Federal Realty’s FRT portfolio of premium retail assets in well-off communities with favorable demographics positions it aptly for growth. A focus on essential retail and efforts to develop mixed-use assets aimed at diversification are likely to benefit the retail REIT over the long term. A strong balance sheet provides it with ample liquidity.

However, higher e-commerce adoption and potential tenant bankruptcies remain concerns. The high debt burden adds to its woes.

Last month, FRT announced the sale of Levare, a 108-unit residential building within Santana Row, San Jose, CA, for $74 million. Due to this sale, Federal Realty will be able to enhance its focus on key markets and boost its financial flexibility, allowing it to invest in high-performing assets that align more closely with its long-term growth objectives.

What’s Hurting FRT Stock?

Federal Realty’s portfolio of premium retail assets — mainly situated in the major coastal markets from Washington, D.C., to Boston, San Francisco and Los Angeles — along with a diverse tenant base, both national and local, positions it well for decent growth. The company has strategically selected the first-ring suburbs of nine major high-barrier markets, ensuring resilience and growth. Due to the strong demographics and infill nature of its properties, the company has maintained a healthy occupancy level over the years. As of March 31, 2025, the portfolio occupancy rate was 93.6%, an increase of 180 basis points (bps) year over year.

FRT enjoys a well-diversified tenant base of retailers, including industry giants like TJX Companies TJX, Ahold Delhaize ADRNY and CVS Corporation CVS. This limits the company’s risk to any particular retail industry and positions it well for experiencing a stable source of rental revenues. With a well-located portfolio and 80% of its centers having a grocery component offering essential goods and services, FRT is poised to experience an improving leasing environment.

Federal Realty’s efforts to diversify its portfolio with residential and office properties are likely to pay off. Exploring the mixed-use development option, which has gained immense popularity in recent years, will enable the company to tap into growth opportunities in areas where people prefer to live, work and play. As of March 31, 2025, the company had $515 million of mixed-use expansion projects in process. As of the same date, 12% of ABR came from residential properties, while 10% came from mixed-use office assets.

Federal Realty focuses on maintaining a decent balance sheet position with ample liquidity. The company exited the first quarter of 2025 with $109.2 million in cash and cash equivalents and $109 million drawn under its $1.25 billion total unsecured revolving credit facility. The annualized net debt-to-EBITDA ratio was 5.7 as of March 31, 2025.