Federal Realty Reports Mixed 1Q

Federal Realty Investment Trust (FRT - Analyst Report) reported first quarter 2011 FFO (funds from operations) of $61.3 million or 99 cents per share compared with $57.8 million or 94 cents per share in the year-earlier quarter.

Funds from operations, 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. The reported quarterly FFO was in line with the Zacks Consensus Estimate.

Total revenues during the quarter increased marginally to $138.5 million from $138.3 million in the year-ago quarter. The reported revenues were ahead of the Zacks Consensus Estimate of $138.0 million.

Despite challenging market conditions, Federal Realty executed healthy leasing activities during the quarter. The company signed 96 leases spanning over 382,000 square feet of retail space.

On a same-store basis, the company leased 340,000 square feet at an average cash-basis contractual rent increase of 11.0% per square foot. The average same-store contractual rent for the first year of the new leases is $30.52 per square foot, compared to $27.55 for the last year of the prior leases.

Same-store rents (GAAP) increased 24.0% on an average during the quarter. As of March 31, 2011, Federal Realty's average contractual, cash basis minimum rent for retail and commercial space was $22.73 per square foot.

Same-store net operating income, excluding redevelopment and expansion properties increased 1.8% on a year-over-year basis. The overall portfolio was 93.8% leased at the end of the quarter, compared with 93.9% in the prior-year quarter, while the same-store portfolio was 94.3% leased compared with 94.6% in the year-ago period.

Federal Realty continues to focus on a low-risk business strategy of growth through prudent leasing of assets and completion of redevelopment projects at high risk-adjusted returns. The company is strengthening its presence in the core markets by acquiring new assets, which would eventually lead to better operational and ownership flexibility throughout the entire portfolio.

Federal Realty maintained its quarterly dividend rate of $0.67 per share or $2.68 on an annualized basis. At year-end 2010, the company had cash and cash equivalents of $10.0 million. For full year 2011, Federal Realty reiterated its earlier FFO guidance in the range of $3.95 – $4.02 per share.

Federal Realty currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Acadia Realty Trust (AKR - Snapshot Report) currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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Read the full analyst report on AKR