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 Federal Realty Investment Trust Announces Second Quarter 2017 Operating Results
   Wednesday, August 02, 2017 4:10:00 PM ET

Federal Realty Investment Trust (FRT ) today reported operating results for its second quarter ended June 30, 2017. Highlights of the quarter include:

-- Generated earnings per diluted share of $1.05 for the quarter compared to $0.78 in second quarter 2016.

-- Generated FFO per diluted share of $1.49 for the quarter compared to $1.42 in second quarter 2017, representing growth of 4.9%.

-- Generated same center property operating income growth of 3.9% for the second quarter.

-- Signed leases for 397,555 sf of comparable space (432,164 sf total) in the second quarter at an average rent of $45.55 psf and achieved cash basis rollover growth on those comparable spaces of 13%.

-- Party to a binding contract to form a new joint venture with Primestor Development, which will own an interest in seven shopping centers totaling over 1.3 million square feet on 114 acres of urban land in Latino communities in Los Angeles, California.

-- Opportunistically issued $300 million aggregate principal amount of 3.25% Notes due 2027 at an effective yield of 3.358% and an additional $100 million aggregate principal amount of 4.50% Notes due 2044 at an effective yield of 4.143%.

-- Increased the regular quarterly dividend rate on common shares to $1.00 per share, representing the 50th consecutive year of common dividend increases.

-- Increased 2017 FFO per diluted share guidance range to $5.86 - $5.94.

"We’re very pleased to deliver not only another quarter of record bottom line results but also the 50th year of consecutive dividend increases to our shareholders," said Donald C. Wood, President and Chief Executive Office of Federal Realty. "At Federal Realty, we remain focused on positioning our portfolio for the next decade and beyond - through value creation in our existing assets, infill acquisitions which re-stock our redevelopment pipeline and our recently announced agreement to acquire seven properties located in markets where demand exceeds supply. Our business plan continues to exemplify balance and discipline as we navigate the challenging retail environment."

Financial Results

Net income available for common shareholders was $76.2 million and earnings per diluted share was $1.05 for second quarter 2017 versus $55.8 million and $0.78, respectively, for second quarter 2016.

In second quarter 2017, Federal Realty generated funds from operations available for common shareholders (FFO) of $108.6 million, or $1.49 per diluted share. This compares to FFO of $102.2 million, or $1.42 per diluted share, in second 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

In second quarter 2017, same center property operating income increased 3.9% when including properties that are being redeveloped and decreased 0.7% when excluding those properties. The vacancies impacting same center results have been released to tenants at significantly higher rents.

The overall portfolio was 94.5% leased as of June 30, 2017, compared to 94.6% on March 31, 2017 and 94.5% on June 30, 2016. Federal Realty’s same center portfolio was 95.9% leased on June 30, 2017, compared to 95.8% on March 31, 2017 and 95.9% on June 30, 2016.

During second quarter 2017, Federal Realty signed 111 leases for 432,164 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 397,555 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 $45.55 per square foot compared to the average contractual rent of $40.16 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 straight-line basis, rent increases for comparable retail space averaged 27% for second quarter 2017.

Summary of Other Quarterly Activities and Recent Developments

-- August 1, 2017 - Federal Realty is party to a binding contract to form a new joint venture with Primestor Development Inc., the Los Angeles based owner and developer of premier retail properties serving the urban Latino communities of Southern California. The Trust will hold an approximately 90% interest in the venture. The venture will be seeded with a 100% interest in five dominant community shopping centers, plus one center under redevelopment and a 25% minority interest in a seventh shopping center. These seven properties total over 1.3 million square feet on 114 acres of urban land with tenants such as Ross Dress for Less, Marshalls and Kroger’s Food 4 Less. The Trust’s investment in the venture is expected to approximate $345 million which includes a $20 million commitment to complete the redevelopment of one of the centers.

-- July 31, 2017 - Federal Realty announced the approval by its Board of Trustees of an increase in the regular dividend rate on its common shares to $1.00 per share per quarter resulting in an annualized dividend rate of $4.00 per share. The quarterly cash dividend will be payable on October 16, 2017 to common shareholders of record as of September 22, 2017. Federal Realty is the only real estate investment trust in the United States to have increased its common dividend every year for the last 50 years and one of only a small number of companies in any sector to accomplish such a record. The compound annual growth rate of the dividend increases over that 50 years is in excess of 7%.

-- June 20, 2017 - Federal Realty priced its public offering of $300 million aggregate principal amount of 3.25% Notes due 2027 at an effective yield of 3.358% and an additional $100 million aggregate principal amount of 4.50% Notes due 2044 at an effective yield of 4.143%. The 2044 Notes have the same terms and are of the same series as the notes that Federal Realty first issued on November 14, 2014 and again on March 16, 2015. Federal Realty has a total of $550 million of such series of notes outstanding.

-- May 19, 2017 - Federal Realty acquired a 90% interest in 1700 - 1730 4th Street, a 71,000 square foot single-story, mixed-use building located on Fourth Street in Berkeley, California, one of the Bay Area’s premiere and unique street-retail districts. Current tenants include CB2, California Closets, and the offices of Ingram Books.


Federal Realty increased its 2017 guidance for FFO per diluted share to $5.86 to $5.94 and updated its 2017 earnings per diluted share guidance to $3.31 to $3.39.

Conference Call Information

Federal Realty’s management team will present an in-depth discussion of the Trust’s operating performance on its second quarter 2017 earnings conference call, which is scheduled for Thursday, August 3, 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 39460118 (required). A replay of the webcast will be available on Federal Realty’s website at A telephonic replay of the conference call will also be available through August 10, 2017 by dialing 855.859.2056; Passcode: 39460118.

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 99 properties include over 2,800 tenants, in over 23 million square feet, and over 1,800 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

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.

Investor Inquires:           Media Inquiries:
Leah Andress                 Andrea Simpson
Investor Relations Associate Vice President, Marketing
301.998.8265                 617.684.1511
Federal Realty Investment Trust
Consolidated Balance Sheets
June 30, 2017
                                                                                                                                                                                                           June 30,           December 31,
                                                                                                                                                                                                           2017               2016
                                                                                                                                                                                                           (in thousands, except share and per share data)
Real estate, at cost
Operating (including $1,265,976 and $1,226,918 of consolidated variable interest entities, respectively)                                                                                                   $      6,371,714   $      6,125,957
Construction-in-progress                                                                                                                                                                                   719,713            599,260
Asset held for sale                                                                                                                                                                                        --                 33,856
                                                                                                                                                                                                           7,091,427          6,759,073
Less accumulated depreciation and amortization (including $226,193 and $209,239 of consolidated variable interest entities, respectively)                                                                  (1,808,326)        (1,729,234)
Net real estate                                                                                                                                                                                            5,283,101          5,029,839
Cash and cash equivalents                                                                                                                                                                                  96,326             23,368
Accounts and notes receivable, net                                                                                                                                                                         168,996            116,749
Mortgage notes receivable, net                                                                                                                                                                             30,429             29,904
Investment in real estate partnerships                                                                                                                                                                     13,973             14,864
Prepaid expenses and other assets                                                                                                                                                                          210,678            208,555
TOTAL ASSETS                                                                                                                                                                                               $      5,803,503   $      5,423,279
Mortgages payable (including $383,304 and $439,120 of consolidated variable interest entities, respectively)                                                                                               $      414,891     $      471,117
Capital lease obligations                                                                                                                                                                                  71,573             71,590
Notes payable                                                                                                                                                                                              279,316            279,151
Senior notes and debentures                                                                                                                                                                                2,377,208          1,976,594
Accounts payable and accrued expenses                                                                                                                                                                      190,459            201,756
Dividends payable                                                                                                                                                                                          71,714             71,440
Security deposits payable                                                                                                                                                                                  16,618             16,285
Other liabilities and deferred credits                                                                                                                                                                     143,002            115,817
Total liabilities                                                                                                                                                                                          3,564,781          3,203,750
Commitments and contingencies
Redeemable noncontrolling interests                                                                                                                                                                        152,045            143,694
Shareholders’ equity
Preferred shares, authorized 15,000,000 shares, $.01 par: 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, 72,251,477 and 71,995,897 shares issued and outstanding, respectively                                                       725                722
Additional paid-in capital                                                                                                                                                                                 2,741,803          2,718,325
Accumulated dividends in excess of net income                                                                                                                                                              (759,058)          (749,734)
Accumulated other comprehensive loss                                                                                                                                                                       (1,100)            (2,577)
Total shareholders’ equity of the Trust                                                                                                                                                                    1,992,367          1,976,733
Noncontrolling interests                                                                                                                                                                                   94,310             99,102
Total shareholders’ equity                                                                                                                                                                                 2,086,677          2,075,835
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                                 $      5,803,503   $      5,423,279
Federal Realty Investment Trust
Consolidated Income Statements
June 30, 2017
                                                                    Three Months Ended            Six Months Ended
                                                                    June 30,                      June 30,
                                                                    2017           2016           2017           2016
                                                                    (in thousands, except per share data)
Rental income                                                       $    204,246   $    192,935   $    408,693   $    388,243
Other property income                                               3,068          3,488          5,258          5,800
Mortgage interest income                                            735            1,558          1,487          2,282
Total revenue                                                       208,049        197,981        415,438        396,325
Rental expenses                                                     37,128         36,978         78,237         79,797
Real estate taxes                                                   26,522         23,397         51,612         46,191
General and administrative                                          8,643          9,036          16,910         17,046
Depreciation and amortization                                       52,666         48,435         104,045        96,234
Total operating expenses                                            124,959        117,846        250,804        239,268
OPERATING INCOME                                                    83,090         80,135         164,634        157,057
Other interest income                                               68             77             174            180
Interest expense                                                    (23,907)       (23,101)       (47,665)       (46,830)
(Loss) income from real estate partnerships                         (114)          --             (114)          41
INCOME FROM CONTINUING OPERATIONS                                   59,137         57,111         117,029        110,448
Gain on sale of real estate and change in control of interests, net 18,996         1,787          19,174         27,513
NET INCOME                                                          78,133         58,898         136,203        137,961
Net income attributable to noncontrolling interests                 (1,842)        (2,957)        (3,722)        (5,065)
NET INCOME ATTRIBUTABLE TO THE TRUST                                76,291         55,941         132,481        132,896
Dividends on preferred shares                                       (135)          (135)          (271)          (271)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS                        $    76,156    $    55,806    $    132,210   $    132,625
Continuing operations                                               $    0.79      $    0.78      $    1.57      $    1.50
Gain on sale of real estate and change in control of interests, net 0.26           0.01           0.26           0.38
                                                                    $    1.05      $    0.79      $    1.83      $    1.88
Weighted average number of common shares, basic                     72,001         70,797         71,928         70,270
Continuing operations                                               $    0.79      $    0.77      $    1.57      $    1.50
Gain on sale of real estate and change in control of interests, net 0.26           0.01           0.26           0.38
                                                                    $    1.05      $    0.78      $    1.83      $    1.88
Weighted average number of common shares, diluted                   72,124         70,974         72,061         70,451
Federal Realty Investment Trust
Funds From Operations
June 30, 2017
                                                                     Three Months Ended           Six Months Ended
                                                                     June 30,                     June 30,
                                                                     2017           2016          2017           2016
                                                                     (in thousands, except per share data)
Funds from Operations available for common shareholders (FFO)
Net income                                                           $    78,133    $   58,898    $    136,203   $    137,961
Net income attributable to noncontrolling interests                  (1,842)        (2,957)       (3,722)        (5,065)
Gain on sale of real estate and change in control of interests, net  (18,814)       (701)         (18,884)       (26,427)
Depreciation and amortization of real estate assets                  45,634         42,299        90,316         84,027
Amortization of initial direct costs of leases                       5,066          4,265         9,750          8,469
Funds from operations                                                108,177        101,804       213,663        198,965
Dividends on preferred shares (1)                                    --             (135)         --             (271)
Income attributable to operating partnership units                   783            792           1,567          1,647
Income attributable to unvested shares                               (357)          (264)         (707)          (569)
FFO                                                                  $    108,603   $   102,197   $    214,523   $    199,772
Weighted average number of common shares, diluted                    73,019         71,816        72,956         71,327
FFO per diluted share                                                $    1.49      $   1.42      $    2.94      $    2.80
1)       For the three and six months ended June 30, 2017, dividends on 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
June 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 include the impact of the pending acquisition announced on August 1, 2017, but do not include the impact from potential acquisitions or dispositions which have not closed as of August 2, 2017.
                                                                         Full Year 2017 Guidance Range
                                                                         Low                                                  High
Estimated net income available to common shareholders, per diluted share $                                             3.31   $      3.39
Estimated gain on sale of real estate, net                               (0.26)                                               (0.26)
Estimated depreciation and amortization of real estate                   2.55                                                 2.55
Estimated amortization of initial direct costs of leases                 0.25                                                 0.25
Estimated FFO per diluted share                                          $                                             5.86   $      5.94

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