Federal Realty Investment Trust (FRT, NYSE)
Industry: REIT - Retail
Annual report, fiscal year 2015


# FEDERAL
REALTY
2015
ANNUAL
REPORT



# DEAR
SHAREHOLDERS,

A few months back, I was struggling to find a way to articulate our business strategy and talk about the many initiatives and projects that we had underway in 2015. As a company, we’ve been around for more than 50 years and are keenly aware that commercial real estate is prone to the same ups and downs and other cyclicality as the overall U.S. economy.



When market conditions are not kind to the acquisition market, development often looks better; when leasing is weak in one area of the country, it's often strong in another—and so on. It's why we've always worked hard to balance our business plan in every possible respect so as to get through the inevitable cycles with less volatility than we would otherwise be subject to. But how to articulate that? And then it hit me: baseball!

I've loved the game since I was a kid and always marveled at how a few guys could do it all. They had the core athletic skills to hit for both power and batting average. They had great defensive fielding ability and arm strength. And of course they had elite speed. Baseball scouts and others in the game refer to a player who has exceptional abilities in all five of those core skill areas as a "five-tool player." In the history of baseball, there are only a handful of players who



can legitimately be considered big-league five-tool players. Willie Mays is one of them, Ken Griffey Jr. is another.

It is this exceptional balance and level of competence to which Federal Realty aspires. It is the completeness of the business plan—the determination not to be dependent on any one mode of growth—that we're most proud of, and that was most evident in 2015. So, what are our five tools?

## “IT IS THE COMPLETENESS OF THE BUSINESS PLAN—THE DETERMINATION TO NOT BE DEPENDENT ON ANY ONE MODE OF GROWTH—THAT WE ARE MOST PROUD OF.”

First, the diversity of our core portfolio in terms of retail format, geography and tenant base, all in the highest-quality locations in the country. That real estate portfolio produces a formidable core foundation on which to grow (one that produced same-store growth of more than 3.5% for the fourth year in a row).

Second is the skill set built and honed over many years to re-develop those centers. The teamwork and collaboration to pull off these large and small tactical re-developments necessitate the industry’s most creative and innovative leasing, development and management personnel—and as I write this, we have more than a dozen such re-developments underway.

Third, we have pioneered and refined our unique knowledge and skill set to create vibrant and enduring mixed-use communities through a mixed-use development organization that is second to none. Renowned names like Santana Row and Bethesda Row are being followed with tomorrow’s great communities like Pike & Rose and Assembly Row. More than $170 million was invested in these initiatives in 2015 alone, over $1.5 billion cumulatively.

Fourth is not only our ability to acquire shopping centers (anybody can do that), but our focus and refinement of an acquisition approach that sees opportunities in real estate acquisitions that others don't see, in terms of finding re-development opportunities that refill our re-development and development coffers. Our acquisitions in 2015 of San Antonio Center, CocoWalk and Sunset Place are prime examples.
And fifth and finally, the refinement of our balance sheet over many years (to ensure low leverage through regular, right-sized equity issuances, unsecured borrowings and well-laddered maturities lead to the maximum flexibility) afforded the strongest balance sheet in our sector—and one of only three (out of 198) public REITs with an “A” credit rating by both Moody’s and Standard & Poor’s.

We stumble a bit now and then (as did Willie and Griffey), but our constant striving to be the strongest five-tool player keeps us all very focused on our craft. In 2015, the net result of that concentration was an increase to the declared dividends per share to our shareholders for the 48th consecutive year in a row (no other REIT can say that), a 7.7% increase in funds from operations (FFO) per share (excluding debt prepayment costs), and hundreds of millions of dollars of capital investment in real estate that should continue to stoke the fire of earnings and value creation for many years to come.

The consistency, stability and balance of our business plan is a relentless pursuit for our team, which is made up of the most dedicated and talented real estate professionals in the industry, governed by a Board of Trustees solidly focused on shareholders' interests.

We’re truly a family of colleagues at work, constantly pushing and challenging one another and making the necessary judgment calls that are hardly ever black and white. On behalf of each of us, thank you for the privilege of managing your Company, and we look forward to being part of your investment portfolio for the long term.

Sincerely,



Donald C. Wood
President & CEO



# A STRONG
RECORD OF
SUCCESS.





Note: (1) See discussion of calculation in item 6 “Selected Financial Data” in our Form 10-K





<table><tr><td colspan="7">Annualized Total Return Comparison (through December 31, 2015)</td></tr><tr><td></td><td>1 year</td><td>2 years</td><td>3 years</td><td>5 years</td><td>10 years</td><td>20 years</td></tr><tr><td>Federal Realty Investment Trust</td><td>12.35%</td><td>23.25%</td><td>15.09%</td><td>16.64%</td><td>12.71%</td><td>15.39%</td></tr><tr><td>FTSE NAREIT Equity REIT Index</td><td>2.83%</td><td>14.74%</td><td>10.63%</td><td>11.90%</td><td>7.37%</td><td>10.87%</td></tr><tr><td>S&amp;P 500 Index</td><td>1.38%</td><td>7.36%</td><td>15.13%</td><td>12.56%</td><td>7.30%</td><td>8.18%</td></tr><tr><td>NASDAQ Composite Index</td><td>7.12%</td><td>10.89%</td><td>19.89%</td><td>15.00%</td><td>9.78%</td><td>8.99%</td></tr></table>



## 10-K



## FORM 10-K

The Form 10-K includes the Section 302 certifications filed with the SEC. Certain exhibits to the Form 10-K are not reproduced here, but the Trust will provide them to you upon request, addressed to Federal Realty Investment Trust, 1626 East Jefferson Street, Rockville, MD 20852, Attention: Leah Andress, and payment of a fee covering the Trust's reasonable expenses for copying and mailing.



# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO THE SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-07533

# FEDERAL REALTY INVESTMENT TRUST

(Exact Name of Registrant as Specified in its Declaration of Trust)

Maryland
(State of Organization)

52-0782497
(IRS Employer Identification No.)

1626 East Jefferson Street, Rockville, Maryland
(Address of Principal Executive Offices)

20852

(Zip Code)

(301) 998-8100

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Common Shares of Beneficial Interest, $.01 par value per share, with associated Common Share Purchase Rights

Name of Each Exchange On Which Registered

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☒ Yes ☐ No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

☐ Yes ☒ No

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer
☐ (Do not check if a smaller reporting company) Smaller reporting company

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No

The aggregate market value of the Registrant's common shares held by non-affiliates of the Registrant, based upon the closing sales price of the Registrant's common shares on June 30, 2015 was $8.9 billion.

The number of Registrant’s common shares outstanding on February 5, 2016 was 69,669,864.



# FEDERAL REALTY INVESTMENT TRUST
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 2015

## DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission for the Registrant’s 2015 annual meeting of shareholders to be held in May 2016 will be incorporated by reference into Part III hereof.

## TABLE OF CONTENTS

PART I
Item 1. Business ..... 3
Item 1A. Risk Factors ..... 7
Item 1B. Unresolved Staff Comments ..... 15
Item 2. Properties ..... 16
Item 3. Legal Proceedings ..... 23
Item 4. Mine Safety Disclosures ..... 23

PART II
Item 5. Market for Our Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities ..... 24
Item 6. Selected Financial Data ..... 27
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ..... 29
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ..... 49
Item 8. Financial Statements and Supplementary Data ..... 50
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure ..... 50
Item 9A. Controls and Procedures ..... 50
Item 9B. Other Information ..... 52

PART III
Item 10. Trustees, Executive Officers and Corporate Governance ..... 53
Item 11. Executive Compensation ..... 53
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters ..... 53
Item 13. Certain Relationships and Related Transactions, and Trustee Independence ..... 53
Item 14. Principal Accountant Fees and Services ..... 53

PART IV
Item 15. Exhibits and Financial Statement Schedules ..... 53

SIGNATURES ..... 54



## ITEM 1. BUSINESS

References to “we,” “us,” “our” or the “Trust” refer to Federal Realty Investment Trust and our business and operations conducted through our directly or indirectly owned subsidiaries.

## General

We are an equity real estate investment trust (“REIT”) specializing in the ownership, management, and redevelopment of high quality retail and mixed-use properties located primarily in densely populated and affluent communities in strategically selected metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as in California and South Florida. As of December 31, 2015, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 90 predominantly retail real estate projects comprising approximately 21.4 million square feet. In total, the real estate projects were 94.3% leased and 93.5% occupied at December 31, 2015. A joint venture in which we owned a 30% interest owned six retail real estate projects totaling approximately 0.8 million square feet as of December 31, 2015. In total, the joint venture properties in which we owned an interest were 93.6% leased and 85.3% occupied at December 31, 2015. On January 13, 2016, we acquired our partner's 70% interest in the joint venture and subsequently own 100% of the related properties. We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for 48 consecutive years.

We were founded in 1962 as a REIT under the laws of the District of Columbia and re-formed as a REIT in the state of Maryland in 1999. We operate in a manner intended to qualify as a REIT for tax purposes pursuant to provisions of the Internal Revenue Code of 1986, as amended (the “Code”). Our principal executive offices are located at 1626 East Jefferson Street, Rockville, Maryland 20852. Our telephone number is (301) 998-8100. Our website address is www.federalrealty.com. The information contained on our website is not a part of this report and is not incorporated herein by reference.

## Business Objectives and Strategies

Our primary business objective is to own, manage, acquire and redevelop a portfolio of high quality retail focused properties that will:

• provide increasing cash flow for distribution to shareholders;

• generate higher internal growth than the shopping center industry;

• provide potential for capital appreciation; and

• protect investor capital.

Our portfolio includes, and we continue to acquire and redevelop, high quality retail in many formats ranging from regional, community and neighborhood shopping centers that often are anchored by grocery stores to mixed-use properties that are typically centered around a retail component but also include office, residential and/or hotel components.

## Operating Strategies

Our core operating strategy is to actively manage our properties to maximize rents and maintain occupancy levels by attracting and retaining a strong and diverse base of tenants and replacing less relevant, weaker, underperforming tenants with stronger ones. Our properties are generally located in some of the most densely populated and affluent areas of the country. These strong demographics help our tenants generate higher sales, which has enabled us to maintain higher occupancy rates, charge higher rental rates, and maintain steady rent growth, all of which increase the value of our portfolio. Our operating strategies also include:

- increasing rental rates through the renewal of expiring leases or the leasing of space to new tenants at higher rental rates while limiting vacancy and down-time;

• maintaining a diversified tenant base, thereby limiting exposure to any one tenant’s financial or operating difficulties;

- monitoring the merchandising mix of our tenant base to achieve a balance of strong national and regional tenants with local specialty tenants;

• minimizing overhead and operating costs;

- monitoring the physical appearance of our properties and the construction quality, condition and design of the buildings and other improvements located on our properties to maximize our ability to attract customers and thereby generate higher rents and occupancy rates;



• developing local and regional market expertise in order to capitalize on market and retailing trends;

• leveraging the contacts and experience of our management team to build and maintain long-term relationships with tenants, investors and financing sources;

• providing exceptional customer service; and

- creating an experience at many of our properties that is identifiable, unique and serves the surrounding communities to help insulate these properties and the tenants at these properties from the impact of on-line retailing.

## Investing Strategies

Our investment strategy is to deploy capital at risk-adjusted rates of return that exceed our long-term weighted average cost of capital in projects that have potential for future income growth and increased value. Our investments primarily fall into one of the following four categories:

- renovating, expanding, reconfiguring and/or retenanting our existing properties to take advantage of under-utilized land or existing square footage to increase revenue;

- renovating or expanding tenant spaces for tenants capable of producing higher sales, and therefore, paying higher rents;

- acquiring quality retail and mixed-use properties located in densely populated and/or affluent areas where barriers to entry for further development are high, and that have possibilities for enhancing operating performance and creating value through renovation, expansion, reconfiguration and/or retenanting; and

- developing the retail portions of mixed-use properties and developing or otherwise investing in non-retail portions of mixed-use properties we already own in order to capitalize on the overall value created in these properties.

## Investment Criteria

When we evaluate potential redevelopment, retenanting, expansion, acquisition and development opportunities, we consider such factors as:

- the expected returns in relation to our short and long-term cost of capital as well as the anticipated risk we will face in achieving the expected returns;

• the anticipated growth rate of operating income generated by the property;

• the ability to increase the long-term value of the property through redevelopment and retenanting;

• the tenant mix at the property, tenant sales performance and the creditworthiness of those tenants;

- the geographic area in which the property is located, including the population density and household incomes, as well as the population and income trends in that geographic area;

- competitive conditions in the vicinity of the property, including competition for tenants and the ability of others to create competing properties through redevelopment, new construction or renovation;

- access to and visibility of the property from existing roadways and the potential for new, widened or realigned, roadways within the property’s trade area, which may affect access and commuting and shopping patterns;

• the level and success of our existing investments in the market area;

- the current market value of the land, buildings and other improvements and the potential for increasing those market values; and

- the physical condition of the land, buildings and other improvements, including the structural and environmental condition.

## Financing Strategies

Our financing strategies are designed to enable us to maintain an investment grade balance sheet while retaining sufficient flexibility to fund our operating and investing activities in the most cost-efficient way possible. Our financing strategies include:

- maintaining a prudent level of overall leverage and an appropriate pool of unencumbered properties that is sufficient to support our unsecured borrowings;

• managing our exposure to variable-rate debt;

• maintaining an available line of credit to fund operating and investing needs on a short-term basis;

- taking advantage of market opportunities to refinance existing debt, reduce interest costs and manage our debt maturity schedule so that a significant portion of our debt does not mature in any one year;

- selling properties that have limited growth potential or are not a strategic fit within our overall portfolio and redeploying the proceeds to redevelop, renovate, retenant and/or expand our existing properties, acquire new properties or reduce debt; and

- utilizing the most advantageous long-term source of capital available to us to finance redevelopment and acquisition opportunities, which may include:



the sale of our equity or debt securities through public offerings, including our at-the-market ("ATM") equity program in which we may from time to time offer and sell common shares, or private placements,

the incurrence of indebtedness through unsecured or secured borrowings,

the issuance of operating partnership units in a new or existing “downREIT partnership” that is controlled and consolidated by us (generally operating partnership units in a “downREIT” partnership are issued in exchange for a tax deferred contribution of property; these units receive the same distributions as our common shares and the holders of these units have the right to exchange their units for cash or the same number of our common shares, at our option), or

the use of joint venture arrangements.

## Employees

At February 5, 2016, we had 299 full-time employees and 137 part-time employees. None of our employees are represented by a collective bargaining unit. We believe that our relationship with our employees is good.

## Tax Status

We elected to be taxed as a REIT under the federal income tax laws when we filed our 1962 tax return. As a REIT, we are generally not subject to federal income tax on taxable income that we distribute to our shareholders. Under the Code, REITs are subject to numerous organizational and operational requirements, including the requirement to generally distribute at least 90% of taxable income each year. We will be subject to federal income tax on our taxable income (including any applicable alternative minimum tax) at regular corporate rates if we fail to qualify as a REIT for tax purposes in any taxable year, or to the extent we distribute less than 100% of our taxable income. We will also generally not qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost. Even if we qualify as a REIT for federal income tax purposes, we may be subject to certain state and local income and franchise taxes and to federal income and excise taxes on our undistributed taxable income.

We have elected to treat certain of our subsidiaries as taxable REIT subsidiaries, which we refer to as a TRS. In general, a TRS may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Code. A TRS is subject to federal and state income taxes. Our TRS activities have not been material.

## Governmental Regulations Affecting Our Properties

We and our properties are subject to a variety of federal, state and local environmental, health, safety and similar laws, including without limitation:

- the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, which we refer to as CERCLA;

• the Resource Conservation & Recovery Act;

• the Federal Clean Water Act;

• the Federal Clean Air Act;

• the Toxic Substances Control Act;

• the Occupational Safety & Health Act; and

• the Americans with Disabilities Act.

The application of these laws to a specific property that we own depends on a variety of property-specific circumstances, including the current and former uses of the property, the building materials used at the property and the physical layout of the property. Under certain environmental laws, principally CERCLA, we, as the owner or operator of properties currently or previously owned, may be required to investigate and clean up certain hazardous or toxic substances, asbestos-containing materials, or petroleum product releases at the property. We may also be held liable to a governmental entity or third parties for property damage and for investigation and clean up costs incurred in connection with the contamination, whether or not we knew of, or were responsible for, such contamination. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and costs it incurs in connection with the contamination. As the owner or operator of real estate, we also may be liable under common law to third parties for damages and injuries resulting from environmental contamination emanating from the real estate. Such costs or liabilities could exceed the value of the affected real estate. The presence of contamination or the failure to remediate contamination may adversely affect our ability to sell or lease real estate or to borrow using the real estate as collateral.

Neither existing environmental, health, safety and similar laws nor the costs of our compliance with these laws has had a material adverse effect on our financial condition or results of operations, and management does not believe they will in the future. In addition, we have not incurred, and do not expect to incur, any material costs or liabilities due to environmental contamination at properties we currently own or have owned in the past. However, we cannot predict the impact of new or



changed laws or regulations on properties we currently own or may acquire in the future. We have no current plans for substantial capital expenditures with respect to compliance with environmental, health, safety and similar laws and we carry environmental insurance which covers a number of environmental risks for most of our properties.

## Competition

Numerous commercial developers and real estate companies compete with us with respect to the leasing and the acquisition of properties. Some of these competitors may possess greater capital resources than we do, although we do not believe that any single competitor or group of competitors in any of the primary markets where our properties are located are dominant in that market. This competition may:

• reduce the number of properties available for acquisition;

• increase the cost of properties available for acquisition;

• interfere with our ability to attract and retain tenants, leading to increased vacancy rates and/or reduced rents; and

• adversely affect our ability to minimize expenses of operation.

Retailers at our properties also face increasing competition from online retailers, outlet stores, discount shopping clubs, superstores, and other forms of sales and marketing of goods and services, such as direct mail. This competition could contribute to lease defaults and insolvency of tenants.

## Available Information

Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") are available free of charge through the Investors section of our website at www.federalrealty.com as soon as reasonably practicable after we electronically file the material with, or furnish the material to, the Securities and Exchange Commission, or the SEC.

Our Corporate Governance Guidelines, Code of Business Conduct, Code of Ethics applicable to our Chief Executive Officer and senior financial officers, Whistleblower Policy, organizational documents and the charters of our audit committee, compensation committee and nominating and corporate governance committee are all available in the Corporate Governance section of the Investors section of our website.

Amendments to the Code of Ethics or Code of Business Conduct or waivers that apply to any of our executive officers or our senior financial officers will be disclosed in that section of our website as well.

You may obtain a printed copy of any of the foregoing materials from us by writing to us at Investor Relations, Federal Realty Investment Trust, 1626 East Jefferson Street, Rockville, Maryland 20852.



## ITEM 1A. RISK FACTORS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. Also, documents that we “incorporate by reference” into this Annual Report on Form 10-K, including documents that we subsequently file with the SEC will contain forward-looking statements. When we refer to forward-looking statements or information, sometimes we use words such as “may,” “will,” “could,” “should,” “plans,” “intends,” “expects,” “believes,” “estimates,” “anticipates” and “continues.” In particular, the below risk factors describe forward-looking information. The risk factors describe risks that may affect these statements but are not all-inclusive, particularly with respect to possible future events. Many things can happen that can cause actual results to be different from those we describe. These factors include, but are not limited to the following:

## Revenue from our properties may be reduced or limited if the retail operations of our tenants are not successful.

Revenue from our properties depends primarily on the ability of our tenants to pay the full amount of rent and other charges due under their leases on a timely basis. Some of our leases provide for the payment, in addition to base rent, of additional rent above the base amount according to a specified percentage of the gross sales generated by the tenants and generally provide for reimbursement of real estate taxes and expenses of operating the property. Economic and/or competitive conditions may impact the success of our tenants' retail operations and therefore the amount of rent and expense reimbursements we receive from our tenants. While demand for our retail spaces has been strong, there can be no assurance that this will continue. Any reduction in our tenants' abilities to pay base rent, percentage rent or other charges on a timely basis, including the filing by any of our tenants for bankruptcy protection, will adversely affect our financial condition and results of operations. In the event of default by a tenant, we may experience delays and unexpected costs in enforcing our rights as landlord under lease terms, which may also adversely affect our financial condition and results of operations.

## Our net income depends on the success and continued presence of our “anchor” tenants.

Our net income could be adversely affected in the event of a downturn in the business, or the bankruptcy or insolvency, of any anchor store or anchor tenant. Anchor tenants generally occupy large amounts of square footage, pay a significant portion of the total rents at a property and contribute to the success of other tenants by drawing significant numbers of customers to a property. The closing of one or more anchor stores at a property could adversely affect that property and result in lease terminations by, or reductions in rent from, other tenants whose leases may permit termination or rent reduction in those circumstances or whose own operations may suffer as a result. While our anchor tenant space is currently 96.1% occupied, we have seen an overall decrease in the number of tenants available to fill anchor spaces. Therefore, tenant demand for certain of our anchor spaces may decrease and as a result, we may see an increase in vacancy and/or a decrease in rents for those spaces that could have a negative impact to our net income.

## We may be unable to collect balances due from tenants that file for bankruptcy protection.

If a tenant or lease guarantor files for bankruptcy, we may not be able to collect all pre-petition amounts owed by that party. In addition, a tenant that files for bankruptcy protection may terminate our lease in which event we would have a general unsecured claim that would likely be for less than the full amount owed to us for the remainder of the lease term, which could adversely affect our financial condition and results of operations.

## We may experience difficulty or delay in renewing leases or re-leasing space.

We derive most of our revenue directly or indirectly from rent received from our tenants. We are subject to the risks that, upon expiration or termination of leases, whether by their terms, as a result of a tenant bankruptcy, general economic conditions or otherwise, leases for space in our properties may not be renewed, space may not be re-leased, or the terms of renewal or release, including the cost of required renovations or concessions to tenants, may be less favorable than current lease terms and may include decreases in rental rates. As a result, our net income could be reduced.

## The amount of debt we have and the restrictions imposed by that debt could adversely affect our business and financial condition.

As of December 31, 2015, we had approximately $2.6 billion of debt outstanding. Of that outstanding debt, approximately $482.8 million was secured by all or a portion of nine of our real estate projects and approximately $71.6 million represented capital lease obligations on four of our properties. In addition, we owned a 30% interest in a joint venture that had $34.4 million of debt secured by two properties as of December 31, 2015. On January 13, 2016, we acquired our partner's 70% interest in the joint venture, and assumed 100% of the related debt. Approximately $2.6 billion (97.6%) of our debt as of December 31, 2015 is fixed rate debt, which includes all of our property secured debt, our capital lease obligations and our $275.0 million term loan as the rate is effectively fixed by two interest rate swap agreements. Our joint venture's debt of $34.4



million, which is unconsolidated as of December 31, 2015, is also fixed rate debt. Our organizational documents do not limit the level or amount of debt that we may incur. The amount of our debt outstanding from time to time could have important consequences to our shareholders. For example, it could:

require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, property acquisitions, redevelopments and other appropriate business opportunities that may arise in the future;

• limit our ability to make distributions on our outstanding common shares and preferred shares;

• make it difficult to satisfy our debt service requirements;

• require us to dedicate increased amounts of our cash flow from operations to payments on debt upon refinancing or on our variable rate, unhedged debt, if interest rates rise;

- limit our flexibility in planning for, or reacting to, changes in our business and the factors that affect the profitability of our business;

- limit our ability to obtain any additional debt or equity financing we may need in the future for working capital, debt refinancing, capital expenditures, acquisitions, redevelopments or other general corporate purposes or to obtain such financing on favorable terms; and/or

- limit our flexibility in conducting our business, which may place us at a disadvantage compared to competitors with less debt or debt with less restrictive terms.

Our ability to make scheduled principal payments of, to pay interest on, or to refinance our indebtedness will depend primarily on our future performance, which to a certain extent is subject to economic, financial, competitive and other factors beyond our control. There can be no assurance that our business will continue to generate sufficient cash flow from operations in the future to service our debt or meet our other cash needs. If we are unable to generate this cash flow from our business, we may be required to refinance all or a portion of our existing debt, sell assets or obtain additional financing to meet our debt obligations and other cash needs, including the payment of dividends required to maintain our status as a real estate investment trust. We cannot assure you that any such refinancing, sale of assets or additional financing would be possible on terms that we would find acceptable.

We are obligated to comply with financial and other covenants pursuant to our debt obligations that could restrict our operating activities, and the failure to comply with such covenants could result in defaults that accelerate payment under our debt agreements.

Our revolving credit facility, term loan and certain series of notes include financial covenants that may limit our operating activities in the future. We are also required to comply with additional covenants that include, among other things, provisions:

• relating to the maintenance of property securing a mortgage;

• restricting our ability to pledge assets or create liens;

• restricting our ability to incur additional debt;

• restricting our ability to amend or modify existing leases at properties securing a mortgage;

• restricting our ability to enter into transactions with affiliates; and

• restricting our ability to consolidate, merge or sell all or substantially all of our assets.

As of December 31, 2015, we were in compliance with all of our financial covenants. If we were to breach any of our debt covenants, including the covenants listed above, and did not cure the breach within any applicable cure period, our lenders could require us to repay the debt immediately, and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan. Many of our debt arrangements, including our public notes, term loan and our revolving credit facility, are cross-defaulted, which means that the lenders under those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a default under certain of our other debt obligations. As a result, any default under our debt covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares.

## Our development activities have inherent risks.

The ground-up development of improvements on real property, as opposed to the renovation and redevelopment of existing improvements, presents substantial risks. We generally do not look to acquire raw land for future development; however, we do intend to complete the development and construction of future phases of projects we already own, such as Assembly Row in Somerville, Massachusetts and Pike & Rose in North Bethesda, Maryland. We may undertake development of these and other projects on our own or bring in third parties if it is justifiable on a risk-adjusted return basis. We may also choose to delay completion of a project if market conditions do not allow an appropriate return. If conditions arise and we are not able or decide not to complete a project or if the expected cash flows of our project do not exceed the book value, an impairment of the project may be required. If additional phases of any of our existing projects or if any new projects are not successful, it may adversely affect our financial condition and results of operations.



During 2015, construction commenced on the development of Phase II at both Assembly Row and Pike & Rose. At Santana Row, we continue our on-going redevelopment efforts, and are constructing a new 234,500 square foot office building, which has been fully leased to one tenant. A further discussion of these projects, expected costs, and current status can be found in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the "Outlook" subsection.

In addition to the risks associated with real estate investment in general, as described elsewhere and the specific risks above, the risks associated with our remaining development activities include:

• contractor changes may delay the completion of development projects and increase overall costs;

- significant time lag between commencement and stabilization subjects us to greater risks due to fluctuations in the general economy;

- delivery of residential product (both rental units and for sale condominium units) into uncertain residential environments may result in lower rents or sale prices than underwritten;

- substantial amount of our investment is related to infrastructure, the value of which may be negatively impacted if we do not complete subsequent phases;

• failure or inability to obtain construction or permanent financing on favorable terms;

- failure or inability to obtain public funding from governmental agencies to fund infrastructure projects, including expected public funding in connection with our development at Assembly Row;

• expenditure of money and time on projects that may never be completed;

• failure or inability of partners to perform on hotel joint ventures;

- the third-party developer of office or other buildings may not deliver or may encounter delays in delivering space as planned;

• difficulty securing key anchor or other tenants may impact occupancy rates and projected revenue;

• inability to achieve projected rental rates or anticipated pace of lease-up;

• higher than estimated construction or operating costs, including labor and material costs; and

- possible delay in completion of a project because of a number of factors, including weather, labor disruptions, construction delays or delays in receipt of zoning or other regulatory approvals, acts of terror or other acts of violence, or acts of God (such as fires, earthquakes or floods).

## Redevelopments and acquisitions may fail to perform as expected.

Our investment strategy includes the redevelopment and acquisition of high quality, retail focused properties in densely populated areas with high average household incomes and significant barriers to adding competitive retail supply. The redevelopment and acquisition of properties entail risks that include the following, any of which could adversely affect our results of operations and our ability to meet our obligations:

- our estimate of the costs to improve, reposition or redevelop a property may prove to be too low, or the time we estimate to complete the improvement, repositioning or redevelopment may be too short. As a result, the property may fail to achieve the returns we have projected, either temporarily or for a longer time;

- we may not be able to identify suitable properties to acquire or may be unable to complete the acquisition of the properties we identify;

• we may not be able to integrate an acquisition into our existing operations successfully;

- properties we redevelop or acquire may fail to achieve the occupancy or rental rates we project, within the time frames we project, at the time we make the decision to invest, which may result in the properties’ failure to achieve the returns we projected;

- our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs until after the property is acquired, which could significantly increase our total acquisition costs or decrease cash flow from the property; and

- our investigation of a property or building prior to our acquisition, and any representations we may receive from the seller of such building or property, may fail to reveal various liabilities, which could reduce the cash flow from the property or increase our acquisition cost.

## Our ability to grow will be limited if we cannot obtain additional capital.

Our growth strategy is focused on the redevelopment of properties we already own and the acquisition of additional properties. We believe that it will be difficult to fund our expected growth with cash from operating activities because, in addition to other requirements, we are generally required to distribute to our shareholders at least 90% of our taxable income each year to continue to qualify as a REIT for federal income tax purposes. As a result, we must rely primarily upon the availability of debt or equity capital, which may or may not be available on favorable terms or at all. Debt could include the sale of debt securities and mortgage loans from third parties. If economic conditions and conditions in the capital markets are not favorable at the time we need to raise capital, we may need to obtain capital on less favorable terms. Additionally, we cannot guarantee that additional financing, refinancing or other capital will be available in the amounts we desire or on favorable terms. Our access to



debt or equity capital depends on a number of factors, including the market’s perception of our growth potential and risk profile, our ability to pay dividends, and our current and potential future earnings. Depending on the outcome of these factors as well as the impact of the economic environment, we could experience delay or difficulty in implementing our growth strategy on satisfactory terms, or be unable to implement this strategy.

Rising interest rates could adversely affect our cash flow and the market price of our outstanding debt and preferred shares.

Of our approximately $2.6 billion of debt outstanding as of December 31, 2015, approximately $337.9 million bears interest at variable rates of which $275.0 million is effectively fixed through two interest rate swap agreements. We have a $600.0 million revolving credit facility, on which $53.5 million is outstanding at December 31, 2015, that bears interest at LIBOR plus 90 basis points. We may borrow additional funds at variable interest rates in the future. Increases in interest rates would increase the interest expense on our variable rate debt and reduce our cash flow, which could adversely affect our ability to service our debt and meet our other obligations and also could reduce the amount we are able to distribute to our shareholders. The interest rate on our $275.0 million term loan is currently fixed at 2.62% as a result of two interest rate swap agreements. We may enter into this type of hedging arrangements or other transactions for all or a portion of our variable rate debt to limit our exposure to rising interest rates. However, the amounts we are required to pay under the term loan and any other variable rate debt to which hedging or similar arrangements relate may increase in the event of non-performance by the counterparties to any of our hedging arrangements. In addition, an increase in market interest rates may lead purchasers of our debt securities and preferred shares to demand a higher annual yield, which could adversely affect the market price of our outstanding debt securities and preferred shares and the cost and/or timing of refinancing or issuing additional debt securities or preferred shares.

The market value of our debt and equity securities is subject to various factors that may cause significant fluctuations or volatility.

As with other publicly traded securities, the market price of our debt and equity securities depends on various factors, which may change from time to time and/or may be unrelated to our financial condition, operating performance or prospects that may cause significant fluctuations or volatility in such prices. These factors include, among others:

• general economic and financial market conditions;

• level and trend of interest rates;

• our ability to access the capital markets to raise additional capital;

• the issuance of additional equity or debt securities;

• changes in our funds from operations (“FFO”) or earnings estimates;

• changes in our debt or analyst ratings;

• our financial condition and performance;

• market perception of our business compared to other REITs; and

• market perception of REITs, in general, compared to other investment alternatives.

## Loss of our key management could adversely affect performance and the value of our common shares.

We are dependent on the efforts of our key management. Although we believe qualified replacements could be found for any departures of key executives, the loss of their services could adversely affect our performance and the value of our common shares.

## Our performance and value are subject to general risks associated with the real estate industry.

Our economic performance and the value of our real estate assets, and, consequently, the value of our investments, are subject to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay distributions to our shareholders will be adversely affected. As a real estate company, we are susceptible to the following real estate industry risks:

• economic downturns in general, or in the areas where our properties are located;

• adverse changes in local real estate market conditions, such as an oversupply or reduction in demand;

• changes in tenant preferences that reduce the attractiveness of our properties to tenants;

• zoning or regulatory restrictions;

• decreases in market rental rates;

• weather conditions that may increase or decrease energy costs and other weather-related expenses;

• costs associated with the need to periodically repair, renovate and re-lease space; and

- increases in the cost of adequate maintenance, insurance and other operating costs, including real estate taxes, associated with one or more properties, which may occur even when circumstances such as market factors and



competition cause a reduction in revenues from one or more properties, although real estate taxes typically do not increase upon a reduction in such revenues.

Each of these risks could result in decreases in market rental rates and increases in vacancy rates, which could adversely affect our financial condition and results of operation.

## Many real estate costs are fixed, even if income from our properties decreases.

Our financial results depend primarily on leasing space in our properties to tenants on terms favorable to us. Costs associated with real estate investment, such as real estate taxes, insurance and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease, or other circumstances cause a reduction in income from the property. As a result, cash flow from the operations of our properties may be reduced if a tenant does not pay its rent or we are unable to rent our properties on favorable terms. Under those circumstances, we might not be able to enforce our rights as landlord without delays and may incur substantial legal costs. Additionally, new properties that we may acquire or redevelop may not produce any significant revenue immediately, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with such new properties until they are fully occupied.

## Competition may limit our ability to purchase new properties and generate sufficient income from tenants.

Numerous commercial developers and real estate companies compete with us in seeking tenants for our existing properties and properties for acquisition. This competition may:

• reduce properties available for acquisition;

• increase the cost of properties available for acquisition;

• reduce rents payable to us;

• interfere with our ability to attract and retain tenants;

• lead to increased vacancy rates at our properties; and

• adversely affect our ability to minimize expenses of operation.

Retailers at our properties also face increasing competition from online retailers, outlet stores, discount shopping clubs and other forms of sales and marketing of goods, such as direct mail. This competition could contribute to lease defaults and insolvency of tenants. If we are unable to continue to attract appropriate retail tenants to our properties, or to purchase new properties in our geographic markets, it could materially affect our ability to generate net income, service our debt and make distributions to our shareholders.

## We may be unable to sell properties when appropriate because real estate investments are illiquid.

Real estate investments generally cannot be sold quickly. In addition, there are some limitations under federal income tax laws applicable to real estate and to REITs in particular that may limit our ability to sell our assets. We may not be able to alter our portfolio promptly in response to changes in economic or other conditions including being unable to sell a property at a return we believe is appropriate due to the economic environment. Our inability to respond quickly to adverse changes in the performance of our investments could have an adverse effect on our ability to meet our obligations and make distributions to our shareholders.

## Our insurance coverage on our properties may be inadequate.

We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire, flood, earthquake, environmental matters, rental loss and acts of terrorism. All of these policies contain coverage limitations. We believe these coverages are of the types and amounts customarily obtained for or by an owner of similar types of real property assets located in the areas where our properties are located. We intend to obtain similar insurance coverage on subsequently acquired properties.

The availability of insurance coverage may decrease and the prices for insurance may increase as a consequence of significant losses incurred by the insurance industry and other factors outside our control. As a result, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses due to terrorist acts and toxic mold, or, if offered, the expense of obtaining these types of insurance may not be justified. We therefore may cease to have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. If an uninsured loss or a loss in excess of our insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property, but still remain obligated for any mortgage debt or other financial obligations related to the property. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result



in large expenses to repair or rebuild the property. Also, due to inflation, changes in codes and ordinances, environmental considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed. Further, we may be unable to collect insurance proceeds if our insurers are unable to pay or contest a claim. Events such as these could adversely affect our results of operations and our ability to meet our obligations, including distributions to our shareholders.

## We may have limited flexibility in dealing with our jointly owned investments.

Our organizational documents do not limit the amount of funds that we may invest in properties and assets owned jointly with other persons or entities. As of December 31, 2015, we held nine predominantly retail real estate projects jointly with other persons in addition to our joint venture with affiliates of a discretionary fund created and advised by Clarion Partners (“Clarion”) and properties owned in a “downREIT” structure. Additionally, we have entered into a joint venture agreement related to the hotel component of Phase II of our Pike & Rose development project. We may make additional joint investments in the future. Our existing and future joint investments may subject us to special risks, including the possibility that our partners or co-investors might become bankrupt, that those partners or co-investors might have economic or other business interests or goals which are unlike or incompatible with our business interests or goals, that those partners or co-investors might be in a position to take action contrary to our suggestions or instructions, or in opposition to our policies or objectives, and that disputes may develop with our joint venture partners over decisions affecting the property or the joint venture, which may result in litigation or arbitration or some other form of dispute resolution. Although as of December 31, 2015, we held the controlling interests in all of our existing co-investments (except the Clarion and hotel investments discussed above), we generally must obtain the consent of the co-investor or meet defined criteria to sell or to finance these properties. Joint ownership gives a third party the opportunity to influence the return we can achieve on some of our investments and may adversely affect our ability to make distributions to our shareholders. We may also be liable for the actions of our co-investors.

On January 13, 2016 we acquired our partner's 70% interest in our Clarion joint venture, and subsequently own 100% of the related properties.

## Environmental laws and regulations could reduce the value or profitability of our properties.

All real property and the operations conducted on real property are subject to federal, state and local laws, ordinances and regulations relating to hazardous materials, environmental protection and human health and safety. Under various federal, state and local laws, ordinances and regulations, we and our tenants may be required to investigate and clean up certain hazardous or toxic substances released on or in properties we own or operate, and also may be required to pay other costs relating to hazardous or toxic substances. This liability may be imposed without regard to whether we or our tenants knew about the release of these types of substances or were responsible for their release. The presence of contamination or the failure to properly remediate contamination at any of our properties may adversely affect our ability to sell or lease those properties or to borrow funds by using those properties as collateral. The costs or liabilities could exceed the value of the affected real estate. We are not aware of any environmental condition with respect to any of our properties that management believes would have a material adverse effect on our business, assets or results of operations taken as a whole. The uses of any of our properties prior to our acquisition of the property and the building materials used at the property are among the property-specific factors that will affect how the environmental laws are applied to our properties. If we are subject to any material environmental liabilities, the liabilities could adversely affect our results of operations and our ability to meet our obligations.

We cannot predict what other environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist on the properties in the future. Compliance with existing and new laws and regulations may require us or our tenants to spend funds to remedy environmental problems. Our tenants, like many of their competitors, have incurred, and will continue to incur, capital and operating expenditures and other costs associated with complying with these laws and regulations, which will adversely affect their potential profitability.

Generally, our tenants must comply with environmental laws and meet remediation requirements. Our leases typically impose obligations on our tenants to indemnify us from any compliance costs we may incur as a result of the environmental conditions on the property caused by the tenant. If a lease does not require compliance or if a tenant fails to or cannot comply, we could be forced to pay these costs. If not addressed, environmental conditions could impair our ability to sell or re-lease the affected properties in the future or result in lower sales prices or rent payments.



The Americans with Disabilities Act of 1990 could require us to take remedial steps with respect to existing or newly acquired properties.

Our existing properties, as well as properties we may acquire, as commercial facilities, are required to comply with Title III of the Americans with Disabilities Act of 1990. Investigation of a property may reveal non-compliance with this Act. The requirements of this Act, or of other federal, state or local laws or regulations, also may change in the future and restrict further renovations of our properties with respect to access for disabled persons. Future compliance with this Act may require expensive changes to the properties.

The revenues generated by our tenants could be negatively affected by various federal, state and local laws to which they are subject.

We and our tenants are subject to a wide range of federal, state and local laws and regulations, such as local licensing requirements, consumer protection laws and state and local fire, life-safety and similar requirements that affect the use of the properties. The leases typically require that each tenant comply with all laws and regulations. Failure to comply could result in fines by governmental authorities, awards of damages to private litigants, or restrictions on the ability to conduct business on such properties. Non-compliance of this sort could reduce our revenues from a tenant, could require us to pay penalties or fines relating to any non-compliance, and could adversely affect our ability to sell or lease a property.

Failure to qualify as a REIT for federal income tax purposes would cause us to be taxed as a corporation, which would substantially reduce funds available for payment of distributions.

We believe that we are organized and qualified as a REIT for federal income tax purposes and currently intend to operate in a manner that will allow us to continue to qualify as a REIT under the Code. However, we cannot assure you that we will remain qualified as such in the future.

Qualification as a REIT involves the application of highly technical and complex Code provisions and applicable income tax regulations that have been issued under the Code. Certain facts and circumstances not entirely within our control may affect our ability to qualify as a REIT. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying rents and certain other income. Satisfying this requirement could be difficult, for example, if defaults by tenants were to reduce the amount of income from qualifying rents. As a REIT, we must generally make annual distributions to shareholders of at least 90% of our taxable income. In addition, new legislation, new regulations, new administrative interpretations or new court decisions may significantly change the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification. Any modification in the tax treatment of REITs could have a significant adverse impact to our net income.

If we fail to qualify as a REIT:

• we would not be allowed a deduction for distributions to shareholders in computing taxable income;

• we would be subject to federal income tax at regular corporate rates;

• we could be subject to the federal alternative minimum tax;

- unless we are entitled to relief under specific statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified;

- we could be required to pay significant income taxes, which would substantially reduce the funds available for investment or for distribution to our shareholders for each year in which we failed or were not permitted to qualify; and

• we would no longer be required by law to make any distributions to our shareholders.

## We may be required to incur additional debt to qualify as a REIT.

As a REIT, we must generally make annual distributions to shareholders of at least 90% of our taxable income. We are subject to income tax on amounts of undistributed taxable income and net capital gain. In addition, we would be subject to a 4% excise tax if we fail to distribute sufficient income to meet a minimum distribution test based on our ordinary income, capital gain and aggregate undistributed income from prior years. We intend to make distributions to shareholders to comply with the Code’s distribution provisions and to avoid federal income and excise tax. We may need to borrow funds to meet our distribution requirements because:

- our income may not be matched by our related expenses at the time the income is considered received for purposes of determining taxable income; and

- non-deductible capital expenditures, creation of reserves, or debt service requirements may reduce available cash but not taxable income.



In these circumstances, we might have to borrow funds on terms we might otherwise find unfavorable and we may have to borrow funds even if our management believes the market conditions make borrowing financially unattractive. Current tax law also allows us to pay a portion of our distributions in shares instead of cash.

## To maintain our status as a REIT, we limit the amount of shares any one shareholder can own.

The Code imposes certain limitations on the ownership of the stock of a REIT. For example, not more than 50% in value of our outstanding shares of capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code) during the last half of any taxable year. To protect our REIT status, our declaration of trust prohibits any one shareholder from owning (actually or constructively) more than 9.8% in value of the outstanding common shares or of any class or series of outstanding preferred shares. The constructive ownership rules are complex. Shares of our capital stock owned, actually or constructively, by a group of related individuals and/or entities may be treated as constructively owned by one of those individuals or entities. As a result, the acquisition of less than 9.8% in value of the outstanding common shares and/or a class or series of preferred shares (or the acquisition of an interest in an entity that owns common shares or preferred shares) by an individual or entity could cause that individual or entity (or another) to own constructively more than 9.8% in value of the outstanding capital stock. If that happened, either the transfer of ownership would be void or the shares would be transferred to a charitable trust and then sold to someone who can own those shares without violating the 9.8% ownership limit.

The Board of Trustees may waive these restrictions on a case-by-case basis. In addition, the Board of Trustees and two-thirds of our shareholders eligible to vote at a shareholder meeting may remove these restrictions if they determine it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. The 9.8% ownership restrictions may delay, defer or prevent a transaction or a change of our control that might involve a premium price for the common shares or otherwise be in the shareholders' best interest.

## We cannot assure you we will continue to pay dividends at historical rates.

Our ability to continue to pay dividends on our common shares at historical rates or to increase our common share dividend rate, and our ability to pay preferred share dividends and service our debt securities, will depend on a number of factors, including, among others, the following:

• our financial condition and results of future operations;

• the performance of lease terms by tenants;

• the terms of our loan covenants; and

• our ability to acquire, finance, develop or redevelop and lease additional properties at attractive rates.

If we do not maintain or increase the dividend on our common shares, it could have an adverse effect on the market price of our common shares and other securities. Any preferred shares we may offer in the future may have a fixed dividend rate that would not increase with any increases in the dividend rate of our common shares. Conversely, payment of dividends on our common shares may be subject to payment in full of the dividends on any preferred shares and payment of interest on any debt securities we may offer.

## Certain tax and anti-takeover provisions of our declaration of trust and bylaws may inhibit a change of our control.

Certain provisions contained in our declaration of trust and bylaws and the Maryland General Corporation Law, as applicable to Maryland REITs, may discourage a third party from making a tender offer or acquisition proposal to us. If this were to happen, it could delay, deter or prevent a change in control or the removal of existing management. These provisions also may delay or prevent the shareholders from receiving a premium for their common shares over then-prevailing market prices. These provisions include:

• the REIT ownership limit described above;

• authorization of the issuance of our preferred shares with powers, preferences or rights to be determined by the Board of Trustees;

- special meetings of our shareholders may be called only by the chairman of the board, the chief executive officer, the president, by one-third of the trustees or by shareholders possessing no less than 25% of all the votes entitled to be cast at the meeting;

- the Board of Trustees, without a shareholder vote, can classify or reclassify unissued shares of beneficial interest, including the reclassification of common shares into preferred shares and vice-versa;

• a two-thirds shareholder vote is required to approve some amendments to the declaration of trust; and

• advance-notice requirements for proposals to be presented at shareholder meetings.

In addition, if we elect to be governed by it in the future, the Maryland Control Share Acquisition Law could delay or prevent a change in control. Under Maryland law, unless a REIT elects not to be subject to this law, “control shares” acquired in a “control share acquisition” have no voting rights except to the extent approved by shareholders by a vote of two-thirds of the



votes entitled to be cast on the matter, excluding shares owned by the acquirer and by officers or trustees who are employees of the REIT. “Control shares” are voting shares that would entitle the acquirer to exercise voting power in electing trustees within specified ranges of voting power. A “control share acquisition” means the acquisition of control shares, with some exceptions.

Our bylaws state that the Maryland control share acquisition law will not apply to any acquisition by any person of our common shares. This bylaw provision may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares, by a vote of a majority of the shareholders entitled to vote, and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.

## We may amend or revise our business policies without your approval.

Our Board of Trustees may amend or revise our operating policies without shareholder approval. Our investment, financing and borrowing policies and policies with respect to all other activities, such as growth, debt, capitalization and operations, are determined by the Board of Trustees. The Board of Trustees may amend or revise these policies at any time and from time to time at its discretion. A change in these policies could adversely affect our financial condition and results of operations, and the market price of our securities.

The current business plan adopted by our Board of Trustees focuses on our investment in high quality retail based properties that are typically neighborhood and community shopping centers or mixed-use properties, principally through redevelopments and acquisitions. If this business plan is not successful, it could have a material adverse effect on our financial condition and results of operations.

Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this Annual Report on Form 10-K. Except as may be required by law, we make no promise to update any of the forward-looking statements as a result of new information, future events or otherwise. You should carefully review the above risks and the risk factors.

## Natural disasters and severe weather conditions could have an adverse impact on our cash flow and operating results.

Changing weather patterns and climatic conditions, such as global warming, may have added to the unpredictability and frequency of natural disasters and severe weather conditions and created additional uncertainty as to future trends and exposures. Our operations are located in areas that are subject to natural disasters and severe weather conditions such as hurricanes, earthquakes, droughts, snow storms, floods and fires. The occurrence of natural disasters or severe weather conditions can delay new development projects, increase investment costs to repair or replace damaged properties, increase operation costs, increase future property insurance costs, and negatively impact the tenant demand for lease space. If insurance is unavailable to us or is unavailable on acceptable terms, or if our insurance is not adequate to cover business interruption or losses from these events, our earnings, liquidity or capital resources could be adversely affected.

## We face risks relating to cybersecurity attacks that could cause loss of confidential information and other business disruptions.

We rely extensively on computer systems to process transactions and manage our business, and our business is at risk from and may be impacted by cybersecurity attacks. These could include attempts to gain unauthorized access to our data and computer systems. Attacks can be both individual and/or highly organized attempts organized by very sophisticated hacking organizations. We employ a number of measures to prevent, detect and mitigate these threats, which include password encryption, frequent password change events, firewall detection systems, anti-virus software in-place, frequent backups, a redundant data system for core applications and annual penetration testing; however, there is no guarantee such efforts will be successful in preventing a cyber attack. A cybersecurity attack could compromise the confidential information of our employees, tenants and vendors. A successful attack could disrupt and otherwise adversely affect our business operations.

## Changes in accounting standards may adversely impact our financial results.

The Financial Accounting Standards Board ("FASB"), in conjunction with the SEC, has several key projects on their agenda that could impact how we currently account for our material transactions, including lease accounting and other convergence projects with the International Accounting Standards Board. At this time, we are unable to predict with certainty which, if any, proposals may be passed or what level of impact any such proposal could have on the presentation of our consolidated financial statements, our results of operations and our financial ratios required by our debt covenants.

## ITEM 1B. UNRESOLVED STAFF COMMENTS

None.



## ITEM 2. PROPERTIES

## General

As of December 31, 2015, we owned or had a majority ownership interest in community and neighborhood shopping centers and mixed-used properties which are operated as 90 predominantly retail real estate projects comprising approximately 21.4 million square feet. These properties are located primarily in densely populated and affluent communities in strategic metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as California and South Florida. No single property accounted for over 10% of our 2015 total revenue. We believe that our properties are adequately covered by commercial general liability, fire, flood, earthquake, terrorism and business interruption insurance provided by reputable companies, with commercially reasonable exclusions, deductibles and limits.

## Tenant Diversification

As of December 31, 2015, we had approximately 2,700 leases, with tenants ranging from sole proprietors to major national and international retailers. No one tenant or affiliated group of tenants accounted for more than 2.9% of our annualized base rent as of December 31, 2015. As a result of our tenant diversification, we believe our exposure to any one bankruptcy filing in the retail sector has not been and will not be significant, however, multiple filings by a number of retailers could have a significant impact.

## Geographic Diversification

Our 90 real estate projects are located in 12 states and the District of Columbia. The following table shows the number of projects, the gross leasable area (“GLA”) of commercial space and the percentage of total portfolio gross leasable area of commercial space in each state as of December 31, 2015.

<table><tr><td>State</td><td>Number of Projects</td><td>Gross Leasable Area</td><td>Percentage of Gross Leasable Area</td></tr><tr><td></td><td></td><td>(In square feet)</td><td></td></tr><tr><td>Maryland</td><td>18</td><td>3,977,000</td><td>18.6%</td></tr><tr><td>California</td><td>14</td><td>3,854,000</td><td>18.0%</td></tr><tr><td>Virginia</td><td>15</td><td>3,601,000</td><td>16.8%</td></tr><tr><td>Pennsylvania(1)</td><td>10</td><td>2,299,000</td><td>10.8%</td></tr><tr><td>Massachusetts</td><td>7</td><td>1,789,000</td><td>8.4%</td></tr><tr><td>New Jersey</td><td>6</td><td>1,718,000</td><td>8.0%</td></tr><tr><td>Florida</td><td>4</td><td>1,316,000</td><td>6.2%</td></tr><tr><td>New York</td><td>5</td><td>1,138,000</td><td>5.3%</td></tr><tr><td>Illinois</td><td>4</td><td>752,000</td><td>3.5%</td></tr><tr><td>Connecticut(1)</td><td>3</td><td>397,000</td><td>1.9%</td></tr><tr><td>Michigan</td><td>1</td><td>217,000</td><td>1.0%</td></tr><tr><td>District of Columbia</td><td>2</td><td>168,000</td><td>0.8%</td></tr><tr><td>North Carolina</td><td>1</td><td>153,000</td><td>0.7%</td></tr><tr><td>Total</td><td>90</td><td>21,379,000</td><td>100.0%</td></tr></table>

(1) Additionally, we own two participating mortgages totaling approximately $29.9 million secured by multiple buildings in Manayunk, Pennsylvania, and an $11.7 million mortgage secured by a shopping center in Norwalk, Connecticut.

## Leases, Lease Terms and Lease Expirations

Our leases are classified as operating leases and typically are structured to require the monthly payment of minimum rents in advance, subject to periodic increases during the term of the lease, percentage rents based on the level of sales achieved by tenants, and reimbursement of a majority of on-site operating expenses and real estate taxes. These features in our leases generally reduce our exposure to higher costs and allow us to participate in improved tenant sales.

Commercial property leases generally range from three to ten years; however, certain leases, primarily with anchor tenants, may be longer. Many of our leases contain tenant options that enable the tenant to extend the term of the lease at expiration at pre-established rental rates that often include fixed rent increases, consumer price index adjustments or other market rate adjustments from the prior base rent. Leases on residential units are generally for a period of one year or less and, in 2015, represented approximately 6.1% of total rental income.



The following table sets forth the schedule of lease expirations for our commercial leases in place as of December 31, 2015 for each of the 10 years beginning with 2016 and after 2025 in the aggregate assuming that none of the tenants exercise future renewal options. Annualized base rents reflect in-place contractual rents as of December 31, 2015.

<table><tr><td>Year of Lease Expiration</td><td>Leased Square Footage Expiring</td><td>Percentage of Leased Square Footage Expiring</td><td>Annualized Base Rent Represented by Expiring Leases</td><td>Percentage of Annualized Base Rent Represented by Expiring Leases</td></tr><tr><td>2016</td><td>1,117,000</td><td>6%</td><td>$ 33,337,000</td><td>6%</td></tr><tr><td>2017</td><td>2,601,000</td><td>13%</td><td>67,645,000</td><td>13%</td></tr><tr><td>2018</td><td>2,507,000</td><td>13%</td><td>63,129,000</td><td>12%</td></tr><tr><td>2019</td><td>2,632,000</td><td>13%</td><td>65,970,000</td><td>13%</td></tr><tr><td>2020</td><td>2,026,000</td><td>10%</td><td>55,177,000</td><td>11%</td></tr><tr><td>2021</td><td>2,115,000</td><td>11%</td><td>54,767,000</td><td>10%</td></tr><tr><td>2022</td><td>1,390,000</td><td>7%</td><td>34,514,000</td><td>7%</td></tr><tr><td>2023</td><td>885,000</td><td>4%</td><td>27,868,000</td><td>5%</td></tr><tr><td>2024</td><td>1,050,000</td><td>5%</td><td>31,088,000</td><td>6%</td></tr><tr><td>2025</td><td>1,299,000</td><td>6%</td><td>36,668,000</td><td>7%</td></tr><tr><td>Thereafter</td><td>2,364,000</td><td>12%</td><td>55,055,000</td><td>10%</td></tr><tr><td>Total</td><td>19,986,000</td><td>100%</td><td>$ 525,218,000</td><td>100%</td></tr></table>

## Lease Rollovers

For 2015, we signed leases for a total of 1,593,000 square feet of retail space including 1,405,000 square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of 17% on a cash basis and 29% on a straight-line basis. New leases for comparable spaces were signed for 547,000 square feet at an average rental increase of 22% on a cash basis and 35% on a straight-line basis. Renewals for comparable spaces were signed for 859,000 square feet at an average rental increase of 14% on a cash basis and 24% on a straight-line basis. Tenant improvements and incentives for comparable spaces were $60.98 per square foot for new leases and $8.79 per square foot for renewals in 2015.

For 2014, we signed leases for a total of 1,765,000 square feet of retail space including 1,545,000 square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of 16% on a cash basis and 29% on a straight-line basis. New leases for comparable spaces were signed for 704,000 square feet at an average rental increase of 25% on a cash basis and 38% on a straight-line basis. Renewals for comparable spaces were signed for 840,000 square feet at an average rental increase of 11% on a cash basis and 23% on a straight-line basis. Tenant improvements and incentives for comparable spaces were $44.46 per square foot for new leases and $1.27 for renewal leases in 2014.

The rental increases associated with comparable spaces generally include all leases signed in arms-length transactions reflecting market leverage between landlords and tenants during the period. The comparison between average rent for expiring leases and new leases is determined by including minimum rent and percentage rent paid on the expiring lease and minimum rent and in some instances, projections of first lease year percentage rent, to be paid on the new lease. In atypical circumstances, management may exercise judgment as to how to most effectively reflect the comparability of spaces reported in this calculation. The change in rental income on comparable space leases is impacted by numerous factors including current market rates, location, individual tenant creditworthiness, use of space, market conditions when the expiring lease was signed, capital investment made in the space and the specific lease structure.

The leases signed in 2015 generally become effective over the following two years though some may not become effective until 2018 and beyond. Further, there is risk that some new tenants will not ultimately take possession of their space and that tenants for both new and renewal leases may not pay all of their contractual rent due to operating, financing or other matters. However, these increases do provide information about the tenant/landlord relationship and the potential increase we may achieve in rental income over time.

Historically, we have executed comparable space leases for 1.2 to 1.5 million square feet of retail space each year and expect the volume for 2016 will be in line with our historical averages with overall positive increases in rental income. However, changes in rental income associated with individual signed leases on comparable spaces may be positive or negative, and we can provide no assurance that the rents on new leases will continue to increase at the above disclosed levels, if at all.



## Retail and Residential Properties

The following table sets forth information concerning all real estate projects in which we owned an equity interest, had a leasehold interest, or otherwise controlled and are consolidated as of December 31, 2015. Except as otherwise noted, we are the sole owner of our retail real estate projects. Principal tenants are the largest tenants in the project based on square feet leased or are tenants important to a project’s success due to their ability to attract retail customers.

<table><tr><td>Property, City, State, Zip Code</td><td>Year Completed</td><td>Year Acquired</td><td>Square Feet(1) /Apartment Units</td><td>Average Rent Per Square Foot(2)</td><td>Percentage Leased(3)</td><td>Principal Tenant(s)</td></tr><tr><td>California</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>150 Post Street</td><td>1908, 1965</td><td>1997</td><td>105,000</td><td>$35.18</td><td>83%</td><td>H &amp; M</td></tr><tr><td>San Francisco, CA 94108</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Colorado Blvd</td><td>1905-1988</td><td>1996/1998</td><td>69,000</td><td>$41.05</td><td>100%</td><td>Pottery Barn</td></tr><tr><td>Pasadena, CA 91103(4)</td><td></td><td></td><td></td><td></td><td></td><td>Banana Republic</td></tr><tr><td>Crow Canyon Commons</td><td>1980, 1998, 2006</td><td>2005/2007</td><td>241,000</td><td>$26.44</td><td>95%</td><td>Sprouts</td></tr><tr><td>San Ramon, CA 94583</td><td></td><td></td><td></td><td></td><td></td><td>Rite Aid</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Sports Authority</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Orchard Supply Hardware</td></tr><tr><td>East Bay Bridge</td><td>1994-2001, 2011, 2012</td><td>2012</td><td>438,000</td><td>$17.72</td><td>99%</td><td>Home Depot</td></tr><tr><td>Emeryville &amp; Oakland, CA 94608</td><td></td><td></td><td></td><td></td><td></td><td>Michaels</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Pak-N-Save</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Target</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Nordstrom Rack</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Sports Authority</td></tr><tr><td>Escondido Promenade</td><td>1987</td><td>1996/2010</td><td>298,000</td><td>$24.34</td><td>98%</td><td>TJ Maxx</td></tr><tr><td>Escondido, CA 92029(5)</td><td></td><td></td><td></td><td></td><td></td><td>Toys R Us</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Dick&#x27;s Sporting Goods</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Ross Dress For Less</td></tr><tr><td>Hermosa Avenue</td><td>1922</td><td>1997</td><td>24,000</td><td>$37.64</td><td>100%</td><td></td></tr><tr><td>Hermosa Beach, CA 90254</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Hollywood Blvd</td><td>1929, 1991</td><td>1999</td><td>180,000</td><td>$33.56</td><td>91%</td><td>Marshalls</td></tr><tr><td>Hollywood, CA 90028(6)</td><td></td><td></td><td></td><td></td><td></td><td>La La Land</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>DSW</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>L.A. Fitness</td></tr><tr><td>Kings Court</td><td>1960</td><td>1998</td><td>80,000</td><td>$31.46</td><td>100%</td><td>Lunardi&#x27;s Supermarket</td></tr><tr><td>Los Gatos, CA 95032(4)(7)</td><td></td><td></td><td></td><td></td><td></td><td>CVS</td></tr><tr><td>Old Town Center</td><td>1962, 1998</td><td>1997</td><td>95,000</td><td>$38.55</td><td>97%</td><td>Gap</td></tr><tr><td>Los Gatos, CA 95030</td><td></td><td></td><td></td><td></td><td></td><td>Banana Republic</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Anthropologie</td></tr><tr><td>Plaza El Segundo / The Point</td><td>2006-2007</td><td>2011/2015</td><td>450,000</td><td>$41.63</td><td>98%</td><td>H&amp;M</td></tr><tr><td>El Segundo, CA 90245(5)(10)</td><td></td><td></td><td></td><td></td><td></td><td>Anthropologie</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Best Buy</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>HomeGoods</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Whole Foods</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Dick&#x27;s Sporting Goods</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Container Store</td></tr><tr><td>Santana Row</td><td>2002, 2009</td><td>1997</td><td>651,000</td><td>$50.13</td><td>98%</td><td>H&amp;M</td></tr><tr><td>San Jose, CA 95128</td><td></td><td></td><td></td><td></td><td></td><td>Crate &amp; Barrel</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Container Store</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Best Buy</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>CineArts Theatre</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Hotel Valencia</td></tr><tr><td>Santana Row Residential</td><td>2003-2006, 2011, 2014</td><td>1997, 2012</td><td>662 units</td><td>N/A</td><td>95%</td><td></td></tr><tr><td>San Jose, CA 95128</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>San Antonio Center</td><td>1958, 1964-1965, 1974-1975, 1995-1997</td><td>2015</td><td>376,000</td><td>$12.67</td><td>96%</td><td>Kohl&#x27;s</td></tr><tr><td>Mountain View, CA 94040 (4)(7)</td><td></td><td></td><td></td><td></td><td></td><td>Walmart</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Trader Joe&#x27;s</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>24 Hour Fitness</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Jo-Ann Stores</td></tr><tr><td>Third Street Promenade</td><td>1888-2000</td><td>1996-2000</td><td>209,000</td><td>$71.00</td><td>99%</td><td>Abercrombie &amp; Fitch</td></tr><tr><td>Santa Monica, CA 90401</td><td></td><td></td><td></td><td></td><td></td><td>J. Crew</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Old Navy</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Banana Republic</td></tr><tr><td>Westgate Center</td><td>1960-1966</td><td>2004</td><td>638,000</td><td>$17.38</td><td>98%</td><td>Nike Factory</td></tr><tr><td>San Jose, CA 95129</td><td></td><td></td><td></td><td></td><td></td><td>Target</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Walmart Neighborhood</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Market</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Burlington Coat Factory</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Ross Dress For Less</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Michaels</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Nordstrom Rack</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>J. Crew</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Gap Factory Store</td></tr></table>



<table><tr><td>Property, City, State, Zip Code</td><td>Year Completed</td><td>Year Acquired</td><td>Square Feet(1) /Apartment Units</td><td>Average Rent Per Square Foot(2)</td><td>Percentage Leased(3)</td><td>Principal Tenant(s)</td></tr><tr><td>Connecticut</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Bristol Plaza</td><td>1959</td><td>1995</td><td>266,000</td><td>$13.17</td><td>92%</td><td>Stop &amp; Shop TJ Maxx</td></tr><tr><td>Bristol, CT 06010</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Darien</td><td>1920-2009</td><td>2013</td><td>95,000</td><td>$28.30</td><td>97%</td><td>Stop &amp; Shop Equinox</td></tr><tr><td>Darien, CT 06820</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Greenwich Avenue</td><td>1968</td><td>1995</td><td>36,000</td><td>$61.00</td><td>100%</td><td>Saks Fifth Avenue</td></tr><tr><td>Greenwich Avenue, CT 06830</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>District of Columbia</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Friendship Center</td><td>1998</td><td>2001</td><td>119,000</td><td>$28.12</td><td>100%</td><td>Marshalls DSW Maggiano&#x27;s Nordstrom Rack</td></tr><tr><td>Washington, DC 20015</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Sam&#x27;s Park &amp; Shop</td><td>1930</td><td>1995</td><td>49,000</td><td>$44.28</td><td>86%</td><td>Petco</td></tr><tr><td>Washington, DC 20008</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Florida</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>CocoWalk</td><td>1990/1994, 1922-1973</td><td>2015</td><td>216,000</td><td>$36.20</td><td>82%</td><td>Cinepolis Theaters Gap Youfit Health Club</td></tr><tr><td>Coconut Grove, FL 33133 (5)(13)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Del Mar Village</td><td>1982, 1994 &amp; 2007</td><td>2008/2014</td><td>196,000</td><td>$16.21</td><td>74%</td><td>Winn Dixie CVS</td></tr><tr><td>Boca Raton, FL 33433</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>The Shops at Sunset Place</td><td>1999</td><td>2015</td><td>515,000</td><td>$22.53</td><td>82%</td><td>AMC Theaters L.A. Fitness Barnes &amp; Noble GameTime</td></tr><tr><td>South Miami, FL 33143 (5)(10)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tower Shops</td><td>1989</td><td>2011/2014</td><td>389,000</td><td>$20.14</td><td>98%</td><td>Ulta Best Buy DSW Old Navy Ross Dress For Less TJ Maxx Trader Joe&#x27;s</td></tr><tr><td>Davie, FL 33324</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Illinois</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Crossroads</td><td>1959</td><td>1993</td><td>168,000</td><td>$22.29</td><td>91%</td><td>Golfsmith Guitar Center L.A. Fitness</td></tr><tr><td>Highland Park, IL 60035</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Finley Square</td><td>1974</td><td>1995</td><td>315,000</td><td>$12.49</td><td>91%</td><td>Bed, Bath &amp; Beyond Petsmart Buy Buy Baby Michaels</td></tr><tr><td>Downers Grove, IL 60515</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Garden Market</td><td>1958</td><td>1994</td><td>140,000</td><td>$13.30</td><td>100%</td><td>Mariano&#x27;s Fresh Market Walgreens</td></tr><tr><td>Western Springs, IL 60558</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>North Lake Commons</td><td>1989</td><td>1994</td><td>129,000</td><td>$10.95</td><td>85%</td><td>Jewel Osco</td></tr><tr><td>Lake Zurich, IL 60047</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Maryland</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Bethesda Row</td><td>1945-1991</td><td>1993-2006</td><td>533,000</td><td>$49.07</td><td>98%</td><td>Apple Computer Barnes &amp; Noble Equinox Giant Food Landmark Theater</td></tr><tr><td>Bethesda, MD 20814(4)</td><td>2001, 2008</td><td>2008/2010</td><td></td><td></td><td></td><td></td></tr><tr><td>Bethesda Row Residential</td><td>2008</td><td>1993</td><td>180 units</td><td>N/A</td><td>95%</td><td></td></tr><tr><td>Bethesda, MD 20814</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Congressional Plaza</td><td>1965</td><td>1965</td><td>325,000</td><td>$40.10</td><td>97%</td><td>Buy Buy Baby Last Call Studio by Neiman Marcus Container Store The Fresh Market</td></tr><tr><td>Rockville, MD 20852(5)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Congressional Plaza Residential</td><td>2003</td><td>1965</td><td>146 units</td><td>N/A</td><td>91%</td><td></td></tr><tr><td>Rockville, MD 20852(5)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Courthouse Center</td><td>1975</td><td>1997</td><td>35,000</td><td>$23.60</td><td>66%</td><td></td></tr><tr><td>Rockville, MD 20852</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Federal Plaza</td><td>1970</td><td>1989</td><td>248,000</td><td>$34.48</td><td>99%</td><td>Micro Center Ross Dress For Less TJ Maxx Trader Joe&#x27;s</td></tr><tr><td>Rockville, MD 20852</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Free State Shopping Center</td><td>1970</td><td>2007</td><td>279,000</td><td>$16.61</td><td>94%</td><td>Giant Food TJ Maxx Ross Dress For Less Office Depot</td></tr></table>



<table><tr><td>Property, City, State, Zip Code</td><td>Year Completed</td><td>Year Acquired</td><td>Square Feet(1) /Apartment Units</td><td>Average Rent Per Square Foot(2)</td><td>Percentage Leased(3)</td><td>Principal Tenant(s)</td></tr><tr><td>Gaithersburg Square</td><td>1966</td><td>1993</td><td>207,000</td><td>$26.53</td><td>92%</td><td>Bed, Bath &amp; Beyond</td></tr><tr><td>Gaithersburg, MD 20878</td><td></td><td></td><td></td><td></td><td></td><td>Ross Dress For Less</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Ashley Furniture</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>HomeStore</td></tr><tr><td>Governor Plaza</td><td>1963</td><td>1985</td><td>243,000</td><td>$18.95</td><td>100%</td><td>Aldi</td></tr><tr><td>Glen Burnie, MD 21961</td><td></td><td></td><td></td><td></td><td></td><td>Dick&#x27;s Sporting Goods</td></tr><tr><td>Laurel</td><td>1956</td><td>1986</td><td>389,000</td><td>$22.41</td><td>80%</td><td>L.A. Fitness</td></tr><tr><td>Laurel, MD 20707</td><td></td><td></td><td></td><td></td><td></td><td>Giant Food</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Marshalls</td></tr><tr><td>Montrose Crossing</td><td>1960-1979, 1996, 2011</td><td>2011/2013</td><td>366,000</td><td>$24.56</td><td>93%</td><td>A.C. Moore</td></tr><tr><td>Rockville, MD 20852 (5)(10)</td><td></td><td></td><td></td><td></td><td></td><td>Giant Food</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Sports Authority</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Barnes &amp; Noble</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Marshalls</td></tr><tr><td>Perring Plaza</td><td>1963</td><td>1985</td><td>395,000</td><td>$14.35</td><td>100%</td><td>Micro Center</td></tr><tr><td>Baltimore, MD 21134</td><td></td><td></td><td></td><td></td><td></td><td>Burlington Coat Factory</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Home Depot</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Shoppers Food Warehouse</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Jo-Ann Stores</td></tr><tr><td>Pike &amp; Rose</td><td>1963, 2014</td><td>1982/2007/2012</td><td>208,000</td><td>$44.14</td><td>96%</td><td>iPic Theater</td></tr><tr><td>North Bethesda, MD 20852 (12)</td><td></td><td></td><td></td><td></td><td></td><td>Gap/Gap Kids</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Sport &amp; Health</td></tr><tr><td>Pike &amp; Rose Residential</td><td>2014</td><td>1982/2007</td><td>389 units</td><td>N/A</td><td>73%</td><td></td></tr><tr><td>North Bethesda, MD 20852 (12)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Plaza Del Mercado</td><td>1969</td><td>2004</td><td>96,000</td><td>$35.46</td><td>92%</td><td>CVS</td></tr><tr><td>Silver Spring, MD 20906(9)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Quince Orchard</td><td>1975</td><td>1993</td><td>267,000</td><td>$21.78</td><td>96%</td><td>Aldi</td></tr><tr><td>Gaithersburg, MD 20877(4)</td><td></td><td></td><td></td><td></td><td></td><td>HomeGoods</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>L.A. Fitness</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Staples</td></tr><tr><td>Rockville Town Square</td><td>2006-2007</td><td>2006-2007</td><td>187,000</td><td>$29.59</td><td>93%</td><td>CVS</td></tr><tr><td>Rockville, MD 20852 (8)</td><td></td><td></td><td></td><td></td><td></td><td>Gold&#x27;s Gym</td></tr><tr><td>Rollingwood Apartments</td><td>1960</td><td>1971</td><td>282 units</td><td>N/A</td><td>95%</td><td></td></tr><tr><td>Silver Spring, MD 20910</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>9 three-story buildings(10)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>THE AVENUE at White Marsh</td><td>1997</td><td>2007</td><td>305,000</td><td>$24.24</td><td>99%</td><td>AMC Loews</td></tr><tr><td>Baltimore, MD 21236(7)(10)</td><td></td><td></td><td></td><td></td><td></td><td>Old Navy</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Barnes &amp; Noble</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>A.C. Moore</td></tr><tr><td>The Shoppes at Nottingham Square</td><td>2005-2006</td><td>2007</td><td>32,000</td><td>$48.13</td><td>100%</td><td></td></tr><tr><td>Baltimore, MD 21236</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>White Marsh Other</td><td>1985</td><td>2007</td><td>73,000</td><td>$31.67</td><td>98%</td><td></td></tr><tr><td>Baltimore, MD 21236</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>White Marsh Plaza</td><td>1987</td><td>2007</td><td>80,000</td><td>$21.80</td><td>96%</td><td>Giant Food</td></tr><tr><td>Baltimore, MD 21236</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Wildwood</td><td>1958</td><td>1969</td><td>84,000</td><td>$95.44</td><td>99%</td><td>CVS</td></tr><tr><td>Bethesda, MD 20814</td><td></td><td></td><td></td><td></td><td></td><td>Balducci&#x27;s</td></tr><tr><td>Massachusetts</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Assembly Row/</td><td>2005, 2014</td><td>2005-2011, 2013</td><td>738,000</td><td>$22.49</td><td>100%</td><td>AMC Theatres</td></tr><tr><td>Assembly Square Marketplace</td><td></td><td></td><td></td><td></td><td></td><td>LEGOLAND Discovery</td></tr><tr><td>Somerville, MA 02145 (12)</td><td></td><td></td><td></td><td></td><td></td><td>Center</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Saks Fifth Avenue Off 5th</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Nike Factory</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>J. Crew</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Legal on the Mystic</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Bed, Bath &amp; Beyond</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>TJ Maxx</td></tr><tr><td>Atlantic Plaza</td><td>1960</td><td>2004</td><td>123,000</td><td>$15.83</td><td>90%</td><td>Stop &amp; Shop</td></tr><tr><td>North Reading, MA 01864(9)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Campus Plaza</td><td>1970</td><td>2004</td><td>116,000</td><td>$14.86</td><td>100%</td><td>Roche Brothers</td></tr><tr><td>Bridgewater, MA 02324(9)</td><td></td><td></td><td></td><td></td><td></td><td>Burlington Coat Factory</td></tr><tr><td>Chelsea Commons</td><td>1962-1969, 2008</td><td>2006-2008</td><td>222,000</td><td>$11.43</td><td>100%</td><td>Sav-A-Lot</td></tr><tr><td>Chelsea, MA 02150(10)</td><td></td><td></td><td></td><td></td><td></td><td>Home Depot</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td>Planet Fitness</td></tr><tr><td>Chelsea Commons Residential</td><td>2013</td><td>2008</td><td>56 units</td><td>N/A</td><td>95%</td><td></td></tr><tr><td>Chelsea, MA 02150</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Dedham Plaza</td><td>1959</td><td>1993</td><td>241,000</td><td>$15.90</td><td>92%</td><td>Star Market</td></tr><tr><td>Dedham, MA 02026</td><td></td><td></td><td></td><td></td><td></td><td></td></tr></table>



<table><tr><td>Property, City, State, Zip Code</td><td>Year Completed</td><td>Year Acquired</td><td>Square Feet(1) /Apartment Units</td><td>Average Rent Per Square Foot(2)</td><td>Percentage Leased(3)</td><td>Principal Tenant(s)</td></tr><tr><td>Linden Square Wellesley, MA 02481</td><td>1960, 2008</td><td>2006</td><td>223,000</td><td>$46.08</td><td>94%</td><td>Roche Brothers Supermarket CVS</td></tr><tr><td>North Dartmouth North Dartmouth, MA 02747</td><td>2004</td><td>2006</td><td>48,000</td><td>$15.71</td><td>100%</td><td>Stop &amp; Shop</td></tr><tr><td>Queen Anne Plaza Norwell, MA 02061</td><td>1967</td><td>1994</td><td>149,000</td><td>$16.64</td><td>100%</td><td>HomeGoods TJ Maxx Hannaford</td></tr><tr><td>Saugus Plaza Saugus, MA 01906</td><td>1976</td><td>1996</td><td>168,000</td><td>$11.99</td><td>100%</td><td>Kmart Super Stop &amp; Shop</td></tr><tr><td>Michigan</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Gratiot Plaza Roseville, MI 48066</td><td>1964</td><td>1973</td><td>217,000</td><td>$11.91</td><td>99%</td><td>Bed, Bath &amp; Beyond Best Buy Kroger DSW</td></tr><tr><td>North Carolina</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Eastgate Chapel Hill, NC 27514</td><td>1963</td><td>1986</td><td>153,000</td><td>$24.06</td><td>91%</td><td>Stein Mart Trader Joe&#x27;s</td></tr><tr><td>New Jersey</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Brick Plaza Brick Township, NJ 08723(4)</td><td>1958</td><td>1989</td><td>422,000</td><td>$19.56</td><td>74%</td><td>Barnes &amp; Noble AMC Loews Sports Authority</td></tr><tr><td>Brook 35 Sea Girt, NJ 08750(5)(7)(10)</td><td>1986, 2004</td><td>2014</td><td>98,000</td><td>$34.79</td><td>98%</td><td>Ann Taylor Banana Republic Coach Williams-Sonoma</td></tr><tr><td>Ellisburg Cherry Hill, NJ 08034</td><td>1959</td><td>1992</td><td>268,000</td><td>$15.94</td><td>97%</td><td>Whole Foods Buy Buy Baby Stein Mart</td></tr><tr><td>Mercer Mall Lawrenceville, NJ 08648(4)(8)</td><td>1975</td><td>2003</td><td>527,000</td><td>$23.60</td><td>99%</td><td>Raymour &amp; Flanigan Bed, Bath &amp; Beyond DSW TJ Maxx Shop Rite Nordstrom Rack REI</td></tr><tr><td>The Grove at Shrewsbury Shrewsbury, NJ 07702(5)(7)(10)</td><td>1988, 1993 &amp; 2007</td><td>2014</td><td>192,000</td><td>$43.51</td><td>99%</td><td>Lululemon Brooks Brothers Anthropologie Pottery Barn J. Crew Banana Republic Williams-Sonoma</td></tr><tr><td>Troy Parsippany-Troy, NJ 07054</td><td>1966</td><td>1980</td><td>211,000</td><td>$27.92</td><td>67%</td><td>L.A. Fitness</td></tr><tr><td>New York</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fresh Meadows Queens, NY 11365</td><td>1949</td><td>1997</td><td>404,000</td><td>$30.60</td><td>100%</td><td>Island of Gold Modell&#x27;s AMC Loews Kohl&#x27;s Michaels</td></tr><tr><td>Greenlawn Plaza Greenlawn, NY 11743(9)(10)</td><td>1975, 2004</td><td>2006</td><td>106,000</td><td>$17.18</td><td>93%</td><td>Greenlawn Farms Tuesday Morning</td></tr><tr><td>Hauppauge Hauppauge, NY 11788</td><td>1963</td><td>1998</td><td>134,000</td><td>$28.10</td><td>100%</td><td>Shop Rite A.C. Moore</td></tr><tr><td>Huntington Huntington, NY 11746</td><td>1962</td><td>1988/2007</td><td>279,000</td><td>$25.92</td><td>100%</td><td>Nordstrom Rack Bed, Bath &amp; Beyond Buy Buy Baby Michaels</td></tr><tr><td>Huntington Square East Northport, NY 11731(4)</td><td>1980, 2007</td><td>2010</td><td>74,000</td><td>$26.90</td><td>93%</td><td>Barnes &amp; Noble</td></tr><tr><td>Melville Mall Huntington, NY 11747(4)</td><td>1974</td><td>2006</td><td>247,000</td><td>$24.01</td><td>73%</td><td>Dick&#x27;s Sporting Goods Marshalls Macy&#x27;s Backstage</td></tr></table>



<table><tr><td>Property, City, State, Zip Code</td><td>Year Completed</td><td>Year Acquired</td><td>Square Feet(1) /Apartment Units</td><td>Average Rent Per Square Foot(2)</td><td>Percentage Leased(3)</td><td>Principal Tenant(s)</td></tr><tr><td>Pennsylvania</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Andorra</td><td>1953</td><td>1988</td><td>265,000</td><td>$15.65</td><td>95%</td><td>Acme Markets Kohl&#x27;s Staples L.A. Fitness</td></tr><tr><td>Philadelphia, PA 19128</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Bala Cynwyd</td><td>1955</td><td>1993</td><td>294,000</td><td>$23.77</td><td>100%</td><td>Acme Markets Lord &amp; Taylor Michaels L.A. Fitness</td></tr><tr><td>Bala Cynwyd, PA 19004</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Flourtown</td><td>1957</td><td>1980</td><td>156,000</td><td>$20.81</td><td>97%</td><td>Giant Food Movie Tavern</td></tr><tr><td>Flourtown, PA 19031</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Lancaster</td><td>1958</td><td>1980</td><td>127,000</td><td>$17.73</td><td>97%</td><td>Giant Food Michaels</td></tr><tr><td>Lancaster, PA 17601(8)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Langhorne Square</td><td>1966</td><td>1985</td><td>219,000</td><td>$17.39</td><td>100%</td><td>Marshalls Redner&#x27;s Warehouse Market</td></tr><tr><td>Levittown, PA 19056</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Lawrence Park</td><td>1972</td><td>1980</td><td>364,000</td><td>$20.45</td><td>96%</td><td>Acme Markets TJ Maxx HomeGoods Virginia College</td></tr><tr><td>Broomall, PA 19008</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Northeast</td><td>1959</td><td>1983</td><td>288,000</td><td>$12.02</td><td>87%</td><td>Burlington Coat Factory Home Gallery Marshalls</td></tr><tr><td>Philadelphia, PA 19114</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Town Center of New Britain</td><td>1969</td><td>2006</td><td>124,000</td><td>$9.91</td><td>90%</td><td>Giant Food Rite Aid</td></tr><tr><td>New Britain, PA 18901</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Willow Grove</td><td>1953</td><td>1984</td><td>211,000</td><td>$19.51</td><td>99%</td><td>Home Goods Marshalls Barnes &amp; Noble</td></tr><tr><td>Willow Grove, PA 19090</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Wynnewood</td><td>1948</td><td>1996</td><td>251,000</td><td>$27.24</td><td>100%</td><td>DSW Bed, Bath &amp; Beyond Giant Food Old Navy</td></tr><tr><td>Wynnewood, PA 19096</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Virginia</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>29th Place</td><td>1975-2001</td><td>2007</td><td>169,000</td><td>$17.60</td><td>98%</td><td>HomeGoods DSW Stein Mart Staples</td></tr><tr><td>Charlottesville, VA 22091(10)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Barcroft Plaza</td><td>1963, 1972 &amp; 1990</td><td>2006-2007</td><td>100,000</td><td>$24.61</td><td>92%</td><td>Harris Teeter Bank of America</td></tr><tr><td>Falls Church, VA 22041(9)(10)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Barracks Road</td><td>1958</td><td>1985</td><td>497,000</td><td>$25.05</td><td>99%</td><td>Anthropologie Bed, Bath &amp; Beyond Harris Teeter Kroger Barnes &amp; Noble Old Navy Michaels Ulta</td></tr><tr><td>Charlottesville, VA 22905</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Falls Plaza/Falls Plaza—East</td><td>1960-1962</td><td>1967/1972</td><td>144,000</td><td>$34.43</td><td>97%</td><td>Giant Food CVS Staples</td></tr><tr><td>Falls Church, VA 22046</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Graham Park Plaza</td><td>1971</td><td>1983</td><td>260,000</td><td>$27.77</td><td>93%</td><td>Stein Mart Giant Food L.A. Fitness</td></tr><tr><td>Fairfax, VA 22042</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Idylwood Plaza</td><td>1991</td><td>1994</td><td>73,000</td><td>$46.59</td><td>100%</td><td>Whole Foods</td></tr><tr><td>Falls Church, VA 22030</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Leesburg Plaza</td><td>1967</td><td>1998</td><td>236,000</td><td>$23.04</td><td>94%</td><td>Giant Food Pier 1 Imports Office Depot Petsmart</td></tr><tr><td>Leesburg, VA 20176</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Mount Vernon/South Valley/</td><td>1966,</td><td>2003/2006</td><td>569,000</td><td>$17.14</td><td>97%</td><td>Shoppers Food Warehouse Bed, Bath &amp; Beyond Michaels Home Depot TJ Maxx Gold&#x27;s Gym Staples DSW</td></tr><tr><td>7770 Richmond Hwy</td><td>1972,1987</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Alexandria, VA 22306(4)(7)</td><td>&amp; 2001</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Old Keene Mill</td><td>1968</td><td>1976</td><td>92,000</td><td>$41.19</td><td>84%</td><td>Whole Foods Walgreens</td></tr><tr><td>Springfield, VA 22152</td><td></td><td></td><td></td><td></td><td></td><td></td></tr></table>



<table><tr><td>Property, City, State, Zip Code</td><td>Year Completed</td><td>Year Acquired</td><td>Square Feet(1) /Apartment Units</td><td>Average Rent Per Square Foot(2)</td><td>Percentage Leased(3)</td><td>Principal Tenant(s)</td></tr><tr><td>Pan Am Fairfax, VA 22031</td><td>1979</td><td>1993</td><td>227,000</td><td>$22.37</td><td>98%</td><td>Michaels Micro Center Safeway</td></tr><tr><td>Pentagon Row Arlington, VA 22202</td><td>2001-2002</td><td>1998/2010</td><td>299,000</td><td>$38.63</td><td>78%</td><td>Harris Teeter Bed, Bath &amp; Beyond DSW</td></tr><tr><td>Pike 7 Plaza Vienna, VA 22180</td><td>1968</td><td>1997/2015</td><td>164,000</td><td>$42.75</td><td>99%</td><td>DSW Staples TJ Maxx</td></tr><tr><td>Tower Shopping Center Springfield, VA 22150</td><td>1960</td><td>1998</td><td>112,000</td><td>$24.38</td><td>92%</td><td>Talbots L.A. Mart Total Wine &amp; More</td></tr><tr><td>Tyson&#x27;s Station Falls Church, VA 22043</td><td>1954</td><td>1978</td><td>49,000</td><td>$43.20</td><td>92%</td><td>Trader Joe&#x27;s</td></tr><tr><td>Village at Shirlington Arlington, VA 22206(8)</td><td>1940, 2006-2009</td><td>1995</td><td>265,000</td><td>$36.17</td><td>88%</td><td>AMC Loews Carlyle Grand Café Harris Teeter</td></tr><tr><td>Willow Lawn Richmond, VA 23230</td><td>1957</td><td>1983</td><td>445,000</td><td>$17.91</td><td>93%</td><td>Kroger Old Navy Ross Dress For Less Staples</td></tr><tr><td>Total All Regions—Retail(11)</td><td></td><td></td><td>21,379,000</td><td>$26.28</td><td>94%</td><td></td></tr><tr><td>Total All Regions—Residential</td><td></td><td></td><td>1,715 units</td><td></td><td>90%</td><td></td></tr></table>

(1) Represents the GLA of the commercial portion of the property. Some of our properties include office space which is included in this square footage but is not material in total.

(2) Average base rent is calculated as the aggregate, annualized in-place contractual (defined as cash basis including adjustments for concessions) minimum rent for all occupied spaces divided by the aggregate GLA of all occupied spaces.

(3) Percentage leased is expressed as a percentage of rentable commercial square feet occupied or subject to a lease. Residential percentage leased is expressed as a percentage of units occupied or subject to a lease.

(4) All or a portion of this property is owned pursuant to a ground lease.

(5) We own the controlling interest in this center.

(6) We own a 90% general and limited partnership interest in these buildings.

(7) We own all or a portion of this property in a “downREIT” partnership, of which a wholly owned subsidiary of the Trust is the sole general partner, with third party partners holding operating partnership units.

(8) All or a portion of this property is subject to a capital lease obligation.

(9) Properties acquired through a joint venture arrangement with affiliates of a discretionary fund created and advised by Clarion Partners. On January 13, 2016, we acquired Clarion's 70% interest in these properties.

(10) All or a portion of this property is encumbered by a mortgage loan.

(11) Aggregate information is calculated on a GLA weighted-average basis, excluding properties owned through a joint venture arrangement with affiliates of a discretionary fund created and advised by Clarion Partners.

(12) Portion of property is currently under development. See further discussion in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

(13) This property includes partial interests in eight buildings in addition to our initial acquisition. See further discussion in Note 3 to the Financial Statements.

## ITEM 3. LEGAL PROCEEDINGS

None.

## ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.



## PART II

## ITEM 5. MARKET FOR OUR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common shares trade on the New York Stock Exchange under the symbol “FRT.” Listed below are the high and low closing prices of our common shares as reported on the New York Stock Exchange and the dividends declared for each of the periods indicated.

<table><tr><td rowspan="2"></td><td colspan="3">Price Per Share</td><td rowspan="2">Dividends Declared Per Share</td></tr><tr><td>High</td><td>Low</td><td></td></tr><tr><td>2015</td><td></td><td></td><td></td><td></td></tr><tr><td>Fourth quarter</td><td>$     149.96</td><td>$     135.60</td><td>$     0.940</td><td></td></tr><tr><td>Third quarter</td><td>$     139.05</td><td>$     124.96</td><td>$     0.940</td><td></td></tr><tr><td>Second quarter</td><td>$     149.20</td><td>$     127.84</td><td>$     0.870</td><td></td></tr><tr><td>First quarter</td><td>$     150.27</td><td>$     135.74</td><td>$     0.870</td><td></td></tr><tr><td>2014</td><td></td><td></td><td></td><td></td></tr><tr><td>Fourth quarter</td><td>$     137.18</td><td>$     118.28</td><td>$     0.870</td><td></td></tr><tr><td>Third quarter</td><td>$     125.80</td><td>$     117.12</td><td>$     0.870</td><td></td></tr><tr><td>Second quarter</td><td>$     123.11</td><td>$     112.07</td><td>$     0.780</td><td></td></tr><tr><td>First quarter</td><td>$     114.72</td><td>$     100.90</td><td>$     0.780</td><td></td></tr></table>

On February 5, 2016, there were 2,840 holders of record of our common shares.

Our ongoing operations generally will not be subject to federal income taxes as long as we maintain our REIT status and distribute to shareholders at least 100% of our taxable income. Under the Code, REITs are subject to numerous organizational and operational requirements, including the requirement to generally distribute at least 90% of taxable income.

Future distributions will be at the discretion of our Board of Trustees and will depend on our actual net income available for common shareholders, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Trustees deems relevant. We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our regular annual dividend rate for 48 consecutive years.

Our total annual dividends paid per common share for 2015 and 2014 were $3.55 per share and $3.21 per share, respectively. The annual dividend amounts are different from dividends as calculated for federal income tax purposes. Distributions to the extent of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to a shareholder as ordinary dividend income. Distributions in excess of current and accumulated earnings and profits will be treated as a nontaxable reduction of the shareholder's basis in such shareholder's shares, to the extent thereof, and thereafter as taxable capital gain. Distributions that are treated as a reduction of the shareholder's basis in its shares will have the effect of increasing the amount of gain, or reducing the amount of loss, recognized upon the sale of the shareholder's shares. No assurances can be given regarding what portion, if any, of distributions in 2016 or subsequent years will constitute a return of capital for federal income tax purposes. During a year in which a REIT earns a net long-term capital gain, the REIT can elect under Section 857(b)(3) of the Code to designate a portion of dividends paid to shareholders as capital gain dividends. If this election is made, then the capital gain dividends are generally taxable to the shareholder as long-term capital gains.

The following table reflects the income tax status of distributions per share paid to common shareholders:

<table><tr><td rowspan="2"></td><td colspan="3">Year Ended December 31,</td></tr><tr><td colspan="2">2015</td><td>2014</td></tr><tr><td>Ordinary dividend</td><td>$     3,515</td><td>$     3,178</td><td></td></tr><tr><td>Capital gain</td><td>0.035</td><td>0.032</td><td></td></tr><tr><td></td><td>$     3,550</td><td>$     3,210</td><td></td></tr></table>

Distributions on our 5.417% Series 1 Cumulative Convertible Preferred Shares were paid at the rate of $1.354 per share per annum commencing on the issuance date of March 8, 2007. We do not believe that the preferential rights available to the holders of our preferred shares or the financial covenants contained in our debt agreements had or will have an adverse effect



on our ability to pay dividends in the normal course of business to our common shareholders or to distribute amounts necessary to maintain our qualification as a REIT.

## Total Stockholder Return Performance

The following performance graph compares the cumulative total shareholder return on Federal Realty's common shares with the S&P 500 Index and the index of equity real estate investment trusts prepared by the National Association of Real Estate Investment Trusts ("NAREIT") for the five fiscal years commencing December 31, 2010, and ending December 31, 2015, assuming an investment of $100 and the reinvestment of all dividends into additional common shares during the holding period. Equity real estate investment trusts are defined as those that derive more than 75% of their income from equity investments in real estate assets. The FTSE NAREIT Equity REIT Total Return Index includes all tax qualified real estate investment trusts listed on the NYSE, NYSE Amex (formerly known as the American Stock Exchange), or the NASDAQ National Market. Stock performance for the past five years is not necessarily indicative of future results.

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN



## Recent Sales of Unregistered Shares

Under the terms of various operating partnership agreements of certain of our affiliated limited partnerships, the interest of limited partners in those limited partnerships may be redeemed, subject to certain conditions, for cash or an equivalent number of our common shares, at our option. During the three months ended December 31, 2015, there were no redemptions of operating partnership units. All other equity securities sold by us during 2015 that were not registered have been previously reported in a Quarterly Report on Form 10-Q.

## Purchases of Equity Securities by the Issuer and Affiliated Purchasers

During 2015, 9,915 restricted common shares were forfeited by former employees.

The following information describes stock repurchases during the fourth quarter of the fiscal year ended December 31, 2015:



<table><tr><td>Period</td><td>Total number of shares purchased (1)</td><td>Average price paid per share</td><td>Total number of shares purchased as part of publicly announced plans or programs</td><td>Maximum number or approximate dollar amount of shares that may yet be purchased under the plans or programs</td></tr><tr><td>October 1, 2015 - October 31, 2015</td><td>29,064</td><td>$ 142.05</td><td>—</td><td>$ —</td></tr></table>

(1) Represents shares delivered in payment of withholding taxes in connection with restricted stock vesting by participants.



## ITEM 6. SELECTED FINANCIAL DATA

The following table includes certain financial information on a consolidated historical basis. You should read this section in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data.”

<table><tr><td rowspan="3"></td><td colspan="5">Year Ended December 31,</td></tr><tr><td>2015</td><td>2014</td><td>2013</td><td>2012</td><td>2011</td></tr><tr><td colspan="5">(In thousands, except per share data and ratios)</td></tr><tr><td>Operating Data:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Rental income</td><td>$ 727,812</td><td>$ 666,322</td><td>$ 620,089</td><td>$ 580,114</td><td>$ 536,749</td></tr><tr><td>Property operating income(1)</td><td>$ 510,595</td><td>$ 474,167</td><td>$ 446,959</td><td>$ 426,721</td><td>$ 381,335</td></tr><tr><td>Income from continuing operations</td><td>$ 190,094</td><td>$ 167,888</td><td>$ 137,811</td><td>$ 142,972</td><td>$ 130,319</td></tr><tr><td>Gain on sale of real estate</td><td>$ 28,330</td><td>$ 4,401</td><td>$ 28,855</td><td>$ 11,860</td><td>$ 15,075</td></tr><tr><td>Net income</td><td>$ 218,424</td><td>$ 172,289</td><td>$ 167,608</td><td>$ 156,232</td><td>$ 149,612</td></tr><tr><td>Net income attributable to the Trust</td><td>$ 210,219</td><td>$ 164,535</td><td>$ 162,681</td><td>$ 151,925</td><td>$ 143,917</td></tr><tr><td>Net income available for common shareholders</td><td>$ 209,678</td><td>$ 163,994</td><td>$ 162,140</td><td>$ 151,384</td><td>$ 143,376</td></tr><tr><td>Net cash provided by operating activities</td><td>$ 359,835</td><td>$ 346,130</td><td>$ 314,498</td><td>$ 296,633</td><td>$ 244,711</td></tr><tr><td>Net cash used in investing activities</td><td>$ (353,763)</td><td>$ (396,150)</td><td>$ (345,198)</td><td>$ (273,558)</td><td>$ (196,369)</td></tr><tr><td>Net cash (used in) provided by financing activities</td><td>$ (32,977)</td><td>$ 9,044</td><td>$ 82,639</td><td>$ (53,893)</td><td>$ 3,667</td></tr><tr><td>Dividends declared on common shares</td><td>$ 250,388</td><td>$ 224,190</td><td>$ 198,965</td><td>$ 182,813</td><td>$ 171,335</td></tr><tr><td>Weighted average number of common shares outstanding:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Basic</td><td>68,797</td><td>67,322</td><td>65,331</td><td>63,881</td><td>62,438</td></tr><tr><td>Diluted</td><td>68,981</td><td>67,492</td><td>65,483</td><td>64,056</td><td>62,603</td></tr><tr><td>Earnings per common share, basic:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Continuing operations</td><td>$ 2.63</td><td>$ 2.35</td><td>$ 2.01</td><td>$ 2.15</td><td>$ 1.98</td></tr><tr><td>Discontinued operations</td><td>—</td><td>—</td><td>0.38</td><td>0.02</td><td>0.31</td></tr><tr><td>Gain on sale of real estate</td><td>0.41</td><td>0.07</td><td>0.08</td><td>0.19</td><td>—</td></tr><tr><td>Total</td><td>$ 3.04</td><td>$ 2.42</td><td>$ 2.47</td><td>$ 2.36</td><td>$ 2.29</td></tr><tr><td>Earnings per common share, diluted:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Continuing operations</td><td>$ 2.62</td><td>$ 2.34</td><td>$ 2.00</td><td>$ 2.14</td><td>$ 1.97</td></tr><tr><td>Discontinued operations</td><td>—</td><td>—</td><td>0.38</td><td>0.02</td><td>0.31</td></tr><tr><td>Gain on sale of real estate</td><td>0.41</td><td>0.07</td><td>0.08</td><td>0.19</td><td>—</td></tr><tr><td>Total</td><td>$ 3.03</td><td>$ 2.41</td><td>$ 2.46</td><td>$ 2.35</td><td>$ 2.28</td></tr><tr><td>Dividends declared per common share</td><td>$ 3.62</td><td>$ 3.30</td><td>$ 3.02</td><td>$ 2.84</td><td>$ 2.72</td></tr><tr><td>Other Data:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Funds from operations available to common shareholders(2)</td><td>$ 352,857</td><td>$ 327,597</td><td>$ 289,938</td><td>$ 277,237</td><td>$ 251,576</td></tr><tr><td>EBITDA(3)</td><td>$ 504,696</td><td>$ 447,495</td><td>$ 446,555</td><td>$ 410,918</td><td>$ 374,131</td></tr><tr><td>Adjusted EBITDA(3)</td><td>$ 476,366</td><td>$ 443,094</td><td>$ 417,700</td><td>$ 399,058</td><td>$ 357,030</td></tr><tr><td>Ratio of EBITDA to combined fixed charges and preferred share dividends(3)(4)</td><td>3.9 x</td><td>3.5 x</td><td>3.3 x</td><td>3.3 x</td><td>3.5 x</td></tr><tr><td>Ratio of Adjusted EBITDA to combined fixed charges and preferred share dividends(3)(4)</td><td>3.6 x</td><td>3.5 x</td><td>3.1 x</td><td>3.2 x</td><td>3.3 x</td></tr></table>



As of December 31,

<table><tr><td rowspan="2"></td><td rowspan="2">2015</td><td rowspan="2">2014</td><td rowspan="2">2013</td><td rowspan="2">2012</td><td rowspan="2">2011</td></tr><tr></tr><tr><td>Balance Sheet Data:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Real estate, at cost</td><td>$ 6,064,406</td><td>$ 5,608,998</td><td>$ 5,149,463</td><td>$ 4,779,674</td><td>$ 4,426,444</td></tr><tr><td>Total assets</td><td>$ 4,911,709</td><td>$ 4,546,870</td><td>$ 4,219,294</td><td>$ 3,898,565</td><td>$ 3,666,210</td></tr><tr><td>Mortgages payable and capital lease obligations</td><td>$ 554,442</td><td>$ 635,345</td><td>$ 660,127</td><td>$ 832,482</td><td>$ 810,616</td></tr><tr><td>Notes payable</td><td>$ 343,600</td><td>$ 290,519</td><td>$ 300,822</td><td>$ 299,575</td><td>$ 295,159</td></tr><tr><td>Senior notes and debentures</td><td>$ 1,744,324</td><td>$ 1,483,813</td><td>$ 1,360,913</td><td>$ 1,076,545</td><td>$ 1,004,635</td></tr><tr><td>Preferred shares</td><td>$ 9,997</td><td>$ 9,997</td><td>$ 9,997</td><td>$ 9,997</td><td>$ 9.997</td></tr><tr><td>Shareholders&#x27; equity</td><td>$ 1,781,931</td><td>$ 1,692,556</td><td>$ 1,471,297</td><td>$ 1,310,593</td><td>$ 1,240,604</td></tr><tr><td>Number of common shares outstanding</td><td>69,493</td><td>68,606</td><td>66,701</td><td>64,815</td><td>63,544</td></tr></table>

(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.

The reconciliation of operating income to property operating income is as follows:

<table><tr><td rowspan="2"></td><td rowspan="2">2015</td><td rowspan="2">2014</td><td rowspan="2">2013</td><td rowspan="2">2012</td><td rowspan="2">2011</td></tr><tr></tr><tr><td>Operating income</td><td>$ 300,154</td><td>$ 271,037</td><td>$ 254,161</td><td>$ 253,862</td><td>$ 226,462</td></tr><tr><td>General and administrative</td><td>35,645</td><td>32,316</td><td>31,970</td><td>31,158</td><td>28,985</td></tr><tr><td>Depreciation and amortization</td><td>174,796</td><td>170,814</td><td>160,828</td><td>141,701</td><td>125,888</td></tr><tr><td>Property operating income</td><td>$ 510,595</td><td>$ 474,167</td><td>$ 446,959</td><td>$ 426,721</td><td>$ 381,335</td></tr></table>

(2) Funds from operations ("FFO") is a supplemental non-GAAP financial measure of real estate companies' operating performances. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as follows: net income, computed in accordance with U.S. GAAP, plus real estate related depreciation and amortization and excluding extraordinary items and gains on the sale of real estate. We compute FFO in accordance with the NAREIT definition, and we have historically reported our FFO available for common shareholders in addition to our net income.

We consider FFO available for common shareholders a meaningful, additional measure of operating performance primarily because it excludes the assumption that the value of the real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation. We use FFO primarily as one of several means of assessing our operating performance in comparison with other REITs. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs. Additional information regarding our calculation of FFO is contained in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”



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

<table><tr><td rowspan="2"></td><td rowspan="2">2015</td><td rowspan="2">2014</td><td rowspan="2">2013</td><td rowspan="2">2012</td><td rowspan="2">2011</td></tr><tr><td>(In thousands)</td></tr><tr><td>Net income</td><td>$ 218,424</td><td>$ 172,289</td><td>$ 167,608</td><td>$ 156,232</td><td>$ 149,612</td></tr><tr><td>Net income attributable to noncontrolling interests</td><td>(8,205)</td><td>(7,754)</td><td>(4,927)</td><td>(4,307)</td><td>(5,695)</td></tr><tr><td>Gain on sale of real estate</td><td>(28,330)</td><td>(4,401)</td><td>(28,855)</td><td>(11,860)</td><td>(15,075)</td></tr><tr><td>Gain on deconsolidation of VIE</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(2,026)</td></tr><tr><td>Depreciation and amortization of real estate assets</td><td>152,888</td><td>152,505</td><td>144,873</td><td>125,611</td><td>113,188</td></tr><tr><td>Amortization of initial direct costs of leases</td><td>15,026</td><td>12,391</td><td>10,694</td><td>10,935</td><td>10,432</td></tr><tr><td>Depreciation of joint venture real estate assets</td><td>1,344</td><td>1,555</td><td>1,504</td><td>1,513</td><td>1,771</td></tr><tr><td>Funds from operations</td><td>351,147</td><td>326,585</td><td>290,897</td><td>278,124</td><td>252,207</td></tr><tr><td>Dividends on preferred shares</td><td>(541)</td><td>(541)</td><td>(541)</td><td>(541)</td><td>(541</td></tr><tr><td>Income attributable to operating partnership units</td><td>3,398</td><td>3,027</td><td>888</td><td>943</td><td>981</td></tr><tr><td>Income attributable to unvested shares</td><td>(1,147)</td><td>(1,474)</td><td>(1,306)</td><td>(1,289)</td><td>(1,071)</td></tr><tr><td>Funds from operations available for common shareholders</td><td>$ 352,857</td><td>$ 327,597</td><td>$ 289,938</td><td>$ 277,237</td><td>$ 251,576</td></tr></table>

(3) The SEC has stated that EBITDA is a non-GAAP measure as calculated in the table below. Adjusted EBITDA is a non-GAAP measure that means net income or loss plus net interest expense, income taxes, depreciation and amortization, gain or loss on sale of real estate and impairments of real estate if any. Adjusted EBITDA is presented because it approximates a key performance measure in our debt covenants, but it should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP. Adjusted EBITDA as presented may not be comparable to other similarly titled measures used by other REITs.

The reconciliation of net income to EBITDA and adjusted EBITDA for the periods presented is as follows:

<table><tr><td rowspan="2"></td><td rowspan="2">2015</td><td rowspan="2">2014</td><td rowspan="2">2013</td><td rowspan="2">2012</td><td rowspan="2">2011</td></tr><tr><td>(In thousands)</td></tr><tr><td>Net income</td><td>$ 218,424</td><td>$ 172,289</td><td>$ 167,608</td><td>$ 156,232</td><td>$ 149,612</td></tr><tr><td>Depreciation and amortization</td><td>174,796</td><td>170,814</td><td>161,099</td><td>142,039</td><td>126,568</td></tr><tr><td>Interest expense</td><td>92,553</td><td>93,941</td><td>104,977</td><td>113,336</td><td>98,465</td></tr><tr><td>Early extinguishment of debt</td><td>19,072</td><td>10,545</td><td>13,304</td><td>—</td><td>(296)</td></tr><tr><td>Other interest income</td><td>(149)</td><td>(94)</td><td>(433)</td><td>(689)</td><td>(218)</td></tr><tr><td>EBITDA</td><td>504,696</td><td>447,495</td><td>446,555</td><td>410,918</td><td>374,131</td></tr><tr><td>Gain on sale of real estate</td><td>(28,330)</td><td>(4,401)</td><td>(28,855)</td><td>(11,860)</td><td>(15,075)</td></tr><tr><td>Gain on deconsolidation of VIE</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(2,026)</td></tr><tr><td>Adjusted EBITDA</td><td>$ 476,366</td><td>$ 443,094</td><td>$ 417,700</td><td>$ 399,058</td><td>$ 357,030</td></tr></table>

(4) Fixed charges consist of interest on borrowed funds (including capitalized interest), amortization of debt discount/premiums and debt costs, costs related to the early extinguishment of debt, and the portion of rent expense representing an interest factor. Excluding the $19.1 million, $10.5 million, and $13.3 million of early extinguishment of debt charge from fixed charges in 2015, 2014, and 2013, respectively, the ratio of EBITDA and adjusted EBITDA to combined fixed charges and preferred share dividends is 4.5x and 4.3x, respectively, for 2015, 3.9x and 3.8x, respectively, for 2014, and 3.7x and 3.4x, respectively for 2013.

## ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

## Forward-Looking Statements

Certain statements in this section or elsewhere in this report may be deemed “forward-looking statements”. See “Item 1A. Risk Factors” in this report for important information regarding these forward-looking statements and certain risk and uncertainties.



that may affect us. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing in “Item 8. Financial Statements and Supplementary Data” of this report.

## Overview

We are an equity real estate investment trust (“REIT”) specializing in the ownership, management, and redevelopment of high quality retail and mixed-use properties located primarily in densely populated and affluent communities in strategically selected metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as in California and South Florida. As of December 31, 2015, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 90 predominantly retail real estate projects comprising approximately 21.4 million square feet. In total, the real estate projects were 94.3% leased and 93.5% occupied at December 31, 2015. A joint venture in which we owned a 30% interest owned six retail real estate projects totaling approximately 0.8 million square feet as of December 31, 2015. In total, the joint venture properties in which we owned a 30% interest were 93.6% leased and 85.3% occupied at December 31, 2015. On January 13, 2016, we acquired our partner's 70% interest in the joint venture and subsequently own 100% of the related properties. We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for 48 consecutive years.

## Critical Accounting Policies

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 and current events and economic conditions. In addition, information relied upon by management in preparing such estimates includes internally generated financial and operating information, external market information, when available, and when necessary, information obtained from consultations with third party experts. Actual results could differ from these estimates. A discussion of possible risks which may affect these estimates is included in “Item 1A. Risk Factors” of this report. Management considers an accounting estimate to be critical if changes in the estimate could have a material impact on our consolidated results of operations or financial condition.

Our significant accounting policies are more fully described in Note 2 to the consolidated financial statements; however, the most critical accounting policies, which involve the use of estimates and assumptions as to future uncertainties and, therefore, may result in actual amounts that differ from estimates, are as follows:

## Revenue Recognition and Accounts Receivable

Our leases with tenants are classified as operating leases. Substantially all such leases contain fixed escalations which occur at specified times during the term of the lease. Base rents are recognized on a straight-line basis from when the tenant controls the space through the term of the related lease, net of valuation adjustments, based on management’s assessment of credit, collection and other business risk. Percentage rents, which represent additional rents based upon the level of sales achieved by certain tenants, are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved and the percentage rents are collectible. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related expenditures are incurred. For a tenant to terminate its lease agreement prior to the end of the agreed term, we may require that they pay a fee to cancel the lease agreement. Lease termination fees for which the tenant has relinquished control of the space are generally recognized on the termination date. When a lease is terminated early but the tenant continues to control the space under a modified lease agreement, the lease termination fee is generally recognized evenly over the remaining term of the modified lease agreement.

Current accounts receivable from tenants primarily relate to contractual minimum rent and percentage rent as well as real estate tax and other cost reimbursements. Accounts receivable from straight-line rent is typically longer term in nature and relates to the cumulative amount by which straight-line rental income recorded to date exceeds cash rents billed to date under the contractual lease agreement.

We make estimates of the collectability of our current accounts receivable and straight-line rents receivable which requires significant judgment by management. The collectability of receivables is affected by numerous factors including current economic conditions, bankruptcies, and the ability of the tenant to perform under the terms of their lease agreement. While we make estimates of potentially uncollectible amounts and provide an allowance for them through bad debt expense, actual collectability could differ from those estimates which could affect our net income. With respect to the allowance for current uncollectible tenant receivables, we assess the collectability of outstanding receivables by evaluating such factors as nature and age of the receivable, past history and current financial condition of the specific tenant including our assessment of the tenant's ability to meet its contractual lease obligations, and the status of any pending disputes or lease negotiations with the tenant. At December 31, 2015 and 2014, our allowance for doubtful accounts was $11.7 million and $12.4 million, respectively.



Historically, we have recognized bad debt expense between 0.3% and 1.3% of rental income and it was 0.2% in 2015 reflecting positive economic changes and their impact to our tenants. A change in the estimate of collectability of a receivable would result in a change to our allowance for doubtful accounts and correspondingly bad debt expense and net income. For example, in the event our estimates were not accurate and we were required to increase our allowance by 1% of rental income, our bad debt expense would have increased and our net income would have decreased by $7.3 million.

Due to the nature of the accounts receivable from straight-line rents, the collection period of these amounts typically extends beyond one year. Our experience relative to unbilled straight-line rents is that a portion of the amounts otherwise recognizable as revenue is never billed to or collected from tenants due to early lease terminations, lease modifications, bankruptcies and other factors. Accordingly, the extended collection period for straight-line rents along with our evaluation of tenant credit risk may result in the nonrecognition of a portion of straight-line rental income until the collection of such income is reasonably assured. If our evaluation of tenant credit risk changes indicating more straight-line revenue is reasonably collectible than previously estimated and realized, the additional straight-line rental income is recognized as revenue. If our evaluation of tenant credit risk changes indicating a portion of realized straight-line rental income is no longer collectible, a reserve and bad debt expense is recorded. At December 31, 2015 and 2014, accounts receivable includes approximately $72.7 million and $66.1 million, respectively, related to straight-line rents. Correspondingly, these estimates of collectability have a direct impact on our net income.

## Real Estate

The nature of our business as an owner, redeveloper and operator of retail shopping centers and mixed-use properties means that we invest significant amounts of capital. Depreciation and maintenance costs relating to our properties constitute substantial costs for us as well as the industry as a whole. We capitalize real estate investments and depreciate them on a straight-line basis in accordance with GAAP and consistent with industry standards based on our best estimates of the assets' physical and economic useful lives. We periodically review the estimated lives of our assets and implement changes, as necessary, to these estimates and, therefore, to our depreciation rates. These reviews may take into account such factors as the historical retirement and replacement of our assets, expected redevelopments, and general economic and real estate factors. Certain events, such as unforeseen competition or changes in customer shopping habits, could substantially alter our assumptions regarding our ability to realize the expected return on investment in the property and therefore reduce the economic life of the asset and affect the amount of depreciation expense to be charged against both the current and future revenues. These assessments have a direct impact on our net income. The longer the economic useful life, the lower the depreciation expense will be for that asset in a fiscal period, which in turn will increase our net income. Similarly, having a shorter economic useful life would increase the depreciation for a fiscal period and decrease our net income.

Land, buildings and real estate under development are recorded at cost. We compute depreciation using the straight-line method with useful lives ranging generally from 35 years to a maximum of 50 years on buildings and major improvements. Maintenance and repair costs are charged to operations as incurred. Tenant work and other major improvements, which improve or extend the life of the asset, are capitalized and depreciated over the life of the lease or the estimated useful life of the improvements, whichever is shorter. Minor improvements, furniture and equipment are capitalized and depreciated over useful lives ranging from 2 to 20 years.

Capitalized costs associated with leases are depreciated or amortized over the base term of the lease. Unamortized leasing costs are charged to expense if the applicable tenant vacates before the expiration of its lease. Undepreciated tenant work is written-off if the applicable tenant vacates and the tenant work is replaced or has no future value. Additionally, we make estimates as to the probability of certain development and redevelopment projects being completed. If we determine the redevelopment is no longer probable of completion, we immediately expense all capitalized costs which are not recoverable.

Interest costs on developments and major redevelopments are capitalized as part of developments and redevelopments not yet placed in service. Capitalization of interest commences when development activities and expenditures begin and end upon completion, which is when the asset is ready for its intended use. Generally, rental property is considered substantially complete and ready for its intended use upon completion of tenant improvements, but no later than one year from completion of major construction activity. We make judgments as to the time period over which to capitalize such costs and these assumptions have a direct impact on net income because capitalized costs are not subtracted in calculating net income. If the time period for capitalizing interest is extended, more interest is capitalized, thereby decreasing interest expense and increasing net income during that period.

Certain external and internal costs directly related to the development, redevelopment and leasing of real estate, including pre-construction costs, real estate taxes, insurance, construction costs and salaries and related costs of personnel directly involved, are capitalized. We capitalized external and internal costs related to both development and redevelopment activities of $232 million and $8 million, respectively, for 2015 and $277 million and $7 million, respectively, for 2014. We capitalized external



and internal costs related to other property improvements of $42 million and $2 million, respectively, for 2015 and $45 million and $2 million, respectively, for 2014. We capitalized external and internal costs related to leasing activities of $17 million and $6 million, respectively, for 2015 and $29 million and $7 million, respectively, for 2014. The amount of capitalized internal costs for salaries and related benefits for development and redevelopment activities, other property improvements, and leasing activities were $7 million, $1 million, and $6 million, for both 2015 and 2014. Total capitalized costs were $307 million and $367 million for 2015 and 2014, respectively.

When applicable, as lessee, we classify our leases of land and building as operating or capital leases. We are required to use judgment and make estimates in determining the lease term, the estimated economic life of the property and the interest rate to be used in determining whether or not the lease meets the qualification of a capital lease and is recorded as an asset.

## Real Estate Acquisitions

Upon acquisition of operating real estate properties, we estimate the fair value of assets and liabilities acquired including land, building, improvements, leasing costs, intangibles such as in-place leases, assumed debt, and current assets and liabilities, if any. Based on these estimates, we allocate the purchase price to the applicable assets and liabilities. We utilize methods similar to those used by independent appraisers in estimating the fair value of acquired assets and liabilities. The value allocated to in-place leases is amortized over the related lease term and reflected as rental income in the statement of operations. We consider qualitative and quantitative factors in evaluating the likelihood of a tenant exercising a below market renewal option and include such renewal options in the calculation of in-place lease value when we consider these to be bargain renewal options. If the value of below market lease intangibles includes renewal option periods, we include such renewal periods in the amortization period utilized. If a tenant vacates its space prior to contractual termination of its lease, the unamortized balance of any in-place lease value is written off to rental income.

## Long-Lived Assets and Impairment

There are estimates and assumptions made by management in preparing the consolidated financial statements for which the actual results will be determined over long periods of time. This includes the recoverability of long-lived assets, including our properties that have been acquired or redeveloped and our investment in certain joint ventures. Management’s evaluation of impairment includes review for possible indicators of impairment as well as, in certain circumstances, undiscounted and discounted cash flow analysis. Since most of our investments in real estate are wholly-owned or controlled assets which are held for use, a property with impairment indicators is first tested for impairment by comparing the undiscounted cash flows, including residual value, to the current net book value of the property. If the undiscounted cash flows are less than the net book value, the property is written down to expected fair value.

The calculation of both discounted and undiscounted cash flows requires management to make estimates of future cash flows including revenues, operating expenses, required maintenance and development expenditures, market conditions, demand for space by tenants and rental rates over long periods. Because our properties typically have a long life, the assumptions used to estimate the future recoverability of book value requires significant management judgment. Actual results could be significantly different from the estimates. These estimates have a direct impact on net income, because recording an impairment charge results in a negative adjustment to net income.

## 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 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. Any difference between our estimate of a potential loss and the actual outcome would result in an increase or decrease to net income.

In addition, we reserve for estimated losses, if any, associated with warranties given to a buyer at the time an asset is sold or other potential liabilities relating to that sale, taking any insurance policies into account. These warranties may extend up to ten years and the calculation of potential liability requires significant judgment. If changes in facts and circumstances indicate that warranty reserves are understated, we will accrue additional reserves at such time a liability has been incurred and the costs can be reasonably estimated. Warranty reserves are released once the legal liability period has expired or all related work has been substantially completed. Any changes to our estimated warranty losses would result in an increase or decrease in net income.



## Self-Insurance

We are self-insured for general liability costs up to predetermined retained amounts per claim, and we believe that we maintain adequate accruals to cover our retained liability. We currently do not maintain third party stop-loss insurance policies to cover liability costs in excess of predetermined retained amounts. Our accrual for self-insurance liability is determined by management and is based on claims filed and an estimate of claims projected to be incurred but not yet reported. Management considers a number of factors, including third-party actuarial analysis, previous experience in our portfolio, and future increases in costs of claims, when making these determinations. If our liability costs differ from these accruals, it will increase or decrease our net income.

## Recently Adopted and Recently Issued Accounting Pronouncements

See Note 2 to the consolidated financial statements.

## 2015 Significant Property Acquisitions and Dispositions

In January 2015, we acquired a controlling interest in San Antonio Center, a 376,000 square foot shopping center in Mountain View, California based on a total value of $62.2 million. Our effective interest approximates 80% and was funded by the assumption of our share of $18.7 million of mortgage debt, 58,000 downREIT operating partnership units, and $27 million of cash. A portion of the land is controlled under a long-term ground lease. Approximately $8.1 million of assets acquired were allocated to lease intangibles and included within other assets. Approximately $19.1 million was allocated to lease intangibles primarily related to "below market leases," and is included within other liabilities. Additionally, $16.3 million was allocated to noncontrolling interests. We incurred $1.8 million of acquisition costs, of which $1.1 million were incurred in 2015, and included in "general and administrative expense" in 2015 and 2014.

On February 25, 2015, we acquired the interest of one of the noncontrolling interest holders in The Grove at Shrewsbury for $8.8 million. As this noncontrolling interest was mandatorily redeemable, it was classified as a liability and was included in "other liabilities and deferred credits" on the accompanying December 31, 2014 consolidated balance sheet.

On April 24, 2015, we sold our Houston Street property in San Antonio, Texas for a sales price of $46.1 million, resulting in a gain of $11.5 million.

On May 4, 2015, we acquired CocoWalk, a 198,000 square foot retail property located in the Coconut Grove neighborhood of Miami, Florida for $87.5 million. The acquisition was completed through a newly formed entity ("CocoWalk LLC") for which we own a preferred interest and an 80% common interest. Approximately $1.5 million and $4.3 million of net assets acquired

were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively. Additionally, approximately $6.9 million was allocated to noncontrolling interests. On July 1, 2015 and December 16, 2015, we acquired partial interests in eight buildings in the Coconut Grove neighborhood of Miami, Florida for $7.8 million through our CocoWalk LLC entity. In total, we incurred $1.1 million in acquisition costs which are included in "general and administrative expenses" in 2015.

On July 8, 2015 we acquired a parcel of land adjacent to our Pike 7 Plaza property for $5.0 million.

On October 1, 2015, we acquired The Shops at Sunset Place, a 515,000 square foot mixed-use property located in South Miami, Florida based on a gross value of $110.2 million. The acquisition was completed through a newly formed entity for which we own an 85% interest. Approximately $4.8 million and $6.6 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively. Additionally, approximately $6.3 million was allocated to noncontrolling interests. We incurred $0.9 million of acquisition costs, which are included in "general and administrative expenses" in 2015. The transaction includes the assumption of an existing $70.8 million mortgage loan.

On November 19, 2015, we sold our Courtyard Shops property in Wellington, Florida for a sales price of $52.8 million, resulting in a gain of $16.8 million.

## Subsequent Event - 2016 Property Acquisition

On January 13, 2016, we acquired our partner's 70% equity interest in our joint venture arrangement with affiliates of a discretionary fund created and advised by Clarion Partners ("Clarion"), for $153.7 million, which includes $130 million of cash and the assumption of three interest only mortgage loans with a total principal balance of $34.4 million. With the acquisition, we gained control of the six underlying properties, which will be consolidated as of the acquisition date.



## 2015 Significant Debt and Equity Transactions

In connection with the acquisition of San Antonio Center in January 2015, we assumed a mortgage loan with a face amount of $18.7 million and a fair value of $19.3 million. The mortgage loan bore interest at 5.27%, and had an original maturity date of January 1, 2016. On November 2, 2015, we repaid the mortgage loan at par for $18.1 million.

On March 16, 2015, we issued $200.0 million aggregate principal amount of 4.50% senior unsecured notes due December 1, 2044. The notes were offered at 105.38% of the principal amount with a yield to maturity of 4.18%. The notes have the same terms and are of the same series as the $250.0 million senior notes issued on November 14, 2014. Our net proceeds from the March note offering after issuance premium, underwriting fees and other costs were $208.6 million. The proceeds were used on April 11, 2015 to repay our $200.0 million 6.20% notes prior to the original maturity date of January 15, 2017. The redemption price of $222.2 million included a make-whole premium of $19.2 million and accrued but unpaid interest of $3.0 million. The make-whole premium is included in "early extinguishment of debt" in 2015.

On August 3, 2015 we repaid the following mortgage loans, which had a weighted average interest rate of 7.9%, at par prior to their maturity date of November 1, 2015:

<table><tr><td rowspan="2"></td><td colspan="2">Principal Payoff Amount</td></tr><tr><td colspan="2">(In millions)</td></tr><tr><td>Barracks Road</td><td>$     35.3</td><td></td></tr><tr><td>Brick Plaza</td><td>25.9</td><td></td></tr><tr><td>Wynnewood</td><td>25.5</td><td></td></tr><tr><td>Lawrence Park</td><td>25.0</td><td></td></tr><tr><td>Wildwood</td><td>22.0</td><td></td></tr><tr><td>Hauppauge</td><td>13.3</td><td></td></tr><tr><td></td><td>$     147.0</td><td></td></tr></table>

On September 28, 2015, we issued $250.0 million of fixed rate senior notes that mature on January 15, 2021 and bear interest at 2.55%. The net proceeds from this note offering after issuance discounts, underwriting fees, and other costs were approximately $247.5 million.

In connection with the acquisition of The Shops at Sunset Place on October 1, 2015, we assumed a mortgage loan with a face amount of $70.8 million and a fair value of $76.5 million. The mortgage loan bears interest at 5.62% and has a maturity date of September 1, 2020.

On May 11, 2015 we replaced our existing at the market (“ATM”) equity program with a new ATM equity program in which we may from time to time offer and sell common shares having an aggregate offering price of up to $300.0 million. We intend to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay amounts of outstanding under our revolving credit facility and/or for general corporate purposes. For the three months ended December 31, 2015, we issued 63,007 common shares at a weighted average price per share of $144.54 for net cash proceeds of $9.0 million and paid $0.1 million in commissions and less than $0.1 million in additional offering expenses related to the sales of these common shares. For the year ended December 31, 2015, we issued 813,414 common shares at a weighted average price per share of $135.01 for net cash proceeds of $108.5 million and paid $1.1 million in commissions and $0.2 million in additional offering expenses related to the sales of these common shares. As of December 31, 2015, we had the capacity to issue up to $190.2 million in common shares under our ATM equity program.

## Outlook

We seek growth in earnings, funds from operations, and cash flows primarily through a combination of the following:

• growth in our same-center portfolio,

• growth in our portfolio from property development and redevelopments, and

• expansion of our portfolio through property acquisitions.

Our same-center growth is primarily driven by increases in rental rates on new leases and lease renewals and changes in portfolio occupancy. Over the long-term, the infill nature and strong demographics of our properties provide a strategic advantage allowing us to maintain relatively high occupancy and increase rental rates. We have generally continued to see an encouraging operating environment for many of our tenants as well as strong levels of interest from prospective tenants for our retail spaces. While there can be no assurance that these conditions will continue, we believe the locations of our centers and diverse tenant base partially mitigates any negative changes in the economic environment. However, any significant reduction in our tenants' abilities to pay base rent, percentage rent or other charges, will adversely affect our financial condition and



results of operations. We seek to maintain a mix of strong national, regional, and local retailers. At December 31, 2015, no single tenant accounted for more than 2.9% of annualized base rent.

Our properties are located primarily in densely populated and/or affluent areas with high barriers to entry which allow us to take advantage of redevelopment opportunities that enhance our operating performance through renovation, expansion, reconfiguration, and/or retenanting. We evaluate our properties on an ongoing basis to identify these types of opportunities. In 2016, we expect to have redevelopment projects stabilizing with projected costs of approximately $154 million.

We continue our ongoing redevelopment efforts at Santana Row, and are currently proceeding with our next phase of redevelopment which is a six story building with 234,500 square feet of office space and 670 parking spaces. During the third quarter 2015, we executed a lease with Splunk Inc. for the entire building. The building is expected to cost between $110 and $115 million and stabilize in 2017. After current phases, we have approximately 9 acres remaining for further redevelopment and entitlements in place for an additional 395 residential units and 634,000 square feet of commercial space. Additionally, we control an additional 12 acres of land adjacent to Santana Row.

We continue to invest in the development at Assembly Row which is a long-term multi-phased mixed-use development project we expect to be involved in over the coming years. The carrying value of the development portion of this project at December 31, 2015 is approximately $395 million. The project currently has zoning entitlements to build 3.4 million square feet of commercial-use buildings, 1,843 residential units, and a 170 room hotel. The first phase consists of approximately 331,000 square feet of retail space and 98,000 square feet of office space (both owned by the Trust) and 445 residential units owned by AvalonBay Communities. The Massachusetts Bay Transit Authority (MBTA) constructed the new orange line T-Stop at the property, which opened in September 2014. Minimal amounts of construction remain to be completed on the first phase. The retail space in Phase I opened during 2014 and currently is 100% leased. Additionally, as of December 31, 2015, 74,000 square feet of office space is open, and we expect the remainder to open through the first half of 2016. Phase I is expected to stabilize in 2016. Total expected costs for Phase I of Assembly Row, net of reimbursements expected, range from $194 million to $196 million, of which $193 million has been incurred to date.

We are also proceeding with development of Phase II of Assembly Row which will include 167,000 square feet of retail space, a 160 room boutique hotel and 447 residential units. The hotel will be owned and operated by a joint venture in which we will be a partner. Total expected costs range from $270 million to $285 million and stabilization is expected in 2018/2019. Construction commenced on Phase II in July 2015. Phase II is also expected to include 134 for-sale condominium units with an expected total cost of $70 million to $75 million. Additionally, as part of the second phase, we entered into a ground lease agreement with Partners HealthCare to bring more than 700,000 square feet of office space to Assembly Row. The ground lease agreement includes a purchase option. Partners HealthCare commenced construction on this new building in September 2014 and plans to relocate over 4,500 employees to Assembly Row starting in 2016.

We invested $41 million in Assembly Row in 2015 and expect to invest between $100 million and $125 million in Assembly Row in 2016.

Our Pike & Rose project in North Bethesda, MD, a long-term multi-phased mixed-use development project, currently has zoning entitlements to build 1.6 million square feet of commercial-use buildings and 1,605 residential units. Phase I of Pike & Rose includes 493 residential units, 157,000 square feet of retail space and 79,000 square feet of office space. In late June 2014, our 174 unit residential building opened and achieved stabilized occupancy in the 1st quarter 2015. As of December 31, 2015, 132,000 square feet of the retail space and 45,000 square feet of the office space in Phase I is open, and in July the first tenants moved into our 319 unit residential building. We expect the remaining retail, office and 319 unit residential building to open in early 2016, and expect Phase I to stabilize in 2016. Total expected costs for Phase I of Pike & Rose range from $265 million to $270 million of which $259 million has been incurred to date.

Additionally, we are proceeding with development of Phase II of Pike & Rose and building construction has commenced. Phase II will include approximately 190,000 square feet of retail space, a 177 room select-service hotel and 272 residential units, as well as a pre-leased auto dealership building. Total expected costs range from $200 million to $207 million and stabilization is expected in 2018/2019. The hotel will be owned and operated by a joint venture in which we will be a partner. Phase II is also expected to include 104 for-sale condominium units with an expected cost of $53 million to $58 million. We invested $88 million in Pike & Rose in 2015 and expect to invest between $105 million and $130 million in Pike & Rose in 2016.

The development of future phases of Assembly Row, Pike & Rose and Santana Row will be pursued opportunistically based on, among other things, market conditions, tenant demand, and our evaluation of whether those phases will generate an appropriate financial return.



We continue to review acquisition opportunities in our primary markets that complement our portfolio and provide long-term growth opportunities. Initially, some of our acquisitions do not contribute significantly to earnings growth; however, we believe they provide long-term re-leasing growth, redevelopment opportunities, and other strategic opportunities. Any growth from acquisitions is contingent on our ability to find properties that meet our qualitative standards at prices that meet our financial hurdles. Changes in interest rates may affect our success in achieving earnings growth through acquisitions by affecting both the price that must be paid to acquire a property, as well as our ability to economically finance the property acquisition. Generally, our acquisitions are initially financed by available cash and/or borrowings under our revolving credit facility which may be repaid later with funds raised through the issuance of new equity or new long-term debt. We may also finance our acquisitions through the issuance of common shares, preferred shares, or downREIT units as well as through new or assumed mortgages.

At December 31, 2015, the leasable square feet in our properties was 93.5% occupied and 94.3% leased. The leased rate is higher than the occupied rate due to leased spaces that are being redeveloped or improved or that are awaiting permits and, therefore, are not yet ready to be occupied. Our occupancy and leased rates are subject to variability over time due to factors including acquisitions, the timing of the start and stabilization of our redevelopment projects, lease expirations and tenant bankruptcies.

## Same-Center

Throughout this section, we have provided certain information on a “same-center” basis. Information provided on a same-center basis includes the results of properties that we owned and operated for the entirety of both periods being compared except for properties for which significant redevelopment or expansion occurred during either of the periods being compared and properties classified as discontinued operations. For the year ended December 31, 2015 and the comparison of 2015 and 2014, all or a portion of 77 properties were considered same-center and fourteen properties were considered redevelopment or expansion. For the year ended December 31, 2015, three properties were moved from acquisition to same-center, three properties were moved from same-center to redevelopment, two properties were removed from same-center as they were sold during 2015, and one property was moved from redevelopment to same-center, compared to the designations as of December 31, 2014. For the year ended December 31, 2014 and the comparison of 2014 and 2013, all or a portion of 78 properties were considered same-center and thirteen properties were considered redevelopment or expansion. For the year ended December 31, 2014, two properties were moved from same-center to redevelopment, one property was moved from redevelopment to same-center, and one property was moved from redevelopment as it was vacant and was demolished in 2014, compared to the designations as of December 31, 2013. While there is judgment surrounding changes in designations, we typically move redevelopment properties to same-center once they have stabilized, which is typically considered 95% occupancy or when the growth expected from the redevelopment has been included in the comparable periods. We typically remove properties from same center when the redevelopment has or is expected to have a significant impact to property operating income within the calendar year. Acquisitions are moved to same-center once we have owned the property for the entirety of comparable periods and the property is not under significant redevelopment or expansion.



## YEAR ENDED DECEMBER 31, 2015 COMPARED TO YEAR ENDED DECEMBER 31, 2014

<table><tr><td rowspan="3"></td><td rowspan="3">2015</td><td rowspan="3">2014</td><td colspan="2">Change</td></tr><tr><td colspan="2">Dollars</td></tr><tr><td colspan="2">(Dollar amounts in thousands)</td></tr><tr><td>Rental income</td><td>$ 727,812</td><td>$ 666,322</td><td>$ 61,490</td><td>9.2 %</td></tr><tr><td>Other property income</td><td>11,810</td><td>14,758</td><td>(2,948)</td><td>(20.0)%</td></tr><tr><td>Mortgage interest income</td><td>4,390</td><td>5,010</td><td>(620)</td><td>(12.4)%</td></tr><tr><td>Total property revenue</td><td>744,012</td><td>686,090</td><td>57,922</td><td>8.4 %</td></tr><tr><td>Rental expenses</td><td>147,593</td><td>135,417</td><td>12,176</td><td>9.0 %</td></tr><tr><td>Real estate taxes</td><td>85,824</td><td>76,506</td><td>9,318</td><td>12.2 %</td></tr><tr><td>Total property expenses</td><td>233,417</td><td>211,923</td><td>21,494</td><td>10.1 %</td></tr><tr><td>Property operating income</td><td>510,595</td><td>474,167</td><td>36,428</td><td>7.7 %</td></tr><tr><td>Other interest income</td><td>149</td><td>94</td><td>55</td><td>58.5 %</td></tr><tr><td>Income from real estate partnerships</td><td>1,416</td><td>1,243</td><td>173</td><td>13.9 %</td></tr><tr><td>Interest expense</td><td>(92,553)</td><td>(93,941)</td><td>1,388</td><td>(1.5)%</td></tr><tr><td>Early extinguishment of debt</td><td>(19,072)</td><td>(10,545)</td><td>(8,527)</td><td>80.9 %</td></tr><tr><td>General and administrative expense</td><td>(35,645)</td><td>(32,316)</td><td>(3,329)</td><td>10.3 %</td></tr><tr><td>Depreciation and amortization</td><td>(174,796)</td><td>(170,814)</td><td>(3,982)</td><td>2.3 %</td></tr><tr><td>Total other, net</td><td>(320,501)</td><td>(306,279)</td><td>(14,222)</td><td>4.6 %</td></tr><tr><td>Income from continuing operations</td><td>190,094</td><td>167,888</td><td>22,206</td><td>13.2 %</td></tr><tr><td>Gain on sale of real estate</td><td>28,330</td><td>4,401</td><td>23,929</td><td>543.7 %</td></tr><tr><td>Net income</td><td>218,424</td><td>172,289</td><td>46,135</td><td>26.8 %</td></tr><tr><td>Net income attributable to noncontrolling interests</td><td>(8,205)</td><td>(7,754)</td><td>(451)</td><td>5.8 %</td></tr><tr><td>Net income attributable to the Trust</td><td>$ 210,219</td><td>$ 164,535</td><td>$ 45,684</td><td>27.8 %</td></tr></table>

## Property Revenues

Total property revenue increased $57.9 million, or 8.4%, to $744.0 million in 2015 compared to $686.1 million in 2014. The percentage occupied at our shopping centers decreased to 93.5% at December 31, 2015 compared to 94.7% at December 31, 2014. Changes in the components of property revenue are discussed below.

## Rental Income

Rental income consists primarily of minimum rent, cost reimbursements from tenants and percentage rent. Rental income increased $61.5 million, or 9.2%, to $727.8 million in 2015 compared to $666.3 million in 2014 due primarily to the following:

• an increase of $22.1 million from Assembly Row and Pike & Rose as portions of both projects opened beginning in second quarter 2014 through 2015,

• an increase of $16.6 million attributable to properties acquired in 2015 and 2014,

• an increase of $15.7 million at same-center properties due primarily to higher rental rates of approximately $10.0 million, a $4.0 million increase in recovery income (primarily the result of reimbursements for higher real estate taxes and other tenant reimbursables), and occupancy impacts of approximately $0.8 million, and

• an increase of $10.4 million at redevelopment properties due primarily to the lease-up of our new 212 unit residential building at Santana Row and the lease-up of four of our retail redevelopments,

partially offset by,

• a decrease of $3.8 million due to the sale of our Houston Street and Courtyard Shops properties in April 2015 and November 2015, respectively.



## Other Property Income

Other property income decreased $2.9 million, or 20.0%, to $11.8 million in 2015 compared to $14.8 million in 2014. Included in other property income are items which, although recurring, inherently tend to fluctuate more than rental income from period to period, such as lease termination fees. This decrease is primarily due to lower lease termination and other fees at our same-center and redevelopment properties.

## Property Expenses

Total property expenses increased $21.5 million, or 10.1%, to $233.4 million in 2015 compared to $211.9 million in 2014. Changes in the components of property expenses are discussed below.

## Rental Expenses

Rental expenses increased $12.2 million, or 9.0%, to $147.6 million in 2015 compared to $135.4 million in 2014. This increase is primarily due to the following:

• an increase of $5.3 million related to properties acquired in 2015 and 2014,

• an increase of $4.3 million related to Assembly Row and Pike & Rose, as portions of these projects opened beginning in second quarter 2014,

• an increase of $3.2 million in repairs and maintenance expenses at same-center and redevelopment properties primarily due to higher snow removal costs, and

• an increase of $0.6 million in utilities at our same-center properties,

## partially offset by

• a decrease of $1.2 million due to the sale of our Houston Street and Courtyard Shops properties in April 2015 and November 2015, respectively.

As a result of the changes in rental income and rental expenses as discussed above, rental expenses as a percentage of rental income plus other property income increased to 20.0% for the year ended December 31, 2015 from 19.9% for the year ended December 31, 2014.

## Real Estate Taxes

Real estate tax expense increased $9.3 million, or 12.2% to $85.8 million in 2015 compared to $76.5 million in 2014 due primarily to Assembly Row and Pike & Rose, higher assessments at our same-center and redevelopment properties, and properties acquired in 2015 and 2014, partially offset by the sale of our Houston Street and Courtyard Shops properties in April 2015 and November 2015, respectively.

## Property Operating Income

Property operating income increased $36.4 million, or 7.7%, to $510.6 million in 2015 compared to $474.2 million in 2014. This increase is primarily due to portions of Assembly Row and Pike & Rose opening beginning in second quarter 2014, growth in earnings at same-center and redevelopment properties, and properties acquired in 2015 and 2014, partially offset by the sale of our Houston Street and Courtyard Shops properties in April 2015 and November 2015, respectively.

## Other

## Interest Expense

Interest expense decreased $1.4 million, or 1.5%, to $92.6 million in 2015 compared to $93.9 million in 2014. This decrease is due primarily to the following:

• a decrease of $12.2 million due to a lower overall weighted average borrowing rate, and

## partially offset by

• an increase of $8.1 million due to higher borrowings.

• a decrease of $2.8 million in capitalized interest due primarily to Phase I of Assembly Row and Pike & Rose, as portions of both projects opened beginning second quarter 2014.

Gross interest costs were $110.7 million and $114.9 million in 2015 and 2014, respectively. Capitalized interest was $18.1 million and $21.0 million in 2015 and 2014, respectively.



## Early Extinguishment of Debt

The $19.1 million early extinguishment of debt in 2015 relates to the make-whole premium paid as part of the early redemption of our 6.20% senior notes, partially offset by the related net write-off of unamortized premium and debt fees.

The $10.5 million early extinguishment of debt in 2014 relates to the make-whole premium paid as part of the early redemption of our 5.65% senior notes, the prepayment premium on our East Bay Bridge mortgage loan, and the related write-off of unamortized debt fees and mortgage premium balance.

## General and Administrative Expense

General and administrative expense increased $3.3 million, or 10.3%, to $35.6 million in 2015 from $32.3 million in 2014. This increase is primarily due to higher personnel related costs and higher transaction costs.

## Depreciation and Amortization

Depreciation and amortization expense increased $4.0 million, or 2.3%, to $174.8 million in 2015 from $170.8 million in 2014. This increase is due primarily to depreciation on Assembly Row and Pike & Rose and properties acquired in 2015, partially offset by accelerated depreciation in 2014 due to the change in use of a redevelopment property.

## Gain on Sale of Real Estate

The $28.3 million gain on sale of real estate for 2015 is due to the sale of our Houston Street property in April 2015 and the sale of our Courtyard Shops property in November 2015.

The $4.4 million gain on sale of real estate for 2014 is due to our portion of the gain resulting from the Partnership's sale of the fee interest in Pleasant Shops in Weymouth, Massachusetts.



## YEAR ENDED DECEMBER 31, 2014 COMPARED TO YEAR ENDED DECEMBER 31, 2013

<table><tr><td rowspan="3"></td><td rowspan="3">2014</td><td rowspan="3">2013</td><td colspan="2">Change</td></tr><tr><td>Dollars</td><td>%</td></tr><tr><td colspan="2">(Dollar amounts in thousands)</td></tr><tr><td>Rental income</td><td>$ 666,322</td><td>$ 620,089</td><td>$ 46,233</td><td>7.5 %</td></tr><tr><td>Other property income</td><td>14,758</td><td>12,169</td><td>2,589</td><td>21.3 %</td></tr><tr><td>Mortgage interest income</td><td>5,010</td><td>5,155</td><td>(145)</td><td>(2.8)%</td></tr><tr><td>Total property revenue</td><td>686,090</td><td>637,413</td><td>48,677</td><td>7.6 %</td></tr><tr><td>Rental expenses</td><td>135,417</td><td>118,695</td><td>16,722</td><td>14.1 %</td></tr><tr><td>Real estate taxes</td><td>76,506</td><td>71,759</td><td>4,747</td><td>6.6 %</td></tr><tr><td>Total property expenses</td><td>211,923</td><td>190,454</td><td>21,469</td><td>11.3 %</td></tr><tr><td>Property operating income</td><td>474,167</td><td>446,959</td><td>27,208</td><td>6.1 %</td></tr><tr><td>Other interest income</td><td>94</td><td>433</td><td>(339)</td><td>(78.3)%</td></tr><tr><td>Income from real estate partnership</td><td>1,243</td><td>1,498</td><td>(255)</td><td>(17.0)%</td></tr><tr><td>Interest expense</td><td>(93,941)</td><td>(104,977)</td><td>11,036</td><td>(10.5)%</td></tr><tr><td>Early extinguishment of debt</td><td>(10,545)</td><td>(13,304)</td><td>2,759</td><td>(20.7)%</td></tr><tr><td>General and administrative expense</td><td>(32,316)</td><td>(31,970)</td><td>(346)</td><td>1.1 %</td></tr><tr><td>Depreciation and amortization</td><td>(170,814)</td><td>(160,828)</td><td>(9,986)</td><td>6.2 %</td></tr><tr><td>Total other, net</td><td>(306,279)</td><td>(309,148)</td><td>2,869</td><td>(0.9)%</td></tr><tr><td>Income from continuing operations</td><td>167,888</td><td>137,811</td><td>30,077</td><td>21.8 %</td></tr><tr><td>Discontinued operations - income</td><td>—</td><td>942</td><td>(942)</td><td>(100.0)%</td></tr><tr><td>Discontinued operations - gain on sale of real estate</td><td>—</td><td>23,861</td><td>(23,861)</td><td>100.0 %</td></tr><tr><td>Gain on sale of real estate</td><td>4,401</td><td>4,994</td><td>(593)</td><td>(11.9)%</td></tr><tr><td>Net income</td><td>172,289</td><td>167,608</td><td>4,681</td><td>2.8 %</td></tr><tr><td>Net income attributable to noncontrolling interests</td><td>(7,754)</td><td>(4,927)</td><td>(2,827)</td><td>57.4 %</td></tr><tr><td>Net income attributable to the Trust</td><td>$ 164,535</td><td>$ 162,681</td><td>$ 1,854</td><td>1.1 %</td></tr></table>

## Property Revenues

Total property revenue increased $48.7 million, or 7.6%, to $686.1 million in 2014 compared to $637.4 million in 2013. The percentage occupied at our shopping centers decreased to 94.7% at December 31, 2014 compared to 95.1% at December 31, 2013. Changes in the components of property revenue are discussed below.

## Rental Income

Rental income consists primarily of minimum rent, cost reimbursements from tenants and percentage rent. Rental income increased $46.2 million, or 7.5%, to $666.3 million in 2014 compared to $620.1 million in 2013 due primarily to the following:

• an increase of $17.7 million at same-center properties due primarily to higher rental rates of approximately $9.4 million and a $7.4 million increase in recovery income (largely the result of reimbursements for higher snow removal costs),

• an increase of $16.6 million attributable to properties acquired in 2014 and 2013,

• an increase of $8.0 million at redevelopment properties due primarily to the lease-up of our new 212 unit residential building at Santana Row and the net impact of other redevelopment properties, and

• an increase of $6.4 million from Assembly Row and Pike & Rose as portions of both projects opened in 2014,

partially offset by,

• a decrease of $1.9 million from Mid-Pike Plaza as the property was demolished in 2014 for the future development of Pike & Rose.



## Other Property Income

Other property income increased $2.6 million, or 21.3%, to $14.8 million in 2014 compared to $12.2 million in 2013. Included in other property income are items which, although recurring, inherently tend to fluctuate more than rental income from period to period, such as lease termination fees. This increase is primarily due an increase in lease termination fees at same-center properties.

## Property Expenses

Total property expenses increased $21.5 million, or 11.3%, to $211.9 million in 2014 compared to $190.5 million in 2013. Changes in the components of property expenses are discussed below.

## Rental Expenses

Rental expenses increased $16.7 million, or 14.1%, to $135.4 million in 2014 compared to $118.7 million in 2013. This increase is primarily due to the following:

• an increase of $5.6 million in repairs and maintenance expenses at same-center and redevelopment properties primarily due to higher snow removal costs,

• an increase of $5.4 million related to Assembly Row and Pike & Rose, as portions of these projects opened in 2014,

• an increase of $3.2 million related to properties acquired in 2014 and 2013,

• an increase of $1.6 million in bad debt expense at same-center properties, and

• an increase of $0.8 million in utilities at our same-center and redevelopment properties primarily due to higher electric costs and usage as a result of the harsh winter.

As a result of the changes in rental income and rental expenses as discussed above, rental expenses as a percentage of rental income plus other property income increased to 19.9% for the year ended December 31, 2014 from 18.8% for the year ended December 31, 2013.

## Real Estate Taxes

Real estate tax expense increased $4.7 million, or 6.6% to $76.5 million in 2014 compared to $71.8 million in 2013 due primarily to higher assessments and lower refunds at our same-center and redevelopment properties and real estate taxes on properties acquired in 2014 and 2013.

## Property Operating Income

Property operating income increased $27.2 million, or 6.1%, to $474.2 million in 2014 compared to $447.0 million in 2013. This increase is primarily due to growth in earnings at same-center properties, properties acquired in 2014 and 2013, and earnings from our redevelopment properties, partially offset by a decline in earnings at Mid-Pike Plaza, which was demolished in 2014.

## Other

## Interest Expense

Interest expense decreased $11.0 million, or 10.5%, to $93.9 million in 2014 compared to $105.0 million in 2013. This decrease is due primarily to the following:

• a decrease of $12.0 million due to a lower overall weighted average borrowing rate, and

• an increase of $4.8 million in capitalized interest due primarily to our ongoing development projects at Assembly Row and Pike & Rose,

## partially offset by

• an increase of $5.6 million due to higher borrowings.

Gross interest costs were $114.9 million and $121.2 million in 2014 and 2013, respectively. Capitalized interest was $21.0 million and $16.2 million in 2014 and 2013, respectively.



## Early Extinguishment of Debt

The $10.5 million early extinguishment of debt in 2014 relates to the make-whole premium paid as part of the early redemption of our 5.65% senior notes, the prepayment premium on our East Bay Bridge mortgage loan, and the related write-off of unamortized debt fees and mortgage premium balance.

The $13.3 million early extinguishment of debt in 2013 relates to the make-whole premiums paid as part of the early redemption of our 5.40% senior notes and 5.95% senior notes, the prepayment premium on our 7.5% mortgage loans, and the related write-off of unamortized debt fees.

## Depreciation and Amortization

Depreciation and amortization expense increased $10.0 million, or 6.2%, to $170.8 million in 2014 from $160.8 million in 2013. This increase is due primarily to 2014 acquisitions and redevelopment projects placed in service during 2014, partially offset by accelerated depreciation in 2013 due to the change in use of a redevelopment property.

## Discontinued Operations—Income

Income from discontinued operations represents the operating income of properties that were disposed prior to January 1, 2014, which were required to be reported separately from results of ongoing operations. The reported operating income of $0.9 million for 2013 primarily represents the operating income for the period during which we owned properties sold in 2013.

## Discontinued Operations—Gain on Sale of Real Estate

The $23.9 million gain on sale of real estate from discontinued operations for 2013 is due to the sale of the fee interest in our final building at Fifth Avenue on July 22, 2013 and the sale of the fee interest in our building in Forest Hills on September 10, 2013.

## Gain on Sale of Real Estate

The $4.4 million gain on sale of real estate for 2014 is due to our portion of the gain resulting from the Partnership's sale of the fee interest in Pleasant Shops in Weymouth, Massachusetts.

The $5.0 million gain on sale of real estate for 2013 is primarily due to the sale of the fee interest in the land under an office building at our Village of Shirlington property in Arlington, Virginia, that was subject to a long term ground lease. The ground lease included an option for the tenant to purchase the fee interest.

## Liquidity and Capital Resources

Due to the nature of our business and strategy, we typically generate significant amounts of cash from operations. The cash generated from operations is primarily paid to our common and preferred shareholders in the form of dividends. As a REIT, we must generally make annual distributions to shareholders of at least 90% of our taxable income.

Our short-term liquidity requirements consist primarily of normal recurring operating expenses, obligations under our capital and operating leases, regular debt service requirements (including debt service relating to additional or replacement debt, as well as scheduled debt maturities), recurring expenditures, non-recurring expenditures (such as tenant improvements and redevelopments) and dividends to common and preferred shareholders. Our long-term capital requirements consist primarily of maturities under our long-term debt agreements, development and redevelopment costs and potential acquisitions.

We intend to operate with and maintain a conservative capital structure that will allow us to maintain strong debt service coverage and fixed-charge coverage ratios as part of our commitment to investment-grade debt ratings. In the short and long term, we may seek to obtain funds through the issuance of additional equity, unsecured and/or secured debt financings, joint venture relationships relating to existing properties or new acquisitions, and property dispositions that are consistent with this conservative structure.

At December 31, 2015, we had $21.0 million of cash and cash equivalents and $53.5 million borrowings outstanding on our $600.0 million revolving credit facility that matures on April 21, 2017, subject to a one-year extension at our option. In addition, we have an option (subject to bank approval) to increase the credit facility through an accordion feature to $1.0 billion. Our $275.0 million unsecured term loan that matures on November 21, 2018, subject to a one-year extension at our option, also has an option (subject to bank approval) to increase the term loan through an accordion feature to $350.0 million. As of December 31, 2015, we had the capacity to issue up to $190.2 million in common shares under our ATM equity program.

For 2015, the maximum amount of borrowings outstanding under our revolving credit facility was $324.0 million, the weighted average amount of borrowings outstanding was $109.7 million and the weighted average interest rate, before amortization of



debt fees, was 1.1%. During 2015, we accessed the public debt markets twice, issuing $200 million of 4.50% senior notes in March 2015, that mature on December 1, 2044 and in September 2015, issuing $250 million of 2.55% senior notes that mature on January 15, 2021. The net proceeds of these two offerings after net issuance premium, underwriting fees, and other costs were approximately $456.2 million. We used the net proceeds from these transactions to redeem our 6.20% senior notes prior to their original maturity date of January 15, 2017, and repay $147 million of mortgage debt that had a weighted average interest rate of 7.9%. During 2016, we have only $9.4 million of debt maturing.

We currently believe that cash flows from operations, cash on hand, our ATM equity program, our revolving credit facility and our general ability to access the capital markets will be sufficient to finance our operations and fund our debt service requirements and capital expenditures.

Our overall capital requirements during 2016 will depend upon acquisition opportunities, the level of improvements and redevelopments on existing properties and the timing and cost of development of Assembly Row, Pike & Rose and future phases of Santana Row. While the amount of future expenditures will depend on numerous factors, we expect to continue to see higher levels of capital investments in our properties under development and redevelopment which is the result of construction on Phase II at both Assembly Row and Pike & Rose and construction of the 234,500 square foot office building at Santana Row. With respect to other capital investments related to our existing properties, we expect to incur levels consistent with prior years. Our capital investments will be funded on a short-term basis with cash flow from operations, cash on hand and/or our revolving credit facility, and on a long-term basis, with long-term debt or equity including shares issued under our ATM equity program. If necessary, we may access the debt or equity capital markets to finance significant acquisitions. Given our past ability to access the capital markets, we expect debt or equity to be available to us. Although there is no intent at this time, if market conditions deteriorate, we may also delay the timing of certain development and redevelopment projects as well as limit future acquisitions, reduce our operating expenditures, or re-evaluate our dividend policy.

In addition to conditions in the capital markets which could affect our ability to access those markets, the following factors could affect our ability to meet our liquidity requirements:

• restrictions in our debt instruments or preferred shares may limit us from incurring debt or issuing equity at all, or on acceptable terms under then-prevailing market conditions; and

• we may be unable to service additional or replacement debt due to increases in interest rates or a decline in our operating performance.

## Summary of Cash Flows

<table><tr><td rowspan="3"></td><td colspan="3">Year Ended December 31,</td></tr><tr><td>2015</td><td colspan="2">2014</td></tr><tr><td colspan="3">(In thousands)</td></tr><tr><td>Cash provided by operating activities</td><td>$ 359,835</td><td>$ 346,130</td><td></td></tr><tr><td>Cash used in investing activities</td><td>(353,763)</td><td>(396,150)</td><td></td></tr><tr><td>Cash (used in) provided by financing activities</td><td>(32,977)</td><td>9,044</td><td></td></tr><tr><td>Decrease in cash and cash equivalents</td><td>(26,905)</td><td>(40,976)</td><td></td></tr><tr><td>Cash and cash equivalents, beginning of year</td><td>47,951</td><td>88,927</td><td></td></tr><tr><td>Cash and cash equivalents, end of year</td><td>$ 21,046</td><td>$ 47,951</td><td></td></tr></table>

Net cash provided by operating activities increased $13.7 million to $359.8 million during 2015 from $346.1 million during 2014. The increase was primarily attributable to higher net income before certain non-cash items, partially offset by the timing of interest payments and other operating costs.

Net cash used in investing activities decreased $42.4 million to $353.8 million during 2015 from $396.2 million during 2014. The decrease in net cash used was primarily attributable to:

• $91.3 million decrease in capital investments and leasing costs,

• $87.0 million increase in proceeds from the sale of real estate, as we sold both Houston Street and Courtyard Shops in 2015,

• $5.3 million increase in repayment of mortgage and other notes receivable, and

• $3.9 million decrease in contributions to real estate partnerships,



partially offset by

• $145.2 million increase in acquisitions of real estate.

Net cash provided by financing activities decreased $42.0 million to $33.0 million used during 2015 from $9.0 million provided in 2014. The decrease was primarily attributable to:

• $105.3 million decrease in net proceeds from the issuance of common shares due primarily to the sale of 0.8 million shares under our ATM equity program at a weighted average price of $135.01 during 2015 compared to 1.8 million shares at a weighted average price of $122.09 during 2014,

• $86.9 million increase in repayment of mortgages, capital leases and notes payable primarily due to the payoff of seven mortgages totaling $165.1 million in 2015 compared to the repayment of two mortgages totaling $84.3 million in 2014,

• $85.0 million increase due to the redemption of $200.0 million of senior notes with a make-whole premium of $19.2 million in 2015, as compared to the redemption of $125.0 million of senior notes with a make-whole premium of $9.2 million in 2014, and

• $28.1 million increase in dividends paid to shareholders due to an increase in the dividend rate and increased number of shares outstanding,

• $211.6 million increase from net proceeds on senior note issuances due to $456.2 million from the reopening of our 4.5% senior notes in March 2015 and the issuance of 2.55% notes in September 2015 as compared to $244.6 million from our 4.50% senior notes issued in November 2014, and

• $53.5 million increase in net borrowings on our revolving credit facility.

## Contractual Commitments

The following table provides a summary of our fixed, noncancelable obligations as of December 31, 2015:

Commitments Due by Period

<table><tr><td rowspan="3"></td><td colspan="6">Commitments Due by Period</td></tr><tr><td rowspan="2">Total</td><td colspan="2">Less Than 1 Year</td><td>1-3 Years</td><td>3-5 Years</td><td>After 5 Years</td></tr><tr><td colspan="5">(In thousands)</td></tr><tr><td>Fixed rate debt (principal and interest)(1)</td><td>$ 3,536,531</td><td>$ 105,776</td><td>$ 696,128</td><td>$ 389,996</td><td>$ 2,344,631</td><td></td></tr><tr><td>Fixed rate debt - unconsolidated real estate partnership (principal and interest)(2)</td><td>10,674</td><td>10,674</td><td>—</td><td>—</td><td>—</td><td></td></tr><tr><td>Capital lease obligations (principal and interest)</td><td>183,395</td><td>5,788</td><td>11,597</td><td>11,600</td><td>154,410</td><td></td></tr><tr><td>Variable rate debt (principal only)(3)</td><td>62,900</td><td>9,400</td><td>53,500</td><td>—</td><td>—</td><td></td></tr><tr><td>Operating leases</td><td>171,649</td><td>2,750</td><td>5,586</td><td>5,989</td><td>157,324</td><td></td></tr><tr><td>Real estate commitments</td><td>67,500</td><td>—</td><td>—</td><td>—</td><td>67,500</td><td></td></tr><tr><td>Development, redevelopment, and capital improvement obligations</td><td>380,682</td><td>259,254</td><td>121,423</td><td>5</td><td>—</td><td></td></tr><tr><td>Contractual operating obligations</td><td>40,610</td><td>20,535</td><td>15,666</td><td>4,349</td><td>60</td><td></td></tr><tr><td>Hotel joint venture obligations (4)</td><td>415</td><td>291</td><td>124</td><td>—</td><td>—</td><td></td></tr><tr><td>Total contractual obligations</td><td>$ 4,454,356</td><td>$ 414,468</td><td>$ 904,024</td><td>$ 411,939</td><td>$ 2,723,925</td><td></td></tr></table>



In addition to the amounts set forth in the table above and other liquidity requirements previously discussed, the following potential commitments exist:

(a) Under the terms of the Congressional Plaza partnership agreement, from and after January 1, 1986, an unaffiliated third party has the right to require us and the other minority partner to purchase its 29.47% interest in Congressional Plaza at the interest’s then-current fair market value. If the other minority partner defaults in their obligation, we must purchase the full interest. Based on management’s current estimate of fair market value as of December 31, 2015, our estimated liability upon exercise of the put option would range from approximately $78 million to $82 million.

(b) Under the terms of a partnership which owns a project in southern California, if certain leasing and revenue levels are obtained for the property owned by the partnership, the other partner may require us to purchase their 10% partnership interest at a formula price based upon property operating income. The purchase price for the partnership interest will be paid using our common shares or, subject to certain conditions, cash. If the other partner does not redeem their interest, we may choose to purchase the partnership interest upon the same terms.

(c) Under the terms of various other 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. As of December 31, 2015, a total of 934,405 operating partnership units are outstanding.

(d) The other member in Montrose Crossing has the right to require us to purchase all of its 10.1% interest in Montrose Crossing at the interest's then-current fair market value. If the other member fails to exercise its put option, we have the right to purchase its interest on or after December 27, 2021 at fair market value. Based on management's current estimate of fair market value as of December 31, 2015, our estimated maximum liability upon exercise of the put option would range from approximately $8 million to $9 million.

(e) Two of the members in Plaza El Segundo have the right to require us to purchase their 10.0% and 11.8% ownership interests at the interests' then-current fair market value. If the members fail to exercise their put options, we have the right to purchase each of their interests on or after December 30, 2026 at fair market value. Based on management's current estimate of fair market value as of December 31, 2015, our estimated maximum liability upon exercise of the put option would range from approximately $21 million to $24 million. Also, between January 1, 2017 and February 1, 2017, we have an option to purchase the preferred interest of another member in Plaza El Segundo. The purchase price will be the lesser of fair value or the $4.9 million stated value of the preferred interest plus any accrued and unpaid preferred returns.

(f) Effective January 1, 2017, the other member in The Grove at Shrewsbury and Brook 35 has the right to require us to purchase all of its approximately 4.8% interest in The Grove at Shrewsbury and approximately 8.8% interest in Brook 35 at the interests' then-current fair market value. Based on management's current estimate of fair market value as of December 31, 2015, our estimated maximum liability upon exercise of the put option would range from $9 million to $10 million.

(g) At December 31, 2015, we had letters of credit outstanding of approximately $13.0 million which are collateral for existing indebtedness and other obligations of the Trust.

## Off-Balance Sheet Arrangements

At December 31, 2015, we had a joint venture arrangement (the “Partnership”) with affiliates of a discretionary fund created and advised by Clarion Partners (“Clarion”). We owned 30% of the equity in the Partnership and Clarion owned 70%. We held a general partnership interest, however, Clarion also held a general partnership interest and had substantive participating rights. We could not make significant decisions without Clarion’s approval. Accordingly, we accounted for our interest in the Partnership using the equity method. As of December 31, 2015, the Partnership owned six retail real estate properties. We were the manager of the Partnership and its properties, earning fees for acquisitions, management, leasing and financing. We also had the opportunity to receive performance-based earnings through our Partnership interest. Accounting policies for the Partnership were similar to accounting policies followed by the Trust. At December 31, 2015, our investment in the Partnership was $31.7 million and the Partnership had $34.4 million of mortgages payable outstanding.

On January 13, 2016, we acquired Clarion's 70% interest and assumed the related mortgage obligations.

Other than the joint venture described above and items disclosed in the Contractual Commitments Table, we have no off-balance sheet arrangements as of December 31, 2015 that are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.



## Debt Financing Arrangements

The following is a summary of our total debt outstanding as of December 31, 2015:

<table><tr><td>Description of Debt</td><td>Original Debt Issued</td><td>Principal Balance as of December 31, 2015</td><td>Stated Interest Rate as of December 31, 2015</td><td>Maturity Date</td></tr><tr><td colspan="5">(Dollars in thousands)</td></tr><tr><td>Mortgages payable (1)</td><td></td><td></td><td></td><td></td></tr><tr><td>Secured fixed rate</td><td></td><td></td><td></td><td></td></tr><tr><td>Plaza El Segundo</td><td>Acquired</td><td>$     175,000</td><td>6.33%</td><td>August 5, 2017</td></tr><tr><td>The Grove at Shrewsbury (East)</td><td>Acquired</td><td>43,557</td><td>5.82%</td><td>October 1, 2017</td></tr><tr><td>The Grove at Shrewsbury (West)</td><td>Acquired</td><td>11,024</td><td>6.38%</td><td>March 1, 2018</td></tr><tr><td>Rollingwood Apartments</td><td>24,050</td><td>21,716</td><td>5.54%</td><td>May 1, 2019</td></tr><tr><td>The Shops at Sunset Place</td><td>Acquired</td><td>70,542</td><td>5.62%</td><td>September 1, 2020</td></tr><tr><td>29th Place</td><td>Acquired</td><td>4,753</td><td>5.91%</td><td>January 31, 2021</td></tr><tr><td>THE AVENUE at White Marsh</td><td>52,705</td><td>52,705</td><td>3.35%</td><td>January 1, 2022</td></tr><tr><td>Montrose Crossing</td><td>80,000</td><td>74,329</td><td>4.20%</td><td>January 10, 2022</td></tr><tr><td>Brook 35</td><td>11,500</td><td>11,500</td><td>4.65%</td><td>July 1, 2029</td></tr><tr><td>Chelsea</td><td>Acquired</td><td>6,868</td><td>5.36%</td><td>January 15, 2031</td></tr><tr><td>Subtotal</td><td></td><td>471,994</td><td></td><td></td></tr><tr><td>Net unamortized premium</td><td></td><td>10,828</td><td></td><td></td></tr><tr><td>Total mortgages payable</td><td></td><td>482,822</td><td></td><td></td></tr><tr><td>Notes payable</td><td></td><td></td><td></td><td></td></tr><tr><td>Unsecured fixed rate</td><td></td><td></td><td></td><td></td></tr><tr><td>Term Loan (2)</td><td>275,000</td><td>275,000</td><td>LIBOR + 0.90%</td><td>November 21, 2018</td></tr><tr><td>Various</td><td>7,239</td><td>5,700</td><td>11.31%</td><td>Various through 2028</td></tr><tr><td>Unsecured variable rate</td><td></td><td></td><td></td><td></td></tr><tr><td>Escondido (municipal bonds) (3)</td><td>9,400</td><td>9,400</td><td>0.03%</td><td>October 1, 2016</td></tr><tr><td>Revolving credit facility (4)</td><td>600,000</td><td>53,500</td><td>LIBOR + 0.90%</td><td>April 21, 2017</td></tr><tr><td>Total notes payable</td><td></td><td>343,600</td><td></td><td></td></tr><tr><td>Senior notes and debentures</td><td></td><td></td><td></td><td></td></tr><tr><td>Unsecured fixed rate</td><td></td><td></td><td></td><td></td></tr><tr><td>5.90% notes</td><td>150,000</td><td>150,000</td><td>5.90%</td><td>April 1, 2020</td></tr><tr><td>2.55% notes</td><td>250,000</td><td>250,000</td><td>2.55%</td><td>January 15, 2021</td></tr><tr><td>3.00% notes</td><td>250,000</td><td>250,000</td><td>3.00%</td><td>August 1, 2022</td></tr><tr><td>2.75% notes</td><td>275,000</td><td>275,000</td><td>2.75%</td><td>June 1, 2023</td></tr><tr><td>3.95% notes</td><td>300,000</td><td>300,000</td><td>3.95%</td><td>January 15, 2024</td></tr><tr><td>7.48% debentures</td><td>50,000</td><td>29,200</td><td>7.48%</td><td>August 15, 2026</td></tr><tr><td>6.82% medium term notes</td><td>40,000</td><td>40,000</td><td>6.82%</td><td>August 1, 2027</td></tr><tr><td>4.50% notes</td><td>450,000</td><td>450,000</td><td>4.50%</td><td>December 1, 2044</td></tr><tr><td>Subtotal</td><td></td><td>1,744,200</td><td></td><td></td></tr><tr><td>Net unamortized premium</td><td></td><td>124</td><td></td><td></td></tr><tr><td>Total senior notes and debentures</td><td></td><td>1,744,324</td><td></td><td></td></tr><tr><td>Capital lease obligations</td><td></td><td></td><td></td><td></td></tr><tr><td>Various</td><td></td><td>71,620</td><td>Various</td><td>Various through 2106</td></tr><tr><td>Total debt and capital lease obligations</td><td></td><td>2,642,366</td><td></td><td></td></tr></table>

1) Mortgages payable do not include our 30% share ($10.3 million) of the $34.4 million debt of the partnership with a discretionary fund created and advised by Clarion Partners. On January 13, 2016, we acquired Clarion's 70% joint venture interest and assumed 100% of the related debt.

2) 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%.

3) The bonds require monthly interest only payments through maturity. The bonds bear interest at a variable rate determined weekly, which would enable the bonds to be remarketed at 100% of their principal amount. The Escondido Promenade property is not encumbered by a lien.

4) The maximum amount drawn under our revolving credit facility during 2015 was $324.0 million and the weighted average effective interest rate on borrowings under our revolving credit facility, before amortization of debt fees, was 1.09%.



Our revolving credit facility, term loan and other debt agreements include financial and other covenants that may limit our operating activities in the future. As of December 31, 2015, we were in compliance with all of the financial and other covenants. If we were to breach any of our debt covenants and did not cure the breach within an applicable cure period, our lenders could require us to repay the debt immediately and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan. Many of our debt arrangements, including our public notes, term loan and our revolving credit facility, are cross-defaulted, which means that the lenders under those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a default under certain of our other debt obligations. As a result, any default under our debt covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares. Our organizational documents do not limit the level or amount of debt that we may incur.

The following is a summary of our scheduled principal repayments as of December 31, 2015:

<table><tr><td rowspan="2"></td><td rowspan="2">Unsecured</td><td colspan="2">Secured</td><td rowspan="2">Capital Lease</td><td rowspan="2">Total</td></tr><tr><td colspan="2">(In thousands)</td></tr><tr><td>2016</td><td>$ 9,812</td><td>$ 5,665</td><td>$ 34</td><td>$ 15,511</td><td></td></tr><tr><td>2017</td><td>53,957</td><td>(1)</td><td>222,469</td><td>34</td><td>276,460</td></tr><tr><td>2018</td><td>275,507</td><td>15,477</td><td>37</td><td>291,021</td><td></td></tr><tr><td>2019</td><td>561</td><td>25,006</td><td>42</td><td>25,609</td><td></td></tr><tr><td>2020</td><td>150,623</td><td>64,687</td><td>46</td><td>215,356</td><td></td></tr><tr><td>Thereafter</td><td>1,597,340</td><td>138,690</td><td>71,427</td><td>1,807,457</td><td></td></tr><tr><td></td><td>$ 2,087,800</td><td>$ 471,994</td><td>$ 71,620</td><td>$ 2,631,414</td><td>(2)</td></tr></table>

1) Our $600.0 million revolving credit facility matures on April 21, 2017, subject to a one-year extension at our option. As of December 31, 2015, there was $53.5 million outstanding under this credit facility.

2) The total debt maturities differs from the total reported on the consolidated balance sheet due to the unamortized net premium or discount on certain mortgage loans and senior notes as of December 31, 2015.

## Interest Rate Hedging

We may use derivative instruments to manage exposure to variable interest rate risk. We generally enter into interest rate swaps to manage our exposure to variable interest rate risk and treasury locks to manage the risk of interest rates rising prior to the issuance of debt. We enter into derivative instruments that qualify as cash flow hedges and do not enter into derivative instruments for speculative purposes.

The interest rate swaps associated with our cash flow hedges are recorded at fair value on a recurring basis. 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 other comprehensive (loss) income which is included in accumulated other comprehensive loss on our consolidated balance sheet and our consolidated statement of shareholders' equity. 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 which includes reviewing debt ratings and financial performance. However, management does not anticipate non-performance by the counterparty. If a cash flow hedge is deemed ineffective, 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.

As of December 31, 2015, we are party to two interest rate swap agreements that effectively fixed the rate on the term loan at 2.62%. Both swaps were designated and qualified as cash flow hedges and were recorded at fair value. Hedge ineffectiveness has not impacted earnings in 2015, 2014 and 2013, and we do not anticipate it will have a significant effect in the future.

## REIT Qualification

We intend to maintain our qualification as a REIT under Section 856(c) of the Code. As a REIT, we generally will not be subject to corporate federal income taxes on income we distribute to our shareholders as long as we satisfy certain technical requirements of the Code, including the requirement to distribute at least 90% of our taxable income to our shareholders.



## Funds From Operations

Funds from operations (“FFO”) is a supplemental non-GAAP financial measure of real estate companies’ operating performance. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as follows: net income, computed in accordance with the U.S. GAAP, plus real estate related depreciation and amortization and excluding extraordinary items and gains and losses on the sale of real estate. We compute FFO in accordance with the NAREIT definition, and we have historically reported our FFO available for common shareholders in addition to our net income and net cash provided by operating activities. It should be noted that FFO:

• does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income);

• should not be considered an alternative to net income as an indication of our performance; and

• is not necessarily indicative of cash flow as a measure of liquidity or ability to fund cash needs, including the payment of dividends.

We consider FFO available for common shareholders a meaningful, additional measure of operating performance primarily because it excludes the assumption that the value of the real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation. We use FFO primarily as one of several means of assessing our operating performance in comparison with other REITs. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.

An increase or decrease in FFO available for common shareholders does not necessarily result in an increase or decrease in aggregate distributions because our Board of Trustees is not required to increase distributions on a quarterly basis unless necessary for us to maintain REIT status. However, we must distribute at least 90% of our taxable income to remain qualified as a REIT. Therefore, a significant increase in FFO will generally require an increase in distributions to shareholders although not necessarily on a proportionate basis.

In addition to FFO, we have also included FFO excluding the "early extinguishment of debt" charges in 2015, 2014, and 2013 which relate to the early redemption of our 6.20% senior notes in 2015, our 5.65% senior notes and East Bay Bridge mortgage loan in 2014, and our 5.40% senior notes, 5.95% senior notes, and 7.50% mortgages loans in 2013. We believe the unusual nature of these charges, being make-whole payments on the remaining principal and interest on the redeemed notes/mortgages, is worthy of separate evaluation and consequently have provided both relevant metrics.



The reconciliation of net income to FFO available for common shareholders and to FFO available for common shareholders excluding early extinguishment of debt is as follows:

<table><tr><td rowspan="3"></td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2015</td><td colspan="2">2014</td><td>2013</td></tr><tr><td colspan="4">(In thousands, except per share data)</td></tr><tr><td>Net income</td><td>$     218,424</td><td>$     172,289</td><td>$     167,608</td><td></td></tr><tr><td>Net income attributable to noncontrolling interests</td><td>(8,205)</td><td>(7,754)</td><td>(4,927)</td><td></td></tr><tr><td>Gain on sale of real estate</td><td>(28,330)</td><td>(4,401)</td><td>(28,855)</td><td></td></tr><tr><td>Depreciation and amortization of real estate assets</td><td>152,888</td><td>152,505</td><td>144,873</td><td></td></tr><tr><td>Amortization of initial direct costs of leases</td><td>15,026</td><td>12,391</td><td>10,694</td><td></td></tr><tr><td>Depreciation of joint venture real estate assets</td><td>1,344</td><td>1,555</td><td>1,504</td><td></td></tr><tr><td>Funds from operations</td><td>351,147</td><td>326,585</td><td>290,897</td><td></td></tr><tr><td>Dividends on preferred shares</td><td>(541)</td><td>(541)</td><td>(541)</td><td></td></tr><tr><td>Income attributable to operating partnership units</td><td>3,398</td><td>3,027</td><td>888</td><td></td></tr><tr><td>Income attributable to unvested shares</td><td>(1,147)</td><td>(1,474)</td><td>(1,306)</td><td></td></tr><tr><td>Funds from operations available for common shareholders</td><td>352,857</td><td>327,597</td><td>289,938</td><td></td></tr><tr><td>Early extinguishment of debt, net of allocation to unvested shares</td><td>19,006</td><td>10,498</td><td>13,244</td><td></td></tr><tr><td>Funds from operations available for common shareholders excluding early extinguishment of debt</td><td>$     371,863</td><td>$     338,095</td><td>$     303,182</td><td></td></tr><tr><td>Weighted average number of common shares, diluted (1)</td><td>69,920</td><td>68,410</td><td>65,778</td><td></td></tr><tr><td>Funds from operations available for common shareholders, per diluted share</td><td>$     5.05</td><td>$     4.79</td><td>$     4.41</td><td></td></tr><tr><td>Funds from operations available for common shareholders excluding early extinguishment of debt, per diluted share</td><td>$     5.32</td><td>$     4.94</td><td>$     4.61</td><td></td></tr></table>

(1) 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.

## ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our use of financial instruments, such as debt instruments, subjects us to market risk which may affect our future earnings and cash flows, as well as the fair value of our assets. Market risk generally refers to the risk of loss from changes in interest rates and market prices. We manage our market risk by attempting to match anticipated inflow of cash from our operating, investing and financing activities with anticipated outflow of cash to fund debt payments, dividends to common and preferred shareholders, investments, capital expenditures and other cash requirements.

We may enter into certain types of derivative financial instruments to further reduce interest rate risk. We use interest rate protection and swap agreements, for example, to convert some of our variable rate debt to a fixed-rate basis or to hedge anticipated financing transactions. We use derivatives for hedging purposes rather than speculation and do not enter into financial instruments for trading purposes. As of December 31, 2015, we were party to two interest rate swap agreements that effectively fix the rate on the $275.0 million term loan at 2.62%.

## Interest Rate Risk

The following discusses the effect of hypothetical changes in market rates of interest on interest expense for our variable rate debt and on the fair value of our total outstanding debt, including our fixed-rate debt. Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our debt. Quoted market prices were used to estimate the fair value of our marketable senior notes and debentures and discounted cash flow analysis is generally used to estimate the fair value of our mortgages and notes payable. Considerable judgment is necessary to estimate the fair value of financial



instruments. This analysis does not purport to take into account all of the factors that may affect our debt, such as the effect that a changing interest rate environment could have on the overall level of economic activity or the action that our management might take to reduce our exposure to the change. This analysis assumes no change in our financial structure.

## Fixed Interest Rate Debt

The majority of our outstanding debt obligations (maturing at various times through 2044 or, with respect to capital lease obligations through 2106) have fixed interest rates which limit the risk of fluctuating interest rates. However, interest rate fluctuations may affect the fair value of our fixed rate debt instruments. At December 31, 2015, we had $2.5 billion of fixed-rate debt outstanding, including our $275.0 million term loan as the rate is effectively fixed by two interest rate swap agreements; we also had capital lease obligations of $71.6 million. If market interest rates used to calculate the fair value on our fixed-rate debt instruments at December 31, 2015 had been 1.0% higher, the fair value of those debt instruments on that date would have decreased by approximately $157.9 million. If market interest rates used to calculate the fair value on our fixed-rate debt instruments at December 31, 2015 had been 1.0% lower, the fair value of those debt instruments on that date would have increased by approximately $179.5 million.

## Variable Interest Rate Debt

Generally, we believe that our primary interest rate risk is due to fluctuations in interest rates on our variable rate debt. At December 31, 2015, we had $62.9 million of variable rate debt outstanding which consisted of $53.5 million on our revolving credit facility and $9.4 million of municipal bonds. Based upon this amount of variable rate debt and the specific terms, if market interest rates increased 1.0%, our annual interest expense would increase by approximately $0.6 million, and our net income and cash flows for the year would decrease by approximately $0.6 million. Conversely, if market interest rates decreased 1.0%, our annual interest expense would decrease by approximately $0.5 million with a corresponding increase in our net income and cash flows for the year.

## ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and supplementary data are included as a separate section of this Annual Report on Form 10-K commencing on page F-1 and are incorporated herein by reference.

## ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

## ITEM 9A. CONTROLS AND PROCEDURES

## Quarterly Assessment

We carried out an assessment as of December 31, 2015 of the effectiveness of the design and operation of our disclosure controls and procedures and our internal control over financial reporting. This assessment was done under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer. Rules adopted by the Securities and Exchange Commission ("SEC") require that we present the conclusions of our principal executive officer and our principal financial officer about the effectiveness of our disclosure controls and procedures and the conclusions of our management about the effectiveness of our internal control over financial reporting as of the end of the period covered by this annual report.

## Principal Executive Officer and Principal Financial Officer Certifications

Included as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K are forms of “Certification” of our principal executive officer and our principal financial officer. The forms of Certification are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002. This section of this Annual Report on Form 10-K that you are currently reading is the information concerning the assessment referred to in the Section 302 certifications and this information should be read in conjunction with the Section 302 certifications for a more complete understanding of the topics presented.



## Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports, such as this report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and Executive Vice President-Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. These controls and procedures are based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e) promulgated under the Exchange Act. Rules adopted by the SEC require that we present the conclusions of the Chief Executive Officer and Chief Financial Officer about the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report.

## Internal Control over Financial Reporting

Establishing and maintaining internal control over financial reporting is a process designed by, or under the supervision of, our President and Chief Executive Officer and Executive Vice President-Chief Financial Officer, as appropriate, and effected by our employees, including management and our Board of Trustees, 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 in the United States of America. This process includes policies and procedures that:

- pertain to the maintenance of records that accurately and fairly reflect the transactions and dispositions of our assets in reasonable detail;

- provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are made only in accordance with the authorization procedures we have established; and

- provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of any of our assets in circumstances that could have a material adverse effect on our financial statements.

## Limitations on the Effectiveness of Controls

Management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. In designing and evaluating our control system, management recognized that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, that may affect our operation have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions that cannot be anticipated at the present time, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

## Scope of the Evaluations

The evaluation by our Chief Executive Officer and our Chief Financial Officer of our disclosure controls and procedures and our internal control over financial reporting included a review of our procedures and procedures performed by internal audit, as well as discussions with our Disclosure Committee and others in our organization, as appropriate. In conducting this evaluation, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control—Integrated Framework. In the course of the evaluation, we sought to identify data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, were being undertaken. The evaluation of our disclosure controls and procedures and our internal control over financial reporting is done on a quarterly basis, so that the conclusions concerning the effectiveness of such controls can be reported in our Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

Our internal control over financial reporting is also assessed on an ongoing basis by personnel in our accounting department and by our independent auditors in connection with their audit and review activities. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures and our internal control over financial reporting and to make modifications as necessary. Our intent in this regard is that the disclosure controls and procedures and internal control over financial reporting will be maintained and updated (including with improvements and corrections) as conditions warrant.



Among other matters, we sought in our evaluation to determine whether there were any “significant deficiencies” or “material weaknesses” in our internal control over financial reporting, or whether we had identified any acts of fraud involving personnel who have a significant role in our internal control over financial reporting. This information is important both for the evaluation generally and because the Section 302 certifications require that our Chief Executive Officer and our Chief Financial Officer disclose that information to the Audit Committee of our Board of Trustees and our independent auditors and also require us to report on related matters in this section of the Annual Report on Form 10-K. In the Public Company Accounting Oversight Board’s Auditing Standard No. 5, a “deficiency” in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A “significant deficiency” is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company’s financial reporting. A “material weakness” is defined in Auditing Standard No. 5 as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. We also sought to deal with other control matters in the evaluation, and in any case in which a problem was identified, we considered what revision, improvement and/or correction was necessary to be made in accordance with our on-going procedures.

## Periodic Evaluation and Conclusion of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that such controls and procedures were effective as of the end of the period covered by this report and provides reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

## Periodic Evaluation and Conclusion of Internal Control over Financial Reporting

Our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of the design and operation of our internal control over financial reporting as of the end of our most recent fiscal year. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that such internal control over financial reporting was effective as of the end of our most recent fiscal year and provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

## Statement of Our Management

Our management has issued a report on its assessment of the Trust’s internal control over financial reporting, which appears on page F-2 of this Annual Report on Form 10-K.

## Statement of Our Independent Registered Public Accounting Firm

Grant Thornton LLP, our independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the Trust’s internal control over financial reporting, which appears on page F-3 of this Annual Report on Form 10-K.

## Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during our fourth fiscal quarter of 2015 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## ITEM 9B. OTHER INFORMATION

Not applicable.



## PART III

Certain information required in Part III is omitted from this Report but is incorporated herein by reference from our Proxy Statement for the 2016 Annual Meeting of Shareholders (as amended or supplemented, the “Proxy Statement”).

## ITEM 10. TRUSTEES, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The tables and narrative in the Proxy Statement identifying our Trustees and Board committees under the caption “Election of Trustees” and “Corporate Governance”, the sections of the Proxy Statement entitled “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” and other information included in the Proxy Statement required by this Item 10 are incorporated herein by reference.

We have adopted a Code of Ethics, which is applicable to our Chief Executive Officer and senior financial officers. The Code of Ethics is available in the Corporate Governance section of the Investors section of our website at www.federalrealty.com.

## ITEM 11. EXECUTIVE COMPENSATION

The sections of the Proxy Statement entitled “Summary Compensation Table,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report,” “Trustee Compensation” and “Compensation Discussion and Analysis” and other information included in the Proxy Statement required by this Item 11 are incorporated herein by reference.

## ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

The sections of the Proxy Statement entitled “Share Ownership” and “Equity Compensation Plan Information” and other information included in the Proxy Statement required by this Item 12 are incorporated herein by reference.

## ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND TRUSTEE INDEPENDENCE

The sections of the Proxy Statement entitled “Certain Relationship and Related Transactions” and “Independence of Trustees” and other information included in the Proxy Statement required by this Item 13 are incorporated herein by reference.

## ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The sections of the Proxy Statement entitled “Ratification of Independent Registered Public Accounting Firm” and “Relationship with Independent Registered Public Accounting Firm” and other information included in the Proxy Statement required by this Item 14 are incorporated herein by reference.

## PART IV

## ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

## (a)(1) Financial Statements

Our consolidated financial statements and notes thereto, together with Management’s Report on Internal Control over Financial Reporting and Reports of Independent Registered Public Accounting Firm are included as a separate section of this Annual Report on Form 10-K commencing on page F-1.

## (2) Financial Statement Schedules

Our financial statement schedules are included in a separate section of this Annual Report on Form 10-K commencing on page F-30.

## (3) Exhibits

A list of exhibits to this Annual Report on Form 10-K is set forth on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference.

(b) See Exhibit Index

(c) Not Applicable



## SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized this February 9, 2016.

Federal Realty Investment Trust

By: /s/ DONALD C. WOOD
Donald C. Wood
President, Chief Executive Officer and Trustee

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated. Each person whose signature appears below hereby constitutes and appoints each of Donald C. Wood and Dawn M. Becker as his or her attorney-in-fact and agent, with full power of substitution and resubstitution for him or her in any and all capacities, to sign any or all amendments to this Report and to file same, with exhibits thereto and other documents in connection therewith, granting unto such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that such attorney-in-fact and agent or his or her substitutes may do or cause to be done by virtue hereof.

<table><tr><td>Signature</td><td>Title</td><td>Date</td></tr><tr><td>/s/ DONALD C. WOOD</td><td>President, Chief Executive Officer and Trustee (Principal Executive Officer)</td><td>February 9, 2016</td></tr><tr><td>Donald C. Wood</td><td>Trustee (Principal Executive Officer)</td><td></td></tr><tr><td>/s/ JAMES M. TAYLOR, JR.</td><td>Executive Vice President-Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)</td><td>February 9, 2016</td></tr><tr><td>James M. Taylor, Jr.</td><td>Trustee</td><td>February 9, 2016</td></tr><tr><td>/s/ JOSEPH S. VASSALLUZZO</td><td>Non-Executive Chairman</td><td>February 9, 2016</td></tr><tr><td>Joseph S. Vassalluzzo</td><td>Trustee</td><td>February 9, 2016</td></tr><tr><td>/s/ JON E. BORTZ</td><td>Trustee</td><td>February 9, 2016</td></tr><tr><td>Jon E. Bortz</td><td>Trustee</td><td>February 9, 2016</td></tr><tr><td>/s/ DAVID W. FAEDER</td><td>Trustee</td><td>February 9, 2016</td></tr><tr><td>David W. Faeder</td><td>Trustee</td><td>February 9, 2016</td></tr><tr><td>/s/ KRISTIN GAMBLE</td><td>Trustee</td><td>February 9, 2016</td></tr><tr><td>Kristin Gamble</td><td>Trustee</td><td>February 9, 2016</td></tr><tr><td>/s/ GAIL P. STEINEL</td><td>Trustee</td><td>February 9, 2016</td></tr><tr><td>Gail P. Steinel</td><td>Trustee</td><td>February 9, 2016</td></tr><tr><td>/s/ WARREN M. THOMPSON</td><td>Trustee</td><td>February 9, 2016</td></tr><tr><td>Warren M. Thompson</td><td>Trustee</td><td>February 9, 2016</td></tr></table>



## Item 8 and Item 15(a)(1) and (2)
Index to Consolidated Financial Statements and Schedules

Consolidated Financial Statements Page No.
Management Assessment Report on Internal Control over Financial Reporting ..... F-2
Report of Independent Registered Public Accounting Firm ..... F-3
Report of Independent Registered Public Accounting Firm ..... F-4
Consolidated Balance Sheets ..... F-5
Consolidated Statements of Comprehensive Income ..... F-6
Consolidated Statement of Shareholders' Equity ..... F-7
Consolidated Statements of Cash Flows ..... F-8
Notes to Consolidated Financial Statements ..... F-9

Financial Statement Schedules
Schedule III—Summary of Real Estate and Accumulated Depreciation ..... F-30
Schedule IV—Mortgage Loans on Real Estate ..... F-37

All other schedules have been omitted either because the information is not applicable, not material, or is disclosed in our consolidated financial statements and related notes.



## Management Assessment Report on Internal Control over Financial Reporting

The management of Federal Realty Investment Trust (the "Trust") is responsible for establishing and maintaining adequate internal control over financial reporting. Establishing and maintaining internal control over financial reporting is a process designed by, or under the supervision of, our President and Chief Executive Officer and Executive Vice President - Chief Financial Officer and Treasurer, as appropriate, and effected by our employees, including management and our Board of Trustees, 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. This process includes policies and procedures that:

- pertain to the maintenance of records that accurately and fairly reflect the transactions and dispositions of our assets in reasonable detail;

- provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are made only in accordance with the authorization procedures we have established; and

- provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of any of our assets in circumstances that could have a material adverse effect on our financial statements.

Management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our internal control over financial reporting will prevent all errors and fraud. In designing and evaluating our control system, management recognized that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, that may affect our operation have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management's override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management conducted an assessment of the effectiveness of the Trust’s internal control over financial reporting as of December 31, 2015. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control—Integrated Framework. Based on this assessment, management concluded that our internal control over financial reporting is effective, based on those criteria, as of December 31, 2015.

Grant Thornton LLP, the independent registered public accounting firm that audited the Trust’s consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the Trust’s internal control over financial reporting, which appears on page F-3 of this Annual Report on Form 10-K.



## Report of Independent Registered Public Accounting Firm

## Trustees and Shareholders of Federal Realty Investment Trust

We have audited the internal control over financial reporting of Federal Realty Investment Trust (a Maryland real estate investment trust) and Subsidiaries (collectively, the "Trust") as of December 31, 2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Trust's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Assessment Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Trust's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Federal Realty Investment Trust and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Trust as of and for the year ended December 31, 2015 and our report dated February 9, 2016 expressed an unqualified opinion on those financial statements.

## /s/ GRANT THORNTON LLP

McLean, Virginia
February 9, 2016



## Report of Independent Registered Public Accounting Firm

## Trustees and Shareholders of Federal Realty Investment Trust

We have audited the accompanying consolidated balance sheets of Federal Realty Investment Trust (a Maryland real estate investment trust) and Subsidiaries (collectively, the "Trust") as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2015. Our audits of the basic consolidated financial statements included the financial statement schedules listed in the index appearing under Item 15(a)(2). These financial statements and financial statement schedules are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Federal Realty Investment Trust and Subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Trust’s internal control over financial reporting as of December 31, 2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 9, 2016 expressed an unqualified opinion.

## /s/ GRANT THORNTON LLP

McLean, Virginia
February 9, 2016



## Federal Realty Investment Trust
Consolidated Balance Sheets

<table><tr><td rowspan="3"></td><td colspan="2">December 31,</td></tr><tr><td>2015</td><td>2014</td></tr><tr><td colspan="2">(In thousands, except share and per share data)</td></tr><tr><td>ASSETS</td><td></td><td></td></tr><tr><td>Real estate, at cost</td><td></td><td></td></tr><tr><td>Operating (including $485,971 and $282,303 of consolidated variable interest entities, respectively)</td><td>$ 5,630,771</td><td>$ 5,128,757</td></tr><tr><td>Construction-in-progress</td><td>433,635</td><td>480,241</td></tr><tr><td></td><td>6,064,406</td><td>5,608,998</td></tr><tr><td>Less accumulated depreciation and amortization (including $35,782 and $26,618 of consolidated variable interest entities, respectively)</td><td>(1,574,041)</td><td>(1,467,050)</td></tr><tr><td>Net real estate</td><td>4,490,365</td><td>4,141,948</td></tr><tr><td>Cash and cash equivalents</td><td>21,046</td><td>47,951</td></tr><tr><td>Accounts and notes receivable, net</td><td>110,402</td><td>93,291</td></tr><tr><td>Mortgage notes receivable, net</td><td>41,618</td><td>50,988</td></tr><tr><td>Investment in real estate partnerships</td><td>41,546</td><td>37,457</td></tr><tr><td>Prepaid expenses and other assets</td><td>190,203</td><td>160,167</td></tr><tr><td>Debt issuance costs, net of accumulated amortization of $11,092 and $11,441, respectively</td><td>16,529</td><td>15,068</td></tr><tr><td>TOTAL ASSETS</td><td>$ 4,911,709</td><td>$ 4,546,870</td></tr><tr><td>LIABILITIES AND SHAREHOLDERS&#x27; EQUITY</td><td></td><td></td></tr><tr><td>Liabilities</td><td></td><td></td></tr><tr><td>Mortgages payable (including $254,241 and $187,632 of consolidated variable interest entities, respectively)</td><td>$ 482,822</td><td>$ 563,698</td></tr><tr><td>Capital lease obligations</td><td>71,620</td><td>71,647</td></tr><tr><td>Notes payable</td><td>343,600</td><td>290,519</td></tr><tr><td>Senior notes and debentures</td><td>1,744,324</td><td>1,483,813</td></tr><tr><td>Accounts payable and accrued expenses</td><td>146,532</td><td>145,685</td></tr><tr><td>Dividends payable</td><td>66,338</td><td>60,620</td></tr><tr><td>Security deposits payable</td><td>15,439</td><td>14,115</td></tr><tr><td>Other liabilities and deferred credits</td><td>121,787</td><td>105,164</td></tr><tr><td>Total liabilities</td><td>2,992,462</td><td>2,735,261</td></tr><tr><td>Commitments and contingencies (Note 9)</td><td></td><td></td></tr><tr><td>Redeemable noncontrolling interests</td><td>137,316</td><td>119,053</td></tr><tr><td>Shareholders&#x27; equity</td><td></td><td></td></tr><tr><td>Preferred shares, authorized 15,000,000 shares, $0.01 par: 5.417% Series 1 Cumulative Convertible Preferred Shares, (stated at liquidation preference $25 per share), 399,896 shares issued and outstanding</td><td>9,997</td><td>9,997</td></tr><tr><td>Common shares of beneficial interest, $0.01 par, 100,000,000 shares authorized, 69,493,392 and 68,605,783 shares issued and outstanding, respectively</td><td>696</td><td>687</td></tr><tr><td>Additional paid-in capital</td><td>2,381,867</td><td>2,281,223</td></tr><tr><td>Accumulated dividends in excess of net income</td><td>(724,701)</td><td>(683,991)</td></tr><tr><td>Accumulated other comprehensive loss</td><td>(4,110)</td><td>(3,515)</td></tr><tr><td>Total shareholders&#x27; equity of the Trust</td><td>1,663,749</td><td>1,604,401</td></tr><tr><td>Noncontrolling interests</td><td>118,182</td><td>88,155</td></tr><tr><td>Total shareholders&#x27; equity</td><td>1,781,931</td><td>1,692,556</td></tr><tr><td>TOTAL LIABILITIES AND SHAREHOLDERS&#x27; EQUITY</td><td>$ 4,911,709</td><td>$ 4,546,870</td></tr></table>

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



## Federal Realty Investment Trust
Consolidated Statements of Comprehensive Income

<table><tr><td rowspan="3"></td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2015</td><td>2014</td><td>2013</td><td></td></tr><tr><td colspan="4">(In thousands, except per share data)</td></tr><tr><td>REVENUE</td><td></td><td></td><td></td><td></td></tr><tr><td>Rental income</td><td>$ 727,812</td><td>$ 666,322</td><td>$ 620,089</td><td></td></tr><tr><td>Other property income</td><td>11,810</td><td>14,758</td><td>12,169</td><td></td></tr><tr><td>Mortgage interest income</td><td>4,390</td><td>5,010</td><td>5,155</td><td></td></tr><tr><td>Total revenue</td><td>744,012</td><td>686,090</td><td>637,413</td><td></td></tr><tr><td>EXPENSES</td><td></td><td></td><td></td><td></td></tr><tr><td>Rental expenses</td><td>147,593</td><td>135,417</td><td>118,695</td><td></td></tr><tr><td>Real estate taxes</td><td>85,824</td><td>76,506</td><td>71,759</td><td></td></tr><tr><td>General and administrative</td><td>35,645</td><td>32,316</td><td>31,970</td><td></td></tr><tr><td>Depreciation and amortization</td><td>174,796</td><td>170,814</td><td>160,828</td><td></td></tr><tr><td>Total operating expenses</td><td>443,858</td><td>415,053</td><td>383,252</td><td></td></tr><tr><td>OPERATING INCOME</td><td>300,154</td><td>271,037</td><td>254,161</td><td></td></tr><tr><td>Other interest income</td><td>149</td><td>94</td><td>433</td><td></td></tr><tr><td>Interest expense</td><td>(92,553)</td><td>(93,941)</td><td>(104,977)</td><td></td></tr><tr><td>Early extinguishment of debt</td><td>(19,072)</td><td>(10,545)</td><td>(13,304)</td><td></td></tr><tr><td>Income from real estate partnerships</td><td>1,416</td><td>1,243</td><td>1,498</td><td></td></tr><tr><td>INCOME FROM CONTINUING OPERATIONS</td><td>190,094</td><td>167,888</td><td>137,811</td><td></td></tr><tr><td>DISCONTINUED OPERATIONS</td><td></td><td></td><td></td><td></td></tr><tr><td>Discontinued operations - income</td><td>—</td><td>—</td><td>942</td><td></td></tr><tr><td>Discontinued operations - gain on sale of real estate</td><td>—</td><td>—</td><td>23,861</td><td></td></tr><tr><td>Results from discontinued operations</td><td>—</td><td>—</td><td>24,803</td><td></td></tr><tr><td>INCOME BEFORE GAIN ON SALE OF REAL ESTATE</td><td>190,094</td><td>167,888</td><td>162,614</td><td></td></tr><tr><td>Gain on sale of real estate</td><td>28,330</td><td>4,401</td><td>4,994</td><td></td></tr><tr><td>NET INCOME</td><td>218,424</td><td>172,289</td><td>167,608</td><td></td></tr><tr><td>Net income attributable to noncontrolling interests</td><td>(8,205)</td><td>(7,754)</td><td>(4,927)</td><td></td></tr><tr><td>NET INCOME ATTRIBUTABLE TO THE TRUST</td><td>210,219</td><td>164,535</td><td>162,681</td><td></td></tr><tr><td>Dividends on preferred shares</td><td>(541)</td><td>(541)</td><td>(541)</td><td></td></tr><tr><td>NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS</td><td>209,678</td><td>163,994</td><td>162,140</td><td></td></tr><tr><td>EARNINGS PER COMMON SHARE, BASIC</td><td></td><td></td><td></td><td></td></tr><tr><td>Continuing operations</td><td>$ 2.63</td><td>$ 2.35</td><td>$ 2.01</td><td></td></tr><tr><td>Discontinued operations</td><td>—</td><td>—</td><td>0.38</td><td></td></tr><tr><td>Gain on sale of real estate</td><td>0.41</td><td>0.07</td><td>0.08</td><td></td></tr><tr><td></td><td>$ 3.04</td><td>$ 2.42</td><td>$ 2.47</td><td></td></tr><tr><td>Weighted average number of common shares, basic</td><td>68,797</td><td>67,322</td><td>65,331</td><td></td></tr><tr><td>EARNINGS PER COMMON SHARE, DILUTED</td><td></td><td></td><td></td><td></td></tr><tr><td>Continuing operations</td><td>$ 2.62</td><td>$ 2.34</td><td>$ 2.00</td><td></td></tr><tr><td>Discontinued operations</td><td>—</td><td>—</td><td>0.38</td><td></td></tr><tr><td>Gain on sale of real estate</td><td>0.41</td><td>0.07</td><td>0.08</td><td></td></tr><tr><td></td><td>$ 3.03</td><td>$ 2.41</td><td>$ 2.46</td><td></td></tr><tr><td>Weighted average number of common shares, diluted</td><td>68,981</td><td>67,492</td><td>65,483</td><td></td></tr><tr><td>NET INCOME</td><td>$ 218,424</td><td>$ 172,289</td><td>$ 167,608</td><td></td></tr><tr><td>Other comprehensive (loss) income - change in value of interest rate swaps</td><td>(595)</td><td>(2,098)</td><td>10,971</td><td></td></tr><tr><td>COMPREHENSIVE INCOME</td><td>217,829</td><td>170,191</td><td>178,579</td><td></td></tr><tr><td>Comprehensive income attributable to noncontrolling interests</td><td>(8,205)</td><td>(7,754)</td><td>(4,927)</td><td></td></tr><tr><td>COMPREHENSIVE INCOME ATTRIBUTABLE TO THE TRUST</td><td>209,624</td><td>162,437</td><td>173,652</td><td></td></tr></table>

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



## Federal Realty Investment Trust
Consolidated Statements of Cash Flows

<table><tr><td rowspan="3"></td><td colspan="3">Year Ended December 31,</td></tr><tr><td>2015</td><td>2014</td><td>2013</td></tr><tr><td colspan="3">(In thousands)</td></tr><tr><td>OPERATING ACTIVITIES</td><td></td><td></td><td></td></tr><tr><td>Net income</td><td>$ 218,424</td><td>$ 172,289</td><td>$ 167,608</td></tr><tr><td>Adjustments to reconcile net income to net cash provided by operating activities</td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization, including discontinued operations</td><td>174,796</td><td>170,814</td><td>161,099</td></tr><tr><td>Gain on sale of real estate</td><td>(28,330)</td><td>(4,401)</td><td>(28,855)</td></tr><tr><td>Early extinguishment of debt</td><td>19,072</td><td>10,545</td><td>13,304</td></tr><tr><td>Income from real estate partnerships</td><td>(1,416)</td><td>(1,243)</td><td>(1,498)</td></tr><tr><td>Other, net</td><td>177</td><td>733</td><td>2,704</td></tr><tr><td>Changes in assets and liabilities, net of effects of acquisitions and dispositions:</td><td></td><td></td><td></td></tr><tr><td>Increase in accounts receivable, net</td><td>(9,200)</td><td>(3,063)</td><td>(6,321)</td></tr><tr><td>(Increase) decrease in prepaid expenses and other assets</td><td>(7,422)</td><td>(4,222)</td><td>69</td></tr><tr><td>(Decrease) increase in accounts payable and accrued expenses</td><td>(9,995)</td><td>4,253</td><td>5,325</td></tr><tr><td>Increase in security deposits and other liabilities</td><td>3,729</td><td>425</td><td>1,063</td></tr><tr><td>Net cash provided by operating activities</td><td>359,835</td><td>346,130</td><td>314,498</td></tr><tr><td>INVESTING ACTIVITIES</td><td></td><td></td><td></td></tr><tr><td>Acquisition of real estate</td><td>(154,313)</td><td>(9,154)</td><td>(87,276)</td></tr><tr><td>Capital expenditures - development and redevelopment</td><td>(236,437)</td><td>(314,654)</td><td>(243,073)</td></tr><tr><td>Capital expenditures - other</td><td>(46,096)</td><td>(46,304)</td><td>(47,069)</td></tr><tr><td>Proceeds from sale of real estate</td><td>97,422</td><td>10,406</td><td>42,866</td></tr><tr><td>Investment in real estate partnerships</td><td>(2,802)</td><td>(6,731)</td><td>—</td></tr><tr><td>Distribution from real estate partnership in excess of earnings</td><td>512</td><td>565</td><td>790</td></tr><tr><td>Leasing costs</td><td>(22,382)</td><td>(35,286)</td><td>(12,393)</td></tr><tr><td>Repayment of mortgage and other notes receivable, net</td><td>10,333</td><td>5,008</td><td>957</td></tr><tr><td>Net cash used in investing activities</td><td>(353,763)</td><td>(396,150)</td><td>(345,198)</td></tr><tr><td>FINANCING ACTIVITIES</td><td></td><td></td><td></td></tr><tr><td>Net borrowings (repayments) under revolving credit facility, net of costs</td><td>53,500</td><td>—</td><td>(1,929)</td></tr><tr><td>Issuance of senior notes, net of costs</td><td>456,151</td><td>244,579</td><td>564,389</td></tr><tr><td>Redemption and retirement of senior notes</td><td>(219,228)</td><td>(134,240)</td><td>(293,360)</td></tr><tr><td>Issuance of mortgages, capital leases and notes payable, net of costs</td><td>—</td><td>—</td><td>860</td></tr><tr><td>Repayment of mortgages, capital leases and notes payable</td><td>(181,315)</td><td>(94,422)</td><td>(173,735)</td></tr><tr><td>Issuance of common shares</td><td>110,855</td><td>216,155</td><td>186,548</td></tr><tr><td>Dividends paid to common and preferred shareholders</td><td>(243,314)</td><td>(215,216)</td><td>(193,016)</td></tr><tr><td>Distributions to and redemptions of noncontrolling interests</td><td>(9,626)</td><td>(7,812)</td><td>(7,118)</td></tr><tr><td>Net cash (used in) provided by financing activities</td><td>(32,977)</td><td>9,044</td><td>82,639</td></tr><tr><td>(Decrease) Increase in cash and cash equivalents</td><td>(26,905)</td><td>(40,976)</td><td>51,939</td></tr><tr><td>Cash and cash equivalents at beginning of year</td><td>47,951</td><td>88,927</td><td>36,988</td></tr><tr><td>Cash and cash equivalents at end of year</td><td>$ 21,046</td><td>$ 47,951</td><td>$ 88,927</td></tr></table>

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



# Federal Realty Investment Trust
Notes to Consolidated Financial Statements
December 31, 2015, 2014 and 2013

## NOTE 1—BUSINESS AND ORGANIZATION

Federal Realty Investment Trust (the “Trust”) is an equity real estate investment trust (“REIT”) specializing in the ownership, management, and redevelopment of retail and mixed-use properties. Our properties are located primarily in densely populated and affluent communities in strategically selected metropolitan markets in the Mid-Atlantic and Northeast regions of the United States, as well as in California and South Florida. As of December 31, 2015, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 90 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.

## NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

## Principles of Consolidation

Our consolidated financial statements include the accounts of the Trust, its corporate subsidiaries, and all entities in which the Trust has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity (“VIE”). The equity interests of other investors are reflected as noncontrolling interests or redeemable noncontrolling interests. All significant intercompany transactions and balances are eliminated in consolidation. We account for our interests in joint ventures, which we do not control, using the equity method of accounting.

## Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, referred to as “GAAP,” requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.

## Revenue Recognition and Accounts Receivable

Our leases with tenants are classified as operating leases. Substantially all such leases contain fixed escalations which occur at specified times during the term of the lease. Base rents are recognized on a straight-line basis from when the tenant controls the space through the term of the related lease, net of valuation adjustments, based on management’s assessment of credit, collection and other business risk. Percentage rents, which represent additional rents based upon the level of sales achieved by certain tenants, are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved and the percentage rents are collectible. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related expenditures are incurred. For a tenant to terminate its lease agreement prior to the end of the agreed term, we may require that they pay a fee to cancel the lease agreement. Lease termination fees for which the tenant has relinquished control of the space are generally recognized on the termination date. When a lease is terminated early but the tenant continues to control the space under a modified lease agreement, the lease termination fee is generally recognized evenly over the remaining term of the modified lease agreement.

We make estimates of the collectability of our accounts receivable related to minimum rents, straight-line rents, expense reimbursements and other revenue. Accounts receivable is carried net of this allowance for doubtful accounts. Our determination as to the collectability of accounts receivable and correspondingly, the adequacy of this allowance, is based primarily upon evaluations of individual receivables, current economic conditions, historical experience and other relevant factors. The allowance for doubtful accounts is increased or decreased through bad debt expense. Accounts receivable are written-off when they are deemed to be uncollectible and we are no longer actively pursuing collection. At December 31, 2015 and 2014, our allowance for doubtful accounts was $11.7 million and $12.4 million, respectively.

In some cases, primarily relating to straight-line rents, the collection of accounts receivable extends beyond one year. Our experience relative to unbilled straight-line rents is that a portion of the amounts otherwise recognizable as revenue is never billed to or collected from tenants due to early lease terminations, lease modifications, bankruptcies and other factors. Accordingly, the extended collection period for straight-line rents along with our evaluation of tenant credit risk may result in the nonrecognition of a portion of straight-line rental income until the collection of such income is reasonably assured. If our evaluation of tenant credit risk changes indicating more straight-line revenue is reasonably collectible than previously estimated



and realized, the additional straight-line rental income is recognized as revenue. If our evaluation of tenant credit risk changes indicating a portion of realized straight-line rental income is no longer collectible, a reserve and bad debt expense is recorded. At December 31, 2015 and 2014, accounts receivable include approximately $72.7 million and $66.1 million, respectively, related to straight-line rents.

## Real Estate

Land, buildings and improvements are recorded at cost. Depreciation is computed using the straight-line method. Estimated useful lives range generally from 35 years to a maximum of 50 years on buildings and major improvements. Minor improvements, furniture and equipment are capitalized and depreciated over useful lives ranging from 2 to 20 years. Maintenance and repairs that do not improve or extend the useful lives of the related assets are charged to operations as incurred. Tenant improvements are capitalized and depreciated over the life of the related lease or their estimated useful life, whichever is shorter. If a tenant vacates its space prior to contractual termination of its lease, the undepreciated balance of any tenant improvements are written off if they are replaced or have no future value. In 2015, 2014 and 2013, real estate depreciation expense was $156.5 million, $155.7 million and $147.7 million, respectively, including amounts from real estate sold and assets under capital lease obligations.

Sales of real estate are recognized only when sufficient down payments have been obtained, possession and other attributes of ownership have been transferred to the buyer and we have no significant continuing involvement. The application of these criteria can be complex and requires us to make assumptions. We believe these criteria were met for all real estate sold during the periods presented.

Our methodology of allocating the cost of acquisitions to assets acquired and liabilities assumed is based on estimated fair values, replacement cost and/or appraised values. When we acquire operating real estate properties, the purchase price is allocated to land, building, improvements, leasing costs, intangibles such as in-place leases, assumed debt, if any, and to current assets and liabilities acquired, if any. The value allocated to in-place leases is amortized over the related lease term and reflected as rental income in the consolidated statements of comprehensive income. We consider qualitative and quantitative factors in evaluating the likelihood of a tenant exercising a below market renewal option and include such renewal options in the calculation of in-place lease value when we consider these to be bargain renewal options. If the value of below market lease intangibles includes renewal option periods, we include such renewal periods in the amortization period utilized. If a tenant vacates its space prior to contractual termination of its lease, the unamortized balance of any in-place lease value is written off to rental income.

Transaction costs related to the acquisition of a business, such as broker fees, transfer taxes, legal, accounting, valuation, and other professional and consulting fees, are expensed as incurred and included in “general and administrative expenses” in our consolidated statements of comprehensive income. The acquisition of an operating shopping center typically qualifies as a business. For asset acquisitions not meeting the definition of a business, transaction costs are capitalized as part of the acquisition cost.

When applicable, as lessee, we classify our leases of land and building as operating or capital leases. We are required to use judgment and make estimates in determining the lease term, the estimated economic life of the property and the interest rate to be used in determining whether or not the lease meets the qualification of a capital lease and is recorded as an asset.

We capitalize certain costs related to the development and redevelopment of real estate including pre-construction costs, real estate taxes, insurance, construction costs and salaries and related costs of personnel directly involved. Additionally, we capitalize interest costs related to development and redevelopment activities. Capitalization of these costs begin when the activities and related expenditures commence and cease when the project is substantially complete and ready for its intended use at which time the project is placed in service and depreciation commences. Additionally, we make estimates as to the probability of certain development and redevelopment projects being completed. If we determine the development or redevelopment is no longer probable of completion, we expense all capitalized costs which are not recoverable.

We review for impairment on a property by property basis. Impairment is recognized on properties held for use when the expected undiscounted cash flows for a property are less than its carrying amount at which time the property is written-down to fair value. Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell. Effective January 1, 2014, we adopted ASU 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity," which amended the definition of a discontinued operation to include only the disposal of a component of an entity that represents a strategic shift that has or will have a major impact on an entity's operations and financial results. The properties we have sold subsequent to January 1, 2014 do not qualify for discontinued operations presentation and thus, the results of those disposals are included in "income from continuing operations." Prior to January 1, 2014, the sale or disposal of a "component of an entity" was treated as discontinued operations. The operating properties sold



by us prior to January 1, 2014 typically met the definition of a component of an entity and as such the revenues and expenses associated with sold properties were reclassified to discontinued operations for all periods presented.

## Cash and Cash Equivalents

We define cash and cash equivalents as cash on hand, demand deposits with financial institutions and short term liquid investments with an initial maturity, when purchased, under three months. Cash balances in individual banks may exceed the federally insured limit by the Federal Deposit Insurance Corporation (the “FDIC”). At December 31, 2015, we had $18.1 million in excess of the FDIC insured limit.

## Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist primarily of lease costs, prepaid property taxes and acquired above market leases. Capitalized lease costs are direct costs incurred which were essential to originate a lease and would not have been incurred had the leasing transaction not taken place and include third party commissions and salaries and related costs of personnel directly related to time spent obtaining a lease. Capitalized lease costs are amortized over the life of the related lease. If a tenant vacates its space prior to the contractual termination of its lease, the unamortized balance of any previously capitalized lease costs are written off.

## Debt Issuance Costs

Costs related to the issuance of debt instruments are capitalized and are amortized as interest expense over the estimated life of the related issue using the straight-line method which approximates the effective interest method. If a debt instrument is paid off prior to its original maturity date, the unamortized balance of debt issuance costs are written off to interest expense or, if significant, included in “early extinguishment of debt.”

## Derivative Instruments

At times, we may use derivative instruments to manage exposure to variable interest rate risk. We generally enter into interest rate swaps to manage our exposure to variable interest rate risk and treasury locks to manage the risk of interest rates rising prior to the issuance of debt. We enter into derivative instruments that qualify as cash flow hedges and do not enter into derivative instruments for speculative purposes.

The interest rate swaps associated with our cash flow hedges are recorded at fair value on a recurring basis. 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 twelve months, we expect to reclassify an estimated $2.9 million as an increase to interest expense. Our cash flow hedges become ineffective if critical terms of the hedging instrument and the debt instrument do not perfectly match such as notional amounts, settlement dates, reset dates, calculation period and LIBOR rate. In addition, we evaluate the default risk of the counterparty by monitoring the credit worthiness of the counterparty. When ineffectiveness exists, the ineffective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recognized in earnings in the period affected. Hedge ineffectiveness did not impact earnings in 2015, 2014 or 2013, and we do not anticipate it will have a significant effect in the future.

See Note 8 for additional disclosures relating to our two existing interest rate swap agreements.

## Mortgage Notes Receivable

We have made certain mortgage loans that, because of their nature, qualify as loan receivables. At the time the loans were made, we did not intend for the arrangement to be anything other than a financing and did not contemplate a real estate investment. We evaluate each investment to determine whether the loan arrangement qualifies as a loan, joint venture or real estate investment and the appropriate accounting thereon. Such determination affects our balance sheet classification of these investments and the recognition of interest income derived therefrom. On some of the loans we receive additional interest, however, we never receive in excess of 50% of the residual profit in the project, and because the borrower has either a substantial investment in the project or has guaranteed all or a portion of our loan (or a combination thereof), the loans qualify for loan accounting. The amounts under these arrangements are presented as mortgage notes receivable at December 31, 2015 and 2014.



Mortgage notes receivable are recorded at cost, net of any valuation adjustments. Interest income is accrued as earned. Mortgage notes receivable are considered past due based on the contractual terms of the note agreement. On a quarterly basis, we evaluate the collectability of each mortgage note receivable based on various factors which may include payment history, expected fair value of the collateral securing the loan, internal and external credit information and/or economic trends. A loan is considered impaired when, based upon current information and events, it is probable that we will be unable to collect all amounts due under the existing contractual terms. When a loan is considered impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the mortgage note receivable to the present value of expected future cash flows. Since all of our loans are collateralized by either a first or second mortgage, the loans have risk characteristics similar to the risks in owning commercial real estate.

## Share Based Compensation

We grant share based compensation awards to employees and trustees typically in the form of restricted common shares, common shares, and options. We measure stock based compensation expense based on the grant date fair value of the award and recognize the expense ratably over the requisite service period, which is typically the vesting period. See Note 15 for further discussion regarding our share based compensation plans and policies.

## Variable Interest Entities

Certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties or in which equity investors do not have the characteristics of a controlling financial interest qualify as VIEs. VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE has both the power to direct the activities that most significantly impact economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

We have evaluated our investments in certain joint ventures including our real estate partnership with affiliates of a discretionary fund created and advised by Clarion Partners as of December 31, 2015 and determined that these joint ventures do not meet the requirements of a variable interest entity and, therefore, consolidation of these ventures is not required. These investments are accounted for using the equity method. See Note 19 for additional information regarding our January 13, 2016 acquisition of Clarion's 70% interest in this partnership. We have also determined that our hotel joint venture at our Pike & Rose project does not meet the requirement of a variable interest entity and have accounted for our related investment using the equity method. We have evaluated our mortgage loans receivable and determined that entities obligated under the mortgage loans are not VIEs for all periods presented. Our equity method investment balances and mortgage notes receivable are presented separately in our consolidated balance sheets.

On October 16, 2006, we acquired the leasehold interest in Melville Mall under a 20 year master lease. Additionally, we loaned the owner of Melville Mall $34.2 million secured by a second mortgage on the property. On June 3, 2014, we repaid the third party mortgage loan, and effectively became the first mortgage lender on the property. We have an option to purchase the shopping center on or after October 16, 2021 for a price of $5.0 million plus the assumption/repayment of the first and second mortgages. If we fail to exercise our purchase option, the owner of Melville Mall has a put option which would require us to purchase Melville Mall in 2023 for $5.0 million and the assumption of the owner's mortgage debt. We have determined that this property is held in a variable interest entity for which we are the primary beneficiary. Accordingly, beginning October 16, 2006, we consolidated this property and its operations. At December 31, 2015 and 2014, net real estate assets related to Melville Mall included in our consolidated balance sheets are approximately $65.0 million and $61.9 million, respectively.

In conjunction with the acquisition of Darien Shopping Center, we entered into a Reverse Section 1031 like-kind exchange agreement with a third party intermediary. The exchange agreement was for a maximum of 180 days and allowed us, for tax purposes, to defer gains on sale of other properties sold within this period. From April 3, 2013 to September 10, 2013, the third party intermediary was the legal owner of the property, although we controlled the activities that most significantly impacted the property, retained all of the economic benefits and risks associated with the property, and were the primary beneficiary. Accordingly, effective April 3, 2013, we consolidated Darien Shopping Center and its operations even during the period it was held by a third party intermediary.

We determined the joint venture that owns Plaza El Segundo is a variable interest entity for which we are the primary beneficiary. We are the managing member and own 48.2% of the entity. We control the significant operating decisions, consequently having the power to direct the activities that most significantly impact economic performance of the VIE, and have the obligation to absorb the majority of the losses and receive the majority of the benefits. Therefore, the entity is consolidated in our financial statements as of December 30, 2011. As of December 31, 2015 and 2014, net real estate assets related to Plaza El Segundo included in our consolidated balance sheets are approximately $172.2 million and $178.1 million,



respectively, and mortgages payable (net of unamortized premium) of $178.3 million and $180.3 million, respectively. Plaza El Segundo's creditors do not have recourse to our general credit. Our maximum exposure to loss is approximately $19.5 million.

On January 1, 2014 we entered into an agreement to acquire the interest of one of the noncontrolling interest holders in The Grove at Shrewsbury in 2015. The entity that held this interest was a variable interest entity for which we were the primary beneficiary. As of December 31, 2014, net real estate assets related to this entity's interest in The Grove at Shrewsbury included in our consolidated balance sheet were approximately $15.7 million, and a mortgage payable (net of unamortized premium) of $7.4 million. On February 25, 2015, we acquired the interest of the noncontrolling interest holder for $8.8 million. As this noncontrolling interest was mandatorily redeemable, it was classified as a liability and was included in "other liabilities and deferred credits" on the accompanying December 31, 2014 consolidated balance sheet.

We have determined the joint venture that owns CocoWalk and other partial interests in buildings in the Coconut Grove neighborhood of Miami, Florida, is a variable interest entity for which we are the primary beneficiary. We own an 80% common interest of the entity, as well as a preferred interest. We control the significant operating decisions, consequently having the power to direct the activities that most significantly impact economic performance of the entity, and have the obligation to absorb the majority of the losses and receive the majority of the benefits. Therefore, the entity is consolidated in our financial statements as of May 4, 2015. As of December 31, 2015, net real estate assets related to CocoWalk included in our consolidated balance sheets are approximately $97.2 million. Our maximum exposure to loss is approximately $88.8 million.

We have determined the joint venture that owns The Shops at Sunset Place is a variable interest entity for which we are the primary beneficiary. We own an 85% common interest of the entity. We control the significant operating decisions, consequently having the power to direct the activities that most significantly impact economic performance of the entity, and have the obligation to absorb the majority of the losses and receive the majority of the benefits. Therefore, the entity is consolidated in our financial statements as of October 1, 2015. As of December 31, 2015, net real estate assets related to The Shops at Sunset Place included in our consolidated balance sheets are approximately $115.8 million, and the entity has a mortgage payable (net of unamortized premium) of $75.9 million. Our maximum exposure to loss is approximately $35.5 million.

## Redeemable Noncontrolling Interests

We have certain noncontrolling interests that are redeemable for cash upon the occurrence of an event that is not solely in our control and therefore are classified outside of permanent equity. We adjust the carrying amounts of these noncontrolling interests that are currently redeemable to redemption value at the balance sheet date. Adjustments to the carrying amount to reflect changes in redemption value are recorded as adjustments to additional paid-in capital in shareholders' equity. These amounts are classified within the mezzanine section of the consolidated balance sheets.

The following table provides a rollforward of the redeemable noncontrolling interests:

<table><tr><td rowspan="3"></td><td colspan="3">Year Ended</td></tr><tr><td colspan="3">December 31,</td></tr><tr><td>2015</td><td>2014</td><td></td></tr><tr><td></td><td colspan="3">(In thousands)</td></tr><tr><td>Beginning balance</td><td>$ 119,053</td><td>$ 104,425</td><td></td></tr><tr><td>Net income</td><td>3,423</td><td>3,452</td><td></td></tr><tr><td>Distributions &amp; Redemptions</td><td>(4,286)</td><td>(3,714)</td><td></td></tr><tr><td>Contributions</td><td>12</td><td>5,858</td><td></td></tr><tr><td>Change in redemption value</td><td>19,114</td><td>9,032</td><td></td></tr><tr><td>Ending balance</td><td>$ 137,316</td><td>$ 119,053</td><td></td></tr></table>

## Income Taxes

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.



We have elected to treat certain of our subsidiaries as taxable REIT subsidiaries, which we refer to as a TRS. In general, a TRS may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Internal Revenue Code of 1986, as amended (the "Code"). A TRS is subject to federal and state income taxes. Our TRS activities have not been material.

With few exceptions, we are no longer subject to U.S. federal, state, and local tax examinations by tax authorities for years before 2011. As of December 31, 2015 and 2014, we had no material unrecognized tax benefits. While we currently have no material unrecognized tax benefits, as a policy, we recognize penalties and interest accrued related to unrecognized tax benefits as income tax expense.

## Segment Information

Our primary business is the ownership, management, and redevelopment of retail and mixed-use properties. We review operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. We evaluate financial performance using property operating income, which consists of rental income, other property income and mortgage interest income, less rental expenses and real estate taxes. No individual property constitutes more than 10% of our revenues or property operating income and we have no operations outside of the United States of America. Therefore, we have aggregated our properties into one reportable segment as the properties share similar long-term economic characteristics and have other similarities including the fact that they are operated using consistent business strategies, are typically located in major metropolitan areas, and have similar tenant mixes.

## Recently Issued Accounting Pronouncements

In January 2015, the FASB issued ASU 2015-01, "Income Statement - Extraordinary and Unusual Items." ASU 2015-01 eliminates the concept, and related presentation and disclosure requirements, of an extraordinary item. The presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include those items that are both unusual in nature and infrequently occurring. ASU 2015-01 is effective for us in the first quarter of 2016 and is not expected to have a significant impact on our consolidated financial statements.

In February 2015, the FASB issued ASU 2015-02, "Amendments to the Consolidation Analysis." ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are variable or voting interest entities, eliminates the presumption that the general partner should consolidate a limited partnership, modifies the consolidation analysis for reporting entities that are involved in variable interest entities, particularly those that have fee arrangements and related party relationships, and provides a scope exception from consolidation guidance for reporting entities with interests in legal entities that operate as registered money market funds. ASU 2015-02 is effective for us in the first quarter of 2016, and is not expected to have a significant impact on our consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs." ASU 2015-03 requires debt issuance costs related to a debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, rather than classified as an asset. Recognition and measurement of debt issuance costs are not affected. Subsequently, in August 2015, the FASB issued ASU 2015-15, "Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements," which allows an entity to present the costs related to securing a line-of-credit arrangement as an asset, regardless of whether there are any outstanding borrowings. ASU 2015-03 and ASU 2015-15 are effective for us in the first quarter of 2016 and are not expected to have a significant impact on our consolidated financial statements.

In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09, "Revenue from Contracts with Customers," which will now be effective for us in the first quarter of 2018. We are currently assessing the impact of this standard to our consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments." ASU 2015-16 requires that, if the initial accounting for the business combination is incomplete as of the end of the reporting period in which the acquisition occurs, the acquirer records provisional amounts based on information available at the acquisition date. The acquirer would then adjust these amounts in the current period, as it obtains more information about facts and circumstances that existed as of the acquisition date. Under the current guidance, an acquirer must revise comparative information on the income statement and balance sheet for any prior periods affected. ASU 2015-16 is effective for us in the first quarter of 2016, and is not expected to have a significant impact on our consolidated financial statements.



## Consolidated Statements of Cash Flows—Supplemental Disclosures

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

<table><tr><td rowspan="3"></td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2015</td><td colspan="2">2014</td><td>2013</td></tr><tr><td colspan="4">(In thousands)</td></tr><tr><td>SUPPLEMENTAL DISCLOSURES:</td><td></td><td></td><td></td><td></td></tr><tr><td>Total interest costs incurred</td><td>$ 110,675</td><td>$ 114,912</td><td>$ 121,158</td><td></td></tr><tr><td>Interest capitalized</td><td>(18,122)</td><td>(20,971)</td><td>(16,181)</td><td></td></tr><tr><td>Interest expense</td><td>$ 92,553</td><td>$ 93,941</td><td>$ 104,977</td><td></td></tr><tr><td>Cash paid for interest, net of amounts capitalized</td><td>$ 116,335</td><td>$ 100,011</td><td>$ 120,934</td><td></td></tr><tr><td>Cash paid for income taxes</td><td>$ 274</td><td>$ 278</td><td>$ 410</td><td></td></tr><tr><td>NON-CASH INVESTING AND FINANCING TRANSACTIONS:</td><td></td><td></td><td></td><td></td></tr><tr><td>Mortgage loans assumed with acquisition</td><td>$ 89,516</td><td>$ 68,282</td><td>$ —</td><td></td></tr><tr><td>DownREIT operating partnership units issued with acquisition</td><td>$ 7,742</td><td>$ 65,348</td><td>$ —</td><td></td></tr><tr><td>Mortgage loans refinanced</td><td>$ —</td><td>$ 64,205</td><td>$ —</td><td></td></tr><tr><td>Repayment of note payable with public funding/related construction-in-progress offset</td><td>$ —</td><td>$ 10,000</td><td>$ —</td><td></td></tr><tr><td>Shares issued under dividend reinvestment plan</td><td>$ 1,977</td><td>$ 1,855</td><td>$ 1,779</td><td></td></tr></table>

See Note 3 for additional disclosures relating to the San Antonio Center, CocoWalk, and The Shops at Sunset Place acquisitions.

Capitalized lease costs are direct costs incurred which were essential to originate a lease and would not have been incurred had the leasing transaction not taken place. These costs include third party commissions and salaries and personnel costs related to obtaining a lease. Capitalized lease costs are amortized over the initial term of the related lease which generally ranges from three to ten years. We view these lease costs as part of the up-front initial investment we made in order to generate a long-term cash inflow and therefore, we classify cash outflows related to leasing costs as an investing activity in our consolidated statements of cash flows.

## NOTE 3—REAL ESTATE

A summary of our real estate investments and related encumbrances is as follows:

<table><tr><td></td><td>Cost</td><td>Accumulated Depreciation and Amortization</td><td>Encumbrances</td></tr><tr><td>December 31, 2015</td><td></td><td></td><td></td></tr><tr><td>Retail and mixed-use properties</td><td>$ 5,929,569</td><td>$ (1,526,934)</td><td>$ 461,106</td></tr><tr><td>Retail properties under capital leases</td><td>124,590</td><td>(38,509)</td><td>71,620</td></tr><tr><td>Residential</td><td>10,247</td><td>(8,598)</td><td>21,716</td></tr><tr><td></td><td>$ 6,064,406</td><td>$ (1,574,041)</td><td>$ 554,442</td></tr><tr><td>December 31, 2014</td><td></td><td></td><td></td></tr><tr><td>Retail and mixed-use properties</td><td>$ 5,478,085</td><td>$ (1,423,682)</td><td>$ 541,568</td></tr><tr><td>Retail properties under capital leases</td><td>121,069</td><td>(35,179)</td><td>71,647</td></tr><tr><td>Residential</td><td>9,844</td><td>(8,189)</td><td>22,130</td></tr><tr><td></td><td>$ 5,608,998</td><td>$ (1,467,050)</td><td>$ 635,345</td></tr></table>

Retail and mixed-use properties includes the residential portion of Santana Row, Bethesda Row, Pike & Rose, Congressional Plaza and Chelsea Commons. The residential property investment is our investment in Rollingwood Apartments.



## 2015 Significant Property Acquisitions and Dispositions

In January 2015, we acquired a controlling interest in San Antonio Center, a 376,000 square foot shopping center in Mountain View, California based on a total value of $62.2 million. Our effective interest approximates 80% and was funded by the assumption of our share of $18.7 million of mortgage debt, 58,000 downREIT operating partnership units, and $27 million of cash. A portion of the land is controlled under a long-term ground lease. Approximately $8.1 million of assets acquired were allocated to lease intangibles and included within other assets. Approximately $19.1 million was allocated to lease intangibles primarily related to "below market leases," and is included within other liabilities. Additionally, $16.3 million was allocated to noncontrolling interests. We incurred $1.8 million of acquisition costs, of which $1.1 million were incurred in 2015, and included in "general and administrative expense" in 2015 and 2014.

On February 25, 2015, we acquired the interest of one of the noncontrolling interest holders in The Grove at Shrewsbury for $8.8 million. As this noncontrolling interest was mandatorily redeemable, it was classified as a liability and was included in "other liabilities and deferred credits" on the accompanying December 31, 2014 consolidated balance sheet.

On April 24, 2015, we sold our Houston Street property in San Antonio, Texas for a sales price of $46.1 million, resulting in a gain of $11.5 million.

On May 4, 2015, we acquired CocoWalk, a 198,000 square foot retail property located in the Coconut Grove neighborhood of Miami, Florida for $87.5 million. The acquisition was completed through a newly formed entity ("CocoWalk LLC") for which we own a preferred interest and an 80% common interest. Approximately $1.5 million and $4.3 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively. Additionally, approximately $6.9 million was allocated to noncontrolling interests. On July 1, 2015 and December 16, 2015, we acquired partial interests in eight buildings in the Coconut Grove neighborhood of Miami, Florida for $7.8 million through our CocoWalk LLC entity. In total, we incurred $1.1 million in acquisition costs which are included in "general and administrative expenses" in 2015.

On July 8, 2015 we acquired a parcel of land adjacent to our Pike 7 Plaza property for $5.0 million.

On October 1, 2015, we acquired The Shops at Sunset Place, a 515,000 square foot mixed-use property located in South Miami, Florida based on a gross value of $110.2 million. The acquisition was completed through a newly formed entity for which we own an 85% interest. Approximately $4.8 million and $6.6 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively. Additionally, approximately $6.3 million was allocated to noncontrolling interests. We incurred $0.9 million of acquisition costs, which are included in "general and administrative expenses" in 2015. The transaction includes the assumption of an existing $70.8 million mortgage loan.

On November 19, 2015, we sold our Courtyard Shops property in Wellington, Florida for a sales price of $52.8 million, resulting in a gain of $16.8 million.

## 2014 Significant Property Acquisition

Effective January 1, 2014, we acquired a controlling interest in The Grove at Shrewsbury, a 187,000 square foot shopping center in Shrewsbury, New Jersey, and Brook 35, a 99,000 square foot shopping center in Sea Girt, New Jersey for a gross value of $161 million. Our effective economic interest approximates 84% and was funded by the assumption of our share of $68 million of mortgage debt, $632,000 downREIT operating partnership units, and $13 million of cash (which was in an escrow account at December 31, 2013). Approximately $1.7 million and $2.3 million of net assets acquired were allocated to other assets for "above market leases" and other liabilities for "below market leases," respectively. Additionally, $71.1 million was allocated to redeemable and nonredeemable noncontrolling interests. We incurred $2.0 million of acquisition costs, of which $1.0 million were incurred in 2014, and are included in "general and administrative expenses" in 2014 and 2013, on the accompanying consolidated statements of comprehensive income.

## NOTE 4—MORTGAGE NOTES RECEIVABLE

At December 31, 2015 and 2014, we had three and four mortgage notes receivable, respectively, with aggregate carrying amounts of $41.6 million and $51.0 million, respectively. At December 31, 2015, all of the loans were secured by first mortgages on retail buildings, and at December 31, 2014, $41.2 million of the loans were secured by first mortgages on retail buildings. We have a note that matured on June 30, 2015 and is currently in default. The estimated net realizable value of the related collateral supports the carrying amount of the note. At December 31, 2015 and 2014, our mortgages had a weighted average interest rate of 9.0%. Under the terms of certain of these mortgages, we receive additional interest based upon the gross income of the secured properties and upon sale, share in the appreciation of the properties.



## NOTE 5—REAL ESTATE PARTNERSHIPS

As of December 31, 2015, we had a joint venture arrangement (the “Partnership”) with affiliates of a discretionary fund created and advised by Clarion Partners (“Clarion”). We owned 30% of the equity in the Partnership and Clarion owned 70%. We held a general partnership interest, however, Clarion also held a general partnership interest and had substantive participating rights. We could not make significant decisions without Clarion’s approval. Accordingly, we accounted for our interest in the Partnership using the equity method. As of December 31, 2015, the Partnership owned six retail real estate properties. We were the manager of the Partnership and its properties, earning fees for acquisitions, dispositions, management, leasing, and financing. Intercompany profit generated from fees was eliminated in consolidation. We also had the opportunity to receive performance-based earnings through our Partnership interest. Accounting policies for the Partnership were similar to accounting policies followed by the Trust. As of December 31, 2015, we made total contributions of $48.8 million and received total distributions of $32.4 million. On January 13, 2016, we acquired Clarion's 70% interest in the partnership, as further discussed in Note 19.

The following tables provide summarized operating results and the financial position of the Partnership:

<table><tr><td rowspan="3"></td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2015</td><td colspan="2">2014</td><td>2013</td></tr><tr><td colspan="4">(In thousands)</td></tr><tr><td>OPERATING RESULTS</td><td></td><td></td><td></td><td></td></tr><tr><td>Revenue</td><td>$ 17,405</td><td>$ 18,329</td><td>$ 19,209</td><td></td></tr><tr><td>Expenses</td><td></td><td></td><td></td><td></td></tr><tr><td>Other operating expenses</td><td>5,992</td><td>5,948</td><td>5,999</td><td></td></tr><tr><td>Depreciation and amortization</td><td>4,974</td><td>5,678</td><td>5,506</td><td></td></tr><tr><td>Interest expense</td><td>2,062</td><td>2,759</td><td>3,363</td><td></td></tr><tr><td>Total expenses</td><td>13,028</td><td>14,385</td><td>14,868</td><td></td></tr><tr><td>Net income before gain on sale of real estate</td><td>4,377</td><td>3,944</td><td>4,341</td><td></td></tr><tr><td>Gain on sale of real estate</td><td>—</td><td>14,507</td><td>—</td><td></td></tr><tr><td>Net income</td><td>$ 4,377</td><td>$ 18,451</td><td>$ 4,341</td><td></td></tr><tr><td>Our share of net income from real estate partnership before gain on sale of real estate</td><td>$ 1,557</td><td>$ 1,423</td><td>$ 1,498</td><td></td></tr><tr><td>Our share of gain on sale of real estate</td><td>$ —</td><td>$ 4,401</td><td>$ —</td><td></td></tr></table>

<table><tr><td rowspan="3"></td><td colspan="2">December 31,</td></tr><tr><td>2015</td><td>2014</td></tr><tr><td colspan="2">(In thousands)</td></tr><tr><td>BALANCE SHEETS</td><td></td><td></td></tr><tr><td>Real estate, net</td><td>$ 146,906</td><td>$ 149,203</td></tr><tr><td>Cash</td><td>2,690</td><td>2,864</td></tr><tr><td>Other assets</td><td>5,495</td><td>5,346</td></tr><tr><td>Total assets</td><td>$ 155,091</td><td>$ 157,413</td></tr><tr><td>Mortgages payable</td><td>$ 34,385</td><td>$ 34,385</td></tr><tr><td>Other liabilities</td><td>3,554</td><td>3,673</td></tr><tr><td>Partners&#x27; capital</td><td>117,152</td><td>119,355</td></tr><tr><td>Total liabilities and partners&#x27; capital</td><td>$ 155,091</td><td>$ 157,413</td></tr><tr><td>Our share of unconsolidated debt</td><td>$ 10,316</td><td>$ 10,316</td></tr><tr><td>Our investment in real estate partnership</td><td>$ 31,745</td><td>$ 32,367</td></tr></table>

On June 5, 2014, the Partnership repaid an $11.9 million mortgage loan secured by one of its properties at par prior to the original maturity date of July 5, 2014. The partners made additional capital contributions totaling $11.9 million to repay the mortgage loan, of which our contribution was $3.6 million.

On July 24, 2014, the Partnership sold the fee interest in Pleasant Shops in Weymouth, Massachusetts for a sales price of $34.3 million, resulting in a gain on sale of $14.5 million. Our share of the gain was $4.4 million. The partners received distributions totaling $32.8 million as a result of the sale, of which our distribution was $10.4 million.



On September 2, 2014, the Partnership repaid a $10.5 million mortgage loan secured by one of its properties at par prior to the original maturity date of December 1, 2014. The partners made additional capital contributions totaling $10.5 million to repay the mortgage loan, of which our contribution was $3.2 million.

## NOTE 6—ACQUIRED IN-PLACE LEASES

Acquired above market leases are included in prepaid expenses and other assets and had a balance of $39.4 million and $32.7 million and accumulated amortization of $22.9 million and $19.3 million at December 31, 2015 and 2014, respectively. Acquired below market leases are included in other liabilities and deferred credits and had a balance of $133.4 million and $109.8 million and accumulated amortization of $40.7 million and $37.0 million at December 31, 2015 and 2014, respectively. The value allocated to in-place leases is amortized over the related lease term and reflected as additional rental income for below market leases or a reduction of rental income for above market leases in the consolidated statements of comprehensive income. Rental income included amortization from acquired above market leases of $4.4 million, $3.4 million and $2.8 million in 2015, 2014 and 2013, respectively and amortization from acquired below market leases of $7.1 million, $5.8 million and $5.9 million in 2015, 2014 and 2013, respectively. The remaining weighted-average amortization period as of December 31, 2015, is 4.4 years and 20.5 years for above market leases and below market leases, respectively.

The amortization for acquired in-place leases during the next five years and thereafter, assuming no early lease terminations, is as follows:

<table><tr><td></td><td>Above Market Leases</td><td>Below Market Leases</td></tr><tr><td></td><td colspan="2">(In thousands)</td></tr><tr><td>Year ending December 31,</td><td></td><td></td></tr><tr><td>2016</td><td>$ 4,629</td><td>$ 8,080</td></tr><tr><td>2017</td><td>3,189</td><td>7,036</td></tr><tr><td>2018</td><td>2,369</td><td>5,849</td></tr><tr><td>2019</td><td>1,236</td><td>5,469</td></tr><tr><td>2020</td><td>983</td><td>4,602</td></tr><tr><td>Thereafter</td><td>4,131</td><td>61,678</td></tr><tr><td></td><td>$ 16,537</td><td>$ 92,714</td></tr></table>



## NOTE 7—DEBT

The following is a summary of our total debt outstanding as of December 31, 2015 and 2014:

<table><tr><td rowspan="2">Description of Debt</td><td colspan="2">Principal Balance as of December 31,</td><td rowspan="2">Stated Interest Rate as of December 31, 2015</td><td rowspan="2">Stated Maturity Date</td></tr><tr><td>2015</td><td>2014</td></tr><tr><td>Mortgages payable</td><td colspan="2">(Dollars in thousands)</td><td></td><td></td></tr><tr><td>Barracks Road</td><td>$ —</td><td>$ 35,985</td><td>7.95%</td><td>November 1, 2015</td></tr><tr><td>Hauppauge</td><td>—</td><td>13,566</td><td>7.95%</td><td>November 1, 2015</td></tr><tr><td>Lawrence Park</td><td>—</td><td>25,507</td><td>7.95%</td><td>November 1, 2015</td></tr><tr><td>Wildwood</td><td>—</td><td>22,420</td><td>7.95%</td><td>November 1, 2015</td></tr><tr><td>Wynnewood</td><td>—</td><td>25,994</td><td>7.95%</td><td>November 1, 2015</td></tr><tr><td>Brick Plaza</td><td>—</td><td>26,415</td><td>7.42%</td><td>November 1, 2015</td></tr><tr><td>Plaza El Segundo</td><td>175,000</td><td>175,000</td><td>6.33%</td><td>August 5, 2017</td></tr><tr><td>The Grove at Shrewsbury (East)</td><td>43,557</td><td>44,519</td><td>5.82%</td><td>October 1, 2017</td></tr><tr><td>The Grove at Shrewsbury (West)</td><td>11,024</td><td>11,242</td><td>6.38%</td><td>March 1, 2018</td></tr><tr><td>Rollingwood Apartments</td><td>21,716</td><td>22,130</td><td>5.54%</td><td>May 1, 2019</td></tr><tr><td>The Shops at Sunset Place</td><td>70,542</td><td>—</td><td>5.62%</td><td>September 1, 2020</td></tr><tr><td>29th Place</td><td>4,753</td><td>4,941</td><td>5.91%</td><td>January 31, 2021</td></tr><tr><td>THE AVENUE at White Marsh</td><td>52,705</td><td>52,705</td><td>3.35%</td><td>January 1, 2022</td></tr><tr><td>Montrose Crossing</td><td>74,329</td><td>75,867</td><td>4.20%</td><td>January 10, 2022</td></tr><tr><td>Brook 35</td><td>11,500</td><td>11,500</td><td>4.65%</td><td>July 1, 2029</td></tr><tr><td>Chelsea</td><td>6,868</td><td>7,074</td><td>5.36%</td><td>January 15, 2031</td></tr><tr><td>Subtotal</td><td>471,994</td><td>554,865</td><td></td><td></td></tr><tr><td>Net unamortized premium</td><td>10,828</td><td>8,833</td><td></td><td></td></tr><tr><td>Total mortgages payable</td><td>482,822</td><td>563,698</td><td></td><td></td></tr><tr><td>Notes payable</td><td></td><td></td><td></td><td></td></tr><tr><td>Escondido (municipal bonds)</td><td>9,400</td><td>9,400</td><td>0.03%</td><td>October 1, 2016</td></tr><tr><td>Revolving credit facility</td><td>53,500</td><td>—</td><td>LIBOR + 0.90%</td><td>April 21, 2017</td></tr><tr><td>Term loan</td><td>275,000</td><td>275,000</td><td>LIBOR + 0.90%</td><td>November 21, 2018</td></tr><tr><td>Various</td><td>5,700</td><td>6,119</td><td>11.31%</td><td>Various through 2028</td></tr><tr><td>Total notes payable</td><td>343,600</td><td>290,519</td><td></td><td></td></tr><tr><td>Senior notes and debentures</td><td></td><td></td><td></td><td></td></tr><tr><td>6.20% notes</td><td>—</td><td>200,000</td><td>6.20%</td><td>January 15, 2017</td></tr><tr><td>5.90% notes</td><td>150,000</td><td>150,000</td><td>5.90%</td><td>April 1, 2020</td></tr><tr><td>2.55% notes</td><td>250,000</td><td>—</td><td>2.55%</td><td>January 15, 2021</td></tr><tr><td>3.00% notes</td><td>250,000</td><td>250,000</td><td>3.00%</td><td>August 1, 2022</td></tr><tr><td>2.75% notes</td><td>275,000</td><td>275,000</td><td>2.75%</td><td>June 1, 2023</td></tr><tr><td>3.95% notes</td><td>300,000</td><td>300,000</td><td>3.95%</td><td>January 15, 2024</td></tr><tr><td>7.48% debentures</td><td>29,200</td><td>29,200</td><td>7.48%</td><td>August 15, 2026</td></tr><tr><td>6.82% medium term notes</td><td>40,000</td><td>40,000</td><td>6.82%</td><td>August 1, 2027</td></tr><tr><td>4.50% notes</td><td>450,000</td><td>250,000</td><td>4.50%</td><td>December 1, 2044</td></tr><tr><td>Subtotal</td><td>1,744,200</td><td>1,494,200</td><td></td><td></td></tr><tr><td>Net unamortized premium (discount)</td><td>124</td><td>(10,387)</td><td></td><td></td></tr><tr><td>Total senior notes and debentures</td><td>1,744,324</td><td>1,483,813</td><td></td><td></td></tr><tr><td>Capital lease obligations</td><td></td><td></td><td></td><td></td></tr><tr><td>Various</td><td>71,620</td><td>71,647</td><td>Various</td><td>Various through 2106</td></tr><tr><td>Total debt and capital lease obligations</td><td>$ 2,642,366</td><td>$ 2,409,677</td><td></td><td></td></tr></table>

In connection with the acquisition of San Antonio Center in January 2015, we assumed a mortgage loan with a face amount of $18.7 million and a fair value of $19.3 million. The mortgage loan had a stated interest rate of 5.27%, and had an original maturity date of January 1, 2016. On November 2, 2015, we repaid the mortgage loan at par for $18.1 million.

On March 16, 2015, we issued $200.0 million aggregate principal amount of 4.50% senior unsecured notes due December 1, 2044. The notes were offered at 105.38% of the principal amount with a yield to maturity of 4.18%. The notes have the same terms and are of the same series as the $250.0 million senior notes issued on November 14, 2014. Our net proceeds from the March note offering after issuance premium, underwriting fees and other costs were $208.6 million. The proceeds were used on April 11, 2015 to repay our $200.0 million 6.20% notes prior to the original maturity date of January 15, 2017. The redemption



price of $222.2 million included a make-whole premium of $19.2 million and accrued but unpaid interest of $3.0 million. The make-whole premium is included in "early extinguishment of debt" in the year ended December 31, 2015.

On August 3, 2015 we repaid the following mortgage loans, which had a weighted average interest rate of 7.9%, at par prior to their maturity date of November 1, 2015:

<table><tr><td></td><td>Principal Payoff Amount (In millions)</td></tr><tr><td>Barracks Road</td><td>35.3</td></tr><tr><td>Brick Plaza</td><td>25.9</td></tr><tr><td>Wynnewood</td><td>25.5</td></tr><tr><td>Lawrence Park</td><td>25.0</td></tr><tr><td>Wildwood</td><td>22.0</td></tr><tr><td>Hauppauge</td><td>13.3</td></tr><tr><td></td><td>147.0</td></tr></table>

On September 28, 2015, we issued $250.0 million of fixed rate senior notes that mature on January 15, 2021 and bear interest at 2.55%. The net proceeds from this note offering after issuance discounts, underwriting fees, and other costs were approximately $247.5 million.

In connection with the acquisition of Sunset Place on October 1, 2015, we assumed a mortgage loan with a face amount of $70.8 million and a fair value of $76.5 million. The mortgage loan bears interest at 5.62% and has a maturity date of September 1, 2020.

During 2015, 2014 and 2013, the maximum amount of borrowings outstanding under our revolving credit facility was $324.0 million, $79.5 million and $76.0 million, respectively. The weighted average amount of borrowings outstanding was $109.7 million, $12.5 million and $10.5 million, respectively, and the weighted average interest rate, before amortization of debt fees, was 1.1%, 1.1% and 1.3%, respectively. The revolving credit facility requires an annual facility fee of $0.9 million. At December 31, 2015, our revolving credit facility had $53.5 million outstanding, and had no balance outstanding at December 31, 2014.

Our revolving credit facility 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 December 31, 2015, we were in compliance with all loan covenants.

Scheduled principal payments on mortgages payable, notes payable, senior notes and debentures as of December 31, 2015 are as follows:

<table><tr><td></td><td>Mortgages Payable</td><td>Notes Payable</td><td>Senior Notes and Debentures</td><td>Total Principal</td></tr><tr><td>Year ending December 31,</td><td></td><td></td><td>(In thousands)</td><td></td></tr><tr><td>2016</td><td>$ 5,665</td><td>$ 9,812</td><td>$ —</td><td>$ 15,477</td></tr><tr><td>2017</td><td>222,469</td><td>53,957 (1)</td><td>—</td><td>276,426</td></tr><tr><td>2018</td><td>15,477</td><td>275,507</td><td>—</td><td>290,984</td></tr><tr><td>2019</td><td>25,006</td><td>561</td><td>—</td><td>25,567</td></tr><tr><td>2020</td><td>64,687</td><td>623</td><td>150,000</td><td>215,310</td></tr><tr><td>Thereafter</td><td>138,690</td><td>3,140</td><td>1,594,200</td><td>1,736,030</td></tr><tr><td></td><td>$ 471,994</td><td>$ 343,600</td><td>$ 1,744,200</td><td>$ 2,559,794</td></tr></table>



Future minimum lease payments and their present value for property under capital leases as of December 31, 2015, are as follows:

<table><tr><td>Year ending December 31,</td><td></td><td></td></tr><tr><td>2016</td><td>$ 5,788</td><td></td></tr><tr><td>2017</td><td>5,797</td><td></td></tr><tr><td>2018</td><td>5,800</td><td></td></tr><tr><td>2019</td><td>5,800</td><td></td></tr><tr><td>2020</td><td>5,800</td><td></td></tr><tr><td>Thereafter</td><td>154,410</td><td></td></tr><tr><td></td><td>183,395</td><td></td></tr><tr><td>Less amount representing interest</td><td>(111,775)</td><td></td></tr><tr><td>Present value</td><td>$ 71,620</td><td></td></tr></table>

## NOTE 8—FAIR VALUE OF FINANCIAL INSTRUMENTS

A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability in an orderly transaction. The hierarchy for inputs used in measuring fair value are as follows:

1. Level 1 Inputs—quoted prices in active markets for identical assets or liabilities

2. Level 2 Inputs—observable inputs other than quoted prices in active markets for identical assets and liabilities

3. Level 3 Inputs—prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

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:

<table><tr><td rowspan="3"></td><td colspan="3">December 31, 2015</td><td colspan="3">December 31, 2014</td></tr><tr><td colspan="2">Carrying Value</td><td colspan="2">Fair Value</td><td>Carrying Value</td><td>Fair Value</td></tr><tr><td colspan="6">(In thousands)</td></tr><tr><td>Mortgages and notes payable</td><td>$     826,422</td><td>$     833,931</td><td>$     854,217</td><td>$     880,866</td><td></td><td></td></tr><tr><td>Senior notes and debentures</td><td>$     1,744,324</td><td>$     1,786,758</td><td>$     1,483,813</td><td>$     1,579,868</td><td></td><td></td></tr></table>

As of December 31, 2015, 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. 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 December 31, 2015 and 2014, was a liability of $4.1 million, and $3.5 million, respectively, and are included in "accounts payable and accrued expenses" on our consolidated balance sheets. The value of our interest rate swaps decreased $0.6 million and $2.1 million (including $4.3 million for both years reclassified from other comprehensive loss to earnings) for 2015 and 2014, respectively. These decreases in value are included in "accumulated other comprehensive loss." A summary of our financial liabilities that are measured at fair value on a recurring basis, by level within the fair value hierarchy is as follows:



<table><tr><td rowspan="2"></td><td colspan="5">December 31, 2015</td><td colspan="5">December 31, 2014</td></tr><tr><td>Level 1</td><td>Level 2</td><td>Level 3</td><td>Total</td><td>Level 1</td><td>Level 2</td><td>Level 3</td><td>Total</td><td></td><td></td></tr><tr><td></td><td></td><td></td><td></td><td colspan="7">(In thousands)</td></tr><tr><td>Interest rate swaps</td><td>$ —</td><td>$ 4,110</td><td>$ —</td><td>$ 4,110</td><td>$ —</td><td>$ 3,515</td><td>$ —</td><td>$ 3,515</td><td></td><td></td></tr></table>

## NOTE 9—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. Other than as described below, 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.

We reserve for estimated losses, if any, associated with warranties given to a buyer at the time real estate is sold or other potential liabilities relating to that sale, taking any insurance policies into account. These warranties may extend up to ten years and require significant judgment. If changes in facts and circumstances indicate that warranty reserves are understated, we will accrue additional reserves at such time a liability has been incurred and the costs can be reasonably estimated. Warranty reserves are released once the legal liability period has expired or all related work has been substantially completed. Any increases to our estimated warranty losses would usually result in a decrease in net income.

We are self-insured for general liability costs up to predetermined retained amounts per claim, and we believe that we maintain adequate accruals to cover our retained liability. We currently do not maintain third party stop-loss insurance policies to cover liability costs in excess of predetermined retained amounts. Our accrual for self-insurance liability is determined by management and is based on claims filed and an estimate of claims incurred but not yet reported. Management considers a number of factors, including third-party actuarial analysis, previous experience in our portfolio, and future increases in costs of claims, when making these determinations. If our liability costs exceed these accruals, it will reduce our net income.

At December 31, 2015 and 2014, our reserves for warranties and general liability costs were $7.7 million and $7.2 million, respectively, and are included in “accounts payable and accrued expenses” in our consolidated balance sheets. Any potential losses which exceed our estimates would result in a decrease in our net income. During 2015 and 2014, we made payments from these reserves of $1.8 million and $1.4 million, respectively. Although we consider the reserve to be adequate, there can be no assurance that the reserve will prove to be adequate over-time to cover losses due to the difference between the assumptions used to estimate the reserve and actual losses.

At December 31, 2015, we had letters of credit outstanding of approximately $13.0 million which are collateral for existing indebtedness and other obligations of the Trust.

As of December 31, 2015 in connection with capital improvement, development, and redevelopment projects, the Trust has contractual obligations of approximately $381.1 million.



We are obligated under ground lease agreements on several shopping centers requiring minimum annual payments as follows, as of December 31, 2015:

<table><tr><td colspan="2">(In thousands)</td></tr><tr><td>Year ending December 31,</td><td></td></tr><tr><td>2016</td><td>$ 2,750</td></tr><tr><td>2017</td><td>2,785</td></tr><tr><td>2018</td><td>2,801</td></tr><tr><td>2019</td><td>2,988</td></tr><tr><td>2020</td><td>3,001</td></tr><tr><td>Thereafter</td><td>157,324</td></tr><tr><td></td><td>$ 171,649</td></tr></table>

A master lease for Mercer Mall includes a fixed purchase price option for $55 million in 2023. If we fail to exercise our purchase option, the owner of Mercer Mall has a put option which would require us to purchase Mercer Mall for $60 million in 2025.

Under the terms of the Congressional Plaza partnership agreement, from and after January 1, 1986, an unaffiliated third party has the right to require us and the other minority partner to purchase its 29.47% interest in Congressional Plaza at the interest's then-current fair market value. If the other minority partner defaults in their obligation, we must purchase the full interest. Based on management's current estimate of fair market value as of December 31, 2015, our estimated maximum liability upon exercise of the put option would range from approximately $78 million to $82 million.

Under the terms of a partnership which owns a project in southern California, if certain leasing and revenue levels are obtained for the property owned by the partnership, the other partner may require us to purchase their 10% partnership interest at a formula price based upon property operating income. The purchase price for the partnership interest will be paid using our common shares or, subject to certain conditions, cash. If the other partner does not redeem their interest, we may choose to purchase the partnership interest upon the same terms.

A master lease for Melville Mall includes a fixed purchase price option in 2021 for $5 million. If we fail to exercise our purchase option, the owner of Melville Mall has a put option which would require us to purchase Melville Mall in 2023 for $5 million.

The other member in Montrose Crossing has the right to require us to purchase all of its 10.1% interest in Montrose Crossing at the interest's then-current fair market value. If the other member fails to exercise its put option, we have the right to purchase its interest on or after December 27, 2021 at fair market value. Based on management's current estimate of fair market value as of December 31, 2015, our estimated maximum liability upon exercise of the put option would range from approximately $8 million to $9 million.

Two of the members in Plaza El Segundo have the right to require us to purchase their 10.0% and 11.8% ownership interests at the interests' then-current fair market value. If the members fail to exercise their put options, we have the right to purchase each of their interests on or after December 30, 2026 at fair market value. Based on management's current estimate of fair market value as of December 31, 2015, our estimated maximum liability upon exercise of the put option would range from approximately $21 million to $24 million. Also, between January 1, 2017 and February 1, 2017, we have an option to purchase the preferred interest of another member in Plaza El Segundo. The purchase price will be the lesser of fair value or the $4.9 million stated value of the preferred interest plus any accrued and unpaid preferred returns.

Effective January 1, 2017, the other member in The Grove at Shrewsbury and Brook 35 has the right to require us to purchase all of its approximately 4.8% interest in The Grove at Shrewsbury and approximately 8.8% interest in Brook 35 at the interests' then-current fair market value. Based on management's current estimate of fair market value as of December 31, 2015, our estimated maximum liability upon exercise of the put option would range from $9 million to $10 million.

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 934,405 operating partnership units are outstanding which have a total fair value of $136.5 million, based on our closing stock price on December 31, 2015.



## NOTE 10—SHAREHOLDERS' EQUITY

We have a Dividend Reinvestment Plan (the “Plan”), whereby shareholders may use their dividends and optional cash payments to purchase shares. In 2015, 2014 and 2013, 16,524 shares, 18,705 shares and 20,026 shares, respectively, were issued under the Plan.

As of December 31, 2015, 2014, and 2013, we had 399,896 shares of 5.417% Series 1 Cumulative Convertible Preferred Shares (“Series 1 Preferred Shares”) outstanding that have a liquidation preference of $25 per share and par value $0.01 per share. The Series 1 Preferred Shares accrue dividends at a rate of 5.417% per year and are convertible at any time by the holders to our common shares at a conversion rate of $104.69 per share. The Series 1 Preferred Shares are also convertible under certain circumstances at our election. The holders of the Series 1 Preferred Shares have no voting rights.

On May 11, 2015, we replaced our existing at-the-market (“ATM”) equity program with a new ATM equity program in which we may from time to time offer and sell common shares having an aggregate offering price of up to $300.0 million. We intend to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay amounts of outstanding under our revolving credit facility and/or for general corporate purposes. For the year ended December 31, 2015, we issued 813,414 common shares at a weighted average price per share of $135.01 for net cash proceeds of $108.5 million and paid $1.1 million in commissions and $0.2 million in additional offering expenses related to the sales of these common shares. For the year ended December 31, 2014, we issued 1,768,583 common shares at a weighted average price per share of $122.09 for net cash proceeds of $213.6 million and paid $2.2 million in commissions and $0.2 million in additional offering expenses related to the sales of these common shares. As of December 31, 2015, we had the capacity to issue up to $190.2 million in common shares under our ATM equity program.

## NOTE 11—DIVIDENDS

The following table provides a summary of dividends declared and paid per share:

<table><tr><td rowspan="3"></td><td colspan="6">Year Ended December 31,</td></tr><tr><td colspan="3">2015</td><td colspan="2">2014</td><td colspan="2">2013</td></tr><tr><td>Declared</td><td>Paid</td><td>Declared</td><td>Paid</td><td>Declared</td><td>Paid</td></tr><tr><td>Common shares</td><td>$ 3,620</td><td>$ 3,550</td><td>$ 3,300</td><td>$ 3,210</td><td>$ 3,020</td><td>$ 2,970</td></tr><tr><td>5.417% Series 1 Cumulative Convertible Preferred shares...</td><td>$ 1,354</td><td>$ 1,354</td><td>$ 1,354</td><td>$ 1,354</td><td>$ 1.354</td><td>$ 1.354</td></tr></table>

A summary of the income tax status of dividends per share paid is as follows:

<table><tr><td rowspan="2"></td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2015</td><td>2014</td><td>2013</td><td></td></tr><tr><td>Common shares</td><td></td><td></td><td></td><td></td></tr><tr><td>Ordinary dividend</td><td>$ 3,515</td><td>$ 3,178</td><td>$ 2,911</td><td></td></tr><tr><td>Capital gain</td><td>0.035</td><td>0.032</td><td>0.059</td><td></td></tr><tr><td></td><td>$ 3,550</td><td>$ 3,210</td><td>$ 2,970</td><td></td></tr><tr><td>5.417% Series 1 Cumulative Convertible Preferred shares</td><td></td><td></td><td></td><td></td></tr><tr><td>Ordinary dividend</td><td>$ 1,340</td><td>$ 1,340</td><td>$ 1,327</td><td></td></tr><tr><td>Capital gain</td><td>0.014</td><td>0.014</td><td>0.027</td><td></td></tr><tr><td></td><td>$ 1,354</td><td>$ 1,354</td><td>$ 1,354</td><td></td></tr></table>

On November 4, 2015, the Trustees declared a quarterly cash dividend of $0.94 per common share, payable January 15, 2016 to common shareholders of record on January 4, 2016.

## NOTE 12—OPERATING LEASES

At December 31, 2015, our 90 predominantly retail shopping center and mixed-use properties are located in 12 states and the District of Columbia. There are approximately 2,700 leases with tenants providing a wide range of retail products and services. These tenants range from sole proprietorships to national retailers; no one tenant or corporate group of tenants accounts for more than 2.9% of annualized base rent.

Our leases with commercial property and residential tenants are classified as operating leases. Commercial property leases generally range from three to ten years (certain leases with anchor tenants may be longer), and in addition to minimum rents,



may provide for percentage rents based on the tenant’s level of sales achieved and cost recoveries for the tenant’s share of certain operating costs. Leases on apartments are generally for a period of 1 year or less.

As of December 31, 2015, minimum future commercial property rentals from noncancelable operating leases, before any reserve for uncollectible amounts and assuming no early lease terminations, at our operating properties are as follows:

<table><tr><td>Year ending December 31,</td><td></td><td>(In thousands)</td></tr><tr><td>2016</td><td>$ 518,325</td><td></td></tr><tr><td>2017</td><td>470,881</td><td></td></tr><tr><td>2018</td><td>406,311</td><td></td></tr><tr><td>2019</td><td>348,429</td><td></td></tr><tr><td>2020</td><td>288,395</td><td></td></tr><tr><td>Thereafter</td><td>1,759,140</td><td></td></tr><tr><td></td><td>$ 3,791,481</td><td></td></tr></table>

## NOTE 13—COMPONENTS OF RENTAL INCOME AND EXPENSE

The principal components of rental income are as follows:

<table><tr><td rowspan="3"></td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2015</td><td>2014</td><td>2013</td><td></td></tr><tr><td colspan="4">(In thousands)</td></tr><tr><td>Minimum rents</td><td></td><td></td><td></td><td></td></tr><tr><td>Retail and commercial</td><td>$ 509,825</td><td>$ 472,602</td><td>$ 448,058</td><td></td></tr><tr><td>Residential</td><td>42,797</td><td>36,099</td><td>28,902</td><td></td></tr><tr><td>Cost reimbursement</td><td>148,110</td><td>135,592</td><td>122,578</td><td></td></tr><tr><td>Percentage rent</td><td>11,911</td><td>10,169</td><td>9,359</td><td></td></tr><tr><td>Other</td><td>15,169</td><td>11,860</td><td>11,192</td><td></td></tr><tr><td>Total rental income</td><td>$ 727,812</td><td>$ 666,322</td><td>$ 620,089</td><td></td></tr></table>

Minimum rents include the following:

<table><tr><td rowspan="3"></td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2015</td><td>2014</td><td>2013</td><td></td></tr><tr><td colspan="4">(In millions)</td></tr><tr><td>Straight-line rents</td><td>$ 7.6</td><td>$ 5.1</td><td>$ 5.4</td><td></td></tr><tr><td>Net amortization of above and below market leases</td><td>$ 2.7</td><td>$ 2.4</td><td>$ 3.1</td><td></td></tr></table>



The principal components of rental expenses are as follows:

<table><tr><td rowspan="3"></td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2015</td><td colspan="2">2014</td><td>2013</td></tr><tr><td colspan="4">(In thousands)</td></tr><tr><td>Repairs and maintenance</td><td>$ 62,420</td><td>$ 55,444</td><td>$ 46,600</td><td></td></tr><tr><td>Utilities</td><td>23,003</td><td>20,499</td><td>19,219</td><td></td></tr><tr><td>Management fees and costs</td><td>18,639</td><td>17,416</td><td>16,250</td><td></td></tr><tr><td>Payroll</td><td>12,673</td><td>11,554</td><td>9,237</td><td></td></tr><tr><td>Marketing</td><td>9,046</td><td>9,532</td><td>8,664</td><td></td></tr><tr><td>Insurance</td><td>7,875</td><td>6,462</td><td>6,811</td><td></td></tr><tr><td>Ground Rent</td><td>2,540</td><td>1,952</td><td>1,916</td><td></td></tr><tr><td>Bad debt expense</td><td>1,168</td><td>2,021</td><td>442</td><td></td></tr><tr><td>Other operating</td><td>10,229</td><td>10,537</td><td>9,556</td><td></td></tr><tr><td>Total rental expenses</td><td>$ 147,593</td><td>$ 135,417</td><td>$ 118,695</td><td></td></tr></table>

## NOTE 14—DISCONTINUED OPERATIONS

During 2013 and prior to our adoption of ASU 2014-08 as further discussed in Note 2, certain disposal transactions were considered discontinued operations. A summary of the financial information for the discontinued operations is as follows:

<table><tr><td rowspan="2"></td><td colspan="2">Year Ended December 31,</td></tr><tr><td colspan="2">2013</td></tr><tr><td>Revenue from discontinued operations</td><td>$</td><td>1.5</td></tr><tr><td>Income from discontinued operations</td><td>$</td><td>0.9</td></tr></table>

## NOTE 15—SHARE-BASED COMPENSATION PLANS

A summary of share-based compensation expense included in net income is as follows:

<table><tr><td rowspan="3"></td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2015</td><td colspan="2">2014</td><td>2013</td></tr><tr><td colspan="4">(In thousands)</td></tr><tr><td>Share-based compensation incurred</td><td></td><td></td><td></td><td></td></tr><tr><td>Grants of common shares</td><td>$ 12,074</td><td>$ 12,892</td><td>$ 10,907</td><td></td></tr><tr><td>Grants of options</td><td>—</td><td>49</td><td>292</td><td></td></tr><tr><td></td><td>12,074</td><td>12,941</td><td>11,199</td><td></td></tr><tr><td>Capitalized share-based compensation</td><td>(868)</td><td>(1,188)</td><td>(1,024)</td><td></td></tr><tr><td>Share-based compensation expense</td><td>$ 11,206</td><td>$ 11,753</td><td>$ 10,175</td><td></td></tr></table>

As of December 31, 2015, we have grants outstanding under two share-based compensation plans. In May 2010, our shareholders approved the 2010 Performance Incentive Plan, as amended (“the 2010 Plan”), which authorized the grant of share options, common shares and other share-based awards for up to 2,450,000 common shares of beneficial interest. Our 2001 Long Term Incentive Plan (the “2001 Plan”), which expired in May 2010, authorized the grant of share options, common shares and other share-based awards of 3,250,000 common shares of beneficial interest.

Option awards under both plans are required to have an exercise price at least equal to the closing trading price of our common shares on the date of grant. Options and restricted share awards under these plans generally vest over three to six years and option awards typically have a ten-year contractual term. We pay dividends on unvested shares. Certain options and share awards provide for accelerated vesting if there is a change in control. Additionally, the vesting on certain option and share awards can accelerate in part or in full upon retirement based on the age of the retiree or upon termination without cause.

The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Expected volatilities, term, dividend yields, employee exercises and estimated forfeitures are primarily based on historical data. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The fair value of each share award is determined



based on the closing trading price of our common shares on the grant date. No options were granted in 2015, 2014 and 2013. The following table provides a summary of option activity for 2015:

<table><tr><td></td><td>Shares Under Option</td><td>Weighted-Average Exercise Price</td><td>Weighted-Average Remaining Contractual Term (In years)</td><td>Aggregate Intrinsic Value (In thousands)</td></tr><tr><td>Outstanding at December 31, 2014</td><td>343,742</td><td>$ 61.55</td><td></td><td></td></tr><tr><td>Granted</td><td>—</td><td>—</td><td></td><td></td></tr><tr><td>Exercised</td><td>(29,940)</td><td>68.04</td><td></td><td></td></tr><tr><td>Forfeited or expired</td><td>—</td><td>—</td><td></td><td></td></tr><tr><td>Outstanding at December 31, 2015</td><td>313,802</td><td>$ 60.93</td><td>2.5</td><td>$ 26,726</td></tr><tr><td>Exercisable at December 31, 2015</td><td>313,802</td><td>$ 60.93</td><td>2.5</td><td>$ 26,726</td></tr></table>

The total cash received from options exercised during 2015, 2014 and 2013 was $2.0 million, $2.3 million and $1.0 million, respectively. The total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was $2.1 million, $1.1 million and $0.7 million, respectively.

The following table provides a summary of restricted share activity for 2015:

<table><tr><td></td><td>Shares</td><td>Weighted-Average Grant-Date Fair Value</td></tr><tr><td>Unvested at December 31, 2014</td><td>306,968</td><td>$ 100.45</td></tr><tr><td>Granted</td><td>62,128</td><td>141.08</td></tr><tr><td>Vested</td><td>(181,967)</td><td>95.99</td></tr><tr><td>Forfeited</td><td>(9,915)</td><td>111.21</td></tr><tr><td>Unvested at December 31, 2015</td><td>177,214</td><td>$ 118.68</td></tr></table>

The weighted-average grant-date fair value of stock awarded in 2015, 2014 and 2013 was $141.08, $111.45 and $106.70, respectively. The total vesting-date fair value of shares vested during the year ended December 31, 2015, 2014 and 2013, was $26.1 million, $12.1 million and $10.6 million, respectively.

As of December 31, 2015, there was $11.8 million of total unrecognized compensation cost related to unvested share-based compensation arrangements (i.e. options and unvested shares) granted under our plans. This cost is expected to be recognized over the next 8.4 years with a weighted-average period of 2.0 years.

Subsequent to December 31, 2015, common shares were awarded under various compensation plans as follows:

<table><tr><td>Date</td><td>Award</td><td>Vesting Term</td><td>Beneficiary</td></tr><tr><td>January 4, 2016</td><td>4,622 Shares</td><td>Immediate</td><td>Trustees</td></tr><tr><td>February 3, 2016</td><td>135,063 Restricted shares</td><td>3-8 years</td><td>Officers and key employees</td></tr><tr><td>February 3, 2016</td><td>682 Options</td><td>5 years</td><td>Officers and key employees</td></tr></table>

## NOTE 16—SAVINGS AND RETIREMENT PLANS

We have a savings and retirement plan in accordance with the provisions of Section 401(k) of the Code. Generally, employees can elect, at their discretion, to contribute a portion of their compensation up to a maximum of $18,000 for 2015, and $17,500 for 2014 and 2013. Under the plan, we contribute 50% of each employee’s elective deferrals up to 5% of eligible earnings. In addition, we may make discretionary contributions within the limits of deductibility set forth by the Code. Our full-time employees are immediately eligible to become plan participants. Employees are eligible to receive matching contributions immediately on their participation; however, these matching payments will not vest until their third anniversary of employment for new employees who joined the Trust after December 31, 2011, and their first anniversary of employment for all other participants. Our expense for the years ended December 31, 2015, 2014 and 2013 was approximately $504,000, $442,000 and $384,000, respectively.

A non-qualified deferred compensation plan for our officers and certain other employees was established in 1994 that allows the participants to defer a portion of their income. As of December 31, 2015 and 2014, we are liable to participants for approximately $9.7 million and $10.3 million, respectively, under this plan. Although this is an unfunded plan, we have



purchased certain investments to match this obligation. Our obligation under this plan and the related investments are both included in the accompanying consolidated financial statements.

## NOTE 17—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 2015, we had 0.2 million weighted average unvested shares outstanding, and in 2014 and 2013, we had 0.3 million, which are considered participating securities. Therefore, we have allocated our earnings for basic and diluted EPS between common shares and unvested shares; the portion of earnings allocated to the unvested shares is reflected as “earnings allocated to unvested shares” in the reconciliation below.

In the dilutive EPS calculation, dilutive stock options were calculated using the treasury stock method consistent with prior periods. There were no anti-dilutive stock options in 2015, 2014, or 2013. 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.

<table><tr><td rowspan="3"></td><td colspan="3">Year Ended December 31,</td></tr><tr><td>2015</td><td>2014</td><td>2013</td></tr><tr><td colspan="3">(In thousands, except per share data)</td></tr><tr><td>NUMERATOR</td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations</td><td>$ 190,094</td><td>$ 167,888</td><td>$ 137,811</td></tr><tr><td>Less: Preferred share dividends</td><td>(541)</td><td>(541)</td><td>(541)</td></tr><tr><td>Less: Income from continuing operations attributable to noncontrolling interests</td><td>(8,205)</td><td>(7,754)</td><td>(4,927)</td></tr><tr><td>Less: Earnings allocated to unvested shares</td><td>(797)</td><td>(1,003)</td><td>(889)</td></tr><tr><td>Income from continuing operations available for common shareholders</td><td>180,551</td><td>158,590</td><td>131,454</td></tr><tr><td>Results from discontinued operations attributable to the Trust</td><td>—</td><td>—</td><td>24,803</td></tr><tr><td>Gain on sale of real estate</td><td>28,330</td><td>4,401</td><td>4,994</td></tr><tr><td>Net income available for common shareholders, basic and diluted</td><td>$ 208,881</td><td>$ 162,991</td><td>$ 161,251</td></tr><tr><td>DENOMINATOR</td><td></td><td></td><td></td></tr><tr><td>Weighted average common shares outstanding—basic</td><td>68,797</td><td>67,322</td><td>65,331</td></tr><tr><td>Effect of dilutive securities:</td><td></td><td></td><td></td></tr><tr><td>Stock options</td><td>184</td><td>170</td><td>152</td></tr><tr><td>Weighted average common shares outstanding—diluted</td><td>68,981</td><td>67,492</td><td>65,483</td></tr><tr><td>EARNINGS PER COMMON SHARE, BASIC</td><td></td><td></td><td></td></tr><tr><td>Continuing operations</td><td>$ 2.63</td><td>$ 2.35</td><td>$ 2.01</td></tr><tr><td>Discontinued operations</td><td>—</td><td>—</td><td>0.38</td></tr><tr><td>Gain on sale of real estate</td><td>0.41</td><td>0.07</td><td>0.08</td></tr><tr><td></td><td>$ 3.04</td><td>$ 2.42</td><td>$ 2.47</td></tr><tr><td>EARNINGS PER COMMON SHARE, DILUTED</td><td></td><td></td><td></td></tr><tr><td>Continuing operations</td><td>$ 2.62</td><td>$ 2.34</td><td>$ 2.00</td></tr><tr><td>Discontinued operations</td><td>—</td><td>—</td><td>0.38</td></tr><tr><td>Gain on sale of real estate</td><td>0.41</td><td>0.07</td><td>0.08</td></tr><tr><td></td><td>$ 3.03</td><td>$ 2.41</td><td>$ 2.46</td></tr><tr><td>Income from continuing operations attributable to the Trust</td><td>$ 181,889</td><td>$ 160,134</td><td>$ 132,884</td></tr></table>



## NOTE 18—SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data is as follows:

<table><tr><td></td><td>First Quarter</td><td>Second Quarter</td><td>Third Quarter</td><td>Fourth Quarter</td></tr><tr><td></td><td colspan="4">(In thousands, except per share data)</td></tr><tr><td>2015</td><td></td><td></td><td></td><td></td></tr><tr><td>Revenue</td><td>$     184,792</td><td>$     181,461</td><td>$     185,252</td><td>$     192,507</td></tr><tr><td>Operating income</td><td>$     72,122</td><td>$     76,201</td><td>$     75,917</td><td>$     75,914</td></tr><tr><td>Net income(1)</td><td>$     48,203</td><td>$     45,673</td><td>$     54,550</td><td>$     69,998</td></tr><tr><td>Net income attributable to the Trust(1)</td><td>$     46,186</td><td>$     43,632</td><td>$     52,447</td><td>$     67,954</td></tr><tr><td>Net income available for common shareholders(1)</td><td>$     46,051</td><td>$     43,497</td><td>$     52,311</td><td>$     67,819</td></tr><tr><td>Earnings per common share—basic(1)</td><td>$     0.67</td><td>$     0.63</td><td>$     0.75</td><td>$     0.98</td></tr><tr><td>Earnings per common share—diluted(1)</td><td>$     0.67</td><td>$     0.63</td><td>$     0.75</td><td>$     0.97</td></tr><tr><td></td><td>First Quarter</td><td>Second Quarter</td><td>Third Quarter</td><td>Fourth Quarter</td></tr><tr><td></td><td colspan="4">(In thousands, except per share data)</td></tr><tr><td>2014</td><td></td><td></td><td></td><td></td></tr><tr><td>Revenue</td><td>$     170,828</td><td>$     167,947</td><td>$     170,938</td><td>$     176,377</td></tr><tr><td>Operating income</td><td>$     63,444</td><td>$     68,361</td><td>$     67,622</td><td>$     71,610</td></tr><tr><td>Net income(1)</td><td>$     40,545</td><td>$     45,416</td><td>$     49,049</td><td>$     37,279</td></tr><tr><td>Net income attributable to the Trust(1)</td><td>$     38,753</td><td>$     43,545</td><td>$     47,075</td><td>$     35,162</td></tr><tr><td>Net income available for common shareholders(1)</td><td>$     38,618</td><td>$     43,410</td><td>$     46,939</td><td>$     35,027</td></tr><tr><td>Earnings per common share—basic(1)</td><td>$     0.58</td><td>$     0.64</td><td>$     0.69</td><td>$     0.51</td></tr><tr><td>Earnings per common share—diluted(1)</td><td>$     0.57</td><td>$     0.64</td><td>$     0.69</td><td>$     0.51</td></tr></table>

(1) Second and fourth quarter 2015 include an $11.5 million and $16.8 million gain on sale, respectively, from our Houston Street and Courtyard Shops properties as further discussed in Note 3. Third quarter 2014 includes a $4.4 million gain on sale reflecting our share of the Partnership's sale of Pleasant Shops as further discussed in Note 5.

## NOTE 19—SUBSEQUENT EVENT

On January 13, 2016, we acquired our partner's 70% equity interest in our unconsolidated real estate partnership further discussed in Note 5, for $153.7 million, which includes $130 million of cash and the assumption of three interest only mortgage loans with a total principal balance of $34.4 million. With the acquisition, we gained control of the six underlying properties, which will be consolidated as of the acquisition date.



FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE ACCOUNT ALLOWED DEPRECIATION

<table><tr><td rowspan="3">COLUMN A</td><td rowspan="3">COLUMN B</td><td rowspan="3">COLUMN C</td><td rowspan="3">Initial cost to company</td><td colspan="2">Gross amount at which carried</td><td rowspan="3">Total</td><td rowspan="3">Accumulated Depreciation and Amortization</td><td rowspan="3">Date of Construction</td><td rowspan="3">Date Acquired</td><td rowspan="3">Life on which depreciation is computed</td></tr><tr><td colspan="2">Capitalized Subscriptions</td></tr><tr><td>Land</td><td>Building and Improvements</td></tr><tr><td colspan="10">(Dollars in thousands)</td></tr><tr><td colspan="10">COSTUME</td></tr><tr><td colspan="10">Description</td></tr><tr><td colspan="10">150 POST STREET (California, CA)</td></tr><tr><td colspan="10">29TH PLACE (Virginia) VA</td></tr><tr><td colspan="10">ANDORRA (Pennsylvania) PA</td></tr><tr><td colspan="10">ASSEMBLY ROYAL ASSEMBLY (PARKER MARKET PLACE) MA</td></tr><tr><td colspan="10">(MARKET PLACE) MA</td></tr><tr><td colspan="10">(BALANCYNEWP) PA</td></tr><tr><td colspan="10">BARRACKS ROAD</td></tr><tr><td colspan="10">BARRACKS ROAD</td></tr><tr><td colspan=10">BETHESHDA ROW (Maryland) MD</td></tr><tr><td colspan=10">BRICK PLAZA (New Jersey) NJ</td></tr><tr><td colspan=10">BRISKPLAZA (Connecticut) CT</td></tr><tr><td colspan=10">BROOKS 35 (New Jersey) NJ</td></tr><tr><td colspan=10">CHIENCO COMMONS (Massachusetts) MA</td></tr><tr><td colspan="10">COCOVAILK (Florida) FL</td></tr><tr><td colspan="10">COLLIARO BLVD (California) CA</td></tr><tr><td colspan="10">CONGRESSONAL PLAZA (Maryland) MD</td></tr><tr><td colspan="10">COURTHOUSE CENTER (Massachusetts) MA</td></tr><tr><td colspan="10">CROSSROADS (Illinois) IL</td></tr><tr><td colspan="10">CROW CANYON (California) CA</td></tr></table>



FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SCHEDULE II
FEDERAL ACCOUNTING
FEDERAL REALTY STAY OF REAL ESTATE COMPLETED DECEMBER 31, 2015

<table><tr><td rowspan="3">COLUMN A</td><td rowspan="3">COLUMN B</td><td rowspan="3">COLUMN C</td><td rowspan="3">Initial cost to company</td><td colspan="2">Gross amount at fair value carried at</td><td colspan="2">COST TO COMPANY</td><td colspan="2">COST TO COMPANY</td><td colspan="2">COST TO COMPAN</td></tr><tr><td colspan="2">Capital Stock (shares)</td><td colspan="2">Accumulated Depreciation</td><td colspan="2">Debt</td><td colspan="2">Debt</td></tr><tr><td>Land</td><td>Buildings and Improvements</td><td>Land</td><td>Buildings and Improvements</td><td>Land</td><td>Buildings and Improvements</td><td>Total</td><td>Buildings and Improvements</td><td>Total</td></tr><tr><td>Descriptions</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>DAREN (Connecticut)</td><td>CT</td><td>29,809</td><td>18,302</td><td>280</td><td>29,809</td><td>18,532</td><td>48,391</td><td>1,777</td><td>19,920,209</td><td>43,720,13</td><td>35 years</td></tr><tr><td>DEDHAM PLAZA (Massachusetts)</td><td>MA</td><td>12,287</td><td>12,918</td><td>9,887</td><td>12,287</td><td>22,805</td><td>35,092</td><td>13,797</td><td>19959</td><td>12,031,193</td><td>35 years</td></tr><tr><td>DEL MAR VILLAGE (Florida)</td><td>FL</td><td>15,624</td><td>41,712</td><td>3,063</td><td>15,587</td><td>44,812</td><td>60,399</td><td>17,250</td><td>1892,9944</td><td>37,810,38</td><td>35 years</td></tr><tr><td>EAST BAY BRIDGE</td><td>CA</td><td>29,608</td><td>13,805</td><td>8,666</td><td>29,079</td><td>14,670</td><td>17,578</td><td>14,449</td><td>101,2012</td><td>12,212,012</td><td>35 years</td></tr><tr><td>EASTGATE (North Carolina)</td><td>NC</td><td>4,608</td><td>20,584</td><td>20,584</td><td>20,584</td><td>20,584</td><td>20,684</td><td>18,307</td><td>19,963</td><td>12,181,896</td><td>35 years</td></tr><tr><td>ELISBURG (New Jersey)</td><td>NJ</td><td>4,117</td><td>11,309</td><td>19,590</td><td>4,013</td><td>30,924</td><td>34,927</td><td>18,354</td><td>2019</td><td>12,031,193</td><td>35 years</td></tr><tr><td>ESCOTNA (PROMENADE California)</td><td>CA</td><td>19,117</td><td>15,829</td><td>12,58</td><td>12,58</td><td>27,987</td><td>47,144</td><td>13,477</td><td>1987</td><td>12,110,76</td><td>35 years</td></tr><tr><td>FALLOUT (Virginia)</td><td>VA</td><td>12,078</td><td>12,20</td><td>18,19</td><td>18,19</td><td>10,028</td><td>10,028</td><td>7,928</td><td>1960,11962</td><td>20,507,2</td><td>35 years</td></tr><tr><td>FEDERAL PLAZA (Maryland)</td><td>MD</td><td>10,216</td><td>17,895</td><td>37,860</td><td>10,216</td><td>55,755</td><td>65,971</td><td>39,128</td><td>1970</td><td>62,019,189</td><td>35 years</td></tr><tr><td>FINDLAY SQUARE (Illinois)</td><td>IL</td><td>9,524</td><td>9,544</td><td>16,032</td><td>9,252</td><td>25,576</td><td>34,828</td><td>17,459</td><td>1974</td><td>42,721,195</td><td>35 years</td></tr><tr><td>FLINT QUARRE (Minnesota)</td><td>PA</td><td>1,534</td><td>3,943</td><td>11,353</td><td>1,345</td><td>15,206</td><td>16,041</td><td>4,886</td><td>1957</td><td>42,519,180</td><td>35 years</td></tr><tr><td>FLORENTINO (Pennsylvania)</td><td>PA</td><td>1,534</td><td>25,255</td><td>31,046</td><td>24,633</td><td>56,293</td><td>80,926</td><td>33,120</td><td>1046,4094</td><td>12,519,197</td><td>35 years</td></tr><tr><td>WYOMING MEDOWS (New York)</td><td>NY</td><td>24,656</td><td>20,803</td><td>4,020</td><td>12,696</td><td>24,823</td><td>37,519</td><td>9,900</td><td>1998</td><td>42,912,001</td><td>35 years</td></tr><tr><td>DISTRICT OF CENTRE</td><td>DC</td><td>12,770</td><td>5,271</td><td>13,702</td><td>5,973</td><td>20,701</td><td>12,866</td><td>6,178</td><td>1966</td><td>42,912,193</td><td>35 years</td></tr><tr><td>GALIFATTIRE SQUARE (California)</td><td>MD</td><td>7,701</td><td>4,829</td><td>5,387</td><td>5,677</td><td>10,210</td><td>12,593</td><td>6,540</td><td>1958</td><td>72,821,943</td><td>35 years</td></tr><tr><td>GARDEN MARKET (Illinois)</td><td>MD</td><td>2,006</td><td>4,905</td><td>20,184</td><td>2,006</td><td>25,089</td><td>27,157</td><td>18,201</td><td>1963</td><td>101,11985</td><td>35 years</td></tr><tr><td>GAYNOR PLAZA</td><td>MD</td><td>2,237</td><td>15,068</td><td>18,002</td><td>1,166</td><td>33,166</td><td>34,335</td><td>25,958</td><td>1971</td><td>72,121,183</td><td>35 years</td></tr><tr><td>GRAHAM PARK PLAZA</td><td>VA</td><td>1,253</td><td>1,601</td><td>17,439</td><td>525</td><td>19,040</td><td>19,565</td><td>16,001</td><td>1964</td><td>32,921,973</td><td>25,75 years</td></tr><tr><td>GRATUIT PLAZA</td><td>MD</td><td>1,484</td><td>5,444</td><td>1,169</td><td>7,484</td><td>6,613</td><td>14,047</td><td>3,782</td><td>1968</td><td>44,121,995</td><td>35 years</td></tr><tr><td>GREENWICH AVENUE (Connecticut)</td><td>CT</td><td>8,791</td><td>15,262</td><td>4,593</td><td>8,426</td><td>20,220</td><td>28,608</td><td>10,295</td><td>1963</td><td>86,61998</td><td>35 years</td></tr><tr><td>HANDPOKE (New York), NY</td><td>NY</td><td>1,116</td><td>280</td><td>4,512</td><td>1,368</td><td>4,540</td><td>5,948</td><td>2,978</td><td>1922</td><td>91,719,97</td><td>35 years</td></tr><tr><td>HEINMOSA AVENUE</td><td>CA</td><td>1,116</td><td>280</td><td>4,512</td><td>1,368</td><td>4,540</td><td>5,948</td><td>2,978</td><td>1922</td><td>91,719,97</td><td>35 years</td></tr></table>



FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE ACCOUNTED FOR

<table><tr><td rowspan="2">COLUMN A</td><td rowspan="2">COLUMN B</td><td rowspan="2">COLUMN C</td><td rowspan="2">COLUMN D</td><td rowspan="2">COLUMN E</td><td colspan="2">GROSS AMOUNT AT WHICH CERTIFIED AND CERTIFIED CERTIFIED AMOUNT</td><td colspan="2">COLLUMN F</td><td colspan="2">COLLUMN G</td><td colspan="2">COLLUMN H</td><td colspan="2">COLLUMN I</td></tr><tr><td>Initial cost to company</td><td>Cost Capital Stock (Applicable to preferred)</td><td>Total</td><td>Accumulated Depreciation</td><td>Date of Construction</td><td>Date Acquired</td><td>Date Acquired</td><td>Date Acquired</td><td>Date Acquired</td><td>Date Acquire</td></tr><tr><td>DESCRIPTIONS</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>OLD KEEBEN MILL (Virginia)</td><td>VA</td><td>Land</td><td>63</td><td>98</td><td>47.75</td><td>63</td><td>5.045</td><td>1968</td><td>1968</td><td>61/5/1976</td><td>33.33 years</td><td></td><td></td><td></td></tr><tr><td>OLD TOWN CENTER (California)</td><td>CA</td><td>3,420</td><td>2,765</td><td>31,655</td><td>3,420</td><td>34,420</td><td>37,840</td><td>20,669</td><td>1997-1998</td><td>10/22/1997</td><td>35 years</td><td></td><td></td><td></td></tr><tr><td>PAN AM (Virginia)</td><td>VA</td><td>8,694</td><td>12,929</td><td>7,230</td><td>8,695</td><td>20,158</td><td>28,853</td><td>13,972</td><td>1979</td><td>25/5/1993</td><td>35 years</td><td></td><td></td><td></td></tr><tr><td>PENTAGON ROW (Virginia)</td><td>VA</td><td>2,955</td><td>2,955</td><td>93726</td><td></td><td>96,681</td><td>96,681</td><td>40,084</td><td>1992-2002</td><td>11/29/1988</td><td>35 years</td><td></td><td></td><td></td></tr><tr><td>PENN PRAIRIE PLAZA (Maryland)</td><td>MD</td><td>2,800</td><td>6,461</td><td>21,156</td><td>2,800</td><td>27,617</td><td>30,417</td><td>21,389</td><td>1963</td><td>10/11/1985</td><td>35 years</td><td></td><td></td><td></td></tr><tr><td>PIKE &amp; ROSE (Maryland)</td><td>MD</td><td>31,471</td><td>10,335</td><td>324,723</td><td>26,199</td><td>340,330</td><td>366,529</td><td>5,488</td><td>2012-2014</td><td>10/26/1977</td><td>50 years</td><td></td><td></td><td></td></tr><tr><td>PIKE PLAZA (Virginia)</td><td>VA</td><td>19,970</td><td>22,799</td><td>3,945</td><td>14,914</td><td>26,800</td><td>41,714</td><td>14,907</td><td>1968</td><td>8/28/2015</td><td>35 years</td><td></td><td></td><td></td></tr><tr><td>PLAZA EL SEQUIN DOWTOFF POINT (California)</td><td>CA</td><td>62,127</td><td>153,556</td><td>55,296</td><td>62,127</td><td>208,852</td><td>270,979</td><td>24,548</td><td>2006.8</td><td>6/13/2013</td><td>35 years</td><td></td><td></td><td></td></tr><tr><td>(MASSACHUSETTS)</td><td>MA</td><td>3,319</td><td>8,457</td><td>6,421</td><td>3,319</td><td>14,878</td><td>18,197</td><td>8,908</td><td>1967</td><td>12/27/1994</td><td>35 years</td><td></td><td></td><td></td></tr><tr><td>(MASSACHUSETTS)</td><td>MD</td><td>3,197</td><td>7,949</td><td>24,155</td><td>2,928</td><td>32,373</td><td>35,301</td><td>16,012</td><td>1975</td><td>4/22/1994</td><td>35 years</td><td></td><td></td><td></td></tr><tr><td>(MASSACHUSETTS)</td><td>MD</td><td>3,197</td><td>8,092</td><td>41,995</td><td>—</td><td>50,087</td><td>50,087</td><td>13,887</td><td>2006-2007</td><td>2006-2007</td><td>50 years</td><td></td><td></td><td></td></tr><tr><td>(MASSACHUSETTS)</td><td>MD</td><td>3,552</td><td>2,246</td><td>7,449</td><td>57</td><td>9,675</td><td>10,254</td><td>8,598</td><td>1960</td><td>11/5/1971</td><td>25 years</td><td></td><td></td><td></td></tr><tr><td>(MASSACHUSETTS)</td><td>MD</td><td>4,840</td><td>6,319</td><td>1,395</td><td>4,840</td><td>7,714</td><td>12,554</td><td>4,634</td><td>1930</td><td>12/11/1995</td><td>35 years</td><td></td><td></td><td></td></tr><tr><td>(MASSACHUSETTS)</td><td>DC</td><td>4,920</td><td>32,466</td><td>33</td><td>39,920</td><td>32,849</td><td>72,769</td><td>19,641,985</td><td>1965</td><td>1/9/2015</td><td>35 years</td><td></td><td></td><td></td></tr><tr><td>(SAN ANTONIO CENTER (California)</td><td>CA</td><td>39,682</td><td>7,502</td><td>658,473</td><td>57,578</td><td>675,079</td><td>73,265</td><td>1,621</td><td>1995-1997</td><td>3/5/1971</td><td>35 years</td><td></td><td></td><td></td></tr><tr><td>(SAN ANTONIO CENTER (California)</td><td>CA</td><td>66,383</td><td>8,291</td><td>2,581</td><td>4,383</td><td>10,872</td><td>15,255</td><td>5,840</td><td>2006-2007</td><td>4/20/2014</td><td>40-50 years</td><td></td><td></td><td></td></tr><tr><td>(SANTA MARIA)</td><td>MA</td><td>4,355</td><td>8,291</td><td>2,581</td><td>4,383</td><td>10,872</td><td>15,255</td><td>5,840</td><td>2006-2007</td><td>4/20/2014</td><td>40-50 years</td><td></td><td></td><td></td></tr></table>



SUMMARY OF REAL ESTATE INVESTMENT TRUST
SCHEDULE III
DECEMBER 31, 2015
COLLATERAL ACQUISITION DEPRECIATION

<table><tr><td rowspan="2">COLLUMB</td><td rowspan="2">COLLUMB B</td><td rowspan="2">COLLUMB C</td><td colspan="2">COLLUMB N</td><td colspan="2">COLLUMB F</td><td colspan="2">COLLUMB G</td><td colspan="2">COLLUMB H</td><td colspan="2">COLLUMB I</td></tr><tr><td>Initial cost of property</td><td>Cost Capitalization Subscriptions</td><td>Gross amount at which carried at close of period</td><td>Total</td><td>Accumulated Depreciation and Amortization</td><td>Date of Construction</td><td>Date Acquired</td><td>Life on which depreciation is stated</td><td>With which depreciation is stated</td><td></td></tr><tr><td>Descriptions</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>THE AVENUE AT WHITE MARSH (Maryland)</td><td>52,705</td><td>20,682</td><td>72,423</td><td>7,028</td><td>20,685</td><td>79,457</td><td>100,142</td><td>25,294</td><td>1997</td><td>3/8/2007</td><td>35 years</td><td></td></tr><tr><td>THE GROVE AT SHREVSBURG (New Jersey)</td><td>56,997</td><td>18,016</td><td>103,115</td><td>995</td><td>18,021</td><td>104,105</td><td>122,126</td><td>6,980</td><td>1988/1/9/3/7</td><td>11/12/01 4/8</td><td>35 years</td><td></td></tr><tr><td>THE STOPPE&#x27;S AT (Maryland)</td><td></td><td>4,441</td><td>1,2849</td><td>163</td><td>4,441</td><td>13,012</td><td>17,453</td><td>3,979</td><td>2005-2006</td><td>3/8/2007</td><td>35 years</td><td></td></tr><tr><td>THE SHORES AT SUNSET PLACE (Florida)</td><td>FL</td><td>64,499</td><td>50,853</td><td>1,229</td><td>64,499</td><td>52,082</td><td>116,581</td><td>743</td><td>1999</td><td>10/1/2015</td><td>35 years</td><td></td></tr><tr><td>THE CREEK (California)</td><td>CA</td><td>22,645</td><td>12,709</td><td>3,418</td><td>25,125</td><td>53,410</td><td>78,525</td><td>30,043</td><td>1888-2000</td><td>19/06-2000</td><td>35 years</td><td></td></tr><tr><td>TOWER (Virginia)</td><td>VA</td><td>7,210</td><td>10,518</td><td>374</td><td></td><td>14,127</td><td>21,425</td><td>7,878</td><td>1953-1960</td><td>8/24/1968</td><td>35 years</td><td></td></tr><tr><td>TOWER SHORES (Florida)</td><td>FL</td><td>29,940</td><td>43,390</td><td>20,004</td><td>29,962</td><td>63,413</td><td>93,675</td><td>10,777</td><td>1989</td><td>6/13/14</td><td>35 years</td><td></td></tr><tr><td>TYSONS STATION (Virginia)</td><td>NV</td><td>3,126</td><td>5,193</td><td>26,281</td><td>4,311</td><td>30,289</td><td>34,603</td><td>19,580</td><td>1966</td><td>7/26/1980</td><td>22 years</td><td></td></tr><tr><td>VILLAGE AT BIRLINGHAM (Virginia)</td><td>VA</td><td>338</td><td>453</td><td>3,752</td><td>475</td><td>4,118</td><td>4,593</td><td>3,425</td><td>1954</td><td>11/17/1978</td><td>17 years</td><td></td></tr><tr><td>WESTLAKE CENTER (California)</td><td>CA</td><td>9,761</td><td>14,808</td><td>36,838</td><td>4,234</td><td>57,173</td><td>61,970</td><td>22,623</td><td>2006-2040</td><td>12/21/1995</td><td>35 years</td><td></td></tr><tr><td>WHITE MARSH PLAZA (Virginia)</td><td>CA</td><td>6,319</td><td>107,284</td><td>32,392</td><td>6,319</td><td>139,676</td><td>145,995</td><td>37,056</td><td>1600-1966</td><td>3/3/12004</td><td>35 years</td><td></td></tr><tr><td>WHITE MARSH OTHER (Virginia)</td><td>MD</td><td>3,478</td><td>21,413</td><td>262</td><td>3,478</td><td>21,675</td><td>25,153</td><td>7,123</td><td>1987</td><td>3/8/2007</td><td>35 years</td><td></td></tr><tr><td>WHITE MARSH OTHER (Virginia)</td><td>MD</td><td>34,281</td><td>1,843</td><td>925</td><td>34,311</td><td>27,738</td><td>37,049</td><td>673</td><td>1985</td><td>3/8/2007</td><td>35 years</td><td></td></tr><tr><td>WILDOOD (Maryland)</td><td>MD</td><td>9,111</td><td>1,061</td><td>8,793</td><td>9,111</td><td>9,854</td><td>18,965</td><td>8,191</td><td>1958</td><td>5/5/1969</td><td>33.3 years</td><td></td></tr><tr><td>WILLOW GROVE (Pennsylvania)</td><td>PA</td><td>949</td><td>6,643</td><td>21,857</td><td>1,499</td><td>28,500</td><td>29,899</td><td>24,244</td><td>1953</td><td>11/20/1984</td><td>35 years</td><td></td></tr><tr><td>WILLOW LAWN (Virginia)</td><td>VA</td><td>3,192</td><td>7,723</td><td>79,673</td><td>7,790</td><td>82,798</td><td>90,588</td><td>52,272</td><td>1957</td><td>12/5/1983</td><td>35 years</td><td></td></tr><tr><td>WYNENEWTOWN (Maryland)</td><td>PA</td><td>8,055</td><td>13,759</td><td>19,912</td><td>8,055</td><td>33,671</td><td>41,726</td><td>20,061</td><td>1948</td><td>10/29/1996</td><td>35 years</td><td></td></tr><tr><td>TOTALS</td><td>S</td><td>5,544,412</td><td>S</td><td>1,910,766</td><td>S</td><td>1,209,804</td><td>S</td><td>4,854,602</td><td>S</td><td>6/10/2014</td><td>S</td><td></td></tr></table>



## FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
Three Years Ended December 31, 2015
Reconciliation of Total Cost
(in thousands)

Balance, December 31, 2012..... $ 4,779,674
Additions during period
Acquisitions..... 76,359
Improvements..... 329,522
Deduction during period—dispositions and retirements of property..... (36,092)
Balance, December 31, 2013..... 5,149,463
Additions during period
Acquisitions..... 174,328
Improvements..... 329,674
Deduction during period—dispositions and retirements of property and transfer to joint venture..... (44,467)
Balance, December 31, 2014..... 5,608,998
Additions during period
Acquisitions..... 291,726
Improvements..... 281,471
Deduction during period—dispositions and retirements of property..... (117,789)
Balance, December 31, 2015..... $ 6,064,406



## FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
Three Years Ended December 31, 2015
Reconciliation of Accumulated Depreciation and Amortization
(in thousands)

Balance, December 31, 2012..... $ 1,224,295
Additions during period—depreciation and amortization expense..... 147,730
Deductions during period—dispositions and retirements of property..... (21,554)
Balance, December 31, 2013..... 1,350,471
Additions during period—depreciation and amortization expense..... 155,662
Deductions during period—dispositions and retirements of property..... (39,083)
Balance, December 31, 2014..... 1,467,050
Additions during period—depreciation and amortization expense..... 156,513
Deductions during period—dispositions and retirements of property..... (49,522)
Balance, December 31, 2015..... $ 1,574,041



# FEDERAL REALTY INVESTMENT TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
Year Ended December 31, 2015

(Dollars in thousands)

<table><tr><td>Column A</td><td>Column B</td><td>Column C</td><td>Column D</td><td>Column E</td><td>Column F</td><td>Column G</td><td>Column H</td></tr><tr><td>Description of Lien</td><td>Interest Rate</td><td>Maturity Date</td><td>Periodic Payment Terms</td><td>Prior Liens</td><td>Face Amount of Mortgages</td><td>Carrying Amount of Mortgages (1)</td><td>Principal Amount of Loans Subject to delinquent Principal or Interest</td></tr><tr><td>Mortgage on retail buildings in Philadelphia, PA</td><td>8% or 10% based on timing of draws, plus participation</td><td>May 2021</td><td>Interest only monthly; balloon payment due at maturity</td><td>$ —</td><td>$20,653</td><td>$ 20,653 (2)</td><td>$ —</td></tr><tr><td>Mortgage on retail buildings in Philadelphia, PA</td><td>10% plus participation</td><td>May 2021</td><td>Interest only monthly; balloon payment due at maturity</td><td>—</td><td>9,250</td><td>9,250</td><td>—</td></tr><tr><td>Mortgage on retail building in Norwalk, CT</td><td>7%</td><td>June 2015</td><td>Interest only; balloon payment due at maturity</td><td>—</td><td>11,715</td><td>11,715</td><td>11,715 (3)</td></tr><tr><td></td><td></td><td></td><td></td><td>$ —</td><td>$41,618</td><td>$ 41,618</td><td>$ 11,715</td></tr></table>



## FEDERAL REALTY INVESTMENT TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE - CONTINUED
Three Years Ended December 31, 2015
Reconciliation of Carrying Amount
(in thousands)

Balance, December 31, 2012..... $ 55,648
Deductions during period:
Collection and satisfaction of loans..... (1,057)
Amortization of discount..... 564
Balance, December 31, 2013..... 55,155
Deductions during period:
Collection and satisfaction of loans..... (4,778)
Amortization of discount..... 611
Balance, December 31, 2014..... 50,988
Additions during period:
Issuance of loans..... 368
Deductions during period:
Collection and satisfaction of loans..... (10,692)
Amortization of discount..... 954
Balance, December 31, 2015..... $ 41,618



## EXHIBIT INDEX

<table><tr><td>Exhibit No.</td><td>Description</td></tr><tr><td>3.1</td><td>Declaration of Trust of Federal Realty Investment Trust dated May 5, 1999 as amended by the Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust dated May 6, 2004, as corrected by the Certificate of Correction of Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust dated June 17, 2004, as amended by the Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust dated May 6, 2009 (previously filed as Exhibit 3.1 to the Trust’s Registration Statement on Form S-3 (File No. 333-160009) and incorporated herein by reference)</td></tr><tr><td>3.2</td><td>Amended and Restated Bylaws of Federal Realty Investment Trust dated February 12, 2003, as amended October 29, 2003, May 5, 2004, February 17, 2006 and May 6, 2009 (previously filed as Exhibit 3.2 to the Trust’s Registration Statement on Form S-3 (File No. 333-160009) and incorporated herein by reference)</td></tr><tr><td>4.1</td><td>Specimen Common Share certificate (previously filed as Exhibit 4(i) to the Trust’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>4.2</td><td>Articles Supplementary relating to the 5.417% Series 1 Cumulative Convertible Preferred Shares of Beneficial Interest (previously filed as Exhibit 4.1 to the Trust’s Current Report on Form 8-K filed on March 13, 2007, (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>4.3</td><td>** Indenture dated December 1, 1993 related to the Trust’s 7.48% Debentures due August 15, 2026; and 6.82% Medium Term Notes due August 1, 2027; (previously filed as Exhibit 4(a) to the Trust’s Registration Statement on Form S-3 (File No. 33-51029), and amended on Form S-3 (File No. 33-63687), filed on December 13, 1993 and incorporated herein by reference)</td></tr><tr><td>4.4</td><td>** Indenture dated September 1, 1998 related to the Trust’s 5.65% Notes due 2016; 6.20% Notes due 2017; 5.90% Notes due 2020; 3.00% Notes due 2022; 2.75% Notes due 2023; 3.95% Notes due 2024; 4.50% Notes due 2044; 2.55% Notes due 2021 (previously filed as Exhibit 4(a) to the Trust’s Registration Statement on Form S-3 (File No. 333-63619) filed on September 17, 1998 and incorporated herein by reference)</td></tr><tr><td>10.1</td><td>* Severance Agreement between the Trust and Donald C. Wood dated February 22, 1999 (previously filed as a portion of Exhibit 10 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 (File No. 1-07533) (the &quot;1999 1Q Form 10-Q&quot;) and incorporated herein by reference)</td></tr><tr><td>10.2</td><td>* Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 22, 1999 (previously filed as a portion of Exhibit 10 to the 1999 1Q Form 10-Q and incorporated herein by reference)</td></tr><tr><td>10.3</td><td>* Amendment to Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 16, 2005 (previously filed as Exhibit 10.12 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 1-07533) (the &quot;2004 Form 10-K&quot;) and incorporated herein by reference)</td></tr><tr><td>10.4</td><td>2001 Long-Term Incentive Plan (previously filed as Exhibit 99.1 to the Trust’s S-8 Registration Number 333-60364 filed on May 7, 2001 and incorporated herein by reference)</td></tr><tr><td>10.5</td><td>* Health Coverage Continuation Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 16, 2005 (previously filed as Exhibit 10.26 to the 2004 Form 10-K and incorporated herein by reference)</td></tr><tr><td>10.6</td><td>* Severance Agreement between the Trust and Dawn M. Becker dated April 19, 2000 (previously filed as Exhibit 10.26 to the Trust’s 2005 2Q Form 10-Q and incorporated herein by reference)</td></tr><tr><td>10.7</td><td>* Amendment to Severance Agreement between the Trust and Dawn M. Becker dated February 16, 2005 (previously filed as Exhibit 10.27 to the 2004 Form 10-K and incorporated herein by reference)</td></tr><tr><td>10.8</td><td>Form of Restricted Share Award Agreement for awards made under the Trust’s 2003 Long-Term Incentive Award Program for shares issued out of 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.28 to the 2004 Form 10-K and incorporated herein by reference)</td></tr><tr><td>10.9</td><td>Form of Restricted Share Award Agreement for long term vesting and retention awards for shares issued out of the 2010 Plan (previously filed as Exhibit 10.35 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010 (File No. 1-07533) (the &quot;2010 Form 10-K&quot;) and incorporated herein by reference)</td></tr><tr><td>10.10</td><td>Form of Option Award Agreement for awards made under the Trust’s 2003 Long-Term Incentive Award Program for shares issued out of the 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.32 to the 2005 Form 10-K and incorporated herein by reference)</td></tr></table>



<table><tr><td>Exhibit No.</td><td>Description</td></tr><tr><td>10.11</td><td>Amended and Restated 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.34 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>10.12</td><td>* Amendment to Severance Agreement between the Trust and Donald C. Wood dated January 1, 2009 (previously filed as Exhibit 10.26 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-07533) (“the 2008 Form 10-K”) and incorporated herein by reference)</td></tr><tr><td>10.13</td><td>* Second Amendment to Executive Agreement between the Trust and Donald C. Wood dated January 1, 2009 (previously filed as Exhibit 10.27 to the Trust’s 2008 Form 10-K and incorporated herein by reference)</td></tr><tr><td>10.14</td><td>* Amendment to Health Coverage Continuation Agreement between the Trust and Donald C. Wood dated January 1, 2009 (previously filed as Exhibit 10.28 to the Trust’s 2008 Form 10-K and incorporated herein by reference)</td></tr><tr><td>10.15</td><td>* Second Amendment to Severance Agreement between the Trust and Dawn M. Becker dated January 1, 2009 (previously filed as Exhibit 10.30 to the Trust’s 2008 Form 10-K and incorporated herein by reference)</td></tr><tr><td>10.16</td><td>2010 Performance Incentive Plan (previously filed as Appendix A to the Trust’s Definitive Proxy Statement for the 2010 Annual Meeting of Shareholders (File No. 01-07533) and incorporated herein by reference)</td></tr><tr><td>10.17</td><td>Amendment to 2010 Performance Incentive Plan (“the 2010 Plan”) (previously filed as Appendix A to the Trust’s Proxy Supplement for the 2010 Annual Meeting of Shareholders (File No. 01-07533) and incorporated herein by reference)</td></tr><tr><td>10.18</td><td>* Restricted Share Award Agreement between the Trust and Donald C. Wood dated October 12, 2010 (previously filed as Exhibit 10.36 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 (File No. 01-07533) and incorporated herein by reference)</td></tr><tr><td>10.19</td><td>Form of Restricted Share Award Agreement for awards made under the Trust’s Long-Term Incentive Award Program and the Trust’s Annual Incentive Bonus Program and basic awards with annual vesting for shares issued out of the 2010 Plan (previously filed as Exhibit 10.34 to the Trust’s 2010 Form 10-K (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>10.20</td><td>Form of Option Award Agreement for awards made under the Trust’s Long-Term Incentive Award Program for shares issued out of the 2010 Plan (previously filed as Exhibit 10.38 to the Trust’s 2010 Form 10-K (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>10.21</td><td>Form of Option Award Agreement for front loaded awards made under the Trust’s Long-Term Incentive Award Program for shares issued out of the 2010 Plan (previously filed as Exhibit 10.39 to the Trust’s 2010 Form 10-K (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>10.22</td><td>Form of Option Award Agreement for basic options awarded out of the 2010 Plan (previously filed as Exhibit 10.40 to the Trust’s 2010 Form 10-K (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>10.23</td><td>Form of Restricted Share Award Agreement, dated as of February 10, 2011, between the Trust and Dawn M. Becker (previously filed as Exhibit 10.41 to the Trust’s 2010 Form 10-K (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>10.24</td><td>* Severance Agreement between the Trust and James M. Taylor dated July 30, 2012 (previously filed as Exhibit 10.35 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>10.25</td><td>Credit Agreement dated as of July 7, 2011, by and among the Trust, as Borrower, the financial institutions party thereto and their permitted assignees under Section 12.6., as Lenders, Wells Fargo Bank, National Association, as Administrative Agent, PNC Bank, National Association, as Syndication Agent, Wells Fargo Securities, LLC, as a Lead Arranger and Book Manager, and PNC Capital Markets LLC, as a Lead Arranger and Book Manager (previously filed as Exhibit 10.1 to the Trust’s Current Report on Form 8-K (File No. 1-07533), filed on July 11, 2011 and incorporated herein by reference)</td></tr><tr><td>10.26</td><td>Term Loan Agreement dated as of November 22, 2011, by and among the Trust, as Borrower, the financial institutions party thereto and their permitted assignees under Section 12.6., as Lenders, PNC Bank, National Association, as Administrative Agent, Capital One, N.A., Syndication Agent, PNC Capital Markets, LLC, as a Lead Arranger and Book Manager, and Capital One, N.A., as a Lead Arranger and Book Manager (previously filed as Exhibit 10.1 to the Trust’s Current Report on Form 8-K (File No. 1-07533), filed on November 28, 2011 and incorporated herein by reference)</td></tr></table>



<table><tr><td>Exhibit No.</td><td>Description</td></tr><tr><td>10.27</td><td>Revised Form of Restricted Share Award Agreement for front loaded awards made under the Trust’s Long-Term Incentive Award Program for shares issued out of the 2010 Plan (previously filed as Exhibit 10.35 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2012 (File No. 1-07533) (the &quot;2012 Form 10-K&quot;) and incorporated herein by reference)</td></tr><tr><td>10.28</td><td>Revised Form of Restricted Share Award Agreement for long-term vesting and retention awards made under the Trust’s Long-Term Incentive Award Program for shares issued out of the 2010 Plan (previously filed as Exhibit 10.36 to the Trust’s 2012 Form 10-K (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>10.29</td><td>Revised Form of Performance Share Award Agreement for shares awarded out of the 2010 Plan (previously filed as Exhibit 10.37 to the Trust’s 2012 Form 10-K (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>10.30</td><td>Revised Form of Restricted Share Award Agreement for awards made under the Trust’s Long-Term Incentive Award Program and the Trust’s Annual Incentive Bonus Program and basic awards with annual vesting for shares issued out of the 2010 Plan (previously filed as Exhibit 10.38 to the Trust’s 2012 Form 10-K (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>10.31</td><td>First Amendment to the Credit Agreement, dated as of April 22, 2013, by and among Federal Realty Investment Trust, each of the Lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent (previously filed as Exhibit 10.1 to the Trust’s Current Report on Form 8-K (File No. 1-07533), filed on April 26, 2013 and incorporated herein by reference)</td></tr><tr><td>10.32</td><td>First Amendment to the Term Loan Agreement, dated as of April 22, 2013, by and among Federal Realty Investment Trust, each of the Lenders party thereto, and PNC Bank, National Association, as Administrative Agent (previously filed as Exhibit 10.40 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 (File No. 1-07533) and incorporated herein by reference)</td></tr><tr><td>10.33</td><td>Second Amendment to Term Loan Agreement, dated as of August 28, 2014, by and among Federal Realty Investment Trust, each of the Lenders party thereto, and PNC Bank, National Association, as Administrative Agent (previously filed as Exhibit 10.1 to the Trust’s Current Report on Form 8-K (File No. 1-07533), filed on September 2, 2014 and incorporated herein by reference)</td></tr><tr><td>21.1</td><td>Subsidiaries of Federal Realty Investment Trust (filed herewith)</td></tr><tr><td>23.1</td><td>Consent of Grant Thornton LLP (filed herewith)</td></tr><tr><td>31.1</td><td>Rule 13a-14(a) Certification of Chief Executive Officer (filed herewith)</td></tr><tr><td>31.2</td><td>Rule 13a-14(a) Certification of Chief Financial Officer (filed herewith)</td></tr><tr><td>32.1</td><td>Section 1350 Certification of Chief Executive Officer (filed herewith)</td></tr><tr><td>32.2</td><td>Section 1350 Certification of Chief Financial Officer (filed herewith)</td></tr><tr><td>101</td><td>The following materials from Federal Realty Investment Trust’s Annual Report on Form 10-K for the year ended December 31, 2015, 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 detailed tagged.</td></tr></table>



## CERTIFICATION

I, Donald C. Wood, certify that:

1) I have reviewed this annual report on Form 10-K 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.

February 9, 2016

/s/ Donald C. Wood

Donald C. Wood,

President, Chief Executive Officer and Trustee (Principal Executive Officer)



## CERTIFICATION

I, James M. Taylor, Jr., certify that:

1) I have reviewed this annual report on Form 10-K 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.

February 9, 2016

/s/ James M. Taylor, Jr.

James M. Taylor, Jr.,

Executive Vice President - Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)



## CERTIFICATION

## PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SABANES-OXLEY ACT OF 2002

The undersigned, Donald C. Wood, the President and Chief Executive Officer of Federal Realty Investment Trust (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Annual Report on Form 10-K for the period ended December 31, 2015 (the “Report”). The undersigned hereby certifies, to the best of his knowledge, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 9, 2016

/s/ Donald C. Wood

Donald C. Wood,

President, Chief Executive Officer and Trustee

(Principal Executive Officer)



## CERTIFICATION

## PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SABANES-OXLEY ACT OF 2002

The undersigned, James M. Taylor, Jr., the Executive Vice President and Chief Financial Officer and Treasurer of Federal Realty Investment Trust (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Annual Report on Form 10-K for the period ended December 31, 2015 (the “Report”). The undersigned hereby certifies, to the best of his knowledge, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 9, 2016

/s/ James M. Taylor, Jr.

James M. Taylor, Jr.,

Executive Vice President -

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)



# CORPORATE
INFORMATION

## CORPORATE OFFICE

1626 East Jefferson Street
Rockville, MD 20852-4041
301.998.8100

## GENERAL COUNSEL

Pillsbury Winthrop Shaw Pittman LLP
Washington, DC

## INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

Grant Thornton LLP
McLean, VA

## TRANSFER AGENT AND REGISTRAR

American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
718.921.8200
800.937.5449
www.amstock.com

## COMMON STOCK LISTING

New York Stock Exchange
Symbol: FRT

## MEMBERSHIPS

International Council of Shopping Centers
National Association of Real Estate Investment Trusts
Urban Land Institute

## ANNUAL MEETING

Federal Realty Investment Trust will hold its Annual Shareholder Meeting at 10 a.m. on May 4, 2016, at AMP by Strathmore, 11810 Grand Park Avenue, North Bethesda, MD.

## CORPORATE GOVERNANCE

The Trust’s Corporate Governance Guidelines and the charters for the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee are available in the Investors section of our Web site at www.federalrealty.com.

## AUTOMATIC CASH INVESTMENT AND DIRECT DEPOSIT

Federal Realty offers automatic cash investment, the option to automatically withdraw funds from a checking/savings or other bank account to purchase additional shares of FRT on the 1st and 15th of each month. Federal Realty also offers shareholders the option to directly deposit their dividends. To sign up for automatic cash investment or direct deposit, please call (800) 937-5449 or visit www.amstock.com.

## INTERNET

## www.federalrealty.com

Visitors to the site can search for and download Securities and Exchange Commission filings, review Federal Realty's Dividend Reinvestment Plan, obtain current stock quotes, read recent press releases, and see a listing of our properties and the properties' respective websites. Printed materials and e-mail news alerts can also be requested.

## INVESTOR RELATIONS CONTACT

You may communicate directly with Federal Realty's Investor Relations department via telephone at (800) 658-8980 or by e-mail at IR@federalrealty.com.



## LOCATIONS

Corporate Headquarters
1626 East Jefferson Street
Rockville, MD 20852
301.998.8100

Regional Offices
BOSTON

450 Artisan Way
Suite 320
Somerville, MA 02145
617.684.1500

LOS ANGELES
710-B South Allied Way
El Segundo, CA 90245
310.414.5280

PHILADELPHIA
50 East Wynnewood Road
Suite 200
Wynnewood, PA 19096
610.896.5870

SAN JOSE
356 Santana Row
Suite 1005
San Jose, CA 95128
408.551.4600

federalrealty.com