Federal Realty Investment Trust (FRT) 10-K risk factor changes: FY2014 vs FY2013

[removed: While] [added: Demand for our retail spaces has been strong and while] there can be no assurance that [removed: these positive signs] [added: this] will continue, we remain [removed: cautiously] optimistic [removed: regarding] [added: given] the [removed: improved] trends we have seen over the past few years.

[removed: As a result of the economic conditions over the last few years,] [added: While our anchor tenant space is currently well occupied,] we have seen [removed: a] [added: an overall] decrease in the number of tenants available to fill anchor spaces.

As of December 31, [removed: 2013,] [added: 2014,] we had approximately [removed: $2.3] [added: $2.4] billion of debt outstanding.

Of that outstanding debt, approximately [removed: $567.8] [added: $563.7] million was secured by all or a portion of [removed: 13] [added: 14] of our real estate projects and approximately [removed: $71.7] [added: $71.6] million represented capital lease obligations on four of our properties.

In addition, we own a 30% interest in a joint venture that had [removed: $56.9] [added: $34.4] million of debt secured by [removed: four] [added: two] properties as of December 31, [removed: 2013.][added: 2014.]

[added: Approximately $2.4 billion (99.6%) of our debt as of] December 31, [removed: 2013] [added: 2014] is fixed rate debt, which includes all of our property secured debt, our capital lease obligations and our $275.0 million term loan as the rate is effectively fixed by two interest rate swap agreements.

[removed: Our unconsolidated joint venture’s debt of $56.9] million is also fixed rate debt.

As of December 31, [removed: 2013,] [added: 2014,] we were in compliance with all of our financial covenants.

We generally do not look to acquire raw land for future development; however, we do intend to complete the development and construction of future phases of projects we already own, such as Santana Row in San Jose, California, Assembly Row in Somerville, Massachusetts, and Pike & Rose [removed: (Mid-Pike Plaza)] in [removed: Rockville,] [added: North Bethesda,] Maryland.

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

[removed: At both Assembly Row and Pike & Rose, a] [added: | • |] substantial amount of our investment is related to infrastructure, the value of which may be negatively impacted if we do not complete subsequent [removed: phases.][added: phases; |]

| • | the third-party developer of [removed: residential] [added: office or other] buildings may not deliver or may encounter delays in delivering [removed: residential] space as planned; |

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

[removed: Additionally, we cannot guarantee that] additional financing, refinancing or other capital will be available in the amounts we desire or on favorable terms.

Of our approximately [removed: $2.3] [added: $2.4] billion of debt outstanding as of December 31, [removed: 2013,] [added: 2014,] 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 $600.0 million revolving credit facility, on which no balance is outstanding at December 31, [removed: 2013,] [added: 2014,] that bears interest at LIBOR plus 90 basis points.

The interest rate on our $275.0 million term loan is currently fixed at [removed: 3.02%] [added: 2.62%] as a result of two interest rate swap agreements.

| • | increases in the cost of adequate maintenance, insurance and other operating costs, including real estate taxes, associated with one or more properties, which may occur even when circumstances such as market factors and [removed: competition cause a reduction in revenues from one or more properties, although real estate taxes typically do not increase upon a reduction in such revenues.] |

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

If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result [removed: in large expenses to repair or rebuild the property.]

As of December 31, [removed: 2013,] [added: 2014,] we held [removed: five] [added: seven] 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: 2013,] [added: 2014,] we held the managing general partnership or membership interest in all of our existing co-investments [added: (except the hotel investment discussed above)] we generally must obtain the consent of the co-investor or meet defined criteria to sell or to finance these properties.

Our partner’s consent is required to take certain actions with respect to the properties acquired by the [removed: venture, and] [added: venture and,] as a result, we may not be able to take actions that we believe are necessary or desirable to protect or increase the value of the property or the property’s income stream.

As of December 31, [removed: 2013,] [added: 2014,] this joint venture owned [removed: seven] [added: six] properties.

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 [added: aggregate undistributed income from prior years.]

If that happened, either the transfer [removed: or] [added: of] ownership would be void or the shares would be transferred to a charitable trust and then sold to someone who can own those shares without violating the 9.8% ownership limit.

Our unconsolidated joint venture’s debt of $34.4

During 2014, construction on Phase I of both Assembly Row and Pike & Rose continued with portions of both projects opening in 2014 and the remainder of Phase I of both projects expected to be completed in 2015.

Additionally, we plan to proceed with the development of Phase II at Pike & Rose with construction expected to commence in the first half of 2015.

At Santana Row, we completed and stabilized the new 212 unit residential building and commenced construction in Q4 2014 on a new 225,500 square foot office building.

A further discussion of these projects, expected costs, and current status can be found in Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations in the "Outlook" subsection.

| • | delivery of residential product (both rental units and for sale condominium units) into uncertain residential environments may result in lower rents or sale prices than underwritten; |

Additionally, we cannot guarantee that

competition cause a reduction in revenues from one or more properties, although real estate taxes typically do not increase upon a reduction in such revenues.

in large expenses to repair or rebuild the property.

Additionally, in fourth quarter 2014, we entered into a joint venture agreement related to the hotel component of Phase II of our Pike & Rose development project.

| | |

| --- | --- |

| | |

| --- | --- |

We face risks relating to cybersecurity attacks that could cause loss of confidential information and other business disruptions.

We rely extensively on computer systems to process transactions and manage our business, and our business is at risk from and may be impacted by cybersecurity attacks.

These could include attempts to gain unauthorized access to our data and computer systems.

Attacks can be both individual and/or highly organized attempts organized by very sophisticated hacking organizations.

We employ a number of measures to prevent, detect and mitigate these threats, which include password encryption, frequent password change events, firewall detection systems, anti-virus software in-place, frequent backups, a redundant data system for core applications and annual penetration testing; however, there is no guarantee such efforts will be

successful in preventing a cyber attack.

A cybersecurity attack could compromise the confidential information of our employees, tenants and vendors.

A successful attack could disrupt and otherwise adversely affect our business operations.

We have continued to see signs of improvement for many of our tenants as well as increased interest from prospective tenants for our retail spaces.

Approximately $2.3 billion (99.6%) of our debt as of

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

During 2013, construction continued on Phase I of Assembly Row, Phase I of Pike & Rose and a new residential building at Santana Row and we anticipate that our total investment in the current phase of these projects will approximate $530 million.

There are a number of risks associated with these projects, including the size of the overall aggregate investment in these projects.

At Assembly Row, we are dependent on the performance of third parties to deliver significant aspects of the project that are critical to our success.

In addition at this project, our projected investment assumes that we will receive public funding which has been committed but has not been entirely funded.

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

and mortgage loans from third parties.

related to the property.

aggregate undistributed income from prior years.

As of December 31, [removed: 2013,] [added: 2014,] we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as [removed: 87] [added: 89] predominantly retail real estate projects comprising approximately [removed: 19.5] [added: 20.2] million square feet.

In total, the real estate projects were [removed: 95.8%] [added: 95.6%] leased and [removed: 95.1%] [added: 94.7%] occupied at December 31, [removed: 2013.][added: 2014.]

A joint venture in which we own a 30% interest owned [removed: seven] [added: six] retail real estate projects totaling approximately [removed: 1.0] [added: 0.8] million square feet as of December 31, [removed: 2013.][added: 2014.]

In total, the joint venture properties in which we own a 30% interest were [removed: 84.9%] [added: 86.1%] leased and [removed: 84.9%] [added: 82.8%] occupied at December 31, [removed: 2013.][added: 2014.]

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for [removed: 46] [added: 47] consecutive years.

A discussion of possible risks which may [added: affect these estimates is included in “Item 1A.]

Lease [removed: termination] fees for which the tenant has relinquished control of the space are generally recognized on the termination date.

At December 31, [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] our allowance for doubtful accounts was [removed: $12.7] [added: $12.4] million and [removed: $15.9] [added: $12.7] million, respectively.

Historically, we have recognized bad debt expense between 0.4% and 1.3% of rental income and it was [removed: 0.1%] [added: 0.3%] in [removed: 2013] [added: 2014] reflecting positive economic changes and their impact to our tenants.

[removed: 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: $6.2] [added: $6.7] million.

At December 31, [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] accounts receivable includes approximately [removed: $60.6] [added: $66.1] million and [removed: $56.1] [added: $60.6] million, respectively, related to straight-line rents.

We periodically review the estimated lives of our assets and implement changes, as [added: necessary, to these estimates and, therefore, to our depreciation rates.]

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

[removed: Unforeseen] [added: Certain events, such as unforeseen] competition or changes in customer shopping [removed: habits] [added: habits,] could substantially alter our assumptions regarding our ability to realize the expected return on investment in the property and therefore reduce the economic life of the asset and affect the amount of depreciation expense to be charged against both the current and future revenues.

We capitalized external and internal costs related to both development and redevelopment activities of [removed: $275] [added: $277] million and [removed: $6] [added: $7] million, respectively, for [removed: 2013] [added: 2014] and [removed: $129] [added: $275] million and $6 million, respectively, for [removed: 2012.][added: 2013.]

We capitalized external and internal costs related to other property improvements of [removed: $48] [added: $45] million and [removed: $1] [added: $2] million, respectively, for [removed: 2013] [added: 2014] and [removed: $52] [added: $48] million and $1 million, respectively, for [removed: 2012.][added: 2013.]

We capitalized external and internal costs related to leasing activities of [removed: $9] [added: $29] million and [removed: $6] [added: $7] million, respectively, for [removed: 2013] [added: 2014] and $9 million and $6 million, respectively, for [removed: 2012.][added: 2013.]

[removed: The amount of capitalized internal costs] for salaries and related benefits for development and redevelopment activities, other property improvements, and leasing activities were [removed: $6] [added: $7] million, $1 million, and [removed: $5] [added: $6] million, respectively, for [removed: 2013] [added: 2014] and [removed: $5] [added: $6] million, $1 million, and $5 million, respectively, for [removed: 2012.][added: 2013.]

[removed: Additionally, interest] [added: Interest] costs on developments and major redevelopments are capitalized as part of developments and redevelopments not yet placed in service.

[removed: Our accrual for self-insurance liability is determined by] management and is based on claims filed and an estimate of claims projected to be incurred but not yet reported.

Recently Adopted [added: and Recently Issued] Accounting Pronouncements

[removed: 2013] [added: 2014] Significant Property Acquisitions and [removed: Dispositions][added: Disposition]

Approximately [removed: $0.1] [added: $1.7] million and [removed: $1.8] [added: $2.3] million of net assets acquired were allocated to other assets for "above market leases" and other liabilities for "below market [removed: leases",] [added: leases,"] respectively.

We incurred [removed: $0.2] [added: $0.7] million of acquisition costs [added: in 2014] which are included in "general and administrative [removed: expenses" in 2013.][added: expenses."]

[removed: On April 5, 2013, one] [added: The $5.0 million gain on sale] of [removed: our tenants acquired our] [added: real estate for 2013 is primarily due to the sale of the] fee interest in the land under an office building at our Village of Shirlington property in Arlington, Virginia, that was subject to a long term ground lease.

Subsequent Event - [removed: 2014] [added: 2015] Property Acquisition

Effective January 1, 2014, we acquired a controlling interest in The Grove at Shrewsbury, a 187,000 square foot shopping center in Shrewsbury, New Jersey, and Brook [removed: 35 Plaza,] [added: 35,] a 99,000 square foot shopping center in Sea Girt, New Jersey for a gross value of $161 million.

Our effective economic interest approximates 84% and was funded by the assumption of our share of $68 million of mortgage debt, 632,000 downREIT [added: operating partnership] units, and $13 million of [removed: cash.][added: cash (which was in an escrow account at December 31, 2013).]

The mortgage [removed: debt assumed is] [added: loans are] secured by the individual properties [removed: and has] [added: with] the following contractual terms:

| The Grove at Shrewsbury [added: (East)] | [removed: 45.4] [added: $] | [added: 45.4] | | | 5.82 | % | | October 1, 2017 |

| The Grove at Shrewsbury (West) | [removed: 11.4] [added: $] | [added: 11.4] | | | 6.38 | % | | March 1, 2018 |

[removed: Additionally, we have] [added: We] entered into an agreement to acquire the interest of one of the [removed: non-controlling] [added: noncontrolling] interest holders in [removed: the] [added: The] Grove at Shrewsbury [removed: for approximately $9 million] in 2015.

[removed: 2013] [added: 2014] Significant Debt and Equity Transactions

During [removed: 2013,] [added: 2014,] we [added: fully] repaid [added: or redeemed] the following [removed: mortgage loans:][added: loans or debt securities:]

| | [removed: Principal] [added: |] Payoff Amount | | | | Repayment Date | | Maturity Date |

| | [added: |] (In millions) | | | | | | | [added: | | |]

[removed: On April 22, 2013,] [added: At December 31, 2014,] we [removed: upsized] [added: had $48.0 million of cash and cash equivalents and no borrowings outstanding on] our [removed: $400.0] [added: $600.0] million revolving credit facility [removed: to $600.0 million and extended the maturity date to] [added: that matures on] April 21, 2017, subject to a one-year extension at our option.

[added: (1)] The net proceeds from this note offering after issuance discounts, underwriting [removed: fees,] [added: fees] and other costs were approximately [removed: $269.3] [added: $244.6] million.

[added: (2)] The redemption price of [removed: $138.5] [added: $134.5] million included a make-whole premium of approximately [removed: $3.3] [added: $9.2] million and accrued but unpaid interest of $0.2 million.

The make-whole premium is included in "early extinguishment of debt" in [removed: 2013.][added: 2014.]

For example,

The amount of capitalized internal costs

Total capitalized costs were $367 million and $345 million for 2014 and 2013, respectively.

Our accrual for self-insurance liability is determined by

Additionally, $71.1 million was allocated to redeemable and nonredeemable noncontrolling interests.

We incurred $2.0 million of acquisition costs, of which $1.0 million were incurred in 2014, and are included in "general and administrative expenses" in 2014 and 2013 on the accompanying consolidated statements of comprehensive income.

As this noncontrolling interest is mandatorily redeemable, it has been classified as a liability of approximately $9 million and is included in "other liabilities and deferred credits" on the December 31, 2014 consolidated balance sheet.

An additional noncontrolling interest holder has the right to require us to acquire its interests in The Grove at Shrewsbury and Brook 35 at the then current fair market value beginning on January 1, 2017.

On July 24, 2014, the joint venture arrangement with affiliates of a discretionary fund created and advised by ING Clarion Partners sold the fee interest in Pleasant Shops in Weymouth, Massachusetts for a sales price of $34.3 million, resulting in a gain on sale of $14.5 million.

Our share of the gain was $4.4 million.

The joint venture partners received distributions totaling $32.8 million as a result of the sale, of which our distribution was $10.4 million.

In January 2015, we acquired a controlling interest in San Antonio Center, a 376,000 square foot shopping center in Mountain View, California based on a total value of $62.2 million.

Our effective interest approximates 80% and was funded by the assumption of our share of $18.7 million of mortgage debt, which has a stated interest rate of 5.27% and matures on January 1, 2016, approximately 58,000 downREIT operating partnership units and approximately $27 million of cash.

In connection with the acquisition of The Grove at Shrewsbury and Brook 35 on January 1, 2014, we assumed mortgage loans with a face amount of $68.3 million and a fair value of $73.8 million.

During 2014, we refinanced or issued the following loans or debt securities:

| | | Amount | | | | Stated Interest Rate | | | Refinance/Issuance Date | | Maturity Date |

| Brook 35 Plaza Mortgage Loan | Refinance | $ | 11.5 | | | 4.65 | % | | June 2, 2014 | | July 1, 2029 |

| 4.50% Senior Notes (1) | Issuance | $ | 250.0 | | | 4.50 | % | | November 14, 2014 | | December 1, 2044 |

| THE AVENUE at White Marsh Mortgage Loan | Refinance | $ | 52.7 | | | 3.35 | % | | December 15, 2014 | | January 1, 2022 |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | |

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

| Melville Mall Mortgage Loan | | $ | 20.3 | | | June 3, 2014 | | September 1, 2014 |

| East Bay Bridge Mortgage Loan (1) | | $ | 61.0 | | | December 10, 2014 | | March 1, 2016 |

| 5.65% Senior Notes (2) | | $ | 125.0 | | | December 12, 2014 | | June 1, 2016 |

| | | | | | | | | |

(1) The total amount due at payoff of $64.0 million included a prepayment premium of $3.0 million and accrued but unpaid interest of $0.1 million.

On August 28, 2014, we amended our term loan agreement and lowered the spread over LIBOR by 40 basis points from 130 basis points to 90 basis points based on our current credit rating.

The amendment also provides us the option to extend the maturity date by one year.

We continue our ongoing redevelopment efforts at Santana Row.

Our most recent 212 unit residential building was completed during second quarter.

The building was 98.6% leased as of December 31, 2014, and had a total cost of $76 million.

We are also proceeding with our next phase of redevelopment which is a six story building including approximately 225,500 square feet of office space, 1,500 square feet of retail space, and 670 parking spaces.

After current phases, we have approximately 9 acres remaining for further redevelopment and entitlements in place for an additional 348 residential units and 69,000 square feet of commercial space.

We are currently in the process of seeking additional entitlements and have under control an additional 12 acres of land adjacent to Santana Row.

Minimal amounts of construction remain to be completed on the first phase.

The retail space in Phase I opened during 2014 and currently is 97.3% leased; the office space will open in 2015.

Phase I is expected to stabilize in 2015/2016.

Additionally, we entered into a ground lease agreement with Partners HealthCare to bring more than 700,000 square feet of office space and an additional 100,000 square feet of retail space to Assembly Row.

affect these estimates is included in “Item 1A.

necessary, to these estimates and, therefore, to our depreciation rates.

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

The capitalized costs associated with developments and redevelopments are depreciated over the life of the improvement.

In February 2013, the FASB issued ASU 2013-02, "Comprehensive Income (Topic 220): Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income." ASU 2013-02 requires entities to disclose certain information relating to amounts reclassified out of accumulated other comprehensive income.

We adopted the standard effective January 1, 2013 and it did not have a significant impact to our consolidated financial statements.

On April 3, 2013 we acquired the fee interest in a 95,000 square foot retail property located in Darien, Connecticut for $47.3 million.

The sales price was $6.5 million, and the gain was $5.0 million.

On July 22, 2013, we sold the fee interest in our final building at Fifth Avenue in San Diego, California for a sales price of $15.3 million resulting in a gain of $10.7 million.

On September 10, 2013, we sold the fee interest in a building in Forest Hills (Queens), New York, for a sales price of $20.4 million resulting in a gain of $13.2 million.

Both sales were completed as a Section 1031 tax deferred exchange transaction with the acquisition of the property in Darien.

On October 1, 2013, we acquired the fee interest in an 11.8 acre land parcel adjacent to our Assembly Row development project for a purchase price of $18.0 million.

On December 19, 2013, we acquired the fee interest in a land parcel contiguous with our Montrose Crossing shopping center that is encumbered by two retail ground leases.

The total purchase price was $10.5 million and our 89.9% share was $9.4 million.

The purchase price allocation will be completed after our valuation studies are complete.

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| White Marsh Plaza | $ | 9.0 | | | January 2, 2013 | | April 1, 2013 |

| Crow Canyon | 19.3 | | | | June 11, 2013 | | August 11, 2013 |

| Idylwood Plaza (1) | 15.7 | | | | December 5, 2013 | | June 5, 2014 |

| Leesburg Plaza (1) | 27.3 | | | | December 5, 2013 | | June 5, 2014 |

| Loehmann's Plaza (1) | 35.3 | | | | December 5, 2013 | | June 5, 2014 |

| Pentagon Row (1) | 50.7 | | | | December 5, 2013 | | June 5, 2014 |

| | $ | 157.3 | | | | | |

(1) The payoff included a prepayment premium totaling $4.4 million for all four mortgages which is included in "early extinguishment of debt" in 2013.

Under the amended credit facility, the spread over LIBOR is 90 basis points based on our credit rating as of May 1, 2013.

On May 9, 2013, we issued $275.0 million of fixed rate senior notes that mature on June 1, 2023 and bear interest at 2.75%.

On June 9, 2013, we redeemed our $135.0 million 5.40% senior notes prior to the original maturity date of December 1, 2013.

On December 9, 2013 we issued $300.0 million of fixed rate senior notes that mature on January 15, 2024 and bear interest at 3.95%.

The net proceeds from this note offering after issuance discounts, underwriting fees and other costs were approximately $294.7 million.

On December 27, 2013, we redeemed our $150.0 million 5.95% senior notes prior to the original maturity date of August 15, 2014.

The redemption price of $158.3 million included a make whole premium of approximately $5.0 million and accrued but unpaid interest of $3.3 million.

We continue our ongoing redevelopment efforts at Santana Row which currently has zoning entitlements to build an additional 348 residential units and 305,000 square feet of retail and office space.

The first phase of our new 212 unit residential building will be completed in first quarter 2014 with the remainder of the building expected to be completed by mid-2014.

The building is expected to stabilize in 2014 and to cost approximately $75 million of which $66 million has been incurred to date.

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

We expect Phase I to open in 2014 and stabilize in 2015.

Additionally during 2013, 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.

The $11.9 million gain on sale of real estate in 2012 is due to the sale of our Newbury Street Partnership's entire portfolio of three buildings on October 31, 2011.

As of December 31, [removed: 2013,] [added: 2014,] we were party to two interest rate swap agreements that effectively fix the rate on the $275.0 million term loan at [removed: 3.02%.][added: 2.62%.]

[added: Interest rate risk amounts were] determined by considering the impact of hypothetical interest rates on our debt.

[removed: 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.

The majority of our outstanding debt obligations (maturing at various times through [removed: 2031] [added: 2044] or, with respect to capital lease obligations through 2106) have fixed interest rates which limit the risk of fluctuating interest rates.

At December 31, [removed: 2013,] [added: 2014,] we had $2.3 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; we also had capital lease obligations of [removed: $71.7] [added: $71.6] million.

If market interest rates used to calculate the fair value on our fixed-rate debt instruments at December 31, [removed: 2013] [added: 2014] had been 1.0% higher, the fair value of those debt instruments on that date would have decreased by approximately [removed: $101.8] [added: $133.6] million.

If market interest rates used to calculate the fair value on our fixed-rate debt instruments at December 31, [removed: 2013] [added: 2014] had been 1.0% lower, the fair value of those debt instruments on that date would have increased by approximately [removed: $109.5] [added: $149.8] million.

At December 31, [removed: 2013,] [added: 2014,] 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: 2013.][added: 2014.]

Quoted market prices were used to estimate the

Interest rate risk amounts were

As of December 31, [removed: 2013,] [added: 2014,] we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as [removed: 87] [added: 89] predominantly retail real estate projects comprising approximately [removed: 19.5] [added: 20.2] million square feet.

In total, the real estate projects were [removed: 95.8%] [added: 95.6%] leased and [removed: 95.1%] [added: 94.7%] occupied at December 31, [removed: 2013.][added: 2014.]

A joint venture in which we own a 30% interest owned [removed: seven] [added: six] retail real estate projects totaling approximately [removed: 1.0] [added: 0.8] million square feet as of December 31, [removed: 2013.][added: 2014.]

In total, the joint venture properties in which we own an interest were [removed: 84.9%] [added: 86.1%] leased and [added: 82.8%] occupied at December 31, [removed: 2013.][added: 2014.]

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for [removed: 46] [added: 47] consecutive years.

| • | protect investor [removed: capital;] [added: capital.] |

| • | generate higher internal growth than [removed: our peers; and] [added: the shopping center industry;] |

| • | provide potential for capital [removed: appreciation.] [added: appreciation; and] |

Our portfolio includes, and we continue to acquire and redevelop, high quality retail in many formats ranging from [removed: regional] [added: regional,] community and neighborhood shopping centers that [removed: generally] [added: often] are anchored by grocery stores to mixed-use properties that are typically centered around a retail component but [removed: may] also include office, residential and/or hotel components.

At February [removed: 7, 2014,] [added: 6, 2015,] we had [removed: 266] [added: 269] full-time employees and [removed: 159] [added: 136] part-time employees.

[removed: We have no current plans for] substantial capital expenditures with respect to compliance with environmental, health, safety and similar laws and we carry environmental insurance which covers a number of environmental risks for most of our properties.

| • | the ability to increase the long-term value of the property through redevelopment and retenanting; |

We have no current plans for

| | |

| --- | --- |

For the fiscal year ended December 31, [removed: 2013][added: 2014]

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: 2013] [added: 2014] was [removed: $6.8] [added: $8.2] billion.

The number of Registrant’s common shares outstanding on February [removed: 7, 2014] [added: 6, 2015] was [removed: 66,822,208.][added: 68,664,043.]

FISCAL YEAR ENDED DECEMBER 31, [removed: 2013][added: 2014]

Portions of the Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission for the Registrant’s [removed: 2013] [added: 2014] annual meeting of shareholders to be held in May [removed: 2014] [added: 2015] will be incorporated by reference into Part III hereof.

| Item 1. | Business | [removed: [3](#s30563078FEA5A8EE27BA2A006E7441F1)] [added: [3](#s7B9B56494721B82FCEB8C49B3C0FD1AB)] |

| Item 1A. | Risk Factors | [removed: [7](#s75D48E02E9315DCF1F192A006EA645E2)] [added: [7](#s1B9AB4EA9B6B1E83DECEC49B3C41B183)] |

| Item 1B. | Unresolved Staff Comments | [removed: [15](#sC4420D0C4C57BF424EA32A006EC8166D)] [added: [16](#s98A220306E7962EB3C45C49B3C6093BE)] |

| Item 2. | Properties | [removed: [16](#sF6261B64469250DB63472A003BEC73DC)] [added: [16](#sDE463F425FAADF817873C49B17514288)] |

| Item 3. | Legal Proceedings | [removed: [24](#sE3995F7168DD0A48243A2A006F3953B4)] [added: [24](#sD7477B66233E3FAF9DABC49B3CBC91D9)] |

| Item 4. | Mine Safety Disclosures | [removed: [24](#sF47C0B77E83B3A6714622A006F4CA41B)] [added: [24](#s912CF828819305108EB2C49B3CE51083)] |

| Item 5. | Market for Our Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities | [removed: [25](#s56D432296FA6F47DF5D32A003C3C8225)] [added: [25](#sC2B0A4B40B77E444BC53C49B187B906E)] |

| Item 6. | Selected Financial Data | [removed: [27](#sD5C3ED7C5B39F15631212A003C8BC751)] [added: [27](#s90CCCBFD758BE9427A54C49B15D7CF8A)] |

| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | [removed: [29](#sA67CBA1F20D92F715E372A002DA25841)] [added: [29](#s11BDF115496F85CF521AC49B0E77EC11)] |

| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | [removed: [48](#s0D372139885F04237B942A0070C22F37)] [added: [49](#s37C04C6A39EFC790407AC49B3E370065)] |

| Item 8. | Financial Statements and Supplementary Data | [removed: [49](#sCBDB33F1E15E593BEF682A0070CFA78E)] [added: [50](#sC48A330246881ED5111EC49B3E41D461)] |

| Item 9. | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure | [removed: [49](#sE85D3231DF5630EBC9232A0070D68086)] [added: [50](#s2DD52A7D7BA4414F88A6C49B3E541777)] |

| Item 9A. | Controls and Procedures | [removed: [49](#s990070F93B9AB9E06FC02A0070EDCF86)] [added: [50](#sD000159793CAACC123C7C49B3E864F8D)] |

| Item 9B. | Other Information | [removed: [51](#s201ECCD8F8FB3AA3B3372A00710E514F)] [added: [52](#sA50BFB701D2D6AC0E55FC49B3EA68C73)] |

| Item 10. | Trustees, Executive Officers and Corporate Governance | [removed: [52](#sA70E167601644ED736862A0071614C97)] [added: [53](#sDAA5385C744A9F175B69C49B3EFD2402)] |

| Item 11. | Executive Compensation | [removed: [52](#sF26A2FC75165BA0E9CEB2A0071A2F940)] [added: [53](#s6BE4F11828FAA7E6BA8AC49B3F2EDB91)] |

| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters | [removed: [52](#sB5F2825814E4017673442A0071B6202C)] [added: [53](#sCC46C0AC9E2BAB15CC02C49B3F4E1454)] |

| Item 13. | Certain Relationships and Related Transactions, and Trustee Independence | [removed: [52](#sC3312B0B79C7242D13A22A0071E7014E)] [added: [53](#sF1FC1C99D05E0B291D54C49B3F7FA8BA)] |

| Item 14. | Principal Accountant Fees and Services | [removed: [52](#s72A50ADFED76A4742F442A007208FD5B)] [added: [53](#sE7CB8AB2741B928B7D5DC49B3FA102D8)] |

| Item 15. | Exhibits and Financial Statement Schedules | [removed: [52](#s252BD52DCFFE64BD36E42A00725C3B9D)] [added: [53](#s63D0C892EF929C7D0194C49B3FF79B7D)] |

10-K 1 frt-1231201410k.htm 10-K

| SIGNATURES | | [54](#s84F49B2A9FBBB3BDABA6C49B4029D873) |

10-K 1 frt-12312013x10k.htm 10-K

| SIGNATURES | | [53](#sBC98AA1CAD9D473C71C92A00728EEA7E) |

As of December 31, [removed: 2013,] [added: 2014,] 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: 89] predominantly retail real estate projects comprising approximately [removed: 19.5] [added: 20.2] million square feet.

No single property accounted for over 10% of our [removed: 2013] [added: 2014] total revenue.

As of December 31, [removed: 2013,] [added: 2014,] we had approximately [removed: 2,500] [added: 2,700] 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: 3.5%] [added: 3.1%] of our annualized base rent as of December 31, [removed: 2013.][added: 2014.]

Our [removed: 87] [added: 89] 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: 2013.][added: 2014.]

| Pennsylvania(1) | | 10 | | | 2,295,000 | | | [removed: 11.8] [added: 11.3] | % |

| New Jersey | | [removed: 4] [added: 6] | | | [removed: 1,392,000] [added: 1,688,000] | | | [removed: 7.1] [added: 8.3] | % |

| New York | | 5 | | | [removed: 1,139,000] [added: 1,137,000] | | | [removed: 5.8] [added: 5.6] | % |

| Connecticut(1) | | 3 | | | [removed: 397,000] [added: 398,000] | | | 2.0 | % |

| Texas | | 1 | | | [removed: 175,000] [added: 172,000] | | | 0.9 | % |

| District of Columbia | | 2 | | | 168,000 | | | [removed: 0.9] [added: 0.8] | % |

| Total | | [removed: 87] [added: 89] | | | [removed: 19,544,000] [added: 20,242,000] | | | 100.0 | % |

Leases on residential units are generally for a period of one year or less and, in [removed: 2013,] [added: 2014,] represented approximately [removed: 4.7%] [added: 5.6%] 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: 2013] [added: 2014] for each of the 10 years beginning with [removed: 2014] [added: 2015] and after [removed: 2023] [added: 2024] 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: 2013.][added: 2014.]

For [removed: 2012,] [added: 2014,] we signed leases for a total of [removed: 1,965,000] [added: 1,765,000] square feet of retail space including [removed: 1,800,000] [added: 1,545,000] square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of [removed: 13%] [added: 16%] on a cash basis and [removed: 23%] [added: 29%] on a straight-line basis.

New leases for comparable spaces were signed for [removed: 882,000] [added: 704,000] square feet at an average rental increase of [removed: 23%] [added: 25%] on a cash basis and [removed: 32%] [added: 38%] on a straight-line basis.

Renewals for comparable spaces were signed for [removed: 918,000] [added: 840,000] square feet at an average rental increase of [removed: 4%] [added: 11%] on a cash basis and [removed: 14%] [added: 23%] on a straight-line basis.

Tenant improvements and incentives for comparable spaces were $45.83 per square foot for new leases and $1.70 [removed: per square foot] for [removed: renewals] [added: renewal leases] in 2013.

Tenant improvements and incentives for comparable spaces were [removed: $36.20] [added: $44.46] per square foot for new leases and [removed: $2.78] [added: $1.27 per square foot] for [removed: renewal leases] [added: renewals] in [removed: 2012.][added: 2014.]

The leases signed in [removed: 2013] [added: 2014] generally become effective over the following two years though some may not become effective until [removed: 2015] [added: 2017] and beyond.

Historically, we have executed comparable space leases for 1.2 to 1.5 million square feet of retail space each [removed: year.][added: year and expect that volume for 2015 will be in line with our historical averages with overall positive increases in rental income.]

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: 2013.][added: 2014.]

| 150 Post Street San Francisco, CA 94108 | | 1908, 1965 | | 1997 | | [removed: 103,000] [added: 104,000] | | [removed: $43.60] [added: $44.73] | | [removed: 93%] [added: 98%] | | [removed: Brooks Brothers] H & M |

| Colorado Blvd Pasadena, CA 91103(4) | | 1905-1988 | | 1996/1998 | | 69,000 | | [removed: $38.51] [added: $39.48] | | 100% | | Pottery Barn Banana Republic |

| Crow Canyon Commons San Ramon, CA 94583 | | [removed: 1980-2006] [added: 1980, 1998, 2006] | | 2005/2007 | | [removed: 242,000] [added: 241,000] | | [removed: $20.37] [added: $22.12] | | [removed: 95%] [added: 98%] | | [removed: Lucky Loehmann’s Dress Shop] [added: Sprouts] Rite Aid [added: Sports Authority] |

| East Bay Bridge Emeryville & Oakland, CA 94608 [removed: (11)] | | [removed: 1994-1995, 2010,] [added: 1994-2001, 2011,] 2012 | | 2012 | | 438,000 | | [removed: $15.56] [added: $15.71] | | 100% | | Home Depot Michaels Pak-N-Save Target |

| Escondido Promenade Escondido, CA 92029(5) | | 1987 | | 1996/2010 | | [removed: 297,000] [added: 298,000] | | [removed: $23.13] [added: $23.58] | | 98% | | TJ Maxx Toys R Us Dick's Sporting Goods Ross Dress For Less |

| Hermosa Avenue Hermosa Beach, CA 90254 | | 1922 | | 1997 | | [removed: 22,000] [added: 24,000] | | [removed: $36.32] [added: $36.92] | | 100% | | |

| Hollywood Blvd Hollywood, CA 90028(6) | | 1929, 1991 | | 1999 | | [removed: 140,000] [added: 187,000] | | [removed: $28.87] [added: $30.53] | | 99% | | [added: Marshalls La La Land] DSW L.A. Fitness Fresh & Easy |

| Kings Court Los Gatos, CA 95032(4)(7) | | 1960 | | 1998 | | 80,000 | | [removed: $29.32] [added: $31.11] | | [removed: 99%] [added: 100%] | | Lunardi’s Supermarket CVS |

| Old Town Center Los Gatos, CA 95030 | | 1962, 1998 | | 1997 | | [removed: 96,000] [added: 95,000] | | [removed: $35.07] [added: $37.26] | | [removed: 94%] [added: 98%] | | Gap Banana Republic Anthropologie |

| Plaza El Segundo El Segundo, CA [removed: 90245 (5)(11)] [added: 90245(5)(10)] | | 2006-2007 | | 2011 | | [removed: 381,000] [added: 380,000] | | [removed: $37.35] [added: $37.88] | | [removed: 100%] [added: 99%] | | H&M Anthropologie Best Buy HomeGoods Whole Foods Dick's Sporting Goods Container Store |

| Santana [removed: Row—Retail] [added: Row] San Jose, CA 95128 | | 2002, 2009 | | 1997 | | [removed: 650,000] [added: 649,000] | | [removed: $48.72] [added: $49.44] | | [removed: 96%] [added: 98%] | | H&M Crate & Barrel Container Store Best Buy CineArts Theatre Hotel Valencia |

| Santana [removed: Row—Residential] [added: Row Residential] San Jose, CA 95128 | | [removed: 1999-2009, 2011] [added: 2003-2006, 2011, 2014] | | 1997, 2012 | | [removed: 505] [added: 662] units | | N/A | | [removed: 95%] [added: 97%] | | |

| Third Street Promenade Santa Monica, CA 90401 | | 1888-2000 | | 1996-2000 | | 209,000 | | [removed: $64.88] [added: $69.57] | | [removed: 97%] [added: 100%] | | Abercrombie & Fitch J. Crew Old Navy Banana Republic |

| Westgate Center San Jose, CA 95129 | | 1960-1966 | | 2004 | | [removed: 636,000] [added: 637,000] | | [removed: $14.11] [added: $16.11] | | [removed: 94%] [added: 98%] | | [added: Nike Factory] Target Walmart Neighborhood Market Burlington Coat Factory Ross Dress For Less Michaels Nordstrom Rack [added: J. Crew Gap Factory Store] |

| Bristol [added: Plaza] Bristol, CT 06010 | | 1959 | | 1995 | | 267,000 | | [removed: $12.52] [added: $12.89] | | [removed: 94%] [added: 91%] | | Stop & Shop TJ Maxx |

| [removed: Darien, CT] [added: Darien] Darien, CT 06820 | | 1920-2009 | | 2013 | | 95,000 | | [removed: $27.39] [added: $28.04] | | [removed: 97%] [added: 95%] | | Stop & Shop Equinox |

| Maryland | | 18 | | | 3,851,000 | | | 19.0 | % |

| Virginia | | 15 | | | 3,595,000 | | | 17.8 | % |

| California | | 13 | | | 3,411,000 | | | 16.9 | % |

| Massachusetts | | 7 | | | 1,708,000 | | | 8.4 | % |

| Illinois | | 4 | | | 751,000 | | | 3.7 | % |

| Florida | | 3 | | | 698,000 | | | 3.4 | % |

| 2015 | | 1,203,000 | | | 6 | % | | $ | 30,857,000 | | | 6 | % |

| 2016 | | 1,907,000 | | | 10 | % | | 51,812,000 | | | | 11 | % |

| 2017 | | 2,602,000 | | | 14 | % | | 66,746,000 | | | | 14 | % |

| 2018 | | 2,425,000 | | | 13 | % | | 59,936,000 | | | | 12 | % |

| 2019 | | 2,619,000 | | | 14 | % | | 63,209,000 | | | | 13 | % |

| 2020 | | 1,471,000 | | | 8 | % | | 37,669,000 | | | | 8 | % |

| 2021 | | 1,230,000 | | | 6 | % | | 34,128,000 | | | | 7 | % |

| 2022 | | 1,257,000 | | | 6 | % | | 31,054,000 | | | | 6 | % |

| 2023 | | 909,000 | | | 5 | % | | 27,175,000 | | | | 5 | % |

| 2024 | | 1,002,000 | | | 5 | % | | 28,994,000 | | | | 6 | % |

| Thereafter | | 2,547,000 | | | 13 | % | | 59,022,000 | | | | 12 | % |

| Total | | 19,172,000 | | | 100 | % | | $ | 490,602,000 | | | 100 | % |

| Pike & Rose North Bethesda, MD 20852 (12) | | 1963, 2014 | | 1982/2007/2012 | | 92,000 | | $44.96 | | 100% | | iPic Theater Gap/Gap Kids |

| Pike & Rose Residential North Bethesda, MD 20852 (12) | | 2014 | | 1982/2007 | | 174 units | | N/A | | 85% | | |

| Assembly Row/ Assembly Square Marketplace Somerville, MA 02145 (12) | | 2005, 2014 | | 2005-2011, 2013 | | 657,000 | | $22.49 | | 99% | | AMC Theatres LEGOLAND Discovery Center Saks Fifth Avenue Off 5th Nike Factory J. Crew Legal on the Mystic Bed, Bath & Beyond TJ Maxx |

| Brook 35 Sea Girt, NJ 08750(5)(7)(10) | | 1986, 2004 | | 2014 | | 98,000 | | $33.31 | | 94% | | Ann Taylor Banana Republic Coach Williams-Sonoma |

| The Grove at Shrewsbury Shrewsbury, NJ 07702(5)(7)(10) | | 1988, 1993 & 2007 | | 2014 | | 192,000 | | $41.94 | | 98% | | Lululemon Brooks Brothers Anthropologie Pottery Barn J. Crew Banana Republic Williams-Sonoma |

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

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

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

| 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) |

| Maryland | | 18 | | | 3,834,000 | | | 19.6 | % |

| Virginia | | 15 | | | 3,593,000 | | | 18.4 | % |

| California | | 13 | | | 3,363,000 | | | 17.2 | % |

| Massachusetts | | 7 | | | 1,390,000 | | | 7.1 | % |

| Illinois | | 4 | | | 750,000 | | | 3.8 | % |

| Florida | | 3 | | | 678,000 | | | 3.5 | % |

| | |

| --- | --- |

| 2014 | | 1,190,000 | | | 6 | % | | $ | 31,629,000 | | | 7 | % |

| 2015 | | 1,796,000 | | | 10 | % | | 44,496,000 | | | | 10 | % |

| 2016 | | 1,997,000 | | | 11 | % | | 53,437,000 | | | | 12 | % |

| 2017 | | 2,550,000 | | | 14 | % | | 63,720,000 | | | | 14 | % |

| 2018 | | 2,405,000 | | | 13 | % | | 56,833,000 | | | | 12 | % |

| 2019 | | 2,196,000 | | | 12 | % | | 46,554,000 | | | | 10 | % |

| 2020 | | 924,000 | | | 5 | % | | 22,964,000 | | | | 5 | % |

| 2021 | | 1,104,000 | | | 6 | % | | 29,997,000 | | | | 7 | % |

| 2022 | | 1,232,000 | | | 6 | % | | 30,740,000 | | | | 7 | % |

| 2023 | | 914,000 | | | 5 | % | | 27,082,000 | | | | 6 | % |

| Thereafter | | 2,236,000 | | | 12 | % | | 47,642,000 | | | | 10 | % |

| Total | | 18,544,000 | | | 100 | % | | $ | 455,094,000 | | | 100 | % |

In 2013, tenant improvements and incentives increased for new leases relative to our historical experience primarily due to one grocery anchor lease at Ellisburg Shopping Center and an anchor tenant at Westgate Center which is currently being redeveloped.

In future periods, we expect tenant improvements and incentives to return to levels more in line with our historical experience; however, our historical experience has also shown that costs have generally increased over time even absent specific tenant circumstances as noted above.

We believe our leasing volume for 2014 will be inline with our historical averages with overall positive increases in rental income.

| Mid-Pike Plaza/Pike & Rose Rockville, MD 20852 (13) | | 1963 | | 1982/2007 | | 59,000 | | $35.69 | | 100% | | Toys R Us |

| Assembly Square Marketplace/ Assembly Row Somerville, MA 02145 (13) | | 2005 | | 2005-2011 | | 336,000 | | $17.55 | | 100% | | Bed, Bath & Beyond Christmas Tree Shops Kmart Staples TJ Maxx A.C. Moore Sports Authority |

| Pleasant Shops Weymouth, MA 02190(9) | | 1974 | | 2004 | | 130,000 | | $13.97 | | 93% | | Whole Foods Marshalls |

| (10) | The Trust controls Melville Mall through a 20 year master lease and secondary financing to the owner. Because the Trust controls the activities that most significantly impact this property and retains substantially all of the economic benefit and risk associated with it, we consolidate this property and its operations. |

On February [removed: 7, 2014,] [added: 6, 2015,] there were [removed: 3,128] [added: 2,971] 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: 46] [added: 47] consecutive years.

Our total annual dividends paid per common share for [removed: 2013] [added: 2014] and [removed: 2012] [added: 2013] were [removed: $2.97] [added: $3.21] per share and [removed: $2.80] [added: $2.97] per share, respectively.

No assurances can be given regarding what portion, if any, of distributions in [removed: 2014] [added: 2015] or subsequent years will constitute a return of capital for federal income tax purposes.

| Ordinary dividend | $ | [removed: 2.911] [added: 3.178] | | | $ | [removed: 2.772] [added: 2.911] | |

| Capital gain | [removed: 0.059] [added: 0.032] | | | | [removed: 0.028] [added: 0.059] | | |

We do not believe that the preferential rights available to the holders of our preferred shares or the financial covenants contained in our debt agreements had or will have an adverse effect [removed: on our ability to pay dividends in the normal course of business to our common shareholders or to distribute amounts necessary to maintain our qualification as a REIT.]

During the three months ended December 31, [removed: 2013,] [added: 2014,] there were no redemptions of operating partnership units.

All other equity securities sold by us during [removed: 2013] [added: 2014] that were not registered have been previously reported in a Quarterly Report on Form 10-Q.

During the fourth quarter of [removed: 2013,] [added: 2014,] no equity securities were purchased by [removed: us and 230 restricted common shares were forfeited by former employees.][added: us.]

| 2014 | | | | | | | | | | | |

| Fourth quarter | $ | 137.18 | | | $ | 118.28 | | | $ | 0.870 | |

| Third quarter | $ | 125.80 | | | $ | 117.12 | | | $ | 0.870 | |

| Second quarter | $ | 123.11 | | | $ | 112.07 | | | $ | 0.780 | |

| First quarter | $ | 114.72 | | | $ | 100.90 | | | $ | 0.780 | |

| 2014 | | | | 2013 | | | |

| | $ | 3.210 | | | $ | 2.970 | |

on our ability to pay dividends in the normal course of business to our common shareholders or to distribute amounts necessary to maintain our qualification as a REIT.

Total Stockholder Return Performance

The following performance graph compares the cumulative total shareholder return on Federal Realty's common shares with the S&P 500 Index and the index of equity real estate investment trusts prepared by the National Association of Real Estate Investment Trusts ("NAREIT") for the five fiscal years commencing December 31, 2009, and ending December 31, 2014, assuming an investment of $100 and the reinvestment of all dividends into additional common shares during the holding period.

Equity real estate investment trusts are defined as those that derive more than 75% of their income from equity investments in real estate assets.

The FTSE NAREIT Equity REIT Total Return Index includes all tax qualified real estate investment trusts listed on the NYSE, NYSE Amex (formerly known as the American Stock Exchange), or the NASDAQ National Market.

Stock performance for the past five years is not necessarily indicative of future results.


| 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 | |

| 2013 | | | | 2012 | | | |

| Ordinary dividend eligible for 15% tax rate | — | | | | — | | |

| Return of capital | — | | | | — | | |

| | $ | 2.970 | | | $ | 2.800 | |

Financial Statements and Supplementary Data.” Our selected operating data, other data and balance sheet data for the years ended December 31, [removed: 2009] [added: 2010] through [removed: 2012] [added: 2013] have been reclassified to conform to the [removed: 2013] [added: 2014] presentation.

| [removed: 2013] [added: 2014] | | | | | [removed: 2012] [added: 2013] | | | | | [removed: 2011] [added: 2012] | | | | | [removed: 2010] [added: 2011] | | | | | [removed: 2009] [added: 2010] | | | | |

| Rental income | $ | [removed: 620,089] [added: 666,322] | | | | $ | [removed: 580,114] [added: 620,089] | | | | $ | [removed: 536,749] [added: 580,114] | | | | $ | [removed: 520,677] [added: 536,749] | | | | $ | [removed: 508,607] [added: 520,677] | | |

| Property operating income(1) | $ | [removed: 446,959] [added: 474,167] | | | | $ | [removed: 426,721] [added: 446,959] | | | | $ | [removed: 381,335] [added: 426,721] | | | | $ | [removed: 371,198] [added: 381,335] | | | | $ | [removed: 360,618] [added: 371,198] | | |

| Income from continuing operations | $ | [removed: 137,811] [added: 167,888] | | | | $ | [removed: 142,972] [added: 137,811] | | | | $ | [removed: 130,319] [added: 142,972] | | | | $ | [removed: 124,778] [added: 130,319] | | | | $ | [removed: 99,956] [added: 124,778] | | |

| Gain on sale of real estate | $ | [removed: 28,855] [added: 4,401] | | | | $ | [removed: 11,860] [added: 28,855] | | | | $ | [removed: 15,075] [added: 11,860] | | | | $ | [removed: 1,410] [added: 15,075] | | | | $ | [removed: 1,298] [added: 1,410] | | |

| Net income | $ | [removed: 167,608] [added: 172,289] | | | | $ | [removed: 156,232] [added: 167,608] | | | | $ | [removed: 149,612] [added: 156,232] | | | | $ | [removed: 128,237] [added: 149,612] | | | | $ | [removed: 103,872] [added: 128,237] | | |

| Net income attributable to the Trust | $ | [removed: 162,681] [added: 164,535] | | | | $ | [removed: 151,925] [added: 162,681] | | | | $ | [removed: 143,917] [added: 151,925] | | | | $ | [removed: 122,790] [added: 143,917] | | | | $ | [removed: 98,304] [added: 122,790] | | |

| Net income available for common shareholders | $ | [removed: 162,140] [added: 163,994] | | | | $ | [removed: 151,384] [added: 162,140] | | | | $ | [removed: 143,376] [added: 151,384] | | | | $ | [removed: 122,249] [added: 143,376] | | | | $ | [removed: 97,763] [added: 122,249] | | |

| Net cash provided by operating activities | $ | [removed: 314,498] [added: 346,130] | | | | $ | [removed: 296,633] [added: 314,498] | | | | $ | [removed: 244,711] [added: 296,633] | | | | $ | [removed: 256,735] [added: 244,711] | | | | $ | [removed: 256,765] [added: 256,735] | | |

| Net cash used in investing activities | $ | [removed: (345,198] [added: (396,150] | ) | | | $ | [removed: (273,558] [added: (345,198] | ) | | | $ | [removed: (196,369] [added: (273,558] | ) | | | $ | [removed: (187,088] [added: (196,369] | ) | | | $ | [removed: (127,341] [added: (187,088] | ) | |

| Net cash provided by (used in) financing activities | $ | [removed: 82,639] [added: 9,044] | | | | $ | [removed: (53,893] [added: 82,639] | [removed: )] | | | $ | [removed: 3,667] [added: (53,893] | [added: )] | | | $ | [removed: (189,239] [added: 3,667] | [removed: )] | | | $ | [removed: (9,258] [added: (189,239] | ) | |

| Dividends declared on common shares | $ | [removed: 198,965] [added: 224,190] | | | | $ | [removed: 182,813] [added: 198,965] | | | | $ | [removed: 171,335] [added: 182,813] | | | | $ | [removed: 163,382] [added: 171,335] | | | | $ | [removed: 157,638] [added: 163,382] | | |

| Basic | [removed: 65,331] [added: 67,322] | | | | | [removed: 63,881] [added: 65,331] | | | | | [removed: 62,438] [added: 63,881] | | | | | [removed: 61,182] [added: 62,438] | | | | | [removed: 59,704] [added: 61,182] | | | |

| Diluted | [removed: 65,483] [added: 67,492] | | | | | [removed: 64,056] [added: 65,483] | | | | | [removed: 62,603] [added: 64,056] | | | | | [removed: 61,324] [added: 62,603] | | | | | [removed: 59,830] [added: 61,324] | | | |

| Continuing operations | $ | [removed: 2.01] [added: 2.35] | | | | $ | [removed: 2.15] [added: 2.01] | | | | $ | [removed: 1.98] [added: 2.15] | | | | $ | [removed: 1.93] [added: 1.98] | | | | $ | [removed: 1.56] [added: 1.93] | | |

| Discontinued operations | [removed: 0.38] [added: —] | | | | | [removed: 0.02] [added: 0.38] | | | | | [removed: 0.31] [added: 0.02] | | | | | [removed: 0.05] [added: 0.31] | | | | | [removed: 0.07] [added: 0.05] | | | |

| Gain on sale of real estate | [removed: 0.08] [added: 0.07] | | | | | [removed: 0.19] [added: 0.08] | | | | | [removed: —] [added: 0.19] | | | | | [removed: 0.01] [added: —] | | | | | [removed: —] [added: 0.01] | | | |

| Total | $ | [removed: 2.47] [added: 2.42] | | | | $ | [removed: 2.36] [added: 2.47] | | | | $ | [removed: 2.29] [added: 2.36] | | | | $ | [removed: 1.99] [added: 2.29] | | | | $ | [removed: 1.63] [added: 1.99] | | |

| Continuing operations | $ | [removed: 2.00] [added: 2.34] | | | | $ | [removed: 2.14] [added: 2.00] | | | | $ | [removed: 1.97] [added: 2.14] | | | | $ | [removed: 1.93] [added: 1.97] | | | | $ | [removed: 1.56] [added: 1.93] | | |

| Discontinued operations | [removed: 0.38] [added: —] | | | | | [removed: 0.02] [added: 0.38] | | | | | [removed: 0.31] [added: 0.02] | | | | | [removed: 0.04] [added: 0.31] | | | | | [removed: 0.07] [added: 0.04] | | | |

| Total | $ | [removed: 2.46] [added: 2.41] | | | | $ | [removed: 2.35] [added: 2.46] | | | | $ | [removed: 2.28] [added: 2.35] | | | | $ | [removed: 1.98] [added: 2.28] | | | | $ | [removed: 1.63] [added: 1.98] | | |

| Dividends declared per common share | $ | [removed: 3.02] [added: 3.30] | | | | $ | [removed: 2.84] [added: 3.02] | | | | $ | [removed: 2.72] [added: 2.84] | | | | $ | [removed: 2.66] [added: 2.72] | | | | $ | [removed: 2.62] [added: 2.66] | | |

| Funds from operations available to common [removed: shareholders(2)(3)] [added: shareholders(2)] | $ | [removed: 289,938] [added: 327,597] | | | | $ | [removed: 277,237] [added: 289,938] | | | | $ | [removed: 251,576] [added: 277,237] | | | | $ | [removed: 239,210] [added: 251,576] | | | | $ | [removed: 211,065] [added: 239,210] | | |

| [removed: EBITDA(3)(4)] [added: EBITDA(3)] | $ | [removed: 446,555] [added: 447,495] | | | | $ | [removed: 410,918] [added: 446,555] | | | | $ | [removed: 374,131] [added: 410,918] | | | | $ | [removed: 352,481] [added: 374,131] | | | | $ | [removed: 328,491] [added: 352,481] | | |

| Adjusted [removed: EBITDA(3)(4)] [added: EBITDA(3)] | $ | [removed: 417,700] [added: 443,094] | | | | $ | [removed: 399,058] [added: 417,700] | | | | $ | [removed: 357,030] [added: 399,058] | | | | $ | [removed: 351,071] [added: 357,030] | | | | $ | [removed: 327,193] [added: 351,071] | | |

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

| Ratio of Adjusted EBITDA to combined fixed charges and preferred share [removed: dividends(3)(4)(5)] [added: dividends(3)(4)] | [removed: 3.1] [added: 3.5] | | | x | | [removed: 3.2] [added: 3.1] | | | x | | [removed: 3.3] [added: 3.2] | | | x | | [removed: 3.1] [added: 3.3] | | | x | | [removed: 2.7] [added: 3.1] | | | x |

| [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | | | [removed: 2009] [added: 2010] | | | |

| Real estate, at cost | $ | [removed: 5,149,463] [added: 5,608,998] | | | $ | [removed: 4,779,674] [added: 5,149,463] | | | $ | [removed: 4,426,444] [added: 4,779,674] | | | $ | [removed: 3,895,942] [added: 4,426,444] | | | $ | [removed: 3,759,234] [added: 3,895,942] | |

| Total assets | $ | [removed: 4,219,294] [added: 4,546,870] | | | $ | [removed: 3,898,565] [added: 4,219,294] | | | $ | [removed: 3,666,210] [added: 3,898,565] | | | $ | [removed: 3,159,553] [added: 3,666,210] | | | $ | [removed: 3,222,309] [added: 3,159,553] | |

| Mortgages payable and capital lease obligations | $ | [removed: 660,127] [added: 635,345] | | | $ | [removed: 832,482] [added: 660,127] | | | $ | [removed: 810,616] [added: 832,482] | | | $ | [removed: 589,441] [added: 810,616] | | | $ | [removed: 601,884] [added: 589,441] | |

| Notes payable | $ | [removed: 300,822] [added: 290,519] | | | $ | [removed: 299,575] [added: 300,822] | | | $ | [removed: 295,159] [added: 299,575] | | | $ | [removed: 97,881] [added: 295,159] | | | $ | [removed: 261,745] [added: 97,881] | |

| Senior notes and debentures | $ | [removed: 1,360,913] [added: 1,483,813] | | | $ | [removed: 1,076,545] [added: 1,360,913] | | | $ | [removed: 1,004,635] [added: 1,076,545] | | | $ | [removed: 1,079,827] [added: 1,004,635] | | | $ | [removed: 930,219] [added: 1,079,827] | |

| Shareholders’ equity | $ | [removed: 1,471,297] [added: 1,692,556] | | | $ | [removed: 1,310,593] [added: 1,471,297] | | | $ | [removed: 1,240,604] [added: 1,310,593] | | | $ | [removed: 1,115,768] [added: 1,240,604] | | | $ | [removed: 1,151,738] [added: 1,115,768] | |

| Number of common shares outstanding | [removed: 66,701] [added: 68,606] | | | | [removed: 64,815] [added: 66,701] | | | | [removed: 63,544] [added: 64,815] | | | | [removed: 61,526] [added: 63,544] | | | | [removed: 61,242] [added: 61,526] | | |

| (2) | [removed: FFO] [added: Funds from operations ("FFO")] is a supplemental non-GAAP financial measure of real estate companies’ operating performances. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as follows: net income, computed in accordance with U.S. GAAP, plus real estate related depreciation and amortization and excluding extraordinary items and gains on the sale of real estate. We compute FFO in accordance with the NAREIT definition, and we have historically reported our FFO available for common shareholders in addition to our net income. |

The reconciliation of net income to [removed: funds from operations] [added: FFO] available for common shareholders is as follows:

| | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | | | [removed: 2009] [added: 2010] | | |

| Net income | $ | [removed: 167,608] [added: 172,289] | | | $ | [removed: 156,232] [added: 167,608] | | | $ | [removed: 149,612] [added: 156,232] | | | $ | [removed: 128,237] [added: 149,612] | | | $ | [removed: 103,872] [added: 128,237] | |

| Gain on sale of real estate | 0.07 | | | | | 0.08 | | | | | 0.19 | | | | | — | | | | | 0.01 | | | |

| (In thousands) | | | | | | | | | | | | | | | | | | | |

The reconciliation of operating income to property operating income is as follows:

| Operating income | $ | 271,037 | | | $ | 254,161 | | | $ | 253,862 | | | $ | 226,462 | | | $ | 228,145 | |

| General and administrative | 32,316 | | | | 31,970 | | | | 31,158 | | | | 28,985 | | | | 24,189 | | |

| Litigation provision | — | | | | — | | | | — | | | | — | | | | 330 | | |

| Depreciation and amortization | 170,814 | | | | 160,828 | | | | 141,701 | | | | 125,888 | | | | 118,534 | | |

| Property operating income | $ | 474,167 | | | $ | 446,959 | | | $ | 426,721 | | | $ | 381,335 | | | $ | 371,198 | |

| | 2014 | | | | 2013 | | | | 2012 | | | | 2011 | | | | 2010 | | |

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

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

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

| | 2014 | | | | 2013 | | | | 2012 | | | | 2011 | | | | 2010 | | |

| | (In thousands) | | | | | | | | | | | | | | | | | | |

| Net income | $ | 172,289 | | | $ | 167,608 | | | $ | 156,232 | | | $ | 149,612 | | | $ | 128,237 | |

| Gain on sale of real estate | (4,401 | | ) | | (28,855 | | ) | | (11,860 | | ) | | (15,075 | | ) | | (1,410 | | ) |

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

| (In thousands, except per share data) | | | | | | | | | | | | | | | | | | | |

| | |

| --- | --- |

| (3) | Includes a charge of $0.3 million and $16.4 million in 2010 and 2009, respectively, for adjusting the accrual for litigation regarding a parcel of land located adjacent to Santana Row as well as other costs related to the litigation and appeal process. The matter is further discussed in Note 9 to the consolidated financial statements. |

We carried out an assessment as of December 31, [removed: 2013] [added: 2014] of the effectiveness of the design and operation of our disclosure controls and procedures and our internal control over financial reporting.

Rules adopted by the [removed: SEC] [added: Securities and Exchange Commission ("SEC")] require that we present the conclusions of our principal executive officer and our principal financial officer about the effectiveness of our disclosure controls and procedures and the conclusions of our management about the effectiveness of our internal control over financial reporting as of the end of the period covered by this annual report.

In conducting this evaluation, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the [removed: 1992] [added: 2013] Internal Control—Integrated Framework.

There was no change in our internal control over financial reporting during our fourth fiscal quarter of [removed: 2013] [added: 2014] that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Certain information required in Part III is omitted from this Report but is incorporated herein by reference from our Proxy Statement for the [removed: 2014] [added: 2015] Annual Meeting of Shareholders (as amended or supplemented, the “Proxy Statement”).

Our consolidated financial statements and notes thereto, together with Management’s Report on Internal Control over Financial Reporting and Reports of Independent Registered Public Accounting Firm are included as a separate section of this Annual Report on Form 10-K commencing on page [removed: F-1.][added: [F-1](#s1A9E9BEE25635DFD653BC49B4048F840).]

Our financial statement schedules are included in a separate section of this Annual Report on Form 10-K commencing on page [removed: [F-31](#s3BA9A04BCA87DE142D492A00330FAC7D).][added: [F-30](#s9073DB2B8CFD0E5635F4C49B1147B84D).]

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: 11, 2014.][added: 10, 2015.]

| /S/ DONALD C. WOOD | | President, Chief Executive Officer and | | February [removed: 11, 2014] [added: 10, 2015] |

| /S/ JAMES M. TAYLOR, JR. | | Executive Vice President-Chief Financial | | February [removed: 11, 2014] [added: 10, 2015] |

| /S/ JOSEPH S. VASSALLUZZO | | Non-Executive Chairman | | February [removed: 11, 2014] [added: 10, 2015] |

| /S/ JON E. BORTZ | | Trustee | | February [removed: 11, 2014] [added: 10, 2015] |

| /S/ DAVID W. FAEDER | | Trustee | | February [removed: 11, 2014] [added: 10, 2015] |

| /S/ KRISTIN GAMBLE | | Trustee | | February [removed: 11, 2014] [added: 10, 2015] |

| /S/ GAIL P. STEINEL | | Trustee | | February [removed: 11, 2014] [added: 10, 2015] |

| /S/ WARREN M. THOMPSON | | Trustee | | February [removed: 11, 2014] [added: 10, 2015] |

| Management Assessment Report on Internal Control over Financial Reporting | [removed: [F-2](#sC4AC7F6FA41F2DAB228A2A0072E34E77)] [added: [F-2](#sDF019990C5DE590CC2FBC49B407A93C9)] |

| Report of Independent Registered Public Accounting Firm | [removed: [F-3](#sBF53134D37A3B4E64E372A007303AB5F)] [added: [F-3](#s56A34A35F3BFC0E4BC75C49B409B1822)] |

| Report of Independent Registered Public Accounting Firm | [removed: [F-4](#s9C658CA731C7D49498452A0073350A8A)] [added: [F-4](#s9C4C2A987395852FC12CC49B40CDB483)] |

| Consolidated Balance Sheets | [removed: [F-5](#s2F774F6D7936C0A541812A002DA3AC3E)] [added: [F-5](#sCD064BF7A6CA4D240EEBC49B0E78E3B8)] |

| Consolidated Statements of Comprehensive Income | [removed: [F-6](#s97F469C28CECF52D699E2A002DBFAB5A)] [added: [F-6](#sA146975C6DD77FDE624AC49B0E8E517C)] |

| Consolidated Statement of Shareholders’ Equity | [removed: [F-7](#sA57C084E30982EF4B05E2A002DDD4FB8)] [added: [F-7](#sB4CCFD6885B80DD6712AC49B0EA5DA07)] |

| Consolidated Statements of Cash Flows | [removed: [F-8](#s7659FBED57775D90F9E52A002E3C16D7)] [added: [F-8](#s2C7A0293E72CC5F2288CC49B0F69F41F)] |

| Notes to Consolidated Financial Statements | [removed: [F-9](#sFBAFC468DC475A3B58442A0074DD9250)] [added: [F-9](#sB4CDE776A4D81479C36FC49B41EB869E)] |

| Schedule III—Summary of Real Estate and Accumulated Depreciation | [removed: [F-30](#s3BA9A04BCA87DE142D492A00330FAC7D)] [added: [F-30](#s9073DB2B8CFD0E5635F4C49B1147B84D)] |

| Schedule IV—Mortgage Loans on Real Estate | [removed: [F-37](#sC0DF1F78169AFA1C53552A00388601F8)] [added: [F-37](#sEDC81DC093E56751FC90C49B1288D2B3)] |

The management of Federal Realty [added: Investment Trust (the "Trust")] is responsible for establishing and maintaining adequate internal control over financial reporting.

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 Executive Vice President - Chief Financial [removed: Officer,] [added: Officer and Treasurer,] 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: 2013.][added: 2014.]

In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the [removed: 1992] [added: 2013] Internal Control—Integrated Framework.

Based on this assessment, management concluded that our internal control over financial reporting is effective, based on those criteria, as of December 31, [removed: 2013.][added: 2014.]

We have audited the internal control over financial reporting of Federal Realty Investment Trust (a Maryland real estate investment trust) and Subsidiaries (collectively, the "Trust") as of December 31, [removed: 2013,] [added: 2014,] based on criteria established in the [removed: 1992] [added: 2013] Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, Federal Realty Investment Trust and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2013,] [added: 2014,] based on criteria established in the [removed: 1992] [added: 2013] 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 financial statements of the Trust as of and for the year ended December 31, [removed: 2013] [added: 2014] and our report dated February [removed: 11, 2014] [added: 10, 2015] expressed an unqualified opinion on those financial statements.

We have audited the accompanying consolidated balance sheets of Federal Realty Investment Trust (a Maryland real estate investment trust) and Subsidiaries (collectively, the "Trust") as of December 31, [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] and the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2013.][added: 2014.]

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Federal Realty Investment Trust and Subsidiaries as of December 31, [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] and the results of their operations and their cash flows for each of the three years in the period ended December 31, [removed: 2013,] [added: 2014,] 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: 2013,] [added: 2014,] based on criteria established in the [removed: 1992] [added: 2013] Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February [removed: 11, 2014] [added: 10, 2015] expressed an unqualified opinion.

| | [added: 2014 | | | |] 2013 | | | | 2012 | | |

| | (In thousands, except share [added: and per share] data) | | | | | | |

| Operating (including [removed: $265,138] [added: $282,303] and [removed: $264,506] [added: $265,138] of consolidated variable interest entities, respectively) | $ | [removed: 4,618,258] [added: 5,128,757] | | | $ | [removed: 4,473,813] [added: 4,618,258] | |

| Construction-in-progress | [removed: 531,205] [added: 480,241] | | | | [removed: 288,714] [added: 531,205] | | |

| Less accumulated depreciation and amortization (including [removed: $19,086] [added: $26,618] and [removed: $12,024] [added: $19,086] of consolidated variable interest entities, respectively) | [removed: (1,350,471] [added: (1,467,050] | | ) | | [removed: (1,224,295] [added: (1,350,471] | | ) |

| Net real estate | [removed: 3,798,992] [added: 4,141,948] | | | | [removed: 3,555,379] [added: 3,798,992] | | |

| Cash and cash equivalents | [removed: 88,927] [added: 47,951] | | | | [removed: 36,988] [added: 88,927] | | |

| Accounts and notes receivable, net | [removed: 84,838] [added: 93,291] | | | | [removed: 73,861] [added: 84,838] | | |

| Mortgage notes receivable, net | [removed: 55,155] [added: 50,988] | | | | [removed: 55,648] [added: 55,155] | | |

| [removed: Investment] [added: Our investment] in real estate partnership | [removed: 32,264] [added: $] | [added: 32,367] | | | [removed: 33,169] [added: $] | [added: 32,264] | |

| Prepaid expenses and other assets | [removed: 145,062] [added: 160,167] | | | | [removed: 132,659] [added: 145,062] | | |

| Debt issuance costs, net of accumulated amortization of [removed: $9,535] [added: $11,441] and [removed: $10,140,] [added: $9,535,] respectively | [removed: 14,056] [added: 15,068] | | | | [removed: 10,861] [added: 14,056] | | |

| TOTAL ASSETS | $ | [removed: 4,219,294] [added: 4,546,870] | | | $ | [removed: 3,898,565] [added: 4,219,294] | |

| Mortgages payable (including [removed: $202,782] [added: $187,632] and [removed: $205,299] [added: $202,782] of consolidated variable interest entities, respectively) | $ | [removed: 588,456] [added: 563,698] | | | $ | [removed: 760,789] [added: 588,456] | |

| Capital lease obligations | [removed: 71,671] [added: 71,647] | | | | [removed: 71,693] [added: 71,671] | | |

| Notes payable | [removed: 300,822] [added: 290,519] | | | | [removed: 299,575] [added: 300,822] | | |

| Senior notes and debentures | [removed: 1,360,913] [added: 1,483,813] | | | | [removed: 1,076,545] [added: 1,360,913] | | |

| Accounts payable and accrued expenses | [removed: 156,270] [added: 145,685] | | | | [removed: 120,929] [added: 156,270] | | |

| Dividends payable | [removed: 52,385] [added: 60,620] | | | | [removed: 47,685] [added: 52,385] | | |

February 10, 2015

February 10, 2015

| | 2014 | | | | 2013 | | |

| | 5,608,998 | | | | 5,149,463 | | |

| Discontinued operations | — | | | | 0.38 | | | | 0.02 | | |

| Gain on sale of real estate | 0.07 | | | | 0.08 | | | | 0.19 | | |

| Net income, excluding $3,452 attributable to redeemable noncontrolling interests | — | | | — | | | | — | | | — | | | | — | | | | 164,535 | | | | — | | | | 4,302 | | | | 168,837 | | |

| Common shares issued | — | | | — | | | | 1,768,703 | | | 18 | | | | 213,562 | | | | — | | | | — | | | | — | | | | 213,580 | | |

| Exercise of stock options | — | | | — | | | | 29,218 | | | 1 | | | | 2,261 | | | | — | | | | — | | | | — | | | | 2,262 | | |

| Share-based compensation expense, net of shares withheld for employee taxes | — | | | — | | | | 87,735 | | | 1 | | | | 9,605 | | | | — | | | | — | | | | — | | | | 9,606 | | |

| BALANCE AT DECEMBER 31, 2014 | 399,896 | | | $ | 9,997 | | | 68,605,783 | | | $ | 687 | | | $ | 2,281,223 | | | $ | (683,991 | ) | | $ | (3,515 | ) | | $ | 88,155 | | | $ | 1,692,556 | |

| Net income | $ | 172,289 | | | $ | 167,608 | | | $ | 156,232 | |

and realized, the additional straight-line rental income is recognized as revenue.

Effective January 1, 2014, we adopted ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” as further discussed in "Recently Adopted Accounting Pronouncements." Prior to January 1, 2014, the sale or disposal of a “component of an entity” was treated as discontinued operations.

On June 3, 2014, we repaid the third party mortgage loan as further discussed in Note 7, and effectively became the first mortgage lender on the property.

As further discussed in Note 3, we have entered into an agreement to acquire the interest of one of the noncontrolling interest holders in The Grove at Shrewsbury in 2015.

As of December 31, 2014, net real estate assets related to this entity's interest in The Grove at Shrewsbury included in our consolidated balance sheet are approximately $15.7 million and a mortgage payable (net of unamortized premium) of $7.4 million.

| | 2014 | | | | 2013 | | |

In April 2014, the FASB issued ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU 2014-08 amends the definition of a discontinued operation to include only the disposal of a component of an entity that represents a strategic shift that has or will have a major impact on an entity’s operations and financial results.

The standard also requires additional disclosures about discontinued operations as well as disposal transactions that do not meet the discontinued operations criteria.

The standard is applicable prospectively for all disposals initially classified as held for sale in periods after adoption.

We adopted the standard effective January 1, 2014, and there was no impact to the current period financial statements.

In future periods, the adoption will result in most individual property disposals not qualifying for discontinued operations presentation and thus, the results of those disposals will remain in “income from continuing operations.” Properties sold prior to January 1, 2014, are not subject to ASU 2014-08 and therefore, continue to be classified as discontinued operations using the previous definition.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 supersedes nearly all existing revenue recognition guidance under GAAP and replaces it with a core revenue recognition principle, that an entity will recognize revenue when it transfers control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and creates a five-step model for revenue recognition in accordance with this principle.

ASU 2014-09 also requires new disclosures in both interim and annual reporting periods.

The guidance in ASU 2014-09 does not apply to contracts within the scope of ASC 840, Leases.

ASU 2014-09 will be effective for us in the first quarter of 2017 and allows for either full retrospective or modified retrospective adoption.

We are currently assessing the impact of this standard to our consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 provides guidance regarding management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and if such doubt exists, requires specific disclosures.

In January 2015, the FASB issued ASU 2015-01, "Income Statement - Extraordinary and Unusual Items." ASU 2015-01 eliminates the concept, and related presentation and disclosure requirements, of an extraordinary item.

The presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include those items that are both unusual in nature and infrequently occurring.

ASU 2015-01 is effective for us in the first quarter of 2016 and is not expected to have a significant impact on our consolidated financial statements.

| DownREIT operating partnership units issued with acquisition | $ | 65,348 | | | $ | — | | | $ | — | |

| Mortgage loans refinanced | $ | 64,205 | | | $ | — | | | $ | — | |

| Repayment of note payable with public funding/related construction-in-progress offset | $ | 10,000 | | | $ | — | | | $ | — | |

See Note 3 for additional disclosures relating to The Grove at Shrewsbury and Brook 35 acquisition.

| December 31, 2014 | | | | | | | | | | | | |

| Retail and mixed-use properties | | $ | 5,478,085 | | | $ | (1,423,682 | ) | | $ | 541,568 | |

| Retail properties under capital leases | | 121,069 | | | | (35,179 | | ) | | 71,647 | | |

| | |

| --- | --- |

February 11, 2014

| Assets held for sale (discontinued operations) | — | | | | 17,147 | | |

| | 5,149,463 | | | | 4,779,674 | | |

| Discontinued operations - gain on deconsolidation of VIE | — | | | | — | | | | 2,026 | | |

| BALANCE AT DECEMBER 31, 2010 | 399,896 | | | $ | 9,997 | | | 61,526,418 | | | $ | 615 | | | $ | 1,611,706 | | | $ | (527,582 | ) | | $ | — | | | $ | 21,032 | | | $ | 1,115,768 | |

| Net income, excluding $3,492 attributable to redeemable noncontrolling interests | — | | | — | | | | — | | | — | | | | — | | | | 143,917 | | | | — | | | | 2,203 | | | | 146,120 | | |

| Common shares issued | — | | | — | | | | 1,662,230 | | | 17 | | | | 139,281 | | | | — | | | | — | | | | — | | | | 139,298 | | |

| Exercise of stock options | — | | | — | | | | 237,271 | | | 3 | | | | 15,187 | | | | — | | | | — | | | | — | | | | 15,190 | | |

| Share-based compensation expense, net | — | | | — | | | | 89,408 | | | 1 | | | | 8,246 | | | | — | | | | — | | | | — | | | | 8,247 | | |

| Purchase of noncontrolling interest | — | | | — | | | | — | | | — | | | | (2,331 | | ) | | — | | | | — | | | | (207 | | ) | | (2,538 | | ) |

| Deconsolidation of VIE | — | | | — | | | | — | | | — | | | | — | | | | — | | | | — | | | | (420 | | ) | | (420 | | ) |

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

Certain 2012 and 2011 amounts have been reclassified to conform to current period presentation.

If our

The sale or disposal of a “component of an entity” is treated as discontinued operations.

A summary of the significant properties is as follows:

| | | | | |

| --- | --- | --- | --- | --- |

| Property | | Dates Held by a Third Party Intermediary | | Date Consolidated |

| Huntington Square | | August 16, 2010 to February 12, 2011 | | August 16, 2010 |

| Tower Shops | | January 19, 2011 to July 12, 2011 | | January 19, 2011 |

| Darien Shopping Center | | April 3, 2013 to September 10, 2013 | | April 3, 2013 |

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.

| Deconsolidation of VIE | $ | — | | | $ | — | | | $ | 18,311 | |

| Capital lease obligation | $ | — | | | $ | — | | | $ | 4,556 | |

| 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 | |

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.

The purchase price was $116.6 million which included the assumption of a mortgage loan with a face amount of $62.9 million and a fair value of approximately $67.6 million.

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 (which was subsequently sold in 2013 for $2.5 million).

Prior to June 30, 2011, we were the lender on a first and second mortgage loan on a shopping center and an adjacent commercial building in Norwalk, Connecticut.

Our carrying amount of the loans was approximately $18.3 million.

The loans were in default and foreclosure proceedings had been filed, however, we were in negotiations with the borrower to refinance the loans.