- The Washington Times - Tuesday, June 12, 2007

Federal Realty Investment Trust, is making moves in the Mid-Atlantic market with the purchase of two regional shopping centers since March.

But the Rockville-based real estate investment trust is still feeling the effects of a 2002 fire that destroyed a portion of its Santana Row development in San Jose, Calif.

The company has 19.6 million square feet of real estate nationwide and controls more than 100 properties in the Northeast, Mid-Atlantic and California.

“Fundamentally, this is one of the best [real estate investment trusts] in the industry,” said Philip Martin, an analyst at Cantor Fitzgerald LP, a financial services firm in New York.

“Historically, Federal has been able to outline a road map for growth and operating performance and their management team has shown that they can deliver it,” Mr. Martin continued.

However,Federal Realty’s history of development in California still bears the mark of an accidental fire that destroyed portions of its Santana Row development.

In August 2002, a fire broke out during the construction of the company’s 40-acre development for mixed use.

The 11-alarm fire consumed large portions of property and spread to nearby homes.

In a recent Securities and Exchange Commission filing, Federal Realty said a court found the company liable for damages caused to a neighboring property as a result of the fire. The filing said that if the suit is not overturned, the company may have to pay the damages and its future profits could be affected.

But Matt Ostrower, an analyst at Morgan Stanley, a New York financial services firm said he is not concerned about Federal Realty’s history catching up with them.

“Ever since the Santana difficulties, there is nothing you can complain about. Operationally, they have not skipped a beat.”

He is not alone. Richard Moore, an analyst at RBC Capital Markets, an international investment bank said, “Federal Realty has the highest-quality shopping center portfolio in the industry. ” said Mr. Moore.

Federal Realty has been steadily building its Mid-Atlantic portfolio, which already includes D.C. area retail developments such as Bethesda Row, Rockville Town Square and Pentagon Row in Arlington.

In the past year and a half, the company has spent $580 million on new assets including its March purchase of the White Marsh property in Baltimore for $190 million.

Last week, the company bought Shoppers World, a 166,200-square-foot shopping center in Charlottesville.

“We think of D.C. and Baltimore as key markets,” said Barry Carty, Federal Realty’s director of acquisitions.

“We have over 6 million square feet of development in the region.” The Charlottesville acquisition is the company’s fourth major purchase this year.

The company’s stock closed at $84.20 per share yesterday, down $1.14 from Friday’s closing price.

The company’s Funds from operations for the first quarter ended March 31 rose 14 percent to $49.6 million (88 cents) from $43.4 million (81 cents) a year ago.

Net income for the same period fell 25 percent to $23.1 million (41 cents per diluted share) from $31 million (37 cents) the previous year.



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