Federal Realty Investment Trust Announces Second Quarter 2022 Operating Results and 55th Annual Dividend Increase

Published: Aug. 4, 2022 at 7:15 AM EDT

NORTH BETHESDA, Md., Aug. 4, 2022 /PRNewswire/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its second quarter ended June 30, 2022. For the three months ended June 30, 2022 and 2021, net income available for common shareholders was $0.75 per diluted share and $0.57 per diluted share, respectively.

Federal Realty is a recognized leader in the ownership, operation and redevelopment of...
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. (PRNewsfoto/Federal Realty Investment Trust)(PRNewswire)

Highlights for the quarter and subsequent events include:

  • Generated record funds from operations available to common shareholders (FFO) per diluted share of $1.65 for the quarter compared to $1.41 for the second quarter 2021.
  • Generated comparable property operating income (POI) growth of 8.2% for the second quarter.
  • Continued record levels of leasing with 132 signed leases for 562,111 square feet of comparable space in the second quarter, our most active quarter on record.
  • Federal Realty's portfolio was 92.0% occupied and 94.1% leased, representing year-over-year increases of 240 basis points and 140 basis points, respectively.
  • Continued strong small shop leasing, ending the quarter at 89.3% leased, an increase of 360 basis points year over year and an increase of 580 basis points since the COVID-era low.
  • During the quarter and subsequent to quarter end, acquired 3 assets which total over 1 million square feet on 93 acres of land for a total purchase price of $434 million.
  • Increased the regular quarterly cash dividend to $1.08 per common share, resulting in an indicated annual rate of $4.32 per common share. This increase represents the 55th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector.
  • Increased 2022 earnings per diluted share guidance to $2.50 - $2.65 and increased 2022 FFO per diluted share guidance to $6.10 - $6.25.
  • Increased Comparable POI growth expectations to 5.5% - 7.0%.
  • Issued the Company's annual Environmental, Social and Governance Report.

"A record quarter for Federal Realty; from funds from operations per share of $1.65, to continued record leasing levels, to celebrating our 55th consecutive year of increased common dividends," said Donald C. Wood, Chief Executive Officer. "The quality of our assets, our sector leading demographics and high-barrier markets give us confidence that our multi-faceted business plan is the right one to serve the consumer in today's economy."

Financial Results

Net Income

Net income available for common shareholders was $59.7 million and earnings per diluted share was $0.75 for second quarter 2022 versus $44.2 million and $0.57 respectively, for second quarter 2021.

FFO

In the second quarter 2022, Federal Realty generated FFO of $131.6 million, or $1.65 per diluted share. This compares to FFO of $110.1 million, or $1.41 per diluted share, in second 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 92.0% occupied as of June 30, 2022, an increase of 80 basis points quarter-over-quarter and an increase of 240 basis points year-over-year. The portfolio was 94.1% leased as of June 30, 2022, an increase of 40 basis points quarter-over-quarter and an increase of 140 basis points year-over-year. The spread between our leased and occupied percentages was 210 basis points at the end of the second quarter.

Additionally, our comparable residential properties were 98.5% leased as of June 30, 2022, a sequential increase of 100 basis points over first quarter.

Leasing Activity

During the second quarter 2022, Federal Realty signed 137 leases for 577,338 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 562,111 square feet at an average rent of $35.86 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 5%, 13% on a straight-line basis.

Transaction Activity

During the quarter and subsequent to quarter end, we acquired 3 assets which total 1 million square feet on 93 acres of land for a total purchase price of $434 million.

  • July 18, 2022 – Federal Realty acquired a 214,000 square foot office building adjacent to Hilton Village in Scottsdale, Arizona at the entrance to the town of Paradise Valley, the most affluent community in the greater Phoenix market for $53.6 million. The office building will be integrated into Federal's existing Hilton Village retail asset.
  • July 27, 2022 – Federal Realty acquired The Shops at Pembroke Gardens, a 392,000 square foot super regional shopping center on 41 acres located in Broward County, Florida, adjacent to I-75 at the Pines Boulevard interchange, for $180.5 million. The property is anchored by Nike, Old Navy, DSW and Barnes & Noble with the opportunity to increase value over time through remerchandising, increasing rents and incremental capital investment.
  • July 27, 2022 - Federal Realty closed on phase two of the previously announced acquisition of Kingstowne Towne Center in Kingstowne, Virginia, for $100 million representing a total purchase price of $200 million (phase one closed April 2022). Combined, the property comprises 410,000 square feet of retail space on 45 acres of land and is anchored by Safeway, Giant, T.J. Maxx, Ross Dress for Less and HomeGoods.

Regular Quarterly Dividends

Federal Realty announced today that its Board of Trustees increased the regular quarterly cash dividend to $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 October 17, 2022 to common shareholders of record as of September 22, 2022. This increase represents the 55th 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 17, 2022 to shareholders of record as of October 3, 2022.

Summary of Other Quarterly Activities

  • June 1, 2022 – Federal Realty issued its 2021 Environmental, Social and Governance Report highlighting the Company's commitment to its ESG initiatives and accomplishments.
  • June 21, 2022 – Federal Realty was named to The Washington Post's 2022 Top Workplaces list for its leadership in employee satisfaction and engagement.

Guidance

Federal Realty increased its 2022 guidance for earnings per diluted share to $2.50 - $2.65 from $2.36 - $2.56 and 2022 FFO per diluted share to $6.10 - $6.25 from $5.85 - $6.05.

Federal Realty increased comparable POI growth expectations to 5.5% - 7.0% from 3.5% – 5.0%.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of Federal Realty's operating performance on its second quarter 2022 earnings conference call, which is scheduled for Thursday, August 4, 2022 at 11:00 AM ET.  To participate, please call 877.407.9208 five to ten minutes prior to the call start time and use the passcode 13729950 (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 18, 2022 by dialing 844.512.2921; Passcode: 13729950.

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 105 properties include approximately 3,100 tenants, in 25 million square feet, and approximately 3,400 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


June 30, 2022



June 30,


December 31,



2022


2021



(in thousands, except share and per share data)



(unaudited)




ASSETS





Real estate, at cost





Operating (including $2,219,568 and $2,207,648 of consolidated variable interest entities, respectively)

$  9,076,274


$  8,814,791


Construction-in-progress (including $24,865 and $18,752 of consolidated variable interest entities, respectively)

630,287


607,271



9,706,561


9,422,062


Less accumulated depreciation and amortization (including $418,633 and $389,950 of consolidated variable
interest entities, respectively)

(2,648,474)


(2,531,095)


Net real estate

7,058,087


6,890,967


Cash and cash equivalents

176,559


162,132


Accounts and notes receivable, net

187,370


169,007


Mortgage notes receivable, net

9,499


9,543


Investment in partnerships

13,515


13,027


Operating lease right of use assets

89,613


90,743


Finance lease right of use assets

49,190


49,832


Prepaid expenses and other assets

226,608


237,069


TOTAL ASSETS

$  7,810,441


$  7,622,320


LIABILITIES AND SHAREHOLDERS' EQUITY





Liabilities





Mortgages payable, net (including $317,619 and $335,301 of consolidated variable interest entities, respectively)

$      321,975


$      339,993


Notes payable, net

301,480


301,466


Senior notes and debentures, net

3,406,895


3,406,088


Accounts payable and accrued expenses

226,660


235,168


Dividends payable

87,397


86,538


Security deposits payable

27,232


25,331


Operating lease liabilities

71,827


72,661


Finance lease liabilities

72,019


72,032


Other liabilities and deferred credits

209,217


206,187


Total liabilities

4,724,702


4,745,464


Commitments and contingencies





Redeemable noncontrolling interests

209,312


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, 80,896,804 and 78,603,305
shares issued and outstanding, respectively

813


790


Additional paid-in capital

3,758,161


3,488,794


Accumulated dividends in excess of net income

(1,126,463)


(1,066,932)


Accumulated other comprehensive income (loss)

3,550


(2,047)


Total shareholders' equity of the Trust

2,795,883


2,580,602


Noncontrolling interests

80,544


82,546


Total shareholders' equity

2,876,427


2,663,148


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

                                                                                        

$  7,810,441


$  7,622,320










Federal Realty Investment Trust








Consolidated Income Statements








June 30, 2022









Three Months Ended


Six Months Ended


June 30,


June 30,


2022


2021


2022


2021


(in thousands, except per share data)


(unaudited)

REVENUE








Rental income

$    263,830


$    230,795


$    520,337


$    447,930

Mortgage interest income

269


830


533


1,856

Total revenue

264,099


231,625


520,870


449,786

EXPENSES








Rental expenses

51,169


42,918


107,380


92,156

Real estate taxes

31,265


29,323


61,825


58,743

General and administrative

13,604


12,846


25,946


23,104

Depreciation and amortization

74,461


67,675


146,135


131,549

Total operating expenses

170,499


152,762


341,286


305,552









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




17,428









OPERATING INCOME

93,600


78,863


179,584


161,662









OTHER INCOME/(EXPENSE)








Other interest income

133


250


253


613

Interest expense

(32,074)


(31,177)


(63,647)


(63,262)

Income (loss) from partnerships

2,808


123


3,005


(1,215)

NET INCOME

64,467


48,059


119,195


97,798

   Net income attributable to noncontrolling interests

(2,791)


(1,855)


(5,535)


(3,358)

NET INCOME ATTRIBUTABLE TO THE TRUST

61,676


46,204


113,660


94,440

Dividends on preferred shares

(2,008)


(2,011)


(4,018)


(4,021)

NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS

$      59,668


$      44,193


$    109,642


$      90,419









EARNINGS PER COMMON SHARE, BASIC:








Net income available for common shareholders

$           0.75


$           0.57


$           1.38


$           1.16

Weighted average number of common shares

79,202


77,474


78,826


77,160

EARNINGS PER COMMON SHARE, DILUTED:








Net income available for common shareholders

$           0.75


$           0.57


$           1.38


$           1.16

Weighted average number of common shares

79,202


77,505


78,855


77,162













Federal Realty Investment Trust









Funds From Operations



June 30, 2022











Three Months Ended


Six Months Ended



June 30,


June 30,



2022


2021


2022


2021



(in thousands, except per share data)

Funds from Operations available for common shareholders (FFO)







Net income


$   64,467


$   48,059


$ 119,195


$   97,798

Net income attributable to noncontrolling interests


(2,791)


(1,855)


(5,535)


(3,358)

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





(17,428)

Depreciation and amortization of real estate assets


65,727


56,431


128,704


113,534

Amortization of initial direct costs of leases


5,882


9,181


11,675


13,925

Funds from operations


133,285


111,816


254,039


204,471

Dividends on preferred shares (1)


(1,875)


(2,011)


(3,750)


(4,021)

Income attributable to downREIT operating partnership units


701


740


1,407


1,525

Income attributable to unvested shares


(467)


(398)


(904)


(721)

FFO


$ 131,644


$ 110,147


$ 250,792


$ 201,254

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


79,952


78,203


79,608


77,881

FFO per diluted share (2)


$        1.65


$        1.41


$        3.15


$        2.58










Notes:

1)

For the three and six months ended June 30, 2022, 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."

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 these periods.

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

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