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Federal Realty Generates High FFO in Q3


At a $1.58 a share in the third quarter, Federal Realty Investment Trust generated more funds from operations in a 90-day period than ever before in its 56-year history. According to Don Wood, president and CEO of the firm, “on an absolute basis, this was simply the best quarter we’ve ever had.”

He explained on the company’s Q3 call that more than 5% ahead of last year’s quarter, and in excess of both the streets and the company’s internal expectations contributions came from all parts of the company’s business and on both coasts. “Overall rental income grew 5.5% quarter-over-quarter. Earnings growth at comparable properties was particularly strong at 3.5%.”

The comparable portfolio remains 95% leased and 94% occupied and operating expenses including G&A, but not including real estate taxes, actually fell slightly quarter-over-quarter despite 12 million more in revenue, real estate taxes it seems never goes down, he said. “The only metric that was underwhelming for us on the surface was comparable retail lease rollover growth at 6%, 90-day comp, 90 comparable deals were 448,000 square feet and an average rent of 38.31 per foot, 6% above the 36.22 that the previous tenant was paying in the last year of the lease. Not bad, but it’s not what you’re used to seeing.”

Taking a deeper look, he says, and breaking down the overall results space leased to new tenants grew at 13% with the previous tenant, while renewals of existing tenants grew at only 2%. That’s the combined 6% rollover. “The detail supporting this 2% renewal rollover rates revealed that more than half of the renewal rent came from just two deals, both of whom renewed flat for the last year their previously lease and therefore depressed the reported percentage increase. A strong credit anchor at East Bay Bridge in Emeryville, California and the Best Buy building at Santana Row.”