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News Release

Federal Realty Investment Trust Announces Operating Results for the Year and Quarter Ended December 31, 2017
- Reports 13% comparable lease rollover and 3.4% same-center POI growth for the year -

ROCKVILLE, Md., Feb. 13, 2018 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its year and quarter ended December 31, 2017.  Highlights of the full year and quarter include:

  • Generated earnings per diluted share of $3.97 for the year compared to $3.50 in 2016. For the fourth quarter, generated earnings per diluted share of $0.67 compared to $0.80 for the fourth quarter 2016.
  • Generated FFO per diluted share of $5.74 for the year ($5.91 excluding prepayment premium) compared to $5.65 in 2016. For the fourth quarter, generated FFO per diluted share of $1.30 ($1.47 excluding prepayment premium) compared to $1.45 for the fourth quarter 2016.  
  • Generated same-center property operating income growth of 3.4% for the year ended 2017. For the fourth quarter, same-center growth was 2.6%.  
  • Signed leases for 300,511 sf of comparable space in the fourth quarter at an average rent of $34.75 psf and achieved cash basis rollover growth on those comparable spaces of 15%.
  • Opportunistically issued $175 million of 3.25% senior unsecured notes due 2027 offered at 99.404% of the principal amount with a re-offer yield of 3.323%.
  • Introduced 2018 FFO per diluted share guidance range of $6.08 to $6.24.  

Federal Realty Investment Trust is an equity real estate investment trust specializing in the ownership, management, development, and redevelopment of high quality retail assets. Federal Realty's portfolio is located primarily in strategic metropolitan markets in the Northeast, Mid-Atlantic, and California. Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has the longest consecutive record of annual dividend increases in the REIT industry. (PRNewsFoto/Federal Realty Investment Trust)

"We remain focused on the future as we navigate through this transitional time in the retail real estate space," said Donald C. Wood, President and Chief Executive Officer of Federal Realty. "Through thoughtful positioning of our portfolio over the last decade, there are more arrows in our quiver than ever before. Federal Realty is the only shopping center company to grow NAREIT-defined FFO year-over-year for the entirety of the current real estate cycle, and we remain confident that retail-based real estate in the best locations, with flexible formats and carefully created environments will be the future of retail and will thrive in the years to come."

Financial Results

For the full year 2017, Federal Realty reported net income available for common shareholders of $287.5 million and earnings per diluted share of $3.97. This compares to net income available for common shareholders of $249.4 million and earnings per diluted share of $3.50 for the full year 2016.   Net income available for common shareholders was $48.6 million and earnings per diluted share was $0.67 for the fourth quarter 2017 versus $57.9 million and $0.80, respectively, for the fourth quarter 2016.

For the full year 2017, Federal Realty generated funds from operations available for common shareholders (FFO) of $420.0 million, or $5.74 per diluted share. Excluding the $12.3 million early extinguishment of debt charge in the fourth quarter 2017, FFO per diluted share for the full year 2017 would have been $5.91. This compares to FFO of $406.4 million, or $5.65 per diluted share, for the full year 2016. For the fourth quarter 2017, FFO was $95.5 million, or $1.30 per diluted share ($1.47 if the early extinguishment of debt charge was excluded), compared to $104.9 million, or $1.45 per diluted share for the fourth quarter 2016.

FFO is a non-GAAP supplemental earnings measure which the Trust considers meaningful in measuring its operating performance.  A reconciliation of FFO to net income is attached to this press release.

Portfolio Results

For the year 2017, same-center property operating income increased 3.4% when including properties that are being redeveloped and 0.7% when excluding those properties. In fourth quarter 2017, same-center property operating income increased 2.6% when including properties that are being redeveloped and 1.0% when excluding those properties. As anticipated, the Trust's proactive releasing initiatives throughout the portfolio negatively impacted the year end and quarterly results.

The overall portfolio was 95.3% leased as of December 31, 2017, compared to 94.4% on December 31, 2016.  Federal Realty's same center portfolio was 96.3% leased on December 31, 2017, compared to 95.9% on December 31, 2016.

For the year 2017, Federal Realty signed 406 leases for 1.8 million square feet of retail space. On a comparable basis (i.e., spaces for which there was a former tenant), Federal Realty leased 1.6 million square feet at an average cash-basis contractual rent increase (i.e., excluding the impact of straight-line rents) of 13%. The average contractual rent on this comparable space for the first year of the new leases is $38.31 per square foot compared to the average contractual rent of $33.79 per square foot for the last year of the prior leases. The previous average contractual rent was calculated by including both the minimum rent and any percentage rent actually paid during the last year of the lease term for the re-leased space.  On a GAAP basis (i.e., including the impact of straight-line rents), rent increases for comparable retail space averaged 26% for the year ended 2017.

During fourth quarter 2017, Federal Realty signed 91 leases for 344,768 square feet of retail space.  On a comparable space basis, Federal Realty leased 300,511 square feet at an average cash basis contractual rent increase of 15% and 27% on a GAAP basis.  The average contractual rent on this comparable space for the first year of the new leases is $34.75 per square foot compared to the average contractual rent of $30.19 per square foot for the last year of the prior leases.

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees declared a regular quarterly cash dividend of $1.00 per common share, resulting in an indicated annual rate of $4.00 per common share. The regular common dividend will be payable on April 16, 2018 to common shareholders of record as of March 14, 2018.

Federal Realty's Board of Trustees also declared a quarterly cash dividend with respect to the Trust's Series C Preferred Shares. All dividends on the preferred shares will be payable on April 16, 2018 to preferred shareholders of record as of April 2, 2018.

Summary of Other Quarterly Activities and Recent Developments

February 12, 2018Federal Realty announced promotions within its finance, operating and development Ranks. Melissa Solis was promoted to Senior Vice President – Chief Accounting Officer. Christian Fleming was promoted to Vice President – Asset Management. Patrick McMahon was promoted to Vice President – Development.

December 21, 2017Federal Realty issued $175 million aggregate principal amount of 3.25% senior unsecured notes due 2027. The notes were offered at 99.404% of the principal amount with a re-offer yield of 3.323%. The notes have the same terms and are of the same series as the notes that Federal Realty issued on June 23, 2017. Federal Realty has a total of $475 million of such notes outstanding. Federal Realty used the net proceeds from the offering to redeem all of its outstanding 5.90% Notes due 2020, incurring a $12.3 million prepayment charge, and for general corporate purposes.

Guidance

Federal Realty introduced 2018 guidance for FFO per diluted share of $6.08 to $6.24 and 2018 earnings per diluted share guidance of $3.01 to $3.17.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its fourth quarter and year end 2017 earnings conference call, which is scheduled for Wednesday, February 14, 2018 at 9:00AM ET.  To participate, please call 877.445.3230 five to ten minutes prior to the call start time and use the passcode 5292449 (required).  A replay of the webcast will be available on Federal Realty's website at www.federalrealty.com. A telephonic replay of the conference call will also be available through February 21, 2018 by dialing 855.859.2056; Passcode: 5292449.

About Federal Realty

Federal Realty is a recognized leader in the ownership, operation and redevelopment of high-quality retail based properties located primarily in major coastal markets from Washington, D.C. to Boston as well as San Francisco and Los Angeles. Founded in 1962, our mission is to deliver long term, sustainable growth through investing in densely populated, affluent communities where retail demand exceeds supply. Our expertise includes creating urban, mixed-use neighborhoods like Santana Row in San Jose, California, Pike & Rose in North Bethesda, Maryland and Assembly Row in Somerville, Massachusetts. These unique and vibrant environments that combine shopping, dining, living and working provide a destination experience valued by their respective communities. Federal Realty's 104 properties include approximately 3,000 tenants, in approximately 24 million square feet, and over 2,300 residential units. 

Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has increased its dividend rate for 50 consecutive years, the longest record in the REIT industry. Federal Realty shares are traded on the NYSE under the symbol FRT. For additional information about Federal Realty and its properties, visit www.FederalRealty.com.

Safe Harbor Language

Certain matters discussed within this press release may be deemed to be forward-looking statements within the meaning of the federal securities laws. Although Federal Realty believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. These factors include, but are not limited to, the risk factors described in our Annual Report on Form 10-K filed on February 13, 2018, and include the following:

  • risks that our tenants will not pay rent, may vacate early or may file for bankruptcy or that we may be unable to renew leases or re-let space at favorable rents as leases expire;
  • risks that we may not be able to proceed with or obtain necessary approvals for any redevelopment or renovation project, and that completion of anticipated or ongoing property redevelopments or renovation projects that we do pursue may cost more, take more time to complete, or fail to perform as expected;
  • risks that we are investing a significant amount in ground-up development projects that may not perform as planned, may be dependent on third parties to deliver critical aspects of certain projects, requires spending a substantial amount upfront in infrastructure, and assumes receipt of public funding which has been committed but not entirely funded;
  • risks normally associated with the real estate industry, including risks that occupancy levels at our properties and the amount of rent that we receive from our properties may be lower than expected, that new acquisitions may fail to perform as expected, that competition for acquisitions could result in increased prices for acquisitions, that costs associated with the periodic maintenance and repair or renovation of space, insurance and other operations may increase, that environmental issues may develop at our properties and result in unanticipated costs, and, because real estate is illiquid, that we may not be able to sell properties when appropriate;
  • risks that our growth will be limited if we cannot obtain additional capital;
  • risks associated with general economic conditions, including local economic conditions in our geographic markets;
  • risks of financing, such as our ability to consummate additional financings or obtain replacement financing on terms which are acceptable to us, our ability to meet existing financial covenants and the limitations imposed on our operations by those covenants, and the possibility of increases in interest rates that would result in increased interest expense; and
  • risks related to our status as a real estate investment trust, commonly referred to as a REIT, for federal income tax purposes, such as the existence of complex tax regulations relating to our status as a REIT, the effect of future changes in REIT requirements as a result of new legislation, and the adverse consequences of the failure to qualify as a REIT.

Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this press release. 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 risks and risk factors included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 13, 2018.

Investor Inquires:                       

Media Inquiries:

Leah Andress                             

Andrea Simpson

Investor Relations Associate       

Vice President, Marketing

301.998.8265                                

617.684.1511

landress@federalrealty.com          

asimpson@federalrealty.com

 

 

Federal Realty Investment Trust

Consolidated Balance Sheets

December 31, 2017

 

December 31,

 

2017

 

2016

 

(in thousands, except share and

 

per share data)

ASSETS

     

Real estate, at cost

     

Operating (including $1,639,486 and $1,211,605 of consolidated variable interest entities, respectively)

$

6,950,188

   

$

6,125,957

 

Construction-in-progress (including $43,393 and $15,313 of consolidated variable interest entities, respectively)

684,873

   

599,260

 

Assets held for sale

   

33,856

 
 

7,635,061

   

6,759,073

 

Less accumulated depreciation and amortization (including $247,410 and $209,239 of consolidated variable interest entities, respectively)

(1,876,544)

   

(1,729,234)

 

Net real estate

5,758,517

   

5,029,839

 

Cash and cash equivalents

15,188

   

23,368

 

Accounts and notes receivable

209,877

   

116,749

 

Mortgage notes receivable, net

30,429

   

29,904

 

Investment in real estate partnerships

23,941

   

14,864

 

Prepaid expenses and other assets

237,803

   

208,555

 

TOTAL ASSETS

$

6,275,755

   

$

5,423,279

 

LIABILITIES AND SHAREHOLDERS' EQUITY

     

Liabilities

     

Mortgages payable (including $460,372 and $439,120 of consolidated variable interest entities, respectively)

$

491,505

   

$

471,117

 

Capital lease obligations

71,556

   

71,590

 

Notes payable

320,265

   

279,151

 

Senior notes and debentures

2,401,440

   

1,976,594

 

Accounts payable and other liabilities

196,332

   

201,756

 

Dividends payable

75,931

   

71,440

 

Security deposits payable

16,667

   

16,285

 

Other liabilities and deferred credits

169,388

   

115,817

 

Total liabilities

3,743,084

   

3,203,750

 

Commitments and contingencies

     

Redeemable noncontrolling interests

141,157

   

143,694

 

Shareholders' equity

     

Preferred shares, authorized 15,000,000 shares, $.01 par:

     

5.0% Series C Cumulative Redeemable Preferred Shares, (stated at liquidation preference $25,000 per share), 6,000 and 0 shares issued and outstanding, respectively

150,000

   

 

5.417% Series 1 Cumulative Convertible Preferred Shares, (stated at liquidation preference $25 per share), 399,896 shares issued and outstanding

9,997

   

9,997

 

Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized, 73,090,877 and 71,995,897 shares issued and outstanding, respectively

733

   

722

 

Additional paid-in capital

2,855,321

   

2,718,325

 

Accumulated dividends in excess of net income

(749,367)

   

(749,734)

 

Accumulated other comprehensive income (loss)

22

   

(2,577)

 

Total shareholders' equity of the Trust

2,266,706

   

1,976,733

 

Noncontrolling interests

124,808

   

99,102

 

Total shareholders' equity

2,391,514

   

2,075,835

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

6,275,755

   

$

5,423,279

 

 

 

Federal Realty Investment Trust

Consolidated Income Statements

December 31, 2017

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

2017

 

2016

 

2017

 

2016

 

(in thousands, except per share data)

   

REVENUE

             

 Rental income

$

220,720

   

$

200,871

   

$

841,461

   

$

786,583

 

 Other property income

2,396

   

2,456

   

12,825

   

11,015

 

 Mortgage interest income

841

   

782

   

3,062

   

3,993

 

 Total revenue

223,957

   

204,109

   

857,348

   

801,591

 

EXPENSES

             

 Rental expenses

45,403

   

39,941

   

164,890

   

158,326

 

 Real estate taxes

28,735

   

24,122

   

107,839

   

95,286

 

 General and administrative

10,268

   

8,121

   

36,281

   

33,399

 

 Depreciation and amortization

56,394

   

48,448

   

216,050

   

193,585

 

 Total operating expenses

140,800

   

120,632

   

525,060

   

480,596

 

OPERATING INCOME

83,157

   

83,477

   

332,288

   

320,995

 

 Other interest income

222

   

89

   

475

   

374

 

 Interest expense

(26,173)

   

(23,851)

   

(100,125)

   

(94,994

 

 Early extinguishment of debt

(12,273)

   

   

(12,273)

   

 

 (Loss) income from real estate partnerships

(121)

   

9

   

(417)

   

50

 

INCOME FROM CONTINUING OPERATIONS

44,812

   

59,724

   

219,948

   

226,425

 

 Gain on sale of real estate and change in control of interests, net

7,973

   

   

77,922

   

32,458

 

NET INCOME

52,785

   

59,724

   

297,870

   

258,883

 

   Net income attributable to noncontrolling interests

(2,129)

   

(1,687)

   

(7,956)

   

(8,973

 

NET INCOME ATTRIBUTABLE TO THE TRUST

50,656

   

58,037

   

289,914

   

249,910

 

 Dividends on preferred shares

(2,011)

   

(135)

   

(2,458)

   

(541

 

NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$

48,645

   

$

57,902

   

$

287,456

   

$

249,369

 

EARNINGS PER COMMON SHARE, BASIC

             

 Net income available for common shareholders

$

0.67

   

$

0.81

   

$

3.97

   

$

3.51

 

 Weighted average number of common shares, basic

72,515

   

71,628

   

72,117

   

70,877

 

EARNINGS PER COMMON SHARE, DILUTED

             

 Net income available for common shareholders

$

0.67

   

$

0.80

   

$

3.97

   

$

3.50

 

 Weighted average number of common shares, diluted

72,598

   

71,785

   

72,233

   

71,049

 

 

 

Federal Realty Investment Trust

Funds From Operations

December 31, 2017

           
   

Three Months Ended

 

Year Ended

   

December 31,

 

December 31,

   

2017

 

2016

 

2017

 

2016

   

(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO)

               

Net income

 

$

52,785

   

$

59,724

   

$

297,870

   

$

258,883

 

Net income attributable to noncontrolling interests

 

(2,129)

   

(1,687)

   

(7,956)

   

(8,973)

 

Gain on sale of real estate and change in control of interests, net

 

(7,973)

   

   

(77,632)

   

(31,133)

 

Depreciation and amortization of real estate assets

 

49,607

   

42,392

   

188,719

   

169,198

 

Amortization of initial direct costs of leases

 

4,594

   

4,146

   

19,124

   

16,875

 

Funds from operations

 

96,884

   

104,575

   

420,125

   

404,850

 

Dividends on preferred shares (1)

 

(1,876)

   

(135)

   

(1,917)

   

(541)

 

Income attributable to operating partnership units

 

788

   

748

   

3,143

   

3,145

 

Income attributable to unvested shares

 

(310)

   

(267)

   

(1,374)

   

(1,095)

 

FFO (2)

 

$

95,486

   

$

104,921

   

$

419,977

   

$

406,359

 

Weighted average number of common shares, diluted (1)

 

73,481

   

72,549

   

73,122

   

71,869

 

FFO per diluted share (2)

 

$

1.30

   

$

1.45

   

$

5.74

   

$

5.65

 
                 

 

Notes:

1)

For the three months and year ended December 31, 2017, dividends on our Series 1 preferred stock are not deducted in the calculation of FFO available to common shareholders, as the related shares are dilutive and included in "weighted average common shares, diluted."

2)

If the $12.3 million early extinguishment of debt charge incurred in the fourth quarter of 2017 was excluded, our FFO and FFO per diluted share would have been:

 

   

Three Months Ended

 

Year Ended

   

December 31, 2017

 

December 31, 2017

   

(in thousands, except per share data)

FFO

 

$

107,719

   

$

432,210

 

FFO per diluted share

 

$

1.47

   

$

5.91

 
 

 

 

Federal Realty Investment Trust

Reconciliation of FFO Guidance

December 31, 2017

 

The following table provides a reconciliation of the range of estimated earnings per diluted share to estimated FFO per diluted share for the full year 2018. Estimates do not include the impact from potential acquisitions or potential dispositions which have not closed as of February 13, 2018.

 
       
 

Full Year 2018 Guidance
Range

   
 

Low

 

High

Estimated net income available to common shareholders, per diluted share

$

3.01

   

$

3.17

 

Adjustments:

     

Estimated depreciation and amortization

3.07

   

3.07

 

Estimated FFO per diluted share

$

6.08

   

$

6.24

 

 

 

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SOURCE Federal Realty Investment Trust