Federal Realty Investment Trust Announces Operating Results for the Year and Quarter Ended December 31, 2017

ROCKVILLE, Md., Feb. 13, 2018 /PRNewswire/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its year and quarter ended December 31, 2017.  Highlights of the full year and quarter include:

• Generated earnings per diluted share of $3.97 for the year compared to $3.50 in 2016. For the fourth quarter, generated earnings per diluted share of $0.67 compared to $0.80 for the fourth quarter 2016.
• Generated FFO per diluted share of $5.74 for the year ($5.91 excluding prepayment premium) compared to $5.65 in 2016. For the fourth quarter, generated FFO per diluted share of $1.30 ($1.47 excluding prepayment premium) compared to $1.45 for the fourth quarter 2016.  
• Generated same-center property operating income growth of 3.4% for the year ended 2017. For the fourth quarter, same-center growth was 2.6%.  
• Signed leases for 300,511 sf of comparable space in the fourth quarter at an average rent of $34.75 psf and achieved cash basis rollover growth on those comparable spaces of 15%.
• Opportunistically issued $175 million of 3.25% senior unsecured notes due 2027 offered at 99.404% of the principal amount with a re-offer yield of 3.323%.
• Introduced 2018 FFO per diluted share guidance range of $6.08 to $6.24.  

"We remain focused on the future as we navigate through this transitional time in the retail real estate space," said Donald C. Wood, President and Chief Executive Officer of Federal Realty. "Through thoughtful positioning of our portfolio over the last decade, there are more arrows in our quiver than ever before. Federal Realty is the only shopping center company to grow NAREIT-defined FFO year-over-year for the entirety of the current real estate cycle, and we remain confident that retail-based real estate in the best locations, with flexible formats and carefully created environments will be the future of retail and will thrive in the years to come."

Financial Results

For the full year 2017, Federal Realty reported net income available for common shareholders of $287.5 million and earnings per diluted share of $3.97. This compares to net income available for common shareholders of $249.4 million and earnings per diluted share of $3.50 for the full year 2016.   Net income available for common shareholders was $48.6 million and earnings per diluted share was $0.67 for the fourth quarter 2017 versus $57.9 million and $0.80, respectively, for the fourth quarter 2016.

For the full year 2017, Federal Realty generated funds from operations available for common shareholders (FFO) of $420.0 million, or $5.74 per diluted share. Excluding the $12.3 million early extinguishment of debt charge in the fourth quarter 2017, FFO per diluted share for the full year 2017 would have been $5.91. This compares to FFO of $406.4 million, or $5.65 per diluted share, for the full year 2016. For the fourth quarter 2017, FFO was $95.5 million, or $1.30 per diluted share ($1.47 if the early extinguishment of debt charge was excluded), compared to $104.9 million, or $1.45 per diluted share for the fourth quarter 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

For the year 2017, same-center property operating income increased 3.4% when including properties that are being redeveloped and 0.7% when excluding those properties. In fourth quarter 2017, same-center property operating income increased 2.6% when including properties that are being redeveloped and 1.0% when excluding those properties. As anticipated, the Trust's proactive releasing initiatives throughout the portfolio negatively impacted the year end and quarterly results.

The overall portfolio was 95.3% leased as of December 31, 2017, compared to 94.4% on December 31, 2016.  Federal Realty's same center portfolio was 96.3% leased on December 31, 2017, compared to 95.9% on December 31, 2016.

For the year 2017, Federal Realty signed 406 leases for 1.8 million square feet of retail space. On a comparable basis (i.e., spaces for which there was a former tenant), Federal Realty leased 1.6 million square feet at an average cash-basis contractual rent increase (i.e., excluding the impact of straight-line rents) of 13%. The average contractual rent on this comparable space for the first year of the new leases is $38.31 per square foot compared to the average contractual rent of $33.79 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 for comparable retail space averaged 26% for the year ended 2017.

During fourth quarter 2017, Federal Realty signed 91 leases for 344,768 square feet of retail space.  On a comparable space basis, Federal Realty leased 300,511 square feet at an average cash basis contractual rent increase of 15% and 27% on a GAAP basis.  The average contractual rent on this comparable space for the first year of the new leases is $34.75 per square foot compared to the average contractual rent of $30.19 per square foot for the last year of the prior leases.

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees declared a regular quarterly cash dividend of $1.00 per common share, resulting in an indicated annual rate of $4.00 per common share. The regular common dividend will be payable on April 16, 2018 to common shareholders of record as of March 14, 2018.

Federal Realty's Board of Trustees also declared a quarterly cash dividend with respect to the Trust's Series C Preferred Shares. All dividends on the preferred shares will be payable on April 16, 2018 to preferred shareholders of record as of April 2, 2018.

Summary of Other Quarterly Activities and Recent Developments

February 12, 2018 – Federal Realty announced promotions within its finance, operating and development Ranks. Melissa Solis was promoted to Senior Vice President – Chief Accounting Officer. Christian Fleming was promoted to Vice President – Asset Management. Patrick McMahon was promoted to Vice President – Development.

December 21, 2017 – Federal Realty issued $175 million aggregate principal amount of 3.25% senior unsecured notes due 2027. The notes were offered at 99.404% of the principal amount with a re-offer yield of 3.323%. The notes have the same terms and are of the same series as the notes that Federal Realty issued on June 23, 2017. Federal Realty has a total of $475 million of such notes outstanding. Federal Realty used the net proceeds from the offering to redeem all of its outstanding 5.90% Notes due 2020, incurring a $12.3 million prepayment charge, and for general corporate purposes.

Guidance

Federal Realty introduced 2018 guidance for FFO per diluted share of $6.08 to $6.24 and 2018 earnings per diluted share guidance of $3.01 to $3.17.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its fourth quarter and year end 2017 earnings conference call, which is scheduled for Wednesday, February 14, 2018 at 9:00AM ET.  To participate, please call 877.445.3230 five to ten minutes prior to the call start time and use the passcode 5292449 (required).  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 February 21, 2018 by dialing 855.859.2056; Passcode: 5292449.

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 approximately 3,000 tenants, in approximately 24 million square feet, and over 2,300 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, 2018, 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, 2018.

 

 

 

 

 

 

 

 

 

 

 

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