FEDERAL REALTY INVESTMENT TRUST (FRT) stock intrinsic value fair value estimate & owner earnings analysis

Federal Realty owns 104 mostly retail properties (about 28.8 million square feet): grocery-anchored centers and mixed-use districts such as Santana Row (San Jose, CA), Bethesda Row and Pike & Rose (Maryland) and Assembly Row (Somerville, MA). At year-end 2025 they were 96.1% leased and 94.1% occupied, and tenants are contractually committed to about $5.4 billion of minimum future rent, including roughly $850 million in 2026 and $810 million in 2027. The company has raised its dividend for 58 consecutive years. How we measured earnings. We start from operating cash flow, remove working-capital swings and stock compensation, and deduct the money needed to keep the centers competitive: redevelopment, other capital spending and leasing costs (tenant allowances and commissions). Property purchases are left out because they are discretionary and financed separately. Most redevelopment spending is treated as a cost of standing still, which is conservative. On that basis 2025 owner earnings were about $318 million ($3.69 per share), versus $3.76 in 2024. In 2022 they were $1.50 and in 2021 $0.43, when the company was spending $300-440 million a year on development at Pike & Rose, Assembly Row and Santana Row (as it did in 2016-2020, when 2020 also brought the pandemic and an 11% revenue drop). Those years describe a different phase of the business, so we anchor on 2023-2025 only. Debt is handled in the order lenders are paid. We add back cash interest ($172 million in 2025) to get the cash the properties produce before lenders: $4.77, $5.78 and $5.68 per share in 2023, 2024 and 2025. The median, $5.68 per share (about $490 million), is our starting point. We value that stream at a flat 6% and then subtract what the company owes, once. Net debt is about $4.9 billion: roughly $4.86 billion of borrowings at March 31, 2026 (credit facility and term loans $1.37 billion, senior notes $2.97 billion, mortgages $0.52 billion), less $116 million of cash, plus $158.5 million so that the February 2026 sale of a Santana Row residential building and Courthouse Center is not counted twice (we keep their earnings in the starting point and ignore the sale proceeds). The debt carries a 3.8% average rate, well below 6%, so we reduce the debt figure by about $250 million (the present value of the below-6% interest until each maturity). We also subtract $252 million for outside partners' interests in consolidated properties. The total is about $4.9 billion, or $56.60 per share on 86.7 million shares. Growth. Owner earnings per share slipped about 2% in 2025 (higher capital spending), yet our base case assumes +3% in year one. The dated reason: more than $600 million of the $735 million of properties bought in 2025 closed after the first quarter, so 2026 gets a full year of income from properties that are already paid for and included in the debt above; in the first quarter of 2026 revenue rose 10.3% and operating cash flow plus interest rose 5.3% versus the first quarter of 2025. After that we credit only 1.5% a year for years 2-10, at or below the dividend's 1.7% annual growth since 2016 ($3.80 to $4.43); comparable-property rental income grew $36.4 million in 2025 (about 3% of prior-year revenue), which supports at least that. From year 11 the base case holds earnings flat, which the long-lived leases and property locations support without needing any new growth. Left out: new development phases (management describes them as opportunistic), further acquisitions, and lower capital spending. Cases (business value, less what it owes, equals value per share): - Bear: $73.54 - $56.60 = $16.94. It starts from the weakest recent year ($4.77) and declines 1% a year for ten years, then stays flat, because costs are growing faster than rents (2025 property expenses rose 6.9% and real estate taxes 6.5%, against comparable-property rental income growth of about 3%). Even then the properties generate about twice their interest bill, so the debt is carried. - Base: $108.01 - $56.60 = $51.41. - Bull: $119.99 - $56.60 = $63.39. It starts from $5.78 (2024), grows 5% in year one (in line with the first-quarter trend), then 2.5% a year through year 10 (below the roughly 3% annual growth in revenue per share since 2016), as the 2-point gap between leased and occupied space fills. Flat afterwards. Debt watch-points. Principal was about $4.96 billion at year-end 2025, with roughly $0.66 billion due in 2026, $1.0 billion in 2027, $1.16 billion in 2028 and $0.95 billion in 2029, so over $3 billion must be refinanced within three years, probably at higher rates than today's 3.8% average (the revolving credit line averaged 5.0% in 2025). A $200 million Bethesda Row mortgage due in 2026 has an option to extend to December 2027. A new $250 million term loan and a 2025 mortgage refinancing were priced at SOFR plus 0.85%, which suggests lenders view the credit as strong. In the first quarter of 2026 senior notes outstanding fell by about $0.4 billion while bank borrowings rose about $0.3 billion. What we tested. We challenged the idea that capital spending will fall back: the filing shows $314 million of committed redevelopment and capital contracts ($239 million due within 12 months) and $375 million of construction in progress, against 2025 development and other capital spending of $291 million, so nothing supports assuming relief and our starting point keeps 2023-2025 spending levels. Because the company is leveraged, a 1% change in business value moves the share value by about 2%. The values would prove too high if refinancing costs land well above 6% or if rents and occupancy fall; they would prove too low if the development already under way earns more than we credit. Change since our last analysis. We previously showed $0.00 / $3.61 / $31.10. That work used discount rates of 8.5% to 11.5% and a different capital-spending treatment; this update values the properties before their lenders, subtracts debt once and uses a flat 6%, which is the main reason for the higher figures. The business itself has not changed dramatically.