Regency Centers' (REG) Q3 FFO & Revenues Beat Estimates

Regency Centers Corporation’s REG third-quarter 2019 NAREIT funds from operations (FFO) per share came in at 99 cents, which exceeded the Zacks Consensus Estimate of 96 cents. The reported figure is also up 3.1% from the prior-year quarter tally.

The quarterly results mirror a rise in revenues, mainly driven by increase in lease income. Also, decent leasing activity and rent spreads aided its performance.

Total revenues in the quarter came in at $282.3 million, beating the Zacks Consensus Estimate of $275.4 million. In addition, the figure increased from the year-ago tally of $278.3 million.

Inside the Headlines

During the reported quarter, Regency executed around 1.7 million square feet of comparable new and renewal leases, leading to rent spread on new leases and renewal leases of 10% and 5.7%, respectively, with blended rent spreads for the September-end quarter of 6.6%.   

As of Sep 30, 2019, the company’s wholly-owned portfolio, along with its pro-rata shares of co-investment partnerships, was 94.8% leased. The company’s same-property portfolio was 95.2% leased, indicating an expansion of 10 basis points (bps) sequentially, and descend of 80 bps year over year, mainly due to the Sears bankruptcy. However, same-property net operating income, excluding termination fees, climbed 2.1% on a year-over-year basis.

Regency’s cash and cash equivalents were $47.5 million at Sep 30, 2019, up from the $45.2 million recorded at the end of 2018. The company has fixed charge coverage of 4.3x. Notably, the company sold around $128.8 million through its ATM equity program in September at a weighted average price per share of $67.99. Sales were executed on a forward basis and settlement will occur within 12 months.

Portfolio Activity

During the reported quarter, the company acquired The Pruneyard — a 258,000-square-foot retail center — in Silicon Valley for $212.5 million. The company also acquired Circle Marina Center — an off-market acquisition of 118,000 square feet of premier retail — located on Pacific Coast Highway in the heart of Long Beach, CA, for $50 million. Meanwhile, Regency sold one wholly-owned center — Bluebonnet Village — in Baton Rouge, LA, for a gross price of $14.2 million. Moreover, during the third quarter, Regency commenced three redevelopment projects with combined pro-rata costs of around $21.5 million.

Also, at the end of third-quarter 2019, the company had 24 properties in development or redevelopment, indicating estimated net project costs of $470 million. Further, in-process development and redevelopment projects were 89% leased and committed, projected to yield an average return of 7.7%.

Outlook

Regency has updated its 2019 NAREIT FFO per share outlook, to reflect certain non-recurring items. Particularly, the company now expects 2019 NAREIT FFO per share of $3.84-$3.87 compared with the $3.81-$3.85 guided earlier. The Zacks Consensus Estimate for the same is currently pinned at $3.84.

The company’s full-year outlook is backed by same-property NOI growth, excluding termination fees of 2%.

Dividend Update

On Oct 29, Regency’s board of directors announced a quarterly cash dividend of 58.5 cents per share on its common stock. This dividend will be paid on Nov 22, to shareholders of record as of Nov 12, 2019.

Our Take

Regency put up a decent show in the July-September period. Notably, its premium quality portfolio of shopping centers, located in strong trade areas, which are characterized with higher spending power, enables it to attract top retailers. Focus on building a premium portfolio of grocery-anchored shopping centers that are usually necessity driven augurs well. Investments in value-accretive developments and buyouts will likely enhance its portfolio quality over the long term.

Nevertheless, the company is not immune to store closures and retail bankruptcies and in fact, the Sears bankruptcy has affected its performance. Furthermore, significant upfront costs involved with the development and redevelopment pipelines might strain near-term margins.

Regency currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Regency Centers Corporation Price, Consensus and EPS Surprise

Regency Centers Corporation Price, Consensus and EPS Surprise

Regency Centers Corporation price-consensus-eps-surprise-chart | Regency Centers Corporation Quote

We, now, look forward to the earnings releases of other REITs like Realty Income Corporation O, Outfront Media Inc. OUT and Host Hotels & Resorts, Inc. HST, all of which are slated to report their quarterly numbers next week.

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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