Federal Realty Investment Trust Announces First Quarter 2023 Operating Results

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May 04, 2023, 16:05 ET

NORTH BETHESDA, Md., May 4, 2023 /PRNewswire/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its first quarter ended March 31, 2023. For the three months ended March 31, 2023 and 2022, net income available for common shareholders was $0.65 per diluted share and $0.63 per diluted share, respectively. For the three months ended March 31, 2023 and 2022, operating income was $95.8 million and $86.0 million, respectively.

Highlights for the first quarter and subsequent to quarter-end include:

Generated funds from operations available to common shareholders (FFO) per diluted share of $1.59 for the quarter, compared to $1.50 for the first quarter 2022, an increase of 6% year-over-year.
Generated comparable property operating income (POI) growth of 3.6% for the first quarter.
Continued robust levels of leasing with 101 signed leases for 504,502 square feet of comparable space in the first quarter at a cash basis rollover of 11%, the second consecutive quarter of double-digit cash basis rollover.
Federal Realty's portfolio was 92.6% occupied and 94.2% leased, representing year-over-year increases of 140 basis points and 50 basis points, respectively.
Subsequent to quarter end, issued, as a green bond, $350.0 million of fixed rate senior unsecured notes that mature on May 1, 2028 and bear interest at 5.375%. The notes were offered at 99.590% of the principal amount with a yield to maturity of 5.468%.

"Strong start to 2023, the strongest first quarter in Federal Realty's 60-year history," said Donald C. Wood, Federal Realty's Chief Executive Officer. "Leasing volume has remained strong exceeding pre-pandemic levels by 20 – 30%. The retail demand for the product that Federal Realty offers is in lock step with what today's consumers and retailers demand in the affluent first ring suburbs of major metropolitan areas in which we operate."

Financial Results

Net Income

For the first quarter 2023, net income available for common shareholders was $53.3 million and earnings per diluted share was $0.65 versus $50.0 million and $0.63, respectively, for the first quarter 2022.

FFO

For the first quarter 2023, FFO was $130.3 million, or $1.59 per diluted share, compared to $119.1 million, or $1.50 per diluted share for the first quarter 2022.

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.

Operational Update

Occupancy

The portfolio was 92.6% occupied as of March 31, 2023, an increase of 140 basis points year-over-year. The portfolio was 94.2% leased as of March 31, 2023, an increase of 50 basis points year-over-year.

Additionally, our comparable residential properties were 96.9% leased as of March 31, 2023.

Leasing Activity

During the first quarter 2023, Federal Realty signed 107 leases for 524,286 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty signed 101 leases for 504,502 square feet at an average rent of $34.72 per square foot compared to the average contractual rent of $31.20 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 11%, 24% on a straight-line basis.

Transaction Activity

During the first quarter, Federal Realty acquired the remaining portions of Huntington Square in East Northport, New York, for $35.5 million. The acquisition included a 168,000 square foot parcel and the entire fee interest of the property giving us full control of the entirety of this 243,000 square foot property located in the heart of Suffolk County's retail corridor.

In the first quarter, Federal Realty sold one retail property for a total sales price of $13.2 million.

Regular Quarterly Dividends

Federal Realty announced today that its Board of Trustees declared a regular quarterly cash dividend of $1.08 per common share, resulting in an indicated annual rate of $4.32 per common share. The regular common dividend will be payable on July 17, 2023 to common shareholders of record as of June 22, 2023.

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 July 17, 2023 to shareholders of record as of July 3, 2023.

Guidance

Federal Realty maintained its 2023 guidance for earnings per diluted share of $2.59 to $2.79 and 2023 FFO per diluted share of $6.38 to $6.58.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of Federal Realty's operating performance on its first quarter 2023 earnings conference call, which is scheduled for Thursday, May 4, 2023 at 5:00 PM ET. To participate, please call 1-844-826-3035 five to ten minutes prior to the call start time and use the passcode 8664992 (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 May 25, 2023 by dialing 1-844-512-2921; Passcode: 10177310.

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 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 102 properties include approximately 3,200 tenants, in 26 million square feet, and approximately 3,100 residential units.

Federal Realty has increased its quarterly dividends to its shareholders for 55 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 8, 2023, 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 or to fill existing vacancy;
risks that we may not be able to proceed with or obtain necessary approvals for any development, redevelopment or renovation project, and that completion of anticipated or ongoing property development, redevelopment or renovation projects that we do pursue may cost more, take more time to complete or fail to perform as expected;
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, or if the costs of capital we obtain are significantly higher than historical levels;
risks associated with general economic conditions, including inflation and local economic conditions in our geographic markets;
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; and
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 8, 2023.

Federal Realty Investment Trust
Consolidated Balance Sheets
March 31, 2023
	March 31,	December 31,
	2023	2022
	(in thousands, except share and per share data)
	(unaudited)
ASSETS
Real estate, at cost
Operating (including $2,002,163 and $1,997,583 of consolidated variable interest entities, respectively)	$ 9,532,332	$ 9,441,945
Construction-in-progress (including $12,174 and $8,477 of consolidated variable interest entities, respectively)	664,184	662,554
	10,196,516	10,104,499
Less accumulated depreciation and amortization (including $376,441 and $362,921 of consolidated variable interest entities, respectively)	(2,771,150)	(2,715,817)
Net real estate	7,425,366	7,388,682
Cash and cash equivalents	99,449	85,558
Accounts and notes receivable, net	200,512	197,648
Mortgage notes receivable, net	9,443	9,456
Investment in partnerships	143,464	145,205
Operating lease right of use assets, net	88,831	94,569
Finance lease right of use assets	45,179	45,467
Prepaid expenses and other assets	257,050	267,406
TOTAL ASSETS	$ 8,269,294	$ 8,233,991
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable, net (including $191,193 and $191,827 of consolidated variable interest entities, respectively)	$ 319,910	$ 320,615
Notes payable, net	661,391	601,077
Senior notes and debentures, net	3,408,104	3,407,701
Accounts payable and accrued expenses	196,092	190,340
Dividends payable	90,436	90,263
Security deposits payable	28,351	28,508
Operating lease liabilities	77,442	77,743
Finance lease liabilities	67,658	67,660
Other liabilities and deferred credits	237,316	237,699
Total liabilities	5,086,700	5,021,606
Commitments and contingencies
Redeemable noncontrolling interests	178,353	178,370
Shareholders' equity
Preferred shares, authorized 15,000,000 shares, $0.01 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), 392,878 shares issued and outstanding	9,822	9,822
Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized, 81,511,204 and 81,342,959 shares issued and outstanding, respectively	820	818
Additional paid-in capital	3,828,930	3,821,801
Accumulated dividends in excess of net income	(1,068,892)	(1,034,186)
Accumulated other comprehensive income	4,546	5,757
Total shareholders' equity of the Trust	2,925,226	2,954,012
Noncontrolling interests	79,015	80,003
Total shareholders' equity	3,004,241	3,034,015
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 8,269,294	$ 8,233,991

Federal Realty Investment Trust
Consolidated Income Statements
March 31, 2023
	Three Months Ended
	March 31,
	2023	2022
	(in thousands, except per share data)
	(unaudited)
REVENUE
Rental income	$ 272,798	$ 256,507
Mortgage interest income	261	264
Total revenue	273,059	256,771
EXPENSES
Rental expenses	55,205	56,211
Real estate taxes	32,566	30,560
General and administrative	12,545	12,342
Depreciation and amortization	78,637	71,674
Total operating expenses	178,953	170,787

Gain on sale of real estate	1,702	—

OPERATING INCOME	95,808	85,984

OTHER INCOME/(EXPENSE)
Other interest income	632	120
Interest expense	(39,225)	(31,573)
Income from partnerships	516	197
NET INCOME	57,731	54,728
Net income attributable to noncontrolling interests	(2,396)	(2,744)
NET INCOME ATTRIBUTABLE TO THE TRUST	55,335	51,984
Dividends on preferred shares	(2,008)	(2,010)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS	$ 53,327	$ 49,974

EARNINGS PER COMMON SHARE, BASIC:
Net income available for common shareholders	$ 0.65	$ 0.63
Weighted average number of common shares	81,141	78,446
EARNINGS PER COMMON SHARE, DILUTED:
Net income available for common shareholders	$ 0.65	$ 0.63
Weighted average number of common shares	81,141	78,543

Federal Realty Investment Trust
Funds From Operations
March 31, 2023
	Three Months Ended
	March 31,
	2023	2022
	(in thousands, except per share data)
Funds from Operations available for common shareholders (FFO)
Net income	$ 57,731	$ 54,728
Net income attributable to noncontrolling interests	(2,396)	(2,744)
Gain on sale of real estate	(1,702)	—
Depreciation and amortization of real estate assets	70,504	62,977
Amortization of initial direct costs of leases	7,785	5,793
Funds from operations	131,922	120,754
Dividends on preferred shares (1)	(1,875)	(1,875)
Income attributable to downREIT operating partnership units	693	706
Income attributable to unvested shares	(482)	(436)
FFO	$ 130,258	$ 119,149
Weighted average number of common shares, diluted (1)(2)	81,877	79,299
FFO per diluted share (2)	$ 1.59	$ 1.50

Notes:

(1) For the three months ended March 31, 2023 and 2022, 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 are included in "weighted average common shares, diluted."

(2) The weighted average common shares used to compute FFO per diluted common share includes downREIT operating partnership units that were excluded from the computation of diluted EPS. Conversion of these operating partnership units is dilutive in the computation of FFO per diluted share, but is anti-dilutive for the computation of dilutive EPS for these periods.

Investor Inquiries:

Leah Andress Brady

Vice President, Investor Relations

301.998.8265

[email protected]

Media Inquiries:

Brenda Pomar

Director, Corporate Communications

301.998.8316

[email protected]

SOURCE Federal Realty Investment Trust