Federal Realty Buys Tower Shops - Analyst Blog

Federal Realty Investment Trust (FRT), a real estate investment trust (REIT) that owns, manages and develops retail and mixed-use properties, has recently acquired Tower Shops, a 372,000 square foot community retail center in Davie, Florida, for $66.1 million. The property was previously owned by Turnberry Associates, one of the premier real estate development and property management companies in the U.S.

Tower Shops is located in a densely populated trade area with a population of about 326,000 within a five-mile radius, and offers sufficient scope for redevelopment and expansion. The shopping center is anchored by leading retailers such as The TJX Companies, Inc. (TJX) and Ross Stores Inc. (ROST), while Best Buy Co. Inc. (BBY) is slated to open a retail store in fall 2011.

Tower Shops is also shadow-anchored by Costco Wholesale Corporation (COST) and The Home Depot, Inc. (HD). A shadow anchor is a major retail store that generates a great deal of customer footfalls and provides significant customer attraction for another retail center of which it itself is not a part.

The acquisition is a strategic fit as it expands Federal Realty's portfolio in South Florida to over 680,000 square feet of retail space. The property is expected to be accretive to future earnings of the company with its regional dominance, and infill location. 

Federal Realty primarily owns Class-A shopping centers in high-barrier, high-growth areas. The properties of the company are anchored by supermarkets, drug stores or high-volume value-oriented retailers, which provide consumer necessities.

Since its inception in 1962, Federal Realty has paid uninterrupted dividends, and has the unique distinction of increasing the dividend for 43 consecutive years – the longest in the REIT industry.

We maintain our ‘Neutral' recommendation on Federal Realty, which presently has a Zacks #3 Rank that translates into a short-term ‘Hold' recommendation and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months.

 
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