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News Release

Federal Realty Investment Trust Announces Third Quarter 2019 Operating Results

ROCKVILLE, Md., Oct. 30, 2019 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its third quarter ended September 30, 2019. For the three months ended September 30, 2019 and 2018, net income available for common shareholders was $0.84 per diluted share and $0.82 per diluted share, respectively.

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)

Highlights of the quarter include:

  • Generated funds from operations available for common shareholders (FFO) per diluted share of $1.43 for the quarter ($1.59 excluding the charge related to the buyout of the Kmart lease at Assembly) compared to $1.58 in the third quarter 2018.
  • Generated comparable property operating income (POI) growth of 2.1% for the third quarter.
  • Signed leases for 468,643 sf of comparable space in the third quarter at an average rent of $38.93 psf and achieved cash basis rollover growth on those comparable spaces of 7%.
  • Opportunistically issued $100 million aggregate principal of Notes due 2029 at an effective yield of 2.744%.

"An overall solid operating quarter for the Company made even better by numerous strategic initiatives that will benefit the future," said Donald C. Wood, President and Chief Executive Officer. "Opportunities that availed themselves to us in the third quarter like the targeted acquisition of the Kmart parcel at Assembly and important lease recaptures elsewhere enable future development that pave the way for a clear path to further value enhancement."

Financial Results

Net income available for common shareholders was $63.5 million and earnings per diluted share was $0.84 for third quarter 2019 versus $60.5 million and $0.82, respectively, for third quarter 2018.

In the third quarter 2019, Federal Realty generated FFO of $108.0 million, or $1.43 per diluted share ($1.59 excluding the $11.9 million charge related to the buyout of the Kmart lease at Assembly). This compares to FFO of $117.3 million, or $1.58 per diluted share, in the third quarter 2018.

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

The overall portfolio was 94.2% leased as of September 30, 2019, and the comparable portfolio was 94.9% leased. In the third quarter 2019, comparable property POI increased 2.1%. 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. Additionally, the charge related to the buyout of the Kmart lease at Assembly is excluded.    

During the third quarter 2019, Federal Realty signed 103 leases for 491,414 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 468,643 square feet at an average rent of $38.93 per square foot compared to the average contractual rent of $36.31 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 7%.

Regular Quarterly Dividends

Federal Realty's Board of Trustees declared a regular quarterly cash dividend of $1.05 per common share, resulting in an indicated annual rate of $4.20 per common share. The regular common dividend will be payable on January 15, 2020 to common shareholders of record as of January 2, 2020.

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, 2020 to shareholders of record as of January 2, 2020.

Summary of Other Quarterly Activities and Recent Developments

August 12, 2019Federal Realty acquired the Kmart lease at Assembly for $14.5 million, unlocking significant value creation potential on a 6 acre parcel of land at its highly successful Assembly Row project.

August 21, 2019Federal Realty issued $100 million aggregate principal amount of Notes due 2029 at an effective yield of 2.744%.  The notes have the same terms and are of the same series as the notes that Federal Realty issued on June 7, 2019. Federal Realty used the net proceeds from the offering to reduce amounts outstanding under its revolving credit facility and for general corporate purposes.

October 11, 2019Federal Realty closed on the sale of Plaza Pacoima for $51.3 million. Plaza Pacoima is a 204,000 square foot Costco and Best Buy anchored power center located in Pacoima, California. The property was part of the Primestor Joint Venture formed in 2017 and was planned for sale as part of that acquisition. Year-to-date, Federal Realty has completed $149 million of dispositions.

Guidance

Federal Realty revised its 2019 guidance for FFO per diluted share to a range of $6.16 to $6.22 ($6.32 to $6.38 excluding the charge related to the buyout of the Kmart lease at Assembly) and 2019 earnings per diluted share guidance to $3.48 to $3.54.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its third quarter 2019 earnings conference call, which is scheduled for Thursday October 31, 2019 at 10:00AM ET.  To participate, please call 877.407.9208 five to ten minutes prior to the call start time and use the passcode 13694901 (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 November 14, 2019 by dialing 844.512.2921; Passcode: 13694901.

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 104 properties include approximately 3,000 tenants, in 24 million square feet, and over 2,600 residential units. 

Federal Realty has increased its quarterly dividends to its shareholders for 52 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, 2019, 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, 2019.


 

 

Federal Realty Investment Trust

Consolidated Balance Sheets

September 30, 2019


September 30,


December 31,



2019


2018



(in thousands, except share and
per share data)



(unaudited)



ASSETS




Real estate, at cost




Operating (including $1,536,443 and $1,701,804 of consolidated variable interest entities, respectively)

$

7,302,912



$

7,307,622


Construction-in-progress (including $97,922 and $51,313 of consolidated variable interest entities, respectively)

691,989



495,274


Assets held for sale

49,835



16,576



8,044,736



7,819,472


Less accumulated depreciation and amortization (including $289,739 and $292,374 of consolidated variable interest entities, respectively)

(2,190,486)



(2,059,143)


Net real estate

5,854,250



5,760,329


Cash and cash equivalents

162,543



64,087


Accounts and notes receivable, net

143,855



142,237


Mortgage notes receivable, net

30,429



30,429


Investment in partnerships

30,017



26,859


Operating lease right of use assets

94,271




Finance lease right of use assets

52,723




Prepaid expenses and other assets

239,477



265,703


TOTAL ASSETS

$

6,607,565



$

6,289,644


LIABILITIES AND SHAREHOLDERS' EQUITY




Liabilities




Mortgages payable, net (including $389,523 and $444,388 of consolidated variable interest entities, respectively)

$

466,600



$

474,379


Capital lease obligations



71,519


Notes payable, net

3,889



279,027


Senior notes and debentures, net

2,806,422



2,404,279


Accounts payable and accrued expenses

221,781



177,922


Dividends payable

81,477



78,207


Security deposits payable

20,354



17,875


Operating lease liabilities

74,032




Finance lease liabilities

72,065




Other liabilities and deferred credits

165,542



182,898


Total liabilities

3,912,162



3,686,106


Commitments and contingencies




Redeemable noncontrolling interests

122,282



136,208


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, 75,494,931 and 74,249,633 shares issued and outstanding, respectively

758



745


Additional paid-in capital

3,167,460



3,004,442


Accumulated dividends in excess of net income

(857,152)



(818,877)


Accumulated other comprehensive loss

(1,135)



(416)


Total shareholders' equity of the Trust

2,469,928



2,345,891


Noncontrolling interests

103,193



121,439


Total shareholders' equity

2,573,121



2,467,330


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

6,607,565



$

6,289,644


 


Federal Realty Investment Trust

Consolidated Income Statements

September 30, 2019









Three Months Ended


Nine Months Ended


September 30,


September 30,


2019


2018


2019


2018


(in thousands, except per share data)


(unaudited)

REVENUE








Rental income

$

233,212



$

228,960



$

694,435



$

677,776


Mortgage interest income

735



793



2,204



2,284


Total revenue

233,947



229,753



696,639



680,060


EXPENSES








Rental expenses

54,484



41,909



140,182



126,587


Real estate taxes

29,030



29,086



81,883



85,841


General and administrative

11,060



7,638



32,047



23,980


Depreciation and amortization

59,648



60,778



178,327



177,269


Total operating expenses

154,222



139,411



432,439



413,677










Gain on sale of real estate, net of tax

14,293



3,125



30,490



10,413










OPERATING INCOME

94,018



93,467



294,690



276,796










OTHER INCOME/(EXPENSE)








Other interest income

389



319



755



657


Interest expense

(27,052)



(28,166)



(82,567)



(82,116)


Loss from partnerships

(249)



(1,440)



(1,302)



(2,693)


NET INCOME

67,106



64,180



211,576



192,644


   Net income attributable to noncontrolling interests

(1,641)



(1,622)



(5,065)



(5,244)


NET INCOME ATTRIBUTABLE TO THE TRUST

65,465



62,558



206,511



187,400


Dividends on preferred shares

(2,010)



(2,010)



(6,031)



(6,031)


NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$

63,455



$

60,548



$

200,480



$

181,369


EARNINGS PER COMMON SHARE, BASIC:








Net income available for common shareholders

$

0.84



$

0.82



$

2.68



$

2.47


Weighted average number of common shares

74,832



73,400



74,584



73,100


EARNINGS PER COMMON SHARE, DILUTED:








Net income available for common shareholders

$

0.84



$

0.82



$

2.68



2.47


Weighted average number of common shares

74,832



73,408



74,584



73,136


 

 

Federal Realty Investment Trust

Funds From Operations



September 30, 2019



Three Months Ended


Nine Months Ended



September 30,


September 30,



2019


2018


2019


2018



(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO) (1)







Net income


$

67,106



$

64,180



$

211,576



$

192,644


Net income attributable to noncontrolling interests


(1,641)



(1,622)



(5,065)



(5,244)


Gain on sale of real estate, net


(14,293)



(3,125)



(30,490)



(10,413)


Depreciation and amortization of real estate assets


53,441



54,132



160,253



157,494


Amortization of initial direct costs of leases


4,878



5,232



14,165



14,534


Funds from operations


109,491



118,797



350,439



349,015


Dividends on preferred shares


(1,875)



(1,875)



(5,625)



(5,625)


Income attributable to operating partnership units


658



765



2,048



2,299


Income attributable to unvested shares


(314)



(353)



(1,004)



(1,139)


FFO (2)


$

107,960



$

117,334



$

345,858



$

344,550


Weighted average number of common shares, diluted


75,554



74,254



75,342



73,992


FFO per diluted share (2)


$

1.43



$

1.58



$

4.59



$

4.66











Notes:

1)             In connection with the adoption of the new lease accounting standard, effective January 1, 2019, certain internal and external legal leasing costs no longer qualify for capitalization. As a result, capitalized leasing costs excluding external commissions decreased to $0.7 million and $1.7 million for the three and nine months ended September 30, 2019, respectively, from $1.7 million and $5.3 million for the three and nine months ended September 30, 2018, respectively.

2)             Funds from operations available for common shareholders includes an $11.9 million charge related to the buyout of the Kmart lease at Assembly Row Marketplace. If this charge was excluded, our FFO, FFO per diluted share, and dividend payout ratio as a percentage of FFO would have been:



Three Months Ended


Nine Months Ended



September 30, 2019


September 30, 2019



(in thousands, except per share data)

FFO


$

119,837



$

357,735


FFO per diluted share


$

1.59



$

4.75


 

Investor Inquires:                                                    

Media Inquiries:

Leah Andress Brady                          

Brenda Pomar

Investor Relations Senior Manager             

Corporate Communications Manager

301.998.8265                                                

301.998.8316

lbrady@federalrealty.com                                        

bpomar@federalrealty.com

 

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SOURCE Federal Realty Investment Trust