As part of a strategic step in fortifying its portfolio, Federal Realty Investment Trust FRT recently acquired a 47-acre, grocery-anchored lifestyle center, Del Monte Shopping Center, in Monterey, CA, for $123.5 million. This acquisition adds approximately 674,000 square feet of retail space to Federal Realty’s portfolio and underscores its commitment to owning and operating high-quality, high-traffic retail properties in affluent markets.

Premier retail destination of the Monterey Peninsula, Del Monte Shopping Center is strategically positioned on Highway 1, which serves as the region's major commercial and commuting spine. Within a 15-mile radius, the property is the most visited retail center in the region and serves a trade area of more than 225,000 residents. According to Placer.ai, its annual foot traffic puts it in the top 5% of all shopping centers in the country.

Del Monte Shopping Center is currently 83% leased, and is anchored by Whole Foods and features high-performing retailers such as Apple, Sephora, Lululemon, Pottery Barn and Anthropologie.

Federal Realty, which has a strong track record of owning, managing, and transforming market-dominant centers, plans to add value at Del Monte through strategic lease-up, merchandising, and placemaking enhancements. The Monterey market, along with the company's property enhancement strategy align with assets such as Barracks Road and Virginia Gateway. These assets serve affluent customers in extensive trade areas as their regions' "consolidator" shopping centers.

Per Jan Sweetnam, executive vice president and chief investment officer of Federal Realty, "This acquisition aligns with Federal Realty's strategy to expand into affluent but underserved markets. We look forward to capitalizing on our deep relationships with aspirational retailers looking to expand and enter new markets with a partner who has a history of delivering great places and strong sales."

FRT: In a Nutshell

Federal Realty’s portfolio of premium retail assets in well-off communities with favorable demographics positions it well for growth. A diverse tenant base and a focus on essential retail ensure steady cash flows. The company’s efforts to diversify its portfolio and develop mixed-use assets are likely to benefit it over the long term. Also, efforts to improve its operating performance through conversion, redevelopment and repurposing of assets are encouraging. However, increased e-commerce adoption and high interest expenses are likely to weigh on Federal Realty.

FRT’s Q4 2024 Results

This month, this North Bethesda, MD-based real estate investment trust (REIT) reported fourth-quarter 2024 funds from operations (FFO) per share of $1.73, in line the Zacks Consensus Estimate. Moreover, the figure improved 5.5% on a year-over-year basis. Results reflected healthy leasing activity and significant occupancy gains at its properties.

FRT’s Zacks Rank

Shares of this Zacks Rank #3 (Hold) company have declined 9.7% in the past three months compared with the industry’s decline of 5.3%.

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Stocks to Consider

Some better-ranked stocks from the retail REIT sector are Regency Centers REG and Tanger, Inc. SKT, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Regency Center’s 2025 FFO per share of $4.52 indicates a 5.1% increase year over year.

The Zacks Consensus Estimate for Tanger’s 2025 FFO per share is pegged at $2.25, which suggests 5.6% year-over-year growth.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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