Federal Realty Investment Trust Announces Operating Results for the Year and Quarter Ended December 31, 2023
NORTH BETHESDA, Md., Feb. 12, 2024 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its year and quarter ended December 31, 2023. For the year ended December 31, 2023 and 2022, net income available for common shareholders was $2.80 per diluted share and $4.71 per diluted share, respectively. For the three months ended December 31, 2023 and 2022, net income available for common shareholders was $0.76 per diluted share and $1.40 per diluted share, respectively. For the year ended December 31, 2023 and 2022, Federal Realty reported operating income of $406.5 million and $526.4 million, respectively. For the three months ended December 31, 2023 and 2022, operating income was $108.8 million and $155.1 million, respectively.
Highlights for the full year, fourth quarter and subsequent to quarter-end include:
- Generated funds from operations available to common shareholders (FFO) per diluted share of $6.55 for the year, compared to $6.32 in 2022. For the fourth quarter, generated FFO per diluted share of $1.64, compared to $1.58 for the fourth quarter 2022.
- Generated comparable property operating income (POI) excluding lease termination fees and prior period rents collected growth of 4.3% for the year 2023 and 4.4% for the fourth quarter.
- Continued robust levels of leasing with 100 signed comparable retail leases in the fourth quarter at a cash basis rollover of 12%, bringing 2023 to 408 signed leases for over 2 million square feet of comparable space.
- Comparable leases represented 98% of total retail leases signed in the fourth quarter.
- Federal Realty's portfolio was 92.2% occupied and 94.2% leased at quarter end.
- Continued strong small shop leasing, ending the quarter at 90.7% representing an increase of 70 basis points year-over-year.
- Announced second phase of residential redevelopment at Bala Cynwyd in Bala Cynwyd, PA at a projected cost of $90 - $95 million and projected return on investment (ROI) of 7%.
- Raised $685.0 million of capital in two separate financings:
- $200.0 million mortgage loan secured by Bethesda Row.
- $485.0 million of 3.25% Exchangeable Senior Notes due January 2029.
- Repaid $600.0 million 3.95% senior unsecured notes at maturity, January 16, 2024.
- Introduced 2024 earnings per diluted share guidance of $2.72 to $2.94 and 2024 FFO per diluted share guidance of $6.65 to $6.87.
"In 2023, Federal's FFO per diluted share reached an all-time high, showcasing the Company's resilience in the face of elevated interest rates," said Donald C. Wood, Federal Realty's Chief Executive Officer. "Our multi-faceted business plan drove FFO growth, marked by continued growth in our comparable pool, contributions from our redevelopment and expansion program and accretive acquisition activity. We believe that Federal's high-quality open-air shopping centers and mixed-use communities located in the first-tier suburbs of major metropolitan markets remain the real-estate of choice for today's top-tier tenants. We head into 2024 energized and optimistic, poised for another exceptional year ahead."
Financial Results
Net Income
For the full year 2023, Federal Realty reported net income available for common shareholders of $229.0 million and earnings per diluted share of $2.80. This compares to net income available for common shareholders of $377.5 million and earnings per diluted share of $4.71 for the full year 2022, which included significant one-time gains from transaction activity.
For the fourth quarter 2023, net income available for common shareholders was $62.1 million and earnings per diluted share was $0.76 versus $113.7 million and $1.40, respectively, for the fourth quarter 2022.
FFO
For the full year 2023, Federal Realty generated funds from operations available for common shareholders (FFO) of $537.3 million, or $6.55 per diluted share. This compares to FFO of $509.2 million, or $6.32 per diluted share for the full year 2022.
For the fourth quarter 2023, FFO was $134.9 million, or $1.64 per diluted share, compared to $129.0 million, or $1.58 per diluted share for the fourth quarter 2022.
FFO is a non-GAAP supplemental earnings measure which the Trust considers meaningful in measuring its operating performance. A reconciliation of FFO to net income is attached to this press release.
Operational Update
Occupancy
The portfolio was 92.2% occupied and 94.2% leased as of December 31, 2023.
Additionally, our comparable residential properties were 95.9% leased as of December 31, 2023.
Leasing Activity
For the full year 2023, Federal Realty signed 426 leases for 2,091,071 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty signed 408 leases for 2,027,373 square feet at an average rent of $36.75 per square foot compared to the average contractual rent of $33.43 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 10%, 22% on a straight-line basis. Comparable leases represented 96% of total comparable and non-comparable leases signed during 2023.
During the fourth quarter 2023, Federal Realty signed 102 leases for 398,378 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty signed 100 leases for 393,761 square feet at an average rent of $44.57 per square foot compared to the average contractual rent of $39.97 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 12%, 23% on a straight-line basis. Comparable leases represented 98% of total comparable and non-comparable leases signed during the fourth quarter 2023.
Redevelopment
Subsequent to quarter end, Federal Realty announced the second phase of residential redevelopment at Bala Cynwyd in Bala Cynwyd, PA. The redevelopment will include the demolition of a two level department store building to construct a new six story residential building with 217 residential units, 16,000 square feet of retail and a two-story parking structure with 234 parking stalls. The redevelopment has a projected cost of $90 - $95 million and projected ROI of 7%.
Financing Transactions
On December 28, 2023, one of our wholly-owned subsidiaries entered into a $200.0 million mortgage loan, which bears interest at SOFR plus a 95 basis point spread, matures on December 28, 2025, plus two one-year extensions, at our option, and is secured by our Bethesda Row property. The interest rate is effectively fixed at 5.03% through the initial maturity date.
On January 11, 2024, our Operating Partnership issued $485.0 million aggregate principal amount of 3.25% Exchangeable Senior Notes that mature on January 15, 2029, unless earlier exchanged, purchased or redeemed. See our Form 8-K filing on January 11, 2024 for additional information on this transaction.
On January 16, 2024, we repaid the $600.0 million 3.95% senior unsecured notes at maturity.
Regular Quarterly Dividends
Federal Realty announced today that its Board of Trustees declared a regular quarterly cash dividend of $1.09 per common share, resulting in an indicated annual rate of $4.36 per common share. The regular common dividend will be payable on April 15, 2024 to common shareholders of record as of March 13, 2024.
Federal Realty's Board of Trustees also declared a quarterly cash dividend on its Class C depositary shares, each representing 1/1000 of a 5.000% Series C Cumulative Preferred Share of Beneficial Interest, of $0.3125 per depositary share. All dividends on the depositary shares will be payable on April 15, 2024 to shareholders of record as of April 1, 2024.
2024 Initial Guidance
2024 Earnings per diluted share | $2.72 to $2.94 |
2024 FFO per diluted share | $6.65 to $6.87 |
The company's initial 2024 guidance is based on the following assumptions (1): | |
Comparable properties growth | 2% - 3.5% |
Comparable properties growth excluding prior period rents and lease termination fees | 2.5% - 4% |
Prior period rents (2) | $2 - $3 million |
Lease termination fees | $4 - $7 million |
Incremental redevelopment/expansion POI (3) | $9 - $12 million |
General and administrative expenses | $48 - $52 million |
Development/redevelopment capital | $100 - $150 million |
Capitalized interest | $18 - $21 million |
(1) | Does not assume the impact of potential acquisitions or dispositions which have not closed as of January 31, 2024. |
(2) | Reflects amounts which were contractually deferred or payments renegotiated specifically related to the COVID-19 pandemic. |
(3) | Includes the expected additional POI to be recognized in 2024 compared to the amount recognized in 2023 from all of the redevelopments listed on page 16 of our supplemental information document filed on Form 8-K on February 12, 2024. Does not include any additional POI from "Active Property Improvement Projects." |
Conference Call Information
Federal Realty's management team will present an in-depth discussion of Federal Realty's operating performance on its fourth quarter 2023 earnings conference call, which is scheduled for Monday, February 12, 2024 at 5:00 PM ET. To participate, please call 844-826-3035 or 412-317-5195 five to ten minutes prior to the call start time. The teleconference can also be accessed via a live webcast at www.federalrealty.com in the Investors section. A replay of the webcast will be available on Federal Realty's website at www.federalrealty.com. A telephonic replay of the conference call will also be available through February 26, 2024 by dialing 844-512-2921 or 412-317-6671; Passcode: 10185405.
About Federal Realty
Federal Realty is a recognized leader in the ownership, operation and redevelopment of high-quality retail-based properties located primarily in major coastal markets from Washington, D.C. to Boston as well as San Francisco and Los Angeles. Founded in 1962, Federal Realty's mission is to deliver long-term, sustainable growth through investing in communities where retail demand exceeds supply. Its expertise includes creating urban, mixed-use neighborhoods like Santana Row in San Jose, California, Pike & Rose in North Bethesda, Maryland and Assembly Row in Somerville, Massachusetts. These unique and vibrant environments that combine shopping, dining, living and working provide a destination experience valued by their respective communities. Federal Realty's 102 properties include approximately 3,300 tenants, in 26 million commercial square feet, and approximately 3,100 residential units.
Federal Realty has increased its quarterly dividends to its shareholders for 56 consecutive years, the longest record in the REIT industry. Federal Realty is an S&P 500 index member and its shares are traded on the NYSE under the symbol FRT. For additional information about Federal Realty and its properties, visit www.federalrealty.com.
Safe Harbor Language
Certain matters discussed within this Press Release may be deemed to be forward-looking statements within the meaning of the federal securities laws. Although Federal Realty believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. These factors include, but are not limited to, the risk factors described in our Annual Report on Form 10-K filed on February 12, 2024 and include the following:
- risks that our tenants will not pay rent, may vacate early or may file for bankruptcy or that we may be unable to renew leases or re-let space at favorable rents as leases expire or to fill existing vacancy;
- risks that we may not be able to proceed with or obtain necessary approvals for any development, redevelopment or renovation project, and that completion of anticipated or ongoing property development, redevelopment or renovation projects that we do pursue may cost more, take more time to complete or fail to perform as expected;
- risks normally associated with the real estate industry, including risks that occupancy levels at our properties and the amount of rent that we receive from our properties may be lower than expected, that new acquisitions may fail to perform as expected, that competition for acquisitions could result in increased prices for acquisitions, that costs associated with the periodic maintenance and repair or renovation of space, insurance and other operations may increase, that environmental issues may develop at our properties and result in unanticipated costs, and, because real estate is illiquid, that we may not be able to sell properties when appropriate;
- risks that our growth will be limited if we cannot obtain additional capital, or if the costs of capital we obtain are significantly higher than historical levels;
- risks associated with general economic conditions, including inflation and local economic conditions in our geographic markets;
- risks of financing on terms which are acceptable to us, our ability to meet existing financial covenants and the limitations imposed on our operations by those covenants, and the possibility of increases in interest rates that would result in increased interest expense;
- risks related to our status as a real estate investment trust, commonly referred to as a REIT, for federal income tax purposes, such as the existence of complex tax regulations relating to our status as a REIT, the effect of future changes in REIT requirements as a result of new legislation, and the adverse consequences of the failure to qualify as a REIT; and
- risks related to natural disasters, climate change and public health crises (such as the outbreak and worldwide spread of COVID-19), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address them, may precipitate or materially exacerbate one or more of the above-mentioned risks, and may significantly disrupt or prevent us from operating our business in the ordinary course for an extended period.
Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this Press Release. Except as required by law, we make no promise to update any of the forward-looking statements as a result of new information, future events, or otherwise. You should review the risks contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 12, 2024.
Investor Inquiries: Leah Andress Brady Vice President, Investor Relations 301.998.8265 | Media Inquiries: Brenda Pomar Senior Director, Corporate Communications 301.998.8316 |
Federal Realty Investment Trust | |||
Consolidated Balance Sheets | |||
December 31, 2023 | |||
December 31, | December 31, | ||
2023 | 2022 | ||
(in thousands, except share and per share data) | |||
ASSETS | |||
Real estate, at cost | |||
Operating (including $2,021,622 and $1,997,583 of consolidated variable interest entities, respectively) | $ 9,932,891 | $ 9,441,945 | |
Construction-in-progress (including $8,677 and $8,477 of consolidated variable interest entities, respectively) | 613,296 | 662,554 | |
10,546,187 | 10,104,499 | ||
Less accumulated depreciation and amortization (including $416,663 and $362,921 of consolidated variable interest entities, respectively) | (2,963,519) | (2,715,817) | |
Net real estate | 7,582,668 | 7,388,682 | |
Cash and cash equivalents | 250,825 | 85,558 | |
Accounts and notes receivable, net | 201,733 | 197,648 | |
Mortgage notes receivable, net | 9,196 | 9,456 | |
Investment in partnerships | 34,870 | 145,205 | |
Operating lease right of use assets, net | 86,993 | 94,569 | |
Finance lease right of use assets, net | 6,850 | 45,467 | |
Prepaid expenses and other assets | 263,377 | 267,406 | |
TOTAL ASSETS | $ 8,436,512 | $ 8,233,991 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | |||
Liabilities | |||
Mortgages payable, net (including $189,286 and $191,827 of consolidated variable interest entities, respectively) | $ 516,936 | $ 320,615 | |
Notes payable, net | 601,945 | 601,077 | |
Senior notes and debentures, net | 3,480,296 | 3,407,701 | |
Accounts payable and accrued expenses | 174,714 | 190,340 | |
Dividends payable | 92,634 | 90,263 | |
Security deposits payable | 30,482 | 28,508 | |
Operating lease liabilities | 75,870 | 77,743 | |
Finance lease liabilities | 12,670 | 67,660 | |
Other liabilities and deferred credits | 225,443 | 237,699 | |
Total liabilities | 5,210,990 | 5,021,606 | |
Commitments and contingencies | |||
Redeemable noncontrolling interests | 183,363 | 178,370 | |
Shareholders' equity | |||
Preferred shares, authorized 15,000,000 shares, $0.01 par: | |||
5.0% Series C Cumulative Redeemable Preferred Shares, (stated at liquidation preference $25,000 per share), 6,000 shares issued and outstanding | 150,000 | 150,000 | |
5.417% Series 1 Cumulative Convertible Preferred Shares, (stated at liquidation preference $25 per share), 392,878 shares issued and outstanding | 9,822 | 9,822 | |
Common shares of beneficial interest, $0.01 par, 200,000,000 and 100,000,000 shares authorized, respectively, 82,775,286 and 81,342,959 shares issued and outstanding, respectively | 833 | 818 | |
Additional paid-in capital | 3,959,276 | 3,821,801 | |
Accumulated dividends in excess of net income | (1,160,474) | (1,034,186) | |
Accumulated other comprehensive income | 4,052 | 5,757 | |
Total shareholders' equity of the Trust | 2,963,509 | 2,954,012 | |
Noncontrolling interests | 78,650 | 80,003 | |
Total shareholders' equity | 3,042,159 | 3,034,015 | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 8,436,512 | $ 8,233,991 | |
Federal Realty Investment Trust | |||||||
Consolidated Income Statements | |||||||
December 31, 2023 | |||||||
Three Months Ended | Year Ended | ||||||
December 31, | December 31, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
(in thousands, except per share data) | |||||||
(unaudited) | |||||||
REVENUE | |||||||
Rental income | $ 291,532 | $ 279,776 | $ 1,131,041 | $ 1,073,292 | |||
Mortgage interest income | 280 | 281 | 1,113 | 1,086 | |||
Total revenue | 291,812 | 280,057 | 1,132,154 | 1,074,378 | |||
EXPENSES | |||||||
Rental expenses | 62,256 | 62,769 | 231,666 | 228,958 | |||
Real estate taxes | 33,437 | 33,196 | 131,429 | 127,824 | |||
General and administrative | 13,100 | 13,590 | 50,707 | 52,636 | |||
Depreciation and amortization | 82,421 | 79,165 | 321,763 | 302,409 | |||
Total operating expenses | 191,214 | 188,720 | 735,565 | 711,827 | |||
Gain on deconsolidation of VIE | — | — | — | 70,374 | |||
Gain on sale of real estate | 8,179 | 63,760 | 9,881 | 93,483 | |||
OPERATING INCOME | 108,777 | 155,097 | 406,470 | 526,408 | |||
OTHER INCOME/(EXPENSE) | |||||||
Other interest income | 912 | 585 | 4,687 | 1,072 | |||
Interest expense | (42,974) | (38,282) | (167,809) | (136,989) | |||
Income from partnerships | 375 | 292 | 3,869 | 5,170 | |||
NET INCOME | 67,090 | 117,692 | 247,217 | 395,661 | |||
Net income attributable to noncontrolling interests | (2,987) | (1,999) | (10,232) | (10,170) | |||
NET INCOME ATTRIBUTABLE TO THE TRUST | 64,103 | 115,693 | 236,985 | 385,491 | |||
Dividends on preferred shares | (2,008) | (2,008) | (8,032) | (8,034) | |||
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS | $ 62,095 | $ 113,685 | $ 228,953 | $ 377,457 | |||
EARNINGS PER COMMON SHARE, BASIC: | |||||||
Net income available for common shareholders | $ 0.76 | $ 1.40 | $ 2.80 | $ 4.71 | |||
Weighted average number of common shares | 81,617 | 80,966 | 81,313 | 79,854 | |||
EARNINGS PER COMMON SHARE, DILUTED: | |||||||
Net income available for common shareholders | $ 0.76 | $ 1.40 | $ 2.80 | $ 4.71 | |||
Weighted average number of common shares | 81,617 | 81,613 | 81,313 | 80,508 | |||
Federal Realty Investment Trust | ||||||||
Funds From Operations | ||||||||
December 31, 2023 | ||||||||
Three Months Ended | Year Ended | |||||||
December 31, | December 31, | |||||||
2023 | 2022 | 2023 | 2022 | |||||
(in thousands, except per share data) | ||||||||
Funds from Operations available for common shareholders (FFO) | ||||||||
Net income | $ 67,090 | $ 117,692 | $ 247,217 | $ 395,661 | ||||
Net income attributable to noncontrolling interests | (2,987) | (1,999) | (10,232) | (10,170) | ||||
Gain on deconsolidation of VIE | — | — | — | (70,374) | ||||
Gain on sale of real estate | (8,179) | (63,760) | (9,881) | (93,483) | ||||
Depreciation and amortization of real estate assets | 72,897 | 70,582 | 285,689 | 266,741 | ||||
Amortization of initial direct costs of leases | 7,740 | 8,139 | 31,208 | 27,268 | ||||
Funds from operations | 136,561 | 130,654 | 544,001 | 515,643 | ||||
Dividends on preferred shares (1) | (1,875) | (1,875) | (7,500) | (7,500) | ||||
Income attributable to downREIT operating partnership units | 693 | 699 | 2,767 | 2,810 | ||||
Income attributable to unvested shares | (474) | (445) | (1,955) | (1,797) | ||||
FFO | $ 134,905 | $ 129,033 | $ 537,313 | $ 509,156 | ||||
Weighted average number of common shares, diluted (1)(2) | 82,346 | 81,707 | 82,044 | 80,603 | ||||
FFO per diluted share (2) | $ 1.64 | $ 1.58 | $ 6.55 | $ 6.32 | ||||
Notes: | |
(1) | For the three months and year ended December 31, 2023 and 2022, dividends on our Series 1 preferred stock were not deducted in the calculation of FFO available to common shareholders, as the related shares were dilutive and are included in "weighted average number of common shares, diluted." |
(2) | For the three months and year ended December 31, 2023, the weighted average common shares used to compute FFO per diluted common share includes downREIT operating partnership units that were excluded from the computation of diluted EPS. Conversion of these operating partnership units is dilutive in the computation of FFO per diluted share, but is anti-dilutive for the computation of dilutive EPS for these periods. |
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