FRT - Embedded Expectations Analysis - 2020 10 30
Federal Realty Investment Trust (FRT:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 51.5x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about liquidity, rent income, and bankruptcy closuresSpecifically, management may have concerns about the long-term uncertainty in the office leasing space. In addition, they may be overstating the flexibility of their liquidity position, and their ability to treat every negotiation on a tenant-by-tenant and a space-by-space basis. Furthermore, they may be concerned about the sustainability of contractual payments from their tenants that are on a percentage rent basis and the continued rise of their net debt-to-EBITDA. Additionally, management may lack confidence in their ability to materialize the lease negotiation deals in their pipeline, sustain parking revenue, and collect rental income. Finally, they may be downplaying concerns about the occupancy impact of bankruptcy closures and may be concerned about their ability to maintain their dividend
Federal Realty Investment Trust is an equity real estate investment trust that focuses on the ownership, management, and redevelopment of retail and mixed-use properties located primarily in communities in selected metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as in California and South Florida. The company owns or has a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as predominantly retail real estate projects.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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