Federal Realty Investment Trust Announces Third Quarter 2015 Operating Results

04 Nov, 2015, 16:10 ET from Federal Realty Investment Trust

ROCKVILLE, Md., Nov. 4, 2015 /PRNewswire/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its third quarter ended September 30, 2015.  Highlights of the quarter and recent activity include:

  • Generated FFO of $1.36 per diluted share for the quarter, an increase of 10.6% over third quarter 2014.
  • Signed leases for 478,411 sf of comparable space and achieved cash basis rollover growth on comparable spaces of 19%.
  • Generated same center property operating income growth of 4.2% (or 2.0% when properties under redevelopment are excluded).
  • Completed leasing of the first phase of Assembly Row and commenced leasing of Pallas, the 319 unit high rise residential building at Pike & Rose.
  • 100% preleased 500 Santana Row, a 234,500 sf office building scheduled to deliver in late 2016.
  • Subsequent to quarter end, acquired an 85% interest in the Shops at Sunset Place in South Miami based on a total value of $110.2 million
  • Subsequent to quarter end, received bankruptcy court approval to acquire three of our A&P leases totaling 184,000 sf with an average in-place minimum rent of $11.64 psf. 
  • Increased FFO per diluted share guidance for 2015 to a range of $5.30 to $5.33.
  • Provided initial 2016 FFO per diluted share guidance of $5.65 to $5.71.

"We are pleased to deliver another record quarter of bottom line results while we continue to invest in the future" commented Donald C. Wood, President and Chief Executive Officer of Federal Realty.  "With the value creation we are delivering in our mixed-use developments and the redevelopments of our existing assets, the continued strong leasing rollover in our core portfolio and the acquisitions of leases and assets that present compelling value creation opportunities, we are well under way to achieving our long term plan."

Financial Results In the third quarter 2015, Federal Realty generated funds from operations available for common shareholders (FFO) of $95.2 million, or $1.36 per diluted share. This compares to FFO of $84.5 million, or $1.23 per diluted share, in third quarter 2014. For the nine months ended September 30, 2015, FFO was $256.4 million, or $3.68 per diluted share, compared to $249.9 million, or $3.66 per diluted share for the same nine month period in 2014. Excluding early extinguishment of debt, for the nine months ended September 30, 2015, Federal Realty reported FFO of $275.4 million, or $3.95 per diluted share.

Net income available for common shareholders was $52.3 million and earnings per diluted share was $0.75 for third quarter 2015, versus $46.9 million and $0.69, respectively, for third quarter 2014.  Year-to-date, Federal Realty reported net income available for common shareholders of $141.9 million and earnings per diluted share of $2.05. This compares to net income available for common shareholders of $129.0 million and earnings per diluted share of $1.91 for the nine months ended September 30, 2014.

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 third quarter 2015, same-center property operating income increased 4.2% over the prior year when including properties that are being redeveloped and 2.0% when excluding those properties.

The overall portfolio was 95.5% leased as of September 30, 2015, compared to 95.7% on June 30, 2015 and 95.6% on September 30, 2014.  Federal Realty's same center portfolio was 96.0% leased on September 30, 2015, compared to 96.2% leased on June 30, 2015 and 96.3% on September 30, 2014.

During third quarter 2015, Federal Realty signed 95 leases for 560,884 square feet of retail space.  On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 478,411 square feet at an average cash basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 19%.  The average contractual rent on this comparable space for the first year of the new leases is $26.98 per square foot compared to the average contractual rent of $22.69 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 33% for third quarter 2015. As of September 30, 2015, Federal Realty's average contractual, cash basis minimum rent for retail and commercial space in its portfolio was $26.01 per square foot.

Regular Quarterly Dividends Federal Realty also announced today that its Board of Trustees declared a regular quarterly cash dividend of $0.94 per share, resulting in an indicated annual rate of $3.76 per share. The regular common dividend will be payable on January 15, 2016 to common shareholders of record as of January 4, 2016.

Summary of Other Quarterly Activities and Recent Developments

  • August 3, 2015 – Federal Realty repaid at par $147 million of mortgage loans due November 2015, with an average interest rate of 7.9%.
  • September 8, 2015 – Federal Realty announced that Splunk Inc. (NASDAQ:   SPLK) executed a long-term lease for 100% of the Trust's 500 Santana Row, a 234,500 square foot, Class-A office building under construction at Santana Row on Winchester Boulevard and Olsen Drive.
  • September 28, 2015 – Federal Realty closed on the public offering of $250 million aggregate principal amount of 2.55% senior unsecured notes due January 15, 2021. The notes were offered at 99.771% of the principal amount with a yield to maturity of 2.597%.
  • October 1, 2015 – Federal Realty acquired an 85% interest in The Shops at Sunset Place, a 515,000-square-foot mixed-use center in South Miami, Florida, based on a gross value of $110.2 million. The transaction includes the assumption of an existing $70.8 million mortgage with an interest rate of 5.6 percent and maturity date of September 2020.  

Guidance Federal Realty increased its guidance for 2015 FFO per diluted share excluding early extinguishment of debt to a range of $5.30 to $5.33 and 2015 earnings per diluted share guidance to a range of $2.79 to $2.82. In addition, Federal Realty provided initial 2016 FFO per diluted share guidance of $5.65 to $5.71 and 2016 earnings per diluted share guidance of $3.12 to $3.18.

Conference Call Information Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its third quarter 2015 earnings conference call, which is scheduled for November 5, 2015, at 11 a.m. Eastern Standard Time.  To participate, please call (877) 445-3230 five to ten minutes prior to the call start time and use the passcode 63994089 (required).  Federal Realty will also provide an online webcast on the Company's web site, http://www.federalrealty.com, which will remain available for 30 days following the call.  A telephone recording of the call will also be available through November 12, 2015, by dialing (855) 859-2056 and using the passcode 63994089.

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, our mission is to deliver long term, sustainable growth through investing in densely populated, affluent communities where retail demand exceeds supply.  Our 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 90 properties include over 2,700 tenants, in approximately 21 million square feet, and over 1500 residential units. 

Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has increased its dividend rate for 48 consecutive years, the longest record in the REIT industry. Federal Realty 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 10, 2015, 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 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 10, 2015.

Investor Inquiries

Media Inquiries

Brittany Schmelz

Andrea Simpson

Investor Relations

Director, Marketing

301/998-8265

617/684-1511

bschmelz@federalrealty.com

asimpson@federalrealty.com

 

 

Federal Realty Investment Trust

Summarized Balance Sheets

September 30, 2015

September 30,

December 31,

2015

2014

(in thousands)

(unaudited)

ASSETS

Real estate, at cost

Operating (including $365,318 and $282,303 of consolidated variable interest entities, respectively)

$

5,423,981

$

5,128,757

Construction-in-progress

492,865

480,241

5,916,846

5,608,998

Less accumulated depreciation and amortization (including $32,566 and $26,618 of consolidated variable interest entities, respectively)

(1,546,176)

(1,467,050)

Net real estate

4,370,670

4,141,948

Cash and cash equivalents

12,864

47,951

Accounts and notes receivable, net

112,267

93,291

Mortgage notes receivable, net

41,250

50,988

Investment in real estate partnerships

41,329

37,457

Prepaid expenses and other assets

205,423

175,235

TOTAL ASSETS

$

4,783,803

$

4,546,870

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities

Mortgages and capital lease obligations (including $178,811 and $187,632 of consolidated variable interest entities, respectively)

$

498,498

$

635,345

Notes payable

290,207

290,519

Senior notes and debentures

1,744,120

1,483,813

Accounts payable and other liabilities

352,231

325,584

Total liabilities

2,885,056

2,735,261

Redeemable noncontrolling interests

121,172

119,053

Shareholders' equity

Preferred shares

9,997

9,997

Common shares and other shareholders' equity

1,655,707

1,594,404

Total shareholders' equity of the Trust

1,665,704

1,604,401

    Noncontrolling interests

111,871

88,155

Total shareholders' equity

1,777,575

1,692,556

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

4,783,803

$

4,546,870

 

 

Federal Realty Investment Trust

Summarized Income Statements

September 30, 2015

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

(in thousands, except per share data)

(unaudited)

Revenue

Rental income

$

181,562

$

166,112

$

538,612

$

494,688

Other property income

2,479

3,622

9,364

11,347

Mortgage interest income

1,211

1,204

3,529

3,678

Total revenue

185,252

170,938

551,505

509,713

Expenses

Rental expenses

34,439

31,908

108,501

100,443

Real estate taxes

21,804

20,374

62,865

58,238

General and administrative

9,374

8,374

27,526

24,202

Depreciation and amortization

43,718

42,660

128,373

127,403

Total operating expenses

109,335

103,316

327,265

310,286

Operating income

75,917

67,622

224,240

199,427

Other interest income

6

2

109

45

Interest expense

(21,733)

(23,422)

(69,346)

(69,772

Early extinguishment of debt

(19,072)

Income from real estate partnerships

360

446

986

909

Income from continuing operations

54,550

44,648

136,917

130,609

Gain on sale of real estate

4,401

11,509

4,401

Net income

54,550

49,049

148,426

135,010

   Net income attributable to noncontrolling interests

(2,103)

(1,974)

(6,161)

(5,637

Net income attributable to the Trust

52,447

47,075

142,265

129,373

Dividends on preferred shares

(136)

(136)

(406)

(406

Net income available for common shareholders

$

52,311

$

46,939

$

141,859

$

128,967

EARNINGS PER COMMON SHARE, BASIC

Continuing operations

$

0.75

$

0.62

$

1.89

$

1.84

Gain on sale of real estate

0.07

0.17

0.07

$

0.75

$

0.69

$

2.06

$

1.91

Weighted average number of common shares, basic

69,006

67,559

68,637

67,095

EARNINGS PER COMMON SHARE, DILUTED

Continuing operations

$

0.75

$

0.62

$

1.88

$

1.84

Gain on sale of real estate

0.07

0.17

0.07

$

0.75

$

0.69

$

2.05

$

1.91

Weighted average number of common shares, diluted

69,181

67,732

68,821

67,261

 

 

Federal Realty Investment Trust

Funds From Operations

September 30, 2015

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO)

Net income

$

54,550

$

49,049

$

148,426

$

135,010

Net income attributable to noncontrolling interests

(2,103)

(1,974)

(6,161)

(5,637)

Gain on sale of real estate

(4,401)

(11,509)

(4,401)

Depreciation and amortization of real estate assets

38,251

37,964

112,595

114,012

Amortization of initial direct costs of leases

3,689

3,193

10,805

8,971

Depreciation of joint venture real estate assets

352

352

1,018

1,202

Funds from operations

94,739

84,183

255,174

249,157

Dividends on preferred shares

(136)

(136)

(406)

(406)

Income attributable to operating partnership units

879

798

2,520

2,229

Income attributable to unvested shares

(325)

(378)

(899)

(1,128)

FFO

$

95,157

$

84,467

$

256,389

$

249,852

Early extinguishment of debt, net of allocation to unvested shares

19,006

FFO excluding early extinguishment of debt

$

95,157

$

84,467

$

275,395

$

249,852

       Weighted average number of common shares, diluted

70,115

68,649

69,761

68,179

FFO per diluted share

$

1.36

$

1.23

$

3.68

$

3.66

FFO excluding early extinguishment of debt, per diluted share

$

1.36

$

1.23

$

3.95

$

3.66

 

 

Federal Realty Investment Trust

Reconciliation of FFO Guidance

September 30, 2015

The following table provides a reconciliation of the range of earnings per diluted share to estimated FFO per diluted share for the full year 2015 and 2016. Estimates do not include the impact from potential acquisitions or dispositions which have not closed as of November 4, 2015.

2015 Guidance

Low

High

Net income available to common shareholders, per diluted share

$

2.79

$

2.82

Adjustments:

Gain on sale of real estate

(0.16)

(0.16)

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

2.19

2.19

Amortization of initial direct costs of leases

0.20

0.20

All other amounts

0.01

0.01

FFO per diluted share

$

5.03

$

5.06

Early extinguishment of debt, net of allocation to unvested shares

0.27

0.27

FFO per diluted share excluding early extinguishment of debt

$

5.30

$

5.33

2016 Guidance

Low

High

Net income available to common shareholders, per diluted share

$

3.12

$

3.18

Adjustments:

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

2.31

2.31

Amortization of initial direct costs of leases

0.22

0.22

All other amounts

0.00

0.00

FFO per diluted share

$

5.65

$

5.71

Note:

See Glossary of Terms. Individual items may not add up to total due to rounding.

 

 

SOURCE Federal Realty Investment Trust



RELATED LINKS

http://www.federalrealty.com