Federal Realty Investment Trust's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Call Start: 11:03

Call End: 12:04

Federal Realty Investment Trust (FRT)

Q4 2011 Earnings Call

February 16, 2012 11:00 am ET


Kristina Lennox - IR

Don Wood – President & CEO

Dawn Becker – COO

Andy Blocher – CFO

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

Chris Weilminster – SVP, Leasing


Geoffrey Donnelly - Wells Fargo

Paul Morgan - Morgan Stanley

Alex Goldfarb - Sandler O'Neill

Jeff Spector - Bank of America

Christy McElroy - UBS

Michael Mueller - J.P. Morgan

Vincent Chao - Deutsche Bank

Wes Golladay - RBC Capital Markets

Michael Bilerman - Citigroup



Good day, ladies and gentlemen, and welcome to the Fourth Quarter and Year End 2011 Federal Realty Investment Trust Earnings Conference Call. My name is Cathy and I’ll be your operator for today. At this time, all participants are in a listen-only. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today’s call to Ms. Kristina Lennox. Please proceed.

Kristina Lennox

Thank you. Good morning. I’d like to thank everyone for joining us today for Federal Realty’s fourth quarter year-end 2011 earnings conference call. Joining me on the call 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.

In addition to our fourth quarter and year-end 2011 supplemental disclosure package, we also filed our 10-K yesterday. Both documents provide you with a significant amount of valuable information with respect to the Trust’s 2011 operating and financial performance and both are currently available on our website.

Certain matters discussed in 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 it’s 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 operation.

Before I turn the call over to Don Wood, I would like to announce that on May 16th and 17th 2012 we will be sponsoring an Analyst and Investor Day in San Jose. If you like additional information please contact me directly.

And now, Don will begin our discussion of our fourth quarter and year end 2011 results. Don?

Don Wood

Thanks Kristina. Good morning everybody. About midway through 2011 I began to feel decisively more upbeat about our business and I tried to convey that optimism in my second quarter comments call remarks and then again in the third quarter remarks. Now, February 2012 the books are closed for the year and I think the improving sentiment is reflected for all to see in our 2011 results.

Federal Realty had a very strong year and the momentum has carried over into January of 2012 with the signing of some key leases and a continuation of low bad debt type cost. Reported FFO per share for the year was $4 which includes some very significant acquisition expenses tied to the Montrose Crossing and Plaza El Segundo. It still grew 3.1% in 2011 and set an all-time record for Federal as did revenues at $553 million and EBITDA of $354 million. That’s an all-time record better than the heydays of 2006 and 2007 and every other year in our 50-year long history before and since.

If you look at our earnings growth without those acquisitions costs, which are closed in late December by the way so there is no offsetting benefit in 2011 for the properties operations, you would see FFO per share growth of 4.4% and again that’s over an all-time high last year.

In the fourth quarter, the reported number of $0.97 includes $0.04 of those Montrose Crossing acquisition expenses and therefore appears to be flat with the $1.10 reported in last year’s fourth quarter. But remember that we had just settled our dispute with Vornado on the Pentagon Row land last year and that settlement benefitted fourth quarter 2010 by $0.03 or $0.04 too. I go through all of this only to show that the improved operating trends that we saw in the middle of 2011 carried through to the end of the year and in fact in 2012.

Same center of growth for the full year was solid, just under 2% both including and excluding profit under redevelopment, it was even better for the fourth quarter, 2.7% excluding redevelopment 3.5% when including those profits. Those results were of course the result of our strong leasing results earlier in the year and last in the executed deals in the fourth quarter and they bode well for a strong 2012 too. I will talk about those deals for a minute.

In the quarter 82 deals done; 74 of them for our existing comparable space at average first year new rents of $32.81 a foot compared with $29.80 a foot for the last year the previous lease, 10% increase. Two thirds of those deals were renewals and a 9% increase and one third were new tenants at a 12% increase. We saw that relative leasing strength in all three of our major geographic regions. We saw it in the North East, the Mid Atlantic and California, and we saw it among both shopping centers and mixed use properties.

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