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Regency Centers (REG) Beats on Q4 FFO, Revenue Estimates

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Backed by better-than-expected growth in revenue, Regency Centers Corporation 's REG fourth-quarter 2016 core funds from operations ("FFO") per share of 86 cents came ahead of the Zacks Consensus Estimate of 84 cents.

Further, the results compared favorably with 79 cents reported in the year-ago quarter. Moreover, it experienced growth in same property net operating income ("SPNOI").

Total revenue for the quarter came in at $159.6 million, while adjusted revenue was $153 million, ahead of the Zacks Consensus Estimate of $148 million. The figures also compared favorably with the year-ago quarter's total revenue of $146.2 million and adjusted revenue of $138.6 million.

For full-year 2016, Regency came up with core FFO per share of $3.29, ahead of the prior-year tally of $3.04. The performance reflects 7.8% growth in total revenue to $614.4 million.

Inside the Headlines

During the quarter, Regency's tally for new and renewal leasing transactions reached 452, spanning 1.86 million square feet of space. Moreover, Regency's SPNOI climbed 3.9% on a year-over-year basis, excluding termination fees, for its wholly owned properties, along with its pro-rata share of co-investment partnerships.

Rental rate growth for new leases was 21.4%, while the same for renewal leases was 9.7%. Same properties portfolio was 96.2% leased, while all of the company's properties were 95.4% leased.

Regency's cash and cash equivalents were $17.9 million at the end of fourth-quarter 2016, down from $40.6 million at the end of 2015. The company's total outstanding debt was $1.64 billion, down from $1.86 billion at the end of the previous year.

Notable Portfolio Activity

During the quarter, Regency and a co-investment partner acquired Plaza Venezia in Orlando, FL, for a gross purchase price of $92.5 million. The company's share of the gross purchase price was $18.5 million.

Further, on Nov 14, 2016, the company and Equity One, Inc. struck a deal, providing for the merger of Equity One with and into Regency. This is expected to close on or around Mar 1, 2017.

On the other hand, the company has sold one wholly owned property and one co-investment property for an aggregate gross sales price of $78.7 million, with Regency's share being $58.7 million.

At year end, the company had 21 properties in development or under redevelopment with combined, estimated costs of $290.9 million.

Outlook

Regency updated its guidance for 2017 due to its recently disclosed debt offerings. The company now expects core FFO per share in the $3.44-$3.50 band, against the prior guided range of $3.42-$3.48. The Zacks Consensus Estimate is currently pegged at $3.46 and lies within this range.

Dividend Update

On Feb 7, 2017, Regency's board of directors announced a quarterly cash dividend of 51 cents per share on its common stock, denoting an increase from the company's normal dividend of 50 cents. The move reflected the additional period up to the shareholder meeting to approve the merger. This dividend will be paid on Mar 1 to shareholders of record as of Feb 24, 2017.

Our Take

Regency's focus on building a premium portfolio of grocery-anchored shopping centers augurs well for the near term. Such centers are usually necessity driven and attract huge traffic. In addition, the presence of a cluster of leading grocers will cushion the company from market swings.

Further, the company's pending merger with Equity One would bolster the company's position in the retail real estate market and offer it with a host of opportunities to drive long-term growth. However, intense competition and an anticipated rise in interest rates pose concerns for the stock.

Regency currently carries 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 other retail REITs like DDR Corp. DDR , Federal Realty Investment Trust FRT and Realty Income Corp. O which are expected to report in the upcoming weeks.

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. All EPS numbers presented in this write up represent FFO per share.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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