The increase in consumers’ preference for in-person shopping experiences following the pandemic downtime has been driving the recovery in the retail real estate industry.
Given this backdrop, Regency Centers Corp.’s REG portfolio of premium shopping centers in the affluent suburban areas and near urban trade areas of the United States, having strong growth drivers, positions it well for growth.
This retail real estate investment trust (REIT) is focused on building a premium portfolio of grocery-anchored shopping centers. As of the fourth-quarter end, its portfolio comprised 80% of the grocery-anchored neighborhood and community centers, which are necessity-driven. This ensures dependable traffic and allows the company to bank on its grocery centers during uncertain times.
REG’s portfolio has a good tenant mix with several industry-leading grocers. This enables it to generate steady rental revenues.
With more people moving into the suburbs due to the post-pandemic migration and the hybrid work setup, Regency’s suburban-shopping-center portfolio is expected to benefit.
Regency’s expansion efforts into the key markets and development initiatives seem encouraging. In 2022, the company’s acquisitions totaled $210 million (at Regency’s share), encompassing 1.15 million gross leasable area.
On the balance sheet front, the company had the full capacity under its $1.2-billion revolving credit facility as of Dec 31, 2022. Its low leverage and limited near-term maturities provide ample financial flexibility and position it well to capitalize on growth opportunities.
Analysts, too, seem bullish about the Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for the company’s 2023 funds from operations (FFO) per share has moved marginally upward over the past month, indicating a favorable outlook for Regency.
Nonetheless, 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 inflationary environment, supply-chain challenges and labor shortages could adversely impact Regency’s development and redevelopment project pipeline.
Also, rising interest rates are likely to increase the company's borrowing costs, affecting its ability to purchase or develop real estate.
Shares of REG have lost 3% in the quarter-to-date period against the industry’s growth of 3.4%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the retail REIT sector are Federal Realty Investment Trust FRT, EPR Properties EPR and Tanger Factory Outlet Centers SKT, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Federal Realty’s current-year FFO per share is pegged at $6.43.
The Zacks Consensus Estimate for EPR Properties’ ongoing year’s FFO per share stands at $4.86.
The Zacks Consensus Estimate for Tanger Factory Outlet’s 2023 FFO per share is pegged at $1.84.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
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