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News Release

Federal Realty Investment Trust Announces Second Quarter 2016 Operating Results

ROCKVILLE, Md., Aug. 4, 2016 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its second quarter ended June 30, 2016. Highlights of the quarter and recent activity include:

  • Generated earnings per diluted share of $0.78 for the quarter compared to $0.63 in second quarter 2015.
  • Generated FFO per diluted share of $1.42 for the quarter compared to $1.06 in second quarter 2015 ($1.33 excluding prepayment premiums in second quarter 2015).
  • Generated same center property operating income growth of 3.5% (or 2.9% when properties under redevelopment are excluded). 
  • Signed leases for 372,778 sf of comparable space at an average rent of $38.21 psf and achieved cash basis rollover growth on comparable spaces of 12%.
  • Named Dan Guglielmone as Executive Vice President, Chief Financial Officer and Treasurer effective August 15, 2016.
  • Increased the regular quarterly dividend rate on common shares to $0.98 per share, representing the 49th consecutive year of common dividend increases.
  • Subsequent to quarter end, opportunistically issued $250 million aggregate principal amount of 3.625% senior unsecured notes due August 1, 2046.

"We're very pleased with our record second quarter results that continue to reflect the broad base of our business plan and strong progress in all of our business divisions and initiatives," said Donald C. Wood, Federal Realty's President and Chief Executive Officer. "Also particularly gratifying, was the opportunistic raise and strong execution of $250 million of 3.625% 30 year notes; the lowest coupon for a 30 year unsecured offering ever recorded by a REIT and again validating the cost of capital advantage that our company enjoys which, in turn, lowers the risk of our business plan execution".

The issuance of the unsecured notes referenced above, which were used to pay down our short term line of credit, will be dilutive to 2016 earnings relative to our previous expectations by three to four cents per share. Accordingly, we are adjusting our 2016 guidance of FFO per diluted share to $5.62 to $5.68, and updated our earnings per diluted share guidance to $3.43 to $3.49.

Financial Results

Net income available for common shareholders was $55.8 million and earnings per diluted share was $0.78 for second quarter 2016 versus $43.5 million and $0.63, respectively, for second quarter 2015. Year-to-date Federal Realty reported net income available for common shareholders of $132.6 million and earnings per diluted share of $1.88. This compares to net income available for common shareholders of $89.5 million and earnings per diluted share of $1.30 for the six months ended June 30, 2015.   

In the second quarter 2016, Federal Realty generated funds from operations available for common shareholders (FFO) of $102.2 million, or $1.42 per diluted share. This compares to FFO of $73.9 million, or $1.06 per diluted share, in second quarter 2015.  Excluding the early extinguishment of debt charge in second quarter 2015, FFO per diluted share was $1.33.  Year-to-date, Federal Realty reported FFO of $199.8 million, or $2.80 per diluted share. This compares to FFO of $161.2 million, or $2.32 per diluted share for the six months ended June 30, 2015.  Excluding the early extinguishment of debt charge in 2015, FFO per diluted share for the six months ended June 30, 2015 was $2.59.

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 in addition to Form 8-K that was filed.

Portfolio Results

In the second quarter 2016, same-center property operating income increased 3.5% including redevelopment and expansion properties, and 2.9% excluding redevelopment and expansion properties.

The overall portfolio was 94.5% leased as of June 30, 2016, compared to 94.1% on March 31, 2016 and 95.7% on June 30, 2015.  Federal Realty's same-center portfolio was 95.9% leased on June 30, 2016, compared to 95.6% on March 31, 2016 and 96.4% on June 30, 2015.

During second quarter 2016, the Trust signed 103 leases for 467,364 square feet of retail space.  On a comparable space basis (i.e., spaces for which there was a former tenant), the Trust leased 372,778 square feet at an average cash-basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 12%.  The average contractual rent on this comparable space for the first year of the new lease is $38.21 per square foot compared to the average contractual rent of $34.13 per square foot for the last year of the prior lease.  The previous average contractual rent is 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 per square foot for comparable retail space averaged 25% for second quarter 2016.

Summary of Other Quarterly Activities and Recent Developments

  • July 12, 2016Federal Realty closed on the public offering of $250 million aggregate principal amount of 3.625% senior unsecured notes due August 1, 2046. The notes were offered at 97.756% of the principal amount with a yield to maturity of 3.750%
  • July 13, 2016Federal Realty announced the appointment of Dan Guglielmone to the position of Executive Vice President, Chief Financial Officer and Treasurer effective August 15, 2016. Mr. Guglielmone will be a member of the Firm's Executive and Investment Committees and will be responsible for all capital markets activity along with east coast acquisitions. In addition, he will be responsible for the oversight of the accounting, financial reporting and investor relations functions. Dan will be based at Federal's headquarters in Rockville, Md.

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees increased the regular dividend rate on its common shares, declaring a regular quarterly cash dividend of $0.98 per share, resulting in an indicated annual rate of $3.92 per share.  The regular common dividend will be payable on October 17, 2016, to common shareholders of record on September 22, 2016. This increase represents the 49th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector, and among the longest such records for publically traded companies in the US.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its second quarter 2016 earnings conference call, which is scheduled for August 5, 2016, at 11 a.m. Eastern Time.  To participate, please call (877) 445-3230 five to ten minutes prior to the call start time and use the passcode 24393436 (required).  Federal Realty will also provide an online webcast on the Company's website, www.federalrealty.com, which will remain available for 30 days following the call.  A telephone recording of the call will also be available through August 12, 2016 by dialing (855) 859-2056 and using the passcode 24393436.

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)

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 96 properties include over 2,800 tenants, in approximately 22 million square feet, and over 1,800 residential units. 

Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has increased its dividend rate for 49 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 9, 2016, 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 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 9, 2016.

 

Federal Realty Investment Trust

Consolidated Balance Sheets

June 30, 2016

 

June 30,

 

December 31,

 

2016

 

2015

 

(in thousands, except share and
per share data)

 

(unaudited)

   

ASSETS

     

Real estate, at cost

     

Operating (including $1,206,112 and $1,192,336 of consolidated variable interest entities, respectively)

$

5,951,546

   

$

5,630,771

 

Construction-in-progress

506,843

   

433,635

 
 

6,458,389

   

6,064,406

 

Less accumulated depreciation and amortization (including $192,445 and $176,057 of consolidated variable interest entities, respectively)

(1,651,549)

   

(1,574,041)

 

Net real estate

4,806,840

   

4,490,365

 

Cash and cash equivalents

18,622

   

21,046

 

Accounts and notes receivable, net

114,431

   

110,402

 

Mortgage notes receivable, net

41,618

   

41,618

 

Investment in real estate partnerships

9,807

   

41,546

 

Prepaid expenses and other assets

197,150

   

191,582

 

TOTAL ASSETS

$

5,188,468

   

$

4,896,559

 

LIABILITIES AND SHAREHOLDERS' EQUITY

     

Liabilities

     

Mortgages payable (including $443,766 and $448,315 of consolidated variable interest entities, respectively)

$

476,155

   

$

481,084

 

Capital lease obligations

71,605

   

71,620

 

Notes payable

383,582

   

341,961

 

Senior notes and debentures

1,733,611

   

1,732,551

 

Accounts payable and accrued expenses

171,982

   

146,532

 

Dividends payable

67,931

   

66,338

 

Security deposits payable

15,868

   

15,439

 

Other liabilities and deferred credits

118,646

   

121,787

 

Total liabilities

3,039,380

   

2,977,312

 

Commitments and contingencies

     

Redeemable noncontrolling interests

126,102

   

137,316

 

Shareholders' equity

     

Preferred shares, authorized 15,000,000 shares, $.01 par: 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, 71,417,253 and 69,493,392 shares issued and outstanding, respectively

716

   

696

 

Additional paid-in capital

2,645,984

   

2,381,867

 

Accumulated dividends in excess of net income

(725,665)

   

(724,701)

 

Accumulated other comprehensive loss

(7,293)

   

(4,110)

 

Total shareholders' equity of the Trust

1,923,739

   

1,663,749

 

Noncontrolling interests

99,247

   

118,182

 

Total shareholders' equity

2,022,986

   

1,781,931

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

5,188,468

   

$

4,896,559

 

 

 

Federal Realty Investment Trust

           

Consolidated Income Statements

           

June 30, 2016

             
               
 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2016

 

2015

 

2016

 

2015

 

(in thousands, except per share data)

 

(unaudited)

REVENUE

             

Rental income

$

192,935

   

$

175,884

   

$

388,243

   

$

357,050

 

Other property income

3,488

   

4,420

   

5,800

   

6,885

 

Mortgage interest income

1,558

   

1,157

   

2,282

   

2,318

 

Total revenue

197,981

   

181,461

   

396,325

   

366,253

 

EXPENSES

             

Rental expenses

36,978

   

32,623

   

79,797

   

74,062

 

Real estate taxes

23,397

   

20,667

   

46,191

   

41,061

 

General and administrative

9,036

   

9,299

   

17,046

   

18,152

 

Depreciation and amortization

48,435

   

42,671

   

96,234

   

84,655

 

Total operating expenses

117,846

   

105,260

   

239,268

   

217,930

 

OPERATING INCOME

80,135

   

76,201

   

157,057

   

148,323

 

Other interest income

77

   

74

   

180

   

103

 

Interest expense

(23,101)

   

(23,445)

   

(46,830)

   

(47,613)

 

Early extinguishment of debt

   

(19,072)

   

   

(19,072)

 

Income from real estate partnerships

   

406

   

41

   

626

 

INCOME FROM CONTINUING OPERATIONS

57,111

   

34,164

   

110,448

   

82,367

 

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

1,787

   

11,509

   

27,513

   

11,509

 

NET INCOME

58,898

   

45,673

   

137,961

   

93,876

 

   Net income attributable to noncontrolling interests

(2,957)

   

(2,041)

   

(5,065)

   

(4,058)

 

NET INCOME ATTRIBUTABLE TO THE TRUST

55,941

   

43,632

   

132,896

   

89,818

 

Dividends on preferred shares

(135)

   

(135)

   

(271)

   

(271)

 

NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$

55,806

   

$

43,497

   

$

132,625

   

$

89,547

 

EARNINGS PER COMMON SHARE, BASIC

             

Continuing operations

$

0.78

   

$

0.46

   

$

1.50

   

$

1.13

 

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

0.01

   

0.17

   

0.38

   

0.17

 
 

$

0.79

   

$

0.63

   

$

1.88

   

$

1.30

 

Weighted average number of common shares, basic

70,797

   

68,531

   

70,270

   

68,449

 

EARNINGS PER COMMON SHARE, DILUTED

             

Continuing operations

$

0.77

   

$

0.46

   

$

1.50

   

$

1.13

 

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

0.01

   

0.17

   

0.38

   

0.17

 
 

$

0.78

   

$

0.63

   

$

1.88

   

$

1.30

 

Weighted average number of common shares, diluted

70,974

   

68,713

   

70,451

   

68,638

 

 

 

Federal Realty Investment Trust

           

Funds From Operations

   

June 30, 2016

               
                 
   

Three Months Ended

 

Six Months Ended

   

June 30,

 

June 30,

   

2016

 

2015

 

2016

 

2015

   

(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO)

               

Net income

 

$

58,898

   

$

45,673

   

$

137,961

   

$

93,876

 

Net income attributable to noncontrolling interests

 

(2,957)

   

(2,041)

   

(5,065)

   

(4,058)

 

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

 

(701)

   

(11,509)

   

(26,427)

   

(11,509)

 

Depreciation and amortization of real estate assets

 

42,299

   

37,726

   

84,027

   

75,010

 

Amortization of initial direct costs of leases

 

4,265

   

3,676

   

8,469

   

7,116

 

Funds from operations

 

101,804

   

73,525

   

198,965

   

160,435

 

Dividends on preferred shares

 

(135)

   

(135)

   

(271)

   

(271)

 

Income attributable to operating partnership units

 

792

   

808

   

1,647

   

1,641

 

Income attributable to unvested shares

 

(264)

   

(256)

   

(569)

   

(573)

 

FFO (1)

 

$

102,197

   

$

73,942

   

$

199,772

   

$

161,232

 

Weighted average number of common shares, diluted

 

71,816

   

69,647

   

71,327

   

69,581

 

FFO per diluted share (1)

 

$

1.42

   

$

1.06

   

$

2.80

   

$

2.32

 
                 
   

Notes:

 

(1)

If the $19.1 million early extinguishment of debt charge in 2015 was excluded, our FFO for the three and six months ended June 30, 2015 would have been $92.9 million and $180.2 million, respectively, and FFO per diluted share would have been $1.33 and $2.59, respectively.

 

 

Federal Realty Investment Trust

     

Reconciliation of FFO Guidance

     

June 30, 2016

     
       

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 2016. Estimates do not include the impact from potential acquisitions or dispositions which have not closed as of August 4, 2016.

       
 

Full Year 2016 Guidance Range

   
 

Low

 

High

Estimated net income available to common shareholders, per diluted share

$

3.43

   

$

3.49

 

Adjustments:

     

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

(0.37)

   

(0.37)

 

Estimated depreciation and amortization of real estate

2.33

   

2.33

 

Estimated amortization of initial direct costs of leases

0.23

   

0.23

 

Estimated FFO per diluted share

$

5.62

   

$

5.68

 
               
               

 

Note:
See Glossary of Terms. Individual items may not add up to total due to rounding.

 

 

 

 

         

 

Investor Inquiries 

Media Inquiries

Leah Andress

Andrea Simpson

Investor Relations Associate 

Vice President, Marketing

301/998-8265

617/684-1511

landress@federalrealty.com

asimpson@federalrealty.com

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SOURCE Federal Realty Investment Trust