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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



NYSE Listing: FRT

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