Regency Centers' (REG) Q3 FFO In Line, Revenues Surpass

Regency Centers Corporation’s (NYSE:REG) third-quarter 2016 core funds from operations (“FFO”) of 81 cents per share came in line with the Zacks Consensus Estimate. Further, the results compared favorably with 76 cents reported in the year-ago quarter.

The company reported better-than-expected growth in revenue. Moreover, it experienced growth in same property net operating income (“SPNOI”).

Total revenue for the quarter came in at $152.8 million, surpassing the Zacks Consensus Estimate of $149 million and up from $142.1 in the prior year.

Behind the Headlines

During the quarter, Regency’s tally for new and renewal leasing transactions reached 376, spanning 1.55 million square feet of space. Moreover, Regency’s SPNOI climbed 2.9% on a year-over-year basis, excluding termination fees, for its wholly owned properties, along with its pro-rata share of co-investment partnerships.

Rental rate growth for new leases was 14.3%, while the same for renewal leases was 4.6%. Same properties portfolio was 96.0% leased, while all of the company’s properties were 95.6% leased.

Regency’s cash and cash equivalents were $44.9 million at the end of third-quarter 2016, up from $40.6 million at the end of 2015. The company’s total outstanding debt was $1.63 billion, down from $1.86 billion at the end of the previous year.

Notable Portfolio Activity

During the quarter, Regency acquired Klahanie shopping center in the greater Seattle area, on a wholly owned, unencumbered basis, for a gross price of $36.0 million. On the other hand, the company sold three wholly owned properties as well as transferred the 50% ownership stake in three properties to a co-investment partner, for an aggregate of $66.6 million. Notably, the company has sold 16 properties for a total of $115.8 million year to date.

At the end of the reported quarter, the company had 21 properties in development or under redevelopment with combined, estimated costs of $220.5 million.

Outlook

Regency updated its guidance and now projects 2016 core FFO per share in a range of $3.25–$3.28 against the prior outlook of $3.22–$3.27. The Zacks Consensus Estimate is currently pegged at $3.26.

Dividend Update

On Oct 25, 2016, Regency’s board of directors announced a quarterly cash dividend of 50 cents per share on its common stock. The dividend will be paid on Nov 30 to shareholders of record as of Nov 16.

Our Take

The company’s focus on building a premium portfolio of grocery-anchored shopping centers augurs well for the near term. Such centers are usually necessity driven and attract huge traffic. Also, the presence of a cluster of leading grocers will cushion the company from market swings. Yet, stiff competition and an anticipated rise in interest rates pose concerns for the stock.

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

Investors interested in the retail REIT industry may consider stocks like Realty Income Corp. (NYSE:O) , STORE Capital Corp. (NYSE:O) and Washington Prime Group Inc. (NYSE:WPG) . Each of these stocks carries a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All EPS numbers presented in this write up represent FFO per share.


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