Federal Realty Investment Trust (FRT - Analyst Report) posted third-quarter 2013 core FFO (funds from operations) per share of $1.16, beating the Zacks Consensus Estimate by a whisker and the year-ago quarter figure by 4 cents.
The decent results came on the back of improved performance in the same-store portfolio and notable top-line growth. Prompted by the quarterly performance, Federal Realty raised its 2013 FFO per share outlook for the third time this year.
Total revenue during the reported quarter upped 1.1% year over year to $159.0 million and came in line with the Zacks Consensus Estimate.
Federal Realty executed healthy leasing activities in the quarter. The company signed 102 leases for 398,637 square feet of retail space. As of Sep 30, 2013, Federal Realty’s overall portfolio was 95.3% leased, up 20 basis points (bps) year over year.
On a comparable space basis (spaces for which a former tenant was there), Federal Realty leased 273,505 square feet at an average cash-basis contractual rent increase of 20% per square foot. Rent increases (GAAP basis) for comparable retail space averaged 34% per square foot in the quarter under review.
Same-center property operating income (excluding assets under redevelopment) escalated 5.7% year over year. As of Sep 30, 2013, the company’s same-center portfolio was 95.4% leased, up 20 bps year over year.
Portfolio Restructuring Activities
During the third-quarter, Federal Realty accomplished the disposition of its assets in San Diego, California and Forest Hills, N.Y. for $36 million in total. The dispositions were part of a reverse 1031 exchange related to the Darien, Conn.-based shopping center acquisition in April this year.
Subsequent to quarter end, on Oct 1, Federal Realty bought the 12 acre land parcel, which is adjacent to Assembly Row, in Boston for $18 million.
Federal Realty exited the quarter with cash and cash equivalents of approximately $127.8 million, up from $108.4 million as of Jun 30, 2013.
Federal Realty raised its guidance for 2013 FFO per share (excluding the debt prepayment charge) to the range of $4.60 – $4.61, from $4.56 – $4.60 forecasted earlier. This reflects the full-year guidance increase for the third time by this retail real estate investment trust (REIT) this year.
Also, Federal Realty provided guidance for full-year 2014 FFO per share in the range of $4.84 – $4.92.
Concurrent with the earnings release, Federal Realty declared a quarterly dividend of 78 cents per share. The dividend is payable on Jan 15, 2014, to common stockholders of record as of Jan 2.
We are encouraged by Federal Realty’s decent performance for the second consecutive quarter. The company’s portfolio of Class A shopping centers along with the diversified tenant base, comprising grocery stores and low-end discount retailers, position it well to maintain the upward trend. Moreover, Federal Realty’s successful expansion strategy has long-term value potential and promises steady income growth. Also, a raise in the outlook boosts investors’ confidence in the stock and is thus noteworthy.
Yet, a significant development pipeline and rising online purchases remain concerns for this Zacks Rank #3 (Hold) stock.
Other better performing retail REITs include Regency Centers Corporation (REG - Analyst Report) , Simon Property Group Inc. (SPG - Analyst Report) and Weingarten Realty Investors (WRI - Snapshot Report) , all carrying a Zacks Rank #2 (Buy).
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.