Regency Q3 FFO Beats on Higher Revenues, Raises Outlook - Analyst Blog

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.

Raised Outlook

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.

Our Take

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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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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