Federal Realty Investment Trust(US:FRT)2023-02-07 16:00Real Estate Portfolio - As of December 31, 2022, the company owned or had a majority interest in 103 predominantly retail real estate projects comprising approximately 25.8 million square feet, with a leasing rate of 94.5% and occupancy rate of 92.8%[24]. - As of December 31, 2022, the occupancy rate for anchor tenant space is 95.6%, with 96.9% leased[51]. - The company currently owns 100% of the OP Units issued by the Partnership and is its sole Limited Partner[105]. - The company’s business plan focuses on high-quality retail properties, primarily through redevelopments and acquisitions[108]. - The company’s growth strategy relies on the development and acquisition of properties, but it must distribute at least 90% of taxable income to maintain REIT status, limiting cash available for growth[82]. - The company has a workforce of 314 full-time employees and 8 part-time employees, with no employees represented by a collective bargaining unit[32]. - The company is focused on acquiring quality retail and mixed-use properties in densely populated areas with high barriers to entry for further development[31]. - The company has maintained a prudent level of overall leverage and manages exposure to variable-rate debt to support its financial strategies[31]. - The company has included necessary investments for compliance with energy and emissions regulations in its capital improvement planning, which have not materially affected financial results to date[44]. - The company is subject to financial covenants that could restrict operational flexibility and lead to defaults if not complied with[78]. Financial Performance - Total property revenue increased by $123.2 million, or 12.9%, to $1.1 billion in 2022 compared to $951.2 million in 2021[198]. - Rental income rose by $124.5 million, or 13.1%, to $1.1 billion in 2022, primarily driven by the recovery from COVID-19 impacts[203]. - Property operating income increased by $83.0 million, or 13.1%, to $717.6 million in 2022, attributed to higher occupancy and rental rates[210]. - Operating income increased by $131.7 million, or 33.4%, to $526.4 million in 2022 compared to $394.7 million in 2021, driven by the gain on deconsolidation of a VIE and recovery from COVID-19 impacts[216]. - Interest expense increased by $9.3 million, or 7.3%, to $137.0 million in 2022, with gross interest costs at $155.7 million[219]. - The company reported a $90.0 million gain on sale of real estate for the year ended December 31, 2021, from the sale of two properties and portions of three properties[215]. Dividends and Shareholder Returns - The company has paid quarterly dividends continuously since its founding in 1962 and has increased dividends per common share for 55 consecutive years[24]. - Total annual dividends paid per common share for 2022 were $4.29, an increase from $4.25 in 2021, marking a continuous dividend increase for 55 consecutive years[148]. - The ordinary dividend for 2022 was $3.518 per share, up from $3.358 in 2021, while capital gain dividends increased to $0.772 from $0.680[149]. - The company must generally make annual distributions to shareholders of at least 90% of its taxable income to maintain REIT status[100]. - Failure to qualify as a REIT would result in the company being taxed as a corporation, significantly reducing funds available for distributions[89]. Market and Economic Conditions - The company continues to monitor general economic conditions, including inflation and rising interest rates, which may impact business operations and growth strategies[40]. - Economic downturns or adverse conditions in the 12 states and the District of Columbia where the company operates could negatively affect financial performance[53]. - The shift from brick-and-mortar retail to online shopping may adversely impact cash flow and financial condition, despite a strategy to maintain a diverse portfolio[52]. - The company faces competition from numerous commercial developers and real estate companies, which may limit its ability to attract tenants and acquire new properties[65]. - Rising interest rates could increase interest expenses on approximately $655.1 million of variable rate debt, adversely affecting cash flow and the ability to service debt[83]. Risk Management - The company actively manages properties to maximize rents and maintain occupancy levels, focusing on attracting and retaining a diverse tenant base[27]. - The company has implemented various measures to mitigate risks from cyber attacks, although no guarantee of success can be provided[110]. - The company believes its properties are adequately insured against various risks, including fire, flood, and business interruption[112]. - The company may experience delays and unexpected costs in enforcing lease terms if tenants default, adversely affecting financial results[50]. - The presence of hazardous materials on properties could reduce their value and profitability, impacting financial condition[86]. - Natural disasters and climate change could disrupt operations and increase costs, impacting cash flow and tenant demand[71]. Property Management and Leasing - The company completed 2.0 million square feet of comparable space leasing in 2022, with a leased rate of 94.5% compared to an occupied rate of 92.8%[189]. - The company expects to execute comparable space leases for 1.4 to 2.0 million square feet of retail space in 2023, in line with historical averages[122]. - The company had approximately 3,300 commercial leases and 3,000 residential leases, with no single tenant accounting for more than 2.8% of annualized base rent[113]. - The company continues to focus on expanding its portfolio with strategic acquisitions and developments in key markets[130]. - The company may face challenges in renewing leases or re-leasing space, which could lead to reduced net income[55]. Sustainability and Compliance - The company has 19 LEED certified buildings and is focused on sustainable development practices, including energy efficiency and waste minimization[162]. - The company has installed on-site solar systems at 25 properties with a total capacity of 14 MW and over 300 electric vehicle charging stations[163]. - Changes in government legislation on climate change could lead to increased capital expenditures for energy efficiency improvements[86]. - Increased focus on ESG factors may impose additional costs and expose the company to reputational risks if it fails to meet investor expectations[73].