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Regency (REG) Grows Portfolio With Connecticut Asset Buyout

Regency Centers REG recently announced the acquisition of the Compo Shopping Centers in the heart of Westport, CT. The acquisition of this 76,000-square-foot retail destination comes as part of the company’s efforts to expand in the Northeast.

These two centers, which are referred to in the market as Compo I & II, will merge their operations with Regency's existing adjacent center, Compo Acres. Collectively, they will be named the Compo Acres Shopping Center and comprise nearly 120,000 square feet of community-centric, premium retail space straddling Post Road and situated just minutes away from downtown. Regency has plans to improve the center’s connection with the community while seeking additional acquisition prospects.

Given the strategic location of the property and its popularity, it is likely to draw in substantial consumer footfall and boost sales, making the move strategic for Regency.

Regency is well-poised to benefit from its strategically located portfolio of premium shopping centers, concentrated in affluent suburban areas and near urban trade areas where consumers have high spending power. Over the years, the company has made several strategic acquisitions and developments in the key markets of the United States to bolster growth.

In December 2023, Regency acquired a neighborhood center, The Longmeadow Shops, in Longmeadow, MA, expanding its footprint of high-quality shopping centers in premier suburban trade areas with compelling demographics. In October 2023, it acquired Nohl Plaza in Orange County, CA, for $25 million.

In August 2023, it closed the buyout of Urstadt Biddle Properties Inc. in an all-stock transaction. The combined portfolio comprising 480 properties and encompassing more than 56 million square feet of the gross leasable area enhanced Regency's geographic diversification, tenant mix, growth prospects and balance sheet strength.

As of Mar 31, 2024, Regency Centers’ in-process development and redevelopment projects estimated net project costs of around $547 million at the company’s share. So far, it has incurred 46% of the cost.
In addition, REG’s healthy balance sheet position is expected to support its growth endeavors. As of Mar 31, 2024, this retail REIT had more than $1.7 billion of liquidity, including $1.5 billion of capacity under its revolving credit facility.

Shares of this Zacks Rank #3 (Hold) company have risen 1.9% in the past month compared with the industry's upside of 2.1%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

However, given the conveniences of online shopping, rising e-commerce adoption is concerning for Regency. The efforts of online retailers to go deeper into the grocery business in recent years are likely to hurt the market share for brick-and-mortar stores, raising concerns for the company.

A high interest rate environment is likely to keep its interest expenses elevated, affecting its ability to purchase or develop real estate.

Stocks to Consider

Some better-ranked stocks from the retail REIT sector are Kite Realty Group Trust KRG and Acadia Realty Trust AKR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Kite Realty Group’s ongoing year’s funds from operations (FFO) per share is pegged at $2.04, which indicates a year-over-year marginal increase.  

The Zacks Consensus Estimate for Acadia Realty Trust’s current-year FFO per share has been revised a cent upward over the past month to $1.28.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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