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Regency Centers (REG) Q1 FFO and Revenues Beat Estimates

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Regency Centers Corporation’s REG first-quarter 2018 funds from operations (FFO) per share of 96 cents surpassed the Zacks Consensus Estimate of 94 cents.  Further, results compared favorably with 27 cents reported in the year-ago quarter. However, results in the year-ago period included one-time merger-related costs of 55 cents per share.

The company’s quarterly results reflect growth in same-property net operating income (NOI).

Adjusted revenues for the quarter came in at $269.5 million, outpacing the Zacks Consensus Estimate of $263.1 million. In addition, the figure came in higher than the year-ago tally of $189.4 million.

Inside the Headlines

During the reported quarter, Regency executed around 1.0 million square feet of new and renewal leases on a comparable basis, leading to 8.4% blended rent spreads. Rent spreads on new leases came in at 15.5%, while the same for renewal leases was 6.8%.

As of Mar 31, 2018, the company’s wholly owned portfolio, along with its pro-rata shares of co-investment partnerships, was 95.1% leased. The same-property portfolio was 95.7% leased, which reflected a contraction of 40 basis points (bps) sequentially, however, remained flat year over year.

In addition, Regency’s same-property NOI as adjusted, excluding termination fees, climbed 4.0% on a year-over-year basis, mainly due to growth in base rent. Also, it reflects adjustments for the Equity One merger.

Regency’s cash and cash equivalents were $93.6 million at the end of first-quarter 2018, up from $49.4 million recorded at the end of 2017. The company’s total outstanding debt was $3.8 billion, up from $3.6 billion witnessed at the end of the previous year.

However, during the reported quarter, the company completed a public offering of $300 million 4.125% notes due 2028, as well as increased the size of its unsecured revolving credit facility to $1.25 billion, with maturity extension to 2023.

Notable Portfolio Activity

During the quarter under review, the company closed on $64.9 million of acquisitions and $3.5 million of dispositions.

At the first-quarter end, the company had 19 properties in development or redevelopment with combined, estimated net development costs of approximately $454 million.

Outlook

Regency expects FFO per share of $3.74-$3.79 compared with the previous guidance of $3.73-$3.82. The Zacks Consensus Estimate for the same is currently pegged at $3.80.

The company expects 2.40%-3.25% growth in same-property net operating income, excluding termination fees, compared with 2.25%-3.25% guided earlier.

Dividend Update

On Apr 25, Regency’s board of directors announced a quarterly cash dividend of 55.5 cents per share on its common stock. This dividend will be paid on May 30 to shareholders of record as of May 16, 2018.

Share Repurchase Update

During the first quarter, the company purchased 2.145 million shares of common stock at an average price of $58.24 per share for $125 million under its $250-million stock-repurchase program that is slated to expire on Feb 6, 2020.

Our Take

Regency has resorted to strategic acquisitions in a bid to fortify its portfolio in thriving sub-markets. The company has been focusing on building a premium portfolio of grocery-anchored shopping centers, which are usually necessity driven and enjoy dependable traffic. However, recent efforts of online retailers to penetrate deeper into the grocery business have emerged as a concern. Additionally, rate hike adds to its woes.

Regency currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
 

Regency Centers Corporation Price, Consensus and EPS Surprise
 

Regency Centers Corporation Price, Consensus and EPS Surprise | Regency Centers Corporation Quote

We now look forward to the earnings releases of other REITs like Essex Property Trust Inc. ESS, Host Hotels & Resorts, Inc. HST and Federal Realty Investment Trust FRT, all of which are slated to report quarterly numbers on May 2.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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