Federal Realty (FRT) Q3 2025 Earnings Transcript

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DATE

Friday, October 31, 2025 at 9 a.m. ET

CALL PARTICIPANTS

Chief Investment Officer (Interim CEO) — Jan W. Sweetnam

Chief Financial Officer — Daniel Guglielmone

Eastern Region President & Chief Operating Officer — Wendy A. Seher

Corporate Secretary — Jill Ryann Sawyer

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TAKEAWAYS

Record Leasing Volume -- 727,000 square feet of comparable space leased at $35.71 per square foot, reflecting 28% higher annual cash rents than prior tenants.

Renewal Mix and Capital -- Two-thirds of leased space were renewals executed with minimal capital requirements; over half of the new-tenant deals covered currently occupied space via early lease execution.

Comparable Operating Income Growth -- 4.4% increase in comparable operating income; cash basis POI growth was 3.7%, both exceeding internal expectations.

Funds From Operations (FFO) Per Share -- Reported FFO per share was $1.77, at the top end of guidance, with a 4¢ headwind from lack of capitalized interest and costs at Santana West.

Portfolio Occupancy -- Comparable occupancy rose 20 basis points year-over-year to 94%; total overall occupancy is 93.8%, including recent acquisitions at 85%-91% occupancy rates at closing.

Comparable Lease Rate -- 95.7% comparable lease rate with expectations for positive momentum into year-end 2025, supported by 175,000 square feet of lease negotiations underway.

Acquisition Activity -- Closed Annapolis Town Center for $187 million at a 7% unlevered return, with blended acquisitions in 2025 exceeding $750 million at an initial cash yield of approximately 7% and initial occupancy of 88%.

Asset Sale Pipeline -- $200 million of asset sales expected to close by year-end or shortly after, with another $200 million projected for 2026, with an additional $200 million projected for 2026; over $1 billion more under consideration.

Balance Sheet Position -- $1.3 billion in liquidity at quarter end, 5.6x net debt to EBITDA, and 3.9x fixed charge coverage, with near-term maturities addressed through refinancing or extension options.

2025 Full-Year Guidance Update -- Raised FFO per share guidance (excluding one-time items), reflecting 4.6% midpoint growth for 2025; including new market tax credits, brings the range to $7.20-$7.26 (6.8% midpoint growth over 2024).

Q4 2025 FFO Guidance -- Projected at $1.82-$1.88 per share, Projected FFO per share represents a 7% year-over-year increase at the midpoint compared to Q4 2024.

Development Pipeline -- Broke ground on 258 new residential units at Santana Row ($145 million committed), part of three projects totaling $280 million requiring capital; unlevered yields estimated at 6.5%-7%.

Leasing Metrics Trend -- Approximately 70% of new leases were for space already occupied, enhancing future rent stream stability and reducing downtime.

SUMMARY

Federal Realty Investment Trust (NYSE:FRT) reported a record leasing quarter with 123 comparable deals and achieved notable 28% rent spreads, indicating active tenant replacement and robust demand across its portfolio. The company closed on significant acquisitions including Annapolis Town Center, adding scale and achieving immediate accretion on FFO, while maintaining a focus on geographic and asset quality consistency. Strategic asset recycling advanced, with $400 million of dispositions on track for near-term closure, and capital redeployment targeted toward higher-yielding opportunities. An active development pipeline and disciplined acquisitions support multi-year NOI and earnings growth, with management issuing raised earnings guidance and projecting continued occupancy gains. Robust liquidity and balance sheet flexibility provide additional support for continued investment and operational execution.

CFO Guglielmone said, "Implied FFO guidance is 1.82 to 1.88, and represents 7% growth year over year at the midpoint."

Wendy A. Seher highlighted sustained leasing momentum into 2026 with a "strong pipeline including over 175,000 square feet of new leases currently in process for vacant space."

Capitalized interest is expected to decline to $10-$11 million in 2026 from $13-$14 million in 2025.

Development projects at Hoboken, Bala Cynwyd, and Santana Row are progressing on or under budget and on track, with new residential leasing to begin in early 2026 at Bala Cynwyd.

Jan W. Sweetnam affirmed no material strategic deviation, stating, "Same business plan and strategy, just on different land with the same characteristics."

Anticipated refinancing of $400 million bonds in February 2026 may create a 150-200 basis point earnings headwind, partially offset by underlying portfolio growth.

Snow pipeline totals $38 million in rents, with about 25% commencing in Q4 2025, 60% in 2026, and 15% in 2027, contributing to future revenue visibility.

Recent acquisitions have room for rent growth, as "a lot of runway on the rents" remains given prior underinvestment and suboptimal property management, according to Stu Beal.

No incremental acquisitions are included in mid-4% baseline recurring FFO growth guidance for 2026; any accretive acquisitions completed would provide upside to that baseline.

INDUSTRY GLOSSARY

Comparable Operating Income (POI): Property-level net operating income growth measured on a same-property basis excluding impacts from acquisitions and dispositions.

FFO (Funds From Operations): Key REIT earnings metric that adjusts net income for real estate depreciation and gains/losses from asset sales.

Cap Rate: Ratio of net operating income to property value, expressing the expected yield on real estate investments.

Snow Pipeline (SNO): Contracted signed-not-opened rent streams from leases signed but not yet commenced, representing future revenue.

Unlevered IRR: Calculated internal rate of return on an investment before the impact of leverage or debt financing.

Full Conference Call Transcript

Jill Ryann Sawyer: Good morning. Thank you for joining us today for Federal Realty's third quarter 2025 earnings call. Before we get started, a reminder that certain matters discussed on this call may be deemed to be forward-looking statements. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results including guidance. Although Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements and we can give no assurance that these expectations can be attained.

The earnings release and supplemental reporting package that we issued this morning, our annual report filed on Form 10-Ks, and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and operational results. Before we begin our prepared remarks, I want to note that Don Wood, our Chief Executive Officer, is temporarily away due to a recent loss of an immediate family member. Our thoughts are with Don and his family during this very difficult time. In his absence, our Chief Investment Officer, Jan Sweetnam, will be reading Don's prepared remarks.

In addition to Jan, joining me on the call today are Dan Guglielmone, Chief Financial Officer, Wendy Seher, Eastern Region President and Chief Operating Officer, as well as other members of our executive and senior leadership team including Don Becker, Jeff Krasich, Stu Beal, and Melissa Solis, who are available to take your questions at the conclusion of our prepared remarks. And with that, I will turn the call over to Jan Sweetnam. Jan, please begin.

Jan W. Sweetnam: Thanks, Jill, and good morning, everybody. Following are Don's prepared remarks. Best leasing quarter we've ever had. Ever. And that's saying something given the leasing strength over the past few years. 727,000 feet of comparable space written at $35.71, 28% more annual cash rent than the previous tenant. Two-thirds of that space was for renewals with the minimum capital required. Of the remaining one-third related to new tenants, over half related to space that is currently occupied, but for which a more productive tenant executed a lease a year or two or even three early in order to lock it up. There's no better evidence of the attractiveness of a shopping center to retailers than that.

And it's one of the best ways in our business to assure an increasing stream of cash flows well into the future. Wendy will talk about core leasing a bit more in a few minutes. Strong comparable operating income growth of 4.4% in the quarter was equally encouraging and led to FFO per share of 1.77. Despite the absence of capitalized interest and operating costs at Santana West that negatively impacted FFO per share by 4¢. That drag will begin to dissipate in this fourth quarter, in 2026 and 2027 as tenants in the 90% leased soon to be 95% leased, building continues to occupy and work through free rent periods. Operationally, this was a really strong quarter.

And based on what we see thus far in October, should allow us to close out 2025 strong. In terms of development and redevelopment, residential construction at Hoboken, New Jersey, and Balakinwood, Pennsylvania are moving along nicely on or under budget and on time with leasing to begin in early 2026 at Balla Kinwood. During the third quarter, we broke ground on 258 new residential units on the last surface parking lot at Santana Row committing capital of roughly $145 million. Those three projects, Hoboken, Bawa, and Santana, will require roughly $280 million of capital, all in fully amenitized and proven environments and should yield and a half to 7% unlevered.

More to come in this component of our business in 2026. Current conditions suggest market value should be 150 to 200 basis points inside those returns. We're committed to realizing that value over time as we've demonstrated with the sale of Lavaria at Santana Row earlier this year, Palace At Pike And Rose, which is currently under contract for sale and should close right around year-end, and the current marketing of Missora at Santana Row. On the acquisition front, I really want to thank those of you that made the trip to Kansas City to join us for our investor tour of Town Center Crossing And Plaza in Leawood earlier this month.

We're off to a great start there from a cash flow and value-enhancing perspective. And I just want to reemphasize the two points that I think became apparent to investors and analysts on that trip. First, that we are not sacrificing quality by expanding our geographical footprint. The growth prospects for these investments exceed both the retail and residential assets we're selling it is highly likely that the exit cap rates for the shopping centers we're pursuing will tighten considerably based upon our retenanting and redevelopment. And second, that this is not a change in strategy for federal.

Our deep and experienced team is doing what it has always done, lease it better, both from a merchandising and strength of lease contract standpoint, create a more inviting physical space that lengthens stay times and increases spend, and intensify the land with more retail or residential GLA where and whenever economically feasible. Same business plan and strategy, just on different land with the same characteristics. The affluent consumer is underserved. The centers are big and dominant. And existing relevant tenants have proven that it's the place in the submarket to be.

You might have also seen that we closed on the acquisition of Annapolis Town Center in a plus location off State Route 50, which heads into DC, and Interstate 97, which takes you to Baltimore in Annapolis, Maryland. We bought the property for $187 million at a 7% unlevered return. With an anchor and shadow anchor foundation grounded by very successful retailers, Whole Foods, Lifetime Fitness, and Target. We expect to be able to enhance surrounding merchandising with better and more productive tenancy enabling higher rents. We're very excited about this addition in our core market. Next up is another large and dominant center in a growing submarket that we expect to close in this fourth quarter.

More to come on that one soon. So that's about it for my prepared remarks. Enhanced internal and external growth using all the tools at our disposal is the name of the game. Quarters like this 2025 increase my confidence of doing so. Let me now turn it over to Wendy. Expand on the leasing environment.

Wendy A. Seher: Thank you, Jan, and good morning, everybody. Exceptional performance for the quarter highlighted by record leasing volumes that build significant forward momentum as we conclude the year and look ahead to 2026. As reflected in Don's comments, we successfully recorded a record 123 comparable deals at impressive rent spreads of 28% over in place prior rents. Our operational metrics are in top form evidenced by strong occupancy, healthy margins, and reduced controllable expenses, all underscoring a solid financial performance. Outstanding results overall for the quarter. Occupancy in the comparable pool continues to show momentum as our occupied rate climbed 40 basis points last quarter and 20 basis points year over year to 94%.

On an overall occupancy basis, including all of our shopping centers, we stand at 93.8% today. Keep in mind, our two recent acquisitions, Leawood and Annapolis, were roughly 91-85% occupied at closing, therefore impacting total overall occupancy as we head into the fourth quarter. We encourage investors to focus on our comparable occupancy metrics which more accurately reflect the continued strength and momentum across the core portfolio. Turning to our leased rate, Our comparable lease rate stands at a very healthy 95.7%. We expect the figure to grow and show positive momentum into year-end driven by a strong pipeline including over 175,000 square feet of new leases currently in process for vacant space.

This represents roughly 70 basis points of incremental lease rate opportunity. While the third quarter saw record leasing volume, a significant portion of this activity was for space which currently was occupied. This is a testament to the durability of the centers and reinforces future stability in our occupancy metrics. Providing embedded growth even if it doesn't immediately lift the record rate. By pre-leasing space, we effectively reduce downtime we smoothed out quarter to quarter revenue, and strengthen occupancy over time. This proactive approach is a major focus across our operating teams.

We continue to see broad-based demand for our quality real estate with a variety of best-in-class names and categories such as Chopped, Aloe, Burlington, Our House, and Ross to name a few. And we continue to upgrade our retail lineup including within our more recent acquisitions Virginia Gateway, Pembroke and Leawood to be specific which names with names such as Coach and Lego, Warby Parker, and Blue Mercury. We were able to drive rents and earn a return on our capital there. Merchandising and retail sales performance is our focus.

Loveshack Fancy just had their grand opening this past weekend at The Grove in Shrewsbury, attracted by the addition of our small format Bloomie's concept Loveshaq fancy open to align out the door, and had their best opening ever of their 25 locations. Merchandising matters in noncommodity centers. Our acquisition of Annapolis Town Center this quarter is a prime example of our disciplined acquisition strategy. 479,000 square foot mixed-use retail property confirms our focus on acquiring high-quality, dominant centers in affluent markets.

With an 85% current occupancy rate we expect the addition of Annapolis to provide meaningful growth with strong existing anchors like Whole Foods, Target and Lifetime, and featuring popular retail brands such as Sephora, RH, Pottery Barn, and Anthropologie. A perfect addition to Maryland to our Maryland portfolio. Expect us to provide a number of tenant announcements for Annapolis on our next call. And with that, I'll turn it over to Dan.

Daniel Guglielmone: Thank you, Wendy, and hello, everyone. Our reported FFO per share for the third quarter of $1.77 above consensus and at the top end of our guidance range of $1.72 to 1.77 Comparable POI growth for the quarter was 4.4% on a GAAP basis and 3.7% on a cash basis. Both metrics outperformed our expectations primarily due to higher than forecasted revenues in retail, residential and parking. And as a result, we will increase guidance for both 2025 FFO per share and comparable POI growth. More to come on that later in my prepared remarks. But first, an update on the balance sheet.

We continue to have significant liquidity of approximately $1.3 billion quarter end, comprised of availability on our $1.25 billion unsecured credit facility, and over $100 million of cash at quarter end. Committed active capital allocation program our balance sheet remains strong. Third quarter annualized net debt to EBITDA is solid and stands at 5.6 times reflecting the purchase of the Leeward assets and our fixed charge coverage stood at 3.9 times. We continue to look to execute on our capital recycling program. With $400 million of assets at various stages in the asset sale process, with roughly $200 million expected to close by year-end or shortly thereafter and another $200 plus million forecasted to close in 2026.

Behind that, have a pool of over $1 billion of noncore assets under consideration to be brought to market in 2026 and beyond. Of that total, roughly $1.5 billion pool about a third is peripherally located residential, with the other two-thirds being non-core retail. With estimated blended yields targeted in the mid to upper five percent cap rate range, and blended unlevered IRRs inside of seven. Very attractively priced capital. While leverage may fluctuate modestly from quarter to quarter, given inherent timing differences between acquisition and sale transactions, we expect to maintain a long-term net debt to EBITDA ratio in the low to mid five times range.

From a flexibility perspective with leverage metrics where they are, and over $1.5 billion of asset sales in process, and under consideration we are very well positioned to continue to be on offense with respect to capital deployment. Now on to guidance. As mentioned earlier, with a third consecutive beaten raise, we are raising our forecasted range for FFO per share excluding the new market tax credit more akin to a recurring FFO This represents about 4.6% growth on this recurring basis at the midpoint over 2024. And roughly four to 5% at the low and high end of the range respectively.

Including the one-time new market tax credits in these figures are nearly defined range increases to $7.20 to $7.26 which represents 6.8% growth. At the midpoint over 2024. This increase is driven by $01 of net operating outperformance during the quarter and roughly 1¢ accretion from the Annapolis acquisition for the quarter which translates to $0.03 to $0.04 on an annualized basis. Given another strong result for 3Q, we are increasing our forecast for 2025 comparable POI growth to 3.5 to 4% or 3.75% at the midpoint. And that's 4% when excluding prior period rent and term fees.

We expect comparable occupied levels to be in the low 94s by year-end given the deal signed to date and the continued robust pipeline of leasing activity which continues to have momentum even after a record third quarter volumes. Retail tenant demand for our portfolio is showing no signs of abating to date. We do have one other acquisition we have under contract that should close before year-end of roughly $150 million. Although given the expected closing late in the quarter, we do not expect it to materially add to 2025 FFO.

One thing to keep in mind, the acquisitions we've completed so far this year including the one currently under contract, will total over $750 million at a blended initial cash yield of roughly 7% a GAAP yield north of 7%, and initial blended occupied rate just 88%. These are high-quality assets with clear leasing upside, which will enhance growth in 2026, 2027, and beyond. Implied FFO guidance for fourth quarter 2025 is 182 to 188, and represents 7% growth year over year at the midpoint. While we won't be providing formal 2026 guidance, until our fourth quarter call in February, we do expect a strong year operationally.

We're executing from a position of strength We're investing strategically maintaining balance sheet discipline, and setting ourselves up for another year of meaningful growth ahead. Before I hand the call back to the operator, given the number of participants on the call, we kindly ask that you limit yourself to one question during this segment of the call. And please, no multipart questions. You have additional questions, please requeue. And given the really tough news that Jill shared earlier, he completely understands that many of you may want to send a message of support to Don and his family However, we respectfully ask that you refrain from expressing condolences on this call.

So we can focus on the discussion of Federal Realty and its third quarter results and keep the Q and A segment of the call as efficient as possible. Thank you. And with that, operator, please open the line for questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, you would like to withdraw your question, please press star then 2. Please rejoin the queue for any follow-up questions. At this time, we will pause momentarily to assemble our roster. The first question comes from Juan Sanabria with BMO Capital Markets. Please go ahead.

Juan Carlos Sanabria: Hi. Great. Thank you for the time. For the team, I guess, Dan, you talked about the dispositions and processing. You have kind of a blended cap rate, but just curious if you can give any color on how the two main buckets retail versus resi compare given kinda early feedback on what may be kinda out there in the marketplace to test pricing.

Daniel Guglielmone: Sure. Sure. I look. We've got, as we mentioned, $400 million in the market now. That's probably a little bit more skewed towards, you know, residential Overall, the billion 5 is a third of the peripheral residential. Two-thirds, you know, non-core retail. Pricing is gonna be, you know, gonna and around five, sub five. For what we're selling on the residential. It'll be in and around six yeah. Low sixes, six. Sometimes high fives on a blended basis on the retail And so blended, we should be in the mid to upper fives. Overall.

So, you know, I think a nice positive spread to where we're deploying the capital, you know, in and around know, the high sixes, low sevens on a cash basis. And gap yields above that.

Juan Carlos Sanabria: Thank you.

Operator: The next question comes from Michael Goldsmith with UBS. Please go ahead.

Michael Goldsmith: Good morning. Thanks a lot for taking my question. Dan, mentioned you're not gonna issue formal 2026 guidance, but can you did talk about some of the factors, right, like an Annapolis and the benefit that you'll see next year. And then I as well as the capitalized interest in Sam's counter when you're starting to pay. So can you outline kind of any sort of one-time or other topics that you've already talked about for 2026 just so we can get a sense of where the focus is going, what's the trajectory of the company, and what earnings growth next year could look like based on what you've already said? Thanks.

Daniel Guglielmone: Yeah. Doug, good question. Thank you, Michael. You know, we with respect to one-timers, obviously, the big one-timer really is what's occurred in 2025 with the new market tax credit. We would encourage folks if they want to understand kind of the true operational growth underlying the businesses to exclude that one-timer in 2025 and focus on the $7.08 of kind of more of a recurring number. And in terms of looking forward, we don't have anything or expect to have any one-timers. You know, one-timers, you know, we consider recurring numbers term fees. We think that's recurring. It's a part of the business. It's unforecastable.

But we do not expect any kind of material differences from our current guidance, which we increased a little bit this quarter. In the in the $5 million, $5 to $6 million range. So it should be consistent with that. With regards to capitalized interest, you brought up, you know, we had about $13.5 million or expecting in the $13 to $14 million range. This year. We're not done. We don't have a precise number, but I think as a placeholder using kind of a $10 to $11 million kind of level for capitalized interest is something you can use for now. But we'll provide more precision on that in February.

With regards to, you know, growth in you know, we don't have a precise number But, you know, right now, at current guidance in 2025, you know, the recurring number is in the mid-fours, 4.6%. I would expect that's feels like it should be somewhat consistent with where we'd expect things to be next year as well on a recurring basis. Keep in mind, that's with about a 150 to 200 basis points of headwind the refinancing of our bonds. In February. That we're expecting. And so that's, call it, five and a half to 7% underlying growth in the in the core business, which I think is you know, we feel really, really good about.

And so that's kind of, I think, the big numbers I would I would I would point you to. We do expect you know, we only had three to $5 million of incremental development POI contribution this year. That will be up higher next year into the, you know, into the double digits. We'll have a more precise number for you in '20 you know, in terms of the 2026 con incremental contribution on the fall in February.

Operator: Our next question comes from Sameer Kunal with Bank of America. Please go ahead.

Samir Upadhyay Khanal: Good morning, everybody. I guess, Sean or Wendy, the spreads in the quarter were impressive. Right? 28% cash spreads. I guess if you take a step back, how much of that is sort of true market rent growth that you're seeing in your portfolio? You know, versus maybe just sort of, you know, mix or tenant upgrades? Trying to understand if these spreads are sustainable. And if there's a sort of this inflection of market rents that are taking place, you know, for your type of assets. Thanks.

Wendy A. Seher: Sure. There's no question that the 28% is a is a number from us. As you as you kind of the way I kinda look at it is more over a twelve-month period. Is more we're seeing kind of in the mid-teens. So continue to be aggressive, and it makes sense. Right? Because our leased and occupied rate continue to increase, so we're able to drive rents. At that rate. I think that it can be lumpy, so not every quarter will be 28%. But I think that we are definitely seeing some ability to drive rents.

And like I said, that trailing twelve months should be should provide us in that mid-teens as the results will play out in the fourth quarter and into the first quarter.

Operator: Our next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Alexander David Goldfarb: Hey. Morning down there. Dan, on out of Santana West, you had that office tenant that you know, whatever didn't take the space this year, whatever the take space, you know, making it ready. That got delayed. Is that tenant looking to be on track for 26 meeting Like, should we expect Or you know, sort of early in '26 that revenue would start flowing is that could that be further delayed from a revenue recognition standpoint?

Daniel Guglielmone: Yes. From our expectation is in line with you know, our revised guidance earlier in the year. That this fourth quarter, we will begin recognizing straight-line rent. And so they'll be, you know, we'll we'll be recognizing on PwC which is roughly the 40% anchor tenant in the in the building. Will be recognizing straight-line rent. And that's why that's that's one of the drivers. Of kind of the incremental POI that we'll see from our development pipeline. Or development portfolio in 2026. So, you know, on yeah. Like, In line with our expectations and will be a driver of growth next year.

Operator: Our next question comes from Michael Griffin with Evercore ISI. Please go ahead.

Michael Anderson Griffin: Great. Thanks. Maybe one for Jan just as it relates to sort of the investment pipeline and outlook. I know in Kansas City, talked about the upside opportunity in some of these larger open-air centers similar to Town Center versus maybe the premium the market is putting on more grocery anchors. So can you just talk about your thoughts on maybe the disconnect between those two types of properties? I mean, is it expectations for higher foot traffic at Grocery Anchor Center that's maybe driving down that cap rate? Or is there just a broader disconnect versus the types of assets like a town center or an Annapolis that you all are targeting? Thank you.

Jan W. Sweetnam: Yes. Thanks, Michael. Good question. Time in the market. There has historically been at least the last ten years, strong demand for grocery-anchored centers and, you know, cap rates have gotten bid down to, you know, relatively, low levels. It sort of feels like they've they've flattened out, a little bit. And there just has not been as much capital on the market. In fact, really recently, there's been very little capital in the market for larger transactions. And so the few transactions that came to the market there was good bidding for it, but the yields were higher because there's just there wasn't that much competition for it.

And so this last in the in the second half of this year, I think what we've seen is there's a lot of a lot large centers that have come to the market. There's a lot of there's more capital in the in the market chasing those. It still feels like there's a good supply-demand equilibrium there. But it's just that we still see that spread happening here. Simply because the larger centers are they can be more complicated to, to execute. There's a lot more leasing that needs to be done there.

And I just think we are one of the reasons we're really interested in it is we think we get a great risk-adjusted yield in buying these assets that are a little bit more complicated. They're larger. They're harder to operate because we've just got a great leasing team. We got such great relationships with the with the merchants, and we get so much intel on these things. Before we actually, you know, start bidding on them. No. Let's put them under contract. And so we still think that spread's gonna be there. Has it has not disappeared.

Operator: Our next question comes from Simi Rome with Barclays. Please go ahead.

Simi Rome: Hi, thanks very much for taking the I was wondering if you could elaborate a bit on the debt maturity schedule and particularly the $200 million Potesta Row mortgage. Maturing in December. I saw there's two one-year extension options there, so I was just wondering what the plan is. Thanks.

Daniel Guglielmone: Yep. With regards specifically to Bethesda Row, and I'll I'll talk a little bit more broadly about our maturity schedule going forward. But Bethesda Row, we will be extending that for another year, exercising the first of those two options would take us to the 2026. We have the flexibility to push it out to the 2027. It's a low leverage. It surely is imminently financeable at the end as well. So really no concerns there. We did refinance our Azalea alone, which has maturity of tomorrow. And so that's been refinanced at very attractive rates in the kind of a swap to fix basis. It'll be end up in kind of the below fours.

And then with regards to the maturity, we have in February of our $400 million of bonds with a one and a quarter percent, We've got, you know, we've got options, and it's good to have options, whether it be in the bond market whether it be in the bank term loan market, whether it be in the convertible market, to have those options is really kinda what you know, being federal and having our high investment grade rating kind of allows us to do to be able to be opportunistic and nimble with regard to how we plan to refinance that, and we'll look to optimize it.

And so more to come on that Obviously, February, you know, there'll be more color on exactly how we executed.

Operator: Our next question comes from Floris Van Dijkum with Ladenburg. Please go ahead.

Floris Van Dijkum: Hey. Thanks. Question on your physical occupancy. I note you're still about a 160 basis points, I believe, below peak levels. And maybe, Wendy, if you can give some sort of update on you know, you know, how quickly you see that trending, and is there a chance that we could surpass that level over the next, you know, eighteen months or so?

Wendy A. Seher: Sure. Thanks, Flores. Think what we're what we're seeing is in terms of our ability to drive that occupancy rate up, I'm feeling good about the anchor side of it. I think it's where we have more room to push that number I think you're gonna see that, as I mentioned in my comments, with that 175,000 square feet of space that we have really finalizing and signing leases in the next quarter for spaces that are currently vacant. So you're gonna see that push up towards the end of the quarter. And I think on the small shop side, you know, we're over 93 leased right now.

I think we're gonna use that as an opportunity to continue to drive rent It could go up a little bit, but we're gonna we like a little bit of that frictional vacancy as I call it so that we can drive rents. I think you're gonna see it more increase on the anchor side, which will overall increase our occupancy.

Operator: Your next question comes from Cooper Clark with Wells Fargo. Please go ahead.

Cooper R. Clark: Great. Thanks for taking the questions. Curious how Annapolis is funded and how that ties into the $01 accretion for 4Q and 3 to 4¢ for the full year. Wondering if that $01 accretion is combined with the $200 million of sales to fund or just trying to figure out how that 1¢ is inclusive of sales to close by year-end or not.

Daniel Guglielmone: Yeah. Look. It's somewhat fungible. And look. We are have a big balance sheet that allows us the flexibility to fund Ultimately, you know, we've got capacity on our credit facilities, our term loans. Temporarily, we funded on that basis cash on hand. Ultimately, on a long-term basis, it will be on a permanent basis, be funded with the asset sales. So the 1¢ accretion is really the spread between kind of a long-term you know, basically, yield or the initial yield day one and next twelve months. Relative to, you know, where we're selling stuff in the initial yields in the mid to high fives. And we're in the on a GAAP basis in the sevens.

That's how you get to the one first the 1¢ accretion on a quarterly basis for the fourth quarter and $03 to $04 on an annualized basis for the full year. Hopefully, that answers your question. It's a good one, Cooper. But hopefully, answers it.

Operator: Our next question comes from Greg McGinnis with Scotiabank. Please go ahead.

Victor Petty: Hello. This is Victor Petty on with Greg McGinnis. As, you are now in an active external growth mode. Could you share some details on current competition for the assets you target and how it is impacting cap rates overall. Just trying to understand whether the pool of assets that check all the boxes for federal are is shrinking or not.

Jan W. Sweetnam: Yeah. I'm not sure I totally heard the full question. Is a question in terms of what does the pool of future potential acquisitions look like? Is that was that the question?

Victor Petty: Yeah. Yeah. As a result of peer intense. Dynamic and competition for the assets. Yeah. Just trying to understand the size of the pool. Yeah.

Jan W. Sweetnam: Yeah. Yeah. Got you got it. Alright. So the, I sort of it sort of feels like we're we're in continued equilibrium. And by what I what I mean by that is you know, go back twelve months or nine months ago, there weren't a lot of, large transactions that we're in, that were on the market, and there weren't a lot of people chasing those type of, those type of assets. And so it felt like it sort of, was in was in equilibrium. And today, there was a lot of large transactions that came on the market in April, May, June, that were also matched by more capital coming in looking at those acquisitions and those possibilities.

And so it feels like we're sort of, while there's more competition out there, I think it's more work for the sellers trying to understand, you know, who's real in the bid sheet, And of the ones that are real, who are the ones that really stand out as being able to work through issues and be at the closing at the end? And as we think through, we think we compete very well on that on that basis. So just from a competitive standpoint, it feels like we're sort of in the same position an equilibrium standpoint.

We'll have to see what happens in '26 and beyond that, but we would expect to continue to see more large transactions coming to the later this year, beginning of next year, and we think we're in a pretty good competitive position to, to make a play for.

Daniel Guglielmone: Yeah. And look, I think that another thing that is not kind of, I think, fully appreciated And, yes, is the skill set that we have instead of Realty, whether it be in our leasing capability, our relationships with tenants, our ability to you know, add place making and other things that enhance the operations and productivity of the assets that we buy. Lot of these assets are under managed, and they're not it's not easy. It's not low hanging fruit, and you need a really, really good operator to drive those kind of results. And I think that's a competitive advantage we have over, much of the capital that we're competing with.

And we can do things that others can't in terms of driving, you know, POI upside and NOI upside at these potential acquisitions.

Operator: Our next question comes from Greg Mailman with Citi. Please go ahead. You may be Craig. Craig. Craig, we don't hear you. On mute? K. We'll go to the next question. Next operator? The next question is from Robbie Fabia with Mizuho. Please go ahead.

Ravi Vijay Vaidya: Hi there. Good morning. Can we discuss the snow pipeline? Much do we have in total rent that's embedded in that pipeline, and what's the projected timeline for this to come online? Do you think it will compress from here on out and or is there room for this to expand further as occupancy grows? Thanks.

Daniel Guglielmone: Great question, Ravi. And Craig, you'll requeue. We'll get to your question whatever the technical difficulty. We didn't hear you. But please requeue so we can we wanna hear from you. Ravi, great question. Snow is gonna be, you know, about $20 million in a comparable portfolio and another $18 million in kind of the to be delivered portfolio. So $38 million in total. In terms of about a quarter of that, will come online or on an annualized basis begin and commence in the fourth quarter about, call it, 60% should be in 2026. And the remaining 15% should occur, call it, in 2027 for the most part.

You know, the probably of the 60% next year, you know, roughly probably three-quarters of it is gonna be, you know, 70 per 70 to 75% should be in the first half of the year. Obviously, SNO has become a, you know, is helpful for you guys from a modeling perspective. Only tells half the story. I mean, you when you look at S and O, you have to look at the other side of you know, that's filling the top of the bucket, SNO. What is the least in the bottom of the bucket? What is your credit reserve? What's the credit profile of your tenancy?

You know, I think that needs to be looked at in tandem So we encourage you guys to the extent that snow is important to you that you look at both sides of that. With regards to our snow, given what Wendy had indicated, we expect our least rate to grow. Into the fourth quarter and into the 2026. That should grow our spread between our lease rate and occupied rate Both of them should trend upwards, which is what you want. I think that's more important The direction of your occupancy metrics than necessarily what the spread is between the two.

You know, we will look to it may increase up towards 200 basis points, but our objective is to tighten that as much as we can and get into kind of historical levels in the low you know, hundreds, know, 100 to 150 basis points. That's that's obviously kinda where we'd like to be. That shows efficiency in getting tenants open. And it also an indication about credit quality. Of your tenancy if you kind of can maintain a very, very tight SNL. As everyone likes to say.

Operator: Our next question comes from Craig Mailman with Citi. Please go ahead.

Sydney: Hey, guys. This is Sydney on for Craig. I think he was having some technical difficulties. So, Wendy, you mentioned that tenants are vying for currently occupied space. You know? Two to three quarters and years ahead of expirations now. Is this a significant trend that you're seeing? Or is this you know, more anecdotal? And how much does this activity actually drive the cash spreads on new leases during the quarter?

Wendy A. Seher: Yes. Thank you for the question, Sydney. You know, when I look at we've been doing over the last several quarters, you can see that our rate of new deals that are being basically signed up for space that's already occupied has continued to tick up. So maybe it's more in the if you if you look kind of coming out of COVID, we were leasing we had more vacancy. We were leasing space. That was occupied in the 30, 40% range. Now we're up to 50, sixty, percent, and this quarter was 70%. Of what we're leasing is already for occupied space.

So I think that'll continue as our occupancy and lease rates go up, and I think it's showing a healthy ability to reduce downtime and to level out our revenues quarter to quarter and that's really what we're focused on.

Operator: Our next question comes from Honglian Zhan with JPMorgan. Please go ahead.

Honglian Zhan: Yeah. Hey. Hey, Dan. I guess quick question, for clarification. I think you talked about FFO growth being kind of in the mid-fours on a recurring basis going forward. Does is that just for the current portfolio, or does that also layer on future acquisition and disposition activity too?

Daniel Guglielmone: Yeah. No. That's just kind of with what's in place for the for the most part. It reflects kind of expectations with Annapolis. But it does not assume any incremental acquisitions up yeah. And in '20 or speculative acquisitions in 2026. That would be additive. Given our, you know, our objective of, you know, doing acquisitions that are accretive from day one, Obviously, that is, you know, the four the mid-fours is kind of the baseline. And, you know, acquisitions will enhance you know, that figure kind of going forward. It's there's no embedded assumptions on speculative acquisitions. Or dispositions in that number.

Operator: Our next question comes from Omotayo Okusanya with Deutsche Bank. Please go ahead.

Omotayo Tejumade Okusanya: Hi. Yes. Good morning. Could you talk a little bit about the $450 million acquisition that's still meant to happen by year-end? If you just kinda give us a general sense of kind of what it is, where it is,

Daniel Guglielmone: Yeah. I don't John, you can add on. I'm just gonna look. We'll we'll announce that when we close on it. We are expecting we're under contract. It's roughly a $150 million. As Don alluded to, it's kind of in a it's a know, be a similar market to a you know, be with Kansas type of location. We'll announce that when it closes as is our policy and kind of what we do on a normal basis. Hey, Jan. I don't know. With regards to returns, you know, it's gonna be consistent with the returns that we've been achieving. On the assets to date.

Don, I don't know if there's any other color, but I think that's what we're probably prepared to you know, give you today. Dale.

Jan W. Sweetnam: Yeah. No. I think you nailed it, Dan. I think the only thing I would add or reemphasize is it'll it'll it's gonna be it's a great city. It's a great MSA. Yeah. It's fits it unbelievably well in the affluent, submarket, and the affluent customer there is underserved, and there's pent-up demand in the marketplace. And I think that will be able to demonstrate that and talk about it once we, once we close it. So that's what I would ask. And I'd add another thing that this is an off-market transaction. Something that was sourced off-market.

And it fits perfectly within federal playbook in terms of top metros with a dynamic employment Affluence, unmet retail demand, and proven hits and checks all of those boxes. So we're excited about it and, you know, stay tuned.

Operator: Our next question comes from Linda Tsai with Jefferies. Please go ahead.

Linda Tsai: Hi, thanks for taking my question. Sounds like including what you have under contract to sell, 200 closing by year-end and another 100 closing in 2026, you can be selling up to the 1 and a half billion you've identified. It feasible to replenish with another 1 and a half billion and recycle that as well? Just wondering about the length of runway for unlocking of value creation.

Daniel Guglielmone: Yeah. Look, I it's a great question, Linda, and thanks. I think that the you know, that gives us runway probably into '27 and the existing billion dollars. Gives us runway These are identified. We think that they'll attract interest from the market and so forth. Do we have more behind that? Is there yes. I mean, we could kinda delve in. I think this is the near term that I eighteen, twenty-four, thirty-six month pool that we're considering. And is there more behind it Yeah. Yes.

You know, you know, we need to be thoughtful A lot of what we are you know, we own in our in our portfolio as significant gains because we created significant amounts of value in these assets. And so we need, kinda, to be thoughtful with regards to managing that. Ideally, we'd like to do that through ten thirty-one exchanges. So that also was kinda a governor. But to the extent we need to accelerate because we see more opportunities, in the market, to deploy capital on the acquisition front or in redevelopments, and so forth.

You know, we have that ability to accelerate and move up some of the pool to the forefront of activity in our in our asset sale process.

Operator: The next question comes from Kenneth Billingsley with Compass Point. Please go ahead.

Kenneth Billingsley: I just want to follow-up. I think you made some comments on the leasing side, but looking at renewal rates of up 29%, GLA was the highest in the last twelve months. Can you maybe just discuss there weren't weren't a lot of TIs in there. Could you just maybe discuss what formulated such a high increase on a renewal basis?

Daniel Guglielmone: Yeah. Look. We were able to push rents on the renewal. Yeah. Look. Timing of renewals, it ebbs and flows. We happen to have a significant kind of opportunity this quarter, and those deals got done. There were some, you know, some really strong renewal rates that we were able to achieve. And, you know, in terms of the volume of renewals, that happens. That 11 flow over time I think there were a number of deals that we're able to get renewals at rates that were kind of above average. I would not expect us to maintain, continue to be driving renewal rates I would look also on a trailing twelve-month basis, maybe a little bit lower.

Just because renewals tend to be a little bit lower, but yeah, I would look at kind of a more normalized numbers as looking at the trailing 12, which is you know, in our in our supplement on the leasing page there.

Operator: Our next question comes from Paulina Rojas-Schmidt with Green Street. Please go ahead.

Paulina Alejandra Rojas-Schmidt: Good morning. This is a more big picture question. And you have highlighted that the recently acquired centers have a very clear significant operational upside. Do you think these acquisitions along with the broader market focus are turning points for the company in terms of expected growth Or you are more maintaining a growth trajectory, essentially replacing more mature centers for others that will drive the next state of growth. And yeah, I hope my question is clear.

Daniel Guglielmone: Yeah. Yeah. I think I understand. And it's a good question, Paulina. Look. We are seeing kind of the to buy assets that are more raw material to kind of put into our know, kind of the federal business model. Where we can really drive merchandising, leasing, rents, invest capital on a disciplined basis to really drive and enhance returns for those assets. I think that is something that is additive It's no different. Look, we are able to do that on our existing portfolio as well.

But I think, you know, you know, we see the opportunity to sell some of the you know, the some of the assets that maybe, you know, we you know, we've done a really, really good job of harvesting the opportunity in the near term and see that as an attractive source of capital. To redeploy into assets that you know, can enhance our growth rate. But I don't see it as a turning point. I think it's more a continuation of what we do well I think we're seeing an opportunity to harvest gains in our portfolio.

And redeploy them into and really to enhance our growth rate But it's really just a continuation and an expansion of what federal has always done.

Operator: Again, if you have a question, please press 1. We have a follow-up question from Alexander Goldfarb with Piper Sandler. Please go ahead.

Alexander David Goldfarb: As you guys look at some of the expansion markets, that you're, you know, obviously, Leawood and then whatever the next city is. Do you see that perhaps retailers or rents haven't been pushed as much as they have in those markets. I'm just trying to understand, like, obviously, everyone knows, like, the infill markets, like, you know, Philly area or New York Metro or DC Metro and you know, retailers know that, hey. You have to pay big rent. There's big incomes.

But just wondering as you go to some of these next you know, some of the Midwest markets, and meet, you know, just different, legacy of ownership, Do you find that the rents have been pushed in the same way or is there a is that part of the opportunity? I'm just trying to understand if it's more just, hey. New area for growth. Versus actually the way the market's have worked. They maybe haven't been as efficient because you know, just different types of ownership that may have existed there versus in the coastal markets.

Stu Beal: Yeah. I'm gonna I'm gonna let Stu Beal answer that one. You guys all met Stu. On our Leewood trip. Stu, you probably at the forefront of that. Sure. Yeah. Alex. Thanks for the question. I think the short answer is that there is a lot of runway on the rents here. They have not been pushed as hard. They the properties haven't been invested in the right way to push them as hard. At the end of the day, this is all a fraction of the function of the volume the tenants believe they can do here.

I think we showed you guys when we were at Lee with the volumes that were coming out of that property before they had been kinda running the way that we would run them. And so I do think that's a big part of this push is there is a lot of runway to continue to upgrade the merchandise merchandising, push the sales, invest in the properties, and push those rents to get closer to what they're used to paying other places in the country.

Operator: This concludes our question and answer session. Would like to turn the conference back over to Jill Sawyer for any closing remarks.

Jill Ryann Sawyer: Thanks for joining us today. Have a nice weekend, everyone.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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