Federal Realty Investment Trust
CEO : Mr. Donald C. Wood CPA
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | 10.2% YoY | 5.2% | -33.8% | 2023-02-08 |
Donald Wood says,
Strong 2022 Performance
- 2022 FFO per share of $1.58 in the quarter and $6.32 for the full year, ahead of internal and external consensus expectations
- A record 497 leases were executed for over 2 million square feet of retail space in 2022
- Leased up the portfolio at 94.5% at year-end compared with 93.6% a year before
- Inherent contractual rent bumps increased to over 2.25% annually overall
Continued Growth in 2023
- Expect a higher lease rollover percentage in 2023 as continued strong demand and inflationary pressures are helping negotiations
- 68,000 households with annual average household incomes of $150 to $1,000 sit within 3 miles of federal centers
- Expect a slowdown in consumer spending due to higher interest rates, but Federal’s superior demographics and diversification of rent will mitigate impact
- Full year of contributions from ’22 acquisitions will cover incremental interest and lead to an all-time record earnings year in 2023 with sector-leading growth
Portfolio Management
- Opportunistically pruning the portfolio of non-core and slower-growing assets
- Sold three smaller properties for proceeds of about $135 million, which were reinvested into assets generating better going-in yields and add significantly better growth process
- Ability to sell non-core assets accretively is a differentiating tool to manage the company through economic cycles
Strong Financial Position
- Federal has been around since 1962 and has raised its dividend every year since 1967
- Significant incremental rent from contracts that are already in place will more than cover incremental interest in 2023
- $600 million-plus construction and process number on the year-end balance sheet identifies a large source of future income, much of which is not yet reflected in the results
Don Wood says,
Impact of Business Strategy on Accounting
- The business decisions and strategies drive the accounting practices, not the other way around.
- The company did not know the accounting when deciding on tenant base after losing big building users.
’23 Outlook and Santana West
- The operating growth and bottom line projected for 2023 are not impacted by Santana West.
- The impact of everything else in the company is reflected in the 2023 outlook.
- The company expects rent on Santana West to eventually cover interest expenses, but this will not be seen in 2023.
Q & A sessions,
Shifting Strategy for Santana West
- Shifting to strategy of building out individual floors instead of full building user
- More demand for 50,000 to 100,000 sq ft users
- Building getting a lot of looks, tours being given
- Strategy expected to be fruitful
Accounting for Santana West
- 250 million invested in building at 5% or so a year of carry on that
- Continuing to be on the balance sheet
- Expected to go through the P&L eventually
Building Progress and Timing
- Individual floors being built out, a year’s worth of work ahead of time
- Timing expected to be good
Incremental Carry and Cost
- Expected to be higher due to building out individual floors
- Benefits in base building and other things reducing cost of Santana West
Importance of Santana West in Portfolio
- Santana West makes up 1.5% of asset base
- Entire office portfolio, backed out Santana West, is 92% leased
- Other ongoing buildings, backed out Pike & Rose, are 97% leased
- Product is right all the way through, different when attached to Santana Row, Assembly Row, Pike & Rose
No bad stock 