Regency Centers Corporation (REG) reported second-quarter 2013 Core Funds From Operations (Core FFO) per share of 67 cents, which beat the Zacks Consensus Estimate by 3 cents, but was down by 2 cents from the year-ago figure.
While a dip in both overall revenues and net operating income (:NOI) acted as dampeners, Regency’s results benefited from significant leasing and portfolio restructuring activities. Notably, this retail real estate investment trust (:REIT) raised its Core FFO per share guidance for 2013.
Including non-core items, FFO for the quarter was flat at 68 cents per share with the year-ago period.
Behind the Headlines
Total revenue came in at $120.7 million, down 2.3% year over year and almost in line with the Zacks Consensus Estimate of $121 million.
Same property NOI, excluding termination fees, climbed 5.2% on a year-over-year basis, with same-space rental rate growth of 5.7% (cash basis for spaces vacant for less than 12 months).
Moreover, Regency executed a total of 435 new and renewal lease deals for 1.6 million square feet of space, during the quarter. At the quarter-end, its same property portfolio was 94.6% leased, up 30 basis points (bps) sequentially. On the other hand, all of its properties were 94.3% occupied, up 10 bps sequentially.
Acquisitions & Dispositions
During the quarter, Regency acquired a Dallas-based property – Preston Oaks – for $27.0 million. This neighborhood center spans 103,503 square feet and houses several well-known national and regional retailers including The Gap Inc. (GPS), Pier 1 Imports Inc. (PIR) and White House Black Market.
Also, subsequent to the quarter-end, Regency and one of its co-investment partners bought an off-market asset – Shoppes of Burnt Mills – in Silver Spring for $13.6 million. Notably, the company’s share of the price was $2.7 million. The 31,316 square feet neighborhood center is occupied by leading national retailers such as Starbucks Corporation (SBUX) and Trader Joe’s.
In addition, Regency divested 4 wholly owned properties for $85.3 million during the quarter. The company also sold 1 co-investment asset for $11.2 million, of which Regency’s share was $4.5 million. Additionally, Regency sold 3 outparcels for $2.1 million.
Developments & Redevelopments
During the said quarter, Regency started 3 redevelopment projects. As of Jun 30, 2013, the company had 14 redevelopment projects in its pipeline for a total estimated cost of $45.3 million.
Moreover, at the quarter-end, Regency had 6 development projects in its pipeline for an estimated cost of $240.8 million. The company financed 65% of these projects that – including retailer-owned square footage – were 91% leased and committed.
Subsequent to the quarter-end, Regency declared the commencement of its first ground-up development – Fontainebleau Square – in Miami, Fla. for a projected cost of $52.6 million.
At the end of the quarter, Regency’s cash and cash equivalents were about $64.5 million, up from $28.5 million at the prior quarter-end. The company’s total outstanding debt came in at $1.89 billion, below the $1.93 billion at the end of the previous quarter.
Regency generated gross proceeds of $36.5 million from its at-the-market equity program. Notably, the company issued around 0.7 million new common stocks at a weighted average price of $54.77 per share.
On Jul 29, 2013, Regency declared a common stock quarterly dividend of 46.25 cents per share, payable on Aug 28 to stockholders of record as of Aug 14, 2013.
Regency raised its Core FFO per share guidance for full-year 2013 and now expects it in the range of $2.55–$2.60 (prior range being $2.50–$2.57).
Although declining revenues affected Regency’s second-quarter results, the successful execution of strategic initiatives helped in offsetting the impact. In particular, the company’s focus on spreading its footprint in high-income and high-barrier markets through acquisitions will position it well going forward. Moreover, the inclusion of premium development and redevelopment projects as well as leading national retailers as tenants is noteworthy.
However, Regency’s assets pool mainly comprises community shopping centers, which makes its performance dependent upon general economic conditions of the market for retail space. This remains a plausible concern.
Regency currently carries a Zacks Rank #3 (Hold).
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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