Active acquisition activity with $287 million of investments
NORTH BETHESDA, Md., Aug. 1, 2024 -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its second quarter ended June 30, 2024. For the three months ended June 30, 2024 and 2023, net income available for common shareholders was $1.32 per diluted share and $0.72 per diluted share, respectively. For the three months ended June 30, 2024 and 2023, operating income was $157.0 million and $101.8 million, respectively.
Highlights for the second quarter include:
- Generated funds from operations available to common shareholders (FFO) per diluted share of $1.69 for the quarter, compared to $1.67 for the second quarter of 2023.
- Signed 122 leases for 594,361 square feet of comparable retail space, a record level of comparable square footage signed in any second quarter and the second highest of any quarter, at a cash basis rollover growth of 10% and 23% on a straight-line basis.
- Generated comparable property operating income (POI) growth of 2.9% for the second quarter, excluding lease termination fees and prior period rents collected.
- Reported portfolio occupancy of 93.1% and a leased rate of 95.3% at quarter end, representing an increase of 110 basis points and 100 basis points, respectively, quarter-over-quarter.
- Continued strong small shop leasing, ending the quarter at 92.5% leased, with an increase of 110 basis points quarter-over-quarter and 230 basis points year-over-year.
- During the quarter and subsequent to quarter end:
- Acquired two assets totaling 880,000 square feet on 129 acres for a total purchase price of $275 million.
- Completed the sale of its remaining assets on Third Street Promenade in Santa Monica, CA, for $103 million.
- Increased the regular quarterly cash dividend to $1.10 per common share, resulting in an indicated annual rate of $4.40 per common share. This marks the 57th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector.
- Tightened and raised 2024 earnings per diluted share guidance to $3.33 – $3.51, 2024 FFO per diluted share guidance to $6.70 – $6.88, and 2024 comparable properties growth excluding lease termination fees and prior period rents collected assumption to 3% – 4%.
- Issued the company's 2023 Sustainability Report.
"Another record quarter for Federal Realty, starting with funds from operations per share of $1.69, to continued record leasing volume, to furthering our REIT industry record with the 57th consecutive year of increased common dividends," said Donald C. Wood, Chief Executive Officer. "The robust leasing demand we continue to see is a clear indicator of the value and attractiveness of our properties, setting a solid foundation for strong future earnings growth."
Financial Results
Net Income
For the second quarter 2024, net income available for common shareholders was $110.0 million and earnings per diluted share was $1.32 versus $58.5 million and $0.72, respectively, for the second quarter 2023.
FFO
For the second quarter 2024, FFO was $141.3 million, or $1.69 per diluted share, compared to $136.9 million, or $1.67 per diluted share for the second quarter 2023.
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.
Operational Update
Occupancy
The portfolio was 93.1% occupied and 95.3% leased as of June 30, 2024.
Small shop leased rate was 92.5% as of June 30, 2024, an increase of 110 basis points quarter-over-quarter and 230 basis points year-over-year.
The anchor tenant leased rate was 96.7%, reflecting an increase of 90 basis points quarter-over-quarter and 30 basis points year-over-year.
Additionally, residential properties were 97.6% leased as of June 30, 2024.
Leasing Activity
During the second quarter 2024, Federal Realty signed 124 leases for 600,669 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty signed 122 leases for 594,361 square feet at an average rent of $37.72 per square foot compared to the average contractual rent of $34.29 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 10%, 23% on a straight-line basis. Comparable leases represented 98% of total comparable and non-comparable retail leases signed during the second quarter 2024.
Transaction Activity
- April 1, 2024 — Acquired the approximately 10% non-controlling interest in the partnership that owns CocoWalk in suburban Miami, Florida for $12.4 million bringing Federal Realty's ownership to 100%.
- May 31, 2024 — Acquired Virginia Gateway, a 664,000 square-foot, 110-acre super-regional community center comprising five adjacent open-air retail properties located at the highly trafficked intersection of I-66 and Route 29 in Gainesville, VA, for $215 million, further expanding Federal Realty's presence in Northern Virginia.
- July 31, 2024 — Acquired Pinole Vista Crossing, a dominant 216,000-square-foot, 19-acre regional open-air grocery-anchored community center located along I-80 in Pinole, CA, 13 miles north of Federal Realty's East Bay Bridge Shopping Center, for $60 million, expanding the company's presence in Northern California's East Bay sub-market.
- June 5, 2024 — Completed the sale of its remaining assets on Third Street Promenade in Santa Monica, CA, for $103 million, resulting in a gain on sale of $52 million.
Regular Quarterly Dividends
Federal Realty announced today that its Board of Trustees increased the regular quarterly cash dividend to $1.10 per common share, resulting in an indicated annual rate of $4.40 per common share. The regular common dividend will be payable on October 15, 2024 to common shareholders of record as of October 1, 2024. This increase represents the 57th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector.
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, 2024 to shareholders of record as of October 1, 2024.
2024 Guidance
Federal Realty has updated its 2024 guidance, as summarized in the table below:
Full Year 2024 Guidance | Revised Guidance | Prior Guidance |
2024 Earnings per diluted share | $3.33 to $3.51 | $2.74 to $2.94 |
2024 FFO per diluted share | $6.70 to $6.88 | $6.67 to $6.87 |
Conference Call Information
Federal Realty's management team will present an in-depth discussion of Federal Realty's operating performance on its second quarter 2024 earnings conference call, which is scheduled for Thursday, August 1, 2024 at 5:00 PM ET. To participate, please call 1-844-826-3035 or 1-412-317-5195 five to ten minutes prior to the call start time. The teleconference can also be accessed via a live webcast at www.federalrealty.com in the Investors section. 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 15, 2024 by dialing 1-844-512-2921 or 1-412-317-6671; Passcode: 10189450.
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 Northern and Southern California. Founded in 1962, Federal Realty's mission is to deliver long-term, sustainable growth through investing in 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 102 properties include approximately 3,400 tenants, in 27 million commercial square feet, and approximately 3,100 residential units.
Federal Realty has increased its quarterly dividends to its shareholders for 57 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 12, 2024 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 or to fill existing vacancy;
- risks that we may not be able to proceed with or obtain necessary approvals for any development, redevelopment or renovation project, and that completion of anticipated or ongoing property development, redevelopment or renovation projects that we do pursue may cost more, take more time to complete or fail to perform as expected;
- 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, or if the costs of capital we obtain are significantly higher than historical levels;
- risks associated with general economic conditions, including inflation and local economic conditions in our geographic markets;
- risks of 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;
- 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; and
- risks related to natural disasters, climate change and public health crises (such as the outbreak and worldwide spread of COVID-19), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address them, may precipitate or materially exacerbate one or more of the above-mentioned risks, and may significantly disrupt or prevent us from operating our business in the ordinary course for an extended period.
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 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 review the risks contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 12, 2024 and subsequent quarterly reports on Form 10-Q.
Federal Realty Investment Trust | |||
Consolidated Balance Sheets | |||
June 30, 2024 | |||
June 30, | December 31, | ||
2024 | 2023 | ||
(in thousands, except share and | |||
(unaudited) | |||
ASSETS | |||
Real estate, at cost | |||
Operating (including $1,829,059 and $2,021,622 of consolidated variable interest | $ 10,222,540 | $ 9,932,891 | |
Construction-in-progress (including $9,132 and $8,677 of consolidated variable interest | 553,365 | 613,296 | |
10,775,905 | 10,546,187 | ||
Less accumulated depreciation and amortization (including $410,922 and $416,663 of | (3,054,555) | (2,963,519) | |
Net real estate | 7,721,350 | 7,582,668 | |
Cash and cash equivalents | 103,234 | 250,825 | |
Accounts and notes receivable, net | 194,611 | 201,733 | |
Mortgage notes receivable, net | 9,170 | 9,196 | |
Investment in partnerships | 33,937 | 34,870 | |
Operating lease right of use assets, net | 86,997 | 86,993 | |
Finance lease right of use assets, net | 6,740 | 6,850 | |
Prepaid expenses and other assets | 265,128 | 263,377 | |
TOTAL ASSETS | $ 8,421,167 | $ 8,436,512 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | |||
Liabilities | |||
Mortgages payable, net (including $187,972 and $189,286 of consolidated variable | $ 515,637 | $ 516,936 | |
Notes payable, net | 683,280 | 601,945 | |
Senior notes and debentures, net | 3,354,755 | 3,480,296 | |
Accounts payable and accrued expenses | 176,686 | 174,714 | |
Dividends payable | 93,492 | 92,634 | |
Security deposits payable | 29,805 | 30,482 | |
Operating lease liabilities | 75,950 | 75,870 | |
Finance lease liabilities | 12,726 | 12,670 | |
Other liabilities and deferred credits | 225,465 | 225,443 | |
Total liabilities | 5,167,796 | 5,210,990 | |
Commitments and contingencies | |||
Redeemable noncontrolling interests | 182,558 | 183,363 | |
Shareholders' equity | |||
Preferred shares, authorized 15,000,000 shares, $.01 par: | |||
5.0% Series C Cumulative Redeemable Preferred Shares, (stated at liquidation | 150,000 | 150,000 | |
5.417% Series 1 Cumulative Convertible Preferred Shares, (stated at liquidation | 9,822 | 9,822 | |
Common shares of beneficial interest, $.01 par, 200,000,000 shares authorized, | 841 | 833 | |
Additional paid-in capital | 4,005,249 | 3,959,276 | |
Accumulated dividends in excess of net income | (1,177,336) | (1,160,474) | |
Accumulated other comprehensive income | 7,042 | 4,052 | |
Total shareholders' equity of the Trust | 2,995,618 | 2,963,509 | |
Noncontrolling interests | 75,195 | 78,650 | |
Total shareholders' equity | 3,070,813 | 3,042,159 | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 8,421,167 | $ 8,436,512 | |
Federal Realty Investment Trust | |||||||
Consolidated Income Statements | |||||||
June 30, 2024 | |||||||
Three Months Ended | Six Months Ended | ||||||
June 30, | June 30, | ||||||
2024 | 2023 | 2024 | 2023 | ||||
(in thousands, except per share data) | |||||||
(unaudited) | |||||||
REVENUE | |||||||
Rental income | $ 295,775 | $ 280,388 | $ 586,820 | $ 553,186 | |||
Mortgage interest income | 277 | 291 | 555 | 552 | |||
Total revenue | 296,052 | 280,679 | 587,375 | 553,738 | |||
EXPENSES | |||||||
Rental expenses | 58,891 | 55,610 | 120,550 | 110,815 | |||
Real estate taxes | 35,289 | 32,381 | 69,349 | 64,947 | |||
General and administrative | 12,092 | 11,913 | 24,098 | 24,458 | |||
Depreciation and amortization | 85,049 | 78,974 | 168,453 | 157,611 | |||
Total operating expenses | 191,321 | 178,878 | 382,450 | 357,831 | |||
Gain on sale of real estate | 52,280 | — | 52,280 | 1,702 | |||
OPERATING INCOME | 157,011 | 101,801 | 257,205 | 197,609 | |||
OTHER INCOME/(EXPENSE) | |||||||
Other interest income | 1,051 | 2,422 | 2,534 | 3,054 | |||
Interest expense | (44,312) | (42,884) | (88,005) | (82,109) | |||
Income from partnerships | 905 | 1,665 | 937 | 2,181 | |||
NET INCOME | 114,655 | 63,004 | 172,671 | 120,735 | |||
Net income attributable to noncontrolling interests | (2,673) | (2,505) | (3,953) | (4,901) | |||
NET INCOME ATTRIBUTABLE TO THE TRUST | 111,982 | 60,499 | 168,718 | 115,834 | |||
Dividends on preferred shares | (2,008) | (2,008) | (4,016) | (4,016) | |||
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS | $ 109,974 | $ 58,491 | $ 164,702 | $ 111,818 | |||
EARNINGS PER COMMON SHARE, BASIC: | |||||||
Net income available for common shareholders | $ 1.32 | $ 0.72 | $ 1.98 | $ 1.37 | |||
Weighted average number of common shares | 82,932 | 81,214 | 82,768 | 81,178 | |||
EARNINGS PER COMMON SHARE, DILUTED: | |||||||
Net income available for common shareholders | $ 1.32 | $ 0.72 | $ 1.98 | $ 1.37 | |||
Weighted average number of common shares | 83,563 | 81,214 | 82,768 | 81,178 | |||
Federal Realty Investment Trust | |||||||||
Funds From Operations | |||||||||
June 30, 2024 | |||||||||
Three Months Ended | Six Months Ended | ||||||||
June 30, | June 30, | ||||||||
2024 | 2023 | 2024 | 2023 | ||||||
(in thousands, except per share data) | |||||||||
Funds from Operations available for common shareholders (FFO) | |||||||||
Net income | $ 114,655 | $ 63,004 | 172,671 | 120,735 | |||||
Net income attributable to noncontrolling interests | (2,673) | (2,505) | (3,953) | (4,901) | |||||
Gain on sale of real estate | (52,280) | — | (52,280) | (1,702) | |||||
Depreciation and amortization of real estate assets | 75,157 | 70,486 | 149,095 | 140,990 | |||||
Amortization of initial direct costs of leases | 8,179 | 7,567 | 15,916 | 15,352 | |||||
Funds from operations | 143,038 | 138,552 | 281,449 | 270,474 | |||||
Dividends on preferred shares (1) | (1,875) | (1,875) | (3,750) | (3,750) | |||||
Income attributable to downREIT operating partnership units | 688 | 688 | 1,380 | 1,381 | |||||
Income attributable to unvested shares | (514) | (505) | (1,017) | (987) | |||||
FFO | $ 141,337 | $ 136,860 | $ 278,062 | $ 267,118 | |||||
Weighted average number of common shares, diluted (1)(2) | 83,657 | 81,945 | 83,495 | 81,911 | |||||
FFO per diluted share (2) | $ 1.69 | $ 1.67 | $ 3.33 | $ 3.26 | |||||
Notes: | |
(1) | For the three and six months ended June 30, 2024 and 2023, dividends on our Series 1 preferred stock were not deducted in the calculation of FFO available to common shareholders, as the related shares were dilutive and are included in "weighted average number of common shares, diluted." |
(2) | The weighted average common shares used to compute FFO per diluted common share includes downREIT operating partnership units that were excluded from the computation of diluted EPS. Conversion of these operating partnership units is dilutive in the computation of FFO per diluted share for all period presented, but is anti-dilutive for the computation of dilutive EPS for the six months ended June 30, 2024 and the three and six months ended June 30, 2023. |
Inquiries:
Brenda Pomar
Senior Director, Corporate Communications
301.998.8316
bpomar@federalrealty.com
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