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Federal Realty Investment Trust Announces Second Quarter 2019 Operating Results

ROCKVILLE, Md., Aug. 1, 2019 /PRNewswire/ -- Federal Realty Investment Trust (FRT) today reported operating results for its second quarter ended June 30, 2019. For the three months ended June 30, 2019 and 2018, net income available for common shareholders was $1.05 per diluted share and $0.84 per diluted share, respectively.

Federal Realty Investment Trust is an equity real estate investment trust specializing in the ownership, management, development, and redevelopment of high quality retail assets. Federal Realty's portfolio is located primarily in strategic metropolitan markets in the Northeast, Mid-Atlantic, and California. Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has the longest consecutive record of annual dividend increases in the REIT industry. (PRNewsFoto/Federal Realty Investment Trust)

Highlights of the quarter include:

  • Generated funds from operations available for common shareholders (FFO) per diluted share of $1.60 for the quarter compared to $1.55 in second quarter 2018.
  • Generated comparable property operating income (POI) growth of 3.5% for the second quarter.
  • Signed leases for 378,756 sf of comparable space in the second quarter at an average rent of $42.68 psf and achieved cash basis rollover growth on those comparable spaces of 7%.
  • Opportunistically issued $300 million aggregate principal amount of 3.20% Notes due 2029.
  • Amended our revolving credit facility to increase our borrowing capacity to $1.0 billion, extend the maturity date to January 2024, plus two six-month extension options, and lower the spread over LIBOR to 77.5 basis points.
  • Increased the regular quarterly dividend rate on common shares to $1.05 per share, representing the 52nd consecutive year of common dividend increases.
  • Maintained our 2019 FFO per diluted share guidance range of $6.30 - $6.46.

"Continuing to reliably grow bottom line results despite headwinds remains our focal point and the second quarter didn't disappoint," said Donald C. Wood, President and Chief Executive Officer. "Our multi-faceted business plan including great properties, strong leases, redevelopment and development opportunities and an advantageous cost of capital all contributed to a solid result and allowed us to increase our dividend to our shareholders for a REIT-record 52 years in a row."

Financial Results

Net income available for common shareholders was $78.9 million and earnings per diluted share was $1.05 for second quarter 2019 versus $61.6 million and $0.84, respectively, for second quarter 2018.

In the second quarter 2019, Federal Realty generated FFO of $121.0 million, or $1.60 per diluted share. This compares to FFO of $114.8 million, or $1.55 per diluted share, in second quarter 2018.

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

The overall portfolio was 94.1% leased as of June 30, 2019, and the comparable portfolio was 94.6% leased. In second quarter 2019, comparable property POI increased 3.5%. Comparable property POI represents our consolidated property portfolio other than those properties that distort comparability between periods in two primary categories (1) assets that were not owned for the full quarter in both periods presented and (2) assets currently under development or being repositioned for significant redevelopment and investment.   

During the second quarter 2019, Federal Realty signed 115 leases for 382,656 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 378,756 square feet at an average rent of $42.68 per square foot compared to the average contractual rent of $39.75 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 7%.

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees increased the regular dividend rate on its common shares, declaring a regular quarterly cash dividend of $1.05 per share, resulting in an indicated annual rate of $4.20 per share.  The regular common dividend will be payable on October 15, 2019, to common shareholders of record on September 23, 2019. This increase represents the 52nd consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector, and one of only a small number of companies in any sector to accomplish such a record.

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, 2019 to shareholders of record as of September 23, 2019.

Summary of Other Quarterly Activities and Recent Developments

May 28, 2019 – Federal Realty closed on the sale of Free State Shopping Center for $72.0 million. Free State Shopping Center is a 264,000 square foot Giant Food anchored shopping center located in Bowie, Maryland.

June 7, 2019 – Federal Realty issued $300 million aggregate principal amount of 3.20% Notes due 2029 at 99.838% of par value. Federal Realty used the net proceeds from the offering to repay in full the outstanding balance of its unsecured term loan and for general corporate purposes.

July 25, 2019 – Federal Realty completed an amendment of its revolving credit facility to increase the borrowing capacity to $1.0 billion from $800 million and extend the maturity date to January 19, 2024, plus two six-month extension options. The pricing was also lowered to LIBOR plus 77.5 basis points based on the Trust's current rating.

Guidance

Federal Realty maintained its 2019 guidance for FFO per diluted share of $6.30 to $6.46 and updated 2019 earnings per diluted share guidance to $3.39 to $3.55.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its second quarter 2019 earnings conference call, which is scheduled for Friday, August 2, 2019 at 10:00AM ET.  To participate, please call 877.445.3230 five to ten minutes prior to the call start time and use the passcode 9787327 (required).  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 9, 2019 by dialing 855.859.2056; Passcode: 9787327.

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, Federal Realty's mission is to deliver long term, sustainable growth through investing in densely populated, affluent 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 104 properties include approximately 3,000 tenants, in 24 million square feet, and over 2,600 residential units. 

Federal Realty has increased its quarterly dividends to its shareholders for 52 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 13, 2019, 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, 2019.

Investor Inquires: 

Media Inquiries:

Leah Andress Brady   

Brenda Pomar

Investor Relations Senior Manager 

Corporate Communications Manager

301.998.8265            

301.998.8316

lbrady@federalrealty.com

bpomar@federalrealty.com

 

Federal Realty Investment Trust

Consolidated Balance Sheets

June 30, 2019


June 30,


December 31,


2019


2018


(in thousands, except share and
per share data)


(unaudited)



ASSETS




Real estate, at cost




Operating (including $1,703,069 and $1,701,804 of consolidated variable interest
entities, respectively)

$

7,293,212


$

7,307,622

Construction-in-progress (including $78,633 and $51,313 of consolidated variable
interest entities, respectively)

575,229


495,274

Assets held for sale

5,938


16,576


7,874,379


7,819,472

Less accumulated depreciation and amortization (including $312,416 and $292,374 of
consolidated variable interest entities, respectively)

(2,148,010)


(2,059,143)

Net real estate

5,726,369


5,760,329

Cash and cash equivalents

105,903


64,087

Accounts and notes receivable, net

138,870


142,237

Mortgage notes receivable, net

30,429


30,429

Investment in partnerships

30,800


26,859

Operating lease right of use assets

94,828


Finance lease right of use assets

53,044


Prepaid expenses and other assets

203,498


265,703

TOTAL ASSETS

$

6,383,741


$

6,289,644

LIABILITIES AND SHAREHOLDERS' EQUITY





Liabilities




Mortgages payable, net (including $441,469 and $444,388 of consolidated variable
interest entities, respectively)

$

450,883


$

474,379

Capital lease obligations


71,519

Notes payable, net

4,163


279,027

Senior notes and debentures, net

2,702,737


2,404,279

Accounts payable and accrued expenses

177,078


177,922

Dividends payable

78,808


78,207

Security deposits payable

20,588


17,875

Operating lease liabilities

74,536


Finance lease liabilities

72,068


Other liabilities and deferred credits

157,524


182,898

Total liabilities

3,738,385


3,686,106

Commitments and contingencies




Redeemable noncontrolling interests

134,710


136,208

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), 399,896 shares issued and outstanding

9,997


9,997

Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized,
74,950,197 and 74,249,633 shares issued and outstanding, respectively

752


745

Additional paid-in capital

3,088,946


3,004,442

Accumulated dividends in excess of net income

(841,505)


(818,877)

Accumulated other comprehensive loss

(1,024)


(416)

Total shareholders' equity of the Trust

2,407,166


2,345,891

Noncontrolling interests

103,480


121,439

Total shareholders' equity

2,510,646


2,467,330

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

6,383,741


$

6,289,644

 

 

Federal Realty Investment Trust

Consolidated Income Statements

June 30, 2019









Three Months Ended


Six Months Ended


June 30,


June 30,


2019


2018


2019


2018


(in thousands, except per share data)


(unaudited)

REVENUE








Rental income

$

229,731


$

224,168


$

461,223


$

448,816

Mortgage interest income

734


734


1,469


1,491

Total revenue

230,465


224,902


462,692


450,307

EXPENSES








Rental expenses

41,438


39,905


85,698


84,678

Real estate taxes

25,166


28,307


52,853


56,755

General and administrative

11,422


8,413


20,987


16,342

Depreciation and amortization

59,057


58,381


118,679


116,491

Total operating expenses

137,083


135,006


278,217


274,266









Gain on sale of real estate, net of tax

16,197


3,972


16,197


7,288









OPERATING INCOME

109,579


93,868


200,672


183,329









OTHER INCOME/(EXPENSE)








Other interest income

189


159


366


338

Interest expense

(27,482)


(27,766)


(55,515)


(53,950)

Income (loss) from partnerships

381


(728)


(1,053)


(1,253)

NET INCOME

82,667


65,533


144,470


128,464

   Net income attributable to noncontrolling interests

(1,765)


(1,938)


(3,424)


(3,622)

NET INCOME ATTRIBUTABLE TO THE TRUST

80,902


63,595


141,046


124,842

Dividends on preferred shares

(2,011)


(2,011)


(4,021)


(4,021)

NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$

78,891


$

61,584


$

137,025


$

120,821

EARNINGS PER COMMON SHARE, BASIC:












Net income available for common shareholders

$

1.05


$

0.84


$

1.83


$

1.65

Weighted average number of common shares

74,713


72,990


74,458


72,948

EARNINGS PER COMMON SHARE, DILUTED:








Net income available for common shareholders

$

1.05


$

0.84


$

1.83


$

1.65

Weighted average number of common shares

74,713


73,025


74,458


72,997


 

 

Federal Realty Investment Trust









Funds From Operations



June 30, 2019











Three Months Ended


Six Months Ended



June 30,


June 30,



2019


2018


2019


2018



(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO) (1)










Net income


$

82,667


$

65,533


$

144,470


$

128,464

Net income attributable to noncontrolling interests


(1,765)


(1,938)


(3,424)


(3,622)

Gain on sale of real estate, net


(16,197)


(3,972)


(16,197)


(7,288)

Depreciation and amortization of real estate assets


53,323


52,011


106,812


103,362

Amortization of initial direct costs of leases


4,537


4,702


9,287


9,302

Funds from operations


122,565


116,336


240,948


230,218

Dividends on preferred shares


(1,875)


(1,875)


(3,750)


(3,750)

Income attributable to operating partnership units


661


759


1,390


1,534

Income attributable to unvested shares


(346)


(398)


(690)


(786)

FFO


$

121,005


$

114,822


$

237,898


$

227,216

Weighted average number of common shares, diluted


75,456


73,880


75,235


73,859

FFO per diluted share


$

1.60


$

1.55


$

3.16


$

3.08














 

Notes:


1)

In connection with the adoption of the new lease accounting standard, effective January 1, 2019, certain internal and external legal leasing costs
no longer qualify for capitalization. As a result, capitalized leasing costs excluding external commissions decreased to $0.6 million and $1.0
million for the three and six months ended June 30, 2019, respectively, from $2.0 million and $3.6 million for the three and six months ended
June 30, 2018, respectively.

Cision

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