Federal Realty Investment Trust FRT posted second-quarter 2015 funds from operations (“FFO”) per share of $1.33, beating the Zacks Consensus Estimate of $1.30 and higher than the year-ago quarter tally of $1.23. Improved same-store portfolio performance aided the results.
Total revenue for the quarter grew 8% year over year to $181.5 million. However, the top line lagged the Zacks Consensus Estimate of $183 million.
Inside the Headlines
During the second quarter, Federal Realty inked 85 lease deals for 313,887 square feet of space. As of Jun 30, 2015, the company’s overall portfolio was 95.7% leased, up 40 basis points (bps) year over year.
On a comparable-space basis (spaces for which a former tenant was there), Federal Realty leased 296,946 square feet, at an average cash-basis contractual rent escalation of 15% per square foot. Rent increases (GAAP basis) for comparable retail space averaged at 25% per square foot.
Same-center property operating income (excluding redevelopments) improved 3% year over year in the quarter. As of Jun 30, 2015, Federal Realty’s same-center portfolio was 96.2% leased, up 30 bps year over year.
During the quarter, Federal Realty acquired 80% stake in a 198,000-square foot lifestyle center in South Florida, based on a total value of $87.5 million. Also, the company completed the divestiture of Houston St. property in San Antonio, TX for $46.1 million.
Federal Realty exited the second quarter with cash and cash equivalents of approximately $22.2 million, down from $48 million at the end of Dec 2014.
2015 Guidance
Federal Realty has raised 2015 FFO guidance to a range of $5.29–$5.33 from $5.26–$5.34. The Zacks Consensus Estimate of $5.30 falls in this range.
Dividend Update
Concurrent with the earnings release, Federal Realty declared a quarterly dividend of 94 cents. This marks an increase of 8% over the prior payment. The dividend will be paid on Oct 15, 2015 to shareholders of record as of Sep 22.
Our Take
The company’s portfolio of Class A shopping centers, along with a diversified tenant base, comprising grocery stores and low-end discount retailers, positions it well for growth. Additionally, Federal Realty’s focus on exploring expansion opportunities in premium markets, which generate income growth as well as long-term value, bodes well for its future.
Federal Realty currently carries a Zacks Rank #3 (Hold). Investors interested in the retail REIT industry may consider stocks Acadia Realty Trust AKR, Agree Realty Corp. ADC and American Assets Trust, Inc. AAT. While Acadia Realty Trust sports a Zacks Rank #1 (Strong Buy), both Agree Realty and American Assets Trust carry 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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