Federal Realty Investment Trust Announces Second Quarter 2024 Operating Results

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Aug 01, 2024, 16:05 ET

Active acquisition activity with $287 million of investments

NORTH BETHESDA, Md., Aug. 1, 2024 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its second quarter ended June 30, 2024. For the three months ended June 30, 2024 and 2023, net income available for common shareholders was $1.32 per diluted share and $0.72 per diluted share, respectively. For the three months ended June 30, 2024 and 2023, operating income was $157.0 million and $101.8 million, respectively.

Highlights for the second quarter include:

Generated funds from operations available to common shareholders (FFO) per diluted share of $1.69 for the quarter, compared to $1.67 for the second quarter of 2023.
Signed 122 leases for 594,361 square feet of comparable retail space, a record level of comparable square footage signed in any second quarter and the second highest of any quarter, at a cash basis rollover growth of 10% and 23% on a straight-line basis.
Generated comparable property operating income (POI) growth of 2.9% for the second quarter, excluding lease termination fees and prior period rents collected.
Reported portfolio occupancy of 93.1% and a leased rate of 95.3% at quarter end, representing an increase of 110 basis points and 100 basis points, respectively, quarter-over-quarter.
Continued strong small shop leasing, ending the quarter at 92.5% leased, with an increase of 110 basis points quarter-over-quarter and 230 basis points year-over-year.
During the quarter and subsequent to quarter end:
- Acquired two assets totaling 880,000 square feet on 129 acres for a total purchase price of $275 million.
- Completed the sale of its remaining assets on Third Street Promenade in Santa Monica, CA, for $103 million.
Increased the regular quarterly cash dividend to $1.10 per common share, resulting in an indicated annual rate of $4.40 per common share. This marks the 57th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector.
Tightened and raised 2024 earnings per diluted share guidance to $3.33 – $3.51, 2024 FFO per diluted share guidance to $6.70 – $6.88, and 2024 comparable properties growth excluding lease termination fees and prior period rents collected assumption to 3% – 4%.
Issued the company's 2023 Sustainability Report.

"Another record quarter for Federal Realty, starting with funds from operations per share of $1.69, to continued record leasing volume, to furthering our REIT industry record with the 57th consecutive year of increased common dividends," said Donald C. Wood, Chief Executive Officer. "The robust leasing demand we continue to see is a clear indicator of the value and attractiveness of our properties, setting a solid foundation for strong future earnings growth."

Financial Results

Net Income

For the second quarter 2024, net income available for common shareholders was $110.0 million and earnings per diluted share was $1.32 versus $58.5 million and $0.72, respectively, for the second quarter 2023.

FFO

For the second quarter 2024, FFO was $141.3 million, or $1.69 per diluted share, compared to $136.9 million, or $1.67 per diluted share for the second 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

The portfolio was 93.1% occupied and 95.3% leased as of June 30, 2024.

Small shop leased rate was 92.5% as of June 30, 2024, an increase of 110 basis points quarter-over-quarter and 230 basis points year-over-year.

The anchor tenant leased rate was 96.7%, reflecting an increase of 90 basis points quarter-over-quarter and 30 basis points year-over-year.

Additionally, residential properties were 97.6% leased as of June 30, 2024.

Leasing Activity

During the second quarter 2024, Federal Realty signed 124 leases for 600,669 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty signed 122 leases for 594,361 square feet at an average rent of $37.72 per square foot compared to the average contractual rent of $34.29 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 10%, 23% on a straight-line basis. Comparable leases represented 98% of total comparable and non-comparable retail leases signed during the second quarter 2024.

Transaction Activity

April 1, 2024 — Acquired the approximately 10% non-controlling interest in the partnership that owns CocoWalk in suburban Miami, Florida for $12.4 million bringing Federal Realty's ownership to 100%.
May 31, 2024 — Acquired Virginia Gateway, a 664,000 square-foot, 110-acre super-regional community center comprising five adjacent open-air retail properties located at the highly trafficked intersection of I-66 and Route 29 in Gainesville, VA, for $215 million, further expanding Federal Realty's presence in Northern Virginia.
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.
June 5, 2024 — Completed the sale of its remaining assets on Third Street Promenade in Santa Monica, CA, for $103 million, resulting in a gain on sale of $52 million.

Regular Quarterly Dividends

Federal Realty announced today that its Board of Trustees increased the regular quarterly cash dividend to $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 October 15, 2024 to common shareholders of record as of October 1, 2024. This increase represents the 57th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector.

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, 2024 to shareholders of record as of October 1, 2024.

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	$3.33 to $3.51	$2.74 to $2.94
2024 FFO per diluted share	$6.70 to $6.88	$6.67 to $6.87

Conference Call Information

Federal Realty's management team will present an in-depth discussion of Federal Realty's operating performance on its second quarter 2024 earnings conference call, which is scheduled for Thursday, August 1, 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 August 15, 2024 by dialing 1-844-512-2921 or 1-412-317-6671; Passcode: 10189450.

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 3,400 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
June 30, 2024
	June 30,	December 31,
	2024	2023
	(in thousands, except share and per share data)
	(unaudited)
ASSETS
Real estate, at cost
Operating (including $1,829,059 and $2,021,622 of consolidated variable interest entities, respectively)	$ 10,222,540	$ 9,932,891
Construction-in-progress (including $9,132 and $8,677 of consolidated variable interest entities, respectively)	553,365	613,296
	10,775,905	10,546,187
Less accumulated depreciation and amortization (including $410,922 and $416,663 of consolidated variable interest entities, respectively)	(3,054,555)	(2,963,519)
Net real estate	7,721,350	7,582,668
Cash and cash equivalents	103,234	250,825
Accounts and notes receivable, net	194,611	201,733
Mortgage notes receivable, net	9,170	9,196
Investment in partnerships	33,937	34,870
Operating lease right of use assets, net	86,997	86,993
Finance lease right of use assets, net	6,740	6,850
Prepaid expenses and other assets	265,128	263,377
TOTAL ASSETS	$ 8,421,167	$ 8,436,512
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable, net (including $187,972 and $189,286 of consolidated variable interest entities, respectively)	$ 515,637	$ 516,936
Notes payable, net	683,280	601,945
Senior notes and debentures, net	3,354,755	3,480,296
Accounts payable and accrued expenses	176,686	174,714
Dividends payable	93,492	92,634
Security deposits payable	29,805	30,482
Operating lease liabilities	75,950	75,870
Finance lease liabilities	12,726	12,670
Other liabilities and deferred credits	225,465	225,443
Total liabilities	5,167,796	5,210,990
Commitments and contingencies
Redeemable noncontrolling interests	182,558	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, 83,590,543 and 82,775,286 shares issued and outstanding, respectively	841	833
Additional paid-in capital	4,005,249	3,959,276
Accumulated dividends in excess of net income	(1,177,336)	(1,160,474)
Accumulated other comprehensive income	7,042	4,052
Total shareholders' equity of the Trust	2,995,618	2,963,509
Noncontrolling interests	75,195	78,650
Total shareholders' equity	3,070,813	3,042,159
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 8,421,167	$ 8,436,512

Federal Realty Investment Trust
Consolidated Income Statements
June 30, 2024

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2024	2023	2024	2023
	(in thousands, except per share data)
	(unaudited)
REVENUE
Rental income	$ 295,775	$ 280,388	$ 586,820	$ 553,186
Mortgage interest income	277	291	555	552
Total revenue	296,052	280,679	587,375	553,738
EXPENSES
Rental expenses	58,891	55,610	120,550	110,815
Real estate taxes	35,289	32,381	69,349	64,947
General and administrative	12,092	11,913	24,098	24,458
Depreciation and amortization	85,049	78,974	168,453	157,611
Total operating expenses	191,321	178,878	382,450	357,831

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

OPERATING INCOME	157,011	101,801	257,205	197,609

OTHER INCOME/(EXPENSE)
Other interest income	1,051	2,422	2,534	3,054
Interest expense	(44,312)	(42,884)	(88,005)	(82,109)
Income from partnerships	905	1,665	937	2,181
NET INCOME	114,655	63,004	172,671	120,735
Net income attributable to noncontrolling interests	(2,673)	(2,505)	(3,953)	(4,901)
NET INCOME ATTRIBUTABLE TO THE TRUST	111,982	60,499	168,718	115,834
Dividends on preferred shares	(2,008)	(2,008)	(4,016)	(4,016)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS	$ 109,974	$ 58,491	$ 164,702	$ 111,818

EARNINGS PER COMMON SHARE, BASIC:
Net income available for common shareholders	$ 1.32	$ 0.72	$ 1.98	$ 1.37
Weighted average number of common shares	82,932	81,214	82,768	81,178
EARNINGS PER COMMON SHARE, DILUTED:
Net income available for common shareholders	$ 1.32	$ 0.72	$ 1.98	$ 1.37
Weighted average number of common shares	83,563	81,214	82,768	81,178

Federal Realty Investment Trust
Funds From Operations
June 30, 2024

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2024	2023	2024	2023
	(in thousands, except per share data)
Funds from Operations available for common shareholders (FFO)
Net income	$ 114,655	$ 63,004	172,671	120,735
Net income attributable to noncontrolling interests	(2,673)	(2,505)	(3,953)	(4,901)
Gain on sale of real estate	(52,280)	—	(52,280)	(1,702)
Depreciation and amortization of real estate assets	75,157	70,486	149,095	140,990
Amortization of initial direct costs of leases	8,179	7,567	15,916	15,352
Funds from operations	143,038	138,552	281,449	270,474
Dividends on preferred shares (1)	(1,875)	(1,875)	(3,750)	(3,750)
Income attributable to downREIT operating partnership units	688	688	1,380	1,381
Income attributable to unvested shares	(514)	(505)	(1,017)	(987)
FFO	$ 141,337	$ 136,860	$ 278,062	$ 267,118
Weighted average number of common shares, diluted (1)(2)	83,657	81,945	83,495	81,911

FFO per diluted share (2)	$ 1.69	$ 1.67	$ 3.33	$ 3.26

Notes:
(1)	For the three and six months ended June 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 for all period presented, but is anti-dilutive for the computation of dilutive EPS for the six months ended June 30, 2024 and the three and six months ended June 30, 2023.

Inquiries:
Brenda Pomar
Senior Director, Corporate Communications
301.998.8316
[email protected]

SOURCE Federal Realty Investment Trust