Great article, Paul! Please forgive the ignorant question, but what do they use the capex for? Is it mostly development of new shopping centers or improvements on existing assets?
Are tenant improvements in this bucket? If so, what's the weighted average lease expiration looking like, and do they disclose average TI spend?
Thanks, Leyla. REIT capex is generally divided into development capex and what I call sustaining capex. New centers are cleanly labeled as the development capex.
Tenant improvements is often called out as an item and for Federal it is labeled "leasing expenses." But there are gray areas, especially related to redevelopment. If you are updating a center to improve its performance, there are options how to label the capex. But in reality you must spend that kind of money to sustain quality and function. I look at the disclosures, whatever they are, and apply my best judgement in labeling the capex.
There are clues. When you see leasing start to run ahead of occupancy, along with a big jump in non-development capex, the two are almost certainly related. Comments over time indicate that the cost of retenanting can run near two years of rent. Federal is spending less than that, at something like 1.3x (supporting my analysis of the capex).
Thanks Paul. I moved some of my FRT over to REG, which is now getting to be a mid-sized position for me. I am debating whether to move the rest of my FRT to ARE, but haven't decided about that one just yet. Anways, you article is much appreciated, so thanks!
I haven't seen a compelling reason to get back into FRT again since I sold off the last of my shares in March '22. Missed that peak in January 2022 but sold on either side in the $20's. Can't complain since I bought in late 2020. I just don't see much price growth and that little dividend growth does nothing for me. I'll have to look into REG, maybe BRX. I'm still putting a little on each dip into ARE. Dividend is higher than FRT and I can wait several years for the price to move.
Great article, Paul! Please forgive the ignorant question, but what do they use the capex for? Is it mostly development of new shopping centers or improvements on existing assets?
Are tenant improvements in this bucket? If so, what's the weighted average lease expiration looking like, and do they disclose average TI spend?
Thanks, Leyla. REIT capex is generally divided into development capex and what I call sustaining capex. New centers are cleanly labeled as the development capex.
Tenant improvements is often called out as an item and for Federal it is labeled "leasing expenses." But there are gray areas, especially related to redevelopment. If you are updating a center to improve its performance, there are options how to label the capex. But in reality you must spend that kind of money to sustain quality and function. I look at the disclosures, whatever they are, and apply my best judgement in labeling the capex.
There are clues. When you see leasing start to run ahead of occupancy, along with a big jump in non-development capex, the two are almost certainly related. Comments over time indicate that the cost of retenanting can run near two years of rent. Federal is spending less than that, at something like 1.3x (supporting my analysis of the capex).
Calmly considered,clearly presented,thorough quality. Once again.
In a world full of hyperbole, there is too little of this level of wisdom and quality around us nowadays.
Thanks PoP. I will keep trying.
Thanks Paul. I moved some of my FRT over to REG, which is now getting to be a mid-sized position for me. I am debating whether to move the rest of my FRT to ARE, but haven't decided about that one just yet. Anways, you article is much appreciated, so thanks!
You are welcome, Dave.
I haven't seen a compelling reason to get back into FRT again since I sold off the last of my shares in March '22. Missed that peak in January 2022 but sold on either side in the $20's. Can't complain since I bought in late 2020. I just don't see much price growth and that little dividend growth does nothing for me. I'll have to look into REG, maybe BRX. I'm still putting a little on each dip into ARE. Dividend is higher than FRT and I can wait several years for the price to move.
Should $120's not 20's.
Thanks Paul, I'm thinking about starting a (small) REG position. Looks better than FRT (which I used to own and sold in the mid $90s a while ago)
as you can tell, I agree.