Regency Centers' (REG) Q4 FFO, Revenues Beat Estimates

Regency Centers Corporation’s (NASDAQ:REG) fourth-quarter 2018 NAREIT funds from operations (FFO) per share came in at 98 cents, which beat the Zacks Consensus Estimate, as well as came ahead of the year-ago tally, both, by 4 cents. The company’s quarterly results reflect growth in revenues.

Total adjusted revenues for the quarter came in at $277.07 million, outpacing the Zacks Consensus Estimate of $269.96 million. In addition, the figure came in higher than the year-ago tally of $257.9 million.

For full-year 2018, the company reported NAREIT FFO per share of $3.83, ahead of the year-ago number of $3.09. This is backed by a 14% year-over-year increase in adjusted revenues to nearly $1.1 billion.

Inside the Headlines

During the reported quarter, Regency executed around 2 million square feet of new and renewal leases, leading to rent spreads on comparable new leases and renewal leases of 22.5% and 7.2%, respectively, with blended rent spreads for the Dec-end quarter of 9.3 %.

As of Dec 31, 2018, the company’s wholly-owned portfolio, along with its pro-rata shares of co-investment partnerships, was 95.6% leased. The company’s same-property portfolio was 96.1% leased, indicating an expansion of 20 basis points (bps) sequentially.

Spaces greater than or equal to 10,000 square feet — Anchors — in the same property portfolio were 98.5% leased as of Dec 31, 2018, denoting an expansion of 50 bps sequentially. In addition, Regency’s same-property NOI as adjusted, excluding termination fees, climbed 2.2% on a year-over-year basis.

Regency’s cash and cash equivalents were $45.2 million at the end of 2018, slightly down from $49.4 million recorded at the end of 2017. The company’s total outstanding debt was $3.7 billion, up from $3.6 billion witnessed at the end of the prior year.

The company repurchased around $122 million shares of common stock at an average price of $57.70 per share. This led to total share repurchase for full-year 2018 to approximately $247 million at average price of $57.97 per share.

Notable Portfolio Activity

During the quarter under review, the company acquired an interest in one shopping center for around $18.5 million and sold four shopping centers for nearly $82.2 million, at Regency’s share.

Also, at year-end 2018, the company had 19 properties in development or redevelopment, indicating a total investment worth $390 million. Moreover, in-process development projects were a combined 62% funded and 79% leased, and are projected to yield average return of 7.2%. Notably, for full-year 2018, the company commenced nearly $200 million of developments and redevelopments. This contributed toward a five-year goal of $1.25-$1.50 billion.

Outlook

Regency expects 2019 NAREIT FFO per share of $3.83-$3.89. The Zacks Consensus Estimate for the same is currently pegged at $3.90, which comes 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

Regency’s board of directors announced a quarterly cash dividend of 58.5 cents per share on its common stock, denoting an annualized hike of 5.4%. This dividend will be paid on Mar 7, to shareholders of record as of Feb 25, 2019.

Our Take

Regency’s better-than-expected performance in the fourth quarter is encouraging. The company’s premium quality portfolio of shopping centers, located in strong trade areas, which are characterized with higher spending power, enables the company to attract top grocers and retailers. This, again, aids the company to achieve higher leasing and NOI growth.

Nevertheless, to keep pace with the changing retail landscape, the company has undertaken numerous development and redevelopment activities. Amid these, rising construction costs, entitlement delays and lease-ups will likely drag near-term margins until project completions. Also, recent efforts of online retailers to penetrate deeper into the grocery business is a concern for Regency.

Regency Centers currently has 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 Quote

We, now, look forward to the earnings releases of PS Business Parks, Inc. (NYSE:PSB) , Realty Income Corp. (NYSE:O) and Extra Space Storage Inc. (NYSE:EXR) , all of which are scheduled to report their quarterly numbers on Feb 20.

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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