Regency Centers Corp. REG has a high-quality portfolio of shopping centers, located in favorable trade areas. The company is focused on grocery-anchored shopping centers, which are usually necessity driven and drive a dependable traffic.
In fact, 80% of its properties are anchored by leading grocers, with grocer sales that average $650 per square foot (PSF) annually compared with the national average of $450 PSF, demonstrating the locations, relevance of grocers, and stable quality of its centers. This augurs well for steady cash flows and long-term growth.
Regency has a considerable experience in the retail real estate industry. The company’s $1 billion of development and redevelopment starts, over the last five years, are resulting in significant value creation. Furthermore, the company’s 2019 estimated starts of +/- $250 million augur well for long-term growth. Additionally, backed by its capabilities, it expects to deliver $1.25-$1.50 billion in developments and redevelopments at attractive returns, over the next five years.
Moreover, Regency has resorted to strategic acquisitions in a bid to fortify its portfolio in thriving sub-markets. Such strategic moves are expected to improve the company’s portfolio quality and drive long-term growth.
Furthermore, large pool of unencumbered assets and good relationships with lenders are driving factors for the company. Its debt-maturity profile is well laddered, with limited near-term maturities. The company also enjoys substantial liquidity and capacity, with $1.25-billion line of credit. Also, solid dividend payouts are arguably the biggest attraction for REIT shareholders and Regency’s dividend has witnessed a compound annual growth rate of 4.5% since 2014.
Nonetheless, move-outs, store closures and retailer bankruptcies are likely to affect performance of the retail real estate market in the near term. This, in turn, will dampen the performance of companies, including Macerich Company MAC, Taubman Centers TCO, Kimco Realty Corporation KIM and Regency as well.
The recent effort of online retailers to go deeper into the grocery business has emerged as a concern for Regency that focuses on building a premium portfolio of grocery-anchored shopping centers. The company currently expects same-property net operating income (NOI) and core operating earnings growth in 2020 to be flat to slightly positive. This downside is mainly due to the elevated impact from bankruptcies, together with additional known and potential move-outs. Along with that, muted contribution from redevelopments will add to its woes for the near term.
Amid these, shares of Regency have gained 9.1% so far in the year but underperformed the industry’s 15.8% rally. However, the Zacks Consensus Estimate for the current-year funds from operations (FFO) per share has been revised marginally downward to $3.85 over the past month. Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Kimco Realty Corporation (KIM) : Free Stock Analysis Report
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