Donald Wood
Chief Executive Officer at Federal Realty Investment Trust
Thanks, Leah, and good afternoon, everybody. And special thanks to David Simon for finishing his call more or less on time this afternoon. All-time record-setting quarter for Federal Realty this time with $1.67 second quarter FFO per share result ahead of consensus, ahead of internal expectations and ahead of last year's second quarter.
By the way, last year's second quarter was helped by a large termination fee from Amazon as they exited their brick-and-mortar bookstores. Ex termination fees, this quarter's bottom line FFO per share growth grew 5% despite significantly higher interest expense. That's a really strong quarter for us.
Leasing velocity continues to be the highlight. We signed 107 comparable leases of 576,000 square feet at $35.34 a foot, 7% higher than the cash basis rent the previous tenant was paying in the final year of their lease, 19% on a straight-line basis. Demand was exceptional.
When you include noncomparable leases, which, by the way, for us, largely relates to newly built out space on our redevelopment and development projects, along with our office leasing, we executed 135 leases in the second quarter for a very robust 652,000 square feet, representing $23 million of newly contracted annual rent. These are production numbers that lie well outside the averages over our very long history, and we'll go a long way towards offsetting the loss at Bed Bath & Beyond and Christmas Tree Shop income stream in 2024 until they're re-leased and rent paying.
In terms of Bed Bath, we lost 1 of our remaining 9 Bed Bath leases during the quarter. That lease, a 25,000 square foot box at Mont Burnon Plaza [Phonetic] in Northern Virginia, has been re-leased to Burlington at a 57% rent increase. Three more Bed Bath leases were rejected effective June 30 and July rent was received on the remaining 5. 2 of the remaining 5 were buybuy BABY locations that were assumed by online baby retailer Dream on Me, and we, therefore, expect to continue to receive rents in the future.
The remaining 3 leases were rejected in the third quarter, and accordingly, we'll have a hit to occupancy of about 1% and lost rent of $2.5 million or so for the balance of 2023, all of which has been considered in our guidance. Deals are in the works for all of our Bed Bath locations and replacement rent will start to ramp up in late 2024.
Both leased and physical occupancy continued to improve compared with the previous quarter and the previous year. 94.3% leased, a 92.8% physical occupancy at quarter end are up 10 and 20 basis points, respectively, compared with the first quarter and 20 and 80 basis points, respectively, year-over-year.
Small shop occupancy gains, in particular, continued their trend during the quarter and increased 20 basis points on a lease basis and 40% on an occupied basis. That's a total increase in small shop occupancy of 310 basis points since Q1 '22. The quality of our small shop tenants and the discerning way that we choose them at our properties is where we create a ton of value. All small shop vacancy or tenancy rather is not created equal.
I've noted in the past couple of quarters that leasing productivity and rate that have occurred at the properties we've acquired over the past several years has significantly exceeded our underwriting and that has continued. Similarly, leasing productivity at properties that have recently undergone redevelopment and/or property improvement plans have outperformed our expectations, and we expect that to continue, means that maybe we can be a bit too conservative at times.
The roughly 3,100 apartments that make up an important part of the revenue stream at our mixed-use and other properties remain a real differentiating bright spot for our portfolio and continue to add to both cash flow and to value. In the aggregate, our residential portfolio was 98% leased at June 30 and provided 11% more property operating income this quarter than compared with the last year's second quarter.
Resi is a super important component of our mixed-use neighborhoods as is the office component, which is also 98% leased outside Santana West and the Choice headquarters building, which is under construction. We did, by the way, deliver the newly built out office space to Choice Hotels this quarter and expect them to finish their work and occupy the building by year-end. Sodexo in the same building will follow right behind.
I reported last quarter that inquiries and property tours have seen renewed life at Santana West, and that has certainly continued. Even the Northern California press is starting lower layoffs and dramatic new investment and hiring in areas like AI, electric vehicles and related technologies. Feels like Silicon Valley is stabilizing.
So I look back and I think about what it is that we're doing, and I kind of tell you that some of the country's most productive and well-known mixed-use communities sitting just outside San Jose, Boston, Washington, D.C., and Miami seem to us, seem to me, be the right on the mark of the product that is and will remain in high demand as resilient consumers continue to prove that to be so.
Let me turn it over to Dan before opening it up to your questions.