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Federal Realty Investment Trust Announces Third Quarter 2020 Operating Results

ROCKVILLE, Md., Nov. 5, 2020 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its third quarter ended September 30, 2020.

"Progress in many respects was the theme of the third quarter," said Donald C. Wood, President and Chief Executive Officer. "Improving rent collections, leasing volumes at pre-COVID levels and improved liquidity through our $400 million green bond offering all point to a bright future on the other side of this."

Financial Results

Net (loss) income available for common shareholders was ($30.3) million and earnings per diluted share was ($0.41) for third quarter 2020 which includes the $50.7 million net impairment charge relating to The Shops at Sunset Place. This compares to $63.5 million and $0.84, respectively, for third quarter 2019. 

In the third quarter 2020, Federal Realty generated funds from operations available for common shareholders (FFO) of $85.0 million, or $1.12 per diluted share. This compares to FFO of $108.0 million, or $1.43 per diluted share, in the third quarter 2019 which included the $11.9 million charge related to the buyout of the Kmart lease at Assembly.

The year-over-year decreases in net income and FFO were attributable to the impacts of the COVID-19 pandemic with the primary driver being collectibility related adjustment impacts during the third quarter totaling $29.4 million, or $0.39 per share, which included a $1.7 million impact to straight-line rent. The decrease in net income was also driven by The Shops at Sunset Place impairment charge.

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 portfolio was 92.2% leased as of September 30, 2020, and the comparable portfolio was 92.0% leased.

During the third quarter 2020, Federal Realty signed 101 leases for 481,105 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 471,726 square feet at an average rent of $37.38 per square foot compared to the average contractual rent of $37.74 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of -1%, 6% on a straight-line basis. Additionally, Federal Realty signed 13 leases for 63,609 square feet of office space during the third quarter 2020.

COVID-19 Operational Update

All 104 properties remain open and operating. Approximately 97% of our retail tenants based on annualized base rent are open and operating as of October 30, 2020. Annualized base rent reflects the aggregate, annualized in-place contractual (defined as rents billed on a cash basis without taking the impact of rent abatements into account) minimum rent for all occupied commercial spaces.

As of October 30, 2020, the Company has collected approximately 85% of total third quarter 2020 billed recurring rents and 85% of October 2020.

With $863 million of cash and cash equivalents as of September 30, 2020, Federal Realty has approximately $1.9 billion of liquidity in cash and undrawn availability under its $1.0 billion revolving credit facility. Additionally, subsequent to quarter end, the Company issued $400.0 million of green bonds.

Additional information on the impact of the COVID-19 pandemic on the Company's business to date is available in a presentation posted on the Investor section of Federal Realty's website. 

Regular Quarterly Dividends

Federal Realty announced today that its Board of Trustees declared a regular quarterly cash dividend of $1.06 per share, resulting in an indicated annual rate of $4.24 per share.  The regular common dividend will be payable on January 15, 2021, to common shareholders of record as of January 4, 2021.

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, 2021, to shareholders of record as of January 4, 2021.

Summary of Other Quarterly Activities and Recent Developments

October 13, 2020 – Federal Realty closed on its inaugural issuance of green bonds, $400.0 million aggregate principal amount of 1.250% notes at an effective yield of 1.379%, maturing February 15, 2026. The company intends to allocate an amount equal to the net proceeds from this offering to the financing and refinancing of recently completed and future eligible green projects.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of Federal Realty's operating performance on its third quarter 2020 earnings conference call, which is scheduled for Friday, November 6, 2020 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 13705852 (required).  The teleconference can also be accessed via a live webcast at www.federalrealty.com in the Investors section. 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 20, 2020 by dialing 844.512.2921; Passcode: 13705852.

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 2,800 tenants, in 24 million square feet, and approximately 2,800 residential units. 

Federal Realty has increased its quarterly dividends to its shareholders for 53 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 10, 2020 and subsequent quarterly reports on Form 10-Q, 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 redevelopment or renovation projects that we do pursue may cost more, take more time to complete or fail to perform as expected;
  • risk 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 of 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;
  • 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;
  • risks related to natural disasters, climate change and public health crises (such as the outbreak and worldwide spread of COVID-19), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address them, may precipitate or materially exacerbate one or more of the above-mentioned risks, and may significantly disrupt or prevent us from operating our business in the ordinary course for an extended period.

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 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 review the risks contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 10, 2020 and subsequent quarterly reports on Form 10-Q.

 

Federal Realty Investment Trust

Consolidated Balance Sheets

September 30, 2020

September 30,

December 31,

2020

2019

(in thousands, except share and per share data)

(unaudited)

ASSETS


Real estate, at cost


Operating (including $1,709,234 and $1,676,866 of consolidated variable interest entities, respectively)

$

7,817,819

$

7,535,983

Construction-in-progress (including $81,463 and $102,583 of consolidated variable interest entities, respectively)

769,668

760,420

Assets held for sale

—

1,729

8,587,487

8,298,132

Less accumulated depreciation and amortization (including $314,866 and $296,165 of consolidated variable interest entities, respectively)

(2,339,664)

(2,215,413)

Net real estate

6,247,823

6,082,719

Cash and cash equivalents

863,279

127,432

Accounts and notes receivable, net

164,882

152,572

Mortgage notes receivable, net

39,905

30,429

Investment in partnerships

22,093

28,604

Operating lease right of use assets

92,837

93,774

Finance lease right of use assets

51,437

52,402

Prepaid expenses and other assets

229,037

227,060

TOTAL ASSETS

$

7,711,293

$

6,794,992

LIABILITIES AND SHAREHOLDERS' EQUITY


Liabilities


Mortgages payable, net (including $474,775 and $469,184 of consolidated variable interest entities, respectively)

$

549,445

$

545,679

Notes payable, net

402,580

3,781

Senior notes and debentures, net

3,508,824

2,807,134

Accounts payable and accrued expenses

276,396

255,503

Dividends payable

82,688

81,676

Security deposits payable

19,693

21,701

Operating lease liabilities

72,921

73,628

Finance lease liabilities

72,052

72,062

Other liabilities and deferred credits

148,889

157,938

Total liabilities

5,133,488

4,019,102

Commitments and contingencies


Redeemable noncontrolling interests

159,721

139,758

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, 75,641,074 and 75,540,804 shares issued and outstanding, respectively

760

759

Additional paid-in capital

3,174,066

3,166,522

Accumulated dividends in excess of net income

(999,664)

(791,124)

Accumulated other comprehensive loss

(7,300)

(813)

Total shareholders' equity of the Trust

2,327,859

2,535,341

Noncontrolling interests

90,225

100,791

Total shareholders' equity

2,418,084

2,636,132

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

7,711,293

$

6,794,992

 

Federal Realty Investment Trust






Consolidated Income Statements






September 30, 2020







Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

(in thousands, except per share data)

(unaudited)

REVENUE






Rental income

$

207,410

$

233,212

$

613,687

$

694,435

Mortgage interest income

787

735

2,294

2,204

Total revenue

208,197

233,947

615,981

696,639

EXPENSES






Rental expenses

41,832

54,484

122,561

140,182

Real estate taxes

30,520

29,030

90,183

81,883

General and administrative

9,308

11,060

29,373

32,047

Depreciation and amortization

65,631

59,648

190,603

178,327

Total operating expenses

147,291

154,222

432,720

432,439








Impairment charge

(57,218)

—

(57,218)

—

Gain on sale of real estate, net of tax

—

14,293

11,682

30,490








OPERATING INCOME

3,688

94,018

137,725

294,690








OTHER INCOME/(EXPENSE)






Other interest income

538

389

1,355

755

Interest expense

(36,228)

(27,052)

(98,746)

(82,567)

Loss from partnerships

(1,621)

(249)

(6,657)

(1,302)

NET (LOSS) INCOME

(33,623)

67,106

33,677

211,576

   Net loss (income) attributable to noncontrolling interests

5,334

(1,641)

3,304

(5,065)

NET (LOSS) INCOME ATTRIBUTABLE TO THE TRUST

(28,289)

65,465

36,981

206,511

Dividends on preferred shares

(2,010)

(2,010)

(6,031)

(6,031)

NET (LOSS) INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$

(30,299)

$

63,455

$

30,950

$

200,480








EARNINGS PER COMMON SHARE, BASIC AND DILUTED:






Net (loss) income available for common shareholders

$

(0.41)

$

0.84

$

0.40

$

2.68

Weighted average number of common shares

75,404

74,832

75,386

74,584

 

Federal Realty Investment Trust







Funds From Operations / Other Supplemental Information

September 30, 2020









Three Months Ended

Nine Months Ended


September 30,

September 30,


2020

2019

2020

2019


(in thousands, except per share data)

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





Net (loss) income

$

(33,623)

$

67,106

$

33,677

$

211,576

Net loss (income) attributable to noncontrolling interests

5,334

(1,641)

3,304

(5,065)

Gain on sale of real estate, net of tax

—

(14,293)

(11,682)

(30,490)

Impairment charge, net (2)

50,728

—

50,728

—

Depreciation and amortization of real estate assets

58,224

53,441

170,878

160,253

Amortization of initial direct costs of leases

5,853

4,878

15,562

14,165

Funds from operations

86,516

109,491

262,467

350,439

Dividends on preferred shares (3)

(2,010)

(1,875)

(6,031)

(5,625)

Income attributable to operating partnership units

790

658

2,362

2,048

Income attributable to unvested shares

(265)

(314)

(806)

(1,004)

FFO (4)

$

85,031

$

107,960

$

257,992

$

345,858

Weighted average number of common shares, diluted (3)

76,149

75,554

76,133

75,342

FFO per diluted share (4)

$

1.12

$

1.43

$

3.39

$

4.59


Notes:


1)

Amounts reflect the components of "net loss (income) attributable to noncontrolling interests," but excludes "income attributable to operating partnership units."

2)

Impairment charge relates to The Shops at Sunset Place. Amount is net of the allocation to noncontrolling interests.

3)

For the three and nine months ended September 30, 2019, dividends on our Series 1 preferred stock were not deducted in the calculation of FFO available to common shareholders, as the related shares were dilutive and included in "weighted average common shares, diluted."

4)

Funds from operations available for common shareholders for the three and nine months ended September 30, 2019 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 for those periods would have been:




Three Months Ended

Nine Months Ended


September 30, 2019


(in thousands, except per share data)

FFO

$

119,837

$

357,735

FFO per diluted share

$

1.59

$

4.75

 

Inquiries:
Leah Andress Brady
Investor Relations Senior Manager
301.998.8265
lbrady@federalrealty.com

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SOURCE Federal Realty Investment Trust