Federal Realty Earnings: Small Occupancy Decline Caused by Bed Bath & Beyond Vacating Anchor Spaces

Federal Realty reported third-quarter results that were slightly better than we anticipated, giving us confidence in our $142 fair value estimate for the no-moat company. Same-store occupancy fell 10 basis points sequentially and declined 40 basis points year over year to 93.8%, worse than our estimate of 94.2% occupancy for the quarter. However, re-leasing spreads came in at 10.7% well above our estimate of 7.9% re-leasing spreads. As a result, same-store revenue grew 3.2% in the third quarter, in line with our estimate of 3.3%. However, operating expenses only grew 2.1%, below our estimate of 4.2% growth, which led to 3.8% same-store net operating income growth that exceeded our estimate of 1.1% growth. Federal reported funds from operations of $1.65 per share in the third quarter, two cents better than our $1.63 estimate and six cents better than the $1.59 figure the company reported in the third quarter of 2022.