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Regency Centers Revises Outlook, Updates Investment Activity

Zacks Equity Research

Retail REIT Regency Centers Corporation REG recently revised its outlook for 2017 and provided the preliminary guidance for 2018. Moreover, the company reported its fourth-quarter 2017 acquisitions and dispositions.

Specifically, the company projects core funds from operations (FFO) per share for 2017 in the band of $3.68-$3.70, backed by same-property net operating income (NOI) growth, excluding termination fees, of +/- 3.6% on a pro-rata basis. The company had earlier estimated core FFO per share in the range of $3.66-$3.70 on 3.2-4.0% growth in same-property NOI. The Zacks Consensus Estimate for the same is $3.69.

Moreover, the preliminary guidance for 2018 includes core FFO per share projection of $3.76-$3.83, on same-property NOI growth, excluding termination fees, of 2.25-3.25% on a pro-rata basis. The Zacks Consensus Estimate for the same is pegged at $3.83. The company has also introduced an operating FFO per share outlook in the band of $3.48-$3.54 for the year. Notably, the company is considering operating FFO to measure earnings growth because the purchase accounting adjustments required with the Equity One merger would have an uneven impact on earnings.

Regarding investment activity, Regency Centers stated that it closed acquisitions worth around $150 million during fourth-quarter 2017. This included the 132,000-square foot neighborhood shopping center — Scripps Ranch Marketplace (San Diego, CA) — for $81.6 million. This property is anchored by Vons. The other asset is 150,000-square foot infill retail center — Roosevelt Square (Seattle, WA) — anchored by Whole Foods Market which was purchased for $68.3 million.

On the other hand, the company reaped approximately $103 million of gross proceeds from the sale of five shopping centers during the quarter. Further, it commenced the development of two projects, with Regency’s share of net estimated development costs aggregating $39 million. This included Wegmans anchored 174,000-square foot shopping center — Midtown East — in Raleigh, NC, and Publix Greenwise anchored 51,000-square foot shopping center Indigo Square in Charleston, SC.

In addition, Regency received around $89.1 million of net proceeds following the final settlement of its forward sale agreement that took place on Dec 14, 2017, through delivery of 1,250,000 shares of the company’s common stock.

Notably, at a time when shrinking footfall at malls amid rise in online channels, store closures and bankruptcy of retailers have emerged as a pressing concerns for most retail REITs, including Simon Property Group, Inc. SPG, GGP Inc. GGP and Macerich Company MAC, Regency is focused on building a premium portfolio of grocery-anchored shopping centers. Such centers are usually necessity driven and steer a dependable traffic.

The company has considerable experience in the retail real estate industry and has developed several real estate projects over the years. However, recent efforts of e-retailers to expand in the grocery business have emerged as a concern. Rate hike and stiff completion also add to its woes.

Over the past three months, shares of this Zacks Rank #3 (Hold) company have outperformed the industry it belongs to. While the company’s shares have edged down 0.3%, the industry incurred a loss of 3% during the same time period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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