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.
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.
- 210 basis point spread between leased and occupied.
- 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%.
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.
