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Federal Realty Q4 FFO in Line; Ups 2014 View

Zacks Equity Research

Federal Realty Investment Trust (FRT) posted fourth-quarter 2013 core FFO (funds from operations) per share of $1.18, in line with the Zacks Consensus Estimate and higher than the year-ago quarter figure of $1.11.

The decent results came on the back of notable leasing activity, rent escalations and improved same-store portfolio performance. Also, Federal Realty raised its 2014 FFO per share outlook.

Including the debt’s early extinguishment charges, reported FFO in the quarter came in at $1.03 per share, down from $1.11 per share in the comparable prior year period.

Total revenue during the reported quarter escalated 5.2% year over year to $163.8 million and exceeded the Zacks Consensus Estimate of $161 million.

For full-year 2013, Federal Realty’s core FFO stood at $4.61 per share on revenues of $637.4 million. This was higher than the prior-year core FFO per share of $4.31 on revenues of $605.8 million. Also, the reported FFO for 2013 was $4.41 per share, up from $4.31 per share in 2012.

Quarterly Details

Federal Realty inked 99 lease deals for 484,144 square feet of retail space. As of Dec 31, 2013, the company’s overall portfolio was 95.8% leased, up 50 basis points (bps) both year over year and sequentially. 

On a comparable space basis (spaces for which a former tenant was there), Federal Realty leased 395,906 square feet at an average cash-basis contractual rent increase of 25% per square foot. Rent increases (GAAP basis) for comparable retail space averaged 38% per square foot, up from 34% in prior quarter.

Same-center property operating income (excluding assets under redevelopments and expansions) escalated 4.3% year over year. As of Dec 31, 2013, the company’s same-center portfolio was 95.9% leased, up 70 bps year over year and 50 bps sequentially.


Federal Realty exited 2013 with cash and cash equivalents of approximately $88.9 million, up from $37.0 million at the end of 2012.

2014 Outlook Raised

Federal Realty increased its guidance for full-year 2014 FFO per share in the range of $4.86 – $4.93, from $4.84 – $4.92 forecasted earlier. The Zacks Consensus Estimate of $4.90 for the same is within this range.


Concurrent with the earnings release, Federal Realty declared a quarterly dividend of 78 cents per share. The dividend is payable on Apr 15, 2014 to shareholders of record as of Mar 21, 2014.

Subsequent to Quarter-end Activity

On Jan 6, 2014, Federal Realty disclosed the buyout of a controlling stake in two shopping centers –The Grove at Shrewsbury and Brook 35 – in New Jersey for $161 million. These properties serve the flourishing NY Metro area and boast outlets of some renowned national and regional retailers such as The Gap, Inc. (GPS), Coach, Inc. (COH) and ANN INC. (ANN).

Our Viewpoint

Although one-time expenses related to debt broke Federal Realty’s earnings surprise streak, this retail real estate investment trust (:REIT) assures a comeback in the quarters ahead. In particular, the company’s portfolio of Class A shopping centers along with the diversified tenant base, comprising grocery stores and low-end discount retailers, position it well to maintain the upward trend. Also, the acquisition of New Jersey.-based premium shopping centers is commendable. Moreover, a raise in the outlook boosts investors’ confidence in the stock and is thus noteworthy.

Federal Realty currently carries a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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