Federal Realty Investment Trust Announces Third Quarter 2024 Operating Results

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Oct 30, 2024, 16:05 ET

NORTH BETHESDA, Md., Oct. 30, 2024 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its third quarter ended September 30, 2024. For the three months ended September 30, 2024 and 2023, net income available for common shareholders was $0.70 per diluted share and $0.67 per diluted share, respectively. For the three months ended September 30, 2024 and 2023, operating income was $105.8 million and $100.1 million, respectively.

Highlights for the third quarter include:

Generated funds from operations available to common shareholders (FFO) per diluted share of $1.71 for the quarter, compared to $1.65 for the third quarter of 2023.
Signed 126 leases for 580,977 square feet of comparable retail space at a cash basis rollover growth of 14% and 26% on a straight-line basis.
Generated comparable property operating income (POI) growth of 2.9% for the third quarter, excluding lease termination fees and prior period rents collected.
Reported portfolio occupancy of 94.0% and a leased rate of 95.9% at quarter end, representing an increase of:
- +90 basis points of occupancy and +60 basis points of leased rate quarter-over-quarter
- +170 basis points of occupancy and +190 basis points of leased rate year-over-year
Continued strong small shop leasing, ending the quarter at 93.1% leased, with an increase of +60 basis points quarter-over-quarter and +240 basis points year-over-year.
Acquired Pinole Vista Crossing in Pinole, California, a grocery-anchored shopping center, comprising 216,000 square feet on 19 acres of land, for a purchase price of $60 million.
Tightened and raised 2024 earnings per diluted share guidance to $3.40 – $3.50 and 2024 FFO per diluted share guidance to $6.76 – $6.86.

"Federal Realty delivered another strong quarter, driven by record FFO, elevated leasing activity, and significant occupancy gains," said Donald C. Wood, Chief Executive Officer. "The demographics of our properties continue to be our greatest asset. Looking ahead, we are confident that Federal Realty is well-positioned for continued success, thanks to our exposure to affluent and resilient shoppers who frequent our best-in-class properties."

Financial Results

Net Income

For the third quarter 2024, net income available for common shareholders was $58.9 million and earnings per diluted share was $0.70 versus $55.0 million and $0.67, respectively, for the third quarter 2023.

FFO

For the third quarter 2024, FFO was $144.6 million, or $1.71 per diluted share, compared to $135.3 million, or $1.65 per diluted share for the third quarter 2023.

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

As of September 30, 2024, the portfolio was 94.0% occupied, an increase of 90 basis points quarter-over-quarter and 170 basis points year-over-year. The portfolio was 95.9% leased, an increase of 60 basis points quarter-over-quarter and 190 basis points year-over-year.

Small shop leased rate was 93.1% as of September 30, 2024, an increase of 60 basis points quarter-over-quarter and 240 basis points year-over-year.

The anchor tenant leased rate was 97.3%, reflecting an increase of 60 basis points quarter-over-quarter and 150 basis points year-over-year.

Additionally, residential properties were 97.5% leased as of September 30, 2024.

Leasing Activity

During the third quarter 2024, Federal Realty signed 129 leases for 592,527 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty signed 126 leases for 580,977 square feet at an average rent of $34.94 per square foot compared to the average contractual rent of $30.51 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 14%, 26% on a straight-line basis. Comparable leases represented 98% of total comparable and non-comparable retail leases signed during the third quarter 2024.

Transaction Activity

July 31, 2024 — Acquired Pinole Vista Crossing, a dominant 216,000-square-foot, 19-acre regional open-air grocery-anchored community center located along I-80 in Pinole, CA, 13 miles north of Federal Realty's East Bay Bridge Shopping Center, for $60 million, expanding the company's presence in Northern California's East Bay sub-market.

Regular Quarterly Dividends

Federal Realty announced today that its Board of Trustees declared a regular quarterly cash dividend of $1.10 per common share, resulting in an indicated annual rate of $4.40 per common share. The regular common dividend will be payable on January 15, 2025 to common shareholders of record as of January 2, 2025.

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 15, 2025 to shareholders of record as of January 2, 2025.

2024 Guidance

Federal Realty has updated its 2024 guidance, as summarized in the table below:

Full Year 2024 Guidance	Revised Guidance	Prior Guidance
2024 Earnings per diluted share	$3.40 to $3.50	$3.33 to $3.51
2024 FFO per diluted share	$6.76 to $6.86	$6.70 to $6.88

Conference Call Information

Federal Realty's management team will present an in-depth discussion of Federal Realty's operating performance on its third quarter 2024 earnings conference call, which is scheduled for Wednesday, October 30, 2024 at 5:00 PM ET. To participate, please call 1-844-826-3035 or 1-412-317-5195 five to ten minutes prior to the call start time. 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 13, 2024 by dialing 1-844-512-2921 or 1-412-317-6671; Passcode: 10192360.

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 Northern and Southern California. 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 3,500 tenants, in 27 million commercial square feet, and approximately 3,100 residential units.

Federal Realty has increased its quarterly dividends to its shareholders for 57 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 12, 2024 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 12, 2024 and subsequent quarterly reports on Form 10-Q.

Federal Realty Investment Trust
Consolidated Balance Sheets
September 30, 2024
	September 30,	December 31,
	2024	2023
	(in thousands, except share and per share data)
	(unaudited)
ASSETS
Real estate, at cost
Operating (including $1,822,143 and $2,021,622 of consolidated variable interest entities, respectively)	$ 10,355,292	$ 9,932,891
Construction-in-progress (including $8,352 and $8,677 of consolidated variable interest entities, respectively)	524,707	613,296
	10,879,999	10,546,187
Less accumulated depreciation and amortization (including $414,128 and $416,663 of consolidated variable interest entities, respectively)	(3,115,910)	(2,963,519)
Net real estate	7,764,089	7,582,668
Cash and cash equivalents	97,023	250,825
Accounts and notes receivable, net	206,513	201,733
Mortgage notes receivable, net	9,157	9,196
Investment in partnerships	33,008	34,870
Operating lease right of use assets, net	86,415	86,993
Finance lease right of use assets, net	6,685	6,850
Prepaid expenses and other assets	276,328	263,377
TOTAL ASSETS	$ 8,479,218	$ 8,436,512
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable, net (including $187,311 and $189,286 of consolidated variable interest entities, respectively)	$ 515,012	$ 516,936
Notes payable, net	601,307	601,945
Senior notes and debentures, net	3,356,298	3,480,296
Accounts payable and accrued expenses	201,066	174,714
Dividends payable	95,849	92,634
Security deposits payable	30,284	30,482
Operating lease liabilities	75,409	75,870
Finance lease liabilities	12,754	12,670
Other liabilities and deferred credits	224,693	225,443
Total liabilities	5,112,672	5,210,990
Commitments and contingencies
Redeemable noncontrolling interests	180,946	183,363
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), 392,878 shares issued and outstanding	9,822	9,822
Common shares of beneficial interest, $.01 par, 200,000,000 shares authorized, respectively, 84,952,538 and 82,775,286 shares issued and outstanding, respectively	855	833
Additional paid-in capital	4,160,451	3,959,276
Accumulated dividends in excess of net income	(1,211,833)	(1,160,474)
Accumulated other comprehensive income	2,172	4,052
Total shareholders' equity of the Trust	3,111,467	2,963,509
Noncontrolling interests	74,133	78,650
Total shareholders' equity	3,185,600	3,042,159
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 8,479,218	$ 8,436,512

Federal Realty Investment Trust
Consolidated Income Statements
September 30, 2024
	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2024	2023	2024	2023
	(in thousands, except per share data)
	(unaudited)
REVENUE
Rental income	$ 303,352	$ 286,323	$ 890,172	$ 839,509
Mortgage interest income	281	281	836	833
Total revenue	303,633	286,604	891,008	840,342
EXPENSES
Rental expenses	63,898	58,595	184,448	169,410
Real estate taxes	36,053	33,045	105,402	97,992
General and administrative	10,822	13,149	34,920	37,607
Depreciation and amortization	87,028	81,731	255,481	239,342
Total operating expenses	197,801	186,520	580,251	544,351

Gain on sale of real estate	—	—	52,280	1,702

OPERATING INCOME	105,832	100,084	363,037	297,693

OTHER INCOME/(EXPENSE)
Other interest income	978	721	3,512	3,775
Interest expense	(44,237)	(42,726)	(132,242)	(124,835)
Income from partnerships	888	1,313	1,825	3,494
NET INCOME	63,461	59,392	236,132	180,127
Net income attributable to noncontrolling interests	(2,508)	(2,344)	(6,461)	(7,245)
NET INCOME ATTRIBUTABLE TO THE TRUST	60,953	57,048	229,671	172,882
Dividends on preferred shares	(2,008)	(2,008)	(6,024)	(6,024)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS	$ 58,945	$ 55,040	$ 223,647	$ 166,858

EARNINGS PER COMMON SHARE, BASIC AND DILUTED:
Net income available for common shareholders	$ 0.70	$ 0.67	$ 2.68	$ 2.04
Weighted average number of common shares	83,994	81,274	83,180	81,210

Federal Realty Investment Trust
Funds From Operations
September 30, 2024
	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2024	2023	2024	2023
	(in thousands, except per share data)
Funds from Operations available for common shareholders (FFO)
Net income	$ 63,461	$ 59,392	$ 236,132	$ 180,127
Net income attributable to noncontrolling interests	(2,508)	(2,344)	(6,461)	(7,245)
Gain on sale of real estate	—	—	(52,280)	(1,702)
Depreciation and amortization of real estate assets	76,581	71,802	225,676	212,792
Amortization of initial direct costs of leases	8,757	8,116	24,673	23,468
Funds from operations	146,291	136,966	427,740	407,440
Dividends on preferred shares (1)	(1,875)	(1,875)	(5,625)	(5,625)
Income attributable to downREIT operating partnership units	688	693	2,068	2,074
Income attributable to unvested shares	(506)	(494)	(1,524)	(1,481)
FFO	$ 144,598	$ 135,290	$ 422,659	$ 402,408
Weighted average number of common shares, diluted (1)(2)	84,714	82,004	83,904	81,942

FFO per diluted share (2)	$ 1.71	$ 1.65	$ 5.04	$ 4.91

Notes:

(1)	For the three and nine months ended September 30, 2024 and 2023, 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 number of 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 the three and nine months ended September 30, 2024 and 2023.