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Regency Centers (REG) Beats Q3 FFO Estimates, Lifts View

Regency Centers Corporation’s REG third-quarter 2017 core funds from operations (FFO) per share of 95 cents surpassed the Zacks Consensus Estimate of 91 cents. Further, results compared favorably with 81 cents reported in the year-ago quarter.

The company’s quarterly results reflect growth in same-property net operating income (NOI) and strong leasing activity during the quarter.

Total revenues for the quarter came in at $262.1 million, comfortably outpacing the Zacks Consensus Estimate of $254 million. The figure also came in higher than the year-ago tally of $152.7 million. Total real estate revenues of $243.7 million in the quarter compared favorably with the year-ago tally of $143.7 million.

Regency Centers Corporation Price, Consensus and EPS Surprise
 

Note: The EPS numbers presented in the above chart represent funds from operations (FFO) per share.

Inside the Headlines

During the reported quarter, Regency executed 1.8 million square feet of new and renewal leases on a comparable basis, leading to 7.8% blended rent spreads. Rent spreads on new leases came in at 17.4%, while the same for renewal leases was 5.7%.

As of Sep 30, 2017, the company’s wholly owned portfolio, including pro-rata shares of co-investment partnerships, was 95.3% leased. Moreover, the same-property portfolio was 96.1% leased, reflecting an expansion of 20 basis points (bps) sequentially and 40 bps year over year when adjusted for the present same property pool. In the same-property asset portfolio, small shops were 92.5% leased, reflecting an uptick of 40 bps sequentially and 70 bps year over year.

In addition, Regency’s same-property NOI as adjusted, excluding termination fees, climbed 5% on a year-over-year basis. It included an 80-bps positive impact from redevelopments.

Regency’s cash and cash equivalents were $30.6 million at the end of third-quarter 2017, up from $17.9 million recorded at the end of 2016. The company’s total outstanding debt was $3.5 billion, up from $1.64 billion witnessed at the end of the previous year.

Notable Portfolio Activity

During the quarter under review, the company sold one co-investment property, for $29.9 million, Regency’s share being $6 million.

At the third-quarter end, the company had 30 properties in development or under redevelopment with combined, estimated net development costs of over $600 million.

Outlook

Regency lifted its guidance for 2017. The company now expects core FFO per share in the $3.66-3.70 band, against the prior guided range of $3.62-$3.68. The Zacks Consensus Estimate for the same is currently pegged at $3.67.

Dividend Update

On Oct 31, Regency’s board of directors announced a quarterly cash dividend of 53 cents per share on its common stock. This dividend will be paid on Nov 29 to shareholders of record as of Nov 15, 2017.

Our Take

Regency’s focus on building a premium portfolio of grocery-anchored shopping centers augurs well for the long term. Such centers are usually necessity driven and enjoy dependable traffic. Furthermore, the company’s focus on small-shops portfolio has proved beneficial for the company.

Also, the company’s merger with Equity One has elevated the former’s position in the retail real estate market and offered a host of opportunities to drive long-term growth.

However, Regency incurred merger-related costs which impacted its bottom line.

In addition to this, the recent trend of online retailers to go deeper into the grocery business has emerged as a concern for this real estate investment trust (REIT)

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

The stock has declined 9.9% year to date, underperforming the 8.8% loss incurred by the industry it belongs to.

 

We are now looking forward to the earnings releases of Lamar Advertising Company LAMR, EPR Properties EPR and Outfront Media Inc. OUT all of which are expected to report in the upcoming days.

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.

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