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Federal Realty (FRT) Q3 FFO Meets, Revenues Beat Estimates

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Retail REIT Federal Realty Investment Trust’s (FRT - Free Report) third-quarter 2019 adjusted funds from operations (FFO) per share of $1.59 came in line with the Zacks Consensus Estimate. The reported figure improved from the prior-year tally of $1.58. The current-year adjusted FFO figure excludes the $11.9-million charge associated with the buyout of the Kmart lease at Assembly.

Total revenues inched up 1.8% year over year to $233.9 million. The top-line figure surpassed the Zacks Consensus Estimate of $232.4 million.

Results reflect rise in property operating income and cash-basis rollover growth on comparable spaces.

Quarter in Details

During the reported quarter, Federal Realty signed 103 leases for 491,414 square feet of retail space. On a comparable space basis, the company leased 468,643 square feet at an average rent of $38.93 per square foot. This denotes cash-basis rollover growth of 7%.

As of Sep 30, 2019, the company’s overall portfolio was 94.2%, down 60 basis points (bps) year over year. As of that date, comparable property portfolio was 94.9% leased, down 60 bps from the prior-year period. However, property operating income (POI) for comparable properties grew 2.1% for the third quarter.

Federal Realty exited third-quarter 2019 with cash and cash equivalents of approximately $162.5 million, up from the $64.1 million posted at the end of 2018.

During the quarter, Federal Realty acquired the Kmart lease at Assembly Square Marketplace in Somerville, MA, for $14.5 million. The move comes as part of the company’s efforts to gain control and capitalize on future prospects in the dynamic, mixed-use Assembly neighborhood. It offers substantial value creation potential on a six-acre parcel of land at its highly successful Assembly Row project.


For 2019, Federal Realty revised its FFO per share guidance to $6.16-$6.22. Excluding the charge related to the buyout of the Kmart lease at Assembly, the company estimates FFO per share of $6.32-$6.38. The Zacks Consensus Estimate for the same is currently pinned at $6.39.


Federal Realty announced a quarterly cash dividend of $1.05 per share. The increased dividend will be paid on Jan 15, to shareholders on record as of Jan 2, 2020.

Our Take

Federal Realty put up a decent show in the third quarter and undertook a number of strategic initiatives. These included the targeted acquisition of the Kmart parcel at Assembly as well as important lease recaptures. These offer future development potential which augur well for the company’s long-term growth.

In fact, the company’s premium retail real estate assets, diverse tenant base, balance sheet strength and focus on mixed used properties have the capability to drive growth over the long haul. Nevertheless, the choppy retail real estate market is a concern. Shrinking footfall at malls amid shift of consumers toward online channels, store closures and bankruptcy of retailers will likely keep affecting this retail REIT’s performance in the near run.

Federal Realty currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Federal Realty Investment Trust Price, Consensus and EPS Surprise

Federal Realty Investment Trust Price, Consensus and EPS Surprise

Federal Realty Investment Trust price-consensus-eps-surprise-chart | Federal Realty Investment Trust Quote

We, now, look forward to the earnings releases of other REITs like Realty Income Corporation (O - Free Report) , Outfront Media Inc. (OUT - Free Report) and Host Hotels & Resorts, Inc. (HST - Free Report) , all of which are slated to report their quarterly numbers next week.

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

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