Federal Realty Investment Trust Announces First Quarter 2024 Operating Results

Rhea-AI Summary

Federal Realty Investment Trust reported strong first quarter 2024 results with net income available for common shareholders at $0.66 per diluted share, operating income of $100.2 million, and FFO per diluted share of $1.64. The company achieved record leasing volume, high occupancy rates, and raised its earnings and FFO guidance for 2024. Federal Realty also declared regular quarterly dividends.

Positive

• Record leasing volume of 566,865 square feet in the first quarter.

• Operating income of $100.2 million for the first quarter, an increase year-over-year.

• FFO per diluted share of $1.64 for the first quarter, up from $1.59 in 2023.

• Portfolio occupancy at 92.0% and leased at 94.3% at quarter end.

• Earnings per diluted share guidance raised to $2.74 - $2.94 for 2024.

Negative

• The increase in earnings per diluted share guidance was minimal compared to the prior guidance.

• Comparable property operating income growth was modest at 3.8% excluding lease termination fees.

Insights

Financial Analyst

The slight year-over-year increase in earnings per diluted share from $0.65 to $0.66 reflects conservative but steady growth for Federal Realty Investment Trust. The reported growth in FFO, from $1.59 to $1.64 per diluted share, suggests operational efficiency and is often viewed favorably by investors as it excludes depreciation and amortization, providing a clearer view of the Trust's operating performance. The revision in the 2024 FFO guidance, now at $6.67 to $6.87 per diluted share, may signal management's confidence in sustained income generation, potentially influencing investor sentiment. The dividend announcement, maintaining a steady payout, further positions the Trust as a consistent income provider, a typical attraction for REIT investors seeking stable cash flow.

Real Estate Market Analyst

The record leasing volumes, with 104 leases for retail space and significant leasing in office space, indicate strong demand in Federal Realty's markets. Occupancy rates above 90% for retail and small shop segments, combined with the leased rate for residential properties at 96.3%, demonstrate robust portfolio performance and resilience amidst a competitive landscape. The cash basis rollover growth of 9% and 20% on a straight-line basis for retail leases is particularly notable, showcasing the Trust's ability to command higher rents. This kind of aggressive rent growth, if sustainable, can be an important driver of revenue and, by extension, investor returns in the medium to long term.

REIT Analyst

Federal Realty's consistent increase in quarterly dividends for an impressive 56 consecutive years is a testament to its operational stability and disciplined capital allocation strategy. For retail investors, such a record is indicative of the Trust's reliability and potential as a long-term investment. The occupancy and leasing metrics reported reflect well on the Trust's portfolio quality and management's ability to attract and retain tenants. While short-term market fluctuations may occur, the provided guidance and demonstrated performance pose a positive outlook for stability and growth, key factors in evaluating REITs for investment.

NORTH BETHESDA, Md., May 2, 2024 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its first quarter ended March 31, 2024. For the three months ended March 31, 2024 and 2023, net income available for common shareholders was $0.66 per diluted share and $0.65 per diluted share, respectively. For the three months ended March 31, 2024 and 2023, operating income was $100.2 million and $95.8 million, respectively.

Highlights for the first quarter include:

• Generated funds from operations available to common shareholders (FFO) per diluted share of $1.64 for the quarter, compared to $1.59 for the first quarter 2023, an increase of 3.1% year-over-year.
• Generated comparable property operating income (POI) growth of 3.8% for the first quarter excluding lease termination fees and prior period rents collected.
• Record levels of leasing with 104 signed leases for 566,865 square feet of comparable retail space in the first quarter, the highest first quarter volume on record, at a cash basis rollover growth of 9% and 20% on a straight line basis.
• Federal Realty's portfolio was 92.0% occupied and 94.3% leased at quarter end.
• Continued strong small shop leasing, ending the quarter at 91.4% leased, the highest level since 2015, and an increase of 70 basis points quarter-over-quarter and 140 basis points year-over-year.
• Tightened and raised 2024 earnings per diluted share guidance to $2.74 - $2.94, 2024 FFO per diluted share guidance to $6.67 - $6.87 and 2024 comparable properties growth excluding lease termination fees and prior period rents collected assumption to 2.75% - 4%.

"Federal Realty's strong start to 2024 is highlighted by our highest first-quarter leasing volume on record, surpassing 566,000 square feet of comparable retail space signed," said Donald C. Wood, Federal Realty's Chief Executive Officer. "In addition, we successfully executed leases for approximately 190,000 square feet of office space during the quarter at our premier mixed-use destinations. This robust demand underscores that our best-in-class shopping center and mixed-use offerings are the preferred choice for modern consumers, retailers, office employees, and corporate decision-makers when considering the future of their successful businesses."

Financial Results

Net Income

For the first quarter 2024, net income available for common shareholders was $54.7 million and earnings per diluted share was $0.66 versus $53.3 million and $0.65, respectively, for the first quarter 2023.

FFO

For the first quarter 2024, FFO was $136.7 million, or $1.64 per diluted share, compared to $130.3 million, or $1.59 per diluted share for the first 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 92.0% occupied and 94.3% leased as of March 31, 2024. Small shop leased rate was 91.4% as of March 31, 2024, an increase of 70 basis points quarter-over-quarter and 140 basis points year-over-year.

Additionally, our residential properties were 96.3% leased as of March 31, 2024.

Leasing Activity

During the first quarter 2024, Federal Realty signed 111 leases for 587,329 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty signed 104 leases for 566,865 square feet at an average rent of $36.39 per square foot compared to the average contractual rent of $33.30 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 9%, 20% on a straight-line basis. Comparable leases represented 94% of total comparable and non-comparable retail leases signed during the first quarter 2024.

Regular Quarterly Dividends

Federal Realty announced today that its Board of Trustees declared a regular quarterly cash dividend of $1.09 per common share, resulting in an indicated annual rate of $4.36 per common share. The regular common dividend will be payable on July 15, 2024 to common shareholders of record as of June 21, 2024.

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 July 15, 2024 to shareholders of record as of July 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	$2.74 to $2.94	$2.72 to $2.94
2024 FFO per diluted share	$6.67 to $6.87	$6.65 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 first quarter 2024 earnings conference call, which is scheduled for Thursday, May 2, 2024 at 5:00 PM ET.  To participate, please call 1-877-407-9208 or 1-201-493-6784 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 May 16, 2024 by dialing 1-844-512-2921 or 1-412-317-6671; Passcode: 13745637.

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 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 3,300 tenants, in 26 million commercial square feet, and approximately 3,100 residential units. 

Federal Realty has increased its quarterly dividends to its shareholders for 56 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.

Investor Inquiries: Leah Andress Brady Vice President, Investor Relations            301.998.8265 lbrady@federalrealty.com

Media Inquiries: Brenda Pomar Senior Director, Corporate Communications 301.998.8316 bpomar@federalrealty.com

 

Federal Realty Investment Trust
Consolidated Balance Sheets
March 31, 2024
	March 31,		December 31,
	2024		2023
	(in thousands, except share and per share data)
	(unaudited)
ASSETS
Real estate, at cost
Operating (including $2,024,995 and $2,021,622 of consolidated variable interest entities, respectively)	$ 10,027,356		$  9,932,891
Construction-in-progress (including $13,299 and $8,677 of consolidated variable interest entities, respectively)	577,745		613,296
	10,605,101		10,546,187
Less accumulated depreciation and amortization (including $430,578 and $416,663 of consolidated variable interest entities, respectively)	(3,032,163)		(2,963,519)
Net real estate	7,572,938		7,582,668
Cash and cash equivalents	95,936		250,825
Accounts and notes receivable, net	207,650		201,733
Mortgage notes receivable, net	9,183		9,196
Investment in partnerships	33,687		34,870
Operating lease right of use assets, net	86,359		86,993
Finance lease right of use assets, net	6,795		6,850
Prepaid expenses and other assets	259,112		263,377
TOTAL ASSETS	$  8,271,660		$  8,436,512
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable, net (including $188,629 and $189,286 of consolidated variable interest entities, respectively)	$      516,257		$      516,936
Notes payable, net	613,912		601,945
Senior notes and debentures, net	3,353,228		3,480,296
Accounts payable and accrued expenses	185,594		174,714
Dividends payable	92,818		92,634
Security deposits payable	29,895		30,482
Operating lease liabilities	75,275		75,870
Finance lease liabilities	12,698		12,670
Other liabilities and deferred credits	213,027		225,443
Total liabilities	5,092,704		5,210,990
Commitments and contingencies
Redeemable noncontrolling interests	182,964		183,363
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), $392,878 shares issued and outstanding	9,822		9,822
Common shares of beneficial interest, $.01 par, 200,000,000 shares authorized, respectively, 82,948,600 and 82,775,286 shares issued and outstanding, respectively	835		833
Additional paid-in capital	3,946,740		3,959,276
Accumulated dividends in excess of net income	(1,196,225)		(1,160,474)
Accumulated other comprehensive income	6,899		4,052
Total shareholders' equity of the Trust	2,918,071		2,963,509
Noncontrolling interests	77,921		78,650
Total shareholders' equity	2,995,992		3,042,159
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$  8,271,660		$  8,436,512

 

Federal Realty Investment Trust
Consolidated Income Statements
March 31, 2024
	Three Months Ended
	March 31,
	2024		2023
	(in thousands, except per share data)
	(unaudited)
REVENUE
Rental income	$         291,045		$         272,798
Mortgage interest income	278		261
Total revenue	291,323		273,059
EXPENSES
Rental expenses	61,659		55,205
Real estate taxes	34,060		32,566
General and administrative	12,006		12,545
Depreciation and amortization	83,404		78,637
Total operating expenses	191,129		178,953
Gain on sale of real estate	—		1,702
OPERATING INCOME	100,194		95,808
OTHER INCOME/(EXPENSE)
Other interest income	1,483		632
Interest expense	(43,693)		(39,225)
Income from partnerships	32		516
NET INCOME	58,016		57,731
Net income attributable to noncontrolling interests	(1,280)		(2,396)
NET INCOME ATTRIBUTABLE TO THE TRUST	56,736		55,335
Dividends on preferred shares	(2,008)		(2,008)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS	$           54,728		$           53,327
EARNINGS PER COMMON SHARE, BASIC AND DILUTED:
Net income available for common shareholders	$               0.66		$               0.65
Weighted average number of common shares	82,605		81,141

 

Federal Realty Investment Trust
Funds From Operations
March 31, 2024
		Three Months Ended
		March 31,
		2024		2023
		(in thousands, except per share data)
Funds from Operations available for common shareholders (FFO)
Net income		$        58,016		$        57,731
Net income attributable to noncontrolling interests		(1,280)		(2,396)
Gain on sale of real estate		—		(1,702)
Depreciation and amortization of real estate assets		73,938		70,504
Amortization of initial direct costs of leases		7,737		7,785
Funds from operations		138,411		131,922
Dividends on preferred shares (1)		(1,875)		(1,875)
Income attributable to downREIT operating partnership units		692		693
Income attributable to unvested shares		(503)		(482)
FFO		$      136,725		$      130,258
Weighted average number of common shares, diluted (1)(2)		83,334		81,877
FFO per diluted share (2)		$            1.64		$            1.59

Notes:
(1)	For the three months ended March 31, 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, but is anti-dilutive for the computation of dilutive EPS for both the three months ended March 31, 2024 and 2023.

 

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SOURCE Federal Realty Investment Trust

FAQ

What was Federal Realty's net income per diluted share for the first quarter 2024?

Federal Realty's net income available for common shareholders was $0.66 per diluted share for the first quarter 2024.

What was Federal Realty's FFO per diluted share for the first quarter 2024?

Federal Realty's FFO per diluted share for the first quarter 2024 was $1.64.

What was Federal Realty's portfolio occupancy at the end of the first quarter 2024?

Federal Realty's portfolio was 92.0% occupied and 94.3% leased at the end of the first quarter 2024.

What was the cash basis rollover growth of Federal Realty's comparable property operating income in the first quarter?

Federal Realty achieved a cash basis rollover growth of 9% for comparable property operating income in the first quarter.

When will Federal Realty pay its regular quarterly dividends?

Federal Realty's regular quarterly dividends will be payable on July 15, 2024 to common shareholders of record as of June 21, 2024.