On this page of StockholderLetter.com we present the 3/24/2023 shareholder letter from FEDERAL REALTY INVESTMENT TRUST — ticker symbol FRT. Reading current and past FRT letters to shareholders can bring important insights into the investment thesis.

 •  3/24/2023 Letter Continued (Full PDF)
 •  3/22/2024 FRT Stockholder Letter
 •  More "REITs" Category Stockholder Letters
 •  FRT Benford's Law Stock Score = 78

FRT 3/24/2023 Shareholder/Stockholder Letter Transcript:

FEDERAL REALTY INVESTMENT TRUST
2022 Annual Report
Form 10-K & Proxy Statement


Dear Fellow
Shareholders,
Resilient; (adjective), able to withstand or
recover quickly from difficult conditions.
No word in our vocabulary better describes
our company, our properties, and our people
better than resilient.
The pandemic was particularly hard on Federal
Realty. Because many of our properties are
located in high density coastal states
(Massachusetts, Maryland, California, New York,
New Jersey, etc.); mandated government
shutdowns were more restrictive and lasted
longer in our markets than in others. When those
restrictions were finally lifted, those consumers
(and retail tenants) responded enthusiastically
and led to a recovery from the pandemic in 2022
which was far stronger and faster than our most
aggressive expectations. We are inherently social
creatures, and if that reality was temporarily
forgotten in the dominant    bricks and mortar
retail is dead    dialogue of 2016-2020, the global
pandemic and its aftermath have surely put that
novel notion to bed.
Our high-quality properties are thriving and,
with a collection of the most relevant tenants of
today and qualities such as enhanced
landscaping, outdoor seating areas and creative
   placemaking    that bring consumers back time
and again, our properties are an integral part of
the day-to-day life of the local communities.
Retail destinations where sustainability and
operating efficiency considerations are built in
and not an afterthought. In short, the postpandemic consumer demands more from the
shopping centers serving their communities.
Federal Realty delivers on that demand.
Bethesda Row | Bethesda, MD
FEDERAL REALTY |
A N N U A L R E P O R T 2022

55 consecutive years
of increased dividends.
$4.32*
$0.12*
1967
2022
*Annualized dividends per share
Records Broken
As one of the oldest real estate investment
trusts (REITs) in the United States, Federal
Realty celebrated its 60th anniversary in 2022.
It   s fitting then that 2022 marked the first year
in that long history that total rental revenue
exceeded $1 billion and total real estate
holdings, at cost, exceeded $10 billion.
Decades of measured growth where the
acquisition and development of only the
highest quality real estate were pursued,
resulting in the widely acknowledged premier
open air shopping center portfolio in the
country. At $6.32 per diluted share1, our funds
from operations came within a penny of our
all-time record; a record that we expect to beat
in 2023.
We   re also proud to have long been referred to
as a Dividend Aristocrat, an honor bestowed
only on those companies that have increased
common dividends to shareholders for at
least 25 consecutive years. Today, the honor
is even greater as we are proud to be referred
to as a Dividend King, which requires a
50 year unbroken record of increased
dividends for which we are the lone REIT
1
included in that very short list. Except that
now we   ve increased our common dividends
per share every year for 55 years! There   s no
special title for that other than perhaps
   unicorn   . Our real estate is that good.
The Heart of the Business
With over 100 real estate properties spread
out over 12 states and the District of
Columbia, finding the right mix of retail,
restaurant, and office tenants for our
26 million square feet of commercial space is
the heart of our business. We strive to find
those tenants that have the best chance of
honoring their contracts (leases) through their
full term. We strive to assure that when a
tenant inevitably does fail, those contracts are
strong and give us the best chance at financial
recovery and, importantly, that there are new
tenants excited to replace them. Diversity of
that contractual rental stream is always a
paramount consideration. It   s why we insist
on diversity geographically, by type of
shopping center and by tenant base. No one
tenant accounts for more than 2.8% of our
rental stream, and that tenant is A-rated TJX.
Refer to page 48 of our Form 10-K for information on funds from operations per diluted share.
FEDERAL REALTY |
A N N U A L R E P O R T 2022

In addition to our commercial space, we also
own and operate over 3,000 high quality
residential apartments, all of which are an
integral component of our retail driven mixedused properties and larger shopping centers.
Incorporating apartments in our portfolio not
only creates material land value, but also adds
another element of revenue diversity to our
income stream, further differentiating the
Federal Realty offering.
In 2022, our team executed nearly 500 retail
space leases (not to mention 60 additional
office leases and hundreds more residential
leases) for over 2 million square feet of space
at rents that were 6% higher than what the
previous lease called for (to the extent there
was a previous lease). In only 2 of the
60 years in our long history were we able to
sign commitments for over 2 million square
feet   2021 and 2022. Our business is healthy
and our properties are in strong demand. Our
entire portfolio is now 94.5% leased; a strong
result that can still be improved upon.
Headwinds and Tailwinds
The Federal Reserve   s actions to raise interest
rates and tame inflation are expected to
impact most businesses, including ours, as we
enter 2023 and beyond. As economic activity
falls and higher interest rates affect
everything from car loans to mortgage
payments, to deal underwriting, we would not
be surprised to see a slowdown in consumer
spending which very well may cause retailer
reticence and a residual impact on deal
making. As of this writing, we haven   t seen
any such reticence but the concern is pretty
obvious. Our business remains more than
solid and if history is any indication (and we
believe it is), Federal Realty   s real estate will
outperform in times like these given the
superior demographics along with the very
strong diversification of our income stream.
To put a finer point on that, today   s troubled
tenants: Bed Bath & Beyond, Party City,
Tuesday Morning, Kirkland, (and even Regal
Cinemas of which we have no exposure),     all
of them combined comprise less than 1% of
our 2023 forecasted rental stream.
While higher interest rates will surely pressure
most companies    earnings, including ours, to
some extent in 2023 and future years, this
business plan doesn   t need money to be
virtually free to thrive. We   ve been around for
60 years and have raised our dividend to
shareholders every single year since 1967.
Neither interest rates in the high teens in the
late 70   s and early 80   s, nor the great financial
crisis of 2008-2009, nor even a global
pandemic in 2020-2021 interrupted our
commitment to shareholders as expressed
through a common share dividend raise. We
believe we owe that to you.
Refining the Portfolio
The continuous refinement of our portfolio
through buying, building and selling are
critical components to long term value
creation and one of the parts of our business
plan that we feel differentiates us. In 2022,
we were able to sell three properties in
Maryland with limited upside for $134 million,
at a 5% capitalization rate. Those properties,
one a legacy residential community from
Federal   s earliest days, the second a Federal
developed residential building on excess land
that we controlled, and the third one of our
earliest small retail developments, gave us the
opportunity to reinvest those and additional
proceeds accretively (in other words, at a
return in excess of 5%) into retail properties
that
have
significantly
better
growth
prospects. Acquisitions in 2022 included,
Kingstowne Towne Center in Kingstowne,
Virginia, The Shops at Pembroke Gardens in
Pembroke Pines, Florida, and a furthering of
our real estate footprint on desirable
Washington Street in Hoboken New Jersey. In
short, those dispositions and acquisitions
make Federal Realty   s portfolio even stronger
going into 2023 than it was a year ago.
The same can be said of our development
business which has focused on expanding the
footprint of our award-winning mixed-use
properties in San Jose California, Somerville
Massachusetts and North Bethesda, Maryland.
The    Big 3   , in addition to smaller projects in
Coconut
Grove,
Florida
and
Darien,
Connecticut, are critical to our brand and our
long term growth. You only need to look at
the $650 million plus of construction in
process on our year-end balance sheet to
identify a large source of future income.
FEDERAL REALTY |
A N N U A L R E P O R T 2022



 3/24/2023 Letter Continued (Full PDF)