Federal Realty Investment Trust (NYSE:FRT) Q4 2022 Earnings Call Transcript

Derek Johnston: Everyone, good afternoon. Yes, so you mentioned earlier and obviously it’s widely understood, with debt cost of capital elevated, what about tapping the equity markets as valuation here as the year recovers. I think there’s $200 million issuance at the midpoint. But really, guys, it seems to match development spend. So I guess how do you view greater equity activity as a financing tool given the state of capital markets and as values recover? Thanks.

Donald Wood: Yes, Derek, let me start, and Dan will add to this. Look, there’s a couple of principles involved here. So one is I never want to surprise our own so I never want a whole bunch of equity out there at any one time. I’d like to do it in conservative amounts as we go through a year. We opportunistically then obviously can turn that dial up or back based on where we believe value lies and what the uses are. The most important thing is what is the use for that money. And at the end of the day, to the extent we are very comfortable that we can use shareholder or debtholder proceeds to be able to create incremental value, that’s what we will do. That’s the driver always because we don’t have to, to the extent we don’t have those uses, and even the development pipeline that you know, it’s far lower than it was, only a couple of hundred million dollars left spend at this point.

So lots of flexibility. And that’s what I always want to maintain with respect to the balance sheet here is the ability to kind of take advantage opportunistically of what’s going on in the marketplace to create value. And I look at debt and equity similar to that.

Operator: And our next question is from Anthony Powell with Barclays. Please proceed with your question.

Anthony Powell: Hi, good afternoon. It’s a question on lease spreads. Good to see the acceleration in the fourth quarter. How are you balancing higher lease spreads versus maybe higher bumps? And are you seeing any tenant push back in that conversations or tenants just saying we need the space and like the space, so we’re going to accept the higher prices?

Dan Guglielmone : Yes. Look, there is — these are an amalgamation of a number of deals. In any particular quarter, you’ll see some deals that have higher rollover, you’ll see some that are more anchor related versus small shop related. There’s a giant mix. I don’t want you to look and say, I see a deceleration in leasing spreads in the fourth quarter. There’s no trend there. The trend you should expect to see is actually higher rollovers in 2023 based on what we see in the pipeline. And that’s simply an opportunistic notion of being able to understand what spaces are coming due, where the demand is for that space, and that’s what’s in the pipeline. And that’s opportunistic based on what’s happening there. But in every case, we’re pushing for very high contractual bumps associated with those leases.