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Regency Centers' (REG) Q2 FFO & Revenues Miss Estimates

Zacks Equity Research

Regency Centers Corporation’s REG second-quarter 2019 NAREIT funds from operations (FFO) per share came in at 95 cents (including a charge of 2 cents per share for a one-time non-cash expenses), which missed the Zacks Consensus Estimate of 96 cents. Nonetheless, the figure improves from the year-ago tally of 93 cents. The quarterly results reflect a decline in revenues.

Total adjusted revenues in the quarter came in at $268.4 million, lagging the Zacks Consensus Estimate of $271.9 million. In addition, the figure declined from the year-ago tally of $274.5 million.

Inside the Headlines

During the reported quarter, Regency executed around 1.9 million square feet of comparable new and renewal leases, leading to rent spread on new leases and renewal leases of 6.9% and 7%, respectively, with blended rent spreads for the June-end quarter of 7%.   

As of Jun 30, 2019, the company’s wholly-owned portfolio, along with its pro-rata shares of co-investment partnerships, was 94.7% leased. The company’s same-property portfolio was 95.1% leased, indicating an expansion of 10 basis points (bps) sequentially and descend of 60 bps year over year.

However, same property net operating income, excluding termination fees, climbed 1.4% on a year-over-year basis, affected by the Sears bankruptcy.

Regency’s cash and cash equivalents were $37.4 million at Jun 30, 2019, down from $45.2 million recorded at the end of 2018. The company has fixed charge coverage of 5x.

Portfolio Activity

During the reported quarter, the company acquired a multi-tenant retail building — 6401 Roosevelt — in Seattle, WA, for $3.6 million. Also, subsequent to the quarter end, the company acquired The Pruneyard in Silicon Valley, for around $212.5 million.

Moreover, during the second quarter, Regency commenced a ground-up development project and four redevelopment projects.

Also, at the end of second-quarter 2019, the company had 23 properties in development or redevelopment, indicating a total investment of $474 million. Moreover, in-process development and redevelopment projects were 89% leased and projected to yield an average return of 7.6%.


Regency has updated its 2019 NAREIT FFO per share outlook, incorporating one-time non-cash straight-line rent charge of 2 cents.

Particularly, the company now expects 2019 NAREIT FFO per share of $3.81-$3.85 compared with $3.80-$3.86 guided earlier. The Zacks Consensus Estimate for the same is currently pegged at $3.85.

The company’s full-year outlook is backed by same-property NOI growth, excluding termination fees of 2-2.5%.

Dividend Update

On Jul 31, Regency’s board of directors announced a quarterly cash dividend of 58.5 cents per share on its common stock. This dividend will be paid on Aug 22, to shareholders of record as of Aug 12, 2019.

Our Take

Regency put up a lackluster show in the second quarter. Although the company has a premium quality portfolio of shopping centers, located in strong trade areas, it is not immune to the ongoing store closures and retail bankruptcies. In fact, the Sears bankruptcy affected the company’s same-property portfolio leased rate and same-property NOI during the second quarter.

Nonetheless,Regency has resorted to asset sales and reinvesting the proceeds in value accretive developments and acquisitions with better prospects. This will likely improve its portfolio quality and fuel long-term growth.

Regency Centers Corporation Price, Consensus and EPS Surprise

Regency Centers Corporation Price, Consensus and EPS Surprise

Regency Centers Corporation price-consensus-eps-surprise-chart | Regency Centers Corporation Quote

Regency currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Kimco Realty Corp.’s KIM second-quarter 2019 FFO as adjusted came in at 36 cents per share, in line with the Zacks Consensus Estimate. The reported figure came in a penny less than the year-ago quarter’s FFO as adjusted of 37 cents per share.

Taubman Centers Inc. TCO reported second-quarter 2019 adjusted FFO per share of 94 cents, beating the Zacks Consensus Estimate of 83 cents. The figure also compared favorably with the year-ago quarter’s reported tally of 87 cents.  

Simon Property Group, Inc.’s SPG second-quarter FFO per share of $2.99 per share exceeded the Zacks Consensus Estimate by a whisker. The FFO per share figure also surpassed the year-ago quarter’s reported tally of $2.98.

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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