TWST: Could you provide our readers with a brief overview of Federal Realty Investment Trust?

Mr. Wood: Federal Realty is an equity REIT that was one of the first public REITs in the country. We're a retail company, with high quality strip shopping center assets being our primary source of growth through the mid-1990s, and urban street retail product generating the growth for the past several years. The foundation of Federal Realty has always been real estate in urban, dense, affluent suburbs. When I say urban, I am not necessarily referring to Manhattan, but rather the dense suburbs of major metropolitan areas. The company grew up around Washington, DC, and as a result, Federal has a significant presence in the Washington, DC markets and the close suburbs of northern Virginia and Montgomery County, Maryland. The same is true in and around Philadelphia, as well as in New Jersey, and to a lesser extent, New York and Boston. A very large part of the company's growth through the early to mid-1990s was on the East Coast between Boston and Washington, DC. In the mid-1990s, the President of the company, Steve Guttman, a real visionary on the retail side, felt that the future of retail was in more urban, mixed-use products. Products where people can live, where they can shop and where they can work all within walking distance. A lot of that had to do with the demographic changes in the country; people are living longer and getting married later. We started buying up existing income producing acquisitions in areas like Third Street Promenade in Santa Monica, California as well as Bethesda, Maryland and Greenwich, Connecticut. Many of these buildings have either an office or residential component above them, but are retail-based in terms of the street level. Rents in these buildings were growing faster than they were in most strip shopping centers, and the opportunities for growth looked superior over the long term, but there were some challenges in finding and acquiring enough of that type of product to make a difference in a large public REIT portfolio. In the late 1990s, we began to build new, ground-up developments of urban mixed-use products. In 1997, we were able to acquire over 40 acres in San Jose, California at an irreplaceable location, the corner of two major arteries in northern California; the Interstate 880 and the Interstate 280, across from one of the highest performing regional malls in the country: Valley Fair Mall in San Jose. That project, which we are calling Santana Row, is the epitome of the street retail experience that we are trying to create. We are creating a complete shopping and living district with residential, hotel, restaurants, and a significant main street retail component that creates a lifestyle; we like to call it a 'sense of place.' Today, Federal Realty is a company that is comprised of the highest quality strip shopping centers in the REIT universe as well as urban, mixed-use, retail districts that give us a real competitive advantage in the future of retail.

TWST: What do you see as the future growth prospects for strip shopping centers in general?

Mr. Wood: I believe that on a macro level, the country is over-retailed. But you don't make money in real estate at the macro level; real estate is local. I think the better real estate, in better locations will survive and thrive, while I think some of the outlying locations in certain markets will be particularly challenged in terms of growth. I do believe that there will be some centers that do better than others, and I believe we are uniquely positioned to thrive given the type of assets we own and operate.

TWST: Do you own any theaters? You mentioned theaters earlier.

Mr. Wood: Yes, we have some theaters that are tenants, but a very small percentage of our portfolio. In fact, one of the unique advantages of Federal Realty is our diversification of tenants; no tenant comprises more than 2% of revenue.

TWST: Do you see the growth basically coming more from retail than from office?

Mr. Wood: Yes, well, we are a retail company through and through. While we do have a small percentage of office and residential products, our investment decision is always primarily based on the retail prospects.

TWST: What would you say your occupancy rate is?

Mr. Wood: Our occupancy is near 96%.

TWST: What is it that gives you a competitive advantage?

Mr. Wood: A couple of things. The underlying real estate cannot be underestimated. I think our underlying real estate on the whole is better than our competitors', and I think what that means is, in bad times, which we haven't had in the past eight years, I think our portfolio holds up better than others, and in good times rent growth is stronger. I think that as an operating company we have excellent leasing skills with the appropriate relationships and expertise to get deals done. As I previously stated, no one tenant that we have makes up more than 2% of our revenue stream. So we are not at risk to Kmart going out of business, nor are we at risk for any particular tenant causing serious concern in this company, which is a significant advantage compared to our competitors. In addition, when you look at our largest tenants, they are generally strong, credit-rated companies. So, given our tenant mix, given where our real estate is, the demographics of affluent and densely populated areas, I think we have a terrific hedge against bad times. Finally, I think when you look at Federal Realty's growth internally, in other words without the impact of incremental acquisitions, I think you will find that our company grows internally better than most, if not all of our competitors.

TWST: Will you be emphasizing organic growth for the most part?

Mr. Wood: Our new development pipeline, which includes Santana Row, the San Jose development that I referred to earlier ' along with developments in Arlington, Virginia; Bethesda, Maryland; and Portland, Oregon ' is the primary source of growth at Federal Realty. Execution of these projects is a primary goal of the company in the next 15 to 18 months. During that time we are also continuing to maximize the returns of the core shopping center portfolio.

TWST: What kind of affect will consolidation within the industry have on your business?

Mr. Wood: That is yet to be seen. With where the economy maybe going, I suspect there will be some pretty good buys out there. I think that there are a number of weak competitors that will be acquired. There are a number of strong competitors that will be strengthened, and I think we will be one of them.

TWST: Would you say that the economy poses the most significant challenge right now, or if not, what would present the biggest challenge?

Mr. Wood: Certainly the economy poses a challenge. Reductions in interest rates absolutely benefit us, so the move that the Fed is taking now is a near term positive. However, to the extent the economy does turn bad, it poses a threat to us as it does to everyone. As I've said, I think we are in a better position to weather a downturn with respect to the core portfolio than others. The biggest threat to us is the economy as it relates to our development pipeline, specifically Santana Row. But we feel confident in our ability to execute.

TWST: Would you say that the Santana Row project represents your biggest opportunity right now?

Mr. Wood: Absolutely!

TWST: What do you see as the potential rate of gain in sales and earnings for the company in the next year or so? Is that something that you can comment on?

Mr. Wood: It is not something that I feel comfortable commenting on here, we will provide earnings guidance in our conference call.

TWST: Do you have any thoughts on the current stock price?

Mr. Wood: We are clearly trading at a discount to net asset value, and have been for some time. I think we have shown that we can continue to grow earnings. I think the multiple contraction that has happened, not only to Federal Realty, but to the rest of the REIT industry, is exacerbated at Federal Realty because we are developing Santana Row and projects like that at this time. I do believe that there is a drag, if you will, on our current stock price as a result of the development risk, and I understand that. It is our job to prove that we do know how to develop and that we can perform. I believe that as we prove it, the drag on the stock price will begin to diminish.

TWST: Would you say that Santana Row represents the biggest milestone right now?

Mr. Wood: Yes, I would.

TWST: Is there anything that I may have missed that you would want to point out to potential long-term investors before we conclude the interview?

Mr. Wood: Yes, a couple of things. I think from a macro perspective, when you sit back and look at the choices that you have among real estate investments, I think that asset quality has not been given the appropriate emphasis over the past five, six, seven years, and I understand why. It all has been very good. It has been a great economy. It has been a great situation in the country. I believe a dollar of rental income from a Federal Realty center is worth more than a dollar of rental income from another center in a weaker location with weaker tenancy. As the economy changes, I believe the quality of our portfolio becomes more important, and it will become apparent that the dollar of rent from Federal Realty is worth more than a dollar from somebody else. Having said that, I also believe that there are opportunities at this company given new developments like Santana Row in San Jose, and Pentagon Row in Arlington, Virginia as well as Bethesda Row, in Bethesda, Maryland that provide upside that a prototypical shopping center company doesn't have. So I think we have a unique hedge against the downside and I think we have growth prospects in the form of new development on the upside that make us pretty unique.

TWST: Thank you. (JF)

DONALD C. WOOD Sr. Vice President Federal Realty Investment Trust 1626 East Jefferson Street Rockville, MD 20852 (301) 998-8100 (301) 998-3700 e-mail:

Each Executive who is the featured subject of a TWST Interview is offered the opportunity to include an Investors Brief or other highlight material to be provided and sponsored by and for the company.

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