Federal Realty Investment Trust Announces Second Quarter 2013 Operating Results

- FFO per share, as adjusted, increases 9.6% to $1.14 for the quarter -

- Common dividend increased for record 46th consecutive year -

Aug 01, 2013, 16:30 ET from Federal Realty Investment Trust

ROCKVILLE, Md., Aug. 1, 2013 /PRNewswire/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its second quarter ended June 30, 2013.

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Financial Results

In the second quarter 2013, Federal Realty generated funds from operations available for common shareholders (FFO) of $71.1 million or $1.08 per diluted share.  This compares to FFO of $66.8 million, or $1.04 per diluted share, in second quarter 2012.  For the six months ended June 30, 2013, Federal Realty reported FFO of $145.2 million, or $2.22 per diluted share, compared to $133.4 million, or $2.08 per diluted share for the same six-month period in 2012. The Trust's reported results include a $3.4 million charge related to the make-whole premium for prepaying the Trust's 5.40% senior notes from the proceeds of the new 2.75% senior notes issuance completed in the second quarter.  Excluding this charge, FFO per diluted share increased 9.6% to $1.14 in second quarter 2013 and 9.1% to $2.27 for the six months ended June 30, 2013.

Net income available for common shareholders was $37.4 million and earnings per diluted share was $0.57 for the quarter ended June 30, 2013 versus $32.5 million and $0.51, respectively, for second quarter 2012.  Year-to-date, Federal Realty reported net income available for common shareholders of $71.9 million and earnings per diluted share of $1.10.  This compares to net income available for common shareholders of $75.3 million and earnings per diluted share of $1.18 for the six months ended June 30, 2012.

FFO is a non-GAAP supplemental earnings measure which the Trust considers meaningful in measuring its operating performance.  A reconciliation of net income to FFO is attached to this press release.

Portfolio Results

In second quarter 2013, same-center property operating income increased 5.0% over second quarter 2012.  When redevelopment and expansion properties are excluded from same-center results, property operating income for second quarter 2013 increased 5.2% compared to second quarter 2012. 

The overall portfolio was 95.3% leased as of June 30, 2013, compared to 95.1% on March 31, 2013 and 94.2% on June 30, 2012.  Federal Realty's same-center portfolio was 95.3% leased on June 30, 2013, compared to 95.1% on March 31, 2013 and 95.0% on June 30, 2012.

During the second quarter of 2013, Federal Realty signed 111 leases for 504,605 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), the Trust leased 470,832 square feet at an average cash-basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 15%. The average contractual rent on this comparable space for the first year of the new leases is $31.10 per square foot, compared to the average contractual rent of $27.00 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 GAAP basis (i.e., including the impact of straight-line rents), rent increases per square foot for comparable retail space averaged 29% for second quarter 2013. As of June 30, 2013, Federal Realty's average contractual, cash basis minimum rent for retail and commercial space in its portfolio was $24.29 per square foot.

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees increased the dividend rate on its common shares, declaring a regular quarterly cash dividend of $0.78 per share, resulting in an indicated annual rate of $3.12 per share, an increase of 6.8%. The regular common dividend will be payable on October 15, 2013, to common shareholders of record as of September 23, 2013. This increase represents the 46th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector, and amongst the longest such records for publicly traded companies in the US.

"Our portfolio continues to outperform expectations and our leasing activity, which produced rollover growth in excess of 15%, sets us up well for the future. We are also pleased with the progress and momentum in our development pipeline and the value creation we expect it to deliver," said Don Wood, president and chief executive officer of Federal Realty Investment Trust.  "Finally, we are proud to increase our dividend for the 46th consecutive year, the only REIT to have such record."

Guidance

Federal Realty increased guidance, excluding the $3.4 million debt prepayment charge, for 2013 FFO per diluted share to a range of $4.56 to $4.60, and provided 2013 earnings per diluted share guidance of $2.41 to $2.45

Summary of Other Quarterly Activities and Recent Developments

  • May 9, 2013 – Federal Realty announced the closing of its public offering of $275 million aggregate principal amount of 2.75% senior unsecured notes due June 1, 2023. 
  • June 10, 2013 – Federal Realty announced the redemption of its 5.40% Senior Unsecured notes due December 1, 2013 (the "Notes") for aggregate principal of $135 million.  The redemption price was approximately $138.5 million, including $0.2 million of accrued and unpaid interest.
  • July 22, 2013 – Federal Realty closed on the sale of its 5th Avenue asset in San Diego, and entered into an agreement to sell its Forest Hills asset in Long Island, New York.  The total sales price for the two assets is $36 million.  The Forest Hills sale is still subject to buyer's due diligence.  These asset sales are part of a reverse 1031 exchange in connection with the acquisition of our shopping center in Darien, Connecticut in April 2013.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its second quarter 2013 earnings conference call, which is scheduled for August 2, 2013, at 11 a.m. Eastern Daylight Time.  To participate, please call (800) 447-0521 five to ten minutes prior to the call start time and use the passcode 35097821 (required).  Federal Realty will also provide an online webcast on the Company's website, www.federalrealty.com, which will remain available for 30 days following the call.  A telephone recording of the call will also be available through September 1, 2013, by dialing (888) 843-7419 and using the passcode 35097821.

About Federal Realty

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 (excluding joint venture properties) contains approximately 20 million square feet located primarily in strategically selected metropolitan markets in the Northeast, Mid-Atlantic, and California. In addition, the Trust has an ownership interest in approximately 1.0 million square feet of retail space through a joint venture in which the Trust has a 30% interest. Our operating portfolio (excluding joint venture properties) was 95.3% leased to national, regional, and local retailers as of June 30, 2013, with no single tenant accounting for more than approximately 3.4% of annualized base rent. Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has increased its dividend rate for 46 consecutive years, the longest record in the REIT industry. Federal Realty is an S&P MidCap 400 company and its shares are traded on the NYSE under the symbol FRT.

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, 2013, 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 renovations 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 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 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 12, 2013.

 

Federal Realty Investment Trust

Summarized Balance Sheets

June 30, 2013

June 30,

December 31,

2013

2012

(in thousands)

(unaudited)

ASSETS

Real estate, at cost

Operating (including $264,821 and $264,506 of consolidated

variable interest entities, respectively)

$

4,550,534

$

4,490,960

Construction-in-progress

401,385

288,714

4,951,919

4,779,674

Less accumulated depreciation and amortization (including $15,579

and $12,024 of consolidated variable interest entities, respectively)

(1,286,923)

(1,224,295)

Net real estate

3,664,996

3,555,379

Cash and cash equivalents

108,366

36,988

Accounts and notes receivable, net

84,103

73,861

Mortgage notes receivable, net

55,494

55,648

Investment in real estate partnership

33,029

33,169

Prepaid expenses and other assets

139,215

143,520

TOTAL ASSETS

$

4,085,203

$

3,898,565

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities

Mortgages and capital lease obligations (including $204,055 and

$205,299 of consolidated variable interest entities, respectively)

$

796,666

$

832,482

Notes payable

299,979

299,575

Senior notes and debentures

1,213,333

1,076,545

Accounts payable and other liabilities

297,288

284,950

Total liabilities

2,607,266

2,493,552

Redeemable noncontrolling interests

94,150

94,420

Shareholders' equity

Preferred shares

9,997

9,997

Common shares and other shareholders' equity

1,350,720

1,276,815

Total shareholders' equity of the Trust

1,360,717

1,286,812

Noncontrolling interests

23,070

23,781

Total shareholders' equity

1,383,787

1,310,593

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

4,085,203

$

3,898,565

 

Federal Realty Investment Trust

Summarized Income Statements

June 30, 2013

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

(in thousands, except per share data)

(unaudited)

Revenue

Rental income

$

153,769

$

141,796

$

306,988

$

282,457

Other property income

2,915

4,478

6,183

8,840

Mortgage interest income

1,263

1,286

2,528

2,552

    Total revenue

157,947

147,560

315,699

293,849

Expenses

Rental expenses

28,229

26,906

57,744

53,016

Real estate taxes

17,650

16,537

35,301

32,594

General and administrative

8,302

7,139

15,359

14,143

Depreciation and amortization

39,853

35,199

80,477

71,770

    Total operating expenses

94,034

85,781

188,881

171,523

Operating income

63,913

61,779

126,818

122,326

Other interest income

64

112

94

319

Interest expense

(27,147)

(28,733)

(54,552)

(57,526)

Early extinguishment of debt

(3,399)

(3,399)

Income from real estate partnerships

372

438

684

739

Income from continuing operations

33,803

33,596

69,645

65,858

Gain on sale of real estate

4,994

4,994

11,860

Net income

38,797

33,596

74,639

77,718

Net income attributable to noncontrolling interests

(1,258)

(993)

(2,512)

(2,129)

Net income attributable to the Trust

37,539

32,603

72,127

75,589

Dividends on preferred shares

(135)

(135)

(271)

(271)

Net income available for common shareholders

$

37,404

$

32,468

$

71,856

$

75,318

EARNINGS PER COMMON SHARE, BASIC

Continuing operations

$

0.49

$

0.51

$

1.02

$

0.99

Gain on sale of real estate

0.08

0.08

0.19

$

0.57

$

0.51

$

1.10

$

1.18

Weighted average number of common shares, basic

65,149

63,700

64,922

63,556

EARNINGS PER COMMON SHARE, DILUTED

Continuing operations

$

0.49

$

0.51

$

1.02

$

0.99

Gain on sale of real estate

0.08

0.08

0.19

$

0.57

$

0.51

$

1.10

$

1.18

Weighted average number of common shares, diluted

65,311

63,880

65,080

63,732

 

Federal Realty Investment Trust

Funds From Operations

June 30, 2013

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO)

Net income

$

38,797

$

33,596

$

74,639

$

77,718

Net income attributable to noncontrolling interests

(1,258)

(993)

(2,512)

(2,129)

Gain on sale of real estate

(4,994)

(4,994)

(11,860)

Depreciation and amortization of real estate assets

35,834

31,357

72,396

63,772

Amortization of initial direct costs of leases

2,639

2,670

5,407

5,606

Depreciation of joint venture real estate assets

370

375

746

756

Funds from operations

71,388

67,005

145,682

133,863

Dividends on preferred shares

(135)

(135)

(271)

(271)

Income attributable to operating partnership units

215

224

442

471

Income attributable to unvested shares

(320)

(316)

(656)

(631)

FFO

71,148

66,778

145,197

133,432

Early extinguishment of debt, net of allocation to unvested shares

3,383

3,383

FFO excluding early extinguishment of debt

$

74,531

$

66,778

$

148,580

$

133,432

Weighted average number of common shares, diluted

65,605

64,204

65,383

64,074

FFO per diluted share

$

1.08

$

1.04

$

2.22

$

2.08

FFO excluding early extinguishment of debt, per diluted share

$

1.14

$

1.04

$

2.27

$

2.08

 

Federal Realty Investment Trust

Reconciliation of Net Income to FFO Guidance

June 30, 2013

2013 Guidance

(Dollars in millions except

per share amounts) (1)

Funds from Operations available for common shareholders (FFO)

Net income

$

162

$

164

Net income attributable to noncontrolling interests

(5)

(5)

Gain on sale of real estate in real estate partnership

(16)

(16)

Depreciation and amortization of real estate & joint venture real estate assets

147

147

Amortization of initial direct costs of leases

11

11

Prepayment Premium on 5.40% Notes

3

3

Funds from operations excluding Prepayment Premium on 5.40% Notes

302

305

Dividends on preferred shares

(1)

(1)

Income attributable to operating partnership units

1

1

Income attributable to unvested shares

(1)

(1)

FFO excluding Prepayment Premium on 5.40% Notes

$

301

$

304

Weighted average number of common shares, diluted

66.0

66.0

FFO per diluted share

$

4.56

$

4.60

Note: (1) - Individual items may not add up to total due to rounding.

 

Media Inquiries

Investor Inquiries

Andrea Simpson

Kristina Lennox

Director, Marketing

Investor Relations Manager

617/684-1511

301/998-8265

asimpson@federalrealty.com

klennox@federalrealty.com

 

 

SOURCE Federal Realty Investment Trust



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