Federal Realty Books Profit, Announces Boston Deals

August 5, 2010

By Paul McMorrow

Federal Realty Investment Trust has tapped AvalonBay Communities to develop the multifamily housing component of its Assembly Square project in Somerville, and the Maryland-based REIT will lead a $200 million fund to invest in Back Bay properties.

Federal Realty disclosed the new Boston fund in an earnings release. The firm will hold an 85 percent interest in the $200 million Back Bay fund, which will be managed by Boston firms Taurus Investment Holdings LLC and UrbanMeritage LLC.

Earlier this summer, the joint venture made its first two acquisitions, scooping up 111-115 Newbury St. and 127-129 Newbury St. from Kimco Realty. The fund paid $17.5 million for the two properties.

In an earnings call, AvalonBay President Tim Naughton said his REIT has signed a letter of intent to develop the housing component of Federal Realty's 5 million-square-foot Assembly Square project in Somerville. Assembly Square is currently permitted for 2.3 million square feet of commercial space, 2,100 housing units, and a 200-room hotel. Federal Realty said in an SEC filing it expects to "structure any future development [at Assembly Square] in a manner designed to mitigate our risk which may include transfers of entitlements or co-developing with other real estate companies."

Yesterday, Federal Realty reported a second quarter profit of $31 million, up 9.5 percent from a year ago.