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Regency's Q3 FFO, Revenues Beat Estimates; Guidance Up

Regency Centers Corporation 's REG third-quarter 2015 core funds from operations ("FFO") of 76 cents per share beat the Zacks Consensus Estimate by 2 cents. Further, the results compared favorably with the year-ago quarter tally of 71 cents. Better-than-expected results were attributable to strong growth in same property net operating income ("NOI").

Total revenue for the quarter rose 6.7% year over year to nearly $136.3 million, outpacing the Zacks Consensus Estimate of $135.2 million.

Behind the Headlines

During the quarter, Regency's tally for new and renewal leasing transactions reached 353 and included 1,174,000 square feet of space.

Moreover, in third-quarter 2015, Regency's same property NOI ("SPNOI"), excluding termination fees for its wholly owned properties plus its pro-rata share of co-investment partnerships, climbed 4.7% on a year-over-year basis. On the other hand, rental rate growth for new leases was 12.9%, while the same for renewal leases was 7.6%. Same properties portfolio was 96% leased, reflecting year-over-year growth of 10 basis points (bps). On the other hand, all of the company's properties were 96% leased, up 70 bps year over year.

During the quarter, Regency sold two properties; while year to date, it has disposed five properties for a combined gross sales price of $128.7 million. The company's share of the combined gross sales price is $109.9 million. Further, the company acquired 180,000-square foot University Commons at Boca Raton, FL for a gross purchase price of $80.5 million.

Moreover, at quarter-end, the company had 15 projects in development or under redevelopment (estimated net development cost of $188.9 million). In-process developments were 71% funded as well as 91% leased and committed, including retailer-owned square footage. During the quarter, Regency completed one project, comprising $60 million in net development costs and a yield of 8%.

Regency's total pro-rata share of cash and cash equivalents was $40.7 million at the end of third-quarter 2015, down from $128.5 million at 2014-end. The company's total outstanding debt stood at $2.02 billion on Sep 30, 2015, almost unchanged from prior-year end.

2015 Outlook Raised

Regency raised its core FFO per share guidance to $3.00-$3.03 from the earlier projection of $2.95-$2.99. The Zacks Consensus Estimate for 2015 is currently pegged at $2.98. The company further revised SPNOI growth (pro rata), excluding termination fees, to a range of 4.0-4.3% from the earlier band of 3.6-4.1%.

Dividend Update

On Oct 28, 2015, Regency's Board of Directors announced a quarterly cash dividend of 48.5 cents per share on its common stock. The dividend will be paid on Dec 2 to shareholders of record as of Nov 18.

Our Take

Going forward, Regency's focus on building a premium portfolio of grocery-anchored shopping centers augurs well. Such centers are usually necessity-driven and attract huge traffic. Also, presence of a cluster of leading grocers will protect it from market swings. Yet, stiff competition and an anticipated rise in interest rates in the medium term pose concerns.

Regency currently carries a Zacks Rank #3 (Hold). Presently, we look forward to other REIT stocks that are scheduled to release third-quarter 2015 results next week. These include General Growth Properties, Inc GGP , Vornado Realty Trust VNO and Apartment Investment and Management Company AIV .

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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