Analyst Note| Kevin Brown |
Second-quarter results for Federal Realty were well ahead of our expectations. However, we don't plan any material changes to our $122 fair value estimate for the no-moat company given the company's updated 2022 guidance. Same-store occupancy increased 80 basis points sequentially to 92.5% in the second quarter, better than our estimate of occupancy falling to 91.5%. Re-leasing spreads continue to be strong despite the pandemic, seeing rents on leases signed during the quarter increase 7.5% with leases to new tenants up 10.2% over the prior rent. Second-quarter rent collection improved to 94% compared with 90% in the first quarter and improved to 98% compared with 96% if rent abatement and rent deferral agreements are included. Improving rent collection drove same-store net operating income growth of 39.4% in the quarter, ahead of our 28.1% estimate in the second quarter. As a result, funds from operations came in at $1.41 for the quarter, above of our estimate of $1.25 in the quarter and well above the $0.77 figure reported in the second quarter of 2020 but still below the $1.60 level reported in the second quarter of 2019.