Federal Realty Investment Trust Announces Third Quarter 2022 Operating Results

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.

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SOURCE Federal Realty Investment Trust