To optimize its portfolio and strengthen its balance sheet, Federal Realty Investment Trust (FRT Quick QuoteFRT - Free Report) has taken a significant step by selling its remaining assets on Third Street Promenade in Santa Monica, CA, for $103 million. The portfolio comprised eight buildings with 185,000 square feet of space. This sale completes the disposition of the portfolio, bringing total proceeds to $120 million, including a prior transaction.

Located just a quarter mile from Santa Monica Beach, the Third Street Promenade portfolio includes 147,000 square feet of retail space and 60,000 square feet of office space across both transactions. The successful sale underscores the company's commitment to dynamic portfolio management and strategic capital allocation.

By selling these non-core assets, Federal Realty is able to enhance its focus on key markets and boost its financial flexibility, allowing it to invest in properties that align more closely with its long-term growth objectives.

One such strategic investment is the recent acquisition of Virginia Gateway, a dominant 110-acre retail hub located in Gainesville, VA. This acquisition added approximately 665,000 square feet of prime retail space to Federal Realty’s portfolio and underscored its commitment to owning and operating high-quality, high-traffic retail properties in affluent markets.

A highly visible and accessible retail center, Virginia Gateway is situated at the bustling intersection of Route 29 and I-66 and is roughly 95% occupied. This prominent retail and entertainment hub, which draws visitors from a wide regional trade area, ranked third in Virginia for annual visits in 2023, per Placer.ai and is placed just behind Tysons Corner. This high foot traffic translates into robust tenant sales across categories, particularly in the food and beverage sector.

Gainesville, VA, is a thriving community with strong economic and demographic fundamentals. It enjoys a strong population supported by an influx of higher-paying jobs. The average household income within a three-mile radius of Virginia Gateway surpasses $184,000, which exceeds the company's in-place portfolio average. This affluent consumer base, coupled with the area’s job growth driven by the nearby Dulles Technology Corridor, positions Virginia Gateway for sustained high performance and growth.

This shift toward high-growth assets in key markets demonstrates Federal Realty's proactive approach to portfolio management. Going forward, Federal Realty’s portfolio of premium retail assets in well-off communities with favorable demographics positions it well for growth.

A diverse tenant base and a focus on essential retail ensure steady cash flows. The company’s efforts to diversify its portfolio and develop mixed-use assets are likely to benefit it over the long term. However, higher e-commerce adoption and potential tenant bankruptcies are likely to weigh on Federal Realty. A high interest rate environment adds to its concerns.

Shares of this Zacks Rank #3 (Hold) company have risen 2.9% in the past six months against the industry's decline of 0.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Stocks to Consider

Some better-ranked stocks from the retail REIT sector are Kite Realty Group Trust (KRG Quick QuoteKRG - Free Report) and Acadia Realty Trust (AKR Quick QuoteAKR - Free Report) , each currently carrying a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for KRG’s 2024 funds from operations (FFO) per share has been revised a cent northward over the past month to $2.05.

The consensus estimate for AKR’s current-year FFO per share has been revised a cent upward over the past two months to $1.28.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.