Higher revenue growth kept Regency Centers Corporation 's ( REG ) winning streak alive, with a positive earnings surprise of around 3% in third-quarter 2014. In particular, the company's core funds from operations (core FFO) of 71 cents per share exceeded the Zacks Consensus Estimate by 2 cents and the year-ago quarter figure by 6 cents.
Encouragingly, this retail real estate investment trust (REIT) raised its outlook for 2014. In addition, including non-core items, reported FFO for the quarter was 70 cents per share, up from the prior-year quarter figure of 65 cents.
Total revenue for the quarter rose 11% year over year to $133.6 million, exceeding the Zacks Consensus Estimate of $130 million.
Quarter in Details
Same property net operating income (NOI), excluding termination fees, climbed 4.1% on a year-over-year basis, with same-space rental rate growing 22.8% on new leases and 9.9% on renewal leases (cash basis for spaces vacant for less than 12 months).
Regency executed a total of 357 new and renewal lease deals for 1.3 million square feet of space. At the end of third-quarter 2014, its same properties portfolio was 95.8% leased, up 50 basis points (bps) sequentially. On the other hand, all of its properties were 95.3% leased, up 30 bps sequentially.
During the reported quarter, Regency disposed one co-investment asset for $9.3 million ($3.7 million being the company's share of gross sales price) and four wholly-owned properties for $55.4 million. On the other hand, the company acquired one property in Lincoln Park, on a wholly owned basis, for $19.0 million. The company accomplished one project for $14.5 million in net development costs.
Furthermore, at quarter end, the company had 8 projects in development (estimated net development costs of $264.8 million) and 18 redevelopment projects in process (total estimated incremental investment upon completion of $83.4 million).
Regency exited third-quarter 2014 with cash and cash equivalents of about $110.0 million, up from $45.6 million at the prior-quarter end. The company's total outstanding debt stood at $2.02 billion at the end of Sep 2014, slightly down from $2.03 billion at the prior-quarter end.
The company reaped gross proceeds of $50.0 million through its at-the-market common equity program (weighted average price of $57.35 per share). Moreover, the company's corporate credit rating and senior unsecured ratings of BBB, with a Stable outlook, has been affirmed by Fitch Ratings.
Regency has raised its outlook range for 2014 core FFO per share and presently expects it in the range of $2.80 - $2.83, up from $2.75 - $2.80 guided earlier. This new range is higher than the Zacks Consensus Estimate of $2.78 per share.
Regency came up with another encouraging quarterly performance this season. The company is primarily focused on building a premium portfolio of grocery-anchored shopping centers. Such centers are usually necessity driven and bring in dependable traffic. Additionally, the outlook raise boosts investors' confidence in the stock.
Regency currently carries a Zacks Rank #2 (Buy). Investors interested in the retail REIT industry may also consider stocks like DDR Corp. ( DDR ), The Macerich Company ( MAC ) and Washington Prime Group Inc. ( WPG ). All these stocks have the same Zacks Rank as Regency.
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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