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Can Regency Centers' Portfolio Counter Coronavirus Scare?

Zacks Equity Research

Regency Centers Corporation REG has a high-quality portfolio, focused on essential retail businesses and the majority of the company’s annual base rent comes from grocery-anchored centers. Amid low customer traffic, resulting from government-mandated closures and social distancing requirements, these necessity-driven tenants have continued to thrive even during the pandemic.

The significant focus on essential businesses at the company’s centers has enabled its properties to remain open, operating for the entirety of the pandemic. In fact, in April, around 60% of its tenants were allowed to operate.

Moreover, the company’s tenant roster includes top grocers and retailers, consisting primarily of anchor tenants as well as national and regional ones. This encouraging tenant mix helps it enjoy steady rental revenues.

Additionally, a large pool of unencumbered assets and strong credit ratings facilitate accessibility to secured and unsecured debt markets, and maintain availability on the line. Further, amid the ongoing economic volatility and uncertainty, a sound liquidity position bodes well.On the back of various measures, Regency boosted its liquidity to $1.3 billion as of Mar 31, 2020. Hence, it has sufficient to meet expected near-term capital needs.

However, the escalating number of coronavirus cases forced several retailers to close stores to contain the spread of the virus. As a result, retail REITs, including Regency, which have already been struggling with store closures and bankruptcy issues, are experiencing the brunt. In fact, the pandemic has been most impactful for many non-essential businesses that are experiencing significant declines in customer traffic and temporarily store closures.

This is expected to have a significant adverse impact on the tenants’ ability to pay rent obligations. As a result, there could be a significant increase in the number of tenants making late or partial rent payments, requesting rent deferrals, or defaulted on rent payments.

Further, in the near term, it expects to spend $80 million in its in-process projects and has selectively deferred investments worth $145 million in the light of the virus outbreak. Although a huge development and redevelopment project pipeline is encouraging, it exposes the company to various risks such as rising construction costs, entitlement delays and lease-ups.

Shares of this Zacks Rank #3 (Hold) company have tanked 38.2% over the past year, underperforming the industry’s decline of 32.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Better-Ranked Stocks to Consider

Alexander Baldwin Holdings, Inc.’s ALEX Zacks Consensus Estimate for 2020 funds from operations (FFO) per share has moved upward to 83 cents over the past month. The company currently flaunts a Zacks Rank of 1.

Gladstone Land Corporation’s LAND FFO per share estimate for 2020 has moved 3% upward to 68 cents over the past month. Further, it currently carries a Zacks Rank of 2 (Buy).

Ashford Hospitality Trust Inc.’s AHT FFO per share estimate for the ongoing year has been unchanged at 35 cents over the past 30 days. Additionally, it carries a Zacks Rank of 2 at present.

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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