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Federal Realty Investment Trust Announces Second Quarter 2016 Operating Results

ROCKVILLE, Md., Aug. 4, 2016 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its second quarter ended June 30, 2016. Highlights of the quarter and recent activity include:

  • Generated earnings per diluted share of $0.78 for the quarter compared to $0.63 in second quarter 2015.
  • Generated FFO per diluted share of $1.42 for the quarter compared to $1.06 in second quarter 2015 ($1.33 excluding prepayment premiums in second quarter 2015).
  • Generated same center property operating income growth of 3.5% (or 2.9% when properties under redevelopment are excluded). 
  • Signed leases for 372,778 sf of comparable space at an average rent of $38.21 psf and achieved cash basis rollover growth on comparable spaces of 12%.
  • Named Dan Guglielmone as Executive Vice President, Chief Financial Officer and Treasurer effective August 15, 2016.
  • Increased the regular quarterly dividend rate on common shares to $0.98 per share, representing the 49th consecutive year of common dividend increases.
  • Subsequent to quarter end, opportunistically issued $250 million aggregate principal amount of 3.625% senior unsecured notes due August 1, 2046.

"We're very pleased with our record second quarter results that continue to reflect the broad base of our business plan and strong progress in all of our business divisions and initiatives," said Donald C. Wood, Federal Realty's President and Chief Executive Officer. "Also particularly gratifying, was the opportunistic raise and strong execution of $250 million of 3.625% 30 year notes; the lowest coupon for a 30 year unsecured offering ever recorded by a REIT and again validating the cost of capital advantage that our company enjoys which, in turn, lowers the risk of our business plan execution".

The issuance of the unsecured notes referenced above, which were used to pay down our short term line of credit, will be dilutive to 2016 earnings relative to our previous expectations by three to four cents per share. Accordingly, we are adjusting our 2016 guidance of FFO per diluted share to $5.62 to $5.68, and updated our earnings per diluted share guidance to $3.43 to $3.49.

Financial Results

Net income available for common shareholders was $55.8 million and earnings per diluted share was $0.78 for second quarter 2016 versus $43.5 million and $0.63, respectively, for second quarter 2015. Year-to-date Federal Realty reported net income available for common shareholders of $132.6 million and earnings per diluted share of $1.88. This compares to net income available for common shareholders of $89.5 million and earnings per diluted share of $1.30 for the six months ended June 30, 2015.   

In the second quarter 2016, Federal Realty generated funds from operations available for common shareholders (FFO) of $102.2 million, or $1.42 per diluted share. This compares to FFO of $73.9 million, or $1.06 per diluted share, in second quarter 2015.  Excluding the early extinguishment of debt charge in second quarter 2015, FFO per diluted share was $1.33.  Year-to-date, Federal Realty reported FFO of $199.8 million, or $2.80 per diluted share. This compares to FFO of $161.2 million, or $2.32 per diluted share for the six months ended June 30, 2015.  Excluding the early extinguishment of debt charge in 2015, FFO per diluted share for the six months ended June 30, 2015 was $2.59.

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 in addition to Form 8-K that was filed.

Portfolio Results

In the second quarter 2016, same-center property operating income increased 3.5% including redevelopment and expansion properties, and 2.9% excluding redevelopment and expansion properties.

The overall portfolio was 94.5% leased as of June 30, 2016, compared to 94.1% on March 31, 2016 and 95.7% on June 30, 2015.  Federal Realty's same-center portfolio was 95.9% leased on June 30, 2016, compared to 95.6% on March 31, 2016 and 96.4% on June 30, 2015.

During second quarter 2016, the Trust signed 103 leases for 467,364 square feet of retail space.  On a comparable space basis (i.e., spaces for which there was a former tenant), the Trust leased 372,778 square feet at an average cash-basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 12%.  The average contractual rent on this comparable space for the first year of the new lease is $38.21 per square foot compared to the average contractual rent of $34.13 per square foot for the last year of the prior lease.  The previous average contractual rent is 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 25% for second quarter 2016.

Summary of Other Quarterly Activities and Recent Developments

  • July 12, 2016Federal Realty closed on the public offering of $250 million aggregate principal amount of 3.625% senior unsecured notes due August 1, 2046. The notes were offered at 97.756% of the principal amount with a yield to maturity of 3.750%
  • July 13, 2016Federal Realty announced the appointment of Dan Guglielmone to the position of Executive Vice President, Chief Financial Officer and Treasurer effective August 15, 2016. Mr. Guglielmone will be a member of the Firm's Executive and Investment Committees and will be responsible for all capital markets activity along with east coast acquisitions. In addition, he will be responsible for the oversight of the accounting, financial reporting and investor relations functions. Dan will be based at Federal's headquarters in Rockville, Md.

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees increased the regular dividend rate on its common shares, declaring a regular quarterly cash dividend of $0.98 per share, resulting in an indicated annual rate of $3.92 per share.  The regular common dividend will be payable on October 17, 2016, to common shareholders of record on September 22, 2016. This increase represents the 49th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector, and among the longest such records for publically traded companies in the US.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its second quarter 2016 earnings conference call, which is scheduled for August 5, 2016, at 11 a.m. Eastern Time.  To participate, please call (877) 445-3230 five to ten minutes prior to the call start time and use the passcode 24393436 (required).  Federal Realty will also provide an online webcast on the Company's website, www.federalrealty.com, which will remain available for 30 days following the call.  A telephone recording of the call will also be available through August 12, 2016 by dialing (855) 859-2056 and using the passcode 24393436.

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)

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 96 properties include over 2,800 tenants, in approximately 22 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 49 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 9, 2016, 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 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 9, 2016.

 

Federal Realty Investment Trust

Consolidated Balance Sheets

June 30, 2016


June 30,


December 31,


2016


2015


(in thousands, except share and
per share data)


(unaudited)



ASSETS




Real estate, at cost




Operating (including $1,206,112 and $1,192,336 of consolidated variable interest entities, respectively)

$

5,951,546



$

5,630,771


Construction-in-progress

506,843



433,635



6,458,389



6,064,406


Less accumulated depreciation and amortization (including $192,445 and $176,057 of consolidated variable interest entities, respectively)

(1,651,549)



(1,574,041)


Net real estate

4,806,840



4,490,365


Cash and cash equivalents

18,622



21,046


Accounts and notes receivable, net

114,431



110,402


Mortgage notes receivable, net

41,618



41,618


Investment in real estate partnerships

9,807



41,546


Prepaid expenses and other assets

197,150



191,582


TOTAL ASSETS

$

5,188,468



$

4,896,559


LIABILITIES AND SHAREHOLDERS' EQUITY




Liabilities




Mortgages payable (including $443,766 and $448,315 of consolidated variable interest entities, respectively)

$

476,155



$

481,084


Capital lease obligations

71,605



71,620


Notes payable

383,582



341,961


Senior notes and debentures

1,733,611



1,732,551


Accounts payable and accrued expenses

171,982



146,532


Dividends payable

67,931



66,338


Security deposits payable

15,868



15,439


Other liabilities and deferred credits

118,646



121,787


Total liabilities

3,039,380



2,977,312


Commitments and contingencies




Redeemable noncontrolling interests

126,102



137,316


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, 71,417,253 and 69,493,392 shares issued and outstanding, respectively

716



696


Additional paid-in capital

2,645,984



2,381,867


Accumulated dividends in excess of net income

(725,665)



(724,701)


Accumulated other comprehensive loss

(7,293)



(4,110)


Total shareholders' equity of the Trust

1,923,739



1,663,749


Noncontrolling interests

99,247



118,182


Total shareholders' equity

2,022,986



1,781,931


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

5,188,468



$

4,896,559


 

 

Federal Realty Investment Trust







Consolidated Income Statements







June 30, 2016

















Three Months Ended


Six Months Ended


June 30,


June 30,


2016


2015


2016


2015


(in thousands, except per share data)


(unaudited)

REVENUE








Rental income

$

192,935



$

175,884



$

388,243



$

357,050


Other property income

3,488



4,420



5,800



6,885


Mortgage interest income

1,558



1,157



2,282



2,318


Total revenue

197,981



181,461



396,325



366,253


EXPENSES








Rental expenses

36,978



32,623



79,797



74,062


Real estate taxes

23,397



20,667



46,191



41,061


General and administrative

9,036



9,299



17,046



18,152


Depreciation and amortization

48,435



42,671



96,234



84,655


Total operating expenses

117,846



105,260



239,268



217,930


OPERATING INCOME

80,135



76,201



157,057



148,323


Other interest income

77



74



180



103


Interest expense

(23,101)



(23,445)



(46,830)



(47,613)


Early extinguishment of debt



(19,072)





(19,072)


Income from real estate partnerships



406



41



626


INCOME FROM CONTINUING OPERATIONS

57,111



34,164



110,448



82,367


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

1,787



11,509



27,513



11,509


NET INCOME

58,898



45,673



137,961



93,876


   Net income attributable to noncontrolling interests

(2,957)



(2,041)



(5,065)



(4,058)


NET INCOME ATTRIBUTABLE TO THE TRUST

55,941



43,632



132,896



89,818


Dividends on preferred shares

(135)



(135)



(271)



(271)


NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$

55,806



$

43,497



$

132,625



$

89,547


EARNINGS PER COMMON SHARE, BASIC








Continuing operations

$

0.78



$

0.46



$

1.50



$

1.13


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

0.01



0.17



0.38



0.17



$

0.79



$

0.63



$

1.88



$

1.30


Weighted average number of common shares, basic

70,797



68,531



70,270



68,449


EARNINGS PER COMMON SHARE, DILUTED








Continuing operations

$

0.77



$

0.46



$

1.50



$

1.13


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

0.01



0.17



0.38



0.17



$

0.78



$

0.63



$

1.88



$

1.30


Weighted average number of common shares, diluted

70,974



68,713



70,451



68,638


 

 

Federal Realty Investment Trust







Funds From Operations



June 30, 2016




















Three Months Ended


Six Months Ended



June 30,


June 30,



2016


2015


2016


2015



(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO)









Net income


$

58,898



$

45,673



$

137,961



$

93,876


Net income attributable to noncontrolling interests


(2,957)



(2,041)



(5,065)



(4,058)


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


(701)



(11,509)



(26,427)



(11,509)


Depreciation and amortization of real estate assets


42,299



37,726



84,027



75,010


Amortization of initial direct costs of leases


4,265



3,676



8,469



7,116


Funds from operations


101,804



73,525



198,965



160,435


Dividends on preferred shares


(135)



(135)



(271)



(271)


Income attributable to operating partnership units


792



808



1,647



1,641


Income attributable to unvested shares


(264)



(256)



(569)



(573)


FFO (1)


$

102,197



$

73,942



$

199,772



$

161,232


Weighted average number of common shares, diluted


71,816



69,647



71,327



69,581


FFO per diluted share (1)


$

1.42



$

1.06



$

2.80



$

2.32













Notes:


(1)

If the $19.1 million early extinguishment of debt charge in 2015 was excluded, our FFO for the three and six months ended June 30, 2015 would have been $92.9 million and $180.2 million, respectively, and FFO per diluted share would have been $1.33 and $2.59, respectively.

 

 

Federal Realty Investment Trust




Reconciliation of FFO Guidance




June 30, 2016








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 2016. Estimates do not include the impact from potential acquisitions or dispositions which have not closed as of August 4, 2016.






Full Year 2016 Guidance Range




Low


High

Estimated net income available to common shareholders, per diluted share

$

3.43



$

3.49


Adjustments:




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

(0.37)



(0.37)


Estimated depreciation and amortization of real estate

2.33



2.33


Estimated amortization of initial direct costs of leases

0.23



0.23


Estimated FFO per diluted share

$

5.62



$

5.68


















Note:
See Glossary of Terms. Individual items may not add up to total due to rounding.






 

Investor Inquiries 

Media Inquiries

Leah Andress

Andrea Simpson

Investor Relations Associate 

Vice President, Marketing

301/998-8265

617/684-1511

landress@federalrealty.com

asimpson@federalrealty.com

Logo - http://photos.prnewswire.com/prnh/20050907/DCW070LOGO

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/federal-realty-investment-trust-announces-second-quarter-2016-operating-results-300309517.html

SOURCE Federal Realty Investment Trust



NYSE Listing: FRT

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