Regency Centers (REG) Q2 FFO Beat Estimates on Higher NOI

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Regency Centers Corporation 's REG second-quarter 2018 NAREIT funds from operations (FFO) per share of 93 cents surpassed the Zacks Consensus Estimate by a whisker. Further, the figure compares favorably with the year-ago tally of 84 cents.

The company's quarterly results reflect growth in same-property net operating income (NOI) backed by higher base rent.

Adjusted revenues for the quarter came in at $274.5 million, outpacing the Zacks Consensus Estimate of $269.2 million. In addition, the figure came in higher than the year-ago tally of $240.4 million.

Inside the Headlines

During the reported quarter, Regency executed around 1.7 million square feet of new and renewal leases on a comparable basis, leading to rent spreads on new leases and renewal leases of 9.4% and 6% respectively, over the trailing 12 months.

As of Jun 30, 2018, the company's wholly owned portfolio, along with its pro-rata shares of co-investment partnerships, was 95% leased. The same-property portfolio was 95.5% leased, which underlined a contraction of 20 basis points (bps) sequentially and 10 bps year over year.

In addition, Regency's same-property NOI as adjusted, excluding termination fees, climbed 4.2% on a year-over-year basis, mainly due to growth in base rent.

Regency's cash and cash equivalents were $43.2 million at the end of second-quarter 2018, down from $49.4 million recorded at the end of 2017. The company's total outstanding debt was $3.8 billion, up from $3.6 billion witnessed at the end of the previous year.

However, during the June-end quarter, the company redeemed its 6% notes originally due on Jun 15, 2018, worth $150 million. The transaction also included a make-whole premium of $10.5 million.

Notable Portfolio Activity

During the quarter under review, the company closed on $71 million of acquisitions and $32.5million of dispositions.

At the second-quarter end, the company had 21 properties in development or redevelopment with combined, estimated net development costs of approximately $348.5 million.

Outlook for 2018

Regency expects NAREIT FFO per share of $3.75-$3.79 compared with the previous guidance of $3.74-$3.79. The Zacks Consensus Estimate for the same is currently pegged at the upper end of this range.

The company expects 2.75-3.25% growth in same-property net operating income, excluding termination fees, compared with 2.40-3.25% guided earlier.

Dividend Update

On Jul 31, Regency's board of directors announced a quarterly cash dividend of 55.5 cents per share on its common stock. This dividend will be paid on Aug 29 to shareholders of record as of Aug 15, 2018.

Our Take

Regency has resorted to strategic acquisitions in a bid to fortify its portfolio in thriving sub-markets. It has also made significant dispositions in the April-June quarter. Notably, with a premium quality portfolio of shopping centers nationwide, Regency is well poised to attract top retailer sand grocers. This is expected to boost its operating performance in the future.

However, recent efforts of online retailers to penetrate deeper into the grocery business have emerged as a concern. Additionally, rate hike adds to its woes.

Regency Centers Corporation Price and EPS Surprise

Regency Centers Corporation Price and EPS Surprise | Regency Centers Corporation Quote

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

We, now, look forward to the earnings releases of Lamar Advertising Company LAMR , Host Hotels & Resorts, Inc. HST and Outfront Media Inc. OUT , all of which are scheduled to report their quarterly numbers next week.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) - a widely used metric to gauge the performance of REITs.

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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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