We have reiterated our Neutral recommendation on Regency-Centers Corporation. (REG), a real estate investments trust (REIT), as we expect the stock to perform in line with the broader market. The company reported first quarter 2012 FFO (funds from operations) of $49.9 million or 55 cents per share compared with $52.7 million or 61 cents in the year-earlier quarter. Fund from operations, 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, while adjusted FFO excludes impairment and restructuring charges.
Jacksonville, Florida-based Regency Centers Corporation is a self-administered and self-managed real estate investment trust (REIT), engaged in owning, operating, and developing grocery-anchored retail shopping centers in the U.S.
With properties located in high income, high-barrier markets, Regency’s retail strip center portfolio is among the best in the sector and allows it to continually perform at the top-end of its peer group. The company’s dominant anchor tenants are grocery stores, a segment that is comparatively less affected in a challenging economy. Consequently, Regency has a relatively steady source of revenue
Regency maintains a conservative capital structure and follows a self-funding capital strategy to fund growth, which includes disposal of non-strategic assets and a continued focus on industry-leading co-investment partnership programs. This augurs well for its long-term growth.For full year 2012, Regency revised its FFO guidance from the range of $2.23 -$2.39 to $2.30 – $2.42 per share and recurring FFO from the range of $2.38- $2.52 to the range of $2.42 – $2.54 per share.
However, Regency has an active development pipeline, which increases operational risks in the current credit-constrained market, exposing it to rising construction costs, entitlement delays, and lease-up risk. As such, we are skeptical about the long-term earnings potential of the company.
Regency Centers currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. One of its competitors, Simon Property Group Inc. (SPG) holds a Zacks #2 Rank, which translates into a short- term Buy rating.
REGENCY CTRS CP (REG): Free Stock Analysis Report
SIMON PROPERTY (SPG): Free Stock Analysis Report
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