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Federal Realty Investment Trust (FRT) Presents at Citi's 2023 Global Property CEO Conference (Transcript)
FRTFederal Realty Investment Trust(FRT)2023-03-06 22:40

Summary of Federal Realty Investment Trust Conference Call Company Overview - Company: Federal Realty Investment Trust (NYSE:FRT) - Industry: Real Estate Investment Trust (REIT) - Founded: 1962, one of the oldest REITs in the U.S. - Focus Areas: Primarily operates in coastal markets including Boston, New York, New Jersey, Philadelphia, Washington D.C., Miami, and Southern California [6][8] Core Business Insights - Business Model: Primarily a retail real estate company with about one-third of its business in mixed-use real estate, which has grown organically [7][8] - Portfolio Value: Total capitalization of approximately 12billion,builtthroughselectiveacquisitionsratherthanlargeportfoliopurchases[8]−∗∗Long−termStrategy∗∗:Focusonbuildingaportfoliothatcangenerateconsistentcashflowthrougheconomiccycles[8]InvestmentThesis−∗∗Demographics∗∗:Strongdemographicsintargetmarkets,whicharecriticalformaintainingcashflowduringeconomicdownturns[10][12]−∗∗VisibleGrowth∗∗:Thecompanyhasamultifacetedbusinessplanthatincludesadevelopmentcomponent,contributingtovisiblegrowthin2023and2024[10][11]−∗∗EarningsMultiple∗∗:Currentlytradingatapremiumcomparedtotheindustry,butthispremiumisthetightestinadecade,indicatingrelativeaffordability[10][11]RentandLeaseDynamics−∗∗Mark−to−MarketAbility∗∗:Thecompanyissuccessfullysigningnewleasesatsignificantlyhigherratesthanexistingones,within−placerentsaround12 billion, built through selective acquisitions rather than large portfolio purchases [8] - **Long-term Strategy**: Focus on building a portfolio that can generate consistent cash flow through economic cycles [8] Investment Thesis - **Demographics**: Strong demographics in target markets, which are critical for maintaining cash flow during economic downturns [10][12] - **Visible Growth**: The company has a multifaceted business plan that includes a development component, contributing to visible growth in 2023 and 2024 [10][11] - **Earnings Multiple**: Currently trading at a premium compared to the industry, but this premium is the tightest in a decade, indicating relative affordability [10][11] Rent and Lease Dynamics - **Mark-to-Market Ability**: The company is successfully signing new leases at significantly higher rates than existing ones, with in-place rents around 29-30andnewleasesinthehigh30 and new leases in the high 30s to mid-$40s [16][18] - Inflation Impact: The company benefits from contractual rent bumps averaging 2.25% per year, which helps maintain property value over time [18][19] - Tenant Diversity: The largest tenant accounts for only 2.8% of revenue, with a highly diversified portfolio reducing exposure to single tenant failures [33][34] Economic Outlook - Consumer Sentiment: While there are concerns about economic weakness, the company believes that high-quality real estate will continue to attract tenants [24][27] - Bad Debt Expectations: Historically, bad debt averages around 1% of revenues; the company expects 2023 to fall within this range [32][35] - Tenant Health: Tenants are currently paying rent and performing well, which supports strong leasing activity [34] External Growth Strategies - Acquisitions and Development: The company is cautious about acquisitions in the current market but remains open to opportunities that align with long-term growth strategies [40][41] - Development Pipeline: The company has a million square feet of shovel-ready projects but is currently turning down development activity due to market uncertainties [49][50] Conclusion - Long-term Resilience: The company is positioned to outperform in a typical recession due to its diversified portfolio, strong tenant base, and strategic focus on high-quality real estate [51][52] - Market Positioning: Federal Realty Investment Trust emphasizes the importance of location, tenant quality, and a multifaceted business plan to navigate economic cycles effectively [28][50]