FORM 10-Q |
ý | QUARTERLY REPORT PURSUANT TO THE SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Maryland | 52-0782497 | |
(State of Organization) | (IRS Employer Identification No.) | |
1626 East Jefferson Street, Rockville, Maryland | 20852 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large Accelerated Filer | ý | Accelerated filer | ¨ |
Non-Accelerated Filer | o (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Emerging growth company | ¨ | ||
If an emerging growth company, indicate by checkmark if the registrant has elected not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ |
PART I. FINANCIAL INFORMATION | |||
Item 1. | Financial Statements | ||
Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017 | |||
Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended June 30, 2018 and 2017 | |||
Consolidated Statement of Shareholders' Equity (unaudited) for the six months ended June 30, 2018 | |||
Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2018 and 2017 | |||
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 |
June 30, | December 31, | ||||||
2018 | 2017 | ||||||
(In thousands, except share and per share data) | |||||||
(Unaudited) | |||||||
ASSETS | |||||||
Real estate, at cost | |||||||
Operating (including $1,660,403 and $1,639,486 of consolidated variable interest entities, respectively) | $ | 7,181,679 | $ | 6,950,188 | |||
Construction-in-progress (including $47,251 and $43,393 of consolidated variable interest entities, respectively) | 535,658 | 684,873 | |||||
Assets held for sale | 27,773 | — | |||||
7,745,110 | 7,635,061 | ||||||
Less accumulated depreciation and amortization (including $268,723 and $247,410 of consolidated variable interest entities, respectively) | (1,970,173 | ) | (1,876,544 | ) | |||
Net real estate | 5,774,937 | 5,758,517 | |||||
Cash and cash equivalents | 56,116 | 15,188 | |||||
Accounts and notes receivable, net | 149,861 | 209,877 | |||||
Mortgage notes receivable, net | 30,429 | 30,429 | |||||
Investment in real estate partnerships | 22,613 | 23,941 | |||||
Prepaid expenses and other assets | 268,747 | 237,803 | |||||
TOTAL ASSETS | $ | 6,302,703 | $ | 6,275,755 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Liabilities | |||||||
Mortgages payable, net (including $447,246 and $460,372 of consolidated variable interest entities, respectively) | $ | 477,706 | $ | 491,505 | |||
Capital lease obligations | 71,538 | 71,556 | |||||
Notes payable, net | 368,389 | 320,265 | |||||
Senior notes and debentures, net | 2,402,851 | 2,401,440 | |||||
Accounts payable and accrued expenses | 178,665 | 196,332 | |||||
Dividends payable | 75,757 | 75,931 | |||||
Security deposits payable | 17,187 | 16,667 | |||||
Other liabilities and deferred credits | 181,601 | 169,388 | |||||
Total liabilities | 3,773,694 | 3,743,084 | |||||
Commitments and contingencies (Note 6) | |||||||
Redeemable noncontrolling interests | 141,417 | 141,157 | |||||
Shareholders’ equity | |||||||
Preferred shares, authorized 15,000,000 shares, $.01 par: | |||||||
5.0% Series C Cumulative Redeemable Preferred Shares, (stated at liquidation preference $25,000 per share), 6,000 shares issued and outstanding | 150,000 | 150,000 | |||||
5.417% Series 1 Cumulative Convertible Preferred Shares, (stated at liquidation preference $25 per share), 399,896 shares issued and outstanding | 9,997 | 9,997 | |||||
Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized, 73,434,943 and 73,090,877 shares issued and outstanding, respectively | 737 | 733 | |||||
Additional paid-in capital | 2,884,771 | 2,855,321 | |||||
Accumulated dividends in excess of net income | (780,973 | ) | (749,367 | ) | |||
Accumulated other comprehensive income | 412 | 22 | |||||
Total shareholders’ equity of the Trust | 2,264,944 | 2,266,706 | |||||
Noncontrolling interests | 122,648 | 124,808 | |||||
Total shareholders’ equity | 2,387,592 | 2,391,514 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 6,302,703 | $ | 6,275,755 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
REVENUE | |||||||||||||||
Rental income | $ | 220,476 | $ | 204,246 | $ | 441,057 | $ | 408,693 | |||||||
Other property income | 3,692 | 3,068 | 7,759 | 5,258 | |||||||||||
Mortgage interest income | 734 | 735 | 1,491 | 1,487 | |||||||||||
Total revenue | 224,902 | 208,049 | 450,307 | 415,438 | |||||||||||
EXPENSES | |||||||||||||||
Rental expenses | 39,905 | 37,128 | 84,678 | 78,237 | |||||||||||
Real estate taxes | 28,307 | 26,522 | 56,755 | 51,612 | |||||||||||
General and administrative | 8,413 | 8,643 | 16,342 | 16,910 | |||||||||||
Depreciation and amortization | 58,381 | 52,666 | 116,491 | 104,045 | |||||||||||
Total operating expenses | 135,006 | 124,959 | 274,266 | 250,804 | |||||||||||
OPERATING INCOME | 89,896 | 83,090 | 176,041 | 164,634 | |||||||||||
Other interest income | 159 | 68 | 338 | 174 | |||||||||||
Interest expense | (27,766 | ) | (23,907 | ) | (53,950 | ) | (47,665 | ) | |||||||
Loss from real estate partnerships | (728 | ) | (114 | ) | (1,253 | ) | (114 | ) | |||||||
INCOME FROM CONTINUING OPERATIONS | 61,561 | 59,137 | 121,176 | 117,029 | |||||||||||
Gain on sale of real estate, net | 3,972 | 18,996 | 7,288 | 19,174 | |||||||||||
NET INCOME | 65,533 | 78,133 | 128,464 | 136,203 | |||||||||||
Net income attributable to noncontrolling interests | (1,938 | ) | (1,842 | ) | (3,622 | ) | (3,722 | ) | |||||||
NET INCOME ATTRIBUTABLE TO THE TRUST | 63,595 | 76,291 | 124,842 | 132,481 | |||||||||||
Dividends on preferred shares | (2,011 | ) | (135 | ) | (4,021 | ) | (271 | ) | |||||||
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS | $ | 61,584 | $ | 76,156 | $ | 120,821 | $ | 132,210 | |||||||
EARNINGS PER COMMON SHARE, BASIC: | |||||||||||||||
Net income available for common shareholders | $ | 0.84 | $ | 1.05 | $ | 1.65 | $ | 1.83 | |||||||
Weighted average number of common shares | 72,990 | 72,001 | 72,948 | 71,928 | |||||||||||
EARNINGS PER COMMON SHARE, DILUTED: | |||||||||||||||
Net income available for common shareholders | $ | 0.84 | $ | 1.05 | $ | 1.65 | $ | 1.83 | |||||||
Weighted average number of common shares | 73,025 | 72,124 | 72,997 | 72,061 | |||||||||||
COMPREHENSIVE INCOME | $ | 65,456 | $ | 78,526 | $ | 128,854 | $ | 137,680 | |||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE TRUST | $ | 63,518 | $ | 76,684 | $ | 125,232 | $ | 133,958 |
Shareholders’ Equity of the Trust | |||||||||||||||||||||||||||||||||
Preferred Shares | Common Shares | Additional Paid-in Capital | Accumulated Dividends in Excess of Net Income | Accumulated Other Comprehensive Income | Noncontrolling Interests | Total Shareholders' Equity | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||
(In thousands, except share data) | |||||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2017 | 405,896 | $ | 159,997 | 73,090,877 | $ | 733 | $ | 2,855,321 | $ | (749,367 | ) | $ | 22 | $ | 124,808 | $ | 2,391,514 | ||||||||||||||||
January 1, 2018 adoption of new accounting standard - See Note 2 | — | — | — | — | — | (6,028 | ) | — | — | (6,028 | ) | ||||||||||||||||||||||
Net income, excluding $1,998 attributable to redeemable noncontrolling interests | — | — | — | — | — | 124,842 | — | 1,624 | 126,466 | ||||||||||||||||||||||||
Other comprehensive income - change in fair value of interest rate swaps | — | — | — | — | — | — | 390 | — | 390 | ||||||||||||||||||||||||
Dividends declared to common shareholders | — | — | — | — | — | (146,399 | ) | — | — | (146,399 | ) | ||||||||||||||||||||||
Dividends declared to preferred shareholders | — | — | — | — | — | (4,021 | ) | — | — | (4,021 | ) | ||||||||||||||||||||||
Distributions declared to noncontrolling interests | — | — | — | — | — | — | — | (2,767 | ) | (2,767 | ) | ||||||||||||||||||||||
Common shares issued, net | — | — | 148,614 | 2 | 18,318 | — | — | — | 18,320 | ||||||||||||||||||||||||
Exercise of stock options | — | — | 93,593 | 1 | 4,040 | — | — | — | 4,041 | ||||||||||||||||||||||||
Shares issued under dividend reinvestment plan | — | — | 9,292 | — | 1,086 | — | — | — | 1,086 | ||||||||||||||||||||||||
Share-based compensation expense, net of forfeitures | — | — | 99,574 | 1 | 7,143 | — | — | — | 7,144 | ||||||||||||||||||||||||
Shares withheld for employee taxes | — | — | (7,007 | ) | — | (777 | ) | — | — | — | (777 | ) | |||||||||||||||||||||
Redemption of OP units | — | — | — | — | (360 | ) | — | — | (4,026 | ) | (4,386 | ) | |||||||||||||||||||||
Contributions from noncontrolling interests | — | — | — | — | — | — | — | 3,009 | 3,009 | ||||||||||||||||||||||||
BALANCE AT JUNE 30, 2018 | 405,896 | $ | 159,997 | 73,434,943 | $ | 737 | $ | 2,884,771 | $ | (780,973 | ) | $ | 412 | $ | 122,648 | $ | 2,387,592 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
(In thousands) | |||||||
OPERATING ACTIVITIES | |||||||
Net income | $ | 128,464 | $ | 136,203 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 116,491 | 104,045 | |||||
Gain on sale of real estate, net | (7,288 | ) | (19,174 | ) | |||
Loss from real estate partnerships | 1,253 | 114 | |||||
Other, net | 2,825 | (1,761 | ) | ||||
Changes in assets and liabilities, net of effects of acquisitions and dispositions: | |||||||
Proceeds from new market tax credit transaction, net of deferred costs | 12,353 | — | |||||
(Increase) decrease in accounts receivable, net | (3,805 | ) | 3,467 | ||||
Decrease in prepaid expenses and other assets | 10,077 | 9,928 | |||||
(Decrease) increase in accounts payable and accrued expenses | (1,286 | ) | 1,065 | ||||
Increase in security deposits and other liabilities | 4,027 | 4,773 | |||||
Net cash provided by operating activities | 263,111 | 238,660 | |||||
INVESTING ACTIVITIES | |||||||
Acquisition of real estate | (1,736 | ) | (165,065 | ) | |||
Capital expenditures - development and redevelopment | (150,119 | ) | (229,198 | ) | |||
Capital expenditures - other | (35,654 | ) | (33,622 | ) | |||
Proceeds from sale of real estate and real estate partnership interests | 121,391 | 46,731 | |||||
Investment in real estate partnerships | (120 | ) | (430 | ) | |||
Distribution from real estate partnership in excess of earnings | 205 | 1,672 | |||||
Leasing costs | (12,339 | ) | (6,273 | ) | |||
Issuance of mortgage and other notes receivable, net | (323 | ) | (514 | ) | |||
Net cash used in investing activities | (78,695 | ) | (386,699 | ) | |||
FINANCING ACTIVITIES | |||||||
Net borrowings under revolving credit facility, net of costs | 48,000 | — | |||||
Issuance of senior notes, net of costs | — | 399,410 | |||||
Repayment of mortgages and capital leases | (13,408 | ) | (53,924 | ) | |||
Issuance of common shares, net of costs | 22,492 | 17,390 | |||||
Dividends paid to common and preferred shareholders | (149,603 | ) | (140,447 | ) | |||
Shares withheld for employee taxes | (777 | ) | (4,077 | ) | |||
Contributions from noncontrolling interests | 1,728 | 13,068 | |||||
Distributions to and redemptions of noncontrolling interests | (9,086 | ) | (10,312 | ) | |||
Net cash (used in) provided by financing activities | (100,654 | ) | 221,108 | ||||
Increase in cash, cash equivalents and restricted cash | 83,762 | 73,069 | |||||
Cash, cash equivalents, and restricted cash at beginning of year | 25,200 | 34,849 | |||||
Cash, cash equivalents, and restricted cash at end of period | $ | 108,962 | $ | 107,918 |
Standard | Description | Date of Adoption | Effect on the financial statements or significant matters | |||
Recently Adopted: | ||||||
Revenue from Contracts with Customers (Topic 606) and related updates: ASU 2014-09, May 2014, Revenue from Contracts with Customers ASU 2015-14, August 2015, Revenue from Contracts with Customers: Deferral of the Effective Date ASU 2016-08, March 2016, Revenue from Contracts with Customers: Principal versus Agent Considerations ASU 2016-10, April 2016, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing ASU 2016-12, May 2016, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients ASU 2016-20, December 2016, Revenue from Contracts with Customers: Technical Corrections and Improvements | In May 2014, the the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 as amended and interpreted by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20, supersedes nearly all existing revenue recognition guidance under GAAP and replaces it with a core revenue recognition principle, that an entity will recognize revenue when it transfers control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and creates a five-step model for revenue recognition in accordance with this principle. ASU 2014-09 also requires new disclosures in both interim and annual reporting periods. The guidance in ASU 2014-09 does not apply to contracts within the scope of ASC 840, Leases. ASU 2016-08 clarifies how to identify the unit of accounting for the principal versus agent evaluation, how to apply the control principle to certain types of arrangements, such as service transactions, and reframed the indicators in the guidance to focus on evidence that an entity is acting as a principal rather than as an agent. ASU 2016-10 clarifies the existing guidance on identifying performance obligations and licensing implementation. ASU 2016-12 adds practical expedients related to the transition for contract modifications and further defines a completed contract, clarifies the objective of the collectability assessment and how revenue is recognized if collectability is not probable, and when non-cash considerations should be measured. ASU 2016-20 corrects or improves guidance in thirteen narrowly focused aspects of the guidance. The standard allows for either "full retrospective" adoption, meaning the standard is applied to all of the periods presented, or "modified retrospective" adoption, meaning the cumulative impact of applying the standard is recognized in accumulated dividends in excess of net income on the date of application. | January 2018 | We implemented the new revenue recognition guidance retrospectively with the cumulative effect recognized in accumulated dividends in excess of net income at the date of initial application. The primary impact relates to condominium sales. Most of our revenue is accounted for under the leasing standard, and therefore is not subject to this standard. In 2017, gains on contracted condominium sales were recognized using the percentage-of-completion method, with the gain recognized once certain criteria were met in advance of legal closing. Under the new guidance, condominium sale gains are recognized as the condominium units are legally sold, which is typically upon closing. $5.4 million of condominium gains (net of $1.4 million of income taxes) recorded under the percentage-of-completion method in 2017 were reversed through opening accumulated dividends in excess of net income. With the exception of condominium sales, the adoption of the standard did not have a significant impact on our consolidated financial statements, with an additional cumulative effect of $0.6 million reflected in opening accumulated dividends in excess of net income. | |||
Standard | Description | Date of Adoption | Effect on the financial statements or significant matters | |||
ASU 2016-15, August 2016, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments | This ASU provides classification guidance for eight specific topics including debt extinguishment costs, contingent consideration payments made after a business combination, and distributions received from equity method investees. | January 2018 | This standard did not have an impact on our consolidated financial statements. | |||
ASU 2016-18, November 2016, Statement of Cash Flows (Topic 203) - Restricted Cash | This ASU requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or cash equivalents. Amounts generally described as restricted cash and equivalents should be included with cash and cash equivalents when reconciling the beginning and end of period total amounts on the statement of cash flows. | January 2018 | Prior to the adoption of this standard, "net cash provided by operating activities" was $241.8 million and "net cash used in investing activities" was $390.0 million, for the six months ended June 30, 2017. After the adoption, "net cash provided by operating activities" was $238.7 million and "net cash used in investing activities" was $386.7 million, for the six months ended June 30, 2017. The reclassification is reflected in "increase in cash, cash equivalents, and restricted cash" in the Consolidated Statements of Cash Flows. See additional disclosures in "Consolidated Statement of Cash Flows - Supplemental Disclosures." | |||
ASU 2017-05, February 2017, Other Income - Gains and Losses from the Recognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets | This ASU clarifies that ASC 610-20 applies to all nonfinancial assets (including real estate) for which the counterparty is not a customer and also clarifies that all businesses are derecognized using the deconsolidation guidance. Additionally, it defines an insubstance nonfinancial asset as a financial asset that is promised to a counterparty in a contract in which substantially all of the fair value of the assets promised in the contract is concentrated in nonfinancial assets, which excludes cash or cash equivalents and liabilities. Under the current guidance, a partial sale is recognized and carryover basis is used for the retained interest, however, the new guidance eliminates the use of carryover basis and generally requires a full gain to be recognized for prospective disposals of nonfinancial assets. | January 2018 | The new guidance impacts the gain recognized when a real estate asset is sold to a non-customer and a noncontrolling interest is retained. The adoption of this standard did not have a significant impact on our consolidated financial statements. | |||
ASU 2017-09, May 2017, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting | The ASU clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under the new guidance, an entity will not apply modification accounting if the awards' fair value, vesting conditions, and the classification of the award as equity or a liability are the same immediately before and after the change. The new guidance is applied prospectively to awards granted or modified after the adoption date. | January 2018 | The adoption of this standard did not have an impact to our financial statements, as there have been no modifications to awards for the six months ended June 30, 2018. | |||
Standard | Description | Date of Adoption | Effect on the financial statements or significant matters | |||
Not Yet Adopted: | ||||||
Leases (Topic 842) and related updates: ASU 2016-02, February 2016, Leases (Topic 842) ASU 2018-10, July 2018, Codification improvements to Topic 842, Leases ASU 2018-11, July 2018, Leases (Topic 842) | This ASU significantly changes the accounting for leases by requiring lessees to recognize assets and liabilities for leases greater than 12 months on their balance sheet. The lessor model stays substantially the same; however, there were modifications to conform lessor accounting with the lessee model, eliminate real estate specific guidance, further define certain lease and non-lease components, and change the definition of initial direct costs of leases requiring significantly more leasing related costs to be expensed upfront. ASU 2018-10 provides narrow amendments that clarify how to apply certain aspects of the guidance in ASU 2016-02. ASU 2018-11 provides the option of an additional transition method, by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. It also provides lessors an option to not separate lease and non-lease components when certain criteria are met. | January 2019 | We are currently assessing the full impact of this standard to our consolidated financial statements. We have, however, identified certain areas which will be impacted as follows: We are currently a lessee for land underneath all or a portion of 14 properties that are subject to ground leases (in addition to 4 other properties that we currently account for as capital leases). Upon adoption, we will recognize the lease obligation for the 14 ground leases and a corresponding right of use asset on our consolidated balance sheet. Additionally, we will no longer be able to capitalize certain internal leasing and external legal leasing costs. For the six months ended June 30, 2018, we have capitalized approximately $3.6 million of internal leasing and external legal leasing costs, of which a portion will will be expensed when we adopt ASU 2016-02. |
Six Months Ended | |||||||
June 30, | |||||||
2018 | 2017 | ||||||
(In thousands) | |||||||
SUPPLEMENTAL DISCLOSURES: | |||||||
Total interest costs incurred | $ | 64,685 | $ | 59,304 | |||
Interest capitalized | (10,735 | ) | (11,639 | ) | |||
Interest expense | $ | 53,950 | $ | 47,665 | |||
Cash paid for interest, net of amounts capitalized | $ | 52,997 | $ | 47,995 | |||
Cash paid for income taxes | $ | 692 | $ | 341 | |||
NON-CASH INVESTING AND FINANCING TRANSACTIONS: | |||||||
Mortgage loan refinanced | $ | — | $ | 125,000 | |||
DownREIT operating partnership units issued with acquisition of noncontrolling interest | $ | — | $ | 5,918 | |||
DownREIT operating partnership units redeemed for common shares | $ | — | $ | 2,569 | |||
Shares issued under dividend reinvestment plan | $ | 955 | $ | 1,036 |
June 30, | December 31, | ||||||
2018 | 2017 | ||||||
(In thousands) | |||||||
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH: | |||||||
Cash and cash equivalents | $ | 56,116 | $ | 15,188 | |||
Restricted cash (1) | 52,846 | 10,012 | |||||
Total cash, cash equivalents, and restricted cash | $ | 108,962 | $ | 25,200 |
(1) | Restricted cash balances are included in "prepaid expenses and other assets" on our consolidated balance sheets. |
June 30, 2018 | December 31, 2017 | ||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
(In thousands) | |||||||||||||||
Mortgages and notes payable | $ | 846,095 | $ | 844,756 | $ | 811,770 | $ | 824,419 | |||||||
Senior notes and debentures | $ | 2,402,851 | $ | 2,371,478 | $ | 2,401,440 | $ | 2,498,445 |
June 30, 2018 | December 31, 2017 | ||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
Interest rate swaps | $ | — | $ | 412 | $ | — | $ | 412 | $ | — | $ | 22 | $ | — | $ | 22 |
Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | ||||||||||||||
Declared | Paid | Declared | Paid | ||||||||||||
Common shares | $ | 2.000 | $ | 2.000 | $ | 1.960 | $ | 1.960 | |||||||
5.417% Series 1 Cumulative Convertible Preferred shares | $ | 0.677 | $ | 0.677 | $ | 0.677 | $ | 0.677 | |||||||
5.0% Series C Cumulative Redeemable Preferred shares (1) | $ | 0.625 | $ | 0.681 | $ | — | $ | — |
(1) | Amount represents dividends per depository share, each representing 1/1000th of a share. |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(In thousands) | |||||||||||||||
Minimum rents | |||||||||||||||
Retail and commercial | $ | 153,423 | $ | 144,276 | $ | 305,573 | $ | 286,419 | |||||||
Residential | 17,105 | 13,441 | 33,120 | 26,944 | |||||||||||
Cost reimbursement | 42,531 | 39,877 | 87,735 | 81,395 | |||||||||||
Percentage rents | 2,707 | 2,397 | 5,481 | 5,220 | |||||||||||
Other | 4,710 | 4,255 | 9,148 | 8,715 | |||||||||||
Total rental income | $ | 220,476 | $ | 204,246 | $ | 441,057 | $ | 408,693 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(In millions) | |||||||||||||||
Straight-line rents | $ | 1.4 | $ | 3.8 | $ | 3.3 | $ | 7.4 | |||||||
Amortization of above market leases | $ | (1.3 | ) | $ | (1.4 | ) | $ | (3.0 | ) | $ | (2.8 | ) | |||
Amortization of below market leases | $ | 2.3 | $ | 2.7 | $ | 4.8 | $ | 5.2 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(In thousands) | |||||||||||||||
Grants of common shares and options | $ | 3,274 | $ | 2,908 | $ | 7,144 | $ | 6,457 | |||||||
Capitalized share-based compensation | (488 | ) | (381 | ) | (926 | ) | (698 | ) | |||||||
Share-based compensation expense | $ | 2,786 | $ | 2,527 | $ | 6,218 | $ | 5,759 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
NUMERATOR | |||||||||||||||
Income from continuing operations | $ | 61,561 | $ | 59,137 | $ | 121,176 | $ | 117,029 | |||||||
Less: Preferred share dividends | (2,011 | ) | (135 | ) | (4,021 | ) | (271 | ) | |||||||
Less: Income from continuing operations attributable to noncontrolling interests | (1,938 | ) | (1,660 | ) | (3,622 | ) | (3,432 | ) | |||||||
Less: Earnings allocated to unvested shares | (255 | ) | (251 | ) | (508 | ) | (468 | ) | |||||||
Income from continuing operations available for common shareholders | 57,357 | 57,091 | 113,025 | 112,858 | |||||||||||
Gain on sale of real estate, net | 3,972 | 18,814 | 7,288 | 18,884 | |||||||||||
Net income available for common shareholders, basic and diluted | $ | 61,329 | $ | 75,905 | $ | 120,313 | $ | 131,742 | |||||||
DENOMINATOR | |||||||||||||||
Weighted average common shares outstanding—basic | 72,990 | 72,001 | 72,948 | 71,928 | |||||||||||
Stock options | 35 | 123 | 49 | 133 | |||||||||||
Weighted average common shares outstanding—diluted | 73,025 | 72,124 | 72,997 | 72,061 | |||||||||||
EARNINGS PER COMMON SHARE, BASIC: | |||||||||||||||
Net income available for common shareholders | $ | 0.84 | $ | 1.05 | $ | 1.65 | $ | 1.83 | |||||||
EARNINGS PER COMMON SHARE, DILUTED: | |||||||||||||||
Net income available for common shareholders | $ | 0.84 | $ | 1.05 | $ | 1.65 | $ | 1.83 | |||||||
Income from continuing operations attributable to the Trust | $ | 59,623 | $ | 57,477 | $ | 117,554 | $ | 113,597 |
• | growth in our comparable property portfolio, |
• | growth in our portfolio from property development and redevelopments, and |
• | expansion of our portfolio through property acquisitions. |
Change | ||||||||||||||
2018 | 2017 | Dollars | % | |||||||||||
(Dollar amounts in thousands) | ||||||||||||||
Rental income | $ | 220,476 | $ | 204,246 | $ | 16,230 | 7.9 | % | ||||||
Other property income | 3,692 | 3,068 | 624 | 20.3 | % | |||||||||
Mortgage interest income | 734 | 735 | (1 | ) | (0.1 | )% | ||||||||
Total property revenue | 224,902 | 208,049 | 16,853 | 8.1 | % | |||||||||
Rental expenses | 39,905 | 37,128 | 2,777 | 7.5 | % | |||||||||
Real estate taxes | 28,307 | 26,522 | 1,785 | 6.7 | % | |||||||||
Total property expenses | 68,212 | 63,650 | 4,562 | 7.2 | % | |||||||||
Property operating income (1) | 156,690 | 144,399 | 12,291 | 8.5 | % | |||||||||
General and administrative expense | (8,413 | ) | (8,643 | ) | 230 | (2.7 | )% | |||||||
Depreciation and amortization | (58,381 | ) | (52,666 | ) | (5,715 | ) | 10.9 | % | ||||||
Operating Income | 89,896 | 83,090 | 6,806 | 8.2 | % | |||||||||
Other interest income | 159 | 68 | 91 | 133.8 | % | |||||||||
Interest expense | (27,766 | ) | (23,907 | ) | (3,859 | ) | 16.1 | % | ||||||
Loss from real estate partnerships | (728 | ) | (114 | ) | (614 | ) | (538.6 | )% | ||||||
Total other, net | (28,335 | ) | (23,953 | ) | (4,382 | ) | 18.3 | % | ||||||
Income from continuing operations | 61,561 | 59,137 | 2,424 | 4.1 | % | |||||||||
Gain on sale of real estate, net | 3,972 | 18,996 | (15,024 | ) | (79.1 | )% | ||||||||
Net income | 65,533 | 78,133 | (12,600 | ) | (16.1 | )% | ||||||||
Net income attributable to noncontrolling interests | (1,938 | ) | (1,842 | ) | (96 | ) | 5.2 | % | ||||||
Net income attributable to the Trust | $ | 63,595 | $ | 76,291 | $ | (12,696 | ) | (16.6 | )% |
(1) | Property operating income is a non-GAAP measure that consists of rental income, other property income and mortgage interest income, less rental expenses and real estate taxes. This measure is used internally to evaluate the performance of property operations and we consider it to be a significant measure. Property operating income should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP. |
• | an increase of $8.0 million from acquisitions, primarily related to the six shopping centers acquired in Los Angeles County, California in August 2017, |
• | an increase of $5.4 million at comparable properties due primarily to higher rental rates of approximately $2.8 million, higher average occupancy of approximately $1.3 million, and higher recoveries of $0.5 million, and |
• | an increase of $4.6 million at non-comparable properties due primarily to the opening of Phase II at Assembly Row and Pike & Rose during the second half of 2017 into 2018 partially offset by lower occupancy at two of our Florida properties in the beginning stages of redevelopment, |
• | a decrease of $1.9 million from 2017 property sales. |
• | an increase of $1.8 million from acquisitions, primarily related to six shopping centers acquired in Los Angeles County, California in August 2017, |
• | an increase of $1.1 million from non-comparable properties due primarily to the opening of Phase II at Assembly Row and Pike & Rose during the second half of 2017 into 2018, and |
• | a decrease of $0.4 million from 2017 property sales. |
• | an increase of $1.2 million from acquisitions, primarily related to our acquisition of six shopping centers in Los Angeles County, California in August 2017, and |
• | an increase of $1.1 million at non-comparable properties due primarily to increases in assessments as a result of our redevelopment activities, |
• | a decrease of $0.3 million from 2017 property sales. |
• | an increase of $2.8 million due to higher borrowings primarily attributable to the $475 million issuance of 3.25% senior notes ($300 million issued in June 2017 and $175 million issued in December 2017) and the $100 million reopening in June 2017 of the 4.50% senior notes, partially offset by the early redemption of our $150 million 5.90% senior notes in December 2017, and |
• | a decrease of $1.5 million in capitalized interest, |
• | a decrease of $0.5 million due to a lower overall weighted average borrowing rate. |
• | $15.4 million gain related to the sale of ground lease parcels at our Assembly Row property in Somerville, Massachusetts, and |
• | $3.3 million net percentage-of-completion gain, related to condominiums under binding contract at our Assembly Row property (see discussion in Note 2 to the Consolidated Financial Statements with respect to the change in accounting for condominium gains). |
Change | ||||||||||||||
2018 | 2017 | Dollars | % | |||||||||||
(Dollar amounts in thousands) | ||||||||||||||
Rental income | $ | 441,057 | $ | 408,693 | $ | 32,364 | 7.9 | % | ||||||
Other property income | 7,759 | 5,258 | 2,501 | 47.6 | % | |||||||||
Mortgage interest income | 1,491 | 1,487 | 4 | 0.3 | % | |||||||||
Total property revenue | 450,307 | 415,438 | 34,869 | 8.4 | % | |||||||||
Rental expenses | 84,678 | 78,237 | 6,441 | 8.2 | % | |||||||||
Real estate taxes | 56,755 | 51,612 | 5,143 | 10.0 | % | |||||||||
Total property expenses | 141,433 | 129,849 | 11,584 | 8.9 | % | |||||||||
Property operating income (1) | 308,874 | 285,589 | 23,285 | 8.2 | % | |||||||||
General and administrative expense | (16,342 | ) | (16,910 | ) | 568 | (3.4 | )% | |||||||
Depreciation and amortization | (116,491 | ) | (104,045 | ) | (12,446 | ) | 12.0 | % | ||||||
Operating Income | 176,041 | 164,634 | 11,407 | 6.9 | % | |||||||||
Other interest income | 338 | 174 | 164 | 94.3 | % | |||||||||
Interest expense | (53,950 | ) | (47,665 | ) | (6,285 | ) | 13.2 | % | ||||||
Loss from real estate partnerships | (1,253 | ) | (114 | ) | (1,139 | ) | 999.1 | % | ||||||
Total other, net | (54,865 | ) | (47,605 | ) | (7,260 | ) | 15.3 | % | ||||||
Income from continuing operations | 121,176 | 117,029 | 4,147 | 3.5 | % | |||||||||
Gain on sale of real estate and change in control of interests, net | 7,288 | 19,174 | (11,886 | ) | (62.0 | )% | ||||||||
Net income | 128,464 | 136,203 | (7,739 | ) | (5.7 | )% | ||||||||
Net income attributable to noncontrolling interests | (3,622 | ) | (3,722 | ) | 100 | (2.7 | )% | |||||||
Net income attributable to the Trust | $ | 124,842 | $ | 132,481 | $ | (7,639 | ) | (5.8 | )% |
(1) | Property operating income is a non-GAAP measure that consists of rental income, other property income and mortgage interest income, less rental expenses and real estate taxes. This measure is used internally to evaluate the performance of property operations and we consider it to be a significant measure. Property operating income should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP. |
• | an increase of $17.6 million from acquisitions, primarily related to the six shopping centers acquired in Los Angeles County, California in August 2017 and Riverpoint Center in March 2017, |
• | an increase of $10.7 million at comparable properties due primarily to higher rental rates of approximately $6.0 million, higher average occupancy of approximately $2.6 million, and higher recoveries of $1.4 million, and |
• | an increase of $7.9 million at non-comparable properties due primarily to the opening of Phase II at Assembly Row and Pike & Rose during the second half of 2017 into 2018 and the lease-up of two other redevelopments, partially offset by lower occupancy at two of our Florida properties in the beginning stages of redevelopment, |
• | a decrease of $3.9 million from 2017 property sales. |
• | an increase of $4.1 million from acquisitions, primarily related to six shopping centers acquired in Los Angeles County, California in August 2017 and Riverpoint Center in March 2017, |
• | an increase of $2.1 million from non-comparable properties, due primarily to the opening of Phase II at Assembly Row and Pike & Rose during the second half of 2017 into 2018, partially offset by lower expenses at two of our Florida properties in the beginning stages of redevelopment, and |
• | an increase of $0.8 million from comparable properties, primarily due to higher bad debt expense, |
• | a decrease of $0.7 million from 2017 property sales. |
• | an increase of $3.2 million from acquisitions, primarily related to our acquisition of six shopping centers in Los Angeles County, California in August 2017 and Riverpoint Center in March 2017, |
• | an increase of $1.7 million at non-comparable properties due primarily to increases in assessments as a result of our redevelopment activities, |
• | an increase of $1.0 million at comparable properties due to higher assessments, |
• | a decrease of $0.8 million from 2017 property sales. |
• | an increase of $7.2 million due to higher borrowings primarily attributable to the $475 million issuance of 3.25% senior notes ($300 million issued in June 2017 and $175 million issued in December 2017) and the $100 million reopening in June 2017 of the 4.50% senior notes, partially offset by the early redemption of our $150 million 5.90% senior notes in December 2017, and |
• | a decrease of $0.9 million in capitalized interest, |
• | a decrease of $1.9 million due to a lower overall weighted average borrowing rate. |
• | $15.4 million gain related to the sale transactions on our ground lease parcels at our Assembly Row property in Somerville, Massachusetts, and |
• | $3.3 million net percentage-of-completion gain, related to condominiums under binding contract at our Assembly Row property (see discussion in Note 2 to the Consolidated Financial Statements with respect to the change in accounting for condominium gains). |
• | 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. |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
(In thousands) | |||||||
Cash provided by operating activities | $ | 263,111 | $ | 238,660 | |||
Cash used in investing activities | (78,695 | ) | (386,699 | ) | |||
Cash (used in) provided by financing activities | (100,654 | ) | 221,108 | ||||
Increase in cash, cash equivalents and restricted cash | 83,762 | 73,069 | |||||
Cash, cash equivalents and restricted cash, beginning of year | 25,200 | 34,849 | |||||
Cash, cash equivalents and restricted cash, end of period | $ | 108,962 | $ | 107,918 |
• | a $163.3 million decrease in acquisitions of real estate, primarily due to the 2017 acquisitions of our Riverpoint Center, Hastings Ranch, and Fourth Street properties, |
• | a $77.0 million decrease in capital expenditures as we complete portions of Phase II of both our Assembly Row and Pike & Rose projects, and |
• | a $74.7 million increase in proceeds from sale of real estate primarily due to the sale of condominiums at our Assembly Row and Pike & Rose properties in 2018. |
• | $399.4 million in net proceeds from the June 2017 issuance of $300.0 million of 3.25% senior unsecured notes and $100.0 million of 4.50% notes, |
• | an $11.3 million decrease in contributions from noncontrolling interests primarily due to contributions to fund the $50.0 million repayment of the Plaza El Segundo mortgage loan in June 2017, and |
• | a $9.2 million increase in dividends paid to shareholders due to an increase in the common share dividend rate, an increase in the number of common shares outstanding, and preferred dividends related to the issuance of our Series C Preferred Shares in September 2017, |
• | a $48.0 million increase in net borrowings on our revolving credit facility, and |
• | a $40.5 million decrease in repayment of mortgages and capital leases due to the $10.5 million payoff of the mortgage loan on the Grove at Shrewsbury (West) in March 2018, as compared to the $50.0 million paydown of the Plaza El Segundo mortgage loan in June 2017. |
Description of Debt | Original Debt Issued | Principal Balance as of June 30, 2018 | Stated Interest Rate as of June 30, 2018 | Maturity Date | ||||||||
(Dollar amounts in thousands) | ||||||||||||
Mortgages payable | ||||||||||||
Secured fixed rate | ||||||||||||
Rollingwood Apartments | $ | 24,050 | $ | 20,578 | 5.54 | % | May 1, 2019 | |||||
The Shops at Sunset Place | Acquired | 65,538 | 5.62 | % | September 1, 2020 | |||||||
29th Place | Acquired | 4,231 | 5.91 | % | January 31, 2021 | |||||||
Sylmar Towne Center | Acquired | 17,185 | 5.39 | % | June 6, 2021 | |||||||
Plaza Del Sol | Acquired | 8,496 | 5.23 | % | December 1, 2021 | |||||||
The AVENUE at White Marsh | 52,705 | 52,705 | 3.35 | % | January 1, 2022 | |||||||
Montrose Crossing | 80,000 | 70,191 | 4.20 | % | January 10, 2022 | |||||||
Azalea | Acquired | 40,000 | 3.73 | % | November 1, 2025 | |||||||
Bell Gardens | Acquired | 13,061 | 4.06 | % | August 1, 2026 | |||||||
Plaza El Segundo | 125,000 | 125,000 | 3.83 | % | June 5, 2027 | |||||||
The Grove at Shrewsbury (East) | 43,600 | 43,600 | 3.77 | % | September 1, 2027 | |||||||
Brook 35 | 11,500 | 11,500 | 4.65 | % | July 1, 2029 | |||||||
Chelsea | Acquired | 6,105 | 5.36 | % | January 15, 2031 | |||||||
Subtotal | 478,190 | |||||||||||
Net unamortized premium and debt issuance costs | (484 | ) | ||||||||||
Total mortgages payable, net | 477,706 | |||||||||||
Notes payable | ||||||||||||
Unsecured fixed rate | ||||||||||||
Term loan (1) | 275,000 | 275,000 | LIBOR + 0.90% | November 21, 2018 | ||||||||
Various | 7,239 | 4,672 | 11.31% | Various through 2028 | ||||||||
Unsecured variable rate | ||||||||||||
Revolving credit facility (2) | 800,000 | 89,000 | LIBOR + 0.825% | April 20, 2020 | ||||||||
Subtotal | 368,672 | |||||||||||
Net unamortized debt issuance costs | (283 | ) | ||||||||||
Total notes payable, net | 368,389 | |||||||||||
Senior notes and debentures | ||||||||||||
Unsecured fixed rate | ||||||||||||
2.55% notes | 250,000 | 250,000 | 2.55 | % | January 15, 2021 | |||||||
3.00% notes | 250,000 | 250,000 | 3.00 | % | August 1, 2022 | |||||||
2.75% notes | 275,000 | 275,000 | 2.75 | % | June 1, 2023 | |||||||
3.95% notes | 300,000 | 300,000 | 3.95 | % | January 15, 2024 | |||||||
7.48% debentures | 50,000 | 29,200 | 7.48 | % | August 15, 2026 | |||||||
3.25% notes | 475,000 | 475,000 | 3.25 | % | July 15, 2027 | |||||||
6.82% medium term notes | 40,000 | 40,000 | 6.82 | % | August 1, 2027 | |||||||
4.50% notes | 550,000 | 550,000 | 4.50 | % | December 1, 2044 | |||||||
3.625% notes | 250,000 | 250,000 | 3.625 | % | August 1, 2046 | |||||||
Subtotal | 2,419,200 | |||||||||||
Net unamortized discount and debt issuance costs | (16,349 | ) | ||||||||||
Total senior notes and debentures, net | 2,402,851 | |||||||||||
Capital lease obligations | ||||||||||||
Various | 71,538 | Various | Various through 2106 | |||||||||
Total debt and capital lease obligations, net | $ | 3,320,484 |
1) | We entered into two interest rate swap agreements that fix the LIBOR portion of the interest rate on the term loan at 1.72%. The spread on the term loan is 90 basis points resulting in a fixed rate of 2.62%. |
2) | The maximum amount drawn under our revolving credit facility during the six months ended June 30, 2018 was $177.0 million, and the weighted average interest rate on borrowings under our revolving credit facility, before amortization of debt fees, was 2.5%. |
Unsecured | Secured | Capital Lease | Total | |||||||||||||
(In thousands) | ||||||||||||||||
2018 | $ | 275,359 | (1) | $ | 2,857 | $ | 23 | $ | 278,239 | |||||||
2019 | 563 | 25,820 | 42 | 26,425 | ||||||||||||
2020 | 89,624 | (2) | 65,539 | 46 | 155,209 | |||||||||||
2021 | 250,694 | 30,541 | 51 | 281,286 | ||||||||||||
2022 | 250,771 | 117,018 | 56 | 367,845 | ||||||||||||
Thereafter | 1,920,861 | 236,415 | 71,320 | 2,228,596 | ||||||||||||
$ | 2,787,872 | $ | 478,190 | $ | 71,538 | $ | 3,337,600 | (3) |
1) | Our $275.0 million unsecured term loan matures on November 21, 2018, subject to a one-year extension at our option. |
2) | Our $800.0 million revolving credit facility matures on April 20, 2020, subject to two six-month extensions at our option. As of June 30, 2018, there was $89.0 million outstanding under this credit facility. |
3) | The total debt maturities differ from the total reported on the consolidated balance sheet due to the unamortized net premium/discount and debt issuance costs on mortgage loans, notes payable, and senior notes as of June 30, 2018. |
• | does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income); |
• | should not be considered an alternative to net income as an indication of our performance; and |
• | is not necessarily indicative of cash flow as a measure of liquidity or ability to fund cash needs, including the payment of dividends. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Net income | $ | 65,533 | $ | 78,133 | $ | 128,464 | $ | 136,203 | |||||||
Net income attributable to noncontrolling interests | (1,938 | ) | (1,842 | ) | (3,622 | ) | (3,722 | ) | |||||||
Gain on sale of real estate, net | (3,972 | ) | (18,814 | ) | (7,288 | ) | (18,884 | ) | |||||||
Depreciation and amortization of real estate assets | 52,011 | 45,634 | 103,362 | 90,316 | |||||||||||
Amortization of initial direct costs of leases | 4,702 | 5,066 | 9,302 | 9,750 | |||||||||||
Funds from operations | 116,336 | 108,177 | 230,218 | 213,663 | |||||||||||
Dividends on preferred shares (1) | (1,875 | ) | — | (3,750 | ) | — | |||||||||
Income attributable to operating partnership units | 759 | 783 | 1,534 | 1,567 | |||||||||||
Income attributable to unvested shares | (398 | ) | (357 | ) | (786 | ) | (707 | ) | |||||||
Funds from operations available for common shareholders | $ | 114,822 | $ | 108,603 | $ | 227,216 | 214,523 | ||||||||
Weighted average number of common shares, diluted (1) | 73,880 | 73,019 | 73,859 | 72,956 | |||||||||||
Funds from operations available for common shareholders, per diluted share | $ | 1.55 | $ | 1.49 | $ | 3.08 | $ | 2.94 |
(1) | Dividends on our Series 1 preferred shares are not deducted in the calculation of FFO available to common shareholders, as the related shares are dilutive and included in "weighted average common shares, diluted" and the weighted average common shares used to compute FFO per diluted common share includes operating partnership units that were excluded from the computation of diluted EPS. Conversion of these operating partnership units is dilutive in the computation of FFO per diluted common share but is anti-dilutive for the computation of diluted EPS for the periods presented. |
• | risks that our tenants will not pay rent, may vacate early or may file for bankruptcy or that we may be unable to renew leases or re-let space at favorable rents as leases expire; |
• | risks that we may not be able to proceed with or obtain necessary approvals for any redevelopment or renovation project, and that completion of anticipated or ongoing property redevelopment or renovation projects that we do pursue may cost more, take more time to complete or fail to perform as expected; |
• | risk that we are investing a significant amount in ground-up development projects that may be dependent on third parties to deliver critical aspects of certain projects, requires spending a substantial amount upfront in infrastructure, and assumes receipt of public funding which has been committed but not entirely funded; |
• | risks normally associated with the real estate industry, including risks that: |
• | occupancy levels at our properties and the amount of rent that we receive from our properties may be lower than expected, |
• | new acquisitions may fail to perform as expected, |
• | 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, |
• | environmental issues may develop at our properties and result in unanticipated costs, and |
• | because real estate is illiquid, we may not be able to sell properties when appropriate; |
• | risks that our growth will be limited if we cannot obtain additional capital; |
• | risks associated with general economic conditions, including local economic conditions in our geographic markets; |
• | risks of financing, such as our ability to consummate additional financings or obtain replacement 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; and |
• | 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. |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
EXHIBIT INDEX | ||
Exhibit No. | Description | |
Rule 13a-14(a) Certification of Chief Executive Officer (filed herewith) | ||
Rule 13a-14(a) Certification of Principal Financial Officer (filed herewith) | ||
Section 1350 Certification of Chief Executive Officer (filed herewith) | ||
Section 1350 Certification of Principal Financial Officer (filed herewith) | ||
The following materials from Federal Realty Investment Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, formatted in XBRL (Extensible Business Reporting Language): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Comprehensive Income, (3) the Consolidated Statement of Shareholders’ Equity, (4) the Consolidated Statements of Cash Flows, and (5) Notes to Consolidated Financial Statements that have been detail tagged. |
FEDERAL REALTY INVESTMENT TRUST | ||
August 1, 2018 | /s/ Donald C. Wood | |
Donald C. Wood, | ||
President, Chief Executive Officer and Trustee | ||
(Principal Financial and Executive Officer) | ||
FEDERAL REALTY INVESTMENT TRUST | ||
August 1, 2018 | /s/ Daniel Guglielmone | |
Daniel Guglielmone, | ||
Executive Vice President | ||
Chief Financial Officer and Treasurer | ||
(Principal Financial and Accounting Officer) | ||
1) | I have reviewed this quarterly report on Form 10-Q of Federal Realty Investment Trust; |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4) | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5) | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of trustees (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
August 1, 2018 | /s/ Donald C. Wood | |
Donald C. Wood, | ||
President, Chief Executive Officer and Trustee | ||
(Principal Financial and Executive Officer) |
1) | I have reviewed this quarterly report on Form 10-Q of Federal Realty Investment Trust; |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4) | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5) | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of trustees (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
August 1, 2018 | /s/ Daniel Guglielmone | |
Daniel Guglielmone | ||
Executive Vice President - Chief Financial Officer and Treasurer | ||
(Principal Financial and Accounting Officer) |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
August 1, 2018 | /s/ Donald C. Wood | |
Donald C. Wood, | ||
President, Chief Executive Officer and Trustee | ||
(Principal Financial and Executive Officer) |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
August 1, 2018 | /s/ Daniel Guglielmone | |
Daniel Guglielmone | ||
Executive Vice President - Chief Financial Officer and Treasurer | ||
(Principal Financial and Accounting Officer) |
Document and Entity Information Document - shares |
6 Months Ended | |
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Jun. 30, 2018 |
Jul. 27, 2018 |
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Document And Entity Information [Abstract] | ||
6/30/2018 | Jun. 30, 2018 | |
Entity Registrant Name | FEDERAL REALTY INVESTMENT TRUST | |
Entity Central Index Key | 0000034903 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 73,491,303 |
Consolidated Statements Of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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REVENUE | ||||
Rental income | $ 220,476 | $ 204,246 | $ 441,057 | $ 408,693 |
Other property income | 3,692 | 3,068 | 7,759 | 5,258 |
Mortgage interest income | 734 | 735 | 1,491 | 1,487 |
Total revenue | 224,902 | 208,049 | 450,307 | 415,438 |
EXPENSES | ||||
Rental expenses | 39,905 | 37,128 | 84,678 | 78,237 |
Real estate taxes | 28,307 | 26,522 | 56,755 | 51,612 |
General and administrative | 8,413 | 8,643 | 16,342 | 16,910 |
Depreciation and amortization | 58,381 | 52,666 | 116,491 | 104,045 |
Total operating expenses | 135,006 | 124,959 | 274,266 | 250,804 |
OPERATING INCOME | 89,896 | 83,090 | 176,041 | 164,634 |
Other interest income | 159 | 68 | 338 | 174 |
Interest expense | (27,766) | (23,907) | (53,950) | (47,665) |
Loss from real estate partnerships | (728) | (114) | (1,253) | (114) |
INCOME FROM CONTINUING OPERATIONS | 61,561 | 59,137 | 121,176 | 117,029 |
Gain on sale of real estate, net | 3,972 | 18,996 | 7,288 | 19,174 |
NET INCOME | 65,533 | 78,133 | 128,464 | 136,203 |
Net income attributable to noncontrolling interests | (1,938) | (1,842) | (3,622) | (3,722) |
NET INCOME ATTRIBUTABLE TO THE TRUST | 63,595 | 76,291 | 124,842 | 132,481 |
Dividends on preferred shares | (2,011) | (135) | (4,021) | (271) |
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS | $ 61,584 | $ 76,156 | $ 120,821 | $ 132,210 |
EARNINGS PER COMMON SHARE, BASIC: | ||||
Net income available for common shareholders | $ 0.84 | $ 1.05 | $ 1.65 | $ 1.83 |
Weighted average number of common shares | 72,990 | 72,001 | 72,948 | 71,928 |
EARNINGS PER COMMON SHARE, DILUTED: | ||||
Net income available for common shareholders | $ 0.84 | $ 1.05 | $ 1.65 | $ 1.83 |
Weighted average number of common shares | 73,025 | 72,124 | 72,997 | 72,061 |
COMPREHENSIVE INCOME | $ 65,456 | $ 78,526 | $ 128,854 | $ 137,680 |
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE TRUST | $ 63,518 | $ 76,684 | $ 125,232 | $ 133,958 |
Consolidated Statement Of Shareholders' Equity (Parentheticals) $ in Thousands |
6 Months Ended |
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Jun. 30, 2018
USD ($)
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Statement of Stockholders' Equity [Abstract] | |
Net income attributable to redeemable noncontrolling interests | $ 1,998 |
Business And Organization |
6 Months Ended |
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Jun. 30, 2018 | |
Nature Of Operations [Abstract] | |
BUSINESS AND ORGANIZATION | BUSINESS AND ORGANIZATION Federal Realty Investment Trust (the “Trust”) is an equity real estate investment trust (“REIT”) specializing in the ownership, management, and redevelopment of retail and mixed-use properties. Our properties are located primarily in densely populated and affluent communities in strategically selected metropolitan markets in the Mid-Atlantic and Northeast regions of the United States, California, and South Florida. As of June 30, 2018, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 105 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. |
Summary Of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The accompanying consolidated balance sheet as of December 31, 2017, which has been derived from audited financial statements, and unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Trust’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 six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the full year. Principles of Consolidation Our consolidated financial statements include the accounts of the Trust, its corporate subsidiaries, and all entities in which the Trust has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity (“VIE”). The equity interests of other investors are reflected as noncontrolling interests or redeemable noncontrolling interests. All significant intercompany transactions and balances are eliminated in consolidation. We account for our interests in joint ventures, which we do not control, using the equity method of accounting. Certain 2017 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 and Issued Accounting Pronouncements
Consolidated Statements of Cash Flows—Supplemental Disclosures The following tables provide supplemental disclosures related to the Consolidated Statements of Cash Flows:
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Real Estate |
6 Months Ended |
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Jun. 30, 2018 | |
Real Estate [Abstract] | |
REAL ESTATE | REAL ESTATE On June 15, 2018, we formed a new joint venture to develop Jordan Downs Plaza which, when completed, will be an approximately 113,000 square foot grocery anchored shopping center located in Los Angeles County, California. The total investment at June 30, 2018 was $34.4 million as a result of a pre-funding requirement for equity to be advanced prior to the start of construction. We own approximately 91% of the venture, and control the 9.4 acre land parcel on which the shopping center will be constructed under a long-term ground lease that expires June 15, 2093 (including two 10-year option periods which may be exercised at our option). The Jordan Downs Plaza development is expected to generate income tax credits under the New Market Tax Credit Program ("NMTC") which was provided for in the Community Renewal Tax Relief Act of 2000 ("the Act") and is intended to induce investment in underserved areas of the United States. The Act permits taxpayers to claim credits against their Federal income taxes for qualified investments. A third party bank contributed $13.9 million to the development, and is entitled to the related tax credit benefits, but they do not have an interest in the underlying economics of the property. The transaction also includes a put/call provision whereby we may be obligated or entitled to purchase the third party bank’s interest. We believe the put will be exercised at its $1,000 strike price. Based on our assessment of control, we concluded that the project and certain other transaction related entities should be consolidated. The $13.9 million in proceeds received in exchange for the transfer of the tax credits has been deferred and will be recognized when the tax benefits are delivered to the third party bank without risk of recapture. Direct and incremental costs of $1.6 million incurred in structuring the NMTC transaction have also been deferred. The Trust anticipates recognizing the net cash received as revenue upon completion of the seven-year NMTC compliance period. Cash in escrow at June 30, 2018 of $41.6 million reflects cash that will ultimately be used for the development of the shopping center. The cash is held in escrow pursuant to the new market tax credit transaction documents and will be released as qualified development expenditures are incurred. During the three and six months ended June 30, 2018, we closed on the sale of 86 and 159 condominium units, respectively, at our Assembly Row and Pike & Rose properties (combined) and received proceeds net of closing costs of $69.9 million and $121.4 million, respectively, resulting in a $4.0 million and $7.3 million gain, respectively, net of $0.7 million and $1.7 million of income taxes, respectively. The cost basis for remaining condominium units that are ready for their intended use as of June 30, 2018 is $27.8 million, and is included in "assets held for sale" on our consolidated balance sheets. |
Debt |
6 Months Ended |
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Jun. 30, 2018 | |
Debt Instruments [Abstract] | |
DEBT | DEBT On March 1, 2018, we repaid the $10.5 million mortgage loan on The Grove at Shrewsbury (West) at par. During the three and six months ended June 30, 2018, the maximum amount of borrowings outstanding under our $800.0 million revolving credit facility was $177.0 million for both periods and the weighted average interest rate, before amortization of debt fees, was 2.7% and 2.5%, respectively. During the three and six months ended June 30, 2018, the weighted average borrowings outstanding were $119.8 million and $109.9 million, respectively. At June 30, 2018, the outstanding balance was $89.0 million. Our revolving credit facility, term loan and certain notes require us to comply with various financial covenants, including the maintenance of minimum shareholders' equity and debt coverage ratios and a maximum ratio of debt to net worth. As of June 30, 2018, we were in compliance with all default related debt covenants. |
Fair Value Of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS Except as disclosed below, the carrying amount of our financial instruments approximates their fair value. The fair value of our mortgages payable, notes payable and senior notes and debentures is sensitive to fluctuations in interest rates. Quoted market prices (Level 1) were used to estimate the fair value of our marketable senior notes and debentures and discounted cash flow analysis (Level 2) is generally used to estimate the fair value of our mortgages and notes payable. Considerable judgment is necessary to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. A summary of the carrying amount and fair value of our mortgages payable, notes payable and senior notes and debentures is as follows:
As of June 30, 2018, 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% 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 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 $0.4 million as a decrease 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 June 30, 2018, 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 June 30, 2018 was an asset of $0.4 million and is included in "prepaid expenses and other assets" on our consolidated balance sheets. For the three and six months ended June 30, 2018, the change in valuation on our interest rate swaps resulted in a $0.1 million decrease in our derivative asset and a $0.4 million increase in our derivative asset, respectively, (including $0.2 million and $0.1 million, respectively, reclassified from other comprehensive income as a decrease to interest expense). The change in valuation on our interest rate swaps is included in "accumulated other comprehensive income." A summary of our financial assets that are measured at fair value on a recurring basis, by level within the fair value hierarchy is as follows:
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Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES We are sometimes involved in lawsuits, warranty claims, and environmental matters arising in the ordinary course of business. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters. We are currently a party to various legal proceedings. We accrue a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate within the range; however, if no amount within the range is a better estimate than any other amount, the minimum within the range is accrued. Legal fees related to litigation are expensed as incurred. We do not believe that the ultimate outcome of these matters, either individually or in the aggregate, could have a material adverse effect on our financial position or overall trends in results of operations; however, litigation is subject to inherent uncertainties. Also under our leases, tenants are typically obligated to indemnify us from and against all liabilities, costs and expenses imposed upon or asserted against us (1) as owner of the properties due to certain matters relating to the operation of the properties by the tenant, and (2) where appropriate, due to certain matters relating to the ownership of the properties prior to their acquisition by us. Under the terms of certain partnership agreements, the partners have the right to exchange their operating partnership units for cash or the same number of our common shares, at our option. A total of 752,036 downREIT operating partnership units are outstanding which have a total fair value of $95.2 million, based on our closing stock price on June 30, 2018. |
Shareholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | SHAREHOLDERS’ EQUITY The following table provides a summary of dividends declared and paid per share:
On May 7, 2018, we replaced our existing at-the-market (“ATM”) equity program with a new ATM 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. For the three and six months ended June 30, 2018, we sold 199,263 common shares (of which, 50,700 settled on July 2, 2018) at a weighted average price per share of $125.46 for net cash proceeds of $24.6 million and paid $0.3 million in commissions and $0.1 million in additional offering expenses related to the sales of these common shares. As of June 30, 2018, we had the capacity to issue up to $375.0 million in common shares under our ATM equity program. |
Components Of Rental Income |
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Components Of Rental Income and Expense [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMPONENTS OF RENTAL INCOME | COMPONENTS OF RENTAL INCOME The principal components of rental income are as follows:
Minimum rents include the following:
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Share-Based Compensation Plans |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION PLANS | SHARE-BASED COMPENSATION PLANS A summary of share-based compensation expense included in net income is as follows:
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Earnings Per Share |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | EARNINGS PER SHARE We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each class of common stock and participating securities is calculated according to dividends declared and participation rights in undistributed earnings. For the three and six months ended June 30, 2018, we had 0.3 million weighted average unvested shares outstanding, which are considered participating securities. For the three and six months ended June 30, 2017, we had 0.2 million weighted average unvested shares outstanding, which are considered participating securities. Therefore, we have allocated our earnings for basic and diluted EPS between common shares and unvested shares; the portion of earnings allocated to the unvested shares is reflected as “earnings allocated to unvested shares” in the reconciliation below. In the dilutive EPS calculation, dilutive stock options were calculated using the treasury stock method consistent with prior periods. There were 682 anti-dilutive stock options for the three and six months ended June 30, 2018, and no anti-dilutive stock options for the three and six months ended June 30, 2017. The conversions of downREIT operating partnership units and 5.417% Series 1 Cumulative Convertible Preferred Shares are anti-dilutive for all periods presented and accordingly, have been excluded from the weighted average common shares used to compute diluted EPS.
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Summary of Significant Accounting Policies (Policy) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of presentation The accompanying consolidated balance sheet as of December 31, 2017, which has been derived from audited financial statements, and unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Trust’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 six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the full year. |
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Principles of Consolidation | Principles of Consolidation Our consolidated financial statements include the accounts of the Trust, its corporate subsidiaries, and all entities in which the Trust has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity (“VIE”). The equity interests of other investors are reflected as noncontrolling interests or redeemable noncontrolling interests. All significant intercompany transactions and balances are eliminated in consolidation. We account for our interests in joint ventures, which we do not control, using the equity method of accounting. Certain 2017 amounts have been reclassified to conform to current period presentation. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, referred to as “GAAP,” requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates |
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Recently Adopted Accounting Pronouncements | Recently Adopted and Issued Accounting Pronouncements
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Summary Of Significant Accounting Policies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental disclosures related to the Consolidated Statements Of Cash Flows |
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Reconciliation of cash, cash equivalents, and restricted cash |
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Fair Value Of Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of carrying amount and fair value of financial instruments | A summary of the carrying amount and fair value of our mortgages payable, notes payable and senior notes and debentures is as follows:
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Summary of financial liabilities measured at fair value on a recurring basis | A summary of our financial assets that are measured at fair value on a recurring basis, by level within the fair value hierarchy is as follows:
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Shareholders' Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of dividends declared and paid per share | The following table provides a summary of dividends declared and paid per share:
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Components Of Rental Income (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Components Of Rental Income and Expense [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal components of rental income | The principal components of rental income are as follows:
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Minimum rents | Minimum rents include the following:
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Share-Based Compensation Plans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of share-based compensation expense included in net income | A summary of share-based compensation expense included in net income is as follows:
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Earnings Per Share (Tables) |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earnings per share | In the dilutive EPS calculation, dilutive stock options were calculated using the treasury stock method consistent with prior periods. There were 682 anti-dilutive stock options for the three and six months ended June 30, 2018, and no anti-dilutive stock options for the three and six months ended June 30, 2017. The conversions of downREIT operating partnership units and 5.417% Series 1 Cumulative Convertible Preferred Shares are anti-dilutive for all periods presented and accordingly, have been excluded from the weighted average common shares used to compute diluted EPS.
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Business And Organization (Details) |
6 Months Ended |
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Jun. 30, 2018
project
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Nature Of Operations [Abstract] | |
Number of real estate properties | 105 |
Minimum percentage of taxable income distributed to shareholders | 90.00% |
Summary Of Significant Accounting Policies Consolidated Statement of Cash Flows - Supplemental Disclosures (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Accounting Policies [Abstract] | ||||
Total interest costs incurred | $ 64,685 | $ 59,304 | ||
Interest capitalized | (10,735) | (11,639) | ||
Interest expense | $ 27,766 | $ 23,907 | 53,950 | 47,665 |
Cash paid for interest, net of amounts capitalized | 52,997 | 47,995 | ||
Cash paid for income taxes | 692 | 341 | ||
Mortgage loan refinanced | 0 | 125,000 | ||
DownREIT operating partnership units issued with acquisition of noncontrolling interest | 0 | 5,918 | ||
DownREIT operating partnership units redeemed for common shares | 0 | 2,569 | ||
Shares issued under dividend reinvestment plan | $ 955 | $ 1,036 |
Summary Of Significant Accounting Policies Consolidated Statement of Cash Flows - Reconciliation of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
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Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Abstract] | ||||||
Cash and cash equivalents | $ 56,116 | $ 15,188 | ||||
Restricted cash | [1] | 52,846 | 10,012 | |||
Total cash, cash equivalents, and restricted cash | $ 108,962 | $ 25,200 | $ 107,918 | $ 34,849 | ||
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Debt (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Mar. 01, 2018 |
Jun. 30, 2018 |
Jun. 30, 2018 |
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Debt Instrument [Line Items] | |||
Maximum borrowing capacity under revolving credit facility | $ 800.0 | $ 800.0 | |
Maximum amount outstanding under revolving credit facility | $ 177.0 | $ 177.0 | |
Weighted average interest rate, before amortization of debt fees | 2.70% | 2.50% | |
Weighted average borrowings outstanding | $ 119.8 | $ 109.9 | |
Outstanding balance of revolving credit facility | $ 89.0 | $ 89.0 | |
Mortgage loan | The Grove at Shrewsbury (West) | |||
Debt Instrument [Line Items] | |||
Principal amount of mortgage loan repayment | $ 10.5 |
Fair Value of Financial Instruments - Summary of Carrying Value and Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
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Mortgages payable and notes payable | Carrying Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Fair value of long-term debt | $ 846,095 | $ 811,770 |
Mortgages payable and notes payable | Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Fair value of long-term debt | 844,756 | 824,419 |
Senior notes and debentures | Carrying Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Fair value of long-term debt | 2,402,851 | 2,401,440 |
Senior notes and debentures | Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Fair value of long-term debt | $ 2,371,478 | $ 2,498,445 |
Fair Value of Financial Instruments - Summary of Financial Liabilities Measured on a Recurring Basis (Details) - Interest Rate Swap - Fair Value, Measurements, Recurring - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
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Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Fair value of interest rate swaps | $ 412 | $ 22 |
Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Fair value of interest rate swaps | 0 | 0 |
Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Fair value of interest rate swaps | 412 | 22 |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Fair value of interest rate swaps | $ 0 | $ 0 |
Commitments and Contingencies (Details) $ in Millions |
Jun. 30, 2018
USD ($)
shares
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
downREIT operating partnership units, outstanding | shares | 752,036 |
downREIT operating partnership units outstanding, fair value | $ | $ 95.2 |
Shareholders' Equity (Summary of Dividends) (Details) - $ / shares |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
||||
Dividends | ||||||||
Dividends declared per common share | $ 2.00 | $ 1.96 | ||||||
Dividends paid per common share | $ 2.00 | $ 1.96 | ||||||
Preferred shares, percentage | 5.417% | 5.417% | 5.417% | 5.417% | ||||
5.417% Series 1 Cumulative Convertible Preferred | ||||||||
Dividends | ||||||||
Preferred shares, percentage | 5.417% | 5.417% | 5.417% | |||||
Dividends declared per preferred shares | $ 0.677 | $ 0.677 | ||||||
Dividends paid per preferred share | $ 0.677 | $ 0.677 | ||||||
5.0% Series C Cumulative Redeemable Preferred | ||||||||
Dividends | ||||||||
Preferred shares, percentage | 5.00% | 5.00% | 5.00% | |||||
Dividends declared per preferred shares | [1] | $ 0.625 | $ 0 | |||||
Dividends paid per preferred share | [1] | $ 0.681 | $ 0 | |||||
|
Shareholders' Equity Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jul. 02, 2018 |
Jun. 30, 2018 |
Jun. 30, 2018 |
Jun. 30, 2017 |
May 07, 2018 |
|
Class of Stock [Line Items] | |||||
Net cash proceeds of common stock | $ 22,492 | $ 17,390 | |||
At The Market Equity Program | |||||
Class of Stock [Line Items] | |||||
Aggregate offering price of common share | $ 400,000 | ||||
Shares sold | 199,263 | 199,263 | |||
Weighted average price per common share | $ 125.46 | $ 125.46 | |||
Net cash proceeds of common stock | $ 24,600 | $ 24,600 | |||
Remaining capacity to issue | 375,000 | 375,000 | |||
At The Market Equity Program | Subsequent Event | |||||
Class of Stock [Line Items] | |||||
Common shares sold prior to the period end, but subsequently settled | 50,700 | ||||
At The Market Equity Program | Commissions | |||||
Class of Stock [Line Items] | |||||
Commissions related to sales of common shares | 300 | 300 | |||
At The Market Equity Program | Other offering costs | |||||
Class of Stock [Line Items] | |||||
Commissions related to sales of common shares | $ 100 | $ 100 |
Components Of Rental Income (Schedule Of Principal Components Of Rental Income) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Cost reimbursement | $ 42,531 | $ 39,877 | $ 87,735 | $ 81,395 |
Percentage rents | 2,707 | 2,397 | 5,481 | 5,220 |
Other | 4,710 | 4,255 | 9,148 | 8,715 |
Total rental income | 220,476 | 204,246 | 441,057 | 408,693 |
Retail and Commercial | ||||
Minimum rents | 153,423 | 144,276 | 305,573 | 286,419 |
Residential | ||||
Minimum rents | $ 17,105 | $ 13,441 | $ 33,120 | $ 26,944 |
Components Of Rental Income (Schedule Of Minimum Rent) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Minimum Rent [Line Items] | ||||
Straight-line rents | $ 1.4 | $ 3.8 | $ 3.3 | $ 7.4 |
Amortization of above market leases | ||||
Minimum Rent [Line Items] | ||||
Amortization of above and below market leases | (1.3) | (1.4) | (3.0) | (2.8) |
Amortization of below market leases | ||||
Minimum Rent [Line Items] | ||||
Amortization of above and below market leases | $ 2.3 | $ 2.7 | $ 4.8 | $ 5.2 |
Share-Based Compensation (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract] | ||||
Grants of common shares and options | $ 3,274 | $ 2,908 | $ 7,144 | $ 6,457 |
Capitalized share-based compensation | (488) | (381) | (926) | (698) |
Share-based compensation expense | $ 2,786 | $ 2,527 | $ 6,218 | $ 5,759 |
Earnings Per Share (Narrative) (Details) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Earnings Per Share [Abstract] | ||||
Weighted average unvested shares outstanding | 300,000 | 200,000 | 300,000 | 200,000 |
Anti-dilutive stock options | 682 | 0 | 682 | 0 |
Cumulative convertible preferred shares, dividend rate | 5.417% | 5.417% | 5.417% | 5.417% |
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