Shopping center REITs posted a lackluster performance in the fourth quarter of 2008 stemming from impairment charges related to abandoned projects, aborted deals and declining land values. Of the 11 REITs reporting, just one, Saul Centers Inc. (NYSE: BFS) beat analysts’ consensus estimates.
The other 10 fell short by a range of $0.01 per share to $1.73 per share for the quarter ended Dec. 31. Nine posted FFO that was negatively impacted by impairment charges related to factors ranging from slumping land values to severance payments for laid-off workers.
Shopping center REITs defied the long-held position that they could weather a recession better than regional mall REITs, because their tenants sell staples including food and pharmaceuticals rather than discretionary goods, says Michael Magerman, senior vice president for the REIT sector with Realpoint LLC, a Horsham, Pa.-based credit rating agency.
“I am not sure if I agree with the premise that shopping center REITs are more insulated from the recession,” says Magerman. “It’s true shopping center REIT [properties] have supermarkets and drug stores, but they also have a lot of apparel and electronics tenants that are going to suffer along with the regional mall tenants.” By the second quarter of 2009, Magerman forecasts, many shopping center REITs will post negative same-store NOI.
The REIT exceeding analyst expectations, Saul Centers Inc., beat consensus estimates by $0.01 per share for the quarter. The Bethesda, Md.-based firm posted FFO of $0.66 per share, 5.7 percent below the $0.70 per share it reported in the fourth quarter of 2007. Occupancy at Saul’s portfolio fell 110 basis points during the quarter, to 94.2 percent from 95.3 percent the same quarter in 2007. Its same-store NOI in the fourth quarter of 2008 decreased 1.7 percent.
At the opposite end was Developers Diversified Realty (NYSE: DDR). The REIT reported fourth quarter FFO that missed analysts’ consensus by $1.73 per share. It was a decrease of $0.95; compared to an increase of $0.82 per share during the same period in 2007. The Beachwood, Ohio-based REIT’s occupancy fell 380 basis points in the quarter to 92.2 percent, from 96.0 percent a year ago. However, its same-store NOI for the year rose 1.7 percent. DDR announced Monday, it had agreed to sell 30 million of its common shares for $3.75 per share, with the option to purchase an additional 10 million shares over the next five years for $6.00 per share, to German shopping center developer Alexander Otto and his family. The move will help the company pay down debt coming due in 2009 and 2010, notes Rich Moore, analyst with RBC Capital Markets.
Weingarten Realty Investors (NYSE: WRI), the Houston, Texas-based REIT, missed consensus estimates by $0.58 per share, with FFO of $0.14 per share, reflecting a decrease of 82.0 percent from $0.78 per share a year ago. Occupancy at Weingarten’s 42-million-square-foot retail portfolio declined 150 basis points, to 93.0 percent from 94.5 percent. Its fourth quarter NOI fell 3.5 percent.
Ramco-Gershenson Properties Trust (NYSE: RPT) fell short of analyst estimates by $0.26 per share. The Farmington Hills, Mich.-based REIT reported a 45.3 percent decline in FFO in the fourth quarter, to $0.35 per share, compared to $0.64 per share a year ago. The company’s occupancy dropped 100 basis points, to 93.7 percent from 94.7 percent in the same quarter a year ago. Its NOI declined 3.5 percent for the most recent quarter.
Jacksonville, Fla.-based Regency Centers (NYSE: REG) missed consensus estimates by $0.22 per share. The company’s FFO of $0.72 per share during the quarter was a 37.9 percent drop from the $1.16 per share reported a year ago. Regency’s occupancy fell 120 basis points, to 93.8 percent from 95.0 percent in the same period a year ago. Its NOI rose 3 percent during the quarter.
Kimco Realty Group (NYSE: KIM), missed consensus estimates by $0.20 per share. The New Hyde Park, N.Y.-based firm reported FFO of $0.04 per share in the quarter; that was 92.5 percent below the $0.53 per share earned a year ago. Kimco’s occupancy in the fourth quarter stood at 93.4 percent, 290 basis points below the 96.3 percent recorded in the fourth quarter of 2007. NOI during the quarter rose 1.3 percent.
Oakbrook, Ill.-based Inland Real Estate Corp. (NYSE: IRC) missed consensus estimates by $0.10 per share. The company reported FFO per share of $0.26 in the fourth quarter, down 27.8 percent from $0.36 per share during the same quarter in 2007. Occupancy at Inland’s 14.5-million-square-foot portfolio fell 150 basis points, to 94.1 percent from 95.6 percent a year ago. Its same-store NOI declined 2.9 percent for the quarter.
Greenwich, Conn.-based Urstadt Biddle Properties (NYSE: UBA and UBP), missed consensus estimates by $0.04 per share. The company’s FFO of $0.28 per share in the fourth quarter fell 6.7 percent from the $0.30 per share earned during the same quarter in 2007. Its occupancy fell 160 basis points, to 95.0 from 96.0 percent in the same quarter last year.
Kite Realty Group Trust (NYSE: KRG), an Indianapolis-based REIT, missed consensus estimates by $0.02 per share, with fourth quarter FFO of $0.24 per share. The figure represents a decline of 29.4 percent from $0.34 per share in the fourth quarter of 2007. Occupancy at Kite’s 5.6-million-square-foot portfolio fell 190 basis points, to 92.3 percent from 94.2 percent. Its same-store NOI decreased 1.2 percent.
Federal Realty Investment Trust (NYSE: FRT) missed consensus estimates by $0.01 per share, with fourth quarter FFO of $0.99 per share. This represented an increase of 7.0 percent from the fourth quarter of 2007, when Federal’s FFO reached $0.92 per share. Occupancy at the company’s portfolio declined 170 basis points, to 95.0 percent from 96.7 percent a year ago. Its same-store NOI rose 5.5 percent during the quarter.
Acadia Realty Trust (NYSE: AKR) missed consensus estimates by $0.01 per share. The company reported FFO of $0.12 per share for the fourth quarter, a 58.6 percent decline from $0.29 per share in the fourth quarter of 2007. Acadia’s portfolio occupancy fell 90 basis points during the period, to 93.3 percent from 94.2 percent, but its same-store NOI rose 1.2 percent.
Companies that have yet to release their earnings include Equity One (NYSE: EQY), which is scheduled to report on Feb. 25, and Cedar Shopping Centers (NYSE: CDR), which will report in March.