“The basis of our strategy is a solid platform of high-quality assets that provide superior levels of growth through rental increases and consistently strong occupancy, but allows us to take a much more selective approach to things like acquisition and development. It’s low risk, but higher growth. Over the last 50 years we’ve been very, very disciplined in the way we invest our money in retail assets in the nation’s best markets,” Andy Blocher, CFO of Federal Realty, told AdvisorOne on Tuesday, adding that despite the trust’s 50-year history, it only owns 88 properties.
“Our asset base hasn’t expanded nearly to the extent as some of our others, but we’ve always been very disciplined in how it is that we’ve approached it. The key to our strategy is owning stuff in the best locations, in the best markets in the country,” Blocher said.
FRT owns properties primarily on the East and West Coasts, Blocher (left) says. In California, there are properties in the Bay Area, South Bay and San Jose, as well as in Los Angeles and San Diego in Southern California. On the East Coast, FRT owns properties in Washington, Baltimore, Philadelphia, New York, Boston and throughout New Jersey. In 2008, Blocher says, they started shopping in insular markets in South Florida, purchasing properties in Palm Beach, Broward County and Miami-Dade County.
In selecting a property, there are three characteristics, Blocher says. “One, those markets, and our properties in particular, have very, very strong levels of population that surround them; there’s a lot of people. Two, they have very high household income and high levels of educational attainment. And three, and probably most importantly, is they are insular in nature.” By that he means the area is built up enough that the completion is unlikely to purchase land nearby. “The last thing you want to do is have a great asset and then have one of your competitors buy the lot across the street and build the same thing,” he says.
While the economy does present challenges, Blocher notes that different markets feel economic pressure in different ways. In fact, while there hasn’t been a dramatic improvement in his markets, he has seen “continued strength.” For full-year 2011, new tenants are paying 9% more than tenants previously in a particular property, he says. “We’re able to find good tenants in order to beef up some of the vacancies that we have. We continue to be able to drive good solid rent deals.”
“It’s by no means back to where we were in ’05, ’06, ’07, but we continue to see good, solid, stable performance,” he states.