Federal Realty Investment Trust(FRT) - 2024 Q4 - Annual Results

Fourth Quarter 2024 Earnings Press Release Financial and Operating Highlights Federal Realty reported a record-breaking year in 2024, with unprecedented leasing momentum driving all-time highs in leasing volume, revenue, and earnings. Key achievements include a 3.4% growth in comparable property operating income for the full year, a significant increase in portfolio occupancy to its highest level in nearly a decade, and the introduction of strong 2025 FFO guidance of $7.10 to $7.22 per share - 2024 was a record-breaking year with the highest annual comparable leasing volume on record, signing 452 leases for 2.4 million square feet at an 11% cash basis rollover[7][8] 2024 Key Performance Indicators | Metric | Full Year 2024 | Q4 2024 | | :--- | :--- | :--- | | FFO per Diluted Share | $6.77 (+3.4% YoY) | $1.73 (+5.5% YoY) | | Comparable POI Growth (1) | 3.4% | 4.2% | | Portfolio Occupied % | 94.1% (+190 bps YoY) | 94.1% | | Portfolio Leased % | 96.2% (+200 bps YoY) | 96.2% | | Small Shop Leased % | 93.6% (+290 bps YoY) | 93.6% | (1) Excluding lease termination fees and prior period rents collected - The company introduced 2025 FFO per diluted share guidance of $7.10 to $7.22 and earnings per diluted share guidance of $3.00 to $3.12[13][23] Financial Results (Net Income & FFO) For the full year 2024, net income available to common shareholders increased to $287.2 million ($3.42/share) from $229.0 million ($2.80/share) in 2023. Funds from Operations (FFO) also grew, reaching $570.2 million ($6.77/share) for the year, up from $537.3 million ($6.55/share) in the prior year Net Income Available for Common Shareholders | Period | Net Income (millions) | EPS (diluted) | | :--- | :--- | :--- | | Full Year 2024 | $287.2 | $3.42 | | Full Year 2023 | $229.0 | $2.80 | | Q4 2024 | $63.5 | $0.75 | | Q4 2023 | $62.1 | $0.76 | Funds From Operations (FFO) | Period | FFO (millions) | FFO per Share (diluted) | | :--- | :--- | :--- | | Full Year 2024 | $570.2 | $6.77 | | Full Year 2023 | $537.3 | $6.55 | | Q4 2024 | $147.6 | $1.73 | | Q4 2023 | $134.9 | $1.64 | Operational Update (Occupancy & Leasing) As of December 31, 2024, the portfolio's occupancy rose to 94.1%, a 190 basis point year-over-year increase, while the leased rate hit 96.2%. The company executed a record 2.4 million square feet of comparable retail leasing for the full year at an 11% cash basis rollover growth - The portfolio was 94.1% occupied and 96.2% leased as of year-end 2024, representing year-over-year increases of 190 and 200 basis points, respectively. Small shop leased rate saw a significant increase of 290 basis points to 93.6%[13] 2024 Leasing Activity (Comparable Spaces) | Period | Leases Signed | Square Feet | Cash Rollover Growth | Straight-Line Rollover Growth | | :--- | :--- | :--- | :--- | :--- | | Full Year 2024 | 452 | 2,391,575 | 11% | 22% | | Q4 2024 | 100 | 649,372 | 10% | 21% | Strategic Activities (Redevelopment, Acquisitions, Dividends) The company announced two new redevelopment projects in Hoboken, NJ, and Philadelphia, PA, with projected costs of $45-$48 million and $32 million, respectively. It is also under contract to acquire a Northern California shopping center for $124 million. The Board declared a quarterly cash dividend of $1.10 per common share - Announced a residential redevelopment in Hoboken, NJ, with a projected cost of $45-$48 million and ROI of 6%-7%[17] - Announced the redevelopment of Andorra Shopping Center in Philadelphia, PA, with a projected cost of $32 million and an incremental ROI of 7%-8%[18] - The company is under contract to purchase a 673,000 sq ft shopping center in Northern California for $124 million, expected to close in late February 2025[19] - The Board of Trustees declared a regular quarterly cash dividend of $1.10 per common share, marking the 57th consecutive year of increased dividends[20][26] 2025 Initial Guidance Federal Realty has issued its initial guidance for 2025, projecting FFO per diluted share between $7.10 and $7.22, and earnings per diluted share from $3.00 to $3.12. This outlook is based on assumptions including 3-4% comparable properties growth and $175-$225 million in development/redevelopment capital spending 2025 Full Year Guidance | Metric | Guidance Range | | :--- | :--- | | Earnings per diluted share | $3.00 - $3.12 | | FFO per diluted share | $7.10 - $7.22 | Key 2025 Guidance Assumptions | Assumption | Value | | :--- | :--- | | Comparable properties growth | 3% - 4% | | Acquisitions | $124 million | | Development/redevelopment capital | $175 - $225 million | | General and administrative expenses | $45 - $48 million | Financial Highlights Consolidated Income Statements For the year ended December 31, 2024, total revenues increased to $1.20 billion from $1.13 billion in 2023. Operating income grew to $472.4 million, up from $406.5 million in the prior year, while net income rose to $304.3 million from $247.2 million Annual Income Statement Highlights (in thousands) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenue | $1,202,452 | $1,132,154 | | Operating Income | $472,356 | $406,470 | | Net Income | $304,334 | $247,217 | | Net Income Available for Common Shareholders | $287,176 | $228,953 | Consolidated Balance Sheets As of December 31, 2024, Federal Realty's total assets stood at $8.52 billion, a slight increase from $8.44 billion at year-end 2023. Total liabilities decreased to $5.10 billion from $5.21 billion, contributing to an increase in total shareholders' equity to $3.24 billion Balance Sheet Summary (in thousands) | Account | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $8,524,757 | $8,436,512 | | Total Liabilities | $5,100,327 | $5,210,990 | | Total Shareholders' Equity | $3,244,144 | $3,042,159 | Funds From Operations / Other Supplemental Information For the full year 2024, Funds from Operations (FFO) available to common shareholders was $570.2 million, or $6.77 per diluted share, compared to $537.3 million, or $6.55 per diluted share in 2023. Total capital expenditures for 2024 amounted to $252.4 million, down from $288.4 million in the previous year FFO Reconciliation Summary - Full Year (in thousands) | Line Item | 2024 | 2023 | | :--- | :--- | :--- | | Net income | $304,334 | $247,217 | | Depreciation and amortization of real estate | $302,455 | $285,689 | | FFO available for common shareholders | $570,239 | $537,313 | | FFO per diluted share | $6.77 | $6.55 | Capital Expenditures Summary - Full Year (in thousands) | Category | 2024 | 2023 | | :--- | :--- | :--- | | Non-maintenance capital expenditures | $227,893 | $266,039 | | Maintenance capital expenditures | $24,552 | $22,358 | | Total capital expenditures | $252,445 | $288,397 | Components of Rental Income Total rental income for the year 2024 was $1.17 billion, up from $1.10 billion in 2023. The primary components were commercial minimum rents ($789.9 million), residential minimum rents ($108.3 million), and cost reimbursements ($230.1 million) Components of Rental Income - Full Year (in thousands) | Component | 2024 | 2023 | | :--- | :--- | :--- | | Minimum rents - Commercial | $789,947 | $742,977 | | Minimum rents - Residential | $108,318 | $102,740 | | Cost reimbursements | $230,069 | $211,693 | | Total rental income | $1,170,078 | $1,101,439 | Comparable Property Information For the full year 2024, comparable property operating income (POI) grew by 2.8% to $766.8 million. Excluding lease termination fees and prior period rents, this growth was 3.4%. For Q4 2024, the growth was even stronger at 4.2% on the same adjusted basis. Leased percentage for comparable properties increased to 96.1% from 94.4% year-over-year Comparable Property POI Growth | Period | Growth (incl. fees) | Growth (excl. fees & prior rents) | | :--- | :--- | :--- | | Full Year 2024 | 2.8% | 3.4% | | Q4 2024 | 3.8% | 4.2% | Comparable Property Occupancy Statistics | Metric | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Leased % | 96.1% | 94.4% | | Occupancy % | 93.8% | 92.3% | Market Data, Debt Metrics, and Covenants As of December 31, 2024, the company's total market capitalization was $14.17 billion, with a net debt to market cap ratio of 31%. The ratio of EBITDAre to fixed charges and preferred dividends was 3.7x for the year. All senior notes and debentures covenants were met with significant headroom - Total market capitalization stood at $14.17 billion, with total net debt of $4.35 billion[42] Key Ratios and Covenants (as of Dec 31, 2024) | Metric | Actual | Covenant Threshold | | :--- | :--- | :--- | | Total Debt to Total Assets | 39% | < 60% | | Secured Debt to Total Assets | 5% | < 40% | | Consolidated Income to Annual Debt Service | 3.8x | > 1.5x | | Unencumbered Assets to Unsecured Debt | 257% | > 150% | Summary of Debt Summary of Outstanding Debt As of December 31, 2024, total net debt was approximately $4.47 billion with a weighted average effective interest rate of 4.08%. The debt is composed of $514.4 million in mortgages, $601.4 million in notes payable, and $3.36 billion in senior notes. 87% of the total debt is fixed-rate Debt Composition (as of Dec 31, 2024) | Debt Type | Balance (net, in millions) | % of Total | | :--- | :--- | :--- | | Mortgages payable | $514.4 | 11.5% | | Notes payable | $601.4 | 13.4% | | Senior notes and debentures | $3,357.8 | 75.1% | | Total debt, net | $4,473.6 | 100% | - The debt portfolio is heavily weighted towards fixed-rate obligations, with 87% of total net debt being fixed-rate at a weighted average effective rate of 3.87%[45] Summary of Debt Maturities The company has significant debt maturities in 2026 ($1.06 billion, 23.5% of total) and 2027 ($893.3 million, 19.9% of total), assuming all extension options are exercised. The weighted average remaining term for all debt is approximately 6 years Upcoming Debt Maturities (in millions) | Year | Total Maturing | Percent of Total | | :--- | :--- | :--- | | 2025 | $48.1 | 1.1% | | 2026 | $1,055.6 | 23.5% | | 2027 | $893.3 | 19.9% | | 2028 | $352.5 | 7.8% | | 2029 | $945.4 | 21.0% | - The weighted average remaining term on the company's mortgages, notes, and senior notes is approximately 6 years[50] Summary of Redevelopment and Expansion Opportunities Active Redevelopment Projects The company is actively working on several major redevelopment projects, including the Santana West office development in San Jose, CA, and the Pike & Rose office building in North Bethesda, MD. These projects represent a significant capital investment with projected ROIs ranging from 5% to 8% Major Projects in Process | Property | Opportunity | Projected Cost (millions) | Projected ROI | | :--- | :--- | :--- | :--- | | Santana West | 369,000 sq ft office building | $325 - $335 | 5% - 6% | | Pike & Rose - 915 Meeting Street | 266,000 sq ft office building | $180 - $190 | 6% | | Huntington | 102,000 sq ft retail space | $80 - $85 | 8% | | Hoboken - 301 Washington Street | 45-unit residential building | $45 - $48 | 6% - 7% | | Andorra | Redevelopment for national grocer | $32 | 7% - 8% | - In addition to major projects, the company is pursuing ongoing improvements at 10 properties, with a total cost of $70 million and projected ROIs of 8%-13%[53][57] Future Redevelopment and Expansion Opportunities Future Pipeline Federal Realty has identified a pipeline of future redevelopment opportunities focused on property expansion, residential additions, and long-term mixed-use projects. Significant remaining entitlements exist at key properties like Assembly Row, Pike & Rose, and Santana Row, offering substantial long-term value creation potential - The company has identified numerous properties for potential expansion/conversion, residential additions, or long-term mixed-use redevelopment[58][59] - Key properties with significant remaining entitlements include: - Assembly Row: ~1.5 million sq ft of commercial space and 326 residential units - Pike & Rose: ~530,000 sq ft of commercial space and 741 residential units - Santana Row: ~321,000 sq ft of commercial space and 395 residential units[59][60] Significant Transactions Acquisitions, Dispositions, and Financing During 2024, the company acquired two properties, Virginia Gateway and Pinole Vista Crossing, for a total of $275 million. It disposed of its Third Street Promenade property for $103 million. Financing activities included issuing 2.77 million common shares and $485 million in 3.25% Exchangeable Senior Notes, while repaying $600 million of 3.95% Senior Notes 2024 Property Acquisitions | Property | GLA (sq ft) | Purchase Price (millions) | | :--- | :--- | :--- | | Virginia Gateway | 664,000 | $215.0 | | Pinole Vista Crossing | 216,000 | $60.0 | - Disposed of the Third Street Promenade property in Santa Monica, CA for $103.0 million[64] - Issued $485.0 million of 3.25% Exchangeable Senior Notes due 2029 and repaid $600.0 million of 3.95% Senior Notes[66][67] - Issued 2,769,579 common shares at a weighted average gross price of $110.92 during the year[65] Real Estate Status Report Portfolio Overview As of December 31, 2024, Federal Realty's total portfolio consists of 26.8 million square feet of commercial GLA and 3,104 residential units. The commercial portfolio is 96% leased and 94% occupied, with an average rent of $31.81 per square foot. The largest concentration is in the Washington Metropolitan Area, with 7.1 million square feet Grand Total Portfolio Statistics | Metric | Value | | :--- | :--- | | Commercial GLA | 26,832,000 sq ft | | % Leased | 96% | | % Occupied | 94% | | Average Rent PSF | $31.81 | | Residential Units | 3,104 | Portfolio by MSA (Top 3 by GLA) | MSA Description | GLA (in thousands) | % Leased | % Occupied | | :--- | :--- | :--- | :--- | | Washington Metropolitan Area | 7,102 | 97% | 96% | | California | 6,394 | 95% | 93% | | NY Metro/New Jersey | 3,279 | 97% | 96% | Retail Leasing Summary 2024 Leasing Activity Analysis For the full 12 months of 2024, the company signed 452 comparable retail leases covering 2.4 million square feet, achieving an 11% cash basis rent increase over prior rents. New leases saw a 15% cash basis increase, while renewal leases had an 8% increase. Tenant improvement costs were significantly higher for new leases ($58.91/PSF) compared to renewals ($3.25/PSF) Full Year 2024 Comparable Lease Summary | Lease Type | Leases Signed | GLA Signed | Cash Basis % Increase | TI & Incentives PSF | | :--- | :--- | :--- | :--- | :--- | | Total Comparable | 452 | 2,391,575 | 11% | $26.03 | | New Leases | 204 | 978,822 | 15% | $58.91 | | Renewal Leases | 248 | 1,412,753 | 8% | $3.25 | Lease Expirations Lease Expiration Schedule Assuming no exercise of lease options, 7% of the total portfolio square footage is set to expire in 2025, followed by 10% in 2026 and 12% in 2027. Over the next five years (2025-2029), a cumulative 54% of the total square footage will expire, presenting both risk and opportunity for rental rate adjustments Lease Expirations (Assuming No Options Exercised) | Year | Expiring SF (Total) | % of Total SF | Minimum Rent PSF | | :--- | :--- | :--- | :--- | | 2025 | 1,840,000 | 7% | $27.32 | | 2026 | 2,635,000 | 10% | $29.88 | | 2027 | 3,109,000 | 12% | $32.56 | | 2028 | 2,822,000 | 11% | $31.67 | | 2029 | 3,529,000 | 14% | $32.89 | Portfolio Leased Statistics Occupancy and Leasing Trends The overall commercial portfolio's leased percentage improved to 96.2% as of December 31, 2024, up from 94.2% a year prior. Occupancy also increased to 94.1% from 92.2%. Notably, the leased percentage for small shop tenants saw a significant jump from 90.7% to 93.6% year-over-year Commercial Portfolio Statistics Comparison | Metric | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Leased % | 96.2% | 94.2% | | Occupied % | 94.1% | 92.2% | | Leased % - anchor tenants | 97.5% | 96.0% | | Leased % - small shop tenants | 93.6% | 90.7% | Summary of Top 25 Tenants Tenant Concentration The company's tenant base is well-diversified, with the top 25 tenants accounting for 24.31% of the total annualized base rent. The top tenant, The TJX Companies, represents 2.62% of the total annualized base rent. Other top tenants include Ahold Delhaize, NetApp, Inc., and Cisco Systems, Inc - The top 25 tenants represent 24.31% of total annualized base rent and 29.18% of total GLA[90] Top 5 Tenants by Annualized Base Rent | Rank | Tenant Name | % of Total ABR | | :--- | :--- | :--- | | 1 | TJX Companies, The | 2.62% | | 2 | Ahold Delhaize | 1.90% | | 3 | NetApp, Inc. | 1.67% | | 4 | Cisco Systems, Inc. | 1.54% | | 5 | Gap, Inc., The | 1.24% | Reconciliation of FFO Guidance FFO Guidance Details The company provides a reconciliation for its 2025 guidance, bridging the estimated earnings per diluted share ($3.00 - $3.12) to the estimated FFO per diluted share ($7.10 - $7.22). The primary adjustment is for estimated depreciation and amortization, projected to be $4.10 per share 2025 FFO Guidance Reconciliation (per diluted share) | | Low | High | | :--- | :--- | :--- | | Estimated net income available to common shareholders | $3.00 | $3.12 | | Estimated depreciation and amortization | $4.10 | $4.10 | | Estimated FFO per diluted share | $7.10 | $7.22 | - Key assumptions for this guidance include 3-4% comparable properties growth and $124 million in acquisitions[94] Glossary of Terms Key Definitions This section provides definitions for key non-GAAP measures and terms used throughout the report. It includes detailed definitions and reconciliations for EBITDA for Real Estate (EBITDAre) and Funds From Operations (FFO), as well as explanations for terms like 'Comparable Properties' and 'Annualized Base Rent' - Defines Funds From Operations (FFO) as net income plus real estate depreciation and amortization, and gains/losses on property sales, noting it is a supplemental performance measure[97] - Defines EBITDA for Real Estate (EBITDAre) per NAREIT standards and provides a reconciliation from net income[97] - Defines 'Comparable Properties' as the consolidated portfolio excluding assets not owned for the full period or those under significant development, which could distort period-over-period comparisons[99]