Federal Realty Investment Trust (FRT) 10-K risk factor changes: FY2018 vs FY2017

[removed: Economic] [added: Economic, legal,] and/or competitive conditions may impact the success of our tenants’ retail operations and therefore the amount of rent and expense reimbursements we receive from our tenants.

As of December 31, [removed: 2017,] [added: 2018,] our anchor tenant space is [removed: 98.1%] [added: 97.6%] leased and [removed: 96.5%] [added: 96.9%] occupied.

As of December 31, [removed: 2017,] [added: 2018,] we had approximately [removed: $3.3] [added: $3.2] billion of debt outstanding.

Of that outstanding debt, approximately [removed: $491.6] [added: $475.3] million was secured by all or a portion of 13 of our real estate projects and approximately [removed: $71.6] [added: $71.5] million represented capital lease obligations on four of our properties.

As of December 31, [removed: 2017, 98.8%] [added: 2018, 91.5%] of our debt is fixed rate, which includes all of our property secured debt, our unsecured senior notes, [added: and] our capital lease [removed: obligations, and our $275.0 million term loan, as the rate is effectively fixed by two interest rate swap agreements.][added: obligations.]

Our organizational documents do not limit the level or amount of [added: debt that we may incur.]

As of December 31, [removed: 2017,] [added: 2018,] we were in compliance with all of our default related financial covenants.

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

During [removed: 2017,] [added: 2018,] construction continued on the development of Phase II at both Assembly Row and Pike & Rose, with portions of both projects opening during [removed: 2017.][added: 2018.]

| • | substantial amount of our investment is related to [removed: infrastructure,] [added: infrastructure and] the [added: overall] value of [removed: which] [added: the project] may be negatively impacted if we do not complete subsequent phases; |

We [added: also] have an $800.0 million revolving credit facility, on which [removed: $41.0 million is] [added: no balance was] outstanding at December 31, [removed: 2017,] [added: 2018,] that bears interest at LIBOR plus 82.5 basis points.

However, the amounts we are required to pay under [removed: the term loan and any other] variable rate debt to which hedging or similar arrangements relate may increase in the event of non-performance by the counterparties to any [removed: of our] [added: such] hedging arrangements.

[removed: In addition, insurance companies may no] longer offer coverage against certain types of losses, such as losses due to terrorist acts and toxic mold, or, if offered, the expense of obtaining these types of insurance may not be justified.

As of December 31, [removed: 2017,] [added: 2018,] we held [removed: 16] [added: 17] predominantly retail real estate projects jointly with other persons in addition to properties owned in a “downREIT” structure.

Although as of December 31, [removed: 2017,] [added: 2018,] we held the controlling interests in all of our existing co-investments (except the hotel investments discussed 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 [added: environmental problems.]

| • | we could be subject to the federal alternative minimum [removed: tax;] [added: tax for our taxable years ending on or prior to December 31, 2017;] |

Any preferred shares we may offer in the future may have a fixed dividend rate that would [added: not increase with any increases in the dividend rate of our common shares.]

[added: 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.

We face risks relating to [removed: cybersecurity] [added: cyber] attacks that could cause loss of confidential information and other business disruptions.

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

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

A [removed: cybersecurity] [added: cyber] attack could compromise the confidential information of our employees, tenants and vendors.

We continue to see higher levels of anchor turnover and closings in some markets, which has caused an oversupply of larger retail spaces.

Additionally, we commenced construction on Phase III at both projects, and we continued our on-going redevelopment efforts at Santana Row.

Of our approximately $3.2 billion of debt outstanding as of December 31, 2018, approximately $275.0 million bears interest at a variable rate of LIBOR plus 90.0 basis points.

In addition, insurance companies may no

While demand for our retail spaces has been sufficient to increase occupancy, there can be no assurance that this will continue.

We 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.

We also have seen an overall decrease in the number of tenants available to fill anchor spaces.

debt that we may incur.

| | |

| --- | --- |

At Santana Row, we continue our on-going redevelopment efforts, including construction of an eight story 284,000 square foot office building, which will include an additional 29,000 square feet of retail space and 1,300 parking spaces.

| • | failure or inability of partners to perform on hotel joint ventures; |

| • | the third-party developer of office or other buildings may not deliver or may encounter delays in delivering space as planned; |

Of our approximately $3.3 billion of debt outstanding as of December 31, 2017, approximately $316.0 million bears interest at variable rates, of which $275.0 million is effectively fixed at 2.62% through two interest rate swap agreements.

environmental problems.

not increase with any increases in the dividend rate of our common shares.

If insurance

As of December 31, [removed: 2017,] [added: 2018,] we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 104 predominantly retail real estate projects comprising approximately [removed: 24.2] [added: 24.1] million square feet.

In total, the real estate projects were [removed: 95.3%] [added: 94.6%] leased and [removed: 93.9%] [added: 93.6%] occupied at December 31, [removed: 2017.][added: 2018.]

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for [removed: 50] [added: 51] consecutive years.

At December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] our allowance for doubtful accounts was [removed: $11.8] [added: $12.7] million and [removed: $11.9] [added: $11.8] million, respectively.

Historically, we have recognized bad debt expense between 0.3% and 1.3% of rental income and it was [removed: 0.3%] [added: 0.5%] in [removed: 2017.][added: 2018.]

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: $8.4] [added: $9.0] million.

At December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] accounts receivable includes approximately [removed: $93.1] [added: $97.4] million and [removed: $80.6] [added: $93.1] million, respectively, related to straight-line rents.

We [removed: are currently under] [added: completed] construction on 221 condominium units at our Assembly Row and Pike & Rose properties.

[removed: Gains or losses on the sale of these condominium units are recognized] [added: However,] in [removed: accordance with the provisions of ASC Topic 360-20, “Property, Plant and Equipment – Real Estate Sales.” We account] [added: 2017, we accounted] for contracted condominium sales under the percentage-of completion method, based on an evaluation of the criteria specified in ASC Topic [removed: 360-20] [added: 360-20, “Property, Plant and Equipment – Real Estate Sales,”] including: the legal commitment of the purchaser in the real estate contract, whether the construction of the project [removed: is] [added: was] beyond a preliminary phase, whether sufficient units [removed: have] [added: had] been contracted to ensure the project [removed: will] [added: would] 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 [removed: has] [added: had] made an adequate initial and continuing cash investment under the contract.

When the percentage-of-completion criteria [removed: have] [added: had] not been met, no profit [removed: is] [added: was] recognized.

The application of these criteria can be complex and [removed: requires] [added: required] us to make assumptions.

[removed: The timing of revenue recognition related to these condominium sales will be impacted by the] [added: Beginning on] January 1, [removed: 2018] [added: 2018, with the] adoption of ASU [removed: 2014-09] [added: 2014-09,] "Revenue from Contracts with [removed: Customers." See] [added: Customers," (see] "Recent Accounting [removed: Pronouncements," in Note 2 to the consolidated financial statements] [added: Pronouncements"] for [removed: further] discussion [removed: regarding] [added: of change in timing of revenue recognition), gains or losses on] the [removed: changes.][added: sale of these condominium units are recognized as the condominium units are legally sold.]

We capitalized external and internal costs related to both development and redevelopment activities of [removed: $410] [added: $274] million and $8 million, respectively, for [removed: 2017] [added: 2018] and [removed: $420] [added: $410] million and [removed: $9] [added: $8] million, respectively, for [removed: 2016.][added: 2017.]

We capitalized external and internal costs related to other property improvements of [removed: $74] [added: $62] million and $3 million, respectively, for [removed: 2017] [added: 2018] and [removed: $61] [added: $74] million and $3 million, respectively, for [removed: 2016.][added: 2017.]

We capitalized external and internal costs related to leasing activities of [removed: $11] [added: $20] million and $6 million, respectively, for [removed: 2017] [added: 2018] and [removed: $13] [added: $11] million and $6 million, respectively, for [removed: 2016.][added: 2017.]

The amount of capitalized internal costs for salaries and related benefits for development and redevelopment activities, other property improvements, and leasing activities were $7 million, $3 million, and $6 million, for [removed: 2017 and $8 million, $2 million,] [added: both 2018] and [removed: $6 million for 2016.][added: 2017.]

Total capitalized costs were [removed: $512] [added: $373] million and [removed: $511] [added: $512] million for [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively.

[removed: 2017] [added: 2018] Property Acquisitions and Dispositions

[removed: At December 31, 2016, the total] [added: The] cost basis [added: for remaining condominium units that are ready for their intended use as] of [removed: the related land was $33.9 million] [added: December 31, 2018 is $16.6 million,] and is included in "assets held for sale" on our consolidated balance [removed: sheet.][added: sheets.]

[removed: On August 25, 2017, we sold] [added: | • | $45.2 million gain related to the sale of] our [removed: property located at] 150 Post Street [removed: in San Francisco, California for a sales price of $69.3 million, resulting] [added: property] in [removed: a gain of $45.2 million.][added: August 2017, |]

On [removed: September 25, 2017,] [added: November 9, 2018,] we sold our [removed: North Lake Commons] [added: Atlantic Plaza] property in [removed: Lake Zurich, Illinois] [added: North Reading, Massachusetts] for a sales price of [removed: $15.6] [added: $27.2] million, resulting in a gain of [removed: $4.9] [added: $1.6] million.

[removed: On December 28, 2017, we sold] [added: | • | $6.5 million gain related to the sale of] a parcel of land at our Bethesda Row property in [removed: Bethesda, Maryland for a sales price of $8.5 million, resulting in a gain of $6.5 million.][added: December 2017, |]

[removed: 2017] [added: 2018 and 2019] Significant Debt and Equity Transactions

| [added: Description of Debt] | | [added: Original Debt Issued | | |] Principal [added: Balance as of December 31, 2018] | | | | Stated Interest Rate [added: as of December 31, 2018] | | | Maturity Date |

| Sylmar Towne Center | | [removed: $] [added: Acquired] | [removed: 17.5] | | [added: 17,006] | [added: | | |] 5.39 | % | | June 6, 2021 |

| Plaza Del Sol | | [removed: 8.6] [added: Acquired] | | | [added: 8,409] | [added: | | |] 5.23 | % | | December 1, 2021 |

| Bell Gardens | | [removed: 13.3] [added: Acquired] | | | [added: 12,936] | [added: | | |] 4.06 | % | | August 1, 2026 |

On [removed: November 4, 2016,] [added: May 7, 2018,] we replaced our existing at-the-market (“ATM”) equity program with a new ATM [removed: 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.

For the three months ended December 31, [removed: 2017,] [added: 2018,] we [removed: issued 501,120] [added: sold 374,725] common shares at a weighted average price per share of [removed: $132.22] [added: $131.36] for net cash proceeds of [removed: $65.6] [added: $48.7] million and paid [removed: $0.7] [added: $0.5] million in commissions and less than $0.1 million in additional offering expenses related to the sales of these common shares.

For the year ended December 31, [removed: 2017,] [added: 2018,] we issued [removed: 826,517] [added: 987,383] common shares at a weighted average price per share of [removed: $132.56] [added: $129.19] for net cash proceeds of [removed: $108.3] [added: $126.1] million and paid [removed: $1.1] [added: $1.3] million in commissions and $0.2 million in additional offering expenses related to the sales of these common shares.

As of December 31, [removed: 2017,] [added: 2018,] we had the capacity to issue up to [removed: $261.3] [added: $272.4] million in common shares under our ATM equity program.

| • | growth in our [removed: same-center] [added: comparable property] portfolio, |

Our [removed: same-center] [added: comparable property] growth is primarily driven by increases in rental rates on new leases and lease renewals, changes in portfolio occupancy, and the redevelopment of those assets.

We 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 [removed: process.]

At December 31, [removed: 2017,] [added: 2018,] no single tenant accounted for more than [removed: 2.9%] [added: 2.7%] 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, [added: reconfiguration, and/or retenanting.]

We currently have redevelopment projects underway with a projected cost of approximately [removed: $155] [added: $210] million that we expect to stabilize in the next several years.

We continue our ongoing redevelopment efforts at Santana Row and are under construction on an eight story [removed: 284,000] [added: 301,000] square foot office building which will include an additional [removed: 29,000] [added: 18,000] square feet of retail space and 1,300 parking spaces.

The building is expected to cost between $205 and $215 [removed: million and] [added: million,] to be delivered in [removed: 2019.][added: 2019, and the office portion is 100% pre-leased.]

Construction [removed: of] [added: continues on] Phase II of Assembly Row which [removed: will include] [added: includes approximately] 161,000 square feet of retail space, 447 residential units, and a 158 room boutique hotel [removed: (which will be owned] [added: (owned] and operated by a joint venture in which we are a [removed: partner) is underway.][added: partner).]

On June 15, 2018, we formed a new joint venture to develop Jordan Downs Plaza which, when completed, will be an approximately 113,000 square foot grocery anchored shopping center located in Los Angeles County, California.

We initially invested $34.4 million as a result of a pre-funding requirement for equity to be advanced prior to the start of construction.

We own approximately 91% of the venture, and control the 9.4 acre land parcel on which the shopping center will be constructed under a long-term ground lease that expires June 15, 2093 (including two 10-year option periods which may be exercised at our option).

The Jordan Downs Plaza development is expected to generate income tax credits under the New Market Tax Credit Program ("NMTC") which was provided for in the Community Renewal Tax Relief Act of 2000 ("the Act") and is intended to induce investment in underserved areas of the United States.

The Act permits taxpayers to claim credits against their Federal income taxes for qualified investments.

A third party bank contributed $13.9 million to the development, and is entitled to the related tax credit benefits, but they do not have an interest in the underlying economics of the property.

The transaction also includes a put/call provision whereby we may be obligated or entitled to purchase the third party bank’s interest.

We believe the put will be exercised at its $1,000 strike price.

Based on our assessment of control, we concluded that the project and certain

other transaction related entities should be consolidated.

The $13.9 million in proceeds received in exchange for the transfer of the tax credits has been deferred and will be recognized when the tax benefits are delivered to the third party bank without risk of recapture.

Direct and incremental costs of $1.6 million incurred in structuring the NMTC transaction have also been deferred.

The Trust anticipates recognizing the net cash received as revenue upon completion of the seven-year NMTC compliance period.

Cash in escrow at December 31, 2018 of $32.2 million reflects cash that will ultimately be used for the development of the shopping center, and is included in "prepaid expenses and other assets" on our consolidated balance sheet.

The cash is held in escrow pursuant to the new market tax credit transaction documents and will be released as qualified development expenditures are incurred.

In August 2018, we contributed hotel related assets valued at $44.0 million to our Assembly Row hotel joint venture, and received a cash distribution of $38.0 million.

At December 31, 2018, our investment in the venture was $5.6 million.

The joint venture is considered a variable interest entity controlled by our partner, and as a result, we are using the equity method to account for our investment.

On August 16, 2018, we sold the residential building at our Chelsea Commons property in Chelsea, Massachusetts for a sales price of $15.0 million, resulting in a gain of $3.1 million.

On November 29, 2018, we acquired a 40,000 square foot building adjacent to our Bell Gardens property for $9.6 million.

During the year ended December 31, 2018, we closed on the sale of 176 condominium units at our Assembly Row and Pike & Rose properties (combined) and received proceeds net of closing costs of $133.5 million, For the year ended December 31, 2018, we recognized a gain of $7.2 million, net of $1.6 million of income taxes.

On January 31, 2019, we repaid the $20.3 million mortgage loan on Rollingwood Apartments, at par, prior to its original maturity date.

process.

Additionally, we control 12 acres of land across from Santana Row, which has approximately 1 million square feet of commercial space entitlements.

As of December 31, 2018, approximately 120,000 square feet of retail space and the 158 room hotel have opened, and all of the residential units have been completed.

Phase II also includes 122 for-sale condominium units, of which 107 have closed as of December 31, 2018.

The remaining 15 units are expected to close in 2019.

The condominium units have an expected total cost of $81 million.

Additionally, Partners HealthCare built a 741,500 square foot office building as part of Phase II.

Additionally, we commenced construction on Phase III of Assembly Row, which will include 277,000 square feet of office space (of which, 150,000 square feet is pre-leased), 56,000 square feet of retail space, 500 residential units, and over 800 additional parking spaces.

The expected costs for Phase III are between $465 million and $485 million and is projected to open beginning in 2022.

As of December 31, 2018, approximately 190,000 square feet of retail space and the 177 room hotel have opened, and all of the residential units have been completed.

As of December 31, 2018, we closed on the sale of 69 of the 99 for-sale condominium units in Phase II.

The condominiums have an expected total cost of $62 million.

Additionally, at Pike & Rose, we commenced construction on a 212,000 square foot office building (which includes 4,000 square feet of ground floor retail space), and will include over 600 additional parking spaces.

The building is expected to cost between $128 million and $135 million and is projected to open beginning in 2021.

We may also finance our

Comparable Properties

Comparable property information replaces our previous same center designations.

| | 2018 | | | | 2017 | | | | Dollars | | | | % | |

On February 1, 2017, we acquired a leasehold interest in Hastings Ranch Plaza, a 274,000 square foot shopping center in Pasadena, California for $29.5 million.

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.

Approximately $1.0 million and $12.3 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively.

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.

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 | |

| | | | | 1,352,000 | |

| (1) Property is currently being redeveloped. GLA reflects approximate square footage once the property is open and operating. | | | | | |

For the year ended December 31, 2017, we recognized a $5.4 million gain, net of $1.4 million of income taxes, related to the sale of condominiums at our Assembly Row property based on the percentage-of-completion method.

In connection with recording the gain, we recognized a receivable of $67.1 million as of December 31, 2017.

The closing of the Assembly Row condominium sales is expected to commence in 2018.

As of December 31, 2017, no gain has been recognized for contracted condominium sales at Pike & Rose, as not all of the criteria necessary for profit recognition have been met.

At December 31, [removed: 2017,] [added: 2018,] we had [removed: $3.2] [added: $2.9] billion of fixed-rate debt [removed: outstanding, including our $275.0 million term loan as the rate is effectively fixed by two interest rate swap agreements;] [added: outstanding;] we also had capital lease obligations of [removed: $71.6] [added: $71.5] million.

If market interest rates used to calculate the fair value on our fixed-rate debt instruments at December 31, [removed: 2017] [added: 2018] had been 1.0% higher, the fair value of those debt instruments on that date would have decreased by approximately [removed: $239.4] [added: $203.8] million.

If market interest rates used to calculate the fair value on our fixed-rate debt instruments at December 31, [removed: 2017] [added: 2018] had been 1.0% lower, the fair value of those debt instruments on that date would have increased by approximately [removed: $276.4] [added: $234.2] million.

At December 31, [removed: 2017,] [added: 2018,] we had [removed: $41.0] [added: $275.0] 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 [removed: woud] [added: would] increase by approximately [removed: $0.4] [added: $2.8] 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 [removed: $0.4] [added: $2.8] million with a corresponding increase in our net income and cash flows for the year.

As of December 31, 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%.

As of December 31, [removed: 2017,] [added: 2018,] we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 104 predominantly retail real estate projects comprising approximately [removed: 24.2] [added: 24.1] million square feet.

In total, the real estate projects were [removed: 95.3%] [added: 94.6%] leased and [removed: 93.9%] [added: 93.6%] occupied at December 31, [removed: 2017.][added: 2018.]

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for [removed: 50] [added: 51] consecutive years.

| ◦ | the issuance of operating partnership units in a new or existing “downREIT partnership” that is controlled and consolidated by us (generally operating partnership units in a “downREIT” partnership are issued in exchange for a tax deferred contribution of property; these units [added: typically] receive the same distributions as our common shares and the holders of these units have the right to exchange their units for cash or [removed: the same number of our] common shares, at our option), or |

At February 8, [removed: 2018,] [added: 2019,] we had [removed: 311] [added: 298] full-time employees and [removed: 15] [added: 5] part-time employees.

We will be subject to federal income tax on our taxable income [removed: (including] [added: (including, for our taxable years ending on or prior to December 31, 2017,] any applicable alternative minimum tax) at regular corporate rates if we fail to qualify as a REIT for tax purposes in any taxable year, or to the extent we distribute less than 100% of our taxable income.

Given the costs and risks of continuing litigation on this matter, we elected to participate in a settlement for which our share [removed: is] [added: was] approximately $0.4 [removed: million.][added: million, and was reimbursed by insurance.]

[added: 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 [removed: approximately $0.2 million, assuming payment on the same terms as the settlement.][added: less than $0.1 million.]

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.

We expect that this settlement amount will be reimbursed by insurance.

The

For the fiscal year ended December 31, [removed: 2017][added: 2018]

| [removed: Depository] [added: Depositary] 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 |

Indicate by check mark whether the Registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

| Non-Accelerated Filer | o [removed: (Do not check if a smaller reporting company)] | Smaller reporting company | ¨ |

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: 2017] [added: 2018] was [removed: $9.1] [added: $9.3] billion.

The number of Registrant’s common shares outstanding on February 8, [removed: 2018] [added: 2019] was [removed: 73,192,726.][added: 74,365,801.]

FISCAL YEAR ENDED DECEMBER 31, [removed: 2017][added: 2018]

Portions of the Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission for the Registrant’s [removed: 2017] [added: 2018] annual meeting of shareholders to be held in May [removed: 2018] [added: 2019] will be incorporated by reference into Part III hereof.

| Item 1. | Business | [removed: [3](#s95A868FD881051E0ABD8F251A580880F)] [added: [3](#sE155B96CAACB5666BCD5C89ECCA52EC1)] |

| Item 1A. | Risk Factors | [removed: [7](#sDB156C125270584CAD9D2306EFD62924)] [added: [7](#s271F7F516F44525389925AA298DD2DB5)] |

| Item 1B. | Unresolved Staff Comments | [removed: [16](#s440BEE8839B05DFBA46E866A0299F111)] [added: [16](#s72D35EFB0822576BA4E24D9ECBA9C7A5)] |

| Item 2. | Properties | [removed: [16](#s355B6550FE1854DC9B1A00473B9BD3CA)] [added: [16](#s380862995A6C5C82AE45BE0635CC81A6)] |

| Item 3. | Legal Proceedings | [removed: [24](#sE1CFBE00CBFB5445B7B232C349704DBA)] [added: [24](#s7723D3EA8CF959FDB05129557264D5A7)] |

| Item 4. | Mine Safety Disclosures | [removed: [25](#sDE22E72E68EC5E9199FBC8007959705F)] [added: [25](#s4EB83DF31A8D5943A77277938CEFAF9D)] |

| Item 5. | Market for Our Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities | [removed: [26](#sCF6C217C76D15AD7A7FBA9FC1CAA7B4B)] [added: [26](#s2A4DA775AF16579A88FF840211523518)] |

| Item 6. | Selected Financial Data | [removed: [28](#s1B09187A1D83560E9F47FF35E1D42D49)] [added: [28](#sAF7C37944CE05C8C95C3CD231B476837)] |

| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | [removed: [30](#sC56967C7B7DF58FE9ACB4F2F5E009A5E)] [added: [30](#sF86BFBBA566A533B941363C11C949ED6)] |

| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | [removed: [51](#s916DFC49C45B5C3F818CA1A503EE9729)] [added: [50](#s40BA056AB80E55398ACBC78F053AA8B8)] |

| Item 8. | Financial Statements and Supplementary Data | [removed: [51](#s7540CAB1150254B9B9E33AA487A5FBD1)] [added: [50](#s9E8D21C4480A5E1BA095A42E1727FA32)] |

| Item 9. | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure | [removed: [52](#sC87E66C77AB45DF18F18745BFB86D9E9)] [added: [50](#s8C699730800254A78B1271014E33BF9D)] |

| Item 9A. | Controls and Procedures | [removed: [52](#s1F304F40012E56A19F5F887CEA336D62)] [added: [50](#s82224872845A5E9B8D447D190886CA50)] |

| Item 9B. | Other Information | [removed: [52](#s5D0E1998707C54628C912170AA668612)] [added: [51](#sFD9D46BE4E8555BEBAF03644D1506F54)] |

| Item 10. | Trustees, Executive Officers and Corporate Governance | [removed: [53](#s9641E13533325953BE1A86C5716E141D)] [added: [52](#sD64BDF59324D5772A4274546752D7EC9)] |

| Item 11. | Executive Compensation | [removed: [53](#sD4660CB75B725CC79782E85ED6529A1F)] [added: [52](#s2B4B76EDCAF85B069B046A65D48DEBAF)] |

| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters | [removed: [53](#s008773DAFE155603974D62893830BA93)] [added: [52](#s2F9BD56A41C553F2B2781DE08CED4DED)] |

| Item 13. | Certain Relationships and Related Transactions, and Trustee Independence | [removed: [53](#sF078103B0B1E5B7A911687F42B6CE58B)] [added: [52](#sEA1AA8617FB959C484EC2128BB8079E3)] |

| Item 14. | Principal Accountant Fees and Services | [removed: [53](#sE108B928D7EF598EA4BE3CC8C4463C8A)] [added: [52](#sD537867738345858A9D19E67171BD400)] |

| Item 15. | Exhibits and Financial Statement Schedules | [removed: [53](#s737C1F4F4097597FADEBDD372B660744)] [added: [52](#s01F6D320E2885C939B7953A5373461B7)] |

| Item 16. | Form 10-K Summary | [removed: [57](#sADEC33762D6E535C976A439FB30D4689)] [added: [56](#sE6DAF4C1238554A7ABAA38ACE71A6F1F)] |

10-K 1 frt-1231201810k.htm 10-K

| | | | |

| SIGNATURES | | [57](#s89DC85D4265C5DE2A4BE6257FCBE153B) |

10-K 1 frt-1231201710k.htm 10-K

| SIGNATURES | | [58](#s9877D4EEA7A5563B8696EB2B01B334A3) |

As of December 31, [removed: 2017,] [added: 2018,] we owned or had a majority ownership interest in community and neighborhood shopping centers and mixed-used properties which are operated as 104 predominantly retail real estate projects comprising approximately [removed: 24.2] [added: 24.1] million square feet.

No single [added: commercial or residential] property accounted for over 10% of our [removed: 2017] [added: 2018] total revenue.

As of December 31, [removed: 2017,] [added: 2018,] we had approximately 3,000 [added: commercial leases and 2,600 residential] leases, with tenants ranging from sole proprietors to major national and international retailers.

No one tenant or affiliated group of tenants accounted for more than [removed: 2.9%] [added: 2.7%] of our annualized base rent as of December 31, [removed: 2017.][added: 2018.]

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: 2017.][added: 2018.]

| Pennsylvania(1) | | 10 | | | [removed: 2,316,000] [added: 2,321,000] | | | 9.6 | % |

| New Jersey | | 6 | | | [removed: 1,722,000] [added: 1,726,000] | | | [removed: 7.1] [added: 7.2] | % |

| New York | | 6 | | | [removed: 1,248,000] [added: 1,246,000] | | | 5.2 | % |

| District of Columbia | | 2 | | | [removed: 168,000] [added: 169,000] | | | 0.7 | % |

| Total | | 104 | | | [removed: 24,206,000] [added: 24,127,000] | | | 100.0 | % |

[removed: Many of our leases contain tenant options that enable the tenant to extend the term of the lease at expiration at] pre-established rental rates that often include fixed rent increases, consumer price index adjustments or other market rate adjustments from the prior base rent.

Leases on residential units are generally for a period of one year or less and, in [removed: 2017,] [added: 2018,] represented approximately [removed: 6.9%] [added: 8.5%] 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: 2017] [added: 2018] for each of the 10 years beginning with [removed: 2018] [added: 2019] and after [removed: 2027] [added: 2028] 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: 2017.][added: 2018.]

Tenant improvements and incentives for comparable spaces were $36.00 per square foot, of which, $62.11 per square foot was for new leases and $12.18 [removed: per square foot] was for [removed: renewals] [added: renewal leases] in 2017.

During [removed: 2016,] [added: 2018,] we signed leases for a total of [removed: 1,688,000] [added: 1,972,000] square feet of retail space including [removed: 1,473,000] [added: 1,874,000] square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of [removed: 13%] [added: 12%] on a cash basis and [removed: 26%] [added: 23%] on a straight-line basis.

New leases for comparable spaces were signed for [removed: 543,000] [added: 796,000] square feet at an average rental increase of [removed: 24%] [added: 25%] on a cash basis and [removed: 40%] [added: 38%] on a straight-line basis.

Renewals for comparable spaces were signed for [removed: 930,000] [added: 1,078,000] square feet at an average rental increase of [removed: 7%] [added: 4%] on a cash basis and [removed: 17%] [added: 13%] on a straight-line basis.

Tenant improvements and incentives for comparable spaces were [removed: $31.00] [added: $27.09] per square foot, of which, [removed: $66.47] [added: $61.02] per square foot was for new leases and [removed: $10.28] [added: $2.02 per square foot] was for [removed: renewal leases] [added: renewals] in [removed: 2016.][added: 2018.]

The rental increases associated with comparable spaces generally include all leases signed [added: for retail space] in arms-length transactions reflecting market leverage between landlords and tenants during the period.

The leases signed in [removed: 2017] [added: 2018] generally become effective over the following two years though some may not become effective until [removed: 2020] [added: 2021] and beyond.

Historically, we have executed comparable space leases for 1.2 to [removed: 1.6] [added: 1.7] million square feet of retail space each year and expect the volume for [removed: 2018] [added: 2019] will be in line with our historical averages with overall positive increases in rental income.

[removed: However,] changes in rental income associated with individual signed leases on comparable spaces may be positive or negative, and we can provide no assurance that the rents on new leases will continue to increase at the above disclosed levels, if at all.

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: 2017.][added: 2018.]

Except as otherwise noted, we are the sole owner of our [removed: retail] real estate projects.

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

| Azalea South Gate, CA [removed: 90280(5)(8)] [added: 90280(5)(9)] | | 2014 | | 2017 | | [removed: 222,000] [added: 223,000] | | [removed: $27.43] [added: $27.95] | | 100% | | Marshalls Ross Dress for Less Ulta CVS |

| Bell Gardens Bell Gardens, CA [removed: 90201(4)(5)(8)] [added: 90201(4)(5)(9)] | | 1990, 2003, 2006 | | [removed: 2017] [added: 2017/2018] | | 330,000 | | [removed: $20.37] [added: $22.02] | | [removed: 100%] [added: 93%] | | Food4Less Marshalls Ross Dress for Less [removed: Petco] [added: Bob's Discount Furniture] |

| Colorado Blvd Pasadena, CA 91103(4) | | 1905-1988 | | 1996/1998 | | [removed: 69,000] [added: 62,000] | | [removed: $45.04] [added: $46.85] | | 100% | | Pottery Barn Banana Republic |

| Crow Canyon Commons San Ramon, CA 94583 | | 1980, 1998, 2006 | | 2005/2007 | | 241,000 | | [removed: $28.16] [added: $28.48] | | [removed: 94%] [added: 97%] | | Sprouts [removed: Orchard Supply Hardware] Rite Aid Total Wine & More |

| East Bay Bridge Emeryville & Oakland, CA 94608 | | 1994-2001, 2011, 2012 | | 2012 | | [removed: 439,000] [added: 441,000] | | [removed: $18.42] [added: $18.59] | | 100% | | Pak-N-Save Home Depot Target Nordstrom Rack |

| Escondido Promenade Escondido, CA 92029(5) | | 1987 | | 1996/2010 | | [removed: 299,000] [added: 298,000] | | [removed: $25.29] [added: $29.62] | | 99% | | TJ Maxx Dick's Sporting Goods Ross Dress For Less [removed: Toys R Us] |

| Fourth Street Berkeley, CA 94710(5) | | 1948, 1975 | | 2017 | | 71,000 | | [removed: $28.14] [added: $28.98] | | 55% | | CB2 Ingram Book Group |

| Hastings Ranch Plaza Pasadena, CA 91107(4) | | 1958, 1984, 2006, 2007 | | 2017 | | 273,000 | | [removed: $7.21] [added: $7.22] | | [removed: 98%] [added: 99%] | | Marshalls HomeGoods CVS Sears |

| Hermosa Avenue Hermosa Beach, CA 90254 | | 1922 | | 1997 | | 23,000 | | [removed: $49.18] [added: $49.82] | | 81% | | |

| Hollywood Blvd Hollywood, CA 90028 | | 1929, 1991 | | 1999 | | [removed: 180,000] [added: 179,000] | | [removed: $30.01] [added: $34.06] | | [removed: 91%] [added: 73%] | | Marshalls [removed: DSW] L.A. Fitness La La Land |

| Kings Court Los Gatos, CA [removed: 95032(4)(6)] [added: 95032(4)(7)] | | 1960 | | 1998 | | 80,000 | | [removed: $32.55] [added: $40.29] | | 100% | | Lunardi's [removed: Supermarket] CVS |

| La Alameda Walnut Park, CA [removed: 90255(4)(7)(8)] [added: 90255(4)(8)(9)] | | 2008 | | 2017 | | 245,000 | | [removed: $24.96] [added: $23.39] | | [removed: 94%] [added: 88%] | | Marshalls Ross Dress For Less CVS Petco |

| Old Town Center Los Gatos, CA 95030 | | 1962, 1998 | | 1997 | | 98,000 | | [removed: $41.40] [added: $41.98] | | [removed: 99%] [added: 86%] | | Anthropologie Banana Republic GAP |

| Olivo at Mission Hills Mission Hills, CA 91345(5) | | [removed: 2017] [added: 2018] | | 2017 | | [removed: 105,000] [added: 136,000] | | [removed: $30.05] [added: $30.71] | | [removed: 100%] [added: 91%] | | Target 24 Hour Fitness [removed: Fallas Stores] [added: Ross Dress for Less] |

| California | | 22 | | | 5,471,000 | | | 22.7 | % |

| Maryland | | 21 | | | 4,610,000 | | | 19.1 | % |

| Virginia | | 16 | | | 3,651,000 | | | 15.1 | % |

| Massachusetts | | 8 | | | 2,053,000 | | | 8.5 | % |

| Florida | | 4 | | | 1,310,000 | | | 5.4 | % |

Many of our leases contain tenant options that enable the tenant to extend the term of the lease at expiration at

| 2019 | | 1,693,000 | | | 8 | % | | $ | 44,352,000 | | | 7 | % |

| 2020 | | 2,223,000 | | | 10 | % | | 59,515,000 | | | | 9 | % |

| 2021 | | 2,557,000 | | | 11 | % | | 76,611,000 | | | | 12 | % |

| 2022 | | 3,036,000 | | | 14 | % | | 78,507,000 | | | | 13 | % |

| 2023 | | 2,620,000 | | | 12 | % | | 75,880,000 | | | | 12 | % |

| 2024 | | 2,895,000 | | | 13 | % | | 69,640,000 | | | | 11 | % |

| 2025 | | 1,417,000 | | | 6 | % | | 41,728,000 | | | | 7 | % |

| 2026 | | 942,000 | | | 4 | % | | 31,996,000 | | | | 5 | % |

| 2027 | | 1,234,000 | | | 5 | % | | 49,308,000 | | | | 8 | % |

| 2028 | | 1,132,000 | | | 5 | % | | 36,245,000 | | | | 6 | % |

| Thereafter | | 2,761,000 | | | 12 | % | | 61,278,000 | | | | 10 | % |

| Total | | 22,510,000 | | | 100 | % | | $ | 625,060,000 | | | 100 | % |

However,

| | | | | | 12 Units | | N/A | | 100% | | | |

| Jordan Downs Plaza Los Angeles County, CA 90002(4)(5)(6) | | N/A | | 2018 | | N/A | | N/A | | N/A | | |

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

| | | | | 6 Units | | N/A | | 67% | | | | |

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

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

| | | | | | 7 Units | | N/A | | 100% | | | |

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

| | | | | | 9 Units | | N/A | | 67% | | | |

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

| (6) | On June 15, 2018, we formed a new joint venture to develop Jordan Downs Plaza, which when completed, will be an approximately 113,000 square foot grocery anchored shopping center. See Note 3 to the Consolidated Financial Statements for for further discussion. |

| | |

| --- | --- |

| California | | 21 | | | 5,442,000 | | | 22.5 | % |

| Maryland | | 21 | | | 4,562,000 | | | 18.8 | % |

| Virginia | | 16 | | | 3,738,000 | | | 15.4 | % |

| 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 | % |

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

| Atlantic Plaza North Reading, MA 01864 | | 1960 | | 2004 | | 123,000 | | $16.43 | | 96% | | Stop & Shop |

| Chelsea Commons Residential Chelsea, MA 02150 | | 2013 | | 2008 | | 56 units | | N/A | | 91% | | |

On February 8, [removed: 2018,] [added: 2019,] there were [removed: 2,568] [added: 2,492] 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: 50] [added: 51] consecutive years.

Our total annual dividends paid per common share for [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] were [removed: $3.94] [added: $4.02] per share and [removed: $3.80] [added: $3.94] per share, respectively.

No assurances can be given regarding what portion, if any, of distributions in [removed: 2018] [added: 2019] or subsequent years will constitute a return of capital for federal income tax purposes.

| Ordinary dividend | $ | [removed: 3.940] [added: 3.859] | | | $ | [removed: 3.800] [added: 3.940] | |

[removed: 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 [removed: depository] [added: depositary] share per annum, [added: and the first payment date was January 16, 2018.]

We do not believe that the preferential rights available to the holders of [added: interest in] our preferred shares or the financial covenants contained in our debt agreements had or will have an adverse effect 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: 2012,] [added: 2013,] and ending December 31, [removed: 2017,] [added: 2018,] 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: 2017, there were no redemptions] [added: 2018, we issued 864 common shares in connection with the redemption] of operating partnership units.

Any other equity securities sold by us during [removed: 2017] [added: 2018] that were not registered have been previously reported in a Quarterly Report on Form 10-Q.

During [removed: 2017, 2,293] [added: 2018, 46,391] restricted common shares were forfeited by former employees.

| 2018 | | | | | | | | | | | |

| Fourth quarter | $ | 135.68 | | | $ | 115.22 | | | $ | 1.020 | |

| Third quarter | $ | 131.72 | | | $ | 120.00 | | | $ | 1.020 | |

| Second quarter | $ | 128.00 | | | $ | 110.66 | | | $ | 1.000 | |

| First quarter | $ | 134.20 | | | $ | 106.41 | | | $ | 1.000 | |

| 2018 | | | | 2017 | | | |

| Ordinary dividend eligible for 15% rate | 0.161 | | | | — | | |

| | $ | 4.020 | | | $ | 3.940 | |

Distributions on our 5.0% Series C Cumulative Redeemable

In 2018, dividends paid per depositary share were $1.306 due to the timing of issuance.

| 2016 | | | | | | | | | | | |

| Fourth quarter | $ | 148.74 | | | $ | 136.98 | | | $ | 0.980 | |

| Third quarter | $ | 170.35 | | | $ | 153.93 | | | $ | 0.980 | |

| Second quarter | $ | 165.55 | | | $ | 149.75 | | | $ | 0.940 | |

| First quarter | $ | 158.96 | | | $ | 144.82 | | | $ | 0.940 | |

| 2017 | | | | 2016 | | | |

| Capital gain | — | | | | — | | |

| | $ | 3.940 | | | $ | 3.800 | |

and the first payment date was January 16, 2018.

| | Year Ended December 31, | | | | | | | | | | | | | | | | | | | | | | | [added: |]

| [removed: 2017] [added: 2018] | | | | | [removed: 2016] [added: 2017] | | | | | [removed: 2015] [added: 2016] | | | | | [removed: 2014] [added: 2015] | | | | | [removed: 2013] [added: 2014] | | | | [added: |]

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

| Operating Data: | | | | | | | | | | | | | | | | | | | | | | | | [added: |]

| Rental income | $ | [removed: 841,461] [added: 895,698] | | | | $ | [removed: 786,583] [added: 841,461] | | | | $ | [removed: 727,812] [added: 786,583] | | | | $ | [removed: 666,322] [added: 727,812] | | | | $ | [removed: 620,089] [added: 666,322] | | [added: |]

| Property operating income(1) | $ | [removed: 584,619] [added: 627,566] | | | | $ | [removed: 547,979] [added: 584,619] | | | | $ | [removed: 510,595] [added: 547,979] | | | | $ | [removed: 474,167] [added: 510,595] | | | | $ | [removed: 446,959] [added: 474,167] | | [added: |]

| Operating income | $ | [removed: 332,288] [added: 349,721] | | | | $ | [removed: 320,995] [added: 332,288] | | | | $ | [removed: 300,154] [added: 320,995] | | | | $ | [removed: 271,037] [added: 300,154] | | | | $ | [removed: 254,161] [added: 271,037] | | [added: |]

| Income from continuing operations | $ | [removed: 219,948] [added: 237,111] | | | | $ | [removed: 226,425] [added: 219,948] | | | | $ | [removed: 190,094] [added: 226,425] | | | | $ | [removed: 167,888] [added: 190,094] | | | | $ | [removed: 137,811] [added: 167,888] | | [added: |]

| Gain on sale of real estate and change in control of interests, net | $ | [removed: 77,922] [added: 11,915] | | | | $ | [removed: 32,458] [added: 77,922] | | | | $ | [removed: 28,330] [added: 32,458] | | | | $ | [removed: 4,401] [added: 28,330] | | | | $ | [removed: 28,855] [added: 4,401] | | [added: |]

| Net income | $ | [removed: 297,870] [added: 249,026] | | | | $ | [removed: 258,883] [added: 297,870] | | | | $ | [removed: 218,424] [added: 258,883] | | | | $ | [removed: 172,289] [added: 218,424] | | | | $ | [removed: 167,608] [added: 172,289] | | [added: |]

| Net income available for common shareholders | $ | [removed: 287,456] [added: 233,865] | | | | $ | [removed: 249,369] [added: 287,456] | | | | $ | [removed: 209,678] [added: 249,369] | | | | $ | [removed: 163,994] [added: 209,678] | | | | $ | [removed: 162,140] [added: 163,994] | | [added: |]

| Net cash [removed: provided by] (used in) [added: provided by] financing activities | $ | [removed: 369,445] [added: (241,309] | [added: )] | | | $ | [removed: 168,838] [added: 369,445] | | | | $ | [removed: (42,188] [added: 168,838] | [removed: )] | | | $ | [removed: 5,709] [added: (42,188] | [added: )] | | | $ | [removed: 80,797] [added: 5,699] | | [added: |]

| Earnings per common share, basic: | | | | | | | | | | | | | | | | | | | | | | | | [added: |]

| Net income available to common shareholders | $ | [removed: 3.97] [added: 3.18] | | | | $ | [removed: 3.51] [added: 3.97] | | | | $ | [removed: 3.04] [added: 3.51] | | | | $ | [removed: 2.42] [added: 3.04] | | | | $ | [removed: 2.47] [added: 2.42] | | [added: |]

| Weighted average number of common shares, basic | [removed: 72,117] [added: 73,274] | | | | | [removed: 70,877] [added: 72,117] | | | | | [removed: 68,797] [added: 70,877] | | | | | [removed: 67,322] [added: 68,797] | | | | | [removed: 65,331] [added: 67,322] | | | [added: |]

| Earnings per common share, diluted: | | | | | | | | | | | | | | | | | | | | | | | | [added: |]

| Net income available to common shareholders | $ | [removed: 3.97] [added: 3.18] | | | | $ | [removed: 3.50] [added: 3.97] | | | | $ | [removed: 3.03] [added: 3.50] | | | | $ | [removed: 2.41] [added: 3.03] | | | | $ | [removed: 2.46] [added: 2.41] | | [added: |]

| Weighted average number of common shares, diluted | [removed: 72,233] [added: 73,302] | | | | | [removed: 71,049] [added: 72,233] | | | | | [removed: 68,981] [added: 71,049] | | | | | [removed: 67,492] [added: 68,981] | | | | | [removed: 65,483] [added: 67,492] | | | [added: |]

| Dividends declared per common share | $ | [removed: 3.96] [added: 4.04] | | | | $ | [removed: 3.84] [added: 3.96] | | | | $ | [removed: 3.62] [added: 3.84] | | | | $ | [removed: 3.30] [added: 3.62] | | | | $ | [removed: 3.02] [added: 3.30] | | [added: |]

| Other Data: | | | | | | | | | | | | | | | | | | | | | | | | [added: |]

| Funds from operations available to common shareholders(2) | $ | [removed: 419,977] [added: 461,777] | | | | $ | [removed: 406,359] [added: 419,977] | | | | $ | [removed: 352,857] [added: 406,359] | | | | $ | [removed: 327,597] [added: 352,857] | | | | $ | [removed: 289,938] [added: 327,597] | | [added: |]

| Ratio of [removed: EBITDA] [added: EBITDAre] to combined fixed charges and preferred share dividends(3)(4) | [removed: 4.4] [added: 4.2x] | | | [removed: x] | | [removed: 4.8] [added: 3.9x] | | | [removed: x] | | [removed: 3.9] [added: 4.5x] | | | [removed: x] | | [removed: 3.5] [added: 3.6x] | | | [removed: x] | | [removed: 3.3] [added: 3.5x] | | | [added: |]

| [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | |

| Real estate, at cost | $ | [removed: 7,635,061] [added: 7,819,472] | | | $ | [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] | |

| Total assets | $ | [removed: 6,275,755] [added: 6,289,644] | | | $ | [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] | |

| Total debt | $ | [removed: 3,284,766] [added: 3,229,204] | | | $ | [removed: 2,798,452] [added: 3,284,766] | | | $ | [removed: 2,627,216] [added: 2,798,452] | | | $ | [removed: 2,397,043] [added: 2,627,216] | | | $ | [removed: 2,311,294] [added: 2,397,043] | |

| Total shareholders’ equity | $ | [removed: 2,391,514] [added: 2,467,330] | | | $ | [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] | |

| Number of common shares outstanding | [removed: 73,091] [added: 74,250] | | | | [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: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Operating income | $ | [removed: 332,288] [added: 349,721] | | | $ | [removed: 320,995] [added: 332,288] | | | $ | [removed: 300,154] [added: 320,995] | | | $ | [removed: 271,037] [added: 300,154] | | | $ | [removed: 254,161] [added: 271,037] | |

| General and administrative | [removed: 36,281] [added: 33,600] | | | | [removed: 33,399] [added: 36,281] | | | | [removed: 35,645] [added: 33,399] | | | | [removed: 32,316] [added: 35,645] | | | | [removed: 31,970] [added: 32,316] | | |

| Depreciation and amortization | [removed: 216,050] [added: 244,245] | | | | [removed: 193,585] [added: 216,050] | | | | [removed: 174,796] [added: 193,585] | | | | [removed: 170,814] [added: 174,796] | | | | [removed: 160,828] [added: 170,814] | | |

| Property operating income | $ | [removed: 584,619] [added: 627,566] | | | $ | [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: 2017 |] [added: 2018] | | | [removed: 2016] | [added: 2017] | | | [removed: 2015] | [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| | (In thousands) | | | | | | | | | | | | | | | | | | | [removed: |]

| Net income | $ | [removed: 297,870] [added: 249,026] | | | $ | [removed: 258,883] [added: 297,870] | | | $ | [removed: 218,424 |] [added: 258,883] | | | $ | [removed: 172,289] [added: 218,424] | | | $ | [removed: 167,608] [added: 172,289] | |

| Net income attributable to noncontrolling interests | [removed: (7,956] [added: (7,119] | | ) | | [removed: (8,973] [added: (7,956] | | ) | | [removed: (8,205] [added: (8,973] | | ) | | [removed: | (7,754] [added: (8,205] | | ) | | [removed: (4,927] [added: (7,754] | | ) |

| Gain on sale of real estate and change in control of interests, net | [removed: (77,632] [added: (11,915] | | ) | | [removed: (31,133] [added: (77,632] | | ) | | [removed: (28,330] [added: (31,133] | | ) | | [removed: | (4,401] [added: (28,330] | | ) | | [removed: (28,855] [added: (4,401] | | ) |

| Depreciation and amortization of real estate assets | [removed: 188,719 |] [added: 213,098] | | | [removed: 169,198] | [added: 188,719] | | | [removed: 154,232] | [added: 169,198] | | | | [removed: 154,060] [added: 154,232] | | | | [removed: 146,377] [added: 154,060] | | |

| Amortization of initial direct costs of leases | [removed: 19,124 |] [added: 24,603] | | | [removed: 16,875] | [added: 19,124] | | | [removed: 15,026] | [added: 16,875] | | | | [removed: 12,391] [added: 15,026] | | | | [removed: 10,694] [added: 12,391] | | |

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

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

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

| Net cash provided by operating activities | $ | 516,688 | | | | $ | 458,828 | | | | $ | 427,672 | | | | $ | 371,808 | | | | $ | 349,415 | | |

| Net cash used in investing activities | $ | (192,247 | ) | | | $ | (837,922 | ) | | | $ | (590,221 | ) | | | $ | (355,353 | ) | | | $ | (410,225 | ) | |

| EBITDAre(3) | $ | 595,558 | | | | $ | 549,107 | | | | $ | 515,151 | | | | $ | 478,734 | | | | $ | 445,888 | | |

We calculate EBITDAre consistent with the NAREIT definition.

As EBITDA is a widely known and understood measure of performance, management believes EBITDAre represents an additional non-GAAP performance measure, independent of a company's capital structure that will provide investors with a uniform basis to measure the enterprise value of a company.

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

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

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

| | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | |

| Adjustments of EBITDAre of unconsolidated affiliates | 5,114 | | | | 796 | | | | 521 | | | | 2,368 | | | | 2,794 | | |

| EBITDAre | $ | 595,558 | | | $ | 549,107 | | | $ | 515,151 | | | $ | 478,734 | | | $ | 445,888 | |

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

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

| Net cash provided by operating activities | $ | 459,177 | | | | $ | 423,705 | | | | $ | 369,046 | | | | $ | 349,465 | | | | $ | 316,340 | |

| Net cash used in investing activities | $ | (836,802 | ) | | | $ | (590,221 | ) | | | $ | (353,763 | ) | | | $ | (396,150 | ) | | | $ | (345,198 | ) |

| EBITDA(3) | $ | 627,656 | | | | $ | 547,088 | | | | $ | 504,696 | | | | $ | 447,495 | | | | $ | 446,555 | |

| Adjusted EBITDA(3) | $ | 548,311 | | | | $ | 514,630 | | | | $ | 476,366 | | | | $ | 443,094 | | | | $ | 417,700 | |

| Ratio of Adjusted EBITDA to combined fixed charges and preferred share dividends(3)(4) | 3.9 | | | x | | 4.5 | | | x | | 3.6 | | | x | | 3.5 | | | x | | 3.1 | | |

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

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

(3) EBITDA is a non-GAAP measure as calculated in the table below.

Adjusted EBITDA as presented may not be comparable to other similarly titled measures used by other REITs.

| EBITDA | 627,656 | | | | 547,088 | | | | 504,696 | | | | 447,495 | | | | 446,555 | | |

| Adjusted EBITDA | $ | 548,311 | | | $ | 514,630 | | | $ | 476,366 | | | $ | 443,094 | | | $ | 417,700 | |

Our management, with the participation of the Trust’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Trust’s disclosure controls and procedures as of December 31, [removed: 2017.][added: 2018.]

Based on that evaluation, the Trust’s Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, [removed: 2017,] [added: 2018,] the Trust’s disclosure controls and procedures were effective at a reasonable assurance level.

We assessed the effectiveness of the Trust’s internal control over financial reporting as of December 31, [removed: 2017.][added: 2018.]

Based on that assessment and criteria, management concluded that the Trust's internal control over financial reporting was effective as of December 31, [removed: 2017.][added: 2018.]

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 [removed: [F-2](#s1902CD94F50556AF9B97ED4342EADEC3)] [added: [F-2](#sB2F6F2038BD0548E9EB6DE3A73F2AF4C)] 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: 2017] [added: 2018] that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Certain information required in Part III is omitted from this Report but is incorporated herein by reference from our Proxy Statement for the [removed: 2018] [added: 2019] Annual Meeting of Shareholders (as amended or supplemented, the “Proxy Statement”).

| Our consolidated financial statements and notes thereto, together with 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](#sE140073089CE5AB8969ACA7F36A0881A).] [added: [F-1](#s6945CFF0F87B5D2ABCE136DD0F92C971).] |

| Our financial statement schedules are included in a separate section of this Annual Report on Form 10-K commencing on page [removed: [F-31](#s7ECD9E2C6C415C4B9FF10E0407CFBC51).] [added: [F-32](#s461C81A100555F5A854A17BCEC5AD4FA).] |

| 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 [removed: Depository,] [added: Depositary,] 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) |

| 10.2 | | * Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 22, 1999 (previously filed as a portion of [Exhibit [removed: 10](http://www.sec.gov/Archives/edgar/data/34903/000119312517299279/d453589dex43.htm)] [added: 10](http://www.sec.gov/Archives/edgar/data/34903/0000928385-99-001432.txt)] to the 1999 1Q Form 10-Q and incorporated herein by reference) |

| 21.1 | | [Subsidiaries of Federal Realty Investment Trust (filed [removed: herewith)](https://www.sec.gov/Archives/edgar/data/34903/000003490318000009/frt-12312017xex211.htm)] [added: herewith)](https://www.sec.gov/Archives/edgar/data/34903/000003490319000013/frt-12312018xex211.htm)] |

| 23.1 | | [Consent of Grant Thornton LLP (filed [removed: herewith)](https://www.sec.gov/Archives/edgar/data/34903/000003490318000009/frt-12312017xex231.htm)] [added: herewith)](https://www.sec.gov/Archives/edgar/data/34903/000003490319000013/frt-12312018xex231.htm)] |

| 31.1 | | [Rule 13a-14(a) Certification of Chief Executive Officer (filed [removed: herewith)](https://www.sec.gov/Archives/edgar/data/34903/000003490318000009/frt-12312017xex311.htm)] [added: herewith)](https://www.sec.gov/Archives/edgar/data/34903/000003490319000013/frt-12312018xex311.htm)] |

| 31.2 | | [Rule 13a-14(a) Certification of Chief Financial Officer (filed [removed: herewith)](https://www.sec.gov/Archives/edgar/data/34903/000003490318000009/frt-12312017xex312.htm)] [added: herewith)](https://www.sec.gov/Archives/edgar/data/34903/000003490319000013/frt-12312018xex312.htm)] |

| 32.1 | | [Section 1350 Certification of Chief Executive Officer (filed [removed: herewith)](https://www.sec.gov/Archives/edgar/data/34903/000003490318000009/frt-12312017xex321.htm)] [added: herewith)](https://www.sec.gov/Archives/edgar/data/34903/000003490319000013/frt-12312018xex321.htm)] |

| 32.2 | | [Section 1350 Certification of Chief Financial Officer (filed [removed: herewith)](https://www.sec.gov/Archives/edgar/data/34903/000003490318000009/frt-12312017xex322.htm)] [added: herewith)](https://www.sec.gov/Archives/edgar/data/34903/000003490319000013/frt-12312018xex322.htm)] |

| 101 | | [The following materials from Federal Realty Investment Trust’s Annual Report on Form 10-K for the year ended December 31, [removed: 2017,] [added: 2018,] formatted in XBRL (Extensible Business Reporting Language): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Comprehensive Income, (3) the Consolidated Statement of Shareholders’ Equity, (4) the Consolidated Statements of Cash Flows, and (5) Notes to Consolidated Financial Statements that have been detail [removed: tagged.](https://www.sec.gov/Archives/edgar/data/34903/000003490318000009/frt-20171231.xml)] [added: tagged.](https://www.sec.gov/Archives/edgar/data/34903/000003490319000013/frt-20181231.xml)] |

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: 2018.][added: 2019.]

| /S/ DONALD C. WOOD | | President, Chief Executive Officer and | | February 13, [removed: 2018] [added: 2019] |

| /S/ DANIEL GUGLIELMONE | | Executive Vice President-Chief Financial | | February 13, [removed: 2018] [added: 2019] |

| /S/ JOSEPH S. VASSALLUZZO | | Non-Executive Chairman | | February 13, [removed: 2018] [added: 2019] |

| /S/ JON E. BORTZ | | Trustee | | February 13, [removed: 2018] [added: 2019] |

| /S/ DAVID W. FAEDER | | Trustee | | February 13, [removed: 2018] [added: 2019] |

| /S/ ELIZABETH I. HOLLAND | | Trustee | | February 13, [removed: 2018] [added: 2019] |

| /S/ GAIL P. STEINEL | | Trustee | | February 13, [removed: 2018] [added: 2019] |

| /S/ WARREN M. THOMPSON | | Trustee | | February 13, [removed: 2018] [added: 2019] |

| /S/ MARK S. ORDAN | | Trustee | | February 13, 2019 |

| Mark S. Ordan | | | | |

| | | | | |

| Report of Independent Registered Public Accounting Firm | [removed: [F-2](#s1902CD94F50556AF9B97ED4342EADEC3)] [added: [F-2](#sB2F6F2038BD0548E9EB6DE3A73F2AF4C)] |

| Report of Independent Registered Public Accounting Firm | [removed: [F-3](#s654D1071737D5B89B4158FB09D243E5E)] [added: [F-3](#s983525F2BB6058D695A96D47B260A614)] |

| Consolidated Balance Sheets | [removed: [F-4](#s6ADA4671E7685A1D89608AB3ED38B58D)] [added: [F-4](#s81E59DC779D659AB979E8EB75BD63280)] |

| Consolidated Statements of Comprehensive Income | [removed: [F-5](#sBE0302355DE356C0AC7B632A4CCD2337)] [added: [F-5](#s3AF6F66FBEE35282A4529BFCC4AD6BA5)] |

| Consolidated Statement of Shareholders’ Equity | [removed: [F-6](#s81E3D673580252468E4920767E1A01BF)] [added: [F-6](#sE9FCFBA2EE2053F0A5D90E833CDC6711)] |

| Consolidated Statements of Cash Flows | [removed: [F-7](#sA3682009FDC950FD8F2B0F8F1DD99BCC)] [added: [F-7](#s9E6AD32F049D56099CB735855DF15A49)] |

| Notes to Consolidated Financial Statements | [removed: [F-8](#sBC6DD23F8774512096C26518F3B5AC0F)] [added: [F-8](#s55184684EDCB539AA22B2E24752679CC)] |

| Schedule III—Summary of Real Estate and Accumulated Depreciation | [removed: [F-31](#s7ECD9E2C6C415C4B9FF10E0407CFBC51)] [added: [F-32](#s461C81A100555F5A854A17BCEC5AD4FA)] |

| Schedule IV—Mortgage Loans on Real Estate | [removed: [F-39](#s5F96786CE2DB5AAAAF9271BC6FEE7ED7)] [added: [F-40](#s4BA4E8E8B99E5680898BEE99C1144A49)] |

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: 2017,] [added: 2018,] based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

In our opinion, the Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in the 2013 Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Trust as of and for the year ended December 31, [removed: 2017,] [added: 2018,] and our report dated February 13, [removed: 2018] [added: 2019] 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: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] 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: 2017,] [added: 2018,] and the related notes and schedules (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Trust as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Trust’s internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 13, [removed: 2018] [added: 2019] expressed an unqualified [removed: opinion on those financial statements.][added: opinion.]

| | [added: 2018 | | | |] 2017 | | | | 2016 | | |

| Operating (including [removed: $1,639,486] [added: $1,701,804] and [removed: $1,211,605] [added: $1,639,486] of consolidated variable interest entities, respectively) | $ | [removed: 6,950,188] [added: 7,307,622] | | | $ | [removed: 6,125,957] [added: 6,950,188] | |

| Construction-in-progress (including [removed: $43,393] [added: $51,313] and [removed: $15,313] [added: $43,393] of consolidated variable interest entities, respectively) | [removed: 684,873] [added: 495,274] | | | | [removed: 599,260] [added: 684,873] | | |

| Assets held for sale | [removed: —] [added: 16,576] | | | | [removed: 33,856] [added: —] | | |

| Less accumulated depreciation and amortization (including [removed: $247,410] [added: $292,374] and [removed: $209,239] [added: $247,410] of consolidated variable interest entities, respectively) | [removed: (1,876,544] [added: (2,059,143] | | ) | | [removed: (1,729,234] [added: (1,876,544] | | ) |

| Net real estate | [removed: 5,758,517] [added: 5,760,329] | | | | [removed: 5,029,839] [added: 5,758,517] | | |

| Cash and cash equivalents | [removed: 15,188] [added: 64,087] | | | | [removed: 23,368] [added: 15,188] | | |

| Accounts and notes receivable | [removed: 209,877] [added: 142,237] | | | | [removed: 116,749] [added: 209,877] | | |

| Mortgage notes receivable, net | 30,429 | | | | [removed: 29,904] [added: 30,429] | | |

| Investment in real estate partnerships | [removed: 23,941] [added: 26,859] | | | | [removed: 14,864] [added: 23,941] | | |

| Prepaid expenses and other assets | [removed: 237,803] [added: 265,703] | | | | [removed: 208,555] [added: 237,803] | | |

| TOTAL ASSETS | $ | [removed: 6,275,755] [added: 6,289,644] | | | $ | [removed: 5,423,279] [added: 6,275,755] | |

| Mortgages payable (including [removed: $460,372] [added: $444,388] and [removed: $439,120] [added: $460,372] of consolidated variable interest entities, respectively) | $ | [removed: 491,505] [added: 474,379] | | | $ | [removed: 471,117] [added: 491,505] | |

| Capital lease obligations | [removed: 71,556] [added: 71,519] | | | | [removed: 71,590] [added: 71,556] | | |

| Notes payable | [removed: 320,265] [added: 279,027] | | | | [removed: 279,151] [added: 320,265] | | |

| Senior notes and debentures | [removed: 2,401,440] [added: 2,404,279] | | | | [removed: 1,976,594] [added: 2,401,440] | | |

| Accounts payable and accrued expenses | [removed: 196,332] [added: 177,922] | | | | [removed: 201,756] [added: 196,332] | | |

| Dividends payable | [removed: 75,931] [added: 78,207] | | | | [removed: 71,440] [added: 75,931] | | |

| Security deposits payable | [removed: 16,667] [added: 17,875] | | | | [removed: 16,285] [added: 16,667] | | |

| Other liabilities and deferred credits | [removed: 169,388] [added: 182,898] | | | | [removed: 115,817] [added: 169,388] | | |

| Total liabilities | [removed: 3,743,084] [added: 3,686,106] | | | | [removed: 3,203,750] [added: 3,743,084] | | |

| Redeemable noncontrolling interests | [removed: 141,157] [added: 136,208] | | | | [removed: 143,694] [added: 141,157] | | |

| 5.0% Series C Cumulative Redeemable Preferred Shares, (stated at liquidation preference $25,000 per share), 6,000 [removed: and 0] shares issued and [removed: outstanding, respectively] [added: outstanding] | 150,000 | | | | [removed: —] [added: 150,000] | | |

| Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized, [removed: 73,090,877] [added: 74,249,633] and [removed: 71,995,897] [added: 73,090,877] shares issued and outstanding, respectively | [removed: 733] [added: 745] | | | | [removed: 722] [added: 733] | | |

| Additional paid-in capital | [removed: 2,855,321] [added: 3,004,442] | | | | [removed: 2,718,325] [added: 2,855,321] | | |

Charlotte, North Carolina

February 13, 2019

Charlotte, North Carolina

February 13, 2019

| | 2018 | | | | 2017 | | |

| | 7,819,472 | | | | 7,635,061 | | |

| January 1, 2018 adoption of new accounting standard - See Note 2 | — | | | — | | | | — | | | — | | | | — | | | | (6,028 | | ) | | — | | | | — | | | | (6,028 | | ) |

| Net income, excluding $3,865 attributable to redeemable noncontrolling interests | — | | | — | | | | — | | | — | | | | — | | | | 241,907 | | | | — | | | | 3,254 | | | | 245,161 | | |

| Common shares issued, net | — | | | — | | | | 987,461 | | | 10 | | | | 126,061 | | | | — | | | | — | | | | — | | | | 126,071 | | |

| Exercise of stock options | — | | | — | | | | 105,803 | | | 1 | | | | 4,571 | | | | — | | | | — | | | | — | | | | 4,572 | | |

| Conversion and redemption of OP units | — | | | — | | | | 749 | | | — | | | | (544 | | ) | | — | | | | — | | | | (5,468 | | ) | | (6,012 | | ) |

| BALANCE AT DECEMBER 31, 2018 | 405,896 | | | $ | 159,997 | | | 74,249,633 | | | $ | 745 | | | $ | 3,004,442 | | | $ | (818,877 | ) | | $ | (416 | ) | | $ | 121,439 | | | $ | 2,467,330 | |

| Net income | $ | 249,026 | | | $ | 297,870 | | | $ | 258,883 | |

| Depreciation and amortization | 244,245 | | | | 216,050 | | | | 193,585 | | |

| Proceeds from new market tax credit transaction, net of deferred costs | 12,353 | | | | — | | | | — | | |

| Net cash provided by operating activities | 516,688 | | | | 458,828 | | | | 427,672 | | |

| Proceeds from partnership formation | 37,998 | | | | — | | | | — | | |

| Cash, cash equivalents, and restricted cash at end of year | $ | 108,332 | | | $ | 25,200 | | | $ | 34,849 | |

Effective January 1, 2018, (upon the adoption of ASU 2014-09, "Revenue from Contracts with Customers," as amended and interpreted) sales of real estate are recognized generally upon the transfer of control, which usually occurs when the real estate is legally sold.

The application of these criteria can be complex and required us to make assumptions.

use at which time the project is placed in service and depreciation commences.

Prior to November 1, 2018, we were party to two interest rate swap agreements that effectively fixed the rate on the term loan at 2.62%.

Both swaps were designated and qualified as cash flow hedges and were recorded at fair value.

As of December 31, 2018, our Assembly Row hotel joint venture is a party to two interest rate swap agreements that effectively fix the interest rate on the joint venture's mortgage debt at 5.206%.

Both swaps were designated and qualify as cash flow hedges.

Hedge ineffectiveness has not impacted earnings in 2018, 2017 and 2016.

estate investment and the appropriate accounting thereon.

| | 2018 | | | | 2017 | | |

| Leases (Topic 842) and related updates: ASU 2016-02, February 2016, Leases (Topic 842) ASU 2018-10, July 2018, Codification improvements to Topic 842, Leases ASU 2018-11, July 2018, Leases (Topic 842) ASU 2018-20, December 2018, Leases (Topic 842) Narrow Scope Improvements for Lessors | | This ASU significantly changes the accounting for leases by requiring lessees to recognize assets and liabilities for leases greater than 12 months on their balance sheet. The lessor model stays substantially the same; however, there were modifications to conform lessor accounting with the lessee model, eliminate real estate specific guidance, further define certain lease and non-lease components, and change the definition of initial direct costs of leases requiring significantly more leasing related costs to be expensed upfront. ASU 2018-10 provides narrow amendments that clarify how to apply certain aspects of the guidance in ASU 2016-02. ASU 2018-11 provides the option of an additional transition method, by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. It also provides lessors an option to not separate lease and non-lease components when certain criteria are met. ASU 2018-20 provides narrow scope amendments including the requirement to exclude variable payments made by the lessee to a third party on behalf of the lessor from revenue (e.g., lessee payments of real estate taxes made directly to the taxing authority on behalf of the lessor are excluded from revenue). | | January 2019 | | We have elected to apply the transition provisions of ASC Topic 842 at the beginning of the period of adoption (i.e., January 1, 2019), and therefore, will not retrospectively adjust prior periods presented. We have also elected to apply certain adoption related practical expedients for all leases that commenced prior to the effective date. These practical expedients include not reassessing whether any expired or existing contracts are or contain leases; not reassessing the lease classification for any expired or existing leases; and not reassessing initial direct costs for any existing leases. The primary impact of adoption on January 1, 2019 will be to record a lease obligation liability and right of use asset for operating leases where we are the lessee. The most significant of these operating leases are ground leases at 14 properties. The lease obligation liability and right of use asset (prior to adjustments for unamortized direct costs and purchase accounting assets/liabilities) to be recorded on January 1, 2019 approximates $75 million. Given our application of the practical expedients noted above, we will apply the lease classification requirements under ASC Topic 842 for all new leases or existing leases that are modified after the adoption date and we will no longer be able to capitalize certain costs related to these leases. For the year ended December 31, 2018, we capitalized approximately $7.5 million of internal leasing and external legal leasing costs. For new leases and existing leases that are modified after the effective date, only a portion of these types of costs can be capitalized and as a result, the costs that no longer qualify for capitalization will be included in “general and administrative expense” in the period incurred. Additionally, the presentation of certain rental income and rental expense on the consolidated statements of comprehensive income will be impacted. For the year ended December 31, 2018, rental income and rental expense include $6.5 million relating to real estate taxes paid by tenants on our behalf directly to taxing authorities. Effective January 1, 2019, payments of this nature will no longer be recorded gross as revenue and expense on the consolidated statements of comprehensive income. |

| Standard | | Description | | Date of Adoption | | Effect on the financial statements or significant matters |

| ASU 2018-15, August 2018, Intangibles - Goodwill and Other Internal Use Software: Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract | | This ASU requires a customer in a cloud computing arrangement (i.e. hosting arrangement) that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement. Entities will expense costs during the preliminary project and post-implementation stages as they are incurred. The guidance can be applied prospectively to all implementation costs incurred after th date of adoption or retrospectively in accordance with ASC 250-10-45-5 through ASC 250-10-45-10. | | January 2020 | | This standard is not expected to have a significant impact to our consolidated financial statements. |

| Contribution from noncontrolling interest | $ | 1,435 | | | $ | — | | | $ | — | |

(1) See Note 3 for additional disclosures relating to our investment in the Assembly Row hotel joint venture.

See the "Recent Accounting Pronouncements Adopted Subsequent to December 31, 2018," section in this note for further discussion regarding the change in accounting for lease costs.

| | | | | | | | |

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

| | | | | | | | |

| | 2018 | | | | 2017 | | |

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

| RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH: | | | | | | | |

New York, New York

February 13, 2018

| | 7,635,061 | | | | 6,759,073 | | |

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

| Net income, excluding $3,423 attributable to redeemable noncontrolling interests | — | | | — | | | | — | | | — | | | | — | | | | 210,219 | | | | — | | | | 4,782 | | | | 215,001 | | |

| Common shares issued | — | | | — | | | | 813,548 | | | 8 | | | | 108,537 | | | | — | | | | — | | | | — | | | | 108,545 | | |

| Exercise of stock options | — | | | — | | | | 29,940 | | | — | | | | 1,991 | | | | — | | | | — | | | | — | | | | 1,991 | | |

| Redemption of OP units | — | | | — | | | | 39,611 | | | — | | | | 4,072 | | | | — | | | | — | | | | (4,223 | | ) | | (151 | | ) |

| Net cash provided by operating activities | 459,177 | | | | 423,705 | | | | 369,046 | | |

See "Recent Accounting Pronouncements" for further discussion.

Additionally, we make estimates as to the

Hedge ineffectiveness did not impact earnings in 2017, 2016 or 2015, and we do not anticipate it will have a significant effect in the future.

See Note 6 for additional disclosures relating to our two existing interest rate swap agreements.

project or has guaranteed all or a portion of our loan (or a combination thereof), the loans qualify for loan accounting.

Effective January 1, 2017, we adopted ASU 2016-09, "Compensation-Stock Compensation," which impacts accounting for forfeitures and the classification for shares withheld for employee taxes on the Statement of Cash Flows.

On February 12, 2016, we acquired the 10% noncontrolling interest in the partnership that owns our Hollywood Blvd project for $13.0 million, bringing our ownership interest to 100%.

| ASU 2016-09, March 2016, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting | | This ASU simplifies the accounting for share-based payment transactions, including a policy election option with respect to accounting for forfeitures either as they occur or estimating forfeitures (as was previously required), as well as increasing the amount an employer can withhold to cover income taxes on equity awards. Additionally, it requires the cash paid to a taxing authority when shares are withheld to pay employee taxes to be classified as a "financing activity" rather than an "operating activity," as was done previously on the Statement of Cash Flows. | | January 2017 | | The adoption of this standard resulted in accounting for forfeitures as they occur, and we have recorded the cumulative impact on the adoption date as a $0.1 million adjustment to additional paid-in capital and accumulated dividends in excess of net income. The amounts reclassified from "operating activities" to "financing activities" for shares withheld for employee taxes was $4.5 million and $9.2 million, respectively, for 2016 and 2015. |

| ASU 2017-01, January 2017, Business Combinations (Topic 805): Clarifying the Definition of a Business | | This ASU changes the definition of a business to exclude acquisitions where substantially all of the fair value of the assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets. Given this change in definition, we believe most of our shopping center acquisitions will no longer be considered business combinations, but rather asset acquisitions. | | January 2017 | | The largest impact of this standard is that transaction costs are capitalized for asset acquisitions rather than expensed when they are considered business combinations. Based on acquisitions in the last several years, transaction costs for a single shopping center acquisition have typically ranged from $0.2 million to $2.4 million with significantly higher transaction costs expected for an acquisition of a larger portfolio. We are applying the new guidance prospectively. Our acquisitions during the year ended December 31, 2017 (further discussed in Note 3) qualified as asset acquisitions and consequently, all transaction costs were capitalized after the adoption date. |

| ASU 2016-02, February 2016, Leases (Topic 842) | | This ASU significantly changes the accounting for leases by requiring lessees to recognize assets and liabilities for leases greater than 12 months on their balance sheet. The lessor model stays substantially the same; however, there were modifications to conform lessor accounting with the lessee model, eliminate real estate specific guidance, further define certain lease and non-lease components, and change the definition of initial direct costs of leases requiring significantly more leasing related costs to be expensed upfront. | | January 2019 | | We are currently assessing the impact of this standard to our consolidated financial statements. |

| Retail and mixed-use properties | | $ | 6,621,170 | | | $ | (1,677,938 | ) | | $ | 449,896 | |

| Residential | | 10,544 | | | | (8,988 | | ) | | 21,221 | | |

| | | $ | 6,759,073 | | | $ | (1,729,234 | ) | | $ | 542,707 | |

Retail and mixed-use properties includes the residential portion of Assembly Row, Bethesda Row, Chelsea Commons, Congressional Plaza, Pike & Rose, Santana Row, and Towson Residential (Flats @ 703).

The closing of the Assembly Row condominium sales is expected to commence in 2018.

As of December 31, 2017, no gain has been recognized for contracted condominium sales at Pike & Rose, as not all of the criteria necessary for profit recognition have been met.

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 $130.0 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.

Approximately $7.3 million and $4.9 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively.

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.

Our share of the gain, net of noncontrolling interests, was $0.5 million.

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.

| 2018 | | $ | 5,810 | | | $ | 9,990 | |

| 2019 | | 3,829 | | | | 9,488 | | |

| 2020 | | 3,182 | | | | 8,494 | | |

| 2021 | | 2,804 | | | | 7,869 | | |

| 2022 | | 2,381 | | | | 7,484 | | |