Federal Realty Investment Trust (FRT) posted fourth-quarter 2014 funds from operations (“FFO”) per share of $1.28, beating the Zacks Consensus Estimate by 5 cents and the year-ago quarter figure by 10 cents. Higher revenues and improved same-store portfolio performance aided the results.
For 2014, Federal Realty posted FFO per share of $4.94, beating the Zacks Consensus Estimate of $4.90 and outpacing the year-ago quarter figure of $4.61.
Total revenue for the quarter grew 7.6% year over year to $176.4 million, surpassing the Zacks Consensus Estimate of $176 million.
For 2014, total revenue rose 7.6% year over year to $686.1 million, beating the Zacks Consensus Estimate of $676 million.
Inside the Headlines
During the fourth quarter, Federal Realty inked 83 lease deals for 343,896 square feet of space. As of Dec 31, 2014, the company’s overall portfolio was 95.6% leased, down 20 basis points year over year.
On a comparable space basis (spaces for which a former tenant was there), Federal Realty leased 306,860 square feet, at an average cash-basis contractual rent escalation of 20% per square foot. Rent increases (GAAP basis) for comparable retail space averaged 32% per square foot.
Same-center property operating income (excluding redevelopments and expansions) improved 3% year over year in the quarter. As of Dec 31, 2014, Federal Realty’s same-center portfolio was 95.8% leased, unchanged year over year.
Subsequent to the quarter end, in Jan, Federal Realty acquired a controlling interest in a 376,000 square feet San Antonio Shopping Center in Mountain View, CA, for $62.2 million.
Federal Realty exited the fourth quarter with cash and cash equivalents of approximately $48 million, compared to $23.9 million at the end of Sep 2014.
2015 Guidance
Federal Realty has kept the 2015 FFO guidance unchanged in the range of $5.26–$5.34. The Zacks Consensus Estimate of $5.31 falls within this range.
Dividend Update
Concurrent with the earnings release, Federal Realty declared a quarterly dividend of 87 cents. The dividend is payable on Apr 15, 2015 to shareholders of record as of Mar 20.
Our Take
We are encouraged with Federal Realty’s solid quarterly performance. The company’s portfolio of Class A shopping centers, along with the diversified tenant base, comprising grocery stores and low-end discount retailers, position it well to maintain the upward trend. Additionally, Federal Realty’s focus on exploring expansion opportunities in premium markets, which generate income growth and long-term value creation potential, bodes well.
Federal Realty currently carries a Zacks Rank #3 (Hold). Investors interested in the retail REIT industry may consider stocks like Pennsylvania Real Estate Investment Trust (PEI), Regency Centers Corporation (REG) and American Assets Trust, Inc. (AAT), each holding a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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