Federal Realty Investment Trust Announces Third Quarter 2017 Operating Results

ROCKVILLE, Md., Nov. 1, 2017 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its third quarter ended September 30, 2017.  Highlights of the quarter and recent activity include:

• Generated earnings per diluted share of $1.47 for the quarter compared to $0.82 in third quarter 2016.
• Generated FFO per diluted share of $1.50 for the quarter compared to $1.41 in third quarter 2016.
• Generated same-center property operating income growth of 4.4%. 
• Signed leases for 399,619 sf of comparable space at an average rent of $38.24 psf and achieved cash basis rollover growth on comparable spaces of 14%.
• Opportunistically issued $150.0 million of 5.0% Series C Cumulative Redeemable Preferred Shares.
• Narrowed 2017 FFO per diluted share guidance range to $5.89 to $5.92.

"Solid performance all around this quarter," said Donald C. Wood, President and Chief Executive Officer of Federal Realty. "Thoughtful positioning of our portfolio and company over the last decade empowers us to continue to excel during this transitional time in the retail real estate space. The balance of owning the best real estate in flexible formats combined with our A rated balance sheet sets us apart and allows us to focus on the future."

Financial Results

Net income available for common shareholders was $106.6 million and earnings per diluted share was $1.47 for third quarter 2017 versus $58.8 million and $0.82, respectively, for third quarter 2016. Year-to-date Federal Realty reported net income available for common shareholders of $238.8 million and earnings per diluted share of $3.30. This compares to net income available for common shareholders of $191.5 million and earnings per diluted share of $2.70 for the nine months ended September 30, 2016.  

In the third quarter 2017, Federal Realty generated funds from operations available for common shareholders (FFO) of $110.0 million, or $1.50 per diluted share. This compares to FFO of $101.7 million, or $1.41 per diluted share, in third quarter 2016. For the nine months ended September 30, 2017, FFO was $324.5 million, or $4.45 per diluted share, compared to $301.4 million, or $4.21 per diluted share for the same nine month period in 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 third quarter 2017, same-center property operating income increased 4.4% over the prior year when including properties that are being redeveloped and 2.6% when excluding those properties.

The overall portfolio was 94.9% leased as of September 30, 2017, compared to 94.3% on September 30, 2016.  Federal Realty's same center portfolio was 96.0% leased on September 30, 2017, compared to 95.7% on September 30, 2016.

During third quarter 2017, Federal Realty signed 90 leases for 424,492 square feet of retail space.  On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 399,619 square feet at an average cash basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 14%.  The average contractual rent on this comparable space for the first year of the new leases is $38.24 per square foot compared to the average contractual rent of $33.43 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 27% for third quarter 2017.

Dividend Declarations

Federal Realty's Board of Trustees declared a regular quarterly cash dividend of $1.00 per share, resulting in an indicated annual rate of $4.00 per share. The regular common dividend will be payable on January 16, 2018 to common shareholders of record as of January 2, 2018.

Federal Realty's Board of Trustees also declared quarterly cash dividends with respect to the Trust's Series C Preferred Shares. All dividends on the preferred shares will be payable on January 16, 2018 to preferred shareholders of record as of January 2, 2018.

Summary of Other Quarterly Activities and Recent Developments

• October 12, 2017 – Federal Realty received the inaugural Best Sustainability Program award from the NAIOP DC | MD Chapter.  The award is given to an organization that "demonstrates a strong commitment to sustainable business practices and solutions that contribute to environmental responsibility and economic success."
• September 25, 2017 – Federal Realty issued 6,000 5.0% Series C Cumulative Redeemable Preferred Shares, par value $0.01 per share at the liquidation preference of $25,000 per share in an underwritten public offering. The Series C Preferred Shares accrue dividends at a rate of 5.0% per year and are redeemable at our option on or after September 29, 2022.
• August 31, 2017 – Federal Realty announced the sale of 150 Post Street, a seven-story, 105,000 square foot retail and office building located in the Union Square district of San Francisco, for $69.3 million.

Guidance

Federal Realty narrowed its guidance for 2017 FFO per diluted share to a range of $5.89 to $5.92 and adjusted 2017 earnings per diluted share guidance to a range of $4.02 to $4.05.

Federal Realty will provide preliminary expectations for 2018 FFO per diluted share on the Trust's third quarter 2017 earnings conference call.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its third quarter 2017 earnings conference call, which is scheduled for Thursday, November 2, 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 84997180 (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 telephonic replay of the conference call will also be available through November 9, 2017 by dialing 855.859.2056; Passcode: 84997180.

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 104 properties include over 2,900 tenants, in approximately 24 million square feet, and over 2,000 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.

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SOURCE Federal Realty Investment Trust

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