Federal Realty Investment Trust Announces Second Quarter 2023 Operating Results

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Aug 02, 2023, 16:05 ET

NORTH BETHESDA, Md., Aug. 2, 2023 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its second quarter ended June 30, 2023. For the three months ended June 30, 2023 and 2022, net income available for common shareholders was $0.72 per diluted share and $0.75 per diluted share, respectively. For the three months ended June 30, 2023 and 2022, operating income was $101.8 million and $93.6 million, respectively.

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

Generated funds from operations available to common shareholders (FFO) per diluted share of $1.67 for the quarter, a company record.
Generated 4.6% comparable property operating income (POI) growth excluding lease termination fees and COVID-19 pandemic related prior period rents collected for the second quarter.
Continued robust levels of leasing with 107 signed leases for 576,345 square feet of comparable space in the second quarter at a cash basis rollover of 7%, highest second quarter comparable leasing volume on record.
Federal Realty's portfolio was 92.8% occupied and 94.3% leased, representing year-over-year increases of 80 basis points and 20 basis points, respectively.
Issued $350.0 million of fixed rate senior unsecured notes, as a green bond, 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%.
Increased the regular quarterly cash dividend to $1.09 per common share, resulting in an indicated annual rate of $4.36 per common share. This increase represents the 56^th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector.
Increased 2023 earnings per diluted share guidance to $2.64 - $2.76 and increased 2023 FFO per diluted share guidance to $6.46 - $6.58.
Issued the Company's annual Environmental, Social and Governance Report.

"A record quarter for Federal Realty; $1.67 of FFO per share driven by strong results in all aspects of our company and our 56^th consecutive year of increased common dividends to our shareholders, also a REIT industry record," said Donald C. Wood, Federal Realty's Chief Executive Officer. "Continued robust leasing activity demonstrates the strength of retail demand for the high-quality product that Federal Realty offers."

Financial Results

Net Income

For the second quarter 2023, net income available for common shareholders was $58.5 million and earnings per diluted share was $0.72 versus $59.7 million and $0.75, respectively, for the second quarter 2022.

FFO

For the second quarter 2023, FFO was $136.9 million, or $1.67 per diluted share, compared to $131.6 million, or $1.65 per diluted share for the second 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 92.8% occupied as of June 30, 2023, an increase of 80 basis points year-over-year. The portfolio was 94.3% leased as of June 30, 2023, an increase of 20 basis points year-over-year.

Additionally, our comparable residential properties were 98.0% leased as of June 30, 2023.

Leasing Activity

During the second quarter 2023, Federal Realty signed 112 leases for 602,911 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty signed 107 leases for 576,345 square feet at an average rent of $35.34 per square foot compared to the average contractual rent of $33.09 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 7%, 19% on a straight-line basis.

Regular Quarterly Dividends

Federal Realty announced today that its Board of Trustees increased the regular quarterly cash dividend to $1.09 per common share, resulting in an indicated annual rate of $4.36 per common share. The regular common dividend will be payable on October 16, 2023 to common shareholders of record as of September 22, 2023. This increase represents the 56th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector.

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 16, 2023 to shareholders of record as of October 2, 2023.

Summary of Other Quarterly Activities

April 12, 2023 – Federal Realty issued $350.0 million of fixed rate senior unsecured notes, as a green bond, 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%. The net proceeds, after issuance discount, underwriting fees, and other costs were $345.7 million.
June 1, 2023 – Federal Realty repaid its $275.0 million 2.75% senior unsecured notes at maturity.
June 1, 2023 – Federal Realty issued its 2022 Environmental, Social and Governance Report highlighting the Company's commitment to its ESG initiatives and accomplishments.
June 21, 2023 – Federal Realty was named to The Washington Post's 2023 Top Workplaces list for its leadership in employee satisfaction and engagement.

Guidance

Federal Realty increased its 2023 guidance for earnings per diluted share to $2.64 to $2.76 from $2.59 to $2.79 and 2023 FFO per diluted share to $6.46 to $6.58 from $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 second quarter 2023 earnings conference call, which is scheduled for Wednesday, August 2, 2023 at 5:30 PM ET. To participate, please call 1-844-826-3035 five to ten minutes prior to the call start time and use the passcode 3865860 (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 16, 2023 by dialing 1-844-512-2921; Passcode: 10180484.

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 3,300 tenants, in 26 million square feet, and approximately 3,100 residential units.

Federal Realty has increased its quarterly dividends to its shareholders for 56 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 and subsequent quarterly reports on Form 10-Q.

Investor Inquiries:

Leah Andress Brady

Vice President, Investor Relations

301.998.8265

[email protected]

Media Inquiries:

Brenda Pomar

Senior Director, Corporate Communications

301.998.8316

[email protected]

Federal Realty Investment Trust
Consolidated Balance Sheets
June 30, 2023
	June 30,	December 31,
	2023	2022
	(in thousands, except share and per share data)
	(unaudited)
ASSETS
Real estate, at cost
Operating (including $2,008,167 and $1,997,583 of consolidated variable interest entities, respectively)	$ 9,732,833	$ 9,441,945
Construction-in-progress (including $11,441 and $8,477 of consolidated variable interest entities, respectively)	667,554	662,554
	10,400,387	10,104,499
Less accumulated depreciation and amortization (including $388,881 and $362,921 of consolidated variable interest entities, respectively)	(2,839,550)	(2,715,817)
Net real estate	7,560,837	7,388,682
Cash and cash equivalents	98,064	85,558
Accounts and notes receivable, net	195,689	197,648
Mortgage notes receivable, net	9,222	9,456
Investment in partnerships	34,942	145,205
Operating lease right of use assets, net	88,215	94,569
Finance lease right of use assets	44,891	45,467
Prepaid expenses and other assets	247,016	267,406
TOTAL ASSETS	$ 8,278,876	$ 8,233,991
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable, net (including $190,562 and $191,827 of consolidated variable interest entities, respectively)	$ 319,208	$ 320,615
Notes payable, net	633,095	601,077
Senior notes and debentures, net	3,479,333	3,407,701
Accounts payable and accrued expenses	187,027	190,340
Dividends payable	90,441	90,263
Security deposits payable	29,292	28,508
Operating lease liabilities	76,928	77,743
Finance lease liabilities	67,655	67,660
Other liabilities and deferred credits	237,317	237,699
Total liabilities	5,120,296	5,021,606
Commitments and contingencies
Redeemable noncontrolling interests	178,149	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, 200,000,000 and 100,000,000 shares authorized, respectively, 81,515,511 and 81,342,959 shares issued and outstanding, respectively	820	818
Additional paid-in capital	3,832,983	3,821,801
Accumulated dividends in excess of net income	(1,098,432)	(1,034,186)
Accumulated other comprehensive income	5,496	5,757
Total shareholders' equity of the Trust	2,900,689	2,954,012
Noncontrolling interests	79,742	80,003
Total shareholders' equity	2,980,431	3,034,015
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 8,278,876	$ 8,233,991

Federal Realty Investment Trust
Consolidated Income Statements
June 30, 2023
	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2023	2022	2023	2022
	(in thousands, except per share data)
	(unaudited)
REVENUE
Rental income	$ 280,388	$ 263,830	$ 553,186	$ 520,337
Mortgage interest income	291	269	552	533
Total revenue	280,679	264,099	553,738	520,870
EXPENSES
Rental expenses	55,610	51,169	110,815	107,380
Real estate taxes	32,381	31,265	64,947	61,825
General and administrative	11,913	13,604	24,458	25,946
Depreciation and amortization	78,974	74,461	157,611	146,135
Total operating expenses	178,878	170,499	357,831	341,286

Gain on sale of real estate	—	—	1,702	—

OPERATING INCOME	101,801	93,600	197,609	179,584

OTHER INCOME/(EXPENSE)
Other interest income	2,422	133	3,054	253
Interest expense	(42,884)	(32,074)	(82,109)	(63,647)
Income from partnerships	1,665	2,808	2,181	3,005
NET INCOME	63,004	64,467	120,735	119,195
Net income attributable to noncontrolling interests	(2,505)	(2,791)	(4,901)	(5,535)
NET INCOME ATTRIBUTABLE TO THE TRUST	60,499	61,676	115,834	113,660
Dividends on preferred shares	(2,008)	(2,008)	(4,016)	(4,018)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS	$ 58,491	$ 59,668	$ 111,818	$ 109,642

EARNINGS PER COMMON SHARE, BASIC:
Net income available for common shareholders	$ 0.72	$ 0.75	$ 1.37	$ 1.38
Weighted average number of common shares	81,214	79,202	81,178	78,826
EARNINGS PER COMMON SHARE, DILUTED:
Net income available for common shareholders	$ 0.72	$ 0.75	$ 1.37	$ 1.38
Weighted average number of common shares	81,214	79,202	81,178	78,855

Federal Realty Investment Trust
Funds From Operations
June 30, 2023
	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2023	2022	2023	2022
	(in thousands, except per share data)
Funds from Operations available for common shareholders (FFO)
Net income	$ 63,004	$ 64,467	$ 120,735	$ 119,195
Net income attributable to noncontrolling interests	(2,505)	(2,791)	(4,901)	(5,535)
Gain on sale of real estate	—	—	(1,702)	—
Depreciation and amortization of real estate assets	70,486	65,727	140,990	128,704
Amortization of initial direct costs of leases	7,567	5,882	15,352	11,675
Funds from operations	138,552	133,285	270,474	254,039
Dividends on preferred shares (1)	(1,875)	(1,875)	(3,750)	(3,750)
Income attributable to downREIT operating partnership units	688	701	1,381	1,407
Income attributable to unvested shares	(505)	(467)	(987)	(904)
FFO	$ 136,860	$ 131,644	$ 267,118	$ 250,792
Weighted average number of common shares, diluted (1)(2)	81,945	79,952	81,911	79,608
FFO per diluted share (2)	$ 1.67	$ 1.65	$ 3.26	$ 3.15

Notes:

For the three and six months ended June 30, 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."
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.

SOURCE Federal Realty Investment Trust