Federal Realty Misses by a Penny

Federal Realty Investment Trust (FRT - Analyst Report) a real estate investment trust (REIT) reported fourth quarter 2011 FFO (funds from operations) of $62.1million or 97 cents per share compared with $62.2 million or $1.01 per share in the year-earlier quarter. Fund 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, however, missed the Zacks Consensus Estimate by a penny.

The company reported FFO (funds from operations) of $251.6 million or $4.00 per share in fiscal 2011 compared with $239.2 million or $3.88 per share in fiscal 2010.

Total revenue during the reported quarter increased to $141.5 million from $137.4 million in the year-ago quarter.

Total revenue during 2011 increased to $553.1 million from $541.7 million a year ago

Federal Realty executed healthy leasing activities during the quarter. The company signed 82 leases spanning 254,557 square feet of retail space during the reported quarter.

On a same-store basis, the company leased 231,394 square feet at an average cash-basis contractual rent increase of 10.0% per square foot. The average same-store contractual rent for the first year of new leases was $32.81 per square foot as against $29.80 for the last year of the prior leases.

Same-store rents per square foot (GAAP) increased 22.0% on an average during the fourth quarter. As of December 30, 2011, Federal Realty's average contractual, cash basis minimum rent for retail and commercial space was $23.37 per square foot compared with $22.77 in the prior year.

Same-store net operating income, excluding redevelopment and expansion properties increased 2.8% on a yearly basis. The overall portfolio was 93.4% leased at the end of fiscal 2011, compared with 93.9% in the prioryear, while the same-store portfolio was 93.9% leased at the end of the fiscal year compared with 94.4% in the prior year.

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

With the addition of high quality acquisitions like Tower Shops, Plaza El Segundo and Montrose Crossing and the significant development activities at Pike & Rose, Assembly Row and Santana Row, the company continues to provide earnings growth and value creation for its shareholders.

Federal Realty maintained its quarterly dividend rate of 69 cents per share or $2.76 per share on an annualized basis. At quarter end, the company had cash and cash equivalents of $67.8 million. Federal Realty increased its FFO guidance for full year 2012 from the earlier range of $4.02 -$4.04 to $4.19 - $4.25.

Federal Realty currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, National Retail Properties, Inc. (NNN) also holds a Zacks #2 Rank.