Regency Beats by a Nickel
Regency Centers Corporation (REG) – a real estate investment trust (:REIT) – reported fourth quarter 2012 core FFO (funds from operations) per share of 63 cents, beating the Zacks Consensus Estimate by a nickel. Moreover, this was in line with the year-ago FFO.
For full year 2012, core FFO per share jumped 6.7% year over year to $2.56 and also exceeded the Zacks Consensus Estimate of $2.51. The results were aided by successful execution of strategic initiatives along with significant leasing activity.
The reported FFO for the quarter stood at $58.9 million or 65 cents per share compared with $56.5 million or 63 cents per share in the year-ago period. For 2012, reported FFO stood at $222.1 million or $2.47 per share compared with $220.3 million or $2.48 per share last year.
Behind the Headlines
Total revenue for the fourth quarter reached $116.1 million compared with $119.2 million in the year-ago quarter. However, total revenue marginally beat the Zacks Consensus Estimate of $116 million.
For the full year, the company reported revenues of $473.8 million, marginally dipping from $474.1 million in the previous year. Also, the revenues missed the Zacks Consensus Estimate of $475 million.
During the quarter under review, same-store net operating income (:NOI) excluding termination fees climbed 3.7% on a year-over-year basis, with a rental rate growth of 3.4% (cash basis for spaces vacant less than 12 months).
For the full year, same-store NOI (excluding termination fees) hiked 4.0% from the last year, with a rental rate growth of 5.5% (cash basis for spaces vacant less than 12 months).
Leasing Activity
Regency executed a total of 457 new and renewal lease deals, spanning 1.1 million square feet, during the quarter under review. This represented a 15.4% increase from the last quarter’s figure of 396 deals. For 2012, the company inked a total of 1800 new and renewal lease deals spanning 5.1 million square feet.
At the end of the year, Regency’s same-store portfolio was 94.5% leased, whereas all of its properties were 94.4% occupied.
Portfolio Restructuring Activity
During the quarter, Regency acquired 2 wholly-owned and 2 co-investment in-service assets at a gross price of $192.2 million. The company’s share of the gross price was $148.9 million. At the time of the acquisition, 2 of these properties were burdened with separate mortgage loans, with a combined outstanding principal balance of $61.1 million. Regency’s share of the assumed debt was $38.9 million.
Other noteworthy acquisitions during the quarter include the buyouts of three premium shopping centers – Uptown District, Sandy Springs Plaza and Village Plaza. The properties are anchored by eminent industry-leading grocers such as The Kroger Co. (KR) and Whole Foods Market Inc. (WFM).
In addition, Regency sold 1 wholly-owned and 2 co-investment in-service properties at a gross price of $76.6 million during the quarter. The company’s share of the price was $49.7 million. The company also sold one outparcel for $3.3 million.
During the quarter Regency finished 3 development projects worth $57.0 million. At year-end 2012, the company had 4 projects under development at an anticipated cost of $187.6 million. Also, it had 1 redevelopment project in process with a projected total price (including the pro-rata share of co-investment partnerships) of $8.5 million.
As of Dec 31, 2012, Regency owned 348 retail properties (including those held in co-investment partnerships), spanning a total of 46.3 million square feet located across the top U.S. markets.
Liquidity
Regency maintains a conservative capital structure and follows a self-funding capital strategy to support its growth, which includes disposal of non-strategic assets and a continued focus on industry-leading co-investment partnership programs.
During the quarter, the company used the remaining $100 million amount in its unsecured term loan to partly pay the outstanding balance on the unsecured revolving credit facility worth $800 million. The term loan will mature on Dec 15, 2016.
At the end of 2012, Regency’s cash and cash equivalents stood at about $22.3 million and outstanding total debt came in at $1.9 billion.
Dividend
On Jan 28, 2013, Regency declared a common share quarterly dividend of 46.25 cents per share, payable on Feb 27 to stockholders of record as of Feb 13.
Outlook
For full year 2013, Regency increased its core FFO per share guidance in the range of $2.48–$2.56, from the previous range of $2.45–$2.53.
Our Viewpoint
We are encouraged by the Regency’s fourth-quarter results. The company is actively spreading its footprints in high-income and high-barrier markets through the addition of upscale assets. Also, the inclusion of premium development and redevelopment projects as well as leading national retailers as tenants is noteworthy. Thus, we expect these activities to provide Regency a considerable up-market potential and boosts its top-line growth going forward.
Regency currently holds a Zacks Rank #3 (Hold). In the same industry, Simon Property Group Inc. (SPG) carries a Zacks Rank #2 (Buy) and is scheduled to report its fourth-quarter results on Feb 4, before the opening bell.
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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