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EX-31.2 - EXHIBIT 31.2 - FEDERAL REALTY INVESTMENT TRUSTfrt-12312015xex312.htm
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EX-21.1 - EXHIBIT 21.1 - FEDERAL REALTY INVESTMENT TRUSTfrt-12312015xex211.htm
EX-23.1 - EXHIBIT 23.1 - FEDERAL REALTY INVESTMENT TRUSTfrt-12312015xex231.htm
EX-32.1 - EXHIBIT 32.1 - FEDERAL REALTY INVESTMENT TRUSTfrt-12312015xex321.htm
EX-32.2 - EXHIBIT 32.2 - FEDERAL REALTY INVESTMENT TRUSTfrt-12312015xex322.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-K
ý
ANNUAL REPORT PURSUANT TO THE SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 1-07533 
FEDERAL REALTY INVESTMENT TRUST
(Exact Name of Registrant as Specified in its Declaration of Trust) 
Maryland
 
52-0782497
(State of Organization)
 
(IRS Employer Identification No.)
 
 
1626 East Jefferson Street, Rockville, Maryland
 
20852
(Address of Principal Executive Offices)
 
(Zip Code)
(301) 998-8100
(Registrant’s Telephone Number, Including Area Code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange On Which Registered
Common Shares of Beneficial Interest, $.01 par value per share, with associated Common Share Purchase Rights
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ý  Yes    ¨  No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨  Yes    ý  No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ý  Yes    ¨  No
Indicate by check mark whether the Registrant has submitted electronically 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 and post such files).    ý  Yes    ¨  No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer
ý
Accelerated Filer
¨
 
 
 
 
Non-Accelerated Filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     ¨  Yes    ý  No
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, 2015 was $8.9 billion.
The number of Registrant’s common shares outstanding on February 5, 2016 was 69,669,864.



FEDERAL REALTY INVESTMENT TRUST
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 2015

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission for the Registrant’s 2015 annual meeting of shareholders to be held in May 2016 will be incorporated by reference into Part III hereof.

TABLE OF CONTENTS
PART I
 
 
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
 
 
 
PART II
 
 
Item 5.
Market for Our Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
 
 
 
PART III
 
 
Item 10.
Trustees, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Item 13.
Certain Relationships and Related Transactions, and Trustee Independence
Item 14.
Principal Accountant Fees and Services
 
 
 
PART IV
 
 
Item 15.
Exhibits and Financial Statement Schedules
 
 
SIGNATURES

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PART I


ITEM 1.    BUSINESS
References to “we,” “us,” “our” or the “Trust” refer to Federal Realty Investment Trust and our business and operations conducted through our directly or indirectly owned subsidiaries.
General
We are an equity real estate investment trust (“REIT”) specializing in the ownership, management, and redevelopment of high quality retail and mixed-use properties located primarily in densely populated and affluent communities in strategically selected metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as in California and South Florida. As of December 31, 2015, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 90 predominantly retail real estate projects comprising approximately 21.4 million square feet. In total, the real estate projects were 94.3% leased and 93.5% occupied at December 31, 2015. A joint venture in which we owned a 30% interest owned six retail real estate projects totaling approximately 0.8 million square feet as of December 31, 2015. In total, the joint venture properties in which we owned an interest were 93.6% leased and 85.3% occupied at December 31, 2015. On January 13, 2016, we acquired our partner's 70% interest in the joint venture and subsequently own 100% of the related properties. We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for 48 consecutive years.
We were founded in 1962 as a REIT under the laws of the District of Columbia and re-formed as a REIT in the state of Maryland in 1999. We operate in a manner intended to qualify as a REIT for tax purposes pursuant to provisions of the Internal Revenue Code of 1986, as amended (the “Code”). Our principal executive offices are located at 1626 East Jefferson Street, Rockville, Maryland 20852. Our telephone number is (301) 998-8100. Our website address is www.federalrealty.com. The information contained on our website is not a part of this report and is not incorporated herein by reference.
Business Objectives and Strategies
Our primary business objective is to own, manage, acquire and redevelop a portfolio of high quality retail focused properties that will:
provide increasing cash flow for distribution to shareholders;
generate higher internal growth than the shopping center industry;
provide potential for capital appreciation; and
protect investor capital.
Our portfolio includes, and we continue to acquire and redevelop, high quality retail in many formats ranging from regional, community and neighborhood shopping centers that often are anchored by grocery stores to mixed-use properties that are typically centered around a retail component but also include office, residential and/or hotel components.
Operating Strategies
Our core operating strategy is to actively manage our properties to maximize rents and maintain occupancy levels by attracting and retaining a strong and diverse base of tenants and replacing less relevant, weaker, underperforming tenants with stronger ones. Our properties are generally located in some of the most densely populated and affluent areas of the country. These strong demographics help our tenants generate higher sales, which has enabled us to maintain higher occupancy rates, charge higher rental rates, and maintain steady rent growth, all of which increase the value of our portfolio. Our operating strategies also include:
increasing rental rates through the renewal of expiring leases or the leasing of space to new tenants at higher rental rates while limiting vacancy and down-time;
maintaining a diversified tenant base, thereby limiting exposure to any one tenant’s financial or operating difficulties;
monitoring the merchandising mix of our tenant base to achieve a balance of strong national and regional tenants with local specialty tenants;
minimizing overhead and operating costs;
monitoring the physical appearance of our properties and the construction quality, condition and design of the buildings and other improvements located on our properties to maximize our ability to attract customers and thereby generate higher rents and occupancy rates;

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developing local and regional market expertise in order to capitalize on market and retailing trends;
leveraging the contacts and experience of our management team to build and maintain long-term relationships with tenants, investors and financing sources;
providing exceptional customer service; and
creating an experience at many of our properties that is identifiable, unique and serves the surrounding communities to help insulate these properties and the tenants at these properties from the impact of on-line retailing.
Investing Strategies
Our investment strategy is to deploy capital at risk-adjusted rates of return that exceed our long-term weighted average cost of capital in projects that have potential for future income growth and increased value. Our investments primarily fall into one of the following four categories:
renovating, expanding, reconfiguring and/or retenanting our existing properties to take advantage of under-utilized land or existing square footage to increase revenue;
renovating or expanding tenant spaces for tenants capable of producing higher sales, and therefore, paying higher rents;
acquiring quality retail and mixed-use properties located in densely populated and/or affluent areas where barriers to entry for further development are high, and that have possibilities for enhancing operating performance and creating value through renovation, expansion, reconfiguration and/or retenanting; and
developing the retail portions of mixed-use properties and developing or otherwise investing in non-retail portions of mixed-use properties we already own in order to capitalize on the overall value created in these properties.
Investment Criteria
When we evaluate potential redevelopment, retenanting, expansion, acquisition and development opportunities, we consider such factors as:
the expected returns in relation to our short and long-term cost of capital as well as the anticipated risk we will face in achieving the expected returns;
the anticipated growth rate of operating income generated by the property;
the ability to increase the long-term value of the property through redevelopment and retenanting;
the tenant mix at the property, tenant sales performance and the creditworthiness of those tenants;
the geographic area in which the property is located, including the population density and household incomes, as well as the population and income trends in that geographic area;
competitive conditions in the vicinity of the property, including competition for tenants and the ability of others to create competing properties through redevelopment, new construction or renovation;
access to and visibility of the property from existing roadways and the potential for new, widened or realigned, roadways within the property’s trade area, which may affect access and commuting and shopping patterns;
the level and success of our existing investments in the market area;
the current market value of the land, buildings and other improvements and the potential for increasing those market values; and
the physical condition of the land, buildings and other improvements, including the structural and environmental condition.
Financing Strategies
Our financing strategies are designed to enable us to maintain an investment grade balance sheet while retaining sufficient flexibility to fund our operating and investing activities in the most cost-efficient way possible. Our financing strategies include:
maintaining a prudent level of overall leverage and an appropriate pool of unencumbered properties that is sufficient to support our unsecured borrowings;
managing our exposure to variable-rate debt;
maintaining an available line of credit to fund operating and investing needs on a short-term basis;
taking advantage of market opportunities to refinance existing debt, reduce interest costs and manage our debt maturity schedule so that a significant portion of our debt does not mature in any one year;
selling properties that have limited growth potential or are not a strategic fit within our overall portfolio and redeploying the proceeds to redevelop, renovate, retenant and/or expand our existing properties, acquire new properties or reduce debt; and
utilizing the most advantageous long-term source of capital available to us to finance redevelopment and acquisition opportunities, which may include:

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the sale of our equity or debt securities through public offerings, including our at-the-market ("ATM") equity program in which we may from time to time offer and sell common shares, or private placements,
the incurrence of indebtedness through unsecured or secured borrowings,
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 receive the same distributions as our common shares and the holders of these units have the right to exchange their units for cash or the same number of our common shares, at our option), or
the use of joint venture arrangements.
Employees
At February 5, 2016, we had 299 full-time employees and 137 part-time employees. None of our employees are represented by a collective bargaining unit. We believe that our relationship with our employees is good.
Tax Status
We elected to be taxed as a REIT under the federal income tax laws when we filed our 1962 tax return. As a REIT, we are generally not subject to federal income tax on taxable income that we distribute to our shareholders. Under the Code, REITs are subject to numerous organizational and operational requirements, including the requirement to generally distribute at least 90% of taxable income each year. We will be subject to federal income tax on our taxable income (including 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. We will also generally not qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost. Even if we qualify as a REIT for federal income tax purposes, we may be subject to certain state and local income and franchise taxes and to federal income and excise taxes on our undistributed taxable income.
We have elected to treat certain of our subsidiaries as taxable REIT subsidiaries, which we refer to as a TRS. In general, a TRS may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Code. A TRS is subject to federal and state income taxes. Our TRS activities have not been material.
Governmental Regulations Affecting Our Properties
We and our properties are subject to a variety of federal, state and local environmental, health, safety and similar laws, including without limitation:
the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, which we refer to as CERCLA;
the Resource Conservation & Recovery Act;
the Federal Clean Water Act;
the Federal Clean Air Act;
the Toxic Substances Control Act;
the Occupational Safety & Health Act; and
the Americans with Disabilities Act.
The application of these laws to a specific property that we own depends on a variety of property-specific circumstances, including the current and former uses of the property, the building materials used at the property and the physical layout of the property. Under certain environmental laws, principally CERCLA, we, as the owner or operator of properties currently or previously owned, may be required to investigate and clean up certain hazardous or toxic substances, asbestos-containing materials, or petroleum product releases at the property. We may also be held liable to a governmental entity or third parties for property damage and for investigation and clean up costs incurred in connection with the contamination, whether or not we knew of, or were responsible for, such contamination. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and costs it incurs in connection with the contamination. As the owner or operator of real estate, we also may be liable under common law to third parties for damages and injuries resulting from environmental contamination emanating from the real estate. Such costs or liabilities could exceed the value of the affected real estate. The presence of contamination or the failure to remediate contamination may adversely affect our ability to sell or lease real estate or to borrow using the real estate as collateral.
Neither existing environmental, health, safety and similar laws nor the costs of our compliance with these laws has had a material adverse effect on our financial condition or results of operations, and management does not believe they will in the future. In addition, we have not incurred, and do not expect to incur, any material costs or liabilities due to environmental contamination at properties we currently own or have owned in the past. However, we cannot predict the impact of new or

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changed laws or regulations on properties we currently own or may acquire in the future. We have no current plans for substantial capital expenditures with respect to compliance with environmental, health, safety and similar laws and we carry environmental insurance which covers a number of environmental risks for most of our properties.
Competition
Numerous commercial developers and real estate companies compete with us with respect to the leasing and the acquisition of properties. Some of these competitors may possess greater capital resources than we do, although we do not believe that any single competitor or group of competitors in any of the primary markets where our properties are located are dominant in that market. This competition may:
reduce the number of properties available for acquisition;
increase the cost of properties available for acquisition;
interfere with our ability to attract and retain tenants, leading to increased vacancy rates and/or reduced rents; and
adversely affect our ability to minimize expenses of operation.
Retailers at our properties also face increasing competition from online retailers, outlet stores, discount shopping clubs, superstores, and other forms of sales and marketing of goods and services, such as direct mail. This competition could contribute to lease defaults and insolvency of tenants.
Available Information
Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) are available free of charge through the Investors section of our website at www.federalrealty.com as soon as reasonably practicable after we electronically file the material with, or furnish the material to, the Securities and Exchange Commission, or the SEC.
Our Corporate Governance Guidelines, Code of Business Conduct, Code of Ethics applicable to our Chief Executive Officer and senior financial officers, Whistleblower Policy, organizational documents and the charters of our audit committee, compensation committee and nominating and corporate governance committee are all available in the Corporate Governance section of the Investors section of our website.
Amendments to the Code of Ethics or Code of Business Conduct or waivers that apply to any of our executive officers or our senior financial officers will be disclosed in that section of our website as well.
You may obtain a printed copy of any of the foregoing materials from us by writing to us at Investor Relations, Federal Realty Investment Trust, 1626 East Jefferson Street, Rockville, Maryland 20852.


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ITEM 1A.    RISK FACTORS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. Also, documents that we “incorporate by reference” into this Annual Report on Form 10-K, including documents that we subsequently file with the SEC will contain forward-looking statements. When we refer to forward-looking statements or information, sometimes we use words such as “may,” “will,” “could,” “should,” “plans,” “intends,” “expects,” “believes,” “estimates,” “anticipates” and “continues.” In particular, the below risk factors describe forward-looking information. The risk factors describe risks that may affect these statements but are not all-inclusive, particularly with respect to possible future events. Many things can happen that can cause actual results to be different from those we describe. These factors include, but are not limited to the following:
Revenue from our properties may be reduced or limited if the retail operations of our tenants are not successful.
Revenue from our properties depends primarily on the ability of our tenants to pay the full amount of rent and other charges due under their leases on a timely basis. Some of our leases provide for the payment, in addition to base rent, of additional rent above the base amount according to a specified percentage of the gross sales generated by the tenants and generally provide for reimbursement of real estate taxes and expenses of operating the property. Economic 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. While demand for our retail spaces has been strong, there can be no assurance that this will continue. Any reduction in our tenants’ abilities to pay base rent, percentage rent or other charges on a timely basis, including the filing by any of our tenants for bankruptcy protection, will adversely affect our financial condition and results of operations. In the event of default by a tenant, we may experience delays and unexpected costs in enforcing our rights as landlord under lease terms, which may also adversely affect our financial condition and results of operations.
Our net income depends on the success and continued presence of our “anchor” tenants.
Our net income could be adversely affected in the event of a downturn in the business, or the bankruptcy or insolvency, of any anchor store or anchor tenant. Anchor tenants generally occupy large amounts of square footage, pay a significant portion of the total rents at a property and contribute to the success of other tenants by drawing significant numbers of customers to a property. The closing of one or more anchor stores at a property could adversely affect that property and result in lease terminations by, or reductions in rent from, other tenants whose leases may permit termination or rent reduction in those circumstances or whose own operations may suffer as a result. While our anchor tenant space is currently 96.1% occupied, we have seen an overall decrease in the number of tenants available to fill anchor spaces. Therefore, tenant demand for certain of our anchor spaces may decrease and as a result, we may see an increase in vacancy and/or a decrease in rents for those spaces that could have a negative impact to our net income.
We may be unable to collect balances due from tenants that file for bankruptcy protection.
If a tenant or lease guarantor files for bankruptcy, we may not be able to collect all pre-petition amounts owed by that party. In addition, a tenant that files for bankruptcy protection may terminate our lease in which event we would have a general unsecured claim that would likely be for less than the full amount owed to us for the remainder of the lease term, which could adversely affect our financial condition and results of operations.
We may experience difficulty or delay in renewing leases or re-leasing space.
We derive most of our revenue directly or indirectly from rent received from our tenants. We are subject to the risks that, upon expiration or termination of leases, whether by their terms, as a result of a tenant bankruptcy, general economic conditions or otherwise, leases for space in our properties may not be renewed, space may not be re-leased, or the terms of renewal or re-lease, including the cost of required renovations or concessions to tenants, may be less favorable than current lease terms and may include decreases in rental rates. As a result, our net income could be reduced.
The amount of debt we have and the restrictions imposed by that debt could adversely affect our business and financial condition.
As of December 31, 2015, we had approximately $2.6 billion of debt outstanding. Of that outstanding debt, approximately $482.8 million was secured by all or a portion of nine of our real estate projects and approximately $71.6 million represented capital lease obligations on four of our properties. In addition, we owned a 30% interest in a joint venture that had $34.4 million of debt secured by two properties as of December 31, 2015. On January 13, 2016, we acquired our partner's 70% interest in the joint venture, and assumed 100% of the related debt. Approximately $2.6 billion (97.6%) of our debt as of December 31, 2015 is fixed rate debt, which includes all of our property secured debt, our capital lease obligations and our $275.0 million term loan as the rate is effectively fixed by two interest rate swap agreements. Our joint venture’s debt of $34.4

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million, which is unconsolidated as of December 31, 2015, is also fixed rate debt. Our organizational documents do not limit the level or amount of debt that we may incur. The amount of our debt outstanding from time to time could have important consequences to our shareholders. For example, it could:
require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, property acquisitions, redevelopments and other appropriate business opportunities that may arise in the future;
limit our ability to make distributions on our outstanding common shares and preferred shares;
make it difficult to satisfy our debt service requirements;
require us to dedicate increased amounts of our cash flow from operations to payments on debt upon refinancing or on our variable rate, unhedged debt, if interest rates rise;
limit our flexibility in planning for, or reacting to, changes in our business and the factors that affect the profitability of our business;
limit our ability to obtain any additional debt or equity financing we may need in the future for working capital, debt refinancing, capital expenditures, acquisitions, redevelopments or other general corporate purposes or to obtain such financing on favorable terms; and/or
limit our flexibility in conducting our business, which may place us at a disadvantage compared to competitors with less debt or debt with less restrictive terms.
Our ability to make scheduled principal payments of, to pay interest on, or to refinance our indebtedness will depend primarily on our future performance, which to a certain extent is subject to economic, financial, competitive and other factors beyond our control. There can be no assurance that our business will continue to generate sufficient cash flow from operations in the future to service our debt or meet our other cash needs. If we are unable to generate this cash flow from our business, we may be required to refinance all or a portion of our existing debt, sell assets or obtain additional financing to meet our debt obligations and other cash needs, including the payment of dividends required to maintain our status as a real estate investment trust. We cannot assure you that any such refinancing, sale of assets or additional financing would be possible on terms that we would find acceptable.
We are obligated to comply with financial and other covenants pursuant to our debt obligations that could restrict our operating activities, and the failure to comply with such covenants could result in defaults that accelerate payment under our debt agreements.
Our revolving credit facility, term loan and certain series of notes include financial covenants that may limit our operating activities in the future. We are also required to comply with additional covenants that include, among other things, provisions:
relating to the maintenance of property securing a mortgage;
restricting our ability to pledge assets or create liens;
restricting our ability to incur additional debt;
restricting our ability to amend or modify existing leases at properties securing a mortgage;
restricting our ability to enter into transactions with affiliates; and
restricting our ability to consolidate, merge or sell all or substantially all of our assets.
As of December 31, 2015, we were in compliance with all of our financial covenants. If we were to breach any of our debt covenants, including the covenants listed above, and did not cure the breach within any applicable cure period, our lenders could require us to repay the debt immediately, and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan. Many of our debt arrangements, including our public notes, term loan and our revolving credit facility, are cross-defaulted, which means that the lenders under those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a default under certain of our other debt obligations. As a result, any default under our debt covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares.
Our development activities have inherent risks.
The ground-up development of improvements on real property, as opposed to the renovation and redevelopment of existing improvements, presents substantial risks. We generally do not look to acquire raw land for future development; however, we do intend to complete the development and construction of future phases of projects we already own, such as Assembly Row in Somerville, Massachusetts and Pike & Rose in North Bethesda, Maryland. We may undertake development of these and other projects on our own or bring in third parties if it is justifiable on a risk-adjusted return basis. We may also choose to delay completion of a project if market conditions do not allow an appropriate return. If conditions arise and we are not able or decide not to complete a project or if the expected cash flows of our project do not exceed the book value, an impairment of the project may be required. If additional phases of any of our existing projects or if any new projects are not successful, it may adversely affect our financial condition and results of operations.

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During 2015, construction commenced on the development of Phase II at both Assembly Row and Pike & Rose. At Santana Row, we continue our on-going redevelopment efforts, and are constructing a new 234,500 square foot office building, which has been fully leased to one tenant. A further discussion of these projects, expected costs, and current status can be found in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the "Outlook" subsection.
In addition to the risks associated with real estate investment in general, as described elsewhere and the specific risks above, the risks associated with our remaining development activities include:
contractor changes may delay the completion of development projects and increase overall costs;
significant time lag between commencement and stabilization subjects us to greater risks due to fluctuations in the general economy;
delivery of residential product (both rental units and for sale condominium units) into uncertain residential environments may result in lower rents or sale prices than underwritten;
substantial amount of our investment is related to infrastructure, the value of which may be negatively impacted if we do not complete subsequent phases;
failure or inability to obtain construction or permanent financing on favorable terms;
failure or inability to obtain public funding from governmental agencies to fund infrastructure projects, including expected public funding in connection with our development at Assembly Row;
expenditure of money and time on projects that may never be completed;
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;
difficulty securing key anchor or other tenants may impact occupancy rates and projected revenue;
inability to achieve projected rental rates or anticipated pace of lease-up;
higher than estimated construction or operating costs, including labor and material costs; and
possible delay in completion of a project because of a number of factors, including weather, labor disruptions, construction delays or delays in receipt of zoning or other regulatory approvals, acts of terror or other acts of violence, or acts of God (such as fires, earthquakes or floods).
Redevelopments and acquisitions may fail to perform as expected.
Our investment strategy includes the redevelopment and acquisition of high quality, retail focused properties in densely populated areas with high average household incomes and significant barriers to adding competitive retail supply. The redevelopment and acquisition of properties entail risks that include the following, any of which could adversely affect our results of operations and our ability to meet our obligations:
our estimate of the costs to improve, reposition or redevelop a property may prove to be too low, or the time we estimate to complete the improvement, repositioning or redevelopment may be too short. As a result, the property may fail to achieve the returns we have projected, either temporarily or for a longer time;
we may not be able to identify suitable properties to acquire or may be unable to complete the acquisition of the properties we identify;
we may not be able to integrate an acquisition into our existing operations successfully;
properties we redevelop or acquire may fail to achieve the occupancy or rental rates we project, within the time frames we project, at the time we make the decision to invest, which may result in the properties’ failure to achieve the returns we projected;
our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs until after the property is acquired, which could significantly increase our total acquisition costs or decrease cash flow from the property; and
our investigation of a property or building prior to our acquisition, and any representations we may receive from the seller of such building or property, may fail to reveal various liabilities, which could reduce the cash flow from the property or increase our acquisition cost.
Our ability to grow will be limited if we cannot obtain additional capital.
Our growth strategy is focused on the redevelopment of properties we already own and the acquisition of additional properties. We believe that it will be difficult to fund our expected growth with cash from operating activities because, in addition to other requirements, we are generally required to distribute to our shareholders at least 90% of our taxable income each year to continue to qualify as a REIT for federal income tax purposes. As a result, we must rely primarily upon the availability of debt or equity capital, which may or may not be available on favorable terms or at all. Debt could include the sale of debt securities and mortgage loans from third parties. If economic conditions and conditions in the capital markets are not favorable at the time we need to raise capital, we may need to obtain capital on less favorable terms. Additionally, we cannot guarantee that additional financing, refinancing or other capital will be available in the amounts we desire or on favorable terms. Our access to

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debt or equity capital depends on a number of factors, including the market’s perception of our growth potential and risk profile, our ability to pay dividends, and our current and potential future earnings. Depending on the outcome of these factors as well as the impact of the economic environment, we could experience delay or difficulty in implementing our growth strategy on satisfactory terms, or be unable to implement this strategy.
Rising interest rates could adversely affect our cash flow and the market price of our outstanding debt and preferred shares.
Of our approximately $2.6 billion of debt outstanding as of December 31, 2015, approximately $337.9 million bears interest at variable rates of which $275.0 million is effectively fixed through two interest rate swap agreements. We have a $600.0 million revolving credit facility, on which $53.5 million is outstanding at December 31, 2015, that bears interest at LIBOR plus 90 basis points. We may borrow additional funds at variable interest rates in the future. Increases in interest rates would increase the interest expense on our variable rate debt and reduce our cash flow, which could adversely affect our ability to service our debt and meet our other obligations and also could reduce the amount we are able to distribute to our shareholders. The interest rate on our $275.0 million term loan is currently fixed at 2.62% as a result of two interest rate swap agreements. We may enter into this type of hedging arrangements or other transactions for all or a portion of our variable rate debt to limit our exposure to rising interest rates. However, the amounts we are required to pay under 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 of our hedging arrangements. In addition, an increase in market interest rates may lead purchasers of our debt securities and preferred shares to demand a higher annual yield, which could adversely affect the market price of our outstanding debt securities and preferred shares and the cost and/or timing of refinancing or issuing additional debt securities or preferred shares.
The market value of our debt and equity securities is subject to various factors that may cause significant fluctuations or volatility.
As with other publicly traded securities, the market price of our debt and equity securities depends on various factors, which may change from time to time and/or may be unrelated to our financial condition, operating performance or prospects that may cause significant fluctuations or volatility in such prices. These factors include, among others:
general economic and financial market conditions;
level and trend of interest rates;
our ability to access the capital markets to raise additional capital;
the issuance of additional equity or debt securities;
changes in our funds from operations (“FFO”) or earnings estimates;
changes in our debt or analyst ratings;
our financial condition and performance;
market perception of our business compared to other REITs; and
market perception of REITs, in general, compared to other investment alternatives.

Loss of our key management could adversely affect performance and the value of our common shares.
We are dependent on the efforts of our key management. Although we believe qualified replacements could be found for any departures of key executives, the loss of their services could adversely affect our performance and the value of our common shares.
Our performance and value are subject to general risks associated with the real estate industry.
Our economic performance and the value of our real estate assets, and, consequently, the value of our investments, are subject to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay distributions to our shareholders will be adversely affected. As a real estate company, we are susceptible to the following real estate industry risks:
economic downturns in general, or in the areas where our properties are located;
adverse changes in local real estate market conditions, such as an oversupply or reduction in demand;
changes in tenant preferences that reduce the attractiveness of our properties to tenants;
zoning or regulatory restrictions;
decreases in market rental rates;
weather conditions that may increase or decrease energy costs and other weather-related expenses;
costs associated with the need to periodically repair, renovate and re-lease space; and
increases in the cost of adequate maintenance, insurance and other operating costs, including real estate taxes, associated with one or more properties, which may occur even when circumstances such as market factors and

10


competition cause a reduction in revenues from one or more properties, although real estate taxes typically do not increase upon a reduction in such revenues.
Each of these risks could result in decreases in market rental rates and increases in vacancy rates, which could adversely affect our financial condition and results of operation.
Many real estate costs are fixed, even if income from our properties decreases.
Our financial results depend primarily on leasing space in our properties to tenants on terms favorable to us. Costs associated with real estate investment, such as real estate taxes, insurance and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease, or other circumstances cause a reduction in income from the property. As a result, cash flow from the operations of our properties may be reduced if a tenant does not pay its rent or we are unable to rent our properties on favorable terms. Under those circumstances, we might not be able to enforce our rights as landlord without delays and may incur substantial legal costs. Additionally, new properties that we may acquire or redevelop may not produce any significant revenue immediately, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with such new properties until they are fully occupied.
Competition may limit our ability to purchase new properties and generate sufficient income from tenants.
Numerous commercial developers and real estate companies compete with us in seeking tenants for our existing properties and properties for acquisition. This competition may:
reduce properties available for acquisition;
increase the cost of properties available for acquisition;
reduce rents payable to us;
interfere with our ability to attract and retain tenants;
lead to increased vacancy rates at our properties; and
adversely affect our ability to minimize expenses of operation.
Retailers at our properties also face increasing competition from online retailers, outlet stores, discount shopping clubs and other forms of sales and marketing of goods, such as direct mail. This competition could contribute to lease defaults and insolvency of tenants. If we are unable to continue to attract appropriate retail tenants to our properties, or to purchase new properties in our geographic markets, it could materially affect our ability to generate net income, service our debt and make distributions to our shareholders.
We may be unable to sell properties when appropriate because real estate investments are illiquid.
Real estate investments generally cannot be sold quickly. In addition, there are some limitations under federal income tax laws applicable to real estate and to REITs in particular that may limit our ability to sell our assets. We may not be able to alter our portfolio promptly in response to changes in economic or other conditions including being unable to sell a property at a return we believe is appropriate due to the economic environment. Our inability to respond quickly to adverse changes in the performance of our investments could have an adverse effect on our ability to meet our obligations and make distributions to our shareholders.
Our insurance coverage on our properties may be inadequate.
We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire, flood, earthquake, environmental matters, rental loss and acts of terrorism. All of these policies contain coverage limitations. We believe these coverages are of the types and amounts customarily obtained for or by an owner of similar types of real property assets located in the areas where our properties are located. We intend to obtain similar insurance coverage on subsequently acquired properties.
The availability of insurance coverage may decrease and the prices for insurance may increase as a consequence of significant losses incurred by the insurance industry and other factors outside our control. As a result, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. 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. We therefore may cease to have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. If an uninsured loss or a loss in excess of our insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property, but still remain obligated for any mortgage debt or other financial obligations related to the property. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result

11


in large expenses to repair or rebuild the property. Also, due to inflation, changes in codes and ordinances, environmental considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed. Further, we may be unable to collect insurance proceeds if our insurers are unable to pay or contest a claim. Events such as these could adversely affect our results of operations and our ability to meet our obligations, including distributions to our shareholders.
We may have limited flexibility in dealing with our jointly owned investments.
Our organizational documents do not limit the amount of funds that we may invest in properties and assets owned jointly with other persons or entities. As of December 31, 2015, we held nine predominantly retail real estate projects jointly with other persons in addition to our joint venture with affiliates of a discretionary fund created and advised by Clarion Partners (“Clarion”) and properties owned in a “downREIT” structure. Additionally, we have entered into a joint venture agreement related to the hotel component of Phase II of our Pike & Rose development project. We may make additional joint investments in the future. Our existing and future joint investments may subject us to special risks, including the possibility that our partners or co-investors might become bankrupt, that those partners or co-investors might have economic or other business interests or goals which are unlike or incompatible with our business interests or goals, that those partners or co-investors might be in a position to take action contrary to our suggestions or instructions, or in opposition to our policies or objectives, and that disputes may develop with our joint venture partners over decisions affecting the property or the joint venture, which may result in litigation or arbitration or some other form of dispute resolution. Although as of December 31, 2015, we held the controlling interests in all of our existing co-investments (except the Clarion and hotel investments discussed above), we generally must obtain the consent of the co-investor or meet defined criteria to sell or to finance these properties. Joint ownership gives a third party the opportunity to influence the return we can achieve on some of our investments and may adversely affect our ability to make distributions to our shareholders. We may also be liable for the actions of our co-investors.
On January 13, 2016 we acquired our partner's 70% interest in our Clarion joint venture, and subsequently own 100% of the related properties.
Environmental laws and regulations could reduce the value or profitability of our properties.
All real property and the operations conducted on real property are subject to federal, state and local laws, ordinances and regulations relating to hazardous materials, environmental protection and human health and safety. Under various federal, state and local laws, ordinances and regulations, we and our tenants may be required to investigate and clean up certain hazardous or toxic substances released on or in properties we own or operate, and also may be required to pay other costs relating to hazardous or toxic substances. This liability may be imposed without regard to whether we or our tenants knew about the release of these types of substances or were responsible for their release. The presence of contamination or the failure to properly remediate contamination at any of our properties may adversely affect our ability to sell or lease those properties or to borrow funds by using those properties as collateral. The costs or liabilities could exceed the value of the affected real estate. We are not aware of any environmental condition with respect to any of our properties that management believes would have a material adverse effect on our business, assets or results of operations taken as a whole. The uses of any of our properties prior to our acquisition of the property and the building materials used at the property are among the property-specific factors that will affect how the environmental laws are applied to our properties. If we are subject to any material environmental liabilities, the liabilities could adversely affect our results of operations and our ability to meet our obligations.
We cannot predict what other environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist on the properties in the future. Compliance with existing and new laws and regulations may require us or our tenants to spend funds to remedy environmental problems. Our tenants, like many of their competitors, have incurred, and will continue to incur, capital and operating expenditures and other costs associated with complying with these laws and regulations, which will adversely affect their potential profitability.
Generally, our tenants must comply with environmental laws and meet remediation requirements. Our leases typically impose obligations on our tenants to indemnify us from any compliance costs we may incur as a result of the environmental conditions on the property caused by the tenant. If a lease does not require compliance or if a tenant fails to or cannot comply, we could be forced to pay these costs. If not addressed, environmental conditions could impair our ability to sell or re-lease the affected properties in the future or result in lower sales prices or rent payments.

12


The Americans with Disabilities Act of 1990 could require us to take remedial steps with respect to existing or newly acquired properties.
Our existing properties, as well as properties we may acquire, as commercial facilities, are required to comply with Title III of the Americans with Disabilities Act of 1990. Investigation of a property may reveal non-compliance with this Act. The requirements of this Act, or of other federal, state or local laws or regulations, also may change in the future and restrict further renovations of our properties with respect to access for disabled persons. Future compliance with this Act may require expensive changes to the properties.
The revenues generated by our tenants could be negatively affected by various federal, state and local laws to which they are subject.
We and our tenants are subject to a wide range of federal, state and local laws and regulations, such as local licensing requirements, consumer protection laws and state and local fire, life-safety and similar requirements that affect the use of the properties. The leases typically require that each tenant comply with all laws and regulations. Failure to comply could result in fines by governmental authorities, awards of damages to private litigants, or restrictions on the ability to conduct business on such properties. Non-compliance of this sort could reduce our revenues from a tenant, could require us to pay penalties or fines relating to any non-compliance, and could adversely affect our ability to sell or lease a property.
Failure to qualify as a REIT for federal income tax purposes would cause us to be taxed as a corporation, which would substantially reduce funds available for payment of distributions.
We believe that we are organized and qualified as a REIT for federal income tax purposes and currently intend to operate in a manner that will allow us to continue to qualify as a REIT under the Code. However, we cannot assure you that we will remain qualified as such in the future.
Qualification as a REIT involves the application of highly technical and complex Code provisions and applicable income tax regulations that have been issued under the Code. Certain facts and circumstances not entirely within our control may affect our ability to qualify as a REIT. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying rents and certain other income. Satisfying this requirement could be difficult, for example, if defaults by tenants were to reduce the amount of income from qualifying rents. As a REIT, we must generally make annual distributions to shareholders of at least 90% of our taxable income. In addition, new legislation, new regulations, new administrative interpretations or new court decisions may significantly change the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification. Any modification in the tax treatment of REITs could have a significant adverse impact to our net income.
If we fail to qualify as a REIT:
we would not be allowed a deduction for distributions to shareholders in computing taxable income;
we would be subject to federal income tax at regular corporate rates;
we could be subject to the federal alternative minimum tax;
unless we are entitled to relief under specific statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified;
we could be required to pay significant income taxes, which would substantially reduce the funds available for investment or for distribution to our shareholders for each year in which we failed or were not permitted to qualify; and
we would no longer be required by law to make any distributions to our shareholders.
We may be required to incur additional debt to qualify as a REIT.
As a REIT, we must generally make annual distributions to shareholders of at least 90% of our taxable income. We are subject to income tax on amounts of undistributed taxable income and net capital gain. In addition, we would be subject to a 4% excise tax if we fail to distribute sufficient income to meet a minimum distribution test based on our ordinary income, capital gain and aggregate undistributed income from prior years. We intend to make distributions to shareholders to comply with the Code’s distribution provisions and to avoid federal income and excise tax. We may need to borrow funds to meet our distribution requirements because:
our income may not be matched by our related expenses at the time the income is considered received for purposes of determining taxable income; and
non-deductible capital expenditures, creation of reserves, or debt service requirements may reduce available cash but not taxable income.

13


In these circumstances, we might have to borrow funds on terms we might otherwise find unfavorable and we may have to borrow funds even if our management believes the market conditions make borrowing financially unattractive. Current tax law also allows us to pay a portion of our distributions in shares instead of cash.
To maintain our status as a REIT, we limit the amount of shares any one shareholder can own.
The Code imposes certain limitations on the ownership of the stock of a REIT. For example, not more than 50% in value of our outstanding shares of capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code) during the last half of any taxable year. To protect our REIT status, our declaration of trust prohibits any one shareholder from owning (actually or constructively) more than 9.8% in value of the outstanding common shares or of any class or series of outstanding preferred shares. The constructive ownership rules are complex. Shares of our capital stock owned, actually or constructively, by a group of related individuals and/or entities may be treated as constructively owned by one of those individuals or entities. As a result, the acquisition of less than 9.8% in value of the outstanding common shares and/or a class or series of preferred shares (or the acquisition of an interest in an entity that owns common shares or preferred shares) by an individual or entity could cause that individual or entity (or another) to own constructively more than 9.8% in value of the outstanding capital stock. If that happened, either the transfer of ownership would be void or the shares would be transferred to a charitable trust and then sold to someone who can own those shares without violating the 9.8% ownership limit.
The Board of Trustees may waive these restrictions on a case-by-case basis. In addition, the Board of Trustees and two-thirds of our shareholders eligible to vote at a shareholder meeting may remove these restrictions if they determine it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. The 9.8% ownership restrictions may delay, defer or prevent a transaction or a change of our control that might involve a premium price for the common shares or otherwise be in the shareholders’ best interest.
We cannot assure you we will continue to pay dividends at historical rates.
Our ability to continue to pay dividends on our common shares at historical rates or to increase our common share dividend rate, and our ability to pay preferred share dividends and service our debt securities, will depend on a number of factors, including, among others, the following:
our financial condition and results of future operations;
the performance of lease terms by tenants;
the terms of our loan covenants; and
our ability to acquire, finance, develop or redevelop and lease additional properties at attractive rates.
If we do not maintain or increase the dividend on our common shares, it could have an adverse effect on the market price of our common shares and other securities. Any preferred shares we may offer in the future may have a fixed dividend rate that would not increase with any increases in the dividend rate of our common shares. Conversely, payment of dividends on our common shares may be subject to payment in full of the dividends on any preferred shares and payment of interest on any debt securities we may offer.
Certain tax and anti-takeover provisions of our declaration of trust and bylaws may inhibit a change of our control.
Certain provisions contained in our declaration of trust and bylaws and the Maryland General Corporation Law, as applicable to Maryland REITs, may discourage a third party from making a tender offer or acquisition proposal to us. If this were to happen, it could delay, deter or prevent a change in control or the removal of existing management. These provisions also may delay or prevent the shareholders from receiving a premium for their common shares over then-prevailing market prices. These provisions include:
the REIT ownership limit described above;
authorization of the issuance of our preferred shares with powers, preferences or rights to be determined by the Board of Trustees;
special meetings of our shareholders may be called only by the chairman of the board, the chief executive officer, the president, by one-third of the trustees or by shareholders possessing no less than 25% of all the votes entitled to be cast at the meeting;
the Board of Trustees, without a shareholder vote, can classify or reclassify unissued shares of beneficial interest, including the reclassification of common shares into preferred shares and vice-versa;
a two-thirds shareholder vote is required to approve some amendments to the declaration of trust; and
advance-notice requirements for proposals to be presented at shareholder meetings.
In addition, if we elect to be governed by it in the future, the Maryland Control Share Acquisition Law could delay or prevent a change in control. Under Maryland law, unless a REIT elects not to be subject to this law, “control shares” acquired in a “control share acquisition” have no voting rights except to the extent approved by shareholders by a vote of two-thirds of the

14


votes entitled to be cast on the matter, excluding shares owned by the acquirer and by officers or trustees who are employees of the REIT. “Control shares” are voting shares that would entitle the acquirer to exercise voting power in electing trustees within specified ranges of voting power. A “control share acquisition” means the acquisition of control shares, with some exceptions.
Our bylaws state that the Maryland control share acquisition law will not apply to any acquisition by any person of our common shares. This bylaw provision may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares, by a vote of a majority of the shareholders entitled to vote, and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.
We may amend or revise our business policies without your approval.
Our Board of Trustees may amend or revise our operating policies without shareholder approval. Our investment, financing and borrowing policies and policies with respect to all other activities, such as growth, debt, capitalization and operations, are determined by the Board of Trustees. The Board of Trustees may amend or revise these policies at any time and from time to time at its discretion. A change in these policies could adversely affect our financial condition and results of operations, and the market price of our securities.
The current business plan adopted by our Board of Trustees focuses on our investment in high quality retail based properties that are typically neighborhood and community shopping centers or mixed-use properties, principally through redevelopments and acquisitions. If this business plan is not successful, it could have a material adverse effect on our financial condition and results of operations.
Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this Annual Report on Form 10-K. Except as may be required by law, we make no promise to update any of the forward-looking statements as a result of new information, future events or otherwise. You should carefully review the above risks and the risk factors.
Natural disasters and severe weather conditions could have an adverse impact on our cash flow and operating results.
Changing weather patterns and climatic conditions, such as global warming, may have added to the unpredictability and frequency of natural disasters and severe weather conditions and created additional uncertainty as to future trends and exposures.  Our operations are located in areas that are subject to natural disasters and severe weather conditions such as hurricanes, earthquakes, droughts, snow storms, floods and fires.  The occurrence of natural disasters or severe weather conditions can delay new development projects, increase investment costs to repair or replace damaged properties, increase operation costs, increase future property insurance costs, and negatively impact the tenant demand for lease space.  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 cybersecurity attacks that could cause loss of confidential information and other business disruptions.
We rely extensively on computer systems to process transactions and manage our business, and our business is at risk from and may be impacted by cybersecurity attacks. These could include attempts to gain unauthorized access to our data and computer systems. Attacks can be both individual and/or highly organized attempts organized by very sophisticated hacking organizations. We employ a number of measures to prevent, detect and mitigate these threats, which include password encryption, frequent password change events, firewall detection systems, anti-virus software in-place, frequent backups, a redundant data system for core applications and annual penetration testing; however, there is no guarantee such efforts will be successful in preventing a cyber attack. A cybersecurity attack could compromise the confidential information of our employees, tenants and vendors. A successful attack could disrupt and otherwise adversely affect our business operations.
Changes in accounting standards may adversely impact our financial results.
The Financial Accounting Standards Board ("FASB"), in conjunction with the SEC, has several key projects on their agenda that could impact how we currently account for our material transactions, including lease accounting and other convergence projects with the International Accounting Standards Board. At this time, we are unable to predict with certainty which, if any, proposals may be passed or what level of impact any such proposal could have on the presentation of our consolidated financial statements, our results of operations and our financial ratios required by our debt covenants.
ITEM 1B.    UNRESOLVED STAFF COMMENTS
None.

15


ITEM 2.    PROPERTIES
General
As of December 31, 2015, we owned or had a majority ownership interest in community and neighborhood shopping centers and mixed-used properties which are operated as 90 predominantly retail real estate projects comprising approximately 21.4 million square feet. These properties are located primarily in densely populated and affluent communities in strategic metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as California and South Florida. No single property accounted for over 10% of our 2015 total revenue. We believe that our properties are adequately covered by commercial general liability, fire, flood, earthquake, terrorism and business interruption insurance provided by reputable companies, with commercially reasonable exclusions, deductibles and limits.
Tenant Diversification
As of December 31, 2015, we had approximately 2,700 leases, with tenants ranging from sole proprietors to major national and international retailers. No one tenant or affiliated group of tenants accounted for more than 2.9% of our annualized base rent as of December 31, 2015. As a result of our tenant diversification, we believe our exposure to any one bankruptcy filing in the retail sector has not been and will not be significant, however, multiple filings by a number of retailers could have a significant impact.
Geographic Diversification
Our 90 real estate projects are located in 12 states and the District of Columbia. The following table shows the number of projects, the gross leasable area (“GLA”) of commercial space and the percentage of total portfolio gross leasable area of commercial space in each state as of December 31, 2015.
 
State
 
Number of
Projects
 
Gross Leasable
Area
 
Percentage
of Gross
Leasable
Area
 
 
(In square feet)
Maryland
 
18

 
3,977,000

 
18.6
%
California
 
14

 
3,854,000

 
18.0
%
Virginia
 
15

 
3,601,000

 
16.8
%
Pennsylvania(1)
 
10

 
2,299,000

 
10.8
%
Massachusetts
 
7

 
1,789,000

 
8.4
%
New Jersey
 
6

 
1,718,000

 
8.0
%
Florida
 
4

 
1,316,000

 
6.2
%
New York
 
5

 
1,138,000

 
5.3
%
Illinois
 
4

 
752,000

 
3.5
%
Connecticut(1)
 
3

 
397,000

 
1.9
%
Michigan
 
1

 
217,000

 
1.0
%
District of Columbia
 
2

 
168,000

 
0.8
%
North Carolina
 
1

 
153,000

 
0.7
%
Total
 
90

 
21,379,000

 
100.0
%
 
(1)
Additionally, we own two participating mortgages totaling approximately $29.9 million secured by multiple buildings in Manayunk, Pennsylvania, and an $11.7 million mortgage secured by a shopping center in Norwalk, Connecticut.
Leases, Lease Terms and Lease Expirations
Our leases are classified as operating leases and typically are structured to require the monthly payment of minimum rents in advance, subject to periodic increases during the term of the lease, percentage rents based on the level of sales achieved by tenants, and reimbursement of a majority of on-site operating expenses and real estate taxes. These features in our leases generally reduce our exposure to higher costs and allow us to participate in improved tenant sales.
Commercial property leases generally range from three to ten years; however, certain leases, primarily with anchor tenants, may be longer. 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 2015, represented approximately 6.1% of total rental income.

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The following table sets forth the schedule of lease expirations for our commercial leases in place as of December 31, 2015 for each of the 10 years beginning with 2016 and after 2025 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, 2015.
 
Year of Lease Expiration
 
Leased
Square
Footage
Expiring
 
Percentage of
Leased Square
Footage
Expiring
 
Annualized
Base Rent
Represented by
Expiring Leases
 
Percentage of  Annualized Base Rent  Represented by Expiring Leases
2016
 
1,117,000

 
6
%
 
$
33,337,000

 
6
%
2017
 
2,601,000

 
13
%
 
67,645,000

 
13
%
2018
 
2,507,000

 
13
%
 
63,129,000

 
12
%
2019
 
2,632,000

 
13
%
 
65,970,000

 
13
%
2020
 
2,026,000

 
10
%
 
55,177,000

 
11
%
2021
 
2,115,000

 
11
%
 
54,767,000

 
10
%
2022
 
1,390,000

 
7
%
 
34,514,000

 
7
%
2023
 
885,000

 
4
%
 
27,868,000

 
5
%
2024
 
1,050,000

 
5
%
 
31,088,000

 
6
%
2025
 
1,299,000

 
6
%
 
36,668,000

 
7
%
Thereafter
 
2,364,000

 
12
%
 
55,055,000

 
10
%
Total
 
19,986,000

 
100
%
 
$
525,218,000

 
100
%
Lease Rollovers
For 2015, we signed leases for a total of 1,593,000 square feet of retail space including 1,405,000 square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of 17% on a cash basis and 29% on a straight-line basis. New leases for comparable spaces were signed for 547,000 square feet at an average rental increase of 22% on a cash basis and 35% on a straight-line basis. Renewals for comparable spaces were signed for 859,000 square feet at an average rental increase of 14% on a cash basis and 24% on a straight-line basis. Tenant improvements and incentives for comparable spaces were $60.98 per square foot for new leases and $8.79 per square foot for renewals in 2015.
For 2014, we signed leases for a total of 1,765,000 square feet of retail space including 1,545,000 square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of 16% on a cash basis and 29% on a straight-line basis. New leases for comparable spaces were signed for 704,000 square feet at an average rental increase of 25% on a cash basis and 38% on a straight-line basis. Renewals for comparable spaces were signed for 840,000 square feet at an average rental increase of 11% on a cash basis and 23% on a straight-line basis. Tenant improvements and incentives for comparable spaces were $44.46 per square foot for new leases and $1.27 for renewal leases in 2014.
The rental increases associated with comparable spaces generally include all leases signed in arms-length transactions reflecting market leverage between landlords and tenants during the period. The comparison between average rent for expiring leases and new leases is determined by including minimum rent and percentage rent paid on the expiring lease and minimum rent and in some instances, projections of first lease year percentage rent, to be paid on the new lease. In atypical circumstances, management may exercise judgment as to how to most effectively reflect the comparability of spaces reported in this calculation. The change in rental income on comparable space leases is impacted by numerous factors including current market rates, location, individual tenant creditworthiness, use of space, market conditions when the expiring lease was signed, capital investment made in the space and the specific lease structure.
The leases signed in 2015 generally become effective over the following two years though some may not become effective until 2018 and beyond. Further, there is risk that some new tenants will not ultimately take possession of their space and that tenants for both new and renewal leases may not pay all of their contractual rent due to operating, financing or other matters. However, these increases do provide information about the tenant/landlord relationship and the potential increase we may achieve in rental income over time.
Historically, we have executed comparable space leases for 1.2 to 1.5 million square feet of retail space each year and expect the volume for 2016 will be in line with our historical averages with overall positive increases in rental income. 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.


17


Retail and Residential Properties
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, 2015. Except as otherwise noted, we are the sole owner of our retail real estate projects. Principal tenants are the largest tenants in the project based on square feet leased or are tenants important to a project’s success due to their ability to attract retail customers.

Property, City, State, Zip Code
 
Year
Completed
 
Year
Acquired
 
Square Feet(1)
/Apartment
Units
 
Average Rent
Per Square
Foot(2)
 
Percentage
Leased(3)
 
Principal Tenant(s)
California
 
 
 
 
 
 
 
 
 
 
 
 
150 Post Street
    San Francisco, CA 94108
 
1908, 1965
 
1997
 
105,000
 
$35.18
 
83%
 
H & M
Colorado Blvd
    Pasadena, CA 91103(4)
 
1905-1988
 
1996/1998
 
69,000
 
$41.05
 
100%
 
Pottery Barn
Banana Republic
Crow Canyon Commons
    San Ramon, CA 94583
 
1980, 1998, 2006
 
2005/2007
 
241,000
 
$26.44
 
95%
 
Sprouts
Rite Aid Sports Authority
Orchard Supply Hardware
East Bay Bridge
    Emeryville & Oakland, CA 94608
 
1994-2001, 2011, 2012
 
2012
 
438,000
 
$17.72
 
99%
 
Home Depot Michaels Pak-N-Save Target
Nordstrom Rack
Sports Authority
Escondido Promenade
    Escondido, CA 92029(5)
 
1987
 
1996/2010
 
298,000
 
$24.34
 
98%
 
TJ Maxx
Toys R Us
Dick's Sporting Goods
Ross Dress For Less
Hermosa Avenue
    Hermosa Beach, CA 90254
 
1922
 
1997
 
24,000
 
$37.64
 
100%
 
 
Hollywood Blvd
    Hollywood, CA 90028(6)
 
1929, 1991
 
1999
 
180,000
 
$33.56
 
91%
 
Marshalls La La Land DSW
L.A. Fitness
Kings Court
    Los Gatos, CA 95032(4)(7)
 
1960
 
1998
 
80,000
 
$31.46
 
100%
 
Lunardi’s Supermarket
CVS
Old Town Center
    Los Gatos, CA 95030
 
1962, 1998
 
1997
 
95,000
 
$38.55
 
97%
 
Gap
Banana Republic Anthropologie
Plaza El Segundo / The Point
    El Segundo, CA 90245(5)(10)
 
2006-2007
 
2011/2015
 
450,000
 
$41.63
 
98%
 
H&M
Anthropologie
Best Buy
HomeGoods
Whole Foods
Dick's Sporting Goods Container Store
Santana Row
    San Jose, CA 95128
 
2002, 2009
 
1997
 
651,000
 
$50.13
 
98%
 
H&M Crate & Barrel
Container Store
Best Buy
CineArts Theatre
Hotel Valencia
Santana Row Residential
    San Jose, CA 95128
 
2003-2006, 2011, 2014
 
1997, 2012
 
662 units
 
N/A
 
95%
 
 
San Antonio Center
    Mountain View, CA 94040 (4)(7)
 
1958, 1964-1965, 1974-1975, 1995-1997
 
2015
 
376,000
 
$12.67
 
96%
 
Kohl's
Walmart
Trader Joe's
24 Hour Fitness
Jo-Ann Stores
Third Street Promenade
    Santa Monica, CA 90401
 
1888-2000
 
1996-2000
 
209,000
 
$71.00
 
99%
 
Abercrombie & Fitch
J. Crew
Old Navy
Banana Republic
Westgate Center
    San Jose, CA 95129
 
1960-1966
 
2004
 
638,000
 
$17.38
 
98%
 
Nike Factory Target Walmart Neighborhood Market
Burlington Coat Factory
Ross Dress For Less
Michaels Nordstrom Rack J. Crew Gap Factory Store

18


Property, City, State, Zip Code
 
Year
Completed
 
Year
Acquired
 
Square Feet(1)
/Apartment
Units
 
Average Rent
Per Square
Foot(2)
 
Percentage
Leased(3)
 
Principal Tenant(s)
Connecticut
 
 
 
 
 
 
 
 
 
 
 
 
Bristol Plaza
    Bristol, CT 06010
 
1959
 
1995
 
266,000
 
$13.17
 
92%
 
Stop & Shop
TJ Maxx
Darien
    Darien, CT 06820
 
1920-2009
 
2013
 
95,000
 
$28.30
 
97%
 
Stop & Shop Equinox
Greenwich Avenue
    Greenwich Avenue, CT 06830
 
1968
 
1995
 
36,000
 
$61.00
 
100%
 
Saks Fifth Avenue
District of Columbia
 
 
 
 
 
 
 
 
 
 
 
 
Friendship Center
    Washington, DC 20015
 
1998
 
2001
 
119,000
 
$28.12
 
100%
 
Marshalls DSW Maggiano’s
Nordstrom Rack
Sam’s Park & Shop
    Washington, DC 20008
 
1930
 
1995
 
49,000
 
$44.28
 
86%
 
Petco
Florida
 
 
 
 
 
 
 
 
 
 
 
 
CocoWalk
    Coconut Grove, FL 33133 (5)(13)
 
1990/1994, 1922-1973
 
2015
 
216,000
 
$36.20
 
82%
 
Cinepolis Theaters
Gap
Youfit Health Club
Del Mar Village
    Boca Raton, FL 33433
 
1982, 1994 & 2007
 
2008/2014
 
196,000
 
$16.21
 
74%
 
Winn Dixie
CVS
The Shops at Sunset Place
    South Miami, FL 33143 (5)(10)
 
1999
 
2015
 
515,000
 
$22.53
 
82%
 
AMC Theaters
L.A. Fitness
Barnes & Noble
GameTime
Tower Shops
    Davie, FL 33324
 
1989
 
2011/2014
 
389,000
 
$20.14
 
98%
 
Ulta Best Buy
DSW
Old Navy
Ross Dress For Less
TJ Maxx
Trader Joe's
Illinois
 
 
 
 
 
 
 
 
 
 
 
 
Crossroads
    Highland Park, IL 60035
 
1959
 
1993
 
168,000
 
$22.29
 
91%
 
Golfsmith
Guitar Center
L.A. Fitness
Finley Square
    Downers Grove, IL 60515
 
1974
 
1995
 
315,000
 
$12.49
 
91%
 
Bed, Bath & Beyond
Petsmart
Buy Buy Baby
Michaels
Garden Market
    Western Springs, IL 60558
 
1958
 
1994
 
140,000
 
$13.30
 
100%
 
Mariano's Fresh Market Walgreens
North Lake Commons
    Lake Zurich, IL 60047
 
1989
 
1994
 
129,000
 
$10.95
 
85%
 
Jewel Osco
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
Bethesda Row
    Bethesda, MD 20814(4)
 
1945-1991 2001, 2008
 
1993-2006 2008/2010
 
533,000
 
$49.07
 
98%
 
Apple Computer
Barnes & Noble
Equinox Giant Food
Landmark Theater
Bethesda Row Residential
    Bethesda, MD 20814
 
2008
 
1993
 
180 units
 
N/A
 
95%
 
 
Congressional Plaza
    Rockville, MD 20852(5)
 
1965
 
1965
 
325,000
 
$40.10
 
97%
 
Buy Buy Baby
Last Call Studio by Neiman Marcus
Container Store The Fresh Market
Congressional Plaza Residential
    Rockville, MD 20852(5)
 
2003
 
1965
 
146 units
 
N/A
 
91%
 
 
Courthouse Center
    Rockville, MD 20852
 
1975
 
1997
 
35,000
 
$23.60
 
66%
 
 
Federal Plaza
    Rockville, MD 20852
 
1970
 
1989
 
248,000
 
$34.48
 
99%
 
Micro Center
Ross Dress For Less
TJ Maxx
Trader Joe’s
Free State Shopping Center
    Bowie, MD 20715(9)
 
1970
 
2007
 
279,000
 
$16.61
 
94%
 
Giant Food
TJ Maxx
Ross Dress For Less
Office Depot

19


Property, City, State, Zip Code
 
Year
Completed
 
Year
Acquired
 
Square Feet(1)
/Apartment
Units
 
Average Rent
Per Square
Foot(2)
 
Percentage
Leased(3)
 
Principal Tenant(s)
Gaithersburg Square
    Gaithersburg, MD 20878
 
1966
 
1993
 
207,000
 
$26.53
 
92%
 
Bed, Bath & Beyond
Ross Dress For Less Ashley Furniture HomeStore
Governor Plaza
    Glen Burnie, MD 21961
 
1963
 
1985
 
243,000
 
$18.95
 
100%
 
Aldi
Dick’s Sporting Goods
Laurel
    Laurel, MD 20707
 
1956
 
1986
 
389,000
 
$22.41
 
80%
 
L.A. Fitness Giant Food
Marshalls
Montrose Crossing
    Rockville, MD 20852 (5)(10)
 
1960-1979, 1996, 2011
 
2011/2013
 
366,000
 
$24.56
 
93%
 
A.C. Moore Giant Food
Sports Authority
Barnes & Noble
Marshalls
Perring Plaza
    Baltimore, MD 21134
 
1963
 
1985
 
395,000
 
$14.35
 
100%
 
Micro Center Burlington Coat Factory
Home Depot
Shoppers Food Warehouse
Jo-Ann Stores
Pike & Rose
    North Bethesda, MD 20852 (12)
 
1963, 2014
 
1982/2007/2012
 
208,000
 
$44.14
 
96%
 
iPic Theater Gap/Gap Kids
Sport & Health
Pike & Rose Residential
    North Bethesda, MD 20852 (12)
 
2014
 
1982/2007
 
389 units
 
N/A
 
73%
 
 
Plaza Del Mercado
    Silver Spring, MD 20906(9)
 
1969
 
2004
 
96,000
 
$35.46
 
92%
 
CVS
Quince Orchard
    Gaithersburg, MD 20877(4)
 
1975
 
1993
 
267,000
 
$21.78
 
96%
 
Aldi
HomeGoods L.A. Fitness Staples
Rockville Town Square
    Rockville, MD 20852 (8)
 
2006-2007
 
2006-2007
 
187,000
 
$29.59
 
93%
 
CVS
Gold’s Gym
Rollingwood Apartments
    Silver Spring, MD 20910
    9 three-story buildings(10)
 
1960
 
1971
 
282 units
 
N/A
 
95%
 
 
THE AVENUE at White Marsh
    Baltimore, MD 21236(7)(10)
 
1997
 
2007
 
305,000
 
$24.24
 
99%
 
AMC Loews
Old Navy
Barnes & Noble
A.C. Moore
The Shoppes at Nottingham Square
    Baltimore, MD 21236
 
2005-2006
 
2007
 
32,000
 
$48.13
 
100%
 
 
White Marsh Other
    Baltimore, MD 21236
 
1985
 
2007
 
73,000
 
$31.67
 
98%
 
 
White Marsh Plaza
    Baltimore, MD 21236
 
1987
 
2007
 
80,000
 
$21.80
 
96%
 
Giant Food
Wildwood
    Bethesda, MD 20814
 
1958
 
1969
 
84,000
 
$95.44
 
99%
 
CVS
Balducci’s
Massachusetts
 
 
 
 
 
 
 
 
 
 
 
 
Assembly Row/
Assembly Square Marketplace
    Somerville, MA 02145 (12)
 
2005, 2014
 
2005-2011, 2013
 
738,000
 
$22.49
 
100%
 
AMC Theatres LEGOLAND Discovery Center Saks Fifth Avenue Off 5th Nike Factory J. Crew Legal on the Mystic Bed, Bath & Beyond
TJ Maxx
Atlantic Plaza
    North Reading, MA 01864(9)
 
1960
 
2004
 
123,000
 
$15.83
 
90%
 
Stop & Shop
Campus Plaza
    Bridgewater, MA 02324(9)
 
1970
 
2004
 
116,000
 
$14.86
 
100%
 
Roche Brothers
Burlington Coat Factory
Chelsea Commons
    Chelsea, MA 02150(10)
 
1962-1969, 2008
 
2006-2008
 
222,000
 
$11.43
 
100%
 
Sav-A-Lot
Home Depot
Planet Fitness
Chelsea Commons Residential
    Chelsea, MA 02150
 
2013
 
2008
 
56 units
 
N/A
 
95%
 
 
Dedham Plaza
    Dedham, MA 02026
 
1959
 
1993
 
241,000
 
$15.90
 
92%
 
Star Market

20


Property, City, State, Zip Code
 
Year
Completed
 
Year
Acquired
 
Square Feet(1)
/Apartment
Units
 
Average Rent
Per Square
Foot(2)
 
Percentage
Leased(3)
 
Principal Tenant(s)
Linden Square
    Wellesley, MA 02481
 
1960, 2008
 
2006
 
223,000
 
$46.08
 
94%
 
Roche Brothers Supermarket
CVS
North Dartmouth
    North Dartmouth, MA 02747
 
2004
 
2006
 
48,000
 
$15.71
 
100%
 
Stop & Shop
Queen Anne Plaza
    Norwell, MA 02061
 
1967
 
1994
 
149,000
 
$16.64
 
100%
 
HomeGoods
TJ Maxx
Hannaford
Saugus Plaza
    Saugus, MA 01906
 
1976
 
1996
 
168,000
 
$11.99
 
100%
 
Kmart
Super Stop & Shop
Michigan
 
 
 
 
 
 
 
 
 
 
 
 
Gratiot Plaza
    Roseville, MI 48066
 
1964
 
1973
 
217,000
 
$11.91
 
99%
 
Bed, Bath & Beyond
Best Buy
Kroger
DSW
North Carolina
 
 
 
 
 
 
 
 
 
 
 
 
Eastgate
    Chapel Hill, NC 27514
 
1963
 
1986
 
153,000
 
$24.06
 
91%
 
Stein Mart
Trader Joe’s
 
 
 
 
 
 
 
 
 
 
 
 
 
New Jersey
 
 
 
 
 
 
 
 
 
 
 
 
Brick Plaza
    Brick Township, NJ 08723(4)
 
1958
 
1989
 
422,000
 
$19.56
 
74%
 
Barnes & Noble
AMC Loews
Sports Authority
Brook 35
    Sea Girt, NJ 08750(5)(7)(10)
 
1986, 2004
 
2014
 
98,000
 
$34.79
 
98%
 
Ann Taylor
Banana Republic
Coach
Williams-Sonoma
Ellisburg
    Cherry Hill, NJ 08034
 
1959
 
1992
 
268,000
 
$15.94
 
97%
 
Whole Foods Buy Buy Baby
Stein Mart
Mercer Mall
    Lawrenceville, NJ 08648(4)(8)
 
1975
 
2003
 
527,000
 
$23.60
 
99%
 
Raymour & Flanigan
Bed, Bath & Beyond
DSW
TJ Maxx
Shop Rite
Nordstrom Rack
REI
The Grove at Shrewsbury
    Shrewsbury, NJ 07702(5)(7)(10)
 
1988, 1993 & 2007
 
2014
 
192,000
 
$43.51
 
99%
 
Lululemon
Brooks Brothers
Anthropologie
Pottery Barn
J. Crew
Banana Republic
Williams-Sonoma
Troy
    Parsippany-Troy, NJ 07054
 
1966
 
1980
 
211,000
 
$27.92
 
67%
 
L.A. Fitness
New York
 
 
 
 
 
 
 
 
 
 
 
 
Fresh Meadows
    Queens, NY 11365
 
1949
 
1997
 
404,000
 
$30.60
 
100%
 
Island of Gold Modell's AMC Loews
Kohl’s Michaels
Greenlawn Plaza
    Greenlawn, NY 11743(9)(10)
 
1975, 2004
 
2006
 
106,000
 
$17.18
 
93%
 
Greenlawn Farms
Tuesday Morning
Hauppauge
    Hauppauge, NY 11788
 
1963
 
1998
 
134,000
 
$28.10
 
100%
 
Shop Rite
A.C. Moore
Huntington
    Huntington, NY 11746
 
1962
 
1988/2007
 
279,000
 
$25.92
 
100%
 
Nordstrom Rack Bed, Bath & Beyond
Buy Buy Baby
Michaels
Huntington Square
    East Northport, NY 11731(4)
 
1980, 2007
 
2010
 
74,000
 
$26.90
 
93%
 
Barnes & Noble
Melville Mall
    Huntington, NY 11747(4)
 
1974
 
2006
 
247,000
 
$24.01
 
73%
 
Dick's Sporting Goods
Marshalls
Macy's Backstage
 
 
 
 
 
 
 
 
 
 
 
 
 

21


Property, City, State, Zip Code
 
Year
Completed
 
Year
Acquired
 
Square Feet(1)
/Apartment
Units
 
Average Rent
Per Square
Foot(2)
 
Percentage
Leased(3)
 
Principal Tenant(s)
Pennsylvania
 
 
 
 
 
 
 
 
 
 
 
 
Andorra
    Philadelphia, PA 19128
 
1953
 
1988
 
265,000
 
$15.65
 
95%
 
Acme Markets
Kohl’s
Staples
L.A. Fitness
Bala Cynwyd
    Bala Cynwyd, PA 19004
 
1955
 
1993
 
294,000
 
$23.77
 
100%
 
Acme Markets
Lord & Taylor
Michaels
L.A. Fitness
Flourtown
    Flourtown, PA 19031
 
1957
 
1980
 
156,000
 
$20.81
 
97%
 
Giant Food
Movie Tavern
Lancaster
    Lancaster, PA 17601(8)
 
1958
 
1980
 
127,000
 
$17.73
 
97%
 
Giant Food
Michaels
Langhorne Square
    Levittown, PA 19056
 
1966
 
1985
 
219,000
 
$17.39
 
100%
 
Marshalls
Redner’s Warehouse Market
Lawrence Park
    Broomall, PA 19008
 
1972
 
1980
 
364,000
 
$20.45
 
96%
 
Acme Markets
TJ Maxx
HomeGoods Virginia College
Northeast
    Philadelphia, PA 19114
 
1959
 
1983
 
288,000
 
$12.02
 
87%
 
Burlington Coat Factory
Home Gallery
Marshalls
Town Center of New Britain
    New Britain, PA 18901
 
1969
 
2006
 
124,000
 
$9.91
 
90%
 
Giant Food
Rite Aid
Willow Grove
    Willow Grove, PA 19090
 
1953
 
1984
 
211,000
 
$19.51
 
99%
 
Home Goods
Marshalls Barnes & Noble
Wynnewood
    Wynnewood, PA 19096
 
1948
 
1996
 
251,000
 
$27.24
 
100%
 
DSW Bed, Bath & Beyond
Giant Food
Old Navy
Virginia
 
 
 
 
 
 
 
 
 
 
 
 
29th Place     Charlottesville, VA 22091(10)
 
1975-2001
 
2007
 
169,000
 
$17.60
 
98%
 
HomeGoods DSW Stein Mart Staples
Barcroft Plaza
    Falls Church, VA 22041(9)(10)
 
1963, 1972 & 1990
 
2006-2007
 
100,000
 
$24.61
 
92%
 
Harris Teeter
Bank of America
Barracks Road
    Charlottesville, VA 22905
 
1958
 
1985
 
497,000
 
$25.05
 
99%
 
Anthropologie
Bed, Bath & Beyond
Harris Teeter
Kroger
Barnes & Noble
Old Navy
Michaels
Ulta
Falls Plaza/Falls Plaza—East
    Falls Church, VA 22046
 
1960-1962
 
1967/1972
 
144,000
 
$34.43
 
97%
 
Giant Food
CVS
Staples
Graham Park Plaza
    Fairfax, VA 22042
 
1971
 
1983
 
260,000
 
$27.77
 
93%
 
Stein Mart
Giant Food L.A. Fitness
Idylwood Plaza
    Falls Church, VA 22030
 
1991
 
1994
 
73,000
 
$46.59
 
100%
 
Whole Foods
Leesburg Plaza
    Leesburg, VA 20176
 
1967
 
1998
 
236,000
 
$23.04
 
94%
 
Giant Food
Pier 1 Imports
Office Depot
Petsmart
Mount Vernon/South Valley/
    7770 Richmond Hwy
    Alexandria, VA 22306(4)(7)
 
1966, 1972,1987 & 2001
 
2003/2006
 
569,000
 
$17.14
 
97%
 
Shoppers Food Warehouse
Bed, Bath & Beyond
Michaels
Home Depot
TJ Maxx
Gold’s Gym Staples
DSW
Old Keene Mill
    Springfield, VA 22152
 
1968
 
1976
 
92,000
 
$41.19
 
84%
 
Whole Foods
Walgreens

22


Property, City, State, Zip Code
 
Year
Completed
 
Year
Acquired
 
Square Feet(1)
/Apartment
Units
 
Average Rent
Per Square
Foot(2)
 
Percentage
Leased(3)
 
Principal Tenant(s)
Pan Am
    Fairfax, VA 22031
 
1979
 
1993
 
227,000
 
$22.37
 
98%
 
Michaels
Micro Center
Safeway
Pentagon Row
    Arlington, VA 22202
 
2001-2002
 
1998/2010
 
299,000
 
$38.63
 
78%
 
Harris Teeter
Bed, Bath & Beyond
DSW
Pike 7 Plaza
    Vienna, VA 22180
 
1968
 
1997/2015
 
164,000
 
$42.75
 
99%
 
DSW
Staples
TJ Maxx
Tower Shopping Center
    Springfield, VA 22150
 
1960
 
1998
 
112,000
 
$24.38
 
92%
 
Talbots L.A. Mart
Total Wine & More
Tyson’s Station
    Falls Church, VA 22043
 
1954
 
1978
 
49,000
 
$43.20
 
92%
 
Trader Joe's
Village at Shirlington
    Arlington, VA 22206(8)
 
1940, 2006-2009
 
1995
 
265,000
 
$36.17
 
88%
 
AMC Loews
Carlyle Grand Café
Harris Teeter
Willow Lawn
    Richmond, VA 23230
 
1957
 
1983
 
445,000
 
$17.91
 
93%
 
Kroger
Old Navy
Ross Dress For Less
Staples
Total All Regions—Retail(11)
 
 
 
 
 
21,379,000
 
$26.28
 
94%
 
 
Total All Regions—Residential
 
 
 
 
 
1,715 units
 
 
 
90%
 
 
 _____________________
(1)
Represents the GLA of the commercial portion of the property. Some of our properties include office space which is included in this square footage but is not material in total.
(2)
Average base rent is calculated as the aggregate, annualized in-place contractual (defined as cash basis including adjustments for concessions) minimum rent for all occupied spaces divided by the aggregate GLA of all occupied spaces.
(3)
Percentage leased is expressed as a percentage of rentable commercial square feet occupied or subject to a lease. Residential percentage leased is expressed as a percentage of units occupied or subject to a lease.
(4)
All or a portion of this property is owned pursuant to a ground lease.
(5)
We own the controlling interest in this center.
(6)
We own a 90% general and limited partnership interest in these buildings.
(7)
We own all or a portion of this property in a “downREIT” partnership, of which a wholly owned subsidiary of the Trust is the sole general partner, with third party partners holding operating partnership units.
(8)
All or a portion of this property is subject to a capital lease obligation.
(9)
Properties acquired through a joint venture arrangement with affiliates of a discretionary fund created and advised by Clarion Partners. On January 13, 2016, we acquired Clarion's 70% interest in these properties.
(10)
All or a portion of this property is encumbered by a mortgage loan.
(11)
Aggregate information is calculated on a GLA weighted-average basis, excluding properties owned through a joint venture arrangement with affiliates of a discretionary fund created and advised by Clarion Partners.
(12)
Portion of property is currently under development. See further discussion in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
(13)
This property includes partial interests in eight buildings in addition to our initial acquisition. See further discussion in Note 3 to the Financial Statements.
ITEM 3.    LEGAL PROCEEDINGS
None.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.

23


PART II
ITEM 5.    MARKET FOR OUR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common shares trade on the New York Stock Exchange under the symbol “FRT.” Listed below are the high and low closing prices of our common shares as reported on the New York Stock Exchange and the dividends declared for each of the periods indicated.
 
 
Price Per Share
 
Dividends
Declared
Per Share
High
 
Low
 
2015
 
 
 
 
 
Fourth quarter
$
149.96

 
$
135.60

 
$
0.940

Third quarter
$
139.05

 
$
124.96

 
$
0.940

Second quarter
$
149.20

 
$
127.84

 
$
0.870

First quarter
$
150.27

 
$
135.74

 
$
0.870

2014
 
 
 
 
 
Fourth quarter
$
137.18

 
$
118.28

 
$
0.870

Third quarter
$
125.80

 
$
117.12

 
$
0.870

Second quarter
$
123.11

 
$
112.07

 
$
0.780

First quarter
$
114.72

 
$
100.90

 
$
0.780

On February 5, 2016, there were 2,840 holders of record of our common shares.
Our ongoing operations generally will not be subject to federal income taxes as long as we maintain our REIT status and distribute to shareholders at least 100% of our taxable income. Under the Code, REITs are subject to numerous organizational and operational requirements, including the requirement to generally distribute at least 90% of taxable income.
Future distributions will be at the discretion of our Board of Trustees and will depend on our actual net income available for common shareholders, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Trustees deems relevant. We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our regular annual dividend rate for 48 consecutive years.
Our total annual dividends paid per common share for 2015 and 2014 were $3.55 per share and $3.21 per share, respectively. The annual dividend amounts are different from dividends as calculated for federal income tax purposes. Distributions to the extent of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to a shareholder as ordinary dividend income. Distributions in excess of current and accumulated earnings and profits will be treated as a nontaxable reduction of the shareholder’s basis in such shareholder’s shares, to the extent thereof, and thereafter as taxable capital gain. Distributions that are treated as a reduction of the shareholder’s basis in its shares will have the effect of increasing the amount of gain, or reducing the amount of loss, recognized upon the sale of the shareholder’s shares. No assurances can be given regarding what portion, if any, of distributions in 2016 or subsequent years will constitute a return of capital for federal income tax purposes. During a year in which a REIT earns a net long-term capital gain, the REIT can elect under Section 857(b)(3) of the Code to designate a portion of dividends paid to shareholders as capital gain dividends. If this election is made, then the capital gain dividends are generally taxable to the shareholder as long-term capital gains.
The following table reflects the income tax status of distributions per share paid to common shareholders:
 
 
Year Ended
December 31,
2015
 
2014
Ordinary dividend
$
3.515

 
$
3.178

Capital gain
0.035

 
0.032

 
$
3.550

 
$
3.210

Distributions on our 5.417% Series 1 Cumulative Convertible Preferred Shares were paid at the rate of $1.354 per share per annum commencing on the issuance date of March 8, 2007. We do not believe that the preferential rights available to the holders of our preferred shares or the financial covenants contained in our debt agreements had or will have an adverse effect

24


on our ability to pay dividends in the normal course of business to our common shareholders or to distribute amounts necessary to maintain our qualification as a REIT.
Total Stockholder Return Performance
The following performance graph compares the cumulative total shareholder return on Federal Realty's common shares with the S&P 500 Index and the index of equity real estate investment trusts prepared by the National Association of Real Estate Investment Trusts ("NAREIT") for the five fiscal years commencing December 31, 2010, and ending December 31, 2015, assuming an investment of $100 and the reinvestment of all dividends into additional common shares during the holding period. Equity real estate investment trusts are defined as those that derive more than 75% of their income from equity investments in real estate assets. The FTSE NAREIT Equity REIT Total Return Index includes all tax qualified real estate investment trusts listed on the NYSE, NYSE Amex (formerly known as the American Stock Exchange), or the NASDAQ National Market. Stock performance for the past five years is not necessarily indicative of future results.
Recent Sales of Unregistered Shares
Under the terms of various operating partnership agreements of certain of our affiliated limited partnerships, the interest of limited partners in those limited partnerships may be redeemed, subject to certain conditions, for cash or an equivalent number of our common shares, at our option. During the three months ended December 31, 2015, there were no redemptions of operating partnership units. All other equity securities sold by us during 2015 that were not registered have been previously reported in a Quarterly Report on Form 10-Q.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During 2015, 9,915 restricted common shares were forfeited by former employees.
The following information describes stock repurchases during the fourth quarter of the fiscal year ended December 31, 2015:

25


Period
Total number of shares purchased (1)
Average price paid per share
Total number of shares purchased as part of publicly announced plans or programs
Maximum number or approximate dollar amount of shares that may yet be purchased under the plans or programs
October 1, 2015 - October 31, 2015
29,064
$
142.05

$

(1) Represents shares delivered in payment of withholding taxes in connection with restricted stock vesting by participants.
 
 

26


ITEM 6.    SELECTED FINANCIAL DATA
The following table includes certain financial information on a consolidated historical basis. You should read this section in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data.”
 
 
Year Ended December 31,
 
2015
 
 
2014
 
 
2013
 
 
2012
 
 
2011
 
(In thousands, except per share data and ratios)
 
Operating Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
727,812

  
 
$
666,322

  
 
$
620,089

  
 
$
580,114

  
 
$
536,749

  
Property operating income(1)
$
510,595

  
 
$
474,167

  
 
$
446,959

  
 
$
426,721

  
 
$
381,335

  
Income from continuing operations
$
190,094

  
 
$
167,888

  
 
$
137,811

  
 
$
142,972

  
 
$
130,319

  
Gain on sale of real estate
$
28,330

  
 
$
4,401

  
 
$
28,855

  
 
$
11,860

  
 
$
15,075

  
Net income
$
218,424

  
 
$
172,289

  
 
$
167,608

  
 
$
156,232

  
 
$
149,612

  
Net income attributable to the Trust
$
210,219

  
 
$
164,535

  
 
$
162,681

  
 
$
151,925

  
 
$
143,917

  
Net income available for common shareholders
$
209,678

  
 
$
163,994

  
 
$
162,140

  
 
$
151,384

  
 
$
143,376

  
Net cash provided by operating activities
$
359,835

  
 
$
346,130

  
 
$
314,498

  
 
$
296,633

  
 
$
244,711

  
Net cash used in investing activities
$
(353,763
)
 
 
$
(396,150
)
 
 
$
(345,198
)
 
 
$
(273,558
)
 
 
$
(196,369
)
 
Net cash (used in) provided by financing activities
$
(32,977
)
 
 
$
9,044

 
 
$
82,639

 
 
$
(53,893
)
 
 
$
3,667

  
Dividends declared on common shares
$
250,388

  
 
$
224,190

  
 
$
198,965

  
 
$
182,813

  
 
$
171,335

  
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
68,797

  
 
67,322

  
 
65,331

  
 
63,881

  
 
62,438

  
Diluted
68,981

  
 
67,492

  
 
65,483

  
 
64,056

  
 
62,603

  
Earnings per common share, basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
$
2.63

  
 
$
2.35

  
 
$
2.01

  
 
$
2.15

  
 
$
1.98

  
Discontinued operations

  
 

  
 
0.38

  
 
0.02

  
 
0.31

  
Gain on sale of real estate
0.41

  
 
0.07

  
 
0.08

  
 
0.19

  
 

  
Total
$
3.04

  
 
$
2.42

  
 
$
2.47

  
 
$
2.36

  
 
$
2.29

  
Earnings per common share, diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
$
2.62

  
 
$
2.34

  
 
$
2.00

  
 
$
2.14

  
 
$
1.97

  
Discontinued operations

  
 

  
 
0.38

  
 
0.02

  
 
0.31

  
Gain on sale of real estate
0.41

  
 
0.07

  
 
0.08

  
 
0.19

  
 

  
Total
$
3.03

  
 
$
2.41

  
 
$
2.46

  
 
$
2.35

  
 
$
2.28

  
Dividends declared per common share
$
3.62

  
 
$
3.30

  
 
$
3.02

  
 
$
2.84

  
 
$
2.72

  
Other Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Funds from operations available to common shareholders(2)
$
352,857

  
 
$
327,597

  
 
$
289,938

  
 
$
277,237

  
 
$
251,576

  
EBITDA(3)
$
504,696

  
 
$
447,495

  
 
$
446,555

  
 
$
410,918

  
 
$
374,131

  
Adjusted EBITDA(3)
$
476,366

  
 
$
443,094

  
 
$
417,700

  
 
$
399,058

  
 
$
357,030

  
Ratio of EBITDA to combined fixed charges and preferred share dividends(3)(4)
3.9

 
3.5

 
3.3

 
3.3

 
3.5

Ratio of Adjusted EBITDA to combined fixed charges and preferred share dividends(3)(4)
3.6

 
3.5

 
3.1

 
3.2

 
3.3


27


 
As of December 31,
2015
 
2014
 
2013
 
2012
 
2011
(In thousands)
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Real estate, at cost
$
6,064,406

 
$
5,608,998

 
$
5,149,463

 
$
4,779,674

 
$
4,426,444

Total assets
$
4,911,709

 
$
4,546,870

 
$
4,219,294

 
$
3,898,565

 
$
3,666,210

Mortgages payable and capital lease obligations
$
554,442

 
$
635,345

 
$
660,127

 
$
832,482

 
$
810,616

Notes payable
$
343,600

 
$
290,519

 
$
300,822

 
$
299,575

 
$
295,159

Senior notes and debentures
$
1,744,324

 
$
1,483,813

 
$
1,360,913

 
$
1,076,545

 
$
1,004,635

Preferred shares
$
9,997

 
$
9,997

 
$
9,997

 
$
9,997

 
$
9,997

Shareholders’ equity
$
1,781,931

 
$
1,692,556

 
$
1,471,297

 
$
1,310,593

 
$
1,240,604

Number of common shares outstanding
69,493

 
68,606

 
66,701

 
64,815

 
63,544

 
(1)
Property operating income is a non-GAAP measure that consists of rental income, other property income and mortgage interest income, less rental expenses and real estate taxes. This measure is used internally to evaluate the performance of property operations and we consider it to be a significant measure. Property operating income should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP.

The reconciliation of operating income to property operating income is as follows:
 
2015
 
2014
 
2013
 
2012
 
2011
 
(In thousands)
Operating income
$
300,154

 
$
271,037

 
$
254,161

 
$
253,862

 
$
226,462

General and administrative
35,645

 
32,316

 
31,970

 
31,158

 
28,985

Depreciation and amortization
174,796

 
170,814

 
160,828

 
141,701

 
125,888

Property operating income
$
510,595

 
$
474,167

 
$
446,959

 
$
426,721

 
$
381,335


(2)
Funds from operations ("FFO") is a supplemental non-GAAP financial measure of real estate companies’ operating performances. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as follows: net income, computed in accordance with U.S. GAAP, plus real estate related depreciation and amortization and excluding extraordinary items and gains on the sale of real estate. We compute FFO in accordance with the NAREIT definition, and we have historically reported our FFO available for common shareholders in addition to our net income.
We consider FFO available for common shareholders a meaningful, additional measure of operating performance primarily because it excludes the assumption that the value of the real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation. We use FFO primarily as one of several means of assessing our operating performance in comparison with other REITs. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs. Additional information regarding our calculation of FFO is contained in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

28


The reconciliation of net income to FFO available for common shareholders is as follows:
 
 
2015
 
2014
 
2013