Federal Realty Investment Trust (FRT) filed Quarterly Report for the period ended 2009-09-30.
Federal Realty Investment Trust is an owner operator & redeveloper ofretail properties. The Trust's strategy is to acquire older well-located properties in prime densely populated & affluent areas & to enhance their operating performance through a program of renovation expansion reconfiguration & retenanting. The Trust's traditional focus has been on community & neighborhood shopping centers that are anchored by supermarkets drug stores or high volume value oriented retailers that provide consumer necessities. Federal Realty Investment Trust has a market cap of $3.7 billion; its shares were traded at around $60.68 with a P/E ratio of 16 and P/S ratio of 7.1. The dividend yield of Federal Realty Investment Trust stocks is 4.4%. Federal Realty Investment Trust had an annual average earning growth of 3.7% over the past 10 years. GuruFocus rated Federal Realty Investment Trust the business predictability rank of 3-star.
Highlight of Business Operations:
On May 4, 2009, we refinanced our then existing $200 million term loan with a new $372 million term loan which bears interest at LIBOR, subject to a 1.50% floor, plus 300 basis points and matures on July 27, 2011. The $200 million term loan and the $135 million outstanding balance on our revolving credit facility were repaid with the proceeds from the new $372 million term loan.
In May 2003, a breach of contract action was filed against us which alleged that a one page document entitled “Final Proposal” constituted a ground lease of a parcel of property located adjacent to our Santana Row property and gave the plaintiff the option to require that we acquire the property at a price determined in accordance with a formula included in the “Final Proposal.” The “Final Proposal” explicitly stated that it was subject to approval of the terms and conditions of a formal agreement. A trial as to liability only was held in June 2006 and a jury rendered a verdict against us. A trial on the issue of damages was held in April 2008 and the court issued a tentative ruling in April 2009 awarding damages to the plaintiff of approximately $14.4 million plus interest. Based on this tentative ruling, we estimated interest could range from $2.1 million to $8.4 million. Accordingly, considering all the information available to us on May 6, 2009, when we filed our Form 10-Q for the three months ended March 31, 2009, our best estimate of damages, interest, and other costs was $21.4 million. Accordingly, we increased our accrual for the matter from $0.8 million at
December 31, 2008, to $21.4 million at March 31, 2009. The increase in our accrual of $20.6 million is presented as a separate line item in our consolidated statement of operations, and the $21.4 million accrual is included in the “accounts payable and accrued expenses” line item in our consolidated balance sheet as of September 30, 2009.
In June 2009, the court issued a final judgment awarding damages of $15.9 million (including interest) plus costs of suit. In July 2009, we and the plaintiff both filed a notice of appeal. The plaintiff also filed reimbursement motions for $2.1 million of legal fees, expert fees, and court costs of which $1.9 million was subsequently denied. We expect the appeal process will take in excess of a year to complete; all judgments will be stayed until completion of the appeals. Given the uncertainty surrounding the final outcome of the lawsuit, no further adjustment was made to the $21.4 million litigation provision accrual. During the three and nine months ended September 30, 2009, we incurred additional legal and other costs related to the lawsuit and appeal process which are also included in the “litigation provision” line item in the consolidated statement of operations. Furthermore, we continue to believe that the “Final Proposal” which included express language that it was subject to formal documentation was not a binding contract and that we should have no liability whatsoever, and will vigorously defend our position as part of the appeal process.
Real estate tax expense decreased $0.2 million, or 1.4%, to $14.5 million in the three months ended September 30, 2009 compared to $14.7 million in the three months ended September 30, 2008. This decrease is due primarily to a decrease of $0.7 million related to same-center properties partially offset by an increase of $0.6 million related primarily to higher tax assessments at redevelopment properties and properties acquired in 2008.
Gross interest costs were $31.4 million and $26.2 million in the three months ended September 30, 2009 and 2008, respectively. Capitalized interest was $1.2 million and $0.8 million in the three months ended September 30, 2009 and 2008, respectively.
FRT is in the portfolios of Ken Heebner of CAPITAL GROWTH MANAGEMENT LP, Chris Davis of Davis Selected Advisers.
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