Regency Centers' (REG) Q1 FFO & Revenues Beat Estimates

Regency Centers Corporation’s (NASDAQ:REG) first-quarter 2019 adjusted funds from operations (FFO) per share came in at 98 cents, which beat the Zacks Consensus Estimate as well as improved from the year-ago tally, both being 2 cents. The quarterly results reflect growth in revenues.

Total adjusted revenues in the quarter came in at $286.3 million, outpacing the Zacks Consensus Estimate of $274.4 million. In addition, the figure was 3.5% higher than the year-ago tally of $276.7 million.

Inside the Headlines

During the reported quarter, Regency executed around 1.1 million square feet of comparable new and renewal leases, leading to rent spread on new leases and renewal leases of 13.2% and 7.9%, respectively, with blended rent spreads for the March-end quarter of 8.8%.

As of Mar 31, 2019, the company’s wholly-owned portfolio along with its pro-rata shares of co-investment partnerships, was 94.6% leased. The company’s same-property portfolio was 95.0% leased, indicating a contraction of 120 basis points (bps) sequentially and 70 bps year over year.

However, same property net operating income, excluding termination fees, climbed 2.9% on a year-over-year basis, backed by base rent growth.

Regency’s cash and cash equivalents were $42.8 million at Mar 31, 2019, slightly down from $45.2 million recorded at the end of 2018. The company has fixed charge coverage of 4.2x.

Portfolio Activity

During the quarter under review, the company acquired a 21,000-square-foot center — Melrose Market — in the Capitol Hill neighborhood of Seattle for $15.5 million. Also, the company acquired an additional interest in the Town and Country Center, in Los Angeles, resulting in total current investment to $36.3 million. This took its total ownership stake to around 18.4%.

The company sold seven shopping centers for a combined pro-rata sales price of about $136.5 million, at a weighted average cap rate of 7.5%. Moreover, during the quarter, Regency commenced two redevelopment projects with combined costs of around $13.5 million.

Also, at the end of first-quarter 2019, the company had 21 properties in development or redevelopment, indicating a total investment of $403 million. Moreover, in-process development and redevelopment projects were 86% leased and projected to yield average return of 7.5%.

Outlook

Regency has updated its 2019 NAREIT FFO per share outlook, incorporating a negative 3 cents per share impact from non-recurring items (6 cents per share charge related to the early repayment of debt and 3 cents per share benefit for accelerated write-off of below-market rent intangibles caused by recapture of two anchor spaces).

Particularly, the company now expects 2019 NAREIT FFO per share of $3.80-$3.86, compared with $3.83-$3.89 guided earlier. The Zacks Consensus Estimate for the same is currently pegged at $3.87, which is above the guided range.

The company’s full-year outlook is backed by same-property NOI growth, excluding termination fees of 2.0-2.5% as well as development and redevelopment starts of $150.0-$250.0 million.

Dividend Update

On Apr 30, 2019, 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 May 23, to shareholders of record as of May 13, 2019.

Our Take

Regency’s first quarter has been an encouraging one. The company’s premium quality portfolio of shopping centers, located in strong trade areas, which are characterized by higher spending power, enables it to attract top grocers and retailers. The company has considerable experience in the retail real estate industry and has developed several retail real estate projects over the years. Its focus on building a premium portfolio of grocery-anchored shopping centers, which are usually necessity-driven, augurs well. Regency has resorted to dispositions, reinvesting the proceeds in value accretive developments and acquisitions with better prospects. But, recent efforts of online retailers to penetrate deeper into the grocery business is a concern.

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

We now look forward to the earnings reports of other REITs like Omega Healthcare Investors, Inc. (NYSE:OHI) , Senior Housing Properties Trust (NASDAQ:SNH) and Plymouth Industrial REIT, Inc. (NYSE:PLYM) , which are slated for release 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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