Company Reports

Federal Realty is a retail-based real estate investment trust that focuses on owning and operating high-quality shopping centers and mixed-use assets in eight of the largest metropolitan areas. It has strategically acquired and developed assets in submarkets with strong demand drivers, creating a portfolio with average location population density and median household income higher than any other retail REIT. As a result, Federal Realty has been able to drive strong same-store net operating income growth and average double-digit re-leasing spreads over the past two decades. Its portfolio should continue to attract shoppers and tenants and produce solid internal growth even in a challenging retail environment.

Federal Realty reported core funds from operations of $1.88 per share and same-store net operating income growth of 2.8% for the second quarter.

Federal Realty reported core funds from operations of $1.88 per share and same-store net operating income growth of 4.7% for the first quarter.

Federal Realty is a retail-based real estate investment trust that focuses on owning and operating high-quality shopping centers and mixed-use assets in eight of the largest metropolitan areas. It has strategically acquired and developed assets in submarkets with strong demand drivers, creating a portfolio with average location population density and median household income higher than any other retail REIT. As a result, Federal Realty has been able to drive strong same-store net operating income growth and average double-digit re-leasing spreads over the past two decades. Its portfolio should continue to attract shoppers and tenants and produce solid internal growth even in a challenging retail environment.

Federal Realty reported core funds from operations of $1.84 per share and same-store net operating income growth of 2.8% for the fourth quarter.

Federal Realty Investment Trust reported core funds from operations of $1.77 per share and same-store net operating income growth of 4.4% for the third quarter.

Federal Realty is a retail-based real estate investment trust that focuses on owning and operating high-quality shopping centers and mixed-use assets in eight of the largest metropolitan areas. It has strategically acquired and developed assets in submarkets with strong demand drivers, creating a portfolio with average location population density and median household income higher than any other retail REIT. As a result, Federal Realty has been able to drive strong same-store net operating income growth and average double-digit re-leasing spreads over the past two decades. Its portfolio should continue to attract shoppers and tenants and produce solid internal growth even in a challenging retail environment.

Federal Realty reported core funds from operations of $1.91 per share, inclusive of a $0.15 benefit resulting from new market tax credit transaction income, and same-store net operating income growth of 4.9% for the second quarter.

Federal Realty is a retail-based real estate investment trust that focuses on owning and operating high-quality shopping centers and mixed-use assets in eight of the largest metropolitan areas. It has strategically acquired and developed assets in submarkets with strong demand drivers, creating a portfolio with average location population density and median household income higher than any other retail REIT. As a result, Federal Realty has been able to drive strong same-store net operating income growth and average double-digit re-leasing spreads over the past two decades. Its portfolio should continue to attract shoppers and tenants and produce solid internal growth even in a challenging retail environment.

Federal Realty reported core funds from operations of $1.70 per share and same-store net operating income growth of 2.8% for the first quarter.

Federal Realty is a retail-based real estate investment trust that focuses on owning and operating high-quality shopping centers and mixed-use assets in eight of the largest metropolitan areas. It has strategically acquired and developed assets in submarkets with strong demand drivers, creating a portfolio with average location population density and median household income higher than any other retail REIT. As a result, Federal Realty has been able to drive strong same-store net operating income growth and average double-digit re-leasing spreads over the past two decades. Its portfolio should continue to attract shoppers and tenants and produce solid internal growth even in a challenging retail environment.

Fourth-quarter results for no-moat Federal Realty were in line with our expectations, leading us to reaffirm our $142 fair value estimate. Same-store occupancy increased 30 basis points sequentially and 200 basis points year over year to 96.2%, the highest occupancy level reported by the company in at least the past decade. Re-leasing spreads came in at 10.0% in the fourth quarter, relatively in line with the 10.5% average the company has seen over the prior eight quarters. Same-store revenue grew 3.9% while same-store operating expenses were up 4.2%, leading to same-store net operating income growth of 3.8% in the fourth quarter that was slightly ahead of our 3.5% estimate. Federal Realty reported funds from operations of $1.73 per share, relatively in line with our $1.74 estimate and 5.5% higher than the $1.64 figure reported in the fourth quarter of 2023.

Over the past few years, we have observed an inverse relationship between share prices in the REIT sector and interest-rate movements. We believe a major reason is that all commercial real estate valuations are connected to interest rates. Capitalization rates directly indicate the return expectations for a real estate investment and expectations for risk and growth. Historically, we have observed that commercial real trades at cap rates consistently spread above the 10-year US Treasury. If interest rates rise, investors will require a higher return, and thus a higher cap rate, to accept the risk associated with an investment in a real estate asset. Since return expectations have held relatively steady for most real estate sectors over the past few years, higher cap rates translate to falling prices for real estate.

Federal Realty is a retail-based real estate investment trust that focuses on owning and operating high-quality shopping centers and mixed-use assets in eight of the largest metropolitan areas. It has strategically acquired and developed assets in submarkets with strong demand drivers, creating a portfolio with average location population density and median household income higher than any other retail REIT. As a result, Federal Realty has been able to drive strong same-store net operating income growth and average double-digit re-leasing spreads over the past two decades. Its portfolio should continue to attract shoppers and tenants and produce solid internal growth even in a challenging retail environment.

Federal Realty Investment Trust's third-quarter results were relatively in line with to slightly above our estimates, leading us to reaffirm our $142 fair value estimate for the no-moat company. Same-store occupancy increased 60 basis points sequentially to 95.8%, higher than our estimate of 95.0% for the quarter. Re-leasing spreads were 14.5%, ahead of our estimate of 11.0% and the best quarter the company has reported since 2018. Same-store revenue grew 3.1% while same-store operating expenses were up 4.8%, leading to same-store net operating income growth of just 2.0%, in line with our 2.4% estimate. However, excluding payments of prior rent and lease termination income, which are nonrecurring in nature, same-store NOI growth would have been 2.9%, slightly above our estimate. Federal Realty reported funds from operations of $1.71 per share, which matched our estimate for the quarter and was 3.5% higher than the $1.65 reported in the third quarter of 2023.

The REIT sector in the US offers many companies that should see relatively stable cashflow growth over the next several years. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years with many reaching historical levels of net operating income growth, the REIT sector underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that is due to the sector’s negative correlation with interest rates, as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. Still, we still view many of companies in the US REIT sector as being undervalued as the companies should continue to produce solid long-term growth.

Despite a rally over the past two months, we still view the US REIT sector as being undervalued. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors led combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years, with many reaching historical levels of net operating income growth, the REIT sector has underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that the cause has been due to the sector's negative correlation with interest rates as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. We believe that US REITs will continue to see share price movements that are inverse of interest rate movements.

Second-quarter results for Federal Realty were slightly better than our expectations, giving us confidence in our $142 fair value estimate for the no-moat company. Same-store occupancy sequentially increased 100 basis points to 95.3%, well above our 93.9% estimate, with leasing at both small-tenant stores and anchor spaces up significantly in the quarter. Re-leasing spreads were 10.3% for the second quarter, in line with our estimate of new rent being 9.7% higher than prior rental terms. Same-store revenue grew 3.1% while same-store operating expenses were up 5.0%, leading to same-store net operating income, or NOI, growth of 2.3% that was below our 2.9% estimate. However, excluding payments of prior rent and lease termination income, which are nonrecurring in nature, the same-store NOI growth would have been 2.9%, in line with our estimates. Federal Realty reported second-quarter funds from operations of $1.69 per share, a penny better than our $1.68 estimate and two cents better than the $1.67 figure the company reported in the second quarter of 2023.

Federal Realty is a retail-based real estate investment trust that focuses on owning and operating high-quality shopping centers and mixed-use assets in eight of the largest metropolitan areas. It has strategically acquired and developed assets in submarkets with strong demand drivers, creating a portfolio with average location population density and median household income higher than any other retail REIT. As a result, Federal Realty has been able to drive strong same-store net operating income growth and average double-digit re-leasing spreads over the past two decades. Its portfolio should continue to attract shoppers and tenants and produce solid internal growth even in a challenging retail environment.

The US REIT sector remains significantly undervalued, in our perspective. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past two years, with many REITs reaching historical levels of net operating income growth, the sector has underperformed the broader equity markets over the past two years. We believe that the cause has been the sector’s negative correlation with interest rates as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, we don’t believe that higher rates significantly change our fair value estimates for the sector. Additionally, interest rates are down from the October 2023 highs, and REIT share prices have generally inversely followed the movements of the US 10-year Treasury.