Federal Realty Investment Trust Announces Third Quarter 2005 Operating Results
Santana Row Condominium Sales Result in Special Dividend of $0.20 per Common Share
ROCKVILLE, Md., Oct. 31 /PRNewswire-FirstCall/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its third quarter ended September 30, 2005.
- Funds from operations available for common shareholders (FFO) per diluted share was $0.77 and earnings per common share (diluted) was $0.52 for the quarter ended September 30, 2005.
- For the nine months ended September 30, 2005, FFO per diluted share was $2.28 and earnings per common share (diluted) was $1.34.
- When compared to third quarter 2004, same-center property operating income increased 5.3% including redevelopments and expansions, and 5.9% excluding redevelopments and expansions.
- Rent increases on lease rollovers for retail space for which there was a prior tenant were 20% on a cash-basis and 32% on a GAAP-basis for the quarter ended September 30, 2005.
- The Trust's portfolio was 95.5% leased as of September 30, 2005.
- Initial guidance is being provided for 2006 FFO per diluted share of $3.30 to $3.35.
- Guidance for 2005 FFO per diluted share was increased to a range of $3.05 to $3.06.
Federal Realty reported FFO of $41.0 million, or $0.77 per diluted share, in third quarter 2005. This compares to FFO of $38.3 million, or $0.72 per diluted share, reported in third quarter 2004, which included $0.7 million ($0.01 per diluted share) of insurance recovery for lost income from the Santana Row fire. For the nine months ended September 30, 2005, Federal Realty reported FFO of $121.5 million, or $2.28 per diluted share. This compares to FFO of $111.7 million, or $2.14 per diluted share, for the same nine-month period in 2004, which included $2.8 million ($0.05 per diluted share) of Santana Row insurance proceeds.
Net income available for common shareholders was $27.8 million, and earnings per common share (diluted) was $0.52 for the quarter ended September 30, 2005, versus $15.8 million and $0.30, respectively, for third quarter 2004. Year-to-date, Federal Realty reported net income available for common shareholders of $70.9 million, or $1.34 per diluted share. This compares to net income available for common shareholders of $53.6 million, or $1.04 per diluted share, for the nine months ended September 30, 2004, both of which included insurance recovery for lost income from the Santana Row fire.
FFO is a non-GAAP supplemental earnings measure which the Trust considers meaningful in measuring its operating performance. A reconciliation of FFO and FFO per diluted share to net income available for common shareholders and earnings per common share (diluted), respectively, is attached to this press release.
On a same-center basis, including redevelopment and expansion properties, property operating income increased 5.3% over third quarter 2004. When redevelopment and expansion properties are excluded from same-center results, property operating income increased 5.9% from third quarter 2004. On a year- to-date basis, same center property operating income has increased 5.2% including redevelopments and expansions, and 5.0% when redevelopments and expansions are excluded.
Overall, the Trust's portfolio improved to 95.5% leased as of September 30, 2005, compared to 94.2% on September 30, 2004. Federal Realty's same- center portfolio was 96.7% leased on September 30, 2005, compared to 96.4% on September 30, 2004.
During third quarter 2005, the Trust signed 93 leases for approximately 441,000 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), the Trust leased 395,000 square feet at a weighted-average cash-basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 20%. The weighted-average contractual rent on this comparable space for the first year of the new lease is $24.25 per square foot compared to the weighted-average contractual rent of $20.19 per square foot for the last year of the prior lease. The previous weighted-average contractual rent is calculated by including both the minimum rent and the 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 32% for third quarter 2005.
Year-to-date, Federal Realty has leased more than 860,000 square feet of comparable retail space at a weighted-average cash-basis contractual rent increase per square foot of 23%, and 35% on a GAAP-basis. As of September 30, 2005, Federal Realty's weighted-average contractual minimum rent for retail and commercial space in its portfolio is $18.63 per square foot.
"It is very satisfying to be producing the strong and reliable results that we've been promising to our shareholders," commented Donald C. Wood, president and chief executive officer of Federal Realty Investment Trust. "By aggressively leasing our existing high quality portfolio, effectively executing our pipeline of redevelopment opportunities, and opportunistically acquiring assets that meet our return thresholds, Federal Realty should continue to deliver consistently strong results without taking excessive risk."
In August 2005, Federal Realty began closing sales of residential condominiums at Santana Row. Through October 24, 2005, the Trust had closed 79 units and had 37 units under contract, with associated gross sales proceeds of $47.7 million and $27.0 million, respectively. In addition, Federal Realty had reservations for 13 units. Federal Realty expects the sale of the 219 units to generate total gross sales proceeds of approximately $135 million with sell-out completed in 2006.
As a result of the success of the Santana Row condominium sales to date, the Trust's Board of Trustees declared a special dividend of $0.20 per share on its common shares. The special dividend will be payable on December 20, 2005 to common shareholders of record as of November 28, 2005. As a result of the special dividend, cash dividends paid in 2005 will represent a 17% increase over cash dividends paid in 2004. Depending on the future success of the Santana Row condominium sales, Federal Realty currently anticipates that an additional special dividend is likely to be paid in first quarter 2006.
Initial occupancy of the 256 new residential rental units on the podium of Building Seven commenced in April 2005, with 90 units leased as of October 24, 2005, and lease-up expected to continue through mid-2006.
Regular Quarterly Dividends
Federal Realty also announced today that its Board of Trustees left the regular dividend rate on its common shares unchanged, declaring a regular quarterly cash dividend of $0.555 per share on its common shares, resulting in an indicated annual rate of $2.22 per share. The regular common dividend will be payable on January 16, 2006, to common shareholders of record as of January 3, 2006.
Additionally, Federal Realty's Board of Trustees declared a regular quarterly cash dividend of $0.53125 per share on the Trust's Series B Cumulative Redeemable Preferred Shares (NYSE: FRTprB). Dividends on the Series B Cumulative Redeemable Preferred Shares will be payable on January 31, 2006 to shareholders of record on January 16, 2006.
Federal Realty today increased its guidance for 2005 FFO per diluted share to a range of $3.05 to $3.06, and increased its earnings per common share (diluted) guidance to a range of $1.65 to $1.66. In addition, the Trust provided initial guidance for 2006 FFO per diluted share of $3.30 to $3.35, and earnings per common share (diluted) of $1.56 to $1.61.
Summary of Other Quarterly Activities and Recent Developments
- September 7, 2005 -- Federal Realty declared a regular quarterly cash dividend of $0.555 per common share, resulting in an indicated annual rate of $2.22 per share, and marking 2005 as the 38th consecutive year that Federal Realty has increased its common dividend, the longest consecutive record in the REIT industry.
Conference Call Information
Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its third quarter 2005 earnings conference call, which is scheduled for November 1, 2005, at 11 a.m. Eastern Standard Time. To participate, please call (888) 566-5771 five to ten minutes prior to the call's start time and use the Passcode EARNINGS (required). The conference leader is Andrew Blocher. Federal Realty will also provide an online Web Simulcast on the Company's Web site, http://www.federalrealty.com, which will remain available for 30 days following the call. A telephone recording of the call will also be available through Thursday, December 1, 2005, by dialing (866) 448-4809.
About Federal Realty
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 (excluding joint venture properties) contains approximately 17.3 million square feet located primarily in strategic metropolitan markets in the Northeast, Mid-Atlantic, and California. In addition, the Trust has an ownership interest in approximately 0.5 million square feet of retail space through its joint venture with Clarion Lion Properties Fund in which the Trust has a 30% interest. Our operating portfolio (excluding joint venture properties) was 95.5% leased to national, regional, and local retailers as of September 30, 2005, with no single tenant accounting for more than 2.2% of annualized base rent. Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has increased its dividend rate for 38 consecutive years, the longest consecutive record in the REIT industry. Shares of Federal Realty are traded on the NYSE under the symbol FRT.
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 Current Report on Form 8-K filed on March 2, 2005, and include the following:
- risks that our tenants will not pay rent 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 any redevelopment or renovation project that we do pursue may not perform as anticipated;
- risks that we may not be able to sell the condominium units at Santana Row for the expected prices or within the anticipated time frames;
- risks that the number of properties we acquire for our own account, and therefore the amount of capital we invest in acquisitions, may be impacted by our real estate partnership;
- 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 we may have environmental risks at our properties, 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 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 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 review the risks contained in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and the risks contained in our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 2, 2005.
Federal Realty Investment Trust Operating Results September 30, 2005 Financial Highlights (in thousands, except per share data) (unaudited) Three months ended Nine months ended CONSOLIDATED OPERATING RESULTS September 30, September 30, 2005 2004 2005 2004 Revenues Rental income $98,071 $94,374 $294,501 $278,725 Other property income 2,458 3,230 6,487 7,793 Mortgage interest income 1,310 1,230 4,040 3,611 101,839 98,834 305,028 290,129 Expenses Rental 20,215 22,252 63,435 65,978 Real estate taxes 10,109 9,873 29,644 28,159 General and administrative 4,957 4,673 14,441 13,443 Depreciation and amortization 22,591 23,292 67,629 66,029 57,872 60,090 175,149 173,609 Operating income 43,967 38,744 129,879 116,520 Other interest income 254 459 1,946 1,122 Interest expense (21,664) (21,125) (65,554) (63,835) Income from real estate partnership 126 19 349 19 Minority interests (1,208) (936) (4,003) (3,317) Income from continuing operations 21,475 17,161 62,617 50,509 Discontinued operations (Loss) income before gain on sale of real estate (258) 502 (480) 2,398 Gain on sale of real estate 9,463 997 17,347 9,331 Income from discontinued operations 9,205 1,499 16,867 11,729 Net Income 30,680 18,660 79,484 62,238 Dividends on preferred stock (2,869) (2,869) (8,607) (8,607) Net income available for common shareholders $27,811 $15,791 $70,877 $53,631 FUNDS FROM OPERATIONS AVAILABLE FOR COMMON SHAREHOLDERS Net income $30,680 $18,660 $79,484 $62,238 Gain on sale of real estate (9,463) (997) (17,347) (9,331) Depreciation and amortization of real estate assets 20,506 21,376 61,760 61,145 Amortization of initial direct costs of leases 1,768 1,882 5,195 5,170 Depreciation on real estate partnership assets 157 50 471 50 Funds from operations 43,648 40,971 129,563 119,272 Dividends on preferred stock (2,869) (2,869) (8,607) (8,607) Income attributable to operating partnership units 215 242 573 1,032 Funds from operations available for common shareholders 40,994 38,344 121,529 111,697 Weighted average number of common shares, diluted 53,559 52,934 53,405 52,074 Funds from operations available for common shareholders per diluted share $0.77 $0.72 $2.28 $2.14 EARNINGS PER COMMON SHARE, BASIC Income from continuing operations available for common shareholders $0.35 $0.27 $1.03 $0.83 (Loss) income from discontinued operations before gain on sale of real estate - 0.01 (0.01) 0.05 Gain on sale of real estate 0.18 0.02 0.33 0.18 $0.53 $0.30 $1.35 $1.06 Weighted average number of common shares, basic 52,618 51,640 52,443 50,722 EARNINGS PER COMMON SHARE, DILUTED Income from continuing operations available for common shareholders $0.35 $0.27 $1.02 $0.82 (Loss) income from discontinued operations before gain on sale of real estate (0.01) 0.01 (0.01) 0.04 Gain on sale of real estate 0.18 0.02 0.33 0.18 $0.52 $0.30 $1.34 $1.04 Weighted average number of common shares, diluted 53,149 52,934 52,982 51,273 Federal Realty Investment Trust Summarized Balance Sheets September 30, 2005 Financial Highlights (in thousands) CONSOLIDATED BALANCE SHEETS September 30, December 31, 2005 2004 ASSETS (unaudited) Real estate, at cost Operating $2,620,941 $2,480,626 Construction-in-progress 135,052 130,286 Discontinued operations 12,796 55,364 2,768,789 2,666,276 Less accumulated depreciation and amortization (644,988) (595,338) Net real estate 2,123,801 2,070,938 Cash and cash equivalents 16,573 30,475 Accounts and notes receivable 34,383 34,849 Mortgage notes receivable 37,173 42,909 Investment in real estate partnership 9,425 9,631 Other assets 81,717 78,094 TOTAL ASSETS $2,303,072 $2,266,896 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Obligations under capital leases and mortgage notes $407,643 $410,885 Notes payable 357,298 325,051 Senior notes and debentures 568,546 568,121 Other liabilities 172,390 153,351 Total liabilities 1,505,877 1,457,408 Minority interests 19,282 18,954 Shareholders' equity Preferred stock 135,000 135,000 Common shares and other shareholders' equity 642,913 655,534 Total shareholders' equity 777,913 790,534 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,303,072 $2,266,896 Federal Realty Investment Trust Reconciliation of Net Income to FFO Guidance September 30, 2005 2005 Guidance ($ millions except per share amounts) (1) Net income $100 to $101 Gain on sale of real estate (17) (17) Depreciation and amortization of real estate & joint venture assets 84 84 Amortization of initial direct costs of leases 7 7 Funds from operations 174 175 Income attributable to operating partnership units 1 1 Dividends on preferred stock (11) (11) Funds from operations available for common shareholders 163 to 164 Weighted Average Shares (diluted) 53.5 Funds from operations available for common shareholders per diluted share $3.05 to $3.06 2006 Guidance ($ millions except per share amounts) (1) Net income $95 to $98 Gain on sale of real estate - - Depreciation and amortization of real estate & joint venture assets 86 86 Amortization of initial direct costs of leases 7 7 Funds from operations 188 191 Income attributable to operating partnership units 1 1 Dividends on preferred stock (11) (11) Funds from operations available for common shareholders 177 to 180 Weighted Average Shares (diluted) 53.8 Funds from operations available for common shareholders per diluted share $3.30 to $3.35 Note: (1) Individual items may not add up to total due to rounding.
SOURCE Federal Realty Investment Trust
Andrew Blocher, Vice President, Capital Markets & Investor Relations,
or Suzanne O'Neill, Manager, Investor Relations,
both of Federal Realty Investment Trust