Federal Realty Investment Trust Announces Second Quarter 2021 Operating Results

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Aug 04, 2021, 16:05 ET

NORTH BETHESDA, Md., Aug. 4, 2021 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its second quarter ended June 30, 2021. For the three months ended June 30, 2021 and 2020, net income available for common shareholders was $0.57 per diluted share and $0.11 per diluted share, respectively.

Highlights for the quarter and subsequent events include:

Generated funds from operations available to common shareholders (FFO) per diluted share of $1.41 for the quarter compared to $0.77 for the second quarter 2020.
Record levels of leasing activity with 124 signed leases for 558,490 square feet of comparable space during second quarter and 227 signed leases for 1.1 million square feet of comparable space through the first six months of 2021.
Federal Realty's portfolio was 92.7% leased, a sequential increase of 90 basis points.

310 basis point spread between leased and occupied

Acquired 4 assets which total 1.76 million square feet on 125 acres of land at a gross value of $407 million, of which Federal owns an average 80% interest.
Increased the regular quarterly cash dividend to $1.07 per common share, resulting in an indicated annual rate of $4.28 per common share. This increase represents the 54^th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector.
Increased 2021 earnings per diluted share guidance to $1.91 to $2.01 and increased 2021 FFO per diluted share guidance to $5.05 to $5.15.
Increased 2022 earnings per diluted share guidance to $1.99 to $2.19 and increased 2022 FFO per diluted share guidance to $5.30 to $5.50.

"Our team delivered an outstanding quarter exceeding all our of internal forecasts," said Donald C. Wood, Chief Executive Officer. "Our all-time high leasing volumes with best-in-class, relevant tenants coupled with our new acquisitions and existing development pipeline set our company and our assets up to be more dominant, more relevant and therefore more valuable in a post-COVID world."

Financial Results

Net income available for common shareholders was $44.2 million and earnings per diluted share was $0.57 for second quarter 2021 versus $8.5 million and $0.11, respectively, for second quarter 2020.

In the second quarter 2021, Federal Realty generated FFO of $110.1 million, or $1.41 per diluted share. This compares to FFO of $58.0 million, or $0.77 per diluted share, in second quarter 2020.

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

The portfolio was 92.7% leased as of June 30, 2021, a sequential increase of 90 basis points over the first quarter 2021 and a spread of 310 basis points versus our occupied percentage, 89.6%, at the end of the second quarter.

During the second quarter 2021, Federal Realty signed 133 leases for 576,782 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty signed 124 leases for 558,490 square feet at an average rent of $37.34 per square foot compared to the average contractual rent of $34.72 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 8%, 18% on a straight-line basis.

As of July 28, 2021, the Company has collected approximately 94% of total second quarter 2021 billed recurring rents. Including rent deferral and abatement agreements, total addressed recurring rent was 98%.

With $304 million of cash and cash equivalents as of June 30, 2021, Federal Realty has approximately $1.3 billion of liquidity in cash and undrawn availability under its $1 billion revolving credit facility.

Regular Quarterly Dividends

Federal Realty announced today that its Board of Trustees increased the regular quarterly cash dividend to $1.07 per common share, resulting in an indicated annual rate of $4.28 per common share. The regular common dividend will be payable on October 15, 2021 to common shareholders of record as of September 22, 2021. This increase represents the 54^th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector. Federal is 1 of only 32 companies in any sector to be considered a 'Dividend King'.

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 October 15, 2021 to shareholders of record as of October 1, 2021.

Summary of Other Quarterly Activities and Recent Developments

Second Quarter 2021 – Federal Realty acquired Grossmont Center in greater San Diego, California, Chesterbrook in McLean, Virginia, and Camelback Colonnade and Hilton Village in the Phoenix Metro area. The 4 assets total 1.76 million square feet on 125 acres of land. Federal acquired its average 80% ownership interest in these assets based on a gross value of $407 million.

June 1, 2021 – Federal Realty issued its 2020 corporate responsibility report highlighting the Company's ESG initiatives and accomplishments and established reduction targets of 15% for landlord controlled electric usage and 30% for greenhouse gas emissions by the end of 2025.

May 2021 – The Institute for Market Transformation and the U.S. Department of Energy's (DOE) Better Buildings Alliance announced Federal Realty as a 2021 Green Lease Leader. Green Lease Leaders sets national standards for what constitutes a green lease, while recognizing landlords and tenants who modernize their leases to spur collaborative action on energy efficiency, cost-savings, air quality, and sustainability in buildings.

May 2021 – Federal Realty was selected by GlobeSt. as one of commercial real estate's Best Places to Work in 2021. The annual series identifies and recognizes the most respected, rewarding workplaces that achieve outstanding performance.

Guidance

Federal Realty increased its 2021 guidance for earnings per diluted share to $1.91 to $2.01 and 2021 FFO per diluted share guidance to $5.05 to $5.15.

Additionally, Federal Realty increased its 2022 guidance for earnings per diluted share to $1.99 to $2.19 and 2022 FFO per diluted share guidance to $5.30 to $5.50.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of Federal Realty's operating performance on its second quarter 2021 earnings conference call, which is scheduled for Wednesday, August 4, 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 13721508 (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 August 18, 2021 by dialing 844.512.2921; Passcode: 13721508.

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 105 properties include approximately 3,000 tenants, in 25 million square feet, and approximately 2,900 residential units.

Federal Realty has increased its quarterly dividends to its shareholders for 54 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 associated with general economic conditions, including 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 11, 2021 and subsequent quarterly reports on Form 10-Q.

Investor Inquiries:

Leah Andress Brady

Director, Investor Relations

301.998.8265

[email protected]

Media Inquiries:

Brenda Pomar

Director, Corporate Communications

301.998.8316

[email protected]

Federal Realty Investment Trust
Consolidated Balance Sheets
June 30, 2021
	June 30,		December 31,
	2021		2020
	(in thousands, except share and per share data)
	(unaudited)
ASSETS
Real estate, at cost
Operating (including $2,184,537 and $1,703,202 of consolidated variable interest entities, respectively)	$	8,412,137	$	7,771,981
Construction-in-progress (including $24,679 and $44,896 of consolidated variable interest entities, respectively)	858,488		810,889
	9,270,625		8,582,870
Less accumulated depreciation and amortization (including $359,198 and $335,735 of consolidated variable interest entities, respectively)	(2,444,329)		(2,357,692)
Net real estate	6,826,296		6,225,178
Cash and cash equivalents	304,268		798,329
Accounts and notes receivable, net	153,293		159,780
Mortgage notes receivable, net	9,534		39,892
Investment in partnerships	11,560		22,128
Operating lease right of use assets	92,457		92,248
Finance lease right of use assets	50,474		51,116
Prepaid expenses and other assets	230,994		218,953
TOTAL ASSETS	$	7,678,876	$	7,607,624
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable, net (including $396,732 and $413,681 of consolidated variable interest entities, respectively)	$	466,026	$	484,111
Notes payable, net	301,625		402,776
Senior notes and debentures, net	3,405,282		3,404,488
Accounts payable and accrued expenses	253,092		228,641
Dividends payable	84,881		83,839
Security deposits payable	23,381		20,388
Operating lease liabilities	74,129		72,441
Finance lease liabilities	72,041		72,049
Other liabilities and deferred credits	209,957		152,424
Total liabilities	4,890,414		4,921,157
Commitments and contingencies
Redeemable noncontrolling interests	212,623		137,720
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, 77,760,588 and 76,727,394 shares issued and outstanding, respectively	782		771
Additional paid-in capital	3,395,189		3,297,305
Accumulated dividends in excess of net income	(1,062,641)		(988,272)
Accumulated other comprehensive loss	(3,238)		(5,644)
Total shareholders' equity of the Trust	2,490,089		2,464,157
Noncontrolling interests	85,750		84,590
Total shareholders' equity	2,575,839		2,548,747
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	7,678,876	$	7,607,624

Federal Realty Investment Trust
Consolidated Income Statements
June 30, 2021
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
	(in thousands, except per share data)
	(unaudited)
REVENUE
Rental income	$	230,795	$	175,479	$	447,930	$	406,277
Mortgage interest income	830		748		1,856		1,507
Total revenue	231,625		176,227		449,786		407,784
EXPENSES
Rental expenses	42,918		36,417		92,156		80,729
Real estate taxes	29,323		30,599		58,743		59,663
General and administrative	12,846		9,814		23,104		20,065
Depreciation and amortization	67,675		62,784		131,549		124,972
Total operating expenses	152,762		139,614		305,552		285,429

Gain on sale of real estate and change in control of interest	—		11,682		17,428		11,682

OPERATING INCOME	78,863		48,295		161,662		134,037

OTHER INCOME/(EXPENSE)
Other interest income	250		509		613		817
Interest expense	(31,177)		(34,073)		(63,262)		(62,518)
Income (loss) from partnerships	123		(3,872)		(1,215)		(5,036)
NET INCOME	48,059		10,859		97,798		67,300
Net income attributable to noncontrolling interests	(1,855)		(352)		(3,358)		(2,030)
NET INCOME ATTRIBUTABLE TO THE TRUST	46,204		10,507		94,440		65,270
Dividends on preferred shares	(2,011)		(2,011)		(4,021)		(4,021)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS	$	44,193	$	8,496	$	90,419	$	61,249

EARNINGS PER COMMON SHARE, BASIC:
Net income available for common shareholders	$	0.57	$	0.11	$	1.16	$	0.81
Weighted average number of common shares	77,474		75,394		77,160		75,377
EARNINGS PER COMMON SHARE, DILUTED:
Net income available for common shareholders	$	0.57	$	0.11	$	1.16	$	0.81
Weighted average number of common shares	77,505		75,394		77,162		75,377

Federal Realty Investment Trust
Funds From Operations
June 30, 2021
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
	(in thousands, except per share data)
Funds from Operations available for common shareholders (FFO)
Net income	$	48,059	$	10,859	$	97,798	$	67,300
Net income attributable to noncontrolling interests	(1,855)		(352)		(3,358)		(2,030)
Gain on sale of real estate and change in control of interest	—		(11,682)		(17,428)		(11,682)
Depreciation and amortization of real estate assets	56,431		56,608		113,534		112,654
Amortization of initial direct costs of leases	9,181		4,809		13,925		9,709
Funds from operations	111,816		60,242		204,471		175,951
Dividends on preferred shares (1)	(2,011)		(2,011)		(4,021)		(4,021)
Income attributable to operating partnership units (2)	740		—		1,525		1,572
Income attributable to unvested shares	(398)		(249)		(721)		(541)
FFO	$	110,147	$	57,982	$	201,254	$	172,961
Weighted average number of common shares, diluted (1)(2)	78,203		75,394		77,881		76,126
FFO per diluted share	$	1.41	$	0.77	$	2.58	$	2.27

Notes:

1)	For the three and six months ended June 30, 2021 and 2020, 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."

2)	For the three months ended June 30, 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 three months ended June 30, 2021 and 2020 and the six months ended June 30, 2020, the weighted average common shares used to compute FFO per diluted common share includes 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.