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%.
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.
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.