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Federal Realty Investment Trust Announces Fourth Quarter and Year-End 2008 Operating Results

Posted on: Wednesday, 18 February 2009, 15:45 CST

ROCKVILLE, Md., Feb. 18 /PRNewswire-FirstCall/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its fourth quarter and year-ended December 31, 2008.

(Logo: http://www.newscom.com/cgi-bin/prnh/20050907/DCW070LOGO )

Financial Results

Federal Realty generated funds from operations available for common shareholders (FFO) of $58.8 million, or $0.99 per diluted share, in fourth quarter 2008 and FFO of $229.2 million, or $3.87 per diluted share, for the year ended December 31, 2008. Excluding a $1.6 million charge associated with the settlement of a litigation matter relating to a shopping center in New Jersey, FFO was $1.02 per diluted share for fourth quarter 2008 and $3.89 per diluted share for year-end 2008. This compares to FFO of $52.8 million, or $0.92 per diluted share, in fourth quarter 2007 and FFO of $206.8 million, or $3.63 per diluted share, for the year ended December 31, 2007.

Net income available for common shareholders was $33.6 million and earnings per diluted share was $0.57 for the quarter ended December 31, 2008 versus $122.0 million and $2.14, respectively, for fourth quarter 2007. Fourth quarter 2007 earnings included a gain on sale of $95.8 million ($1.68 per diluted share) primarily from the sale of leasehold interests in six properties in October 2007. For the full year 2008, Federal Realty reported net income available for common shareholders of $129.2 million, or $2.19 per diluted share. This compares to net income available for common shareholders of $195.1 million, or $3.45 per diluted share, for the year ended December 31, 2007.

FFO is a non-GAAP supplemental earnings measure which the Trust considers meaningful in measuring its operating performance. A reconciliation of FFO to net income is attached to this press release.

Portfolio Results

In fourth quarter 2008, same-center property operating income, including redevelopment and expansion properties, increased 5.5% over fourth quarter 2007. When redevelopment and expansion properties are excluded from same-center results, property operating income for fourth quarter 2008 increased 1.7% over fourth quarter 2007. On an annual basis, same-center property operating income in 2008 increased 4.2% including redevelopments and expansions, and 1.2% excluding redevelopments and expansions.

The overall portfolio was 95.0% leased as of December 31, 2008, compared to 95.5% on September 30, 2008 and 96.7% on December 31, 2007. Federal Realty's same-center portfolio was 95.4% leased on December 31, 2008, compared to 96.0% on September 30, 2008 and 97.0% on December 31, 2007.

During fourth quarter 2008, the Trust signed 78 leases for 334,000 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), the Trust leased 330,000 square feet at an average cash-basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 13%. The average contractual rent on this comparable space for the first year of the new lease is $21.62 per square foot compared to the average contractual rent of $19.18 per square foot for the last year of the prior lease. The previous average contractual rent is calculated by including both the minimum rent and any percentage rent actually paid during the last year of the lease term for the re-leased space. On a GAAP basis (i.e., including the impact of straight-line rents), rent increases per square foot for comparable retail space averaged 24% for fourth quarter 2008.

For all of 2008, Federal Realty signed 300 leases representing 1.2 million square feet of comparable retail space at an average cash-basis contractual rent increase per square foot of 21%, and 36% on a GAAP-basis. The average cash-basis contractual rent on this comparable space for the first year of the new lease is $27.33 per square foot compared to the average cash-basis contractual rent of $22.55 per square foot for the last year of the prior lease. As of December 31, 2008, Federal Realty's average contractual minimum rent for retail and commercial space in its portfolio is $21.75 per square foot.

"We are very pleased with our performance in fourth quarter and for full year 2008, particularly given the recessionary environment," commented Donald C. Wood, president and chief executive officer of Federal Realty Investment Trust. "The retail landscape has clearly continued to deteriorate in 2009, making predictions about the near future particularly difficult. We are, however, confident that the work we've done over the past several years in strengthening our balance sheet and focusing internally puts us in the best possible position to work our way through this difficult economic time."

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees left the regular dividend rate on its common shares unchanged, declaring a regular quarterly cash dividend of $0.65 per share on its common shares, resulting in an indicated annual rate of $2.60 per share. The regular common dividend will be payable on April 15, 2009 to common shareholders of record on March 19, 2009.

Guidance

Federal Realty established guidance for 2009 FFO per diluted share at a range of $3.80 to $3.92, and announced 2009 earnings per diluted share guidance of $1.94 to $2.06. Guidance for 2009 assumes an $8 million to $9 million ($0.13 to $0.15 per diluted share) impact of addressing our fourth quarter 2009 debt maturities significantly prior to the actual maturity dates. The Trust's 2009 guidance does not include potential damages associated with the lawsuit related to a property adjacent to Santana Row as further described in Note E (Commitments and Contingencies) of the Trust's most recent Form 10-Q.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its fourth quarter and year-end 2008 earnings conference call, which is scheduled for February 19, 2009, at 11 a.m. Eastern Standard Time. To participate, please call (866) 783-2138 five to ten minutes prior to the call start time and use the Passcode FRT EARNINGS (required). Federal Realty will also provide an online Web Simulcast on the Company's Web site, www.federalrealty.com, which will remain available for 30 days following the call. A telephone recording of the call will also be available through March 19, 2009, by dialing (888) 286-8010 and using the Passcode 58226734.

About Federal Realty

Federal Realty Investment Trust is an equity real estate investment trust specializing in the ownership, management, development, and redevelopment of high quality retail assets. Federal Realty's portfolio (excluding joint venture properties) contains approximately 18.1 million square feet located primarily in strategically selected metropolitan markets in the Northeast, Mid-Atlantic, and California. In addition, the Trust has an ownership interest in approximately 1.0 million square feet of retail space through a joint venture in which the Trust has a 30% interest. Our operating portfolio (excluding joint venture properties) was 95.0% leased to national, regional, and local retailers as of December 31, 2008, with no single tenant accounting for more than approximately 2.6% of annualized base rent. Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has increased its dividend rate for 41 consecutive years, the longest record in the REIT industry. Federal Realty is an S&P MidCap 400 company and its shares are traded on the NYSE under the symbol FRT.

Safe Harbor Language

Certain matters discussed within this press release may be deemed to be forward-looking statements within the meaning of the federal securities laws. Although Federal Realty believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. These factors include, but are not limited to, the risk factors described in our Annual Report on Form 10-K filed on February 27, 2008 and include the following:

• risks that our tenants will not pay rent 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 redevelopments or renovations may cost more, take more time to complete, or fail to perform as expected;
• risks that the number of properties we acquire for our own account, and therefore the amount of capital we invest in acquisitions, may be impacted by our real estate partnership;
• 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 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 of financing, such as our ability to consummate additional financings or obtain replacement 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; and
• 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.

Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this press release. 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 risks and risk factors included in our Annual Report on Form 10-K filed February 27, 2008.

Federal Realty Investment Trust Summarized Balance Sheets December 31, 2008 December 31, 2008 2007 ---- ---- (in thousands) ASSETS (unaudited) Real estate, at cost Operating $3,567,035 $3,265,020 Construction-in-progress 106,650 147,925 Assets held for sale (discontinued operations) - 39,902 --- ------ 3,673,685 3,452,847 Less accumulated depreciation and amortization (846,258) (756,703) -------- -------- Net real estate 2,827,427 2,696,144 Cash and cash equivalents 15,223 50,691 Accounts and notes receivable 73,688 61,108 Mortgage notes receivable 45,780 40,638 Investment in real estate partnership 29,252 29,646 Prepaid expenses and other assets 101,406 111,070 ------- ------- TOTAL ASSETS $3,092,776 $2,989,297 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Mortgages payable and capital lease obligations $452,810 $450,084 Notes payable 336,391 210,820 Senior notes and debentures 956,584 977,556 Accounts payable and other liabilities 200,037 204,387 ------- ------- Total liabilities 1,945,822 1,842,847 Minority interests 32,352 31,818 Shareholders' equity Preferred stock 9,997 9,997 Common shares and other shareholders' equity 1,104,605 1,104,635 --------- --------- Total shareholders' equity 1,114,602 1,114,632 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,092,776 $2,989,297 ========== ========== Federal Realty Investment Trust Summarized Income Statements December 31, 2008 Three months Year ended ended December 31, December 31, 2008 2007 2008 2007 ---- ---- ---- ---- (in thousands, except per share data) (unaudited) Revenue Rental income $130,432 $122,128 $501,964 $465,728 Other property income 1,998 3,284 14,013 12,834 Mortgage interest income 1,206 1,174 4,548 4,560 ----- ----- ----- ----- Total revenue 133,636 126,586 520,525 483,122 ------- ------- ------- ------- Expenses Rental expenses 28,724 26,354 109,718 99,363 Real estate taxes 14,408 13,154 55,714 46,897 General and administrative 7,281 7,687 26,732 26,581 Depreciation and amortization 29,218 26,215 111,022 101,633 ------ ------ ------- ------- Total operating expenses 79,631 73,410 303,186 274,474 ------ ------ ------- ------- Operating income 54,005 53,176 217,339 208,648 Other interest income 254 298 916 921 Interest expense (24,997) (27,118) (99,163) (111,365) Income from real estate partnership 432 275 1,612 1,395 --- --- ----- ----- Income from continuing operations before minority interests 29,694 26,631 120,704 99,599 Minority interests (1,310) (1,281) (5,366) (5,590) ------ ------ ------ ------ Income from continuing operations 28,384 25,350 115,338 94,009 Discontinued operations Income from discontinued operations 207 999 1,877 6,760 Gain on sale of real estate from discontinued operations 5,134 95,819 12,572 94,768 ----- ------ ------ ------ Results from discontinued operations 5,341 96,818 14,449 101,528 ----- ------ ------ ------- Net income 33,725 122,168 129,787 195,537 Dividends on preferred stock (135) (135) (541) (442) Net income available for common shareholders $33,590 $122,033 $129,246 $195,095 ======= ======== ======== ======== EARNINGS PER COMMON SHARE, BASIC Continuing operations $0.48 $0.45 $1.96 $1.67 Discontinued operations 0.09 1.71 0.24 1.81 $0.57 $2.16 $2.20 $3.48 ===== ===== ===== ===== Weighted average number of common shares, basic 58,789 56,526 58,665 56,108 ====== ====== ====== ====== EARNINGS PER COMMON SHARE, DILUTED Continuing operations $0.48 $0.44 $1.95 $1.65 Discontinued operations 0.09 1.70 0.24 1.80 $0.57 $2.14 $2.19 $3.45 ===== ===== ===== ===== Weighted average number of common shares, diluted 58,951 56,955 58,914 56,543 ====== ====== ====== ====== Federal Realty Investment Trust Funds From Operations December 31, 2008 Three months Year ended ended December 31, December 31, ----------------- ------------ 2008 2007 2008 2007 ---- ---- ---- ---- Funds from Operations available for common shareholders (FFO) (1) (in thousands, except per share data) ------------------------------- Net income $33,725 $122,168 $129,787 $195,537 Gain on sale of real estate (5,134) (95,819) (12,572) (94,768) Depreciation and amortization of real estate assets 27,413 23,656 101,450 95,565 Amortization of initial direct costs of leases 2,330 2,361 8,771 8,473 Depreciation of joint venture real estate assets 339 326 1,331 1,241 --- --- ----- ----- Funds from operations 58,673 52,692 228,767 206,048 Dividends on preferred stock (135) (135) (541) (442) Income attributable to operating partnership units 243 232 950 1,156 --- --- --- ----- FFO $58,781 $52,789 $229,176 $206,762 ======= ======= ======== ======== FFO per diluted share (2) $0.99 $0.92 $3.87 $3.63 ===== ===== ===== ===== Weighted average number of common shares, diluted 59,325 57,336 59,292 56,999 ====== ====== ====== ====== Notes: ------ (1) See Glossary of Terms. (2) Excluding a $1.6 million charge associated with the settlement of a litigation matter, FFO per diluted share for the three months and year ended December 31, 2008 was $1.02 and $3.89, respectively. Federal Realty Investment Trust Reconciliation of Net Income to FFO Guidance December 31, 2008 2008 Guidance ------------- ($ millions except per share amounts) (1)(2) Net income $114 to $122 Gain on sale of real estate 0 0 Depreciation and amortization of real estate & real estate partnership assets 103 103 Amortization of initial direct costs of leases 8 8 --- --- Funds from operations 226 233 Dividends on preferred stock (1) (1) Income attributable to operating partnership units 1 1 --- --- Funds from operations available for common shareholders 226 to 233 === === Weighted Average Shares (diluted) 59.6 ---- Funds from operations available for common shareholders per diluted share $3.80 $3.92 ===== ===== Note: ----- (1) Individual items may not add up to total due to rounding. (2) Guidance for 2009 assumes an $8 million to $9 million ($0.13 to $0.15 diluted per share) impact of addressing our fourth quarter 2009 debt maturities significantly prior to the actual maturity dates. The Trust's 2009 guidance does not include potential damages associated with the lawsuit related to a property adjacent to Santana Row as further described in Note E (Commitments and Contingencies) of the Trust's most recent form 10-Q.

SOURCE Federal Realty Investment Trust

Source: PR Newswire

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