Federal Realty Investment Trust(FRT) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - First quarter FFO per share was $1.17, up 3% sequentially from Q4 2020, which was $1.14, indicating better-than-expected performance due to fewer tenant failures and improved cash recoveries [5][12] - Collections improved to 90% for the quarter, with a decrease in COVID-19 collectability reserves to $14.8 million, down 20% sequentially from Q4 [12][13] - Leased occupancy stood at 91.8% at quarter-end, with occupied occupancy at 89.5%, both stronger than initial predictions [12][14] Business Line Data and Key Metrics Changes - Strong leasing activity included over 0.5 million square feet of comparable space leased, with 35% more deals than the previous year and 9% more GLA [5][6] - New deals included 54 leases for over 220,000 square feet at 18% higher rents than previous tenants, indicating robust demand across various sectors [6][9] - The company is focusing on lifestyle-oriented properties, which are recovering well, particularly in California [5][6] Market Data and Key Metrics Changes - California markets showed significant recovery, with a 69% increase in car traffic at Santana Row compared to January, nearing pre-COVID levels [7][9] - The Primestor portfolio in Southern California is among the top-performing shopping centers, with strong rent collection and operating income compared to pre-COVID levels [9] - Tenant demand and consumer traffic in California are among the highest in the portfolio, with expectations for record new retail leases in 2021 [6][7] Company Strategy and Development Direction - The company is increasing the number and scope of shopping center redevelopments, with a capital budget exceeding $75 million for 17 projects aimed at enhancing community-centric centers [8][10] - The company is committed to investing in existing markets while exploring new opportunities in high-demand areas like Phoenix and Dallas [22][23] - The focus remains on high-quality assets with leasing and redevelopment potential, ensuring long-term value creation [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for a strong recovery in 2022 and 2023, driven by pent-up consumer demand and government stimulus [5][12] - There is caution regarding the long-term viability of some retailers, particularly small businesses, which may require more sales growth to sustain operations [5][12] - The company expects occupancy levels to stabilize later in the year, with a projected trough of around 88% for occupied percentage [16][17] Other Important Information - The company ended Q1 with $1.8 billion in total available capital, including $780 million in cash and an undrawn $1 billion revolver [14] - Guidance for 2021 is set between $4.54 and $4.70 per share, with expectations for 2022 ranging from $5.05 to $5.25, indicating potential for double-digit FFO growth [15][17] Q&A Session Summary Question: Can you provide color on the guidance for the year? - Management indicated uncertainty remains, relying on tenant performance and occupancy levels to meet the lower end of the guidance range [20] Question: How do you view your acquisition strategy post-COVID? - The company remains committed to existing markets while considering new opportunities in suburban areas, focusing on high-quality assets [21][23] Question: Are tenants experiencing labor shortages? - While tenants are not expressing issues directly, management acknowledged that many businesses are struggling to find qualified labor [32][34] Question: What is the expected stabilized yield for residential developments? - Management expects to achieve stabilized yields, although timing may be delayed due to current market conditions [58][60] Question: What is the magnitude and cadence of accommodative tenant agreements? - Accommodative agreements are expected to burn off ratably over the next 12 to 18 months, primarily affecting restaurants [64]