Who knew a trip to the neighborhood shopping center could be so profitable?
On January 14, Regency Centers Corp REG hit an intra-day 52-week high of $69.38 after the company announced a 3.2 percent dividend increase and reaffirmed its 2015 guidance originally released December 15, 2014.
Regency also announced a 2,500,000 share secondary stock offering and forward purchase arrangement solely underwritten by Wells Fargo, with a 375,000 30-day underwriter option.
Shares of REG traded down 2.2 percent in after-market trading, despite a separate announcement by Regency after the bell that the secondary equity offering would not be dilutive to previously announced FY2015 core FFO and FFO (funds from operations).
Tale Of The Tape -- A Look Back
The entire REIT sector outperformed the broader market during 2014, and grocery-anchored community centers were certainly no exception. Neighborhood center peers Kimco Realty Corp KIM, Brixmor Property Group Inc BRX and DDR Corp DDR all performed well for investors.
Based upon a January 14 closing price of $69.13, Regency is up another 4.3 percent since the first of the year, reducing its dividend yield to approximately 2.7 percent.
Detailed 2015 FFO Guidance
Investors and analysts were given a clear picture of how Regency sees 2015 unfolding.
Based upon mid-point 2015E guidance of $2.94, Regency is currently trading at relatively high 23.5x Price/Core FFO per share.
Key Operating Metrics -- FY 2014
Regency also publicized updated leasing information and rental trends:
- Percent leased, same properties only: 95.8 percent
- Percent leased, all properties: 95.4 percent
- Increase in same property net operating income (“SPNOI”) over the same period last year, excluding termination fees: 4.0 percent
- Same space rental rate growth on a cash basis for spaces vacant less than 12 months: 31.9 percent on new leases and 8.2 percent on renewal leases for a blended average of 11.9 percent
- Leasing transactions, including in-process developments (partnerships at 100 percent): 1,418 new and renewal lease transactions for a total of 5.4 million square feet
Notably, new leases for vacant space were signed for almost 32 percent higher rates which drove the overall blended average, including renewals, to an impressive, approximately 12 percent increase.
5 Quick Slides: Investor Overview
Originally founded in 1963, Regency has been operating as a publicly traded REIT since 1993. The company currently operates 332 properties containing 43.1 million square feet.
Regency has a strong balance sheet which is reflected by its investment grade ratings of: Moody's BBB, Fitch Baa2 and S&P BBB.
Regency has 17 offices strategically located near clustered properties and staffed by leasing "sharpshooters" with local market knowledge. In stark contrast to its single-tenant, triple-net lease cousins, multi-tenant retail centers require far more active management to be successful
Strong JV Partners
Fee income from third parties is non-dilutive and accretive to cash available for distribution.
Population density and above average household income are critical to ongoing bricks and mortar success.
Online retailing is much less of a competitive threat for grocery anchored centers.
The Other Green
Along with providing outstanding total returns for investors in 2014, Regency Centers was also focused upon multiple conservation and sustainability initiatives.
Bottom Line
The recent banner year for Regency Centers and REIT investors in general is not indicative of future returns.
However, for investors looking to "get rich slowly," Regency Centers appears to be configured for the long-haul, as evidenced by its investment grade ratings and large number of pension fund relationships.
Image credit: Christopher Woo, Wikimedia
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