While Re-Leasing Spreads Slow, Federal Realty Still Produces 3Q Occupancy Gains and Revenue Growth

Federal Realty reported third-quarter results that were slightly better than our estimates, leading us to reaffirm our $139 fair value estimate for the no-moat company. Same-store occupancy improved 20 basis points sequentially and 110 basis points year over year to 94.2%. Total re-leasing spreads slowed to just 2.9% in the quarter, below our estimate of 6.6% blended re-leasing spreads. Same-store revenue grew 5.5% in the third quarter. However, same-store operating expenses were up 9.5%, leading to same-store net operating income growth of 3.7%, though that was ahead of our 1.8% same-store NOI growth estimate for the quarter. As a result, Federal Realty reported third-quarter funds from operations of $1.59 per share, which beat our estimate of $1.55, and was ahead of the $1.51 figure the company reported in the third quarter of 2021.