Regency Beats Q1 FFO & Revs; Guides up - Analyst Blog

Continuing with its winning streak, Regency Centers Corporation REG reported a positive earnings surprise of 6.15% in first-quarter 2014. The company's first-quarter core funds from operations (core FFO) per share of 69 cents exceeded the Zacks Consensus Estimate by 4 cents and the year-ago quarter figure by 5 cents.

Higher revenue growth aided the company's results and this retail real estate investment trust (REIT) raised its outlook for 2014. Shares climbed 1.0% during yesterday's regular trading session the NYSE.

Including non-core items, reported FFO for the quarter was 71 cents per share, up from the prior-year quarter figure of 64 cents.

Quarter in Detail

Total revenue for the quarter rose 10.7% year over year to $133.3 million, which exceeded the Zacks Consensus Estimate of $123 million.

Same property net operating income (NOI), excluding termination fees, climbed 2.9% on a year-over-year basis, with same-space rental rate growth of 11.6% (cash basis for spaces vacant for less than 12 months).

Regency executed a total of 266 new and renewal lease deals for 1.2 million square feet of space in the first quarter. At the end of first-quarter 2014, its same property portfolio was 94.9% leased, down 30 basis points (bps) sequentially. On the other hand, all of its properties were 94.5% leased, down 30 bps sequentially.

Regency disposed a free-standing Rite Aid Corporation RAD unit at $4.0 million. On the other hand, the company acquired a property in Austin, TX, (on a wholly owned basis) for $22.5 million. Furthermore, the company purchased an 80% majority stake in a 3-property portfolio in Fairfield, CT. This acquisition was made as part of a joint venture with a local real estate developer for a gross purchase price of $149.3 million and Regency's share was $119.5 million.

Moreover, as of Mar 31, 2014, the company had 7 projects in development with estimated net development costs of $228.3 million and 18 redevelopment projects in process reflecting a total projected incremental investment of $84.0 million.

Liquidity

Regency exited first-quarter 2014 with cash and cash equivalents of nearly $44.4 million, down from $90.2 million at the prior-quarter end. The company's total outstanding debt came in at $2.0 billion, up from $1.85 billion at year-end 2013.

Raised Outlook

Regency has raised its outlook for 2014 core FFO per share and now expects it to be in the range of $2.68 – $2.74, up from $2.66 – $2.72 guided earlier. The Zacks Consensus Estimate of $2.70 per share also lies within the company's specified range.

Dividend Update

On May 1, 2014, Regency declared a quarterly common stock dividend of 47 cents per share. The dividend will be paid on Jun 4, 2014 to shareholders of record as of May 21, 2014.

Our Take

We are encouraged with yet another encouraging quarterly performance by Regency, which has surprised in the last four quarters as well. The company primarily focuses on building a premium portfolio of grocery-anchored shopping centers. Such centers are usually necessity driven and drive a dependable traffic. Additionally, the outlook raise boosts investors' confidence in the stock.

Regency currently carries a Zacks Rank #3 (Hold). Investors interested in the retail REIT industry may also consider stocks like Acadia Realty Trust AKR and General Growth Properties, Inc. GGP. All these stocks carry a Zacks Rank #2 (Buy).


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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