Federal Realty Investment Trust (FRT) 10-K risk factor changes: FY2017 vs FY2016
The 2017-12-31 10-K against the 2016-12-31 one, compared heading by heading and sentence by sentence. One of these filings carries no fiscal year tag, so its year is the calendar year of the period end.
Item 1A24 rewritten8 added6 removed423 unchanged
All filing items876 rewritten686 added541 removed2,078 unchanged
Summary
counted, not written
- Item 1A headings could not be compared: only 0 carried over between the two years, which usually means one filing was read wrongly, so none is reported as new or removed.
- Sentence by sentence, 686 added, 541 removed, 876 rewritten and 2,078 unchanged across 14 items that differ.
Sentences by item
22 items, with every count and a link to each item that changed
| Item | Added | Removed | Rewritten | Unchanged |
|---|---|---|---|---|
| Item 1A. RISK FACTORS | 8 | 6 | 24 | 423 |
| Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 199 | 117 | 148 | 483 |
| Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 2 | 0 | 5 | 21 |
| Item 1. BUSINESS | 0 | 0 | 8 | 203 |
| Item 3. LEGAL PROCEEDINGS | 6 | 10 | 1 | 0 |
| Cover and table of contents | 6 | 2 | 26 | 73 |
| Item 1B. UNRESOLVED STAFF COMMENTS | 0 | 0 | 0 | 1 |
| Item 2. PROPERTIES | 34 | 26 | 125 | 106 |
| Item 4. MINE SAFETY DISCLOSURES | 0 | 0 | 0 | 2 |
| Item 5. MARKET FOR OUR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 9 | 8 | 13 | 33 |
| Item 6. SELECTED FINANCIAL DATA | 12 | 17 | 47 | 45 |
| Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 0 | 0 | 0 | 1 |
| Item 9A. CONTROLS AND PROCEDURES | 5 | 41 | 11 | 9 |
| Item 9B. OTHER INFORMATION | 0 | 0 | 1 | 2 |
| Item 10. TRUSTEES, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | 0 | 0 | 0 | 3 |
| Item 11. EXECUTIVE COMPENSATION | 0 | 0 | 0 | 1 |
| Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS | 0 | 0 | 0 | 1 |
| Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND TRUSTEE INDEPENDENCE | 0 | 0 | 0 | 1 |
| Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES | 0 | 0 | 0 | 2 |
| Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | 117 | 3 | 3 | 9 |
| Item 16. FORM 10-K SUMMARY | 0 | 3 | 9 | 35 |
| Item 8. and Item 15(a)(1) and (2) | 288 | 308 | 455 | 624 |
Underlined words on a shaded ground are new in FY2017; struck-through words were in FY2016. Sentences that are wholly new or wholly gone are labelled rather than marked.
Item 1A. RISK FACTORS
24 rewritten, 8 added, 6 removed, 423 unchanged
While demand for our retail spaces has been [removed: strong,] [added: sufficient to increase occupancy,] there can be no assurance that this will continue.
Any reduction in our [removed: tenants’] [added: tenants'] abilities to pay base rent, percentage [removed: rent] [added: rent,] or other charges on a timely basis, including the filing by any of our tenants for bankruptcy protection, will adversely affect our financial condition and results of operations.
We [removed: currently are] [added: have been] experiencing higher levels of anchor vacancy and expect this will persist over the next few years while we are actively releasing vacant space, and in some cases, redeveloping the shopping center.
[removed: Our] [added: As of December 31, 2017, our] anchor tenant space is [removed: currently 97.1%] [added: 98.1%] leased and [removed: 96.3%] [added: 96.5%] occupied.
As of December 31, [removed: 2016,] [added: 2017,] we had approximately [removed: $2.8] [added: $3.3] billion of debt outstanding.
Of that outstanding debt, approximately [removed: $466.3] [added: $491.6] million was secured by all or a portion of [removed: nine] [added: 13] of our real estate projects and approximately $71.6 million represented capital lease obligations on four of our properties.
[removed: All of our debt outstanding as] [added: As] of December 31, [removed: 2016] [added: 2017, 98.8% of our debt] is fixed [removed: rate debt,] [added: rate,] which includes all of our property secured debt, our [added: unsecured senior notes, our] capital lease [removed: obligations] [added: obligations,] and our $275.0 million term [removed: loan] [added: loan,] as the rate is effectively fixed by two interest rate swap agreements.
Our organizational documents do not limit the level or amount of [removed: debt that we may]
As of December 31, [removed: 2016,] [added: 2017,] we were in compliance with all of our [added: default related] financial covenants.
If we were to breach any of our [added: default related] debt covenants, including the covenants listed above, and did not cure the breach within any applicable cure period, our lenders could require us to repay the debt immediately, and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan.
During [removed: 2016,] [added: 2017,] construction continued on the development of Phase II at both Assembly Row and Pike & [removed: Rose.][added: Rose, with portions of both projects opening during 2017.]
At Santana Row, we continue our on-going redevelopment efforts, [removed: completed construction of a new 234,500 square foot office building that is pre-leased to Splunk Inc., and are also proceeding with] [added: including] construction of an eight story 284,000 square foot office building, which will include [added: an additional] 29,000 square feet of retail space and 1,300 parking spaces.
| • | 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 [removed: underwritten;] [added: underwritten or longer time periods to reach economic stabilization;] |
Of our approximately [removed: $2.8] [added: $3.3] billion of debt outstanding as of December 31, [removed: 2016,] [added: 2017,] approximately [removed: $275.0] [added: $316.0] million bears interest at variable [removed: rates] [added: rates, of] which [added: $275.0 million] is effectively fixed at 2.62% through two interest rate swap agreements.
We have an $800.0 million revolving credit facility, on which [removed: no balance] [added: $41.0 million] is outstanding at December 31, [removed: 2016,] [added: 2017,] that bears interest at LIBOR plus 82.5 basis points.
We may enter into [removed: this type of] hedging arrangements or other transactions for all or a portion of our variable rate debt to limit our exposure to rising interest rates.
Our economic performance and the value of our real estate assets, and, consequently, the value of our investments, are subject to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and [added: capital expenditures, our cash flow and ability to pay distributions to our shareholders will be adversely affected.]
As of December 31, [removed: 2016,] [added: 2017,] we held [removed: nine] [added: 16] predominantly retail real estate projects jointly with other persons in addition to properties owned in a “downREIT” structure.
Additionally, we have entered into [removed: a] joint venture [removed: agreement] [added: agreements] related to the hotel component of Phase II of our Pike & Rose and Assembly Row development projects.
Although as of December 31, [removed: 2016,] [added: 2017,] we held the controlling interests in all of our existing co-investments (except the hotel investments discussed [removed: above),] [added: above and the investment in the La Alameda shopping center acquired in 2017),] we generally must obtain the consent of the co-investor or meet defined criteria to sell or to finance these properties.
Compliance with existing and new laws and regulations may require us or our tenants to spend funds to remedy [removed: environmental problems.]
If a lease does not require compliance or if a tenant fails to or cannot comply, we could be [added: forced to pay these costs.]
Any preferred shares we may offer in the future may have a fixed dividend rate that would [removed: not increase with any increases in the dividend rate of our common shares.]
[removed: If insurance] is unavailable to us or is unavailable on acceptable terms, or if our insurance is not adequate to cover business interruption or losses from these events, our earnings, liquidity or capital resources could be adversely affected.
debt that we may incur.
environmental problems.
U.S. federal tax reform legislation now and in the future could affect REITs, both positively and negatively, in ways that are difficult to anticipate.
The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”), signed into law on December 22, 2017, represents sweeping tax reform legislation that makes significant changes to corporate and individual tax rates and the calculation of taxes.
While we currently do not expect the 2017 Tax Act will have a significant direct impact on us, it may impact us indirectly as our tenants and the jurisdictions in which we do business as well as the overall investment thesis for REITs may be impacted both positively and negatively in ways that are difficult to predict.
Additionally, the overall impact of the 2017 Tax Act depends on future interpretations and regulations that may be issued by federal tax authorities, as well as changes in state and local taxation in response to the 2017 Tax Act, and it is possible that such future interpretations, regulations and other changes could adversely impact us.
not increase with any increases in the dividend rate of our common shares.
If insurance
incur.
capital expenditures, our cash flow and ability to pay distributions to our shareholders will be adversely affected.
forced to pay these costs.
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 and recently issued standards 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.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
148 rewritten, 199 added, 117 removed, 483 unchanged
As of December 31, [removed: 2016,] [added: 2017,] we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as [removed: 96] [added: 104] predominantly retail real estate projects comprising approximately [removed: 22.6] [added: 24.2] million square feet.
In total, the real estate projects were [removed: 94.4%] [added: 95.3%] leased and [removed: 93.3%] [added: 93.9%] occupied at December 31, [removed: 2016.][added: 2017.]
We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for [removed: 49] [added: 50] consecutive years.
At December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] our allowance for doubtful accounts was [removed: $11.9] [added: $11.8] million and [removed: $11.7] [added: $11.9] million, respectively.
Historically, we have recognized bad debt expense between 0.3% and 1.3% of rental income and it was 0.3% in [removed: 2016.][added: 2017.]
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: $7.9] [added: $8.4] million.
At December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] accounts receivable includes approximately [removed: $80.6] [added: $93.1] million and [removed: $72.7] [added: $80.6] million, respectively, related to straight-line rents.
We capitalized external and internal costs related to both development and redevelopment activities of [removed: $420] [added: $410] million and [removed: $9] [added: $8] million, respectively, for [removed: 2016] [added: 2017] and [removed: $232] [added: $420] million and [removed: $8] [added: $9] million, respectively, for [removed: 2015.][added: 2016.]
We capitalized external and internal costs related to other property improvements of [removed: $61] [added: $74] million and $3 million, respectively, for [removed: 2016] [added: 2017] and [removed: $42] [added: $61] million and [removed: $2] [added: $3] million, respectively, for [removed: 2015.][added: 2016.]
We capitalized external and internal costs related to leasing activities of [removed: $13] [added: $11] million and $6 million, respectively, for [removed: 2016] [added: 2017] and [removed: $17] [added: $13] million and $6 million, respectively, for [removed: 2015.][added: 2016.]
The amount of capitalized internal costs for salaries and related benefits for development and redevelopment activities, other property improvements, and leasing activities were [removed: $8] [added: $7] million, [removed: $2] [added: $3] million, and $6 million, for [removed: 2016] [added: 2017] and [removed: $7] [added: $8] million, [removed: $1] [added: $2] million, and $6 million for [removed: 2015.][added: 2016.]
Total capitalized costs were [removed: $511] [added: $512] million and [removed: $307] [added: $511] million for [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] respectively.
We consider qualitative and quantitative factors in evaluating the likelihood of a tenant exercising a below market renewal option and [removed: include such renewal options in the calculation of in-place lease value when we consider these to be bargain renewal options.]
[removed: 2016] [added: 2017] Property Acquisitions and [removed: Disposition][added: Dispositions]
Approximately [removed: $7.3] [added: $1.0] million and [removed: $4.9] [added: $12.3] million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively.
[added: | • | $1.8 million gain related to the sale of a building in Coconut Grove, Florida.] Our share of the gain, net of noncontrolling interests, was $0.5 million. [added: |]
[removed: 2016] [added: 2017] Significant Debt and Equity Transactions
[removed: On April 20, 2016,] [added: At December 31, 2017,] we [removed: upsized] [added: had cash and cash equivalents of $15.2 million and $41.0 million outstanding on] our [removed: $600.0] [added: $800.0] million [added: unsecured] revolving credit facility [removed: to $800.0 million and extended the maturity date to] [added: which matures on] April 20, 2020, subject to two six-month extensions at our option.
The notes were offered at [removed: 97.756%] [added: 99.404%] of the principal [removed: amount] [added: amount,] with a yield to maturity of [removed: 3.75%.][added: 3.323%.]
[removed: The] [added: Our] net proceeds from [removed: this] [added: the December] note offering after [added: net] issuance [removed: discounts,] [added: premium,] underwriting [removed: fees,] [added: fees] and other costs were [removed: $241.8] [added: approximately $172.5] million.
On November 4, [removed: 2016] [added: 2016,] we replaced our existing [removed: at the market] [added: at-the-market] (“ATM”) equity program with a new ATM equity program in which we may from time to time offer and sell common shares having an aggregate offering price of up to $400.0 million.
[added: For the three months ended December 31, 2017, we issued 501,120 common shares at a weighted average price per] share of [removed: $141.16] [added: $132.22] for net cash proceeds of [removed: $28.7] [added: $65.6] million and paid [removed: $0.3] [added: $0.7] million in commissions and [added: less than] $0.1 million in additional offering expenses related to the sales of these common shares.
For the year ended December 31, [removed: 2016,] [added: 2017,] we issued [removed: 1,156,571] [added: 826,517] common shares [removed: under our ATM equity program] at a weighted average price per share of [removed: $152.92] [added: $132.56] for net cash proceeds of [removed: $174.8] [added: $108.3] million and paid [removed: $1.8] [added: $1.1] million in commissions and $0.2 million in additional offering expenses related to the sales of these common shares.
As of December 31, [removed: 2016,] [added: 2017,] we had the capacity to issue up to [removed: $370.9] [added: $261.3] million in common shares under our ATM equity program.
Our same-center growth is primarily driven by increases in rental rates on new leases and lease [removed: renewals and] [added: renewals,] changes in portfolio [removed: occupancy.][added: occupancy, and the redevelopment of those assets.]
Over the long-term, the infill nature and strong demographics of our properties provide a strategic advantage allowing us to maintain relatively high occupancy and [added: generally] increase rental rates.
We [removed: continued] [added: continue] to see strong levels of interest from prospective tenants for our retail spaces; however, the time it takes to complete new lease deals is longer, as tenants have become more selective and more deliberate in their decision-making process.
Additionally, we have seen an overall decrease in [added: the] number of tenants available to fill anchor [removed: spaces.][added: spaces, and have seen an uptick in the number of retail tenants closing early and/or filing for bankruptcy.]
We believe the locations [added: and nature] of our centers and diverse tenant base partially mitigates any [added: potential] negative changes in the economic environment.
At December 31, [removed: 2016,] [added: 2017,] no single tenant accounted for more than [removed: 3.1%] [added: 2.9%] of annualized base rent.
Our properties are located primarily in densely populated and/or affluent areas with high barriers to entry which allow us to take advantage of redevelopment opportunities that enhance our operating performance through renovation, expansion, [removed: reconfiguration, and/or retenanting.]
We currently have redevelopment projects underway with a projected cost of approximately [removed: $188] [added: $155] million that we expect to stabilize in the next several years.
[removed: In 2016, we completed and opened] [added: We continue] our [removed: $113 million six story building with 234,500 square feet of office space] [added: ongoing redevelopment efforts at Santana Row] and [removed: 670 parking spaces that was pre-leased to Splunk Inc. We] are [removed: also proceeding with] [added: under construction on] an eight story 284,000 square foot office building which will include [added: an additional] 29,000 square feet of retail space and 1,300 parking spaces.
The building is expected to cost between $205 and $215 million and to [removed: deliver] [added: be delivered] in 2019.
We continue to invest in [removed: the] [added: our long-term multi-phased mixed-use] development [added: projects] at Assembly Row [added: in Somerville, Massachusetts and Pike & Rose in North Bethesda, Maryland] which [removed: is a long-term multi-phased mixed-use development project] we expect to be involved in over the coming years.
[removed: We are also proceeding with development] [added: Construction] of Phase II of Assembly Row which will include 161,000 square feet of retail space, [added: 447 residential units, and] a [removed: 159] [added: 158] room boutique hotel [added: (which will be owned] and [removed: 447 residential units.][added: operated by a joint venture in which we are a partner) is underway.]
Total expected costs range from [removed: $270] [added: $280] million to [removed: $285] [added: $295] million and [added: remaining] delivery is expected in [removed: 2017/2018.][added: 2018.]
Phase II will also include 122 for-sale condominium units with an expected total cost of [removed: $70] [added: $74] million to [removed: $75] [added: $79] million.
The ground lease agreement [removed: includes] [added: included] a purchase option, which was exercised and [removed: is expected to close in] [added: the related sale closed on April 4,] 2017.
We invested [removed: $153] [added: $273] million in Assembly Row [added: and Pike & Rose] in [removed: 2016] [added: 2017] and expect to invest between [removed: $140] [added: $75] million and [removed: $165] [added: $100] million in Assembly Row [added: and Pike & Rose] in [removed: 2017, net of public funding.][added: 2018.]
We are currently under construction on 221 condominium units at our Assembly Row and Pike & Rose properties.
Gains or losses on the sale of these condominium units are recognized in accordance with the provisions of ASC Topic 360-20, “Property, Plant and Equipment – Real Estate Sales.” We account for contracted condominium sales under the percentage-of completion method, based on an evaluation of the criteria specified in ASC Topic 360-20 including: the legal commitment of the purchaser in the real estate contract, whether the construction of the project is beyond a preliminary phase, whether sufficient units have been contracted to ensure the project will not revert to a rental project, the ability to reasonably estimate the aggregate project sale proceeds and aggregate project costs, and the determination that the buyer has made an adequate initial and continuing cash investment under the contract.
When the percentage-of-completion criteria have not been met, no profit is recognized.
The application of these criteria can be complex and requires us to make assumptions.
The timing of revenue recognition related to these condominium sales will be impacted by the January 1, 2018 adoption of ASU 2014-09 "Revenue from Contracts with Customers." See "Recent Accounting Pronouncements," in Note 2 to the consolidated financial statements for further discussion regarding the changes.
include such renewal options in the calculation of in-place lease value when we consider these to be bargain renewal options.
The land is subject to a long-term ground lease that expires on April 30, 2054.
Approximately $21.5 million of assets acquired were allocated to lease intangibles and included within other assets.
Approximately $15.2 million of net assets acquired were allocated to lease liabilities and included in other liabilities.
On March 31, 2017, we acquired the fee interest in Riverpoint Center, a 211,000 square foot shopping center in the Lincoln Park neighborhood of Chicago, Illinois for $107.0 million.
We leased three parcels of land at our Assembly Row property to two ground lessees.
Both lessees exercised purchase options under the related ground leases.
The sale transaction related to the purchase option on one of our ground leases was completed on April 4, 2017 for a sales price of $36.0 million.
On June 28, 2017, the sale transactions related to the purchase options on our other two ground lease parcels were completed for a total sales price of $17.3 million.
The net gain recognized in
connection with these transactions was approximately $15.4 million.
At December 31, 2016, the total cost basis of the related land was $33.9 million and is included in "assets held for sale" on our consolidated balance sheet.
On May 19, 2017, we acquired the fee interest in a 71,000 square foot, mixed-use property located in Berkeley, California based on a gross value of $23.9 million.
The acquisition was completed through a newly formed entity for which we own a 90% controlling interest.
Approximately $0.8 million and $0.3 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively.
Additionally, approximately $2.4 million was allocated to noncontrolling interests.
On August 2, 2017, we acquired an approximately 90% interest in a joint venture that owns six shopping centers in Los Angeles County, California based on a gross value of $357 million, including the assumption of $79.4 million of mortgage debt.
Approximately $7.8 million of assets acquired were allocated to lease intangibles and included within other assets.
Approximately $36.2 million of net assets acquired were allocated to lease liabilities and included in other liabilities.
Additionally, approximately $30.6 million was allocated to noncontrolling interests.
That joint venture also acquired a 24.5% interest in La Alameda, a shopping center in Walnut Park, California for $19.8 million.
The property has $41.0 million of mortgage debt, of which the joint venture's share is approximately $10 million.
Additional information on the properties is listed below:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Property | | City/State | | GLA | |
| | | | | (in square feet) | |
| Azalea | | South Gate, CA | | 222,000 | |
| Bell Gardens | | Bell Gardens, CA | | 330,000 | |
| La Alameda | | Walnut Park, CA | | 245,000 | |
| Olivo at Mission Hills (1) | | Mission Hills, CA | | 155,000 | |
| Plaza Del Sol | | South El Monte, CA | | 48,000 | |
| Plaza Pacoima | | Pacoima, CA | | 204,000 | |
| Sylmar Towne Center | | Sylmar, CA | | 148,000 | |
In addition, we reserve for estimated losses, if any, associated with warranties given to a buyer at the time an asset is sold or other potential liabilities relating to that sale, taking any insurance policies into account.
These warranties may extend up to ten years and the calculation of potential liability requires significant judgment.
If changes in facts and circumstances indicate that warranty reserves are understated, we will accrue additional reserves at such time a liability has been incurred and the costs can be reasonably estimated.
Warranty reserves are released once the legal liability period has expired or all related work has been substantially completed.
Any changes to our estimated warranty losses would result in an increase or decrease in net income.
On January 13, 2016, we acquired our partner's 70% interest in our joint venture arrangement (the "Partnership") with affiliates of a discretionary fund created and advised by Clarion Partners ("Clarion") for $153.7 million, which included the payment of $130 million of cash and the assumption of mortgage loans totaling $34.4 million.
As a result of the transaction, we gained control of the six underlying properties, and effective January 13, 2016, have consolidated the properties.
We also recognized a gain on acquisition of the controlling interest of $25.7 million related to the difference between the carrying value and fair value of the previously held equity interest.
We incurred $0.2 million of acquisition costs, of which $0.1 million were incurred in 2016, and included in "general and administrative expenses" on the consolidated statements of comprehensive income in 2016 and 2015.
On May 12, 2016, an unconsolidated joint venture that we hold an interest in sold a building in Coconut Grove, Florida.
On July 26, 2016, we acquired an additional building in the Coconut Grove neighborhood of Miami, Florida for $5.9 million through our CocoWalk LLC entity.
We incurred $0.2 million in acquisition costs which are included in "general and administrative expenses" in 2016.
On November 7, 2016, we acquired a building adjacent to our Barcroft Plaza property for $5.3 million, and incurred $0.1 million of acquisition costs which are included in "general and administrative expenses" in 2016.
Subsequent Event - 2017 Property Acquisition
On January 13, 2016, in connection with the acquisition of our partner's 70% interest in our unconsolidated real estate partnership, we assumed interest only mortgage loans with a face amount of $34.4 million and a fair value of $34.7 million.
These mortgage loans had a weighted average interest rate of 5.95% and were repaid at par on April 1, 2016.
On March 7, 2016, we issued 1.0 million common shares at $149.43 per share, in an underwritten public offering, for cash proceeds of $149.3 million, net of expenses.
Under the amended credit facility, the spread over LIBOR is 82.5 basis points based on our current credit rating.
In addition, we have an option (subject to bank approval) to increase the credit facility through an accordion feature to $1.5 billion.
On July 12, 2016, we issued $250.0 million of fixed rate senior unsecured notes that mature on August 1, 2046 and bear interest at 3.625%.
On October 1, 2016 we repaid the $9.4 million Escondido municipal bonds at par.
For the three months ended December 31, 2016, we issued 206,400 common shares under our ATM equity program at a weighted average price per
We continue our ongoing redevelopment efforts at Santana Row.
The carrying value of the development portion of this project at December 31, 2016 is approximately $541 million.
The project currently has zoning entitlements to build 3.4 million square feet of commercial-use buildings, 1,840 residential units, and a 170 room hotel.
The first phase consists of approximately 331,000 square feet of retail space and 98,000 square feet of office space (both owned by the Trust) and 445 residential units owned by AvalonBay Communities (AvalonBay Communities has exercised their purchase option for the land related to the residential buildings, which is expected to close in 2017).
The Massachusetts Bay Transit Authority (MBTA) constructed the new orange line T-Stop at the property, which opened in September 2014.
The retail and office space in Phase I are fully delivered and are 100% leased.
Total costs for Phase I of Assembly Row are $196 million.
The hotel will be owned and operated by a joint venture in which we are a partner.
Partners HealthCare commenced construction on this new building in September 2014 and during the second quarter of 2016, started relocating its employees to Assembly Row.
Our Pike & Rose project in North Bethesda, MD, a long-term multi-phased mixed-use development project, currently has zoning entitlements to build 1.6 million square feet of commercial-use buildings and 1,605 residential units.
Phase I of Pike & Rose includes 493 residential units, 159,000 square feet of retail space and 80,000 square feet of office space.
Phase I reached stabilized physical occupancy in the fourth quarter of 2016.
Total costs for Phase I of Pike & Rose range from $265 million to $270 million.
Additionally, we are proceeding with development of Phase II of Pike & Rose.
We invested $100 million in Pike & Rose in 2016 and expect to invest between $105 million and $130 million in Pike & Rose in 2017.
partially offset by,
| | 2015 | | | | 2014 | | | | Dollars | | | | % | |
| Rental income | $ | 727,812 | | | $ | 666,322 | | | $ | 61,490 | | | 9.2 | % |
An excerpt. Shown here: 40 of 148 rewritten, 40 of 199 added and 40 of 117 removed. The counts are complete. For every sentence, read Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS in the FY2017 filing and the FY2016 filing.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
5 rewritten, 2 added, 0 removed, 21 unchanged
As of December 31, [removed: 2016,] [added: 2017,] we were party to two interest rate swap agreements that effectively fix the rate on the $275.0 million term loan at 2.62%.
At December 31, [removed: 2016,] [added: 2017,] we had [removed: $2.7] [added: $3.2] 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; we also had capital lease obligations of $71.6 million.
If market interest rates used to calculate the fair value on our fixed-rate debt instruments at December 31, [removed: 2016] [added: 2017] had been 1.0% higher, the fair value of those debt instruments on that date would have decreased by approximately [removed: $176.9] [added: $239.4] million.
If market interest rates used to calculate the fair value on our fixed-rate debt instruments at December 31, [removed: 2016] [added: 2017] had been 1.0% lower, the fair value of those debt instruments on that date would have increased by approximately [removed: $205.3] [added: $276.4] million.
At December 31, [removed: 2016,] [added: 2017,] we had [removed: no] [added: $41.0 million of] variable rate debt outstanding.
Based upon this amount of variable rate debt and the specific terms, if market interest rates increased 1.0%, our annual interest expense woud increase by approximately $0.4 million with a corresponding decrease in our net income and cash flows for the year.
Conversely, if market rates decreased 1.0%, our annual interest expense would decrease by approximately $0.4 million with a corresponding increase in our net income and cash flows for the year.
Item 1. BUSINESS
8 rewritten, 0 added, 0 removed, 203 unchanged
As of December 31, [removed: 2016,] [added: 2017,] we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as [removed: 96] [added: 104] predominantly retail real estate projects comprising approximately [removed: 22.6] [added: 24.2] million square feet.
In total, the real estate projects were [removed: 94.4%] [added: 95.3%] leased and [removed: 93.3%] [added: 93.9%] occupied at December 31, [removed: 2016.][added: 2017.]
We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for [removed: 49] [added: 50] consecutive years.
| • | generate higher internal growth than the shopping center [removed: industry;] [added: industry over the long term;] |
| • | the geographic area in which the property is located, including the population [removed: density and] [added: density,] household incomes, [added: education levels,] as well as the population and income trends in that geographic area; |
| • | competitive conditions in the vicinity of the property, including [added: gross leasable area (GLA) per capita,] competition for tenants and the ability of others to create competing properties through redevelopment, new construction or renovation; |
| • | taking advantage of market opportunities to refinance existing debt, reduce interest costs and manage our debt maturity schedule so that a significant portion of our debt [added: relative to our size] does not mature in any one year; |
At February 8, [removed: 2017,] [added: 2018,] we had [removed: 312] [added: 311] full-time employees and [removed: 17] [added: 15] part-time employees.
Item 3. LEGAL PROCEEDINGS
1 rewritten, 6 added, 10 removed, 0 unchanged
In November 2016, we were included as a defendant in a class action [removed: lawsuit] [added: lawsuit, in the circuit court for Montgomery County, Maryland,] related to predatory towing by a third party company we had retained to provide towing services at several of our properties in Montgomery County, Maryland.
We, individually and collectively with other members of the more than 500 property owner defendant class, have undertaken numerous legal actions to challenge property owner liability in this case, including challenging the certification of the class as a matter of law; however, all of these legal actions have been unsuccessful.
Given the costs and risks of continuing litigation on this matter, we elected to participate in a settlement for which our share is approximately $0.4 million.
We expect that this settlement amount will be reimbursed by insurance.
The
settlement did not cover liability for certain tows that were included in the lawsuit that the defendant class believes cannot be pursued because of the statute of limitations.
Accordingly, we do not believe we should have any additional liability for these remaining tows; however, if we are unsuccessful in dismissing these tows from the litigation, our liability would be approximately $0.2 million, assuming payment on the same terms as the settlement.
We were not named as a defendant in the litigation prior to the certification of the defendant class.
In December 2015, the towing company defendant reached a settlement with the plaintiff class that resulted in a $22 million judgment being entered against them.
After the judgment was entered, the Circuit Court for Montgomery County, Maryland certified a defendant class of approximately 600 property owners, including us.
We believe this is the first time a Maryland court has certified a defendant class that has resulted in a complete denial of due process to the members of that class and together with the others, filed a Writ of Mandamus challenging the certification of the defendant class.
The hearing of the Writ by the Court of Appeals is discretionary.
Because of the specific facts and circumstances of our contractual relationship with the towing company, we do
not believe we should have been included in the defendant class nor do we believe we should have any liability in this matter.
We are currently pursuing all available legal remedies and intend to vigorously defend ourselves in the matter, including defenses based on the total lack of due process afforded to us to present our unique facts and circumstances.
We believe our potential loss in this matter ranges from $0 to an undetermined share of the $22 million judgment.
The judgment does not provide any guidance for how the judgment amount is to be shared amongst the defendant class.
Cover and table of contents
26 rewritten, 6 added, 2 removed, 73 unchanged
For the fiscal year ended December 31, [removed: 2016][added: 2017]
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: 2016] [added: 2017] was [removed: $11.8] [added: $9.1] billion.
The number of Registrant’s common shares outstanding on February 8, [removed: 2017] [added: 2018] was [removed: 72,105,659.][added: 73,192,726.]
FISCAL YEAR ENDED DECEMBER 31, [removed: 2016][added: 2017]
Portions of the Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission for the Registrant’s [removed: 2016] [added: 2017] annual meeting of shareholders to be held in May [removed: 2017] [added: 2018] will be incorporated by reference into Part III hereof.
| Item 1. | Business | [removed: [3](#s873D93F53C9C5AFFBA7577E912D40C0E)] [added: [3](#s95A868FD881051E0ABD8F251A580880F)] |
| Item 1A. | Risk Factors | [removed: [7](#s65F78EBC4DE959DFAB3E57D236E92842)] [added: [7](#sDB156C125270584CAD9D2306EFD62924)] |
| Item 1B. | Unresolved Staff Comments | [removed: [16](#sAA6D57D7F90350F8B5AE4A19E3C58CD3)] [added: [16](#s440BEE8839B05DFBA46E866A0299F111)] |
| Item 2. | Properties | [removed: [16](#sC08224BAD8175419AF04AE7D20A19A4D)] [added: [16](#s355B6550FE1854DC9B1A00473B9BD3CA)] |
| Item 3. | Legal Proceedings | [removed: [24](#s9634485AD4C255948517272F2F773BD5)] [added: [24](#sE1CFBE00CBFB5445B7B232C349704DBA)] |
| Item 4. | Mine Safety Disclosures | [removed: [25](#s34FA22F7002F5920A2D2063D206B4E12)] [added: [25](#sDE22E72E68EC5E9199FBC8007959705F)] |
| Item 5. | Market for Our Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities | [removed: [26](#s627400A1C2995BE6B20E06EA5D30C4DE)] [added: [26](#sCF6C217C76D15AD7A7FBA9FC1CAA7B4B)] |
| Item 6. | Selected Financial Data | [removed: [28](#s6B196A34EF165243A7EC034B82017514)] [added: [28](#s1B09187A1D83560E9F47FF35E1D42D49)] |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | [removed: [30](#sA049CC7DDA6455D7A00A9D3F3D600B68)] [added: [30](#sC56967C7B7DF58FE9ACB4F2F5E009A5E)] |
| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | [removed: [49](#s7D62464C9D8B51028EDB758722A3CD4D)] [added: [51](#s916DFC49C45B5C3F818CA1A503EE9729)] |
| Item 8. | Financial Statements and Supplementary Data | [removed: [49](#s85653BAD238F553AB5E1F86822FCA129)] [added: [51](#s7540CAB1150254B9B9E33AA487A5FBD1)] |
| Item 9. | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure | [removed: [49](#s6366AED404F856F5B21B57F16AA5D449)] [added: [52](#sC87E66C77AB45DF18F18745BFB86D9E9)] |
| Item 9A. | Controls and Procedures | [removed: [49](#sB3C74D848A4357BFA60379788D0F9D34)] [added: [52](#s1F304F40012E56A19F5F887CEA336D62)] |
| Item 9B. | Other Information | [removed: [52](#s3DFF1C9958435792861DF573318EABDE)] [added: [52](#s5D0E1998707C54628C912170AA668612)] |
| Item 10. | Trustees, Executive Officers and Corporate Governance | [removed: [53](#sC4BD44D4AB7F51E4A9C89FD1F535BFEB)] [added: [53](#s9641E13533325953BE1A86C5716E141D)] |
| Item 11. | Executive Compensation | [removed: [53](#sBBB940A2B21A594F9A6B9A80FE08F975)] [added: [53](#sD4660CB75B725CC79782E85ED6529A1F)] |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters | [removed: [53](#s47AC4A500F195E2D921EAB8D8D60E9ED)] [added: [53](#s008773DAFE155603974D62893830BA93)] |
| Item 13. | Certain Relationships and Related Transactions, and Trustee Independence | [removed: [53](#s14F3EF7608DD5348A858C590043FD968)] [added: [53](#sF078103B0B1E5B7A911687F42B6CE58B)] |
| Item 14. | Principal Accountant Fees and Services | [removed: [53](#s2BE943198E3F5B4498E60A3C7C11A46F)] [added: [53](#sE108B928D7EF598EA4BE3CC8C4463C8A)] |
| Item 15. | Exhibits and Financial Statement Schedules | [removed: [53](#s76D7F62F9C5357E7BD80A34A0B2CBE10)] [added: [53](#s737C1F4F4097597FADEBDD372B660744)] |
| Item 16. | Form 10-K Summary | [removed: [54](#sf7f398b52dd849cc8ff165c24c781103)] [added: [57](#sADEC33762D6E535C976A439FB30D4689)] |
10-K 1 frt-1231201710k.htm 10-K
| Depository Shares, each representing 1/1000 of a share of 5.00% Series C Cumulative Redeemable Preferred Stock, $.01 par value per share | | New York Stock Exchange |
| | | Emerging growth company | ¨ |
| | | | |
| If an emerging growth company, indicate by checkmark if the registrant has elected not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | | | ¨ |
| SIGNATURES | | [58](#s9877D4EEA7A5563B8696EB2B01B334A3) |
10-K 1 frt-1231201610k.htm 10-K
| SIGNATURES | | [55](#sC8FD919DBFB350DDAD24C84321AB7044) |
Item 2. PROPERTIES
125 rewritten, 34 added, 26 removed, 106 unchanged
As of December 31, [removed: 2016,] [added: 2017,] we owned or had a majority ownership interest in community and neighborhood shopping centers and mixed-used properties which are operated as [removed: 96] [added: 104] predominantly retail real estate projects comprising approximately [removed: 22.6] [added: 24.2] million square feet.
No single property accounted for over 10% of our [removed: 2016] [added: 2017] total revenue.
As of December 31, [removed: 2016,] [added: 2017,] we had approximately [removed: 2,900] [added: 3,000] 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: 3.1%] [added: 2.9%] of our annualized base rent as of December 31, [removed: 2016.][added: 2017.]
Our [removed: 96] [added: 104] real estate projects are located in 12 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: 2016.][added: 2017.]
| New Jersey | | 6 | | | [removed: 1,721,000] [added: 1,722,000] | | | [removed: 7.6] [added: 7.1] | % |
| New York | | 6 | | | 1,248,000 | | | [removed: 5.5] [added: 5.2] | % |
| Illinois | | 4 | | | [removed: 753,000] [added: 797,000] | | | 3.3 | % |
| Connecticut | | 3 | | | 397,000 | | | [removed: 1.7] [added: 1.6] | % |
| Michigan | | 1 | | | 217,000 | | | [removed: 1.0] [added: 0.9] | % |
| North Carolina | | 1 | | | [removed: 153,000] [added: 159,000] | | | 0.7 | % |
| Total | | [removed: 96] [added: 104] | | | [removed: 22,630,000] [added: 24,206,000] | | | 100.0 | % |
| (1) | Additionally, we own two participating mortgages totaling approximately [removed: $29.9] [added: $30.4] million secured by multiple buildings in Manayunk, Pennsylvania. |
Leases on residential units are generally for a period of one year or less and, in [removed: 2016,] [added: 2017,] represented approximately [removed: 6.6%] [added: 6.9%] 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: 2016] [added: 2017] for each of the 10 years beginning with [removed: 2017] [added: 2018] and after [removed: 2026] [added: 2027] 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: 2016.][added: 2017.]
[removed: For] [added: During] 2016, we signed leases for a total of 1,688,000 square feet of retail space including 1,473,000 square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of 13% on a cash basis and 26% on a straight-line basis.
Tenant improvements and incentives for comparable spaces were [added: $31.00 per square foot, of which,] $66.47 per square foot [added: was] for new leases and $10.28 [removed: per square foot] [added: was] for [removed: renewals] [added: renewal leases] in 2016.
[removed: For 2015,] [added: During 2017,] we signed leases for a total of [removed: 1,593,000] [added: 1,793,000] square feet of retail space including [removed: 1,405,000] [added: 1,622,000] square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of [removed: 17%] [added: 13%] on a cash basis and [removed: 29%] [added: 26%] on a straight-line basis.
New leases for comparable spaces were signed for [removed: 547,000] [added: 773,000] square feet at an average rental increase of [removed: 22%] [added: 19%] on a cash basis and [removed: 35%] [added: 32%] on a straight-line basis.
Renewals for comparable spaces were signed for [removed: 859,000] [added: 848,000] square feet at an average rental increase of [removed: 14%] [added: 9%] on a cash basis and [removed: 24%] [added: 21%] on a straight-line basis.
Tenant improvements and incentives for comparable spaces were [removed: $60.98] [added: $36.00] per square [added: foot, of which, $62.11 per square] foot [added: was] for new leases and [removed: $8.79] [added: $12.18 per square foot was] for [removed: renewal leases] [added: renewals] in [removed: 2015.][added: 2017.]
The leases signed in [removed: 2016] [added: 2017] generally become effective over the following two years though some may not become effective until [removed: 2019] [added: 2020] and beyond.
Historically, we have executed comparable space leases for 1.2 to [removed: 1.5] [added: 1.6] million square feet of retail space each year and expect the volume for [removed: 2017] [added: 2018] 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: 2016.][added: 2017.]
| Colorado Blvd Pasadena, CA 91103(4) | | 1905-1988 | | 1996/1998 | | 69,000 | | [removed: $44.18] [added: $45.04] | | 100% | | Pottery Barn Banana Republic |
| Crow Canyon Commons San Ramon, CA 94583 | | 1980, 1998, 2006 | | 2005/2007 | | 241,000 | | [removed: $27.37] [added: $28.16] | | [removed: 91%] [added: 94%] | | Sprouts [removed: Rite Aid] Orchard Supply Hardware [added: Rite Aid Total Wine & More] |
| East Bay Bridge Emeryville & Oakland, CA 94608 | | 1994-2001, 2011, 2012 | | 2012 | | 439,000 | | [removed: $18.17] [added: $18.42] | | 100% | | [added: Pak-N-Save] Home Depot [removed: Michaels Pak-N-Save] Target Nordstrom Rack [removed: Ashley Furniture Ulta] |
| Escondido Promenade Escondido, CA 92029(5) | | 1987 | | 1996/2010 | | [removed: 298,000] [added: 299,000] | | [removed: $24.59] [added: $25.29] | | [removed: 98%] [added: 99%] | | TJ Maxx [removed: Toys R Us] Dick's Sporting Goods Ross Dress For Less [added: Toys R Us] |
| Hermosa Avenue Hermosa Beach, CA 90254 | | 1922 | | 1997 | | 23,000 | | [removed: $42.27] [added: $49.18] | | [removed: 100%] [added: 81%] | | |
| Hollywood Blvd Hollywood, CA 90028 | | 1929, 1991 | | 1999 | | 180,000 | | [removed: $33.98] [added: $30.01] | | 91% | | Marshalls [removed: La La Land] DSW L.A. Fitness [added: La La Land] |
| Kings Court Los Gatos, CA 95032(4)(6) | | 1960 | | 1998 | | [removed: 79,000] [added: 80,000] | | [removed: $32.03] [added: $32.55] | | 100% | | Lunardi's Supermarket CVS |
| Old Town Center Los Gatos, CA 95030 | | 1962, 1998 | | 1997 | | 98,000 | | [removed: $41.51] [added: $41.40] | | 99% | | [removed: Gap] [added: Anthropologie] Banana Republic [removed: Anthropologie] [added: GAP] |
| Plaza El Segundo / The Point El Segundo, CA 90245(5)(8) | | 2006-2007, 2016 | | 2011/2013 | | [removed: 494,000] [added: 495,000] | | [removed: $43.26] [added: $44.71] | | [removed: 96%] [added: 95%] | | [removed: H&M Anthropologie Best Buy HomeGoods] Whole Foods [added: Anthropologie Home Goods] Dick's Sporting Goods [removed: Container Store] [added: Multiple Restaurants] |
| San Antonio Center Mountain View, CA [removed: 94040(4)(5)(6)] [added: 94040(4)(6)] | | 1958, 1964-1965, 1974-1975, 1995-1997 | | 2015 | | 376,000 | | [removed: $13.36] [added: $13.74] | | [removed: 95%] [added: 97%] | | [removed: Kohl's Walmart] Trader Joe's [added: Wal-mart Kohl's] 24 Hour Fitness [removed: Jo-Ann Stores] |
| Santana Row San Jose, CA 95128(4) | | 2002, 2009, 2016 | | 1997 | | [removed: 888,000] [added: 885,000] | | [removed: 49.81] [added: $52.42] | | [removed: 99%] [added: 98%] | | [removed: H&M] Crate & Barrel [added: H&M] Container Store [removed: Best Buy CineArts Theatre Hotel Valencia Splunk, Inc.] [added: Multiple Restaurants] |
| Santana Row Residential San Jose, CA 95128 | | 2003-2006, 2011, 2014 | | 1997/2012 | | 662 units | | N/A | | [removed: 95%] [added: 97%] | | |
| Third Street Promenade Santa Monica, CA 90401 | | 1888-2000 | | 1996-2000 | | 209,000 | | [removed: $76.01] [added: $79.66] | | [removed: 94%] [added: 98%] | | [added: Banana Republic Old Navy J. Crew] Abercrombie & Fitch [removed: J. Crew Old Navy Banana Republic] |
| Westgate Center San Jose, CA 95129 | | 1960-1966 | | 2004 | | [removed: 638,000] [added: 647,000] | | [removed: $17.96] [added: $17.78] | | [removed: 96%] [added: 99%] | | [removed: Nike Factory Target] Walmart Neighborhood Market [removed: Burlington Coat Factory Ross Dress For Less Michaels] [added: Target] Nordstrom Rack [removed: J. Crew Gap] [added: Nike] Factory [removed: Store] [added: Burlington] |
| California | | 21 | | | 5,442,000 | | | 22.5 | % |
| Maryland | | 21 | | | 4,562,000 | | | 18.8 | % |
| Virginia | | 16 | | | 3,738,000 | | | 15.4 | % |
| Pennsylvania(1) | | 10 | | | 2,316,000 | | | 9.6 | % |
| Massachusetts | | 9 | | | 2,101,000 | | | 8.7 | % |
| Florida | | 4 | | | 1,339,000 | | | 5.5 | % |
| 2018 | | 1,849,000 | | | 8 | % | | $ | 47,382,000 | | | 8 | % |
| 2019 | | 3,042,000 | | | 13 | % | | 73,854,000 | | | | 12 | % |
| 2020 | | 2,339,000 | | | 10 | % | | 62,409,000 | | | | 10 | % |
| 2021 | | 2,601,000 | | | 12 | % | | 76,900,000 | | | | 13 | % |
| 2022 | | 3,045,000 | | | 13 | % | | 77,417,000 | | | | 13 | % |
| 2023 | | 1,958,000 | | | 9 | % | | 54,840,000 | | | | 9 | % |
| 2024 | | 1,523,000 | | | 7 | % | | 40,296,000 | | | | 7 | % |
| 2025 | | 1,346,000 | | | 6 | % | | 39,245,000 | | | | 6 | % |
| 2026 | | 921,000 | | | 4 | % | | 30,520,000 | | | | 5 | % |
| 2027 | | 1,183,000 | | | 5 | % | | 44,532,000 | | | | 7 | % |
| Thereafter | | 2,861,000 | | | 13 | % | | 62,388,000 | | | | 10 | % |
| Total | | 22,668,000 | | | 100 | % | | $ | 609,783,000 | | | 100 | % |
| Azalea South Gate, CA 90280(5)(8) | | 2014 | | 2017 | | 222,000 | | $27.43 | | 100% | | Marshalls Ross Dress for Less Ulta CVS |
| Bell Gardens Bell Gardens, CA 90201(4)(5)(8) | | 1990, 2003, 2006 | | 2017 | | 330,000 | | $20.37 | | 100% | | Food4Less Marshalls Ross Dress for Less Petco |
| Fourth Street Berkeley, CA 94710(5) | | 1948, 1975 | | 2017 | | 71,000 | | $28.14 | | 55% | | CB2 Ingram Book Group |
| Hastings Ranch Plaza Pasadena, CA 91107(4) | | 1958, 1984, 2006, 2007 | | 2017 | | 273,000 | | $7.21 | | 98% | | Marshalls HomeGoods CVS Sears |
| La Alameda Walnut Park, CA 90255(4)(7)(8) | | 2008 | | 2017 | | 245,000 | | $24.96 | | 94% | | Marshalls Ross Dress For Less CVS Petco |
| Olivo at Mission Hills Mission Hills, CA 91345(5) | | 2017 | | 2017 | | 105,000 | | $30.05 | | 100% | | Target 24 Hour Fitness Fallas Stores |
| Plaza Del Sol South El Monte, CA 91733(5)(8) | | 2009 | | 2017 | | 48,000 | | $23.01 | | 100% | | Marshalls |
| Plaza Pacoima Pacoima, CA 91331(5) | | 2010 | | 2017 | | 204,000 | | $14.33 | | 99% | | Costco Best Buy |
| Sylmar Towne Center Sylmar, CA 91342(5)(8) | | 1973 | | 2017 | | 148,000 | | $14.56 | | 91% | | Food4Less CVS |
| Riverpoint Center Chicago, IL 60614 | | 1989, 2012 | | 2017 | | 211,000 | | $22.38 | | 96% | | Jewel Osco Marshalls Old Navy |
| Towson Residential (Flats @703) Baltimore, MD 21236 | | 2017 | | 2007 | | 4,000 | | $71.41 | | 100% | | |
| | | | 105 units | | N/A | | 55% | | | | | |
| Assembly Row/ Assembly Square Marketplace Somerville, MA 02145(10) | | 2005, 2014 | | 2005-2011/ 2013 | | 810,000 | | $24.97 | | 99% | | Trader Joe's TJ Maxx AMC LEGOLAND Discovery Center Multiple Restaurants & Outlets |
| Assembly Row Residential Somerville, MA 02145(10) | | 2017 | | 2005-2011 | | 141 units | | N/A | | 94% | | |
| | | | | | | | | | | | | |
| (7) | We own a noncontrolling interest in this property. |
| Maryland | | 20 | | | 4,394,000 | | | 19.4 | % |
| California | | 14 | | | 4,137,000 | | | 18.3 | % |
| Virginia | | 16 | | | 3,735,000 | | | 16.5 | % |
| Pennsylvania(1) | | 10 | | | 2,300,000 | | | 10.2 | % |
| Massachusetts | | 9 | | | 2,052,000 | | | 9.1 | % |
| Florida | | 4 | | | 1,355,000 | | | 6.0 | % |
| | |
| --- | --- |
| 2017 | | 1,365,000 | | | 7 | % | | $ | 39,813,000 | | | 7 | % |
| 2018 | | 2,789,000 | | | 13 | % | | 69,380,000 | | | | 12 | % |
| 2019 | | 2,814,000 | | | 13 | % | | 70,995,000 | | | | 12 | % |
| 2020 | | 2,209,000 | | | 11 | % | | 58,764,000 | | | | 10 | % |
| 2021 | | 2,522,000 | | | 12 | % | | 71,346,000 | | | | 13 | % |
| 2022 | | 2,476,000 | | | 12 | % | | 58,671,000 | | | | 10 | % |
| 2023 | | 1,027,000 | | | 5 | % | | 32,492,000 | | | | 6 | % |
| 2024 | | 1,111,000 | | | 5 | % | | 33,493,000 | | | | 6 | % |
| 2025 | | 1,329,000 | | | 6 | % | | 38,095,000 | | | | 7 | % |
| 2026 | | 843,000 | | | 4 | % | | 28,029,000 | | | | 5 | % |
| Thereafter | | 2,566,000 | | | 12 | % | | 65,336,000 | | | | 12 | % |
| Total | | 21,051,000 | | | 100 | % | | $ | 566,414,000 | | | 100 | % |
Lease Rollovers
| 150 Post Street San Francisco, CA 94108 | | 1908, 1965 | | 1997 | | 105,000 | | $44.41 | | 81% | | Shreve & Co. |
| North Lake Commons Lake Zurich, IL 60047 | | 1989 | | 1994 | | 129,000 | | $11.55 | | 85% | | Jewel Osco |
| Assembly Row/ Assembly Square Marketplace Somerville, MA 02145(10) | | 2005, 2014 | | 2005-2011/ 2013 | | 761,000 | | $23.45 | | 94% | | AMC Theaters LEGOLAND Discovery Center Saks Fifth Avenue Off 5th Nike Factory J. Crew Legal on the Mystic Bed, Bath & Beyond TJ Maxx |
| (7) | All or a portion of this property is subject to a capital lease obligation. |
| (12) | On January 13, 2016, we acquired the 70% controlling interest in these properties and now own the properties 100%. The year acquired reflects the year we first acquired an equity interest in the property. |
An excerpt. Shown here: 40 of 125 rewritten, all 34 added and all 26 removed. The counts are complete. For every sentence, read Item 2. PROPERTIES in the FY2017 filing and the FY2016 filing.
Item 5. MARKET FOR OUR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
13 rewritten, 9 added, 8 removed, 33 unchanged
Our common shares trade on the New York Stock Exchange under the symbol “FRT.” Listed below are the high and low [removed: closing] [added: sales] prices of our common shares as reported on the New York Stock Exchange and the dividends declared for each of the periods indicated.
On February 8, [removed: 2017,] [added: 2018,] there were [removed: 2,706] [added: 2,568] 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: 49] [added: 50] consecutive years.
Our total annual dividends paid per common share for [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] were [removed: $3.80] [added: $3.94] per share and [removed: $3.55] [added: $3.80] per share, respectively.
No assurances can be given regarding what portion, if any, of distributions in [removed: 2017] [added: 2018] or subsequent years will constitute a return of capital for federal income tax purposes.
| Ordinary dividend | $ | [removed: 3.800] [added: 3.940] | | | $ | [removed: 3.515] [added: 3.800] | |
| Capital gain | — | | | | [removed: 0.035] [added: —] | | |
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 [added: 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.]
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, [removed: 2011,] [added: 2012,] and ending December 31, [removed: 2016,] [added: 2017,] assuming an investment of $100 and the reinvestment of all dividends into additional common shares during the holding period.
[removed: ][added: ]
During the three months ended December 31, [removed: 2016,] [added: 2017,] there were no redemptions of operating partnership units.
[removed: All] [added: Any] other equity securities sold by us during [removed: 2016] [added: 2017] that were not registered have been previously reported in a Quarterly Report on Form 10-Q.
During [removed: 2016, 18,537] [added: 2017, 2,293] restricted common shares were forfeited by former employees.
| 2017 | | | | | | | | | | | |
| Fourth quarter | $ | 134.52 | | | $ | 119.37 | | | $ | 1.000 | |
| Third quarter | $ | 135.59 | | | $ | 122.60 | | | $ | 1.000 | |
| Second quarter | $ | 138.12 | | | $ | 120.50 | | | $ | 0.980 | |
| First quarter | $ | 145.80 | | | $ | 126.02 | | | $ | 0.980 | |
| 2017 | | | | 2016 | | | |
| | $ | 3.940 | | | $ | 3.800 | |
Distributions on our 5.0% Series C Cumulative Redeemable Preferred Shares (which were issued September 29, 2017) were declared at the rate of $1.25 per depository share per annum,
and the first payment date was January 16, 2018.
| 2015 | | | | | | | | | | | |
| Fourth quarter | $ | 149.96 | | | $ | 135.60 | | | $ | 0.940 | |
| Third quarter | $ | 139.05 | | | $ | 124.96 | | | $ | 0.940 | |
| Second quarter | $ | 149.20 | | | $ | 127.84 | | | $ | 0.870 | |
| First quarter | $ | 150.27 | | | $ | 135.74 | | | $ | 0.870 | |
| 2016 | | | | 2015 | | | |
| | $ | 3.800 | | | $ | 3.550 | |
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.
Item 6. SELECTED FINANCIAL DATA
47 rewritten, 12 added, 17 removed, 45 unchanged
| [removed: 2016] [added: 2017] | | | | | [removed: 2015] [added: 2016] | | | | | [removed: 2014] [added: 2015] | | | | | [removed: 2013] [added: 2014] | | | | | [removed: 2012] [added: 2013] | | | |
| Rental income | $ | [removed: 786,583] [added: 841,461] | | | | $ | [removed: 727,812] [added: 786,583] | | | | $ | [removed: 666,322] [added: 727,812] | | | | $ | [removed: 620,089] [added: 666,322] | | | | $ | [removed: 580,114] [added: 620,089] | |
| Property operating income(1) | $ | [removed: 547,979] [added: 584,619] | | | | $ | [removed: 510,595] [added: 547,979] | | | | $ | [removed: 474,167] [added: 510,595] | | | | $ | [removed: 446,959] [added: 474,167] | | | | $ | [removed: 426,721] [added: 446,959] | |
| Operating income | $ | [removed: 320,995] [added: 332,288] | | | | $ | [removed: 300,154] [added: 320,995] | | | | $ | [removed: 271,037] [added: 300,154] | | | | $ | [removed: 254,161] [added: 271,037] | | | | $ | [removed: 253,862] [added: 254,161] | |
| Income from continuing operations | $ | [removed: 226,425] [added: 219,948] | | | | $ | [removed: 190,094] [added: 226,425] | | | | $ | [removed: 167,888] [added: 190,094] | | | | $ | [removed: 137,811] [added: 167,888] | | | | $ | [removed: 142,972] [added: 137,811] | |
| Gain on sale of real estate and change in control of interests | [removed: $ | 32,458 | | |] [added: (79,345] | [removed: $] | [removed: 28,330] [added: )] | | [added: (32,458] | | [removed: $] [added: )] | [removed: 4,401] | [added: (28,330] | | [added: )] | [removed: $] | [removed: 28,855] [added: (4,401] | | [added: )] | | [removed: $] [added: (28,855] | [removed: 11,860] | [added: )] |
| Net income | $ | [removed: 258,883] [added: 297,870] | | | | $ | [removed: 218,424] [added: 258,883] | | | | $ | [removed: 172,289] [added: 218,424] | | | | $ | [removed: 167,608] [added: 172,289] | | | | $ | [removed: 156,232] [added: 167,608] | |
| Net income available for common shareholders | $ | [removed: 249,369] [added: 287,456] | | | | $ | [removed: 209,678] [added: 249,369] | | | | $ | [removed: 163,994] [added: 209,678] | | | | $ | [removed: 162,140] [added: 163,994] | | | | $ | [removed: 151,384] [added: 162,140] | |
| Net cash used in investing activities | $ | [removed: (590,221] [added: (836,802] | ) | | | $ | [removed: (353,763] [added: (590,221] | ) | | | $ | [removed: (396,150] [added: (353,763] | ) | | | $ | [removed: (345,198] [added: (396,150] | ) | | | $ | [removed: (273,558] [added: (345,198] | ) |
| Weighted average number of common [removed: shares outstanding:] [added: shares, basic] | [added: 72,117] | | | | | [added: 70,877] | | | | | [added: 68,797] | | | | | [added: 67,322] | | | | | [added: 65,331] | | |
| [removed: Diluted] [added: Weighted average number of common shares, diluted] | [removed: 71,049] [added: 72,233] | | | | | [removed: 68,981] [added: 71,049] | | | | | [removed: 67,492] [added: 68,981] | | | | | [removed: 65,483] [added: 67,492] | | | | | [removed: 64,056] [added: 65,483] | | |
| Gain on sale of real estate and change in control of interests, net | [removed: 0.44] [added: $] | [added: 77,922] | | | | [removed: 0.41] [added: $] | [added: 32,458] | | | | [removed: 0.07] [added: $] | [added: 28,330] | | | | [removed: 0.08] [added: $] | [added: 4,401] | | | | [removed: 0.19] [added: $] | [added: 28,855] | |
| Dividends declared per common share | $ | [removed: 3.84] [added: 3.96] | | | | $ | [removed: 3.62] [added: 3.84] | | | | $ | [removed: 3.30] [added: 3.62] | | | | $ | [removed: 3.02] [added: 3.30] | | | | $ | [removed: 2.84] [added: 3.02] | |
| Funds from operations available to common shareholders(2) | $ | [removed: 406,359] [added: 419,977] | | | | $ | [removed: 352,857] [added: 406,359] | | | | $ | [removed: 327,597] [added: 352,857] | | | | $ | [removed: 289,938] [added: 327,597] | | | | $ | [removed: 277,237] [added: 289,938] | |
| EBITDA(3) | $ | [removed: 547,088] [added: 627,656] | | | | $ | [removed: 504,696] [added: 547,088] | | | | $ | [removed: 447,495] [added: 504,696] | | | | $ | [removed: 446,555] [added: 447,495] | | | | $ | [removed: 410,918] [added: 446,555] | |
| Adjusted EBITDA(3) | $ | [removed: 514,630] [added: 548,311] | | | | $ | [removed: 476,366] [added: 514,630] | | | | $ | [removed: 443,094] [added: 476,366] | | | | $ | [removed: 417,700] [added: 443,094] | | | | $ | [removed: 399,058] [added: 417,700] | |
| Ratio of EBITDA to combined fixed charges and preferred share dividends(3)(4) | [removed: 4.8] [added: 4.4] | | | x | | [removed: 3.9] [added: 4.8] | | | x | | [removed: 3.5] [added: 3.9] | | | x | | [removed: 3.3] [added: 3.5] | | | x | | 3.3 | | |
| Ratio of Adjusted EBITDA to combined fixed charges and preferred share dividends(3)(4) | [removed: 4.5] [added: 3.9] | | | x | | [removed: 3.6] [added: 4.5] | | | x | | [removed: 3.5] [added: 3.6] | | | x | | [removed: 3.1] [added: 3.5] | | | x | | [removed: 3.2] [added: 3.1] | | |
| [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | |
| Real estate, at cost | $ | [removed: 6,759,073] [added: 7,635,061] | | | $ | [removed: 6,064,406] [added: 6,759,073] | | | $ | [removed: 5,608,998] [added: 6,064,406] | | | $ | [removed: 5,149,463] [added: 5,608,998] | | | $ | [removed: 4,779,674] [added: 5,149,463] | |
| Total assets | $ | [removed: 5,423,279] [added: 6,275,755] | | | $ | [removed: 4,896,559] [added: 5,423,279] | | | $ | [removed: 4,534,237] [added: 4,896,559] | | | $ | [removed: 4,208,727] [added: 4,534,237] | | | $ | [removed: 3,890,315] [added: 4,208,727] | |
| [removed: Shareholders’] [added: Total shareholders’] equity | $ | [removed: 2,075,835] [added: 2,391,514] | | | $ | [removed: 1,781,931] [added: 2,075,835] | | | $ | [removed: 1,692,556] [added: 1,781,931] | | | $ | [removed: 1,471,297] [added: 1,692,556] | | | $ | [removed: 1,310,593] [added: 1,471,297] | |
| Number of common shares outstanding | [removed: 71,996] [added: 73,091] | | | | [removed: 69,493] [added: 71,996] | | | | [removed: 68,606] [added: 69,493] | | | | [removed: 66,701] [added: 68,606] | | | | [removed: 64,815] [added: 66,701] | | |
| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | [added: |]
| Operating income | $ | [removed: 320,995] [added: 332,288] | | | $ | [removed: 300,154] [added: 320,995] | | | $ | [removed: 271,037] [added: 300,154] | | | $ | [removed: 254,161] [added: 271,037] | | | $ | [removed: 253,862] [added: 254,161] | |
| General and administrative | [removed: 33,399] [added: 36,281] | | | | [removed: 35,645] [added: 33,399] | | | | [removed: 32,316] [added: 35,645] | | | | [removed: 31,970] [added: 32,316] | | | | [removed: 31,158] [added: 31,970] | | |
| Depreciation and amortization | [removed: 193,585] [added: 216,050] | | | | [removed: 174,796] [added: 193,585] | | | | [removed: 170,814] [added: 174,796] | | | | [removed: 160,828] [added: 170,814] | | | | [removed: 141,701] [added: 160,828] | | |
| Property operating income | $ | [removed: 547,979] [added: 584,619] | | | $ | [removed: 510,595] [added: 547,979] | | | $ | [removed: 474,167] [added: 510,595] | | | $ | [removed: 446,959] [added: 474,167] | | | $ | [removed: 426,721] [added: 446,959] | |
| Net income | $ | [removed: 258,883] [added: 297,870] | | | $ | [removed: 218,424] [added: 258,883] | | | $ | [removed: 172,289] [added: 218,424] | | | [added: |] $ | [removed: 167,608] [added: 172,289] | | | $ | [removed: 156,232] [added: 167,608] | |
| Net income attributable to noncontrolling interests | [removed: (8,973] [added: (7,956] | | ) | | [removed: (8,205] [added: (8,973] | | ) | | [removed: (7,754] [added: (8,205] | | ) | | [removed: (4,927] | [added: (7,754] | [added: |] ) | | [removed: (4,307] [added: (4,927] | | ) |
| Gain on sale of real estate and change in control of interests, net | [removed: (31,133] [added: (77,632] | | ) | | [removed: (28,330] [added: (31,133] | | ) | | [removed: (4,401] [added: (28,330] | | ) | | [removed: (28,855] | [added: (4,401] | [added: |] ) | | [removed: (11,860] [added: (28,855] | | ) |
| Depreciation and amortization of real estate assets | [removed: 169,198] [added: 188,719] | | | | [removed: 154,232] [added: 169,198] | | | | [removed: 154,060] [added: 154,232] | | | | [removed: 146,377] | [added: 154,060] | | | [removed: 127,124] | [added: 146,377] | | [added: |]
| Amortization of initial direct costs of leases | [removed: 16,875] [added: 19,124] | | | | [removed: 15,026] [added: 16,875] | | | | [removed: 12,391] [added: 15,026] | | | | [removed: 10,694] | [added: 12,391] | | | [removed: 10,935] | [added: 10,694] | | [added: |]
| Funds from operations | [removed: 404,850] [added: 420,125] | | | | [removed: 351,147] [added: 404,850] | | | | [removed: 326,585] [added: 351,147] | | | | [removed: 290,897] | [added: 326,585] | | | [removed: 278,124] | [added: 290,897] | | [added: |]
| Dividends on preferred shares | [removed: (541] [added: (1,917] | | ) | | (541 | | ) | | (541 | | ) | | [added: |] (541 | | ) | | (541 | | ) |
| Income attributable to operating partnership units | [removed: 3,145] [added: 3,143] | | | | [removed: 3,398] [added: 3,145] | | | | [removed: 3,027] [added: 3,398] | | | [added: 3,398] | [removed: 888] | [added: 3,027] | | | [removed: 943] | [added: 888] | | [added: |]
| Income attributable to unvested shares | [removed: (1,095] [added: (1,374] | | ) | | [removed: (1,147] [added: (1,095] | | ) | | [removed: (1,474] [added: (1,147] | | ) | | [removed: (1,306] | [added: (1,474] | [added: |] ) | | [removed: (1,289] [added: (1,306] | | ) |
| Funds from operations available for common shareholders | $ | [removed: 406,359] [added: 419,977] | | | $ | [removed: 352,857] [added: 406,359] | | | $ | [removed: 327,597] [added: 352,857] | | | [added: |] $ | [removed: 289,938] [added: 327,597] | | | $ | [removed: 277,237] [added: 289,938] | |
(3) [removed: The SEC has stated that] EBITDA is a non-GAAP measure as calculated in the table below.
| Net cash provided by operating activities | $ | 459,177 | | | | $ | 423,705 | | | | $ | 369,046 | | | | $ | 349,465 | | | | $ | 316,340 | |
| Net cash provided by (used in) financing activities | $ | 369,445 | | | | $ | 168,838 | | | | $ | (42,188 | ) | | | $ | 5,709 | | | | $ | 80,797 | |
| Net income available to common shareholders | $ | 3.97 | | | | $ | 3.51 | | | | $ | 3.04 | | | | $ | 2.42 | | | | $ | 2.47 | |
| Net income available to common shareholders | $ | 3.97 | | | | $ | 3.50 | | | | $ | 3.03 | | | | $ | 2.41 | | | | $ | 2.46 | |
| Total debt | $ | 3,284,766 | | | $ | 2,798,452 | | | $ | 2,627,216 | | | $ | 2,397,043 | | | $ | 2,311,294 | |
| | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | 2017 | | | | 2016 | | | | 2015 | | | | | 2014 | | | | 2013 | | |
| | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | |
| Net income | $ | 297,870 | | | $ | 258,883 | | | $ | 218,424 | | | $ | 172,289 | | | $ | 167,608 | |
| Provision for income tax | 1,813 | | | | — | | | | — | | | | — | | | | — | | |
| Net income attributable to the Trust | $ | 249,910 | | | | $ | 210,219 | | | | $ | 164,535 | | | | $ | 162,681 | | | | $ | 151,925 | |
| Net cash provided by operating activities | $ | 419,254 | | | | $ | 359,835 | | | | $ | 346,130 | | | | $ | 314,498 | | | | $ | 296,633 | |
| Net cash provided by (used in) financing activities | $ | 173,289 | | | | $ | (32,977 | ) | | | $ | 9,044 | | | | $ | 82,639 | | | | $ | (53,893 | ) |
| Dividends declared on common shares | 274,402 | | | | | 250,388 | | | | | 224,190 | | | | | $ | 198,965 | | | | $ | 182,813 | |
| Basic | 70,877 | | | | | 68,797 | | | | | 67,322 | | | | | 65,331 | | | | | 63,881 | | |
| Continuing operations | $ | 3.07 | | | | $ | 2.63 | | | | $ | 2.35 | | | | $ | 2.01 | | | | $ | 2.15 | |
| Discontinued operations | — | | | | | — | | | | | — | | | | | 0.38 | | | | | 0.02 | | |
| Total | $ | 3.51 | | | | $ | 3.04 | | | | $ | 2.42 | | | | $ | 2.47 | | | | $ | 2.36 | |
| Continuing operations | $ | 3.06 | | | | $ | 2.62 | | | | $ | 2.34 | | | | $ | 2.00 | | | | $ | 2.14 | |
| Total | $ | 3.50 | | | | $ | 3.03 | | | | $ | 2.41 | | | | $ | 2.46 | | | | $ | 2.35 | |
| | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Mortgages payable and capital lease obligations | $ | 542,707 | | | $ | 552,704 | | | $ | 633,955 | | | $ | 659,329 | | | $ | 831,022 | |
| Notes payable | $ | 279,151 | | | $ | 341,961 | | | $ | 288,339 | | | $ | 298,736 | | | $ | 297,125 | |
| Senior notes and debentures | $ | 1,976,594 | | | $ | 1,732,551 | | | $ | 1,474,749 | | | $ | 1,353,229 | | | $ | 1,072,204 | |
| Preferred shares | $ | 9,997 | | | $ | 9,997 | | | $ | 9,997 | | | $ | 9,997 | | | $ | 9,997 | |
| Gain on sale of real estate and change in control of interests | (32,458 | | ) | | (28,330 | | ) | | (4,401 | | ) | | (28,855 | | ) | | (11,860 | | ) |
An excerpt. Shown here: 40 of 47 rewritten, all 12 added and all 17 removed. The counts are complete. For every sentence, read Item 6. SELECTED FINANCIAL DATA in the FY2017 filing and the FY2016 filing.
Item 9A. CONTROLS AND PROCEDURES
11 rewritten, 5 added, 41 removed, 9 unchanged
[added: Management's Evaluation of] Disclosure Controls and Procedures
[removed: We maintain] [added: The Trust maintains] disclosure controls and procedures [added: (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))] that are designed to provide reasonable assurance that information required to be disclosed in [removed: our] [added: the reports that we file or submit under the] Exchange Act [removed: reports, such as this report on Form 10-K,] is recorded, processed, summarized and reported within the time periods specified in the [removed: SEC’s] [added: SEC's] rules and forms, and that such information is accumulated and communicated to [removed: our] [added: the Trust’s] management, including [removed: our President and] [added: its] Chief Executive Officer and [removed: Executive Vice President-Chief] [added: Chief] Financial Officer, as [removed: appropriate,] [added: appropriate] to allow timely decisions regarding required [removed: disclosure.][added: disclosures.]
[removed: Establishing and maintaining internal] [added: Internal] control over financial reporting is [added: defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as] a process designed by, or under the supervision of, [removed: our President and Chief Executive Officer] [added: the Trust’s principal executive] and [removed: Executive Vice President-Chief Financial Officer, as appropriate,] [added: principal financial officers] and effected by our [removed: employees, including management and our] Board of Trustees, [added: management and other personnel,] 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 [removed: America.][added: America (GAAP) and includes those policies and procedures that:]
| • | pertain to the maintenance of records that [added: in reasonable detail] accurately and fairly reflect [removed: the] [added: our] transactions and [removed: dispositions] [added: disposition] of our [removed: assets in reasonable detail;] [added: assets;] |
| • | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are [added: being] made only in accordance with [removed: the] authorization [removed: procedures we have established;] [added: of management] and [added: our Trustees; and] |
[removed: In designing] [added: Because of inherent limitations, disclosure controls] and [removed: evaluating our control system, management recognized that any control system,] [added: procedures,] no matter how well designed and operated, can provide only reasonable, [added: and] not absolute, assurance [removed: of achieving] [added: that] the [removed: desired control objectives.][added: objectives of disclosure controls and procedures are met.]
[removed: Over time,] [added: Projections of any evaluation of effectiveness to future periods are subject to the risk that] controls may become inadequate because of changes in [removed: conditions that cannot be anticipated at the present time,] [added: conditions,] or [added: that] the degree of compliance with the policies or procedures may deteriorate.
In [removed: conducting] [added: making] this [removed: evaluation, our management] [added: assessment, we] used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in [removed: the 2013] Internal [removed: Control—Integrated Framework.][added: Control-Integrated Framework (2013).]
Our [added: management, with the participation of the Trust’s] Chief Executive Officer and Chief Financial [removed: Officer have conducted an evaluation of] [added: Officer, evaluated] the effectiveness of the design and operation of [removed: our] [added: the Trust’s] disclosure controls and procedures as of [removed: the end of the period covered by this report.][added: December 31, 2017.]
[removed: Our management] [added: Grant Thornton LLP, the independent registered public accounting firm that audited the Trust's consolidated financial statements included in this Annual Report on Form 10-K,] has issued [removed: a] [added: an attestation] report on [removed: its assessment of] the [removed: Trust’s] [added: Trust's] internal control over financial reporting, which appears on page [removed: F-2] [added: [F-2](#s1902CD94F50556AF9B97ED4342EADEC3)] of this Annual Report on Form 10-K.
There was no change in our internal control over financial reporting during our fourth fiscal quarter of [removed: 2016] [added: 2017] that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Based on that evaluation, the Trust’s Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2017, the Trust’s disclosure controls and procedures were effective at a reasonable assurance level.
The Trust’s management is responsible for establishing and maintaining adequate internal control over financial reporting.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
We assessed the effectiveness of the Trust’s internal control over financial reporting as of December 31, 2017.
Based on that assessment and criteria, management concluded that the Trust's internal control over financial reporting was effective as of December 31, 2017.
Quarterly Assessment
We carried out an assessment as of December 31, 2016 of the effectiveness of the design and operation of our disclosure controls and procedures and our internal control over financial reporting.
This assessment was done under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer.
Rules adopted by the 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.
Principal Executive Officer and Principal Financial Officer Certifications
Included as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K are forms of “Certification” of our principal executive officer and our principal financial officer.
The forms of Certification are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
This section of this Annual Report on Form 10-K that you are currently reading is the information concerning the assessment referred to in the Section 302 certifications and this information should be read in conjunction with the Section 302 certifications for a more complete understanding of the topics presented.
These controls and procedures are based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e) promulgated under the Exchange Act.
Rules adopted by the SEC require that we present the conclusions of the Chief Executive Officer and Chief Financial Officer about the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report.
This process includes policies and procedures that:
Limitations on the Effectiveness of Controls
Management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud.
Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, that may affect our operation have been or will be detected.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Scope of the Evaluations
The evaluation by our Chief Executive Officer and our Chief Financial Officer of our disclosure controls and procedures and our internal control over financial reporting included a review of our procedures and procedures performed by internal audit, as well as discussions with our Disclosure Committee and others in our organization, as appropriate.
In the course of the evaluation, we sought to identify data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, were being undertaken.
The evaluation of our disclosure controls and procedures and our internal control over financial
reporting is done on a quarterly basis, so that the conclusions concerning the effectiveness of such controls can be reported in our Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.
Our internal control over financial reporting is also assessed on an ongoing basis by personnel in our accounting department and by our independent auditors in connection with their audit and review activities.
The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures and our internal control over financial reporting and to make modifications as necessary.
Our intent in this regard is that the disclosure controls and procedures and internal control over financial reporting will be maintained and updated (including with improvements and corrections) as conditions warrant.
Among other matters, we sought in our evaluation to determine whether there were any “significant deficiencies” or “material weaknesses” in our internal control over financial reporting, or whether we had identified any acts of fraud involving personnel who have a significant role in our internal control over financial reporting.
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.
In the Public Company Accounting Oversight Board’s Auditing Standard No. 5, a “deficiency” in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.
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 responsible for oversight of the company’s financial reporting.
A “material weakness” is defined in Auditing Standard No. 5 as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We also sought to deal with other control matters in the evaluation, and in any case in which a problem was identified, we considered what revision, improvement and/or correction was necessary to be made in accordance with our on-going procedures.
Periodic Evaluation and Conclusion of Disclosure Controls and Procedures
Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that such controls and procedures were effective as of the end of the period covered by this report and provides reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
Periodic Evaluation and Conclusion of Internal Control over Financial Reporting
Our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of the design and operation of our internal control over financial reporting as of the end of our most recent fiscal year.
Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that such internal control over financial reporting was effective as of the end of our most recent fiscal year and provides 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.
Statement of Our Management
Statement of Our Independent Registered Public Accounting Firm
An excerpt. Shown here: all 11 rewritten, all 5 added and 40 of 41 removed. The counts are complete. For every sentence, read Item 9A. CONTROLS AND PROCEDURES in the FY2017 filing and the FY2016 filing.
Item 9B. OTHER INFORMATION
1 rewritten, 0 added, 0 removed, 2 unchanged
Certain information required in Part III is omitted from this Report but is incorporated herein by reference from our Proxy Statement for the [removed: 2017] [added: 2018] Annual Meeting of Shareholders (as amended or supplemented, the “Proxy Statement”).
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
3 rewritten, 117 added, 3 removed, 9 unchanged
| Our consolidated financial statements and notes thereto, together with [removed: 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](#sF39E1492114F542FA236C96F0D80378E).] [added: [F-1](#sE140073089CE5AB8969ACA7F36A0881A).] |
| Our financial statement schedules are included in a separate section of this Annual Report on Form 10-K commencing on page [removed: [F-31](#s2C33A490C9EA523599E2D7A6411578E8).] [added: [F-31](#s7ECD9E2C6C415C4B9FF10E0407CFBC51).] |
[removed: | (b) See Exhibit Index |][added: EXHIBIT INDEX]
| (b) The following documents are filed as exhibits are filed as part of, or incorporated by reference info, this report: |
| | | |
| --- | --- | --- |
| | | |
| Exhibit No. | | Description |
| | | |
| 3.1 | | Declaration of Trust of Federal Realty Investment Trust dated May 5, 1999 as amended by the Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust dated May 6, 2004, as corrected by the Certificate of Correction of Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust dated June 17, 2004, as amended by the Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust dated May 6, 2009 (previously filed as [Exhibit 3.1](http://www.sec.gov/Archives/edgar/data/34903/000119312509131764/dex31.htm) to the Trust’s Registration Statement on Form S-3 (File No. 333-160009) and incorporated herein by reference) |
| | | |
| 3.2 | | Amended and Restated Bylaws of Federal Realty Investment Trust dated February 12, 2003, as amended October 29, 2003, May 5, 2004, February 17, 2006, May 6, 2009, and November 2, 2016 (previously files a [Exhibit 3.2](http://www.sec.gov/Archives/edgar/data/34903/000003490317000008/frt-12312016xex32.htm) to the Trust's Annual Report on Form 10-K for the year ended December 31, 2016 (File No. 1-07533) and incorporated herein by reference) |
| | | |
| 4.1 | | Specimen Common Share certificate (previously filed as Exhibit 4(i) to the Trust’s Annual Report on [Form 10-K](http://www.sec.gov/Archives/edgar/data/34903/000095010900001048/0000950109-00-001048.txt) for the year ended December 31, 1999 (File No. 1-07533) and incorporated herein by reference) |
| | | |
| 4.2 | | Articles Supplementary relating to the 5.417% Series 1 Cumulative Convertible Preferred Shares of Beneficial Interest (previously filed as [Exhibit 4.1](http://www.sec.gov/Archives/edgar/data/34903/000119312507053506/dex41.htm) to the Trust’s Current Report on Form 8-K filed on March 13, 2007, (File No. 1-07533) and incorporated herein by reference) |
| | | |
| 4.3 | | Indenture dated December 1, 1993 related to the Trust’s 7.48% Debentures due August 15, 2026; and 6.82% Medium Term Notes due August 1, 2027; (previously filed as Exhibit 4(a) to the Trust’s Registration Statement on Form S-3 (File No. 33-51029), and amended on Form S-3 (File No. 33-63687), filed on December 13, 1993 and incorporated herein by reference) |
| | | |
| 4.4 | | Indenture dated September 1, 1998 related to the Trust’s 5.90% Notes due 2020; 3.00% Notes due 2022; 2.75% Notes due 2023; 3.95% Notes due 2024; 4.50% Notes due 2044; 2.55% Notes due 2021; 3.625% Notes due 2046; 3.25% Notes due 2027 (previously filed as [Exhibit 4(a)](http://www.sec.gov/Archives/edgar/data/34903/0000950109-98-004542.txt) to the Trust’s Registration Statement on Form S-3 (File No. 333-63619) filed on September 17, 1998 and incorporated herein by reference) |
| | | |
| 4.5 | | Articles Supplementary relating to the 5.000% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest (previously filed as [Exhibit 3.2](http://www.sec.gov/Archives/edgar/data/34903/000119312517299279/d453589dex32.htm) to the Trust's Registration Statement on Form 8-A (File No. 1-07533), filed on September 29, 2017 and incorporated herein by reference) |
| | | |
| 4.6 | | Deposit Agreement, dated as of September 29, 2017, by and among Federal Realty Investment Trust, American Stock Transfer and Trust Company, LLC, as Depository, and all holders from time to time of Receipt (previously filed as [Exhibit 4.1](http://www.sec.gov/Archives/edgar/data/34903/000119312517299279/d453589dex41.htm) to the Trust's Registration Statement on Form 8-A (File No. 1-07533), filed on September 29, 2017 and incorporated herein by reference) |
| | | |
| 4.7 | | Specimen certificate relating to the 5.000% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest (previously filed as [Exhibit 4.3](http://www.sec.gov/Archives/edgar/data/34903/000119312517299279/d453589dex43.htm) to the Trust's Registration Statement on Form 8-A (File No. 1-07533), filed on September 29, 2017 and incorporated herein by reference) |
| | | |
| 10.1 | | * Severance Agreement between the Trust and Donald C. Wood dated February 22, 1999 (previously filed as a portion of [Exhibit 10](http://www.sec.gov/Archives/edgar/data/34903/0000928385-99-001432.txt) to the Trust's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 (File No. 1-07533) (the "1999 1Q Form 10-Q") and incorporated herein by reference) |
| | | |
| 10.2 | | * Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 22, 1999 (previously filed as a portion of [Exhibit 10](http://www.sec.gov/Archives/edgar/data/34903/000119312517299279/d453589dex43.htm) to the 1999 1Q Form 10-Q and incorporated herein by reference) |
| | | |
| 10.3 | | * Amendment to Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 16, 2005 (previously filed as [Exhibit 10.12](http://www.sec.gov/Archives/edgar/data/34903/000119312505043736/dex1012.htm) to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 1-07533) (the “2004 Form 10-K”) and incorporated herein by reference) |
| | | |
| 10.4 | | 2001 Long-Term Incentive Plan (previously filed as [Exhibit 99.1](http://www.sec.gov/Archives/edgar/data/34903/000092838501500706/dex991.txt) to the Trust’s S-8 Registration Number 333-60364 filed on May 7, 2001 and incorporated herein by reference) |
| | | |
| 10.5 | | * Health Coverage Continuation Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 16, 2005 (previously filed as [Exhibit 10.26](http://www.sec.gov/Archives/edgar/data/34903/000119312505043736/dex1026.htm) to the 2004 Form 10-K and incorporated herein by reference) |
| | | |
| 10.6 | | * Severance Agreement between the Trust and Dawn M. Becker dated April 19, 2000 (previously filed as [Exhibit 10.26](http://www.sec.gov/Archives/edgar/data/34903/000119312505151516/dex1026.htm) to the Trust’s 2005 2Q Form 10-Q and incorporated herein by reference) |
| | | |
| 10.7 | | * Amendment to Severance Agreement between the Trust and Dawn M. Becker dated February 16, 2005 (previously filed as [Exhibit 10.27](http://www.sec.gov/Archives/edgar/data/34903/000119312505043736/dex1027.htm) to the 2004 Form 10-K and incorporated herein by reference) |
| | | |
| | | |
| --- | --- | --- |
| |
| A list of exhibits to this Annual Report on Form 10-K is set forth on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference. |
| (c) Not Applicable |
An excerpt. Shown here: all 3 rewritten, 40 of 117 added and all 3 removed. The counts are complete. For every sentence, read Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES in the FY2017 filing and the FY2016 filing.
Item 16. FORM 10-K SUMMARY
9 rewritten, 0 added, 3 removed, 35 unchanged
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 13, [removed: 2017.][added: 2018.]
| /S/ DONALD C. WOOD | | President, Chief Executive Officer and | | February 13, [removed: 2017] [added: 2018] |
| /S/ DANIEL GUGLIELMONE | | Executive Vice President-Chief Financial | | February 13, [removed: 2017] [added: 2018] |
| /S/ JOSEPH S. VASSALLUZZO | | Non-Executive Chairman | | February 13, [removed: 2017] [added: 2018] |
| /S/ JON E. BORTZ | | Trustee | | February 13, [removed: 2017] [added: 2018] |
| /S/ DAVID W. FAEDER | | Trustee | | February 13, [removed: 2017] [added: 2018] |
| /S/ ELIZABETH I. HOLLAND | | Trustee | | February 13, [removed: 2017] [added: 2018] |
| /S/ GAIL P. STEINEL | | Trustee | | February 13, [removed: 2017] [added: 2018] |
| /S/ WARREN M. THOMPSON | | Trustee | | February 13, [removed: 2017] [added: 2018] |
| | | | | |
| /S/ KRISTIN GAMBLE | | Trustee | | February 13, 2017 |
| Kristin Gamble | | | | |
Item 8. and Item 15(a)(1) and (2)
455 rewritten, 288 added, 308 removed, 624 unchanged
[removed: | Management Assessment Report] [added: Opinion] on [removed: Internal Control] [added: internal control] over [removed: Financial Reporting | [F-2](#s3353046710D65E3DA05ADD76902583B5) |][added: financial reporting]
| Report of Independent Registered Public Accounting Firm | [removed: [F-3](#s0B36DFC27C465C4EB2128114433392BA)] [added: [F-2](#s1902CD94F50556AF9B97ED4342EADEC3)] |
| Report of Independent Registered Public Accounting Firm | [removed: [F-4](#s6C200D724CF353CC9826064848EC2DF9)] [added: [F-3](#s654D1071737D5B89B4158FB09D243E5E)] |
| Consolidated Balance Sheets | [removed: [F-5](#sE0DA67E8A1895E898FB37139BD3C9EF9)] [added: [F-4](#s6ADA4671E7685A1D89608AB3ED38B58D)] |
| Consolidated Statements of Comprehensive Income | [removed: [F-6](#s47E9B8D2DB71509CA9134607FAC191F5)] [added: [F-5](#sBE0302355DE356C0AC7B632A4CCD2337)] |
| Consolidated Statement of Shareholders’ Equity | [removed: [F-7](#s6DFBA0E9D2E550E5B9142DD53C28AB17)] [added: [F-6](#s81E3D673580252468E4920767E1A01BF)] |
| Consolidated Statements of Cash Flows | [removed: [F-8](#sD387181734DC5D5483B676CF26DD9AE0)] [added: [F-7](#sA3682009FDC950FD8F2B0F8F1DD99BCC)] |
| Notes to Consolidated Financial Statements | [removed: [F-9](#s306ECD739A79562683E8D1CC4DEC9747)] [added: [F-8](#sBC6DD23F8774512096C26518F3B5AC0F)] |
| Schedule III—Summary of Real Estate and Accumulated Depreciation | [removed: [F-31](#s2C33A490C9EA523599E2D7A6411578E8)] [added: [F-31](#s7ECD9E2C6C415C4B9FF10E0407CFBC51)] |
| Schedule IV—Mortgage Loans on Real Estate | [removed: [F-39](#s2388C9FF5E295A649173344333CDBF13)] [added: [F-39](#s5F96786CE2DB5AAAAF9271BC6FEE7ED7)] |
[removed: Management Assessment Report on Internal Control] [added: Definition and limitations of internal control] over [removed: Financial Reporting][added: financial reporting]
[removed: Management conducted an] [added: The Trust’s management is responsible for maintaining effective internal control over financial reporting and for its] assessment of the effectiveness of [removed: the Trust’s] internal control over financial [removed: reporting as] [added: reporting, included in the accompanying Management's Evaluation] of [removed: December 31, 2016.][added: Disclosure Controls and Procedures.]
[removed: Trustees and Shareholders of] Federal Realty Investment Trust
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: 2016,] [added: 2017,] based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: (COSO).][added: ("COSO").]
We conducted our audit in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]
In our opinion, [removed: Federal Realty Investment] [added: the] Trust [removed: and Subsidiaries] maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria established in the 2013 Internal [removed: Control—Integrated] [added: Control-Integrated] Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United [removed: States),] [added: States) (“PCAOB”),] the consolidated financial statements of the Trust as of and for the year ended December 31, [removed: 2016] [added: 2017,] and our report dated February 13, [removed: 2017] [added: 2018] 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: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the related consolidated statements of comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2016.][added: 2017, and the related notes and schedules (collectively referred to as the “financial statements”).]
These financial statements [removed: and financial statement schedules] are the responsibility of the Trust’s management.
Our responsibility is to express an opinion on [removed: these] [added: the Trust’s] financial statements [removed: and financial statement schedules] based on our audits.
We conducted our audits in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material [removed: misstatement.][added: misstatement, whether due to error or fraud.]
[removed: An audit includes] [added: Such procedures included] examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
[removed: An audit] [added: Our audits] also [removed: includes assessing] [added: included evaluating] the accounting principles used and significant estimates made by management, as well as evaluating the overall [added: presentation of the] financial [removed: statement presentation.][added: statements.]
In our opinion, the [removed: consolidated] financial statements [removed: referred to above] present fairly, in all material respects, the financial position of [removed: Federal Realty Investment] [added: the] Trust [removed: and Subsidiaries] as of December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the results of [removed: their] [added: its] operations and [removed: their] [added: its] cash flows for each of the three years in the period ended December 31, [removed: 2016,] [added: 2017,] 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 [removed: States),] [added: States) (“PCAOB”),] the Trust’s internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria established in the 2013 Internal [removed: Control—Integrated] [added: Control-Integrated] Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: (COSO)] [added: (“COSO”),] and our report dated February 13, [removed: 2017] [added: 2018] expressed an unqualified [removed: opinion.][added: opinion on those financial statements.]
| | [added: 2017 | | | |] 2016 | | | | 2015 | | |
| Operating (including [removed: $1,226,918] [added: $1,639,486] and [removed: $1,192,336] [added: $1,211,605] of consolidated variable interest entities, respectively) | $ | [removed: 6,125,957] [added: 6,950,188] | | | $ | [removed: 5,630,771] [added: 6,125,957] | |
| Assets held for sale | [removed: 33,856] [added: —] | | | | [removed: —] [added: 33,856] | | |
| Less accumulated depreciation and amortization (including [removed: $209,239] [added: $247,410] and [removed: $176,057] [added: $209,239] of consolidated variable interest entities, respectively) | [removed: (1,729,234] [added: (1,876,544] | | ) | | [removed: (1,574,041] [added: (1,729,234] | | ) |
| Net real estate | [removed: 5,029,839] [added: 5,758,517] | | | | [removed: 4,490,365] [added: 5,029,839] | | |
| Cash and cash equivalents | [removed: 23,368] [added: 15,188] | | | | [removed: 21,046] [added: 23,368] | | |
| Accounts and notes [removed: receivable, net] [added: receivable] | [removed: 116,749] [added: 209,877] | | | | [removed: 110,402] [added: 116,749] | | |
| Mortgage notes receivable, net | [removed: 29,904] [added: 30,429] | | | | [removed: 41,618] [added: 29,904] | | |
| Investment in real estate partnerships | [removed: 14,864] [added: 23,941] | | | | [removed: 41,546] [added: 14,864] | | |
| Prepaid expenses and other assets | [removed: 208,555] [added: 237,803] | | | | [removed: 191,582] [added: 208,555] | | |
| TOTAL ASSETS | $ | [removed: 5,423,279] [added: 6,275,755] | | | $ | [removed: 4,896,559] [added: 5,423,279] | |
| Mortgages payable (including [removed: $439,120] [added: $460,372] and [removed: $448,315] [added: $439,120] of consolidated variable interest entities, respectively) | $ | [removed: 471,117] [added: 491,505] | | | $ | [removed: 481,084] [added: 471,117] | |
| Capital lease obligations | [removed: 71,590] [added: 71,556] | | | | [removed: 71,620] [added: 71,590] | | |
| Notes payable | [removed: 279,151] [added: 320,265] | | | | [removed: 341,961] [added: 279,151] | | |
Trustees and Shareholders
Basis for opinion
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
New York, New York
February 13, 2018
Trustees and Shareholders
Opinion on the financial statements
Basis for opinion
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
We have served as the Trust’s auditor since 2002.
New York, New York
February 13, 2018
| | 2017 | | | | 2016 | | |
| Construction-in-progress (including $43,393 and $15,313 of consolidated variable interest entities, respectively) | 684,873 | | | | 599,260 | | |
| | 7,635,061 | | | | 6,759,073 | | |
| Preferred shares, authorized 15,000,000 shares, $.01 par: | | | | | | | |
| 5.0% Series C Cumulative Redeemable Preferred Shares, (stated at liquidation preference $25,000 per share), 6,000 and 0 shares issued and outstanding, respectively | 150,000 | | | | — | | |
| Net income available for common shareholders | $ | 3.97 | | | $ | 3.51 | | | $ | 3.04 | |
| Net income available for common shareholders | $ | 3.97 | | | $ | 3.50 | | | $ | 3.03 | |
| January 1, 2017 adoption of new accounting standard - See Note 2 | | | | | | | | | | | | | | | 83 | | | | (83 | | ) | | | | | | | | | | — | | |
| Net income, excluding $3,874 attributable to redeemable noncontrolling interests | — | | | — | | | | — | | | — | | | | — | | | | 289,914 | | | | — | | | | 4,082 | | | | 293,996 | | |
| Common shares issued, net | — | | | — | | | | 826,592 | | | 8 | | | | 108,240 | | | | — | | | | — | | | | — | | | | 108,248 | | |
| Preferred shares issued, net | 6,000 | | | 150,000 | | | | — | | | — | | | | (5,035 | | ) | | — | | | | — | | | | — | | | | 144,965 | | |
| Exercise of stock options | — | | | — | | | | 152,634 | | | 2 | | | | 9,977 | | | | — | | | | — | | | | — | | | | 9,979 | | |
| Conversion and redemption of OP units | — | | | — | | | | 20,030 | | | — | | | | 2,569 | | | | — | | | | — | | | | (2,569 | | ) | | — | | |
| Purchase of noncontrolling interests | — | | | — | | | | — | | | — | | | | 42 | | | | — | | | | — | | | | (5,578 | | ) | | (5,536 | | ) |
| BALANCE AT DECEMBER 31, 2017 | 405,896 | | | $ | 159,997 | | | 73,090,877 | | | $ | 733 | | | $ | 2,855,321 | | | $ | (749,367 | ) | | $ | 22 | | | $ | 124,808 | | | $ | 2,391,514 | |
| Net income | $ | 297,870 | | | $ | 258,883 | | | $ | 218,424 | |
| Depreciation and amortization | 216,050 | | | | 193,585 | | | | 174,796 | | |
| Other, net | (2,674 | | ) | | 474 | | | | (29 | | ) |
| Net cash provided by operating activities | 459,177 | | | | 423,705 | | | | 369,046 | | |
| Issuance of preferred shares, net of costs | 144,991 | | | | — | | | | — | | |
| Shares withheld for employee taxes | (4,229 | | ) | | (4,451 | | ) | | (9,211 | | ) |
| Contributions from noncontrolling interests | 13,449 | | | | 662 | | | | — | | |
the nonrecognition of a portion of straight-line rental income until the collection of such income is reasonably assured.
We are currently under construction on 221 condominium units at our Assembly Row and Pike & Rose properties.
Gains or losses on the sale of these condominium units are recognized in accordance with the provisions of ASC Topic 360-20, “Property, Plant and Equipment – Real Estate Sales.” We account for contracted condominium sales under the percentage-of completion method, based on an evaluation of the criteria specified in ASC Topic 360-20 including: the legal commitment of the purchaser in the real estate contract, whether the construction of the project is beyond a preliminary phase, whether sufficient units have been contracted to ensure the project will not revert to a rental project, the ability to reasonably estimate the aggregate project sale proceeds and aggregate project costs, and the determination that the buyer has made an adequate initial and continuing cash investment under the contract.
When the percentage-of-completion criteria have not been met, no profit is recognized.
See "Recent Accounting Pronouncements," for discussion of change in timing of revenue recognition with the adoption of ASU 2014-09 on January 1, 2018.
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The management of Federal Realty 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 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.
This process includes policies and procedures that:
| • | pertain to the maintenance of records that accurately and fairly reflect the transactions and dispositions of our assets in reasonable detail; |
| • | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are made only in accordance with the authorization procedures we have established; and |
| • | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of any of our assets in circumstances that could have a material adverse effect on our financial statements. |
Management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our internal control over financial reporting will prevent all errors and fraud.
In designing and evaluating our control system, management recognized that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.
Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, that may affect our operation have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 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, 2016.
Grant Thornton LLP, the independent registered public accounting firm that audited the Trust’s consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the Trust’s internal control over financial reporting, which appears on page F-3 of this Annual Report on Form 10-K.
The Trust’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Assessment Report on Internal Control over Financial Reporting.
Arlington, Virginia
February 13, 2017
Our audits of the basic consolidated financial statements included the financial statement schedules listed in the index appearing under Item 15(a)(2).
Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
| | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Construction-in-progress | 599,260 | | | | 433,635 | | |
| | 6,759,073 | | | | 6,064,406 | | |
| Continuing operations | $ | 3.07 | | | $ | 2.63 | | | $ | 2.35 | |
| | $ | 3.51 | | | $ | 3.04 | | | $ | 2.42 | |
| Continuing operations | $ | 3.06 | | | $ | 2.62 | | | $ | 2.34 | |
| | $ | 3.50 | | | $ | 3.03 | | | $ | 2.41 | |
| BALANCE AT DECEMBER 31, 2013 | 399,896 | | | $ | 9,997 | | | 66,701,422 | | | $ | 667 | | | $ | 2,062,708 | | | $ | (623,795 | ) | | $ | (1,417 | ) | | $ | 23,137 | | | 1,471,297 | | |
| 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 | | |
| Redemption of OP units | — | | | — | | | | — | | | — | | | | (49 | | ) | | — | | | | — | | | | (14 | | ) | | (63 | | ) |
| Other, net | (89 | | ) | | 177 | | | | 733 | | |
| Net cash provided by operating activities | 419,254 | | | | 359,835 | | | | 346,130 | | |
| Redemption of redeemable noncontrolling interests | (13,018 | | ) | | — | | | | — | | |
If our
An excerpt. Shown here: 40 of 455 rewritten, 40 of 288 added and 40 of 308 removed. The counts are complete. For every sentence, read Item 8. and Item 15(a)(1) and (2) in the FY2017 filing and the FY2016 filing.