,270
—
116,393
173,094
114,776
33,600
244,245
565,715
—
11,915
289,524
470,911
361,636
1,894
(136,289)
(11,179)
(8,062)
135,888
(4,182)
131,706
(8,042)
123,664
1.62
75,515
1.62
75,515
135,888
(5,302)
130,586
(3,711)
126,875
$
$
$
$
$
1,266
(109,623)
—
(2,012)
360,542
(6,676)
353,866
(8,042)
345,824
4.61
74,766
4.61
74,766
360,542
(397)
360,145
(6,676)
353,469
$
$
$
$
$
942
(110,154)
—
(3,398)
249,026
(7,119)
241,907
(8,042)
233,865
3.18
73,274
3.18
73,302
249,026
(438)
248,588
(7,119)
241,469
$
$
$
$
$
The accompanying notes are an integral part of these consolidated statements.
F-6
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Federal Realty Investment Trust
Consolidated Statements of Cash Flows
Year Ended December 31,
2020
2019
2018
(In thousands)
OPERATING ACTIVITIES
Net income................................................................................................................. $ 135,888
Adjustments to reconcile net income to net cash provided by operating activities:
$ 360,542
$ 249,026
Depreciation and amortization............................................................................
Impairment charge..............................................................................................
Gain on sale of real estate, net of tax..................................................................
Early extinguishment of debt..............................................................................
Loss from partnerships........................................................................................
Other, net.............................................................................................................
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Proceeds from new market tax credit transaction, net of deferred costs.............
(Increase) decrease in accounts receivable, net...................................................
Increase in prepaid expenses and other assets....................................................
Increase in accounts payable and accrued expenses...........................................
(Decrease) 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.......................................................................................
Costs associated with property sold under threat of condemnation, net....................
Proceeds from sale of real estate................................................................................
Proceeds from partnership formation.........................................................................
Investment in partnerships.........................................................................................
Distribution from partnerships in excess of earnings.................................................
Leasing costs..............................................................................................................
Increase in mortgage and other notes receivable, net.................................................
Net cash used in investing activities..........................................................................
255,027
57,218
(98,117)
11,179
8,062
6,142
—
(6,032)
(3,260)
5,621
(1,799)
369,929
(9,589)
(433,872)
(68,064)
(12,924)
183,461
—
(3,348)
1,301
(15,080)
(10,268)
(368,383)
239,758
—
(116,393)
—
2,012
169
—
(16,128)
(10,253)
2,327
(115)
461,919
(204,516)
(327,074)
(82,836)
—
321,997
—
(1,052)
2,765
(25,459)
(357)
(316,532)
244,245
—
(11,915)
—
3,398
4,147
12,353
917
(2,070)
2,650
13,937
516,688
(13,503)
(302,120)
(66,138)
—
177,775
37,998
(1,037)
275
(25,430)
(67)
(192,247)
FINANCING ACTIVITIES
Net repayments under revolving credit facility, including costs................................
(638)
Issuance of senior notes, net of costs.........................................................................
1,094,283
Redemption and retirement of senior notes................................................................
(510,360)
Issuance of notes payable, net of costs.......................................................................
398,722
Repayment of mortgages, finance leases, and notes payable.....................................
(70,237)
Issuance of common shares, net of costs....................................................................
99,177
Dividends paid to common and preferred shareholders.............................................
(324,596)
Shares withheld for employee taxes...........................................................................
(4,052)
Contributions from noncontrolling interests..............................................................
—
Distributions to and redemptions of noncontrolling interests....................................
(20,563)
661,736
Net cash provided by (used in) financing activities...................................................
Increase in cash, cash equivalents, and restricted cash.....................................................
663,282
153,614
Cash, cash equivalents, and restricted cash at beginning of year......................................
Cash, cash equivalents, and restricted cash at end of year................................................ $ 816,896
(4,012)
399,913
—
—
(301,029)
143,027
(313,649)
(4,626)
404
(20,133)
(100,105)
45,282
108,332
$ 153,614
(41,000)
—
—
—
(16,620)
130,918
(301,194)
(958)
2,838
(15,293)
(241,309)
83,132
25,200
$ 108,332
The accompanying notes are an integral part of these consolidated statements.
F-8
Federal Realty Investment Trust
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
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, California, and South Florida. As of December 31, 2020, we owned or had a majority interest in community and
neighborhood shopping centers and mixed-use properties which are operated as 101 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.
Impacts of COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease ("COVID-19") as a
pandemic. While we currently expect the impact to our properties is temporary in nature, the extent of the future effects of
COVID-19 on our business, results of operations, cash flows, and growth prospects is highly uncertain and will ultimately
depend on future developments, none of which can be predicted with any certainty.
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
Policy beginning January 1, 2019, with our adoption of Accounting Standards Codification (ASC) 842, "Leases"
Our leases with our tenants are classified as operating leases. When collection of substantially all lease payments during the
lease term is considered probable, the lease qualifies for accrual accounting. Lease payments are recognized on a straight-line
basis from the point in time when the tenant controls the space through the term of the related lease. Variable lease payments
relating to percentage rent are recognized at the end of the lease year or earlier if we have determined the required sales level is
achieved. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related
expenditures are incurred. 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. 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 are generally recognized on the
termination date if the tenant has relinquished control of the space. 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. Lease concessions (unrelated to the COVID-19 pandemic) are evaluated to determine
whether the concession represents a modification of the original lease contract. Modifications generally result in a reassessment
of the lease term and lease classification, and remeasurement of lease payments received. Remeasured lease payments are
recognized on a straight-line basis over the remaining term of the modified lease contract.
F-9
In April 2020, the Financial Accounting Standards Board ("FASB") issued interpretive guidance relating to the accounting for
lease concessions provided as a result of the COVID-19 pandemic that allows entities to treat the concession as if it was a part
of the existing contract instead of applying lease modification accounting. This guidance is only applicable to the COVID-19
pandemic related lease concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the
lessee. We have elected this option relating to qualifying rent deferral and rent abatement agreements. For qualifying lease
modifications with rent deferrals, this results in no change to our revenue recognition but an increase in the lease receivable
balance until the deferred rent has been repaid. For qualifying lease modifications that include rent abatement concessions, this
results in a direct reduction of rental income in the current period. As of December 31, 2020, we have entered into rent deferral
agreements and rent abatement agreements related to the COVID-19 pandemic representing approximately $36 million and $35
million, respectively, of rent otherwise owed during the year ended December 31, 2020, and continue negotiations with other
tenants.
When collection of substantially all lease payments during the lease term is not considered probable, total lease revenue is
limited to the lesser of revenue recognized under accrual accounting or cash received. Determining the probability of collection
of substantially all lease payments during a lease term requires significant judgment. This determination is impacted by
numerous factors including our assessment of the tenant’s credit worthiness, economic conditions, tenant sales productivity in
that location, historical experience with the tenant and tenants operating in the same industry, future prospects for the tenant and
the industry in which it operates, and the length of the lease term. If leases currently classified as probable are subsequently
reclassified as not probable, any outstanding lease receivables (including straight-line rent receivables) would be written-off
with a corresponding decrease in rental income. If leases currently classified as not probable are subsequently changed to
probable, any lease receivables (including straight-line rent receivables) are re-instated with a corresponding increase to rental
income.
Since March 2020, federal, state, and local governments have taken various actions to mitigate the spread of COVID-19. This
includes initially ordering closures of nonessential business and ordering residents to generally stay at home, subsequent phased
re-openings, and during the fourth quarter of 2020, additional closures and capacity limitations as infection levels increased in
certain areas. These actions, along with the general concern over the spread of COVID-19, have resulted in many of our tenants
temporarily or even permanently closing their businesses, and for some, it has impacted their ability to pay rent. As a result, we
revised our collectibility assumptions for many of our tenants most significantly impacted by COVID-19. Accordingly, during
the year ended December 31, 2020, we recognized collectibility related adjustments of $106.6 million. This includes changes in
our collectibility assessments from probable to not probable, disputed rents, and any rent abatements directly related to
COVID-19, as well as the write-off of $12.7 million of straight-line rent receivables related to tenants changed to a cash basis
of revenue recognition during the year ended December 31, 2020. As of December 31, 2020, the revenue from approximately
35% of our tenants (based on total commercial leases) is being recognized on a cash basis. As of December 31, 2020 and 2019,
our straight-line rent receivables balance was $103.3 million and $100.3 million, respectively, and is included in "accounts and
notes receivable, net" on our consolidated balance sheet.
Policy prior to January 1, 2019
Prior to January 1, 2019, management estimates of collectability were considered when reserving for billed and accrued lease
receivables and straight-line rent receivables. Full and partial reserves were recorded when determined to be appropriate with a
corresponding charge to bad debt expense. The primary impact of the adoption of ASC 842, “Leases,” on our recognition of
lease revenue relates to the upfront and ongoing assessment of the collectability of substantially all lease payments required by
the new standard.
Other revenue recognition policies
Sales of real estate are recognized generally upon the transfer of control, which usually occurs when the real estate is legally
sold. When we enter into a transaction to sell a property or a portion of a property, we evaluate the recognition of the sale under
ASC 610-20, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets." In accordance with ASC
610-20, we apply the guidance in ASC 606, "Revenue from Contracts with Customers," to determine whether and when control
transfers and how to measure the associated gain or loss. We determine the transaction price based on the consideration we
expect to receive. Variable consideration is included in the transaction price to the extent it is probable that a significant reversal
of a gain recognized will not occur. We analyze the risk of a significant gain reversal and if necessary limit the amount of
variable consideration recognized in order to mitigate this risk. The estimation of variable consideration requires us to make
assumptions and apply significant judgment.
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
F-10
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 2020, 2019 and 2018, real estate
depreciation expense was $227.9 million, $215.4 million and $216.0 million, respectively, including amounts from real estate
sold.
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 asset acquisitions, such as broker fees, transfer taxes, legal, accounting, valuation, and other
professional and consulting fees, are capitalized as part of the acquisition cost. The acquisition of an operating shopping center
typically qualifies as an asset acquisition.
Prior to the adoption of ASU 2016-02, "Leases," when applicable, as lessee, we classified our leases of land and building as
operating or capital leases. We were 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. Subsequently, capital leases are now considered "finance leases."
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, are capitalized.
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.
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.
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, 2020, we had $803.6
million in excess of the FDIC insured limit.
F-11
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 incremental direct costs incurred which were essential to originate a successful leasing arrangement
and would not have been incurred had the leasing transaction not taken place. These costs include third party commissions
related to obtaining a lease. Capitalized lease costs are amortized over the initial life 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. 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. See the "Leases" section in this note for further discussion regarding the
change in accounting for lease costs.
Debt Issuance Costs
Costs related to the issuance of debt instruments are deferred 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.” Debt issuance costs related to our revolving credit facility are classified
as an asset and are included in "prepaid expenses and other assets" in our consolidated balance sheets. All other debt issuance
costs are presented as a direct deduction from the carrying amount of the debt liability.
Derivative Instruments
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.
Interest rate swaps associated with cash flow hedges are recorded at fair value on a recurring basis. Effectiveness of cash flow
hedges is assessed both at inception and on an ongoing basis. The effective portion of changes in fair value of the interest rate
swaps associated with cash flow hedges is recorded in other comprehensive income (loss) which is included in accumulated
other comprehensive income (loss) on the balance sheet and statement of shareholders' equity. 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, the default risk of the counterparty is evaluated by
monitoring the credit worthiness of the counterparty which includes reviewing debt ratings and financial performance. If a cash
flow hedge is deemed ineffective, the ineffective portion of changes in fair value of the interest rate swaps associated with cash
flow hedges is recognized in earnings in the period affected.
At December 31, 2020, we have two interest rate swap agreements that effectively fix the interest rate on a mortgage payable
associated with our Hoboken acquisition at 3.67%. Both swaps were designated and qualify for cash flow hedge accounting. As
of December 31, 2020, our Assembly Row hotel joint venture is a party to two interest rate swap agreements that effectively fix
the interest rate on the joint venture's mortgage debt at 5.206%. Both swaps were designated and qualify as cash flow hedges.
Hedge ineffectiveness has not impacted earnings in 2020, 2019 and 2018.
Mortgage Notes Receivable
We have invested in certain mortgage loans that, because of their nature, qualify as loan receivables. At the time of investment,
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. In one of our mortgage loan arrangements, 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, 2020 and 2019.
Mortgage notes receivable are recorded at cost, net of any valuation adjustments. Effective January 1, 2020, (upon the adoption
of ASU 2016-13, "Financial Instruments - Credit Losses," as amended and interpreted), we account for mortgage notes
receivable using the "expected credit loss" model, and accordingly impairment losses are estimated and recorded for the entire
life of the loan. Prior to the implementation of ASC 326, we recognized impairment losses as incurred. Interest income is
accrued as earned. Mortgage notes receivable are considered past due based on the contractual terms of the note agreement. On
F-12
a quarterly basis, we evaluate the collectability of each mortgage note receivable and update our expected credit loss model
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 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 two loans are collateralized by a first mortgage, these loans have risk characteristics similar to the risks in owning
commercial real estate.
At December 31, 2020, we had four mortgage notes receivable with an aggregate carrying amount, net of valuation adjustments
of $39.9 million, and a weighted average interest rate of 10.0%. Approximately $30.3 million of the loans are secured by first
mortgages on retail buildings at December 31, 2020.
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 share 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 12 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.
Our equity method investments in the Pike & Rose hotel joint venture, the Assembly Row hotel joint venture, and the La
Alameda shopping center are also considered variable interests in a VIE. As we do not control the activities that most
significantly impact the economic performance of the joint ventures, we are not the primary beneficiary and do not
consolidate. As of December 31, 2020 and 2019, our investment in these joint ventures and maximum exposure to loss was
$18.7 million and $23.4 million, respectively. On January 4, 2021, we acquired our partner's interest in the Pike & Rose hotel
joint venture. See footnote 15 to the consolidated financial statements for additional details of this transaction.
In addition, we have 17 entities that meet the criteria of a VIE in which we hold a variable interest. For each of these entities,
we control the significant operating decisions and consequently have the power to direct the activities that most significantly
impact the economic performance of the entities. As we also have the obligation to absorb the majority of the losses and/or the
right to receive a majority of the benefits for each of these entities, all are consolidated in our financial statements. Net real
estate assets related to VIEs included in our consolidated balance sheets were approximately $1.4 billion and $1.5 billion as of
December 31, 2020 and 2019, respectively, and mortgages related to VIEs included in our consolidated balance sheets were
approximately $413.7 million and $469.2 million, as of December 31, 2020 and 2019, respectively.
We have also evaluated our mortgage notes receivable investments and determined that the entities obligated under the
mortgage notes are not VIEs. Our equity method investments and mortgage notes receivable balances are presented separately
in our consolidated balance sheets.
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.
F-13
The following table provides a rollforward of the redeemable noncontrolling interests:
Year Ended
December 31,
2020
2019
(In thousands)
Beginning balance.............................................................................................................................. $
139,758
$
136,208
Contributions.................................................................................................................................
Net income.....................................................................................................................................
Distributions & redemptions..........................................................................................................
Other comprehensive loss - change in value of interest rate swaps...............................................
19,335
2,228
(1,197)
(471)
Change in redemption value..........................................................................................................
(21,933)
9,961
3,430
(15,366)
—
5,525
Ending balance................................................................................................................................... $
137,720
$
139,758
On August 2, 2019, we acquired the 10.1% redeemable noncontrolling interest in the partnership that owns our Montrose
Crossing Shopping Center for $10.0 million, bringing our ownership interest to 100%.
Leases
We adopted ASC 842 effective January 1, 2019 under the modified retrospective approach and elected the optional transition
method to apply the provisions of ASC 842 as of the adoption date, rather than the earliest period presented. We elected to
apply certain adoption related practical expedients for all leases that commenced prior to the election date. These practical
expedients included not reassessing whether any expired or existing contracts were or contained leases; not reassessing the lease
classification for any expired or existing leases; and not reassessing initial direct costs for any existing leases. We also elected
the practical expedient for lessors to combine our lease and non-lease components (primarily impacts common area
maintenance recoveries).
Lessor
We recorded a charge to the opening accumulated dividends in excess of net income of $7.1 million in 2019 as a result of the
adoption of ASC 842. This charge was attributable to the write off certain direct leasing costs recorded under the previous lease
accounting rules for leases which had not commenced as well as the write off of unreserved receivables (including straight-line
receivables) for leases where we had determined the collection of substantially all the lease payments required for the term is
not probable. Also upon adoption of ASC 842 and reflected in our 2019 and 2020 financial statements, we do not record a gross
up of revenue and expense for costs (such as real estate taxes) paid directly by lessees on our behalf.
Lessee
We have ground leases at 12 properties which are accounted for as operating leases. The operating lease right of use ("ROU")
assets and related liabilities are shown separately on the face of our consolidated balance sheet and reflect the present value of
the minimum lease payments. A key input in the calculation is the discount rate. As the rate implied in the lease agreements is
not readily determinable, we utilize our incremental borrowing rate that correspond to the remaining term of the lease, our
credit spread, and and adjustment to reflect the collateralized payment terms present in the lease. Our operating lease
agreements may include options to extend the lease term or terminate it early. We include options to extend or terminate leases
in the ROU operating lease asset and liability when it is reasonably certain we will exercise these options. Operating lease
expense is recognized on a straight-line basis over the non-cancellable lease term and is included in rental expenses in our
consolidated statements of operations. We elected to apply the short-term lease exemption within ASC 842, and as such we
have not recorded an ROU asset or lease liability for leases with terms of less than 12 months.
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.
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
F-14
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 2016. As of December 31, 2020 and 2019, 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
commercial or residential 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.
F-15
Recent Accounting Pronouncements
Standard
Description
Effect on the financial statements or
significant matters
This ASU changes the impairment model for most
financial assets and certain other instruments, requiring
the use of an "expected credit loss" model and adding
more disclosure requirements.
ASU 2018-19 clarifies that impairment of of receivables
arising from operating leases should accounted for in
accordance with Topic 842, Leases.
Upon adoption of this standard, we recorded
expected losses of $0.5 million in opening
accumulated dividends in excess of net
income. During the year ended December 31,
2020, we recorded additional expected losses
of $0.4 million, which are included in rental
expenses.
Adopted on January 1, 2020:
Financial Instruments - Credit
Losses (Topic 326) and related
updates:
ASU 2016-13, June
2016, Financial
Instruments - Credit
Losses (Topic 326)
ASU 2018-19,
November 2018,
Codification
improvements to
Topic 326,
Financial
Instruments - Credit
Losses
ASU 2018-15, August 2018,
Intangibles - Goodwill and
Other Internal Use Software:
Customers Accounting for
Implementation Costs Incurred
in a Cloud Computing
Arrangement That Is a Service
Contract
This ASU requires a customer in a cloud computing
arrangement (i.e. hosting arrangement) that is a service
contract to follow the internal-use software guidance in
ASC 350-40 to determine which implementation costs
to capitalize as assets. Capitalized implementation costs
related to a hosting arrangement that is a service
contract will be amortized over the term of the hosting
arrangement. Entities will expense costs during the
preliminary project and post-implementation stages as
they are incurred.
The adoption of this standard did not have a
significant impact to our consolidated financial
statements.
Issued in 2020:
ASU 2020-04, March 2020,
Reference Rate Reform (Topic
848)
This ASU provides companies with optional practical
expedients to ease the accounting burden for contract
modifications associated with transitioning away from
LIBOR and other interbank offered rates that are
expected to be discontinued as part of reference rate
reform. For hedges, the guidance generally allows
changes to the reference rate and other critical terms
without having to de-designate the hedging relationship,
as well as allows the shortcut method to continue to be
applied. For contract modifications, changes in the
reference rate or other critical terms will be treated as a
continuation of the prior contract. This guidance can be
applied immediately, however, is generally only
available through December 31, 2022.
We are still evaluating the impact of reference
rate reform and whether we will apply any of
these practical expedients.
ASU 2020-06, August 2020,
Debt - Debt with Conversion
and Other Options (Subtopic
470-20) and Derivatives and
Hedging - Contracts in Entity's
Own Equity (Subtopic 815-40):
Accounting for Convertible
Instruments and Contracts in
an Entity's Own Equity
This ASU simplifies the accounting for convertible
instruments by removing the requirements to separately
present certain conversion features in equity,
simplifying the settlement assessment that entities are
required to perform to determine whether a contract
qualifies for equity classification, and generally
requiring use of the if-converted method for all
convertible instruments in the diluted EPS calculation
and include the effect of potential share settlement (if
the effect is more dilutive). The guidance is effective for
annual periods beginning after December 15, 2021, and
interim periods therein.
The adoption of this standard is not expected to
have a significant impact to our consolidated
financial statements.
F-16
Consolidated Statements of Cash Flows—Supplemental Disclosures
The following table provides supplemental disclosures related to the Consolidated Statements of Cash Flows:
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 (1):
DownREIT operating partnership units issued with acquisition
Mortgage loans assumed with acquisition
DownREIT operating partnership units redeemed for common shares
Settlement of partner loan receivable via dilution of partner interests
Shares issued under dividend reinvestment plan
Contribution from noncontrolling interest
Year Ended December 31,
2020
2019
2018
(In thousands)
$
$
$
$
$
$
$
$
$
$
159,718
(23,429)
136,289
130,248
580
18,920
8,903
$
$
$
$
$
$
— $
— $
$
1,734
— $
130,110
(20,487)
109,623
106,180
483
$
$
$
$
129,001
(18,847)
110,154
107,494
675
— $
98,041
14,105
5,379
1,784
$
$
$
$
— $
—
—
101
—
1,884
1,435
(1) See Note 5 for additional disclosures relating to the mortgages entered into and assumed as a result of the Hoboken
acquisition.
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:
Cash and cash equivalents....................................................................................................... $
Restricted cash (1)...................................................................................................................
Total cash, cash equivalents, and restricted cash..................................................................... $
798,329
18,567
816,896
$
$
127,432
26,182
153,614
(1) Restricted cash balances are included in "prepaid expenses and other assets" on our consolidated balance sheets.
December 31,
2020
2019
(In thousands)
NOTE 3—REAL ESTATE
2020 Property Acquisitions
Date Acquired
Property
City/State
January 10, 2020
February 12, 2020
Fairfax Junction
Hoboken (2 mixed-use buildings)
Fairfax, Virginia
Hoboken, New Jersey
Gross
Leasable
Area (GLA)
(in square feet)
49,000
12,000
Purchase Price
(in millions)
$
$
22.3 (1)
14.3 (2)
(1) This property is adjacent to, and will be operated as part of the property acquired in 2019. The purchase price was paid with
a combination of cash and the issuance of 163,322 downREIT operating partnership units. Approximately $0.5 million and
$0.4 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below
market leases," respectively.
(2) The purchase price includes the assumption of $8.9 million of mortgage debt, and is in addition to the 37 buildings
previously acquired in 2019, and was completed through the same joint venture. Less than $0.1 million and approximately
$3.3 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below
market leases," respectively.
F-17
2020 Impairment
On September 1, 2020, the $60.6 million non-recourse mortgage loan on The Shops at Sunset Place matured. The mortgage was
not repaid, and thus the lender declared the loan in default. We evaluated our long-term plans for the property, taking into
account current market conditions and prospective development and redevelopment returns, as well as the impact of COVID-19
on the revenue prospects for the property, and concluded we did not expect to move forward with the planned redevelopment or
repay the mortgage balance, and thus, did not expect to be long term holders of the asset. Given these expectations, we recorded
an impairment charge of $57.2 million during the third quarter of 2020.
The fair value estimate used to determine the impairment charge was determined by market comparable data and discounted
cash flow analyses. The cash flows utilized in such analyses are comprised of unobservable inputs which include forecasted
rental revenue and expenses based upon market conditions and future expectations. The capitalization rates and discount rates
utilized in such analyses are based upon unobservable rates that we believe to be within a reasonable range of current market
rates for the property. Based on these inputs, we have determined that the $57 million estimated valuation of the property is
classified within Level 3 of the fair value hierarchy.
On December 31, 2020, we sold The Shops at Sunset Place for $65.5 million and repaid the mortgage loan. The resulting gain
of $9.2 million is included in the cumulative 2020 gain of $98.1 million noted in the 2020 Property Dispositions section below.
2020 Property Dispositions
During the year ended December 31, 2020, we sold three properties (including The Shops at Sunset Place discussed above) and
one building for a total sales price of $186.1 million, which resulted in a gain of $98.1 million.
During the year ended December 31, 2020, we closed on the sale of the remaining two condominium units at our Pike & Rose
property, receiving proceeds net of closing costs of $2.1 million.
2019 Property Acquisitions
Date Acquired
Property
City/State
Fairfax Junction
February 8, 2019
September 13, 2019 San Antonio Center
November 15, 2019 Georgetowne Shopping Center
Various 2019
Hoboken (37 mixed-use buildings)
Fairfax, Virginia
Mountain View, California
Brooklyn, New York
Hoboken, New Jersey
Gross
Leasable
Area (GLA)
(in square feet)
75,000
6,000
147,000
158,000
Purchase Price
(in millions)
$
$
$
$
22.5 (1)
6.5
83.7 (2)
189.2 (3)
(1) Approximately $0.6 million and $0.4 million of net assets acquired were allocated to other assets for "above market leases,"
and other liabilities for "below market leases," respectively.
(2) Approximately $2.0 million and $0.4 million of net assets acquired were allocated to other assets for "above market leases,"
and other liabilities for "below market leases," respectively.
(3) These acquisitions were completed through a newly formed joint venture, for which we own a 90% interest. The purchase
price includes new and assumptions of mortgage debt totaling approximately $98.0 million. This property includes 123
residential units in addition to the GLA in the table above. Approximately $3.6 million and $8.1 million of net assets
acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases,"
respectively.
2019 Property Dispositions
On December 11, 2019, we received $154.7 million in net proceeds related to the sale under the threat of condemnation of 11.7
acres of San Antonio Center to a local school district ("the condemning authority"). As part of the transaction, the condemning
authority will commence condemnation proceedings in order to terminate all existing leases they assumed at closing. We have
indemnified the condemning authority for all costs incurred related to the condemnation proceedings including any payments
required to tenants at the property and expect the process will take several years to complete. The consideration in the
transaction is considered variable because we have agreed to indemnify the condemning authority for these costs.
Consequently, at December 31, 2019, we recorded a liability of $45.5 million to reflect our estimate of the final consideration,
net of estimated condemnation proceeding costs and other transaction related costs. The resulting net gain on sale was
approximately $85.1 million.
During the year ended December 31, 2019, we sold three properties and one land parcel for a net sales price of $149.0 million,
which resulted in a net gain of $28.3 million.
F-18
During the year ended December 31, 2019, we closed on the sale of 43 condominium units at our Assembly Row and Pike &
Rose properties (combined), received proceeds net of closing costs of $20.1 million, and recognized a gain of $2.6 million, net
of income taxes. The cost basis for the remaining condominium units as of December 31, 2019 is $1.7 million, and is included
in "assets held for sale" on our consolidated balance sheet.
NOTE 4—ACQUIRED IN-PLACE LEASES
Acquired lease assets comprise above market leases where we are the lessor and below market leases where we are the lessee.
Acquired lease liabilities comprise below market leases where we are the lessor and above market leases where we are the
lessee. As a lessor, acquired above market leases are included in prepaid expenses and other assets, and acquired below market
leases are included in other liabilities and deferred credits. In accordance with our adoption of ASC Topic 842, acquired below
market leases and acquired above market leases where we are the lessee are included in right of use assets. The following is a
summary of our acquired lease assets and liabilities:
Above market leases, lessor
Below market leases, lessee
Total
Below market leases, lessor
Above market leases, lessee
Total
December 31, 2020
December 31, 2019
Cost
Accumulated
Amortization
Cost
Accumulated
Amortization
$
$
$
$
43,560
34,604
78,164
$
$
(174,582) $
(9,084)
(183,666) $
(in thousands)
(31,661) $
(4,190)
(35,851) $
68,286
2,116
70,402
$
$
48,530
34,604
83,134
$
$
(177,512) $
(9,084)
(186,596) $
(32,833)
(3,362)
(36,195)
66,419
1,590
68,009
The value allocated to in-place leases where we are the lessor 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. The related amortization of in-place leases where we are the lessee is reflected as additional rental
expense for below market leases or a reduction of rental expenses for above market leases in the consolidated statements of
comprehensive income. The following is a summary of acquired lease amortization:
Amortization of above market leases, lessor
Amortization of below market leases, lessor
Net increase in rental income
Amortization of below market leases, lessee
Amortization of above market leases, lessee
Net increase in rental expense
Year Ended December 31,
2020
2019
(in thousands)
2018
(4,060) $
8,406
4,346
$
828
(525)
303
$
$
(3,239) $
9,623
6,384
$
828
(525)
303
$
$
(5,608)
12,445
6,837
828
(505)
323
$
$
$
$
The following is a summary of the remaining weighted average amortization period for our acquired lease assets and acquired
lease liabilities:
Above market leases, lessor
Below market leases, lessee
Below market leases, lessor
Above market leases, lessee
December 31, 2020
3.5 years
38.6 years
17.8 years
13.4 years
The amortization for acquired in-place leases during the next five years and thereafter, assuming no early lease terminations, is
as follows:
F-19
Year ending December 31,
2021
2022
2023
2024
2025
Thereafter
Acquired Lease
Assets
Acquired Lease
Liabilities
(In thousands)
$
$
3,302
2,637
2,439
2,189
1,911
29,835
42,313
$
$
7,738
7,501
7,253
6,784
6,300
77,688
113,264
F-20
NOTE 5—DEBT
The following is a summary of our total debt outstanding as of December 31, 2020 and 2019:
Description of Debt
Mortgages payable
The Shops at Sunset Place
29th Place
Sylmar Towne Center
Plaza Del Sol
THE AVENUE at White Marsh
Montrose Crossing
Azalea
Bell Gardens
Plaza El Segundo
The Grove at Shrewsbury (East)
Brook 35
Hoboken (24 Buildings)
Various Hoboken (14 Buildings)
Chelsea
Hoboken (1 Building)
Subtotal
Net unamortized premium and debt issuance
costs
Total mortgages payable
Notes payable
Term loan
Revolving credit facility
Various
Subtotal
Net unamortized debt issuance costs
Total notes payable
Senior notes and debentures
2.55% notes
3.00% notes
2.75% notes
3.95% notes
1.25% notes
7.48% debentures
3.25% notes
6.82% medium term notes
3.20% notes
3.50% notes
4.50% notes
3.625% notes
Subtotal
Principal Balance as of
December 31,
2020
2019
Stated Interest
Rate as of
December 31, 2020
Stated Maturity Date
as of
December 31, 2020
$
(Dollars in thousands)
— $
—
16,236
8,041
52,705
65,596
40,000
12,408
125,000
43,600
11,500
56,450
32,705
5,234
16,560
486,035
61,987
3,878
16,630
8,230
52,705
67,492
40,000
12,677
125,000
43,600
11,500
56,450
24,627
5,597
16,874
547,247
(1,924)
484,111
(1,568)
545,679
5.62 %
5.91 %
5.39 %
5.23 %
3.35 %
4.20 %
3.73 %
4.06 %
3.83 %
3.77 %
4.65 %
LIBOR + 1.95%
September 1, 2020
January 31, 2021
June 6, 2021
December 1, 2021
January 1, 2022
January 10, 2022
November 1, 2025
August 1, 2026
June 5, 2027
September 1, 2027
July 1, 2029
December 15, 2029
Various (1) Various through 2029
January 15, 2031
July 1, 2042
5.36 %
3.75 %
— LIBOR + 1.35%
— LIBOR + 0.775%
May 6, 2021
January 19, 2024
11.31 % Various through 2028
400,000
—
3,270
403,270
(494)
402,776
—
—
275,000
600,000
400,000
29,200
475,000
40,000
400,000
400,000
550,000
250,000
3,419,200
3,843
3,843
(62)
3,781
250,000
250,000
275,000
300,000
—
29,200
475,000
40,000
400,000
—
550,000
250,000
2,819,200
2.55 %
3.00 %
2.75 %
3.95 %
1.25 %
7.48 %
3.25 %
6.82 %
3.20 %
3.50 %
4.50 %
3.625 %
January 15, 2021
August 1, 2022
June 1, 2023
January 15, 2024
February 15, 2026
August 15, 2026
July 15, 2027
August 1, 2027
June 15, 2029
June 1, 2030
December 1, 2044
August 1, 2046
Net unamortized discount and debt issuance
costs
Total senior notes and debentures
Total debt
_____________________
(14,712)
3,404,488
(12,066)
2,807,134
$ 4,291,375
$ 3,356,594
1)
The interest rates on these mortgages range from 3.91% to 5.00%.
In connection with the two buildings we acquired in Hoboken, New Jersey on February 12, 2020, we assumed two mortgage
loans with a net face amount of $8.9 million and a fair value of $9.0 million. The mortgage loans bear interest at 4.00% and
mature on July 27, 2027.
F-21
In March 2020, in order to strengthen our financial position and balance sheet, to maximize our liquidity, and to provide
maximum financial flexibility to continue our business initiatives as the effects of COVID-19 continue to evolve, we borrowed
$990.0 million under our revolving credit facility, representing a draw-down of almost the entirety of our $1.0 billion revolving
credit facility. This amount was subsequently repaid when we entered into a $400.0 million unsecured term loan on May 6,
2020 and issued $700.0 million of fixed rate unsecured senior notes on May 11, 2020.
The unsecured term loan matures on May 6, 2021, plus one twelve month extension at our option, and bears interest at LIBOR
plus 135 basis points based on our current credit rating. Our net proceeds from this transaction after underwriting fees and other
costs were $398.7 million.
The $700.0 million of unsecured senior notes issued in May 2020 comprise a $300.0 million reopening of our 3.95% senior
notes maturing on January 15, 2024 and a $400.0 million issuance of 3.50% senior notes maturing on June 1, 2030. The 3.95%
senior notes were offered at 103.257% of the principal amount with a yield to maturity of 2.944%, and have the same terms and
are of the same series as the $300.0 million senior notes issued on December 9, 2013. The 3.50% senior notes were offered at
98.911% of the principal amount with a yield to maturity of 3.630%. Our net proceeds from these transactions after the net
issuance premium, underwriting fees, and other costs were $700.1 million.
On September 1, 2020, the $60.6 million non-recourse mortgage loan on The Shops at Sunset Place matured and was not
repaid. The lender declared the loan in default until the non-recourse loan was repaid as part of the sale of the property on
December 31, 2020. The default did not trigger a cross default with any other indebtedness. The repayment amount including
accrued interest and fees, net of $4.5 million of escrows held by the lender was $58.5 million.
On October 13, 2020, we issued $400.0 million of fixed rate senior unsecured notes that mature on February 15, 2026 and bear
interest at 1.25%. The notes were offered at 99.339% of the principal amount with a yield to maturity of 1.379%. The net
proceeds of the notes, or "green bonds," after issuance discount, underwriting fees, and other costs were approximately $394.2
million, and will be allocated to the financing and refinancing of recently completed and future eligible green projects, which
includes (i) investments in acquisitions of buildings; (ii) building developments or redevelopments; (iii) renovations in existing
buildings; and (iv) tenant improvement projects, in each case that have received, or are expected to receive, in the three years
prior to the issuance of the notes or during the term of the notes, a LEED Silver, Gold, or Platinum certification (or
environmentally equivalent successor standards). Net proceeds allocated to previously incurred costs associated with eligible
green projects will be available for repayment of indebtedness.
On December 15, 2020, we repaid our $250.0 million 2.55% notes prior to the original maturity date of January 15, 2021 at par.
The redemption price of $252.7 million included accrued but unpaid interest of $2.7 million.
On December 31, 2020, we repaid our $250.0 million 3.00% notes prior to the original maturity date of August 1, 2022. The
redemption price of $263.5 million included a make-whole premium of $10.4 million and accrued but unpaid interest of $3.1
million. The "early extinguishment of debt" charge in 2020 of $11.2 million includes the make-whole premium and the write
off of the unamortized discount and debt issuance fees.
On December 31, 2020, we also repaid the $3.6 million mortgage loan on 29th Place, at par, prior to its original maturity date.
During 2020, 2019 and 2018, the maximum amount of borrowings outstanding under our revolving credit facility was $990.0
million, $116.5 million and $177.0 million, respectively. The weighted average amount of borrowings outstanding was $138.5
million, $26.8 million and $83.1 million, respectively, and the weighted average interest rate, before amortization of debt fees,
was 1.5%, 3.2% and 2.7%, respectively. The revolving credit facility requires an annual facility fee of $1.0 million. At
December 31, 2020 and 2019, our revolving credit facility had no balance outstanding.
Our revolving credit facility, term loan, 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, 2020, we were in compliance with all default related debt covenants.
F-22
Scheduled principal payments on mortgages payable, notes payable, senior notes and debentures as of December 31, 2020 are
as follows:
Year ending December 31,
2021
2022
2023
2024
2025
Thereafter
Mortgages
Payable
Notes
Payable
Senior Notes and
Debentures
Total
Principal
$
$
28,101
119,706
3,549
3,688
48,033
282,958
486,035
(In thousands)
$
400,676 (1)
$
751
765
656 (2)
333
89
— $
—
275,000
600,000
—
428,777
120,457
279,314
604,344
48,366
2,544,200
2,827,247
$
403,270
$
3,419,200
$
4,308,505
(3)
_____________________
(1) Our $400.0 million term loan matures on May 6, 2021 plus one twelve month extension, at our option.
(2) Our $1.0 billion revolving credit facility matures on January 19, 2024, plus two six-month extensions at our option. As
of December 31, 2020, there was no outstanding balance under this credit facility.
(3) The total debt maturities differ from the total reported on the consolidated balance sheet due to the unamortized net
premium/discount and debt issuance costs on mortgage loans, notes payable, and senior notes as of December 31,
2020.
NOTE 6—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, 2020
December 31, 2019
Carrying
Value
Fair Value
Carrying
Value
Fair Value
(In thousands)
Mortgages and notes payable....................................................... $
886,887
Senior notes and debentures......................................................... $ 3,404,488
$
879,390
$
549,460
$
562,049
$ 3,761,465
$ 2,807,134
$ 3,001,216
As of December 31, 2020, we have two interest rate swap agreements with notional amounts of $56.5 million that are measured
at fair value on a recurring basis. The interest rate swap agreements fix the interest rate on $56.5 million of mortgage payables
at 3.67% through December 15, 2029. 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, 2020 was a liability of $4.7 million and
is included in "prepaid expenses and other assets" on our consolidated balance sheet. During 2020, the value of our interest rate
F-23
swaps decreased $4.8 million (including $0.7 million reclassified from other comprehensive loss to interest expense). A
summary of our financial (liabilities) assets that are measured at fair value on a recurring basis, by level within the fair value
hierarchy is as follows:
December 31, 2020
December 31, 2019
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
(In thousands)
Interest rate swaps.................... $
— $ (4,711) $
— $ (4,711) $
— $
130
$
— $
130
One of our equity method investees has two interest rate swaps which qualify as cash flow hedges. At December 31, 2020 and
December 31, 2019, our share of the decrease in fair value of the related swaps included in "accumulated other comprehensive
loss" was $0.5 million and $0.9 million, respectively.
NOTE 7—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 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.
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.
On December 17, 2020, we acquired one of our partner's preferred and common interests in the partnership that owns our Plaza
El Segundo property for $7.3 million, bringing our ownership to approximately 78.2%.
On December 11, 2019, we received proceeds related to the sale under the threat of condemnation at San Antonio Center as
discussed in Note 3 to the consolidated financial statements. We have indemnified the condemning authority for all costs
incurred related to the condemnation proceedings including any payments required to tenants at the property and expect the
process will take several years to complete. During 2020, we incurred $12.9 million of net payments to tenants, and
consequently, at December 31, 2020, we have a liability of $32.6 million to reflect our estimate of the remaining consideration.
At December 31, 2020 and 2019, our reserves for general liability costs were $4.6 million and $3.0 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 2020 and 2019, we made payments from these reserves of
$0.8 million and $1.3 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, 2020, we had letters of credit outstanding of approximately $4.7 million.
F-24
As of December 31, 2020 in connection with capital improvement, development, and redevelopment projects, the Trust has
contractual obligations of approximately $356.1 million.
We are obligated under operating lease agreements on several shopping centers and one office lease requiring minimum annual
payments as follows, as of December 31, 2020:
Year ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total future minimum operating lease payments
Less amount representing interest
Operating lease liabilities
(In thousands)
$
$
$
5,077
5,197
5,243
5,213
5,084
175,387
201,201
(128,760)
72,441
Future minimum lease payments and their present value for properties under finance leases as of December 31, 2020, are as
follows:
Year ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total future minimum finance lease payments
Less amount representing interest
Finance lease liabilities
(In thousands)
$
$
5,800
5,810
60,013
1,013
1,013
80,837
154,486
(82,437)
72,049
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, a minority partner has the right to require us and the other
minority partner to purchase its 26.63% interest in Congressional Plaza at the interest’s then-current fair market value. If the
okother 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, 2020, our estimated maximum liability upon exercise of the put option would
range from approximately $69 million to $72 million.
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.
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, 2020, our estimated maximum liability upon exercise of the put option would range from
approximately $28 million to $35 million.
F-25
The other member in The Grove at Shrewsbury and Brook 35 has the right to require us to purchase all of its approximately
4.1% interest in The Grove at Shrewsbury and approximately 6.5% 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, 2020, our estimated maximum liability
upon exercise of the put option would range from $6 million to $7 million.
Effective September 18, 2023, the other member in Hoboken has the right to require us to purchase all of its 10.0% ownership
interest at the interest's then-current fair market value. Based on management's current estimate of fair market value as of
December 31, 2020, our estimated maximum liability upon exercise of the put option would range from $5 million to $6
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 744,617 downREIT operating partnership units are
outstanding which have a total fair value of $63.4 million, based on our closing stock price on December 31, 2020.
NOTE 8—SHAREHOLDERS’ EQUITY
We have a Dividend Reinvestment Plan (the “Plan”), whereby shareholders may use their dividends and optional cash
payments to purchase shares. In 2020, 2019 and 2018, 24,491 shares, 15,909 shares and 17,952 shares, respectively, were
issued under the Plan.
As of December 31, 2020, 2019, and 2018, we had 6,000,000 Depositary Shares outstanding, each representing 1/1000th
interest of 5.0% Series C Cumulative Redeemable Preferred Share, par value $0.01 per share ("Series C Preferred Shares"), at
the liquidation preference of $25.00 per depositary share (or $25,000 per Series C Preferred share). The Series C Preferred
Shares accrue dividends at a rate of 5.0% of the $25,000 liquidation preference per year and are redeemable at our option on or
after September 29, 2022. Additionally, they are not convertible and holders of these shares generally have no voting rights,
unless we fail to pay dividends for six or more quarters.
As of December 31, 2020, 2019, and 2018, 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 7, 2018, 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 $400.0 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, 2020, we issued 1,080,804 common shares at a weighted average price per share of $92.51 for net cash proceeds
of $98.8 million including paying $1.0 million in commissions and $0.1 million in additional offering expenses related to the
sales of these common shares. For the year ended December 31, 2019, we issued 1,069,699 common shares at a weighted
average price per share of $134.71 for net cash proceeds of $142.7 million and paid $1.2 million in commissions and $0.2
million in additional offering expenses related to the sales of these common shares. As of December 31, 2020, we had the
capacity to issue up to $28.4 million in common shares under our ATM equity program.
NOTE 9—DIVIDENDS
The following table provides a summary of dividends declared and paid per share:
Year Ended December 31,
2020
2019
2018
Declared
Common shares...................................................................... $ 4.220
5.417% Series 1 Cumulative Convertible Preferred shares... $ 1.354
5.0% Series C Cumulative Redeemable Preferred shares (1) $ 1.250
Paid
Declared
Paid
Declared
Paid
$ 4.210
$ 4.140
$ 4.110
$ 4.040
$ 4.020
$ 1.354
$ 1.354
$ 1.354
$ 1.354
$ 1.354
$ 1.250
$ 1.250
$ 1.250
$ 1.250
$ 1.306
(1) Amount represents dividends per depositary share, each representing 1/1000th of a share.
F-26
A summary of the income tax status of dividends per share paid is as follows:
Common shares
Ordinary dividend
Return of capital
Ordinary dividend eligible for 15% rate
5.417% Series 1 Cumulative Convertible Preferred shares
Ordinary dividend
Ordinary dividend eligible for 15% rate
5.0% Series C Cumulative Redeemable Preferred shares
Ordinary dividend
Ordinary dividend eligible for 15% rate
Year Ended December 31,
2020
2019
2018
$
$
$
$
$
$
3.452
0.758
—
4.210
1.354
—
1.354
1.250
—
1.250
$
$
$
$
$
$
4.110
—
—
4.110
1.354
—
1.354
1.250
—
1.250
$
$
$
$
$
3.859
—
0.161
4.020
1.300
0.054
1.354
1.254
0.052
1.306
On November 5, 2020, the Trustees declared a quarterly cash dividend of $1.06 per common share, payable January 15, 2021 to
common shareholders of record on January 4, 2021.
NOTE 10— LEASES
At December 31, 2020, our 101 predominantly retail shopping center and mixed-use properties are located in 11 states and the
District of Columbia. There are approximately 2,800 commercial leases and 2,700 residential leases. Our commercial tenants
range from sole proprietorships to national retailers and corporations. At December 31, 2020, no one tenant or corporate group
of tenants accounted for more than 3.6% 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,
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, 2020, future minimum rentals from noncancelable commercial operating leases (excluding both tenant
reimbursements of operating expenses and percentage rent based on tenants' sales) are as follows:
Year ending December 31,
2021
2022
2023
2024
2025
Thereafter
(In thousands)
$
586,082
549,529
486,269
421,945
349,671
1,493,377
$ 3,886,873
F-27
The following table provides additional information on our operating and finance leases where we are the lessee:
LEASE COST:
Finance lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Operating lease cost
Variable lease cost
Total lease cost
OTHER INFORMATION:
ROU assets obtained in exchange for operating lease liabilities
ROU assets obtained in exchange for finance lease liabilities
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for finance leases
Operating cash flows for operating leases
Financing cash flows for finance leases
Weighted-average remaining term - finance leases
Weighted-average remaining term - operating leases
Weighted-average discount rate - finance leases
Weighted-average discount rate - operating leases
NOTE 11—COMPONENTS OF RENTAL EXPENSE
The principal components of rental expenses are as follows:
Repairs and maintenance
Utilities
Management fees and costs
Payroll
Insurance
Marketing
Ground rent
Bad debt (1)
Other operating (2)
Total rental expenses
_____________________
$
$
Year Ended December 31,
2020
2019
(In thousands)
$
$
1,284
5,826
5,946
353
13,409
855
—
5,736
5,498
46
1,284
5,824
6,063
487
13,658
—
—
5,759
5,561
47
Year Ended December 31,
2020
2019
17.3 years
53.4 years
8.0 %
4.4 %
18.2 years
53.7 years
8.0 %
4.5 %
Year Ended December 31,
2020
2019
2018
$
$
66,845
25,065
23,752
16,691
12,439
6,432
4,595
—
15,101
170,920
(In thousands)
73,179
$
27,729
24,930
16,485
9,036
7,427
4,803
—
24,242
187,831
$
$
$
67,745
27,635
24,024
16,140
7,547
7,935
4,697
4,708
12,663
173,094
(1) Collectibility adjustments are now presented as a reduction of rental income rather than rental expense in accordance
with our adoption of the new lease standard in 2019.
(2) Other operating for the year ended December 31, 2019 includes an $11.9 million charge relating to the buyout of a
lease at Assembly Square Marketplace.
F-28
NOTE 12—SHARE-BASED COMPENSATION PLANS
A summary of share-based compensation expense included in net income is as follows:
Grants of common shares and options
Capitalized share-based compensation
Share-based compensation expense
Year Ended December 31,
2020
2019
2018
(In thousands)
$
$
13,243
(1,319)
11,924
$
$
13,330
(1,054)
12,276
$
$
12,736
(1,017)
11,719
As of December 31, 2020, we have grants outstanding under two share-based compensation plans. In May 2020, our
shareholders approved the 2020 Performance Incentive Plan ("the 2020 Plan"), which authorized the grant of share options,
common shares, and other share-based awards for up to 1,750,000 common shares of beneficial interest. Our 2010 Long Term
Incentive Plan, as amended (the "2010 Plan”), which expired in May 2020, authorized the grant of share options, common
shares and other share-based awards for up to 2,450,000 common shares of beneficial interest.
Option awards under the 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 the plan generally vest over three to seven 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 based on
the closing trading price of our common shares on the grant date. No options were granted in 2020 and 2019.
The following table provides a summary of the assumptions used to value options granted in 2018:
Volatility
Expected dividend yield
Expected term (in years)
Risk free interest rate
The following table provides a summary of option activity for 2020:
Year Ended
December 31,
2018
18.0 %
3.6 %
7.5
2.8 %
Outstanding at December 31, 2019
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2020
Exercisable at December 31, 2020
Shares
Under
Option
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual Term
Aggregate
Intrinsic
Value
(In years)
(In thousands)
682
—
—
—
682
546
$
$
$
152.34
—
—
—
152.34
152.34
5.1 $
5.1 $
—
—
The weighted-average grant-date fair value of options granted in 2018 was $14.42 per share, which were later forfeited during
2018. The total cash received from options exercised during 2018 was $4.6 million. The total intrinsic value of options
exercised during the year ended December 31, 2018 was $8.2 million.
The following table provides a summary of restricted share activity for 2020:
F-29
Unvested at December 31, 2019
Granted
Vested
Forfeited
Unvested at December 31, 2020
Shares
Weighted-Average
Grant-Date Fair
Value
220,578
116,351
(101,651)
(2,100)
233,178
$
$
129.78
124.55
129.39
131.78
127.32
The weighted-average grant-date fair value of stock awarded in 2020, 2019 and 2018 was $124.55, $133.30 and $112.88,
respectively. The total vesting-date fair value of shares vested during the year ended December 31, 2020, 2019 and 2018, was
$12.4 million, $13.0 million and $9.7 million, respectively.
As of December 31, 2020, there was $17.0 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 5.3 years with a weighted-average period of 2.1 years.
Subsequent to December 31, 2020, common shares were awarded under various compensation plans as follows:
Date
January 4, 2021
February 10, 2021
February 10, 2021
Award
9,928 Shares
137,210 Restricted Shares
3,658 Options
Vesting Term
Beneficiary
Immediate
3-5 years
5 years
Trustees
Officers and key employees
Officers and key employees
Additionally, on February 10, 2021, 10,441 restricted stock units were awarded to an officer that vest at the end of four years.
The final awards earned are based on meeting certain market based performance criteria, and may vary from 0% to 200% of the
original award.
NOTE 13—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 $19,500 for 2020, $19,000 for
2019, and 18,500 for 2018. 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.
Our expense for the years ended December 31, 2020, 2019 and 2018 was approximately $813,000, $764,000 and $688,000,
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, 2020 and 2019, we are liable to participants for
approximately $18.0 million and $14.7 million, respectively, under this plan. Although this is an unfunded plan, we have
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 14—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 2020, 2019, and 2018 we had 0.2 million weighted average
unvested shares outstanding, 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 682 anti-dilutive stock options in 2020, 2019, and 2018, respectively. 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.
F-30
NUMERATOR
Net income
Less: Preferred share dividends
Less: Income from operations attributable to noncontrolling interests
Less: Earnings allocated to unvested shares
Net income available for common shareholders, basic and diluted
DENOMINATOR
Weighted average common shares outstanding—basic
Stock options
Weighted average common shares outstanding—diluted
EARNINGS PER COMMON SHARE, BASIC AND DILUTED
Net income available for common shareholders
NOTE 15—SUBSEQUENT EVENTS
Year Ended December 31,
2020
2019
2018
(In thousands, except per share data)
$ 135,888
$ 360,542
$ 249,026
(8,042)
(4,182)
(992)
(8,042)
(6,676)
(1,007)
(8,042)
(7,119)
(930)
$ 122,672
$ 344,817
$ 232,935
75,515
74,766
73,274
—
—
28
75,515
74,766
73,302
$
1.62
$
4.61
$
3.18
On January 4, 2021, we acquired our partner's 20% interest in our joint venture arrangement related to the Pike & Rose hotel for
$2.3 million, and repaid the $31.5 million mortgage loan. As a result of the transaction, we gained control of the hotel portion
of this property, and effective January 4, 2021, we have consolidated this asset.
On February 5, 2021, we repaid the $16.2 million mortgage loan on Sylmar Town Center, at par, prior to its original maturity
date.
F-31
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F-37
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
Three Years Ended December 31, 2020
Reconciliation of Total Cost
(in thousands)
Balance, December 31, 2017.................................................................................................................................... $ 7,635,061
Additions during period
Acquisitions....................................................................................................................................................
Improvements.................................................................................................................................................
Deduction during period—dispositions and retirements of property...................................................................
Balance, December 31, 2018....................................................................................................................................
January 1, 2019 adoption of new accounting standard - See Note 2...................................................................
Additions during period
Acquisitions....................................................................................................................................................
Improvements.................................................................................................................................................
Deduction during period—dispositions and retirements of property...................................................................
Balance, December 31, 2019....................................................................................................................................
Additions during period
Acquisitions....................................................................................................................................................
Improvements.................................................................................................................................................
Deductions during period.....................................................................................................................................
Impairment of property...................................................................................................................................
Dispositions and retirement of property.........................................................................................................
(68,484)
(159,897)
Balance, December 31, 2020 (1).............................................................................................................................. $ 8,582,870
14,940
407,225
(237,754)
7,819,472
(71,859)
309,921
441,703
(201,105)
8,298,132
39,440
473,679
_____________________
(1) For Federal tax purposes, the aggregate cost basis is approximately $7.7 billion as of December 31, 2020.
F-38
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
Three Years Ended December 31, 2020
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, 2018....................................................................................................................................
January 1, 2019 adoption of new accounting standard - See Note 2...................................................................
Additions during period—depreciation and amortization expense......................................................................
Deductions during period—dispositions and retirements of property.................................................................
Balance, December 31, 2017.................................................................................................................................... $ 1,876,544
215,969
(33,370)
2,059,143
(18,173)
215,382
(40,939)
2,215,413
229,199
Additions during period—depreciation and amortization expense......................................................................
Deductions during period.....................................................................................................................................
Impairment of property...................................................................................................................................
Dispositions and retirements of property........................................................................................................
(11,631)
(75,289)
Balance, December 31, 2020.................................................................................................................................... $ 2,357,692
Balance, December 31, 2019
F-39
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
Year Ended December 31, 2020
(Dollars in thousands)
Column A
Column B
Column C
Column D
Column E
Column F
Column G
Column H
Description of Lien
Mortgage on
retail buildings in
Philadelphia, PA
Mortgage on retail
buildings in
Philadelphia, PA
Second mortgage
on a retail
shopping center in
Rockville, MD
Second mortgage
on a retail
shopping center in
Rockville, MD
May 2021
Interest Rate Maturity Date
8% or 10%
based on
timing of
draws, plus
participation
10% plus
participation
May 2021
11.5%
February
2026
10.75%
February
2026
Prior
Liens
$ —
Face Amount
of Mortgages
$ 21,872
Carrying
Amount
of Mortgages(1)
(2)
$ 21,082
Principal
Amount
of Loans
Subject to
delinquent
Principal
or Interest
$
21,082 (3)
—
9,250
9,250
9,250 (3)
58,750
(4)
5,075
5,075
58,750
(4)
4,500
4,485
—
—
Periodic Payment
Terms
Interest only
monthly; balloon
payment due
at maturity
Interest only
monthly;
balloon
payment due
at maturity
Interest only
monthly;
balloon
payment due
at maturity
Interest only
monthly;
balloon
payment due
at maturity
$58,750
$ 40,697
$ 39,892
$
30,332
_____________________
(1) For Federal tax purposes, the aggregate tax basis is approximately $40.7 million as of December 31, 2020. Upon the adoption of ASU
2016-13, we recorded expected losses related to these loans, and are required to do so going forward. See note 2 to the consolidated
financial statements.
(2) This mortgage is available for up to $25.0 million.
(3) The borrower was notified in October 2020 that these mortgages were in default. No interest payments were made from April through
July, and partial payments from August through December 31, 2020.
(4) These mortgages are both subordinate to a first mortgage of $58.8 million in total. We do not hold the first mortgage loan on this
property. Accordingly, the amount of the prior lien at December 31, 2020 is estimated.
F-40
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE - CONTINUED
Three Years Ended December 31, 2020
Reconciliation of Carrying Amount
(in thousands)
Balance, December 31, 2017, 2018, and 2019......................................................................................................... $
January 1, 2020 adoption of new accounting standard - See Note 2
Additions during period:
Acquisition of loans, net of valuation adjustments.........................................................................................
Issuance of loans.............................................................................................................................................
Balance, December 31, 2020.................................................................................................................................... $
30,429
(790)
9,560
693
39,892
F-41
March 25, 2021
Dear Shareholders:
With the unprecedented global health pandemic and the social unrest experienced throughout the U.S,
2020 was a difficult year for our company and for our employees,
tenants, shareholders and
communities where we do business. From the earliest stages of the pandemic, we took action to
protect the health and safety of our employees and the shoppers and residents who come to our
properties. We also worked hard with those of our tenants who have had their businesses dramatically
impacted by the pandemic to work in partnership with them to find a financial path forward where we
could both continue to have successful long-term businesses when we get to the other side of COVID.
Although there are still many challenges ahead, we believe we’ve positioned the company well to
emerge from the pandemic in a strong position and to deliver long-term success. We’re proud of the
work of our Board and our entire workforce in 2020 and look forward to sharing that with you.
On behalf of the Board of Trustees and the entire Federal team, we’d like you to join us at our 2021
Annual Meeting of Shareholders. Although we would love to be able to see everyone in person, we
believe that the continuing impacts of COVID make it more prudent for us to hold our meeting virtually.
This proxy statement includes important information for how you can join and ask questions in the
meeting and about the matters that will be voted on at the meeting.
We look forward to your participation in the meeting and want to thank you for your continued support
of Federal.
Sincerely,
Joseph S. Vassalluzzo
Non-Executive Chairman of the Board
Donald C. Wood
Chief Executive Officer
The 2021 annual meeting of shareholders of Federal Realty Investment Trust will be held:
When: Wednesday, May 5, 2021 9:00 A.M. Eastern Time
How:
Virtually at https://web.lumiagm.com/202329683
Shareholders will be permitted to ask questions during the meeting. Instructions for asking questions are
included later in this proxy statement.
Proposal
Proposal 1: Election of our seven nominees to serve as
trustees for a term of one year
Proposal 2: Consideration of an advisory vote to approve
executive compensation
Proposal 3: Ratification of the appointment of Grant
Thornton, LLP to serve as our independent
registered public accountants for fiscal year 2021
For More
Information
Page 13
Board
Recommendation
✓ For each nominee
Page 17
Page 34
✓ For
✓ For
Shareholders of record of Federal’s common shares of beneficial interest (“Shares”) (NYSE: FRT) at
the close of business on March 16, 2021 are entitled to vote at the meeting and any postponements or
adjournments of the meeting.
March 25, 2021
Dawn M. Becker
Executive Vice President,
General Counsel and Secretary
Important Notice Regarding Availability of Proxy Materials for the Shareholder Meeting to be
held on May 5, 2021:
The proxy statement and annual report to shareholders, including our annual report on Form 10K for
the year ended December 31, 2020 are available at www.federalrealty.com.
How to Vote
If you own your Shares directly with American Stock Transfer and Trust, LLC, you are a registered
shareholder and can vote in person at the Annual Meeting or by proxy without attending the Annual
Meeting through one of the following methods:
By Internet
Visit www.voteproxy.com, available 24/7
By Telephone
By Mail
Call 1-800-776-9437, available 24/7
Mark, sign and date your proxy card
If you vote by internet or telephone, you will need the control number on your Notice of Internet
Availability, proxy card or voting instruction form. Votes must be submitted by the close of the Annual
Meeting to be counted for the meeting. You may revoke your proxy at any time before it is voted at the
Annual Meeting by notifying the secretary in writing, submitting a proxy dated later than your original
proxy, or attending the Annual Meeting and voting during the webcast. We strongly recommend that
you vote your Shares in advance of
the Annual Meeting. More detailed information on how to
participate in our virtual annual meeting can be found in the “How to Vote” section on page 40.
TABLE OF CONTENTS
About Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COVID-19 Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 Company Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Responsibility and Human Capital Management
Environmental Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuing our Culture and our Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Governance
Corporate Governance Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Key Governance Policies and Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Our Board
Board of Trustees Nominee Information and Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Composition and Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building the Right Board for Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board and Committee Evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board’s Risk Management Oversight
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Interlocks and Insider Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications with the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustee Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal 1: Election of Seven Trustees
Proposal 2: Compensation of our Named Executive Officers
Compensation Discussion and Analysis
2020 Compensation Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Response to Say on Pay Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 NEO Earned Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 Compensation Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Setting Annual Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 Target Pay Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How our NEOs Were Paid for Performance in 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 NEOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Compensation Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Our 2020 NEOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants of Plan-Based Awards Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding Equity Awards at Fiscal Year-End Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Option Exercises and Stock Vested Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Qualified Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potential Payments on Termination of Employment and Change-in-Control . . . . . . . . . . . . . . . . . . . . .
CEO Pay Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Compensation Plan Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Proposal 3: Ratification of Independent Auditor
Audit Committee Report
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
Beneficial Ownership
Ownership of Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ownership of Trustees and Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information for Shareholders
Anti-Hedging Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Important Information About Voting at the 2021 Annual Meeting
Notice of Electronic Availability of Proxy Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why You Are Receiving These Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accessing Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Participate in the Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eliminating Duplicative Proxy Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder Proposals for 2022 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Appendices
Appendix A – Reconciliation of Non-GAAP Financial Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A-1
About Federal
Federal Realty Investment Trust is an S&P 500 company founded in 1962 that owns, operates and
redevelops high-quality retail based real estate located primarily in major coastal markets from
Washington, D.C. to Boston as well as San Francisco and Los Angeles. Federal’s mission is to deliver
long term, sustainable growth through investing in communities where retail demand exceeds supply.
Our expertise includes creating urban, mixed-use neighborhoods like Santana Row in San Jose,
California, Pike & Rose in North Bethesda, Maryland and Assembly Row in Somerville, Massachusetts.
These unique and vibrant environments that combine shopping, dining, living and working provide a
destination experience valued by their
respective communities. Our 101 properties include
approximately 2,800 commercial tenants, in more than 23 million square feet, and approximately 2,900
residential units.
Throughout this proxy statement, we use the terms “Federal”, “Company”, “we”, “our” and “us” to refer
to Federal Realty Investment Trust and the terms “Board” and “Trustees” to refer to the Board of
Trustees of Federal Realty Investment Trust and individual members of the Board.
Summary Information
COVID-19 Response
The Company devoted a substantial amount of time and effort in 2020 to responding to the human and
financial impact of the COVID-19 pandemic while maintaining the focus on positioning the Company for
long-term future growth after the impacts of COVID-19 have dissipated. From the outset of
the
pandemic, the Company took actions to protect and assist our employees, our tenants, visitors to our
properties and the communities in which we do business and to respond to the business impact from
the pandemic.
Our Employees: Throughout the entirety of the pandemic, we maintained our full workforce with no
layoffs, furloughs or modifications to employee compensation or benefits. We quickly transitioned
the majority of our work force to working from home and provided enhanced health, wellness and
other support resources to help everyone deal with the impacts of the pandemic.
Our Properties and Tenants: We quickly implemented health, safety and convenience measures at
our properties for the benefit of our commercial tenants and the shoppers who patronized their
businesses as well as for our residential and office tenants. We also partnered with many of our
leases where their
commercial
businesses were severely impacted by government imposed restrictions and also assisted them in
identifying and securing federal, state and local aid available to combat the impacts of COVID-19.
tenants by modifying the financial obligations under
their
Our Shareholders: Very quickly after the potential impact of the pandemic started to become clear,
we fully drew down our $1 billion line of credit to ensure sufficient liquidity to continue to operate
our business. We raised additional capital throughout the course of 2020 and ultimately repaid the
line of credit. We ended 2020 with a fully undrawn line of credit and $800 million of cash on our
balance sheet which we believe positions us well to weather the impacts from COVID-19 without
jeopardizing the long-term prospects of the Company.
2020 Company Performance
The COVID-19 pandemic had a significant impact on our business. Many of our tenants were unable to
fully operate their businesses for substantial portions of 2020 and as a result, those tenants were
1
unable to pay the full rent owing under their leases during 2020 which is our primary source of
revenue. We modified rent obligations under approximately 1,200 of our commercial
leases in
response to the COVID-19 pandemic as a way to help keep our tenants in business while their
operations were impacted and to maximize our rent collections. Our total revenue decreased by
approximately 11% from $935.8 million in 2019 to $835.5 million in 2020, largely the result of the
impacts of the pandemic. Although our revenues were down significantly, we were not able to reduce
operating expenses by any significant amount as we needed to continue to keep our properties
operational and safe for the essential businesses that remained open and operating in our properties
and their customers. That resulted in our property operating income declining 14% from $637.0 million
in 2019 to $545.3 million in 2020. To ensure we had sufficient liquidity to continue our business during
COVID, we raised $1.6 billion of new capital in 2020 which was in excess of our planned capital needs
for the year. As a result, we carried significant cash balances on our balance sheet during most of
2020 which adversely impacted our earnings. The combination of our decline in revenues and capital
activities were primary causes of our funds from operations per diluted share (“FFO”) decreasing to
$4.38 in 2020 from $6.17 in 2019. See our Annual Report on Form 10-K for more information on the
impact of COVID-19 on our business in 2020 and our calendar year 2020 performance.
Total Revenue
$935.8M
Property Operating
Income
$637.0M
$835.5M
$545.3M
FFO Per Share
$6.17
$4.38
2019
2020
2019
2020
2019
2020
Property operating income and FFO per share are non-GAAP financial measures that we consider
significant in our business. More information on each of these measures can be found on Appendix A.
Corporate Responsibility and Human Capital Management
Corporate responsibility is a high priority for the Company. Our focus on environmental, social and
governance principles (“ESG”) is embedded into the way we do business at every level of our
organization. We believe that we can own, operate, develop and redevelop our real estate assets
incorporating environmental and societal considerations in a way that is beneficial for our stakeholders.
Our ESG matters are governed at the highest level starting with our Nominating and Corporate
Governance Committee (“Nominating Committee”) that has direct oversight responsibility for our ESG
efforts on behalf of the Board. Internally, our ESG matters are overseen by our Executive Vice
President-General Counsel and Head of Sustainability with support from key department heads and an
interdisciplinary council made up of employees representing different functional areas, different offices
and different employee demographics.
We have aligned our ESG efforts with the United Nations Sustainable Development Goals, focusing on
the following goals where our business can have the most impact:
We require that all investments presented to our Board or internal Investment Committee address the
ESG impact of the proposed investment in alignment with these goals.
2
Environmental Sustainability
We have a long-standing commitment to owning, operating, developing and redeveloping our assets in
a way that minimizes their impact on the environment, in particular, lowering greenhouse gas (“GHG”)
emissions, over the long-term. Some of our highlights include:
Actively developing and using solar power. We have installed and own outright solar arrays
on approximately 25% of our properties with capacity to generate in excess of 13 million
kWhs of power annually. We have additional solar projects in process that are expected to
increase our capacity for on-site solar energy production to more than 15 million kWhs per
year. Our on-site solar arrays produced 13% of the electricity purchased for our properties in
2019, including providing electricity to numerous of our tenants who purchase our solar power
directly. We were ranked 4th in the real estate sector by Solar Energy Industry Association in
on-site solar capacity in 2019.1
Investing in energy reduction technology. We continue to upgrade lighting in the common
areas of our properties to LED as a way to reduce overall energy consumption. We have
focused on the common area of our properties because it is the largest contributor to energy
consumption at our properties that we as landlord can control and readily impact.
Approximately 60% of our portfolio has been upgraded in whole or in part to LED lighting with
more in process. Our efforts to improve energy efficiency led to a 12% reduction in our like for
like common area electricity consumption in the three years of 2017 through 2019.
Procuring energy from low carbon sources. We work with a third party to manage our energy
procurement strategy in regions where we can purchase energy directly from an energy
supplier rather than from the utility. In these regions, we purchase renewable energy where
available and financially viable. In 2019, 45% of the electricity we purchased at our properties
came from low carbon sources with 13% of that amount being generated by our on-site solar
arrays and the remaining 32% coming from other low carbon sources such as hydropower
and nuclear.
Supporting electrification infrastructure for automobiles. We are supporting the conversion to
electric vehicles by providing 200 EV changing stations that are currently operational on our
properties with 51 more in process.
Building and investing to minimize environmental
impact. We have invested approximately
$1 billion in 16 LEED certified projects to date with 5 more projects totaling another $1 billion
in progress. All nine of the newly constructed buildings in our Pike & Rose project have
achieved LEED certification which contributed to the entirety of Pike & Rose earning a LEED
for Neighborhood Development Stage 3 Gold certification. As part of these developments, we
purchased more than 7,000 MWh of renewal energy credits and it is estimated that our
energy usage on these buildings has been reduced by 19% from the LEED baseline which is
an estimated avoidance of 7,622 metric tons of CO2 emissions annually. Our development
and redevelopment projects also prioritize the reuse of existing materials to minimize the need
to produce and transport additional product, again minimizing our GHG emissions.
1 COVID-19 significantly impacted our operations in 2020 and a result, operating data for 2020 is not comparable. We are using
2019 data for comparability purposes.
3
Valuing Our Culture and Our Team
Having a team of dedicated and talented employees is critical to our long-term success. We take a
holistic approach to hiring, developing and retaining our employees with the tone set by the Board and
the oversight provided by our Compensation and Human Capital Management Committee
(“Compensation Committee”).
Our Culture: It starts with creating a culture that motivates, inspires and challenges our team.
The foundation of that culture is based on our four core values that guide each employee’s
approach to his or her job and also guides our interactions internally as well as with our
partners and other stakeholders:
Excellence
“Be Outstanding”
/ Strive to be best in class
/ Embrace change
/ Be determined to succeed
Integrity
“Make Us Proud”
/ Always do the right thing
/ Be trustworthy, fair and respectful
/ Value diversity in all respects
/ Value what makes us unique
Accountability
“Own It”
/ Do what you say you’re going to do
/ Take ownership of your work quality
/ Take pride in team achievements
/ Be accountable for what you do
Innovation
“Be Progressive”
/ Innovate and challenge the norm
/ Be creative
/ Take smart risks
/ Learn from setbacks
Our Talent: We invest in our talent in many ways that go beyond providing market competitive
compensation. We support the health and wellness of our employees through a wide range of
benefits that includes providing a working environment that promotes health and well-being.
Two-thirds of our office employees are located in LEED Gold certified office buildings with
ergonomically designed work-stations including those in our corporate headquarters where
we earned a Fitwel certification recognizing the high level of health and wellness features
provided in the office. Our wellness program also supports our commitment to the community
as we leverage wellness motivation with rewards that are linked to social causes that give
back to the community. We have also made significant investments in systems that not only
allow us to train employees to develop new skills but improves the quality of their work
experience by allowing them to focus their efforts on the intellectually challenging and
motivating aspects of their job instead of tedious, routine tasks and by providing them with
more flexibility performing their job to promote greater work life balance. The success in
managing our team is evident in the fact that we had a 94% retention rate in 2020 and the
average tenure of our employees is more than 8 years as of the end of 2020.
Recognition: Our efforts were recognized in 2020 by the Alliance for Workplace Excellence
with their Workplace Seal of Approval (13th consecutive year), Health & Wellness Seal of
Approval (13th consecutive year), and EcoLeadership Award (10th consecutive year). The
Alliance for Workplace Excellence is an organization that recognizes employers throughout
the United States for their exemplary commitment to building excellent places to work.
4
Corporate Governance
Federal’s corporate governance principles, guidelines and practices are designed to support consistent
financial performance and long-term value creation for our shareholders. They incorporate the
regulatory requirements under which we operate, recognized effective governance practices and the
basic structure for effective leadership and oversight by our Board and our senior management team.
Corporate Governance Framework
The functioning of the Board is guided by our Corporate Governance Guidelines which provide a
framework for governance of
the Board. The
Corporate Governance Guidelines are supplemented by committee charters and other governance
documents that are reviewed on a regular basis by the Board to ensure that they remain effective given
then-current conditions. In addition, we have adopted a Code of Ethics that applies to our senior
financial officers as required by law.
forth the responsibilities of
the Company and set
Complete copies of our Corporate Governance Guidelines, Committee Charters, Code of Business
Conduct, Code of Ethics for Senior Financial Officers and other governance documents are available in
the Investor/Corporate Governance section of our website at www.federalrealty.com.
Key Governance Policies and Practices
Some of the key governance policies and practices that govern the Company include the following:
Board Composition
Shareholder Rights
Key Policies
Our Board
✓ Independent Non-Executive Chairman since 2003
✓ Independent Committees
✓ Annual Board and Committee Evaluations
✓ Annual Individual Trustee Evaluations
✓ Annual election of Trustees
✓ Shareholder approval required to classify the Board
✓ Majority voting in uncontested elections
✓ Proxy access for shareholders (New)
✓ No poison pill
✓ Pay for performance compensation philosophy
✓ Prohibition on hedging and pledging our stock
✓ Stock ownership guidelines for Trustees and senior management
✓ Clawback policy in place
Refreshment and diversification were priorities of the Board in 2020. These efforts led to Nicole Y.
Lamb-Hale and Anthony P. Nader, III being added to the Board on September 1, 2020 to fill the
planned vacancies that would be created by the departures of Joseph S. Vassalluzzo (age 73) and Jon
E. Bortz (age 64), neither of whom are standing for reelection in 2021. Information about each of
Ms. Lamb-Hale and Mr. Nader is included below under “Proposal 1 - Election of Seven Trustees”. The
Board believed it was critical to have a significant period of time during which our new Trustees were
able to serve on the Board with all of our current Trustees in order for them to get the broadest range
of Board perspectives and insights into our business and to get up to speed as quickly as possible.
5
This is especially critical in the real estate business given that the decisions made by the Board on real
estate projects often take years to come to fruition and have long-term impacts that cannot easily be
changed. Further changes to our Board will be determined based on individual Trustee performance
evaluations and the ongoing evaluation of the skill sets of our Trustees to ensure that they provide the
full range of expertise needed to effectively carry out
their fiduciary obligations to oversee the
Company on behalf of our shareholders.
Board of Trustees Nominee Information and Statistics
The chart below provides a snapshot of information about the nominees standing for election to the
Board in 2021. It does not include information for either Mr. Vassalluzzo or Mr. Bortz who are currently
Trustees but are not standing for re-election at the 2021 shareholder meeting.
Nominee Qualifications and Information
Faeder
Holland Lamb-Hale
Nader
Ordan
Steinel
Wood
M$
C
M
C
M
M
M$
M
C$
M
2003
64
2017
55
2020
54
2020
57
2019
62
2006
64
2003
60
Qualifications/Experience
Public Company Board Service
REIT/Public Company Executive
Financial Expertise/Literacy
Real Estate Investing/Finance
Retail Industry
Human Capital Management
Corporate Responsibility Oversight
Risk Management Oversight
Committee Membership
Audit
Compensation
Nominating/Corporate Governance
Basic Information
Trustee Since
Age
Gender Diversity
Ethnic Minority
Independent
Average Tenure
(non-management
trustees)
6.5 years
Board Leadership
Positions Held by
Women
50%
Diversity
3 women
1 minority
C=Chair M=Member $=Financial Expert
Board Composition and Independence
With the addition of two new Board members in September 2020, the size of our Board was increased
from seven to nine trustees. Mr. Vassalluzzo and Mr. Bortz who have served on the Board since 2002
and 2005, respectively, will serve out their current term to the 2021 Annual Meeting but will not stand
for reelection at the meeting. At that point, assuming all nominees are elected, our Board will be
comprised of seven trustees including three women and one representative of an underrepresented
minority group. Further, two of our four Board leadership positions are held by women.
the nominee’s ability to exercise independent
Before nominating any individual to the Board whether at the annual meeting or otherwise, the Board
conducts a complete review of each potential nominee to determine whether that
is
independent. That review takes into account all relationships between us and the nominee that could
impact
judgment as well as the independence
requirements outlined in our Corporate Governance Guidelines and the New York Stock Exchange
(“NYSE”) listing manual. Our Corporate Governance Guidelines include a standard that a Trustee’s
position as a director, officer or owner of a company with which we do business does not constitute a
material relationship so long as payments made by that company do not account for more than five
percent (5%) of our gross revenues or more than ten percent (10%) of the gross revenues of that
individual
6
company. After this review, the Board determined that all of our Board members other than Mr. Ordan
and Mr. Wood are independent. In determining that Mr. Nader is independent, the Board considered
certain indirect passive investments Mr. Nader has in a small number of the Company’s tenants and
determined that such investments did not constitute a material relationship with the Company and
would not
judgment. Mr. Ordan is not
considered independent under NYSE listing standards because within the last three years, our chief
executive officer, Mr. Wood, served on the compensation committee of QCP Properties, Inc. (“QCP”)
while Mr. Ordan served as the chief executive officer of QCP. Mr. Wood’s board service at QCP ended
in July 2018 and as a result, starting in August 2021, the Board may determine that Mr. Ordan is
independent.
interfere with Mr. Nader’s ability to exercise independent
Building the Right Board for Federal
Primary responsibility for identifying and recommending individuals to be added to the Board and stand
for election by shareholders has been delegated to the Nominating Committee. The Nominating
Committee focuses on identifying individuals who have the highest personal and professional integrity,
intelligence and judgment, have proven leadership skills, are
have demonstrated exceptional
committed to our success, have the requisite skills necessary to advance our long term strategy which
is so critical in the real estate industry, and have the ability to work effectively with our Chief Executive
Officer and other members of the Board. For incumbent Trustees, the Nominating Committee also
takes into account his/her performance as a board member which is evaluated annually and the need
to periodically refresh the Board. Also critical to the consideration is ensuring there is diversity on the
Board that can bring different viewpoints to discussions reflecting their diverse backgrounds and
experiences. The Board believes that a diversity of skills, ages, tenure, gender and ethnicity are all
factors to be considered, consistent with the goal of creating a Board that best serves the needs of the
Company and our shareholders. The Board has not established any specific diversity goals but made
diversity a priority as part of the Board refreshment in 2020.
To identify, recruit and evaluate qualified candidates for the Board, the Board first looks to individuals
known to current Board members through business and other relationships. If the Board is not able to
identify qualified candidates in that way, the services of a professional search firm would be used. Both
Ms. Lamb-Hale and Mr. Nader were recommended through existing business relationships. Each
Board member met individually with Ms. Lamb-Hale and Mr. Nader before the unanimous decision was
made to add them to the Board.
Shareholders are also able to nominate individuals to stand for election to our Board by following the
procedures set forth in our Bylaws. In February 2021, the Board approved amending the Company’s
Bylaws to implement proxy access. As amended, our Bylaws permit a shareholder, or a group of up to
20 shareholders, that has continuously owned for 3 years at least 3% of the Company’s outstanding
common shares of beneficial interest to nominate and include in the Company’s annual meeting proxy
materials up to the greater of two trustees or 20% of the number of trustees serving on the Board,
provided that the shareholder(s) and the nominee(s) satisfy the requirements set forth in our Bylaws.
For further information regarding submission of a trustee nominee using the Company’s proxy access
Bylaw provision or otherwise, see the “Shareholder Proposals for 2022 Annual Meeting” section at
page 42.
The following table below summarizes certain of the key areas of experience and expertise for our
nominees that help to support our long-term business strategy and as a result are relevant when
considering candidates for election to the Board.
7
Public Company
Board Service
Provides an understanding of corporate governance practices and the dynamics and operation of a
corporate board, management accountability and protecting shareholder interests in a public company
setting
REIT/Public
Company Executive
Experience of this type gives our Board strong leadership experience across a range of corporate
governance, strategic planning, operational and management and succession issues
Financial
Expertise/Literacy
Provides our Board with the financial acumen necessary to inform its oversight of our financial
performance and reporting, internal controls and long-term strategic planning
7 nominees
3 nominees
6 nominees
Real Estate
Investing/Finance
Experience of this type gives our Board the financial acumen to oversee our capital investment decisions
which are significant and have significant impact on earnings and long-term value creation
5 nominees
Retail Industry
Experience of this type provides our Board with necessary perspective on issues facing retailers and how
they grow, finance and operate their businesses to assist the Board in evaluating potential tenant risks
which is critical to understand for our largest revenue stream
3 nominees
Human Capital
Management
Experience of this type enables trustees to make important contributions to our efforts to attract, motivate
and retain high performing employees, engage in succession planning and interact effectively with our
workforce
7 nominees
Corporate
Responsibility
Oversight
Experience of this type supports our emphasis on strong Board and management accountability,
transparency, protection of shareholder interests and long-term value creation through our ESG efforts
and otherwise
Risk Management
Oversight
Experience of this type provides our Board with the ability to identify challenges and potential disruptors
to our business and to help ensure appropriate actions are taken to mitigate risks that could significantly
impact the Company
7 nominees
7 nominees
Board Leadership
Since 2003, our Board has been operated under a structure that includes a non-executive chairman.
The Board believes that its oversight function is enhanced by having an independent trustee in that
leadership role and in a position to set the agenda for, and preside over, meetings of the Board. We
also believe that our leadership structure enhances the active participation of our independent trustees
and provides an effective way to ensure that our non-management trustees are fully informed and have
the opportunity to fully debate all important issues in order to fulfill their oversight responsibilities and
hold management accountable for the performance of
the Company. This also allows our Chief
Executive Officer to focus his time on running our day-to-day business. Our Non-Executive Chairman
presides at all meetings of
the non-management and
the Board and all executive sessions of
independent
trustees. Mr. Vassalluzzo currently serves as the Non-Executive Chairman and will
remain in that position until his term ends with the 2021 Annual Meeting. At that point, Mr. Faeder,
assuming he is elected at the Annual Meeting, will become the Non-Executive Chairman of the Board.
Board Meetings
The Board of Trustees held 7 meetings in 2020 which because of COVID-19 related restrictions, were
conducted in various combinations of in-person and video conference. On average, our Trustees
attended 98% of all meetings of the Board and 100% of all committee meetings during 2020. It is our
policy for all Trustees to attend our annual meeting of shareholders absent exceptional cause and all of
our Trustees did attend our 2020 Annual Meeting of Shareholders which was held virtually because of
COVID-19 restrictions.
8
Board Committees
The Board has three standing committees – the Audit Committee, the Compensation Committee and
the Nominating Committee. Each committee operates under a written charter that is available in the
Investors/Corporate Governance section of our website at www.federalrealty.com. Each committee
member meets the independence, experience and, with respect to the Audit Committee, the financial
literacy requirements of
the Securities and Exchange Commission (“SEC”) and our
Corporate Governance Guidelines. Over the past year, the charter of the Compensation Committee
was updated to specifically require that the committee oversee our general human resource policies
and practices for our entire workforce and the Nominating Committee charter was updated to
specifically require that committee to oversee our ESG efforts. Although these topics have always been
covered in Board meetings, the Board believes that these critical issues should have the heightened
level of attention that committees can bring to bear. Information about each of these committees is
included in the charts below:
the NYSE,
Audit Committee
Members:
Gail P. Steinel (Chair)*
Jon E. Bortz*
David W. Faeder*
Anthony P. Nader*/
# of 2020 Meetings: 4
* Qualifies as an “audit committee
financial expert” as defined by the SEC
The Audit Committee responsibilities include the following:
Š Selecting our independent auditor and approving and overseeing its work
Š Overseeing our financial reporting, including reviewing results with
management and our independent auditor
Š Overseeing our internal systems of accounting and control
Š Overseeing financial, cybersecurity and similar
risks with regular
quarterly updates on each of these topics.
/ Joined the Audit Committee on
November 4, 2020
Each member of the Audit Committee is “independent” as defined by
the SEC, the NYSE and our Corporate Governance Guidelines.
More information on the Audit Committee is included in the Audit
Committee Report and “Proposal 3: Ratification of Independent Auditor”
beginning on page 34.
Compensation and Human Capital Management Committee
Members:
The Compensation Committee responsibilities include the following:
David W. Faeder (Chair)
Elizabeth I. Holland
Nicole Y. Lamb-Hale/
Gail P. Steinel
Joseph S. Vassalluzzo
# of 2020 Meetings: 2
/ Joined the committee on
November 4, 2020
Š Reviewing and recommending compensation for our senior officers
Š Administering and making awards under our long-term incentive award plans
Š Administering other benefit programs of the Company
Š Overseeing our strategies and policies related to key human resources
policies and practices for all employees (New)
Each member of the Compensation Committee is “independent” as
defined by the NYSE and our Corporate Governance Guidelines.
The Compensation Committee Report is included at page 27 of this
proxy statement and more detail on the work of the Compensation
Committee is included in the “Compensation Discussion and Analysis”
beginning on page 18.
9
Nominating and Corporate Governance Committee
Members:
The Nominating Committee responsibilities include the following:
Elizabeth I. Holland (Chair)
Jon E. Bortz
Nicole Y. Lamb-Hale/
Anthony P. Nader/
Joseph S. Vassalluzzo
# of 2020 Meetings: 2
/ Joined the committee on
November 4, 2020
Š Recommending individuals to stand for election to the Board
Š Making recommendations regarding committee memberships
Š Overseeing our corporate responsibility and sustainability efforts
and strategy, including quarterly updates on our strategy, progress
and priorities (New)
Š Overseeing our corporate governance policies and procedures,
including Board and Trustee evaluations
Each member of
defined by the NYSE and our Corporate Governance Guidelines.
the Nominating Committee is “independent” as
Board and Committee Evaluations
The Board and each committee conducts an annual assessment of its effectiveness. The assessment is
conducted as an open discussion in the last meeting of the year and specifically addresses areas
identified in materials circulated in advance of the meeting as well as any other topic raised during the
discussion. In addition, annual evaluations are conducted for each individual trustee. That process is
conducted by the chair of the Nominating Committee who circulates a written questionnaire to each
Trustee who then completes a questionnaire evaluating the performance of each of the other Trustees.
The questionnaires are returned to the Nominating Committee chair who assembles the feedback and
has individual conversations with each Trustee about the results of his/her evaluation including identifying
any areas that need improvement. The one-on-one discussions are also used as an opportunity for any
individual Trustee to raise any other Board related topics they would like to discuss. The Non-Executive
Chairman runs this same process for the evaluation of the chair of the Nominating Committee. At the
Company’s first meeting each year, the Nominating Committee chair and the Non-Executive Chairman
provide an overview of the results of the evaluations to the entirety of the Board.
Board’s Risk Management Oversight
The Board is responsible for overseeing enterprise level risk of the Company and does so directly and
through its committees. The entire Board regularly receives updates from management on the
continued viability of our business plan, market conditions, capital position, and our business results
and specifically reviews potential business risks. Those updates were more frequent in 2020 as the
impacts of COVID-19 were assessed and the strategies and plans for operating through the pandemic
were discussed regularly. The Board reviews that information together with our quarterly and annual
financial statements and operating results and short and long-term business prospects to assess the
risks that we may encounter and to establish appropriate direction to avoid or minimize the potential
impact of the identified risks. Some of the details that are discussed as part of the Board’s review of
potential risks facing us include, without limitation:
Š the impact of market conditions on our business;
Š operational risks to the rental stream and growth potential of our properties;
Š liquidity and credit risks, including our ability to access capital to run and grow our business
and our overall cost of capital and the impact on our profitability;
Š investment risks from acquisitions and our development and redevelopment projects;
Š regulatory risks that may impact our profitability;
Š risks relating to our status as a real estate investment trust;
10
Š environmental related risks including the physical and transitional risks to the Company in
connection with climate change;
Š human capital risks particularly as it relates to our ability to attract and retain high quality
employees critical to our business;
Š cybersecurity risks; and
Š general risks inherent in the real estate industry.
During 2020, a significant portion of the risk discussions and review conducted by the Board were
focused on the impact of COVID-19 both for the short-term ability of the Company to continue its
business operations as well as the potential longer-term impacts.
Compensation Risk Assessment
In February 2021, our Compensation Committee reviewed our compensation policies and practices for
all of our employees to determine whether any of such policies or programs created any risk that is
reasonably likely to have a material adverse effect on the Company. Based on that review, the
Committee does not believe that our compensation programs encourage unnecessary or excessive
risk taking. Specifically, the incentive compensation of 94% of our employees is based solely on
corporate performance objectives. For the approximately 6% of our employees who earn all or a
portion of their compensation from commissions or bonuses earned by completing leasing transactions
or closing acquisitions, they cannot complete any deals without first obtaining approvals from either the
Board and/or one or more members of senior management whose incentive compensation is tied to
corporate performance.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Mr. Faeder, Ms. Holland, Ms. Lamb-Hale, Ms. Steinel and
the
Mr. Vassalluzzo. There are no Compensation Committee interlocks and no member of
the
Compensation Committee serves, or has in the past served, as an employee or officer of
Company.
Communications with the Board
Any shareholder or other interested party may communicate with the Board or any Trustee by sending
the communication to our corporate offices at 909 Rose Avenue, Suite 200, North Bethesda, Maryland
20852 in care of our Secretary. All communications should identify the party to whom it is being sent.
Any communication which indicates it is for the Board of Trustees or fails to identify a particular Trustee
will be deemed to be a communication intended for our Non-Executive Chairman of the Board. Our
Secretary will promptly forward to the appropriate Trustee all communications received for the Board or
any individual Trustee which relate to our business, operations, financial condition, management,
employees or similar matters. Our Secretary will not forward to any Trustee any advertising, solicitation
or similar materials.
11
Trustee Compensation
Our non-management Trustees were eligible to receive the following types and amounts of
compensation for service on the Board and its committees in 2020. No changes were made to Trustee
compensation for 2021. All amounts are prorated for any partial years of service and Shares issued are
fully vested on the grant date.
Non-Executive Chairman
Non-Management Trustees
$110,000 annual retainer paid in cash
$165,000 annual retainer paid in Shares
$80,000 annual retainer paid in cash
$120,000 annual retainer paid in Shares
Audit Committee Chair
$25,000 chair fee paid in cash
Compensation Committee Chair $15,000 chair fee paid in cash
Nominating Committee Chair
$15,000 chair fee paid in cash
In addition to the annual retainer for the Non-Executive Chairman described above, Mr. Vassalluzzo
received administrative support for both Company business and his personal use from our regional
office in Wynnewood, Pennsylvania. There were no additional fees paid or services provided to any
Trustee for service on any of the Board committees or for attendance at any Board or committee
meetings other than those described above.
The actual compensation awarded to our Trustees for service in 2020 was as follows:
Name
Jon E. Bortz
David W. Faeder
Elizabeth I. Holland
Nicole Y. Lamb-Hale(2)
Anthony P. Nader, III(2)
Mark S. Ordan
Gail P. Steinel
Joseph S. Vassalluzzo(3)
Total
Annual Retainer
All Other
Paid in Cash Paid in Shares(1) Chair Fees Compensation
Committee
$
$
$
$
$
$
$
$
$
80,000
80,000
80,000
26,667
26,667
80,000
80,000
110,000
563,333
$
$
$
$
$
$
$
$
$
120,000
120,000
120,000
40,000
40,000
120,000
120,000
165,000
845,000
$
$
$
$
$
$
$
$
$
-
15,000
15,000
-
-
-
25,000
-
55,000
$
$
$
$
$
$
$
$
-
-
-
-
-
-
8,700
8,700
$
$
$
$
$
$
$
$
$
Total
200,000
215,000
215,000
66,667
66,667
200,000
225,000
283,700
1,472,033
(1) Shares were issued on January 4, 2021 with the number of Shares received by each Trustee determined by
dividing the amount to be paid in Shares by $85.12, the closing price of our Shares on the NYSE on
December 31, 2020.
(2) Pro-rated for partial year of service beginning September 1, 2020.
(3) The amount in the “All Other Compensation” column represents the estimated value of the administrative
services we make available to Mr. Vassalluzzo. We do not believe there is any incremental cost to us of
providing this administrative support.
Trustees are required to maintain ownership of our Shares having a value equal to 5 times the amount
of their annual cash retainer. This requirement must be met within 5 years after joining the Board. As of
December 31, 2020, neither Ms. Holland, Ms. Lamb-Hale, Mr. Nader nor Mr. Ordan met the ownership
requirements. Each of these individuals joined the Board within the last 4 years and we expect each of
them to be in compliance within the 5-year time frame.
12
Proposal 1:
Election of Seven Trustees
Our Board, on recommendation of the Nominating Committee, has nominated seven of our current Trustees to
stand for election at the 2021 Annual Meeting. All Trustees elected at the meeting will hold office until the 2022
Annual Meeting of Shareholders and until their successors have been duly elected and qualified. Neither
Mr. Vassalluzzo nor Mr. Bortz will stand for re-election although both will continue to serve for the remainder of
their current terms through the 2021 Annual Meeting.
You are entitled to cast one vote per Share for each of the seven named individuals. Proxies may not be voted
for more than seven individuals. An “abstention” or “broker non-vote” will have no effect on the outcome of the
vote for this proposal. Our Bylaws require that a nominee receive a majority of votes cast in order to be
elected. Any nominee who does not receive a majority of votes cast will be required to submit a resignation to
the Nominating Committee which would then make a recommendation to the Board as to whether to accept the
resignation. The decision by the Board on any resignation would be publicly disclosed, along with the rationale
for the decision, within 90 days after the election. We believe this process is a best practice and provides
accountability to our shareholders. Over the past 5 years, each of our Trustee nominees who have been voted
on at our annual meetings in those years has received on average 96% of the votes cast.
✓ Our Board recommends a vote FOR each of the seven Trustee nominees
Information regarding our nominees, including their qualifications and principal occupations, as well as the key
experience and qualifications that led the Board to conclude each nominee should serve as a trustee, is
provided below.
David W. Faeder
Age: 64
Trustee Since: 2003
Non-Executive Chairman Elect
Federal Committees:
Š Compensation (Chair)
Š Audit
Current Public Company Boards:
Š Federal Realty
Š Arlington Asset Investment
Corp.
Background:
Mr. Faeder has been the managing partner of Fountain Square Properties since 2003 where
he focuses on the ownership, operation and development of senior housing. Prior to that, he
held various positions at Sunrise Senior Living from 1993 to 2003. Those positions included
Vice Chairman, President and Executive Vice President-Chief Financial Officer. Mr. Faeder
began his career in public accounting before moving into investment banking immediately
prior to joining Sunrise. Mr. Faeder received a BS in Business Administration from Old
Dominion University and an MBA from the Colgate Darden Graduate School of Business at
the University of Virginia. Mr. Faeder has been designated by the Board as an audit
committee financial expert in accordance with the SEC definition.
Skills and Qualifications:
Mr. Faeder has deep levels of experience in leadership,
real estate investment and
development as well as finance and accounting acquired from his time as a private investor
and as a REIT CFO coupled with his public company and accounting background. This
experience provides valuable perspective on our investment decisions, alignment of our
capital structure to support those investments and on our financial reporting.
13
Elizabeth I. Holland Federal Committees:
Nominating (Chair)
Compensation
Š
Š
Age: 55
Trustee Since: 2017
Current Public Company Boards:
Š
Š
Federal Realty
Vici Properties, Inc.
Background:
Ms. Holland is the Chief Executive Officer of Abbell Credit Corporation and Abbell Associates,
LLC, a private real estate company. She has held that position since 1997. Prior to that, she
served as a senior staff attorney on the Congressional Bankruptcy Review Commission (1996-
1997), as a business reorganization attorney at Skadden, Arps, Slate, Meagher & Flom (1993-
1996) and as a fixed income portfolio manager at Brown Brothers Harriman & Company from
(1989-1990). From 2016-2017, Ms. Holland served as the Chairman of the Board of Trustees
for the International Council of Shopping Centers and has served as a trustee for that
organization since 2004. Ms. Holland earned a BA from Hamilton College and a JD from
Brooklyn Law School. In addition to her public board service, Ms. Holland serves on the boards
of 1000 Friends of Iowa, a non-profit organization focused on responsible land use, and Primo
Center for Women & Children whose mission is to provide family shelter and permanent
supportive housing and other supportive services to homeless families in Chicago.
Skills and Qualifications:
Ms. Holland brings valuable insights into retailers and the retail industry in general from her
time in leadership positions with the International Council of Shopping Centers and her own
investing experience in retail real estate as well as a wealth of business and leadership
experience from running a private real estate company. Those perspectives are invaluable for
a retail based real estate company.
Nicole Y. Lamb-Hale Federal Committees:
Š
Š
Nominating
Compensation
Current Public Company Boards:
Š
Š
Federal Realty
Age: 54
Trustee Since: 2020
Background:
Ms. Lamb-Hale is a Managing Director at Kroll, a division of Duff & Phelps, a global provider of
risk management solutions, a position she has held since 2016. She is head of Duff & Phelps’
Washington, DC office, chairs the firm’s Committee on Foreign Investments in the US and
National Security practice and co- chairs the firm’s Educational Investigations practice. Prior to
joining Kroll, Ms. Lamb-Hale was a Senior Vice President at Albright Stonebridge Group (2013-
2016), a global strategy consultancy, and served as the Assistant Secretary of Commerce for
Manufacturing and Services in the International Trade Administration of the U.S. Department of
Commerce (2010-2013) and as the Deputy General Counsel for the U.S. Department of
Commerce (2009-2010). Ms. Lamb-Hale is a licensed attorney who began her career at law
firms (1991-2009) where she practiced in the areas of business restructuring and public
finance. Ms. Lamb-Hale earned an AB in Political Science from the University of Michigan and
a JD from Harvard Law School. In addition to her service on Federal’s Board, Ms. Lamb-Hale
serves on the boards of various non-profit groups including the American Leadership Initiative,
The Holton Arms School, Shiloh Baptist Church of Washington, D.C. and the Center for
International Private Enterprise.
Skills and Qualifications:
Ms. Lamb-Hale’s 30 years of experience, spanning the private and public sectors, in law, risk
mitigation and restructuring, coupled with her leadership skills gained from her varied executive
roles, provides the company with diverse and valuable insights as it develops and implements
its current and long-term business strategies.
14
Anthony P. Nader, III Federal Committees:
Age: 57
Trustee Since: 2020
Š
Š
Audit
Nominating
Current Public Company Boards:
Š
Š
Federal Realty
Arlington Asset
Corp.
Investment
Background:
Mr. Nader is a Managing Director of SWaN & Legend Venture Partners, an investment firm that
Mr. Nader co-founded in 2006, with investments in growth-oriented companies. Mr. Nader also
serves as Vice Chairman of Asurion, a privately held company with over 19,000 employees that
provides technology protection to approximately 300 million customers worldwide. In 2008,
Mr. Nader successfully merged his prior company, National Electronics Warranty (“NEW”) with
Asurion. Mr. Nader joined NEW in 1990 as Chief Operating Officer, was named President in
1999 and Chief Executive Officer in 2006, a position he held until 2013. Under his leadership,
NEW grew to be the largest global provider of extended service plans for the consumer
electronics and appliance industry. Mr. Nader earned a BSBA in Finance from John Carroll
University and an MBA from Weatherhead School of Management at Case Western Reserve
University. Mr. Nader also serves as the Chairman of the Inova Health System Board of
Trustees. Mr. Nader has been designated by the Board as an audit committee financial expert
in accordance with the SEC definition.
Skills and Qualifications:
Mr. Nader provides our Board with more than 30 years of business and leadership experience
as well as a deep investment background in both real estate and growth-oriented companies
including retailers. This background complements others on our Board and adds to our depth
of financial and investing expertise that is so critical to the success of the Company.
Mark S. Ordan
Age: 62
Trustee Since: 2019
Federal Committees:
Š
None
Current Public Company Boards:
Š
Š Mednax, Inc.
Federal Realty
Background:
Mr. Ordan currently serves as Chief Executive Officer of Mednax, Inc., a position he has held
since 2020. Mednax is a physician-led health care organization that partners with hospitals,
health systems and health care facilities to offer clinical services spanning the women’s and
children’s continuum of care. Prior to joining Mednax, Mr. Ordan held chairman and Chief
Executive Officer roles with Quality Care Properties, Inc. (2016-2018), Washington Prime
Group (2015-2016), Sunrise Senior Living (2008-2013), The Mills Corporation (2006-2007),
Balducci’s (2003-2006), High Noon Always (1999-2003), Chartwell Health Management
(1996-1999) and Fresh Fields Market (1989-1996). He began his career in investment
banking at Goldman Sachs in 1983. Mr. Ordan earned a BA from Vassar College and an MBA
from Harvard Business School. Previously, Mr. Ordan served on the public company boards
of VEREIT, Inc. (2015-2020), Forest City Realty Trust (2018), Quality Care Properties (2016-
2018) and Washington Prime Group (2014-2017).
Skills and Qualifications:
Mr. Ordan provides our Board with many years of leadership and governance experience from
his years of serving as CEO of multiple companies and as CEO and a director of other public
traded REITs. This is in addition to the retailing understanding he adds to the Board from his
prior experiences of founding and running multiple gourmet grocery and other food concepts.
15
Gail P. Steinel
Age: 64
Trustee Since: 2006
Federal Committees:
Š
Audit (Chair)
Š
Compensation
Current Public Company Boards:
Š
Federal Realty
Background:
Ms. Steinel
is the owner of Executive Advisors (2007-present), a business that provides
consulting services to chief executives and senior officers and leadership seminars/speeches to
various organizations. Prior to creating her own consulting firm, Ms. Steinel was the Executive
Vice President of Global Commercial Services of Bearing Point (2002-2007) and a global
managing partner for Arthur Andersen’s Business Consulting Practice (1984-2002) after
beginning her career as an auditor at Arthur Andersen (1977-1984). Ms. Steinel received a BA
in Accounting from Rutgers University. Ms. Steinel’s public company board service experience
includes MTS Systems Corporation (2009-2020).
In addition to her public board service,
Ms. Steinel also serves on the boards of DAI, an international development company that
tackles fundamental social and economic development problems caused by inefficient markets,
ineffective governance, and instability, and the Center for Hope & Safety, a nonprofit that
assists women and children suffering from domestic violence. Ms. Steinel has been designated
by the Board as an audit committee financial expert in accordance with the SEC definition.
Skills and Qualifications:
Ms. Steinel has over 35 years of experience in auditing, leadership, leadership development
and financial systems that provides us with valuable insights on leadership,
leadership
development, risk management and systems operations.
Donald C. Wood
Age: 60
Trustee Since: 2003
Federal Committees:
Š
None
Current Public Company Boards:
Š
Federal Realty
Background:
Mr. Wood currently serves as our Chief Executive Officer, a role he has held since 2003. Before
assuming that role, he served as our President (2001-2003) and held the titles of Chief
Operating Officer and Chief Financial Officer at various points from 1998-2003. Prior to joining
Federal, Mr. Wood served as the Chief Financial Officer for Caesers World, Inc. (1996-1998),
the Assistant/Deputy Controller of ITT Corporation (1990-1996), the VP of Finance for Trump Taj
Mahal Associates (1989-1990) and as an audit manager with Arthur Andersen (1982-1989).
Mr. Wood received a BS in Business Administration from Montclair State College. Mr. Wood
previously served as a director of public companies Quality Care Properties (2016-2018) and
Post Properties (2011-2016). In addition to his public company board service, Mr. Wood served
as Chairman of the Board of Trustees of the National Association of Real Estate Investment
Trusts (2011-2012) and has served on the Board of Governors of the International Council of
Shopping Centers since 2010.
Skills and Qualifications:
Mr. Wood’s 23 years of experience with Federal and his responsibilities as chief executive
officer provide the Board with familiarity and details on all aspects of operating the company.
16
Proposal 2:
Compensation of Our Named Executive Officers
You are being asked to approve on an advisory basis the compensation of our named executive officers
(“NEOs”) for 2020 as described in the Compensation Discussion and Analysis (“CD&A”) and the
Executive Compensation section that follow. This is an opportunity to express your opinion regarding the
decisions made by the Compensation Committee on the compensation of our NEOs for 2020 as required
by law; however, it will not affect any compensation already paid or awarded for 2020 and will not be
binding on the Compensation Committee, the Board or the Company. We currently ask our shareholders
to approve the compensation of our NEOs on an annual basis. The Board and our Compensation
Committee value the opinions of our shareholders and will review the results of this vote and take those
results into consideration in addressing future compensation policies and decisions.
The Board supports the overall design of the compensation program which is characterized by the
following:
Š A significant portion of our NEOs’ compensation is directly linked to our performance and the
long-term shareholder value through both our annual bonus program (1-year
creation of
performance period) and our long-term incentive plan (3-year performance period with additional
vesting).
Š
The combination of base pay, annual bonus and long-term incentives provides an appropriate
balance between short-term and long-term pay and objectives.
Š Our CEO is required to hold Shares having a value equal to at least 7.0x the amount of his base
pay and our other NEOs are required to hold Shares having a value equal to at least 2.5x the
amount of his/her base pay and annual bonus. The requirement for our CEO was increased in
2020 from its prior level. This requirement aligns our NEOs with our shareholders and incentivizes
them to act in the best long-term interests of the Company.
Š We do not provide any perquisites to our NEOs that are not widely available to our other employees
other than as described in the CD&A and the “Potential Payments on Termination of Employment and
Change-in Control” sections below.
The affirmative vote of a majority of votes cast at the Annual Meeting, in person or by proxy, is required
to approve this proposal. An “abstention” or “broker non-vote” will have no effect on the outcome of the
vote for this proposal.
✓ Our Board recommends a vote FOR the compensation of our NEOs
that
RESOLVED,
the
compensation of our NEOs as described in the CD&A and the Executive Compensation section that
follows as required by Item 402 of Regulation S-K.
the Company hereby approve, on an advisory basis,
the shareholders of
17
Compensation Discussion and Analysis
2020 Compensation Highlights
Response to Say
on Pay
Target NEO
Compensation
Annual Bonus
Long-Term Equity
Engaged with shareholders in response to failed Say on Pay vote and
retained Semler Brossy Consulting Group as our compensation consultant to
review our compensation programs in light of that vote. The Compensation
they will not make any future
Committee and the Board committed that
mid-performance period changes to performance goals or metrics under our
long-term incentive plan. No other changes were made to our compensation
programs. See “Response to Say on Pay Vote” below for a more detailed
discussion on this topic.
Made no changes to the target level of compensation for any of our NEOs.
There were no reductions or negative adjustments to pay for our NEOs or
any other employee, nor were there any furloughs or
layoffs of any
employees as part of our response to COVID-19.
Paid annual bonus at 50% of target for our CEO and 75% of target for all other
employees including our other NEOs. Although the impacts of the COVID-19
pandemic on our financial results did not make it possible to meet the annual
2020 performance goals that were established in early February 2020 before
the impacts of the pandemic were known, the Board, in consultation with our
compensation consultant, exercised discretion to pay bonuses at a reduced
rate based on the work done in 2020 to address the pandemic’s impact. See
“How our NEOS were Paid for Performance in 2020 - Annual Bonus Plan”
section starting on page 22 for a more detailed discussion of this decision.
For the 3-year performance period ended December 31, 2020, awards were
made at 100% of target based on the results achieved under the program with
no modifications or adjustments. See “How our NEOS were Paid for
Performance in 2020 – Long-Term Incentive Plan” section starting on page 24
for a more detailed discussion of this decision.
Response to Say on Pay Vote
The Say on Pay vote held in 2020 with respect to our 2019 compensation decisions yielded support
from only 42% of the votes cast on the matter. In the five annual Say on Pay votes before that (from
2015 through 2019) support for our compensation decisions averaged nearly 95% of the votes cast
which suggested there was not a systemic problem with our pay practices but rather something unique
to our 2019 pay decisions. That was confirmed through our conversations with many of our larger
shareholders including many who voted against our Say on Pay proposal. The objection we heard from
those we spoke to was that they were not supportive of our having changed performance metrics for
our
long-term incentive plan for a performance period that was in progress. Although many
acknowledged and understood why the Compensation Committee made the change and the very real
issue our Compensation Committee was trying to correct by making the change, they indicated that
they would have preferred for the Committee to have solved the problem in a different way.
18
The Compensation Committee retained Semler Brossy Consulting Group (“SBCG”) as its
compensation consultant to review our pay practices in general, to assist in developing a response to
the failed Say on Pay vote and to provide guidance on 2020 annual bonus and long-term equity plan
decisions given the impacts of COVID-19 on performance metrics. Neither the Company nor the
Compensation Committee had previously retained SBCG or used any affiliate of SBCG to perform any
other services for the Company or the Compensation Committee.
SBCG reviewed our compensation programs and pay practices and did not find anything that they
believed was problematic other than the mid-cycle change in performance metrics made for our long-
term incentive plan. The Compensation Committee committed that it would not in the future make any
changes to the performance metrics of our long-term plan mid-performance cycle and after a
significant amount of discussion and thorough review of our compensation programs with SBCG, the
Compensation Committee elected not to make any further changes to our compensation programs.
SBCG also recommended to the Compensation Committee a change to the equity holding requirement
for our CEO. Ultimately the Nominating Committee and the Board approved modifying the equity
holding requirement for our CEO and established a higher level of required ownership than what was
recommended by SBCG. This decision is described in more detail in below. SBCG also assisted in the
final decisions made by the Compensation Committee with respect to our annual bonus plan payout
and long-term equity payouts for 2020 as described in more detail below.
Separate from this engagement, the Compensation Committee retained SBCG to assist with creating
an appropriate compensation package for Mr. Jeffrey S. Berkes in connection with his promotion to
President and Chief Operating Officer. See “2021 NEOs” section starting on page 26 for more
information on that engagement.
2020 NEO Earned Compensation
The key decisions relating to compensation for our 2020 NEOs were:
Š
Š
Š
No change to base pay or total target compensation for any of our NEOs
Annual bonuses paid at 50% of target for Mr. Wood and 75% of target for all other employees,
including our other NEOs, Mr. Guglielmone and Ms. Becker
Long-term incentives paid out at 100% of target, calculated strictly in conformance the terms
of our long-term incentive plan
Those decisions resulted in a year-over-year decline in Mr. Wood’s compensation of 15% and a
decline in the compensation for each of Mr. Guglielmone and Ms. Becker by 10% from 2019 to 2020.
The following chart sets out the 2020 target compensation for each of our NEOs, the compensation
actually earned by each for 2020 based on company and individual performance for the 1- and 3-year
periods ending December 31, 2020 and a comparison of 2020 total earned compensation to 2019 total
earned compensation.
2020 Target Compensation
2020 Actual Earned Compensation
NEO
Base
Salary
Annual
Bonus
Long-Term
Incentive
Total
Base
Salary
Annual
Bonus
Long-Term
Incentive
Total 2019 Total
Don Wood
$950,000 $1,425,000 $5,000,000 $7,375,000 $950,000 $712,500 $5,000,000 $6,662,500 $7,833,417
Dan Guglielmone $500,000 $ 375,000 $ 900,000 $1,775,000 $500,000 $281,250 $ 900,000 $1,681,250 $1,864,098
Dawn Becker
$475,000 $ 356,250 $ 600,000 $1,431,250 $475,000 $267,188 $ 600,000 $1,342,188 $1,496,552
YOY
Change
-15%
-10%
-10%
The amounts shown above for the annual bonus and performance based, long-term incentive program
differ from the amounts shown for 2020 in the Summary Compensation Table because the chart above
reflects the amount earned for the year while the Summary Compensation Table reflects these
19
amounts in the year in which they are paid regardless of the time period during which those amounts
were earned. As a result, the long-term incentive awards actually earned as shown above will not be
reported in the Summary Compensation Table until next year’s proxy. We believe the chart above is
helpful because it reflects the way in which the Compensation Committee considers compensation
decisions for our NEOs and it allows the actual compensation earned for 2020 to be understood in the
context of our financial and other performance for the 1- and 3-year performance periods ending in
2020.
2020 Compensation Components
Shareholder interests are best represented by a compensation program that is properly structured to
attract, retain and motivate our executives to lead the Company effectively. Our program contains
various elements, each designed for a different purpose with the overarching goal of encouraging a
high level of current and future individual and Company performance. The chart below describes the
elements of direct total compensation we pay to our executives and their link to our business and talent
strategies.
Pay Element
Form of Payment
Link to Business and Talent Strategies
Cash
Provides current compensation to assume day-to-
day responsibilities of the position
Fixed Pay
Base Salary
A portion can be deferred into
our Deferred Compensation
Plan
Current pay level recognizes experience, skill, and
performance, with the goal of being market
competitive
Future adjustments may be based on individual
performance, pay relative to other executives,
and/or pay relative to market
Cash
Aligns pay with achieving annual business
objectives
Annual Bonus
(1 year performance period)
Up to 25% can be paid in
Shares at the executive's
election and a portion can be
deferred into our Deferred
Compensation Plan
Payouts are based on achievement of
predetermined goals, with potential for downward
adjustment to align pay with performance
At-Risk Pay
Long-Term Incentive
(3 year performance period +
3-5 year vesting period)
Common Shares
Up to 50% can be paid in
options at the executive's
election
Motivates and rewards achievement of long-term
Company performance
Aligns executive and shareholder interests
Promotes executive ownership in the Company
We also provide various retirement, health and welfare related benefits to our NEOs on the same terms
and conditions as we provide to all of our employees. These benefits are competitive with those offered
by companies with whom we compete for talent and provide another tool that allows us to attract and
retain talented executives.
Setting Annual Compensation
Annual compensation for our NEOs is paid in both cash and restricted Shares with a significant portion
at risk and contingent on achieving either annual or longer term performance goals. The total potential
20
compensation for our NEOs is established based on the scope of his/her individual responsibilities and
contributions to our performance taking into account competitive market compensation paid for similar
positions. Our Compensation Committee determines appropriate levels of total compensation for each
individual understanding, experiences and judgments in the national
NEO by applying their
marketplace of senior level real estate positions and related industry pay in both public and private
companies that may compete for our executives while also considering the relative importance of
various positions at Federal given our business plan and organization compared with the business
plans of our major competitors. The Compensation Committee also consults compensation surveys
prepared for the National Association of Real Estate Investment Trusts (“NAREIT Survey”) to confirm
its assessment of appropriate market compensation for our NEOs, reviewing the information reported
for each position by the 112 real estate investment trusts (“REITs”) that participated in the latest survey
as well as by the approximately 25 retail focused REITs that participated in that survey. In addition, in
finalizing decisions for 2020 with respect to annual bonus payouts and payouts under our long-term
incentive plan, the Compensation Committee consulted with SBCG.
Using the three components of compensation, their knowledge and experience in the marketplace and
the NAREIT Survey information, the Compensation Committee establishes an individual compensation
package for each NEO setting the target level of potential compensation at or slightly below market
level compensation for that NEO. The purpose of setting target compensation at or below market is to
further incentivize our NEOs to achieve the highest level of performance under our incentive programs
with the expectation being that superior company performance will result in our NEOs being paid
slightly above market compensation levels. The Compensation Committee believes that using
performance based compensation as a way to pay our NEOs above market compensation levels helps
us attract and retain the quality talent that is necessary to successfully run a business such as ours
with a more diverse set of property types and tenants than other shopping center companies.
2020 Target Pay Mix
The Committee designs the compensation program to be heavily performance based. The following
charts depict the target compensation mix for Mr. Wood and the average of the target compensation
mix for our other 2020 NEOs.
Mr. Wood
Average for Other 2020 NEOs
Base Salary
(fixed)
13%
Annual Cash
Bonus
19%
Restricted Stock
(long-term equity
incentive)
68%
8
7
%
“
At-Risk” Perfor m a n c e L i n
k e d
21
Base Salary
(fixed)
30%
Restricted Stock
(long-term equity
incentive)
47%
Annual Cash
Bonus
23%
7
0
% “
At-Risk” Perf o r m a n c
e L i n k e d
How our NEOS were Paid for Performance in 2020
Annual Bonus Plan
The annual bonus plan is an annual cash incentive program with payment under the plan contingent on
our achieving FFO per diluted Share within a range set by the Compensation Committee for that year.
The Compensation Committee believes that FFO per diluted Share is the appropriate measure to use
for an annual program because it reflects the impacts of operational decisions, capital allocation
the
decisions and balance sheet management
Compensation Committee set the FFO per diluted Share range for our 2020 annual bonus program at
its first meeting of the year, held on February 4, 2020, to reflect acceptable to exceptional performance
in light of our business objectives for the year after a thorough review and discussion of our budget and
considering investor expectations for the year. At that point in time, the Committee had no information
about the impact the COVID-19 pandemic would have on our business in 2020. The targets and
payout levels set by the Committee in February 2020 were as follows:
the year. Consistent with past practice,
for
Payout Level
Threshold
Target
Stretch
FFO
6.33
6.40
6.48
Payout
75%
100%
125%
$
$
$
Interpolation is used to determine the payout
percentages for results that fall between the FFO
levels shown
See Appendix A for a reconciliation of FFO to net income.
Our actual FFO achieved in 2020 was $4.38 per Share, below the threshold level for any payout under
our annual bonus plan. As discussed in the “2020 Company Performance” section beginning on
page 1, the COVID-19 pandemic had a material adverse impact on our ability to collect significant
portions of our contractual revenue stream given that many of our retail tenants were required to close
or significantly limit their operations for substantial portions of time in 2020 and as a result, they were
unable to pay their full contractual rent. This was particularly pronounced in the populous markets in
which we do business, many of which were the first to close businesses, imposed some of the most
stringent limitations on tenants’ ability to operate and generate revenue and were some of the last to
open and lift operating restrictions. Despite these impacts on our business, the Committee determined
that not paying any bonus would not be appropriate given the extraordinary work done by the
executives and the entire team to guide the Company through the COVID challenges of 2020 and
achieve the objectives the Board required management to focus on as the impacts of the pandemic
22
became clearer. The objectives the Board set in April 2020 to respond to the COVID pandemic and to
focus the team’s efforts throughout the year and what was accomplished are set forth below:
Objective
Ensure sufficient liquidity to operate
until impacts of COVID passed
Maximize property revenue
Achievements
• Modified line of credit to ensure continued ability to draw funds
• Raised $1.5 billion of debt including our first green bond issuance
• Completed sale of 3 properties for gross sales price of $170 million
• Raised approximately $100 million of equity
• Maintained significant cash balances in 2020 to ensure liquidity for the
business
Increased monthly collection rates from 53% in April to 84% in December
•
• Negotiated modified rent deals on approximately 1,200 leases to assist
tenants through COVID
• Modified property operating plans to decrease expenditures where possible
Position the Company for success
post-COVID
•
Identified and obtained approval for improvements to 10 properties to
support current and future leasing efforts
Protect health and wellness of
employees and patrons
• Completed new and renewal leases for retail spaces for approximately
1.8 million square feet
• Advanced ESG efforts with corporate responsibility report, alignment with
United Nations Sustainable Development Goals and formalization of ESG
considerations in investment decisions
• Moved to remote work for all but essential employees
• Relocated corporate headquarters to newly constructed Fitwel certified space
• Provided safety features throughout our properties to protect tenants and
•
their customers
Instituted curbside pick-up throughout the portfolio to support operations of
tenants and safety of their customers
the
Based on these achievements and in consultation with our compensation consultant SBCG,
Committee exercised discretion in awarding partial bonuses notwithstanding the failure to meet the
FFO targets set pre-COVID. The Committee determined that a bonus payout equal to 50% of the
bonus target for Mr. Wood and a bonus payout equal to 75% of the bonus target for all of our other
employees who participate in this plan, including our other NEOs, was appropriate and a reasonable
link of pay to performance given the challenges the Company faced in 2020. The payout for Mr. Wood
took into account his overall leadership during the pandemic and reflected the significant impact on
Company performance. For Mr. Guglielmone,
the Committee determined the bonus payout was
appropriate given his work in ensuring sufficient liquidity for the Company to continue to operate
effectively and for Ms. Becker, the Committee considered her work in addressing legal issues with
tenants, advancing the Company’s environmental and social initiatives and relocating our corporate
headquarters.
Approximately 37% of the 268 participants in our annual bonus plan, including our NEOs, have the option
to receive up to 25% of the final bonus payout in the form of Shares that vest equally over three years
with accelerated vesting on death, disability, change in control and termination without cause.
In
consideration of the extended payment period for this portion of the bonus already earned, the employee
receives Shares valued at 120% of the portion of the annual bonus he/she elects to receive in Shares.
For 2020, Mr. Wood and Ms. Becker each elected to receive 25% of
the bonus in Shares and
Mr. Guglielmone elected to receive all of his annual bonus in cash. The cash portion of the 2020 annual
bonuses is reflected in the “Non-Equity Incentive Plan Compensation” column in the Summary
Compensation Table in this proxy statement. The portion of the annual bonus paid in Shares will be
included in the “Stock Awards” column in the Summary Compensation Table and the Grants of Plan-
Based Awards Table in next year’s proxy statement.
23
Long-Term Incentive Plan
The largest portion of compensation for our NEOs comes from our equity based long-term incentive plan.
This plan aligns the interests of our NEOs with shareholders by incentivizing our NEOs to identify and
accomplish longer-term business objectives that generate value through Share price appreciation and
dividend growth. Key aspects of the program are:
✓
✓
✓
✓
✓
Performance measured over a 3-year period with additional vesting requirements so that NEOs do
not realize full value of awards until 6 to 8 years after beginning of the performance period
Performance Period
Award
Issued
Vesting Period
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Shares
Options
the performance period has ended and the level of
No Shares or options are issued until
performance achievement has been finally determined
Performance metrics are designed to reward creation of long-term value
Paid in the form of restricted Shares; however, recipients can choose to take up to 50% of the
award in the form of options to best accomplish his/her own financial planning objectives. The
Compensation Committee believes the value of that personal choice outweighs any diminution in
retention value from the granting of options in lieu of Shares. Each of our NEOs elected have the
entire amount of the award for the performance period ending in 2020 paid in the form of restricted
Shares
Compensation Committee has the discretion to increase or decrease awards by up to 20% to
reflect individual performance. No adjustments were made to the awards for our NEOs for the
current performance period that ended in December 2020
The metrics under our long-term incentive plan for the performance period from 2018 through 2020,
together with their weighting under our plan and the payouts at various levels of performance are shown
in the following chart.
Metric
Payout Level
Weighting
50%
Threshold
100%
Target
150%
Stretch
Relative Total Return
FFO Multiple Premium
Return on Invested Capital
34%
33%
33%
Index - 5%
Index + 5%
At least 5% At least 15% At least 20%
7.50%
7.25%
7.00%
Index
Interpolation is used to determine the payout percentages for results that fall between the performance levels
shown
Relative Total Return: Directly aligns our compensation program with shareholder interests. This metric
compares our total shareholder return, taking into account Share price appreciation and assuming
reinvestment of dividends, against the total return achieved by the Bloomberg REIT Shopping Center
index (“BBRESHOP”) as a whole. The BBRESHOP is comprised of companies that own and operate
open air shopping centers whose businesses are most closely aligned with ours and face the same
general market dynamics. The Compensation Committee believes this metric is an appropriate reflection
of
the performance comparison used by investors when considering investment choices in public
shopping center companies and that the BBRESHOP is the best index to use for this comparison.
24
FFO Multiple Premium: Directly reflects how investors in the marketplace value our Shares taking into
account investors’ perception of our historical results as well as their belief in our ability to grow and
deliver profits and value in the future. It is an effective measure of long-term performance using both
history and future expectations and one that can be used to effectively evaluate the performance of the
management team. This metric compares the FFO multiple at which the Company is trading at the end of
the performance period against the average FFO multiple at which all other public shopping center
companies (other than the Company) are trading at the end of the performance period as reported by a
third party investment bank.
Return on Invested Capital: Directly reflects how effectively we have allocated our shareholders’ capital
during the 3-year performance period and incentivizes our executives to make sound,
long-term
investment decisions that will generate strong future returns for our shareholders. This metric
encompasses both the revenue and investment impact from all capital decisions including those made to
renovate our assets, develop new buildings,
improve energy efficiency and otherwise mitigate
greenhouse gas emissions from our properties, acquire and sell assets and prepare spaces for
occupancy by tenants. The required performance levels on this metric were designed to be adjusted to
reflect changing market expectations as we acquire, sell and develop assets.
The final
level of performance achieved for each metric in the long-term incentive program for the
performance period ending December 31, 2020 reflected as a percentage of target and after taking into
account program weighting is set forth below.
Metric
Weighting Performance Achieved
Payout as %
of Target
Weighted
Payout as %
of Target
Relative Total Return
FFO Multiple Premium
34% Between threshold and target
33% Above stretch
Return on Invested Capital
33% Between threshold and target
71%
150%
80%
Total Payout as Percentage of Target
24%
50%
26%
100%
Interpolation is used to determine the payout percentages for results that fall between the performance levels shown
Under our long-term incentive program, the Compensation Committee has the discretion to increase or
decrease individual awards by up to twenty percent (20%) to reflect performance or for any other reason
the Committee may choose. The Committee considered a downward adjustment
to the long-term
incentive awards given the Company’s performance in 2020 but elected not to do so. The amounts
earned under the program were heavily influenced by the Company’s performance during the two years
prior to 2020 and the Committee did not believe it was appropriate to make any adjustments to lessen
that impact, acknowledging that future payouts under the long-term plan are likely to be materially
adversely affected by the pandemic impacted years of 2020 and 2021. The Committee committed that it
will not modify the performance metrics under this program mid-performance cycle in the future.
The number of Shares actually awarded to each of our NEOs under the long-term plan is determined by
dividing the amount of the award by the closing price of our stock on the NYSE on the date the awards
are made. There is no amount included in the Summary Compensation Table or Grants of Plan-Based
Awards Table in this proxy statement for long-term incentive plan awards earned for the 2018-2020
performance period. Those amounts will be included in next year’s proxy statement. The long-term
incentive awards included in the Summary Compensation Table and the Grants of Plan-Based Awards
Table for our NEOs in this proxy statement relate to awards made in February 2020 for the 3-year
performance period ending December 31, 2019.
25
Other Benefits
We provide other health and welfare benefits to our NEOs on the same basis as we provide those
benefits to all employees. In addition to those benefits, we provide to Mr. Wood, his spouse and one of
his dependents continuation of health coverage after Mr. Wood’s termination upon death, disability,
retirement, change in control or otherwise (other than a termination with cause or resignation). This
coverage will continue as to Mr. Wood and his spouse until their death, or with respect to his spouse until
divorce, if earlier, and coverage continues for one of Mr. Wood’s dependents until death. We are required
to provide coverage of at least the same level as provided to Mr. Wood and his family at the time of his
termination and such coverage will be secondary to certain other coverages that may be available to
Mr. Wood and his family. This agreement has been in place and remained unchanged since 2008.
2021 NEOs
On February 10, 2021, the Board promoted Jeffrey S. Berkes to President and Chief Operating Officer of
the Company and he was designated as an NEO at that time for 2021. As a result, Mr. Berkes will be
included as an NEO in next year’s proxy statement. The Compensation Committee retained SBCG as its
compensation consultant
the Committee in creating a market compensation package for
Mr. Berkes that was put in place concurrently with his promotion. The compensation package approved
for Mr. Berkes has a target level of total compensation of $2.15 million consisting of base pay of
$575,000, an annual bonus target of 100% of base pay and a long-term equity target of $1 million. In
addition, the Compensation Committee approved for Mr. Berkes a $1 million award of restricted Shares
that will vest equally over 5 years and a performance award with a target of $1 million that can be earned
over a four-year period based on our performance as compared to the BBRESHOP.
to assist
Other Compensation Considerations
Equity Ownership: Each of our NEOs is required to maintain a level of ownership of equity in the
Company equal to a multiple of the sum of his or her base salary and/or annual bonus. Mr. Wood is
required to maintain an equity ownership in the Company equal to at least 7 times his annual base salary
and each of Mr. Guglielmone and Ms. Becker are required to maintain an equity ownership in the
Company equal to at least 2.5 times his/her annual base salary and bonus. The required multiple for
Mr. Wood was modified to its current level by the Board after discussions with SBCG. The Board
ultimately adopted this multiple which is greater than what was recommended by SBCG to reflect the
Board’s desire for our CEO to maintain a significant investment in the Company. Each of our NEOs was
in compliance with the equity ownership requirement as of December 31, 2020.
Risk Assessment: As described in the “Compensation Risk Assessment” section, we have concluded that
our compensation programs do not encourage excessive or unnecessary risk taking. We have in place a
clawback policy allowing us to recoup compensation paid to our NEOs on the basis of incorrect financial
statements where that NEO engaged in fraud or grossly negligent misconduct.
Timing of Equity Grants: Equity awards to our employees under our annual bonus plan and long-term
incentive plan described above are made at the Compensation Committee’s meeting that occurs in
February of each calendar year. Based on our meeting schedule the past several years, these awards
are made before we release financial results for the prior fiscal year. We have no policy that times the
granting of equity awards relative to the release of material non-public information. Equity awards to new
hires are generally made on the first day on which the employee starts work and equity awards to
employees who are promoted generally are made on the day on which the promotion has been fully
approved. All of our options are awarded at the closing price of our Shares on the NYSE on the date the
award is made. The Compensation Committee has never re-priced options, granted options with an
26
exercise price that is less than the closing price on the NYSE on the date of the grant, or granted options
which are priced on a date other than the grant date. Equity awards for Vice Presidents and above for the
3-year performance period ending on December 31, 2020 were made at the Compensation Committee’s
meeting on February 10, 2021 based on the closing price of our Shares on the NYSE on that date.
Termination and Change-in-Control Arrangements: We have agreements in place with each of our NEOs
providing for various payments and benefits to be made to them if there is a change in control or their
employment with us is terminated for certain reasons. The circumstances in which payments may be
in the “Potential
made and the potential amounts of those payments are described in more detail
Payments on Termination of Employment and Change-in-Control” section below. We believe that the
payments provided for in these agreements are reasonable and appropriate as part of
the total
compensation packages available for our named executive officers.
Deductibility of Executive Compensation in Excess of $1.0 Million: For tax years ending on or prior to
December 31, 2017, Section 162(m) of the Internal Revenue Code generally prohibited any publicly held
corporation from taking a federal income tax deduction for compensation in excess of $1 million in any
taxable year paid to an executive officer who is named in the Summary Compensation Table. An
exception was made for qualified performance-based compensation, among other things. Although the
Compensation Committee considered the impact of Section 162(m)
in structuring compensation
programs, the Committee’s primary focus was on creating programs that addressed the needs and
objectives of the Company regardless of the impact of Section 162(m). As a result, the Compensation
Committee made awards and structured programs that were non-deductible under Section 162(m). The
Tax Cuts and Jobs Act of 2017 modified Section 162(m) to, among other things, modify who is subject to
the $1 million deduction limit and to eliminate the exception for performance based pay from the
$1 million deduction limit starting with tax years ending after December 31, 2017. Because our awards
and compensation programs were not necessarily designed to comply with Section 162(m), the changes
to Section 162(m) have not had a material impact on us.
Compensation Committee Report
The Compensation Committee of the Board has reviewed and discussed the CD&A required by Item 402(b)
of Regulation S-K with management and, based on such review and discussions, the Compensation
Committee recommended to the Board that the CD&A be included in this Proxy Statement.
Submitted by:
David W. Faeder, Chairman
Elizabeth I. Holland
Nicole Y. Lamb-Hale (joined the Committee on November 4, 2020)
Gail P. Steinel
Joseph S. Vassalluzzo
27
Executive Compensation
Our 2020 NEOs
For 2020, our NEOs were:
Donald C. Wood
Chief Executive Officer
Age: 60
Tenure at Federal: 23 years
See “Proposal 1 Election of Seven Trustees” for more biographical information.
Education:
See “Proposal 1 Election of Seven Trustees” for educational information.
Daniel Guglielmone
Executive Vice President-Chief Financial Officer &
Treasurer
Age: 53
Tenure at Federal: 5 years
Mr. Guglielmone has served as our Chief Financial Officer since 2016. In that role, he is
responsible for overseeing our capital markets, financial reporting, accounting and East
Coast acquisitions functions. Prior to joining Federal, Mr. Guglielmone was the Senior
Vice President-Acquisitions & Capital Markets for Vornado Realty Trust (2003-2016).
Education:
Mr. Guglielmone earned a BS in Applied Economics from Cornell University and a Masters
in management from the Kellogg School of Management at Northwestern University.
Dawn M. Becker
Executive Vice President-General Counsel & Secretary
Age: 57
Tenure at Federal: 24 years
Ms. Becker has served as our General Counsel and Secretary since 2002. In that role,
legal, human resources and information
she is responsible for overseeing our
technology departments and has primary
for establishing and
implementing all of our environmental, social and governance activities and all ESG
reporting. Previously, Ms. Becker served as our Managing Director Mixed-Use
Operations (2015 -2016) and as our Chief Operating Officer (2010-2015).
responsibility
Education:
Ms. Becker earned a BA in Economics from Bucknell University and a JD from Stanford
Law School.
In February 2021, the Company promoted Jeffrey S. Berkes (age 57) to President and Chief Operating
Officer of the Company. Mr. Berkes has been designated as an NEO for 2021 and his compensation
information will be included in the Compensation Discussion and Analysis and executive compensation
tables in next year’s proxy statement.
28
Summary Compensation Table
The following table summarizes the total compensation earned by each of our NEOs for the fiscal
in accordance with current SEC rules. The
years ended December 31, 2020, 2019 and 2018,
Summary Compensation Table below does not include the value of the Shares issued to our NEOs on
February 10, 2021 for the performance period ending December 31, 2020. The value of those Shares
will appear in next year’s proxy statement in the Grants of Plan-Based Awards Table as well as the
“Stock Awards” column of the Summary Compensation Table.
Name and Principal Position
Year
Salary(1)
Bonus(2)
Stock
Awards(3)
Non-Equity
Incentive Plan
Compensation(4)
All Other
Compensation(5)
Total
Donald C. Wood, Chief Executive
Officer (PEO)
Daniel Guglielmone, Executive Vice
President-Chief Financial Officer and
Treasurer (PFO)
2020 $ 950,000 $
2019 $ 950,000 $
2018 $ 950,000 $
2020 $ 500,000 $
2019 $ 500,000 $
-
-
-
-
-
$ 5,830,493 $
534,375 $
166,928 $ 7,481,796
$ 5,534,437 $
1,128,125 $
18,296 $ 7,630,858
$ 5,160,832 $
1,335,938 $
17,412 $ 7,464,182
$
$
968,270 $
281,250 $
236,818 $ 1,986,338
900,012 $
395,833 $
9,728 $ 1,805,573
2018 $ 475,000 $ 300,000 $
787,508 $
445,313 $
9,592 $ 2,017,413
Dawn M. Becker, Executive Vice
President-General Counsel and Secretary
2020 $ 475,000 $
2019 $ 475,000 $
-
-
$
$
758,275 $
200,391 $
86,359 $ 1,520,025
726,587 $
282,031 $
13,265 $ 1,496,883
2018 $ 450,000 $ 50,000 $
562,490 $
316,406 $
12,406 $ 1,391,302
(1) Amounts shown in the Salary column include all amounts deferred at the election of the NEOs into
(2)
our non-qualified deferred compensation plan.
In 2018, Mr. Guglielmone and Ms. Becker each received a $50,000 cash supplemental bonus and
Mr. Guglielmone received a $250,000 cash bonus that was agreed to as part of his initial hiring
compensation package.
(3) Amounts shown in the Stock Awards column reflect the aggregate grant date fair value of the
awards calculated in accordance with FASB ASC Topic 718 that were issued (as opposed to
earned) in the fiscal years ended December 31, 2020, 2019 and 2018. For a discussion of the
valuation of these awards, please refer to Note 12 in the notes to our consolidated financial
statements in our Annual Report on Form 10-K filed on February 11, 2021.
(4) Amounts shown in this column represent only the cash portion paid under our annual bonus plan
and include amounts deferred by our NEOs into our non-qualified deferred compensation plan.
Each of Mr. Wood and Ms. Becker received 75% of the annual bonus in cash for each of 2018
through 2020 with the remaining amounts earned for those years paid in Shares in an amount
equal
the cash value in consideration of an additional 3-year vesting schedule.
Mr. Guglielmone received 100% of his annual bonus in cash for each of 2018 through 2020.
to 120% of
(5) The amounts shown in this column for the last fiscal year include: (a) payments for group term life
insurance, long-term disability insurance and supplement life insurance of $13,649 for Mr. Wood,
$2,844 for Mr. Guglielmone and $6,157 for Ms. Becker; (b) contributions to our 401(k) plan of
$7,125 for each of our NEOs; (c) $149,925 for Mr. Guglielmone for moving related expenses that
were agreed to as part of his initial hiring package; and (d) accrued vacation payouts of $146,154
for Mr. Wood, $76,923 for Mr. Guglielmone and $73,077 for Ms. Becker. These payouts were
made concurrently with our adopting a policy that Vice Presidents and above would no longer be
eligible to accrue and carry over unused vacation time from year to year and eliminated a
continuing liability of the Company.
29
Grants of Plan Based Awards Table
The following Share awards were made in 2020, all of which were earned based on the 1-year or
3-year performance period ending December 31, 2019. Awards made in 2021 to the NEOs under our
annual bonus plan and long-term incentive plan for the 1-year and 3-year performance periods ending
December 31, 2020 will be reported in the Grants of Plan-Based Awards Table in next year’s proxy
statement.
Name
Donald C. Wood
Daniel Guglielmone
Dawn M. Becker
All Other
Stock Awards:
Number of Shares
of Stock or Units(3)
Grant Date
Fair Value(4)
3,546
42,266
$
451,299
$ 5,379,194
7,608
886
5,072
$
$
$
968,270
112,761
645,513
Grant
Date
2/4/2020 (1)
2/4/2020 (2)
2/4/2020 (2)
2/4/2020 (1)
2/4/2020 (2)
Issued under our annual bonus plan. These Shares vest equally over 3 years.
Issued under our long-term incentive plan. These Shares vest equally over 3 years.
(1)
(2)
(3) Dividends are paid on all Shares issued at the same rate and time as paid to all other holders of our Shares
as declared by our Board from time to time.
(4) Represents the grant date fair value of Share awards as computed in accordance with FASB ASC Topic 718.
The grant date fair value for these Share awards was based on the closing price of our Shares on the grant
date.
Outstanding Equity Awards at Fiscal Year-End Table
The following table sets forth information about outstanding equity awards held by our 2020 NEOs as
of December 31, 2020:
Name
Donald C. Wood
Daniel Guglielmone
Dawn M. Becker
Stock Awards
Number of
Shares or Units of
Stock That Have
Not Vested
Market Value of
Shares or Units of
Stock That Have
Not Vested(5)
3,546 (1) $
42,266 (1) $
2,654 (2) $
24,833 (2) $
1,417 (3) $
14,034 (3) $
7,608 (1) $
4,470 (2) $
2,358 (3) $
2,685 (4) $
886 (1) $
5,072 (1) $
629 (2) $
2,980 (2) $
1,684 (3) $
301,836
3,597,682
225,908
2,113,785
120,615
1,194,574
647,593
380,486
200,713
228,547
75,416
431,729
53,540
253,658
143,342
(1) One-third of these Shares vested on February 12, 2021 and the remaining Shares will vest on February 12,
2022 and 2023.
(2) One-half of these Shares vested on February 12, 2021 and the remaining Shares will vest on February 12,
2022.
30
(3) These shares vested on February 12, 2021.
(4) These Shares will vest equally on August 15 of each of 2021 through 2023.
(5) The market value of outstanding unvested Shares is based on $85.12, the closing price of our Shares on the
NYSE on December 31, 2020. The value of the outstanding unvested Shares at the time they were issued
was previously included in the Summary Compensation Table for the applicable year in which the Shares
were issued. The difference between the market value of
the outstanding unvested Shares as of
December 31, 2020 as compared to the value of those Shares reported in a Summary Compensation Table is
($3,685,988) for Mr. Wood, ($802,004) for Mr. Guglielmone and ($472,522) for Ms. Becker.
Option Exercises and Stock Vested Table
The following table includes information with respect to options exercised and Shares that vested in
2020 for each of our NEOs.
Name
Donald C. Wood
Daniel Guglielmone
Dawn M. Becker
Option Awards
Stock Awards
Number of
Shares Acquired
on Exercise
Value Realized
on Exercise
Number of
Shares Acquired
on Vesting
Value Realized
on Vesting(1)
0
0
0
$
$
$
-
-
-
45,726
7,636
5,825
$
$
$
5,662,708
908,046
721,368
(1) The value realized is based on the closing price of a Share on the date of the Share vesting. The value of
these Shares at issuance was reported in the Stock Award column of the Summary Compensation Table for
the year in which the Shares were issued. The difference between the value realized on the vesting of the
Shares reflected above and the value of the Shares when they were issued and reported as compensation in
a Summary Compensation Table is ($211,542) for Mr. Wood, ($97,421) for Mr. Guglielmone and ($34,7812)
for Ms. Becker.
Non-Qualified Deferred Compensation
We maintain a non-qualified deferred compensation plan that is open to participation by 49 members of
our management team, including our NEOs. Each participant can elect to defer up to 100% of his or
her base salary and cash payment under our annual bonus plan with deferral elections made in
December of each year for amounts to be earned in the following year. A number of widely available
investment options are made available to each plan participant who then decides how to allocate
amounts deferred among those investment options. The amount earned by plan participants on their
deferrals is calculated by our third party plan administrator as if the amounts deferred had actually
been invested in the investment options selected by each participant. We do not make any
contributions to the deferred compensation plan for any individual nor do we guaranty any rate of
return on amounts deferred. Amounts deferred into the plan,
including amounts earned on the
deferrals, are generally payable to the participant shortly after he or she retires or is otherwise no
longer employed by us; however, there are a few other alternatives where amounts may be paid to a
participant sooner. Mr. Wood and Ms. Becker participate in our deferred compensation plan with 2020
activity described below. Mr. Guglielmone does not participate in our deferred compensation plan.
Name
Donald C. Wood
Dawn M. Becker
Executive
Contributions in
Last Fiscal Year(1)
Registrant
Contributions in
Last Fiscal Year
Aggregate
Earnings in
Last Fiscal Year
Aggregate
Withdrawals/
Distributions
Aggregate
Balance at Last
Fiscal Year-End
$
$
250,000 $
49,327 $
- $
- $
1,428,920 $
313,169 $
- $
- $
9,129,217
2,178,863
(1) All amounts in this column are included in either the “Salary” or “Non-Equity Incentive Plan Compensation”
column of the Summary Compensation Table for 2020.
31
Potential Payments on Termination of Employment and Change in Control
We have entered into severance agreements with each of our NEOs that require us to make certain
payments and provide certain benefits to them in the event of a termination of employment or change
in control of the Company. Regardless of the reason for an NEO’s termination of employment, he or
she will be entitled to receive upon termination a distribution of any amounts in our non-qualified
deferred compensation plan as described in the “Non-Qualified Deferred Compensation” section
above. No NEO is entitled to receive a new award under the annual bonus plan or our long-term
incentive plan for the year in which the termination occurs. The agreements with each of our NEOs
contain provisions restricting the executive from engaging in competing behavior and soliciting and/or
hiring our employees for a period of time after termination. The payments that will be made to an NEO
on termination vary depending on the reason for termination and may be conditioned on the signing of
a release in favor of the Company.
The amount of compensation payable to each of our 2020 NEOs under various termination scenarios
is reflected below assuming that the separation of service was effective on December 31, 2020:
Cash
Payment(1)
Medical
Benefits(2)
Acclerated
Equity(3)
Other
Benefits(4)
Excise Tax
Gross-Up
Total
Donald C. Wood
Death
Disability
TWOC
Termination for Cause
CIC(5)
Daniel Guglielmone
Death
Disability
TWOC
Termination for Cause
CIC(5)
Dawn M. Becker
Death
Disability
TWOC
Termination for Cause
CIC(5)
-
$
- $ 2,020,000 $ 7,554,400 $
-
$ 1,286,525 $ 2,354,325 $ 7,554,400 $
60,250
$ 4,096,875 $ 2,430,744 $ 7,554,400 $
$
-
- $
$ 8,193,750 $ 2,525,975 $ 7,554,400 $ 167,165
475,000 $
21,162 $
N/A
N/A
N/A
N/A
$
-
$
9,574,400
$ 11,195,250
$ 14,142,269
$
496,162
$ 18,441,290
- $
$
430,080 $
$
- $
$
$
- $
$ 1,890,626 $
- $
$
361,777 $
$
896,875 $
$
237,500 $
$
$ 1,793,750 $
- $ 1,457,340 $
36,797 $ 1,457,340 $
- $ 1,457,340 $
- $
- $
73,594 $ 1,457,340 $
- $
15,579 $
11,684 $
7,789 $
31,157 $
957,685 $
957,685 $
957,685 $
- $
957,685 $
-
-
-
-
90,375
-
-
60,250
-
90,375
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
$
-
$
$
$
$
$
$
$
$
$
$
1,457,340
1,924,217
1,457,340
-
3,511,935
957,685
1,335,041
1,926,494
245,289
2,872,967
(1) For disability, payments are for 1 year in an amount equal to the difference between then current salary and the
amount of any payments received under any disability policy we maintained plus a tax gross-up on non-tax
exempt payments. The estimated tax gross-ups included in these amounts are $564,525 for Mr. Wood,
$158,080 for Mr. Guglielmone and $114,777 for Ms. Becker. For termination without cause (“TWOC”),
payments are 1.5 times the highest annual base salary and annual bonus paid during the prior 3-year period for
Mr. Wood and 1.0 times that amount for Ms. Becker. For termination for cause, the payments equal 1 month of
base salary for each year of employment greater than 5 years, capped at a total of 6 months. For change in
control (“CIC”), the payments equal 3.0 times the highest annual base salary and annual bonus paid during the
prior 3-year period for Mr. Wood and 2.0 times that amount for Mr. Guglielmone and Ms. Becker.
(2) Amounts in this column represent our estimate of the COBRA equivalent to provide the same benefits as being
provided to each NEO at December 31, 2020 for a period of: (a) 1 year in the event of disability for each of our
NEOs; (b) 6 months for Mr. Wood and Ms. Becker on a termination with cause; (c) 9 months for Mr. Wood and
Ms. Becker on a TWOC; and (d) 3 years for Mr. Wood and 2 years for Mr. Guglielmone and Ms. Becker on a
CIC. These estimates were determined by us with input from our health insurance broker and health coverage
insurer to confirm that our estimate was consistent with the market cost of providing a stand-alone health
insurance program with similar coverage. Because our health insurance program includes a self-insured
retention, we use the COBRA equivalent as a reasonable estimate of the potential costs for these benefits. For
Mr. Wood, this column also includes the following estimated costs (calculated in accordance with GAAP)
32
pursuant to the Health Continuation Coverage Agreement with Mr. Wood: $2,020,000 in the event of death;
$2,312,000 in the event of disability; and $2,399,000 in the event of termination without cause and change in
control.
(3) All unvested Shares and options held by our NEOs will vest in the event of death, disability, TWOC or CIC.
Amounts in this column were calculated by multiplying the number of unvested Shares and options that vest on
the occurrence of the specified event as of December 31, 2020 by the value for each Share and option
determined in accordance with the FASB ASC Topic 718.
(4) Amounts in this column are estimated costs for the following: (a) a full-time administrative assistant and
outplacement assistance for a period of 6 months in the event of a TWOC for Mr. Wood and Ms. Becker and for
a period of 12 months for Mr. Wood and 9 months for Mr. Guglielmone and Ms. Becker in the event of a CIC;
and (b) use of a company vehicle for three years for Mr. Wood in the event of a CIC should he choose to use
that benefit.
(5) Under our active equity plans, a CIC is deemed to have occurred when a person acquires a 20% interest in us,
or our current Trustees, or those subsequently approved by our current Trustees, constitute less than 2/3 or
less than 50% of our Board, depending on the plan. Upon a CIC, each NEO is entitled to receive payments and
benefits so long as he or she (a) is terminated from employment by the company other than for cause or leaves
for good reason within 2 years after the change of control or (b) as to Mr. Wood and Ms. Becker only, he or she
voluntarily leaves employment within the 30 day window following the 1-year anniversary of the CIC.
CEO Pay Ratio
Our compensation and benefit programs are substantially similar throughout the Company and are
designed to reward all employees who contribute to our success with a total compensation package
that is competitive in the marketplace for each employee’s position and performance. We are required
to calculate and disclose the compensation of our median paid employee as well as the ratio of the
total compensation of our median paid employee to the compensation paid to our CEO annually. The
total employee population as of
determination of our median employee was used taking our
December 31, 2020, excluding our CEO, which included 308 full-time and part-time employees ranging
from executive vice presidents to maintenance technicians. For the determination, we used annual
base pay plus annual bonus at target levels plus overtime actually paid, the combination of which we
believe most closely approximates the total annual direct compensation of our employees. For
purposes of the calculation, base pay was annualized for the 22 employees who started with us in
2020. No other adjustments were made.
The actual total annual compensation of our Chief Executive Officer and median paid employee for
2020 was calculated in accordance with the requirements of
the Summary Compensation Table
included in this proxy statement. Based on this methodology, we have determined that the total annual
compensation paid to our Chief Executive Officer in 2020 was $7,481,796 and the total annual
compensation paid to our median paid employee in 2020 was $110,091 resulting in a ratio of 68:1.
We calculated our pay ratio in accordance with SEC rules; however, those rules allow companies
discretion in methodologies used to identify the median paid employee and the compensation used to
this ratio is unique to our Company. Other
determine the median paid employee. As a result,
companies may make their determinations differently so that the ratio may not be comparable across
companies. We believe our ratio is a reasonable estimate. Our ratio is very heavily influenced by what
employees/services we choose to provide through employees as opposed to through third parties who
are not taken into account in the calculation of the pay ratio.
33
Equity Compensation Plan Information
The following table provides information as of December 31, 2020 regarding our equity compensation
plans, all of which were approved by our shareholders.
Plan Category
Equity compensation plans approved by security
holders
Equity compensation plans not approved by security
holders
Total
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(Column A)(1)
Weighted average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available for
future issuance
(excluding securities
reflected in Column A)(2)
682
-
682
$152.34
1,748,482
-
-
$152.34
1,748,482
(1) Consists entirely of Shares authorized for issuance under our 2010 Performance Incentive Plan.
(2) Consists entirely of Shares authorized for issuance under our 2020 Performance Incentive Plan.
Proposal 3:
Ratification of Independent Auditor
Shareholders are being asked to ratify in a non-binding vote the selection of Grant Thornton, LLP
(“GT”) as our independent registered public accounting firm for the fiscal year ending December 31,
2021. Although shareholder ratification of GT is not required by our governance documents, the Board
is submitting the selection of GT to shareholders to solicit shareholder views on our selection of GT as
our independent registered public accounting firm. GT has served in this role since 2002 and the Board
believes it is in the best interests of the Company and our shareholders for GT to continue in this role.
If the selection of GT is not ratified, the Audit Committee may (but will not be required to) reconsider
whether to retain GT. Even if the selection of GT is ratified, the Audit Committee may change the
appointment of GT at any time if it determines such a change would be in the best interests of the
Company and our shareholders. A representative of GT will be present at the Annual Meeting and will
have the opportunity to make a statement if they so desire and answer appropriate questions from
shareholders.
The Audit Committee reviews and approves in advance all audit and permissible non-audit services
provided by GT to the Company as required by and in accordance with the rules and regulations of the
SEC and the Sarbanes-Oxley Act of 2002.
34
The following table sets forth the fees for services rendered by GT for the years ended December 31,
2020 and 2019:
Audit Fees(1)
Audit-Related Fees(2)
Tax Fees(3)
All Other Fees
Total Fees
2020
2019
821,892 $ 1,011,565
134,685
265,005
48,825 $
300,120 $
$
-
-
$
$
$
$
$ 1,170,837 $ 1,411,255
(1) Audit fees include all fees and expenses for services in connection with: (a) the audit of our financial
statements included in our annual reports on Form 10-K; (b) Sarbanes-Oxley Section 404 relating to our
annual audit; (c) the review of the financial statements included in our quarterly reports on Form 10-Q; and
(d) consents and comfort letters issued in connection with debt offerings and common share offerings.
(2) Audit-related fees primarily include the audit of our employee benefit plan, which are paid by the plan and not
(3)
the company, and certain property level audits.
the amounts shown for 2020 and 2019, respectively, relate solely to tax
$264,600 and $260,805 of
compliance and preparation, including the preparation of original and amended tax returns and refund claims
and tax payment planning.
The affirmative vote of a majority of votes cast at the Annual Meeting, in person or by proxy, is required
to approve this proposal. An “abstention” or “broker non-vote” will have no effect on the outcome of the
vote for this proposal.
✓ Our Board recommends a vote FOR the non-binding ratification of our independent auditor
Audit Committee Report
The following Report of the Audit Committee does not constitute soliciting material and should not be
deemed filed or incorporated by reference into any other filing by us under the Securities Act of 1933 or
the Exchange Act, except to the extent the Company specifically incorporates this Report by reference
therein.
The Audit Committee is made up entirely of trustees who meet all independence requirements under
the SEC and NYSE and have the requisite financial competence to serve on the Audit Committee. The
Audit Committee meets at least quarterly and operates pursuant to a written charter that is reviewed at
least every three years. That charter can be accessed under the Investors/Corporate Governance
section of our website at www.federalrealty.com. In 2020, the Audit Committee met four times and
each meeting included an executive session with our independent registered public accounting firm
and no members of management present.
The Audit Committee is directly responsible for the appointment, retention and oversight of GT, the
independent registered public accounting firm retained to audit our financial statements, and also
oversees management, including its internal audit firm, in their performance of its financial functions.
Specifically, management is responsible for the financial reporting process, including the system of
internal controls, for the preparation of consolidated financial statements in accordance with generally
accepted accounting principles in the United States (“GAAP”) and for reporting on internal control over
financial reporting. Management uses Pricewaterhouse Coopers, LLC (“PwC”) to provide its internal
audit function, including oversight of the ongoing testing of the effectiveness of our internal controls.
The Audit Committee met regularly with PwC and one meeting included an executive session with
PwC with no members of GT or management present. GT is responsible for auditing the consolidated
35
financial statements of the Company and expressing an opinion on the financial statements and the
effectiveness of internal control over financial reporting.
During 2020, as part of its oversight function, the Audit Committee:
• Reviewed and discussed with management and GT, individually and collectively, all annual
and quarterly financial statements and operating results prior to their issuance;
• Discussed with GT matters relating to GT’s independence from Federal and received written
confirmation from GT that GT is not aware of any relationships that, in their professional
judgment may impair their independence as required by the Public Company Accounting
Oversight Board;
• Discussed with GT matters required to be discussed pursuant to applicable audit standards,
including the reasonableness of judgments and the clarity and completeness of financial
disclosures;
• Monitored the non-audit services provided by GT to ensure that performance of such services
did not adversely impact GT’s independence; and
• As part of the Committee’s quarterly review of internal controls, the Committee discussed with
management cybersecurity threats, cyber breaches, any responses to such breaches, and
ongoing areas of focus of management in protecting against cyber breaches. During those
quarterly reviews in 2020, the Committee was advised of one isolated and minor information
security breach that resulted in a total cost for all investigative and remedial work of less than
.01% of the Company’s 2020 total revenue. The Committee and management also discussed
the additional training and security measures that were immediately implemented to mitigate
the likelihood of a similar incident in the future. This was the only cyber incident experienced
by the Company in the last three years.
Based on the Audit Committee’s reviews and discussions with GT, PwC and management, the Audit
Committee recommended to the Board of Trustees that the Board approve the inclusion of our audited
financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020
for filing with the SEC.
Submitted by the Audit Committee:
Gail P. Steinel, Chairperson
Jon E. Bortz
David W. Faeder
Anthony P. Nader, III (joined the Committee on November 4, 2020)
36
Beneficial Ownership
Ownership of Principal Shareholders
Based on our records and the information reported in filings with the SEC, the following were beneficial
owners of more than 5% of our Shares as of March 16, 2021:
Name and Address of Beneficial Owner
The Vanguard Group, Inc.(2)
100 Vanguard Blvd.
Malvern, PA 19355
State Street Corporation(3)
State Street Financial Center, One
Lincoln Street
Boston, MA 02111
Norges Bank (The Central Bank of
Norway)(4)
Bankplassen 2, PO Box 1179 Sentrum
NO 0107 Oslo Norway
BlackRock, Inc.(5)
55 East 52nd Street
New York, NY 10055
Capital Research Global Investors(6)
333 South Hope Street, 55th Floor
Los Angeles, CA 90071
Amount and Nature of
Beneficial Ownership
Percentage of Our
Outstanding Shares(1)
11,330,652
14.6%
8,452,342
10.9%
7,212,626
7,148,187
4,246,220
9.3%
9.2%
5.5%
(1) The percentage of outstanding Shares is calculated by taking the number of Shares stated in the Schedule
the total number of Shares
filed with the SEC divided by 77,706,466,
13G or 13G/A, as applicable,
outstanding on March 16, 2021.
Information based on a Schedule 13G/A filed with the SEC on February 10, 2021 by The Vanguard Group
which states that The Vanguard Group, an investment advisor, has shared voting power over 268,291 Shares,
sole dispositive power over 10,867,683 Shares and shared dispositive power over 462,969 Shares.
Information based on a Schedule 13G filed with the SEC on February 11, 2021 by State Street Corporation,
which states that State Street Corporation, a parent holding company, has shared voting power over
7,962,860 Shares and shared dispositive power over 8,451,842 Shares and that SSGA Funds Management,
Inc., a subsidiary of State Street Corporation, has shared voting power over 4,822,602 Shares and shared
dispositive power over 4,851,750 Shares.
Information based on a Schedule 13G/A filed with the SEC on January 28, 2021 by Norges Bank (The Central
Bank of Norway) which states that Norges Bank (The Central Bank of Norway) has sole voting power and sole
dispositive power over 7,212,626 Shares.
Information based on a Schedule 13G/A filed with the SEC on January 29, 2021 by BlackRock, Inc., which
states that BlackRock, Inc., a parent holding company, has sole voting power over 6,521,074 Shares and sole
dispositive power over 7,148,187 Shares.
Information based on a Schedule 13G filed with the SEC on February 16, 2021 by Capital Research Global
Investors which states that Capital Research Global Investors, an investment advisor, has sole voting and
sole dispositive power over 4,246,220 Shares.
(2)
(3)
(4)
(5)
(6)
37
Ownership of Trustees and Executive Officers
The table below reflects beneficial ownership of our Trustees and all current NEOs as of March 16,
2021 determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). Unless noted in the footnotes following the table, each Trustee and NEO has
sole voting and investment power as to all Shares listed.
Name and Address of Beneficial Owner(1)
Dawn M. Becker
Jeffrey S. Berkes
Jon E. Bortz(3)
David W. Faeder
Daniel Guglielmone
Elizabeth I. Holland
Nicole Y. Lamb-Hale
Anthony P. Nader, III
Mark S. Ordan
Gail P. Steinel
Joseph S. Vassalluzzo
Donald C. Wood(4)
Trustees, trustee nominees and executive
Unvested
Restricted
Shares
12,878
42,117
0
0
19,390
0
0
0
0
0
0
98,725
Total Shares
Beneficially
Owned
143,232
62,657
12,921
12,578
36,541
4,084
470
470
2,222
12,374
25,718
462,672
Common
130,354
20,540
12,921
12,578
17,151
4,084
470
470
2,222
12,374
25,718
363,947
Percentage of
Outstanding
Shares
Owned(2)
*
*
*
*
*
*
*
*
*
*
*
*
officers as a group (12 individuals)
602,829
173,110
775,939
1%
Less than 1%
*
(1) The address for each of the named individuals is 909 Rose Avenue, Suite 200, North Bethesda, Maryland
20852.
(2) The percentage of outstanding Shares owned is calculated by taking the number of Shares reflected in the
the total number of Shares
column titled “Total Shares Beneficially Owned” divided by 77,706,466,
outstanding on March 16, 2021.
(3) Voting and investment power is shared with Mr. Bortz’ wife.
(4)
Includes 53,879 Shares owned by Mr. Wood’s wife, 20,000 Shares owned by Great Falls Trust, 46,500
Shares owned by Wood Descendants Trust and 60,000 Shares owned by IJKR II, LLC.
Other Information for Shareholders
Anti-Hedging Policy
All officers and non-employee Trustees are prohibited from engaging in short sales of our securities,
establishing margin accounts, pledging our securities as collateral for a loan, buying or selling puts or
calls on our securities or otherwise engaging in hedging transactions (such as zero-cost dollars,
exchange funds, and forward sale contracts) involving our securities.
Related Party Transactions
Our Code of Business Conduct requires that our Trustees and all of our employees deal with the
Company on an arms-length basis in any related party transaction. All transactions between us and
any of our Trustees, our NEOs or other vice presidents, or entity in which any of them has an
ownership interest must be approved in advance by the Audit Committee. Audit Committee approval is
38
not required for us to enter into a lease with an entity in which any of our Trustees is a director,
employee or owner so long as the lease is entered into in the ordinary course of business and is
negotiated at arms-length and on market terms.
We have no related party transactions with any of our Trustees that are required to be disclosed. None
of our NEOs has any indebtedness to the Company or any relationship with the Company other than
as an employee and shareholder. Employment and change-in-control arrangements between the
Company and the 2020 NEOs are described in the “Potential Payments on Termination of Employment
and Change-in-Control” section above.
Important Information about Voting at the 2021 Annual Meeting
Notice of Electronic Availability of Proxy Materials
We are furnishing proxy materials including this proxy statement and our 2020 Annual Report to
Shareholders, including our Annual Report on Form 10-K for the year ended December 31, 2020
(“Annual Report”), to each shareholder by providing access to such documents on the Internet. On or
about March 25, 2021, we mailed to our shareholders a “Notice of Internet Availability of Proxy
Materials” (“Notice”) containing instructions on how to access and review this proxy statement and our
Annual Report and how to submit your vote on the Internet or by telephone. You cannot vote by
marking the Notice and returning it. If you received the Notice, you will not automatically receive a
printed copy of our proxy materials or Annual Report unless you follow the instructions for requesting
these materials included in the Notice. This section does not apply if you previously requested to
receive these materials by mail. Questions regarding the Notice or voting should be directed to our
Investor Relations Department at (800) 937-5449 or by email at IR@federalrealty.com.
Why You are Receiving These Materials
You are receiving these materials because you owned our Shares as of March 16, 2021, the record
date established by our Board of Trustees for our Annual Meeting. Everyone who owned our Shares as
of this date, whether directly as a registered shareholder or indirectly through a broker or other
nominee,
the Annual Meeting. We had 77,706,466 Shares outstanding on
March 16, 2021. Each Share outstanding on the record date is entitled to one vote. A majority of the
Shares entitled to vote at the Annual Meeting must be present in person or by proxy for us to proceed
with the Annual Meeting.
is entitled to vote at
Accessing Materials
Shareholders can access this Proxy Statement, our Annual Report and our other filings with the SEC
on the Investors page of our website at www.federalrealty.com. A copy of our Annual Report, including
the financial statements and financial statement schedules (“Form 10-K”) is being provided to
shareholders along with this Proxy Statement. The Form 10-K includes certain exhibits, which we will
provide to you only upon request addressed to Investor Relations at 909 Rose Avenue, Suite 200,
North Bethesda, Maryland 20852. The request must be accompanied by payment of a fee to cover our
reasonable expenses for copying and mailing the Form 10-K.
In the future, if you wish to receive paper copies of our proxy materials, without charge, and are a
registered shareholder, you may do so by written request addressed to American Stock Transfer and
Trust, LLC. For those of you holding Shares indirectly in “street name”, you must write your bank,
brokerage firm, broker-dealer or nominee, to obtain paper copies. Any election you make on how to
receive your proxy materials will remain in effect for all future annual meetings until you revoke it.
39
How to Vote
If you own your Shares directly with our transfer agent, American Stock Transfer and Trust, LLC, you
are a registered shareholder and can vote either in person at the Annual Meeting or by proxy without
attending the Annual Meeting through one of the following methods:
By Internet
Visit www.voteproxy.com, available 24/7
By Telephone
By Mail
Call 1-800-776-9437, available 24/7
Mark, sign and date your proxy card
If you vote by internet or telephone, you will need the control number on your Notice, proxy card or
voting instruction form. Votes must be submitted by the conclusion of the Annual Meeting to be
counted for the meeting. You may revoke your proxy at any time before it is voted at the Annual
Meeting by notifying the secretary in writing, submitting a proxy dated later than your original proxy, or
attending and voting at the Annual Meeting.
If you hold your Shares indirectly in an account at a bank, brokerage firm, broker-dealer or nominee,
you are a beneficial owner of Shares held in “street name”. You will receive all proxy materials directly
from your bank, brokerage firm, broker-dealer or nominee and you must either direct them as to how to
vote your Shares or obtain from them a proxy to vote at the Annual Meeting. Please refer to the notice
of internet availability of proxy materials or the voter instruction form used by your bank, brokerage
firm, broker-dealer or nominee for specific instructions on methods of voting. If you fail to give your
bank, brokerage firm, broker-dealer or nominee specific instructions on how to vote your Shares with
respect to Proposals 1 or 2, your vote will NOT be counted for those matters. It is important for every
shareholder’s vote to be counted on these matters so we encourage you to provide your bank,
brokerage firm, broker-dealer or nominee with voting instructions.
to give your bank,
brokerage firm, broker-dealer or nominee specific instructions on how to vote your Shares on Proposal
3, your bank, brokerage firm, broker-dealer or nominee will generally be able to vote on Proposal 3 as
he, she or it determines.
If you fail
You are urged to vote either by telephone (1-800-PROXIES or 1-800-776-9437) or on the Internet
(www.voteproxy.com) by following the instructions on your Notice. For those of you who have elected
email delivery, please follow the instructions for voting provided in the email. If you elect to receive your
proxy materials by mail, please make sure to complete, sign, date and return your proxy card promptly
to make certain your Shares will be voted at the Annual Meeting.
If you do not vote your Shares, your Shares will not be counted and we may not be able to hold the
Annual Meeting. We encourage you to vote by proxy using one of the methods described above even if
you plan to attend the Annual Meeting so that we will know as soon as possible whether enough votes
will be present.
How to Participate in the Annual Meeting
You will be able to join our Annual Meeting as either a shareholder or a guest. All registered
shareholders and shareholders that own in “street name” will be able to ask questions and vote their
Shares at the meeting by following the instructions below. Guests will be permitted to join the meeting
but will not be permitted to ask questions.
You can access the Annual Meeting by joining through this link: https://web.lumiagm.com/202329683.
If you are a registered shareholder owning Shares directly in your name and you would like to be able
40
to ask a question or vote at the Annual Meeting, you should click on “I have a control number”, enter
the control number found on your proxy card or Notice you previously received, and enter the
password “federal2021” (the password is case sensitive) to enter the meeting. If you hold your Shares
in “street name” through a broker, brokerage firm, broker-dealer or nominee and you would like to be
able to ask a question or vote at the Annual Meeting, you must first obtain a legal proxy from your
broker, brokerage firm, broker-dealer or nominee and then submit a request
for registration to
American Stock Transfer & Trust Company, LLC: (1) by email to proxy@astfinancial.com; (2) by
facsimile to 718-765-8730 or (3) by mail to American Stock Transfer & Trust Company, LLC, Attn:
Proxy Tabulation Department, 6201 15th Avenue, Brooklyn, NY 11219. Requests for registration must
be labeled as “Legal Proxy” and must be received by American Stock Transfer & Trust Company, LLC
no later than 5:00 p.m. local time on April 21, 2021. You will receive a confirmation of your registration
by email from American Stock Transfer and & Trust Company, LLC after they receive your registration
materials. The email will also include a control number so that you can ask a question or vote at the
Annual Meeting by clicking on “I have a control number”. Shareholders who hold Shares in “street
name” will not be able to vote your Shares or ask questions without first completing this registration
process. Once you are in the meeting, you can vote your Shares by clicking on the Shareholder
Central link on the screen to submit your ballot. You may also continue to vote using the instructions
provided in the Proxy Materials until the Annual Meeting concludes.
If you do not want to vote your Shares during the meeting or ask a question, you can join the meeting
as a guest using the same link above. You will not need to have your control number or to complete a
registration in order to participate as a guest. We will have technicians ready to assist you with any
technical difficulties you may have accessing the Annual Meeting webcast. Electronic check in begins
at 8:30 a.m. local time on May 5, 2021, the day of the Annual Meeting, so that we may address any
If you encounter any difficulties
technical difficulties before the Annual Meeting webcast begins.
accessing the Annual Meeting webcast during the check-in or meeting time, please go to https://
go.lumiglobal.com/faq or call 718-931-8399, ext. 6449.
Eliminating Duplicative Proxy Materials
We have adopted a procedure approved by the SEC called “householding” under which multiple
shareholders who share an address and do not participate in electronic delivery will receive only one
copy of the annual proxy materials or Notice unless we receive contrary instructions from one or more
the shareholders. If you would like to opt out of householding and continue to receive multiple copies of
the proxy materials or Notice at the same address, or if you have previously opted out of householding
and would now like to participate, you can do so by notifying us in writing, by telephone or by email at:
Investor Relations, 909 Rose Avenue, Suite 200, North Bethesda, Maryland 20852, (800) 937-5449,
IR@federalrealty.com.
Solicitation of Proxies
We will bear the cost of soliciting proxies from beneficial owners of our Shares. Our trustees, officers
and employees, acting without special compensation, and other agents may solicit proxies by
telephone, internet, or otherwise. Copies of solicitation materials will be furnished to brokerage firms,
fiduciaries, and other custodians who hold our Shares of record for beneficial owners for forwarding to
such beneficial owners. We may also reimburse persons representing beneficial owners of our Shares
for their reasonable expenses incurred in forwarding such materials.
Beneficial owners of our Shares who authorize their proxies through the internet should be aware that
they may incur costs to access the internet, such as usage charges from telephone companies or
internet service providers and these costs must be borne by the shareholder.
41
Shareholder Proposals for 2022 Annual Meeting
Proposals of shareholders intended to be presented at the 2022 Annual Meeting of Shareholders,
including nominations for persons for election to the Board of Trustees, must be delivered to us at 909
Rose Avenue, Suite 200, North Bethesda, Maryland 20852, Attention: Corporate Secretary and
received by us no later than November 25, 2021 to be considered for inclusion in our proxy statement
and form of proxy relating to such meeting. All proposals must comply with the requirements set forth
in our Bylaws and the federal securities laws, including Rule 14a-8, in order to be included in the
Company’s proxy statement and proxy card for the 2022 Annual Meeting of Shareholders. Pursuant to
our proxy access Bylaw provision, a shareholder, or a group of up to 20 shareholders, that has
continuously owned for three years at least 3% of the Company’s outstanding common shares, may
nominate and include in the Company’s annual meeting proxy materials up to the greater of two
trustees or 20% of
the shareholder(s) and the
nominee(s) meet the requirements specified in Article II, Section 13 of our Bylaws. Our Bylaws are
available by written request made to the General Counsel & Secretary, 909 Rose Avenue, Suite 200,
North Bethesda, Maryland 20852.
trustees serving on the Board,
the number of
if
If you want to present a proposal for the 2022 Annual Meeting but do not wish to have it included in the
proxy statement and proxy card, you must provide written notice to us no later than November 25,
2021 at the same address as set forth above.
For the Trustees,
Dawn M. Becker
Executive Vice President—General
Counsel and Secretary
Federal Realty Investment Trust
909 Rose Avenue, Suite 200
North Bethesda, Maryland 20852
YOUR PROXY IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE SUBMIT IT TODAY.
42
Appendix A
Reconciliation of Non-GAAP Financial Measures
Property Operating Income:
Property operating income is a non-GAAP measure that consists of rental 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 for the years ended December 31, 2020 and 2019 is as
follows:
Operating income
General and administrative expense
Depreciation and amortization
Impairment Charge
Gain on sale of real estate, net of tax
Property operating income
Funds from Operations:
$
$
$
$
$
$
2019
2020
(in thousands)
$
289,524
$
41,680
$
255,027
57,218
$
(98,117) $
470,911
42,754
239,758
-
(116,393)
545,332
$
637,030
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 U.S. GAAP, plus real estate related depreciation and amortization, gains and losses on the sale
of real estate, and impairment write-downs of depreciable 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. 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. 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 use FFO primarily as one of
several means of assessing our operating performance in comparison with other REITs.
The reconciliation of net income to FFO available for common shareholders for the years ended December 31, 2020 and 2019
is as follows:
Net income
Net income attributable to noncontrolling interests
Gain on sale of real estate, net of tax
Impairment charge, net
Depreciation and amortization of real estate assets
Amortization of initial direct costs of leases
Funds from operations
Dividends on preferred shares
Income attributable to operating partnership units
Income attributable to unvested shares
2020
2019
(in thousands, except per
share data)
$ 135,888
$
$
$
$
$
$
(4,182) $
(91,922) $
$
50,728
$
228,850
$
20,415
$ 339,777
$
$
$
$
(8,042) $
$
3,151
(1,037) $
360,542
(6,676)
(116,393)
-
215,139
19,359
471,971
(7,500)
2,703
(1,355)
Funds from operations available for common shareholders
$
333,849
$
465,819
Weighted average number of common shares, diluted
76,261
75,514
Funds from operations available for common shareholders, per
diluted share
$
4.38
$
6.17
A-1
Corporate
Information
C O R P O R A T E O F F I C E
A N N U A L M E E T I N G
909 Rose Avenue, Suite 200
North Bethesda, MD 20852
301.998.8100
Federal Realty Investment Trust will hold its Annual
Shareholder Meeting virtually at 9:00 a.m. on May 5,
2021.
C O R P O R A T E C O U N S E L
C O R P O R A T E G O V E R N A N C E
Pillsbury Winthrop Shaw Pittman LLP
Washington, DC
I N D E P E N D E N T R E G I S T E R E D
P U B L I C A C C O U N T I N G F I R M
Grant Thornton LLP
New York, NY
T R A N S F E R A G E N T A N D R E G I S T R A R
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
718.921.8124
800.937.5449
www.astfinancial.com
C O M M O N S T O C K L I S T I N G
New York Stock Exchange
Symbol: FRT
M E M B E R S H I P S
International Council of Shopping Centers
National Association of Real Estate Investment Trusts
Urban Land Institute
The Trust’s Corporate Governance Guidelines and the
charters for the Audit Committee, the Compensation
and Human Capital Management Committee and the
Nominating and Corporate Governance Committee are
available in the Investors section of our website at
www.federalrealty.com.
A U T O M A T I C C A S H I N V E S T M E N T
A N D D I R E C T D E P O S I T
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.astfinancial.com.
I N T E R N E T |
W W W . F E D E R A L R E A L T Y . C O M
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 email news
alerts can also be requested.
I N V E S T O R R E L A T I O N S C O N T A C T
You may communicate directly with Federal Realty’s
Investor Relations department via telephone at
800.658.8980 or by email at IR@federalrealty.com.
F E D E R A L R E A L T Y | A N N U A L R E P O R T 2020
Corporate
Headquarters
909 Rose Avenue
Suite 200
North Bethesda, MD 20852
Regional Offices
B O S T O N
450 Artisan Way
Suite 320
Somerville, MA 02145
617.684.1500
L O S A N G E L E S
830 Pacific Coast Highway
Suite 204
El Segundo, CA 90245
310.414.5280
P H I L A D E L P H I A
50 E Wynnewood Road
Suite 200
Wynnewood, PA 19096
610.896.5870
S A N J O S E
356 Santana Row
Suite 1005
San Jose, CA 95128
408.551.4600
T Y S O N S
7930 Jones Branch Drive
Suite 350
McLean, VA 22102