Federal Realty Investment Trust Announces Operating Results for the Year and Quarter Ended December 31, 2020

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Feb 11, 2021, 16:05 ET

NORTH BETHESDA, Md., Feb. 11, 2021 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its year and quarter ended December 31, 2020. For the year ended December 31, 2020 and 2019, net income available for common shareholders was $1.62 per diluted share and $4.61 per diluted share, respectively. For the three months ended December 31, 2020 and 2019, net income available for common shareholders was $1.22 per diluted share and $1.92 per diluted share, respectively.

Key Highlights of the full year and quarter include:

Signed leases for 449,783 square feet of comparable space in the fourth quarter at an average rent of $32.16 psf and achieved cash basis rollover growth on those comparable spaces of 1%.
Sold three properties for combined gross proceeds of $170 million in the fourth quarter.
Executed inaugural green offering, $400.0 million aggregate principal amount of 1.250% notes at an effective yield of 1.379%, maturing February 15, 2026.
Ended the quarter with $798 million of cash on hand, $1.0 billion of availability on its revolving credit facility and no public bonds maturing until 2023.
Generated funds from operations available for common shareholders (FFO) per diluted share of $4.38 for the year ($4.52 excluding the $11.2 million early extinguishment of debt charge) compared to $6.17 in 2019 ($6.33 excluding the $11.9 million charge related to the buyout of the Kmart lease at Assembly). For the fourth quarter, generated FFO per diluted share of $0.99 ($1.14 excluding the early extinguishment of debt charge) compared to $1.58 for the fourth quarter 2019.

"While COVID certainly weighed on our quarterly and yearly results, the sheer volume of leasing and other transactions that we executed at the end of last year along with the continuing strong leasing demand for our real estate as evidenced by the many substantive discussions we're having with prospective tenants today set us up extremely well for a post COVID recovery as vaccinations are delivered to a large segment of the population," said Donald C. Wood, President and Chief Executive Officer. "We believe that Federal's high-quality open-air shopping centers and mixed-use communities located in the first-tier suburbs of major metropolitan markets are the center of the bulls eye in terms of tenant desirability."

Financial Results

For the full year 2020, Federal Realty reported net income available for common shareholders of $123.7 million and earnings per diluted share of $1.62, which includes the $50.7 million net impairment charge relating to The Shops at Sunset Place and the $11.2 million early extinguishment of debt charge. This compares to net income available for common shareholders of $345.8 million and earnings per diluted share of $4.61 for the full year 2019. Net income available for common shareholders was $92.7 million and earnings per diluted share was $1.22 for the fourth quarter 2020 which includes the $11.2 million early extinguishment of debt charge versus $145.3 million and $1.92, respectively, for the fourth quarter 2019.

For the full year 2020, Federal Realty generated funds from operations available for common shareholders (FFO) of $333.8 million, or $4.38 per diluted share ($4.52 excluding the $11.2 million early extinguishment of debt charge). This compares to FFO of $465.8 million, or $6.17 per diluted share ($6.33 excluding the $11.9 million charge related to the buyout of the Kmart lease at Assembly) for the full year 2019. For the fourth quarter 2020, FFO was $75.1 million, or $0.99 per diluted share ($1.14 excluding the early extinguishment of debt charge), compared to $120.0 million, or $1.58 per diluted share for the fourth quarter 2019.

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 impacts totaling $106.6 million, or $1.40 per share, which included a $12.7 million impact to straight-line rent for the full year 2020. For the fourth quarter 2020, collectibility related impacts totaled $18.9 million, or $0.25 per share, which included a $1.6 million impact to straight-line rent.

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 December 31, 2020, and the comparable portfolio was 92.1% leased.

For the year 2020, Federal Realty signed 336 leases for 1.8 million square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 1.7 million square feet at an average rent of $31.53 per square foot compared to the average contractual rent of $30.76 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 3%, 12% on a straight-line basis.

During the fourth quarter 2020, Federal Realty signed 103 leases for 468,901 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 449,783 square feet at an average rent of $32.16 per square foot compared to the average contractual rent of $31.95 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 1%, 11% on a straight-line basis.

COVID-19 Operational Update

All 101 properties remain open and operating. Approximately 98% of our retail tenants based on annualized base rent are open and operating as of January 31, 2021. 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 January 31, 2021, the Company has collected approximately 89% of total fourth quarter 2020 billed recurring rents.

With $798 million of cash and cash equivalents as of December 31, 2020, Federal Realty has approximately $1.8 billion of liquidity in cash and undrawn availability under its $1.0 billion revolving credit facility.

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's Board of Trustees declared a regular quarterly cash dividend of $1.06 per common share, resulting in an indicated annual rate of $4.24 per common share. The regular common dividend will be payable on April 15, 2021, to common shareholders of record as of March 16, 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 April 15, 2021, to shareholders of record as of March 16, 2021.

Summary of Other Quarterly Activities and Recent Developments

February 11, 2021 – Federal Realty announced the promotion of Jeffrey S. Berkes to President and Chief Operating Officer. In this newly created role, Mr. Berkes will have direct responsibility for overseeing and directing all of Federal's day-to-day property operating functions, including leasing, development and asset management, on both the East and West Coasts.

December 2020 – Federal Realty sold three non-strategic assets, The Shops at Sunset Place, Eastgate Crossing and Sam's Park & Shop, for combined gross proceeds of $170 million.

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 fourth quarter 2020 earnings conference call, which is scheduled for Thursday, February 11, 2021 at 5:00 PM ET. To participate, please call 877.407.9208 five to ten minutes prior to the call start time and use the passcode 13714444 (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 February 25, 2021 by dialing 844.512.2921; Passcode: 13714444.

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 101 properties include approximately 2,800 tenants, in 23 million square feet, and approximately 2,900 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 11, 2021, 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; 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, my precipitate or materially exacerbate one or more the above-mentioned risks, and my 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 11, 2021.

Federal Realty Investment Trust
Consolidated Balance Sheets
December 31, 2020
	December 31,
	2020		2019
	(in thousands, except share and
	per share data)
ASSETS
Real estate, at cost
Operating (including $1,703,202 and $1,676,866 of consolidated variable interest entities, respectively)	$	7,771,981	$	7,535,983
Construction-in-progress (including $44,896 and $102,583 of consolidated variable interest entities, respectively)	810,889		760,420
Assets held for sale	—		1,729
	8,582,870		8,298,132
Less accumulated depreciation and amortization (including $335,735 and $296,165 of consolidated variable interest entities, respectively)	(2,357,692)		(2,215,413)
Net real estate	6,225,178		6,082,719
Cash and cash equivalents	798,329		127,432
Accounts and notes receivable	159,780		152,572
Mortgage notes receivable, net	39,892		30,429
Investment in partnerships	22,128		28,604
Operating lease right of use assets	92,248		93,774
Finance lease right of use assets	51,116		52,402
Prepaid expenses and other assets	218,953		227,060
TOTAL ASSETS	$	7,607,624	$	6,794,992
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable, net (including $413,681 and $469,184 of consolidated variable interest entities, respectively)	$	484,111	$	545,679
Notes payable	402,776		3,781
Senior notes and debentures	3,404,488		2,807,134
Accounts payable and other expenses	228,641		255,503
Dividends payable	83,839		81,676
Security deposits payable	20,388		21,701
Operating lease liabilities	72,441		73,628
Finance lease liabilities	72,049		72,062
Other liabilities and deferred credits	152,424		157,938
Total liabilities	4,921,157		4,019,102
Commitments and contingencies
Redeemable noncontrolling interests	137,720		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, 76,727,394 and 75,540,804 shares issued and outstanding, respectively	771		759
Additional paid-in capital	3,297,305		3,166,522
Accumulated dividends in excess of net income	(988,272)		(791,124)
Accumulated other comprehensive loss	(5,644)		(813)
Total shareholders' equity of the Trust	2,464,157		2,535,341
Noncontrolling interests	84,590		100,791
Total shareholders' equity	2,548,747		2,636,132
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	7,607,624	$	6,794,992

Federal Realty Investment Trust
Consolidated Income Statements
December 31, 2020
	Three Months Ended				Year Ended
	December 31,				December 31,
	2020		2019		2020		2019
	(in thousands, except per share data)

REVENUE
Rental income	$	218,484	$	238,303	$	832,171	$	932,738
Mortgage interest income	1,029		846		3,323		3,050
Total revenue	219,513		239,149		835,494		935,788
EXPENSES
Rental expenses	48,359		47,649		170,920		187,831
Real estate taxes	29,059		29,044		119,242		110,927
General and administrative	12,307		10,707		41,680		42,754
Depreciation and amortization	64,424		61,431		255,027		239,758
Total operating expenses	154,149		148,831		586,869		581,270

Impairment charge	—		—		(57,218)		—
Gain on sale of real estate, net of tax	86,435		85,903		98,117		116,393

OPERATING INCOME	151,799		176,221		289,524		470,911

OTHER INCOME/(EXPENSE)
Other interest income	539		511		1,894		1,266
Interest expense	(37,543)		(27,056)		(136,289)		(109,623)
Early extinguishment of debt	(11,179)		—		(11,179)		—
Loss from partnerships	(1,405)		(710)		(8,062)		(2,012)
NET INCOME	102,211		148,966		135,888		360,542
Net income attributable to noncontrolling interests	(7,486)		(1,611)		(4,182)		(6,676)
NET INCOME ATTRIBUTABLE TO THE TRUST	94,725		147,355		131,706		353,866
Dividends on preferred shares	(2,011)		(2,011)		(8,042)		(8,042)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS	$	92,714	$	145,344	$	123,664	$	345,824
EARNINGS PER COMMON SHARE, BASIC AND DILUTED
Net income available for common shareholders	$	1.22	$	1.92	$	1.62	$	4.61
Weighted average number of common shares, basic	75,898		75,305		75,515		74,766


Federal Realty Investment Trust
Funds From Operations
December 31, 2020
	Three Months Ended				Year Ended
	December 31,				December 31,
	2020		2019		2020		2019
	(in thousands, except per share data)
Funds from Operations available for common shareholders (FFO)
Net income	$	102,211	$	148,966	$	135,888	$	360,542
Net income attributable to noncontrolling interests	(7,486)		(1,611)		(4,182)		(6,676)
Gain on sale of real estate, net of tax	(80,240)		(85,903)		(91,922)		(116,393)
Impairment charge, net (1)	—		—		50,728		—
Depreciation and amortization of real estate assets	57,972		54,886		228,850		215,139
Amortization of initial direct costs of leases	4,853		5,194		20,415		19,359
Funds from operations	77,310		121,532		339,777		471,971
Dividends on preferred shares (2)	(2,011)		(1,875)		(8,042)		(7,500)
Income attributable to operating partnership units (3)	—		655		3,151		2,703
Income attributable to unvested shares	(247)		(351)		(1,037)		(1,355)
FFO (5)	$	75,052	$	119,961	$	333,849	$	465,819
Weighted average number of common shares, diluted (2)(3)	75,898		76,024		76,261		75,514
FFO per diluted share (4)	$	0.99	$	1.58	$	4.38	$	6.17

Notes:

1)    Impairment charge relates to The Shops at Sunset Place and was recorded during the quarter ended September 30, 2020. Amount is net of the allocation to noncontrolling interests.
2)    For the three months and year ended December 31, 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."
3)    For the three months ended December 31, 2020, income attributable to operating partnership units is not added back in the calculation of FFO available to common shareholders, as the related shares are not dilutive and are not included in "weighted average common shares, diluted" for this period. For the year ended December 31, 2020 and the three months and year ended December 31, 2019, the weighted average common shares used to compute FFO per diluted common share include 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 anti-dilutive for the computation of dilutive EPS for these periods.
4)    FFO available for common shareholders for the year ended December 31, 2020 includes a $11.2 million charge related to early extinguishment of debt, and for the year ended December 31, 2019 includes an $11.9 million charge related to the buyout of the Kmart lease at Assembly Row Marketplace. If these charges were excluded, our FFO, FFO per diluted share, and dividend payout ratio as a percentage of FFO at each respective year end would have been:

	Three Months Ended		Year Ended
	December 31,		December 31,
	2020		2020		2019
	(in thousands, except per share data)
FFO	$	87,002	$	344,994	$	477,696
FFO per diluted share	$	1.14	$	4.52	$	6.33