Federal Realty Investment Trust's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Federal Realty Investment Trust ( FRT)

Q3 2011 Earnings Call

November 4, 2011 11:00 AM ET

Executives

Katrina Lenox – Investor Relations

Don Wood – President, Chief Executive Officer

Dawn Becker – Chief Operating Officer

Andy Blocher – Chief Financial Officer

Jeff Berkes – EVP, Western Region and President, Federal Realty West Coast Inc.

Chris Weilminster – Senior Vice President, Leasing

Analysts

Craig Schmidt – Bank of America

Paul Morgan – Morgan Stanley

Jeffrey Donnelly – Wells Fargo

RJ Milligan – Raymond James

Nathan Isbee – Stifel Nicolaus

Alexander Goldfarb – Sandler O’Neill

Michael Mueller – J.P. Morgan

Quentin Velleley – Citi

Chris Lucas – Robert Baird

Jeff Spector – Bank of America

Cedrik Lachance – Green Street Advisors

Rich Moore – RBC Capital Markets

Presentation

Operator

Good morning. And welcome to the Third Quarter 2011 Federal Realty Investment Trust Earnings Conference Call. All participants will be with a listen-only until the question-and-answer session of the call. This conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to introduce the conference leader, Ms. [Katrina Lenox]. Ma’am, you may begin.

Katrina Lenox

Good morning. I’d like to thank everyone for joining us today for Federal Realty’s third quarter 2011 earnings conference call. Joining me on the call today are Don Wood, Dawn Becker, Andy Blocher, Jeff Berkes and Chris Weilminster. These and other members of our management team are available to take your questions at the conclusion of our prepared remarks.

Our third quarter 2011 supplemental disclosure package provides a significant amount of valuable information with respect to the Trust’s operating and financial performance. This document is currently available on our website.

Certain matters discussed on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any annualized or projected information, as well as statements referring to expected or anticipated events or results.

Although, Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty’s future operations and its actual performance may differ materially from the information contained in our forward-looking statements and we can give no assurance that these expectations will be attained.

Risks inherent in these assumptions include, but are not limited to, future economic conditions, including interest rates, real estate conditions and the risks and costs of construction.

The earnings release and supplemental reporting package that we issued yesterday, our Annual Report filed on Form 10-K and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and results of operations.

I’ll now turn the call over to Don Wood to begin the discussion of our third quarter results. Don?

Don Wood

Thanks, [Katrina], and good morning, everyone. At $1.01 of FFO per share reported during the second quarter compared with $0.95 last year, 6% growth, we’re very pleased with our operating performance thus far in 2011.

In fact, when you look at the nine months ended September 30th compared with that same period last year, you’ll note FFO per share of 3.02 this year compared with 2.87 last year, 5.2% growth. That comes without any occupancy gains.

In fact, comes with occupancy declined because of the Board is in blockbuster liquidation’s and it comes with a weighted average interest rate largely fixed portfolio wide of 5.9%.

That rate is above today’s long-term rates with a well added maturity schedule over the next decade providing strong cushion against rising rates when that eventually come someday but also some shorter term upside as we continue to find refinancing opportunities.

The other full growth that we’ve experienced this year is encouraging and suggests that we should hit or beat the $4 share mark for the full year in 2011 for the first time in our history.

Let me say a few things about the three other key operating metrics in the portfolio. Internal growth, lease rollovers, and occupancy. Not only was FFO per share strong, but so was our internal growth at 2.4% excluding development and 3.7% including it.

Continued and steady overall rent increases portfolio wide, supplemented by what we’ve seen as a continuing trend of favorable bad debt expenses year-over-year with the two biggest factors affecting the same-store growth. We particularly hope that the bad debt experience continues since to this point, we don’t see any overly worrisome signs and some debt ceiling debacle of 90 days ago.

Also benefiting the quarter’s internal growth, were 10 deliveries that property is formally underdevelopment at places like 300 Santana row, Hampden Lane in Bethesda, the village of Shirlington and Escondido Promenade.

Lease rollover growth on comparable spaces was solid at 8% on a cash basis, 18% straight line. In all, we signed 88 new or renewal leases for a total of 353,000 feet at an average first year cash rent of $31.62 compared with 29.24 for the last year of the expiring leases.

A couple of CVS drugstore renewals at Gaithersburg Square and Laurel shopping center in Suburban Maryland and a strong leasing quarter Bethesda Row and Third Street Promenade in Santa Monica underpinned the leasing for the quarter.

On a year-over-year basis, we once again report a decrease in occupancy given the 130,000 square foot of borders and blockbuster closings that were inevitable.

As I said in my remarks last quarter, the closing of all four borders locations in all of our remaining blockbuster video stores in the second and third quarters couldn’t help but bring down occupancy.

We came in at 93.3% leased, roughly the same as at the end of second quarter but down 60 basis points for the 92.9% leased that we reported in the comparable period last year virtually all due to those retailers.

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