FEDERAL REALTY INVESTMENT TRUST ROCKVILLE, Md., Nov. 1, 2017 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its third quarter ended September 30, 2017. Highlights of the quarter and recent activity include:
-- Generated earnings per diluted share of $1.47 for the quarter compared
to $0.82 in third quarter 2016.
-- Generated FFO per diluted share of $1.50 for the quarter compared to
$1.41 in third quarter 2016.
-- Generated same-center property operating income growth of 4.4%.
-- Signed leases for 399,619 sf of comparable space at an average rent of
$38.24 psf and achieved cash basis rollover growth on comparable spaces
of 14%.
-- Opportunistically issued $150.0 million of 5.0% Series C Cumulative
Redeemable Preferred Shares.
-- Narrowed 2017 FFO per diluted share guidance range to $5.89 to $5.92.
"Solid performance all around this quarter," said Donald C. Wood, President and Chief Executive Officer of Federal Realty. "Thoughtful positioning of our portfolio and company over the last decade empowers us to continue to excel during this transitional time in the retail real estate space. The balance of owning the best real estate in flexible formats combined with our A rated balance sheet sets us apart and allows us to focus on the future."
Financial Results
Net income available for common shareholders was $106.6 million and earnings per diluted share was $1.47 for third quarter 2017 versus $58.8 million and $0.82, respectively, for third quarter 2016. Year-to-date Federal Realty reported net income available for common shareholders of $238.8 million and earnings per diluted share of $3.30. This compares to net income available for common shareholders of $191.5 million and earnings per diluted share of $2.70 for the nine months ended September 30, 2016.
In the third quarter 2017, Federal Realty generated funds from operations available for common shareholders (FFO) of $110.0 million, or $1.50 per diluted share. This compares to FFO of $101.7 million, or $1.41 per diluted share, in third quarter 2016. For the nine months ended September 30, 2017, FFO was $324.5 million, or $4.45 per diluted share, compared to $301.4 million, or $4.21 per diluted share for the same nine month period in 2016.
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
In third quarter 2017, same-center property operating income increased 4.4% over the prior year when including properties that are being redeveloped and 2.6% when excluding those properties.
The overall portfolio was 94.9% leased as of September 30, 2017, compared to 94.3% on September 30, 2016. Federal Realty's same center portfolio was 96.0% leased on September 30, 2017, compared to 95.7% on September 30, 2016.
During third quarter 2017, Federal Realty signed 90 leases for 424,492 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 399,619 square feet at an average cash basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 14%. The average contractual rent on this comparable space for the first year of the new leases is $38.24 per square foot compared to the average contractual rent of $33.43 per square foot for the last year of the prior leases. The previous average contractual rent was calculated by including both the minimum rent and any percentage rent actually paid during the last year of the lease term for the re-leased space. On a GAAP basis (i.e., including the impact of straight-line rents), rent increases per square foot for comparable retail space averaged 27% for third quarter 2017.
Dividend Declarations
Federal Realty's Board of Trustees declared a regular quarterly cash dividend of $1.00 per share, resulting in an indicated annual rate of $4.00 per share. The regular common dividend will be payable on January 16, 2018 to common shareholders of record as of January 2, 2018.
Federal Realty's Board of Trustees also declared quarterly cash dividends with respect to the Trust's Series C Preferred Shares. All dividends on the preferred shares will be payable on January 16, 2018 to preferred shareholders of record as of January 2, 2018.
Summary of Other Quarterly Activities and Recent Developments
-- October 12, 2017 - Federal Realty received the inaugural Best
Sustainability Program award from the NAIOP DC | MD Chapter. The award
is given to an organization that "demonstrates a strong commitment to
sustainable business practices and solutions that contribute to
environmental responsibility and economic success."
-- September 25, 2017 - Federal Realty issued 6,000 5.0% Series C
Cumulative Redeemable Preferred Shares, par value $0.01 per share at the
liquidation preference of $25,000 per share in an underwritten public
offering. The Series C Preferred Shares accrue dividends at a rate of
5.0% per year and are redeemable at our option on or after September 29,
2022.
-- August 31, 2017 - Federal Realty announced the sale of 150 Post Street,
a seven-story, 105,000 square foot retail and office building located in
the Union Square district of San Francisco, for $69.3 million.
Guidance
Federal Realty narrowed its guidance for 2017 FFO per diluted share to a range of $5.89 to $5.92 and adjusted 2017 earnings per diluted share guidance to a range of $4.02 to $4.05.
Federal Realty will provide preliminary expectations for 2018 FFO per diluted share on the Trust's third quarter 2017 earnings conference call.
Conference Call Information
Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its third quarter 2017 earnings conference call, which is scheduled for Thursday, November 2, 2017 at 11:00AM ET. To participate, please call 877-445-3230 five to ten minutes prior to the call start time and use the passcode 84997180 (required). Federal Realty will also provide an online webcast on the Company's web site, http://www.federalrealty.com, which will remain available for 30 days following the call. A telephonic replay of the conference call will also be available through November 9, 2017 by dialing 855.859.2056; Passcode: 84997180.
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, our mission is to deliver long term, sustainable growth through investing in densely populated, affluent communities where retail demand exceeds supply. Our 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 over 2,900 tenants, in approximately 24 million square feet, and over 2,000 residential units.
Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has increased its dividend rate for 50 consecutive years, the longest record in the REIT industry. Federal Realty 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 13, 2017, 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 redevelopments or
renovation projects that we do pursue may cost more, take more time to
complete, or fail to perform as expected;
-- risks that we are investing a significant amount in ground-up
development projects that may not perform as planned, 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 associated with general economic conditions, including local
economic conditions in our geographic markets;
-- risks of financing, such as our ability to consummate additional
financings or obtain replacement 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; and
-- 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.
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 may be 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 carefully review the risks and risk factors included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 13, 2017.
Federal Realty Investment Trust
Consolidated Balance Sheets
September 30, 2017
September 30, December 31,
2017 2016
---- ----
(in thousands, except share and per share
data)
(unaudited)
ASSETS
Real estate, at cost
Operating (including $1,666,691 and
$1,226,918 of consolidated variable
interest entities, respectively) $6,758,728 $6,125,957
Construction-in-progress 769,882 599,260
Asset held for sale - 33,856
--- ------
7,528,610 6,759,073
Less accumulated depreciation and
amortization (including $236,391 and
$209,239 of consolidated variable
interest entities, respectively) (1,828,845) (1,729,234)
---------- ----------
Net real estate 5,699,765 5,029,839
Cash and cash equivalents 22,850 23,368
Accounts and notes receivable, net 200,878 116,749
Mortgage notes receivable, net 30,429 29,904
Investment in real estate partnerships 23,925 14,864
Prepaid expenses and other assets 243,290 208,555
------- -------
TOTAL ASSETS $6,221,137 $5,423,279
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable (including $461,873 and
$439,120 of consolidated variable
interest entities, respectively) $493,240 $471,117
Capital lease obligations 71,565 71,590
Notes payable 320,718 279,151
Senior notes and debentures 2,377,939 1,976,594
Accounts payable and accrued expenses 206,441 201,756
Dividends payable 73,466 71,440
Security deposits payable 16,698 16,285
Other liabilities and deferred credits 175,464 115,817
------- -------
Total liabilities 3,735,531 3,203,750
Commitments and contingencies
Redeemable noncontrolling interests 151,815 143,694
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 and
0 shares issued and outstanding,
respectively 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,
72,542,909 and 71,995,897 shares issued
and outstanding, respectively 728 722
Additional paid-in capital 2,773,890 2,718,325
Accumulated dividends in excess of net
income (724,919) (749,734)
Accumulated other comprehensive loss (742) (2,577)
---- ------
Total shareholders' equity of the Trust 2,208,954 1,976,733
Noncontrolling interests 124,837 99,102
------- ------
Total shareholders' equity 2,333,791 2,075,835
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $6,221,137 $5,423,279
========== ==========
Federal Realty Investment Trust
Consolidated Income Statements
September 30, 2017
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
---- ---- ---- ----
(in thousands, except per share data)
(unaudited)
REVENUE
Rental income $212,048 $197,469 $620,741 $585,712
Other property income 5,171 2,759 10,429 8,559
Mortgage interest income 734 929 2,221 3,211
--- --- ----- -----
Total revenue 217,953 201,157 633,391 597,482
------- ------- ------- -------
EXPENSES
Rental expenses 41,250 38,588 119,487 118,385
Real estate taxes 27,492 24,973 79,104 71,164
General and administrative 9,103 8,232 26,013 25,278
Depreciation and amortization 55,611 48,903 159,656 145,137
------ ------ ------- -------
Total operating expenses 133,456 120,696 384,260 359,964
------- ------- ------- -------
OPERATING INCOME 84,497 80,461 249,131 237,518
Other interest income 79 105 253 285
Interest expense (26,287) (24,313) (73,952) (71,143)
(Loss) income from real estate partnerships (182) - (296) 41
---- --- ---- ---
INCOME FROM CONTINUING OPERATIONS 58,107 56,253 175,136 166,701
Gain on sale of real estate and change in control of interests,
net 50,775 4,945 69,949 32,458
NET INCOME 108,882 61,198 245,085 199,159
Net income attributable to noncontrolling interests (2,105) (2,221) (5,827) (7,286)
------ ------ ------ ------
NET INCOME ATTRIBUTABLE TO THE TRUST 106,777 58,977 239,258 191,873
Dividends on preferred shares (177) (136) (448) (406)
---- ---- ---- ----
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS $106,600 $58,841 $238,810 $191,467
======== ======= ======== ========
EARNINGS PER COMMON SHARE, BASIC:
Net income available for common shareholders $1.47 $0.82 $3.31 $2.70
===== ===== ===== =====
Weighted average number of common shares 72,091 71,319 71,983 70,626
====== ====== ====== ======
EARNINGS PER COMMON SHARE, DILUTED:
Net income available for common shareholders $1.47 $0.82 $3.30 $2.70
===== ===== ===== =====
Weighted average number of common shares 72,206 71,489 72,110 70,804
====== ====== ====== ======
Federal Realty Investment Trust
Funds From Operations
September 30, 2017
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
---- ---- ---- ----
(in thousands, except per share data)
Funds from Operations available for common shareholders (FFO)
------------------------------------------------------------
Net income $108,882 $61,198 $245,085 $199,159
Net income attributable to noncontrolling interests (2,105) (2,221) (5,827) (7,286)
Gain on sale of real estate and change in control of
interests, net (50,775) (4,706) (69,659) (31,133)
Depreciation and amortization of real estate assets 48,796 42,779 139,112 126,806
Amortization of initial direct costs of leases 4,780 4,260 14,530 12,729
Funds from operations 109,578 101,310 323,241 300,275
Dividends on preferred shares (1) (41) (136) (41) (406)
Income attributable to operating partnership units 788 750 2,355 2,397
Income attributable to unvested shares (357) (263) (1,064) (826)
FFO $109,968 $101,661 $324,491 $301,440
======== ======== ======== ========
Weighted average number of common shares, diluted 73,089 72,254 73,001 71,642
====== ====== ====== ======
FFO per diluted share $1.50 $1.41 $4.45 $4.21
===== ===== ===== =====
Notes:
1) For the three and nine months ended
September 30, 2017, dividends on
our Series 1 preferred stock are
not deducted in the calculation of
FFO, as the related shares are
dilutive and included in "weighted
average common shares, diluted."
Federal Realty Investment Trust
Reconciliation of FFO Guidance
September 30, 2017
The following table provides a reconciliation of the range of estimated earnings per diluted share to
estimated FFO per diluted share for the full year 2017. Estimates do not include the impact from
potential acquisitions or dispositions which have not closed as of November 1, 2017.
Full Year 2017 Guidance Range
-----------------------------
Low High
--- ----
Estimated net income
available to common
shareholders, per
diluted share $4.02 $4.05
Adjustments:
Estimated gain on sale
of real estate, net (0.95) (0.95)
Estimated depreciation
and amortization of
real estate 2.57 2.57
Estimated amortization
of initial direct
costs of leases 0.26 0.26
Estimated FFO per
diluted share $5.89 $5.92
===== =====
Investor Inquires: Media Inquiries:
Leah Andress Andrea Simpson
Investor Relations Associate Vice President, Marketing
301.998.8265 617.684.1511
landress@federalrealty.com asimpson@federalrealty.com
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