Federal Realty Investment Trust Announces First Quarter 2019 Operating Results

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May 02, 2019, 16:05 ET

ROCKVILLE, Md., May 2, 2019 /PRNewswire/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its first quarter ended March 31, 2019. For the three months ended March 31, 2019 and 2018, net income available for common shareholders was $0.78 per diluted share and $0.81 per diluted share, respectively.

Highlights of the quarter include:

Generated funds from operations available for common shareholders (FFO) per diluted share of $1.56 for the quarter compared to $1.52 in first quarter 2018.
Generated comparable property operating income (POI) growth of 3.5% for the first quarter.
Signed leases for 247,331 sf of comparable space in the first quarter at an average rent of $45.07 psf and achieved cash basis rollover growth on those comparable spaces of 10%.
Announced the launch of Phase I at Santana West, a 360,000 square foot office building across Winchester Boulevard from Santana Row.
Maintained our 2019 FFO per diluted share guidance range to $6.30 - $6.46.

"We're pleased with our first quarter results," said Donald C. Wood, President and Chief Executive Officer. "We continue to execute on our multifaceted business plan with the goal of driving long term real estate value. Our best-in-class located properties are our greatest assets as we navigate the changing retail environment."

Financial Results

Net income available for common shareholders was $58.1 million and earnings per diluted share was $0.78 for first quarter 2019 versus $59.2 million and $0.81, respectively, for first quarter 2018.

In the first quarter 2019, Federal Realty generated FFO of $116.9 million, or $1.56 per diluted share. This compares to FFO of $112.4 million, or $1.52 per diluted share, in first 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 94.0% leased as of March 31, 2019, and the comparable portfolio was 94.6% leased. In first quarter 2019, 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.

During the first quarter 2019, Federal Realty signed 79 leases for 305,724 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 247,331 square feet at an average rent of $45.07 per square foot compared to the average contractual rent of $41.03 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 10%.

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees declared a regular quarterly cash dividend of $1.02 per common share, resulting in an indicated annual rate of $4.08 per common share. The regular common dividend will be payable on July 15, 2019 to common shareholders of record as of June 21, 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 payable on July 15, 2019 to common shareholders of record as of June 21, 2019.

Summary of Other Quarterly Activities and Recent Developments

May 1, 2019 – Federal Realty announced the launch of Phase I at Santana West, a 360,000 square foot office building across Winchester Boulevard from Santana Row. The estimated total investment in Phase I is expected to be approximately $250 - $270 million.

Guidance

Federal Realty maintained its 2019 guidance for FFO per diluted share of $6.30 to $6.46 and maintained 2019 earnings per diluted share guidance of $3.14 to $3.30.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its first quarter 2019 earnings conference call, which is scheduled for Friday, May 3, 2019 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 6892556 (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 May 10, 2019 by dialing 855.859.2056; Passcode: 6892556.

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 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, 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.

Investor Inquires:	Media Inquiries:
Leah Andress Brady	Brenda Pomar
Investor Relations Manager	Corporate Communications Manager
301.998.8265	301.998.8316
[email protected]	[email protected]

Federal Realty Investment Trust
Consolidated Balance Sheets
March 31, 2019
	March 31,			December 31,
	2019			2018
	(in thousands, except share and per share data)
	(unaudited)
ASSETS
Real estate, at cost
Operating (including $1,699,440 and $1,701,804 of consolidated variable interest entities, respectively)	$	7,293,205		$		7,307,622
Construction-in-progress (including $62,037 and $51,313 of consolidated variable interest entities, respectively)	540,192			495,274
Assets held for sale	10,771			16,576
	7,844,168			7,819,472
Less accumulated depreciation and amortization (including $301,029 and $292,374 of consolidated variable interest entities, respectively)	(2,105,159)			(2,059,143)
Net real estate	5,739,009			5,760,329
Cash and cash equivalents	43,003			64,087
Accounts and notes receivable, net	137,779			142,237
Mortgage notes receivable, net	30,429			30,429
Investment in real estate partnerships	30,530			26,859
Operating lease right of use assets	95,402			—
Finance lease right of use assets	53,365			—
Prepaid expenses and other assets	221,849			265,703
TOTAL ASSETS	$	6,351,366		$		6,289,644
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable, net (including $441,107 and $444,388 of consolidated variable interest entities, respectively)	$	452,466		$		474,379
Capital lease obligations	—			71,519
Notes payable, net	299,106			279,027
Senior notes and debentures, net	2,404,987			2,404,279
Accounts payable and accrued expenses	156,029			177,922
Dividends payable	78,547			78,207
Security deposits payable	19,381			17,875
Operating lease liabilities	75,057			—
Finance lease liabilities	72,071			—
Other liabilities and deferred credits	157,451			182,898
Total liabilities	3,715,095			3,686,106
Commitments and contingencies
Redeemable noncontrolling interests	134,708			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, 74,836,984 and 74,249,633 shares issued and outstanding, respectively	752			745
Additional paid-in capital	3,071,981			3,004,442
Accumulated dividends in excess of net income	(843,947)			(818,877)
Accumulated other comprehensive loss	(625)			(416)
Total shareholders' equity of the Trust	2,388,158			2,345,891
Noncontrolling interests	113,405			121,439
Total shareholders' equity	2,501,563			2,467,330
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	6,351,366		$		6,289,644


Federal Realty Investment Trust
Consolidated Income Statements
March 31, 2019
	Three Months Ended
	March 31,
	2019		2018
	(in thousands, except per share data)
	(unaudited)
REVENUE
Rental income	$	231,492	$		224,648
Mortgage interest income	735		757
Total revenue	232,227		225,405
EXPENSES
Rental expenses	44,260		44,773
Real estate taxes	27,687		28,448
General and administrative	9,565		7,929
Depreciation and amortization	59,622		58,110
Total operating expenses	141,134		139,260

Gain on sale of real estate, net of tax	—		3,316

OPERATING INCOME	91,093		89,461

OTHER INCOME/(EXPENSE)
Other interest income	177		179
Interest expense	(28,033)		(26,184)
Loss from partnerships	(1,434)		(525)
NET INCOME	61,803		62,931
Net income attributable to noncontrolling interests	(1,659)		(1,684)
NET INCOME ATTRIBUTABLE TO THE TRUST	60,144		61,247
Dividends on preferred shares	(2,010)		(2,010)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS	$	58,134	$		59,237
EARNINGS PER COMMON SHARE, BASIC:
Net income available for common shareholders	$	0.78	$		0.81
Weighted average number of common shares	74,200		72,905
EARNINGS PER COMMON SHARE, DILUTED:
Net income available for common shareholders	$	0.78	$		0.81
Weighted average number of common shares	74,200		72,968

Federal Realty Investment Trust
Funds From Operations
March 31, 2019
	Three Months Ended
	March 31,
	2019		2018
	(in thousands, except per share data)
Funds from Operations available for common shareholders (FFO) (1)
Net income	$	61,803	$	62,931
Net income attributable to noncontrolling interests	(1,659)		(1,684)
Gain on sale of real estate, net	—		(3,316)
Depreciation and amortization of real estate assets	53,489		51,351
Amortization of initial direct costs of leases	4,750		4,600
Funds from operations	118,383		113,882
Dividends on preferred shares	(1,875)		(1,875)
Income attributable to operating partnership units	729		775
Income attributable to unvested shares	(344)		(388)
FFO	$	116,893	$	112,394
Weighted average number of common shares, diluted	75,010		73,838
FFO per diluted share	$	1.56	$	1.52

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 $0.4 million for the three months ended March 31, 2019, compared to $1.6 million for the three months ended March 31, 2018.