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Federal Realty Bags PUMA as Anchor Tenant at Assembly Row

Zacks Equity Research

Federal Realty Investment Trust FRT recently signed a long-term lease with PUMA North America for office space at the company’s upcoming 455 Grand Union Boulevard property in Assembly Row. It also launched Phase 3 of Assembly Row, the company’s mixed-use development project in Greater Boston.   

The anchor tenant will occupy 150,000 square feet of space in the office tower that is currently under construction. Specifically, 455 Grand Union Boulevard will be a 13-story, Class-A office building spanning 300,000 square feet of space. It will also offer 25,000 square feet of ground floor retail and 550 dedicated parking spaces. It is 50% pre-leased to PUMA and will serve as the company’s North America headquarters. It will likely relocate 450 employees in 2021.

Notably, existing office spaces in the neighborhood are witnessing favorable demand with 450 Artisan Way 100% leased. Convenient transit, including on-site Assembly T Station and easy access to I-93 providing unrivaled access to Greater Boston, make the location a strategic fit.

Further, Phase 3 of Assembly Row will include 455 Grand Union Boulevard, a 500-unit rental residential building and 55,000 square feet of ground floor retail space. This is expected to cost nearly $475 million. Upon completion of Phase 3, the company’s investment at Assembly Row will total around $1.2 billion.

The new apartment building will be located across from the T station and start pre-leasing in early 2021.  The 24-story property will feature an array of amenities, including a roof deck and co-working style pods for entrepreneurs.

Notably, mixed-use developments have gained popularity for their solid neighborhood character, greater housing variety and density. Such developments bring down the distance between housing, workplaces, retail businesses, as well as other amenities and destinations. Hence, such developmental work enables companies to grab attention of target people, who prefer to live, work and play in the same area — a trend that drove development in several other urbans in the United States. Also, office spaces at such locations help developers command higher rents due to the highly amenitized environment offered.

With more than 20 years of mixed-use experience, Federal Realty seems well positioned to lever on this trend and drive leasing activity at its property. However, such initiatives are capital intensive, involving considerable upfront costs and tend to drag down near-term profitability.

Additionally, shares of this Zacks Rank #3 (Hold) company have outperformed the industry over the past six months. The stock has appreciated 1.1%, while the industry declined 3.9%.


Stocks to Consider

Terreno Realty Corporation TRNO carries a Zacks Rank of 2 (Buy), at present. The company’s funds from operation (FFO) per share estimates for 2018 remained unrevised at $1.32, over the past month. Its shares have rallied 6% over the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

OUTFRONT Media Inc. OUT carries a Zacks Rank of 2, currently. The company’s FFO per share estimates for 2018 remained unchanged at $2.09 in a month’s time. Its shares have appreciated 22% over the past month.

Extra Space Storage Inc EXR also carries a Zacks Rank of 2. The company’s FFO per share estimates for 2018 remained unchanged at $4.64, in a month’s time. Its shares have gained 6.8% over the past three months.

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