Federal Realty Investment Trust Announces Second Quarter 2020 Operating Results

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Federal Realty Investment Trust (NYSE:FRT) reported its Q2 2020 results, reflecting a net income of $8.5 million and earnings per diluted share of $0.11, down from $78.9 million and $1.05 in Q2 2019 due to COVID-19 impacts. The company generated FFO of $58.0 million ($0.77 per diluted share), a significant decline from $121.0 million ($1.60) a year earlier. Despite these challenges, Federal Realty increased its quarterly dividend to $1.06 per share, marking 53 consecutive years of dividend growth. The portfolio was 93% leased, with 68% of Q2 rents collected.

Positive

• Increased regular dividend to $1.06 per share, the 53rd consecutive year of increases.
• Portfolio was 93% leased, indicating strong demand for retail space.
• 67% of second-quarter billed recurring rents collected, showing improvement from earlier in the pandemic.

Negative

• Net income decreased to $8.5 million from $78.9 million year-over-year.
• FFO declined to $58.0 million from $121.0 million a year earlier.
• COVID-19 adjustments impacted earnings by $55.2 million, including a $9.4 million effect on straight-line rent.

ROCKVILLE, Md., Aug. 5, 2020 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its second quarter ended June 30, 2020.

"We remain confident in our ability to weather this pandemic and come out on the other side an even stronger and further differentiated company," said Donald C. Wood, President and Chief Executive Officer. "Continued positive trends in our collections, our fortress balance sheet built for times like these and, most importantly, the continued desirability of our locations, as evidenced by current tenant discussions, gave us the confidence this quarter to increase our dividend for the 53^rd year, an industry record and a coveted aspect of Federal Realty's history."

Financial Results

Net income available for common shareholders was $8.5 million and earnings per diluted share was $0.11 for second quarter 2020 versus $78.9 million and $1.05, respectively, for second quarter 2019. 

In the second quarter 2020, Federal Realty generated funds from operations available for common shareholders (FFO) of $58.0 million, or $0.77 per diluted share. This compares to FFO of $121.0 million, or $1.60 per diluted share, in the second quarter 2019.

The year-over-year decrease in net income and FFO was attributable to the impacts of the COVID-19 pandemic with the primary driver being collectibility related adjustment impacts during the second quarter totaling $55.2 million, or $0.73 per share, which included a $9.4 million impact to straight-line rent.

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 portfolio was 93.0% leased as of June 30, 2020, and the comparable portfolio was 93.7% leased.

During the second quarter 2020, Federal Realty signed 50 leases for 314,679 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 277,681 square feet at an average rent of $28.55 per square foot compared to the average contractual rent of $25.64 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 11%, 23% on a straight-line basis. Additionally, Federal Realty signed 15 leases for 94,805 square feet of office space during the second quarter 2020.

COVID-19 Operational Update

All 104 properties remain open and operating. Approximately 87% of our commercial tenants are open and operating as of July 31, 2020 based on annualized base rent compared to 47% on May 1, 2020. Annualized base rent reflects the aggregate, annualized in-place contractual (defined as rents billed on a cash basis without taking the impact of rent abatements into account) minimum rent for all occupied spaces.

As of July 31, 2020, the Company has collected approximately 68% of total second quarter 2020 billed recurring rents and 76% of July 2020.

As of July 31, 2020, deferral agreements have been executed for $21 million, or 10%, of billed recurring rents for April through June 2020 and have a weighted average repayment period of 9 months.

With $980.0 million of cash and cash equivalents as of June 30, 2020, Federal Realty has approximately $2.0 billion of liquidity in cash and undrawn availability under its $1.0 billion revolving credit facility. 

Additional information on the impact of the COVID-19 pandemic on the Company's business to date is available in a presentation posted on the Investor section of Federal Realty's website. 

Regular Quarterly Dividends

Federal Realty announced today that its Board of Trustees increased the regular dividend rate on its common shares, declaring a regular quarterly cash dividend of $1.06 per share, resulting in an indicated annual rate of $4.24 per share.  The regular common dividend will be payable on October 15, 2020, to common shareholders of record on September 22, 2020. This increase represents the 53rd consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector, and solidifies its position as 1 of only 30 companies in any sector to be considered a 'Dividend King'.

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, 2020 to common shareholders of record as of October 1, 2020.

Summary of Other Quarterly Activities and Recent Developments

May 6, 2020 – Federal Realty closed on a new $400.0 million unsecured term loan. Proceeds were used to repay balances outstanding under the Company's $1.0 billion unsecured credit facility. The term loan bears interest at LIBOR plus 135 basis points and will mature in May 2021, with an option to extend the loan until May 2022.

May 11, 2020 – Federal Realty closed on its public offering of $400.0 million aggregate principal amount of 3.50% senior notes due 2030 at an effective yield of 3.630% and reopened their 3.95% senior notes due 2024 for an additional $300.0 million aggregate principal amount at an effective yield of 2.944%. The 3.95% senior notes have the same terms and are of the same series as the $300.0 million senior notes issued on December 9, 2013. Federal Realty used the net proceeds from this offering to reduce amounts outstanding under its revolving credit facility and for general corporate purposes.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of Federal Realty's operating performance on its second quarter 2020 earnings conference call, which is scheduled for Thursday, August 6, 2020 at 10:00AM ET.  To participate, please call 877.407.9208 five to ten minutes prior to the call start time and use the passcode 13705851 (required).  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 20, 2020 by dialing 844.512.2921; Passcode: 13705851.

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 2,900 tenants, in 24 million square feet, and approximately 2,800 residential units. 

Federal Realty has increased its quarterly dividends to its shareholders for 53 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 10, 2020 and subsequent quarterly reports on Form 10-Q, 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 redevelopment or renovation projects that we do pursue may cost more, take more time to complete or fail to perform as expected;
• risk that we are investing a significant amount in ground-up development projects that 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 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;
• 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 10, 2020 and subsequent quarterly reports on Form 10-Q.

Inquiries:
Brenda Pomar, Corporate Communications Manager
301.998.8316 / bpomar@federalrealty.com

Federal Realty Investment Trust
Consolidated Balance Sheets
June 30, 2020
	June 30,				December 31,
	2020				2019
	(in thousands, except share and per share data)
	(unaudited)
ASSETS
Real estate, at cost
Operating (including $1,754,540 and $1,676,866 of consolidated variable interest entities, respectively)	$	7,790,025			$	7,535,983
Construction-in-progress (including $93,067 and $102,583 of consolidated variable interest entities, respectively)	754,787				760,420
Assets held for sale	1,085				1,729
	8,545,897				8,298,132
Less accumulated depreciation and amortization (including $317,925 and $296,165 of consolidated variable interest entities, respectively)	(2,308,403)				(2,215,413)
Net real estate	6,237,494				6,082,719
Cash and cash equivalents	980,039				127,432
Accounts and notes receivable, net	167,641				152,572
Mortgage notes receivable, net	30,332				30,429
Investment in partnerships	22,879				28,604
Operating lease right of use assets	93,494				93,774
Finance lease right of use assets	51,758				52,402
Prepaid expenses and other assets	206,293				227,060
TOTAL ASSETS	$	7,789,930			$	6,794,992
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable, net (including $475,757 and $469,184 of consolidated variable interest entities, respectively)	$	551,034			$	545,679
Notes payable, net	402,477				3,781
Senior notes and debentures, net	3,508,461				2,807,134
Accounts payable and accrued expenses	244,482				255,503
Dividends payable	81,915				81,676
Security deposits payable	18,922				21,701
Operating lease liabilities	73,527				73,628
Finance lease liabilities	72,056				72,062
Other liabilities and deferred credits	146,372				157,938
Total liabilities	5,099,246				4,019,102
Commitments and contingencies
Redeemable noncontrolling interests	159,583				139,758
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, 75,633,140 and 75,540,804 shares issued and outstanding, respectively	760				759
Additional paid-in capital	3,170,480				3,166,522
Accumulated dividends in excess of net income	(889,195)				(791,124)
Accumulated other comprehensive loss	(7,758)				(813)
Total shareholders' equity of the Trust	2,434,284				2,535,341
Noncontrolling interests	96,817				100,791
Total shareholders' equity	2,531,101				2,636,132
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	7,789,930			$	6,794,992

 

Federal Realty Investment Trust
Consolidated Income Statements
June 30, 2020
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2020				2019				2020				2019
	(in thousands, except per share data)
	(unaudited)
REVENUE
Rental income	$	175,479			$	229,731			$	406,277			$	461,223
Mortgage interest income	748				734				1,507				1,469
Total revenue	176,227				230,465				407,784				462,692
EXPENSES
Rental expenses	36,417				41,438				80,729				85,698
Real estate taxes	30,599				25,166				59,663				52,853
General and administrative	9,814				11,422				20,065				20,987
Depreciation and amortization	62,784				59,057				124,972				118,679
Total operating expenses	139,614				137,083				285,429				278,217
Gain on sale of real estate, net of tax	11,682				16,197				11,682				16,197
OPERATING INCOME	48,295				109,579				134,037				200,672
OTHER INCOME/(EXPENSE)
Other interest income	509				189				817				366
Interest expense	(34,073)				(27,482)				(62,518)				(55,515)
(Loss) income from partnerships	(3,872)				381				(5,036)				(1,053)
NET INCOME	10,859				82,667				67,300				144,470
Net income attributable to noncontrolling interests	(352)				(1,765)				(2,030)				(3,424)
NET INCOME ATTRIBUTABLE TO THE TRUST	10,507				80,902				65,270				141,046
Dividends on preferred shares	(2,011)				(2,011)				(4,021)				(4,021)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS	$	8,496			$	78,891			$	61,249			$	137,025
EARNINGS PER COMMON SHARE, BASIC AND DILUTED:
Net income available for common shareholders	$	0.11			$	1.05			$	0.81			$	1.83
Weighted average number of common shares	75,394				74,713				75,377				74,458

 

Federal Realty Investment Trust
Funds From Operations
June 30, 2020
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2020				2019				2020				2019
		(in thousands, except per share data)
Funds from Operations available for common shareholders (FFO) (1)
Net income		$	10,859			$	82,667			$	67,300			$	144,470
Net income attributable to noncontrolling interests		(352)				(1,765)				(2,030)				(3,424)
Gain on sale of real estate, net		(11,682)				(16,197)				(11,682)				(16,197)
Depreciation and amortization of real estate assets		56,608				53,323				112,654				106,812
Amortization of initial direct costs of leases		4,809				4,537				9,709				9,287
Funds from operations		60,242				122,565				175,951				240,948
Dividends on preferred shares (2)		(2,011)				(1,875)				(4,021)				(3,750)
Income attributable to operating partnership units (3)		—				661				1,572				1,390
Income attributable to unvested shares		(249)				(346)				(541)				(690)
FFO		$	57,982			$	121,005			$	172,961			$	237,898
Weighted average number of common shares, diluted (2)(3)		75,394				75,456				76,126				75,235
FFO per diluted share		$	0.77			$	1.60			$	2.27			$	3.16

Notes:
1)	Amounts reflect the components of "net income attributable to noncontrolling interests," but excludes "income attributable to operating partnership units."
2)	For the three and six months ended June 30, 2019, 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 included in "weighted average common shares, diluted."
3)	For the three months ended June 30, 2020, income attributable to operating partnership units is not added back in the calculation of FFO available to common shareholders, as the related shares are not dilutive and are not included in "weighted average common shares, diluted" for this period. For the six months ended June 30, 2020 and the three and six months ended June 30, 2019, the weighted average common shares used to compute FFO per diluted common share includes 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 these periods.

 

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SOURCE Federal Realty Investment Trust

FAQ

What were Federal Realty's Q2 2020 earnings per share?

Federal Realty reported earnings per diluted share of $0.11 for Q2 2020.

How much dividend did Federal Realty declare in Q2 2020?

Federal Realty declared a quarterly cash dividend of $1.06 per share.

What is Federal Realty's current portfolio leasing percentage?

As of June 30, 2020, Federal Realty's portfolio was 93% leased.

What were the impacts of COVID-19 on Federal Realty's Q2 financials?

COVID-19 adjustments led to a $55.2 million impact on Federal Realty's earnings in Q2 2020.

How much cash did Federal Realty have as of June 30, 2020?

Federal Realty had $980 million in cash and cash equivalents as of June 30, 2020.