FRT-09.30.2013-10Q
Table of Contents




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
ý
QUARTERLY REPORT PURSUANT TO THE SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
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) 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ý  Yes    ¨  No
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ý  Yes    ¨  No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer
ý
Accelerated Filer
¨
 
 
 
 
Non-Accelerated Filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     ¨  Yes    ý  No
The number of Registrant’s common shares outstanding on October 28, 2013 was 65,040,956.


Table of Contents

FEDERAL REALTY INVESTMENT TRUST
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2013

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
 
Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012
 
Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended September 30, 2013 and 2012
 
Consolidated Statement of Shareholders' Equity (unaudited) for the nine months ended September 30, 2013
 
Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2013 and 2012
 
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



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Table of Contents

PART I—FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS
The following balance sheet as of December 31, 2012, which has been derived from audited financial statements, and unaudited interim 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 generally accepted accounting principles (GAAP) have been omitted pursuant to those rules and regulations, although the company believes 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 the company’s 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 nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the full year.



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Federal Realty Investment Trust
Consolidated Balance Sheets
 
 
September 30,
 
December 31,
 
2013
 
2012
 
(In thousands, except share data)
 
(Unaudited)
 
 
ASSETS
 
 
 
Real estate, at cost
 
 
 
Operating (including $265,019 and $264,506 of consolidated variable interest entities, respectively)
$
4,574,676

 
$
4,473,813

Construction-in-progress
452,406

 
288,714

Assets held for sale (discontinued operations)

 
17,147

 
5,027,082

 
4,779,674

Less accumulated depreciation and amortization (including $17,327 and $12,024 of consolidated variable interest entities, respectively)
(1,316,358
)
 
(1,224,295
)
Net real estate
3,710,724

 
3,555,379

Cash and cash equivalents
127,831

 
36,988

Accounts and notes receivable, net
87,284

 
73,861

Mortgage notes receivable, net
55,198

 
55,648

Investment in real estate partnership
32,971

 
33,169

Prepaid expenses and other assets
132,831

 
132,659

Debt issuance costs, net of accumulated amortization of $11,258 and $10,140, respectively
12,637

 
10,861

TOTAL ASSETS
$
4,159,476

 
$
3,898,565

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Liabilities
 
 
 
Mortgages payable (including $203,423 and $205,299 of consolidated variable interest entities, respectively)
$
721,185

 
$
760,789

Capital lease obligations
71,677

 
71,693

Notes payable
299,828

 
299,575

Senior notes and debentures
1,213,508

 
1,076,545

Accounts payable and accrued expenses
160,634

 
120,929

Dividends payable
51,846

 
47,685

Security deposits payable
12,596

 
12,957

Other liabilities and deferred credits
103,272

 
103,379

Total liabilities
2,634,546

 
2,493,552

Commitments and contingencies (Note 7)

 

Redeemable noncontrolling interests
93,820

 
94,420

Shareholders’ equity
 
 
 
Preferred shares, authorized 15,000,000 shares, $.01 par: 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, 66,036,174 and 64,815,446 shares issued and outstanding, respectively
660

 
648

Additional paid-in capital
2,000,965

 
1,875,525

Accumulated dividends in excess of net income
(600,091
)
 
(586,970
)
Accumulated other comprehensive loss
(3,539
)
 
(12,388
)
Total shareholders’ equity of the Trust
1,407,992

 
1,286,812

Noncontrolling interests
23,118

 
23,781

Total shareholders’ equity
1,431,110

 
1,310,593

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
4,159,476

 
$
3,898,565


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

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Federal Realty Investment Trust
Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands, except per share data)
REVENUE
 
 
 
 
 
 
 
Rental income
$
154,308

 
$
146,943

 
$
460,136

 
$
428,330

Other property income
3,480

 
9,007

 
9,661

 
17,842

Mortgage interest income
1,242

 
1,282

 
3,770

 
3,834

Total revenue
159,030

 
157,232

 
473,567

 
450,006

EXPENSES
 
 
 
 
 
 
 
Rental expenses
29,045

 
29,658

 
86,755

 
82,609

Real estate taxes
18,400

 
17,224

 
53,604

 
49,680

General and administrative
7,543

 
8,751

 
22,902

 
22,894

Depreciation and amortization
39,341

 
34,847

 
119,615

 
106,451

Total operating expenses
94,329

 
90,480

 
282,876

 
261,634

OPERATING INCOME
64,701

 
66,752

 
190,691

 
188,372

Other interest income
70

 
261

 
165

 
580

Interest expense
(25,762
)
 
(28,218
)
 
(80,314
)
 
(85,744
)
Early extinguishment of debt

 

 
(3,399
)
 

Income from real estate partnerships
381

 
490

 
1,065

 
1,229

INCOME FROM CONTINUING OPERATIONS
39,390

 
39,285

 
108,208

 
104,437

DISCONTINUED OPERATIONS
 
 
 
 
 
 
 
Discontinued operations - income
115

 
371

 
942

 
1,077

Discontinued operations - gain on sale of real estate
23,861

 

 
23,861

 

Results from discontinued operations
23,976

 
371

 
24,803

 
1,077

INCOME BEFORE GAIN ON SALE OF REAL ESTATE
63,366

 
39,656

 
133,011

 
105,514

Gain on sale of real estate

 

 
4,994

 
11,860

NET INCOME
63,366

 
39,656

 
138,005

 
117,374

Net income attributable to noncontrolling interests
(1,268
)
 
(1,012
)
 
(3,780
)
 
(3,141
)
NET INCOME ATTRIBUTABLE TO THE TRUST
62,098

 
38,644

 
134,225

 
114,233

Dividends on preferred shares
(136
)
 
(136
)
 
(406
)
 
(406
)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS
$
61,962

 
$
38,508

 
$
133,819

 
$
113,827

EARNINGS PER COMMON SHARE, BASIC
 
 
 
 
 
 
 
Continuing operations
$
0.57

 
$
0.59

 
$
1.58

 
$
1.57

Discontinued operations
0.37

 
0.01

 
0.38

 
0.02

Gain on sale of real estate

 

 
0.08

 
0.19

 
$
0.94

 
$
0.60

 
$
2.04

 
$
1.78

Weighted average number of common shares, basic
65,504

 
64,014

 
65,118

 
63,711

EARNINGS PER COMMON SHARE, DILUTED
 
 
 
 
 
 
 
Continuing operations
$
0.57

 
$
0.59

 
$
1.58

 
$
1.56

Discontinued operations
0.37

 
0.01

 
0.38

 
0.02

Gain on sale of real estate

 

 
0.08

 
0.19

 
$
0.94

 
$
0.60

 
$
2.04

 
$
1.77

Weighted average number of common shares, diluted
65,647

 
64,202

 
65,271

 
63,891

 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME
$
62,195

 
$
36,804

 
$
146,854

 
$
108,087

 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE TRUST
$
60,927

 
$
35,792

 
$
143,074

 
$
104,946


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

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Federal Realty Investment Trust
Consolidated Statement of Shareholders’ Equity
For the Nine Months Ended September 30, 2013
(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, 2012
399,896


$
9,997

 
64,815,446

 
$
648

 
$
1,875,525

 
$
(586,970
)
 
$
(12,388
)
 
$
23,781

 
$
1,310,593

Net income, excluding $2,117 attributable to redeemable noncontrolling interests

 

 

 

 

 
134,225

 

 
1,663

 
135,888

Other comprehensive income - change in value of interest rate swaps

 

 

 

 

 

 
8,849

 

 
8,849

Dividends declared to common shareholders

 

 

 

 

 
(146,940
)
 

 

 
(146,940
)
Dividends declared to preferred shareholders

 

 

 

 

 
(406
)
 

 

 
(406
)
Distributions declared to noncontrolling interests

 

 

 

 

 

 

 
(1,529
)
 
(1,529
)
Common shares issued

 

 
1,075,123

 
11

 
116,786

 

 

 

 
116,797

Exercise of stock options

 

 
16,304

 

 
1,005

 

 

 

 
1,005

Shares issued under dividend reinvestment plan

 

 
15,002

 

 
1,610

 

 

 

 
1,610

Share-based compensation expense, net of shares withheld for employee taxes

 

 
91,823

 
1

 
6,664

 

 

 

 
6,665

Conversion and redemption of OP units

 

 
22,476

 

 
(625
)
 

 

 
(797
)
 
(1,422
)
BALANCE AT SEPTEMBER 30, 2013
399,896

 
$
9,997

 
66,036,174

 
$
660

 
$
2,000,965

 
$
(600,091
)
 
$
(3,539
)
 
$
23,118

 
$
1,431,110


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

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Federal Realty Investment Trust
Consolidated Statements of Cash Flows
 (Unaudited)
 
Nine Months Ended September 30,
 
2013
 
2012
 
(In thousands)
OPERATING ACTIVITIES
 
Net income
$
138,005

 
$
117,374

Adjustment to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation and amortization, including discontinued operations
119,885

 
106,702

Gain on sale of real estate
(28,855
)
 
(11,860
)
Income from real estate partnerships
(1,065
)
 
(1,229
)
Other, net
2,578

 
4,236

Changes in assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
Increase in accounts receivable
(10,182
)
 
(2,419
)
Increase in prepaid expenses and other assets
(949
)
 
(7,393
)
Increase in accounts payable and accrued expenses
4,906

 
5,217

Increase (decrease) in security deposits and other liabilities
2,405

 
(1,473
)
Net cash provided by operating activities
226,728

 
209,155

INVESTING ACTIVITIES
 
 
 
Acquisition of real estate
(47,202
)
 
(8,927
)
Capital expenditures - development and redevelopment
(156,651
)
 
(92,316
)
Capital expenditures - other
(32,200
)
 
(33,700
)
Proceeds from sale of real estate
42,866

 

Distribution from real estate partnership in excess of earnings
93

 
420

Leasing costs
(9,088
)
 
(9,003
)
Repayment of mortgage and other notes receivable, net
695

 
91

Net cash used in investing activities
(201,487
)
 
(143,435
)
FINANCING ACTIVITIES
 
 
 
Costs to upsize and extend revolving credit facility
(1,929
)
 

Issuance of senior notes, net of costs
269,347

 
244,807

Redemption and retirement of senior notes
(135,000
)
 
(175,000
)
Issuance of mortgages, capital leases and notes payable, net of costs

 
5,399

Repayment of mortgages, capital leases and notes payable
(37,375
)
 
(16,312
)
Issuance of common shares
118,087

 
93,668

Dividends paid to common and preferred shareholders
(141,849
)
 
(131,172
)
Distributions to and redemptions of noncontrolling interests
(5,679
)
 
(7,236
)
Net cash provided by financing activities
65,602

 
14,154

Increase in cash and cash equivalents
90,843

 
79,874

Cash and cash equivalents at beginning of year
36,988

 
67,806

Cash and cash equivalents at end of period
$
127,831

 
$
147,680


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


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Federal Realty Investment Trust
Notes to Consolidated Financial Statements
September 30, 2013
(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, and California. As of September 30, 2013, we owned or had a controlling interest in community and neighborhood shopping centers and mixed-use properties which are operated as 87 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.


NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. Certain 2012 amounts have been reclassified to conform to current period presentation.
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.
 
 
 
 
Recently Adopted Accounting Pronouncements
In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income.”  ASU 2013-02 requires entities to disclose certain information relating to amounts reclassified out of accumulated other comprehensive income.  We adopted the standard effective January 1, 2013 and it did not have a significant impact to our consolidated financial statements.

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Consolidated Statements of Cash Flows—Supplemental Disclosures
The following table provides supplemental disclosures related to the Consolidated Statements of Cash Flows:

 
Nine Months Ended September 30,
 
2013
 
2012
 
(In thousands)
SUPPLEMENTAL DISCLOSURES:
 
 
 
Total interest costs incurred
$
91,208

 
$
93,213

Interest capitalized
(10,894
)
 
(7,469
)
Interest expense
$
80,314

 
$
85,744

Cash paid for interest, net of amounts capitalized
$
85,240

 
$
89,959

Cash paid (refunded) for income taxes
$
408

 
$
(1,144
)
NON-CASH FINANCING TRANSACTION:
 
 
 
Shares issued under dividend reinvestment plan
$
(1,325
)
 
$
(1,395
)

NOTE 3—REAL ESTATE
On April 3, 2013, we acquired the fee interest in a 95,000 square foot retail property located in Darien, Connecticut for $47.3 million. The purchase price allocation will be finalized after our valuation studies are complete. We incurred approximately $0.2 million of acquisition costs which are included in "general and administrative expenses" for the nine months ended September 30, 2013.
On April 5, 2013, one of our tenants acquired our fee interest in the land under an office building at our Village of Shirlington property in Arlington, Virginia, that was subject to a long term ground lease.  The ground lease included an option for the tenant to purchase the fee interest. The sales price was $6.5 million, and the gain was $5.0 million.
On July 22, 2013, we sold the fee interest in our final building at Fifth Avenue in San Diego, California, for a sales price of $15.3 million resulting in a gain of $10.7 million. On September 10, 2013 we sold the fee interest in a building in Forest Hills (Queens), New York, for a sales price of $20.4 million resulting in a gain of $13.2 million. Both sales were completed as a Section 1031 tax deferred exchange transaction with the acquisition of the property in Darien.

NOTE 4—REAL ESTATE PARTNERSHIP
We have a joint venture arrangement (the “Partnership”) with affiliates of a discretionary fund created and advised by ING Clarion Partners (“Clarion”). We own 30% of the equity in the Partnership and Clarion owns 70%. We hold a general partnership interest, however, Clarion also holds a general partnership interest and has substantive participating rights. We cannot make significant decisions without Clarion’s approval. Accordingly, we account for our interest in the Partnership using the equity method. As of September 30, 2013, the Partnership owned seven retail real estate properties. We are the manager of the Partnership and its properties, earning fees for acquisitions, dispositions, management, leasing, and financing. Intercompany profit generated from fees is eliminated in consolidation. We also have the opportunity to receive performance-based earnings through our Partnership interest. Accounting policies for the Partnership are similar to accounting policies followed by the Trust. The Partnership is subject to a buy-sell provision which is customary for real estate joint venture agreements and the industry. Either partner may initiate this provision at any time, which could result in either the sale of our interest or the use of available cash or borrowings to acquire Clarion’s interest.

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The following tables provide summarized operating results and the financial position of the Partnership:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
OPERATING RESULTS
 
 
 
 
 
 
 
Revenue
$
4,642

 
$
4,772

 
$
14,215

 
$
14,070

Expenses
 
 
 
 
 
 
 
Other operating expenses
1,321

 
1,242

 
4,456

 
3,809

Depreciation and amortization
1,369

 
1,372

 
4,099

 
4,123

Interest expense
840

 
844

 
2,523

 
2,533

Total expenses
3,530

 
3,458

 
11,078

 
10,465

Net income
$
1,112

 
$
1,314

 
$
3,137

 
$
3,605

Our share of net income from real estate partnership
$
381

 
$
490

 
$
1,065

 
$
1,286


 
September 30,
 
December 31,
 
2013
 
2012
 
(In thousands)
BALANCE SHEETS
 
 
 
Real estate, net
$
171,896

 
$
174,509

Cash
3,452

 
2,735

Other assets
5,782

 
5,536

Total assets
$
181,130

 
$
182,780

Mortgages payable
$
56,982

 
$
57,155

Other liabilities
3,809

 
4,771

Partners’ capital
120,339

 
120,854

Total liabilities and partners’ capital
$
181,130

 
$
182,780

Our share of unconsolidated debt
$
17,095

 
$
17,147

Our investment in real estate partnership
$
32,971

 
$
33,169


NOTE 5—DEBT
During the nine months ended September 30, 2013, we repaid the following mortgage loans at par:
 
Payoff Amount
 
Repayment Date
 
Maturity Date
 
(In millions)
 
 
 
 
White Marsh Plaza
$
9.0

 
January 2, 2013
 
April 1, 2013
Crow Canyon
$
19.3

 
June 11, 2013
 
August 11, 2013
On April 22, 2013, we upsized our $400.0 million revolving credit facility to $600.0 million and extended the maturity date to April 21, 2017, subject to a one-year extension at our option. Under the amended credit facility, the spread over LIBOR is 90 basis points based on our credit rating as of May 1, 2013.
On May 9, 2013, we issued $275.0 million of fixed rate senior notes that mature on June 1, 2023 and bear interest at 2.75%. The net proceeds from this note offering after issuance discounts, underwriting fees and other costs were approximately $269.3 million.
On June 9, 2013, we redeemed our $135.0 million 5.40% senior notes prior to the original maturity date of December 1, 2013. The redemption price of $138.5 million included a make-whole premium of approximately $3.3 million and accrued but unpaid interest of $0.2 million. The make-whole premium is included in "early extinguishment of debt" for the nine months ended September 30, 2013.
There was no balance outstanding on our revolving credit facility as of and for the three months ended September 30, 2013. During the nine months ended September 30, 2013, the maximum amount of borrowings outstanding under our revolving credit

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facility was $76.0 million, the weighted average amount of borrowings outstanding was $13.0 million, and the weighted average interest rate, before amortization of debt fees, was 1.29%.
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 September 30, 2013, we were in compliance with all loan covenants.

NOTE 6—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:

 
September 30, 2013
 
December 31, 2012
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
(In thousands)
Mortgages and notes payable
$
1,021,013

 
$
1,055,657

 
$
1,060,364

 
$
1,110,757

Senior notes and debentures
$
1,213,508

 
$
1,247,124

 
$
1,076,545

 
$
1,190,833

 
As of September 30, 2013, we have two interest rate swap agreements with a notional amount of $275.0 million that are measured at fair value on a recurring basis. The interest rate swap agreements fix the variable portion of our $275.0 million term loan at 1.72% from December 1, 2011 through November 1, 2018. We assess effectiveness of our cash flow hedges both at inception and on an ongoing basis. The effective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recorded in accumulated other comprehensive income/loss and is subsequently reclassified into interest expense as interest is incurred on the related variable rate debt. Within the next 12 months, we expect to reclassify an estimated $4.5 million as an increase to interest expense. Our 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. When ineffectiveness exists, the ineffective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recognized in earnings in the period affected. Hedge ineffectiveness has not impacted earnings as of September 30, 2013, and we do not anticipate it will have a significant effect in the future.
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 September 30, 2013 was a liability of $3.5 million and is included in "accounts payable and accrued expenses" on our consolidated balance sheets. For the three and nine months ended September 30, 2013, the change in valuation on our interest rate swaps was a decrease of $1.2 million and an increase of $8.8 million, respectively, (including $1.1 million and $3.2 million, respectively, reclassified from other comprehensive loss to interest expense) and is included in "accumulated other comprehensive loss."
A summary of our financial liabilities that are measured at fair value on a recurring basis, by level within the fair value hierarchy is as follows:
 
September 30, 2013
 
December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Interest rate swaps
$

 
$
3,539

 
$

 
$
3,539

 
$

 
$
12,388

 
$

 
$
12,388


NOTE 7—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.

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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 the same number of our common shares, at our option. A total of 285,722 operating partnership units are outstanding which have a total fair value of $29.0 million, based on our closing stock price on September 30, 2013.

NOTE 8—SHAREHOLDERS’ EQUITY
The following table provides a summary of dividends declared and paid per share:

 
Nine Months Ended September 30,
 
2013
 
2012
 
Declared
 
Paid
 
Declared
 
Paid
Common shares
$
2.240

 
$
2.190

 
$
2.110

 
$
2.070

5.417% Series 1 Cumulative Convertible Preferred shares
$
1.016

 
$
1.016

 
$
1.016

 
$
1.016


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 $300.0 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. For the three months ended September 30, 2013, we issued 340,457 common shares at a weighted average price per share of $103.36 for net cash proceeds of $34.8 million and paid $0.4 million in commissions and less than $0.1 million in additional offering expenses related to the sales of these common shares. For the nine months ended September 30, 2013, we issued 1,075,036 common shares at a weighted average price per share of $110.00 for net cash proceeds of $116.8 million and paid $1.3 million in commissions and $0.1 million in additional offering expenses related to the sales of these common shares. As of September 30, 2013, we had the capacity to issue up to $95.1 million in common shares under our ATM equity program.


NOTE 9—COMPONENTS OF RENTAL INCOME
The principal components of rental income are as follows:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
Minimum rents
 
 
 
 
 
 
 
Retail and commercial
$
111,928

 
$
105,858

 
$
334,628

 
$
312,519

Residential
7,196

 
7,116

 
21,525

 
20,467

Cost reimbursement
30,364

 
29,085

 
89,850

 
82,376

Percentage rent
1,912

 
1,667

 
6,036

 
5,167

Other
2,908

 
3,217

 
8,097

 
7,801

Total rental income
$
154,308

 
$
146,943

 
$
460,136

 
$
428,330




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Minimum rents include the following:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(In millions)
Straight-line rents
$
1.1

 
$
1.8

 
$
3.7

 
$
3.8

Amortization of above market leases
$
(0.5
)
 
$
(0.8
)
 
$
(2.0
)
 
$
(2.6
)
Amortization of below market leases
$
1.3

 
$
1.1

 
$
4.3

 
$
3.4


NOTE 10—DISCONTINUED OPERATIONS
Results of properties disposed or held for disposal which meet certain requirements, constitute discontinued operations and as such, the operations of these properties are classified as discontinued operations for all periods presented. A summary of the financial information for the discontinued operations is as follows:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(in millions)
Revenue from discontinued operations
$
0.4

 
$
0.6

 
$
1.5

 
$
1.6

Income from discontinued operations
0.1

 
0.4

 
0.9

 
1.1


NOTE 11—SHARE-BASED COMPENSATION PLANS
A summary of share-based compensation expense included in net income is as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
Share-based compensation incurred
 
 
 
 
 
 
 
Grants of common shares
$
2,671

 
$
2,754

 
$
8,284

 
$
7,644

Grants of options
69

 
77

 
223

 
358

 
2,740

 
2,831

 
8,507

 
8,002

Capitalized share-based compensation
(405
)
 
(230
)
 
(793
)
 
(683
)
Share-based compensation expense
$
2,335

 
$
2,601

 
$
7,714

 
$
7,319




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NOTE 12—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 nine months ended September 30, 2013 and 2012, we had 0.3 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 no anti-dilutive stock options for the three and nine months ended September 30, 2013 and 2012. 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 September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands, except per share data)
NUMERATOR
 
 
 
 
 
 
 
Income from continuing operations
$
39,390

 
$
39,285

 
$
108,208

 
$
104,437

Less: Preferred share dividends
(136
)
 
(136
)
 
(406
)
 
(406
)
Less: Income from continuing operations attributable to noncontrolling interests
(1,268
)
 
(1,012
)
 
(3,780
)
 
(3,141
)
Less: Earnings allocated to unvested shares
(278
)
 
(221
)
 
(659
)
 
(638
)
Income from continuing operations available for common shareholders
37,708

 
37,916

 
103,363

 
100,252

Results from discontinued operations attributable to the Trust
23,976

 
371

 
24,803

 
1,077

Gain on sale of real estate

 

 
4,994

 
11,860

Net income available for common shareholders, basic and diluted
$
61,684

 
$
38,287

 
$
133,160

 
$
113,189

DENOMINATOR
 
 
 
 
 
 
 
Weighted average common shares outstanding—basic
65,504

 
64,014

 
65,118

 
63,711

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock options
143

 
188

 
153

 
180

Weighted average common shares outstanding—diluted
65,647

 
64,202

 
65,271

 
63,891

EARNINGS PER COMMON SHARE, BASIC
 
 
 
 
 
 
 
Continuing operations
$
0.57

 
$
0.59

 
$
1.58

 
$
1.57

Discontinued operations
0.37

 
0.01

 
0.38

 
0.02

Gain on sale of real estate

 

 
0.08

 
0.19

 
$
0.94

 
$
0.60

 
$
2.04

 
$
1.78

EARNINGS PER COMMON SHARE, DILUTED
 
 
 
 
 
 
 
Continuing operations
$
0.57

 
$
0.59

 
$
1.58

 
$
1.56

Discontinued operations
0.37

 
0.01

 
0.38

 
0.02

Gain on sale of real estate

 

 
0.08

 
0.19

 
$
0.94

 
$
0.60

 
$
2.04

 
$
1.77

Income from continuing operations attributable to the Trust
$
38,122

 
$
38,273

 
$
104,428

 
$
101,296



NOTE 13—SUBSEQUENT EVENT
On October 1, 2013, we acquired an 11.8 acre parcel of land adjacent to our Assembly Row development project for a purchase price of $18.0 million.

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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, 2012 filed with the Securities and Exchange Commission (the “SEC”) on February 12, 2013.
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.” Forward-looking statements are not historical facts or guarantees of future performance and involve certain known and unknown risks, uncertainties, and other factors, many of which are outside our control, that could cause actual results to differ materially from those we describe.
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. Except as may be required by law, we make no promise to update any of the forward-looking statements as a result of new information, future events or otherwise. You should carefully review the risks and the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2012 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, and California. As of September 30, 2013, we owned or had a controlling interest in community and neighborhood shopping centers and mixed-use properties which are operated as 87 predominantly retail real estate projects comprising approximately 19.5 million square feet (excludes unconsolidated joint venture properties). In total, the real estate projects were 95.3% leased and 94.6% occupied at September 30, 2013. A joint venture in which we own a 30% interest owned seven retail real estate projects totaling approximately 1.0 million square feet as of September 30, 2013. In total, the joint venture properties in which we own a 30% interest were 85.3% leased and occupied at September 30, 2013.
2013 Significant Property Acquisition & Dispositions
On April 3, 2013, we acquired the fee interest in a 95,000 square foot retail property located in Darien, Connecticut for $47.3 million. The purchase price allocation will be finalized after our valuation studies are complete. We incurred approximately $0.2 million of acquisition costs which are included in "general and administrative expenses" for the nine months ended September 30, 2013.
On April 5, 2013, one of our tenants acquired our fee interest in the land under an office building at our Village of Shirlington property in Arlington, Virginia, that was subject to a long term ground lease. The ground lease included an option for the tenant to purchase the fee interest. The sales price was $6.5 million, and the gain was $5.0 million.
On July 22, 2013, we sold the fee interest in our final building at Fifth Avenue in San Diego, California for a sales price of $15.3 million resulting in a gain of approximately $10.7 million. On September 10, 2013, we sold the fee interest in Forest Hills in Forest Hills (Queens), New York for a sales price of $20.4 million resulting in a gain of approximately $13.2 million. Both sales were completed as a Section 1031 tax deferred exchange transaction with the acquisition of the property in Darien.
On October 1, 2013, we acquired an 11.8 acre parcel of land adjacent to our Assembly Row development project for a purchase price of $18.0 million.

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2013 Significant Debt and Equity Transactions
During the nine months ended September 30, 2013, we repaid the following mortgage loans at par:
 
Payoff Amount
 
Repayment Date
 
Maturity Date
 
(In millions)
 
 
 
 
White Marsh Plaza
$
9.0

 
January 2, 2013
 
April 1, 2013
Crow Canyon
$
19.3

 
June 11, 2013
 
August 11, 2013
On April 22, 2013, we upsized our $400.0 million revolving credit facility to $600.0 million and extended the maturity date to April 21, 2017, subject to a one-year extension at our option. Under the amended credit facility, the spread over LIBOR is 90 basis points based on our credit rating as of May 1, 2013.
On May 9, 2013, we issued $275.0 million of fixed rate senior notes that mature on June 1, 2023 and bear interest at 2.75%. The net proceeds from this note offering after issuance discounts, underwriting fees and other costs were approximately $269.3 million.
On June 9, 2013, we redeemed our $135.0 million 5.40% senior notes prior to the original maturity date of December 1, 2013. The redemption price of $138.5 million included a make-whole premium of approximately $3.3 million and accrued but unpaid interest of $0.2 million. The make-whole premium is included in "early extinguishment of debt" for the nine months ended September 30, 2013.
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 $300.0 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. For the three months ended September 30, 2013, we issued 340,457 common shares at the weighted average price per share of $103.36 for net cash proceeds of $34.8 million and paid $0.4 million in commissions and less than $0.1 million in additional offering expenses related to the sales of these common shares. For the nine months ended September 30, 2013, we issued 1,075,036 common shares at a weighted average price per share of $110.00 for net cash proceeds of $116.8 million and paid $1.3 million in commissions and $0.1 million in additional offering expenses related to the sales of these common shares. As of September 30, 2013, we had the capacity to issue up to $95.1 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 external and internal costs related to both development and redevelopment activities of $196 million and $4 million, respectively, for the nine months ended September 30, 2013 and $92 million and $5 million, respectively, for the nine months ended September 30, 2012. We capitalized external and internal costs related to other property improvements of $31 million and $1 million, respectively, for the nine months ended September 30, 2013 and $33 million and $1 million, respectively, for the nine months ended September 30, 2012. We capitalized external and internal costs related to leasing activities of $6 million and $5 million, respectively, for the nine months ended September 30, 2013 and $5 million and $4 million, respectively, for the nine months ended September 30, 2012. The amount of capitalized internal costs for salaries and related benefits for development and redevelopment activities, other property improvements, and leasing activities were $4 million, $1 million, and $4 million, respectively, for the nine months ended September 30, 2013 and $4 million, $1 million, and $4 million, respectively, for the nine months ended September 30, 2012.
Outlook
We seek growth in earnings, funds from operations, and cash flows primarily through a combination of the following:
growth in our same-center portfolio,
growth in our portfolio from property development and redevelopments, and
expansion of our portfolio through property acquisitions.

Our same-center growth is primarily driven by increases in rental rates on new leases and lease renewals and changes in portfolio occupancy. Over the long-term, the infill nature and strong demographics of our properties provide a strategic advantage allowing us to maintain relatively high occupancy and increase rental rates. We have continued to see signs of improvement for many of our tenants as well as increased interest from prospective tenants for our retail spaces. While there can be no assurance that these positive signs will continue, we remain cautiously optimistic regarding the improved trends we

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have seen over the past few years. We believe the locations of our centers and diverse tenant base mitigates the negative impact of the economic environment, however, any reduction in our tenants' abilities to pay base rent, percentage rent or other charges, will adversely affect our financial condition and results of operations.  During the last quarter of 2013, we expect to continue to see increases in rental income as a result of our significant leasing activity over the past two years which resulted in higher occupancy in the latter half of 2012. We seek to maintain a mix of strong national, regional, and local retailers. At September 30, 2013, no single tenant accounted for more than 3.4% of annualized base rent.
Our properties are located in densely populated or affluent areas with high barriers to entry which allow us to take advantage of redevelopment opportunities that enhance our operating performance through renovation, expansion, reconfiguration, and/or retenanting. We evaluate our properties on an ongoing basis to identify these types of opportunities. In 2013, we expect to have redevelopment projects stabilizing with projected costs of approximately $29 million.
We continue our ongoing redevelopment efforts at Santana Row and are currently under construction on a 212 unit residential building which we expect to stabilize during 2014. Santana Row currently has zoning entitlements to build an additional 348 residential units and 305,000 square feet of retail and office space. The 212 unit residential building is expected to cost approximately $75 million of which $56 million has been incurred to date. We expect to incur the remaining costs for the project throughout 2013 and early 2014.
We continue to invest in the development at Assembly Row which is a long-term development project we expect to be involved in over the coming years. The carrying value of the development portion of this project at September 30, 2013 is approximately $228 million. The project currently has zoning entitlements to build 2.3 million square feet of commercial-use buildings, 2,100 residential units, and a 200 room hotel. In December 2011, we entered into agreements with AvalonBay Communities ("AvalonBay") for the residential portion of the first phase of development at Assembly Row which will include 450 apartment units (by AvalonBay) and approximately 326,000 square feet of retail space and 98,000 square feet of office space (both by the Trust).  The Massachusetts Bay Transit Authority (MBTA) is constructing the new orange line T-Stop at the property.   Our construction on the first phase commenced during first quarter 2012. Total expected costs for Phase I of Assembly Row range from $190 million to $200 million of which $93 million has been incurred to date. We expect Phase I to stabilize in 2015. Additionally during 2013, we are continuing our infrastructure work. In total, we expect to invest between $90 million and $100 million in Assembly Row in 2013, net of expected public funding.
In the third quarter 2012, we broke ground on the first phase of Pike & Rose in Rockville, MD, a long-term multi-phased mixed-use project located on a portion of our Mid-Pike Plaza property.  The property currently has zoning entitlements to build 1.7 million square feet of commercial-use buildings and 1,583 residential units. Phase I of Pike & Rose involves demolition of roughly 25% of the existing gross leasable area at Mid-Pike Plaza (which was completed during the second quarter 2012) and construction of 493 residential units, 151,000 square feet of retail space and 79,000 square feet of office space. Total expected costs for Phase I of Pike & Rose range from $245 million to $255 million of which $81 million has been incurred to date. We expect Phase I of the project to stabilize in 2015/2016.  We expect to invest between $90 million and $100 million in Pike and Rose in 2013.
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 risk adjusted financial return.
We continue to review acquisition opportunities in our primary markets that complement our portfolio and provide long-term growth opportunities. Initially, some of our acquisitions do not contribute significantly to earnings growth; however, we believe they provide long-term re-leasing growth, redevelopment opportunities, and other strategic opportunities. Any growth from acquisitions is contingent on our ability to find properties that meet our qualitative standards at prices that meet our financial hurdles. Changes in interest rates may affect our success in achieving earnings growth through acquisitions by affecting both the price that must be paid to acquire a property, as well as our ability to economically finance the property acquisition. Generally, our acquisitions are initially financed by available cash and/or borrowings under our revolving credit facility which may be repaid later with funds raised through the issuance of new equity or new long-term debt. On occasion we also finance our acquisitions through the issuance of common shares, preferred shares, or downREIT units as well as through new or assumed mortgages.
At September 30, 2013, the leasable square feet in our properties was 94.6% occupied and 95.3% leased. 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 bankruptcies.

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Lease Rollovers
For the third quarter 2013, we signed leases for a total of 399,000 square feet of retail space including 274,000 square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of 20% on a cash basis and 34% on a straight-line basis. New leases for comparable spaces were signed for 104,000 square feet at an average rental increase of 39% on a cash basis and 57% on a straight-line basis. Renewals for comparable spaces were signed for 169,000 square feet at an average rental increase of 9% on a cash basis and 20% on a straight-line basis.
For the nine months ended September 30, 2013, we signed leases for a total of 1,145,000 square feet of retail space including 974,000 square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of 18% on a cash basis and 32% on a straight-line basis. New leases for comparable spaces were signed for 477,000 square feet at an average rental increase of 36% on a cash basis and 51% on a straight-line basis. Renewals for comparable spaces were signed for 497,000 square feet at an average rental increase of 6% on a cash basis and 18% on a straight-line basis.
Tenant improvements and incentives were $42.82 per square foot for new leases and $1.51 per square foot for renewals for the nine months ended September 30, 2013. Tenant improvements and incentives increased for new leases relative to our historical experience primarily due to one grocery anchor lease at Ellisburg Shopping Center and an anchor tenant at Westgate Center which is currently being redeveloped. We expect the amount to return to levels more in line with our historical experience in future periods.
The rental increases associated with comparable spaces generally include all leases signed in arms-length transactions reflecting market leverage between landlords and tenants during the period. The comparison between average rent for expiring leases and new leases is determined by including minimum rent and percentage rent paid on the expiring lease and minimum rent and in some instances, projections of first lease year percentage rent, to be paid on the new lease. In some instances, management exercises 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 but 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 an inducement to sign a lease that do not represent building improvements.
The leases signed in 2013 generally become effective over the following two years though some may not become effective until 2016 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.
In 2013, we believe our leasing volume will be in-line with our historical averages with overall positive increases in rental income. However, changes in rental income associated with individual signed leases on comparable spaces may be positive or negative, and we can provide no assurance that the rents on new leases will continue to increase at the above disclosed levels, if at all.
Same-Center
Throughout this section, we have provided certain information on a “same-center” basis. Information provided on a same-center basis includes the results of properties that we owned and operated for the entirety of both periods being compared except for properties for which significant redevelopment or expansion occurred during either of the periods being compared and properties classified as discontinued operations. For the three and nine months ended September 30, 2013, all or a portion of 79 properties were considered same-center and ten properties were considered redevelopment or expansion for both periods. For the nine months ended September 30, 2013, two properties were moved from acquisitions to same-center designation and one property was moved from redevelopment to same-center designation when compared to the designations as of December 31, 2012. While there is judgment surrounding changes in designations, we typically move redevelopment properties to same-center once they have stabilized, which is typically considered 95% occupancy or when the growth expected from the redevelopment has been included in the comparable periods.  We typically remove properties from same center when the redevelopment has or is expected to have a significant impact to property operating income within the calendar year.  Acquisitions are moved to same-center once we have owned the property for the entirety of comparable periods and the property is not under significant redevelopment or expansion.

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Table of Contents

        
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
 
 
 
 
 
 
Change
 
2013
 
2012
 
Dollars
 
%
 
(Dollar amounts in thousands)
Rental income
$
154,308

 
$
146,943

 
$
7,365

 
5.0
 %
Other property income
3,480

 
9,007

 
(5,527
)
 
(61.4
)%
Mortgage interest income
1,242

 
1,282

 
(40
)
 
(3.1
)%
Total property revenue
159,030

 
157,232

 
1,798

 
1.1
 %
Rental expenses
29,045

 
29,658

 
(613
)
 
(2.1
)%
Real estate taxes
18,400

 
17,224

 
1,176

 
6.8
 %
Total property expenses
47,445

 
46,882

 
563

 
1.2
 %
Property operating income
111,585

 
110,350

 
1,235

 
1.1
 %
Other interest income
70

 
261

 
(191
)
 
(73.2
)%
Income from real estate partnerships
381

 
490

 
(109
)
 
(22.2
)%
Interest expense
(25,762
)
 
(28,218
)
 
2,456

 
(8.7
)%
General and administrative expense
(7,543
)
 
(8,751
)
 
1,208

 
(13.8
)%
Depreciation and amortization
(39,341
)
 
(34,847
)
 
(4,494
)
 
12.9
 %
Total other, net
(72,195
)
 
(71,065
)
 
(1,130
)
 
1.6
 %
Income from continuing operations
39,390

 
39,285

 
105

 
0.3
 %
Discontinued operations - income
115

 
371

 
(256
)
 
(69.0
)%
Discontinued operations - gain on sale of real estate
23,861

 

 
23,861

 
100.0
 %
Net income
63,366

 
39,656

 
23,710

 
59.8
 %
Net income attributable to noncontrolling interests
(1,268
)
 
(1,012
)
 
(256
)
 
25.3
 %
Net income attributable to the Trust
$
62,098

 
$
38,644

 
$
23,454

 
60.7
 %

Property Revenues
Total property revenue increased $1.8 million, or 1.1%, to $159.0 million in the three months ended September 30, 2013 compared to $157.2 million in the three months ended September 30, 2012. The percentage occupied at our shopping centers increased to 94.6% at September 30, 2013 compared to 94.2% at September 30, 2012. 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. Rental income increased $7.4 million, or 5.0%, to $154.3 million in the three months ended September 30, 2013 compared to $146.9 million in the three months ended September 30, 2012 due primarily to the following:
an increase of $3.9 million at same-center properties due primarily to higher rental rates of approximately $2.5 million, higher occupancy of approximately $0.8 million, and an increase in recovery income, and
an increase of $3.7 million attributable to properties acquired in 2013 and 2012.
Other Property Income
Other property income decreased $5.5 million, or 61.4%, to $3.5 million in the three months ended September 30, 2013 compared to $9.0 million in the three months ended September 30, 2012. Included in other property income are items which, although recurring, inherently tend to fluctuate more than rental income from period to period, such as lease termination fees. This decrease is primarily due to a $6.0 million lease termination fee received in 2012 from an anchor tenant at Ellisburg Shopping Center.

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Property Expenses
Total property expenses increased $0.6 million, or 1.2%, to $47.4 million in the three months ended September 30, 2013 compared to $46.9 million in the three months ended September 30, 2012. Changes in the components of property expenses are discussed below.
Rental Expenses
Rental expenses decreased $0.6 million, or 2.1%, to $29.0 million in the three months ended September 30, 2013 compared to $29.7 million in the three months ended September 30, 2012. This decrease is primarily due to a $0.8 million decrease in bad debt expense at same-center properties partially offset by a $0.5 million increase in rental expenses related to properties acquired in 2013 and 2012.
As a result of the changes in rental income, other property income and rental expenses as discussed above, rental expenses as a percentage of rental income plus other property income decreased to 18.4% in the three months ended September 30, 2013 from 19.0% in the three months ended September 30, 2012.
Real Estate Taxes
Real estate tax expense increased $1.2 million, or 6.8% to $18.4 million in the three months ended September 30, 2013 compared to $17.2 million in the three months ended September 30, 2012 due primarily to properties acquired in 2013 and 2012 and annual increases in assessments.
Property Operating Income
Property operating income increased $1.2 million, or 1.1%, to $111.6 million in the three months ended September 30, 2013 compared to $110.4 million in the three months ended September 30, 2012. This increase is primarily due to growth in earnings at same center properties and properties acquired in 2013 and 2012 partially offset by a decrease in lease termination fees at our same center properties. Excluding the $6.0 million termination fee in 2012, property operating income for the three months ended September 30, 2013 would have increased $7.2 million, or 6.9%.
Other
Interest Expense
Interest expense decreased $2.5 million, or 8.7%, to $25.8 million in the three months ended September 30, 2013 compared to $28.2 million in the three months ended September 30, 2012. This decrease is due primarily to the following:
a decrease of $2.6 million due to a lower overall weighted average borrowing rate, and
an increase of $1.8 million in capitalized interest,
partially offset by
an increase of $2.0 million due to higher borrowings.
Gross interest costs were $30.1 million and $30.7 million in the three months ended September 30, 2013 and 2012, respectively. Capitalized interest was $4.3 million and $2.5 million in the three months ended September 30, 2013 and 2012, respectively.
General and Administrative Expense
General and administrative expense decreased $1.2 million, or 13.8%, to $7.5 million in the three months ended September 30, 2013 from $8.8 million in the three months ended September 30, 2012. This decrease is due primarily to costs related to our CFO change in 2012 partially offset by higher personnel related costs.
Depreciation and Amortization
Depreciation and amortization expense increased $4.5 million, or 12.9%, to $39.3 million in the three months ended September 30, 2013 from $34.8 million in the three months ended September 30, 2012. This increase is due primarily to 2013 and 2012 acquisitions and accelerated depreciation due to the change in use of a redevelopment property.
Discontinued Operations -- Income
Income from discontinued operations represents the operating income of properties that have been disposed or will be disposed, which is required to be reported separately from results of ongoing operations. For the three months ended September 30, 2013, the amount primarily represents the operating income for the period during which we owned properties sold in 2013.

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Table of Contents

Discontinued Operations -- Gain on Sale of Real Estate
The $23.9 million gain on sale of real estate from discontinued operations for the three months ended September 30, 2013 is due to the sale of the fee interest in our final building at Fifth Avenue on July 22, 2013, and the sale of our fee interest in our building in Forest Hills on September 10, 2013.

RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

 
 
 
 
 
Change
 
2013
 
2012
 
Dollars
 
Dollars
 
(Dollar amounts in thousands)
Rental income
$
460,136

 
$
428,330

 
$
31,806

 
7.4
 %
Other property income
9,661

 
17,842

 
(8,181
)
 
(45.9
)%
Mortgage interest income
3,770

 
3,834

 
(64
)
 
(1.7
)%
Total property revenue
473,567

 
450,006

 
23,561

 
5.2
 %
Rental expenses
86,755

 
82,609

 
4,146

 
5.0
 %
Real estate taxes
53,604

 
49,680

 
3,924

 
7.9
 %
Total property expenses
140,359

 
132,289

 
8,070

 
6.1
 %
Property operating income
333,208

 
317,717

 
15,491

 
4.9
 %
Other interest income
165

 
580

 
(415
)
 
(71.6
)%
Income from real estate partnerships
1,065

 
1,229

 
(164
)
 
(13.3
)%
Interest expense
(80,314
)
 
(85,744
)
 
5,430

 
(6.3
)%
Early extinguishment of debt
(3,399
)
 

 
(3,399
)
 
100.0
 %
General and administrative expense
(22,902
)
 
(22,894
)
 
(8
)
 
 %
Depreciation and amortization
(119,615
)
 
(106,451
)
 
(13,164
)
 
12.4
 %
Total other, net
(225,000
)
 
(213,280
)
 
(11,720
)
 
5.5
 %
Income from continuing operations
108,208

 
104,437

 
3,771

 
3.6
 %
Discontinued operations - income
942

 
1,077

 
(135
)
 
(12.5
)%
Discontinued operations - gain on sale of real estate
23,861

 

 
23,861

 
100.0
 %
Gain on sale of real estate
4,994

 
11,860

 
(6,866
)
 
(57.9
)%
Net income
138,005

 
117,374

 
20,631

 
17.6
 %
Net income attributable to noncontrolling interests
(3,780
)
 
(3,141
)
 
(639
)
 
20.3
 %
Net income attributable to the Trust
$
134,225

 
$
114,233

 
$
19,992

 
17.5
 %

Property Revenues
Total property revenue increased $23.6 million, or 5.2%, to $473.6 million in the nine months ended September 30, 2013 compared to $450.0 million in the nine months ended September 30, 2012. The percentage occupied at our shopping centers increased to 94.6% at September 30, 2013 compared to 94.2% at September 30, 2012. 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. Rental income increased $31.8 million, or 7.4%, to $460.1 million in the nine months ended September 30, 2013 compared to $428.3 million in the nine months ended September 30, 2012 due primarily to the following:
an increase of $18.9 million at same-center properties due primarily to higher rental rates of approximately $8.8 million, increased occupancy of approximately $4.0 million, an increase in recovery income, and an increase in percentage rent,
an increase of $10.6 million attributable to properties acquired in 2013 and 2012, and
an increase of $1.7 million at redevelopment properties due primarily to the lease-up and stabilization of certain of our redevelopment properties partially offset by lower income from Mid-Pike Plaza as the property is prepared for the development of Pike & Rose.

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Other Property Income
Other property income decreased $8.2 million, or 45.9%, to $9.7 million in the nine months ended September 30, 2013 compared to $17.8 million in the nine months ended September 30, 2012. Included in other property income are items which, although recurring, inherently tend to fluctuate more than rental income from period to period, such as lease termination fees. This decrease is primarily due to lower lease termination fees at same center properties, largely from a $6.0 million lease termination fee received in 2012 from an anchor tenant at Ellisburg Shopping Center.
Property Expenses
Total property expenses increased $8.1 million, or 6.1%, to $140.4 million in the nine months ended September 30, 2013 compared to $132.3 million in the nine months ended September 30, 2012. Changes in the components of property expenses are discussed below.
Rental Expenses
Rental expenses increased $4.1 million, or 5.0%, to $86.8 million in the nine months ended September 30, 2013 compared to $82.6 million in the nine months ended September 30, 2012. This increase is primarily due to the following:
an increase of $3.1 million in recoverable rental expenses at same center properties primarily due to snow removal costs,
an increase of $1.6 million related to properties acquired in 2013 and 2012, and
an increase of $0.5 million in marketing expenses at our Assembly Row and Pike & Rose projects,
partially offset by
a decrease of $1.4 million in bad debt expense.
Rental expenses as a percentage of rental income plus other property income was 18.5% for the nine months ended September 30, 2013 and 2012.
Real Estate Taxes
Real estate tax expense increased $3.9 million, or 7.9% to $53.6 million in the nine months ended September 30, 2013 compared to $49.7 million in the nine months ended September 30, 2012 due primarily to properties acquired in 2013 and 2012 and annual increases in assessments.
Property Operating Income
Property operating income increased $15.5 million, or 4.9% , to $333.2 million in the nine months ended September 30, 2013 compared to $317.7 million in the nine months ended September 30, 2012. This increase is primarily due to growth in earnings at same-center properties, properties acquired in 2013 and 2012, and redevelopment properties.
Other
Interest Expense
Interest expense decreased $5.4 million, or 6.3%, to $80.3 million in the nine months ended September 30, 2013 compared to $85.7 million in the nine months ended September 30, 2012. This decrease is due primarily to the following:
a decrease of $8.8 million due to a lower overall weighted average borrowing rate, and
an increase of $3.4 million in capitalized interest,
partially offset by
an increase of $6.8 million due to higher borrowings.
Gross interest costs were $91.2 million and $93.2 million in the nine months ended September 30, 2013 and 2012, respectively. Capitalized interest was $10.9 million and $7.5 million in the nine months ended September 30, 2013 and 2012, respectively.
Early Extinguishment of Debt
The $3.4 million of early extinguishment of debt in the nine months ended September 30, 2013 relates to the make-whole premium paid as part of the early redemption of our 5.40% senior notes and the related write-off of unamortized debt fees.

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Table of Contents

Depreciation and Amortization
Depreciation and amortization expense increased $13.2 million, or 12.4%, to $119.6 million in the nine months ended September 30, 2013 from $106.5 million in the nine months ended September 30, 2012. This increase is due primarily to 2013 and 2012 acquisitions and accelerated depreciation due to the change in use of a redevelopment property.
Discontinued Operations -- Income
Income from discontinued operations represents the operating income of properties that have been disposed or will be disposed, which is required to be reported separately from results of ongoing operations. For the nine months ended September 30, 2013, the amount primarily represents the operating income for the period during which we owned properties sold in 2013.
Discontinued Operations -- Gain on Sale of Real Estate
The $23.9 million gain on sale of real estate from discontinued operations for the the nine months ended September 30, 2013 is due to the sale of the fee interest in our final building at Fifth Avenue on July 22, 2013 and the sale of the fee interest in our building in Forest Hills on September 10, 2013.
Gain on Sale of Real Estate
The $5.0 million gain on sale of real estate for the nine months ended September 30, 2013 is primarily due to the sale of the fee interest in the land under an office building at our Village of Shirlington property in Arlington, Virginia, that was subject to a long term ground lease. The ground lease included an option for the tenant to purchase the fee interest.
The $11.9 million gain on sale of real estate in the nine months ended September 30, 2012 is due to the sale of our Newbury Street Partnership's entire portfolio of three buildings on October 31, 2011. Due to the timing of receiving financial information from the general partner, our share of earnings was recorded one quarter in arrears. Therefore, we recognized the gain on sale of $11.9 million in the nine months ended September 30, 2012.

Recently Adopted Accounting Pronouncements
In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income.”  ASU 2013-02 requires entities to disclose certain information relating to amounts reclassified out of accumulated other comprehensive income.  We adopted the standard effective January 1, 2013 and it did not have a significant impact to our consolidated financial statements.

Liquidity and Capital Resources
Due to the nature of our business and strategy, we typically generate significant amounts of cash from operations. The cash generated from operations is primarily paid to our common and preferred shareholders in the form of dividends. As a REIT, we must generally make annual distributions to shareholders of at least 90% of our taxable income.
Our short-term liquidity requirements consist primarily of normal recurring operating expenses, obligations under our capital and operating leases, regular debt service requirements (including debt service relating to additional or replacement debt, as well as scheduled debt maturities), recurring expenditures, non-recurring expenditures (such as tenant improvements and redevelopments) and dividends to common and preferred shareholders. Our long-term capital requirements consist primarily of maturities under our long-term debt agreements, development and redevelopment costs and potential acquisitions.
We intend to operate with and maintain 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. In the short and long term, we may seek to obtain funds through the issuance of additional equity, unsecured and/or secured debt financings, joint venture relationships relating to existing properties or new acquisitions, and property dispositions that are consistent with this conservative structure.
At September 30, 2013, we had $127.8 million of cash and cash equivalents and no borrowings outstanding on our $600.0 million revolving credit facility that matures on April 21, 2017. In addition, we have an option (subject to bank approval) to increase the credit facility through an accordion feature to $1.0 billion. Our $275.0 million unsecured term loan which matures on November 21, 2018 also has an option (subject to bank approval) to increase the term loan through an accordion feature to $350.0 million. As of September 30, 2013, we had the capacity to issue up to $95.1 million in common shares under our ATM equity program.
For the nine months ended September 30, 2013, the maximum amount of borrowings outstanding under our revolving credit facility was $76.0 million, the weighted average amount of borrowings outstanding was $13.0 million and the weighted

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average interest rate, before amortization of debt fees, was 1.29%. On May 9, 2013, we issued $275.0 million of fixed rate senior notes that mature on June 1, 2023 and bear interest at 2.75%. The net proceeds from this note offering after issuance discounts, underwriting fees and other costs were approximately $269.3 million. On June 9, 2013, we redeemed our $135.0 million 5.40% senior notes prior to the original maturity date of December 1, 2013. The redemption included a $3.3 million make-whole premium. We have no additional debt maturing for the remainder of 2013. We currently believe that cash flows from operations, cash on hand, our ATM equity program, our revolving credit facility and our general ability to access the capital markets will be sufficient to finance our operations and fund our debt service requirements (including maturities) and capital expenditures.
Our overall capital requirements for the remainder of 2013 will depend upon acquisition opportunities, the level of improvements and redevelopments on existing properties and the timing and cost of development of Assembly Row, Pike & Rose and future phases of Santana Row. While the amount of future expenditures will depend on numerous factors, we expect to continue to see higher levels of capital investments in our properties under development and redevelopment in 2013 which is the result of the 212 unit residential building at Santana Row, which will open in late 2013, and the continued construction of Phase 1 at both Assembly Row and Pike & Rose with expected openings of portions of both projects in 2014. Over the next two years, we expect to invest approximately $300 million related to the current phases of these three projects. With respect to other capital investments related to our existing properties, we expect to incur levels consistent with prior years. Our capital investments will be funded on a short-term basis with cash flow from operations, cash on hand and/or our revolving credit facility, and on a long-term basis, with long-term debt or equity including shares issued under our ATM equity program. If necessary, we may access the debt or equity capital markets to finance significant acquisitions. Given our past ability to access the capital markets, we expect debt or equity to be available to us. Although there is no intent at this time, if market conditions deteriorate, we may also delay the timing of future development and redevelopment projects as well as limit future acquisitions, reduce our operating expenditures, or re-evaluate our dividend policy.
In addition to conditions in the capital markets which could affect our ability to access those markets, the following factors could affect our ability to meet our liquidity requirements:
restrictions in our debt instruments or preferred shares may limit us from incurring debt or issuing equity at all, or on acceptable terms under then-prevailing market conditions; and
we may be unable to service additional or replacement debt due to increases in interest rates or a decline in our operating performance.
Summary of Cash Flows
 
Nine Months Ended September 30,
 
2013
 
2012
 
(In thousands)
Cash provided by operating activities
$
226,728

 
$
209,155

Cash used in investing activities
(201,487
)
 
(143,435
)
Cash provided by financing activities
65,602

 
14,154

Increase in cash and cash equivalents
90,843

 
79,874

Cash and cash equivalents, beginning of year
36,988

 
67,806

Cash and cash equivalents, end of period
$
127,831

 
$
147,680


Net cash provided by operating activities increased $17.6 million to $226.7 million during the nine months ended September 30, 2013 from $209.2 million during the nine months ended September 30, 2012. The increase was primarily attributable to higher net income before certain non-cash items.
Net cash used in investing activities increased $58.1 million to $201.5 million during the nine months ended September 30, 2013 from $143.4 million during the nine months ended September 30, 2012. The increase was primarily attributable to:
$47.2 million acquisition of a shopping center in Darien, Connecticut in April 2013, and
$62.8 million increase in capital investments in 2013 due primarily to our projects at Assembly Row, Pike & Rose and Santana Row,
partially offset by
$42.9 million in proceeds from the sale of real estate in 2013.

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Table of Contents

Net cash provided by financing activities increased $51.4 million to $65.6 million during the nine months ended September 30, 2013 from $14.2 million during the nine months ended September 30, 2012. The increase was primarily attributable to:
$40.0 million increase due to the $135.0 million redemption of our 5.4% senior notes in June 2013 as compared to the $175.0 million retirement of our 6.00% senior notes in July 2012,
$24.5 million increase due to $269.3 million in net proceeds from the issuance of our 2.75% senior notes in May 2013 as compared to $244.8 million in net proceeds from the issuance of our 3.00% senior notes in July 2012, and
$24.4 million increase in net proceeds from the issuance of common shares due primarily to the sale of 1.1 million shares under our ATM equity program at a weighted average price of $110.00 during the nine months ended September 30, 2013 compared to 0.9 million shares at a weighted average price of $103.54 during the nine months ended September 30, 2012,
partially offset by

$21.1 million increase in repayment of mortgages, capital leases and notes payable due to the payoff of two mortgages totaling $28.2 million in 2013 compared to one mortgage for $6.9 million in 2012,
$10.7 million increase in dividends paid to shareholders due to an increase in the dividend rate and increased number of shares outstanding, and
$5.4 million issuance of notes payable in June 2012.
Off-Balance Sheet Arrangements
We have a joint venture arrangement (the “Partnership”) with affiliates of a discretionary fund created and advised by ING Clarion Partners (“Clarion”). We own 30% of the equity in the Partnership and Clarion owns 70%. We hold a general partnership interest, however, Clarion also holds a general partnership interest and has substantive participating rights. We cannot make significant decisions without Clarion’s approval. Accordingly, we account for our interest in the Partnership using the equity method. As of September 30, 2013, the Partnership owned seven retail real estate properties. We are the manager of the Partnership and its properties, earning fees for acquisitions, management, leasing and financing. We also have the opportunity to receive performance-based earnings through our Partnership interest. The Partnership is subject to a buy-sell provision which is customary in real estate joint venture agreements and the industry. Either partner may initiate this provision at any time, which could result in either the sale of our interest or the use of available cash or borrowings to acquire Clarion’s interest. Accounting policies for the Partnership are similar to accounting policies followed by the Trust. At September 30, 2013, our investment in the Partnership was $33.0 million and the Partnership had approximately $57.0 million of mortgages payable outstanding.

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Table of Contents


Debt Financing Arrangements
The following is a summary of our total debt outstanding as of September 30, 2013:

Description of Debt
Original
Debt
Issued
 
Principal Balance as of September 30, 2013
 
Stated Interest Rate as of September 30, 2013
 
Maturity Date
 
(Dollars in thousands)
 
 
 
 
Mortgages payable (1)
 
 
 
 
 
 
 
Secured fixed rate
 
 
 
 
 
 
 
Idylwood Plaza
16,910

 
15,756

 
7.50
%
 
June 5, 2014
Leesburg Plaza
29,423

 
27,416

 
7.50
%
 
June 5, 2014
Loehmann’s Plaza
38,047

 
35,452

 
7.50
%
 
June 5, 2014
Pentagon Row
54,619

 
50,893

 
7.50
%
 
June 5, 2014
Melville Mall (2)
Acquired

 
20,917

 
5.25
%
 
September 1, 2014
THE AVENUE at White Marsh
Acquired

 
54,452

 
5.46
%
 
January 1, 2015
Barracks Road
44,300

 
37,327

 
7.95
%
 
November 1, 2015
Hauppauge
16,700

 
14,071

 
7.95
%
 
November 1, 2015
Lawrence Park
31,400

 
26,458

 
7.95
%
 
November 1, 2015
Wildwood
27,600

 
23,256

 
7.95
%
 
November 1, 2015
Wynnewood
32,000

 
26,963

 
7.95
%
 
November 1, 2015
Brick Plaza
33,000

 
27,454

 
7.42
%
 
November 1, 2015
East Bay Bridge
Acquired

 
62,228

 
5.13
%
 
March 1, 2016
Plaza El Segundo
Acquired

 
175,000

 
6.33
%
 
August 5, 2017
Rollingwood Apartments
24,050

 
22,616

 
5.54
%
 
May 1, 2019
29th Place (Shoppers’ World)
Acquired

 
5,162

 
5.91
%
 
January 31, 2021
Montrose Crossing
80,000

 
77,700

 
4.20
%
 
January 10, 2022
Chelsea
Acquired

 
7,316

 
5.36
%
 
January 15, 2031
Subtotal
 
 
710,437

 
 
 
 
Net unamortized premium
 
 
10,748

 
 
 
 
Total mortgages payable
 
 
721,185

 
 
 
 
Notes payable
 
 
 
 
 
 
 
Unsecured fixed rate
 
 
 
 
 
 
 
Term loan (3)
275,000

 
275,000

 
LIBOR + 1.30%

 
November 21, 2018
Various (4)
16,005

 
15,428

 
5.37
%
 
Various through 2028
Unsecured variable rate
 
 
 
 
 
 
 
Escondido (municipal bonds) (5)
9,400

 
9,400

 
0.07
%
 
October 1, 2016
Revolving credit facility (6)
600,000

 

 
LIBOR + 0.90%

 
April 21, 2017
Total notes payable
 
 
299,828

 
 
 
 
Senior notes and debentures
 
 
 
 
 
 
 
Unsecured fixed rate
 
 
 
 
 
 
 
5.95% notes
150,000

 
150,000

 
5.95
%
 
August 15, 2014
5.65% notes
125,000

 
125,000

 
5.65
%
 
June 1, 2016
6.20% notes
200,000

 
200,000

 
6.20
%
 
January 15, 2017
5.90% notes
150,000

 
150,000

 
5.90
%
 
April 1, 2020
3.00% notes
250,000

 
250,000

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

 
275,000

 
2.75
%
 
June 1, 2023
7.48% debentures
50,000

 
29,200

 
7.48
%
 
August 15, 2026
6.82% medium term notes
40,000

 
40,000

 
6.82
%
 
August 1, 2027
Subtotal
 
 
1,219,200

 
 
 
 
Net unamortized discount
 
 
(5,692
)
 
 
 
 
Total senior notes and debentures
 
 
1,213,508

 
 
 
 
Capital lease obligations