Federal Realty Tops, Guides Higher

Federal Realty (FRT) reported second quarter 2011 FFO (funds from operations) of $64.3 million or $1.02 per share compared with $60.3 million or 98 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. Reported FFO per share beat the Zacks Consensus Estimate by 2 cents.

Total revenue in the reported quarter increased to $136.3 million from $133.2 million in the year-ago quarter.

Despite challenging market conditions, Federal Realty executed healthy leasing activities during the quarter. The company signed 92 leases spanning over 396,000 square feet of retail space.

On a same-store basis, the company leased 370,000 square feet of space at an average cash-basis contractual rent increase of 6.0% per square foot. The average same-store contractual rent for the first year of the new lease is $28.21 per square foot as opposed to $26.64 for leases in the prior year.

Same-store rents (GAAP) increased 16.0% on an average during the quarter. As of June 30, 2011, Federal Realty's average contractual, cash basis minimum rent for retail and commercial space was $22.88 per square foot.

Same-store net operating income, excluding redevelopment and expansion properties, spiked 1.5% on a year-over-year basis. The overall portfolio was 93.4% leased at the end of the quarter, compared with 93.8% in the prior-year quarter, while the same-store portfolio was 93.7% leased compared with 94.7% in the year-ago period.

Federal Realty 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 increased its quarterly dividend rate by 3.0% to 69 cents per share or $2.76 on an annualized basis.  At the end of fiscal 2010, the company had cash and cash equivalents of $19.8 million. For fiscal 2011, Federal Realty increased its FFO guidance from the range of $3.95 -$4.02 per share to $3.99 - $4.04 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, Akadia Realty Trust (AKR - Snapshot Report) also has a Zacks #3 Rank.

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