Federal Realty Investment Trust (FRT) 10-K risk factor changes: FY2012 vs FY2011

The current economic [removed: conditions] [added: conditions, including pending changes to tax laws,] may impact the success of our tenants’ retail operations and therefore the amount of rent and expense reimbursements we receive from our tenants.

[removed: We] [added: While we] have seen [added: positive signs of improvement for many of our tenants over the past two years, we have seen] some tenants experiencing declining sales, vacating early, failing to pay rent on a timely basis or filing for bankruptcy, as well as seeking rent relief from us as landlord.

As a result of the [removed: current] economic [removed: conditions,] [added: conditions over the last few years,] we have seen a decrease in the number of tenants available to fill anchor spaces.

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 [removed: which] [added: and] may include decreases in rental rates.

As of December 31, [removed: 2011,] [added: 2012,] we had approximately [removed: $2.1] [added: $2.2] billion of debt outstanding.

Of that outstanding debt, approximately [removed: $725.4] [added: $739.4] million was secured by all or a portion of [removed: 21] [added: 19] of our real estate projects and approximately [removed: $63.1] [added: $71.7] million represented capital lease obligations on four of our properties.

In addition, we own a 30% interest in a joint venture that had [removed: $57.4] [added: $57.2] million of debt secured by four properties as of December 31, [removed: 2011.][added: 2012.]

[removed: Approximately $2.1 billion (99.6%) of our debt as of] December 31, [removed: 2011] [added: 2012] is fixed rate debt, which includes all of our property secured debt, our capital lease obligations and our [added: $275.0 million term loan as the rate is effectively fixed by two interest rate swap agreements.]

Our unconsolidated joint venture’s debt of [removed: $57.4] [added: $57.2] million is also fixed rate debt.

As of December 31, [removed: 2011,] [added: 2012,] we were in compliance with all of our financial covenants.

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 [removed: exceed the book value, an impairment of the project may be required.]

[added: If additional phases of] any [added: of our existing projects or if any] new projects are not successful, it may adversely affect our financial condition and results of operations.

In 2012, we [removed: expect to start] [added: began] construction on [added: Phase I of] Assembly Row, [added: Phase I of] Pike & Rose and [removed: additional] [added: a new] residential [removed: units] [added: building] at Santana Row and anticipate investing approximately [removed: $500] [added: $425] million in these projects over the next few years.

[removed: While the significant size of the development investment poses a risk in itself, there] [added: There] are a number of [removed: other] risks associated with these [added: projects, including the size of the overall aggregate investment in these] projects.

Furthermore, with respect to residential development at Pike & Rose and Santana Row, we will be delivering these units into a residential environment in [removed: 2014-2015] [added: 2014-2016] that is uncertain.

In addition to the risks associated with real estate investment in [removed: general] [added: general,] as described elsewhere and the specific risks above, the risks associated with our remaining development activities include:

| • | failure or inability to obtain public funding from governmental agencies to fund infrastructure [removed: projects;] [added: projects,] including expected public funding in connection with our development at Assembly Row; |

| • | difficulty securing key [removed: value-oriented] anchor [added: or other] tenants may impact [removed: retail and residential] occupancy [removed: rates;] [added: rates and projected revenue;] |

The redevelopment and acquisition of properties [removed: entails] [added: entail] risks that include the following, any of which could adversely affect our results of operations and our ability to meet our obligations:

Debt could include the sale of debt securities [removed: and mortgage loans from third parties.]

[added: While we have been able to consummate financings in recent years at favorable rates, 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 than in recent years for debt financings.

Our access to debt or equity capital depends on a number of factors, including the market’s perception of our growth [removed: potential,] [added: potential and risk profile,] our ability to pay dividends, and our current and potential future earnings.

Of our approximately [removed: $2.1] [added: $2.2] billion of debt outstanding as of December 31, [removed: 2011,] [added: 2012,] approximately $284.4 million bears interest at variable rates of which $275.0 million is effectively fixed through two interest rate swap agreements.

We have a $400.0 million revolving credit facility, of which no balance is outstanding at December 31, [removed: 2011,] [added: 2012,] that bears interest at LIBOR plus 115 basis points.

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 [removed: anticipated future revenue from the property, but still remain obligated for any mortgage debt or other financial obligations]

As of December 31, [removed: 2011,] [added: 2012,] we held five predominantly retail real estate projects jointly with other persons in addition to our joint venture with affiliates of a discretionary fund created and advised by ING Clarion Partners (“Clarion”) and properties owned in a “downREIT” structure.

Although as of December 31, [removed: 2011,] [added: 2012,] we held the managing general partnership or membership interest in all of our existing co-investments we generally must obtain the consent of the co-investor or meet defined criteria to sell or to finance these properties.

As of December 31, [removed: 2011,] [added: 2012,] this joint venture owned seven properties.

[removed: Our tenants, like many of their competitors, have incurred, and will continue to incur, capital and] operating expenditures and other costs associated with complying with these laws and regulations, which will adversely affect [added: their potential profitability.]

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 [removed: aggregate undistributed income from prior years.]

We may need to borrow funds to meet our distribution [added: requirements because:]

| • | a two-thirds shareholder vote is required to approve some amendments to the declaration of trust; [added: and] |

| • | advance-notice requirements for proposals to be presented at shareholder [removed: meetings; and] [added: meetings.] |

Approximately $2.2 billion (99.6%) of our debt as of

exceed the book value, an impairment of the project may be required.

and mortgage loans from third parties.

anticipated future revenue from the property, but still remain obligated for any mortgage debt or other financial obligations related to the property.

Our tenants, like many of their competitors, have incurred, and will continue to incur, capital and

Any modification in the tax treatment of REITs could have a significant adverse impact to our net income.

aggregate undistributed income from prior years.

Changes in accounting standards may adversely impact our financial results.

The Financial Accounting Standards Board ("FASB"), in conjunction with the SEC, has several key projects on their agenda that could impact how we currently account for our material transactions, including lease accounting and other convergence projects with the International Accounting Standards Board.

At this time, we are unable to predict with certainty which, if any, proposals may be passed or what level of impact any such proposal could have on the presentation of our consolidated financial statements, our results of operations and our financial ratios required by our debt covenants.

$275.0 million term loan as the rate is effectively fixed by two interest rate swap agreements.

| | |

| --- | --- |

If additional phases of any of our existing projects or if

While we were able to consummate financings during 2009, 2010 and 2011, if economic

related to the property.

their potential profitability.

requirements because:

| • | a shareholder rights plan that provides, among other things, that when specified events occur, our shareholders will be entitled to purchase from us a number of common shares equal in value to two times the purchase price, which initially will be equal to $65 per share, subject to certain adjustments. |

As of December 31, [removed: 2011,] [added: 2012,] we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as [removed: 87] [added: 88] predominantly retail real estate projects comprising approximately [removed: 19.3] [added: 19.6] million square feet.

In total, the real estate projects were [removed: 93.4%] [added: 95.3%] leased and [removed: 92.4%] [added: 94.9%] occupied at December 31, [removed: 2011.][added: 2012.]

A joint venture in which we own a 30% interest owned seven retail real estate projects totaling approximately 1.0 million square feet as of December 31, [removed: 2011.][added: 2012.]

In total, the joint venture properties in which we own a 30% interest were [removed: 90.9%] [added: 86.3%] leased and [added: 86.1%] occupied at December 31, [removed: 2011.][added: 2012.]

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for [removed: 44] [added: 45] consecutive years.

[added: 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.

At December 31, [removed: 2011] [added: 2012] and [removed: 2010,] [added: 2011,] our allowance for doubtful accounts was [removed: $17.6] [added: $15.9] million and [removed: $18.7] [added: $17.6] million, respectively.

Historically, we have recognized bad debt expense between 0.4% and 1.3% of rental income and it was [removed: 0.5%] [added: 0.4%] in [removed: 2011] [added: 2012] reflecting positive economic changes and their impact to our tenants.

For example, in the event our estimates were not accurate and we were required to increase our allowance by 1% of rental income, our bad debt expense would have increased and our net income would have decreased by [removed: $5.4] [added: $5.8] million.

At December 31, [removed: 2011] [added: 2012] and [removed: 2010,] [added: 2011,] accounts receivable include approximately [removed: $50.5] [added: $56.1] million and [removed: $45.6] [added: $50.5] million, respectively, related to straight-line rents.

[added: These reviews may take into account such factors as the] historical retirement and replacement of our assets, expected redevelopments, the repairs required to maintain the condition of our assets, and general economic and real estate factors.

Certain events could occur that would materially affect our estimates [removed: and assumptions related to depreciation.]

Minor improvements, furniture and equipment are capitalized and depreciated over useful lives ranging from [removed: 3] [added: 2] to 20 years.

We capitalized external and internal costs related to both development and redevelopment activities of [removed: $96] [added: $129] million and [removed: $4] [added: $6] million, respectively, for [removed: 2011] [added: 2012] and [removed: $54] [added: $96] million and [removed: $3] [added: $4] million, respectively, for [removed: 2010.][added: 2011.]

We capitalized external and internal costs related to other property improvements of [removed: $46] [added: $52] million and $1 million, respectively, for [removed: 2011] [added: 2012] and [removed: $39] [added: $46] million and $1 million, respectively, for [removed: 2010.][added: 2011.]

We capitalized external and internal costs related to leasing activities of [removed: $8] [added: $9] million and [removed: $5] [added: $6] million, respectively, for [removed: 2011] [added: 2012] and [removed: $7] [added: $8] million and [removed: $4] [added: $5] million, respectively, for [removed: 2010.][added: 2011.]

The amount of capitalized internal costs for salaries and related benefits for development and redevelopment activities, other property improvements, and leasing activities were [removed: $4] [added: $5] million, $1 million, and $5 million, respectively, for [removed: 2011] [added: 2012] and [removed: $3] [added: $4] million, $1 million, and [removed: $4] [added: $5] million, respectively, for [removed: 2010.][added: 2011.]

Recently [removed: Issued] [added: Adopted] Accounting Pronouncements

In May 2011, the [removed: FASB] [added: Financial Accounting Standards Board (the "FASB")] issued Accounting Standards Update (“ASU”) 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” The pronouncement was issued to provide a uniform framework for fair value measurements and related disclosures between U.S. GAAP and International Financial Reporting Standards (“IFRS”).

This pronouncement is effective for us in the first quarter of [removed: 2012] [added: 2013] and is not expected to have a significant impact to our consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” ASU 2011-05 eliminates the option to present components of other comprehensive income [added: solely] as part of the statement of shareholders’ equity and requires the presentation of components of net income and components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.

In December 2011, the FASB deferred the requirement to present reclassification adjustments for each component of accumulated [added: other comprehensive income in both net income and other comprehensive income on the face of the financial]

[removed: These pronouncements are effective for us in] [added: We adopted] the [removed: first quarter of] [added: standard effective January 1,] 2012 and [removed: will] [added: it did] not have a significant impact to our consolidated financial statements.

[removed: 2011] [added: 2012] Significant Property Acquisitions [removed: and Disposition]

[removed: On January 19, 2011, we acquired the fee interest in Tower Shops located in Davie, Florida for a net] [added: The] purchase price [removed: of $66.1] [added: was $116.6] million which included the assumption of a mortgage loan with a face amount of [removed: $41.0] [added: $62.9] million and a fair value of approximately [removed: $42.9] [added: $67.6] million.

Approximately [removed: $1.2] [added: $0.9] million and [removed: $4.4] [added: $47.8] million of net assets acquired were allocated to other assets for “above market leases” and other liabilities for “below market leases”, respectively.

We incurred a total of [removed: $0.4] [added: $0.9] million of acquisition costs [removed: of] which [removed: $0.2 million were incurred in 2011 and] are included in “general and administrative expenses” [removed: for the year ended December 31, 2011.][added: in 2012.]

See Note [removed: 5] [added: 4] to the consolidated financial statements for further discussion of [removed: our Newbury Street Partnership.][added: this transaction.]

The purchase price [added: for Montrose Crossing] was $141.5 million and our 89.9% ownership interest was $127.2 million which was funded with cash and our pro-rata share of $80.0 million of new mortgage [removed: debt.]

The purchase price [added: for Plaza El Segundo] was $192.7 million and our 48.2% ownership interest was funded with $8.5 million of cash and the assumption of our pro-rata share of the existing $175.0 million mortgage debt.

[removed: 2011] [added: 2012] Significant [removed: Debt,] Equity and [removed: Other] [added: Debt] Transactions [added: and Subsequent Event]

In connection with the acquisition of [removed: Tower Shops] [added: East Bay Bridge] on [removed: January 19, 2011,] [added: December 21, 2012,] we assumed a mortgage loan with a face amount of [removed: $41.0] [added: $62.9] million and a fair value of approximately [removed: $42.9] [added: $67.6] million.

The $0.3 million of income from early extinguishment of debt in [removed: the year ended December 31, 2011, relates] [added: 2011 is due] to the [removed: early payoff of this loan and includes the] write-off of [removed: the] unamortized debt premium [removed: of $1.7 million] net of [removed: the 3%] [added: a 3.0%] prepayment premium and unamortized debt [removed: fees.][added: fees related to the payoff of our mortgage loan on Tower Shops prior to its contractual prepayment date.]

On [removed: February 24, 2011,] [added: May 8, 2012,] we [removed: entered into an] [added: replaced our existing] at the market (“ATM”) equity program [added: with a new program] in which we may from time to time offer and sell common shares having an aggregate offering price of up to $300.0 million.

We intend to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay amounts outstanding under our [added: revolving credit facility and/or for general corporate purposes.]

For the year ended December 31, [removed: 2011,] [added: 2012,] we issued [removed: 1,662,038] [added: 1,040,946] common shares at a weighted average price per share of [removed: $85.26] [added: $103.69] for net cash proceeds of [removed: $139.3] [added: $106.4] million and paid [removed: $2.1] [added: $1.4] million in commissions related to the sales of these common shares.

[removed: We] [added: In November 2011, we] entered into two interest rate swap agreements [removed: to fix] [added: that effectively fixed] the [removed: variable] rate [removed: portion of our] [added: on the] $275.0 million term loan at [removed: 1.72% from December 1, 2011 through November 1, 2018.][added: 3.17%.]

[removed: The] [added: | 4) | We entered into two interest rate] swap agreements [added: that] effectively [removed: fixed] [added: fix] the rate on the term loan at 3.17%. [added: |]

| • | expansion of our portfolio through property [removed: acquisitions, and] [added: acquisitions.] |

| • | growth in our same-center [removed: portfolio.] [added: portfolio, and] |

and assumptions related to depreciation.

statements.

We adopted the standards effective January 1, 2012 and modified the presentation in our consolidated financial statements accordingly.

Recently Issued Accounting Pronouncement

In February 2013, the FASB issued ASU 2013-2, “Comprehensive Income (Topic 220): Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU 2013-2 requires entities to disclose certain information relating to amounts reclassified out of accumulated other comprehensive income.

In July and September 2012, we acquired three residential apartment buildings with 47 units located adjacent to Santana Row for $9.0 million.

These properties provide potential future redevelopment opportunities for Santana Row.

On December 21, 2012, we acquired the fee interest in East Bay Bridge, a 438,000 square foot shopping center located in Emeryville and Oakland, California.

Additionally, we acquired a 37,000 square foot single-tenant office/warehouse building in Ontario, California for $2.5 million as part of the transaction.

For the three months ended December 31, 2012, we issued 167,736 common shares at a weighted average price per share of $104.46 for net cash proceeds of $17.3 million and paid $0.2 million in commissions related to the sales of these common shares.

During 2012 and subsequent to year-end, we repaid the following loans at par:

| | Payoff Amount | | | | Repayment Date | | Maturity Date |

| | (In millions) | | | | | | |

| Courtyard Shops Mortgage Loan | $ | 6.9 | | | June 1, 2012 | | July 1, 2012 |

| Mount Vernon Mortgage Loan | 10.2 | | | | October 22, 2012 | | April 15, 2028 |

| Bethesda Row Mortgage Loan | 20.0 | | | | November 2, 2012 | | January 1, 2013 |

| Bethesda Row Mortgage Loan | 3.9 | | | | December 3, 2012 | | February 1, 2013 |

| White Marsh Plaza Mortgage Loan | 9.0 | | | | January 2, 2013 | | April 1, 2013 |

| | $ | 225.0 | | | | | |

On July 19, 2012, we issued $250.0 million of fixed rate senior notes that mature on August 1, 2022 and bear interest at 3.00%.

The net proceeds from this note offering after issuance discounts, underwriting fees, and other costs were approximately $244.8 million.

The mortgage loan bears interest at 5.13% and matures on March 1, 2016.

Final Purchase Price Allocation of 2011 Property Acquisitions

During 2012, we finalized the purchase price allocations for our December 2011 acquisitions of controlling interests in Montrose Crossing and Plaza El Segundo.

debt.

Approximately $2.9 million and $3.8 million of net assets acquired were allocated to other assets for "above market leases" and other liabilities for "below market leases", respectively.

Approximately $7.5 million and $2.3 million of net assets acquired were allocated to other assets for "above market leases" and other liabilities for "below market leases", respectively.

The balance sheet at December 31, 2011, has been adjusted to reflect the final purchase price allocation for both properties.

Chief Financial Officer Transition

On August 15, 2012, James M.

Taylor, a senior managing director in the real estate investment banking group of an affiliate of Wells Fargo, succeeded Andrew Blocher as our chief financial officer.

We believe that the addition of Mr. Taylor to our executive ranks will enhance our ability to source and evaluate corporate business development and strategic opportunities.

For more information about Mr. Taylor's appointment, see our Current Report on Form 8-K filed with the SEC on July 11, 2012.

Our construction on the first phase commenced during the first quarter 2012.

Total expected costs for Phase I of Assembly Row range from $190 million to $200 million of which $43 million has been incurred to date.

We expect Phase I to stabilize in 2015.

Additionally during 2012, we continued our infrastructure work.

In the third quarter 2012, we broke ground on the first phase of Pike & Rose in Rockville, MD, a long-term multi-phased mixed-use project located on a portion of our Mid-Pike Plaza property.

Total expected costs for Phase I of Pike & Rose range from $245 million to $255 million of which $29 million has been incurred to date.

We expect Phase I of the project to stabilize in 2015/2016.

Management considers an accounting estimate to be

These reviews may take into account such factors as the

other comprehensive income in both net income and other comprehensive income on the face of the financial statements.

The property contains approximately 368,000 square feet of gross leasable area on 67 acres and is shadow-anchored by Home Depot and Costco.

On July 12, 2011, we sold Feasterville Shopping Center located in Feasterville, Pennsylvania for a sales price of $20.0 million resulting in a gain of $14.8 million.

The operations of this property are included in “discontinued operations” in the consolidated statements of operations for all periods presented and included in “assets held for sale/disposal” in our consolidated balance sheet as of December 31, 2010.

The sale was completed as a Section 1031 tax deferred exchange transaction with the acquisition of Tower Shops.

On October 31, 2011, our Newbury Street Partnership sold its three buildings for $44.0 million.

As part of the sale, we received $34.6 million of the net proceeds which included the repayment of our $11.8 million loans.

Due to our earnings being recorded one quarter in arrears, we will recognize the gain on sale of $11.8 million in the first quarter 2012.

On December 27, 2011, we acquired an 89.9% controlling interest in Montrose Crossing, a 357,000 square foot shopping center located in Rockville, Maryland.

We are the managing member of the entity, control all significant operating decisions, and receive approximately 89.9% of the cash flow of the entity.

Therefore, we have consolidated the property and its operations effective on the acquisition date.

The purchase price has been preliminarily allocated to real estate assets, debt, and noncontrolling interests.

The final purchase price allocation to all acquired assets, liabilities, and noncontrolling interests will be finalized after our valuation studies are complete.

We incurred approximately $2.4 million of acquisition costs which are included in “general and administrative expenses” in 2011.

On December 30, 2011, we acquired a 48.2% controlling interest in Plaza El Segundo, a 381,000 square foot shopping center located in El Segundo, California.

We are the managing member of the entity, control all significant operating decisions, and receive the majority of the cash flow of the entity.

We incurred approximately $1.0 million of acquisition costs which are included in “general and administrative expenses” in 2011.

On December 30, 2011, we acquired an 8.1 acre land parcel adjacent to Plaza El Segundo for a purchase price of $15.9 million.

We intend to use the land parcel for future development.

The mortgage loan bore interest at 6.52%, had a scheduled maturity on July 1, 2015 and was contractually pre-payable after June 2011 with a 3% prepayment premium.

On March 24, 2011, the lender unexpectedly allowed us to repay the $41.0 million mortgage loan prior to the permitted prepayment date including the 3% prepayment premium of $1.2 million.

On February 15, 2011, we repaid our $75.0 million 4.50% senior notes on the maturity date.

revolving credit facility and/or for general corporate purposes.

For the three months ended December 31, 2011, no shares were issued under the ATM equity program.

In March 2011, we paid the final judgment of $16.2 million related to a previously disclosed lawsuit regarding a parcel of land located adjacent to Santana Row.

The final judgment was previously accrued and is included in “accounts payable and accrued expenses” in our consolidated balance sheet at December 31, 2010.

On April 29, 2011, we repaid the $31.7 million mortgage loan on Federal Plaza which had an original maturity date of June 1, 2011.

On June 1, 2011, we repaid the $5.6 million mortgage loan on Tysons Station which had an original maturity date of September 1, 2011.

On July 7, 2011, we replaced our existing $300.0 million revolving credit facility with a new $400.0 million unsecured revolving credit facility.

This new revolving credit facility matures on July 6, 2015, subject to a one-year extension at our option, and bears interest at LIBOR plus 115 basis points.

The spread over LIBOR is subject to adjustment based on our credit rating.

On November 22, 2011, we entered into a $275.0 million unsecured term loan which bears interest at LIBOR plus 145 basis points.

The loan matures on November 21, 2018 and is prepayable without penalty after three years.

In connection with the acquisition of Montrose Crossing on December 27, 2011, our joint venture that owns the property entered into an $80.0 million mortgage loan that bears interest at 4.20% and matures on January 10, 2022.

As Montrose Crossing is a consolidated property, 100% of the mortgage loan is included in our consolidated balance sheet.

In connection with the acquisition of Plaza El Segundo on December 30, 2011, we assumed our pro-rata share of an existing mortgage loan with a face amount of $175.0 million and a fair value of approximately $185.6 million.

As Plaza El Segundo is a consolidated property, 100% of the mortgage loan is included in our consolidated balance sheet.

The mortgage loan requires monthly interest only payments through maturity, bears interest at a weighted average rate of 6.33% and matures on August 5, 2017.

As of December 31, [removed: 2011,] [added: 2012,] we were party to two interest rate swap agreements [removed: to] [added: that effectively] fix the [removed: variable] rate [removed: portion of our] [added: on the] $275.0 million term loan at [removed: 1.72% from December 1, 2011 through November 1, 2018.][added: 3.17%.]

[added: 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.

At December 31, [removed: 2011,] [added: 2012,] we had [removed: $2.1] [added: $2.2] billion of fixed-rate debt outstanding, including our $275.0 million term loan as the rate is effectively fixed by two interest rate swap agreements, and [removed: $63.1] [added: $71.7] million of capital lease obligations.

If market interest rates used to calculate the fair value on our fixed-rate debt instruments at December 31, [removed: 2011] [added: 2012] had been 1.0% higher, the fair value of those debt instruments on that date would have decreased by approximately [removed: $69.1] [added: $80.0] million.

If market interest rates used to calculate the fair value on our fixed-rate debt instruments at December 31, [removed: 2011] [added: 2012] had been 1.0% lower, the fair value of those debt instruments on that date would have increased by approximately [removed: $73.5] [added: $84.9] million.

At December 31, [removed: 2011,] [added: 2012,] we had $9.4 million of variable rate debt outstanding which consisted of municipal bonds.

Our revolving credit facility had no outstanding balance as of December 31, [removed: 2011.][added: 2012.]

Quoted market prices were used to estimate the

As of December 31, [removed: 2011,] [added: 2012,] we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as [removed: 87] [added: 88] predominantly retail real estate projects comprising approximately [removed: 19.3] [added: 19.6] million square feet.

In total, the real estate projects were [removed: 93.4%] [added: 95.3%] leased and [removed: 92.4%] [added: 94.9%] occupied at December 31, [removed: 2011.][added: 2012.]

A joint venture in which we own a 30% interest owned seven retail real estate projects totaling approximately 1.0 million square feet as of December 31, [removed: 2011.][added: 2012.]

In total, the joint venture properties in which we own an interest were [removed: 90.9%] [added: 86.3%] leased and [added: 86.1%] occupied at December 31, [removed: 2011.][added: 2012.]

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for [removed: 44] [added: 45] consecutive years.

Our primary business objective is to own, manage, acquire and redevelop a portfolio of high quality retail [added: focused] properties that will:

Our core operating strategy is to actively manage our properties to maximize rents and maintain occupancy levels by attracting and retaining a strong and diverse base of tenants and replacing [added: less relevant,] weaker, underperforming tenants with stronger ones.

| • | developing the retail portions of mixed-use properties and developing or otherwise investing in [removed: other] [added: non-retail] portions of mixed-use properties we already own in order to capitalize on the overall value created in these properties. |

| [removed: •] [added: ◦] | 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, |

| [removed: •] [added: ◦] | the incurrence of indebtedness through unsecured or secured borrowings, |

| [removed: •] [added: ◦] | 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 [removed: exchange for a tax deferred contribution of property; these units receive the same distributions as our common shares and the holders] |

[added: exchange for a tax deferred contribution] of [added: property;] these units [added: receive the same distributions as our common shares and the holders of these units] have the right to exchange their units for cash or the same number of our common shares, at our option), or

| [removed: •] [added: ◦] | the use of joint venture arrangements. |

At February [removed: 9, 2012,] [added: 8, 2013,] we had [removed: 254] [added: 256] full-time employees and [removed: 162] [added: 165] part-time employees.

For the fiscal year ended December 31, [removed: 2011][added: 2012]

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, [removed: 2011] [added: 2012] was [removed: $5.3] [added: $6.7] billion.

The number of Registrant’s common shares outstanding on February [removed: 9, 2012] [added: 8, 2013] was [removed: 63,672,252.][added: 64,924,837.]

FISCAL YEAR ENDED DECEMBER 31, [removed: 2011][added: 2012]

Portions of the Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission for the Registrant’s [removed: 2011] [added: 2012] annual meeting of shareholders to be held in May [removed: 2012] [added: 2013] will be incorporated by reference into Part III hereof.

| Item 1. | Business | [removed: [3](#s843ABA28DDE89C3FD0F7A7B47CD30A7F)] [added: [3](#s6B992335BCC7CCF5FCD5E6112016C39D)] |

| Item 1A. | Risk Factors | [removed: [7](#s9635628E1619B9FF9526A9307EA4C550)] [added: [7](#s15C63AB831A082DE2C33E6112036665F)] |

| Item 1B. | Unresolved Staff Comments | [removed: [15](#sD8ABC9F28321B610B891A932C9C16CEC)] [added: [15](#s35D33856E59F4ED42F4FE61120652948)] |

| Item 2. | Properties | [removed: [15](#s0607DA2B72B496B784D1A933897E5880)] [added: [15](#sF6EFF69E46D6B31DCCB6E6110FBC9F19)] |

| Item 3. | Legal Proceedings | [removed: [23](#s203A9896D4F7C9D11D27A975E8BD27A4)] [added: [23](#s7899727E69089C0758C8E61120F16433)] |

| Item 4. | Mine Safety Disclosures | [removed: [23](#s56749186812F1D667C69A9775738C66D)] [added: [23](#sBA48B0900EAE2476217AE6112101BD91)] |

| Item 5. | Market for Our Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities | [removed: [24](#s01048D65867F047706DAA979AB8A727D)] [added: [24](#sCDA74AFB184AF3C40924E611123C9EC2)] |

| Item 6. | Selected Financial Data | [removed: [26](#sBD5541856E9B89DF6D4CA97B46F03D55)] [added: [26](#sFA9BDBD42596002F06F5E6110F10F968)] |

| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | [removed: [28](#s6824A30E57D89EF15092A2FC8D059CF7)] [added: [28](#sF12A8C86049FBE680524E61121BCBFFC)] |

| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | [removed: [49](#s3A52C3FEB747D85E8363A2FC93E9BC59)] [added: [47](#sC74D3D5A164A967E0155E61122F55F11)] |

| Item 8. | Financial Statements and Supplementary Data | [removed: [50](#s77C9D7508F934D1DECE3A99331277A74)] [added: [48](#s910E1C945133F4EB8A6CE611230441C0)] |

| Item 9. | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure | [removed: [50](#s5F90AA5A38D7A2FBECD4A9941F2A95F3)] [added: [48](#sB8215211B5CDE78CF5B1E61123143047)] |

| Item 9A. | Controls and Procedures | [removed: [50](#s4217D37B4C42F31807B3A2FC95F67FD9)] [added: [48](#s2DE37A1D7A9BDB959FD5E6112324BE27)] |

| Item 9B. | Other Information | [removed: [52](#s0BC5ED24070CD2155783A99749256946)] [added: [50](#s442D5B1961EF040BE294E6112352F186)] |

| Item 10. | Trustees, Executive Officers and Corporate Governance | [removed: [52](#s49DE0CC67B675E23B95CA9A95EDDDD57)] [added: [51](#sECF667A082A75248B083E61123A19498)] |

| Item 11. | Executive Compensation | [removed: [53](#s84E1EC4636FDB6822279A9AC4A1B4A13)] [added: [51](#s6A149A28E544F2628823E61123CFDA16)] |

| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters | [removed: [53](#s3F50B4557F354C2B04DAA9AD195F434D)] [added: [51](#sCA461899590A9D41B5CCE61123FE6044)] |

| Item 13. | Certain Relationships and Related Transactions, and Trustee Independence | [removed: [53](#s67292FEFD0DE4AD85997A9ADE0071469)] [added: [51](#sC3971C909C427641438AE611241E6DCE)] |

| Item 14. | Principal Accountant Fees and Services | [removed: [53](#sFAAC47347ECD35D19028A9AF0F8A7953)] [added: [51](#sA2F619D691C9AE334EB3E611244C95F8)] |

| Item 15. | Exhibits and Financial Statement Schedules | [removed: [53](#s4DCE4B6D708BDED8C7ECA9B045F25302)] [added: [51](#sDEB47DC189365B35EDC5E611249BE187)] |

10-K 1 frt-12312012x10k.htm 10-K

| SIGNATURES | | [52](#sC3C3422FA6DB52E64D6DE61124BA9FB2) |

10-K 1 frt-12312011x10k.htm

| SIGNATURES | | [54](#s3ED9023B55460E99104BA2FCA80972EC) |

As of December 31, [removed: 2011,] [added: 2012,] we owned or had a majority ownership interest in community and neighborhood shopping centers and mixed-used properties which are operated as [removed: 87] [added: 88] predominantly retail real estate projects comprising approximately [removed: 19.3] [added: 19.6] million square feet.

No single property accounted for over 10% of our [removed: 2011] [added: 2012] 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 [added: commercially reasonable exclusions, deductibles and limits.]

As of December 31, [removed: 2011,] [added: 2012,] we had approximately 2,500 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 [removed: 2.5%] [added: 3.2%] of our annualized base rent as of December 31, [removed: 2011.][added: 2012.]

Our [removed: 87] [added: 88] real estate projects are located in 13 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, [removed: 2011.][added: 2012.]

| New Jersey | | 4 | | | 1,388,000 | | | [removed: 7.2] [added: 7.1] | % |

| New York | | 6 | | | [removed: 1,200,000] [added: 1,187,000] | | | [removed: 6.2] [added: 6.1] | % |

| Florida | | 3 | | | [removed: 677,000] [added: 678,000] | | | 3.5 | % |

| Texas | | 1 | | | [removed: 182,000] [added: 183,000] | | | 0.9 | % |

| Total | | [removed: 87] [added: 88] | | | [removed: 19,259,000] [added: 19,554,000] | | | 100.0 | % |

| (1) | Additionally, we own two participating mortgages totaling approximately [removed: $29.4] [added: $29.5] million secured by multiple buildings in Manayunk, Pennsylvania, and an $11.7 million mortgage secured by a shopping center in Norwalk, Connecticut. |

Leases on residential units are generally for a period of one year or less and, in [removed: 2011,] [added: 2012,] represented approximately [removed: 4.3%] [added: 4.7%] of total rental income.

The following table sets forth the schedule of lease expirations for our commercial leases in place as of December 31, [removed: 2011] [added: 2012] for each of the 10 years beginning with [removed: 2012] [added: 2013] and after [removed: 2021] [added: 2022] 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, [removed: 2011.][added: 2012.]

For [removed: 2010,] [added: 2012,] we signed leases for a total of [removed: 1,526,000] [added: 1,965,000] square feet of retail space including [removed: 1,455,000] [added: 1,800,000] square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of [removed: 8%] [added: 13%] on a cash basis and [removed: 18%] [added: 23%] on a straight-line basis.

New leases for comparable spaces were signed for [removed: 640,000] [added: 882,000] square feet at an average rental increase of [removed: 6%] [added: 23%] on a cash basis and [removed: 15%] [added: 32%] on a straight-line basis.

Renewals for comparable spaces were signed for [removed: 816,000] [added: 918,000] square feet at an average rental increase of [removed: 9%] [added: 4%] on a cash basis and [removed: 20%] [added: 14%] on a straight-line basis.

The leases signed in [removed: 2011] [added: 2012] generally become effective over the following two years though some may not become effective until [removed: 2014] [added: 2015] and beyond.

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, [removed: 2011.][added: 2012.]

| Property, City, State, Zip Code | | Year Completed | | Year Acquired | | Square Feet(1) /Apartment Units | | Average Rent Per Square [removed: Foot] [added: Foot(2)] | | Percentage [removed: Leased(2)] [added: Leased(3)] | | Principal Tenant(s) |

| 150 Post Street San Francisco, CA 94108 | | 1908, 1965 | | 1997 | | 102,000 | | [removed: $41.48] [added: $42.51] | | [removed: 100%] [added: 95%] | | Brooks Brothers H & M |

| Colorado Blvd Pasadena, [removed: CA(3)] [added: CA 91103(4)] | | 1905-1988 | | 1996/1998 | | 69,000 | | [removed: $39.21] [added: $38.11] | | [removed: 83%] [added: 99%] | | Pottery Barn Banana Republic |

| Crow Canyon Commons San Ramon, [removed: CA(3)(10)] [added: CA 94583(11)] | | 1980-2006 | | 2005/2007 | | 242,000 | | [removed: $19.55] [added: $19.81] | | [removed: 89%] [added: 94%] | | Lucky Loehmann’s Dress Shop Rite Aid |

| Escondido Promenade Escondido, CA [removed: 92029(4)] [added: 92029(5)] | | 1987 | | 1996/2010 | | 297,000 | | [removed: $22.24] [added: $21.99] | | [removed: 96%] [added: 97%] | | TJ Maxx Toys R Us Dick's Sporting Goods Ross Dress For Less |

| Fifth Avenue San Diego, CA [added: 92101] | | 1888-1998 | | 1996 | | [removed: 18,000] [added: 17,000] | | [removed: $47.21] [added: $47.66] | | 100% | | Urban Outfitters |

| Hermosa Avenue Hermosa Beach, CA [added: 90254] | | 1922 | | 1997 | | [removed: 24,000] [added: 22,000] | | [removed: $30.23] [added: $35.73] | | 100% | | |

| Hollywood Blvd Hollywood, [removed: CA(5)] [added: CA 90028(6)] | | [removed: 1921-1991] [added: 1929, 1991] | | 1999 | | 140,000 | | [removed: $24.00] [added: $30.69] | | 91% | | DSW L.A. Fitness Fresh & Easy |

| Kings Court Los Gatos, CA [removed: 95032(3)(6)] [added: 95032(4)(7)] | | 1960 | | 1998 | | [removed: 79,000] [added: 78,000] | | [removed: $28.68] [added: $29.30] | | [removed: 100%] [added: 94%] | | Lunardi’s Supermarket CVS |

| Old Town Center Los Gatos, CA 95030 | | 1962, 1998 | | 1997 | | 96,000 | | [removed: $33.11] [added: $34.56] | | [removed: 83%] [added: 89%] | | Gap Banana Republic [added: Anthropologie] |

| Plaza El Segundo El Segundo, CA 90245 [removed: (4)(10)] [added: (5)(11)] | | 2006-2007 | | 2011 | | 381,000 | | [removed: $33.55] [added: $37.06] | | 99% | | H&M Anthropologie Best Buy HomeGoods Whole Foods Dick's Sporting Goods [added: Container Store] |

| Santana Row—Retail San Jose, CA 95128 | | 2002, 2009 | | 1997 | | [removed: 645,000] [added: 647,000] | | [removed: $46.60] [added: $47.34] | | [removed: 94%] [added: 98%] | | [added: H&M] Crate & Barrel Container Store Best Buy CineArts Theatre Hotel Valencia |

| Santana Row—Residential San Jose, CA 95128 | | 1999-2009, 2011 | | [removed: 1997] [added: 1997, 2012] | | [removed: 403] [added: 450] units | | N/A | | [removed: 88%] [added: 94%] | | |

| Third Street Promenade Santa Monica, CA [added: 90401] | | 1888-2000 | | 1996-2000 | | [removed: 208,000] [added: 210,000] | | [removed: $63.62] [added: $64.92] | | 99% | | Abercrombie & Fitch J. Crew Old Navy Banana Republic |

| Westgate San Jose, CA [added: 95129] | | 1960-1966 | | 2004 | | [removed: 642,000] [added: 639,000] | | [removed: $12.79] [added: $12.83] | | [removed: 95%] [added: 92%] | | Target [added: Walmart] Burlington Coat Factory Ross Dress For Less Michaels Nordstrom Rack |

| Bristol Bristol, CT 06010 | | 1959 | | 1995 | | 266,000 | | [removed: $12.33] [added: $12.35] | | [removed: 95%] [added: 94%] | | Stop & Shop TJ Maxx |

| Greenwich Avenue Greenwich Avenue, CT [added: 06830] | | [removed: 1993] [added: 1968] | | 1995 | | [removed: 35,000] [added: 36,000] | | $61.00 | | 100% | | Saks Fifth Avenue |

| Friendship Center Washington, DC 20015 | | 1998 | | 2001 | | 119,000 | | [removed: $28.67] [added: $28.92] | | [removed: 80%] [added: 100%] | | [added: DSW] Maggiano’s Nordstrom Rack |

| Sam’s Park & Shop Washington, DC 20008 | | 1930 | | 1995 | | 49,000 | | [removed: $39.13] [added: $41.08] | | 100% | | Petco |

| Maryland | | 18 | | | 3,882,000 | | | 19.9 | % |

| Virginia | | 15 | | | 3,581,000 | | | 18.3 | % |

| California | | 14 | | | 3,378,000 | | | 17.3 | % |

| Pennsylvania(1) | | 10 | | | 2,298,000 | | | 11.7 | % |

| Massachusetts | | 7 | | | 1,388,000 | | | 7.1 | % |

| Illinois | | 4 | | | 751,000 | | | 3.8 | % |

| Connecticut(1) | | 2 | | | 302,000 | | | 1.5 | % |

| 2013 | | 1,188,000 | | | 6 | % | | 30,182,000 | | | | 7 | % |

| 2014 | | 2,368,000 | | | 13 | % | | 53,683,000 | | | | 12 | % |

| 2015 | | 1,824,000 | | | 10 | % | | 44,034,000 | | | | 10 | % |

| 2016 | | 1,982,000 | | | 11 | % | | 51,753,000 | | | | 12 | % |

| 2017 | | 2,611,000 | | | 14 | % | | 63,516,000 | | | | 14 | % |

| 2018 | | 2,017,000 | | | 11 | % | | 42,232,000 | | | | 9 | % |

| 2019 | | 1,097,000 | | | 6 | % | | 25,521,000 | | | | 6 | % |

| 2020 | | 854,000 | | | 5 | % | | 20,940,000 | | | | 5 | % |

| 2021 | | 974,000 | | | 5 | % | | 27,674,000 | | | | 6 | % |

| 2022 | | 1,200,000 | | | 6 | % | | 29,630,000 | | | | 7 | % |

| Thereafter | | 2,390,000 | | | 13 | % | | 51,886,000 | | | | 12 | % |

| Total | | 18,505,000 | | | 100 | % | | $ | 441,051,000 | | | 100 | % |

Historically, we have executed around 300 comparable space leases a year for between 1.2 to 1.5 million square feet of retail space.

However, in 2012, we executed approximately 400 comparable space leases for 1.8 million square feet leading to occupancy at December 31, 2012 of 94.9% versus 92.4% at December 31, 2011.

We believe our leasing volume for 2013 will be more inline with our historical averages with overall positive increases in rental income.

| East Bay Bridge Emeryville & Oakland, CA(11) | | 1994-1995, 2010, 2012 | | 2012 | | 438,000 | | $15.37 | | 100% | | Home Depot Michaels Pak-N-Save Target |

| Property, City, State, Zip Code | | Year Completed | | Year Acquired | | Square Feet(1) /Apartment Units | | Average Rent Per Square Foot(2) | | Percentage Leased(3) | | Principal Tenant(s) |

| Property, City, State, Zip Code | | Year Completed | | Year Acquired | | Square Feet(1) /Apartment Units | | Average Rent Per Square Foot(2) | | Percentage Leased(3) | | Principal Tenant(s) |

| Property, City, State, Zip Code | | Year Completed | | Year Acquired | | Square Feet(1) /Apartment Units | | Average Rent Per Square Foot(2) | | Percentage Leased(3) | | Principal Tenant(s) |

| Flourtown Flourtown, PA 19031 | | 1957 | | 1980 | | 160,000 | | $16.38 | | 97% | | Giant Food |

| | | | | | | | | | | | | |

| | | | | | | | | | | | | |

| Property, City, State, Zip Code | | Year Completed | | Year Acquired | | Square Feet(1) /Apartment Units | | Average Rent Per Square Foot(2) | | Percentage Leased(3) | | Principal Tenant(s) |

| (2) | Average base rent is calculated as the aggregate, annualized in-place contractual (defined as cash basis including adjustments for concessions) minimum rent for all occupied spaces divided by the aggregate GLA of all occupied spaces. |

| | |

| --- | --- |

commercially reasonable exclusions, deductibles and limits.

| Maryland | | 18 | | | 4,024,000 | | | 20.9 | % |

| Virginia | | 15 | | | 3,579,000 | | | 18.6 | % |

| California | | 13 | | | 2,943,000 | | | 15.3 | % |

| Pennsylvania(1) | | 10 | | | 2,289,000 | | | 11.9 | % |

| Massachusetts | | 7 | | | 1,386,000 | | | 7.2 | % |

| Illinois | | 4 | | | 752,000 | | | 3.9 | % |

| Connecticut(1) | | 2 | | | 301,000 | | | 1.6 | % |

| 2012 | | 1,319,000 | | | 7 | % | | 33,423,000 | | | | 8 | % |

| 2013 | | 2,141,000 | | | 12 | % | | 51,869,000 | | | | 12 | % |

| 2014 | | 2,273,000 | | | 13 | % | | 52,123,000 | | | | 13 | % |

| 2015 | | 1,859,000 | | | 10 | % | | 42,881,000 | | | | 10 | % |

| 2016 | | 2,072,000 | | | 12 | % | | 51,965,000 | | | | 13 | % |

| 2017 | | 2,077,000 | | | 12 | % | | 45,232,000 | | | | 11 | % |

| 2018 | | 1,025,000 | | | 6 | % | | 22,491,000 | | | | 5 | % |

| 2019 | | 704,000 | | | 4 | % | | 17,481,000 | | | | 4 | % |

| 2020 | | 767,000 | | | 4 | % | | 20,984,000 | | | | 5 | % |

| 2021 | | 914,000 | | | 5 | % | | 25,137,000 | | | | 6 | % |

| Thereafter | | 2,624,000 | | | 15 | % | | 51,734,000 | | | | 13 | % |

| Total | | 17,775,000 | | | 100 | % | | $ | 415,320,000 | | | 100 | % |

In 2012, we expect a similar level of leasing activity compared to prior years with overall positive increases in rental income.

| Flourtown Flourtown, PA 19031 | | 1957 | | 1980 | | 166,000 | | $22.92 | | 48% | | Genuardi’s |

On February [removed: 9, 2012,] [added: 8, 2013,] there were [removed: 3,508] [added: 3,305] holders of record of our common shares.

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our regular annual dividend rate for [removed: 44] [added: 45] consecutive years.

Our total annual dividends paid per common share for [removed: 2011] [added: 2012] and [removed: 2010] [added: 2011] were [removed: $2.70] [added: $2.80] per share and [removed: $2.65] [added: $2.70] per share, respectively.

No assurances can be given regarding what portion, if any, of distributions in [removed: 2012] [added: 2013] or subsequent years will constitute a return of capital for federal income tax purposes.

| Ordinary dividend | $ | [removed: 2.349] [added: 2.772] | | | $ | [removed: 2.519] [added: 2.349] | |

| Ordinary dividend eligible for 15% tax rate | [removed: 0.027] [added: —] | | | | [removed: 0.025] [added: 0.027] | | |

| Return of capital | [removed: 0.162] [added: —] | | | | [removed: 0.106] [added: 0.162] | | |

| Capital gain | [removed: 0.162] [added: 0.028] | | | | [removed: —] [added: 0.162] | | |

All other equity securities sold by us during [removed: 2011] [added: 2012] that were not registered have been previously reported in a Quarterly Report on Form 10-Q.

No equity securities were purchased by us during the fourth quarter of [removed: 2011,] [added: 2012,] and [removed: 13,975] [added: 14,522] restricted common shares were forfeited by former [removed: employees.][added: employees during 2012.]

| 2012 | | | | | | | | | | | |

| Fourth quarter | $ | 110.03 | | | $ | 99.82 | | | $ | 0.730 | |

| Third quarter | $ | 109.49 | | | $ | 103.57 | | | $ | 0.730 | |

| Second quarter | $ | 104.09 | | | $ | 94.95 | | | $ | 0.690 | |

| First quarter | $ | 97.84 | | | $ | 89.23 | | | $ | 0.690 | |

| 2012 | | | | 2011 | | | |

| | $ | 2.800 | | | $ | 2.700 | |

On November 14, 2012 and December 27, 2012, we redeemed 1,446 and 2,048 operating partnership units, respectively, for cash.

| 2010 | | | | | | | | | | | |

| Fourth quarter | $ | 84.32 | | | $ | 74.87 | | | $ | 0.670 | |

| Third quarter | $ | 83.32 | | | $ | 68.91 | | | $ | 0.670 | |

| Second quarter | $ | 79.52 | | | $ | 68.35 | | | $ | 0.660 | |

| First quarter | $ | 74.11 | | | $ | 63.07 | | | $ | 0.660 | |

| 2011 | | | | 2010 | | | |

| | $ | 2.700 | | | $ | 2.650 | |

Financial Statements and Supplementary Data.” Our selected operating data, other data and balance sheet data for the years ended December 31, [removed: 2007] [added: 2008] through [removed: 2010] [added: 2011] have been reclassified to conform to the [removed: 2011] [added: 2012] presentation.

| [removed: 2011] [added: 2012] | | | | | [removed: 2010] [added: 2011] | | | | | [removed: 2009] [added: 2010] | | | | | [removed: 2008] [added: 2009] | | | | | [removed: 2007] [added: 2008] | | | | |

| Rental income | $ | [removed: 538,701] [added: 582,335] | | | | $ | [removed: 522,651] [added: 538,701] | | | | $ | [removed: 510,777] [added: 522,651] | | | | $ | [removed: 499,100] [added: 510,777] | | | | $ | [removed: 462,856] [added: 499,100] | | |

| Property operating income(1) | $ | [removed: 382,890] [added: 428,459] | | | | $ | [removed: 372,615] [added: 382,890] | | | | $ | [removed: 362,359] [added: 372,615] | | | | $ | [removed: 353,373] [added: 362,359] | | | | $ | [removed: 334,950] [added: 353,373] | | |

| Income from continuing operations | $ | [removed: 131,554] [added: 144,372] | | | | $ | [removed: 125,851] [added: 131,554] | | | | $ | [removed: 101,325] [added: 125,851] | | | | $ | [removed: 119,655] [added: 101,325] | | | | $ | [removed: 98,323] [added: 119,655] | | |

| Gain on sale of real estate | $ | [removed: 15,075] [added: 11,860] | | | | $ | [removed: 1,410] [added: 15,075] | | | | $ | [removed: 1,298] [added: 1,410] | | | | $ | [removed: 12,572] [added: 1,298] | | | | $ | [removed: 94,768] [added: 12,572] | | |

| Net income | $ | [removed: 149,612] [added: 156,232] | | | | $ | [removed: 128,237] [added: 149,612] | | | | $ | [removed: 103,872] [added: 128,237] | | | | $ | [removed: 135,153] [added: 103,872] | | | | $ | [removed: 201,127] [added: 135,153] | | |

| Net income attributable to the Trust | $ | [removed: 143,917] [added: 151,925] | | | | $ | [removed: 122,790] [added: 143,917] | | | | $ | [removed: 98,304] [added: 122,790] | | | | $ | [removed: 129,787] [added: 98,304] | | | | $ | [removed: 195,537] [added: 129,787] | | |

| Net income available for common shareholders | $ | [removed: 143,376] [added: 151,384] | | | | $ | [removed: 122,249] [added: 143,376] | | | | $ | [removed: 97,763] [added: 122,249] | | | | $ | [removed: 129,246] [added: 97,763] | | | | $ | [removed: 195,095] [added: 129,246] | | |

| Net cash provided by operating activities | $ | [removed: 244,711] [added: 296,633] | | | | $ | [removed: 256,735] [added: 244,711] | | | | $ | [removed: 256,765] [added: 256,735] | | | | $ | [removed: 228,285] [added: 256,765] | | | | $ | [removed: 214,209] [added: 228,285] | | |

| Net cash used in investing activities | $ | [removed: (196,369] [added: (273,558] | ) | | | $ | [removed: (187,088] [added: (196,369] | ) | | | $ | [removed: (127,341] [added: (187,088] | ) | | | $ | [removed: (207,567] [added: (127,341] | ) | | | $ | [removed: (151,439] [added: (207,567] | ) | |

| Net cash [removed: provided by] (used in) [added: provided by] financing activities | $ | [removed: 3,667] [added: (53,893] | [added: )] | | | $ | [removed: (189,239] [added: 3,667] | [removed: )] | | | $ | [removed: (9,258] [added: (189,239] | ) | | | $ | [removed: (56,186] [added: (9,258] | ) | | | $ | [removed: (23,574] [added: (56,186] | ) | |

| Dividends declared on common shares | $ | [removed: 171,335] [added: 182,813] | | | | $ | [removed: 163,382] [added: 171,335] | | | | $ | [removed: 157,638] [added: 163,382] | | | | $ | [removed: 148,444] [added: 157,638] | | | | $ | [removed: 135,102] [added: 148,444] | | |

| Basic | [removed: 62,438] [added: 63,881] | | | | | [removed: 61,182] [added: 62,438] | | | | | [removed: 59,704] [added: 61,182] | | | | | [removed: 58,665] [added: 59,704] | | | | | [removed: 56,108] [added: 58,665] | | | |

| Diluted | [removed: 62,603] [added: 64,056] | | | | | [removed: 61,324] [added: 62,603] | | | | | [removed: 59,830] [added: 61,324] | | | | | [removed: 58,889] [added: 59,830] | | | | | [removed: 56,473] [added: 58,889] | | | |

| Continuing operations | $ | [removed: 2.00] [added: 2.17] | | | | $ | [removed: 1.95] [added: 2.00] | | | | $ | [removed: 1.59] [added: 1.95] | | | | $ | [removed: 1.93] [added: 1.59] | | | | $ | [removed: 1.64] [added: 1.93] | | |

| Discontinued operations | [removed: 0.29] [added: —] | | | | | [removed: 0.03] [added: 0.29] | | | | | [removed: 0.04] [added: 0.03] | | | | | [removed: 0.26] [added: 0.04] | | | | | [removed: 1.83] [added: 0.26] | | | |

| Gain on sale of real estate | [removed: —] [added: 0.19] | | | | | [removed: 0.01] [added: —] | | | | | [removed: —] [added: 0.01] | | | | | — | | | | | — | | | |

| Total | $ | [removed: 2.29] [added: 2.36] | | | | $ | [removed: 1.99] [added: 2.29] | | | | $ | [removed: 1.63] [added: 1.99] | | | | $ | [removed: 2.19] [added: 1.63] | | | | $ | [removed: 3.47] [added: 2.19] | | |

| Continuing operations | $ | [removed: 1.99] [added: 2.16] | | | | $ | [removed: 1.94] [added: 1.99] | | | | $ | [removed: 1.59] [added: 1.94] | | | | $ | [removed: 1.93] [added: 1.59] | | | | $ | [removed: 1.63] [added: 1.93] | | |

| Discontinued operations | [removed: 0.29] [added: —] | | | | | [removed: 0.03] [added: 0.29] | | | | | [removed: 0.04] [added: 0.03] | | | | | [removed: 0.26] [added: 0.04] | | | | | [removed: 1.82] [added: 0.26] | | | |

| Total | $ | [removed: 2.28] [added: 2.35] | | | | $ | [removed: 1.98] [added: 2.28] | | | | $ | [removed: 1.63] [added: 1.98] | | | | $ | [removed: 2.19] [added: 1.63] | | | | $ | [removed: 3.45] [added: 2.19] | | |

| Dividends declared per common share | $ | [removed: 2.72] [added: 2.84] | | | | $ | [removed: 2.66] [added: 2.72] | | | | $ | [removed: 2.62] [added: 2.66] | | | | $ | [removed: 2.52] [added: 2.62] | | | | $ | [removed: 2.37] [added: 2.52] | | |

| Funds from operations available to common shareholders(2)(3) | $ | [removed: 251,576] [added: 277,237] | | | | $ | [removed: 239,210] [added: 251,576] | | | | $ | [removed: 211,065] [added: 239,210] | | | | $ | [removed: 228,397] [added: 211,065] | | | | $ | [removed: 206,037] [added: 228,397] | | |

| EBITDA(3)(4) | $ | [removed: 374,131] [added: 410,918] | | | | $ | [removed: 352,481] [added: 374,131] | | | | $ | [removed: 328,491] [added: 352,481] | | | | $ | [removed: 344,465] [added: 328,491] | | | | $ | [removed: 423,150] [added: 344,465] | | |

| Adjusted EBITDA(3)(4) | $ | [removed: 357,030] [added: 399,058] | | | | $ | [removed: 351,071] [added: 357,030] | | | | $ | [removed: 327,193] [added: 351,071] | | | | $ | [removed: 331,893] [added: 327,193] | | | | $ | [removed: 328,382] [added: 331,893] | | |

| Ratio of EBITDA to combined fixed charges and preferred share dividends(3)(4)(5) | [removed: 3.5] [added: 3.3] | | | x | | [removed: 3.1] [added: 3.5] | | | x | | [removed: 2.8] [added: 3.1] | | | x | | [removed: 3.2] [added: 2.8] | | | x | | [removed: 3.3] [added: 3.2] | | | x |

| Ratio of Adjusted EBITDA to combined fixed charges and preferred share dividends(3)(4)(5) | [removed: 3.3] [added: 3.2] | | | x | | [removed: 3.1] [added: 3.3] | | | x | | [removed: 2.7] [added: 3.1] | | | x | | [removed: 3.1] [added: 2.7] | | | x | | [removed: 2.6] [added: 3.1] | | | x |

| [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | | | [removed: 2009] [added: 2010] | | | | [removed: 2008] [added: 2009] | | | | [removed: 2007] [added: 2008] | | | |

| Real estate, at cost | $ | [removed: 4,434,544] [added: 4,779,674] | | | $ | [removed: 3,895,942] [added: 4,426,444] | | | $ | [removed: 3,759,234] [added: 3,895,942] | | | $ | [removed: 3,673,685] [added: 3,759,234] | | | $ | [removed: 3,452,847] [added: 3,673,685] | |

| Total assets | $ | [removed: 3,659,908] [added: 3,898,565] | | | $ | [removed: 3,159,553] [added: 3,666,210] | | | $ | [removed: 3,222,309] [added: 3,159,553] | | | $ | [removed: 3,092,776] [added: 3,222,309] | | | $ | [removed: 2,989,297] [added: 3,092,776] | |

| Mortgages payable and capital lease obligations | $ | [removed: 810,616] [added: 832,482] | | | $ | [removed: 589,441] [added: 810,616] | | | $ | [removed: 601,884] [added: 589,441] | | | $ | [removed: 452,810] [added: 601,884] | | | $ | [removed: 450,084] [added: 452,810] | |

| Notes payable | $ | [removed: 295,159] [added: 299,575] | | | $ | [removed: 97,881] [added: 295,159] | | | $ | [removed: 261,745] [added: 97,881] | | | $ | [removed: 336,391] [added: 261,745] | | | $ | [removed: 210,820] [added: 336,391] | |

| Senior notes and debentures | $ | [removed: 1,004,635] [added: 1,076,545] | | | $ | [removed: 1,079,827] [added: 1,004,635] | | | $ | [removed: 930,219] [added: 1,079,827] | | | $ | [removed: 956,584] [added: 930,219] | | | $ | [removed: 977,556] [added: 956,584] | |

| Shareholders’ [removed: equity(6)] [added: equity] | $ | [removed: 1,240,604] [added: 1,310,593] | | | $ | [removed: 1,115,768] [added: 1,240,604] | | | $ | [removed: 1,151,738] [added: 1,115,768] | | | $ | [removed: 1,084,569] [added: 1,151,738] | | | $ | [removed: 1,081,550] [added: 1,084,569] | |

| Number of common shares outstanding | [removed: 63,544] [added: 64,815] | | | | [removed: 61,526] [added: 63,544] | | | | [removed: 61,242] [added: 61,526] | | | | [removed: 58,986] [added: 61,242] | | | | [removed: 58,646] [added: 58,986] | | |

| | [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | | | [removed: 2009] [added: 2010] | | | | [removed: 2008] [added: 2009] | | | | [removed: 2007] [added: 2008] | | |

| Net income | $ | [removed: 149,612] [added: 156,232] | | | $ | [removed: 128,237] [added: 149,612] | | | $ | [removed: 103,872] [added: 128,237] | | | $ | [removed: 135,153] [added: 103,872] | | | $ | [removed: 201,127] [added: 135,153] | |

| Net income attributable to noncontrolling interests | [removed: (5,695] [added: (4,307] | | ) | | [removed: (5,447] [added: (5,695] | | ) | | [removed: (5,568] [added: (5,447] | | ) | | [removed: (5,366] [added: (5,568] | | ) | | [removed: (5,590] [added: (5,366] | | ) |

| Gain on sale of real estate | [removed: (15,075] [added: (11,860] | | ) | | [removed: (1,410] [added: (15,075] | | ) | | [removed: (1,298] [added: (1,410] | | ) | | [removed: (12,572] [added: (1,298] | | ) | | [removed: (94,768] [added: (12,572] | | ) |

| Gain on sale of real estate | 0.19 | | | | | — | | | | | 0.01 | | | | | — | | | | | — | | | |

| | 2012 | | | | 2011 | | | | 2010 | | | | 2009 | | | | 2008 | | |

| Net income | $ | 156,232 | | | $ | 149,612 | | | $ | 128,237 | | | $ | 103,872 | | | $ | 135,153 | |

| Gain on sale of real estate | (11,860 | | ) | | (15,075 | | ) | | (1,410 | | ) | | (1,298 | | ) | | (12,572 | | ) |

| Gain on deconsolidation of VIE | — | | | | (2,026 | | ) | | — | | | | — | | | | — | | |

Adjusted EBITDA is a non-

(6) Prior period balances reflect adjustments related to redeemable noncontrolling interests.

See Note 2 of the consolidated financial statements for further discussion.

We carried out an assessment as of December 31, [removed: 2011] [added: 2012] of the effectiveness of the design and operation of our disclosure controls and procedures and our internal control over financial reporting.

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports, such as this report on Form 10-K, is recorded, processed, summarized and reported [added: within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and Executive Vice President-Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.]

Establishing and maintaining internal control over financial reporting is a process designed by, or under the supervision of, our President and Chief Executive Officer and [removed: Senior] [added: Executive] Vice President-Chief Financial Officer, as appropriate, and effected by our employees, including management and our Board of Trustees, 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.

[added: This information is important both for the evaluation] generally and because the Section 302 certifications require that our Chief Executive Officer and our Chief Financial Officer disclose that information to the Audit Committee of our Board of Trustees and our independent auditors and also require us to report on related matters in this section of the Annual Report on Form 10-K.

A “significant deficiency” is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those [removed: responsible for oversight of the company’s financial reporting.]

There was no change in our internal control over financial reporting during our fourth fiscal quarter of [removed: 2011] [added: 2012] that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

responsible for oversight of the company’s financial reporting.

within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and Senior Vice President-Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

This information is important both for the evaluation

Certain information required in Part III is omitted from this Report but is incorporated herein by reference from our Proxy Statement for the [removed: 2012] [added: 2013] Annual Meeting of Shareholders (as amended or supplemented, the “Proxy Statement”).

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) [added: Beneficial Ownership Reporting Compliance” and other information included in the Proxy Statement required by this Item 10 are incorporated herein by reference.]

Beneficial Ownership Reporting Compliance” and other information included in the Proxy Statement required by this Item 10 are incorporated herein by reference.

Our financial statement schedules are included in a separate section of this Annual Report on Form 10-K commencing on page [removed: F-32.][added: [F-31](#sF2B25BC0D1C04F0377EDE6110A4D937B).]

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 [removed: 15, 2012.][added: 12, 2013.]

| /S/ DONALD C. WOOD | | President, Chief Executive Officer and | | February [removed: 15, 2012] [added: 12, 2013] |

| [removed: Andrew P. Blocher] [added: James M. Taylor, Jr.] | | Officer and Treasurer (Principal | | |

| /S/ JOSEPH S. VASSALLUZZO | | Non-Executive Chairman | | February [removed: 15, 2012] [added: 12, 2013] |

| /S/ JON E. BORTZ | | Trustee | | February [removed: 15, 2012] [added: 12, 2013] |

| /S/ DAVID W. FAEDER | | Trustee | | February [removed: 15, 2012] [added: 12, 2013] |

| /S/ KRISTIN GAMBLE | | Trustee | | February [removed: 15, 2012] [added: 12, 2013] |

| /S/ GAIL P. STEINEL | | Trustee | | February [removed: 15, 2012] [added: 12, 2013] |

| /S/ WARREN M. THOMPSON | | Trustee | | February [removed: 15, 2012] [added: 12, 2013] |

| /S/ JAMES M. TAYLOR, JR. | | Executive Vice President-Chief Financial | | February 12, 2013 |

| /S/ ANDREW P. BLOCHER | | Senior Vice President-Chief Financial | | February 15, 2012 |

| Management Assessment Report on Internal Control over Financial Reporting | [removed: [F-2](#sC2AA0568A00E9B2883F8ACC7828FB917)] [added: [F-2](#s367400E27266916CB129E611251899CE)] |

| Report of Independent Registered Public Accounting Firm | [removed: [F-3](#s02DD410ADA34A86BC60BACC8B363981D)] [added: [F-3](#sF7A6D38DA66F4171E44BE61125469BA8)] |

| Report of Independent Registered Public Accounting Firm | [removed: [F-4](#s5CED0CC9588D33A392FDACC9A0054FD9)] [added: [F-4](#s68448D3F4A019EBF9E19E6112566D0A5)] |

| Consolidated Balance Sheets | [removed: [F-5](#s60B46ABD9A857229011BA2FC0B08EAA2)] [added: [F-5](#sC89B3660AB73F857E441E6110AE9FA1C)] |

| Consolidated Statement of Shareholders’ Equity | [removed: [F-7](#sBD220DB6B2D5F36DAA05A2FC0B7B5FC8)] [added: [F-7](#s98F530E0442DB14786C2E6110ACA39CF)] |

| Consolidated Statements of Cash Flows | [removed: [F-8](#sCD09B1902A622D36C4D9A2FC0BE4DF93)] [added: [F-8](#sB38AFA1BF6864459F714E6110B09FC03)] |

| Notes to Consolidated Financial Statements | [removed: [F-9](#sCEC1033DF6FE9BD20DC2A2FC6DF62F6D)] [added: [F-9](#sCD3B9EBE79C1AC088221E611269EC9BA)] |

| Schedule III—Summary of Real Estate and Accumulated Depreciation | [removed: [F-32](#s33B87BF2538A9FD8B328CDD8F1EA64BD)] [added: [F-31](#sF2B25BC0D1C04F0377EDE6110A4D937B)] |

| Schedule IV—Mortgage Loans on Real Estate | [removed: [F-39](#sD45E3DE56212CFB526E8D4BB3D1F44FE)] [added: [F-38](#sBD59035B19BAD2ED3292E6110A8C3946)] |

Establishing and maintaining internal control over financial reporting is a process designed by, or under the supervision of, our President and Chief Executive Officer and [removed: Senior] [added: Executive] Vice President [removed: and] [added: -] Chief Financial Officer, as appropriate, and effected by our employees, including management and our Board of Trustees, 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.

Management conducted an assessment of the effectiveness of the Trust’s internal control over financial reporting as of December 31, [removed: 2011.][added: 2012.]

Based on this assessment, management concluded that our internal control over financial reporting is effective, based on those criteria, as of December 31, [removed: 2011.][added: 2012.]

We have audited [added: the internal control over financial reporting of] Federal Realty Investment [removed: Trust's] [added: Trust] (a Maryland real estate investment trust) [removed: internal control over financial reporting] [added: and subsidiaries (collectively, the "Trust")] as of December 31, [removed: 2011,] [added: 2012,] based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, [removed: Federal Realty Investment] [added: the] Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2011,] [added: 2012,] based on criteria established in 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), the consolidated balance sheets of [removed: Federal Realty Investment] [added: the] Trust [removed: and subsidiaries] as of December 31, [removed: 2011] [added: 2012] and [removed: 2010,] [added: 2011,] and the related consolidated statements of [removed: operations,] [added: comprehensive income,] shareholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2011] [added: 2012] and our report dated February [removed: 15, 2012] [added: 12, 2013] expressed an unqualified opinion.

We have audited the accompanying consolidated balance sheets of Federal Realty Investment Trust (a Maryland real estate investment trust) and subsidiaries (collectively, the [removed: Trust)] [added: "Trust")] as of December 31, [removed: 2011] [added: 2012] and [removed: 2010,] [added: 2011,] and the related consolidated statements of [removed: operations,] [added: comprehensive income,] shareholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2011.][added: 2012.]

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Trust and subsidiaries as of December 31, [removed: 2011] [added: 2012] and [removed: 2010,] [added: 2011,] and the results of their operations and their cash flows for each of the three years in the period ended December 31, [removed: 2011,] [added: 2012,] 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), the Trust’s internal control over financial reporting as of December 31, [removed: 2011,] [added: 2012,] based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February [removed: 15, 2012] [added: 12, 2013] expressed an unqualified opinion.

| | [added: 2012 | | | |] 2011 | | | | 2010 | | |

| Construction-in-progress | [removed: 193,836] [added: 288,714] | | | | [removed: 163,200] [added: 193,836] | | |

| Less accumulated depreciation and amortization (including [removed: $4,991] [added: $12,024] and [removed: $4,431] [added: $4,991] of consolidated variable interest entities, respectively) | [removed: (1,127,588] [added: (1,224,295] | | ) | | [removed: (1,035,204] [added: (1,127,588] | | ) |

| Cash and cash equivalents | [removed: 67,806] [added: 36,988] | | | | [removed: 15,797] [added: 67,806] | | |

| Accounts and notes receivable, net | [removed: 76,152] [added: 73,861] | | | | [removed: 68,997] [added: 75,921] | | |

| Mortgage notes receivable, net | [removed: 55,967] [added: 55,648] | | | | [removed: 44,813] [added: 55,967] | | |

| Investment in real estate [removed: partnerships] [added: partnership] | [removed: 34,352] [added: 33,169] | | | | [removed: 51,606] [added: 34,352] | | |

| Debt issuance costs, net of accumulated amortization of [removed: $9,098] [added: $10,140] and [removed: $9,075,] [added: $9,098,] respectively | [removed: 11,816] [added: 10,861] | | | | [removed: 6,916] [added: 11,816] | | |

| Mortgages payable (including [removed: $207,683] [added: $205,299] and [removed: $22,785] [added: $207,683] of consolidated variable interest entities, respectively) | $ | [removed: 747,523] [added: 760,789] | | | $ | [removed: 529,501] [added: 747,523] | |

| Capital lease obligations | [removed: 63,093] [added: 71,693] | | | | [removed: 59,940] [added: 63,093] | | |

| Notes payable | [removed: 295,159] [added: 299,575] | | | | [removed: 97,881] [added: 295,159] | | |

| Senior notes and debentures | [removed: 1,004,635] [added: 1,076,545] | | | | [removed: 1,079,827] [added: 1,004,635] | | |

| Accounts payable and accrued expenses | [removed: 104,498] [added: 120,929] | | | | [removed: 102,574] [added: 104,660] | | |

| Dividends payable | [removed: 44,229] [added: 47,685] | | | | [removed: 41,601] [added: 44,229] | | |

| Security deposits payable | [removed: 12,221] [added: 12,957] | | | | [removed: 11,751] [added: 12,221] | | |

| Other liabilities and deferred credits | [removed: 62,621] [added: 103,379] | | | | [removed: 55,348] [added: 68,761] | | |

| Redeemable noncontrolling interests [removed: (Note 2)] | [removed: 85,325] [added: 94,420] | | | | [removed: 65,362] [added: 85,325] | | |

| Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized, [removed: 63,544,150] [added: 64,815,446] and [removed: 61,526,418] [added: 63,544,150] shares issued and outstanding, respectively | [removed: 636] [added: 648] | | | | [removed: 615] [added: 636] | | |

| Additional paid-in capital [removed: (Note 2)] | [removed: 1,764,940] [added: 1,875,525] | | | | [removed: 1,611,706] [added: 1,764,940] | | |

| Accumulated dividends in excess of net income | [removed: (555,541] [added: (586,970] | | ) | | [removed: (527,582] [added: (555,541] | | ) |

| Accumulated other comprehensive loss | [removed: (3,940] [added: (12,388] | | ) | | [removed: —] [added: (3,940] | | [added: )] |

| Total shareholders’ equity of the Trust | [removed: 1,216,092] [added: 1,286,812] | | | | [removed: 1,094,736] [added: 1,216,092] | | |

February 12, 2013

February 12, 2013

| | 2012 | | | | 2011 | | |

| Operating (including $278,826 and $263,570 of consolidated variable interest entities, respectively) | $ | 4,490,960 | | | $ | 4,232,608 | |

| | 4,779,674 | | | | 4,426,444 | | |

| Net real estate | 3,555,379 | | | | 3,298,856 | | |

| Prepaid expenses and other assets | 132,659 | | | | 121,492 | | |

| TOTAL ASSETS | $ | 3,898,565 | | | $ | 3,666,210 | |

| Total liabilities | 2,493,552 | | | | 2,340,281 | | |

| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 3,898,565 | | | $ | 3,666,210 | |

| Discontinued operations | — | | | | 0.29 | | | | 0.03 | | |

| Gain on sale of real estate | 0.19 | | | | — | | | | 0.01 | | |

| Other comprehensive loss - change in value of interest rate swaps | (8,448 | | ) | | (3,940 | | ) | | — | | |

| COMPREHENSIVE INCOME | 147,784 | | | | 145,672 | | | | 128,237 | | |

| Comprehensive income attributable to noncontrolling interests | (4,307 | | ) | | (5,695 | | ) | | (5,447 | | ) |

| COMPREHENSIVE INCOME ATTRIBUTABLE TO THE TRUST | $ | 143,477 | | | $ | 139,977 | | | $ | 122,790 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Dividends declared to preferred shareholders | — | | | — | | | | — | | | — | | | | — | | | | (541 | | ) | | — | | | | — | | | | (541 | | ) |

| Net income, excluding $2,592 attributable to redeemable noncontrolling interests | — | | | — | | | | — | | | — | | | | — | | | | 151,925 | | | | — | | | | 1,715 | | | | 153,640 | | |

| Other comprehensive loss - change in value of interest rate swaps | — | | | — | | | | — | | | — | | | | — | | | | — | | | | (8,448 | | ) | | — | | | | (8,448 | | ) |

| Dividends declared to preferred shareholders | — | | | — | | | | — | | | — | | | | — | | | | (541 | | ) | | — | | | | — | | | | (541 | | ) |

| Common shares issued | — | | | — | | | | 1,039,405 | | | 10 | | | | 106,209 | | | | — | | | | — | | | | — | | | | 106,219 | | |

| Exercise of stock options | — | | | — | | | | 97,430 | | | 1 | | | | 5,666 | | | | — | | | | — | | | | — | | | | 5,667 | | |

| Contributions from noncontrolling interests | — | | | — | | | | — | | | — | | | | — | | | | — | | | | — | | | | 175 | | | | 175 | | |

| BALANCE AT DECEMBER 31, 2012 | 399,896 | | | $ | 9,997 | | | 64,815,446 | | | $ | 648 | | | $ | 1,875,525 | | | $ | (586,970 | ) | | $ | (12,388 | ) | | $ | 23,781 | | | $ | 1,310,593 | |

| Net income | $ | 156,232 | | | $ | 149,612 | | | $ | 128,237 | |

If our

As of December 31, 2012 and 2011, net real estate assets related to Plaza El Segundo included in our consolidated balance sheet are approximately $189.4 million and $194.6 million, respectively, and mortgages payable (net of unamortized premium) of $183.9 million and $185.6 million, respectively.

| | 2012 | | | | 2011 | | |

We adopted the standards effective January 1, 2012 and modified the presentation in our consolidated financial statements accordingly.

Other comprehensive loss in our financial statements relates to the change in valuation on our interest rate swap agreements as further discussed in Note 8.

Recently Issued Accounting Pronouncement

In February 2013, the FASB issued ASU 2013-2, “Comprehensive Income (Topic 220): Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU 2013-2 requires entities to disclose certain information relating to amounts reclassified out of accumulated other comprehensive income.

| December 31, 2012 | | | | | | | | | | | | |

| Retail and mixed-use properties | | $ | 4,655,943 | | | $ | (1,187,993 | ) | | $ | 737,899 | |

| Retail properties under capital leases | | 114,571 | | | | (29,051 | | ) | | 71,693 | | |

| Residential | | 9,160 | | | | (7,251 | | ) | | 22,890 | | |

| | | $ | 4,779,674 | | | $ | (1,224,295 | ) | | $ | 832,482 | |

| | |

| --- | --- |

| Consolidated Statements of Operations | [F-6](#sF0E48565736DDB3A3AE1A2FC0B359E9F) |

February 15, 2012

| Operating (including $271,468 and $78,846 of consolidated variable interest entities, respectively) | $ | 4,240,708 | | | $ | 3,695,848 | |

| Assets held for sale/disposal (discontinued operations) (including $0 and $18,311 of consolidated variable interest entities, respectively) | — | | | | 36,894 | | |

| | 4,434,544 | | | | 3,895,942 | | |

| Net real estate | 3,306,956 | | | | 2,860,738 | | |

| Prepaid expenses and other assets | 106,859 | | | | 110,686 | | |

| TOTAL ASSETS | $ | 3,659,908 | | | $ | 3,159,553 | |

| Total liabilities | 2,333,979 | | | | 1,978,423 | | |

| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 3,659,908 | | | $ | 3,159,553 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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| BALANCE AT DECEMBER 31, 2008 | 399,896 | | | | $ | 9,997 | | | | 58,985,678 | | | | $ | 590 | | | $ | 1,478,785 | | | $ | (426,574 | ) | | $ | — | | | $ | 21,771 | | | $ | 1,084,569 | |

| Net income/comprehensive income, excluding $3,218 attributable to redeemable noncontrolling interests | — | | | | — | | | | | — | | | | — | | | | — | | | | 98,304 | | | | — | | | | 2,350 | | | | 100,654 | | |

| Common shares issued | — | | | | — | | | | | 1,995,563 | | | | 20 | | | | 109,996 | | | | — | | | | — | | | | — | | | | 110,016 | | |

| Exercise of stock options | — | | | | — | | | | | 126,500 | | | | 1 | | | | 2,757 | | | | — | | | | — | | | | — | | | | 2,758 | | |

| Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 142,180 | | |

During 2011, we corrected the accounting related to the classification and measurement of our redeemable noncontrolling interests.

Certain of our noncontrolling interests, primarily related to Congressional Plaza, have the right to put their interest to us for cash at their option and consequently these interests should have been recorded at redemption value in temporary equity on the consolidated balance sheet rather than at book value in permanent equity.

The total balance sheet impact of this reclassification was approximately $65 million as of December 31, 2010.

We determined the correction was not material to our previously issued financial statements, and therefore, have taken the following approach to correcting this error:

| • | Reclassified the redeemable noncontrolling interests to a separate line item outside of shareholders' equity in the consolidated balance sheet as of December 31, 2010. The reclassification resulted in a decrease to shareholders' equity of $65 million and an increase to redeemable noncontrolling interests of $65 million. |

| • | Recorded a $0.3 million expense related to prior periods in the year ended December 31, 2011 for the accretion of a redeemable noncontrolling interest to redemption value. |

The consolidated statement of shareholders' equity has been restated to reflect the proper classification.

There have been no changes to the previously issued consolidated statements of operations or statements of cash flows for this matter.

the periods in which the related expenditures are incurred.

At the time the loans were

Prior to January 1, 2010, the primary beneficiary of a VIE was determined to be the party that absorbs a majority of the entity’s expected losses, receives a majority of its expected returns, or both.

Until the earlier of termination of the exchange

Quantitative and qualitative information regarding significant assets and liabilities for VIEs during 2011 and 2010 are included in Note 3.

| Courtyard Shops | | September 4, 2008 to March 2, 2009 | | September 4, 2008 |

The effective purchase price was $192.7 million which is included in real estate assets.

The entity has a $175.0 million mortgage payable due in August 2017 with a fair value of $185.6 million which is included in mortgages payable at December 31, 2011.

| Other | 9,427 | | | | 8,035 | | |

While we currently have no

| Acquisition of real estate through exchange transaction | $ | — | | | $ | — | | | $ | 30,100 | |

| Proceeds from sale of real estate through exchange transaction | $ | — | | | $ | — | | | $ | 25,100 | |

| Liability assumed through exchange transaction | $ | — | | | $ | — | | | $ | 5,000 | |