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;



                                       16

--------------------------------------------------------------------------------

Table of Contents

• 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;

• 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 September 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 24.1 million square feet. In
total, the real estate projects were 91.5% leased and 90.0% occupied at
September 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 September 30, 2020, we have re-opened most of
    our offices with limited capacity following federal, state and local
    guidelines for phased re-openings, however, much of our workforce continues
    to work remotely.

• During May 2020, we entered into multiple financing transactions to both


    strengthen our financial position and maximize our liquidity. In total, we
    raised $1.1 billion via a $400.0 million term loan and the issuance of $700.0
    million of senior unsecured notes. We also amended how certain covenants are
    calculated in our revolving credit facility to provide us more operating
    flexibility. As of September 30, 2020, there is no outstanding balance on our
    $1.0 billion revolving credit facility and we have cash and cash equivalents
    of $863.3 million. Subsequent to quarter end, we raised an additional $400.0
    million through the issuance of senior unsecured notes.

• Construction activity continues at all of our projects, including Assembly


    Row and Santana West, where activities were paused as a result of
    government restrictions for a portion of the year. Overall, we are
    experiencing a slower pace of construction as well as elevated costs as we
    observe COVID-19 safety protocols at all sites, and a slower lease-up pace.

• 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 .



                                       17

--------------------------------------------------------------------------------

Table of Contents

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. See further discussion of the impact of COVID-19 on our business throughout Item 2.



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
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.
Critical Accounting Policies
See "Revenue Recognition and Accounts Receivable" in Note 2 to the consolidated
financial statements for further discussion related to the FASB's issuance of
interpretive guidance relating to the accounting for lease concessions provided
as a result of the COVID-19 pandemic.
There have been no significant changes to the critical accounting policies
disclosed in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our 2019 Annual Report on   Form 10-K  .
2020 Property Acquisitions, Disposition, and Impairment
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.
On September 1, 2020, the $60.6 million non-recourse mortgage loan on The Shops
at Sunset Place matured. The mortgage was not repaid and thus the lender
declared the loan in default. We are an approximately 90% owner in the
partnership that owns the property, and we consolidate the partnership as we are
the primary beneficiary of this VIE. While we continue to evaluate our long-term
plans for the property, taking into account current market conditions and
prospective development and redevelopment returns, as well as the impact of
COVID-19 on the revenue prospects for the property, we currently believe it is
unlikely we will move forward with the planned redevelopment or repay the
mortgage loan at the current balance, and thus, do not expect we will be
long-term holders of this asset. While we continue to engage in negotiations
with the lender, we expect our exit from the property would either be achieved
through a short term extension of the loan and an orderly sales process
commencing in 2021, or potentially, the lender taking control of the asset.
Given these current expectations, we have recorded an impairment charge of $57.2
million during the three and nine months ended September 30, 2020.
The fair value estimate used to determine the impairment charge was determined
by market comparable data and discounted cash flow analyses. The cash flows
utilized in such analyses are comprised of unobservable inputs which include
forecasted rental revenue and expenses based upon market conditions and future
expectations. The capitalization rates and discount rates utilized in such
analyses are based upon unobservable rates that we believe to be within a
reasonable range of current market rates for the property. Based on these
inputs, we have determined that the $57 million estimated valuation of the
property is classified within Level 3 of the fair value hierarchy.

                                       18

--------------------------------------------------------------------------------

Table of Contents



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.
On October 13, 2020, we issued $400.0 million of fixed rate senior unsecured
notes that mature on February 15, 2026 and bear interest at 1.25%. The notes
were offered at 99.339% of the principal amount with a yield to maturity of
1.379%. The net proceeds of these notes, or "green bonds," will be allocated to
the financing and refinancing of recently completed and future eligible green
projects, which includes (i) investments in acquisitions of buildings; (ii)
building developments or redevelopments; (iii) renovations in existing
buildings; and (iv) tenant improvement projects, in each case that we have
received, or expected to receive, in the three years prior to the issuance of
the notes or during the term of the notes, a LEED silver, Gold, or Platinum
certification (or environmentally equivalent successor standards). Net proceeds
allocated to previously incurred costs associated with eligible green projects
will be available for repayment of indebtedness.
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 September 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
$311 million and $7 million, respectively, for the nine months ended
September 30, 2020, and $266 million and $6 million, respectively, for the nine
months ended September 30, 2019. We capitalized external and internal costs
related to other property improvements of $44 million and $2 million,
respectively, for the nine months ended September 30, 2020, and $49 million and
$2 million for the nine months ended September 30, 2019. We capitalized external
and internal costs related to leasing activities of $8 million and $2 million,
respectively, for the nine months ended September 30, 2020, and $17 million and
$2 million, respectively, for the nine months ended September 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 $7 million, $2 million, and $2 million, respectively,
for the nine months ended September 30, 2020 and $6 million, $2 million, and $2
million, respectively for the nine months ended September 30, 2019. Total
capitalized costs were $374 million and $342 million for the nine months ended
September 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:

                                       19

--------------------------------------------------------------------------------

Table of Contents

• 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 10, 2020, for discussion of 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, as well as the general concern over the spread of COVID-19, 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 October 30, 2020, approximately 97% of our retail tenants were open, compared to 92% at July 31, 2020. These economic hardships have adversely impacted our business, and had a negative effect on our financial results during 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. Subsequently, in the third quarter of 2020, a portion of our tenants have resumed paying their rent and/or other charges as their businesses were able to reopen. Our percentage of contractual rent actually collected has increased each month since April, including some tenants paying past due amounts. As of September 30, 2020, we have entered into agreements with approximately 29% 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. While increasing monthly cash collection rates is a positive trend driven by government mandated restrictions gradually being lifted, we expect 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 have continued construction on a 212,000 square foot
       office building (which includes 4,000 square feet of ground floor retail
       space), and includes over 600 additional parking spaces. The building is
       expected to cost between $128 million and $135 million. At September 30,
       2020, approximately 61,000 square feet of office space has been delivered,
       of which approximately 45,000 square feet is our new corporate
       headquarters.


•      Throughout the portfolio, we currently have redevelopment projects
       underway with a projected total cost of approximately $312 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. 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 September 30, 2020, the leasable square feet in our properties was 91.5% leased and 90.0% 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.



                                       20

--------------------------------------------------------------------------------

Table of Contents



Lease Rollovers
For the third quarter of 2020, we signed leases for a total of 481,000 square
feet of retail space including 472,000 square feet of comparable space leases
(leases for which there was a prior tenant) at an average rental decrease of 1%
on a cash basis. New leases for comparable spaces were signed for 165,000 square
feet at an average rental decrease of 2% on a cash basis. Renewals for
comparable spaces were signed for 307,000 square feet at an average rental
decrease of 1% on a cash basis. Tenant improvements and incentives for
comparable spaces were $34.50 per square foot, of which, $93.67 per square foot
was for new leases and $2.76 per square foot was for renewals for the three
months ended September 30, 2020.
For the nine months ended September 30, 2020, we signed leases for a total of
1,287,000 square feet of retail space including 1,216,000 square feet of
comparable space leases (leases for which there was a prior tenant) at an
average rental increase of 3% on a cash basis. New leases for comparable spaces
were signed for 439,000 square feet at an average rental increase of 8% on a
cash basis. Renewals for comparable spaces were signed for 777,000 square feet
at an average rental increase of 1% on a cash basis. Tenant improvements and
incentives for comparable spaces were $32.49 per square foot, of which, $85.06
per square foot was for new leases and $2.82 per square foot was for renewals
for the nine months ended September 30, 2020.
Historically, we have executed comparable space leases for 1.3 to 1.9 million
square feet of retail space each year. While we are on pace for a similar volume
of deals in 2020, we expect some rental rates to be negatively impacted by the
COVID-19 pandemic, which we started experiencing in the third quarter 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.
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 nine months ended September 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 nine months ended September 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 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.

                                       21

--------------------------------------------------------------------------------


  Table of Contents

     RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
                                                                               Change
                                            2020           2019         Dollars          %
                                                     (Dollar amounts in thousands)
Rental income                           $  207,410     $  233,212     $  (25,802 )     (11.1 )%
Mortgage interest income                       787            735             52         7.1  %
Total property revenue                     208,197        233,947        (25,750 )     (11.0 )%
Rental expenses                             41,832         54,484        (12,652 )     (23.2 )%
Real estate taxes                           30,520         29,030          1,490         5.1  %
Total property expenses                     72,352         83,514        (11,162 )     (13.4 )%
Property operating income (1)              135,845        150,433        (14,588 )      (9.7 )%

General and administrative expense (9,308 ) (11,060 ) 1,752 (15.8 )% Depreciation and amortization

              (65,631 )      (59,648 )       (5,983 )      10.0  %
Impairment charge                          (57,218 )            -        (57,218 )     100.0  %
Gain on sale of real estate, net of tax          -         14,293        (14,293 )    (100.0 )%
Operating income                             3,688         94,018        (90,330 )     (96.1 )%
Other interest income                          538            389            149        38.3  %
Interest expense                           (36,228 )      (27,052 )       (9,176 )      33.9  %
Loss from partnerships                      (1,621 )         (249 )       (1,372 )     551.0  %
Total other, net                           (37,311 )      (26,912 )      (10,399 )      38.6  %
Net (loss) income                          (33,623 )       67,106       (100,729 )    (150.1 )%
Net loss (income) attributable to
noncontrolling interests                     5,334         (1,641 )        6,975      (425.0 )%
Net (loss) income attributable to the
Trust                                   $  (28,289 )   $   65,465     $  (93,754 )    (143.2 )%


(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 $25.8 million, or 11.0%, to $208.2 million in
the three months ended September 30, 2020 compared to $233.9 million in the
three months ended September 30, 2019. The percentage occupied at our shopping
centers was 90.0% at September 30, 2020 compared to 92.8% at September 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 $25.8 million, or 11.1%, to $207.4 million in the three
months ended September 30, 2020 compared to $233.2 million in the three months
ended September 30, 2019 due primarily to the following:
•          higher collectibility related adjustments across all properties of
           $27.9 million primarily the result of COVID-19 impacts. This includes
           the write-off of $1.7 million of straight-line rent receivables
           primarily related to tenants who were changed to a cash basis of
           revenue recognition during the quarter ended September 30, 2020,


•          a decrease of $5.8 million from comparable properties primarily
           related to lower average occupancy of approximately $5.4 million,
           lower recoveries of $2.2 million primarily the result of lower
           utilities and repairs and maintenance costs, $2.0 million of lower
           parking income and percentage rent, primarily due to the impacts from
           COVID-19 related closures, partially offset by $3.2 million of higher
           lease termination fees and higher rental rates of approximately $1.1
           million, and

• a decrease of $2.2 million from property sales,

partially offset by,



                                       22

--------------------------------------------------------------------------------

Table of Contents



•          an increase of $5.3 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 $4.2 million from non-comparable properties primarily
           driven by the opening of our new office building at Santana Row in
           early 2020, partially offset by $0.8 million related to lower parking
           income primarily due to the impacts from COVID-19 related closures.


Property Expenses
Total property expenses decreased $11.2 million, or 13.4%, to $72.4 million in
the three months ended September 30, 2020 compared to $83.5 million in the three
months ended September 30, 2019. Changes in the components of property expenses
are discussed below.
Rental Expenses
Rental expenses decreased $12.7 million, or 23.2%, to $41.8 million in the three
months ended September 30, 2020 compared to $54.5 million in the three months
ended September 30, 2019. This decrease is primarily due to the following:
•          an $11.9 million charge in 2019 related to the buyout of a lease at
           Assembly Square Marketplace,


•          a decrease of $2.2 million from comparable properties due primarily to
           lower utilities and repairs and maintenance costs 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 decreased to 20.2% in
the three months ended September 30, 2020 from 23.4% in the three months ended
September 30, 2019.
Real Estate Taxes
Real estate tax expense increased $1.5 million, or 5.1%, to $30.5 million in the
three months ended September 30, 2020 compared to $29.0 million in the three
months ended September 30, 2019. This increase is primarily due to $0.9 million
from the acquisitions of Hoboken during the second half of 2019 and early 2020
and Georgetowne Shopping Center in November 2019, and $0.7 million from
non-comparable properties due primarily to the opening of our new office
building at Santana Row in early 2020.
Property Operating Income
Property operating income decreased $14.6 million, or 9.7%, to $135.8 million in
the three months ended September 30, 2020 compared to $150.4 million in the
three months ended September 30, 2019. This decrease is primarily due to the
impact of COVID-19, which resulted in higher collectibility related adjustments,
lower parking income, and lower percentage rent; and property sales, partially
offset by the prior year charge related to the buyout of a lease at Assembly
Square Marketplace, 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 $1.8 million, or 15.8%, to $9.3
million in the three months ended September 30, 2020 from $11.1 million in the
three months ended September 30, 2019. This decrease is due primarily to lower
personnel related costs.
Depreciation and Amortization
Depreciation and amortization expense increased $6.0 million, or 10.0%, to $65.6
million in the three months ended September 30, 2020 from $59.6 million in the
three months ended September 30, 2019. This increase is due primarily to the
write off of lease related assets for vacating tenants, acquisitions of Hoboken
during the second half of 2019 and early 2020 and Georgetowne Shopping Center in
November 2019, and the opening of our new office building at Santana Row in
early 2020, partially offset by property sales.
Impairment Charge
The $57.2 million impairment charge for the three months ended September 30,
2020 relates to The Shops at Sunset Place. See Note 2 to the consolidated
financial statements for further discussion.

                                       23

--------------------------------------------------------------------------------

Table of Contents



Gain on Sale of Real Estate, Net of Tax
The $14.3 million gain on sale of real estate, net of tax for the three months
ended September 30, 2019 is due primarily to the sale of one property.
Operating Income
Operating income decreased $90.3 million, or 96.1%, to $3.7 million in the three
months ended September 30, 2020 compared to $94.0 million in the three months
ended September 30, 2019. This decrease is primarily due to the impairment
charge related to The Shops at Sunset Place, the impacts of COVID-19, which
resulted in higher collectibility related adjustments, lower parking income, and
lower percentage rent; a lower net gain on the sale of real estate compared to
prior year; and the write off of lease related assets for vacating tenants;
partially offset by the prior year charge related to the buyout of a lease at
Assembly Square Marketplace; property acquisitions, the opening of our new
office building at Santana Row in early 2020; and lower personnel related costs.
Other
Interest Expense
Interest expense increased $9.2 million, or 33.9%, to $36.2 million in the three
months ended September 30, 2020 compared to $27.1 million in the three months
ended September 30, 2019. This increase is due primarily to the following:
•          an increase of $6.2 million from higher borrowings in response to the
           COVID-19 pandemic (see further discussion in "2020 Debt and Equity
           Transactions" in Item 2 of the Quarterly Report), and


•          an increase of $3.8 million due to higher weighted average borrowings
           primarily from the additional $100 million issuance of our 3.20% notes
           in August 2019, and $106.9 million of mortgage loans associated with
           our Hoboken acquisitions,


partially offset by,
•          an increase of $0.6 million in capitalized interest, primarily
           attributable to the development of Phase III of Assembly Row, and


•          a decrease of $0.3 million due to a lower overall weighted average
           borrowing rate.


Gross interest costs were $42.1 million and $32.3 million in the three months
ended September 30, 2020 and 2019, respectively. Capitalized interest was $5.8
million and $5.3 million for the three months ended September 30, 2020 and 2019,
respectively.
Loss from partnerships
Loss from partnerships increased $1.4 million to $1.6 million in the three
months ended September 30, 2020 compared to $0.2 million in the three months
ended September 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 related reductions in travel.
Net loss (income) attributable to noncontrolling interests
Net loss (income) attributable to noncontrolling interests decreased $7.0
million to a loss of $5.3 million in the three months ended September 30, 2020
compared to income of $1.6 million in the three months ended September 30, 2019.
The decrease is primarily attributable to The Shops at Sunset Place impairment
charge.



                                       24

--------------------------------------------------------------------------------


  Table of Contents


     RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
                                                                               Change
                                            2020           2019         Dollars          %
                                                     (Dollar amounts in thousands)
Rental income                           $  613,687     $  694,435     $  (80,748 )     (11.6 )%
Mortgage interest income                     2,294          2,204             90         4.1  %
Total property revenue                     615,981        696,639        (80,658 )     (11.6 )%
Rental expenses                            122,561        140,182        (17,621 )     (12.6 )%
Real estate taxes                           90,183         81,883          8,300        10.1  %
Total property expenses                    212,744        222,065         (9,321 )      (4.2 )%
Property operating income (1)              403,237        474,574        (71,337 )     (15.0 )%

General and administrative expense (29,373 ) (32,047 ) 2,674 (8.3 )% Depreciation and amortization

             (190,603 )     (178,327 )      (12,276 )       6.9  %
Impairment charge                          (57,218 )            -        (57,218 )     100.0  %
Gain on sale of real estate, net of tax     11,682         30,490        (18,808 )     (61.7 )%
Operating income                           137,725        294,690       (156,965 )     (53.3 )%
Other interest income                        1,355            755            600        79.5  %
Interest expense                           (98,746 )      (82,567 )      (16,179 )      19.6  %
Loss from partnerships                      (6,657 )       (1,302 )       (5,355 )     411.3  %
Total other, net                          (104,048 )      (83,114 )      (20,934 )      25.2  %
Net income                                  33,677        211,576       (177,899 )     (84.1 )%
Net loss (income) attributable to
noncontrolling interests                     3,304         (5,065 )        8,369      (165.2 )%

Net income attributable to the Trust $ 36,981 $ 206,511 $ (169,530 ) (82.1 )%

(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 $80.7 million, or 11.6%, to $616.0 million in
the nine months ended September 30, 2020 compared to $696.6 million in the nine
months ended September 30, 2019. The percentage occupied at our shopping centers
was 90.0% at September 30, 2020 compared to 92.8% at September 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 $80.7 million, or 11.6%, to $613.7 million in the nine
months ended September 30, 2020 compared to $694.4 million in the nine months
ended September 30, 2019 due primarily to the following:
•          higher collectibility related adjustments across all properties of
           $84.4 million primarily the result of COVID-19 impacts. This includes
           the write-off of $11.2 million of straight-line rent receivables
           primarily related to tenants who were changed to a cash basis of
           revenue recognition during the nine months ended September 30, 2020,


•          a decrease of $13.8 million from comparable properties due primarily
           to lower average occupancy of approximately $11.8 million, lower
           parking income and percentage rent of $4.4 million primarily due to
           the impacts from COVID-19 related closures, lower recoveries of $3.6
           million primarily the result of lower snow removal expense and
           utilities, and lower legal fee income of $0.6 million, partially
           offset by higher rental rates of approximately $9.2 million, and

• a decrease of $9.1 million from property sales,

partially offset by,



                                       25

--------------------------------------------------------------------------------

Table of Contents



•          an increase of $15.7 million from acquisitions of Hoboken during the
           second half of 2019 and early 2020, Georgetowne Shopping Center in
           November 2019, and


•          an increase of $10.0 million from non comparable properties driven by
           the opening of our new office building at Santana Row in early 2020,
           partially offset by $2.1 million related to lower parking income
           primarily due to the impacts from COVID-19 related closures.


Property Expenses
Total property expenses decreased $9.3 million, or 4.2%, to $212.7 million in
the nine months ended September 30, 2020 compared to $222.1 million in the nine
months ended September 30, 2019. Changes in the components of property expenses
are discussed below.
Rental Expenses
Rental expenses decreased $17.6 million, or 12.6%, to $122.6 million in the nine
months ended September 30, 2020 compared to $140.2 million in the nine months
ended September 30, 2019 due primarily to the following:
•          an $11.9 million charge in 2019 related to the buyout of a lease at
           Assembly Square Marketplace,


•          a decrease of $8.7 million from comparable properties due to lower
           snow removal expense and lower utilities, repairs and maintenance, and
           management fees primarily driven by the impact of COVID-19, and

• a decrease of $1.0 million from our property sales,




partially offset by,
•          a increase of $2.3 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 decreased to 20.0% in
the nine months ended September 30, 2020 from 20.2% in the nine months ended
September 30, 2019.
Real Estate Taxes
Real estate tax expense increased $8.3 million, or 10.1%, to $90.2 million in
the nine months ended September 30, 2020 compared to $81.9 million in the nine
months ended September 30, 2019. This increase is primarily due to the
following:
•          an increase of $4.9 million from comparable properties primarily due
           to higher current year assessments, and tax refunds recorded in 2019
           from a multi-year appeal and reassessment at three of our properties,


•          an increase of $2.5 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 $1.6 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 $0.7 million from our property sales.


Property Operating Income
Property operating income decreased $71.3 million, or 15.0%, to $403.2 million
in the nine months ended September 30, 2020 compared to $474.6 million in the
nine months ended September 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; as well as higher real estate
assessments and prior year tax refunds and the impact of property sales,
partially offset by the prior year charge related to the buyout of a lease at
Assembly Square Marketplace, 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 $2.7 million, or 8.3%, to $29.4
million in the nine months ended September 30, 2020 from $32.0 million in the
nine months ended September 30, 2019. This decrease is due primarily to lower
personnel related costs and COVID-19 impacts including office closures and
cancellations of all non-essential business travel and company events.

                                       26

--------------------------------------------------------------------------------

Table of Contents



Depreciation and Amortization
Depreciation and amortization expense increased $12.3 million, or 6.9%, to
$190.6 million in the nine months ended September 30, 2020 from $178.3 million
in the nine months ended September 30, 2019. This increase is due primarily to
property acquisitions, the opening of our new office building at Santana Row in
early 2020, and the write off of lease related assets for vacating tenants,
partially offset by property sales.
Impairment Charge
The $57.2 million impairment charge for the nine months ended September 30, 2020
relates to The Shops at Sunset Place. See Note 2 to the consolidated financial
statements for further discussion.
Gain on Sale of Real Estate, Net of Tax
The $11.7 million gain on sale of real estate, net of tax for the nine months
ended September 30, 2020 is due to the sale of a building in Pasadena,
California.
The $30.5 million gain on sale of real estate, net of tax for the nine months
ended September 30, 2019 is due to the sale of two properties and one land
parcel.
Operating Income
Operating income decreased $157.0 million, or 53.3%, to $137.7 million in the
nine months ended September 30, 2020 compared to $294.7 million in the nine
months ended September 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; the impairment charge related to The
Shops at Sunset Place; a lower net gain on the sale of real estate; higher real
estate assessments and prior year tax refunds; and the impact of property sales,
partially offset by the prior charge related to the buyout of a lease at
Assembly Square Marketplace; property acquisitions; the opening of our new
office building at Santana Row in early 2020; and lower personnel related costs,
largely due to the impact of COVID-19.
Other
Interest Expense
Interest expense increased $16.2 million, or 19.6%, to $98.7 million in the nine
months ended September 30, 2020 compared to $82.6 million in the nine months
ended September 30, 2019. This increase is due primarily to the following:
•          an increase of $13.7 million from higher borrowings in response to the
           COVID-19 pandemic (see further discussion in "2020 Debt and Equity
           Transactions" in Item 2 of the Quarterly Report), and


•          an increase of $8.8 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,
•          a decrease of $3.6 million due to a lower overall weighted average
           borrowing rate, and


•          an increase of $2.8 million in capitalized interest, primarily
           attributable to the development of Phase III of Assembly Row and Pike
           & Rose.


Gross interest costs were $116.0 million and $97.1 million in the nine months
ended September 30, 2020 and 2019, respectively. Capitalized interest was $17.3
million and $14.5 million for the nine months ended September 30, 2020 and 2019,
respectively.
Loss from partnerships
Loss from partnerships increased $5.4 million to $6.7 million in the nine months
ended September 30, 2020 compared to $1.3 million in the nine months ended
September 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 related reductions in travel.
Net loss (income) attributable to noncontrolling interests
Net loss (income) attributable to noncontrolling interests decreased $8.4
million to a loss of $3.3 million in the nine months ended September 30, 2020
compared to income of $5.1 million in the nine months ended September 30, 2019.
The decrease is primarily attributable to The Shops at Sunset Place impairment
charge.


                                       27

--------------------------------------------------------------------------------

Table of Contents

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 September 30, 2020, there is no outstanding balance on our $1.0 billion unsecured revolving credit facility and we have cash and cash equivalents of $863.3 million. Our liquidity was further enhanced on October 13, 2020, when we issued $400.0 million of fixed rate senior unsecured notes that mature on February 15, 2026 and bear interest at 1.25%.



For the nine months ended September 30, 2020, our weighted average borrowing
rate on the revolving credit facility, before amortization of debt fees, was
1.5%. As of September 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 $269.7 million of debt maturing, excluding our
$400.0 million term loan, which may be extended for an additional twelve months
at our option, and the $60.6 million mortgage loan at The Shops at Sunset Place,
which is currently in default (see Note 4 to the consolidated financial
statements for additional information).
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 COVID-19, as well as general timing of our
redevelopment and development activities. During the second quarter 2020, we
were able to restart all construction related activities, and consequently have
seen higher levels of capital investments during the third quarter after some
construction related activities were halted for a portion of the first and
second quarter, as a result of COVID-19 related closures. We expect this
increase of capital to continue for 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.

While the COVID-19 pandemic has negatively impacted our business during the quarter ended September 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.



                                       28

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses