Federal Realty (FRT) Q3 2025 10-Q: Solid Growth Amidst Rising Costs

Federal Realty Investment Trust (FRT), a prominent real estate investment trust (REIT) focused on high-end retail and mixed-use properties in key coastal U.S. markets, has just released its financial results for the third quarter of 2025. In this post, we'll dive into their latest 10-Q filing with the SEC to see how the company is performing and what the numbers tell us about their operational health and strategic direction.

A Picture of Profitability

A great way to understand a company's performance is to visualize how its revenue flows through various costs to eventually become profit. The following flow diagram illustrates Federal Realty's financial performance for the three months ending September 30, 2025.

As the chart shows, the vast majority of FRT's revenue comes from rental income, which is typical for a REIT. Let's dig deeper into these numbers.

Strong Revenue and Operational Growth

Federal Realty reported a solid quarter, with total revenue reaching $322.3 million, a 6.1% increase from the $303.6 million generated in the same quarter last year. The primary engine for this growth was Rental Income, which climbed to $313.2 million from $295.1 million in Q3 2024.

According to the company's Management's Discussion and Analysis (MD&A), this top-line improvement was driven by:

• An $11.7 million increase from property acquisitions.
• A $1.6 million increase from non-comparable properties, largely due to higher occupancy rates.

This performance highlights the strength of FRT's core portfolio and its ability to successfully integrate new assets. A key metric for REITs is Property Operating Income (POI), which measures the profitability of their properties before corporate expenses. FRT's POI saw a healthy 6.3% jump to $216.6 million for the quarter, indicating robust operational efficiency at their properties.

Navigating Rising Costs

While revenues grew, so did expenses. Total property expenses rose 5.7% to $105.7 million, keeping pace with revenue growth. However, a couple of other line items stand out:

• Depreciation and Amortization: This non-cash expense increased by 8.3% to $94.3 million, reflecting the company's growing asset base.
• Interest Expense: A crucial metric to watch, interest expense rose 7.6% to $47.6 million. The company attributes this to a combination of higher average borrowings and a decrease in the amount of interest capitalized for development projects.

Despite these rising costs, Federal Realty's Net Income for the quarter was $64.5 million, a slight increase from $63.5 million in the prior year. This translates to earnings per share of $0.69, compared to $0.70 in Q3 2024.

The Bigger Picture

For the first nine months of 2025, Federal Realty's net income attributable to the trust jumped an impressive 22.5% to $281.3 million, up from $229.7 million in the same period of 2024. This was significantly boosted by a $77.7 million gain on the sale of real estate earlier in the year.

The company continues to invest in its future, with several major projects underway, including a 258-unit residential project at its flagship Santana Row property. These developments, along with strategic acquisitions, are central to FRT's long-term growth strategy.

In conclusion, Federal Realty's Q3 2025 results paint a picture of a stable and growing enterprise. The company is effectively leveraging its high-quality portfolio to drive revenue and operational income. While rising interest expenses remain a key factor for all real estate companies, FRT's strong operational performance and strategic investments position it well to continue navigating the current economic environment.