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News Release

Federal Realty Investment Trust Announces Second Quarter 2017 Operating Results

ROCKVILLE, Md., Aug. 2, 2017 /PRNewswire/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its second quarter ended June 30, 2017.  Highlights of the quarter include:

  • Generated earnings per diluted share of $1.05 for the quarter compared to $0.78 in second quarter 2016.
  • Generated FFO per diluted share of $1.49 for the quarter compared to $1.42 in second quarter 2017, representing growth of 4.9%.
  • Generated same center property operating income growth of 3.9% for the second quarter.
  • Signed leases for 397,555 sf of comparable space (432,164 sf total) in the second quarter at an average rent of $45.55 psf and achieved cash basis rollover growth on those comparable spaces of 13%.
  • Party to a binding contract to form a new joint venture with Primestor Development, which will own an interest in seven shopping centers totaling over 1.3 million square feet on 114 acres of urban land in Latino communities in Los Angeles, California.
  • Opportunistically issued $300 million aggregate principal amount of 3.25% Notes due 2027 at an effective yield of 3.358% and an additional $100 million aggregate principal amount of 4.50% Notes due 2044 at an effective yield of 4.143%.
  • Increased the regular quarterly dividend rate on common shares to $1.00 per share, representing the 50th consecutive year of common dividend increases.
  • Increased 2017 FFO per diluted share guidance range to $5.86 - $5.94.

"We're very pleased to deliver not only another quarter of record bottom line results but also the 50th year of consecutive dividend increases to our shareholders," said Donald C. Wood, President and Chief Executive Office of Federal Realty. "At Federal Realty, we remain focused on positioning our portfolio for the next decade and beyond – through value creation in our existing assets, infill acquisitions which re-stock our redevelopment pipeline and our recently announced agreement to acquire seven properties located in markets where demand exceeds supply. Our business plan continues to exemplify balance and discipline as we navigate the challenging retail environment."

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.

Financial Results

Net income available for common shareholders was $76.2 million and earnings per diluted share was $1.05 for second quarter 2017 versus $55.8 million and $0.78, respectively, for second quarter 2016.

In second quarter 2017, Federal Realty generated funds from operations available for common shareholders (FFO) of $108.6 million, or $1.49 per diluted share. This compares to FFO of $102.2 million, or $1.42 per diluted share, in second 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

In second quarter 2017, same center property operating income increased 3.9% when including properties that are being redeveloped and decreased 0.7% when excluding those properties. The vacancies impacting same center results have been released to tenants at significantly higher rents.

The overall portfolio was 94.5% leased as of June 30, 2017, compared to 94.6% on March 31, 2017 and 94.5% on June 30, 2016.  Federal Realty's same center portfolio was 95.9% leased on June 30, 2017, compared to 95.8% on March 31, 2017 and 95.9% on June 30, 2016.

During second quarter 2017, Federal Realty signed 111 leases for 432,164 square feet of retail space.  On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 397,555 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 $45.55 per square foot compared to the average contractual rent of $40.16 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 straight-line basis, rent increases for comparable retail space averaged 27% for second quarter 2017.

Summary of Other Quarterly Activities and Recent Developments

  • August 1, 2017Federal Realty is party to a binding contract to form a new joint venture with Primestor Development Inc., the Los Angeles based owner and developer of premier retail properties serving the urban Latino communities of Southern California. The Trust will hold an approximately 90% interest in the venture. The venture will be seeded with a 100% interest in five dominant community shopping centers, plus one center under redevelopment and a 25% minority interest in a seventh shopping center. These seven properties total over 1.3 million square feet on 114 acres of urban land with tenants such as Ross Dress for Less, Marshalls and Kroger's Food 4 Less. The Trust's investment in the venture is expected to approximate $345 million which includes a $20 million commitment to complete the redevelopment of one of the centers.
  • July 31, 2017Federal Realty announced the approval by its Board of Trustees of an increase in the regular dividend rate on its common shares to $1.00 per share per quarter resulting in an annualized dividend rate of $4.00 per share. The quarterly cash dividend will be payable on October 16, 2017 to common shareholders of record as of September 22, 2017. Federal Realty is the only real estate investment trust in the United States to have increased its common dividend every year for the last 50 years and one of only a small number of companies in any sector to accomplish such a record. The compound annual growth rate of the dividend increases over that 50 years is in excess of 7%.
  • June 20, 2017Federal Realty priced its public offering of $300 million aggregate principal amount of 3.25% Notes due 2027 at an effective yield of 3.358% and an additional $100 million aggregate principal amount of 4.50% Notes due 2044 at an effective yield of 4.143%. The 2044 Notes have the same terms and are of the same series as the notes that Federal Realty first issued on November 14, 2014 and again on March 16, 2015. Federal Realty has a total of $550 million of such series of notes outstanding.
  • May 19, 2017Federal Realty acquired a 90% interest in 1700 - 1730 4th Street, a 71,000 square foot single-story, mixed-use building located on Fourth Street in Berkeley, California, one of the Bay Area's premiere and unique street-retail districts. Current tenants include CB2, California Closets, and the offices of Ingram Books.

Guidance

Federal Realty increased its 2017 guidance for FFO per diluted share to $5.86 to $5.94 and updated its 2017 earnings per diluted share guidance to $3.31 to $3.39.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its second quarter 2017 earnings conference call, which is scheduled for Thursday, August 3, 2017 at 11:00AM ET.  To participate, please call 877.445.3230 five to ten minutes prior to the call start time and use the passcode 39460118 (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 August 10, 2017 by dialing 855.859.2056; Passcode: 39460118.

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 99 properties include over 2,800 tenants, in over 23 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 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, 2017, 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, 2017.

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

June 30, 2017

 

June 30,

 

December 31,

 

2017

 

2016

 

(in thousands, except share and per share data)

 

(unaudited)

   

ASSETS

     

Real estate, at cost

     

Operating (including $1,265,976 and $1,226,918 of consolidated variable interest entities, respectively)

$

6,371,714

   

$

6,125,957

 

Construction-in-progress

719,713

   

599,260

 

Asset held for sale

   

33,856

 
 

7,091,427

   

6,759,073

 

Less accumulated depreciation and amortization (including $226,193 and $209,239 of consolidated variable interest entities, respectively)

(1,808,326)

   

(1,729,234)

 

Net real estate

5,283,101

   

5,029,839

 

Cash and cash equivalents

96,326

   

23,368

 

Accounts and notes receivable, net

168,996

   

116,749

 

Mortgage notes receivable, net

30,429

   

29,904

 

Investment in real estate partnerships

13,973

   

14,864

 

Prepaid expenses and other assets

210,678

   

208,555

 

TOTAL ASSETS

$

5,803,503

   

$

5,423,279

 

LIABILITIES AND SHAREHOLDERS' EQUITY

     

Liabilities

     

Mortgages payable (including $383,304 and $439,120 of consolidated variable interest entities, respectively)

$

414,891

   

$

471,117

 

Capital lease obligations

71,573

   

71,590

 

Notes payable

279,316

   

279,151

 

Senior notes and debentures

2,377,208

   

1,976,594

 

Accounts payable and accrued expenses

190,459

   

201,756

 

Dividends payable

71,714

   

71,440

 

Security deposits payable

16,618

   

16,285

 

Other liabilities and deferred credits

143,002

   

115,817

 

Total liabilities

3,564,781

   

3,203,750

 

Commitments and contingencies

     

Redeemable noncontrolling interests

152,045

   

143,694

 

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, 72,251,477 and 71,995,897 shares issued and outstanding, respectively

725

   

722

 

Additional paid-in capital

2,741,803

   

2,718,325

 

Accumulated dividends in excess of net income

(759,058)

   

(749,734)

 

Accumulated other comprehensive loss

(1,100)

   

(2,577)

 

Total shareholders' equity of the Trust

1,992,367

   

1,976,733

 

Noncontrolling interests

94,310

   

99,102

 

Total shareholders' equity

2,086,677

   

2,075,835

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

5,803,503

   

$

5,423,279

 

 

 

Federal Realty Investment Trust

             

Consolidated Income Statements

             

June 30, 2017

             
 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2017

 

2016

 

2017

 

2016

 

(in thousands, except per share data)

 

(unaudited)

REVENUE

             

Rental income

$

204,246

   

$

192,935

   

$

408,693

   

$

388,243

 

Other property income

3,068

   

3,488

   

5,258

   

5,800

 

Mortgage interest income

735

   

1,558

   

1,487

   

2,282

 

Total revenue

208,049

   

197,981

   

415,438

   

396,325

 

EXPENSES

             

Rental expenses

37,128

   

36,978

   

78,237

   

79,797

 

Real estate taxes

26,522

   

23,397

   

51,612

   

46,191

 

General and administrative

8,643

   

9,036

   

16,910

   

17,046

 

Depreciation and amortization

52,666

   

48,435

   

104,045

   

96,234

 

Total operating expenses

124,959

   

117,846

   

250,804

   

239,268

 

OPERATING INCOME

83,090

   

80,135

   

164,634

   

157,057

 

Other interest income

68

   

77

   

174

   

180

 

Interest expense

(23,907)

   

(23,101)

   

(47,665)

   

(46,830)

 

(Loss) income from real estate partnerships

(114)

   

   

(114)

   

41

 

INCOME FROM CONTINUING OPERATIONS

59,137

   

57,111

   

117,029

   

110,448

 

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

18,996

   

1,787

   

19,174

   

27,513

 

NET INCOME

78,133

   

58,898

   

136,203

   

137,961

 

   Net income attributable to noncontrolling interests

(1,842)

   

(2,957)

   

(3,722)

   

(5,065)

 

NET INCOME ATTRIBUTABLE TO THE TRUST

76,291

   

55,941

   

132,481

   

132,896

 

Dividends on preferred shares

(135)

   

(135)

   

(271)

   

(271)

 

NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$

76,156

   

$

55,806

   

$

132,210

   

$

132,625

 

EARNINGS PER COMMON SHARE, BASIC

             

Continuing operations

$

0.79

   

$

0.78

   

$

1.57

   

$

1.50

 

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

0.26

   

0.01

   

0.26

   

0.38

 
 

$

1.05

   

$

0.79

   

$

1.83

   

$

1.88

 

Weighted average number of common shares, basic

72,001

   

70,797

   

71,928

   

70,270

 

EARNINGS PER COMMON SHARE, DILUTED

             

Continuing operations

$

0.79

   

$

0.77

   

$

1.57

   

$

1.50

 

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

0.26

   

0.01

   

0.26

   

0.38

 
 

$

1.05

   

$

0.78

   

$

1.83

   

$

1.88

 

Weighted average number of common shares, diluted

72,124

   

70,974

   

72,061

   

70,451

 

 

 

Federal Realty Investment Trust

               

Funds From Operations

   

June 30, 2017

               
   

Three Months Ended

 

Six Months Ended

   

June 30,

 

June 30,

   

2017

 

2016

 

2017

 

2016

   

(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO)

               

Net income

 

$

78,133

   

$

58,898

   

$

136,203

   

$

137,961

 

Net income attributable to noncontrolling interests

 

(1,842)

   

(2,957)

   

(3,722)

   

(5,065)

 

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

 

(18,814)

   

(701)

   

(18,884)

   

(26,427)

 

Depreciation and amortization of real estate assets

 

45,634

   

42,299

   

90,316

   

84,027

 

Amortization of initial direct costs of leases

 

5,066

   

4,265

   

9,750

   

8,469

 

Funds from operations

 

108,177

   

101,804

   

213,663

   

198,965

 

Dividends on preferred shares (1)

 

   

(135)

   

   

(271)

 

Income attributable to operating partnership units

 

783

   

792

   

1,567

   

1,647

 

Income attributable to unvested shares

 

(357)

   

(264)

   

(707)

   

(569)

 

FFO

 

$

108,603

   

$

102,197

   

$

214,523

   

$

199,772

 

Weighted average number of common shares, diluted

 

73,019

   

71,816

   

72,956

   

71,327

 

FFO per diluted share

 

$

1.49

   

$

1.42

   

$

2.94

   

$

2.80

 
                 

 

Note:

1)       For the three and six months ended June 30, 2017, dividends on preferred stock are not deducted in the calculation of FFO, as the related shares are dilutive and included in "weighted average common shares, diluted."

 

 

Federal Realty Investment Trust

     

Reconciliation of FFO Guidance

     

June 30, 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 2017. Estimates include the impact of the pending acquisition announced on August 1, 2017, but do not include the impact from potential acquisitions or dispositions which have not closed as of August 2, 2017.

       
       
 

Full Year 2017 Guidance Range

   
 

Low

 

High

Estimated net income available to common shareholders, per diluted share

$

3.31

   

$

3.39

 

Adjustments:

     

Estimated gain on sale of real estate, net

(0.26)

   

(0.26)

 

Estimated depreciation and amortization of real estate

2.55

   

2.55

 

Estimated amortization of initial direct costs of leases

0.25

   

0.25

 

Estimated FFO per diluted share

$

5.86

   

$

5.94

 

 

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SOURCE Federal Realty Investment Trust