On Oct 9, 2013, we reinstated our long-term Neutral
Regency Centers Corp
). The decision reflects successful execution of the company's
strategic initiatives, decent second-quarter 2013 performance and
a flexible balance sheet position. Yet, rising customer purchases
through catalogs and the Internet, and a huge development and
redevelopment pipeline remain our plausible concerns.
Why the Neutral Stance?
Regency's portfolio of shopping centers, located in
high-income, high-barrier markets, is among the best in the
sector. Moreover, with a focus on best-in-class retailers such as
Whole Foods Market, Inc.
The Kroger Co.
), the portfolio drives value and mitigates operating risks.
Also, strategic acquisitions and the inclusion of premium
development and redevelopment projects will boost Regency's
portfolio in infill locations with high occupancy levels and
strong tenant sales and offer ample room for top-line growth
going forward. Encouragingly, Regency raised its outlook range
for full-year 2013 Core Funds From Operations (Core FFO) per
share for the second time in the year. Such moves inspire
Regency's second-quarter 2013 Core FFO per share of 67 cents
exceeded the Zacks Consensus Estimate by 3 cents, driven by
significant leasing and same property net operating income
increases. However, with a dip in overall revenues acting as a
headwind, Regency's Core FFO declined by 2 cents from the
Moreover, stiff competition from other players in the market,
rise in interest rates and geographical concentration of
Regency's assets pose a threat to its profitability. Also,
although, Regency's growing development and redevelopment
pipeline is encouraging, it exposes the company to various risks
such as rising construction costs, entitlement delays and
lease-ups. Additionally, significant rise in online shopping
through the Internet, mobile phones and tablets could upset the
demand for Regency's properties.
Nevertheless, the Zacks Consensus Estimate for 2013 and 2014
FFO per share moved up marginally to $2.59 and $2.67,
respectively, over the last 60 days. Consequently, this retail
real estate investment trust (REIT) now carries a Zacks Rank #2
Regency is scheduled to release its third-quarter 2013
earnings results after the closing bell on Oct 30. The Zacks
Consensus Estimate for FFO per share for the upcoming quarter is
pegged at 63 cents per share, depicting year-over-year growth of
Other Stocks to Consider
Simon Property Group Inc.
) is another retail REIT, which deserves a look with the same
Zacks Rank as Regency.
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.
KROGER CO (KR): Free Stock Analysis Report
REGENCY CTRS CP (REG): Free Stock Analysis
SIMON PROPERTY (SPG): Free Stock Analysis
WHOLE FOODS MKT (WFM): Free Stock Analysis
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