Federal Realty (FRT) Beats Q3 FFO Estimates, Raises '23 View
Federal Realty Investment Trust’s FRT third-quarter 2023 funds from operations (FFO) per share of $1.65 surpassed the Zacks Consensus Estimate of $1.62. This also marked a rise of 3.8% from the year-ago quarter’s tally of $1.59.
Results reflect healthy leasing activity and occupancy levels at its properties. FRT shares were up 0.7% in the after-hours trading session on the NYSE yesterday.
Quarterly revenues of $286.6 million exceeded the consensus mark of $285.1 million and also improved 4.8% from the year-ago quarter’s tally.
Federal Realty generated 3.8% comparable property operating income growth. FRT has also tightened and increased its guidance for 2023 FFO per share.
Per Donald C. Wood, Federal Realty's chief executive officer, "Our business's strength lies in superior demographics, fueling active leasing at our premium retail destinations. We remain focused on continuing to grow occupancy over the coming quarters."
Behind the Headlines
On the leasing aspect, during the reported quarter, Federal Realty signed 105 leases for 565,496 square feet of retail space. On a comparable space basis, the company signed 100 leases for 552,765 square feet of space at an average rent of $34.51 per square foot. This denotes cash-basis rollover growth of 11% and 21% on a straight-line basis.
Moreover, FRT achieved the highest year-to-date comparable leasing volume on record, with 1.6 million square feet of comparable space signed in the first nine months of 2023.
On the operational front, occupancy rates in the portfolio increased by 20 basis points (bps) year over year to 92.3% as of Sep 30, 2023. The portfolio was 94% leased as of the same date. Our estimate for the metric was 94.1%. Both occupied and leased metrics bear a negative impact of around 100 bps resulting from the vacating of the final Bed Bath & Beyond leases.
Sustained robust leasing activity for small shops resulted in a quarter-ending lease rate of 90.7%, marking a 50 bps increase sequentially and an 80 bps rise year over year. Moreover, FRT’s residential properties were 97.8% leased as of the same date.
Federal Realty exited the third quarter of 2023 with cash and cash equivalents of $98.2 million, up from the $85.6 million recorded at the end of 2022.
Guidance
For 2023, Federal Realty increased its guidance for FFO per share in the range of $6.50-$6.58 from the $6.46-$6.58 range guided earlier. The Zacks Consensus Estimate of $6.53 also lies within this range.
Dividend
Concurrent with the third-quarter earnings release, Federal Realty announced a regular quarterly cash dividend of $1.09 per share, indicating an annual rate of $4.36 per share. The dividend will be paid out on Jan 16 to shareholders of record as of Jan 2, 2024.
Conclusion
Federal Realty's decent third-quarter 2023 performance demonstrates the company's ability to adapt to the evolving needs of consumers and retailers, particularly in the affluent first-ring suburbs of major metropolitan areas where it operates. With its strong leasing volume, growing property operating income and improving occupancy rates, FRT is well-positioned to continue its success throughout 2023. Investors should closely monitor Federal Realty as the company maintains its momentum, delivering solid financial results.
Federal Realty currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Federal Realty Investment Trust Price, Consensus and EPS Surprise
Federal Realty Investment Trust price-consensus-eps-surprise-chart | Federal Realty Investment Trust Quote
Performance of Other Retail REITs
Simon Property Group, Inc.’s SPG third-quarter 2023 FFO per share of $3.20 surpassed the Zacks Consensus Estimate of $2.98. Also, the figure increased 9.2% year over year. Results reflected better-than-anticipated revenues on healthy leasing activity and a rise in the base rent per square foot and occupancy levels. However, higher property operating expenses and interest expenses partly offset the upsides. However, this retail behemoth raised its 2023 FFO per share outlook.
Kimco Realty Corp. KIM reported a third-quarter 2023 FFO per share of 40 cents, ahead of the Zacks Consensus Estimate of 39 cents. The figure was only a cent lower than the year-ago quarter’s tally. Results reflected better-than-anticipated revenues, aided by rental rate growth and healthy occupancy levels. Kimco raised its 2023 FFO per share outlook and also announced a hike in its quarterly dividend.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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