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Federal Realty Investment Trust Announces Third Quarter 2022 Operating Results

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Federal Realty Investment Trust (NYSE:FRT) reported strong Q3 2022 results, with net income reaching $154.1 million ($1.89 per diluted share), up from $50.1 million ($0.64) year-over-year. Funds from operations (FFO) increased to $129.3 million ($1.59 per share), compared to $118.0 million ($1.51) in Q3 2021. Leasing activity was robust, with 119 leases signed for 562,859 square feet and portfolio occupancy at 92.1%. Federal Realty raised its 2022 earnings guidance to $3.88 - $3.93 per share and FFO guidance to $6.27 - $6.32. A dividend of $1.08 per share was declared.

Positive
  • Net income for Q3 2022 was $154.1 million, a significant increase from $50.1 million in Q3 2021.
  • FFO per diluted share rose to $1.59, compared to $1.51 in the same quarter last year.
  • Leased percentage increased by 150 basis points year-over-year, reaching 94.3%.
  • Signed 119 leases for 562,859 square feet, marking the highest third-quarter leasing volume on record.
  • Increased 2022 earnings guidance to $3.88 - $3.93 per share and FFO guidance to $6.27 - $6.32.
  • Quarterly dividend increased to $1.08 per share, indicating strong cash flow.
Negative
  • None.

NORTH BETHESDA, Md., Nov. 3, 2022 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its third quarter ended September 30, 2022. For the three months ended September 30, 2022 and 2021, net income available for common shareholders was $1.89 per diluted share and $0.64 per diluted share, respectively.

Highlights for the quarter and subsequent events include:

  • Generated funds from operations available to common shareholders (FFO) per diluted share of $1.59 for the quarter compared to $1.51 for the third quarter 2021.
  • Generated comparable property operating income (POI) growth of 3.7% for the third quarter and 8.8% year-to-date.
  • Continued record levels of leasing with 119 signed leases for 562,859 square feet of comparable space in the third quarter, the highest third quarter volume on record.
  • Federal Realty's portfolio was 92.1% occupied and 94.3% leased, representing year-over-year increases of 190 basis points and 150 basis points, respectively and 10 basis points and 20 basis point increases, respectively quarter-over-quarter.
    • 220 basis point spread between leased and occupied.
  • Continued strong small shop leasing, ending the quarter at 89.9% leased, an increase of 60 basis points over second quarter 2022, an increase of 380 basis points year-over-year and an increase of 640 basis points since the COVID-era low. 
  • Sold 2 non-core assets for a combined sales price of $67 million in the third quarter.
  • Subsequent to quarter end, increased our total bank capacity by $550 million to $1.85 billion
    • Amended our revolving credit facility, increasing the borrowing capacity from $1.0 billion to $1.25 billion, extending the maturity date to April 5, 2027, plus two six-month extension options.
    • Amended our unsecured term loan and borrowed an additional $300.0 million for a total of $600.0 million.
  • Increased 2022 earnings per diluted share guidance to $3.88 - $3.93 and increased 2022 FFO per diluted share guidance to $6.27 - $6.32.

"Another great quarter of outperformance with continued record leasing, a robust forward pipeline and bottom-line growth," said Donald C. Wood, Chief Executive Officer. "The sector leading household income and population levels that surround our properties are the best defense in today's uncertain macro environment."

Financial Results

Net Income

Net income available for common shareholders was $154.1 million and earnings per diluted share was $1.89 for third quarter 2022 versus $50.1 million and $0.64 respectively, for third quarter 2021.

FFO

In the third quarter 2022, Federal Realty generated FFO of $129.3 million, or $1.59 per diluted share. This compares to FFO of $118.0 million, or $1.51 per diluted share, in third quarter 2021.

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

Occupancy

The portfolio was 92.1% occupied as of September 30, 2022, an increase of 10 basis points quarter-over-quarter and an increase of 190 basis points year-over-year. The portfolio was 94.3% leased as of September 30, 2022, an increase of 20 basis points quarter-over-quarter and an increase of 150 basis points year-over-year. The spread between our leased and occupied percentages was 220 basis points at the end of the third quarter.

Additionally, our residential properties were 97.0% leased as of September 30, 2022, a sequential increase of 20 basis points over second quarter.

Leasing Activity

During the third quarter 2022, Federal Realty signed 126 leases for 584,949 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 119 leases for 562,859 square feet at an average rent of $34.57 per square foot compared to the average contractual rent of $33.61 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 3%, 13% on a straight-line basis.

Regular Quarterly Dividends

Federal Realty announced today that its Board of Trustees declared a regular quarterly cash dividend of $1.08 per common share, resulting in an indicated annual rate of $4.32 per common share. The regular common dividend will be payable on January 17, 2023 to common shareholders of record as of January 3, 2023.

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 January 17, 2023 to shareholders of record as of January 3, 2023.

Summary of Other Activities

  • October 18, 2022 – Federal Realty announced that it has been recognized as a peer group leader in multiple categories in the 2022 Global Real Estate Sustainability Benchmark (GRESB) Real Estate Assessment. The company earned the #1 ranking in the U.S. Publicly Listed Retail Centers peer group under the Standing Investments Benchmark Report.  In addition, Federal earned the #1 ranking and was named Sector Leader in the U.S. Diversified-Office/Residential peer group under the Development Benchmark Report. It also received an "A" Public Disclosure Score from GRESB for the second consecutive year and achieved "Green Star" recognition for the fifth year. The REIT was previously named "Development Sector Leader" in GRESB's 2020 Real Estate Assessment.
  • October 11, 2022 – Federal Realty announced it has set a target approved by the Science Based Targets initiative to reduce Scope 1 and 2 greenhouse gas emissions by 46% between 2019 and 2030.  This goal has been set in alignment with the more stringent objective of keeping global temperature increases to less than 1.5°C, the most ambitious goal of the Paris Agreement.
  • October 6, 2022 - Federal Realty acquired a 47.5% interest in an unconsolidated joint venture that owns Chandler Festival and Chandler Gateway, two dominant regional shopping centers located in one of the top retail nodes in the Phoenix metro area for $58.9 million. Combined, the properties comprise 617,000 square feet on 62 acres.
  • October 1, 2022 – Mr. Thomas A. McEachin joined Federal Realty's Board of Trustees replacing Mr. Mark S. Ordan who resigned effective September 30, 2022. Mr. McEachin is a seasoned financial executive having held various positions at leading companies such as United Technologies, Digital Equipment, Xerox and, most recently, as Chief Financial Officer of Covidien Surgical Solutions, the largest division of Covidien PLC.
  • September 2022 - Federal Realty sold two non-core assets, Towson Residential (including a retail pad) and Rockville Town Square, for a combined total sales price of $67 million.

Guidance

Federal Realty increased its 2022 guidance for earnings per diluted share to $3.88 - $3.93 from $2.50 - $2.65 and 2022 FFO per diluted share to $6.27 - $6.32 from $6.10 - $6.25.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of Federal Realty's operating performance on its third quarter 2022 earnings conference call, which is scheduled for Thursday, November 3, 2022 at 5:00 PM ET.  To participate, please call 844.826.3035 five to ten minutes prior to the call start time and use the passcode 10171249 (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 November 17, 2022 by dialing 844.512.2921; Passcode: 10171249.

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 104 properties include approximately 3,200 tenants, in 26 million square feet, and approximately 3,300 residential units. 

Federal Realty has increased its quarterly dividends to its shareholders for 55 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, 2022, 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;
  • risks associated with general economic conditions, including 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 10, 2022 and subsequent quarterly reports on Form 10-Q.

 

Federal Realty Investment Trust

Consolidated Balance Sheets

September 30, 2022


September 30,


December 31,


2022


2021


(in thousands, except share and per share data)


(unaudited)



ASSETS




Real estate, at cost




Operating (including $1,963,129 and $2,207,648 of consolidated variable interest
entities, respectively)

$  9,323,359


$  8,814,791

Construction-in-progress (including $23,448 and $18,752 of consolidated variable
interest entities, respectively)

681,641


607,271


10,005,000


9,422,062

Less accumulated depreciation and amortization (including $349,553 and $389,950 of
consolidated variable interest entities, respectively)

(2,660,799)


(2,531,095)

Net real estate

7,344,201


6,890,967

Cash and cash equivalents

146,214


162,132

Accounts and notes receivable, net

187,149


169,007

Mortgage notes receivable, net

9,475


9,543

Investment in partnerships

122,822


13,027

Operating lease right of use assets

95,187


90,743

Finance lease right of use assets

45,756


49,832

Prepaid expenses and other assets

266,203


237,069

TOTAL ASSETS

$  8,217,007


$  7,622,320

LIABILITIES AND SHAREHOLDERS' EQUITY




Liabilities




Mortgages payable, net (including $192,442 and $335,301 of consolidated variable
interest entities, respectively)

$     321,299


$     339,993

Notes payable, net

568,302


301,466

Senior notes and debentures, net

3,407,298


3,406,088

Accounts payable and accrued expenses

245,610


235,168

Dividends payable

90,121


86,538

Security deposits payable

28,042


25,331

Operating lease liabilities

78,234


72,661

Finance lease liabilities

67,662


72,032

Other liabilities and deferred credits

242,800


206,187

Total liabilities

5,049,368


4,745,464

Commitments and contingencies




Redeemable noncontrolling interests

185,759


213,708

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 and 399,896 shares issued and outstanding, respectively

9,822


9,997

Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized,
81,204,286 and 78,603,305 shares issued and outstanding, respectively

817


790

Additional paid-in capital

3,794,247


3,488,794

Accumulated dividends in excess of net income

(1,060,027)


(1,066,932)

Accumulated other comprehensive income (loss)

6,084


(2,047)

Total shareholders' equity of the Trust

2,900,943


2,580,602

Noncontrolling interests

80,937


82,546

Total shareholders' equity

2,981,880


2,663,148

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$  8,217,007


$  7,622,320

 

Federal Realty Investment Trust








Consolidated Income Statements








September 30, 2022









Three Months Ended


Nine Months Ended


September 30,


September 30,


2022


2021


2022


2021


(in thousands, except per share data)


(unaudited)

REVENUE








Rental income

$    273,179


$    247,024


$    793,516


$    694,954

Mortgage interest income

272


260


805


2,116

Total revenue

273,451


247,284


794,321


697,070

EXPENSES








Rental expenses

58,809


49,318


166,189


141,474

Real estate taxes

32,803


29,529


94,628


88,272

General and administrative

13,100


12,253


39,046


35,357

Depreciation and amortization

77,109


70,611


223,244


202,160

Total operating expenses

181,821


161,711


523,107


467,263









Gain on deconsolidation of VIE

70,374



70,374


Gain on sale of real estate and change in control of interest

29,723



29,723


17,428









OPERATING INCOME

191,727


85,573


371,311


247,235









OTHER INCOME/(EXPENSE)








Other interest income

234


88


487


701

Interest expense

(35,060)


(32,249)


(98,707)


(95,511)

Income (loss) from partnerships

1,873


1,129


4,878


(86)

NET INCOME

158,774


54,541


277,969


152,339

   Net income attributable to noncontrolling interests

(2,636)


(2,419)


(8,171)


(5,777)

NET INCOME ATTRIBUTABLE TO THE TRUST

156,138


52,122


269,798


146,562

Dividends on preferred shares

(2,008)


(2,010)


(6,026)


(6,031)

NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$    154,130


$      50,112


$    263,772


$    140,531









EARNINGS PER COMMON SHARE, BASIC:








Net income available for common shareholders

$          1.90


$          0.64


$          3.31


$          1.81

Weighted average number of common shares

80,765


77,485


79,480


77,269

EARNINGS PER COMMON SHARE, DILUTED:








Net income available for common shareholders

$          1.89


$          0.64


$          3.31


$          1.81

Weighted average number of common shares

81,511


77,575


80,137


77,287

 

Federal Realty Investment Trust









Funds From Operations



September 30, 2022











Three Months Ended


Nine Months Ended



September 30,


September 30,



2022


2021


2022


2021



(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO)







Net income


$ 158,774


$   54,541


$ 277,969


$ 152,339

Net income attributable to noncontrolling interests


(2,636)


(2,419)


(8,171)


(5,777)

Gain on deconsolidation of VIE


(70,374)



(70,374)


Gain on sale of real estate and change in control of interest


(29,723)



(29,723)


(17,428)

Depreciation and amortization of real estate assets


67,455


61,236


196,159


174,770

Amortization of initial direct costs of leases


7,454


6,202


19,129


20,127

Funds from operations


130,950


119,560


384,989


324,031

Dividends on preferred shares (1)


(1,875)


(1,875)


(5,625)


(6,031)

Income attributable to downREIT operating partnership units


704


742


2,111


2,267

Income attributable to unvested shares


(449)


(438)


(1,353)


(1,156)

FFO


$ 129,330


$ 117,989


$ 380,122


$ 319,111

Weighted average number of common shares, diluted (1)(2)


81,511


78,365


80,232


77,997

FFO per diluted share (2)


$       1.59


$       1.51


$       4.74


$       4.09

Notes:

1)

For the three and nine months ended September 30, 2022 and the three months ended September 30, 2021, 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 common shares, diluted."

2)

The weighted average common shares used to compute FFO per diluted common share for all periods presented includes downREIT operating partnership units that were excluded from the computation of diluted EPS for the three and nine months ended September 30, 2021. Conversion of these operating partnership units is dilutive in the computation of FFO per diluted share for all periods presented but is anti-dilutive for the computation of dilutive EPS for the three and nine months ended September 30, 2021.

 

Investor Inquiries:

Leah Andress Brady

Vice President, Investor Relations

301.998.8265

lbrady@federalrealty.com

Media Inquiries:

Brenda Pomar

Director, Corporate Communications

301.998.8316

bpomar@federalrealty.com

 

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SOURCE Federal Realty Investment Trust

FAQ

What were Federal Realty's Q3 2022 earnings per share?

Federal Realty reported earnings per diluted share of $1.89 for Q3 2022.

How much did Federal Realty's FFO increase in Q3 2022?

Funds from operations (FFO) increased to $129.3 million, or $1.59 per diluted share, in Q3 2022.

What is the occupancy rate of Federal Realty's portfolio as of Q3 2022?

The portfolio was 92.1% occupied as of September 30, 2022.

What is the record leasing activity for Federal Realty in Q3 2022?

Federal Realty signed 119 leases for 562,859 square feet, the highest third-quarter volume on record.

When will Federal Realty's quarterly dividend be paid?

The quarterly dividend of $1.08 per share will be payable on January 17, 2023.

Federal Realty Investment Trust

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NORTH BETHESDA