Federal Realty Investment Trust Q2 Earnings Call Highlights

Second-quarter FFO rose 7% year over year to $1.88 per share, supported by record comparable leasing of 819,000 square feet, 96% occupancy and rent spreads 15% above prior leases. Federal Realty raised its outlook, increasing full-year Core FFO guidance to $7.48–$7.56 per share, implying 6.5% growth at the midpoint, while comparable property operating income growth expectations also improved. Major anchor, residential and mixed-use projects are expected to generate additional income, while the company ended the quarter with $1.2 billion in liquidity and raised its dividend for the 59th consecutive year.

Federal Realty Investment Trust NYSE: FRT reported second-quarter funds from operations of $1.88 per share, up 7% from a year earlier, as record leasing volume, higher rents and incremental revenue initiatives supported results above the midpoint of its guidance range. Chief Executive Officer Don Wood said the quarter featured 96% occupancy, record leasing activity and the company’s 59th consecutive annual dividend increase.

Federal Realty signed 124 comparable leases totaling 819,000 square feet during the quarter, with average first-year cash rent of $33.68 per square foot, 15% above prior rents and 28% higher on a straight-line basis. Comparable rent spreads were 15% above prior in-place rents, while trailing 12-month comparable rollover reached 17%, the highest level in more than a decade. Small-shop leasing helped Federal Realty maintain overall occupancy from the prior quarter despite expected anchor transitions. The company added more than 100,000 square feet of net small-shop occupancy, increasing its small-shop occupied rate by 100 basis points during the quarter. Small-shop space was 93.9% leased and 92.3% occupied, the highest levels since 2007. The company had more than 1.5 million square feet in lease negotiations. Executed leases are expected to add $31 million of revenue over the next 18 months.

Foot traffic increased across the portfolio and collections remained strong. Federal Realty expects parking revenue to rise by nearly $3 million year over year, driven by higher rates, events, activations and partnerships.

Wood highlighted anchor leasing and redevelopment progress at Grossmont Shopping Center in suburban San Diego and Barracks Road Shopping Center in Charlottesville, Virginia. At the 860,000-square-foot Grossmont center, Federal Realty signed Bass Pro Shops to a 20-year lease for 161,000 square feet, replacing an underperforming Macy’s and adjacent small-shop tenants. The company also signed a 53,000-square-foot lease with AMC for a new theater. Wood said the planned comprehensive redevelopment is expected to cost $56 million and generate an incremental 10% cash-on-cash return. At the 500,000-square-foot Barracks Road center, Harris Teeter signed for a 79,000-square-foot expanded flagship grocery store. Wood said further merchandising improvements are expected to be announced. The company also continued work on residential development at existing shopping centers. Blayr at Bala Cynwyd is two-thirds leased and ahead of the company’s timing and rent expectations, according to Wood. Other projects include 301 Washington Street.