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Federal Realty Is Facing The Pain, But Offers Attractive Value

Marel profile picture


  • Federal Realty collected ~53% of total April 2020 billed recurring rents, driven by low collections from retail tenants.
  • The company has the ability to make it without resorting to a dividend cut, defending its track record of 52 consecutive years of increased dividends.
  • This is in part due to its very strong balance sheet ($995M of cash), with Debt to Total Market Cap ~25% and Net Debt to EBITDA ~5.5x.
  • Federal Realty's properties are best-in-class, becoming more and more mixed-use neighborhoods.
  • Federal Realty is a blue-chip company on sale.

Federal Realty (NYSE:FRT) is a high-quality, blue-chip, retail-oriented REIT, with properties ranging from grocery-anchored shopping centers to large-scale mixed-use neighborhoods. In addition, 20% of ABR (annualized base rent) comes from office and residential (over 2,700 residential units). The breakdown is as follows:

Source: COVID-19 Business Update - May 6, 2020, slide 2

Unfortunately, the company is feeling the financial pain caused by the coronavirus, with shares down ~40% YTD:

ChartData by YCharts

As of May 1, the company collected ~53% of total April 2020 billed recurring rents, driven by low collections from retail tenants. Specifically, the company collected only 45% collections from retail tenants versus 87% from office tenants and 95% from residential tenants. The worst-performing segments in terms of rent collections are as follows:

  • Fitness (4% of ABR, 5% collections)
  • Experiential Tenants (2% of ABR, 13% collections)
  • Houseware & Furnishings (5% of ABR, 14% collections)
  • Full Price Apparel (8% of ABR, 16% collections)
  • Restaurants (15% of ABR, 27% collections)

This is no surprise due to nationwide lockdown measures. It is also no surprise that Grocery & Drug was the best performing category (9% of ABR, 100% collections). Other top performing categories include Banks/Financial Services (4% of ABR, 99% collections) and Communications & Home Office (4% of ABR, 90% collections).

It all boils down to sector-specific exposure within retail. Not all retail real estate is the same. There is a big difference between different categories, ranging from grocery-anchored centers to malls to experiential properties. In this respect, some companies are more lucky than others. For example:

  • Realty Income (O), which focuses on defensive sectors, collected 82.9% of contractual rent due for April
  • EPR Properties (EPR), an owner of experiential real estate (theaters, ski resorts, museums, marinas, etc.) collected only ~15% of April contractual base rent and mortgage payments
  • The

This article was written by

Marel profile picture
Value-oriented investor focusing on marketable securities, real estate as well as early-stage companies.

Analyst’s Disclosure: I am/we are long FRT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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