Shares of real estate investment trust (REIT) Federal Realty Investment Trust (FRT) fell 10.5% in July, according to data from S&P Global Market Intelligence. Through the first seven months of the year, the stock is down roughly 40%. As with so many things today, it all ties back to the coronavirus.
Federal Realty owns a focused collection of around 100 or so highly desirable retail centers. Many are anchored by grocery stores, and about a third or so are mixed-use developments that include living, working, and entertainment properties.
But when COVID-19 started to spread, a material portion of the company's tenants were forced to shut their doors. To give an idea of how bad it has been, the company only collected around 50% to 60% of its rents in April and May.
That's not a sustainable level, especially if the REIT wants to maintain its incredible 50-year streak of annual dividend increases, one of the things for which Federal Realty is best known. With its business model under severe stress because of the impact of COVID-19, the stock has tended to trade higher and lower along with the progress in the effort to deal with the illness. With the recent rise in cases as states started to reopen their economies, it isn't surprising that Federal Realty shares traded lower in July.
It's unlikely that Federal Realty's earnings will be particularly good reading throughout the rest of the year. Its business may get progressively better, but that's working off of a very low base. This is a historically well-run REIT, but there's a fair amount of uncertainty today. Investors should expect more volatility in the months to come.