Federal Realty Investment Trust (FRT - Analyst Report), a real estate investment trust (REIT), reported first-quarter 2013 FFO (funds from operations) per share of $1.14, beating the Zacks Consensus Estimate by 2 cents and the prior-year quarter figure of $1.04. The better-than-expected results were attributable to improved performance in the same-store portfolio and decent top-line growth.
Total revenue during the reported quarter increased 7.8% to $157.8 million from $146.3 million and marginally topped the Zacks Consensus Estimate of $156 million.
Quarter in Detail
Federal Realty executed healthy leasing activities in the quarter. The company signed 80 leases spanning 266,451 square feet of retail space. On a same-store basis, it leased 254,282 square feet at an average cash-basis contractual rent increase of 12.0% per square foot.
The average same-store contractual rent for the first year of the new lease was $35.78 per square foot, compared with the average contractual rent of $31.89 per square foot for the last year of the prior lease.
Same-store rent per square foot (GAAP) increased 22.0% on an average in the quarter. As of March 31, 2013, the overall portfolio was 95.1% leased, compared with 93.8% at the end of the year-ago quarter. Moreover, Federal Realty's same-center portfolio was 95.1% leased as of Mar 31, 2013, compared with 94.5% as of Mar 31, 2012.
Same-center property operating income in the reported quarter increased 4.4% including redevelopment and expansion properties, and 3.2% excluding redevelopment and expansion properties, compared to the prior-year quarter.
As of March 31, 2013, Federal Realty had cash and cash equivalents of approximately $31.3 million, compared to $37.0 million as of Dec 31, 2012.
Following the quarter-end, on Apr 19, Federal Realty received an upgradation of the Corporate Credit and Senior Unsecured ratings from BBB+, Positive Outlook, to A-, Stable by Standard & Poor's Rating Services.
On Apr 3, 2013, Federal Realty acquired a shopping center located in vibrant Darien, CT for $47.3 million. The property is anchored by an Equinox health club, a Stop & Shop grocer and a Walgreen Co. ’s drug store.
Federal Realty increased its FFO guidance for full-year 2013 to $4.55–4.59 per share from the prior guidance of $4.53–4.58 per share. The updated guidance reflects the impact of the Darien-based shopping center acquisition and cost benefits from the rating upgradation.
In addition, Federal Realty declared a regular quarterly cash dividend of 73 cents per share on its common shares, or $2.92 on an annualized basis. The dividend will be paid on Jul 15, 2013 to common shareholders of record as of Jun 21.
We are encouraged by Federal Realty’s decent performance in another consecutive quarter. The company owns Class A shopping centers in high-barrier, high-growth areas that have fared relatively better during the economic downturn.
The recent Shopping Center acquisition is also a strategic fit and will enhance its retail dominance in the Conn. area going forward. In addition, Federal Realty has a strong balance sheet and has consistently paid its dividends since inception.
Federal Realty currently retains a Zacks Rank #3 (Hold). Other better performing REITs include Cedar Shopping Centers Inc. (CDR - Snapshot Report) and Agree Realty Corp. (ADC - Snapshot Report), carrying a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2 (Buy), respectively.
Note: FFO, 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.