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Federal Realty Investment Trust Announces Operating Results for the Year and Quarter Ended December 31, 2018

ROCKVILLE, Md., Feb. 13, 2019 /PRNewswire/ -- Federal Realty Investment Trust (FRT) today reported operating results for its year and quarter ended December 31, 2018. For the year ended December 31, 2018 and 2017, net income available for common stockholders was $3.18 per diluted share and $3.97 per diluted share, respectively. For the three months ended December 31, 2018 and 2017, net income available for common stockholders was $0.71 per diluted share and $0.67 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)

Key Highlights of the full year and quarter include:

  • Generated FFO per diluted share of $6.23 for the year compared to $5.74 in 2017 ($5.91 excluding prepayment premium). For the fourth quarter, generated FFO per diluted share of $1.57 compared to $1.30 for the fourth quarter 2017 ($1.47 excluding prepayment premium).  
  • Generated comparable property operating income (POI) growth of 3.1% for the year ended 2018. For the fourth quarter, comparable property POI growth was 2.0%.  
  • Signed leases for 573,923 square feet of comparable space (622,234 square feet total) in the fourth quarter at an average rent of $32.16 per square foot and achieved cash basis rollover growth on those comparable spaces of 15%. Over the last four quarters, cash basis rollover growth on comparable spaces was 12%. 
  • Announced the launch of Phase 3 at Assembly Row which includes 277,000 square feet of office space – anchored by PUMA North America, 500 residential units and 56,000 square feet of ground floor retail.
  • Introduced 2019 FFO per diluted share guidance range of $6.30 to $6.46, which reflects the impact of the newly implemented lease accounting standard ASC 842.  

"2018 was a year of records for us; from funds from operations per share of $6.23, to total leasing volume at nearly 2 million square feet, to 51 consecutive years of increased common dividends," said Donald C. Wood, President and Chief Executive Officer of Federal Realty. "The growing diversification of our revenue base, along with the development and redevelopment opportunities being executed by our talented team, gives us confidence that our multi-faceted business plan is the right one to service today's evolving and demanding consumer." 

Financial Results

For the full year 2018, Federal Realty reported net income available for common shareholders of $233.9 million and earnings per diluted share of $3.18. This compares to net income available for common shareholders of $287.5 million and earnings per diluted share of $3.97 for the full year 2017.   Net income available for common shareholders was $52.5 million and earnings per diluted share was $0.71 for the fourth quarter 2018 versus $48.6 million and $0.67, respectively, for the fourth quarter 2017.

For the full year 2018, Federal Realty generated funds from operations available for common shareholders (FFO) of $461.8 million, or $6.23 per diluted share. This compares to FFO of $420.0 million, or $5.74 per diluted share, for the full year 2017. Excluding the $12.3 million early extinguishment of debt charge in the fourth quarter 2017, FFO per diluted share for the full year 2017 would have been $5.91. For the fourth quarter 2018, FFO was $117.2 million, or $1.57 per diluted share, compared to $95.5 million, or $1.30 per diluted share for the fourth quarter 2017 ($1.47 if the early extinguishment of debt charge was excluded).

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 94.6% leased as of December 31, 2018, and the comparable portfolio was 95.1% leased.  Comparable property POI increased 3.1% for the year 2018 and 2.0% in the fourth quarter. 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.

For the year 2018, Federal Realty signed 402 leases for 2.0 million square feet of retail space.  On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 1.9 million square feet at an average rent of $34.11 per square foot compared to the average contractual rent of $30.37 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 12%.

During fourth quarter 2018, Federal Realty signed 114 leases for 622,234 square feet of retail space.  On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 573,923 square feet at an average rent of $32.16 per square foot compared to the average contractual rent of $27.96 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 15%.

Regular Quarterly Dividends

Federal Realty's Board of Trustees declared a regular quarterly cash dividend of $1.02 per common share, resulting in an indicated annual rate of $4.08 per common share. The regular common dividend will be payable on April 15, 2019 to shareholders of record as of March 14, 2019.

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 April 15, 2019 to shareholders of record as of April 1, 2019.

Summary of Other Quarterly Activities and Recent Developments

February 7, 2019 – Federal Realty announced Wendy Seher and Jan Sweetnam have been promoted to executive vice president and will serve as members of the Trust's Executive Committee, in addition to their roles as members of the Investment Committee. Wendy Seher was promoted to Executive Vice President – Eastern Region President. Jan Sweetnam was promoted to Executive Vice President – Western Region Chief Operating Officer.

January 18, 2019 – Federal Realty announced the launch of Phase 3 at Assembly Row which includes 277,000 square feet of office space – anchored by PUMA North America, 500 residential units and 56,000 square feet of ground floor retail. The estimated total investment in Phase 3 is expected to be approximately $475 million. Upon completion of Phase 3, total investment at Assembly Row will be approximately $1.2 billion.

Guidance

Federal Realty introduced 2019 guidance for FFO per diluted share of $6.30 to $6.46 and 2019 earnings per diluted share guidance of $3.14 to $3.30, which reflects the impact of the newly implemented lease accounting standard ASC 842.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its fourth quarter and year end 2018 earnings conference call, which is scheduled for Thursday, February 14, 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 2162635 (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 February 21, 2019 by dialing 855.859.2056; Passcode: 2162635.

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 51 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.

 

 

Federal Realty Investment Trust

Consolidated Balance Sheets

December 31, 2018


December 31,


2018


2017


(in thousands, except share and


per share data)

ASSETS




Real estate, at cost




Operating (including $1,701,804 and $1,639,486 of consolidated variable interest entities, respectively)

$

7,307,622



$

6,950,188

Construction-in-progress (including $51,313 and $43,393 of consolidated variable interest entities, respectively)

495,274



684,873

Assets held for sale

16,576




7,819,472



7,635,061

Less accumulated depreciation and amortization (including $292,374 and $247,410 of consolidated variable interest entities, respectively)

(2,059,143)



(1,876,544)

Net real estate

5,760,329



5,758,517

Cash and cash equivalents

64,087



15,188

Accounts and notes receivable

142,237



209,877

Mortgage notes receivable, net

30,429



30,429

Investment in real estate partnerships

26,859



23,941

Prepaid expenses and other assets

265,703



237,803

TOTAL ASSETS

$

6,289,644



$

6,275,755

LIABILITIES AND SHAREHOLDERS' EQUITY




Liabilities




Mortgages payable (including $444,388 and $460,372 of consolidated variable interest entities, respectively)

$

474,379



$

491,505

Capital lease obligations

71,519



71,556

Notes payable

279,027



320,265

Senior notes and debentures

2,404,279



2,401,440

Accounts payable and other liabilities

177,922



196,332

Dividends payable

78,207



75,931

Security deposits payable

17,875



16,667

Other liabilities and deferred credits

182,898



169,388

Total liabilities

3,686,106



3,743,084

Commitments and contingencies




Redeemable noncontrolling interests

136,208



141,157

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, 74,249,633 and 73,090,877 shares issued and outstanding, respectively

745



733

Additional paid-in capital

3,004,442



2,855,321

Accumulated dividends in excess of net income

(818,877)



(749,367)

Accumulated other comprehensive (loss) income

(416)



22

Total shareholders' equity of the Trust

2,345,891



2,266,706

Noncontrolling interests

121,439



124,808

Total shareholders' equity

2,467,330



2,391,514

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

6,289,644



$

6,275,755

 

 

Federal Realty Investment Trust

Consolidated Income Statements

December 31, 2018


Three Months Ended


Year Ended


December 31,


December 31,


2018


2017


2018


2017


(in thousands, except per share data)



REVENUE








Rental income

$

230,864



$

220,720



$

895,698



$

841,461


Other property income

3,647



2,396



16,589



12,825


Mortgage interest income

865



841



3,149



3,062


Total revenue

235,376



223,957



915,436



857,348


EXPENSES








Rental expenses

46,507



45,403



173,094



164,890


Real estate taxes

28,935



28,735



114,776



107,839


General and administrative

9,620



10,268



33,600



36,281


Depreciation and amortization

66,976



56,394



244,245



216,050


Total operating expenses

152,038



140,800



565,715



525,060


OPERATING INCOME

83,338



83,157



349,721



332,288


Other interest income

285



222



942



475


Interest expense

(28,038)



(26,173)



(110,154)



(100,125)


Early extinguishment of debt



(12,273)





(12,273)


Loss from real estate partnerships

(705)



(121)



(3,398)



(417)


INCOME FROM CONTINUING OPERATIONS

54,880



44,812



237,111



219,948


Gain on sale of real estate, net

1,502



7,973



11,915



77,922


NET INCOME

56,382



52,785



249,026



297,870


     Net income attributable to noncontrolling interests

(1,875)



(2,129)



(7,119)



(7,956)


NET INCOME ATTRIBUTABLE TO THE TRUST

54,507



50,656



241,907



289,914


Dividends on preferred shares

(2,011)



(2,011)



(8,042)



(2,458)


NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$

52,496



$

48,645



$

233,865



$

287,456


EARNINGS PER COMMON SHARE, BASIC








Net income available for common shareholders

$

0.71



$

0.67



$

3.18



$

3.97


Weighted average number of common shares, basic

73,790



72,515



73,274



72,117


EARNINGS PER COMMON SHARE, DILUTED








Net income available for common shareholders

$

0.71



$

0.67



$

3.18



$

3.97


Weighted average number of common shares, diluted

73,796



72,598



73,302



72,233


 

 

Federal Realty Investment Trust

Funds From Operations / Other Supplemental Information

December 31, 2018









Three Months Ended


Year Ended



December 31,


December 31,



2018


2017


2018


2017



(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO)









Net income


$

56,382



$

52,785



$

249,026



$

297,870


Net income attributable to noncontrolling interests


(1,875)



(2,129)



(7,119)



(7,956)


Gain on sale of real estate, net (1)


(1,502)



(7,973)



(11,915)



(77,632)


Depreciation and amortization of real estate assets


55,604



49,607



213,098



188,719


Amortization of initial direct costs of leases


10,069



4,594



24,603



19,124


Funds from operations


118,678



96,884



467,693



420,125


Dividends on preferred shares


(1,875)



(1,876)



(7,500)



(1,917)


Income attributable to operating partnership units


754



788



3,053



3,143


Income attributable to unvested shares


(330)



(310)



(1,469)



(1,374)


FFO (2)


$

117,227



$

95,486



$

461,777



$

419,977


Weighted average number of common shares, diluted


74,630



73,481



74,153



73,122


FFO per diluted share (2)


$

1.57



$

1.30



$

6.23



$

5.74











 

Notes:

1)

The gain on sale of real estate for the year ended December 31, 2018 includes a $7.2 million net gain related to condominium units sold at Assembly Row and Pike & Rose. For the three months and year ended December 31, 2017, the gain on sale of real estate includes $1.5 million and $5.4 million, respectively, of net gains related to Assembly Row condominium units under the percentage-of-completion method. Effective January 1, 2018, we adopted a new accounting standard related to revenue recognition, which results in a change in our revenue recognition policy for condominium sales. See Note 2 of our December 31, 2018 Form 10-K for additional information regarding the adoption.

2)

If the $12.3 million early extinguishment of debt charge incurred in the fourth quarter of 2017 was excluded, our FFO, FFO per diluted share, and dividend payout ratio as a percentage of FFO would have been:

 



Three Months Ended


Year Ended



December 31, 2017


December 31, 2017



(in thousands, except per share data)

FFO


$

107,719



$

432,210


FFO per diluted share


$

1.47



$

5.91


Dividend payout ratio as a percentage of FFO


68

%


66

%

 

Investor Inquires:                        

Media Inquiries:

Leah Andress Brady                    

Brenda Pomar

Investor Relations Manager                

Corporate Communications Manager

301.998.8265                                 

301.998.8316

lbrady@federalrealty.com               

bpomar@federalrealty.com

Cision

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