REG to Buy Stake in Fairfield Portfolio

Zacks

Regency Centers Corporation (REG) inked a deal to buy 80% stake in a shopping center portfolio in Fairfield, Conn. The portfolio is controlled by Kleban Properties, a regional developer and manager of commercial real estate assets.

The shopping center portfolio comprises three properties –The Brick Walk, Fairfield Center and Black Rock Shopping Center – positioned in prosperous areas in Fairfield. The assets totaling about 315,000 square feet boasts outlets of numerous industry leading retailers like The Gap, Inc. (GPS), L Brands, Inc. (LB) and Fidelity.

We view the above transaction as a strategic fit as it is in line with Regency’s strategic objective of expanding its footprint in high-income and high-barrier markets. With respect to this, in October, Regency and a local joint venture acquired Fellsway Plaza in Medford, Mass. for $42.5 million (Regency’s share was $31.9 million).

Also, in that same month, this retail real estate investment trust (:REIT) disclosed the development of a shopping center – Glen Gate – in Glenview, Ill. These efforts will efficiently expand Regency’s portfolio in infill locations with high occupancy levels and strong tenant sales and offer the company a considerable upside potential going forward.

Notably, driven by better-than-expected growth in revenue and higher net operating income, Regency’s third-quarter 2013 core funds from operations (core FFO) per share of 65 cents, beat the Zacks Consensus Estimate by 2 cents and the year-ago quarter figure by 3 cents. The company also raised its core FFO per share guidance for 2013.

Regency currently carries a Zacks Rank #3 (Hold). Investors interested in REIT-Equity Trust – Retail industry may consider stocks like American Assets Trust, Inc. (AAT) carrying a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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