Federal Realty Investment Trust Releases Tax Status of 2024 Distributions

Federal Realty Investment Trust (NYSE: FRT) has released the tax treatment of its 2024 distributions, providing valuable insights for investors. The trust's common shares and preferred shares have distinct tax characteristics, which can impact the overall investment strategy and tax liability for shareholders.

Common Shares:

The total distribution per share for 2024 was $4.37, consisting of $3.5834 in taxable ordinary dividends, $0.6555 in capital gains, and $0.1311 in nontaxable distributions. The quarterly common share distribution increased from $1.09 to $1.10 in the fourth quarter.

The common shares' annual distribution maintains a tax-efficient structure, with 82% qualifying for the Section 199A deduction. This allows eligible taxpayers to deduct up to 20% of qualified REIT dividends, reducing their taxable income. Additionally, the capital gains component, including unrecaptured Section 1250 gains, reflects healthy property appreciation within the portfolio. The 3% nontaxable distribution portion indicates a return of capital, which defers taxation until the shares are sold.

For international investors, the Section 897 FIRPTA implications are particularly relevant, with approximately 98.4% of capital gains related to Section 1231 gains. This classification can affect withholding requirements and tax treatment for foreign shareholders.



Preferred Shares:

The total distribution for the 5.000% Series C Cumulative Redeemable Preferred Shares was $1.25 per depositary share for 2024, comprising $1.0625 in taxable ordinary dividends and $0.1875 in capital gains. The company reported no foreign taxes for the year.

The preferred shares maintain a straightforward distribution structure, with 85% ordinary dividends and 15% capital gains. This offers a predictable tax treatment profile for income-focused investors. The absence of nontaxable distributions in the preferred shares suggests full dividend coverage from taxable earnings.

In conclusion, Federal Realty Investment Trust's 2024 distributions offer a mix of taxable ordinary dividends, capital gains, and nontaxable distributions for common shareholders, with a focus on tax efficiency and property appreciation. Preferred shareholders benefit from a straightforward distribution structure, with a predictable tax treatment profile. Investors should consult with their tax advisors to determine the specific tax treatment of Federal Realty distributions and consider the implications of Section 199A deductions, unrecaptured Section 1250 gains, and Section 897 FIRPTA implications when making investment decisions.