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Federal Realty Investment Trust Reports Operating Results (10-Q)

November 03, 2010 | About:
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10qk

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Federal Realty Investment Trust (FRT) filed Quarterly Report for the period ended 2010-09-30.

Federal Realty Investment Trust has a market cap of $5.09 billion; its shares were traded at around $82.99 with and P/S ratio of 9.5. The dividend yield of Federal Realty Investment Trust stocks is 3.2%. Federal Realty Investment Trust had an annual average earning growth of 2% over the past 10 years. GuruFocus rated Federal Realty Investment Trust the business predictability rank of 4-star.FRT is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management, Chris Davis of Davis Selected Advisers, Pioneer Investments, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

On August 16, 2010, we acquired the leasehold interest in Huntington Square located in East Northport, New York for a purchase price of $17.6 million. The property contains approximately 74,000 square feet of gross leasable area and is adjacent to a 194,000 square foot Sears department store. As part of the purchase price allocation, approximately $9.2 million of the net assets acquired were allocated to other assets for above market leases and a below market ground lease for which we are the lessee. Approximately $1.7 million of the net assets acquired were allocated to liabilities for below market leases. We incurred approximately $0.3 million of acquisition costs related to Huntington Square which are included in general and administrative expenses.

In October 2010, Donald C. Wood, our Chief Executive Officer, was granted approximately $5,000,000 of restricted stock, or 60,931 shares, which will vest on October 12, 2015. Additionally, Mr. Woods annual base pay was increased from $700,000 to $850,000 per year effective November 1, 2010, his target bonus was increased from 100% of his base salary to 150% of his base salary beginning with the 2010 bonus, and his target amount for potential equity to be issued in February 2011 under our Long-term Incentive Award Plan was increased from $2.0 million to $4.0 million. Grants under the Long-term Incentive Award Plan generally vest over three to five years.

On May 26, 2010, Newbury Street Partnership acquired the fee interest in two buildings located on Newbury Street in Boston, Massachusetts for a purchase price of $17.5 million. The properties include approximately 32,000 square feet of retail and office space. We contributed $7.8 million towards this acquisition and provided an $8.8 million interest-only loan secured by the two buildings. The loan matures in May 2012, subject to a one-year extension option, and bears interest at 30-day LIBOR plus 400 basis points. All amounts contributed and advanced to Newbury Street Partnership are included in Investment in real estate partnerships in the consolidated balance sheet. Intercompany profit generated from interest income on the loan is eliminated in consolidation. Due to the timing of receiving financial information from the general partner, our share of operating earnings is recorded one quarter in arrears. During the third quarter 2010, we recorded approximately $0.2 million related to our share of acquisition related costs.

Additionally, we continue to invest in the development at Assembly Row which is a long-term development project we expect to be involved in over the coming years. The project currently has zoning entitlements to build 2.3 million square feet of commercial-use buildings, 2,100 residential units, and a 200 room hotel. We expect that we will structure any future development in a manner designed to mitigate our risk which may include transfers of entitlements or co-developing with other real estate companies. Continuing throughout 2010, we will be completing certain infrastructure work as well as continuing our current pre-development work. We received $10 million of public funding in April 2010, which is included in notes payable in the consolidated balance sheet, related to the infrastructure work we have completed and we expect the Commonwealth of Massachusetts will complete certain additional infrastructure work using government stimulus funds. We expect to invest between $15 million and $20 million related to the development in 2010, net of expected public funding.

Income from real estate partnerships decreased $0.3 million, or 73.6%, to $0.1 million for the three months ended September 30, 2010 compared to $0.5 million in the three months ended September 30, 2009. The decrease is due primarily to $0.2 million of acquisition related expenses from our Newbury Street Partnership.

Gross interest costs were $26.9 million and $31.4 million in the three months ended September 30, 2010 and 2009, respectively. Capitalized interest was $1.6 million and $1.2 million in the three months ended September 30, 2010 and 2009, respectively.

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