Federal Realty Investment Trust Announces Third Quarter 2021 Operating Results

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Nov 04, 2021, 16:05 ET

NORTH BETHESDA, Md., Nov. 4, 2021 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its third quarter ended September 30, 2021. For the three months ended September 30, 2021 and 2020, net income (loss) available for common shareholders was $0.64 per diluted share and ($0.41) 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 $1.51 for the quarter compared to $1.12 for the third quarter 2020.
Strong levels of leasing activity with 119 signed leases for 430,234 square feet of comparable space during third quarter and 346 signed leases for 1.5 million square feet of comparable space through the first nine months of 2021.
Federal Realty's portfolio was 90.2% occupied, a sequential increase of 60 basis points.

260 basis point spread between leased and occupied

Acquired Twinbrooke Shopping Centre in Fairfax, Virginia, bringing the COVID-era, off-market acquisitions total to 5 properties, 1.9 million square feet and 135 acres.
Increased 2021 earnings per diluted share guidance to $2.30 to $2.35 and increased 2021 FFO per diluted share guidance to $5.45 to $5.50.
Increased 2022 earnings per diluted share guidance to $2.25 to $2.45 and increased 2022 FFO per diluted share guidance to $5.65 to $5.85.

"Strong results from all facets of our business were on full display in the third quarter," said Donald C. Wood, Chief Executive Officer. "Collections have improved dramatically, new and exciting retail and office tenants are committing to long term leases at a very brisk pace, and our development and acquisition pipeline have never been more active. We're more confident than ever that the places we create and the markets that we're in are spot on in a post COVID world."

Financial Results

Net income (loss) available for common shareholders was $50.1 million and earnings per diluted share was $0.64 for third quarter 2021 versus ($30.3) million and ($0.41) which includes the $50.7 million net impairment charge relating to The Shops at Sunset Place for third quarter 2020.

In the third quarter 2021, Federal Realty generated FFO of $118.0 million, or $1.51 per diluted share. This compares to FFO of $85.0 million, or $1.12 per diluted share, in third 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 90.2% occupied as of September 30, 2021, a sequential increase of 60 basis points over the second quarter 2021, and a spread of 260 basis points versus our leased percentage, 92.8%, at the end of the third quarter.

During the third quarter 2021, Federal Realty signed 124 leases for 481,607 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty signed 119 leases for 430,234 square feet at an average rent of $40.73 per square foot compared to the average contractual rent of $38.13 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 7%, 16% on a straight-line basis. Additionally, as of November 2, 2021, Federal Realty signed 19 leases for approximately 224,000 square feet of office space during and subsequent to the third quarter 2021.

As of October 29, 2021, the Company has collected approximately 96% of total third quarter 2021 billed recurring rents. Including rent deferral and abatement agreements, total addressed recurring rent was 99%.

With $178 million of cash and cash equivalents as of September 30, 2021, Federal Realty has approximately $1.2 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 declared a regular quarterly cash dividend of $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 January 18, 2022 to common shareholders of record as of January 3, 2022.

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 January 18, 2022 to shareholders of record as of January 3, 2022.

Summary of Other Quarterly Activities and Recent Developments

September 2021 – Federal Realty acquired an 100% interest in Twinbrooke Shopping Centre, a 109,000 square foot grocery anchored neighborhood shopping center on 10 acres located in Fairfax, Virginia. Federal sourced the acquisition off-market for a purchase price of $33.8 million cash. In 2021, Federal Realty has acquired 5 properties totaling 1.9 million square feet and 135 acres at a gross value of $441 million of which Federal has an average 82% ownership interest.

Guidance

Federal Realty increased its 2021 guidance for earnings per diluted share to $2.30 to $2.35 and 2021 FFO per diluted share guidance to $5.45 to $5.50.

Additionally, Federal Realty increased its 2022 guidance for earnings per diluted share to $2.25 to $2.45 and 2022 FFO per diluted share guidance to $5.65 to $5.85.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of Federal Realty's operating performance on its third quarter 2021 earnings conference call, which is scheduled for Thursday, November 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 13723057 (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 November 18, 2021 by dialing 844.512.2921; Passcode: 13723057.

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 106 properties include approximately 3,100 tenants, in 25 million square feet, and approximately 3,200 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 and Media Inquiries:
Brenda Pomar
Director, Corporate Communications
301.998.8316
[email protected]

Federal Realty Investment Trust
Consolidated Balance Sheets
September 30, 2021
	September 30,		December 31,
	2021		2020
	(in thousands, except share and per share data)
	(unaudited)
ASSETS
Real estate, at cost
Operating (including $2,188,736 and $1,703,202 of consolidated variable interest entities, respectively)	$	8,730,079	$	7,771,981
Construction-in-progress (including $28,277 and $44,896 of consolidated variable interest entities, respectively)	662,643		810,889
	9,392,722		8,582,870
Less accumulated depreciation and amortization (including $374,970 and $335,735 of consolidated variable interest entities, respectively)	(2,501,622)		(2,357,692)
Net real estate	6,891,100		6,225,178
Cash and cash equivalents	177,591		798,329
Accounts and notes receivable, net	159,840		159,780
Mortgage notes receivable, net	9,521		39,892
Investment in partnerships	12,079		22,128
Operating lease right of use assets	91,836		92,248
Finance lease right of use assets	50,153		51,116
Prepaid expenses and other assets	242,322		218,953
TOTAL ASSETS	$	7,634,442	$	7,607,624
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable, net (including $388,489 and $413,681 of consolidated variable interest entities, respectively)	$	457,203	$	484,111
Notes payable, net	301,462		402,776
Senior notes and debentures, net	3,405,685		3,404,488
Accounts payable and accrued expenses	244,272		228,641
Dividends payable	85,680		83,839
Security deposits payable	24,933		20,388
Operating lease liabilities	73,609		72,441
Finance lease liabilities	72,037		72,049
Other liabilities and deferred credits	210,429		152,424
Total liabilities	4,875,310		4,921,157
Commitments and contingencies
Redeemable noncontrolling interests	212,950		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, 77,774,645 and 76,727,394 shares issued and outstanding, respectively	782		771
Additional paid-in capital	3,398,851		3,297,305
Accumulated dividends in excess of net income	(1,095,741)		(988,272)
Accumulated other comprehensive loss	(2,726)		(5,644)
Total shareholders' equity of the Trust	2,461,163		2,464,157
Noncontrolling interests	85,019		84,590
Total shareholders' equity	2,546,182		2,548,747
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	7,634,442	$	7,607,624

Federal Realty Investment Trust
Consolidated Income Statements
September 30, 2021
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
	(in thousands, except per share data)
	(unaudited)
REVENUE
Rental income	$	247,024	$	207,410	$	694,954	$	613,687
Mortgage interest income	260		787		2,116		2,294
Total revenue	247,284		208,197		697,070		615,981
EXPENSES
Rental expenses	49,318		41,832		141,474		122,561
Real estate taxes	29,529		30,520		88,272		90,183
General and administrative	12,253		9,308		35,357		29,373
Depreciation and amortization	70,611		65,631		202,160		190,603
Total operating expenses	161,711		147,291		467,263		432,720

Impairment charge	—		(57,218)		—		(57,218)
Gain on sale of real estate and change in control of interest	—		—		17,428		11,682

OPERATING INCOME	85,573		3,688		247,235		137,725

OTHER INCOME/(EXPENSE)
Other interest income	88		538		701		1,355
Interest expense	(32,249)		(36,228)		(95,511)		(98,746)
Income (loss) from partnerships	1,129		(1,621)		(86)		(6,657)
NET INCOME (LOSS)	54,541		(33,623)		152,339		33,677
Net (income) loss attributable to noncontrolling interests	(2,419)		5,334		(5,777)		3,304
NET INCOME (LOSS) ATTRIBUTABLE TO THE TRUST	52,122		(28,289)		146,562		36,981
Dividends on preferred shares	(2,010)		(2,010)		(6,031)		(6,031)
NET INCOME (LOSS) AVAILABLE FOR COMMON SHAREHOLDERS	$	50,112	$	(30,299)	$	140,531	$	30,950

EARNINGS PER COMMON SHARE, BASIC:
Net income (loss) available for common shareholders	$	0.64	$	(0.41)	$	1.81	$	0.40
Weighted average number of common shares	77,485		75,404		77,269		75,386
EARNINGS PER COMMON SHARE, DILUTED:
Net income (loss) available for common shareholders	$	0.64	$	(0.41)	$	1.81	$	0.40
Weighted average number of common shares	77,575		75,404		77,287		75,386

Federal Realty Investment Trust
Funds From Operations
September 30, 2021
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
	(in thousands, except per share data)
Funds from Operations available for common shareholders (FFO)
Net income (loss)	$	54,541	$	(33,623)	$	152,339	$	33,677
Net (income) loss attributable to noncontrolling interests	(2,419)		5,334		(5,777)		3,304
Gain on sale of real estate and change in control of interest	—		—		(17,428)		(11,682)
Impairment charge, net (1)	—		50,728		—		50,728
Depreciation and amortization of real estate assets	61,236		58,224		174,770		170,878
Amortization of initial direct costs of leases	6,202		5,853		20,127		15,562
Funds from operations	119,560		86,516		324,031		262,467
Dividends on preferred shares (2)	(1,875)		(2,010)		(6,031)		(6,031)
Income attributable to operating partnership unit	742		790		2,267		2,362
Income attributable to unvested shares	(438)		(265)		(1,156)		(806)
FFO	$	117,989	$	85,031	$	319,111	$	257,992
Weighted average number of common shares, diluted (2)(3)	78,365		76,149		77,997		76,133
FFO per diluted share	$	1.51	$	1.12	$	4.09	$	3.39


Notes:
1)	Impairment charge relates to The Shops at Sunset Place. Amount is net of the allocation to noncontrolling interests. See our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information.
2)	For the three months ended September 30, 2021, 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)	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.