Federal Realty Earnings: Occupancy in Both Small-Shop and Anchor Stores Up Significantly

Second-quarter results for Federal Realty were slightly better than our expectations, giving us confidence in our $142 fair value estimate for the no-moat company. Same-store occupancy sequentially increased 100 basis points to 95.3%, well above our 93.9% estimate, with leasing at both small-tenant stores and anchor spaces up significantly in the quarter. Re-leasing spreads were 10.3% for the second quarter, in line with our estimate of new rent being 9.7% higher than prior rental terms. Same-store revenue grew 3.1% while same-store operating expenses were up 5.0%, leading to same-store net operating income, or NOI, growth of 2.3% that was below our 2.9% estimate. However, excluding payments of prior rent and lease termination income, which are nonrecurring in nature, the same-store NOI growth would have been 2.9%, in line with our estimates. Federal Realty reported second-quarter funds from operations of $1.69 per share, a penny better than our $1.68 estimate and two cents better than the $1.67 figure the company reported in the second quarter of 2023.