Federal Realty Investment Trust

Good day and welcome to the Federal Realty Investment Trust Third Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Jill Sawyer, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Megan. Good morning. Thank you for joining us today for Federal Realty's third quarter 2025 earnings conference 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-K, 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, Yon Sweetnam, will be reading Don's prepared remarks. In addition to Yon, joining me on the call today are Dan Gugliamone, Chief Financial Officer, Wendy Seer, Eastern Region President and Chief Operating Officer, as well as other members of our executive and senior leadership team, including Don Becker, Jeff Kreshek, Stu Beal, and Melissa Solis, that are available to take your questions at the conclusion of our prepared remarks. And with that, I will turn the call over to Jan Sweetenum. Jan, please begin.

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 cents. That drag will begin to dissipate in this fourth quarter, and in 2026 and 2027, as tenants in the 90% least, soon to be 95% least, building continue 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 in Hoboken, New Jersey, and Ballakinwood, Pennsylvania, are moving along nicely on or under budget, and on time with leasing to begin in early 2026 at Bala-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, Bala, and Santana, will require roughly $280 million of capital, all in fully amenitized and proven environments and should yield 6.5% to 7% unlevered. There's 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 Lavarie at Santana Rote 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 Missouri at Santana Rote. 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. And 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 sub-market to be. You might have also seen that we closed on the acquisition of Annapolis Town Center in the A-plus location off State Route 50, which heads into D.C., 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 the 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 Midwestern sub-market 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 third of 2025 increase my confidence of doing so. Let me now turn it over to Wendy to expand on the leasing environment.