FRT Welcomes WFM at Pleasant Shops

Zacks

Federal Realty Investment Trust (FRT) welcomed the world's leading supplier of natural and organic foods – Whole Foods Market, Inc. (WFM) – at its Mass.-based retail property, Pleasant Shops. The move depicts Federal Realty’s focus on enhancing its tenant base and consequently, the value of the property.

Whole Foods, which opened its 23rd store in Massachusetts, occupies 40,000 square feet of space at Pleasant Shops. Notably, Whole Foods is currently among the top tenants at Pleasant Shops, in terms of space occupied. This new store opened on Jul 10, 2013.

Pleasant Shops, spanning 129,000 square feet, is situated at the intersection of Rt. 18 and Pleasant Valley Pkwy in Norfolk County, Weymouth. The property enjoys a footfall of 53,376 people residing nearby (in a 3-mile radius) whose average household income stands at $86,918.

The center was acquired by Federal Realty in 2004 in a joint venture with a client advised by Clarion Partners. Pleasant Shops is already anchored by over 15 well-known tenants such as Starbucks Corporation (SBUX), CVS Caremark Corporation and Marshalls, a subsidiary of The TJX Companies, Inc. (TJX).

Notably, Federal Realty has a strong tenant base with most of its top tenants being grocery stores and low-end discount retailers that fare comparatively better than the luxury segment, as consumers have become more price conscious post recession. Consequently, the company enjoys a stable source of rental revenue. Therefore, we view this deal with this high-end grocer – Whole Foods – to be a strategic fit for Federal Realty.

The company is scheduled to report second-quarter 2013 results on Aug 1, after the closing bell. The Zacks Consensus Estimate for second-quarter 2013 FFO is pegged at $1.12 per share. Federal Realty has an Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of negative 0.89% and a Zacks Rank #3 (Hold). Thus, we are not so confident of a positive earnings surprise.

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