Federal Realty Investment Trust Announces Second Quarter 2017 Operating Results

ROCKVILLE, Md., Aug. 2, 2017 /PRNewswire/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its second quarter ended June 30, 2017.  Highlights of the quarter include:

• Generated earnings per diluted share of $1.05 for the quarter compared to $0.78 in second quarter 2016.
• Generated FFO per diluted share of $1.49 for the quarter compared to $1.42 in second quarter 2017, representing growth of 4.9%.
• Generated same center property operating income growth of 3.9% for the second quarter.
• Signed leases for 397,555 sf of comparable space (432,164 sf total) in the second quarter at an average rent of $45.55 psf and achieved cash basis rollover growth on those comparable spaces of 13%.
• Party to a binding contract to form a new joint venture with Primestor Development, which will own an interest in seven shopping centers totaling over 1.3 million square feet on 114 acres of urban land in Latino communities in Los Angeles, California.
• Opportunistically issued $300 million aggregate principal amount of 3.25% Notes due 2027 at an effective yield of 3.358% and an additional $100 million aggregate principal amount of 4.50% Notes due 2044 at an effective yield of 4.143%.
• Increased the regular quarterly dividend rate on common shares to $1.00 per share, representing the 50^th consecutive year of common dividend increases.
• Increased 2017 FFO per diluted share guidance range to $5.86 - $5.94.

"We're very pleased to deliver not only another quarter of record bottom line results but also the 50^th year of consecutive dividend increases to our shareholders," said Donald C. Wood, President and Chief Executive Office of Federal Realty. "At Federal Realty, we remain focused on positioning our portfolio for the next decade and beyond – through value creation in our existing assets, infill acquisitions which re-stock our redevelopment pipeline and our recently announced agreement to acquire seven properties located in markets where demand exceeds supply. Our business plan continues to exemplify balance and discipline as we navigate the challenging retail environment."

Financial Results

Net income available for common shareholders was $76.2 million and earnings per diluted share was $1.05 for second quarter 2017 versus $55.8 million and $0.78, respectively, for second quarter 2016.

In second quarter 2017, Federal Realty generated funds from operations available for common shareholders (FFO) of $108.6 million, or $1.49 per diluted share. This compares to FFO of $102.2 million, or $1.42 per diluted share, in second quarter 2016.

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 2017, same center property operating income increased 3.9% when including properties that are being redeveloped and decreased 0.7% when excluding those properties. The vacancies impacting same center results have been released to tenants at significantly higher rents.

The overall portfolio was 94.5% leased as of June 30, 2017, compared to 94.6% on March 31, 2017 and 94.5% on June 30, 2016.  Federal Realty's same center portfolio was 95.9% leased on June 30, 2017, compared to 95.8% on March 31, 2017 and 95.9% on June 30, 2016.

During second quarter 2017, Federal Realty signed 111 leases for 432,164 square feet of retail space.  On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 397,555 square feet at an average cash basis contractual rent increase (i.e., excluding the impact of straight-line rents) of 13%.  The average contractual rent on this comparable space for the first year of the new leases is $45.55 per square foot compared to the average contractual rent of $40.16 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 27% for second quarter 2017.

Summary of Other Quarterly Activities and Recent Developments

• August 1, 2017 – Federal Realty is party to a binding contract to form a new joint venture with Primestor Development Inc., the Los Angeles based owner and developer of premier retail properties serving the urban Latino communities of Southern California. The Trust will hold an approximately 90% interest in the venture. The venture will be seeded with a 100% interest in five dominant community shopping centers, plus one center under redevelopment and a 25% minority interest in a seventh shopping center. These seven properties total over 1.3 million square feet on 114 acres of urban land with tenants such as Ross Dress for Less, Marshalls and Kroger's Food 4 Less. The Trust's investment in the venture is expected to approximate $345 million which includes a $20 million commitment to complete the redevelopment of one of the centers.
• July 31, 2017 – Federal Realty announced the approval by its Board of Trustees of an increase in the regular dividend rate on its common shares to $1.00 per share per quarter resulting in an annualized dividend rate of $4.00 per share. The quarterly cash dividend will be payable on October 16, 2017 to common shareholders of record as of September 22, 2017. Federal Realty is the only real estate investment trust in the United States to have increased its common dividend every year for the last 50 years and one of only a small number of companies in any sector to accomplish such a record. The compound annual growth rate of the dividend increases over that 50 years is in excess of 7%.
• June 20, 2017 – Federal Realty priced its public offering of $300 million aggregate principal amount of 3.25% Notes due 2027 at an effective yield of 3.358% and an additional $100 million aggregate principal amount of 4.50% Notes due 2044 at an effective yield of 4.143%. The 2044 Notes have the same terms and are of the same series as the notes that Federal Realty first issued on November 14, 2014 and again on March 16, 2015. Federal Realty has a total of $550 million of such series of notes outstanding.
• May 19, 2017 – Federal Realty acquired a 90% interest in 1700 - 1730 4th Street, a 71,000 square foot single-story, mixed-use building located on Fourth Street in Berkeley, California, one of the Bay Area's premiere and unique street-retail districts. Current tenants include CB2, California Closets, and the offices of Ingram Books.

Guidance

Federal Realty increased its 2017 guidance for FFO per diluted share to $5.86 to $5.94 and updated its 2017 earnings per diluted share guidance to $3.31 to $3.39.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its second quarter 2017 earnings conference call, which is scheduled for Thursday, August 3, 2017 at 11:00AM ET.  To participate, please call 877.445.3230 five to ten minutes prior to the call start time and use the passcode 39460118 (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 10, 2017 by dialing 855.859.2056; Passcode: 39460118.

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 99 properties include over 2,800 tenants, in over 23 million square feet, and over 1,800 residential units. 

Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has increased its dividend rate for 50 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 13, 2017, 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, 2017.

SOURCE Federal Realty Investment Trust