Regency Centers Corp.’s REG has a high-quality portfolio of shopping centers, located in favorable trade areas. The company’s focus on grocery-anchored shopping centers, which are usually necessity driven, offer ample prospects to generate steady cash flows and drive long-term growth. Nevertheless, the company is not immune to the turbulent retail real estate space.
Regency has a considerable experience in the retail real estate industry and has developed several retail real estate projects over the years. In fact, the company’s $1 billion of development and redevelopment starts, over the last five years, are leading to significant value creation. Additionally, backed by its capabilities, the company expects to deliver $1.25-$1.50 billion in developments and redevelopments at attractive returns, over the next five years. Also, with 80% of its properties being anchored by leading grocers, the company has solid scope to generate steady cash flows.
Moreover, large pool of unencumbered assets and good relationships with lenders is a driving factor for the company. Its debt-maturity profile is well laddered with limited near-term maturities. The company also enjoys substantial liquidity and capacity, with $1.25 billion line of credit.
However, the retail real estate market is witnessing a shift in retail shopping from the brick-and-mortar stores to Internet sales. Particularly, the recent efforts of online retailers to go deeper into the grocery business have emerged as a concern for this REIT that focuses on building a premium portfolio of grocery-anchored shopping centers. Store closures and bankruptcies are becoming rampant.
The company has maintained its same-property NOI growth in the range of 2-2.5%, which is below its 3% strategic objective. This can be attributed to near-term headwinds associated with Sears locations, as well as a muted contribution from redevelopments in 2019.
Also, at the end of second-quarter 2019, the company had 23 properties in development or redevelopment, indicating estimated net project costs of approximately $474 million. Although increase in development and redevelopment projects pipeline is encouraging, it exposes the company to various risks such as rising construction costs, entitlement delays and lease-ups. Further, such initiatives involve significant upfront costs and dampen the margin until the properties get established.
Amid these, shares of Regency have lost 2.1% over the past three months as against the 0.9% rise of the industry. The Zacks Consensus Estimate for current-year funds from operations (FFO) per share has been revised marginally downward to $3.84 in the past 30 days. Currently, the stock holds a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SITE Centers Corp. SITC has been witnessing upward FFO estimate revisions for 2019, for the past 60 days. Moreover, this Zacks #2 Ranked (Buy) company has appreciated 28%, year to date.
KLEPIERRE SA‘s KLPEF 2019 earnings estimate has been revised marginally upward, over the past 60 days. Further, the company’s shares have gained 1.5% in the year-to-date period. At present, it carries a Zacks Rank of 2.
Brixmor Property Group Inc.’s BRX ongoing-year FFO estimate moved north in 60 days’ time. Additionally, the stock has appreciated 29.6%, so far this year. It currently holds a Zacks Rank of 2.
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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Regency Centers Corporation (REG) : Free Stock Analysis Report
Brixmor Property Group Inc. (BRX) : Free Stock Analysis Report
KLEPIERRE SA (KLPEF) : Free Stock Analysis Report
SITE CENTERS CORP. (SITC) : Free Stock Analysis Report
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