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Regency Centers (REG) Q3 FFO Meets Estimates, Revenues Up

Zacks Equity Research

Regency Centers Corporation’s REG fourth-quarter 2017 core funds from operations (FFO) per share of 92 cents came in line with the Zacks Consensus Estimate. Results compared favorably with 86 cents reported in the year-ago quarter.

The company’s quarterly results reflect growth in same-property net operating income (NOI) and strong leasing activity during the quarter.

Adjusted revenues for the quarter came in at $257.9 million, marginally outpacing the Zacks Consensus Estimate of $257.1 million. Further, the figure came in higher than the year-ago tally of $153 million.

For full-year 2017, Regency came up with core FFO per share of $3.69, ahead of the prior-year tally of $3.29. However, it missed the Zacks Consensus Estimate by a penny.

Adjusted revenues for the full-year came in at $958.17 million, slightly above the Zacks Consensus Estimate of $958.16 million. The figure came in significantly higher than the year-ago tally of $589 million.

Inside the Headlines

During the reported quarter, Regency executed 1.8 million square feet of new and renewal leases on a comparable basis, leading to 6% blended rent spreads. Rent spreads on new leases came in at 2.2%, while the same for renewal leases was 7.1%.

New leasing corresponded to roughly 443,000 square feet, with Anchors’ representation of about 60% of new activity, which compares favorably with an average of 30%, recorded in the year-ago quarter.

As of Dec 31, 2017, the company’s wholly-owned portfolio, including pro-rata shares of co-investment partnerships, was 95.5% leased. Moreover, the same-property portfolio was 96.3% leased, reflecting an expansion of 30 basis points (bps) sequentially and year over year, when adjusted for the present same property pool. In the same-property asset portfolio, small shops were 92.5% leased, reflecting an uptick of 10 bps sequentially and 40 bps year over year. Further, within the same-property portfolio, Anchors were 98.6% leased, reflecting a growth of 40 bps sequentially and year over year, when adjusted for the present same property pool.

In addition, Regency’s same-property NOI as adjusted, excluding termination fees, climbed 2.7% on a year-over-year basis.

Regency’s cash and cash equivalents were $49.4 million at the end of fourth-quarter 2017, up from $17.9 million recorded at the end of 2016. The company’s total outstanding debt was $3.6 billion, up from $1.64 billion witnessed at the end of the previous year.

Notable Portfolio Activity

During the quarter under review, the company sold five shopping centers, for a total value of $103 million. Regency closed acquisitions of two properties for about $150 million during the quarter.

As the fourth quarter ended, the company had 23 properties in development or under-development with combined, estimated net development costs of over $544 million.


Regency expects the operating FFO per share to be in the range of $3.48–$3.54, this reflects no change from the guidance issued on Jan 11, 2018.

The company expects 2.25%-3.25% growth in same property net operating income, excluding termination fees. Acquisitions and dispositions are expected to be approximately $150 million each.

Dividend Update

On Feb 6, Regency’s board of directors announced a quarterly cash dividend of 55.5 cents per share on its common stock, denoting an increase of 5.7%. This dividend will be paid on Mar 2 to shareholders of record as of Feb 20, 2018.

Capital Market Activities

The company issued 1.25 million shares of the common stock and received approximately net proceeds of $89.1 million after making adjustments for interest, dividends and the underwriters’ discount.

Regency’s board authorized share repurchase of its common stock for up to $250 million by Feb 6, 2020.

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 enjoy dependable traffic. Furthermore, the company’s focus on small-shops portfolio has proved beneficial for the company. Also, the company’s merger with Equity One has elevated the former’s position in the retail real estate market and offered a host of opportunities to drive long-term growth.

However, Regency incurred merger-related costs, which impacted its bottom line. In addition to this, the recent trend of online retailers, to go deeper into the grocery business, has emerged as a concern for this real estate investment trust (REIT).

Regency Centers Corporation Price, Consensus and EPS Surprise

Regency Centers Corporation Price, Consensus and EPS Surprise | 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.

We now look forward to the earnings releases of other REITs like HCP HCP, CubeSmart CUBE and EPR Properties EPR. HCP and CubeSmart are scheduled to release results on Feb 13 and Feb 15 respectively, while EPR Properties is slated to report its numbers on Feb 28.

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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