Regency Centers (REG) Q2 FFO Beats Estimates, NOI Climbs

Zacks Equity Research
Updated
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Regency Centers Corporation’s REG second-quarter 2017 core funds from operations (“FFO”) per share of 93 cents came ahead of the Zacks Consensus Estimate of 90 cents. Further, the results compared favorably with 82 cents reported in the year-ago quarter.

Results reflect growth in same property net operating income (“NOI”).

Total revenue for the quarter came in at $261.3 million, up from $152.4 million recorded in the prior-year quarter. Total real estate revenues of $240.4 million in the quarter compared favorably with the year-ago period tally of nearly $144.0 million.

Regency Centers Corporation Price, Consensus and EPS Surprise
 

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

Note: The EPS numbers presented in the above chart represent funds from operations (“FFO”) per share.

Inside the Headlines

During the quarter, Regency executed 1.7 million square feet of new and renewal leases on a comparable basis, leading to 9.4% blended rent spreads. Rent spreads on new leases came in at 13.5%, while the same for renewal leases was 8.7%.

As of Jun 30, 2017, the total portfolio was 95.0% leased. Moreover, the same property portfolio was 95.9% leased, reflecting a contraction of 10 basis points (bps) sequentially and 20 bps year over year when adjusted for the present same property pool. In the same property asset portfolio, small shops were 92.1% leased, reflecting an uptick of 30 bps sequentially and 80 bps year over year.

In addition, Regency’s same property NOI as adjusted, excluding termination fees, climbed 3.2% on a year-over-year basis. It included a 70 bps positive impact from redevelopments.

Regency’s cash and cash equivalents were $104.7 million at the end of second-quarter 2017, up from $17.9 million at the end of 2016. The company’s total outstanding debt was $3.5 billion, up from $1.64 billion at the end of the previous year.

Notable Portfolio Activity

During the quarter under review, Regency started the development of Mellody Farm, a 252,000 square foot center in the Chicago metro area, with total estimated net development costs of $97.4 million.

On the other hand, during the quarter, the company sold one wholly owned property and one co-investment property, for a total gross price of $25.1 million, with Regency’s share being $7.1 million.

At second-quarter end, the company had 29 properties in development or under redevelopment with combined, estimated net development costs of over $600 million.

Outlook

Regency updated its guidance for 2017. The company now expects core FFO per share in the $3.62–$3.68 band, against the prior guided range of $3.60–$3.68. The Zacks Consensus Estimate for the same is currently pegged at $3.65.

Dividend Update

On Aug 2, Regency’s board of directors announced a quarterly cash dividend of 53 cents per share on its common stock. This dividend will be paid on Aug 30 to shareholders of record as of Aug 16.

Our Take

Regency’s focus on building a premium portfolio of grocery-anchored shopping centers augurs well for the long term. Such centers are usually necessity driven and attract huge traffic. In addition, presence of a cluster of leading grocers will cushion the company from market swings.

Further, the company’s merger with Equity One elevated the company’s position in the retail real estate market and offered it with a host of opportunities to drive long-term growth. However, shift in retail shopping from brick and mortar stores to internet sales, and rate hikes remain concerns for the company.

Regency currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Let us now look forward to the earnings releases of Condor Hospitality Trust Inc. CDOR, FelCor Lodging Trust Incorporated FCH and Hospitality Properties Trust HPT, all of which are expected to report their quarterly numbers in the upcoming days.

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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