Federal Realty Beats Estimates

Federal Realty Investment Trust ( FRT - Analyst Report ) , a real estate investment trust (REIT), reported first quarter 2012 FFO (funds from operations) of $66.7 million or $1.04 per share compared with $61.3 million or 99 cents per share in the year-earlier quarter.

Funds from operations, a widely accepted and reported measure of REIT’s performance, is derived by adding depreciation, amortization and other non-cash expenses to net income. FFO per share in the reported quarter beat the Zacks Consensus Estimate by 3 cents.

Total revenue during the reported quarter increased to $146.3 million from $137.6 million in the year-ago quarter. Total revenue during the quarter marginally exceeded the Zacks Consensus Estimate of $145 million.

Federal Realty executed healthy leasing activities during the quarter. The company signed 97 leases spanning 472,501 square feet of retail space during the reported quarter. On a same-store basis, the company leased 461,088 square feet of space at an average cash-basis contractual rent increase of 17.0% per square foot. The average same-store contractual rent for the first year of new leases was $31.66 per square foot as against $27.15 for the last year of the prior leases. Same-store rents per square foot (GAAP) increased 24.0% on an average during the first quarter of 2012.

Same-store net operating income, excluding redevelopment and expansion properties increased 5.5% on a year-over-year basis. The overall leased portfolio remained flat year over year at 93.8%, while the same-store portfolio was 94.3% leased at the end of the quarter 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 upgradation of the core portfolio by adding Plaza El Segundo and Montrose Crossing properties and the advance development activities at Pike & Rose, Assembly Row and Santana Row, the company continues to provide earnings growth and creates value for its shareholders.

Federal Realty maintained its quarterly dividend rate of 69 cents per share or $2.76 per share on an annualized basis. The dividend will be payable on July 16, 2012 to stockholders of record as of June 22, 2012. At the quarter end, the company had cash and cash equivalents of $69.2 million. With strong quarterly result, Federal Realty increased its FFO per share guidance for full year 2012 from the earlier range of $4.19 - $4.25 to $4.24 - $4.29.

We maintain our long-term ‘Neutral’ recommendation on Federal Realty, which currently retains a Zacks #3 Rank that translates into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #2 Rank (short-term ‘Buy’ rating) for National Retail Properties, Inc. ( NNN - Snapshot Report ) , one of the Federal Realty’s close competitors.