On Dec 23, 2014, we issued an updated research report on Federal Realty Investment Trust (FRT). The Rockville, MD-based retail real estate investment trust (“REIT”) is continuing with its strategy of expanding into premier markets. The company’s decent balance sheet position and ample liquidity have helped it capitalize on expansion opportunities.
In the third quarter of 2014, Federal Realty successfully continued with development activities at Pike & Rose, Assembly Row and Santana Row. Further, the REIT intends to deliver around $89 million worth of redevelopment activities in 2014 and $153 million in 2015. Also, the company sells non-core assets so as to redeploy the proceeds toward its growth strategies. We expect the addition of such premium assets to its property portfolio and shedding of non-core assets to fuel the company’s bottom-line growth.
Moreover, on Oct 30, Federal Realty posted third-quarter 2014 funds from operations (“FFO”) per share of $1.23, in line with the Zacks Consensus Estimate and surpassing the year-ago quarter figure by 7 cents. The year-over-year FFO increase was aided by higher revenues and improved same-store portfolio performance.
Although Federal Realty’s increasing development and redevelopment pipeline is encouraging for its future growth, it adds to operational risks by exposing it to rising construction costs, entitlement delays and lease-up risks.
Over the past 30 days, the Zacks Consensus Estimate for 2014 edged down 0.2% to $4.90 per share, whereas for 2015, it remained unchanged at $5.32.
Federal Realty currently carries a Zacks Rank #3 (Hold).
Some better-ranked retail REITs include Regency Centers Corporation (REG), Retail Properties of America, Inc. (RPAI) and Rouse Properties, Inc. (RSE). All these stocks hold a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation, amortization and other non-cash expenses to net income.
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