Regency Centers Corp. REG has a high-quality portfolio of shopping centers located in key trade areas. The company is focused on grocery-anchored shopping centers, which are usually necessity-driven and witness consistent traffic.
In fact, 80% of its properties are anchored by leading grocers, with grocer sales averaging $650 per square foot (PSF) annually compared with the national average of $450 PSF, demonstrating the locations’ relevance to grocers and stable quality of its centers. This augurs well for steady cash flows and long-term growth of the company.
Regency Centers has considerable experience in the retail real estate industry. In 2019, the company initiated more than $250 million of value-added developments and redevelopments. Backed by its capabilities, it remains well-poised to achieve its objective to start and complete $1.25-$1.5 billion of projects over the next five years at attractive returns.
Moreover, Regency Centers has resorted to acquisitions to strengthen its portfolio in thriving sub-markets. Such moves are expected to improve the company’s portfolio quality and drive long-term growth.
Furthermore, a large pool of unencumbered assets and good relationships with lenders are driving factors for the company. In fact, as of Dec 31, 2019, 88.6% of its wholly-owned real estate assets were unencumbered. With a high percentage of such assets, the company can enjoy accessibility to secured and unsecured debt markets. Its debt-maturity profile is well laddered.
Notably, solid dividend payouts are arguably the biggest attraction for REIT shareholders and Regency Centers’ dividend has witnessed a compound annual growth rate of 4% since 2014.
Nonetheless, move-outs, store closures and retailer bankruptcies are likely to affect the performance of the retail real estate market in the near term. This, in turn, will likely affect the performance of retail REITs, including Macerich Company MAC, Simon Property SPG, Kimco Realty Corporation KIM and Regency Centers.
Moreover, the recent effort of online retailers to go deeper into the grocery business has emerged as a concern for Regency Centers, which focuses on building a premium portfolio of grocery-anchored shopping centers. Particularly, in 2020, the company anticipates same-property NOI impact of up to 140 basis points (bps) on bankruptcies and store closures. This includes impact of known and unknown bankruptcy-related move-outs. Apart from this, muted contributions from redevelopments, on a net basis, considering projects in and out of redevelopments, adds to its near-term woes.
Amid these, shares of Regency Centers have dipped 8.1% so far in the year compared with the industry's 11% decline. The Zacks Consensus Estimate for the current-year funds from operations per share has been revised marginally downward over the past 60 days.
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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