Federal Realty (FRT) Expects Asset Repositioning Next Year

Federal Realty Investment Trust (NYSE:FRT) is expected to go through repositioning activity next year, as per REIT.com that published excerpts from an interview with the company’s president and CEO, Don Wood. This repositioning would take place within the company’s core portfolio.

According to Wood, consumers are “changing” and “for shopping centers to be relevant in 2020 and 2025” companies should “do more than just backfill space.”

Regarding Federal Realty’s mixed-use developments, Wood said that the company is pleased with its Assembly Row development in Somerville, MA, which is a suburb of Boston. But he also pointed out that its Pike & Rose development in the Maryland suburbs of Washington, D.C., is facing a weak residential market.

Notably, amid a rapid shift in customers’ shopping preferences and patterns with online purchases growing by leaps and bounds, retailers are reconsidering their footprint and eventually opting for store closures in recent times. Also, those retailers that are not able to cope with competition are filing bankruptcies.

Grappling with such challenges, mall landlords are redefining their strategies, digitizing their malls and turning into distribution hubs. They are also transforming into swanky entertainments zones from boring shopping centers.

Moreover, retail REITs are eying mixed-use developments. In fact, mixed-use developments have gained popularity for their solid neighborhood character, greater housing variety and density. In addition, such developments reduce the distance between housing, workplaces, retail businesses, and other amenities and destinations.

Hence, such acquisitions enable the companies to capture the attention of people, who prefer to live, work and play in the same area – a trend that drove development in several other cities in the U.S. As a result, retail properties can enjoy better trade area demographics.

Federal Realty has a Zacks Rank #3 (Hold). Although amid challenges in the retail real estate market the Zacks categorized REIT and Equity Trust – Retail industry is down 10.6% quarter to date, shares of Federal Realty have seen an only 7.9% decline. Also, over the past seven days, the full-year 2016 estimates for funds from operations (FFO) per share have remained unchanged.

Investors interested in the REIT industry can consider stocks like Urban Edge Properties (NYSE:UE) , Mack-Cali Realty Corp. (NYSE:CLI) and DCT Industrial Trust Inc. (NYSE:DCT) . Each of these stocks has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For Urban Edge Properties, the expected growth rate for FFO per share is 36.6% for 2016 and 5.9% for 2017.

Mack-Cali has long-term expected growth rate of 6.4% against the industry average of 5.8%.

DCT Industrial delivered an average positive surprise of 5.18% over the trailing four quarters.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Zacks' Top Investment Ideas for Long-Term Profit

How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>