Federal Realty Investment Trust (FRT) Q2 2012 Earnings Call August 2, 2012 11:00 AM ET Executives Kristina Lennox – IR Coordinator Andy Blocher – SVP and CFO Dawn Becker – EVP and COO Don Wood – President and CEO Jeff Berkes – VP, Leasing West Coast Jim Taylor Analysts Jeffrey Donnelly – Wells Fargo Craig Schmidt – Bank of America Paul Morgan – Morgan Stanley Alex Goldfarb – Sandler O’Neill Joe Dazzio – JP Morgan Tayo Okusanya – Jefferies Quentin Velleley – Citi Rich Moore – RBC Capital Michael Bilerman – Citi Nathan Isbee – Stifel Nicolaus Presentation Operator
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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 conditions and results of operation.Now I’d like to turn the call over to Andy Blocher, who will begin our discussion of second quarter 2012 results. Andy? Andy Blocher Thanks, Kristina and Good morning, everybody. $1.04 of FFO per share in the second quarter matches our record first quarter 2012 result and again was driven by continued strong internal growth which include a higher portfolio occupancy and a continuation of low level of bad debt. Let me provide some of the details of the quarter then we can discuss the capital market activities before going through the assumptions behind our increased guidance and the dividend increase. Property operating income increase $8.5 million versus second quarter 2011, $5.1 million came for 2011 acquisition the Plaza El Segundo and Montrose Crossing. On a same-center this property operating income increase 3.5% including redevelopment and 2.7% excluding redevelopment. Increases in the same center portfolio were driven by improvements in minimum rents through year-over-year occupancy gains and redevelopments coming online such as 300 Santana Row and Levare the latest residential building at Santana Row. Increases in other property income were driven by lease termination fees. You may recall that we’ve been guiding to increase other property income in 2012 and establishing guidance in November. One, just want to go through our improved 2012 guidance. We continue to see low absolute levels of bad debt. The second quarter bad debt increased on a comparable basis based on the very tough second quarter 2011 comp. So roughly $5 million increase in interest expense for the second quarter ‘11 largely comes from mortgage loans associated with the acquisitions of Plaza El Segundo and Montrose Crossing we did last year.
In total funds from operations increase 3.9% to $66.8 million and 2% on a per share basis to $1.04 results in the second quarter. On a year-to-date basis FFO was up 6.3% and 3.5% on a per share basis. Very strong operating performance reflecting the strength of our market and the relative strength of our properties within those markets.Moving on to the balance sheet for a moment. In mid July we retired $175 million of 6% notes utilizing proceeds from our $250 million 10-year unsecured notes issuance. The 3% coupon on our notes represents the lowest coupon ever executed by any REIT in the REIT market for a 10-year term. Demand for the issue was significant, which allowed us to increase the targeted size from $150 million to $250 million and tightened pricing significantly throughout the execution process. I couldn’t happier to have this deal be my last step on markets transaction for the Trust as I believe it represents the combination of all the significant positive changes we’ve made at Federal Realty over the nearly 12 years I’ve been. We also issued another $16 million of common equity through the ATM at an average price of over $101 per share, and we remain in a great balance sheet position with $80 million of cash on the balance sheet, over $400 million of capacity on the credit facility, no significant debt maturities until late 2013 and demonstrated access to both debt and equity capital at historically attractive prices. Read the rest of this transcript for free on seekingalpha.com