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News Release

Federal Realty Investment Trust Announces Third Quarter 2018 Operating Results
- Reports 3.5% comparable property POI growth and raises 2018 Guidance -

ROCKVILLE, Md., Oct. 31, 2018 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its third quarter ended September 30, 2018.  Highlights of the quarter and recent activity include:

  • Generated earnings per diluted share of $0.82 for the quarter compared to $1.47 in third quarter 2017, which included a $0.70 gain on sale of real estate.
  • Generated funds from operations available for common shareholders (FFO) per diluted share of $1.58 for the quarter compared to $1.50 in third quarter 2017.
  • Generated comparable property property operating income (POI) growth of 3.5% for the third quarter.
  • Signed leases for 447,765 square feet of comparable space (469,214 square feet total) in the third quarter at an average rent of $38.31 per square foot and achieved cash basis rollover growth on those comparable spaces of 6%. Over the last four quarters, cash basis rollover growth on comparable spaces was 12%.
  • Signed a long-term lease with Splunk Inc. for 301,000 square feet of office area at 700 Santana Row, a 319,000 square foot, Class-A mixed-use office and retail building under construction at Santana Row
  • Increased 2018 FFO per diluted share guidance range to $6.18 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)

"I couldn't be more pleased with the way our portfolio and our team are responding to changing consumer spending preferences" said Donald C. Wood, President and Chief Executive Officer of Federal Realty. "A big part of our ability to consistently and sustainably grow earnings—this quarter is the best result we've ever posted— is the breadth of the product type that we acquire, build and operate in some of the strongest markets in the country. The retail and entertainment experience that we create on the ground floor is an integral part of our ability to generate revenues from office users, apartment renters and hotel guests who work, live and stay above."

Financial Results

Net income available for common shareholders was $60.5 million and earnings per diluted share was $0.82 for third quarter 2018 versus $106.6 million and $1.47, respectively, for third quarter 2017 which included a $0.70 gain on sale of real estate. Year-to-date Federal Realty reported net income available for common shareholders of $181.4 million and earnings per diluted share of $2.47 which included a $0.14 gain on sale of real estate. This compares to net income available for common shareholders of $238.8 million and earnings per diluted share of $3.30 for the nine months ended September 30, 2017 which included a $0.97 gain on sale of real estate.

In third quarter 2018, Federal Realty generated funds from operations available for common shareholders of $117.3 million, or $1.58 per diluted share. This compares to FFO of $110.0 million, or $1.50 per diluted share, in third quarter 2017. For the nine months ended September 30, 2017, FFO was $344.6 million, or $4.66 per diluted share, compared to $324.5 million, or $4.45 per diluted share for the same nine month period in 2017.

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 2018, comparable property POI increased 3.5%. Comparable property POI represents our consolidated property portfolio other than those properties that distort comparability between periods in two primary categories (1) assets that were not owned for the full quarter in both periods presented and (2) assets currently under development or being repositioned for significant redevelopment and investment.

The overall portfolio was 94.8% leased as of September 30, 2018, compared to 94.9% on September 30, 2017.  Federal Realty's comparable portfolio was 95.2% leased on September 30, 2018, compared to 95.4% on September 30, 2017.

During third quarter 2018, Federal Realty signed 101 leases for 469,214 square feet of retail space.  On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 447,765 square feet at an average rent of $38.31 per square foot compared to the average contractual rent of $36.22 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 6%. Over the last four quarters, cash basis rollover growth on comparable spaces was 12%.

Summary of Other Quarterly Activities and Recent Developments

  • August 27, 2018 –Federal Realty announced that Splunk Inc. (NASDAQ: SPLK) signed a long-term lease for 301,000 square feet of office space in 700 Santana Row, a 319,000 square foot, Class-A mixed-use office and retail building under construction at Santana Row at the intersection of Santana Row and Olsen Drive.

Dividend Declarations

Federal Realty's Board of Trustees declared a regular quarterly cash dividend of $1.02 per share, resulting in an indicated annual rate of $4.08 per share. The regular common dividend will be payable on January 15, 2019 to common shareholders of record as of January 2, 2019.

Federal Realty's Board of Trustees also declared a quarterly cash dividend on its Class C depositary shares, each representing 1/1000 of a 5.000% Series C Cumulative Preferred Share of Beneficial Interest, of $0.3125 per depositary share. All dividends on the depositary shares will be payable on January 15, 2019 to shareholders of record as of January 2, 2019.

Guidance

Federal Realty raised its guidance for 2018 FFO per diluted share to a range of $6.18 to $6.24 and increased 2018 earnings per diluted share guidance to a range of $3.23 to $3.29.

Federal Realty will provide preliminary expectations for 2019 FFO per diluted share on the Trust's third quarter 2018 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 2018 earnings conference call, which is scheduled for Thursday, November 1, 2018 at 10:00AM ET.  To participate, please call 877-445-3230 five to ten minutes prior to the call start time and use the passcode 6491417 (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 8, 2018 by dialing 855.859.2056; Passcode: 6491417.

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, Federal Realty's mission is to deliver long term, sustainable growth through investing in densely populated, affluent communities where retail demand exceeds supply. Its 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 105 properties include approximately 3,000 tenants, in approximately 24 million square feet, and over 2,600 residential units. 

Federal Realty has increased its quarterly dividends to its shareholders for 51 consecutive years, the longest record in the REIT industry. Federal Realty is an S&P 500 index member and its 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.

 

Federal Realty Investment Trust

Consolidated Balance Sheets

September 30, 2018

 
 

September 30,

 

December 31,

 

2018

 

2017

 

(in thousands, except share and
per share data)

 

(unaudited)

   

ASSETS

     

Real estate, at cost

     

Operating (including $1,665,185 and $1,639,486 of consolidated variable interest entities, respectively)

$

7,256,876

   

$

6,950,188

Construction-in-progress (including $60,937 and $43,393 of consolidated variable interest entities, respectively)

481,994

   

684,873

Assets held for sale

21,990

   

 

7,760,860

   

7,635,061

Less accumulated depreciation and amortization (including $280,028 and $247,410 of consolidated variable interest entities, respectively)

(2,018,627)

   

(1,876,544)

Net real estate

5,742,233

   

5,758,517

Cash and cash equivalents

41,872

   

15,188

Accounts and notes receivable, net

151,403

   

209,877

Mortgage notes receivable, net

30,429

   

30,429

Investment in real estate partnerships

27,647

   

23,941

Prepaid expenses and other assets

292,080

   

237,803

TOTAL ASSETS

$

6,285,664

   

$

6,275,755

LIABILITIES AND SHAREHOLDERS' EQUITY

     

Liabilities

     

Mortgages payable, net (including $445,831 and $460,372 of consolidated variable interest entities, respectively)

$

476,057

   

$

491,505

Capital lease obligations

71,529

   

71,556

Notes payable, net

305,483

   

320,265

Senior notes and debentures, net

2,403,565

   

2,401,440

Accounts payable and accrued expenses

184,683

   

196,332

Dividends payable

77,809

   

75,931

Security deposits payable

17,698

   

16,667

Other liabilities and deferred credits

173,953

   

169,388

Total liabilities

3,710,777

   

3,743,084

Commitments and contingencies

     

Redeemable noncontrolling interests

141,448

   

141,157

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 shares issued and outstanding

150,000

   

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, 73,859,280 and 73,090,877 shares issued and outstanding, respectively

741

   

733

Additional paid-in capital

2,946,555

   

2,855,321

Accumulated dividends in excess of net income

(795,649)

   

(749,367)

Accumulated other comprehensive loss

127

   

22

Total shareholders' equity of the Trust

2,311,771

   

2,266,706

Noncontrolling interests

121,668

   

124,808

Total shareholders' equity

2,433,439

   

2,391,514

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

6,285,664

   

$

6,275,755

 

 

 

Federal Realty Investment Trust

Consolidated Income Statements

September 30, 2018

 
 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2018

 

2017

 

2018

 

2017

 

(in thousands, except per share data)

 

(unaudited)

REVENUE

             

Rental income

$

223,777

   

$

212,048

   

$

664,834

   

$

620,741

Other property income

5,183

   

5,171

   

12,942

   

10,429

Mortgage interest income

793

   

734

   

2,284

   

2,221

Total revenue

229,753

   

217,953

   

680,060

   

633,391

EXPENSES

             

Rental expenses

41,909

   

41,250

   

126,587

   

119,487

Real estate taxes

29,086

   

27,492

   

85,841

   

79,104

General and administrative

7,638

   

9,103

   

23,980

   

26,013

Depreciation and amortization

60,778

   

55,611

   

177,269

   

159,656

Total operating expenses

139,411

   

133,456

   

413,677

   

384,260

OPERATING INCOME

90,342

   

84,497

   

266,383

   

249,131

Other interest income

319

   

79

   

657

   

253

Interest expense

(28,166)

   

(26,287)

   

(82,116)

   

(73,952)

Loss from real estate partnerships

(1,440)

   

(182)

   

(2,693)

   

(296)

INCOME FROM CONTINUING OPERATIONS

61,055

   

58,107

   

182,231

   

175,136

Gain on sale of real estate, net

3,125

   

50,775

   

10,413

   

69,949

NET INCOME

64,180

   

108,882

   

192,644

   

245,085

   Net income attributable to noncontrolling interests

(1,622)

   

(2,105)

   

(5,244)

   

(5,827)

NET INCOME ATTRIBUTABLE TO THE TRUST

62,558

   

106,777

   

187,400

   

239,258

Dividends on preferred shares

(2,010)

   

(177)

   

(6,031)

   

(448)

NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$

60,548

   

$

106,600

   

$

181,369

   

$

238,810

EARNINGS PER COMMON SHARE, BASIC:

             

Net income available for common shareholders

$

0.82

   

$

1.47

   

$

2.47

   

$

3.31

Weighted average number of common shares

73,400

   

72,091

   

73,100

   

71,983

EARNINGS PER COMMON SHARE, DILUTED:

             

Net income available for common shareholders

$

0.82

   

$

1.47

   

$

2.47

   

$

3.30

Weighted average number of common shares

73,408

   

72,206

   

73,136

   

72,110

 

 

Federal Realty Investment Trust

Funds From Operations

September 30, 2018

 
   

Three Months Ended

 

Nine Months Ended

   

September 30,

 

September 30,

   

2018

 

2017

 

2018

 

2017

   

(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO)

           

Net income

 

$

64,180

   

$

108,882

   

$

192,644

   

$

245,085

 

Net income attributable to noncontrolling interests

 

(1,622)

   

(2,105)

   

(5,244)

   

(5,827)

 

Gain on sale of real estate, net (1)

 

(3,125)

   

(50,775)

   

(10,413)

   

(69,659)

 

Depreciation and amortization of real estate assets

 

54,132

   

48,796

   

157,494

   

139,112

 

Amortization of initial direct costs of leases

 

5,232

   

4,780

   

14,534

   

14,530

 

Funds from operations

 

118,797

   

109,578

   

349,015

   

323,241

 

Dividends on preferred shares (2)

 

(1,875)

   

(41)

   

(5,625)

   

(41)

 

Income attributable to operating partnership units

 

765

   

788

   

2,299

   

2,355

 

Income attributable to unvested shares

 

(353)

   

(357)

   

(1,139)

   

(1,064)

 

FFO

 

$

117,334

   

$

109,968

   

$

344,550

   

$

324,491

 

Weighted average number of common shares, diluted (2)

 

74,254

   

73,089

   

73,992

   

73,001

 

FFO per diluted share

 

$

1.58

   

$

1.50

   

$

4.66

   

$

4.45

 
   

Notes:

 

1)

$7.3 million of the gain on sale of real estate for the nine months ended September 30, 2018 is related to condominium units sold at Assembly Row and Pike & Rose. $0.6 million and $3.9 million of the gains for the three and nine months ended September 30, 2017, respectively, also include gains related to Assembly Row condominium units under the percentage-of-completion method. Effective January 1, 2018, we adopted a new accounting standard related to revenue recognition, which results in a change in our revenue recognition policy for condominium sales. See Note 2 of our September 30, 2018 Form 10-Q for additional information regarding the adoption.

2)

For the three and nine months ended September 30, 2018 and 2017, dividends on our Series 1 preferred shares 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."

 

Investor Inquires:     

         

Media Inquiries:

Leah Andress Brady 

         

Andrea Simpson

Investor Relations Manager

         

Vice President, Marketing

301.998.8265   

         

617.684.1511

lbrady@federalrealty.com 

         

asimpson@federalrealty.com

 

 

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SOURCE Federal Realty Investment Trust