Federal Realty Earnings: Small Occupancy Gain as Company Reports Record Level of Leasing

Federal Realty reported first-quarter results that were relatively in line with our expectations, leading us to reaffirm our $142 fair value estimate for the no-moat company. Same-store occupancy improved 10 basis points sequentially to 94.3%, slightly better than our assumption of flat growth. Re-leasing spreads came in at 9.3% for the quarter, close to our estimate of 10.1%. Same-store rental income grew a very solid 4.1% in the first quarter. However, same-store operating expenses were up 6.7%, leading to same-store net operating income growth of 3.0%, which was in line with our 3.2% estimate. Federal Realty reported funds from operations of $1.64 per share in the first quarter, below our $1.66 forecast, largely due to higher-than-expected interest expense.