Federal Realty Investment Trust Announces Fourth Quarter and Year-End 2006 Operating Results

ROCKVILLE, Md., Feb. 13 /PRNewswire-FirstCall/ -- Federal Realty Investment Trust today reported operating results for its fourth quarter and year-ended December 31, 2006.

(Logo: http://www.newscom.com/cgi-bin/prnh/20050907/DCW070LOGO ) -- Funds from operations available for common shareholders (FFO) per diluted share was $3.26 and earnings per diluted share was $1.92 for 2006, compared to $3.06 and $1.94, respectively, for 2005. -- FFO per diluted share grew 9.5% to $3.35 in 2006, excluding the impact of the $0.09 per diluted share non-cash redemption charge in fourth quarter 2006, from $3.06 in 2005. -- When compared to 2005, full year same-center property operating income increased 6.2% including redevelopments and expansions, and 5.4% excluding redevelopments and expansions. -- Rent increases on lease rollovers for 1.2 million square feet of comparable retail space in 2006 were 18% on a cash-basis and 29% on a GAAP-basis. -- Guidance for 2007 FFO per diluted share remains unchanged at $3.60 to $3.65. Financial Results

In fourth quarter 2006, Federal Realty generated FFO of $48.0 million, or $0.86 per diluted share, which excludes the impact of a $4.8 million, or $0.09 per diluted share, non-cash charge relating to the redemption of our Series B Preferred Shares in November 2006. This compares to FFO of $42.0 million, or $0.78 per diluted share, generated and reported in fourth quarter 2005. FFO reported by Federal Realty for fourth quarter 2006 was $43.3 million, or $0.77 per diluted share including the preferred share redemption charge.

For the year ended December 31, 2006, Federal Realty generated FFO of $181.9 million, or $3.35 per diluted share, which excludes the impact of the $4.8 million, or $0.09 per diluted share, non-cash preferred share redemption charge described above. This compares to FFO of $163.5 million, or $3.06 per diluted share, generated and reported in 2005. FFO reported by Federal Realty for the year ended December 31, 2006 was $177.1 million, or $3.26 per diluted share including the preferred share redemption charge.

Net income available for common shareholders was $17.8 million and earnings per diluted share was $0.32 for the quarter ended December 31, 2006 versus $32.3 million and $0.61, respectively, for fourth quarter 2005. For the full year 2006, Federal Realty reported net income available for common shareholders of $103.5 million, or $1.92 per diluted share. This compares to net income available for common shareholders of $103.1 million, or $1.94 per diluted share, for the year ended December 31, 2005. Federal Realty's net income available for common shareholders and earnings per diluted share results include the aforementioned $4.8 million Series B Preferred redemption charge in fourth quarter and year-end 2006 results, and a significant decline in gain on sale of real estate, reflecting the completion of the Santana Row condominium sales in August 2006.

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

Portfolio Results

On an annual basis, same-center property operating income in 2006 increased 6.2% including redevelopments and expansions, and 5.4% excluding redevelopments and expansions. In fourth quarter 2006, same-center property operating income, including redevelopment and expansion properties, increased 4.7% over fourth quarter 2005. When redevelopment and expansion properties are excluded from same-center results, property operating income for fourth quarter 2006 increased 5.0% compared to fourth quarter 2005.

The Trust's overall portfolio was 96.5% leased as of December 31, 2006, compared to 96.3% on December 31, 2005. Federal Realty's same-center portfolio was 96.8% leased on December 31, 2006, compared to 97.2% on December 31, 2005.

During fourth quarter 2006, the Trust signed 84 leases for 321,000 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), the Trust leased 304,000 square feet at an average cash-basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 17%. The average contractual rent on this comparable space for the first year of the new lease is $26.72 per square foot compared to the average contractual rent of $22.80 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 the 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 30% for fourth quarter 2006.

In 2006, Federal Realty signed 257 leases representing 1.2 million square feet of comparable retail space at an average cash-basis contractual rent increase per square foot of 18%, and 29% on a GAAP-basis. The average cash- basis contractual rent on this comparable space for the first year of the new lease is $23.45 per square foot compared to the average cash-basis contractual rent of $19.84 per square foot for the last year of the prior lease. As of December 31, 2006, Federal Realty's average contractual minimum rent for retail and commercial space in its portfolio is $18.97 per square foot.

"Our 2006 results continue to reflect the consistency and sustainability of our business strategy," commented Donald C. Wood, president and chief executive officer of Federal Realty Investment Trust. "Strong leasing results and redevelopment returns provide not only significant earnings growth, but considerable value creation for our shareholders."

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 $0.575 per share on its common shares, resulting in an indicated annual rate of $2.30 per share. The regular common dividend will be payable on April 16, 2007 to common shareholders of record as of March 13, 2007.

Guidance

Federal Realty left its guidance for 2007 FFO per diluted share unchanged at a range of $3.60 to $3.65, and its 2007 earnings per diluted share guidance unchanged at a range of $1.79 to $1.84.

Summary of Other Quarterly Activities and Recent Developments -- January 5, 2007 - Sam J. Gorlitz, co-founder of Federal Realty, passed away at the age of 89. Mr. Gorlitz established the Trust in 1962 with three properties in the metropolitan D.C. area including Congressional Plaza in Rockville, Maryland. Mr. Gorlitz retired from the Trust's Board of Trustees in 1999, the same year that Federal Realty renamed Park & Shop Center in Washington, D.C. to Sam's Park & Shop to thank him for his contributions to the Company and the industry. -- November 28, 2006 -- Issued $135 million of 5.40% Notes due 2013. Proceeds of the offering were used to repay outstanding debt. -- November 27, 2006 -- The Trust redeemed all 5,400,000 outstanding shares of its 8.50% Series B Cumulative Redeemable Preferred Shares. -- November 6, 2006 -- Federal Realty announced the acquisition of Melville Mall, a 100% leased supermarket-anchored community center located in Huntington, New York, approximately 1-1/2 miles south of the Trust's Huntington Shopping Center. Tenants at Melville Mall include Waldbaum's, Kohl's, Marshall's and Dick's Sporting Goods. 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 2006 earnings conference call, which is scheduled for February 14, 2007, at 11 a.m. Eastern Standard Time. To participate, please call [phone] five to ten minutes prior to the call's start time and use the Passcode 12532544 (required). The conference leader is Andrew Blocher. Federal Realty will also provide an online Web Simulcast on the Company's Web site, http://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, 2007, by dialing [phone] and using the Passcode 29937458.

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 18.8 million square feet located primarily in strategic metropolitan markets in the Northeast, Mid-Atlantic, and California. In addition, the Trust has an ownership interest in approximately 0.7 million square feet of retail space through its joint venture with Clarion Lion Properties Fund in which the Trust has a 30% interest. Our operating portfolio (excluding joint venture properties) was 96.5% leased to national, regional, and local retailers as of December 31, 2006, with no single tenant accounting for more than approximately 2.5% 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 39 consecutive years, the longest record in the REIT industry. Shares of Federal Realty 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 March 3, 2006 (as amended) 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 March 3, 2006 (as amended).

Investor and Media Inquiries Andrew Blocher Vikki Kayne Vice President, Vice President, Capital Markets & Marketing and Investor Relations Corporate Communications 301/998-8166 301/[e-mail]Federal Realty Investment Trust Summarized Operating Results December 31, 2006 Financial Highlights (in thousands, except per share data) (unaudited) Three months ended Twelve months ended December 31, December 31, 2006 2005 2006 2005 Revenue Rental income $117,192 $103,231 $438,201 $393,548 Other property income 1,982 3,144 7,726 9,551 Mortgage interest income 1,317 1,331 5,095 5,370 120,491 107,706 451,022 408,469 Expenses Rental 24,973 22,546 88,130 84,736 Real estate taxes 12,113 11,131 44,898 39,372 General and administrative 5,593 5,468 21,340 19,909 Depreciation and amortization 25,561 22,797 97,618 88,927 68,240 61,942 251,986 232,944 Operating income 52,251 45,764 199,036 175,525 Interest-rate swap and other interest income 457 269 2,545 2,215 Interest expense (27,625) (23,012) (102,808) (88,566) Income from real estate partnership 122 143 656 493 Minority interests (870) (1,231) (4,353) (5,234) Income from continuing operations 24,335 21,933 95,076 84,433 Discontinued operations Operating income (loss) from discontinued operations 16 (207) (320) (569) Gain on sale of real estate 90 13,402 23,956 30,748 Results from discontinued operations 106 13,195 23,636 30,179 Net income 24,441 35,128 118,712 114,612 Dividends on preferred stock (1,817) (2,869) (10,423) (11,475) Preferred stock redemption costs (4,775) - (4,775) - Net income available for common shareholders $17,849 $32,259 $103,514 $103,137 EARNINGS PER COMMON SHARE, BASIC Continuing operations $0.32 $0.36 $1.50 $1.39 Discontinued operations - 0.25 0.44 0.57 $0.32 $0.61 $1.94 $1.96 Weighted average number of common shares, basic 55,092 52,738 53,469 52,533 EARNINGS PER COMMON SHARE, DILUTED Continuing operations $0.32 $0.36 $1.48 $1.37 Discontinued operations - 0.25 0.44 0.57 $0.32 $0.61 $1.92 $1.94 Weighted average number of common shares, diluted 55,576 53,189 53,962 53,050 Federal Realty Investment Trust Funds From Operations December 31, 2006 Three months ended Twelve months ended December 31, December 31, 2006 2005 2006 2005 (in thousands, (in thousands, Funds from Operations available except per share except per share for common shareholders (FFO) data) data) Net income $24,441 $35,128 $118,712 $114,612 Gain on sale of real estate (90) (13,402) (23,956) (30,748) Depreciation and amortization of real estate assets 23,196 20,992 88,649 82,752 Amortization of initial direct costs of leases 2,013 1,776 7,390 6,972 Depreciation of real estate partnership assets 214 159 768 630 Funds from operations 49,774 44,653 191,563 174,218 Dividends on preferred stock (1,817) (2,869) (10,423) (11,475) Income attributable to operating partnership units 88 228 748 801 Preferred stock redemption costs (4,775) - (4,775) - FFO $43,270 $42,012 $177,113 $163,544 FFO per diluted share $0.77 $0.78 $3.26 $3.06 Preferred stock redemption costs per diluted share 0.09 - 0.09 - FFO per diluted share before preferred stock redemption costs $0.86 $0.78 $3.35 $3.06 Weighted average number of common shares, diluted 55,941 53,597 54,351 53,469 Federal Realty Investment Trust Summarized Balance Sheets December 31, 2006 Financial Highlights (in thousands) (unaudited) December 31, December 31, 2006 2005 ASSETS Real estate, at cost Operating $3,104,484 $2,731,694 Construction-in-progress 99,774 50,593 Discontinued operations - 47,034 3,204,258 2,829,321 Less accumulated depreciation and amortization (740,507) (663,750) Net real estate 2,463,751 2,165,571 Cash and cash equivalents 11,495 8,639 Accounts and notes receivable 47,493 38,161 Mortgage notes receivable 40,756 40,531 Investment in real estate partnership 10,322 9,375 Other assets 114,789 88,575 TOTAL ASSETS $2,688,606 $2,350,852 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Obligations under capital leases and mortgage notes $460,398 $419,713 Notes payable 109,024 316,755 Senior notes and debentures 1,127,508 653,675 Other liabilities 185,407 166,669 Total liabilities 1,882,337 1,556,812 Minority interests 22,191 19,193 Shareholders' equity Preferred stock - 135,000 Common shares and other shareholders' equity 784,078 639,847 Total shareholders' equity 784,078 774,847 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,688,606 $2,350,852 Federal Realty Investment Trust Reconciliation of Net Income to FFO Guidance December 31, 2006 2007 Guidance (in millions except per share amounts) (1) Net income $100 to $102 Gain on sale of real estate 0 0 Depreciation and amortization of real estate & joint venture assets 94 94 Amortization of initial direct costs of leases 7 7 Funds from operations 201 203 Income attributable to operating partnership units 1 1 Funds from operations available for common shareholders 202 to 204 Weighted Average Shares (diluted) 56.0 Funds from operations available for common shareholders per diluted share $3.60 $3.65 Note: (1) Individual items may not add up to total due to rounding.
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