Analyst Note| Kevin Brown |
Federal Realty outperformed our expectations of a retail recovery in the first quarter, giving us confidence in our $113 fair value estimate for the no-moat company. Same-store occupancy slipped 40 basis points sequentially to 91.7% in the first quarter, though that is a little better than our estimate of 91.5%. Meanwhile, FRT was able to push new rents up 8.7% over the expiring rate thanks to 18.1% re-leasing spreads on new leases, though even lease renewals saw positive spreads with 1.6% growth. First-quarter rent collection reached 90%, a slight improvement over the 89% level achieved in the fourth quarter of 2020, and increases to 96% of rent when including rent deferral and abatements agreements. While the uncollected rent led to a same-store revenue decline of 5.9% year over year, that is better than the double-digit declines seen over the prior three quarters and the resulting 12.5% same-store net operating income decline is also a significant improvement over prior periods. So while funds from operations fell 21.7% to $1.17 in the first quarter, that is an 18% improvement over the fourth quarter of 2020 figure and 9 cents better than our estimate.