Federal Realty Investment Trust FRT is making diligent efforts to sell its non-core assets and redeploy the proceeds toward strategic growth schemes. Recently, the company announced that it has sold 150 Post Street — an office and retail property spanning 105,000 square feet of space — for $69.3 million.
Federal Realty took advantage of the competitive investment sales market in the San Francisco area and shed its investment in the seven-story property. The company is actively looking for further opportunities to shed its non-core assets and has already made disposals totaling $123 million, year to date.
Federal Realty has been selling its non-strategic assets to fund acquisitions in premium markets, which, in turn, generates income growth and creates long-term value. This will enable company achieve balanced growth without straining its capital resources and balance sheet.
In sync with such efforts, recently, Federal Realty announced the closing of a new joint venture with Los Angeles-based owner and developer of premier retail properties — Primestor Development Inc. The company has around 90% stake in the venture.
Notably, this venture is seeded with a full interest in five dominant community shopping centers, in addition to one center under redevelopment and a 25% minority stake in a seventh shopping center. Together, these seven properties comprise more than 1.3 million square feet of space on 114 acres of urban land. Federal Realty’s investment in the venture is around $345 million, which includes a $20-million commitment to finish redevelopment of one of the centers.
However, similar to other retail REITs, Federal Realty has been facing stiff competition from online retailing platforms. With online purchases taking precedence, mall traffic continues to be affected, leading to an increasing number of retailers joining the dot-com bandwagon.. This has compelled the existing retailers to reconsider their footprint and eventually opt for store closures.
These challenges in the retail real estate market are expected to have an adverse impact on the company’s shares which have underperformed its industry, year to date. During this period, shares of the company have lost 10.7% of its value, while the industry suffered a decline of 5.8%.
Federal Realty currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the REIT space include American Asset Trust AAT, Getty Realty Corporation GTY and Communications Sales & Leasing, Inc. UNIT. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Asset’s funds from operation (FFO) per share estimates for 2017 inched up 1% to $2 over the past 60 days.
In the last 60 days, Getty Realty’s 2017 FFO per share estimates moved up 7.8% to $1.94.
Communications Sales & Leasing’s FFO per share estimates for full-year 2017 climbed 14.4% to $2.54 in a month’s time.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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Federal Realty Investment Trust (FRT) : Free Stock Analysis Report
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