Rockville-based Federal Realty Investment Trust (NYSE: FRT) was able to power through the first quarter of 2020 to profitability. The owner of some of the most coveted mixed-use projects in the Washington, D.C. area reported earnings only slightly below analyst estimates. Net income came in at $52.8 million or $0.70 per share versus the average analyst estimate of $0.72 per share but President and Chief Executive Officer, Donald Wood gave special attention to three properties in Federal Realty’s portfolio that he said were the top three performers out of the company's 104 properties.
When asked if people would move to less dense and more rural areas due to the impact of the COVID-19 pandemic, Wood said this about Pike and Rose in North Bethesda, Assembly Row in Somerville, Mass (next to downtown Boston) and Santana Row in Silicon Valley. "...I do believe in those first tier suburbs, where we are; the ability to have it all." Wood continued "...In our big three; Assembly Row, Pike and Rose, and Santana Row, all of whom are in those first tier suburban areas, while we absolutely did not collect a lot of the lifestyle rent on the retail side, overall, we collected two thirds of the rent due in those properties, because of the residential, because of the office component to [them], so the notion of those places as kind of centers of jobs, those places as centers of living and the new style for doing it; I think we’re right in the middle of it, right where we belong.” Wood reaffirmed his support for those areas "...at the end of the day the real estate is surely conducive to where the jobs are."
Wood contributed part of the success to the their geography, where those projects are located in a “Goldilocks zone” of their respective metro areas. While dense urban areas have been some of the hardest hit by the COVID-19 pandemic, the ideal locations for Federal Realty’s projects are situated in “first ring” urban districts inside a sea of suburbia but coupled with adjoining job centers and a wealthy demographic. “We see the geography negative in the short-term, as a huge positive on the other side of this. At the end of the day real estate needs to be near high paying job centers to be able to grow in value, ours are” Wood stated.
While Santana Row sticks out in a sea of single family homes and Assembly Row sprung out of an industrial location, Pike and Rose is a mixed-use infill project that became part of the Pike District; an area in Montgomery County that already had a significant amount of office and residential high-rises. It’s also worth noting that Pike and Rose is about 10 miles from downtown D.C. while Santana Row is approximately three miles from downtown San Jose and Assembly Row is two miles from downtown Boston.
The company that also developed Bethesda Row in downtown Bethesda and Pentagon Row in Arlington County, Va, announced last year it would be moving its headquarters to 909 Rose, a new office building under construction in Pike and Rose.
edited:05-22-20 10:36 A.M.