Regency Centers Corporation (REG) – a real estate investment trust (:REIT) – recently announced that it has acquired four shopping centers in December 2012 for $188.5 million. The company bought full ownership of the three properties – Uptown District, Sandy Springs Plaza and Village Plaza – and half ownership of Phillips Place.
San Diego-based Uptown District is the area’s leading grocery shopping destination spanning 148,638 square feet. Regency acquired the 95% occupied upscale property for $81.1 million. Uptown district is leased to two renowned grocers, Trader Joe’s and Ralphs – a subsidiary of The Kroger Co. (KR).
Sandy Springs Plaza, an 115,794 square-foot center, is positioned in the upscale location of Atlanta city. Regency bought the 95% leased property for $35.3 million. The property boasts three eminent tenants – Pier 1 Imports, Inc. (PIR), Party City and Trader Joe’s.
Regency acquired the third property – Village Plaza – in collaboration with a co-investment partner for $16.7 million. The Chapel Hill, North Carolina-based property spans 78,128 square feet. The property is fully occupied by Whole Foods Market, Inc. (WFM).
Charlotte, North Carolina-based Phillips Place is an upscale retail center that spans 133,059 square feet. Regency purchased the half ownership of the property, positioned in the prosperous South Park submarket, for $55.4 million. The 99% occupied property boasts top-notch tenants such as Regal Cinemas, Dean & Deluca and The Palm Restaurant.
In addition, Regency sold three non-core assets worth $76.6 million during the fourth quarter of 2012. Including the abovementioned transactions, Regency acquired worth $334.3 million of shopping centers and sold $581.2 million of non-strategic assets in full year 2012.
We remain impressed with the company’s acquisition of upscale properties. With properties in high-income, high-barrier markets, Regency’s retail strip center portfolio is among the best in the sector, which allows it to continually perform at the top-end of its peer group. Moreover, Regency’s quality portfolio is anchored by dominant grocers as well as leading national retailers, which drive traffic into its centers. This provides Regency with a considerable up-market potential and a relatively steady source of revenue.
Regency is expected to release its fourth-quarter 2012 results on January 30, 2013. The Zacks Consensus Estimate for the fourth quarter FFO (fund from operations) is currently pegged at 58 cents per share.
The company’s fourth-quarter FFO will likely beat the Zacks Consensus Estimate as the earnings ESP (expected surprise prediction) is 1.72% for the stock. Regency currently has a Zacks #3 Rank (implying a short-term Hold rating). However, we maintain our long-term ‘Neutral’ recommendation on the stock.
Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.
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