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News Release

Federal Realty Investment Trust Announces Third Quarter 2017 Operating Results

ROCKVILLE, Md., Nov. 1, 2017 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its third quarter ended September 30, 2017.  Highlights of the quarter and recent activity include:

  • Generated earnings per diluted share of $1.47 for the quarter compared to $0.82 in third quarter 2016.
  • Generated FFO per diluted share of $1.50 for the quarter compared to $1.41 in third quarter 2016.
  • Generated same-center property operating income growth of 4.4%. 
  • Signed leases for 399,619 sf of comparable space at an average rent of $38.24 psf and achieved cash basis rollover growth on comparable spaces of 14%.
  • Opportunistically issued $150.0 million of 5.0% Series C Cumulative Redeemable Preferred Shares.
  • Narrowed 2017 FFO per diluted share guidance range to $5.89 to $5.92.

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)

"Solid performance all around this quarter," said Donald C. Wood, President and Chief Executive Officer of Federal Realty. "Thoughtful positioning of our portfolio and company over the last decade empowers us to continue to excel during this transitional time in the retail real estate space. The balance of owning the best real estate in flexible formats combined with our A rated balance sheet sets us apart and allows us to focus on the future."

Financial Results

Net income available for common shareholders was $106.6 million and earnings per diluted share was $1.47 for third quarter 2017 versus $58.8 million and $0.82, respectively, for third quarter 2016. Year-to-date Federal Realty reported net income available for common shareholders of $238.8 million and earnings per diluted share of $3.30. This compares to net income available for common shareholders of $191.5 million and earnings per diluted share of $2.70 for the nine months ended September 30, 2016.  

In the third quarter 2017, Federal Realty generated funds from operations available for common shareholders (FFO) of $110.0 million, or $1.50 per diluted share. This compares to FFO of $101.7 million, or $1.41 per diluted share, in third quarter 2016. For the nine months ended September 30, 2017, FFO was $324.5 million, or $4.45 per diluted share, compared to $301.4 million, or $4.21 per diluted share for the same nine month period in 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 third quarter 2017, same-center property operating income increased 4.4% over the prior year when including properties that are being redeveloped and 2.6% when excluding those properties.

The overall portfolio was 94.9% leased as of September 30, 2017, compared to 94.3% on September 30, 2016.  Federal Realty's same center portfolio was 96.0% leased on September 30, 2017, compared to 95.7% on September 30, 2016.

During third quarter 2017, Federal Realty signed 90 leases for 424,492 square feet of retail space.  On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 399,619 square feet at an average cash basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 14%.  The average contractual rent on this comparable space for the first year of the new leases is $38.24 per square foot compared to the average contractual rent of $33.43 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 per square foot for comparable retail space averaged 27% for third quarter 2017.

Dividend Declarations

Federal Realty's Board of Trustees declared a regular quarterly cash dividend of $1.00 per share, resulting in an indicated annual rate of $4.00 per share. The regular common dividend will be payable on January 16, 2018 to common shareholders of record as of January 2, 2018.

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

Summary of Other Quarterly Activities and Recent Developments

  • October 12, 2017Federal Realty received the inaugural Best Sustainability Program award from the NAIOP DC | MD Chapter.  The award is given to an organization that "demonstrates a strong commitment to sustainable business practices and solutions that contribute to environmental responsibility and economic success."
  • September 25, 2017Federal Realty issued 6,000 5.0% Series C Cumulative Redeemable Preferred Shares, par value $0.01 per share at the liquidation preference of $25,000 per share in an underwritten public offering. The Series C Preferred Shares accrue dividends at a rate of 5.0% per year and are redeemable at our option on or after September 29, 2022.
  • August 31, 2017Federal Realty announced the sale of 150 Post Street, a seven-story, 105,000 square foot retail and office building located in the Union Square district of San Francisco, for $69.3 million.

Guidance

Federal Realty narrowed its guidance for 2017 FFO per diluted share to a range of $5.89 to $5.92 and adjusted 2017 earnings per diluted share guidance to a range of $4.02 to $4.05.

Federal Realty will provide preliminary expectations for 2018 FFO per diluted share on the Trust's third quarter 2017 earnings conference call.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its third quarter 2017 earnings conference call, which is scheduled for Thursday, November 2, 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 84997180 (required).  Federal Realty will also provide an online webcast on the Company's web site, http://www.federalrealty.com, which will remain available for 30 days following the call.  A telephonic replay of the conference call will also be available through November 9, 2017 by dialing 855.859.2056; Passcode: 84997180.

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 over 2,900 tenants, in approximately 24 million square feet, and over 2,000 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.

 

 

 

Federal Realty Investment Trust

Consolidated Balance Sheets

September 30, 2017

 

September 30,

 

December 31,

 

2017

 

2016

 

(in thousands, except share and per share data)

 

(unaudited)

   

ASSETS

     

Real estate, at cost

     

Operating (including $1,666,691 and $1,226,918 of consolidated variable interest entities, respectively)

$

6,758,728

   

$

6,125,957

 

Construction-in-progress

769,882

   

599,260

 

Asset held for sale

   

33,856

 
 

7,528,610

   

6,759,073

 

Less accumulated depreciation and amortization (including $236,391 and $209,239 of consolidated variable interest entities, respectively)

(1,828,845)

   

(1,729,234)

 

Net real estate

5,699,765

   

5,029,839

 

Cash and cash equivalents

22,850

   

23,368

 

Accounts and notes receivable, net

200,878

   

116,749

 

Mortgage notes receivable, net

30,429

   

29,904

 

Investment in real estate partnerships

23,925

   

14,864

 

Prepaid expenses and other assets

243,290

   

208,555

 

TOTAL ASSETS

$

6,221,137

   

$

5,423,279

 

LIABILITIES AND SHAREHOLDERS' EQUITY

     

Liabilities

     

Mortgages payable (including $461,873 and $439,120 of consolidated variable interest entities, respectively)

$

493,240

   

$

471,117

 

Capital lease obligations

71,565

   

71,590

 

Notes payable

320,718

   

279,151

 

Senior notes and debentures

2,377,939

   

1,976,594

 

Accounts payable and accrued expenses

206,441

   

201,756

 

Dividends payable

73,466

   

71,440

 

Security deposits payable

16,698

   

16,285

 

Other liabilities and deferred credits

175,464

   

115,817

 

Total liabilities

3,735,531

   

3,203,750

 

Commitments and contingencies

     

Redeemable noncontrolling interests

151,815

   

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, 72,542,909 and 71,995,897 shares issued and outstanding, respectively

728

   

722

 

Additional paid-in capital

2,773,890

   

2,718,325

 

Accumulated dividends in excess of net income

(724,919)

   

(749,734)

 

Accumulated other comprehensive loss

(742)

   

(2,577)

 

Total shareholders' equity of the Trust

2,208,954

   

1,976,733

 

Noncontrolling interests

124,837

   

99,102

 

Total shareholders' equity

2,333,791

   

2,075,835

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

6,221,137

   

$

5,423,279

 


 

 

Federal Realty Investment Trust

             

Consolidated Income Statements

             

September 30, 2017

             
 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2017

 

2016

 

2017

 

2016

 

(in thousands, except per share data)

 

(unaudited)

REVENUE

             

Rental income

$

212,048

   

$

197,469

   

$

620,741

   

$

585,712

 

Other property income

5,171

   

2,759

   

10,429

   

8,559

 

Mortgage interest income

734

   

929

   

2,221

   

3,211

 

Total revenue

217,953

   

201,157

   

633,391

   

597,482

 

EXPENSES

             

Rental expenses

41,250

   

38,588

   

119,487

   

118,385

 

Real estate taxes

27,492

   

24,973

   

79,104

   

71,164

 

General and administrative

9,103

   

8,232

   

26,013

   

25,278

 

Depreciation and amortization

55,611

   

48,903

   

159,656

   

145,137

 

Total operating expenses

133,456

   

120,696

   

384,260

   

359,964

 

OPERATING INCOME

84,497

   

80,461

   

249,131

   

237,518

 

Other interest income

79

   

105

   

253

   

285

 

Interest expense

(26,287)

   

(24,313)

   

(73,952)

   

(71,143)

 

(Loss) income from real estate partnerships

(182)

   

   

(296)

   

41

 

INCOME FROM CONTINUING OPERATIONS

58,107

   

56,253

   

175,136

   

166,701

 

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

50,775

   

4,945

   

69,949

   

32,458

 

NET INCOME

108,882

   

61,198

   

245,085

   

199,159

 

   Net income attributable to noncontrolling interests

(2,105)

   

(2,221)

   

(5,827)

   

(7,286)

 

NET INCOME ATTRIBUTABLE TO THE TRUST

106,777

   

58,977

   

239,258

   

191,873

 

Dividends on preferred shares

(177)

   

(136)

   

(448)

   

(406)

 

NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$

106,600

   

$

58,841

   

$

238,810

   

$

191,467

 

EARNINGS PER COMMON SHARE, BASIC:

             

Net income available for common shareholders

$

1.47

   

$

0.82

   

$

3.31

   

$

2.70

 

Weighted average number of common shares

72,091

   

71,319

   

71,983

   

70,626

 

EARNINGS PER COMMON SHARE, DILUTED:

             

Net income available for common shareholders

$

1.47

   

$

0.82

   

$

3.30

   

$

2.70

 

Weighted average number of common shares

72,206

   

71,489

   

72,110

   

70,804

 

 

Federal Realty Investment Trust

               

Funds From Operations

   

September 30, 2017

               
   

Three Months Ended

 

Nine Months Ended

   

September 30,

 

September 30,

   

2017

 

2016

 

2017

 

2016

   

(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO)

               

Net income

 

$

108,882

   

$

61,198

   

$

245,085

   

$

199,159

 

Net income attributable to noncontrolling interests

 

(2,105)

   

(2,221)

   

(5,827)

   

(7,286)

 

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

 

(50,775)

   

(4,706)

   

(69,659)

   

(31,133)

 

Depreciation and amortization of real estate assets

 

48,796

   

42,779

   

139,112

   

126,806

 

Amortization of initial direct costs of leases

 

4,780

   

4,260

   

14,530

   

12,729

 

Funds from operations

 

109,578

   

101,310

   

323,241

   

300,275

 

Dividends on preferred shares (1)

 

(41)

   

(136)

   

(41)

   

(406)

 

Income attributable to operating partnership units

 

788

   

750

   

2,355

   

2,397

 

Income attributable to unvested shares

 

(357)

   

(263)

   

(1,064)

   

(826)

 

FFO

 

$

109,968

   

$

101,661

   

$

324,491

   

$

301,440

 

Weighted average number of common shares, diluted

 

73,089

   

72,254

   

73,001

   

71,642

 

FFO per diluted share

 

$

1.50

   

$

1.41

   

$

4.45

   

$

4.21

 
                 

Notes:

1)

For the three and nine months ended September 30, 2017, dividends on our Series 1 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

     

September 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 do not include the impact from potential acquisitions or dispositions which have not closed as of November 1, 2017.

       
       
 

Full Year 2017 Guidance Range

   
 

Low

 

High

Estimated net income available to common shareholders, per diluted share

$

4.02

   

$

4.05

 

Adjustments:

     

Estimated gain on sale of real estate, net

(0.95)

   

(0.95)

 

Estimated depreciation and amortization of real estate

2.57

   

2.57

 

Estimated amortization of initial direct costs of leases

0.26

   

0.26

 

Estimated FFO per diluted share

$

5.89

   

$

5.92

 

 

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

 

 

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SOURCE Federal Realty Investment Trust