Federal Realty Continues to Benefit From the Recovery of Shopping Center Fundamentals in Q4

Fourth-quarter results were slightly ahead of our expectations for no-moat Federal Realty, leading us to reaffirm our $136 fair value estimate. Same-store occupancy sequentially improved 80 basis points to 93.5%, better than our 93.1% estimate for the fourth quarter. Re-leasing spreads remained positive at 5.7%, though that is slightly worse than our 7.5% estimate and marks the third straight quarter of decelerating re-leasing spreads. Same-store revenue was up 8.8% while same-store operating expenses, which saw a slight decline in real estate taxes, were only up 4.5%, leading to same-store net operating income growth of 11.2% in the fourth quarter that beat our estimate of 9.1% growth. As a result, Federal Realty reported funds from operations of $1.47 per share for the quarter, slightly better than our $1.45 estimate and 49% higher than the $0.99 figure the company reported in the fourth quarter of 2020.