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Federal Realty Investment Trust Announces Second Quarter 2018 Operating Results

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Federal Realty Investment Trust Announces Second Quarter 2018 Operating Results

- Announces 51st consecutive annual dividend increase -

PR Newswire

ROCKVILLE, Md., Aug. 1, 2018 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its second quarter ended June 30, 2018.  Highlights of the quarter and recent activity include:

  • Generated earnings per diluted share of $0.84 for the quarter compared to $1.05 in second quarter 2017, which included a $0.26 gain on sale of real estate.
  • Generated funds from operations available for common shareholders (FFO) per diluted share of $1.55 for the quarter compared to $1.49 in second quarter 2017.
  • Generated comparable property property operating income (POI) growth of 3.6% for the second quarter.
  • Signed leases for 449,247 sf of comparable space (474,578 sf total) in the second quarter at an average rent of $34.75 psf and achieved cash basis rollover growth on those comparable spaces of 10%.
  • Increased the regular quarterly dividend rate on common shares to $1.02 per share, representing the 51st consecutive year of common dividend increases.
  • Increased 2018 FFO per diluted share guidance range to $6.13 - $6.23.

Federal Realty Investment Trust is an equity real estate investment trust specializing in the ownership, management, development, and redevelopment of high quality retail assets. Federal Realty's portfolio is located primarily in strategic metropolitan markets in the Northeast, Mid-Atlantic, and California. Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has the longest consecutive record of annual dividend increases in the REIT industry. (PRNewsFoto/Federal Realty Investment Trust)

"Continued solid growth in our property level operating income this quarter along with solid progress in developing and delivering great new retail and mixed use destinations for the years to come, gives us great confidence in our ability to raise our dividend to shareholders for a REIT record 51st year in a row, that is, since 1967," said Donald C. Wood, President and Chief Executive Officer of Federal Realty. "As I celebrate my own 20th year anniversary with the Company in 2018 and 15th as its chief executive, I still marvel at the quality of the real estate and balance sheet that allows us to build on this incredibly unique and rare feat year in and year out.  It's only possible by truly acting with long term real estate value creation always top of mind." 

Financial Results

Net income available for common shareholders was $61.6 million and earnings per diluted share was $0.84 for second quarter 2018 versus $76.2 million and $1.05, respectively, for second quarter 2017 which included a $0.26 gain on sale of real estate.

In second quarter 2018, Federal Realty generated FFO of $114.8 million, or $1.55 per diluted share. This compares to FFO of $108.6 million, or $1.49 per diluted share, in second quarter 2017.

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

In second quarter 2018, comparable property POI increased 3.6%. Comparable property POI represents our consolidated property portfolio other than those properties that distort comparability between periods in two primary categories (1) assets that were not owned for the full quarter in both periods presented and (2) assets currently under development or being repositioned for significant redevelopment and investment.    

The overall portfolio was 95.0% leased as of June 30, 2018, compared to 94.8% on March 31, 2018 and 94.5% on June 30, 2017.  Federal Realty's comparable portfolio was 95.5% leased on June 30, 2018, compared to 95.3% on March 31, 2018 and June 30, 2017.

During second quarter 2018, Federal Realty signed 106 leases for 474,578 square feet of retail space.  On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 449,247 square feet at an average cash basis contractual rent increase (i.e., excluding the impact of straight-line rents) of 10%.  The average contractual rent on this comparable space for the first year of the new leases is $34.75 per square foot compared to the average contractual rent of $31.61 per square foot for the last year of the prior leases. The previous average contractual rent was calculated by including both the minimum rent and any percentage rent actually paid during the last year of the lease term for the re-leased space.  On a straight-line basis, rent increases for comparable retail space averaged 20% for second quarter 2018.

Summary of Other Quarterly Activities and Recent Developments

  • June 15, 2018 – Federal Realty formed a new joint venture with Primestor Development Inc. to develop Jordan Downs Plaza shopping center in the Watts neighborhood of Los Angeles. When completed, Jordan Downs Plaza will be an approximately 113,000 square foot grocery anchored shopping center. The Trust expects the net project costs to be approximately $40 million.

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees increased the regular dividend rate on its common shares, declaring a regular quarterly cash dividend of $1.02 per share, resulting in an indicated annual rate of $4.08 per share.  The regular common dividend will be payable on October 15, 2018, to common shareholders of record on September 21, 2018. This increase represents the 51st consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector, and one of only a small number of companies in any sector to accomplish such a record.

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, 2018 to shareholders of record as of October 1, 2018.

Guidance

Federal Realty increased its 2018 guidance for FFO per diluted share to $6.13 to $6.23 and increased its 2018 earnings per diluted share guidance to $3.14 to $3.24.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its second quarter 2018 earnings conference call, which is scheduled for Thursday, August 2, 2018 at 10:00AM ET.  To participate, please call 877.445.3230 five to ten minutes prior to the call start time and use the passcode 9687996 (required).  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 9, 2018 by dialing 855.859.2056; Passcode: 9687996.

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 105 properties include approximately 3,000 tenants, in approximately 24 million square feet, and over 2,600 residential units. 

Federal Realty has increased its quarterly dividends to its shareholders for 51 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 13, 2018, 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 redevelopments or renovation projects that we do pursue may cost more, take more time to complete, or fail to perform as expected;
  • risks that we are investing a significant amount in ground-up development projects that may not perform as planned, 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, such as our ability to consummate additional financings or obtain replacement 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; and
  • 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.

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 may be 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 carefully review the risks and risk factors included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 13, 2018.

Federal Realty Investment Trust

Consolidated Balance Sheets

June 30, 2018




June 30,


December 31,


2018


2017


(in thousands, except share
and per share data)


(unaudited)



ASSETS




Real estate, at cost




Operating (including $1,660,403 and $1,639,486 of
consolidated variable interest entities, respectively)

$

7,181,679


$

6,950,188

Construction-in-progress (including $47,251 and
$43,393 of consolidated variable interest entities,
respectively)

535,658


684,873

Assets held for sale

27,773



7,745,110


7,635,061

Less accumulated depreciation and amortization
(including $268,723 and $247,410 of consolidated
variable interest entities, respectively)

(1,970,173)


(1,876,544)

Net real estate

5,774,937


5,758,517

Cash and cash equivalents

56,116


15,188

Accounts and notes receivable, net

149,861


209,877

Mortgage notes receivable, net

30,429


30,429

Investment in real estate partnerships

22,613


23,941

Prepaid expenses and other assets

268,747


237,803

TOTAL ASSETS

$

6,302,703


$

6,275,755

LIABILITIES AND SHAREHOLDERS' EQUITY




Liabilities




Mortgages payable, net (including $447,246 and
$460,372 of consolidated variable interest entities,
respectively)

$

477,706


$

491,505

Capital lease obligations

71,538


71,556

Notes payable, net

368,389


320,265

Senior notes and debentures, net

2,402,851


2,401,440

Accounts payable and accrued expenses

178,665


196,332

Dividends payable

75,757


75,931

Security deposits payable

17,187


16,667

Other liabilities and deferred credits

181,601


169,388

Total liabilities

3,773,694


3,743,084

Commitments and contingencies




Redeemable noncontrolling interests

141,417


141,157

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, 73,434,943 and
73,090,877 shares issued and outstanding, respectively

737


733

Additional paid-in capital

2,884,771


2,855,321

Accumulated dividends in excess of net income

(780,973)


(749,367)

Accumulated other comprehensive loss

412


22

Total shareholders' equity of the Trust

2,264,944


2,266,706

Noncontrolling interests

122,648


124,808

Total shareholders' equity

2,387,592


2,391,514

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

6,302,703


$

6,275,755

 

 

Federal Realty Investment Trust






Consolidated Income Statements







June 30, 2018









Three Months Ended


Six Months Ended


June 30,


June 30,


2018


2017


2018


2017


(in thousands, except per share data)


(unaudited)

REVENUE








Rental income

$

220,476


$

204,246


$

441,057


$

408,693

Other property income

3,692


3,068


7,759


5,258

Mortgage interest income

734


735


1,491


1,487

Total revenue

224,902


208,049


450,307


415,438

EXPENSES








Rental expenses

39,905


37,128


84,678


78,237

Real estate taxes

28,307


26,522


56,755


51,612

General and administrative

8,413


8,643


16,342


16,910

Depreciation and amortization

58,381


52,666


116,491


104,045

Total operating expenses

135,006


124,959


274,266


250,804

OPERATING INCOME

89,896


83,090


176,041


164,634

Other interest income

159


68


338


174

Interest expense

(27,766)


(23,907)


(53,950)


(47,665)

Loss from real estate partnerships

(728)


(114)


(1,253)


(114)

INCOME FROM CONTINUING OPERATIONS

61,561


59,137


121,176


117,029

Gain on sale of real estate, net

3,972


18,996


7,288


19,174

NET INCOME

65,533


78,133


128,464


136,203

   Net income attributable to noncontrolling interests

(1,938)


(1,842)


(3,622)


(3,722)

NET INCOME ATTRIBUTABLE TO THE TRUST

63,595


76,291


124,842


132,481

Dividends on preferred shares

(2,011)


(135)


(4,021)


(271)

NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$

61,584


$

76,156


$

120,821


$

132,210

EARNINGS PER COMMON SHARE, BASIC:








Net income available for common shareholders

$

0.84


$

1.05


$

1.65


$

1.83

Weighted average number of common shares

72,990


72,001


72,948


71,928

EARNINGS PER COMMON SHARE, DILUTED:








Net income available for common shareholders

$

0.84


$

1.05


$

1.65


$

1.83

Weighted average number of common shares

73,025


72,124


72,997


72,061
















 

 

Federal Realty Investment Trust







Funds From Operations













June 30, 2018











Three Months Ended


Six Months Ended



June 30,


June 30,



2018


2017


2018


2017



(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO)







Net income


$

65,533


$

78,133


$

128,464


$

136,203

Net income attributable to noncontrolling interests

(1,938)


(1,842)


(3,622)


(3,722)

Gain on sale of real estate, net (1)

(3,972)


(18,814)


(7,288)


(18,884)

Depreciation and amortization of real estate assets

52,011


45,634


103,362


90,316

Amortization of initial direct costs of leases

4,702


5,066


9,302


9,750

Funds from operations

116,336


108,177


230,218


213,663

Dividends on preferred shares (2)

(1,875)



(3,750)


Income attributable to operating partnership units

759


783


1,534


1,567

Income attributable to unvested shares

(398)


(357)


(786)


(707)

FFO


$

114,822


$

108,603


$

227,216


$

214,523

Weighted average number of common shares, diluted (2)

73,880


73,019


73,859


72,956

FFO per diluted share

$

1.55


$

1.49


$

3.08


$

2.94










 

Notes:


1)

Gain on sale of real estate for the three and six months ended June 30, 2018 is related to condominium units sold at Assembly Row and Pike & Rose. Gains for the three and six months ended June 30, 2017 also include gains related to Assembly Row condominium units under the percentage-of-completion method. Effective January 1, 2018, we adopted a new accounting standard related to revenue recognition, which results in a change in our revenue recognition policy for condominium sales. See Note 2 of our June 30, 2018 Form 10-Q for additional information regarding the adoption.



2)

For the three and six months ended June 30, 2018 and 2017, dividends on our Series 1 preferred shares are not deducted in the calculation of FFO available to common shareholders, as the related shares are dilutive and included in "weighted average common shares, diluted."

 

Investor Inquires:       

Media Inquiries:

Leah Andress Brady 

Andrea Simpson

Investor Relations Manager 

Vice President, Marketing

301.998.8265      

617.684.1511

lbrady@federalrealty.com   

asimpson@federalrealty.com

 

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SOURCE Federal Realty Investment Trust

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