Regency Centers Corporation (REG) reported third-quarter 2013 core funds from operations (core FFO) per share of 65 cents, which beat the Zacks Consensus Estimate by 2 cents and the year-ago quarter figure by 3 cents.
The results were driven by better-than-expected growth in revenue and higher net operating income (NOI). Notably, this retail real estate investment trust (REIT) also raised its core FFO per share guidance for 2013.
Including non-core items, FFO for the quarter was 65 cents per share, up from 58 cents in the year-ago period.
Behind the Headlines
Total revenue came in at $122.1 million, up 5.6% year over year and 1.8% ahead of the Zacks Consensus Estimate of $120 million.
Same property NOI, excluding termination fees, climbed 2.8% on a year-over-year basis, with same-space rental rate growth of 11.5% (cash basis for spaces vacant for less than 12 months).
Moreover, Regency executed a total of 363 new and renewal lease deals for 1.3 million square feet of space, during the quarter. At quarter end, its same property portfolio was 94.9% leased, up 30 basis points (bps) sequentially and 50 bps year over year. On the other hand, all of its properties were 94.6% leased, up 30 bps sequentially and 100 bps year over year.
Acquisitions & Dispositions
During the quarter, Regency sold two wholly owned properties at $48.7 million. The company also accomplished the sale of a portfolio of shopping centers owned by Regency Retail Partners, LP collectively with two adjacent property phases wholly-owned by Regency for $332.0 million, including $207 million of mortgage debt. The company had a share of $38.0 million in the net sales price.
Moreover, Regency and a co-investment partner acquired one property at $13.6 million, of which the company’s share was $2.7 million.
Subsequent to the quarter end, Regency and a local joint venture acquired Fellsway Plaza in Medford, Mass. for $42.5 million (Regency’s share was $31.9 million). Spanning 145,000-square-foot, this infill shopping center is fully leased and anchored by Stop & Shop.
Developments & Redevelopments
At the quarter-end, Regency had 7 development projects in its pipeline for an estimated cost of $291.3 million. Notably, 74% of in-process developments are financed and, including retailer-owned square footage, were 92% leased and committed.
Moreover, during the quarter, Regency started 1 redevelopment project. As of Sep 30, 2013, the company had 14 redevelopment projects in its pipeline for a total estimated cost of $48.9 million.
Subsequent to the quarter end, Regency disclosed 2 new development starts – Glen Gate, a 103,000 square foot center in Glenview, Ill. with estimated net development costs of $29.7 million and Shoppes on Riverside, a 50,000 square foot shopping center in Jacksonville, Fla, with projected net development costs of $13.5 million.
Liquidity
At the end of the quarter, Regency’s cash and cash equivalents were about $68.0 million, up from $28.8 million at year-end 2012. The company’s total outstanding debt came in at $1.86 billion, down from $1.94 billion at year-end 2012.
Dividend
On Oct 30, 2013, Regency declared a common stock quarterly dividend of 46.25 cents per share, payable on Nov 27 to stockholders of record as of Nov 13, 2013.
Outlook Raised
Regency raised its core FFO per share guidance for full-year 2013 and now expects it in the range of $2.60 – $2.63 (prior range being $2.55–$2.60). The projections are based on same property NOI growth w/o term fees of 3.8% – 4.0% (previously 3.5% – 4.0%) and same property leased at period end of 94.5% – 95.0% (previously 94.3% – 95.0%).
Our Viewpoint
Regency’s portfolio of shopping centers, located in high-density markets with affluent customers, is among the best in the sector. Moreover, with a focus on best-in-class grocery anchors, including Whole Foods Market, Inc. (WFM), Publix, Safeway Inc. (SWY), The Kroger Co. (KR) and Trader Joe's, the portfolio drives value and mitigates operating risks. Its 2013 core FFO per share guidance raise is also encouraging.
This retail real estate investment trust now 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.
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