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Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO THE SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
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) 
Title of Each Class
Trading Symbol
Name of Each Exchange On Which Registered
Common Shares of Beneficial Interest
FRT
New York Stock Exchange
$.01 par value per share, with associated Common Share Purchase Rights
 
 
 
 
 
Depositary Shares, each representing 1/1000 of a share
FRT-C
New York Stock Exchange
of 5.00% Series C Cumulative Redeemable Preferred Stock, $.01 par value per share
 
 
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.      Yes      No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      Yes      No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.:
Large Accelerated Filer
Accelerated filer
 
 
 
 
Non-Accelerated Filer
Smaller reporting company
 
 
 
 
 
 
Emerging growth company
 
 
 
 
If an emerging growth company, indicate by checkmark if the registrant has elected not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).       Yes      No
The number of registrant’s common shares outstanding on July 31, 2020 was 75,638,759.


Table of Contents

FEDERAL REALTY INVESTMENT TRUST
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED JUNE 30, 2020

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
 
 
Item 1.
Financial Statements
 
 
Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019
 
 
Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended June 30, 2020 and 2019
 
 
Consolidated Statements of Shareholders' Equity (unaudited) for the three and six months ended June 30, 2020 and 2019
 
 
Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2020 and 2019
 
 
Notes to Consolidated Financial Statements (unaudited)
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
Item 4.
Controls and Procedures
 
 
 
 
PART II. OTHER INFORMATION
 
Item 1.
Legal Proceedings
 
Item 1A.
Risk Factors
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
Item 3.
Defaults Upon Senior Securities
 
Item 4.
Mine Safety Disclosures
 
Item 5.
Other Information
 
Item 6.
Exhibits
 
 
 
SIGNATURES



2

Table of Contents


Federal Realty Investment Trust
Consolidated Balance Sheets
 
June 30,
 
December 31,
 
2020
 
2019
 
(In thousands, except share and per share data)
 
(Unaudited)
 
 
ASSETS
 
 
 
Real estate, at cost
 
 
 
Operating (including $1,754,540 and $1,676,866 of consolidated variable interest entities, respectively)
$
7,790,025

 
$
7,535,983

Construction-in-progress (including $93,067 and $102,583 of consolidated variable interest entities, respectively)
754,787

 
760,420

Assets held for sale
1,085

 
1,729

 
8,545,897

 
8,298,132

Less accumulated depreciation and amortization (including $317,925 and $296,165 of consolidated variable interest entities, respectively)
(2,308,403
)
 
(2,215,413
)
Net real estate
6,237,494

 
6,082,719

Cash and cash equivalents
980,039

 
127,432

Accounts and notes receivable, net
167,641

 
152,572

Mortgage notes receivable, net
30,332

 
30,429

Investment in partnerships
22,879

 
28,604

Operating lease right of use assets
93,494

 
93,774

Finance lease right of use assets
51,758

 
52,402

Prepaid expenses and other assets
206,293

 
227,060

TOTAL ASSETS
$
7,789,930

 
$
6,794,992

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Liabilities
 
 
 
Mortgages payable, net (including $475,757 and $469,184 of consolidated variable interest entities, respectively)
$
551,034

 
$
545,679

Notes payable, net
402,477

 
3,781

Senior notes and debentures, net
3,508,461

 
2,807,134

Accounts payable and accrued expenses
244,482

 
255,503

Dividends payable
81,915

 
81,676

Security deposits payable
18,922

 
21,701

Operating lease liabilities
73,527

 
73,628

Finance lease liabilities
72,056

 
72,062

Other liabilities and deferred credits
146,372

 
157,938

Total liabilities
5,099,246

 
4,019,102

Commitments and contingencies (Note 6)

 

Redeemable noncontrolling interests
159,583

 
139,758

Shareholders’ equity
 
 
 
Preferred shares, authorized 15,000,000 shares, $.01 par:
 
 
 
5.0% Series C Cumulative Redeemable Preferred Shares, (stated at liquidation preference $25,000 per share), 6,000 shares issued and outstanding
150,000

 
150,000

5.417% Series 1 Cumulative Convertible Preferred Shares, (stated at liquidation preference $25 per share), 399,896 shares issued and outstanding
9,997

 
9,997

Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized, 75,633,140 and 75,540,804 shares issued and outstanding, respectively
760

 
759

Additional paid-in capital
3,170,480

 
3,166,522

Accumulated dividends in excess of net income
(889,195
)
 
(791,124
)
Accumulated other comprehensive loss
(7,758
)
 
(813
)
Total shareholders’ equity of the Trust
2,434,284

 
2,535,341

Noncontrolling interests
96,817

 
100,791

Total shareholders’ equity
2,531,101

 
2,636,132

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
7,789,930

 
$
6,794,992

The accompanying notes are an integral part of these consolidated statements.

3

Table of Contents

Federal Realty Investment Trust
Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
 
(In thousands, except per share data)
REVENUE
 
 
 
 
 
 
 
Rental income
$
175,479

 
$
229,731

 
$
406,277

 
$
461,223

Mortgage interest income
748

 
734

 
1,507

 
1,469

Total revenue
176,227

 
230,465

 
407,784

 
462,692

EXPENSES
 
 
 
 
 
 
 
Rental expenses
36,417

 
41,438

 
80,729

 
85,698

Real estate taxes
30,599

 
25,166

 
59,663

 
52,853

General and administrative
9,814

 
11,422

 
20,065

 
20,987

Depreciation and amortization
62,784

 
59,057

 
124,972

 
118,679

Total operating expenses
139,614

 
137,083

 
285,429

 
278,217

 
 
 
 
 
 
 
 
       Gain on sale of real estate, net of tax
11,682

 
16,197

 
11,682

 
16,197

 
 
 
 
 
 
 
 
OPERATING INCOME
48,295

 
109,579

 
134,037

 
200,672

 
 
 
 
 
 
 
 
OTHER INCOME/(EXPENSE)
 
 
 
 
 
 
 
Other interest income
509

 
189

 
817

 
366

Interest expense
(34,073
)
 
(27,482
)
 
(62,518
)
 
(55,515
)
(Loss) income from partnerships
(3,872
)
 
381

 
(5,036
)
 
(1,053
)
NET INCOME
10,859

 
82,667

 
67,300

 
144,470

Net income attributable to noncontrolling interests
(352
)
 
(1,765
)
 
(2,030
)
 
(3,424
)
NET INCOME ATTRIBUTABLE TO THE TRUST
10,507

 
80,902

 
65,270

 
141,046

Dividends on preferred shares
(2,011
)
 
(2,011
)
 
(4,021
)
 
(4,021
)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS
$
8,496

 
$
78,891

 
$
61,249

 
$
137,025

 
 
 
 
 
 
 
 
EARNINGS PER COMMON SHARE, BASIC AND DILUTED:
 
 
 
 
 
 
 
       Net income available for common shareholders
0.11

 
1.05

 
0.81

 
1.83

Weighted average number of common shares
75,394

 
74,713

 
75,377

 
74,458

 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME
$
10,366

 
$
82,268

 
$
60,355

 
$
143,862

 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE TRUST
$
10,014

 
$
80,503

 
$
58,325

 
$
140,438


The accompanying notes are an integral part of these consolidated statements.

4

Table of Contents

Federal Realty Investment Trust
Consolidated Statements of Shareholders’ Equity
For the Three and Six Months Ended June 30, 2020
(Unaudited)
 
Shareholders’ Equity of the Trust
 
 
 
 
 
Preferred Shares
 
Common Shares
 
Additional
Paid-in
Capital
 
Accumulated
Dividends in
Excess of Net
Income
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling Interests
 
Total Shareholders' Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
(In thousands, except share data)
BALANCE AT DECEMBER 31, 2019
405,896

 
$
159,997

 
75,540,804

 
$
759

 
$
3,166,522

 
$
(791,124
)
 
$
(813
)
 
$
100,791

 
$
2,636,132

January 1, 2020 adoption of new accounting standard - See Note 2

 

 

 

 

 
(510
)
 

 

 
(510
)
Net income, excluding $1,157 attributable to redeemable noncontrolling interests

 

 

 

 

 
65,270

 

 
873

 
66,143

Other comprehensive loss - change in fair value of interest rate swaps

 

 

 

 

 

 
(6,945
)
 

 
(6,945
)
Dividends declared to common shareholders ($2.10 per share)

 

 

 

 

 
(158,810
)
 

 

 
(158,810
)
Dividends declared to preferred shareholders

 

 

 

 

 
(4,021
)
 

 

 
(4,021
)
Distributions declared to noncontrolling interests

 

 

 

 

 

 

 
(1,677
)
 
(1,677
)
Common shares issued, net

 

 
29

 

 
2

 

 

 

 
2

Shares issued under dividend reinvestment plan

 

 
10,605

 

 
955

 

 

 

 
955

Share-based compensation expense, net of forfeitures

 

 
114,092

 
1

 
7,028

 

 

 

 
7,029

Shares withheld for employee taxes

 

 
(32,390
)
 

 
(3,997
)
 

 

 

 
(3,997
)
Redemption of OP units

 

 

 

 
(30
)
 

 

 
(3,290
)
 
(3,320
)
Contributions from noncontrolling interests

 

 

 

 

 

 

 
120

 
120

BALANCE AT JUNE 30, 2020
405,896

 
$
159,997

 
75,633,140

 
$
760

 
$
3,170,480

 
$
(889,195
)
 
$
(7,758
)
 
$
96,817

 
$
2,531,101


BALANCE AT MARCH 31, 2020
405,896

 
$
159,997

 
75,622,504

 
$
760

 
$
3,166,899

 
$
(818,284
)
 
$
(7,265
)
 
$
97,501

 
$
2,599,608

Net income, excluding $142 attributable to redeemable noncontrolling interests

 

 

 

 

 
10,507

 

 
210

 
10,717

Other comprehensive loss - change in fair value of interest rate swaps

 

 

 

 

 

 
(493
)
 

 
(493
)
Dividends declared to common shareholders ($1.05 per share)

 

 

 

 

 
(79,407
)
 

 

 
(79,407
)
Dividends declared to preferred shareholders

 

 

 

 

 
(2,011
)
 

 

 
(2,011
)
Distributions declared to noncontrolling interests

 

 

 

 

 

 

 
(894
)
 
(894
)
Common shares issued, net

 

 
16

 

 

 

 

 

 

Shares issued under dividend reinvestment plan

 

 
6,771

 

 
509

 

 

 

 
509

Share-based compensation expense, net of forfeitures

 

 
4,026

 

 
3,087

 

 

 

 
3,087

Shares withheld for employee taxes

 

 
(177
)
 

 
(15
)
 

 

 

 
(15
)
Redemption of OP units

 

 

 

 

 

 

 

 

Contributions from noncontrolling interests

 

 

 

 

 

 

 

 

BALANCE AT JUNE 30, 2020
405,896

 
$
159,997

 
75,633,140

 
$
760

 
$
3,170,480

 
$
(889,195
)
 
$
(7,758
)
 
$
96,817

 
$
2,531,101





5

Table of Contents

Federal Realty Investment Trust
Consolidated Statements of Shareholders’ Equity
For the Three and Six Months Ended June 30, 2019
(Unaudited)
 
Shareholders’ Equity of the Trust
 
 
 
 
 
Preferred Shares
 
Common Shares
 
Additional
Paid-in
Capital
 
Accumulated
Dividends in
Excess of Net
Income
 
Accumulated
Other
Comprehensive
Income
 
Noncontrolling Interests
 
Total Shareholders' Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
(In thousands, except share data)
BALANCE AT DECEMBER 31, 2018
405,896

 
$
159,997

 
74,249,633

 
$
745

 
$
3,004,442

 
$
(818,877
)
 
$
(416
)
 
$
121,439

 
$
2,467,330

January 1, 2019 adoption of new accounting standard

 

 

 

 

 
(7,098
)
 

 

 
(7,098
)
Net income, excluding $1,783 attributable to redeemable noncontrolling interests

 

 

 

 

 
141,046

 

 
1,641

 
142,687

Other comprehensive loss - change in fair value of interest rate swaps

 

 

 

 

 

 
(608
)
 

 
(608
)
Dividends declared to common shareholders ($2.04 per share)

 

 

 

 

 
(152,555
)
 

 

 
(152,555
)
Dividends declared to preferred shareholders

 

 

 

 

 
(4,021
)
 

 

 
(4,021
)
Distributions declared to noncontrolling interests

 

 

 

 

 

 

 
(7,664
)
 
(7,664
)
Common shares issued, net

 

 
511,954

 
5

 
68,299

 

 

 

 
68,304

Shares issued under dividend reinvestment plan

 

 
8,121

 

 
1,054

 

 

 

 
1,054

Share-based compensation expense, net of forfeitures

 

 
102,137

 
1

 
6,991

 

 

 

 
6,992

Shares withheld for employee taxes

 

 
(32,900
)
 

 
(4,442
)
 

 

 

 
(4,442
)
Conversion and redemption of OP units

 

 
111,252

 
1

 
11,935

 

 

 
(11,936
)
 

Adjustment to redeemable noncontrolling interests

 

 

 

 
667

 

 

 

 
667

BALANCE AT JUNE 30, 2019
405,896

 
$
159,997

 
74,950,197

 
752

 
$
3,088,946

 
$
(841,505
)
 
$
(1,024
)
 
$
103,480

 
$
2,510,646


BALANCE AT MARCH 31, 2019
405,896

 
$
159,997

 
74,836,984

 
$
752

 
$
3,071,981

 
$
(843,947
)
 
$
(625
)
 
$
113,405

 
$
2,501,563

Net income, excluding $907 attributable to redeemable noncontrolling interests

 

 

 

 

 
80,902

 

 
858

 
81,760

Other comprehensive loss - change in fair value of interest rate swaps

 

 

 

 

 

 
(399
)
 

 
(399
)
Dividends declared to common shareholders ($1.02 per share)

 

 

 

 

 
(76,449
)
 

 

 
(76,449
)
Dividends declared to preferred shareholders

 

 

 

 

 
(2,011
)
 

 

 
(2,011
)
Distributions declared to noncontrolling interests

 

 

 

 

 

 
 
 
(6,398
)
 
(6,398
)
Common shares issued, net

 

 
65,822

 

 
8,951

 

 

 

 
8,951

Shares issued under dividend reinvestment plan

 

 
3,848

 

 
526

 

 

 

 
526

Share-based compensation expense, net of forfeitures

 

 
1,551

 

 
3,131

 

 

 

 
3,131

Shares withheld for employee taxes

 

 
(214
)
 

 
(28
)
 

 

 

 
(28
)
Conversion and redemption of OP units

 

 
42,206

 

 
4,385

 

 

 
(4,385
)
 

BALANCE AT JUNE 30, 2019
405,896

 
$
159,997

 
74,950,197

 
$
752

 
$
3,088,946

 
$
(841,505
)
 
$
(1,024
)
 
$
103,480

 
$
2,510,646


The accompanying notes are an integral part of these consolidated statements.

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Table of Contents

Federal Realty Investment Trust
Consolidated Statements of Cash Flows
 (Unaudited)
 
Six Months Ended June 30,
 
2020
 
2019
 
(In thousands)
OPERATING ACTIVITIES
 
Net income
$
67,300

 
$
144,470

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
124,972

 
118,679

Gain on sale of real estate, net of tax
(11,682
)
 
(16,197
)
Loss from partnerships
5,036

 
1,053

Other, net
5,240

 
2,138

Changes in assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
Increase in accounts receivable, net
(17,128
)
 
(5,325
)
Decrease in prepaid expenses and other assets
15,887

 
7,800

Increase (decrease) in accounts payable and accrued expenses
5,756

 
(1,493
)
Decrease in security deposits and other liabilities
(13,999
)
 
(8,838
)
Net cash provided by operating activities
181,382

 
242,287

INVESTING ACTIVITIES
 
 
 
Acquisition of real estate
(9,409
)
 
(25,176
)
Capital expenditures - development and redevelopment
(213,181
)
 
(133,570
)
Capital expenditures - other
(30,388
)
 
(36,669
)
Costs associated with property sold under threat of condemnation, net
(12,924
)
 

Proceeds from sale of real estate
17,015

 
93,025

Investment in partnerships
(917
)
 
(907
)
Distribution from partnerships in excess of earnings
849

 
1,301

Leasing costs
(7,923
)
 
(11,473
)
(Issuance) repayment of mortgage and other notes receivable, net
(320
)
 
101

Net cash used in investing activities
(257,198
)
 
(113,368
)
FINANCING ACTIVITIES
 
 
 
Costs to amend revolving credit facility
(638
)
 

Issuance of senior notes, net of costs
700,085

 
297,076

Issuance of notes payable, net of costs
398,732

 

Repayment of mortgages, finance leases and notes payable
(3,264
)
 
(298,100
)
Issuance of common shares, net of costs
97

 
68,461

Dividends paid to common and preferred shareholders
(161,874
)
 
(154,965
)
Shares withheld for employee taxes
(3,997
)
 
(4,442
)
Contributions from noncontrolling interests

 
161

Distributions to and redemptions of noncontrolling interests
(5,702
)
 
(5,173
)
Net cash provided by (used in) financing activities
923,439

 
(96,982
)
Increase in cash, cash equivalents and restricted cash
847,623

 
31,937

Cash, cash equivalents, and restricted cash at beginning of year
153,614

 
108,332

Cash, cash equivalents, and restricted cash at end of period
$
1,001,237

 
$
140,269


The accompanying notes are an integral part of these consolidated statements.


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Table of Contents

Federal Realty Investment Trust
Notes to Consolidated Financial Statements
June 30, 2020
(Unaudited)

NOTE 1—BUSINESS AND ORGANIZATION
Federal Realty Investment Trust (the “Trust”) is an equity real estate investment trust (“REIT”) specializing in the ownership, management, and redevelopment of retail and mixed-use properties. Our properties are located primarily in densely populated and affluent communities in strategically selected metropolitan markets in the Mid-Atlantic and Northeast regions of the United States, California, and South Florida. As of June 30, 2020, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 104 predominantly retail real estate projects.
We operate in a manner intended to enable us to qualify as a REIT for federal income tax purposes. A REIT that distributes at least 90% of its taxable income to its shareholders each year and meets certain other conditions is not taxed on that portion of its taxable income which is distributed to its shareholders. Therefore, federal income taxes on our taxable income have been and are generally expected to be immaterial. We are obligated to pay state taxes, generally consisting of franchise or gross receipts taxes in certain states. Such state taxes also have not been material.
Impacts of COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a pandemic. While we currently expect the impact to our properties is temporary in nature, the extent of the future effects of COVID-19 on our business, results of operations, cash flows, and growth prospects is highly uncertain and will ultimately depend on future developments, none of which can be predicted with any certainty.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying consolidated balance sheet as of December 31, 2019, which has been derived from audited financial statements, and unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in our latest Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation for the periods presented have been included. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the full year.
Principles of Consolidation
Our consolidated financial statements include the accounts of the Trust, its corporate subsidiaries, and all entities in which the Trust has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity (“VIE”). The equity interests of other investors are reflected as noncontrolling interests or redeemable noncontrolling interests. All significant intercompany transactions and balances are eliminated in consolidation. We account for our interests in joint ventures, which we do not control, using the equity method of accounting.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, referred to as “GAAP,” requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.
Revenue Recognition and Accounts Receivable
Our leases with our tenants are classified as operating leases. When collection of substantially all lease payments during the lease term is considered probable, the lease qualifies for accrual accounting. Lease payments are recognized on a straight-line basis from the point in time when the tenant controls the space through the term of the related lease. Variable lease payments relating to percentage rent are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related

8

Table of Contents

expenditures are incurred. For a tenant to terminate its lease agreement prior to the end of the agreed term, we may require that they pay a fee to cancel the lease agreement. Lease termination fees are generally recognized on the termination date if the tenant has relinquished control of the space. When a lease is terminated early but the tenant continues to control the space under a modified lease agreement, the lease termination fee is generally recognized evenly over the remaining term of the modified lease agreement. Lease concessions (unrelated to the COVID-19 pandemic) are evaluated to determine whether the concession represents a modification of the original lease contract. Modifications generally result in a reassessment of the lease term and lease classification, and remeasurement of lease payments received. Remeasured lease payments are recognized on a straight-line basis over the remaining term of the modified lease contract.
In April 2020, the Financial Accounting Standards Board ("FASB") issued interpretive guidance relating to the accounting for lease concessions provided as a result of the COVID-19 pandemic that allows entities to treat the concession as if it was a part of the existing contract instead of applying lease modification accounting. This guidance is only applicable to the COVID-19 pandemic related lease concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We have elected this option relating to qualifying rent deferral and rent abatement agreements. For qualifying lease modifications with rent deferrals, this results in no change to our revenue recognition but an increase in the lease receivable balance until the deferred rent has been repaid. For qualifying lease modifications that include rent abatement concessions, this results in a direct reduction of rental income in the current period. As of June 30, 2020, we have entered into rent deferral agreements related to the COVID-19 pandemic representing approximately $16 million of rent otherwise owed during the months of April through June 2020, and are currently in negotiations with other tenants. 
When collection of substantially all lease payments during the lease term is not considered probable, total lease revenue is limited to the lesser of revenue recognized under accrual accounting or cash received. Determining the probability of collection of substantially all lease payments during a lease term requires significant judgment. This determination is impacted by numerous factors including our assessment of the tenant’s credit worthiness, economic conditions, tenant sales productivity in that location, historical experience with the tenant and tenants operating in the same industry, future prospects for the tenant and the industry in which it operates, and the length of the lease term. If leases currently classified as probable are subsequently reclassified as not probable, any outstanding lease receivables (including straight-line rent receivables) would be written-off with a corresponding decrease in rental income.
The actions taken by federal, state and local governments to mitigate the spread of COVID-19, initially by ordering closures of non-essential businesses and ordering residents to generally stay at home, and subsequent phased re-openings have resulted in many of our tenants temporarily or even permanently closing their businesses, and for some, it had impacted their ability to pay rent. As a result, we revised our collectibility assumptions for many of our tenants most significantly impacted by COVID-19. Accordingly, during the three months ended June 30, 2020, we recognized collectibility related adjustments of $55.2 million. This includes changes in our collectibility assessments from probable to not probable, disputed rents, and any rent abatements, as well as the write-off of $9.4 million of straight-line rent receivables primarily related to tenants changed to a cash basis of revenue recognition in the quarter ended June 30, 2020. As of June 30, 2020, the revenue from approximately 32% of our tenants (based on total commercial leases) is being recognized on a cash basis. As of June 30, 2020 and December 31, 2019, our straight-line rent receivables balance was $100.7 million and $100.3 million, respectively, and is included in "accounts and notes receivable, net" on our consolidated balance sheet.




9

Table of Contents

Recently Adopted and Issued Accounting Pronouncements
Standard
 
Description
 
Effect on the financial statements or significant matters
 
 
 
 
 
Adopted on January 1, 2020:
 
 
Financial Instruments - Credit Losses (Topic 326) and related updates:

ASU 2016-13, June
  2016, Financial
  Instruments - Credit
  Losses (Topic 326)

ASU 2018-19,
  November 2018,
  Codification
improvements to
  Topic 326,
  Financial
  Instruments - Credit
  Losses
 
This ASU changes the impairment model for most financial assets and certain other instruments, requiring the use of an "expected credit loss" model and adding more disclosure requirements.

ASU 2018-19 clarifies that impairment of of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases.
 
Upon adoption of this standard, we recorded expected losses of $0.5 million in opening accumulated dividends in excess of net income. During the six months ended June 30, 2020, we recorded additional expected losses of $0.4 million, which are included in rental expenses.
 
 
 
 
 
ASU 2018-15, August 2018, Intangibles - Goodwill and Other Internal Use Software: Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
 
This ASU requires a customer in a cloud computing arrangement (i.e. hosting arrangement) that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement. Entities will expense costs during the preliminary project and post-implementation stages as they are incurred.

The guidance can be applied prospectively to all implementation costs incurred after the date of adoption or retrospectively in accordance with ASC 250-10-45-5 through ASC 250-10-45-10.
 
The adoption of this standard does not have a significant impact to our consolidated financial statements.
 
 
 
 
 
Issued in 2020:
 
 
ASU 2020-04, March 2020, Reference Rate Reform (Topic 848)
 
This ASU provides companies with optional practical expedients to ease the accounting burden for contract modifications associated with transitioning away from LIBOR and other interbank offered rates that are expected to be discontinued as part of reference rate reform. For hedges, the guidance generally allows changes to the reference rate and other critical terms without having to de-designate the hedging relationship, as well as allows the shortcut method to continue to be applied. For contract modifications, changes in the reference rate or other critical terms will be treated as a continuation of the prior contract. This guidance can be applied immediately, however, is generally only available through December 31, 2022.
 
We are still evaluating the impact of reference rate reform and whether we will apply any of these practical expedients.





10

Table of Contents

Consolidated Statements of Cash Flows—Supplemental Disclosures
The following tables provide supplemental disclosures related to the Consolidated Statements of Cash Flows:
 
Six Months Ended
 
June 30,
 
2020
 
2019
 
(In thousands)
SUPPLEMENTAL DISCLOSURES:
 
 
 
Total interest costs incurred
$
73,942

 
$
64,755

Interest capitalized
(11,424
)
 
(9,240
)
Interest expense
$
62,518

 
$
55,515

Cash paid for interest, net of amounts capitalized
$
52,715

 
$
53,588

Cash paid for income taxes
$
428

 
$
419

NON-CASH INVESTING AND FINANCING TRANSACTIONS:
 
 
 
DownREIT operating partnership units issued with acquisition
$
18,920

 
$

Mortgage loans assumed with acquisition
$
8,903

 
$

DownREIT operating partnership units redeemed for common shares
$

 
$
11,935

Shares issued under dividend reinvestment plan
$
860

 
$
897


 
June 30,
 
December 31,
 
2020
 
2019
 
(In thousands)
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:
 
 
 
Cash and cash equivalents
$
980,039

 
$
127,432

Restricted cash (1)
21,198

 
26,182

Total cash, cash equivalents, and restricted cash
$
1,001,237

 
$
153,614

(1)
Restricted cash balances are included in "prepaid expenses and other assets" on our consolidated balance sheets.

NOTE 3—REAL ESTATE
On January 10, 2020, we acquired a 49,000 square foot shopping center in Fairfax, Virginia for $22.3 million. This property is adjacent to, and will be operated as part of our Fairfax Junction property. This purchase price was paid with a combination of cash and the issuance of 163,322 downREIT operating partnership units. Approximately $0.5 million and $0.4 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively.
On February 12, 2020, we acquired two buildings totaling 12,000 square feet in Hoboken, New Jersey for $14.3 million, including the assumption of $8.9 million of mortgage debt. This acquisition is in addition to the 37 buildings previously acquired, and was completed through the joint venture that was formed in 2019, for which we own a 90% interest. Less than $0.1 million and approximately $3.3 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively.
On April 21, 2020, we sold a building in Pasadena, California for $16.1 million, which resulted in a gain of $11.7 million.

NOTE 4—DEBT
In connection with the two buildings we acquired in Hoboken, New Jersey on February 12, 2020, we assumed two mortgage loans with a net face amount of $8.9 million and a fair value of $9.0 million. The mortgage loans bear interest at 4.00% and mature on July 27, 2027.
In March 2020, in order to strengthen our financial position and balance sheet, to maximize our liquidity, and to provide maximum financial flexibility to continue our business initiatives as the effects of COVID-19 continue to evolve, we borrowed $990.0 million under our revolving credit facility, representing a draw-down of almost the entirety of our $1.0 billion revolving credit facility. This amount was subsequently repaid when we entered into a $400.0 million unsecured term loan on May 6, 2020 and issued $700.0 million of fixed rate unsecured senior notes on May 11, 2020.

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The unsecured term loan matures on May 6, 2021, plus one twelve month extension at our option, and bears interest at LIBOR plus 135 basis points based on our current credit rating. Our net proceeds from this transaction after underwriting fees and other costs were $398.7 million.
The $700.0 million of unsecured senior notes issued in May 2020 comprise a $300.0 million reopening of our 3.95% senior notes maturing on January 15, 2024 and a $400.0 million issuance of 3.50% senior notes maturing on June 1, 2030. The 3.95% senior notes were offered at 103.257% of the principal amount with a yield to maturity of 2.944%, and have the same terms and are of the same series as the $300.0 million senior notes issued on December 9, 2013. The 3.50% senior notes were offered at 98.911% of the principal amount with a yield to maturity of 3.630%. Our net proceeds from these transactions after the net issuance premium, underwriting fees, and other costs were $700.1 million.
During the three and six months ended June 30, 2020, the maximum amount of borrowings outstanding under our revolving credit facility was $990.0 million, and the weighted average interest rate, before amortization of debt fees, was 1.4% and 1.5% for the three and six months ended June 30, 2020, respectively. During the three and six months ended June 30, 2020, the weighted average borrowings outstanding were $413.2 million and $278.5 million, respectively, with no outstanding balance at June 30, 2020. Our revolving credit facility, term loan, and certain notes require us to comply with various financial covenants, including the maintenance of minimum shareholders' equity and debt coverage ratios and a maximum ratio of debt to net worth. As of June 30, 2020, we were in compliance with all default related debt covenants.

NOTE 5—FAIR VALUE OF FINANCIAL INSTRUMENTS
Except as disclosed below, the carrying amount of our financial instruments approximates their fair value. The fair value of our mortgages payable, notes payable and senior notes and debentures is sensitive to fluctuations in interest rates. Quoted market prices (Level 1) were used to estimate the fair value of our marketable senior notes and debentures and discounted cash flow analysis (Level 2) is generally used to estimate the fair value of our mortgages and notes payable. Considerable judgment is necessary to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. A summary of the carrying amount and fair value of our mortgages payable, notes payable and senior notes and debentures is as follows:

 
June 30, 2020
 
December 31, 2019
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
(In thousands)
Mortgages and notes payable
$
953,511

 
$
947,030

 
$
549,460

 
$
562,049

Senior notes and debentures
$
3,508,461

 
$
3,754,061

 
$
2,807,134

 
$
3,001,216



As of June 30, 2020, we have two interest rate swap agreements with notional amounts of $56.5 million that are measured at fair value on a recurring basis. The interest rate swap agreements fix the interest rate on $56.5 million of mortgage payables at 3.67% through December 15, 2029. The fair values of the interest rate swap agreements are based on the estimated amounts we would receive or pay to terminate the contracts at the reporting date and are determined using interest rate pricing models and interest rate related observable inputs. The fair value of our swaps at June 30, 2020 was a liability of $6.1 million and is included in "other liabilities and deferred credits" on our consolidated balance sheet. For the three and six months ended June 30, 2020, the value of our interest rate swaps decreased $0.5 million and $6.2 million, respectively (including $0.2 million reclassified from other comprehensive loss to interest expense for both periods). A summary of our financial (liabilities) assets that are measured at fair value on a recurring basis, by level within the fair value hierarchy is as follows:
 
June 30, 2020
 
December 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Interest rate swaps
$

 
$
(6,059
)
 
$

 
$
(6,059
)
 
$

 
$
130

 
$

 
$
130


One of our equity method investees has two interest rate swaps which qualify for cash flow hedge accounting. For the three and six months ended June 30, 2020, our share of the change in fair value of the related swaps included in "accumulated other comprehensive loss" was an increase of less than $0.1 million and a decrease of $0.8 million, respectively.


12

Table of Contents

NOTE 6—COMMITMENTS AND CONTINGENCIES
We are sometimes involved in lawsuits, warranty claims, and environmental matters arising in the ordinary course of business. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters.
We are currently a party to various legal proceedings. We accrue a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate within the range; however, if no amount within the range is a better estimate than any other amount, the minimum within the range is accrued. Legal fees related to litigation are expensed as incurred. We do not believe that the ultimate outcome of these matters, either individually or in the aggregate, could have a material adverse effect on our financial position or overall trends in results of operations; however, litigation is subject to inherent uncertainties. Also under our leases, tenants are typically obligated to indemnify us from and against all liabilities, costs and expenses imposed upon or asserted against us (1) as owner of the properties due to certain matters relating to the operation of the properties by the tenant, and (2) where appropriate, due to certain matters relating to the ownership of the properties prior to their acquisition by us.
Under the terms of certain partnership agreements, the partners have the right to exchange their operating partnership units for cash or common shares, at our option. A total of 744,617 downREIT operating partnership units are outstanding which have a total fair value of approximately $63.4 million, which is calculated by multiplying the outstanding number of downREIT partnership units by our closing stock price on June 30, 2020.

NOTE 7—SHAREHOLDERS’ EQUITY
The following table provides a summary of dividends declared and paid per share:

 
Six Months Ended June 30,
 
2020
 
2019
 
Declared
 
Paid
 
Declared
 
Paid
Common shares
$
2.100

 
$
2.100

 
$
2.040

 
$
2.040

5.417% Series 1 Cumulative Convertible Preferred shares
$
0.677

 
$
0.677

 
$
0.677

 
$
0.677

5.0% Series C Cumulative Redeemable Preferred shares (1)
$
0.625

 
$
0.625

 
$
0.625

 
$
0.625


(1)
Amount represents dividends per depository share, each representing 1/1000th of a share.

We have an at-the-market (“ATM”) equity program in which we may from time to time offer and sell common shares having an aggregate offering price of up to $400.0 million. We intend to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay amounts outstanding under our revolving credit facility and/or for general corporate purposes. As of June 30, 2020, we had the capacity to issue up to $128.3 million in common shares under our ATM equity program.

NOTE 8—SHARE-BASED COMPENSATION PLANS
A summary of share-based compensation expense included in net income is as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
 
(In thousands)
Grants of common shares and options
$
3,087

 
$
3,131

 
$
7,029

 
$
6,992

Capitalized share-based compensation
(310
)
 
(201
)
 
(642
)
 
(472
)
Share-based compensation expense
$
2,777

 
$
2,930

 
$
6,387

 
$
6,520




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NOTE 9—OPERATING & FINANCE LEASES
The following table provides additional information on our operating and finance leases where we are the lessee:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
 
(In thousands)
LEASE COST:
 
 
 
 
 
 
 
Finance lease cost:
 
 
 
 
 
 
 
     Amortization of right-of-use assets
$
321

 
$
321

 
$
642

 
$
642

     Interest on lease liabilities
1,457

 
1,455

 
2,913

 
2,911

Operating lease cost
1,552

 
1,493

 
3,111

 
2,997

Variable lease cost
70

 
129

 
157

 
220

Total lease cost
$
3,400

 
$
3,398

 
$
6,823

 
$
6,770

 
 
 
 
 
 
 
 
OTHER INFORMATION:
 
 
 
 
 
 
 
Cash paid for amounts included in the measurement of lease liabilities
 
 
 
 
 
 
 
     Operating cash flows for finance leases
$
1,439

 
$
1,433

 
$
2,872

 
$
2,893

     Operating cash flows for operating leases
$
1,261

 
$
1,268

 
$
2,811

 
$
2,779

     Financing cash flows for finance leases
$
11

 
$
16

 
$
22

 
$
41

 
 
 
 
 
 
 
 
 
 
 
June 30,
 
 
 
 
 
2020
 
2019
Weighted-average remaining lease term - finance leases


 


 
17.7 years

 
18.6 years

Weighted-average remaining lease term - operating leases


 


 
53.2 years

 
53.7 years

Weighted-average discount rate - finance leases

 

 
8.0
%
 
8.0
%
Weighted-average discount rate - operating leases

 

 
4.4
%
 
4.5
%


NOTE 10—EARNINGS PER SHARE
We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each class of common stock and participating securities is calculated according to dividends declared and participation rights in undistributed earnings. For the three and six months ended June 30, 2020 and 2019, we had 0.2 million weighted average unvested shares outstanding, which are considered participating securities. Therefore, we have allocated our earnings for basic and diluted EPS between common shares and unvested shares; the portion of earnings allocated to the unvested shares is reflected as “earnings allocated to unvested shares” in the reconciliation below.
In the dilutive EPS calculation, dilutive stock options were calculated using the treasury stock method consistent with prior periods. There were 682 anti-dilutive stock options for the three and six months ended June 30, 2020 and 2019. The conversions of downREIT operating partnership units and 5.417% Series 1 Cumulative Convertible Preferred Shares are anti-dilutive for all periods presented and accordingly, have been excluded from the weighted average common shares used to compute diluted EPS.

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Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
 
(In thousands, except per share data)
NUMERATOR
 
 
 
 
 
 
 
Net income
$
10,859

 
$
82,667

 
$
67,300

 
144,470

Less: Preferred share dividends
(2,011
)
 
(2,011
)
 
(4,021
)
 
(4,021
)
Less: Income from operations attributable to noncontrolling interests
(352
)
 
(1,765
)
 
(2,030
)
 
(3,424
)
Less: Earnings allocated to unvested shares
(249
)
 
(226
)
 
(495
)
 
(439
)
Net income available for common shareholders, basic and diluted
$
8,247

 
$
78,665

 
$
60,754

 
$
136,586

DENOMINATOR
 
 
 
 
 
 
 
Weighted average common shares outstanding, basic and diluted
75,394

 
74,713

 
75,377

 
74,458

 
 
 
 
 
 
 
 
EARNINGS PER COMMON SHARE, BASIC AND DILUTED:
 
 
 
 
 
 
 
Net income available for common shareholders
$
0.11

 
$
1.05

 
$
0.81

 
$
1.83




ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The following discussion should be read in conjunction with the consolidated interim financial statements and notes thereto appearing in Item 1 of this report and the more detailed information contained in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (the “SEC”) on February 10, 2020.
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Federal Realty Investment Trust (“we” “our” or “us”) and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:
risks that our tenants will not pay rent, may vacate early or may file for bankruptcy or that we may be unable to renew leases or re-let space at favorable rents as leases expire;
risks that we may not be able to proceed with or obtain necessary approvals for any redevelopment or renovation project, and that completion of anticipated or ongoing property redevelopment or renovation projects that we do pursue may cost more, take more time to complete or fail to perform as expected;
risk that we are investing a significant amount in ground-up development projects that may be dependent on third parties to deliver critical aspects of certain projects, requires spending a substantial amount upfront in infrastructure, and assumes receipt of public funding which has been committed but not entirely funded;
risks normally associated with the real estate industry, including risks that occupancy levels at our properties and the amount of rent that we receive from our properties may be lower than expected, that new acquisitions may fail to perform as expected, that competition for acquisitions could result in increased prices for acquisitions, that costs associated with the periodic maintenance and repair or renovation of space, insurance and other operations may increase, that environmental issues may develop at our properties and result in unanticipated costs, and, because real estate is illiquid, that we may not be able to sell properties when appropriate;
risks that our growth will be limited if we cannot obtain additional capital;
risks of financing on terms which are acceptable to us, our ability to meet existing financial covenants and the limitations imposed on our operations by those covenants, and the possibility of increases in interest rates that would result in increased interest expense;

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risks related to our status as a real estate investment trust, commonly referred to as a REIT, for federal income tax purposes, such as the existence of complex tax regulations relating to our status as a REIT, the effect of future changes in REIT requirements as a result of new legislation, and the adverse consequences of the failure to qualify as a REIT;
risks related to natural disasters, climate change and public health crises (such as the outbreak and worldwide spread of COVID-19), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address them, may precipitate or materially exacerbate one or more of the above-mentioned risks, and may significantly disrupt or prevent us from operating our business in the ordinary course for an extended period.
Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this Quarterly Report on Form 10-Q. You should carefully review the risks and the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2019 and under Part II, Item 1A in this Quarterly Report on Form 10-Q, before making any investments in us.
Overview
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, California, and South Florida. As of June 30, 2020, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 104 predominantly retail real estate projects comprising approximately 24.0 million square feet. In total, the real estate projects were 93.0% leased and 90.8% occupied at June 30, 2020.
Impacts of COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a pandemic. Our Board of Trustees, as part of its risk oversight function, is regularly coordinating with management to assess the effects of the pandemic on our business and to determine appropriate courses of action to maintain the health and safety of our personnel, to strengthen our financial position and to adapt our business as appropriate. In response to the pandemic, we have taken a number of specific actions so far:
On March 16, 2020, we transitioned our work force to work remotely, canceled all non-essential business travel and have canceled company events, or are holding them remotely. As of June 30, 2020, we have re-opened most of our offices with limited capacity following federal, state and local guidelines for phased re-openings.
During May 2020, we entered into multiple financing transactions to both strengthen our financial position and maximize our liquidity. On May 6, 2020, we entered into a $400.0 million term loan that bears interest at LIBOR plus 135 basis points and matures on May 6, 2021, plus one twelve month extension option at our option. On May 11, 2020, we issued $400.0 million of 3.50% senior notes maturing on June 1, 2030 with a yield to maturity of 3.630% and reopened our 3.95% senior notes maturing on January 15, 2024 for an additional $300.0 million with a yield to maturity of 2.944%. We also repaid the $990.0 million outstanding balance on our revolving credit facility and amended how certain covenants are calculated to provide us more operating flexibility. As of June 30, 2020, there is no outstanding balance on our $1.0 billion revolving credit facility and we have cash and cash equivalents of $980.0 million.
Construction activity has resumed at all of our projects, including Assembly Row and Santana West, where activities were paused as a result of government restrictions. Overall, we are experiencing a slower pace of construction as well as elevated costs as we observe COVID-19 safety protocols at all sites.
Launched The Pick-Up, a curbside, contactless exchange which creates a singular, reliable, centralized service that retailers and restaurants of all sizes can take advantage of, particularly well-suited for small businesses.
The extent of the effects of COVID-19 on our business, results of operations, cash flows, and growth prospects is highly uncertain and will ultimately depend on future developments, none of which can be predicted with any certainty. See Item 1A. Risk Factors. However, we believe the actions we are taking will help minimize interruptions to our operations and will put us in the best position to participate in the resulting economic recovery. Management and our Board of Trustees will continue to actively monitor the effects of the pandemic, including governmental directives in the jurisdictions in which we operate and the recommendations of public health authorities, and will, as needed, take further measures to adapt our business in the best interests of our shareholders and personnel.

Business Continuity
We were able to transition all but a limited number of essential employees to remote work and do not anticipate any adverse impact on our ability to continue to operate our business. Transitioning to a largely remote workforce has not had any material adverse impact on our financial reporting systems, our internal controls or disclosure controls and procedures. As government mandated closures and restrictions are gradually lifted through phased re-openings, we are following local, state and federal governments guidelines and limiting the number of employees coming into our offices as well as implementing health and

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safety guidelines. In addition, we are following the proper guidelines to ensure that property employees are visiting properties only as necessary to ensure that the properties with businesses that are open and operating are able to conduct business and serve their communities. At this time, we have not laid off, furloughed, or terminated any employee in response to COVID-19, nor have we modified the compensation of any employee. The Compensation Committee of our Board of Trustees may reevaluate the performance goals and other aspects of the compensation arrangements of our executive officers later in 2020 as more information about the effects of COVID-19 become known.
2020 Property Acquisitions and Disposition
On January 10, 2020, we acquired a 49,000 square foot shopping center in Fairfax, Virginia for $22.3 million. This property is adjacent to, and will be operated as part of our Fairfax Junction property. This purchase price was paid with a combination of cash and the issuance of 163,322 downREIT operating partnership units. Approximately $0.5 million and $0.4 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively.
On February 12, 2020, we acquired two buildings totaling 12,000 square feet in Hoboken, New Jersey for $14.3 million, including the assumption of $8.9 million of mortgage debt. This acquisition is in addition to the 37 buildings previously acquired, and was completed through the joint venture that was formed in 2019, for which we own a 90% interest. Less than $0.1 million and approximately $3.3 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively.
On April 21, 2020, we sold a building in Pasadena, California for $16.1 million, which resulted in a gain of $11.7 million.
2020 Debt and Equity Transactions
In connection with the two buildings we acquired in Hoboken, New Jersey on February 12, 2020, we assumed two mortgage loans with a net face amount of $8.9 million and a fair value of $9.0 million. The mortgage loans bear interest at 4.00% and mature on July 27, 2027.
In March 2020, in order to strengthen our financial position and balance sheet, to maximize our liquidity, and to provide maximum financial flexibility to continue our business initiatives as the effects of COVID-19 continue to evolve, we borrowed $990.0 million under our revolving credit facility, representing a draw-down of almost the entirety of our $1.0 billion revolving credit facility. This amount was subsequently repaid when we entered into a $400.0 million unsecured term loan on May 6, 2020 and issued $700.0 million of fixed rate unsecured senior notes on May 11, 2020.
The unsecured term loan matures on May 6, 2021, plus one twelve month extension at our option, and bears interest at LIBOR plus 135 basis points based on our current credit rating. Our net proceeds from this transaction after underwriting fees and other costs were $398.7 million.
The $700.0 million of unsecured senior notes issued in May 2020 comprise a $300.0 million reopening of our 3.95% senior notes maturing on January 15, 2024 and a $400.0 million issuance of 3.50% senior notes maturing on June 1, 2030. The 3.95% senior notes were offered at 103.257% of the principal amount with a yield to maturity of 2.944%, and have the same terms and are of the same series as the $300.0 million senior notes issued on December 9, 2013. The 3.50% senior notes were offered at 98.911% of the principal amount with a yield to maturity of 3.630%. Our net proceeds from these transactions after the net issuance premium, underwriting fees, and other costs were $700.1 million.
We have an at-the-market (“ATM”) equity program in which we may from time to time offer and sell common shares having an aggregate offering price of up to $400.0 million. We intend to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay amounts outstanding under our revolving credit facility and/or for general corporate purposes. As of June 30, 2020, we had the capacity to issue up to $128.3 million in common shares under our ATM equity program.
Capitalized Costs
Certain external and internal costs directly related to the development, redevelopment and leasing of real estate, including pre-construction costs, real estate taxes, insurance, construction costs and salaries and related costs of personnel directly involved, are capitalized. We capitalized certain external and internal costs related to both development and redevelopment activities of $202 million and $5 million, respectively, for the six months ended June 30, 2020, and $142 million and $4 million, respectively, for the six months ended June 30, 2019. We capitalized external and internal costs related to other property improvements of $27 million and $2 million, respectively, for the six months ended June 30, 2020, and $29 million and $2 million for the six months ended June 30, 2019. We capitalized external and internal costs related to leasing activities of $5 million and $1 million, respectively, for the six months ended June 30, 2020, and $10 million and $1 million, respectively, for the six months ended June 30, 2019. The amount of capitalized internal costs for salaries and related benefits for development and redevelopment activities, other property improvements, and leasing activities were $5 million, $1 million, and $1 million,

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respectively, for the six months ended June 30, 2020 and $4 million, $1 million, and $1 million, respectively for the six months ended June 30, 2019. Total capitalized costs were $242 million and $188 million for the six months ended June 30, 2020 and 2019, respectively.
Recently Adopted Accounting Pronouncements
See Note 2 to the consolidated financial statements.
Outlook
Our long-term growth strategy is focused on growth in earnings, funds from operations, and cash flows primarily through a combination of the following:
growth in our comparable property portfolio,
growth in our portfolio from property developments and redevelopments, and
expansion of our portfolio through property acquisitions.

While the ongoing COVID-19 pandemic is impacting us in the short-term, our long-term focus has not changed. See our 10-K filed on February 13, 2020, for discussion of our our long-term strategies.

The actions taken by federal, state and local governments to mitigate the spread of COVID-19, initially by ordering closures of non-essential businesses and ordering residents to generally stay at home, and subsequent phased re-openings have resulted in
many of our tenants temporarily or even permanently closing their businesses, and for some, it has impacted their ability to pay rent. As of July 31, 2020, approximately 11% of our tenants (based on occupied square footage) were closed as a result of governmental orders compared to 51% at March 31, 2020. These economic hardships have adversely impacted our business, and had a negative effect on our financial results during the quarter ended June 30, 2020.  With very few exceptions, our leases require tenants to continue to pay rent even while closed as a result of the pandemic, however, many tenants did not pay rents and other charges during the second quarter of 2020 and in July 2020. As of June 30, 2020, we have entered into agreements with approximately 20% of our tenants (based on total commercial leases) to defer rent payments to later periods, largely through 2021, although some extend beyond, and negotiations with other tenants are still ongoing. Our percentage of contractual rent actually collected has increased each month since April, including some tenants paying past due amounts. While this is a positive trend driven by government mandated restrictions gradually being lifted, we are expecting that our rent collections will continue to be below our tenants’ contractual rent obligations and historical levels, which will continue to adversely impact our results of operations. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted. Depending upon the duration of tenant closures, operating restrictions, and the overall economic downturn resulting from COVID-19, we may find that even deferred rents are difficult to collect, and we may experience higher vacancy levels. While the duration and severity of the economic impact resulting from COVID-19 is unknown, we seek to position the Trust to participate in the resulting economic recovery.

We continue to have several development projects in process, albeit at a slower pace due to COVID-19 related restrictions, being delivered as follows:
In the 1st quarter of 2020, we delivered the fully leased eight story, 301,000 square foot office building at Santana Row.
The first phase of construction on the 12 acres of land that we control across from Santana Row includes an eight story 376,000 square foot office building, with over 1,700 parking spaces. The building is expected to cost between $250 million and $270 million with openings beginning in 2022.
Phase III of Assembly Row includes 277,000 square feet of office space (of which, 150,000 square feet is pre-leased), 56,000 square feet of retail space, 500 residential units, and over 800 additional parking spaces. The expected costs for Phase III are between $465 million and $485 million and is projected to open beginning in 2021.
At Pike & Rose, we are continuing construction on a 212,000 square foot office building (which includes 4,000 square feet of ground floor retail space), and will include over 600 additional parking spaces. The building is expected to cost between $128 million and $135 million and will begin to open later in 2020.
Throughout the portfolio, we currently have redevelopment projects underway with a projected total cost of approximately $318 million that we expect to stabilize over the next several years.

The above includes our best estimates based on information currently known, however, the completion of construction, final costs, and the timing of openings will be dependent upon the duration of governmental restrictions and the duration and severity of the economic impacts of COVID-19.

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The development of future phases of Assembly Row, Pike & Rose and Santana Row will be pursued opportunistically based on, among other things, market conditions, tenant demand, and our evaluation of whether those phases will generate an appropriate financial return.
At June 30, 2020, the leasable square feet in our properties was 93.0% leased and 90.8% occupied. The leased rate is higher than the occupied rate due to leased spaces that are being redeveloped or improved or that are awaiting permits and, therefore, are not yet ready to be occupied. Our occupancy and leased rates are subject to variability over time due to factors including acquisitions, the timing of the start and stabilization of our redevelopment projects, lease expirations and tenant closings and bankruptcies.
Lease Rollovers
For the second quarter of 2020, we signed leases for a total of 315,000 square feet of retail space including 278,000 square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of 11% on a cash basis. New leases for comparable spaces were signed for 123,000 square feet at an average rental increase of 32% on a cash basis. Renewals for comparable spaces were signed for 155,000 square feet at no average rental increase on a cash basis. Tenant improvements and incentives for comparable spaces were $30.94 per square foot, of which, $69.12 per square foot was for new leases and $0.69 per square foot was for renewals for the three months ended June 30, 2020.
For the six months ended June 30, 2020, we signed leases for a total of 806,000 square feet of retail space including 744,000 square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of 7% on a cash basis. New leases for comparable spaces were signed for 274,000 square feet at an average rental increase of 16% on a cash basis. Renewals for comparable spaces were signed for 470,000 square feet at an average rental increase of 2% on a cash basis. Tenant improvements and incentives for comparable spaces were $31.21 per square foot, of which, $79.88 per square foot was for new leases and $2.86 per square foot was for renewals for the six months ended June 30, 2020.
The rental increases associated with comparable spaces generally include all leases signed for retail space 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. Tenant improvements and incentives include the total dollars committed for the improvement (fit out) of a space as it relates to a specific lease and, except for redevelopments, may also include base building costs (i.e. expansion, escalators or new entrances) which are required to make the space leasable. Incentives include amounts paid to tenants as inducement to sign a lease that do not represent building improvements. Costs related to redevelopments requires judgment by management in determining what reflects base building costs and thus, is not included in the "tenant improvements and incentives" amount.
The leases signed in 2020 generally become effective over the following two years though some may not become effective until 2023 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 1.3 to 1.9 million square feet of retail space each year, however, we expect that volume and potentially rental rate increases for 2020 to be negatively impacted by the COVID-19 pandemic.
Comparable Properties
Throughout this section, we have provided certain information on a “comparable property” basis. Information provided on a comparable property basis includes the results of properties that we owned and operated for the entirety of both periods being compared except for properties that are currently under development or are being repositioned for significant redevelopment and investment. For the three and six months ended June 30, 2020, all or a portion of 98 and 97 properties, respectively, were considered comparable properties and eight properties were considered non-comparable properties. For the three months ended June 30, 2020, one property was moved from acquisitions to comparable properties and one portion of a property was removed from comparable properties, as it was sold, compared to the designations for the three months ended March 31, 2020, which were 97 properties or portion of properties considered comparable and eight considered non-comparable. For the six months ended June 30, 2020, two properties and two portions of properties were moved from non-comparable properties to comparable properties, one property was moved from comparable properties to non-comparable properties, one property was moved from acquisitions to non-comparable properties, and one portion of a property was removed from comparable properties, as it was

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sold, compared to the designations for the year ended December 31, 2019. While there is judgment surrounding changes in designations, we typically move non-comparable properties to comparable properties once they have stabilized, which is typically considered 90% physical occupancy or when the growth expected from the redevelopment has been included in the comparable periods. We typically remove properties from comparable properties when the repositioning of the asset has commenced and has or is expected to have a significant impact to property operating income within the calendar year. Acquisitions are moved to comparable properties once we have owned the property for the entirety of comparable periods and the property is not under development or being repositioned for significant redevelopment and investment.

RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2020 AND 2019
 
 
 
 
 
Change
 
2020
 
2019
 
Dollars
 
%
 
(Dollar amounts in thousands)
Rental income
$
175,479

 
$
229,731

 
$
(54,252
)
 
(23.6
)%
Mortgage interest income
748

 
734

 
14

 
1.9
 %
Total property revenue
176,227

 
230,465

 
(54,238
)
 
(23.5
)%
Rental expenses
36,417

 
41,438

 
(5,021
)
 
(12.1
)%
Real estate taxes
30,599

 
25,166

 
5,433

 
21.6
 %
Total property expenses
67,016

 
66,604

 
412

 
0.6
 %
Property operating income (1)
109,211

 
163,861

 
(54,650
)
 
(33.4
)%
General and administrative expense
(9,814
)
 
(11,422
)
 
1,608

 
(14.1
)%
Depreciation and amortization
(62,784
)
 
(59,057
)
 
(3,727
)
 
6.3
 %
Gain on sale of real estate, net
11,682

 
16,197

 
(4,515
)
 
(27.9
)%
Operating income
48,295

 
109,579

 
(61,284
)
 
(55.9
)%
Other interest income
509

 
189

 
320

 
169.3
 %
Interest expense
(34,073
)
 
(27,482
)
 
(6,591
)
 
24.0
 %
(Loss) income from partnerships
(3,872
)
 
381

 
(4,253
)
 
(1,116.3
)%
Total other, net
(37,436
)
 
(26,912
)
 
(10,524
)
 
39.1
 %
Net income
10,859

 
82,667

 
(71,808
)
 
(86.9
)%
Net income attributable to noncontrolling interests
(352
)
 
(1,765
)
 
1,413

 
(80.1
)%
Net income attributable to the Trust
$
10,507

 
$
80,902

 
$
(70,395
)
 
(87.0
)%
(1)
Property operating income is a non-GAAP measure that consists of rental 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.

Property Revenues
Total property revenue decreased $54.2 million, or 23.5%, to $176.2 million in the three months ended June 30, 2020 compared to $230.5 million in the three months ended June 30, 2019. The percentage occupied at our shopping centers was 90.8% at June 30, 2020 compared to 93.3% at June 30, 2019. The most significant driver of the decrease in property revenues is the impact of COVID-19, as many of our tenants were forced to temporarily or in some cases permanently close their businesses resulting in changes in our collectibility estimates and in some cases rent abatement. Changes in the components of property revenue are discussed below.
Rental Income
Rental income consists primarily of minimum rent, cost reimbursements from tenants and percentage rent, and is net of collectibility related adjustments. Rental income decreased $54.3 million, or 23.6%, to $175.5 million in the three months ended June 30, 2020 compared to $229.7 million in the three months ended June 30, 2019 due primarily to the following:
higher collectibility related adjustments across all properties of $54.2 million primarily the result of COVID-19 impacts. This includes the write-off of $9.4 million of straight-line rent receivables primarily related to tenants who were changed to a cash basis of revenue recognition during the quarter ended June 30, 2020,
a decrease of $5.0 million from comparable properties primarily related to lower average occupancy of approximately $3.7 million, $2.2 million of lower parking income and percentage rent primarily due to the

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impacts from COVID-19 related closures, and $1.0 million of lower legal and lease termination fees, partially offset by higher rental rates of approximately $3.0 million, and
a decrease of $3.3 million from property sales,
partially offset by,
an increase of $5.2 million from acquisitions of Hoboken during the second half of 2019 and early 2020, Georgetowne Shopping Center in November 2019, and Fairfax Junction in January 2020, and
an increase of $2.9 million from non-comparable properties primarily driven by the opening of our new office building at Santana Row in early 2020, partially offset by $1.0 million related to lower parking income primarily due to the impacts from COVID-19 related closures.
Property Expenses
Total property expenses increased $0.4 million, or 0.6%, to $67.0 million in the three months ended June 30, 2020 compared to $66.6 million in the three months ended June 30, 2019. Changes in the components of property expenses are discussed below.
Rental Expenses
Rental expenses decreased $5.0 million, or 12.1%, to $36.4 million in the three months ended June 30, 2020 compared to $41.4 million in the three months ended June 30, 2019. This decrease is primarily due to the following:
a decrease of $5.2 million from comparable properties due primarily to lower repairs and maintenance costs and utilities primarily driven by the impact of COVID-19, and
a decrease of $0.3 million from property sales,
partially offset by,
an increase of $0.7 million from acquisitions of Hoboken during the second half of 2019 and early 2020 and Georgetowne Shopping Center in November 2019.
As a result of the changes in rental income and rental expenses as discussed above, rental expenses as a percentage of rental income increased to 20.8% in the three months ended June 30, 2020 from 18.0% in the three months ended June 30, 2019.
Real Estate Taxes
Real estate tax expense increased $5.4 million, or 21.6%, to $30.6 million in the three months ended June 30, 2020 compared
to $25.2 million in the three months ended June 30, 2019. This increase is primarily due to the following:
an increase of $4.4 million from comparable properties primarily due to 2019 tax refunds from a multi-year appeal and reassessment at three of our properties, and higher current year assessments,
an increase of $0.8 million from acquisitions of Hoboken during the second half of 2019 and early 2020 and Georgetowne Shopping Center in November 2019, and
an increase of $0.5 million from non-comparable properties due primarily to the opening of our new office building at Santana Row in early 2020,
partially offset by,
a decrease of $0.3 million from property sales.
Property Operating Income
Property operating income decreased $54.7 million, or 33.4%, to $109.2 million in the three months ended June 30, 2020 compared to $163.9 million in the three months ended June 30, 2019. This decrease is primarily due to the impact of COVID-19, which resulted in higher collectibility related adjustments, lower percentage rent, and lower parking income, partially offset by property acquisitions and the opening of our new office building at Santana Row in early 2020.
Other Operating
General and Administrative
General and administrative expense decreased $1.6 million, or 14.1%, to $9.8 million in the three months ended June 30, 2020 from $11.4 million in the three months ended June 30, 2019. This decrease is due primarily to COVID-19 impacts including office closures and cancellations of all non-essential business travel and company events, as well as lower personnel related costs.

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Depreciation and Amortization
Depreciation and amortization expense increased $3.7 million, or 6.3%, to $62.8 million in the three months ended June 30, 2020 from $59.1 million in the three months ended June 30, 2019. This increase is due primarily to 2019 acquisitions and the opening of our new office building at Santana Row in early 2020, partially offset by property sales.
Gain on Sale of Real Estate, Net
The $11.7 million gain on sale of real estate, net for the three months ended June 30, 2020 is due primarily to the sale of a building in Pasadena, California.
The $16.2 million gain on sale of real estate, net for the three months ended June 30, 2019 is due primarily to the sale of Free
State Shopping Center and a land parcel at Northeast Shopping Center.
Operating Income
Operating income decreased $61.3 million, or 55.9%, to $48.3 million in the three months ended June 30, 2020 compared to $109.6 million in the three months ended June 30, 2019. This decrease is primarily due to the impacts of COVID-19, which resulted in higher collectibility related adjustments, lower percentage rent, and lower parking income, as well as a lower net gain on the sale of real estate compared to prior year, partially offset by lower rental expenses and general and administrative expenses due to the impact COVID-19, the opening of our new office building at Santana Row in early 2020, and property acquisitions.
Other
Interest Expense
Interest expense increased $6.6 million, or 24.0%, to $34.1 million in the three months ended June 30, 2020 compared to $27.5 million in the three months ended June 30, 2019. This increase is due primarily to the following:
an increase of $5.7 million from higher borrowings in response to the COVID-19 pandemic (see further discussion in "Impacts of the COVID-19 Pandemic" earlier in Item 2 of this document), and
an increase of $3.3 million due to higher weighted average borrowings primarily from the $400 million issuance of our 3.20% notes in 2019, and $106.9 million of mortgage loans associated with our Hoboken acquisitions, partially offset by the repayment of our $275.0 million term loan in June 2019,
partially offset by,
a decrease of $1.4 million due to a lower overall weighted average borrowing rate, and
an increase of $1.0 million in capitalized interest, primarily attributable to the development of Phase III of Assembly Row and Pike & Rose.
Gross interest costs were $39.8 million and $32.2 million in the three months ended June 30, 2020 and 2019, respectively. Capitalized interest was $5.7 million and $4.7 million for the three months ended June 30, 2020 and 2019, respectively.
(Loss) income from partnerships
Loss from partnerships increased $4.3 million to $3.9 million in the three months ended June 30, 2020 compared to income of $0.4 million in the three months ended June 30, 2019. This decrease is primarily due to our share of losses from our hotel investments at Assembly Row and Pike & Rose, largely the result of COVID-19 closures and restrictions.


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RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2020 AND 2019
 
 
 
 
 
Change
 
2020
 
2019
 
Dollars
 
%
 
(Dollar amounts in thousands)
Rental income
$
406,277

 
$
461,223

 
$
(54,946
)
 
(11.9
)%
Mortgage interest income
1,507

 
1,469

 
38

 
2.6
 %
Total property revenue
407,784

 
462,692

 
(54,908
)
 
(11.9
)%
Rental expenses
80,729

 
85,698

 
(4,969
)
 
(5.8
)%
Real estate taxes
59,663

 
52,853

 
6,810

 
12.9
 %
Total property expenses
140,392

 
138,551

 
1,841

 
1.3
 %
Property operating income (1)
267,392

 
324,141

 
(56,749
)
 
(17.5
)%
General and administrative expense
(20,065
)
 
(20,987
)
 
922

 
(4.4
)%
Depreciation and amortization
(124,972
)
 
(118,679
)
 
(6,293
)
 
5.3
 %
Gain on sale of real estate, net
11,682

 
16,197

 
(4,515
)
 
(27.9
)%
Operating income
134,037

 
200,672

 
(66,635
)
 
(33.2
)%
Other interest income
817

 
366

 
451

 
123.2
 %
Interest expense
(62,518
)
 
(55,515
)
 
(7,003
)
 
12.6
 %
Loss from partnerships
(5,036
)
 
(1,053
)
 
(3,983
)
 
378.3
 %
Total other, net
(66,737
)
 
(56,202
)
 
(10,535
)
 
18.7
 %
Net income
67,300

 
144,470

 
(77,170
)
 
(53.4
)%
Net income attributable to noncontrolling interests
(2,030
)
 
(3,424
)
 
1,394

 
(40.7
)%
Net income attributable to the Trust
$
65,270

 
$
141,046

 
$
(75,776
)
 
(53.7
)%
(1)
Property operating income is a non-GAAP measure that consists of rental 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.

Property Revenues
Total property revenue decreased $54.9 million, or 11.9%, to $407.8 million in the six months ended June 30, 2020 compared to $462.7 million in the six months ended June 30, 2019. The percentage occupied at our shopping centers was 90.8% at June 30, 2020 compared to 93.3% at June 30, 2019. The most significant driver of the decrease in property revenue is the impact of COVID-19, as some of our tenants were forced to temporarily or in some cases permanently close their businesses resulting in changes in our collectibility estimates and in some cases rent abatement. Changes in the components of property revenue are discussed below.
Rental Income
Rental income consists primarily of minimum rent, cost reimbursements from tenants and percentage rent, and is net of collectibility related adjustments. Rental income decreased $54.9 million, or 11.9%, to $406.3 million in the six months ended June 30, 2020 compared to $461.2 million in the six months ended June 30, 2019 due primarily to the following:
higher collectibility related adjustments across all properties of $56.4 million primarily the result of COVID-19 impacts. This includes the write-off of $9.4 million of straight-line rent receivables primarily related to tenants who were changed to a cash basis of revenue recognition during the quarter ended June 30, 2020,
a decrease of $7.9 million from comparable properties due primarily to lower average occupancy of approximately $6.4 million, lower lease termination fees and legal fees of $3.8 million, lower parking income and percentage rent of $2.4 million primarily due to the impacts from COVID-19 related closures, and lower recoveries of $1.8 million primarily the result of lower snow removal expense, partially offset by higher rental rates of approximately $8.1 million, and
a decrease of $6.9 million from property sales,
partially offset by,

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an increase of $10.5 million from acquisitions of Hoboken during the second half of 2019 and early 2020, Georgetowne Shopping Center in November 2019, and Fairfax Junction in January 2020, and
an increase of $5.8 million from non comparable properties driven by the opening of our new office building at Santana Row in early 2020,
Property Expenses
Total property expenses increased $1.8 million, or 1.3%, to $140.4 million in the six months ended June 30, 2020 compared to $138.6 million in the six months ended June 30, 2019. Changes in the components of property expenses are discussed below.
Rental Expenses
Rental expenses decreased $5.0 million, or 5.8%, to $80.7 million in the six months ended June 30, 2020 compared to $85.7 million in the six months ended June 30, 2019 due primarily to the following:
a decrease of $6.5 million from comparable properties due to lower snow removal expense, and lower repairs and maintenance and utilities primarily driven by the impact of COVID-19.
a decrease of $0.8 million from our property sales,
partially offset by,
a increase of $1.5 million from acquisitions of Hoboken during the second half of 2019 and early 2020, Georgetowne Shopping Center in November 2019, and Fairfax Junction in January 2020, and
an increase of $0.4 million from non-comparable properties due primarily to the opening of our new office building at Santana Row in early 2020.
As a result of the changes in rental income and rental expenses as discussed above, rental expenses as a percentage of rental income increased to 19.9% in the six months ended June 30, 2020 from 18.6% in the six months ended June 30, 2019.
Real Estate Taxes
Real estate tax expense increased $6.8 million, or 12.9%, to $59.7 million in the six months ended June 30, 2020 compared
to $52.9 million in the six months ended June 30, 2019. This increase is primarily due to the following:
an increase of $4.8 million from comparable properties primarily due to a 2019 tax refunds from a multi-year appeal and reassessment at three of our properties, and higher current year assessments,
an increase of $1.7 million from acquisitions of Hoboken during the second half of 2019 and early 2020, Georgetowne Shopping Center in November 2019, and Fairfax Junction in January 2020, and
an increase of $0.9 million from non-comparable properties due primarily to the opening of our new office building at Santana Row in early 2020,
partially offset by,
a decrease of $0.6 million from our property sales.
Property Operating Income
Property operating income decreased $56.7 million, or 17.5%, to $267.4 million in the six months ended June 30, 2020 compared to $324.1 million in the six months ended June 30, 2019. This decrease is primarily due to the impact of COVID-19, which resulted in higher collectibility related adjustments, lower percentage rent, and lower parking income, in addition to property sales, and lower lease termination fee income, partially offset by property acquisitions and the opening of our new office building at Santana Row in early 2020.
Other Operating
General and Administrative
General and administrative expense decreased $0.9 million, or 4.4%, to $20.1 million in the six months ended June 30, 2020 from $21.0 million in the six months ended June 30, 2019. This decrease is due primarily to COVID-19 impacts including office closures and cancellations of all non-essential business travel and company events, and lower personnel related costs.
Depreciation and Amortization
Depreciation and amortization expense increased $6.3 million, or 5.3%, to $125.0 million in the six months ended June 30, 2020 from $118.7 million in the six months ended June 30, 2019. This increase is due primarily to property acquisitions and the opening of our new office building at Santana Row in early 2020, partially offset by property sales.

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Table of Contents

Gain on Sale of Real Estate, Net
The $11.7 million gain on sale of real estate, net for the six months ended June 30, 2020 is due to the sale of a building in Pasadena, California.
The $16.2 million gain on sale of real estate, net for the six months ended June 30, 2019 is due to the sale of Free State Shopping Center, a land parcel at Northeast Shopping Center, and condominium sales.
Operating Income
Operating income decreased $66.6 million, or 33.2%, to $134.0 million in the six months ended June 30, 2020 compared to $200.7 million in the six months ended June 30, 2019. This decrease is primarily due to the impacts of COVID-19, which resulted in higher collectibility related adjustments, lower percentage rent, and lower parking income, as well as lower net gain on the sale of real estate and the impact of property sales, partially offset by the opening of our new office building at Santana Row in early 2020, property acquisitions, and lower rental expenses, largely due to the impact of COVID-19.
Other
Interest Expense
Interest expense increased $7.0 million, or 12.6%, to $62.5 million in the six months ended June 30, 2020 compared to $55.5 million in the six months ended June 30, 2019. This increase is due primarily to the following:
an increase of $6.3 million from higher borrowings in response to the COVID-19 pandemic (see further discussion in "Impacts of the COVID-19 Pandemic" earlier in Item 2 of this document), and
an increase of $5.4 million due to higher weighted average borrowings primarily from the $400.0 million issuance of our 3.20% notes in 2019, and $106.9 million of mortgage loans associated with our Hoboken acquisitions, partially offset by the repayment of our $275.0 million term loan in June 2019,
partially offset by,
a decrease of $2.5 million due to a lower overall weighted average borrowing rate, and
an increase of $2.2 million in capitalized interest, primarily attributable to the development of Phase III of Assembly Row and Pike & Rose.
Gross interest costs were $73.9 million and $64.8 million in the six months ended June 30, 2020 and 2019, respectively. Capitalized interest was $11.4 million and $9.2 million for the six months ended June 30, 2020 and 2019, respectively.
Loss from partnerships
Loss from partnerships increased $4.0 million to $5.0 million in the six months ended June 30, 2020 compared to $1.1 million in the six months ended June 30, 2019. This increase is primarily due to our share of losses from our hotel investments at Assembly Row and Pike & Rose, largely the result of COVID-19 closures and restrictions.



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Liquidity and Capital Resources

Due to the nature of our business and strategy, we typically generate significant amounts of cash from operations which is largely paid to our common and preferred shareholders in the form of dividends because as a REIT, we are generally required to make annual distributions to shareholders of at least 90% of our taxable income. Remaining cash flow from operations after dividend payments is used to fund recurring and non-recurring capital projects (such as tenant improvements and redevelopments), and regular debt service requirements (including debt service relating to additional or replacement debt, as well as scheduled debt maturities). We maintain a $1.0 billion revolving credit facility to fund short term cash flow needs and also look to the public and private debt and equity markets, joint venture relationships, and property dispositions to fund capital expenditures on a long-term basis.

We are currently experiencing lower levels of cash from operations due to lower rent collections from tenants impacted by the COVID-19 pandemic (see further discussion under the "Outlook" section of this Item 2). While the overall economic impacts of the pandemic are unknown, we have taken multiple steps during the last several months to strengthen our financial position, maximize liquidity, and to provide maximum flexibility during these uncertain times. In March 2020, we borrowed $990.0 million under our revolving credit facility, representing a draw-down of almost the entirety of our $1.0 billion credit facility. In May 2020, we entered into a $400.0 million unsecured term loan and issued $700.0 million of fixed rate unsecured senior notes for combined net proceeds of $1.1 billion. We subsequently repaid the outstanding balance on our revolving credit facility and amended how certain covenants are calculated to provide us more operating flexibility. As of June 30, 2020, there is no outstanding balance on our $1.0 billion unsecured revolving credit facility and we have cash and cash equivalents of $980.0 million.

For the six months ended June 30, 2020, our weighted average borrowing rate on the revolving credit facility, before amortization of debt fees, was 1.5%. As of June 30, 2020, we had the capacity to issue up to $128.3 million in common shares under our ATM equity program.
Over the next 12 months, we have $330.3 million of debt maturing, excluding our $400.0 million term loan, which may be extended for an additional twelve months at our option. Additionally, our overall capital requirements for the remainder of 2020 will depend upon the nature of government mandated closures and restrictions and the overall economic impact of COVD-19, as well as general timing of our redevelopment and development activities. During the second quarter 2020, we experienced lower levels of capital investment as the result of COVID-19 related closures. However, we were able to restart all construction related activities during the quarter and consequently expect to see higher levels of investment during the remainder of the year, absent further requirements to halt construction activities.
We believe that the cash on our balance sheet together with rents we collect as well as our $1.0 billion revolving credit facility will allow us to continue to operate our business in the near-term. Given our recent ability to access the capital markets, we also expect debt or equity to be available to us. We may also further delay the timing of certain development and redevelopment projects as well as limit future acquisitions, reduce our operating expenditures, or re-evaluate our dividend policy.  We continue to monitor governmental financial assistance programs being made available to address impacts of COVID-19 and may access one or more of these programs to supplement our liquidity if we qualify for them. 

While the COVID-19 pandemic has negatively impacted our business during the quarter ended June 30, 2020 and, we expect it will continue to negatively impact our business in the short term, we maintain our long term commitment to a conservative capital structure that will allow us to maintain strong debt service coverage and fixed-charge coverage ratios as part of our commitment to investment-grade debt ratings.

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Table of Contents

Summary of Cash Flows
 
Six Months Ended June 30,
 
2020
 
2019
 
(In thousands)
Cash provided by operating activities
$
181,382

 
$
242,287

Cash used in investing activities
(257,198
)
 
(113,368
)
Cash provided by (used in) financing activities
923,439

 
(96,982
)
Increase in cash, cash equivalents and restricted cash
847,623

 
31,937

Cash, cash equivalents and restricted cash, beginning of year
153,614

 
108,332

Cash, cash equivalents and restricted cash, end of period
$
1,001,237

 
$
140,269


Net cash provided by operating activities decreased $60.9 million to $181.4 million during the six months ended June 30, 2020 from $242.3 million during the six months ended June 30, 2019. The decrease was primarily attributable to lower net income before non-cash items and higher accounts receivable balances as we experienced lower rent collection rates in the second quarter 2020 as a result of the COVID-19 pandemic, partially offset by the timing of interest payments on our senior notes and lower prepaid expenses.
Net cash used in investing activities increased $143.8 million to $257.2 million during the six months ended June 30, 2020 from $113.4 million during the six months ended June 30, 2019. The increase was primarily attributable to:
a $76.0 million decrease in proceeds from the sale of real estate resulting from the sale of a building in Pasadena, California in April 2020, as compared to the sales of our Free State Shopping Center, a land parcel at our Northeast Shopping Center, and condominiums at our Assembly Row and Pike & Rose properties in 2019,
a $73.3 million increase in capital expenditures as we continue to invest in Pike & Rose, Assembly Row, Santana Row and other redevelopments, and
$12.9 million for net costs paid in 2020 relating to the partial sale under threat of condemnation at San Antonio Center in 2019,
partially offset by
a $15.8 million decrease in acquisition of real estate, primarily due to the February 2019 acquisition of Fairfax Junction, partially offset by the acquisition of two buildings in Hoboken, New Jersey in February 2020.
Net cash provided by financing activities increased $1,020.4 million to $923.4 million during the six months ended June 30, 2020 from $97.0 million used in the six months ended June 30, 2019. The increase was primarily attributable to:
a $403.0 increase due to net proceeds of $700.1 million from the issuance of $400.0 million of 3.50% unsecured senior notes and the $300.0 million reopening of our 3.95% unsecured senior notes in May 2020 as compared to $297.1 million in net proceeds from the issuance of $300.0 million of 3.20% unsecured senior notes in June 2019,
$398.7 million in net proceeds from our unsecured term loan in May 2020, and
a $294.8 million decrease in repayment of mortgages, finance leases, and notes payable primarily due to the repayment of our $275.0 million unsecured term loan in June 2019 and the $20.3 million repayment of the mortgage loan on Rollingwood Apartments in January 2019,
partially offset by
a $68.4 million decrease in net proceeds from the issuance of common shares under our ATM program during the six months ended June 30, 2019.

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Table of Contents

Debt Financing Arrangements
The following is a summary of our total debt outstanding as of June 30, 2020:
Description of Debt
Original
Debt
Issued
 
Principal Balance as of June 30, 2020
 
Stated Interest Rate as of June 30, 2020
 
Maturity Date
 
(Dollar amounts in thousands)
 
 
 
 
Mortgages payable
 
 
 
 
 
 
 
Secured fixed rate
 
 
 
 
 
 
 
The Shops at Sunset Place
Acquired

 
$
60,995

 
5.62
%
 
September 1, 2020
29th Place
Acquired

 
3,754

 
5.91
%
 
January 31, 2021
Sylmar Towne Center
Acquired

 
16,436

 
5.39
%
 
June 6, 2021
Plaza Del Sol
Acquired

 
8,136

 
5.23
%
 
December 1, 2021
The AVENUE at White Marsh
52,705

 
52,705

 
3.35
%
 
January 1, 2022
Montrose Crossing
80,000

 
66,554

 
4.20
%
 
January 10, 2022
Azalea
Acquired

 
40,000

 
3.73
%
 
November 1, 2025
Bell Gardens
Acquired

 
12,544

 
4.06
%
 
August 1, 2026
Plaza El Segundo
125,000

 
125,000

 
3.83
%
 
June 5, 2027
The Grove at Shrewsbury (East)
43,600

 
43,600

 
3.77
%
 
September 1, 2027
Brook 35
11,500

 
11,500

 
4.65
%
 
July 1, 2029
Hoboken (24 Buildings) (1)
Acquired

 
56,450

 
LIBOR + 1.95%

 
December 15, 2029
Various Hoboken (14 Buildings) (2)
Acquired

 
33,130

 
Various

 
Various through 2029
Chelsea
Acquired

 
5,418

 
5.36
%
 
January 15, 2031
Hoboken (1 Building) (3)
Acquired

 
16,719

 
3.75
%
 
July 1, 2042
Subtotal
 
 
552,941

 
 
 
 
Net unamortized premium and debt issuance costs
 
(1,907
)
 
 
 
 
Total mortgages payable, net
 
 
551,034

 
 
 
 
Notes payable
 
 
 
 
 
 
 
Term Loan
400,000

 
400,000

 
LIBOR + 1.35%

 
May 6, 2021
Revolving credit facility (4)
1,000,000

 

 
LIBOR + 0.775%

 
January 19, 2024
Various
7,239

 
3,609

 
11.31%

 
Various through 2028
Subtotal
 
 
403,609

 
 
 
 
Net unamortized debt issuance costs
 
 
(1,132
)
 
 
 
 
Total notes payable, net
 
 
402,477

 
 
 
 
 
 
 
 
 
 
 
 
Senior notes and debentures
 
 
 
 
 
 
 
Unsecured fixed rate
 
 
 
 
 
 
 
2.55% notes
250,000

 
250,000

 
2.55
%
 
January 15, 2021
3.00% notes
250,000

 
250,000

 
3.00
%
 
August 1, 2022
2.75% notes
275,000

 
275,000

 
2.75
%
 
June 1, 2023
3.95% notes
600,000

 
600,000

 
3.95
%
 
January 15, 2024
7.48% debentures
50,000

 
29,200

 
7.48
%
 
August 15, 2026
3.25% notes
475,000

 
475,000

 
3.25
%
 
July 15, 2027
6.82% medium term notes
40,000

 
40,000

 
6.82
%
 
August 1, 2027
3.20% notes
400,000

 
400,000

 
3.20
%
 
June 15, 2029
3.50% notes
400,000

 
400,000

 
3.50
%
 
June 1, 2030
4.50% notes
550,000

 
550,000

 
4.50
%
 
December 1, 2044
3.625% notes
250,000

 
250,000

 
3.625
%
 
August 1, 2046
Subtotal
 
 
3,519,200

 
 
 
 
Net unamortized discount and debt issuance costs
 
(10,739
)
 
 
 
 
Total senior notes and debentures, net
 
 
3,508,461

 
 
 
 
 
 
 
 
 
 
 
 
Total debt, net
 
 
$
4,461,972

 
 
 
 
_____________________
1)
On November 26, 2019, we entered into two interest rate swap agreements that fix the interest rate on this mortgage loan at 3.67%.
2)
The interest rates on these mortgages range from 3.91% to 5.00%.
3)
This mortgage loan has a fixed interest rate, however, the rate resets every five years until maturity. The current interest rate is fixed until July 1, 2022, and the loan is prepayable at par anytime after this date.

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Table of Contents

4)
The maximum amount drawn under our revolving credit facility during the six months ended June 30, 2020 was $990.0 million, and the weighted average interest rate on borrowings under our revolving credit facility, before amortization of debt fees, was 1.5%.
Our revolving credit facility and other debt agreements include financial and other covenants that may limit our operating activities in the future. As of June 30, 2020, we were in compliance with all financial and other covenants related to our revolving credit facility, term loan, and senior notes. Additionally, as of June 30, 2020, we were in compliance with all of the financial and other covenants that could trigger loan default on our mortgage loans. If we were to breach any of these financial and other covenants and did not cure the breach within an 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 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 organizational documents do not limit the level or amount of debt that we may incur.
The following is a summary of our scheduled principal repayments as of June 30, 2020:
 
 
Unsecured
 
Secured
 
Total
 
 
(In thousands)
 
2020
$
379

 
$
63,251

 
$
63,630

 
2021
650,680

(1)
31,756

 
682,436

  
2022
250,756

 
119,706

 
370,462

  
2023
275,775

 
3,549

 
279,324

  
2024
600,665

(2)
3,688

 
604,353

  
Thereafter
2,144,554

 
330,991

 
2,475,545

  
 
$
3,922,809

  
$
552,941

 
$
4,475,750

(3)
__________________
1)
Our $400.0 million term loan matures on May 6, 2021 plus one twelve month extension, at our option.
2)
Our $1.0 billion revolving credit facility matures on January 19, 2024 plus two six-month extensions at our option. As of June 30, 2020, there was no outstanding balance under this credit facility.
3)
The total debt maturities differ from the total reported on the consolidated balance sheet due to the unamortized net premium/discount and debt issuance costs on mortgage loans, notes payable, and senior notes as of June 30, 2020.
Interest Rate Hedging
We may use derivative instruments to manage exposure to variable interest rate risk. We generally enter into interest rate swaps to manage our exposure to variable interest rate risk and treasury locks to manage the risk of interest rates rising prior to the issuance of debt. We enter into derivative instruments that qualify as cash flow hedges and do not enter into derivative instruments for speculative purposes.
Interest rate swaps associated with cash flow hedges are recorded at fair value on a recurring basis. Effectiveness of cash flow hedges is assessed both at inception and on an ongoing basis. The effective portion of changes in fair value of the interest rate swaps associated with cash flow hedges is recorded in other comprehensive loss which is included in "accumulated other comprehensive loss" on the balance sheet and statement of shareholders' equity. Cash flow hedges become ineffective if critical terms of the hedging instrument and the debt instrument do not perfectly match such as notional amounts, settlement dates, reset dates, calculation period and LIBOR rate. In addition, we evaluate the default risk of the counterparty by monitoring the credit-worthiness of the counterparty which includes reviewing debt ratings and financial performance. If a cash flow hedge is deemed ineffective, the ineffective portion of changes in fair value of the interest rate swaps associated with cash flow hedges is recognized in earnings in the period affected.
As of June 30, 2020, we have two interest rate swap agreements that effectively fix the rate on a mortgage payable associated with our Hoboken portfolio at 3.67%. Our Assembly Row hotel joint venture is also a party to two interest rate swap agreements that effectively fix their debt at 5.206%. All swaps were designated and qualify as cash flow hedges. Hedge ineffectiveness has not impacted earnings as of June 30, 2020.

29

Table of Contents

REIT Qualification
We intend to maintain our qualification as a REIT under Section 856(c) of the Code. As a REIT, we generally will not be subject to corporate federal income taxes on income we distribute to our shareholders as long as we satisfy certain technical requirements of the Code, including the requirement to distribute at least 90% of our taxable income to our shareholders.
Funds From Operations
Funds from operations (“FFO”) is a supplemental non-GAAP financial measure of real estate companies’ operating performance. 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 gains and losses on the sale of real estate or changes in control, net of tax, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. 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 and net cash provided by operating activities. It should be noted that FFO:
does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income);
should not be considered an alternative to net income as an indication of our performance; and
is not necessarily indicative of cash flow as a measure of liquidity or ability to fund cash needs, including the payment of dividends.
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.
An increase or decrease in FFO available for common shareholders does not necessarily result in an increase or decrease in aggregate distributions because our Board of Trustees is not required to increase distributions on a quarterly basis. However, we must distribute at least 90% of our annual taxable income to remain qualified as a REIT. Therefore, a significant increase in FFO will generally require an increase in distributions to shareholders although not necessarily on a proportionate basis.

30

Table of Contents

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

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
 
(In thousands, except per share data)
Net income
$
10,859

 
$
82,667

 
$
67,300

 
$
144,470

Net income attributable to noncontrolling interests
(352
)
 
(1,765
)
 
(2,030
)
 
(3,424
)
Gain on sale of real estate, net
(11,682
)
 
(16,197
)
 
(11,682
)
 
(16,197
)
Depreciation and amortization of real estate assets
56,608

 
53,323

 
112,654

 
106,812

Amortization of initial direct costs of leases
4,809

 
4,537

 
9,709

 
9,287

Funds from operations
60,242

 
122,565

 
175,951

 
240,948

Dividends on preferred shares (1)
(2,011
)
 
(1,875
)
 
(4,021
)
 
(3,750
)
Income attributable to operating partnership units (2)

 
661

 
1,572

 
1,390

Income attributable to unvested shares
(249
)
 
(346
)
 
(541
)
 
(690
)
Funds from operations available for common shareholders
$
57,982

 
$
121,005

 
$
172,961

 
$
237,898

Weighted average number of common shares, diluted (1)(2)(3)
75,394

 
75,456

 
76,126

 
75,235

 
 
 
 
 
 
 
 
Funds from operations available for common shareholders, per diluted share
$
0.77

 
$
1.60

 
$
2.27

 
$
3.16

_____________________
(1)
For the three and six months ended June 30, 2019, dividends on our Series 1 preferred stock were not deducted in the calculation of FFO available to common shareholders, as the related shares were dilutive and included in "weighted average common shares, diluted."
(2)
For the three months ended June 30, 2020, income attributable to operating partnership units is not added back in the calculation of FFO available to common shareholders, as the related shares are not dilutive and are not included in "weighted average common shares, diluted" for this period.
(3)
For the six months ended June 30, 2020 and the three and six months ended June 30, 2019, the weighted average common shares used to compute FFO per diluted common share includes operating partnership units that were excluded from the computation of diluted EPS. Conversion of these operating partnership units is dilutive in the computation of FFO per diluted share but is anti-dilutive for the computation of dilutive EPS for these periods.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our use of financial instruments, such as debt instruments, subjects us to market risk which may affect our future earnings and cash flows, as well as the fair value of our assets. Market risk generally refers to the risk of loss from changes in interest rates and market prices. We manage our market risk by attempting to match anticipated inflow of cash from our operating, investing and financing activities with anticipated outflow of cash to fund debt payments, dividends to common and preferred shareholders, investments, capital expenditures and other cash requirements.
We may enter into certain types of derivative financial instruments to further reduce interest rate risk. We use interest rate protection and swap agreements, for example, to convert some of our variable rate debt to a fixed-rate basis or to hedge anticipated financing transactions. We use derivatives for hedging purposes rather than speculation and do not enter into financial instruments for trading purposes.
Interest Rate Risk
The following discusses the effect of hypothetical changes in market rates of interest on interest expense for our variable rate debt and on the fair value of our total outstanding debt, including our fixed-rate debt. Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our debt. Quoted market prices were used to estimate the fair value of our marketable senior notes and debentures and discounted cash flow analysis is generally used to estimate the fair value of our mortgages and notes payable. Considerable judgment is necessary to estimate the fair value of financial instruments. This analysis does not purport to take into account all of the factors that may affect our debt, such as the effect that a changing interest rate environment could have on the overall level of economic activity or the action that our management might take to reduce our exposure to the change. This analysis assumes no change in our financial structure.

31

Table of Contents

Fixed Interest Rate Debt
The majority of our outstanding debt obligations (maturing at various times through 2046) have fixed interest rates which limit the risk of fluctuating interest rates. However, interest rate fluctuations may affect the fair value of our fixed rate debt instruments. At June 30, 2020, we had $4.1 billion of fixed-rate debt outstanding, including $56.5 million of mortgage payables for which the rate is effectively fixed by two interest rate swap agreements. If market interest rates used to calculate the fair value on our fixed-rate debt instruments at June 30, 2020 had been 1.0% higher, the fair value of those debt instruments on that date would have decreased by approximately $278.5 million. If market interest rates used to calculate the fair value on our fixed-rate debt instruments at June 30, 2020 had been 1.0% lower, the fair value of those debt instruments on that date would have increased by approximately $317.5 million.
Variable Interest Rate Debt
Generally, we believe that our primary interest rate risk is due to fluctuations in interest rates on our outstanding variable rate debt. At June 30, 2020, we had $400.0 million of variable rate debt outstanding (the principal balance on our unsecured term loan). Based upon this amount of variable rate debt and the specific terms, if market interest rates increased 1.0%, our annual interest expense would increase approximately $4.0 million with a corresponding decrease in our net income and cash flows for the year. Conversely, if market interest rates decreased 1.0%, our annual interest expense would decrease by approximately $4.0 million with a corresponding increase in our net income and cash flows for the year.
ITEM 4.    CONTROLS AND PROCEDURES
Periodic Evaluation and Conclusion of Disclosure Controls and Procedures
An evaluation has been performed, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2020. Based on this evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of June 30, 2020 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and (ii) accumulated and communicated to the Trust’s management including its principal executive and principal financial officer as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during the quarterly period covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


32

Table of Contents


PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS
There have been no material developments in any of our legal proceedings since the disclosure contained in our Annual Report to Form 10-K for the fiscal year ended December 31, 2019.
ITEM 1A.    RISK FACTORS
This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. 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.” While we attempt to identify, manage and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. . “Item 1A. Risk Factors” of our Annual Report to our Form 10-K for the year ended December 31, 2019 filed with the SEC on February 10, 2020 describes some of the risks and uncertainties associated with our business. These risks and uncertainties have the potential to materially affect our business, results of operations, financial condition, cash flows, projected results and future prospects. Except for the risk factor discussed below, we do not believe that there have been any material changes to the risk factors disclosed in our 2019 Annual Report.

Natural disasters, climate change and public health crises, including the COVID-19 pandemic, could have an adverse impact on our cash flow and operating results.
Climate change may add to the unpredictability and frequency of natural disasters and severe weather conditions and create additional uncertainty as to future trends and exposures. Certain of 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 impact of climate change or the occurrence of natural disasters can delay new development projects, increase investment costs to repair or replace damaged properties, increase operating costs, create additional investment costs to make improvements to existing properties to comply with climate change regulations, increase future property insurance costs, and negatively impact the tenant demand for 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.
In addition, our business is subject to risks related to the effects of public health crises, epidemics and pandemics, including the COVID-19 pandemic. Such events could inhibit global, national and local economic activity; adversely affect trading activity in securities markets, which could negatively impact the trading prices of our common shares and debt securities and our ability to access the securities markets as a source of liquidity; adversely affect our tenants’ financial condition by limiting foot traffic and staffing at their businesses, which could affect their ability to pay rent and willingness to make new leasing commitments; reduce our cash flow, which could impact our ability to pay dividends or to service our debt; temporarily or permanently reduce the demand for retail or office space; interfere with our business operations by requiring our personnel to work remotely; increase the frequency of cyber-attacks; disrupt supply chains that could be important in our development and redevelopment activities; interfere with potential purchases and sales of properties; and have other direct and indirect effects that are difficult to predict. Such risks depend upon the nature and severity of the public health concern, as well as the extent and duration of government-mandated orders and personal decisions to limit travel, economic activity and personal interaction, none of which can be predicted with confidence. In particular, we cannot predict the duration of stay-at-home and other government orders instituted in response to the COVID-19 pandemic, which vary by jurisdiction, or the pandemics' short and long term economic effects, each of which could have a material adverse effect on our business.

ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.

ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.

ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.


33

Table of Contents

ITEM 5.
OTHER INFORMATION
None.

ITEM 6.
EXHIBITS
A list of exhibits to this Quarterly Report on Form 10-Q is set forth on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference.



Table of Contents


EXHIBIT INDEX
 
 
 
Exhibit No.
 
Description
 
 
 
  
Rule 13a-14(a) Certification of Chief Executive Officer (filed herewith)
 
 
  
Rule 13a-14(a) Certification of Principal Financial Officer (filed herewith)
 
 
  
Section 1350 Certification of Chief Executive Officer (filed herewith)
 
 
  
Section 1350 Certification of Principal Financial Officer (filed herewith)
 
 
101
  
The following materials from Federal Realty Investment Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in XBRL (Extensible Business Reporting Language): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Comprehensive Income, (3) the Consolidated Statement of Shareholders’ Equity, (4) the Consolidated Statements of Cash Flows, and (5) Notes to Consolidated Financial Statements that have been detail tagged.
 
 
 
104
 
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

35

Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto authorized.

 
 
FEDERAL REALTY INVESTMENT TRUST
 
 
August 5, 2020
 
/s/    Donald C. Wood        
 
 
Donald C. Wood,
 
 
President, Chief Executive Officer and Trustee
 
 
(Principal Financial and Executive Officer)
 
 

 
 
FEDERAL REALTY INVESTMENT TRUST
 
 
August 5, 2020
 
/s/    Daniel Guglielmone    
 
 
Daniel Guglielmone,
 
 
Executive Vice President
 
 
Chief Financial Officer and Treasurer
 
 
(Principal Financial and Accounting Officer)
 
 


36
Exhibit


Exhibit 31.1
CERTIFICATION
I, Donald C. Wood, certify that:
1)
I have reviewed this quarterly report on Form 10-Q of Federal Realty Investment Trust;
2)
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5)
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of trustees (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 5, 2020
 
/s/ Donald C. Wood
 
 
Donald C. Wood,
 
 
President, Chief Executive Officer and Trustee
 
 
(Principal Financial and Executive Officer)



Exhibit


Exhibit 31.2
CERTIFICATION
I, Daniel Guglielmone, certify that:
1)
I have reviewed this quarterly report on Form 10-Q of Federal Realty Investment Trust;
2)
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5)
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of trustees (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 5, 2020
 
/s/ Daniel Guglielmone
 
 
Daniel Guglielmone
 
 
Executive Vice President -
Chief Financial Officer and Treasurer
 
 
(Principal Financial and Accounting Officer)



Exhibit


Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Donald C. Wood, the President and Chief Executive Officer of Federal Realty Investment Trust (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2020 (the “Report”). The undersigned hereby certifies, to the best of his knowledge, that:
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 5, 2020
 
/s/ Donald C. Wood
 
 
Donald C. Wood,
 
 
President, Chief Executive Officer and Trustee
 
 
(Principal Financial and Executive Officer)



Exhibit


Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Daniel Guglielmone, the Executive Vice President and Chief Financial Officer and Treasurer of Federal Realty Investment Trust (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2020 (the “Report”). The undersigned hereby certifies, to the best of his knowledge, that:
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 5, 2020
 
/s/ Daniel Guglielmone
 
 
Daniel Guglielmone
 
 
Executive Vice President -
Chief Financial Officer and Treasurer
 
 
(Principal Financial and Accounting Officer)



v3.20.2
Document and Entity Information Document - shares
6 Months Ended
Jun. 30, 2020
Jul. 31, 2020
Entity Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2020  
Document Transition Report false  
Commission File Number 1-07533  
Name of Registrant FEDERAL REALTY INVESTMENT TRUST  
State of Organization MD  
IRS Employer Identification No. 52-0782497  
Entity Address, Address 1626 East Jefferson Street  
Entity Address, City Rockville  
Entity Address, State MD  
Entity Address, Zip Code 20852  
Registrant's Telephone Area Code 301  
Registrant's Telephone Number 998-8100  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   75,638,759
Entity Central Index Key 0000034903  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Common Shares of Beneficial Interest    
Entity Information [Line Items]    
Title of 12(b) Security Common Shares of Beneficial Interest  
Trading Symbol FRT  
Security Exchange Name NYSE  
5.0% Series C Cumulative Redeemable Preferred    
Entity Information [Line Items]    
Title of 12(b) Security Depositary Shares, each representing 1/1000 of a share  
Trading Symbol FRT-C  
Security Exchange Name NYSE  
v3.20.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
ASSETS    
Operating (including $1,754,540 and $1,676,866 of consolidated variable interest entities, respectively) $ 7,790,025 $ 7,535,983
Construction-in-progress (including $93,067 and $102,583 of consolidated variable interest entities, respectively) 754,787 760,420
Assets held for sale 1,085 1,729
Real estate, at cost, total 8,545,897 8,298,132
Less accumulated depreciation and amortization (including $317,925 and $296,165 of consolidated variable interest entities, respectively) (2,308,403) (2,215,413)
Net real estate 6,237,494 6,082,719
Cash and cash equivalents 980,039 127,432
Accounts and notes receivable, net 167,641 152,572
Mortgage notes receivable, net 30,332 30,429
Investment in partnerships 22,879 28,604
Operating lease right of use assets 93,494 93,774
Finance lease right of use assets 51,758 52,402
Prepaid expenses and other assets 206,293 227,060
TOTAL ASSETS 7,789,930 6,794,992
Liabilities    
Mortgages payable, net (including $475,757 and $469,184 of consolidated variable interest entities, respectively) 551,034 545,679
Notes payable, net 402,477 3,781
Senior notes and debentures, net 3,508,461 2,807,134
Accounts payable and accrued expenses 244,482 255,503
Dividends payable 81,915 81,676
Security deposits payable 18,922 21,701
Operating lease liabilities 73,527 73,628
Finance lease liabilities 72,056 72,062
Other liabilities and deferred credits 146,372 157,938
Total liabilities 5,099,246 4,019,102
Commitments and contingencies (Note 6)
Redeemable noncontrolling interests 159,583 139,758
Shareholders’ equity    
Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized, 75,633,140 and 75,540,804 shares issued and outstanding, respectively 760 759
Additional paid-in capital 3,170,480 3,166,522
Accumulated dividends in excess of net income (889,195) (791,124)
Accumulated other comprehensive loss (7,758) (813)
Total shareholders’ equity of the Trust 2,434,284 2,535,341
Noncontrolling interests 96,817 100,791
Total shareholders’ equity 2,531,101 2,636,132
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 7,789,930 6,794,992
5.0% Series C Cumulative Redeemable Preferred Shares, (stated at liquidation preference $25,000 per share), 6,000 shares issued and outstanding    
Shareholders’ equity    
Preferred shares, authorized 15,000,000 shares, $.01 par: 150,000 150,000
5.417% Series 1 Cumulative Convertible Preferred Shares, (stated at liquidation preference $25 per share), 399,896 shares issued and outstanding    
Shareholders’ equity    
Preferred shares, authorized 15,000,000 shares, $.01 par: $ 9,997 $ 9,997
v3.20.2
Consolidated Balance Sheets (Parentheticals) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2020
Jun. 30, 2020
Dec. 31, 2019
Operating real estate, consolidated variable interest entities $ 1,754,540 $ 1,754,540 $ 1,676,866
Construction-in-progress, consolidated variable interest entities 93,067 93,067 102,583
Accumulated depreciation and amortization, consolidated variable interest entities 317,925 317,925 296,165
Mortgages payable, consolidated variable interest entities $ 475,757 $ 475,757 $ 469,184
Preferred shares, authorized 15,000,000 15,000,000 15,000,000
Preferred shares, par value $ 0.01 $ 0.01 $ 0.01
Common shares of beneficial interest, par value $ 0.01 $ 0.01 $ 0.01
Common shares of beneficial interest, shares authorized 100,000,000 100,000,000 100,000,000
Common shares of beneficial interest, shares issued 75,633,140 75,633,140 75,540,804
Common shares of beneficial interest, shares outstanding 75,633,140 75,633,140 75,540,804
5.417% Series 1 Cumulative Convertible Preferred      
Preferred shares, percentage 5.417% 5.417% 5.417%
Preferred shares, liquidation preference $ 25 $ 25 $ 25
Preferred shares, shares issued 399,896 399,896 399,896
Preferred shares, shares outstanding 399,896 399,896 399,896
5.0% Series C Cumulative Redeemable Preferred      
Preferred shares, percentage   5.00% 5.00%
Preferred shares, liquidation preference $ 25,000 $ 25,000 $ 25,000
Preferred shares, shares issued 6,000 6,000 6,000
Preferred shares, shares outstanding 6,000 6,000 6,000
v3.20.2
Consolidated Statements Of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
REVENUE        
Rental income $ 175,479 $ 229,731 $ 406,277 $ 461,223
Mortgage interest income 748 734 1,507 1,469
Total revenue 176,227 230,465 407,784 462,692
EXPENSES        
Rental expenses 36,417 41,438 80,729 85,698
Real estate taxes 30,599 25,166 59,663 52,853
General and administrative 9,814 11,422 20,065 20,987
Depreciation and amortization 62,784 59,057 124,972 118,679
Total operating expenses 139,614 137,083 285,429 278,217
Gain on sale of real estate, net of tax 11,682 16,197 11,682 16,197
OPERATING INCOME 48,295 109,579 134,037 200,672
OTHER INCOME/(EXPENSE)        
Other interest income 509 189 817 366
Interest expense (34,073) (27,482) (62,518) (55,515)
(Loss) income from partnerships (3,872) 381 (5,036) (1,053)
NET INCOME 10,859 82,667 67,300 144,470
Net income attributable to noncontrolling interests (352) (1,765) (2,030) (3,424)
NET INCOME ATTRIBUTABLE TO THE TRUST 10,507 80,902 65,270 141,046
Dividends on preferred shares (2,011) (2,011) (4,021) (4,021)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS $ 8,496 $ 78,891 $ 61,249 $ 137,025
EARNINGS PER COMMON SHARE, BASIC AND DILUTED:        
Net income available for common shareholders $ 0.11 $ 1.05 $ 0.81 $ 1.83
Weighted average number of common shares 75,394 74,713 75,377 74,458
COMPREHENSIVE INCOME $ 10,366 $ 82,268 $ 60,355 $ 143,862
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE TRUST $ 10,014 $ 80,503 $ 58,325 $ 140,438
v3.20.2
Consolidated Statement Of Shareholders' Equity - USD ($)
$ in Thousands
Total
Preferred Shares
Common Shares
Additional Paid-in Capital
Accumulated Dividends in Excess of Net Income
Accumulated Other Comprehensive (Loss) Income
Noncontrolling Interests
Common Shares
Additional Paid-in Capital
Beginning balance (in shares) at Dec. 31, 2018   405,896 74,249,633          
Beginning balance at Dec. 31, 2018 $ 2,467,330 $ 159,997 $ 745 $ 3,004,442 $ (818,877) $ (416) $ 121,439  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
January 1st adoption of new accounting standard (7,098)       (7,098)      
Net income, excluding amounts attributable to redeemable noncontrolling interests 142,687       141,046   1,641  
Other comprehensive loss - change in fair value of interest rate swaps (608)         (608)    
Dividends declared to common shareholders (152,555)       (152,555)      
Dividends declared to preferred shareholders (4,021)       (4,021)      
Distributions declared to noncontrolling interests (7,664)           (7,664)  
Shares issued (in shares)     511,954          
Shares issued 68,304   $ 5         $ 68,299
Shares issued under dividend reinvestment plan (in shares)     8,121          
Shares issued under dividend reinvestment plan 1,054     1,054        
Share-based compensation expense, net of forfeitures (in shares)     102,137          
Share-based compensation expense, net of forfeitures 6,992   $ 1 6,991        
Shares withheld for employee taxes (in shares)     (32,900)          
Shares withheld for employee taxes (4,442)     (4,442)        
Conversion and redemption of OP units (in Shares)     111,252          
Conversion and redemption of OP units 0   $ 1 11,935     (11,936)  
Adjustment to redeemable noncontrolling interests 667     667        
Ending balance (in shares) at Jun. 30, 2019   405,896 74,950,197          
Ending balance at Jun. 30, 2019 2,510,646 $ 159,997 $ 752 3,088,946 (841,505) (1,024) 103,480  
Beginning balance (in shares) at Mar. 31, 2019   405,896 74,836,984          
Beginning balance at Mar. 31, 2019 2,501,563 $ 159,997 $ 752 3,071,981 (843,947) (625) 113,405  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income, excluding amounts attributable to redeemable noncontrolling interests 81,760       80,902   858  
Other comprehensive loss - change in fair value of interest rate swaps (399)         (399)    
Dividends declared to common shareholders (76,449)       (76,449)      
Dividends declared to preferred shareholders (2,011)       (2,011)      
Distributions declared to noncontrolling interests (6,398)           (6,398)  
Shares issued (in shares)     65,822          
Shares issued 8,951   $ 0         8,951
Shares issued under dividend reinvestment plan (in shares)     3,848          
Shares issued under dividend reinvestment plan 526     526        
Share-based compensation expense, net of forfeitures (in shares)     1,551          
Share-based compensation expense, net of forfeitures 3,131   $ 0 3,131        
Shares withheld for employee taxes (in shares)     (214)          
Shares withheld for employee taxes (28)     (28)        
Conversion and redemption of OP units (in Shares)     42,206          
Conversion and redemption of OP units 0   $ 0 4,385     (4,385)  
Ending balance (in shares) at Jun. 30, 2019   405,896 74,950,197          
Ending balance at Jun. 30, 2019 2,510,646 $ 159,997 $ 752 3,088,946 (841,505) (1,024) 103,480  
Beginning balance (in shares) at Dec. 31, 2019   405,896 75,540,804          
Beginning balance at Dec. 31, 2019 2,636,132 $ 159,997 $ 759 3,166,522 (791,124) (813) 100,791  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
January 1st adoption of new accounting standard (510)       (510)      
Net income, excluding amounts attributable to redeemable noncontrolling interests 66,143       65,270   873  
Other comprehensive loss - change in fair value of interest rate swaps (6,945)         (6,945)    
Dividends declared to common shareholders (158,810)       (158,810)      
Dividends declared to preferred shareholders (4,021)       (4,021)      
Distributions declared to noncontrolling interests (1,677)           (1,677)  
Shares issued (in shares)     29          
Shares issued 2   $ 0         2
Shares issued under dividend reinvestment plan (in shares)     10,605          
Shares issued under dividend reinvestment plan 955     955        
Share-based compensation expense, net of forfeitures (in shares)     114,092          
Share-based compensation expense, net of forfeitures 7,029   $ 1 7,028        
Shares withheld for employee taxes (in shares)     (32,390)          
Shares withheld for employee taxes (3,997)     (3,997)        
Conversion and redemption of OP units (in Shares)     0          
Conversion and redemption of OP units (3,320)   $ 0 (30)     (3,290)  
Contributions from noncontrolling interests 120           120  
Ending balance (in shares) at Jun. 30, 2020   405,896 75,633,140          
Ending balance at Jun. 30, 2020 2,531,101 $ 159,997 $ 760 3,170,480 (889,195) (7,758) 96,817  
Beginning balance (in shares) at Mar. 31, 2020   405,896 75,622,504          
Beginning balance at Mar. 31, 2020 2,599,608 $ 159,997 $ 760 3,166,899 (818,284) (7,265) 97,501  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income, excluding amounts attributable to redeemable noncontrolling interests 10,717       10,507   210  
Other comprehensive loss - change in fair value of interest rate swaps (493)         (493)    
Dividends declared to common shareholders (79,407)       (79,407)      
Dividends declared to preferred shareholders (2,011)       (2,011)      
Distributions declared to noncontrolling interests (894)           (894)  
Shares issued (in shares)     16          
Shares issued 0   $ 0         $ 0
Shares issued under dividend reinvestment plan (in shares)     6,771          
Shares issued under dividend reinvestment plan 509     509        
Share-based compensation expense, net of forfeitures (in shares)     4,026          
Share-based compensation expense, net of forfeitures 3,087   $ 0 3,087        
Shares withheld for employee taxes (in shares)     (177)          
Shares withheld for employee taxes (15)     (15)        
Conversion and redemption of OP units (in Shares)     0          
Conversion and redemption of OP units 0   $ 0 0     0  
Contributions from noncontrolling interests 0           0  
Ending balance (in shares) at Jun. 30, 2020   405,896 75,633,140          
Ending balance at Jun. 30, 2020 $ 2,531,101 $ 159,997 $ 760 $ 3,170,480 $ (889,195) $ (7,758) $ 96,817  
v3.20.2
Consolidated Statement Of Shareholders' Equity (Parentheticals) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Statement of Stockholders' Equity [Abstract]        
Net income attributable to redeemable noncontrolling interests $ 142 $ 907 $ 1,157 $ 1,783
Dividends declared to common shareholders (in dollars per share) $ 1.05 $ 1.02 $ 2.10 $ 2.04
v3.20.2
Consolidated Statements Of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
OPERATING ACTIVITIES    
Net income $ 67,300 $ 144,470
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 124,972 118,679
Gain on sale of real estate, net of tax (11,682) (16,197)
Loss from partnerships 5,036 1,053
Other, net 5,240 2,138
Changes in assets and liabilities, net of effects of acquisitions and dispositions:    
Increase in accounts receivable, net (17,128) (5,325)
Decrease in prepaid expenses and other assets 15,887 7,800
Increase (decrease) in accounts payable and accrued expenses 5,756 (1,493)
Decrease in security deposits and other liabilities (13,999) (8,838)
Net cash provided by operating activities 181,382 242,287
INVESTING ACTIVITIES    
Acquisition of real estate (9,409) (25,176)
Capital expenditures - development and redevelopment (213,181) (133,570)
Capital Expenditures - Other (30,388) (36,669)
Costs associated with property sold under threat of condemnation (12,924) 0
Proceeds from sale of real estate 17,015 93,025
Investment in partnerships (917) (907)
Distribution from partnerships in excess of earnings 849 1,301
Leasing costs (7,923) (11,473)
(Issuance) repayment of mortgage and other notes receivable, net (320) 101
Net cash used in investing activities (257,198) (113,368)
FINANCING ACTIVITIES    
Costs to amend revolving credit facility (638) 0
Issuance of senior notes, net of costs 700,085 297,076
Issuance of notes payable, net of costs 398,732 0
Repayment of mortgages, finance leases and notes payable (3,264) (298,100)
Issuance of common shares, net of costs 97 68,461
Dividends paid to common and preferred shareholders (161,874) (154,965)
Shares withheld for employee taxes (3,997) (4,442)
Contributions from noncontrolling interests 0 161
Distributions to and redemptions of noncontrolling interests (5,702) (5,173)
Net cash provided by (used in) financing activities 923,439 (96,982)
Increase in cash, cash equivalents and restricted cash 847,623 31,937
Cash, cash equivalents, and restricted cash at beginning of year 153,614 108,332
Cash, cash equivalents, and restricted cash at end of period $ 1,001,237 $ 140,269
v3.20.2
Business And Organization
6 Months Ended
Jun. 30, 2020
Nature Of Operations [Abstract]  
BUSINESS AND ORGANIZATION BUSINESS AND ORGANIZATION
Federal Realty Investment Trust (the “Trust”) is an equity real estate investment trust (“REIT”) specializing in the ownership, management, and redevelopment of retail and mixed-use properties. Our properties are located primarily in densely populated and affluent communities in strategically selected metropolitan markets in the Mid-Atlantic and Northeast regions of the United States, California, and South Florida. As of June 30, 2020, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 104 predominantly retail real estate projects.
We operate in a manner intended to enable us to qualify as a REIT for federal income tax purposes. A REIT that distributes at least 90% of its taxable income to its shareholders each year and meets certain other conditions is not taxed on that portion of its taxable income which is distributed to its shareholders. Therefore, federal income taxes on our taxable income have been and are generally expected to be immaterial. We are obligated to pay state taxes, generally consisting of franchise or gross receipts taxes in certain states. Such state taxes also have not been material.
Impacts of COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a pandemic. While we currently expect the impact to our properties is temporary in nature, the extent of the future effects of COVID-19 on our business, results of operations, cash flows, and growth prospects is highly uncertain and will ultimately depend on future developments, none of which can be predicted with any certainty.
v3.20.2
Summary Of Significant Accounting Policies
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying consolidated balance sheet as of December 31, 2019, which has been derived from audited financial statements, and unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in our latest Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation for the periods presented have been included. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the full year.
Principles of Consolidation
Our consolidated financial statements include the accounts of the Trust, its corporate subsidiaries, and all entities in which the Trust has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity (“VIE”). The equity interests of other investors are reflected as noncontrolling interests or redeemable noncontrolling interests. All significant intercompany transactions and balances are eliminated in consolidation. We account for our interests in joint ventures, which we do not control, using the equity method of accounting.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, referred to as “GAAP,” requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.
Revenue Recognition and Accounts Receivable
Our leases with our tenants are classified as operating leases. When collection of substantially all lease payments during the lease term is considered probable, the lease qualifies for accrual accounting. Lease payments are recognized on a straight-line basis from the point in time when the tenant controls the space through the term of the related lease. Variable lease payments relating to percentage rent are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related
expenditures are incurred. For a tenant to terminate its lease agreement prior to the end of the agreed term, we may require that they pay a fee to cancel the lease agreement. Lease termination fees are generally recognized on the termination date if the tenant has relinquished control of the space. When a lease is terminated early but the tenant continues to control the space under a modified lease agreement, the lease termination fee is generally recognized evenly over the remaining term of the modified lease agreement. Lease concessions (unrelated to the COVID-19 pandemic) are evaluated to determine whether the concession represents a modification of the original lease contract. Modifications generally result in a reassessment of the lease term and lease classification, and remeasurement of lease payments received. Remeasured lease payments are recognized on a straight-line basis over the remaining term of the modified lease contract.
In April 2020, the Financial Accounting Standards Board ("FASB") issued interpretive guidance relating to the accounting for lease concessions provided as a result of the COVID-19 pandemic that allows entities to treat the concession as if it was a part of the existing contract instead of applying lease modification accounting. This guidance is only applicable to the COVID-19 pandemic related lease concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We have elected this option relating to qualifying rent deferral and rent abatement agreements. For qualifying lease modifications with rent deferrals, this results in no change to our revenue recognition but an increase in the lease receivable balance until the deferred rent has been repaid. For qualifying lease modifications that include rent abatement concessions, this results in a direct reduction of rental income in the current period. As of June 30, 2020, we have entered into rent deferral agreements related to the COVID-19 pandemic representing approximately $16 million of rent otherwise owed during the months of April through June 2020, and are currently in negotiations with other tenants. 
When collection of substantially all lease payments during the lease term is not considered probable, total lease revenue is limited to the lesser of revenue recognized under accrual accounting or cash received. Determining the probability of collection of substantially all lease payments during a lease term requires significant judgment. This determination is impacted by numerous factors including our assessment of the tenant’s credit worthiness, economic conditions, tenant sales productivity in that location, historical experience with the tenant and tenants operating in the same industry, future prospects for the tenant and the industry in which it operates, and the length of the lease term. If leases currently classified as probable are subsequently reclassified as not probable, any outstanding lease receivables (including straight-line rent receivables) would be written-off with a corresponding decrease in rental income.
The actions taken by federal, state and local governments to mitigate the spread of COVID-19, initially by ordering closures of non-essential businesses and ordering residents to generally stay at home, and subsequent phased re-openings have resulted in many of our tenants temporarily or even permanently closing their businesses, and for some, it had impacted their ability to pay rent. As a result, we revised our collectibility assumptions for many of our tenants most significantly impacted by COVID-19. Accordingly, during the three months ended June 30, 2020, we recognized collectibility related adjustments of $55.2 million. This includes changes in our collectibility assessments from probable to not probable, disputed rents, and any rent abatements, as well as the write-off of $9.4 million of straight-line rent receivables primarily related to tenants changed to a cash basis of revenue recognition in the quarter ended June 30, 2020. As of June 30, 2020, the revenue from approximately 32% of our tenants (based on total commercial leases) is being recognized on a cash basis. As of June 30, 2020 and December 31, 2019, our straight-line rent receivables balance was $100.7 million and $100.3 million, respectively, and is included in "accounts and notes receivable, net" on our consolidated balance sheet.



Recently Adopted and Issued Accounting Pronouncements
Standard
 
Description
 
Effect on the financial statements or significant matters
 
 
 
 
 
Adopted on January 1, 2020:
 
 
Financial Instruments - Credit Losses (Topic 326) and related updates:

ASU 2016-13, June
  2016, Financial
  Instruments - Credit
  Losses (Topic 326)

ASU 2018-19,
  November 2018,
  Codification
improvements to
  Topic 326,
  Financial
  Instruments - Credit
  Losses
 
This ASU changes the impairment model for most financial assets and certain other instruments, requiring the use of an "expected credit loss" model and adding more disclosure requirements.

ASU 2018-19 clarifies that impairment of of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases.
 
Upon adoption of this standard, we recorded expected losses of $0.5 million in opening accumulated dividends in excess of net income. During the six months ended June 30, 2020, we recorded additional expected losses of $0.4 million, which are included in rental expenses.
 
 
 
 
 
ASU 2018-15, August 2018, Intangibles - Goodwill and Other Internal Use Software: Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
 
This ASU requires a customer in a cloud computing arrangement (i.e. hosting arrangement) that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement. Entities will expense costs during the preliminary project and post-implementation stages as they are incurred.

The guidance can be applied prospectively to all implementation costs incurred after the date of adoption or retrospectively in accordance with ASC 250-10-45-5 through ASC 250-10-45-10.
 
The adoption of this standard does not have a significant impact to our consolidated financial statements.
 
 
 
 
 
Issued in 2020:
 
 
ASU 2020-04, March 2020, Reference Rate Reform (Topic 848)
 
This ASU provides companies with optional practical expedients to ease the accounting burden for contract modifications associated with transitioning away from LIBOR and other interbank offered rates that are expected to be discontinued as part of reference rate reform. For hedges, the guidance generally allows changes to the reference rate and other critical terms without having to de-designate the hedging relationship, as well as allows the shortcut method to continue to be applied. For contract modifications, changes in the reference rate or other critical terms will be treated as a continuation of the prior contract. This guidance can be applied immediately, however, is generally only available through December 31, 2022.
 
We are still evaluating the impact of reference rate reform and whether we will apply any of these practical expedients.




Consolidated Statements of Cash Flows—Supplemental Disclosures
The following tables provide supplemental disclosures related to the Consolidated Statements of Cash Flows:
 
Six Months Ended
 
June 30,
 
2020
 
2019
 
(In thousands)
SUPPLEMENTAL DISCLOSURES:
 
 
 
Total interest costs incurred
$
73,942

 
$
64,755

Interest capitalized
(11,424
)
 
(9,240
)
Interest expense
$
62,518

 
$
55,515

Cash paid for interest, net of amounts capitalized
$
52,715

 
$
53,588

Cash paid for income taxes
$
428

 
$
419

NON-CASH INVESTING AND FINANCING TRANSACTIONS:
 
 
 
DownREIT operating partnership units issued with acquisition
$
18,920

 
$

Mortgage loans assumed with acquisition
$
8,903

 
$

DownREIT operating partnership units redeemed for common shares
$

 
$
11,935

Shares issued under dividend reinvestment plan
$
860

 
$
897


 
June 30,
 
December 31,
 
2020
 
2019
 
(In thousands)
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:
 
 
 
Cash and cash equivalents
$
980,039

 
$
127,432

Restricted cash (1)
21,198

 
26,182

Total cash, cash equivalents, and restricted cash
$
1,001,237

 
$
153,614

(1)
Restricted cash balances are included in "prepaid expenses and other assets" on our consolidated balance sheets.
v3.20.2
Real Estate
6 Months Ended
Jun. 30, 2020
Real Estate [Abstract]  
REAL ESTATE REAL ESTATE
On January 10, 2020, we acquired a 49,000 square foot shopping center in Fairfax, Virginia for $22.3 million. This property is adjacent to, and will be operated as part of our Fairfax Junction property. This purchase price was paid with a combination of cash and the issuance of 163,322 downREIT operating partnership units. Approximately $0.5 million and $0.4 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively.
On February 12, 2020, we acquired two buildings totaling 12,000 square feet in Hoboken, New Jersey for $14.3 million, including the assumption of $8.9 million of mortgage debt. This acquisition is in addition to the 37 buildings previously acquired, and was completed through the joint venture that was formed in 2019, for which we own a 90% interest. Less than $0.1 million and approximately $3.3 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively.
On April 21, 2020, we sold a building in Pasadena, California for $16.1 million, which resulted in a gain of $11.7 million.
v3.20.2
Debt
6 Months Ended
Jun. 30, 2020
Debt Instruments [Abstract]  
DEBT DEBT
In connection with the two buildings we acquired in Hoboken, New Jersey on February 12, 2020, we assumed two mortgage loans with a net face amount of $8.9 million and a fair value of $9.0 million. The mortgage loans bear interest at 4.00% and mature on July 27, 2027.
In March 2020, in order to strengthen our financial position and balance sheet, to maximize our liquidity, and to provide maximum financial flexibility to continue our business initiatives as the effects of COVID-19 continue to evolve, we borrowed $990.0 million under our revolving credit facility, representing a draw-down of almost the entirety of our $1.0 billion revolving credit facility. This amount was subsequently repaid when we entered into a $400.0 million unsecured term loan on May 6, 2020 and issued $700.0 million of fixed rate unsecured senior notes on May 11, 2020.
The unsecured term loan matures on May 6, 2021, plus one twelve month extension at our option, and bears interest at LIBOR plus 135 basis points based on our current credit rating. Our net proceeds from this transaction after underwriting fees and other costs were $398.7 million.
The $700.0 million of unsecured senior notes issued in May 2020 comprise a $300.0 million reopening of our 3.95% senior notes maturing on January 15, 2024 and a $400.0 million issuance of 3.50% senior notes maturing on June 1, 2030. The 3.95% senior notes were offered at 103.257% of the principal amount with a yield to maturity of 2.944%, and have the same terms and are of the same series as the $300.0 million senior notes issued on December 9, 2013. The 3.50% senior notes were offered at 98.911% of the principal amount with a yield to maturity of 3.630%. Our net proceeds from these transactions after the net issuance premium, underwriting fees, and other costs were $700.1 million.
During the three and six months ended June 30, 2020, the maximum amount of borrowings outstanding under our revolving credit facility was $990.0 million, and the weighted average interest rate, before amortization of debt fees, was 1.4% and 1.5% for the three and six months ended June 30, 2020, respectively. During the three and six months ended June 30, 2020, the weighted average borrowings outstanding were $413.2 million and $278.5 million, respectively, with no outstanding balance at June 30, 2020. Our revolving credit facility, term loan, and certain notes require us to comply with various financial covenants, including the maintenance of minimum shareholders' equity and debt coverage ratios and a maximum ratio of debt to net worth. As of June 30, 2020, we were in compliance with all default related debt covenants.
v3.20.2
Fair Value Of Financial Instruments
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS FAIR VALUE OF FINANCIAL INSTRUMENTS
Except as disclosed below, the carrying amount of our financial instruments approximates their fair value. The fair value of our mortgages payable, notes payable and senior notes and debentures is sensitive to fluctuations in interest rates. Quoted market prices (Level 1) were used to estimate the fair value of our marketable senior notes and debentures and discounted cash flow analysis (Level 2) is generally used to estimate the fair value of our mortgages and notes payable. Considerable judgment is necessary to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. A summary of the carrying amount and fair value of our mortgages payable, notes payable and senior notes and debentures is as follows:

 
June 30, 2020
 
December 31, 2019
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
(In thousands)
Mortgages and notes payable
$
953,511

 
$
947,030

 
$
549,460

 
$
562,049

Senior notes and debentures
$
3,508,461

 
$
3,754,061

 
$
2,807,134

 
$
3,001,216



As of June 30, 2020, we have two interest rate swap agreements with notional amounts of $56.5 million that are measured at fair value on a recurring basis. The interest rate swap agreements fix the interest rate on $56.5 million of mortgage payables at 3.67% through December 15, 2029. The fair values of the interest rate swap agreements are based on the estimated amounts we would receive or pay to terminate the contracts at the reporting date and are determined using interest rate pricing models and interest rate related observable inputs. The fair value of our swaps at June 30, 2020 was a liability of $6.1 million and is included in "other liabilities and deferred credits" on our consolidated balance sheet. For the three and six months ended June 30, 2020, the value of our interest rate swaps decreased $0.5 million and $6.2 million, respectively (including $0.2 million reclassified from other comprehensive loss to interest expense for both periods). A summary of our financial (liabilities) assets that are measured at fair value on a recurring basis, by level within the fair value hierarchy is as follows:
 
June 30, 2020
 
December 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Interest rate swaps
$

 
$
(6,059
)
 
$

 
$
(6,059
)
 
$

 
$
130

 
$

 
$
130


One of our equity method investees has two interest rate swaps which qualify for cash flow hedge accounting. For the three and six months ended June 30, 2020, our share of the change in fair value of the related swaps included in "accumulated other comprehensive loss" was an increase of less than $0.1 million and a decrease of $0.8 million, respectively.
v3.20.2
Commitments and Contingencies
6 Months Ended
Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES
We are sometimes involved in lawsuits, warranty claims, and environmental matters arising in the ordinary course of business. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters.
We are currently a party to various legal proceedings. We accrue a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate within the range; however, if no amount within the range is a better estimate than any other amount, the minimum within the range is accrued. Legal fees related to litigation are expensed as incurred. We do not believe that the ultimate outcome of these matters, either individually or in the aggregate, could have a material adverse effect on our financial position or overall trends in results of operations; however, litigation is subject to inherent uncertainties. Also under our leases, tenants are typically obligated to indemnify us from and against all liabilities, costs and expenses imposed upon or asserted against us (1) as owner of the properties due to certain matters relating to the operation of the properties by the tenant, and (2) where appropriate, due to certain matters relating to the ownership of the properties prior to their acquisition by us.
Under the terms of certain partnership agreements, the partners have the right to exchange their operating partnership units for cash or common shares, at our option. A total of 744,617 downREIT operating partnership units are outstanding which have a total fair value of approximately $63.4 million, which is calculated by multiplying the outstanding number of downREIT partnership units by our closing stock price on June 30, 2020.
v3.20.2
Shareholders' Equity
6 Months Ended
Jun. 30, 2020
Stockholders' Equity Note [Abstract]  
SHAREHOLDERS’ EQUITY SHAREHOLDERS’ EQUITY
The following table provides a summary of dividends declared and paid per share:

 
Six Months Ended June 30,
 
2020
 
2019
 
Declared
 
Paid
 
Declared
 
Paid
Common shares
$
2.100

 
$
2.100

 
$
2.040

 
$
2.040

5.417% Series 1 Cumulative Convertible Preferred shares
$
0.677

 
$
0.677

 
$
0.677

 
$
0.677

5.0% Series C Cumulative Redeemable Preferred shares (1)
$
0.625

 
$
0.625

 
$
0.625

 
$
0.625


(1)
Amount represents dividends per depository share, each representing 1/1000th of a share.

We have an at-the-market (“ATM”) equity program in which we may from time to time offer and sell common shares having an aggregate offering price of up to $400.0 million. We intend to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay amounts outstanding under our revolving credit facility and/or for general corporate purposes. As of June 30, 2020, we had the capacity to issue up to $128.3 million in common shares under our ATM equity program.
v3.20.2
Share-Based Compensation Plans
6 Months Ended
Jun. 30, 2020
Share-based Payment Arrangement [Abstract]  
SHARE-BASED COMPENSATION PLANS SHARE-BASED COMPENSATION PLANS
A summary of share-based compensation expense included in net income is as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
 
(In thousands)
Grants of common shares and options
$
3,087

 
$
3,131

 
$
7,029

 
$
6,992

Capitalized share-based compensation
(310
)
 
(201
)
 
(642
)
 
(472
)
Share-based compensation expense
$
2,777

 
$
2,930

 
$
6,387

 
$
6,520


v3.20.2
Operating & Finance Leases (Notes)
6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
OPERATING & FINANCE LEASES
NOTE 9—OPERATING & FINANCE LEASES
The following table provides additional information on our operating and finance leases where we are the lessee:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
 
(In thousands)
LEASE COST:
 
 
 
 
 
 
 
Finance lease cost:
 
 
 
 
 
 
 
     Amortization of right-of-use assets
$
321

 
$
321

 
$
642

 
$
642

     Interest on lease liabilities
1,457

 
1,455

 
2,913

 
2,911

Operating lease cost
1,552

 
1,493

 
3,111

 
2,997

Variable lease cost
70

 
129

 
157

 
220

Total lease cost
$
3,400

 
$
3,398

 
$
6,823

 
$
6,770

 
 
 
 
 
 
 
 
OTHER INFORMATION:
 
 
 
 
 
 
 
Cash paid for amounts included in the measurement of lease liabilities
 
 
 
 
 
 
 
     Operating cash flows for finance leases
$
1,439

 
$
1,433

 
$
2,872

 
$
2,893

     Operating cash flows for operating leases
$
1,261

 
$
1,268

 
$
2,811

 
$
2,779

     Financing cash flows for finance leases
$
11

 
$
16

 
$
22

 
$
41

 
 
 
 
 
 
 
 
 
 
 
June 30,
 
 
 
 
 
2020
 
2019
Weighted-average remaining lease term - finance leases


 


 
17.7 years

 
18.6 years

Weighted-average remaining lease term - operating leases


 


 
53.2 years

 
53.7 years

Weighted-average discount rate - finance leases

 

 
8.0
%
 
8.0
%
Weighted-average discount rate - operating leases

 

 
4.4
%
 
4.5
%

v3.20.2
Earnings Per Share
6 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
EARNINGS PER SHARE EARNINGS PER SHARE
We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each class of common stock and participating securities is calculated according to dividends declared and participation rights in undistributed earnings. For the three and six months ended June 30, 2020 and 2019, we had 0.2 million weighted average unvested shares outstanding, which are considered participating securities. Therefore, we have allocated our earnings for basic and diluted EPS between common shares and unvested shares; the portion of earnings allocated to the unvested shares is reflected as “earnings allocated to unvested shares” in the reconciliation below.
In the dilutive EPS calculation, dilutive stock options were calculated using the treasury stock method consistent with prior periods. There were 682 anti-dilutive stock options for the three and six months ended June 30, 2020 and 2019. The conversions of downREIT operating partnership units and 5.417% Series 1 Cumulative Convertible Preferred Shares are anti-dilutive for all periods presented and accordingly, have been excluded from the weighted average common shares used to compute diluted EPS.
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
 
(In thousands, except per share data)
NUMERATOR
 
 
 
 
 
 
 
Net income
$
10,859

 
$
82,667

 
$
67,300

 
144,470

Less: Preferred share dividends
(2,011
)
 
(2,011
)
 
(4,021
)
 
(4,021
)
Less: Income from operations attributable to noncontrolling interests
(352
)
 
(1,765
)
 
(2,030
)
 
(3,424
)
Less: Earnings allocated to unvested shares
(249
)
 
(226
)
 
(495
)
 
(439
)
Net income available for common shareholders, basic and diluted
$
8,247

 
$
78,665

 
$
60,754

 
$
136,586

DENOMINATOR
 
 
 
 
 
 
 
Weighted average common shares outstanding, basic and diluted
75,394

 
74,713

 
75,377

 
74,458

 
 
 
 
 
 
 
 
EARNINGS PER COMMON SHARE, BASIC AND DILUTED:
 
 
 
 
 
 
 
Net income available for common shareholders
$
0.11

 
$
1.05

 
$
0.81

 
$
1.83


v3.20.2
Summary of Significant Accounting Policies (Policy)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Basis of Presentation
Basis of presentation
The accompanying consolidated balance sheet as of December 31, 2019, which has been derived from audited financial statements, and unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in our latest Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation for the periods presented have been included. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the full year.
Principles of Consolidation
Principles of Consolidation
Our consolidated financial statements include the accounts of the Trust, its corporate subsidiaries, and all entities in which the Trust has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity (“VIE”). The equity interests of other investors are reflected as noncontrolling interests or redeemable noncontrolling interests. All significant intercompany transactions and balances are eliminated in consolidation. We account for our interests in joint ventures, which we do not control, using the equity method of accounting.
Use of Estimates
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, referred to as “GAAP,” requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.
Revenue Recognition and Accounts Receivable
Revenue Recognition and Accounts Receivable
Our leases with our tenants are classified as operating leases. When collection of substantially all lease payments during the lease term is considered probable, the lease qualifies for accrual accounting. Lease payments are recognized on a straight-line basis from the point in time when the tenant controls the space through the term of the related lease. Variable lease payments relating to percentage rent are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related
expenditures are incurred. For a tenant to terminate its lease agreement prior to the end of the agreed term, we may require that they pay a fee to cancel the lease agreement. Lease termination fees are generally recognized on the termination date if the tenant has relinquished control of the space. When a lease is terminated early but the tenant continues to control the space under a modified lease agreement, the lease termination fee is generally recognized evenly over the remaining term of the modified lease agreement. Lease concessions (unrelated to the COVID-19 pandemic) are evaluated to determine whether the concession represents a modification of the original lease contract. Modifications generally result in a reassessment of the lease term and lease classification, and remeasurement of lease payments received. Remeasured lease payments are recognized on a straight-line basis over the remaining term of the modified lease contract.
In April 2020, the Financial Accounting Standards Board ("FASB") issued interpretive guidance relating to the accounting for lease concessions provided as a result of the COVID-19 pandemic that allows entities to treat the concession as if it was a part of the existing contract instead of applying lease modification accounting. This guidance is only applicable to the COVID-19 pandemic related lease concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We have elected this option relating to qualifying rent deferral and rent abatement agreements. For qualifying lease modifications with rent deferrals, this results in no change to our revenue recognition but an increase in the lease receivable balance until the deferred rent has been repaid. For qualifying lease modifications that include rent abatement concessions, this results in a direct reduction of rental income in the current period. As of June 30, 2020, we have entered into rent deferral agreements related to the COVID-19 pandemic representing approximately $16 million of rent otherwise owed during the months of April through June 2020, and are currently in negotiations with other tenants. 
When collection of substantially all lease payments during the lease term is not considered probable, total lease revenue is limited to the lesser of revenue recognized under accrual accounting or cash received. Determining the probability of collection of substantially all lease payments during a lease term requires significant judgment. This determination is impacted by numerous factors including our assessment of the tenant’s credit worthiness, economic conditions, tenant sales productivity in that location, historical experience with the tenant and tenants operating in the same industry, future prospects for the tenant and the industry in which it operates, and the length of the lease term. If leases currently classified as probable are subsequently reclassified as not probable, any outstanding lease receivables (including straight-line rent receivables) would be written-off with a corresponding decrease in rental income.
The actions taken by federal, state and local governments to mitigate the spread of COVID-19, initially by ordering closures of non-essential businesses and ordering residents to generally stay at home, and subsequent phased re-openings have resulted in many of our tenants temporarily or even permanently closing their businesses, and for some, it had impacted their ability to pay rent. As a result, we revised our collectibility assumptions for many of our tenants most significantly impacted by COVID-19. Accordingly, during the three months ended June 30, 2020, we recognized collectibility related adjustments of $55.2 million. This includes changes in our collectibility assessments from probable to not probable, disputed rents, and any rent abatements, as well as the write-off of $9.4 million of straight-line rent receivables primarily related to tenants changed to a cash basis of revenue recognition in the quarter ended June 30, 2020. As of June 30, 2020, the revenue from approximately 32% of our tenants (based on total commercial leases) is being recognized on a cash basis. As of June 30, 2020 and December 31, 2019, our straight-line rent receivables balance was $100.7 million and $100.3 million, respectively, and is included in "accounts and notes receivable, net" on our consolidated balance sheet.



Recently Adopted Accounting Pronouncements
Recently Adopted and Issued Accounting Pronouncements
Standard
 
Description
 
Effect on the financial statements or significant matters
 
 
 
 
 
Adopted on January 1, 2020:
 
 
Financial Instruments - Credit Losses (Topic 326) and related updates:

ASU 2016-13, June
  2016, Financial
  Instruments - Credit
  Losses (Topic 326)

ASU 2018-19,
  November 2018,
  Codification
improvements to
  Topic 326,
  Financial
  Instruments - Credit
  Losses
 
This ASU changes the impairment model for most financial assets and certain other instruments, requiring the use of an "expected credit loss" model and adding more disclosure requirements.

ASU 2018-19 clarifies that impairment of of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases.
 
Upon adoption of this standard, we recorded expected losses of $0.5 million in opening accumulated dividends in excess of net income. During the six months ended June 30, 2020, we recorded additional expected losses of $0.4 million, which are included in rental expenses.
 
 
 
 
 
ASU 2018-15, August 2018, Intangibles - Goodwill and Other Internal Use Software: Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
 
This ASU requires a customer in a cloud computing arrangement (i.e. hosting arrangement) that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement. Entities will expense costs during the preliminary project and post-implementation stages as they are incurred.

The guidance can be applied prospectively to all implementation costs incurred after the date of adoption or retrospectively in accordance with ASC 250-10-45-5 through ASC 250-10-45-10.
 
The adoption of this standard does not have a significant impact to our consolidated financial statements.
 
 
 
 
 
Issued in 2020:
 
 
ASU 2020-04, March 2020, Reference Rate Reform (Topic 848)
 
This ASU provides companies with optional practical expedients to ease the accounting burden for contract modifications associated with transitioning away from LIBOR and other interbank offered rates that are expected to be discontinued as part of reference rate reform. For hedges, the guidance generally allows changes to the reference rate and other critical terms without having to de-designate the hedging relationship, as well as allows the shortcut method to continue to be applied. For contract modifications, changes in the reference rate or other critical terms will be treated as a continuation of the prior contract. This guidance can be applied immediately, however, is generally only available through December 31, 2022.
 
We are still evaluating the impact of reference rate reform and whether we will apply any of these practical expedients.




v3.20.2
Summary Of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Supplemental disclosures related to the Consolidated Statements Of Cash Flows
The following tables provide supplemental disclosures related to the Consolidated Statements of Cash Flows:
 
Six Months Ended
 
June 30,
 
2020
 
2019
 
(In thousands)
SUPPLEMENTAL DISCLOSURES:
 
 
 
Total interest costs incurred
$
73,942

 
$
64,755

Interest capitalized
(11,424
)
 
(9,240
)
Interest expense
$
62,518

 
$
55,515

Cash paid for interest, net of amounts capitalized
$
52,715

 
$
53,588

Cash paid for income taxes
$
428

 
$
419

NON-CASH INVESTING AND FINANCING TRANSACTIONS:
 
 
 
DownREIT operating partnership units issued with acquisition
$
18,920

 
$

Mortgage loans assumed with acquisition
$
8,903

 
$

DownREIT operating partnership units redeemed for common shares
$

 
$
11,935

Shares issued under dividend reinvestment plan
$
860

 
$
897


Reconciliation of cash, cash equivalents, and restricted cash
 
June 30,
 
December 31,
 
2020
 
2019
 
(In thousands)
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:
 
 
 
Cash and cash equivalents
$
980,039

 
$
127,432

Restricted cash (1)
21,198

 
26,182

Total cash, cash equivalents, and restricted cash
$
1,001,237

 
$
153,614

(1)
Restricted cash balances are included in "prepaid expenses and other assets" on our consolidated balance sheets.
v3.20.2
Fair Value Of Financial Instruments (Tables)
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Summary of carrying amount and fair value of financial instruments A summary of the carrying amount and fair value of our mortgages payable, notes payable and senior notes and debentures is as follows:

 
June 30, 2020
 
December 31, 2019
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
(In thousands)
Mortgages and notes payable
$
953,511

 
$
947,030

 
$
549,460

 
$
562,049

Senior notes and debentures
$
3,508,461

 
$
3,754,061

 
$
2,807,134

 
$
3,001,216


Summary of financial (liabilities) assets that are measured at fair value on a recurring basis A summary of our financial (liabilities) assets that are measured at fair value on a recurring basis, by level within the fair value hierarchy is as follows:
 
June 30, 2020
 
December 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Interest rate swaps
$

 
$
(6,059
)
 
$

 
$
(6,059
)
 
$

 
$
130

 
$

 
$
130


v3.20.2
Shareholders' Equity (Tables)
6 Months Ended
Jun. 30, 2020
Stockholders' Equity Note [Abstract]  
Summary of dividends declared and paid per share
The following table provides a summary of dividends declared and paid per share:

 
Six Months Ended June 30,
 
2020
 
2019
 
Declared
 
Paid
 
Declared
 
Paid
Common shares
$
2.100

 
$
2.100

 
$
2.040

 
$
2.040

5.417% Series 1 Cumulative Convertible Preferred shares
$
0.677

 
$
0.677

 
$
0.677

 
$
0.677

5.0% Series C Cumulative Redeemable Preferred shares (1)
$
0.625

 
$
0.625

 
$
0.625

 
$
0.625


(1)
Amount represents dividends per depository share, each representing 1/1000th of a share.

We have an at-the-market (“ATM”) equity program in which we may from time to time offer and sell common shares having an aggregate offering price of up to $400.0 million. We intend to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay amounts outstanding under our revolving credit facility and/or for general corporate purposes. As of June 30, 2020, we had the capacity to issue up to $128.3 million in common shares under our ATM equity program.

v3.20.2
Share-Based Compensation Plans (Tables)
6 Months Ended
Jun. 30, 2020
Share-based Payment Arrangement [Abstract]  
Summary of share-based compensation expense included in net income
A summary of share-based compensation expense included in net income is as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
 
(In thousands)
Grants of common shares and options
$
3,087

 
$
3,131

 
$
7,029

 
$
6,992

Capitalized share-based compensation
(310
)
 
(201
)
 
(642
)
 
(472
)
Share-based compensation expense
$
2,777

 
$
2,930

 
$
6,387

 
$
6,520


v3.20.2
Operating & Finance Leases (Tables)
6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Lease, Cost [Table Text Block]
The following table provides additional information on our operating and finance leases where we are the lessee:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
 
(In thousands)
LEASE COST:
 
 
 
 
 
 
 
Finance lease cost:
 
 
 
 
 
 
 
     Amortization of right-of-use assets
$
321

 
$
321

 
$
642

 
$
642

     Interest on lease liabilities
1,457

 
1,455

 
2,913

 
2,911

Operating lease cost
1,552

 
1,493

 
3,111

 
2,997

Variable lease cost
70

 
129

 
157

 
220

Total lease cost
$
3,400

 
$
3,398

 
$
6,823

 
$
6,770

 
 
 
 
 
 
 
 
OTHER INFORMATION:
 
 
 
 
 
 
 
Cash paid for amounts included in the measurement of lease liabilities
 
 
 
 
 
 
 
     Operating cash flows for finance leases
$
1,439

 
$
1,433

 
$
2,872

 
$
2,893

     Operating cash flows for operating leases
$
1,261

 
$
1,268

 
$
2,811

 
$
2,779

     Financing cash flows for finance leases
$
11

 
$
16

 
$
22

 
$
41

 
 
 
 
 
 
 
 
 
 
 
June 30,
 
 
 
 
 
2020
 
2019
Weighted-average remaining lease term - finance leases


 


 
17.7 years

 
18.6 years

Weighted-average remaining lease term - operating leases


 


 
53.2 years

 
53.7 years

Weighted-average discount rate - finance leases

 

 
8.0
%
 
8.0
%
Weighted-average discount rate - operating leases

 

 
4.4
%
 
4.5
%

v3.20.2
Earnings Per Share (Tables)
6 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Schedule of earnings per share
In the dilutive EPS calculation, dilutive stock options were calculated using the treasury stock method consistent with prior periods. There were 682 anti-dilutive stock options for the three and six months ended June 30, 2020 and 2019. The conversions of downREIT operating partnership units and 5.417% Series 1 Cumulative Convertible Preferred Shares are anti-dilutive for all periods presented and accordingly, have been excluded from the weighted average common shares used to compute diluted EPS.
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
 
(In thousands, except per share data)
NUMERATOR
 
 
 
 
 
 
 
Net income
$
10,859

 
$
82,667

 
$
67,300

 
144,470

Less: Preferred share dividends
(2,011
)
 
(2,011
)
 
(4,021
)
 
(4,021
)
Less: Income from operations attributable to noncontrolling interests
(352
)
 
(1,765
)
 
(2,030
)
 
(3,424
)
Less: Earnings allocated to unvested shares
(249
)
 
(226
)
 
(495
)
 
(439
)
Net income available for common shareholders, basic and diluted
$
8,247

 
$
78,665

 
$
60,754

 
$
136,586

DENOMINATOR
 
 
 
 
 
 
 
Weighted average common shares outstanding, basic and diluted
75,394

 
74,713

 
75,377

 
74,458

 
 
 
 
 
 
 
 
EARNINGS PER COMMON SHARE, BASIC AND DILUTED:
 
 
 
 
 
 
 
Net income available for common shareholders
$
0.11

 
$
1.05

 
$
0.81

 
$
1.83


v3.20.2
Business And Organization (Details)
6 Months Ended
Jun. 30, 2020
project
Nature Of Operations [Abstract]  
Number of real estate properties 104
Minimum percentage of taxable income distributed to shareholders 90.00%
v3.20.2
Summary Of Significant Accounting Policies Revenue Recognition and Accounts Receivable (Details) - USD ($)
$ in Millions
3 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Lessor, Lease, Description [Line Items]    
Collectibility adjustment $ 55.2  
Write-off of straight-line rent receivables $ 9.4  
Tenants with revenue recognized on a cash basis method 32.00%  
Straight-line rent receivables $ 100.7 $ 100.3
April through June 2020    
Lessor, Lease, Description [Line Items]    
Rent deferred $ 16.0  
v3.20.2
Summary Of Significant Accounting Policies Recently Adopted Accounting Pronouncements (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2020
New Accounting Pronouncements or Change in Accounting Principle [Line Items]    
Expected losses included in rental expenses $ 0.4  
Cumulative Effect, Period of Adoption, Adjustment | Accumulated Dividends in Excess of Net Income | ASU 2016-13    
New Accounting Pronouncements or Change in Accounting Principle [Line Items]    
Cumulative impact to accumulated dividends in excess of net income   $ 0.5
v3.20.2
Summary Of Significant Accounting Policies Consolidated Statement of Cash Flows - Supplemental Disclosures (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Accounting Policies [Abstract]        
Total interest costs incurred     $ 73,942 $ 64,755
Interest capitalized     (11,424) (9,240)
Interest expense $ 34,073 $ 27,482 62,518 55,515
Cash paid for interest, net of amounts capitalized     52,715 53,588
Cash paid for income taxes     428 419
DownREIT operating partnership units issued with acquisition     18,920 0
Mortgage loans assumed with acquisition     8,903 0
DownREIT operating partnership units redeemed for common shares     0 11,935
Shares issued under dividend reinvestment plan     $ 860 $ 897
v3.20.2
Summary Of Significant Accounting Policies Consolidated Statement of Cash Flows - Reconciliation of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Jun. 30, 2019
Dec. 31, 2018
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Abstract]        
Cash and cash equivalents $ 980,039 $ 127,432    
Restricted cash [1] 21,198 26,182    
Total cash, cash equivalents, and restricted cash $ 1,001,237 $ 153,614 $ 140,269 $ 108,332
[1]
(1)
Restricted cash balances are included in "prepaid expenses and other assets" on our consolidated balance sheets.
v3.20.2
Real Estate (Significant Acquisition and Dispositions) (Details)
3 Months Ended 6 Months Ended
Apr. 21, 2020
USD ($)
Feb. 12, 2020
USD ($)
ft²
Jan. 10, 2020
USD ($)
ft²
Jun. 30, 2020
USD ($)
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
Jun. 30, 2019
USD ($)
Significant Acquisition and Dispositions              
Mortgage loan assumed with acquisition           $ 8,903,000 $ 0
Gain on sale of property       $ 11,682,000 $ 16,197,000 $ 11,682,000 $ 16,197,000
Shopping center in Fairfax, Virginia              
Significant Acquisition and Dispositions              
Square footage of real estate property | ft²     49,000        
Purchase price of real estate acquisition     $ 22,300,000        
DownREIT operating units issued to fund acquisition     163,322        
Hoboken 2 Buildings              
Significant Acquisition and Dispositions              
Square footage of real estate property | ft²   12,000          
Purchase price of real estate acquisition   $ 14,300,000          
Hoboken              
Significant Acquisition and Dispositions              
Ownership interest in joint venture       90.00%   90.00%  
A building in Pasadena, California              
Significant Acquisition and Dispositions              
Sales price of real estate $ 16,100,000            
Gain on sale of property $ 11,700,000            
Other Liabilities | Shopping center in Fairfax, Virginia              
Significant Acquisition and Dispositions              
Below market leases     $ 400,000        
Other Liabilities | Hoboken 2 Buildings              
Significant Acquisition and Dispositions              
Below market leases   3,300,000          
Amortization of above market leases | Other Assets | Shopping center in Fairfax, Virginia              
Significant Acquisition and Dispositions              
Above market leases     $ 500,000        
Amortization of above market leases | Other Assets | Hoboken 2 Buildings              
Significant Acquisition and Dispositions              
Above market leases   100,000          
Mortgage loan | Hoboken 2 Buildings              
Significant Acquisition and Dispositions              
Mortgage loan assumed with acquisition   $ 8,900,000          
v3.20.2
Debt (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
May 11, 2020
May 06, 2020
Feb. 12, 2020
Jun. 30, 2020
Jun. 30, 2020
Jun. 30, 2019
Dec. 09, 2013
Debt Instrument [Line Items]              
Mortgage loan assumed with acquisition         $ 8,903 $ 0  
Basis spread on LIBOR interest   1.35%          
Maximum amount outstanding under revolving credit facility       $ 990,000 990,000    
Maximum borrowing capacity under revolving credit facility       $ 1,000,000 1,000,000    
Net proceeds from senior note issuances         $ 700,085 $ 297,076  
Weighted average interest rate, before amortization of debt fees       1.40% 1.50%    
Weighted average borrowings outstanding       $ 413,200 $ 278,500    
Outstanding balance on revolving credit facility       $ 0 $ 0    
Unsecured term loan              
Debt Instrument [Line Items]              
Other notes payable   $ 400,000          
Net proceeds from term loan issuance   $ 398,700          
3.95% notes | Unsecured senior notes              
Debt Instrument [Line Items]              
Interest rate 3.95%            
Note offering percent 103.257%            
Debt yield to maturity 2.944%            
Principal balance $ 300,000           $ 300,000
3.50% notes | Unsecured senior notes              
Debt Instrument [Line Items]              
Interest rate 3.50%            
Note offering percent 98.911%            
Debt yield to maturity 3.63%            
Principal balance $ 400,000            
3.95% and 3.50% notes | Unsecured senior notes              
Debt Instrument [Line Items]              
Principal balance 700,000            
Net proceeds from senior note issuances $ 700,100            
Hoboken 2 Buildings | Mortgage loan              
Debt Instrument [Line Items]              
Mortgage loan assumed with acquisition     $ 8,900        
Mortgage loan fair value     $ 9,000        
Interest rate     4.00%        
v3.20.2
Fair Value of Financial Instruments - Summary of Carrying Value and Fair Value of Financial Instruments (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Mortgages payable and notes payable | Carrying Value    
Fair Value, Balance Sheet Grouping, Financial Statement Captions    
Fair value of long-term debt $ 953,511 $ 549,460
Mortgages payable and notes payable | Fair Value    
Fair Value, Balance Sheet Grouping, Financial Statement Captions    
Fair value of long-term debt 947,030 562,049
Senior notes and debentures | Carrying Value    
Fair Value, Balance Sheet Grouping, Financial Statement Captions    
Fair value of long-term debt 3,508,461 2,807,134
Senior notes and debentures | Fair Value    
Fair Value, Balance Sheet Grouping, Financial Statement Captions    
Fair value of long-term debt $ 3,754,061 $ 3,001,216
v3.20.2
Fair Value Of Financial Instruments (Details)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
USD ($)
agreement
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
agreement
Jun. 30, 2019
USD ($)
Dec. 31, 2019
USD ($)
Fair Value, Balance Sheet Grouping, Financial Statement Captions          
Other comprehensive loss $ (493) $ (399) $ (6,945) $ (608)  
Amount reclassified from other comprehensive loss to interest expense (less than)     (200)    
Accumulated other comprehensive loss          
Fair Value, Balance Sheet Grouping, Financial Statement Captions          
Other comprehensive loss (493) $ (399) (6,945) $ (608)  
Accumulated other comprehensive loss | One of our equity method investees          
Fair Value, Balance Sheet Grouping, Financial Statement Captions          
Other comprehensive loss 100   800    
Fair Value, recurring | Interest rate swap          
Fair Value, Balance Sheet Grouping, Financial Statement Captions          
Derivative Liability $ (6,059)   $ (6,059)    
Derivative Asset         $ 130
Fair Value, recurring | Interest rate swap | One of our equity method investees          
Fair Value, Balance Sheet Grouping, Financial Statement Captions          
Number of interest rate swap agreements | agreement 2   2    
Mortgage payable | Hoboken          
Fair Value, Balance Sheet Grouping, Financial Statement Captions          
Number of interest rate swap agreements 2   2    
Other comprehensive loss $ 500   $ 6,200    
Notional amount of derivative liability 56,500   56,500    
Mortgage payable $ 56,500   $ 56,500    
Fixed interest rate on derivative 3.67%   3.67%    
Other liabilities and deferred credits          
Fair Value, Balance Sheet Grouping, Financial Statement Captions          
Derivative Liability $ 6,100   $ 6,100    
Fair Value, Inputs, Level 1 [Member] | Fair Value, recurring | Interest rate swap          
Fair Value, Balance Sheet Grouping, Financial Statement Captions          
Derivative Liability 0   0    
Derivative Asset         0
Fair Value, Inputs, Level 2 [Member] | Fair Value, recurring | Interest rate swap          
Fair Value, Balance Sheet Grouping, Financial Statement Captions          
Derivative Liability (6,059)   (6,059)    
Derivative Asset         130
Fair Value, Inputs, Level 3 [Member] | Fair Value, recurring | Interest rate swap          
Fair Value, Balance Sheet Grouping, Financial Statement Captions          
Derivative Liability $ 0   $ 0    
Derivative Asset         $ 0
v3.20.2
Commitments and Contingencies (Details)
$ in Millions
Jun. 30, 2020
USD ($)
shares
Commitments and Contingencies Disclosure [Abstract]  
downREIT operating partnership units, outstanding | shares 744,617
downREIT operating partnership units outstanding, fair value | $ $ 63.4
v3.20.2
Shareholders' Equity (Summary of Dividends) (Details) - $ / shares
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Dividends          
Dividends declared to common shareholders (in dollars per share) $ 1.05 $ 1.02 $ 2.10 $ 2.04  
Dividends paid per common share     $ 2.100 $ 2.040  
Percentage of depository shares 0.10% 0.10% 0.10% 0.10%  
5.417% Series 1 Cumulative Convertible Preferred          
Dividends          
Preferred shares, percentage 5.417% 5.417% 5.417% 5.417% 5.417%
Dividends declared per preferred shares     $ 0.677 $ 0.677  
Dividends paid per preferred share     $ 0.677 $ 0.677  
5.0% Series C Cumulative Redeemable Preferred          
Dividends          
Preferred shares, percentage     5.00% 5.00% 5.00%
Dividends declared per preferred shares [1]     $ 0.625 $ 0.625  
Dividends paid per preferred share [1]     $ 0.625 $ 0.625  
[1]
(1)
Amount represents dividends per depository share, each representing 1/1000th of a share.
v3.20.2
Shareholders' Equity Narrative (Details) - At The Market Equity Program
$ in Millions
Jun. 30, 2020
USD ($)
Class of Stock [Line Items]  
Aggregate offering price of common share $ 400.0
Remaining capacity to issue $ 128.3
v3.20.2
Share-Based Compensation (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Abstract]        
Grants of common shares and options $ 3,087 $ 3,131 $ 7,029 $ 6,992
Capitalized share-based compensation (310) (201) (642) (472)
Share-based compensation expense $ 2,777 $ 2,930 $ 6,387 $ 6,520
v3.20.2
Operating & Finance Leases (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Leases [Abstract]        
Finance Lease, Amortization of right-of-use assets $ 321 $ 321 $ 642 $ 642
Finance Lease, Interest on lease liabilities 1,457 1,455 2,913 2,911
Operating lease cost 1,552 1,493 3,111 2,997
Variable lease cost 70 129 157 220
Total Lease Cost 3,400 3,398 6,823 6,770
Operating cash flows for finance leases 1,439 1,433 2,872 2,893
Operating cash flows for operating leases 1,261 1,268 2,811 2,779
Financing cash flows for finance leases $ 11 $ 16 $ 22 $ 41
Weighted-average remaining lease term - finance leases 17 years 8 months 12 days 18 years 7 months 6 days 17 years 8 months 12 days 18 years 7 months 6 days
Weighted-average remaining lease term - operating leases 53 years 2 months 12 days 53 years 8 months 12 days 53 years 2 months 12 days 53 years 8 months 12 days
Weighted-average discount rate - finance leases 8.00% 8.00% 8.00% 8.00%
Weighted-average discount rate - operating leases 4.40% 4.50% 4.40% 4.50%
v3.20.2
Earnings Per Share (Narrative) (Details) - shares
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Weighted average unvested shares outstanding 200,000 200,000 200,000 200,000  
Anti-dilutive stock options 682 682 682 682  
5.417% Series 1 Cumulative Convertible Preferred          
Cumulative convertible preferred shares, dividend rate 5.417% 5.417% 5.417% 5.417% 5.417%
v3.20.2
Earnings Per Share (Schedule Of Earnings Per Share) (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Earnings Per Share [Abstract]        
Net income $ 10,859 $ 82,667 $ 67,300 $ 144,470
Less: Preferred share dividends (2,011) (2,011) (4,021) (4,021)
Less: Income from operations attributable to noncontrolling interests (352) (1,765) (2,030) (3,424)
Less: Earnings allocated to unvested shares (249) (226) (495) (439)
Net income available for common shareholders, basic and diluted $ 8,247 $ 78,665 $ 60,754 $ 136,586
Weighted average common shares outstanding, basic and diluted 75,394 74,713 75,377 74,458
Net income available for common shareholders $ 0.11 $ 1.05 $ 0.81 $ 1.83