Regency Centers (REG) Completes Urstadt Biddle Acquisition
Regency Centers Corporation REG has closed the prior announced acquisition of Urstadt Biddle Properties Inc. in an all-stock transaction. This has created a combined company with a total equity market capitalization of more than $11 billion and an enterprise value of more than $16 billion.
The acquisition, which expands Regency’s footprint of high-quality, grocery-anchored shopping centers in premier suburban trade areas, is projected to be immediately accretive to core operating earnings.
According to Lisa Palmer, the president and chief executive officer of Regency, “These centers align well with Regency’s portfolio strategy and meaningfully expand our presence in strong trade areas in the Northeast.”
With the combined portfolio comprising 480 properties and encompassing more than 56 million square feet of gross leasable area, the move enhances Regency's geographic diversification, tenant mix, growth prospects and balance sheet strength.
Per the company’s earlier press release with respect to this acquisition, the transaction is expected to be immediately accretive to Regency's core operating earnings, including roughly $9 million of annual cost savings benefit. The merger also preserves Regency’s strong balance sheet and flexibility for further growth, maintaining a pro forma leverage at the low end of its 5X-5.5X target range.
The move combined two highly aligned portfolios of high-quality, open-air shopping centers that are predominantly anchored by grocery stores and located in premier suburban trade areas. Both companies have a successful track record of owning and operating best-in-class retail properties with strong tenant rosters and high occupancy rates. In an industry where strategic alignments can bring about significant growth and value creation, this merger signals a promising future for REG shareholders.
Regency’s strategically located shopping centers in affluent suburban areas and near urban trade areas enable it to attract top grocers and retailers and position it well to ride the growth curve. Its focus on grocery-anchored shopping centers assures dependable traffic, aiding occupancy levels and rent growth. Further, accretive buyouts, an encouraging development pipeline and a solid balance sheet are likely to drive long-term growth.
Shares of this Zacks Rank #2 (Buy) company have rallied 4.9% in the past three months, outperforming its industry’s increase of 2.9%.
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However, higher e-commerce adoption and efforts of online retailers to go deeper into the grocery business are worrisome for Regency. Also, a high interest rate environment adds to this retail real estate investment trust’s woes.
Other Stocks to Consider
Some other top-ranked stocks from the retail REIT industry are Kite Realty Group Trust KRG and Saul Centers, Inc. BFS. Each of these companies also presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Kite Realty Group’s current-year FFO per share has moved marginally north over the past month to $1.98.
The Zacks Consensus Estimate for Saul Centers’ ongoing year’s FFO per share has been revised marginally upward over the past month to $3.07.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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