Put Federal Realty in Your Shopping Cart

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Federal's latest quarter results include earnings per share of $1.12, which included $2.1 million (3 cents a share) of severance charges. Excluding the charges, funds from operations per share of $1.15 was in line with estimates of $1.11 included 4 cents a share of severance charges.

The Street's consensus, which had also embedded severance charges, stood at $1.11.

Federal increased the lower end of its 2012 FFO per share guidance range to $4.29 to $4.31 from of $4.27 to $4.31.

Guidance assumes lease spreads in the range of 10% to 15%, and 5% same-store net operating income.

Federal also reported increased occupancy as same-store NOI growth remained solid.

The company's overall portfolio was 95.1% leased at quarter-end, up 90 basis points from 94.2% leased at the end of the second quarter.

Excluding a one-time lease termination fee of $6 million, same-store net operating income on a GAAP basis was up 3.5% (excluding redevelopment and expansion properties), while same-store NOI was up 4.0% including redevelopment and expansion properties.

Federal's primary advantage continues to be its well-located real estate that is driving double-digit spreads. The company signed 109 leases for 532,000 square feet of retail space during the quarter. Of the 504,000 square feet that are comparable (spaces for which there was a former tenant), the company recorded an average cash rent increase of 11%.

Federal continues to deliver the highest leasing spreads among its shopping center peers.

As further proof of Federal's "gold standard", the company in July completed a $250 million offering (upsized from $150 million due to strong demand) of 3.0% senior unsecured notes due Aug. 1, 2022.

This coupon is the lowest coupon ever for a 10-year unsecured note in the REIT sector.

Proceeds were used to repay borrowings under the revolving credit facility and for general corporate purposes, including the funding of acquisitions or redevelopment activity.

Put Federal Realty in Your Shopping Cart

As the legendary Ben Graham wrote (in "The Intelligent Investor"), "One of the most persuasive tests of high-quality is an uninterrupted record of dividend payments going back over many years. We think that a record of continuous dividend payments for the last 20 years or more is an important plus factor in the company's quality rating".

As Graham believed, "the defensive investor must confine himself to the shares of important companies with a long record of profitable operations and in strong financial condition."

Most clearly, Federal Realty is a "gold standard" REIT that is defined by the consistency in the high-quality shopping centers that creates the consistency in rent checks. As Graham wrote, "consistency and durability are attributes for competitive advantage."

Federal has a remarkable record based on more than four decades of consistency (44 years with paying increased dividends) and the stalwart REIT is further distinguished at least as much for its ability to control risk as for generating reliable returns.