FEDERAL REALTY INVESTMENT TRUST, DEF 14A, 2000-03-30

FEDERAL REALTY INVESTMENT TRUST
DEF 14A, 2000-03-30
REAL ESTATE INVESTMENT TRUSTS

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<PAGE>

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

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement

[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

Federal Realty Investment Trust
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

Federal Realty Investment Trust
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

<PAGE>

[LOGO OF FEDERAL REALTY APPEARS HERE]

March 30, 2000

Dear Shareholder:

Please accept my personal invitation to attend our Annual Meeting of
Shareholders on Wednesday, May 3, 2000 at 10:00 a.m. This year's meeting will
be held at Woodmont Country Club, 1201 Rockville Pike, Rockville, Maryland.

The business to be conducted at the meeting is set forth in the formal
notice that follows. In addition, Management will provide a review of 1999
operating results and discuss the outlook for the future. After the formal
presentation, the Trustees and Management will be available to answer any
questions that you may have.

In addition to voting by mail by completing, signing and returning the
enclosed proxy card, you may also vote either by telephone (1-800-PROXIES) or
on the Internet (www.voteproxy.com) by following the instructions on your
proxy card.

Your vote is important. I urge you to vote by one of the three methods
mentioned above.

I look forward to seeing you on May 3.

Sincerely,

/s/ STEVEN J. GUTTMAN
Steven J. Guttman
President and Chief Executive
Officer
<PAGE>

FEDERAL REALTY INVESTMENT TRUST

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 3, 2000

To Our Shareholders:

The 2000 Annual Meeting of Shareholders of Federal Realty Investment Trust
("Federal Realty" or the "Trust") will be held at Woodmont Country Club, 1201
Rockville Pike, Rockville, Maryland, on Wednesday, May 3, 2000, at 10:00 a.m.
for the purpose of considering and acting upon the following:

1. The election of two Trustees to serve for the ensuing three years.

2. The transaction of such other business as may properly come before the
meeting or any adjournment.

Shareholders of record at the close of business on March 24, 2000 are
entitled to notice of and to vote at the Annual Meeting.

For the Trustees:

/s/ NANCY J. HERMAN
Nancy J. Herman
Vice President--General
Counsel and Secretary

Your vote is important. Please vote, even if you plan to attend the meeting,
by completing, signing and returning the enclosed proxy card, or by telephone
(1-800-PROXIES) or on the Internet (www.voteproxy.com) by following the
instructions on your proxy card. You may revoke your proxy by submitting a
later-dated proxy, or at the Annual Meeting if you wish to vote in person.
<PAGE>

FEDERAL REALTY INVESTMENT TRUST
1626 East Jefferson Street, Rockville, Maryland 20852

PROXY STATEMENT
March 25, 2000

Proxies in the form enclosed are solicited by the Board of Trustees of
Federal Realty Investment Trust for use at the 2000 Annual Meeting of
Shareholders ("Annual Meeting") to be held at 10:00 a.m., Wednesday, May 3,
2000, at Woodmont Country Club, 1201 Rockville Pike, Rockville, Maryland. The
close of business on March 24, 2000 has been fixed as the record date for
determining shareholders entitled to notice of and to vote at the meeting. On
that date, the Trust had 39,324,827 common shares of beneficial interest
("Shares") outstanding. If the proxy in the enclosed form is submitted, it
will be voted as specified in the proxy; if no specific voting instructions
are indicated, the proxy will be voted in favor of the two Trustees nominated
and in the named proxies' discretion as to other matters at the Annual
Meeting. Any proxy may be revoked by a shareholder at any time before it is
voted by submitting a later-dated proxy or by attending the Annual Meeting and
voting in person.

This proxy statement contains one proposal for shareholder consideration. At
the Annual Meeting, the presence of a majority of the outstanding Shares
entitled to vote, in person or by proxy, constitutes a quorum. Shareholders
are entitled to cast one vote per Share. The affirmative vote of a plurality
of the Shares entitled to vote and present, in person or by proxy, is required
for the election of Trustees.

This Proxy Statement and an accompanying proxy are being mailed to
shareholders on or about March 30, 2000, together with the Trust's 1999 Annual
Report, which includes audited financial statements for the year ended
December 31, 1999.

OWNERSHIP OF SHARES BY CERTAIN BENEFICIAL OWNERS

To the Trust's knowledge, based upon information available to the Trust,
beneficial owners of more than 5% of the Trust's Shares are as follows:

<TABLE>
<CAPTION>
Name and address Amount and nature Percent
of Beneficial Owner of Beneficial Ownership of Class
------------------- ----------------------- --------
<S> <C> <C>
Loomis, Sayles & Company, 3,555,238 8.3%
L.P.(1)
One Financial Center
Boston, Massachusetts 02111
Morgan Stanley Dean Witter & 2,994,810 7.6%
Co.(2)
1585 Broadway
New York, New York 10036
Morgan Stanley Dean Witter In- 2,710,900 6.9%
vestment Management, Inc.(3)
1221 Avenue of the Americas
New York, New York 10020
</TABLE>
- --------
(1) Information based on a Schedule 13G/A filed with the Securities and
Exchange Commission ("SEC") on February 3, 2000. The Schedule 13G/A
indicates that the reporting entity is an investment adviser with sole
voting power over 3,426,750 Shares and shared dispositive power over
3,555,238 Shares, and that the Schedule 13G/A is being filed with respect
to Shares that the reporting entity has a right to acquire as a result of
its benefical ownership of convertible securities.
(2) Information based on a Schedule 13G/A filed with the SEC on February 7,
2000. The Schedule 13G/A indicates that the reporting entity is an
investment adviser with shared voting power over 1,221,110 Shares and
shared dispositive power over 2,994,810 Shares.
(3) Information based on a Schedule 13G/A filed with the SEC on February 7,
2000. The Schedule 13G/A indicates that the reporting entity is an
investment adviser with shared voting power over 937,200 Shares and
shared dispositive power over 2,710,900 Shares.
<PAGE>

PROPOSAL 1
Election of Trustees

Pursuant to Section 5.2 of the Trust's Declaration of Trust, the Trustees
are divided into three classes serving three-year terms. Two Trustees,
comprising one class of Trustees, are to be elected at the Annual Meeting. Mr.
Kenneth D. Brody and Mr. Walter F. Loeb have been nominated for election as
Trustees to hold office until the 2003 Annual Meeting and until their
successors have been elected and shall qualify. Mr. A. Cornet de Ways Ruart is
not seeking reelection to the Board of Trustees when his term expires as of
the Annual Meeting. Proxies may not be voted for more than two Trustees.

Terms of office of the four Trustees named below will continue until the
Annual Meeting in the years indicated.

<TABLE>
<CAPTION>
Principal Occupations Trustee Term to
Name Age and Other Directorships* Since Expire
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dennis L. Berman........ 49 General Partner, Berman Enterprises, 1989 2001
Vingarden Associates, GDR Partnerships,
builders/developers; Director, Beco Manage-
ment, office building owners/managers.
Kristin Gamble.......... 54 President, Flood, Gamble Associates, Inc., 1995 2001
an investment counseling firm; Director,
Ethan Allen Interiors, Inc., a furniture
manufacturer and retailer.
Steven J. Guttman....... 53 President and Chief Executive Officer of 1979 2002
the Trust; Former Trustee, International
Council of Shopping Centers; Member and
Former Chairman, National Association of
Real Estate Investment Trusts Board of
Governors and Executive Committee; Member,
Real Estate Advisory Board and Executive
Committee, Wharton School of the University
of Pennsylvania; Member, Board of Advisors,
George Washington University Law School.
Mark S. Ordan........... 40 Chief Executive Officer, Bethesda Retail 1996 2002
Partners, a retail venture capital and
operating firm; Former Chief Executive
Officer, Chartwell Health Management Inc.;
Former Chairman, President and Chief
Executive Officer, Fresh Fields Markets,
Inc.: Trustee, Vassar College; Trustee,
National Symphony Orchestra.
</TABLE>

- --------
* The business histories set forth in these tables cover a five-year period.

2
<PAGE>

The Board of Trustees has an Audit Committee, comprised of Mr. Ordan
(Chairman), Mr. Berman and Mr. Cornet, which independently reviews the Trust's
financial statements and coordinates its review with the Trust's independent
public accountants. The Audit Committee held four meetings in 1999. The
Compensation Committee of the Board of Trustees, comprised of Mr. Loeb
(Chairman), Mr. Brody and Mr. Ordan, reviews and reports to the Board on
incentive plans and remuneration of officers. That committee held five
meetings in 1999. The Compensation Committee also administers the Trust's
Amended and Restated 1993 Long-Term Incentive Plan (the "Amended Plan").
During 1999 the Board of Trustees held twelve meetings. The Board of Trustees
has no standing nominating committee. All Trustees attended at least 75% of
all meetings of the Board and Board committees on which they served during
1999.

THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE TWO NOMINEES.

3
<PAGE>

OWNERSHIP OF SHARES BY TRUSTEES AND OFFICERS

As of March 24, 2000, Trustees and executive officers as a group, and the
Trustees and named executive officers, individually, beneficially owned the
following Shares:
<TABLE>
<CAPTION>
Percentage of
Number of Shares Outstanding Shares
Name of Beneficial Owner Beneficially Owned (1) of the Trust
- --------------------------------------------------------------------------
<S> <C> <C>
Trustees and executive officers
as a group (12 individuals)(2) 3,149,018 7.74%
Dennis L. Berman(3) 474,940 1.21%
Howard S. Biel(4) 87,558 under 1%
Kenneth D. Brody(5) 11,500 under 1%
A. Cornet de Ways Ruart(6) 38,891 under 1%
Kristin Gamble(7) 97,367 under 1%
Steven J. Guttman(8) 1,681,192 4.19%
Ron D. Kaplan(9) 395,634 1.00%
Walter F. Loeb(10) 33,430 under 1%
Mark S. Ordan(11) 12,807 under 1%
Cecily A. Ward(12) 103,007 under 1%
Donald C. Wood(13) 189,621 under 1%
</TABLE>
- -------
(1) The number and percentage of Shares shown in this table reflect
beneficial ownership, determined in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") including
Shares which are not owned but as to which options are outstanding and may be
exercised within 60 days. Except as noted in the following footnotes, each
Trustee and named executive officer has sole voting and investment power as to
all Shares listed. Fractions are rounded to the nearest full Share.
(2) Includes 1,366,862 options.
(3) Includes 25,000 options. Includes 434,875 Shares as to which Mr. Berman
is Trustee under Voting Trust Agreements for certain family members. Mr.
Berman does not have disposition rights with respect to these Shares. This
number also includes 1,000 Shares owned by a partnership in which Mr. Berman
is a general partner.
(4) Includes 83,333 options. Includes a Restricted Share Award of 1,725
Shares.
(5) Includes 7,500 options.
(6) Includes 17,500 options. Does not include 700 Shares owned by a
corporation of which Mr. Cornet's children are the controlling shareholders.
(7) Includes 12,500 options. Includes 80,967 Shares as to which Ms. Gamble
shares investment power for clients. Includes 1,400 Shares as to which Ms.
Gamble is a Trustee of a profit sharing plan, of which Ms. Gamble has a direct
interest in 571 Shares.
(8) Includes 820,000 options. Includes 12,000 Shares in trust as to which
Mr. Guttman shares voting and investment power with one other trustee, 29,822
Shares held in trust for his children, a Performance Share Award of 240,000
Shares and Restricted Share Awards of 138,286 Shares.
(9) Includes 168,695 options. Includes a Performance Share Award of 50,000
Shares and Restricted Share Awards of 47,874 Shares. Does not include 1,799
Shares as to which Mr. Kaplan's wife has sole voting and investment power.
(10) Includes 20,000 options.
(11) Includes 10,000 options. Includes 3,000 Shares as to which voting and
investment power is shared with Mr. Ordan's wife.
(12) Includes 88,334 options. Includes Restricted Share Awards of 4,632
Shares.
(13) Includes 95,833 options. Includes a Performance Share Award of 37,500
Shares and Restricted Share Awards of 47,697 Shares.

4
<PAGE>

REMUNERATION OF EXECUTIVE OFFICERS AND TRUSTEES

The following table sets forth the summary compensation of the Chief
Executive Officer and the four other most highly paid executive officers
("executive officers" or "named officers").

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------
Annual Compensation Awards Payouts
------------------------------ ------------------ ----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted
Annual Stock LTIP All Other
Salary Bonus Compensation Awards(s) Options Payouts Compensation
Name and (A) (B) (C) (D) (E)
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Steven J. Guttman(1) 1999 $ -- $ -- $ -- $1,032,000 150,000 $1,148,000 $237,000(F)
President & Chief 1998 -- -- -- 984,000 -- -- 226,000(F)
Executive Officer 1997 529,000 -- -- 366,000 800,000 -- 217,000(F)
Howard S. Biel(2) 1999 300,000 120,000 -- 33,000 100,000 -- 22,000
Senior Vice President-- 1998 300,000 225,000 -- -- 200,000 -- 12,000
Chief Development
Officer
Ron D. Kaplan(3) 1999 300,000 160,000 -- 44,000 100,000 239,000 77,000(G)
Senior Vice President-- 1998 285,000 135,000 -- 1,609,000 -- -- 75,000(G)
Capital Markets, Chief 1997 285,000 629,000 -- -- 100,000 -- 72,000(G)
Investment Officer
Cecily A. Ward(4) 1999 160,000 58,000 -- 88,585 15,000 -- 16,000(F)
Vice President-- 1998 155,000 55,000 -- -- 50,000 -- 16,000(F)
Chief Financial Officer 1997 140,000 100,000 -- -- -- -- 14,000(F)
and Treasurer
Donald C. Wood(5) 1999 300,000 180,000 -- 767,000 100,000 -- 15,000
Senior Vice President-- 1998 200,000 230,000 92,000 253,000 250,000 -- 5,000
Chief Operating Officer
</TABLE>
- --------
(1) In January 1999, Mr. Guttman received 26,741 Shares valued at $632,000 and
vesting at the end of five years in lieu of his 1999 cash salary of
$475,000. In February 2000, Mr. Guttman received 22,222 Shares valued at
$400,000 and vesting at the end of five years in lieu of a cash bonus of
$300,000 for 1999. The terms of these arrangements are described below in
"Employment Agreements; Termination of Employment and Change in Control
Arrangements." As of December 31, 1999, Mr. Guttman held a total of 80,715
Restricted Shares valued at $1,518,000.
(2) Mr. Biel commenced employment with the Trust in January 1998. In February
2000, Mr. Biel received a Restricted Share Award of 1,725 Shares, valued
at grant at $33,000, in lieu of 20% of his cash bonus for 1999, as
described below in (B). As of December 31, 1999, Mr. Biel held no
Restricted Shares.
(3) In February 2000, Mr. Kaplan received a Restricted Share Award of 2,301
Shares, valued at grant at $44,000, in lieu of 20% of his cash bonus for
1999, as described below in (B). As of December 31, 1999, Mr. Kaplan held
a total of 46,875 Restricted Shares valued at $882,000.
(4) Ms. Ward, who formerly served as the Trust's Vice President -- Controller,
became the Trust's Treasurer in November 1999 and was promoted in February
2000 to Vice President -- Chief Financial Officer. In February 2000, Ms.
Ward received a Restricted Share Award of 832 Shares, valued at grant at
$16,000, in lieu of 20% of her cash bonus for 1999, as described below in
(B). Also in February 2000, the Trust granted Ms. Ward a Restricted Share
Award of 3,800 Shares, valued at grant at $73,000 and vesting over a five-
year period. As of December 31, 1999, Ms. Ward held no Restricted Shares.
(5) Mr. Wood commenced employment with the Trust in May 1998 as its Senior
Vice President -- Chief Financial Officer and was promoted to Chief
Operating Officer in November 1999. In February 2000, Mr. Wood received a
Restricted Share Award of 2,588 Shares, valued at grant at $49,500, in
lieu of 20% of his cash bonus for 1999, as described below in (B). Also in
February 2000, the Trust granted Mr. Wood (i) a Restricted Share Award of
37,500 Shares, valued at grant at $717,000 and vesting over an eight-year
period, and (ii) a Performance Share Award of 37,500 Shares which will
vest over an eight-year period if

5
<PAGE>

the Trust meets the threshold-level "Performance Target" established each
year by the Compensation Committee, and over a shorter period if the Trust
meets a higher level. The terms of these arrangements are described below
in "Employment Agreements; Termination of Employment and Change in Control
Arrangements." As of December 31, 1999, Mr. Wood held a total of 8,000
Restricted Shares valued at $151,000.
(A) Amounts shown include amounts deferred at the election of the named
officer pursuant to plans available to substantially all employees and
pursuant to a non-qualified deferred compensation plan available to all
officers.
(B) In accordance with the Trust's Incentive Compensation Plan, all Vice
Presidents received 20% of their bonuses for 1999 in Shares vesting over a
three-year period. In consideration for the vesting provision, they
received Shares valued at 110% of the cash amount at date of grant. Senior
Vice Presidents, while not covered by the Incentive Compensation Plan,
received 20% of their 1999 bonuses in Shares as well, on the same terms as
those outlined in the Incentive Compensation Plan.
(C) Dividends are paid on Restricted Stock.
(D) Option exercise price is equal to the fair market value of the Shares on
the date of grant.
(E) The amounts shown in this column for the last fiscal year include the
following: (i) Mr. Guttman: $6,000--Trust paid group term life insurance;
$4,000--Trust paid annuity contract premium; $28,000-- interest that would
have been payable on interest-free loan made in connection with split-
dollar life insurance agreement; $10,000--Trust paid long-term disability
insurance premium; and $189,000--deferred compensation from forgiveness of
loans as described below in (F); (ii) Mr. Biel: $4,000--Trust paid group
term life insurance; $11,000--interest that would have been payable on
interest-free loan made in connection with split-dollar life insurance
agreement; $3,000--Trust paid long-term disability insurance premium;
$4,000--Trust contribution to Section 401(k) Plan; (iii) Mr. Kaplan:
$1,000--Trust paid group term life insurance; $6,000--interest that would
have been payable on interest-free loan made in connection with split-
dollar life insurance agreement; $4,000--Trust contribution to Section
401(k) Plan; $3,000--Trust paid long-term disability insurance premium;
$63,000--deferred compensation from forgiveness of loans as described
below in (G); (iv) Ms. Ward: $2,000--group term life insurance premium;
$4,000--Trust contribution to Section 401(k) Plan; $2,000--Trust paid
long-term disability insurance premium; and $8,000--deferred compensation
from forgiveness of loans as described below in (F); and (v) Mr. Wood:
$1,000--Trust paid group term life insurance; $7,000--interest that would
have been payable on interest-free loan made in connection with split-
dollar life insurance agreement; $3,000--Trust paid long-term disability
insurance premium; $4,000--Trust contribution to Section 401(k) Plan.
(F) In 1991, Mr. Guttman and Ms. Ward were awarded the opportunity to purchase
Shares of the Trust and the Trust made available loans for 100% of the
purchase price. One-half of the loan was originally scheduled to be
forgiven, by forgiving one-sixteenth each January 31, over an eight-year
period so long as the officer was employed by the Trust. The Trust and the
named officers agreed to modify the terms of the loan so that beginning in
1995 and each year thereafter, there will be no forgiveness as of January
31 of each year if Funds from Operations ("FFO") per Share increases by
less than 5% during the preceding fiscal year. If FFO per Share increases
by 5% or more, one-sixteenth of the loan will be forgiven. Beginning in
1996 and thereafter, if FFO per Share increases by 10% or more and total
return to shareholders is 10% or greater during the fiscal year, one-
eighth of the loan will be forgiven on the following January 31. However,
25% of the original principal amount of each loan is not subject to
forgiveness by the Trust. The loans were also modified during 1994 so that
they are due on January 31, 2004.
(G) On December 17, 1993, the Trust awarded Mr. Kaplan the opportunity to
purchase 40,000 Shares as of January 1, 1994 at the closing price of $25
per share on December 31, 1993. The Trust loaned Mr. Kaplan 100% of the
purchase price for a term of 12 years. Forgiveness of Mr. Kaplan's loan
is subject to the same performance measures described above in (F).

Trustee Compensation

Trustees' fees are paid to Trustees other than Mr. Guttman. In accordance
with the provisions of the Amended Plan, Trustees' fees (other than per-
meeting fees) are payable in cash or Shares or a combination of both, at the
election of the Trustee; the Trust issued Shares for 60% of the Trustees' fees
paid in 1999. The annual Trustee fee

6
<PAGE>

for 1999 was $25,000. Each Trustee was paid the fee based on the number of
months during the year he/she served as a Trustee. The annual fee in 1999 for
service on the Compensation Committee was $2,500 and $4,500 for service as its
Chairman. The annual fee in 1999 for service on the Audit Committee was $2,000
and $4,000 for service as its Chairman. Committee fees were also prorated
based on the number of months of service. In addition to annual fees for
service on the Board of Trustees and Board committees, the Trustees received
per-meeting fees of $1,000 per meeting attended in person and $500 per meeting
attended by telephone. In accordance with the Amended Plan, as of the date of
the 1999 Annual Meeting of Shareholders, each non-employee Trustee received an
option to purchase 2,500 Shares at an exercise price of $23.75.

Employment Agreements; Termination of Employment and Change in Control
Arrangements

The Trust has an amended and restated employment agreement with Mr. Guttman
which provides, among other things, that his salary may not be decreased below
its then-current level and is increased on January 1 of each year by 50% of
any increase in the Consumer Price Index ("CPI") for the prior year and that
Mr. Guttman is eligible to receive an annual bonus, in the Board of Trustees'
discretion, of up to 120% of his salary. Mr. Guttman agreed to forgo any base
salary increase in 1999. The agreement provides for a three-year term of
employment to be automatically renewed at the end of each month unless either
party notifies the other that it has elected not to extend the term. The Trust
may terminate Mr. Guttman's employment if he is totally disabled for at least
six consecutive months, in which case Mr. Guttman is entitled to receive each
month for a three-year period the difference, if any, between the monthly
payments he receives under the disability insurance policies the Trust
maintains on his behalf and his base monthly salary. The Trust may terminate
Mr. Guttman's employment for cause (as defined in the agreement) without
payment to Mr. Guttman. Mr. Guttman may terminate his employment under certain
circumstances, including if his responsibilities are materially modified
without his written consent, a change in control occurs (as defined in the
agreement), the Trust relocates its principal office outside the Washington,
D.C. area, he is not reappointed as a member of the Trust's Board of Trustees,
a Chairman of the Trust's Board of Trustees is appointed other than Mr.
Guttman, or his employment agreement is not assumed by a successor to the
Trust. If Mr. Guttman so terminates his employment, he is entitled to receive
the compensation he would have otherwise received (including bonuses) for the
remaining term of the employment agreement. Mr. Guttman may also terminate his
employment for any other reason upon at least six months notice, in which case
the Trust's obligation to pay compensation to him ceases on the effective date
of termination.

Mr. Guttman and the Trust have entered into restricted share award
agreements (the "Restricted Share Agreements") pursuant to which Mr. Guttman
will receive (unless he elects otherwise six months in advance) Shares in lieu
of his salary for the years 1998 through 2002 and Shares in lieu of his bonus
for the years 1997 through 2001. The Shares granted pursuant to the Restricted
Share Agreements (the "Restricted Shares"), which will be 133% of the salary
and bonus levels determined by the Board of Trustees, will vest five years
after the date of grant, subject to accelerated vesting in the event of a
change in control (as defined in the Amended Plan) or the termination of Mr.
Guttman's employment due to his death, disability (as defined in his
employment agreement) or without cause (as defined in his employment
agreement). Dividends are paid on the Shares if and when awarded. If Mr.
Guttman voluntarily resigns from his employment with the Trust or his
employment is terminated for cause prior to the end of the aforementioned
five-year period, his rights to the Restricted Shares are forfeited.

The Trust has severance agreements with Mr. Biel, Mr. Kaplan, Ms. Ward, and
Mr. Wood which provide, among other things, that if the employee is terminated
without cause (as defined in the agreements), the employee will be entitled to
receive his or her salary for up to 18 months, depending upon length of
service (Mr. Wood's agreement provides for 18 months regardless of length of
service) and benefits for nine months. The employee also will receive the
benefits payable upon termination without cause under certain additional
circumstances, including, among other things, a demotion or a substantial
reduction in the employee's responsibilities without his or her written
consent, relocation of the Trust's principal office outside the Washington,
D.C. area, or the decrease of the employee's base salary below a percentage
specified in each employee's severance agreement.

7
<PAGE>

The Trust may terminate the employee's employment with cause without payment
to the employee. If Mr. Kaplan or Ms. Ward voluntarily resigns, they will
receive their salary and benefits for up to six months, depending upon length
of service, unless they become employed by a competing firm.

The Trust has entered into agreements with Mr. Guttman, Mr. Kaplan, Ms. Ward
and Mr. Wood providing that, if any of these officers leave the employment of
the Trust within six months following a change in control (generally defined
to include control of a specified percentage of the outstanding Shares), he or
she will be entitled to receive a lump sum cash payment and benefits and
executive perquisites for a period following such termination, to have the
restrictions on the exercise or receipt of any stock options or stock grants
lapse and, at the option of the officer, to have the Trust redeem all Shares
owned at termination at a formula price. The cash payments the officers are
entitled to receive are computed using a formula based upon the officer's
salary at the date his or her employment terminates and bonuses that were paid
over the previous three years. This amount is multiplied by a certain
percentage: 299% for Mr. Guttman; 200% for Mr. Kaplan and Mr. Wood; and 100%
for Ms. Ward. These agreements also provide that if benefits paid pursuant
thereto are determined to be subject to an excise or similar tax, the Trust
will provide the officer with such additional compensation as is necessary to
place him or her in the same after-tax position as he or she would have been
had such tax not been paid or incurred.

In September 1997, the Trust granted performance share awards ("Performance
Awards") to Mr. Guttman and Mr. Kaplan effective in January 1998 for 300,000
and 62,500 Shares ("Performance Shares"), respectively. Pursuant to the terms
of these awards, a specified number of Performance Shares will vest each year
from 1998 through 2005 if the Trust meets or exceeds the threshold-level
"Performance Target," and over a shorter period of time if the Trust meets a
higher level. For 1998 and 1999, the Performance Targets were fixed at 7% and
9% increases in FFO annual growth per Share; for subsequent years, the
Performance Targets will be established annually by the Compensation Committee
at the beginning of the year to which they will apply. Any Performance Shares
which remain unvested after 2005 vest in five equal annual installments
through 2010. All Performance Shares vest in the event of a change in control
(as defined in the Performance Awards), or the termination of Mr. Guttman's or
Mr. Kaplan's employment due to disability (as defined in the Performance
Awards) or without cause (as defined in the Performance Awards). If Mr.
Guttman's or Mr. Kaplan's employment is terminated for cause, his rights to
any unvested Performance Shares are forfeited. If Mr. Guttman or Mr. Kaplan
dies or voluntarily resigns from his employment with the Trust, a pro rata
number of Performance Shares for that year will vest if the Performance Target
is met, and his rights to any future unvested Shares are forfeited.

In September 1997, the Trust granted restricted share awards ("Service
Awards") to Mr. Kaplan effective in January 1998 for an aggregate of 62,500
Shares. Pursuant to the terms of the Service Awards, an aggregate of 651
Shares vest each month over an eight-year period, subject to accelerated
vesting in the event of a change in control (as defined in the Service Awards)
or the termination of Mr. Kaplan's employment due to disability (as defined in
the Service Awards) or without cause (as defined in the Service Awards). If
Mr. Kaplan voluntarily resigns from his employment with the Trust or his
employment is terminated for cause prior to the end of the aforementioned
eight-year period, his rights to any unvested Shares are forfeited. If Mr.
Kaplan dies, the number of Shares which would have vested in the month of his
death vest and his rights to any future unvested Shares are forfeited.

The Trust granted a restricted share award of 10,000 Shares (the "Restricted
Share Award") to Mr. Wood in May 1998 upon the commencement of his employment.
Pursuant to the terms of the Restricted Share Award, the Shares will vest in
five equal annual installments, subject to accelerated vesting if any of the
following events occur after the first anniversary of the date of grant: a
change in control or the termination of Mr. Wood's employment due to death,
disability or without cause (as such terms are defined in the Restricted Share
Award). If Mr. Wood voluntarily resigns from his employment with the Trust or
his employment is terminated for cause prior to the end of the five-year
vesting period, his rights to any unvested Shares are forfeited.

8
<PAGE>

In February 2000, the Trust granted a Performance Award to Mr. Wood for
37,500 Performance Shares. Pursuant to the terms of this award, a specified
number of Performance Shares will vest each year from 2000 through 2007 if the
Trust meets or exceeds the threshold-level "Performance Target," and over a
shorter period of time if the Trust meets a higher level. Both levels are
established annually by the Compensation Committee at the beginning of the
year to which they will apply. Any Performance Shares which remain unvested
after 2007 vest in five equal annual installments through 2012. In all other
respects, the Performance Award is identical to the Performance Awards of Mr.
Guttman and Mr. Kaplan described above in this section.

In February 2000, the Trust granted a Service Award to Mr. Wood for an
aggregate of 37,500 Shares. Pursuant to the terms of the Service Award, an
aggregate of 391 Shares vest each month over an eight-year period. In all
other respects, the Service Award is identical to the Service Award of Mr.
Kaplan described above in this section.

The Trust has entered into split-dollar life insurance agreements with Mr.
Guttman, Mr. Kaplan, Mr. Biel and Mr. Wood pursuant to which the Trust makes
certain premium payments on their behalf relating to certain insurance
policies and is reimbursed for those premiums after fifteen years. The Trust's
funding obligations end, and it is entitled to immediate reimbursement, in the
event of termination of the employee's employment under certain circumstances.
The Trust's funding obligations do not end, however, in the event of
termination without cause or in connection with a change in control of the
Trust, provided in either case that the employee has been employed by the
Trust for at least five years at the time of termination.

The Amended Plan provides that all stock options granted pursuant to it
shall vest in the event of a change of control, as defined in the Amended
Plan.

The Share Purchase Plan permits the Trust to make non-recourse purchase
loans to participants to facilitate the purchase of Shares pursuant to awards
made thereunder. The Share Purchase Plan provides that a portion of the
outstanding balance of any purchase loan will be forgiven as of the date of a
change in control.

Option Awards in 1999

The following table provides information on option awards in 1999 to the
named officers.

<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Awards for Option Term (1)
- -------------------------------------------------------------------------- ----------------------
(a) (b) (c) (d) (e) (f) (g)
% of
Total
Options
Awarded to
Employees
Options in Fiscal Exercise Expiration
Name Awarded (#)(2) Year Price ($/Sh) Date 5% ($) 10% ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Steven J. Guttman....... 150,000 21% $21.0625 2/22/09 $ 1,987,000 $5,035,000
Howard S. Biel.......... 100,000 14% 21.0625 2/22/09 1,325,000 3,357,000
Ron D. Kaplan........... 100,000 14% 21.0625 2/22/09 1,325,000 3,357,000
Cecily A. Ward.......... 15,000 2% 21.0625 2/22/09 199,000 504,000
Donald C. Wood.......... 100,000 14% 21.0625 2/22/09 1,325,000 3,357,000
</TABLE>
- --------
(1) These assumed annual rates of stock price appreciation are specified by
the SEC. No assurance can be given that such rates will be achieved.
(2) These options vest in three equal annual installments beginning on
February 22, 2000.

9
<PAGE>

Aggregated Option Exercises in 1999 and December 31, 1999 Option Values

The following table provides information on option exercises in 1999 by the
named officers, and the value of each such officer's unexercised options at
December 31, 1999.

<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year-End (#) Fiscal Year-End ($)(1)
Shares Acquired ------------------------- -------------------------
Name on Exercise (#) Value Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Steven J. Guttman....... -- $ -- 637,000 333,000 $-- $--
Howard S. Biel.......... -- -- -- 300,000 -- --
Ron D. Kaplan........... -- -- 102,000 133,000 -- --
Cecily A. Ward.......... -- -- 67,000 48,000 -- --
Donald C. Wood.......... -- -- -- 350,000 -- --
</TABLE>
- --------
(1) Based on $18.8125 per Share closing price on the NYSE on December 31,
1999.

Report of the Compensation Committee on Executive Compensation

In 1999, as in prior years, the Compensation Committee was responsible for
determining the level of compensation paid to the Trust's executive officers,
subject to the review and approval of the Board of Trustees. The Compensation
Committee is comprised entirely of non-employee Trustees.

Philosophy: The members of the Compensation Committee believe that the
Trust's success is largely due to the efforts of its employees and, in
particular, the leadership exercised by its executive officers. Therefore, the
Compensation Committee believes that it is important to:

. Adopt compensation programs that stress stock ownership and, thereby, tie
long-term compensation to increases in shareholder value as evidenced by
Trust Share price appreciation.

. Adopt compensation programs that enhance the Trust's ability to attract
and retain qualified executive officers while providing the financial
motivation necessary to achieve continued high levels of Trust
performance.

. Provide a mix of cash and stock-based compensation programs that are
competitive with a select group of successful real estate investment
trusts and other successful national and regional firms that the members
of the Compensation Committee believe are comparable to the Trust.

. Adjust salary, bonuses and other compensation awards commensurate with
overall corporate results.

. Implement compensation programs that emphasize teamwork, pay-for-
performance and overall corporate results.

The Compensation Committee has traditionally retained a high degree of
flexibility in structuring the Trust's compensation programs. This approach
has allowed the Compensation Committee annually to evaluate subjectively and
reward each executive officer's individual performance and contribution to the
Trust's overall financial and operational success.

Named Executive Officers (other than the Chief Executive Officer). Near the
end of each year, or early in the following year, the Compensation Committee
determines the salary to be paid to each executive officer during the
subsequent year and the bonus to be paid for the current year for executive
officers other than Ms. Ward, whose bonus is determined in accordance with the
Incentive Compensation Plan, which is discussed below. Mr. Guttman assists the
Compensation Committee by making recommendations concerning salaries and
bonuses to be paid to executive officers, other than himself.

10
<PAGE>

Mr. Guttman's recommendations and the Committee's decisions are based upon
their subjective evaluation of each executive officer's performance and
responsibilities as they relate to certain "Performance Factors" including the
increase in funds from operations ("FFO"), the financing transactions
completed and the development, redevelopment and operation of the Trust's
properties. The bonuses awarded by the Compensation Committee for 1999
consider the Trust's operating performance in 1999 as well as the market
demand for the Trust's key employees. In recognition of the Trust's strong
performance in 1999, the bonuses for executive officers for 1999 were
generally higher than for 1998.

In determining the executive officers' salary and bonus levels, the
Compensation Committee also takes into account the total cash compensation
paid to executive officers with similar positions in select successful real
estate investment trusts and other national and regional companies that it
concludes possess revenues, profitability and growth that are comparable to
the Trust's (the "Survey Group"). Some of the companies in the Survey Group
are included in the National Association of Real Estate Investment Trust
equity index. The Compensation Committee's goal is to maintain the total
compensation package for executive officers at a level which is competitive
with the total compensation paid to executive officers of the companies in the
Survey Group.

In 1999, the Compensation Committee adopted a new Incentive Compensation
Plan for most Trust employees other than the senior executive officers, aimed
at increasing objectivity of the annual bonus awards by quantifying awards
based on specific operational performance thresholds (including targets based
on growth in FFO and regional net operating income) and the achievement of
individual objectives. Pursuant to this Plan, Ms. Ward is eligible for a bonus
of 30-50% of her base salary, depending upon the level of FFO growth per Share
achieved by the Trust; the actual bonus is based 60% upon the attainment of
Trust goals and 40% upon the attainment of individual goals. In accordance
with the Incentive Compensation Plan, all Vice Presidents received 20% of
their bonuses for 1999 in Shares vesting over a three-year period. In
consideration for the vesting provision, they received Shares valued at 110%
of the cash amount at date of grant. The Compensation Committee determined
that Senior Vice Presidents, while not covered by the Incentive Compensation
Plan, should receive 20% of their 1999 bonuses in Shares as well, on the same
terms as those outlined in the Incentive Compensation Plan.

Chief Executive Officer. As Chief Executive Officer, Mr. Guttman is
compensated pursuant to his employment agreement discussed above and in
accordance with the performance factors discussed earlier. Mr. Guttman's
compensation package is comprised of:

. a base salary component commensurate with other non-founder chief executive
officers in the region and industry
. an annual incentive bonus awarded at the discretion of the Board of
Trustees which has historically approximated 40-60% of base pay
. a long-term performance share component which vests based on FFO
performance hurdles.

In September 1997, the Compensation Committee approved a plan to link Mr.
Guttman's compensation to shareholder value. The Compensation Committee
approved a Stock in Lieu of Salary Plan and a Stock in Lieu of Bonus Plan
pursuant to which Mr. Guttman may elect to forgo receipt of his salary and/or
bonus in cash and receive instead the number of Shares equal to 133% of his
salary and/or bonus amount divided by the closing price per Share as of
December 31 of the previous year. To implement the Stock in Lieu of Salary and
Bonus Plans, the Trust and Mr. Guttman entered into restricted share award
agreements pursuant to which Mr. Guttman will receive (unless he elects
otherwise) Shares in lieu of his salary for the years 1998 through 2002 and
Shares in lieu of his bonus for the years 1997 through 2001. The terms of
these agreements are described above in "Employment Agreements; Termination of
Employment and Change in Control Arrangements." Mr. Guttman's salary for 1999
remained at its 1998 level of $475,000, and his salary for 2000 was increased
to $500,000. Mr. Guttman elected to receive Shares in lieu of cash for his
1999 salary and 1998 bonus (cash award of $265,000) as well as his 2000 salary
and 1999 bonus (cash award of $300,000). Pursuant to these elections and the
applicable restricted share award agreements, a total of 41,660 Restricted
Shares were awarded in January and February 1999 for his 1999 salary and 1998
bonus, and a total of 57,571 Restricted Shares were awarded in January and
February 2000 for his 2000 salary and 1999 bonus.

11
<PAGE>

Also in September 1997, the Compensation Committee awarded Mr. Guttman a
performance share award of 300,000 Shares effective January 1, 1998, as
described above in "Employment Agreements; Termination of Employment and
Change in Control Arrangements." Since growth in the Trust's FFO per Share
exceeded 9% in 1999, 60,000 of Mr. Guttman's Performance Shares vested in
accordance with the terms of his performance share award agreement. Mr.
Guttman's performance share award agreement was amended in 2000 to provide
that, for calendar years subsequent to 1999, the Performance Targets will be
established annually by the Compensation Committee at the beginning of each
year in order to better align the financial incentives under his performance
share award agreement with successful execution of the Trust's business plan
for that year.

The Compensation Committee believes that the compensation arrangements
described above will fulfill the objective of linking Mr. Guttman's long-term
compensation directly and closely to increasing shareholder value. Increasing
Mr. Guttman's equity ownership in the Trust will align his interests with
shareholders' long-term interests because the value of Mr. Guttman's options
and restricted share and performance awards over time will increase only as
Share value increases.

Amended and Restated 1993 Long-Term Incentive Plan. In 1997, the
Compensation Committee, the Board of Trustees and the shareholders approved
revisions to the Amended Plan to improve and modify its terms and to qualify
the Amended Plan under the performance-based compensation exception to Section
162(m) of the Code.

Deductibility of Executive Compensation in Excess of $1.0 Million. Section
162(m) of the Code generally disallows a federal income tax deduction to any
publicly held corporation for compensation paid in excess of $1 million in any
taxable year to an executive officer who is named in the Summary Compensation
Table. Exceptions are made for qualified performance-based compensation, among
other things. The Compensation Committee intends generally to structure its
executive awards under the Amended Plan to take advantage of this Section
162(m) exception. However, the Committee does not believe that it is
necessarily in the best interest of the Trust and its shareholders that all
compensation meet the requirements of Section 162(m) for deductibility and the
Committee may determine to award non-deductible compensation in such
circumstances as it deems appropriate. Moreover, in light of the ambiguities
and uncertainties under Section 162(m), no assurance can be given that
compensation intended by the Trust to satisfy the requirements for
deductibility under Section 162(m) does in fact do so.

Walter F. Loeb (Chairman)
Kenneth D. Brody
Mark S. Ordan

12
<PAGE>

Compensation Committee Interlocks and Insider Participation

The Compensation Committee consists of Messrs. Brody, Loeb and Ordan. There
are no Compensation Committee interlocks and no Trust employees serve on the
Compensation Committee.

Stock Price Performance

The following stock price performance chart compares the Trust's performance
to the S&P 500 and the index of equity real estate investment trusts prepared
by the National Association of Real Estate Investment Trusts ("NAREIT"). Equity
real estate investment trusts are defined as those which derive more than 75%
of their income from equity investments in real estate assets. The NAREIT
equity index includes all tax qualified real estate investment trusts listed on
the NYSE, American Stock Exchange or the NASDAQ National Market. Stock price
performance for the past five years is not necessarily indicative of future
results. All stock price performance includes the reinvestment of dividends.

STOCK PRICE PERFORMANCE

[STOCK PRICE PERFORMANCE CHART APPEARS HERE]

FRT NAREIT S&P
------ ------ ------
December 1994 100.00 100.00 100.00
December 1995 116.45 115.27 137.43
December 1996 149.47 155.92 168.98
December 1997 151.04 187.51 225.37
December 1998 148.89 154.69 289.78
December 1999 128.81 147.54 350.72

13
<PAGE>

CERTAIN TRANSACTIONS

Pursuant to the terms of stock option plans, from 1984 through 1999 officers
and key employees have exercised options and paid for some of the Shares by
issuance of notes to the Trust. Notes accepted pursuant to the 1983 or 1985
stock option plans are for a term extending to the employee's or officer's
retirement date with interest payable quarterly at the per annum rate that is
either the lesser of (i) the Trust's current borrowing rate or (ii) the
current indicated annual dividend rate on the Shares acquired pursuant to the
option divided by the purchase price of such Shares. Notes accepted pursuant
to the Amended Plan are for a period extending to the employee's or officer's
retirement date with interest payable quarterly at the per annum rate that is
the lesser of (i) the Trust's borrowing rate on the date of exercise or (ii)
the indicated annual dividend rate on the date of exercise of the option
divided by the option price of such Shares. The stock option notes are secured
by the Shares, which will not be released until the notes are paid in full.
Pursuant to the terms of a restricted stock agreement, Mr. Guttman borrowed
$210,000, $105,000 of which was repaid in 1992. The remaining balance of
$105,000 is payable on April 15, 2001, with no interest. The note is secured
by 18,975 Shares.

In 1991, the Trust accepted notes from Trust officers in connection with the
1991 Share Purchase Plan for $5,359,922. The current balance of the notes is
$1,543,000. Up to 75% of the original principal balance of these loans may be
forgiven by the Trust if certain conditions are met. In connection with the
1991 Share Purchase Plan, the Trust has loaned officers $947,000 with which to
pay income taxes associated with the forgiveness. The interest rate on the
share purchase loans and related tax loans is 9.39%. On January 1, 1994, the
Trust lent Mr. Kaplan $1,000,000 to purchase 40,000 Shares. The current
balance is $563,000 and he has been loaned $175,000 with which to pay income
taxes associated with the forgiveness. Up to 75% of the original principal
balance of the share purchase loan may be forgiven by the Trust if certain
conditions are met. The interest rate on his share purchase loans and related
tax loans is 6.24%.

The Trust has loaned Mr. Guttman and Mr. Kaplan a total of $574,000 and
$120,000, respectively, with which to pay income taxes associated with the
vesting of Shares pursuant to their Performance Awards, and has loaned Mr.
Kaplan a total of $175,000 with which to pay income taxes associated with the
vesting of Shares pursuant to his Service Awards. The interest rate on such
loans is 6.36%.

The following table sets forth the indebtedness to the Trust of the officers
as of March 24, 2000:

<TABLE>
<CAPTION>
Maximum
Outstanding Current
during Balance
Name Title 1999 of Notes
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Steven J. Guttman......... President and Chief $2,603,000 $2,950,000
Executive Officer
Ron D. Kaplan............. Senior Vice President- 2,054,000 2,137,000
Capital Markets, Chief
Investment Officer
Cecily A. Ward............ Vice President-Chief 124,000 107,000
Financial Officer and
Treasurer
</TABLE>

Mr. Samuel J. Gorlitz, who is one of the founders of the Trust and served as
a Trustee until May 1999, was paid $120,000 in 1999 for consulting services
pursuant to a retirement and consulting plan adopted in 1978. The plan
provides for Mr. Gorlitz to provide consulting services to the Trust for an
annual consultation fee of $120,000 until notice of retirement is given by
either Mr. Gorlitz or the Trust, after which time Mr. Gorlitz will receive an
annual retirement payment of $75,000 plus adjustments for changes in the
Consumer Price Index occurring between June 1, 1988 and the date of Mr.
Gorlitz's retirement. Thereafter, the retirement payment will be adjusted
annually for changes in the Consumer Price Index, except that no annual
adjustment may exceed 10%. Notice of retirement and termination of consulting
services under the plan was given in September 1999, effective January 1,
2000. Consistent with the terms of the plan, Mr. Gorlitz will receive an
annual retirement payment of $106,500 in 2000.

From time to time the Trustees may actively engage on their own behalf and
as agents for and advisors to others in real estate transactions, including
development and financing. The Trustees have agreed that they will not acquire
an interest in any property which meets the investment criteria of the Trust
without first offering the property to the Trust.

14
<PAGE>

The Trust paid approximately $311,000 to Morgan Stanley Realty, Inc. in 1999
for investment banking services. Morgan Stanley Realty, Inc. is a wholly owned
subsidiary of Morgan Stanley Dean Witter & Co., which has indicated that it is
the beneficial owner of more than 5% of the Trust's Shares. See "Ownership of
Shares by Certain Beneficial Owners" above.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The Trustees and executive officers of the Trust are required by Section
16(a) of the Exchange Act to file reports of initial ownership and changes of
ownership of the Trust's Shares with the Securities and Exchange Commission
and with the New York Stock Exchange. To the Trust's best knowledge, based
solely on review of copies of such reports furnished to the Trust and written
representations that no other reports were required, the required filings of
all such Trustees and executive officers were filed timely.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen LLP has been selected as independent public accountants for
the Trust for the current year, and examined the Trust's financial statements
for the year ended December 31, 1999. On May 5, 1999, Grant Thornton LLP was
dismissed and Arthur Andersen LLP was engaged as the principal independent
public accountant for the Trust. The decision to change accountants was
approved by the Board of Trustees upon the recommendation of the Audit
Committee. The reports of Grant Thornton LLP on the financial statements of
the Trust for the years ended December 31, 1997 and 1998 did not contain any
adverse opinion or disclaimer of opinion, nor were they qualified as to
uncertainty, audit scope or accounting principles. During the Trust's fiscal
years ended December 31, 1997 and 1998 and the subsequent interim period
through May 5, 1999, there were no disagreements with Grant Thornton LLP on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements, if not
resolved to the satisfaction of Grant Thornton LLP, would have caused them to
make reference thereto in their reports on the financial statements for those
years. During the Trust's fiscal years ended December 31, 1997 and 1998 and
the subsequent interim period through May 5, 1999, Arthur Andersen LLP was not
engaged as an independent accountant to audit the Trust's financial
statements, nor was it consulted regarding the application of the Trust's
accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on the Trust's
financial statements.

A representative of Arthur Andersen LLP will be present at the Annual
Meeting and will have the opportunity to make a statement and answer
appropriate questions from shareholders.

ANNUAL REPORT

A COPY OF THE TRUST'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE MAILED
WITHOUT CHARGE TO SHAREHOLDERS UPON REQUEST. REQUESTS SHOULD BE ADDRESSED TO
THE TRUST, 1626 EAST JEFFERSON STREET, ROCKVILLE, MARYLAND 20852, ATTENTION:
MS. KATHY KLEIN, VICE PRESIDENT--CORPORATE COMMUNICATIONS. THE FORM 10-K
INCLUDES CERTAIN EXHIBITS, WHICH WILL BE PROVIDED ONLY UPON PAYMENT OF A FEE
COVERING THE TRUST'S REASONABLE EXPENSES.

SOLICITATION OF PROXIES, SHAREHOLDER PROPOSALS AND OTHER MATTERS

The cost of this solicitation of proxies will be borne by the Trust. In
addition to the use of the mails, Trust officials may solicit proxies in
person and by telephone, telegraph or facsimile, and may request brokerage
houses and other custodians, nominees and fiduciaries to forward soliciting
materials to the beneficial owners of Shares.

Proposals of shareholders intended to be presented at the 2001 Annual
Meeting, including nominations for persons for election to the Board of
Trustees, must be received by the Trust no later than November 27, 2000 to be
considered for inclusion in the Trust's proxy statement and form of proxy
relating to such meeting.

15
<PAGE>

The Trustees know of no other business to be presented at the Annual
Meeting. If other matters properly come before the meeting, the persons named
as proxies will vote on them in accordance with their discretion.

You are urged to complete, sign, date and return your proxy promptly to make
certain your Shares will be voted at the Annual Meeting. For your convenience
in returning the proxy, an addressed envelope is enclosed, requiring no
additional postage if mailed in the United States. If you prefer, you may vote
either by telephone (1-800-PROXIES) or on the Internet (www.voteproxy.com) by
following the instructions on your proxy card.

For the Trustees,

/s/ NANCY J. HERMAN

Nancy J. Herman
Vice President--General
Counsel and Secretary

YOUR PROXY IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
PLEASE SUBMIT IT TODAY.

16
<PAGE>

Please date, sign and mail your
proxy card back as soon as possible!

Annual Meeting of Shareholders
FEDERAL REALTY INVESTMENT TRUST

May 3, 2000

[down arrow] Please Detach and Mail in the Envelope Provided [down arrow]

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

A [X] Please mark your
votes as in this
example.

This Proxy when properly executed will be voted as directed by the undersigned
shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR"
PROPOSAL 1.

1. To elect the following Trustees for FOR WITHHELD
terms expiring as set forth in the [ ] [ ]
accompanying Proxy Statement.
The Board of Trustees unanimously
Nominees: Kenneth D. Brody recommends a vote FOR the two
Walter F. Loeb nominees.

For all, except as otherwise indicated.

(INSTRUCTION: To withhold authority to vote for
any individual nominee, strike a line through the
nominee's name in the list.)

2. In their discretion, on any other matters properly coming before the
meeting or any postponement or adjournment thereof.

SIGNATURE(S) DATE
------------------------------------------- ----------------

-------------------------------------------
NOTE: Please sign exactly as your name(s) appear(s) hereon. If the shares are
held jointly each party must sign. If the shareholder named is a
corporation, partnership or other association, please sign its name and
add your own name and title. When signing as an attorney, executor,
administrator, trustee, guardian or in any other representative capacity,
please also give your full title or capacity.

<PAGE>

ANNUAL MEETING OF SHAREHOLDERS of

FEDERAL REALTY INVESTMENT TRUST

May 3, 2000

-------------------------------
PROXY VOTING INSTRUCTIONS
-------------------------------

TO VOTE BY MAIL
- ---------------
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.

TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- --------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.

TO VOTE BY INTERNET
- -------------------
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.

YOUR CONTROL NUMBER IS [right arrow] [ ]

[down arrow] Please Detach and Mail in the Envelope Provided [down arrow]

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

A [X] Please mark your
votes as in this
example.

This Proxy when properly executed will be voted as directed by the undersigned
shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR"
PROPOSAL 1.

For all, except as otherwise indicated.

(INSTRUCTION: To withhold authority to vote for
any individual nominee, strike a line through the
nominee's name in the list.)

2. In their discretion, on any other matters properly coming before the
meeting or any postponement or adjournment thereof.

SIGNATURE(S) DATE
------------------------------------------- ----------------

<PAGE>

PROXY

FEDERAL REALTY INVESTMENT TRUST

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES

The undersigned, a shareholder of Federal Realty Investment Trust (the
"Trust"), hereby constitutes and appoints RON D. KAPLAN and CECILY A. WARD, or
either of them, as the true and lawful attorneys and proxies of the undersigned,
with full power of substitution in each of them, for and in the name of the
undersigned, to vote and otherwise act at the Annual Meeting of Shareholders of
the Trust to be held at Woodmont Country Club, 1201 Rockville Pike, Rockville,
Maryland on Wednesday, May 3, 2000 at 10:00 a.m., or at any postponement or
adjournment thereof, with respect to all of the Common Shares of Beneficial
Interest of the Trust which the undersigned would be entitled to vote, with all
the powers the undersigned would possess if personally present, on the following
matters.

The undersigned hereby ratifies and confirms all that the aforesaid attorneys
and proxies may do hereunder.

The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
and of the accompanying Proxy Statement and revokes any proxy previously given
with respect to that Annual Meeting.

(To Be Signed on Reverse Side)
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SEE REVERSE
SIDE
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