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Regency Centers Reports Second Quarter 2018 Results

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Regency Centers Corporation ("Regency" or the "Company") (NYSE:REG) today
reported financial and operating results for the period ended June 30,
2018.

Second Quarter 2018 Highlights

  • Net Income Attributable to Common Stockholders ("Net Income") of $0.28
    per diluted share.
  • NAREIT Funds From Operations ("NAREIT FFO") of $0.93 per diluted share.
  • Same property Net Operating Income ("NOI"), excluding termination
    fees, increased 4.2% as compared to the same period in the prior year.
  • As of June 30, 2018, the same property portfolio was 95.5% leased.
    Spaces less than 10,000 square feet ("Small Shops") were 92.2% leased.
  • Acquisition and disposition activity of $71.0 million and $32.5
    million, respectively.
  • On a year-to-date basis, including the property sales subsequent to
    quarter end, the Company has sold properties for a combined gross
    sales price of $142.9 million at a weighted average cap rate of 7.9%.
  • Completed two developments with a combined net development cost of
    $110.9 million at an average return of 7.0%.
  • As of June 30, 2018, a total of 21 properties were in development or
    redevelopment representing a total investment of $348.5 million.

"Regency's unequaled combination of strategic advantages produced
another quarter of gratifying results. Our best-in-class national
portfolio of high quality shopping centers, located in densely populated
and affluent trade areas, continues to attract market leading grocers
and retailers allowing for consistent and impressive NOI growth," said
Martin E. "Hap" Stein, Jr., Chairman and Chief Executive Officer. "Led
by a dedicated and experienced team, Regency is well positioned to
compound growth in earnings, cash flow, and dividends."

Financial Results

Regency reported Net Income for the second quarter of $47.8 million, or
$0.28 per diluted share compared to $48.4 million, or $0.28 per diluted
share, for the same period in 2017.

The Company reported NAREIT FFO for the second quarter of $157.3
million, or $0.93 per diluted share, compared to $143.6 million, or
$0.84 per diluted share, for the same period in 2017.

The Company reported Operating FFO, an additional performance measure
used by Regency that excludes certain non-comparable items as well as
non-cash components of earnings derived from above and below market rent
amortization, straight-line rents, and amortization of mark-to-market of
debt adjustments, for the second quarter of $150.5 million, or $0.89 per
diluted share, compared to $143.3 million, or $0.84 per diluted share,
for the same period in 2017.

Operating Results

Second quarter same property NOI, excluding termination fees, increased
4.2% compared to the same period in 2017, with base rent growth
contributing 3.5%.

As of June 30, 2018, Regency's wholly-owned portfolio plus its pro-rata
share of co-investment partnerships was 95.0% leased. The same property
portfolio was 95.5% leased, which is a decrease of 20 basis points
sequentially and 10 basis points from the same period in 2017. The
primary driver of the decline in same property percent leased is related
to the Toys "R" Us moveouts in the second quarter. Small Shops were
92.2% leased, a decrease of 10 basis points sequentially and 20 basis
points from the same period in 2017.

For the three months ended June 30, 2018, Regency executed approximately
1.7 million square feet of new and renewal leases. Rent spreads on
comparable new and renewal leases for the trailing twelve months were
9.4% and 6.0%, respectively, with total rent growth of 6.7%. "Leasing
fundamentals continue to be healthy across the portfolio. We have solid
demand for our premier portfolio as tenants continue to validate the
importance of high quality locations as they thoughtfully execute their
expansion plans," said Jim Thompson, Executive Vice President of
Operations. "We've had great success in embedding contractual rent
increases into our executed leases over the past several years, which is
translating into our strong Same Property NOI performance."

Investments

Property Transactions

During the quarter the Company closed on $71.0 million of acquisitions
and $32.5 million of dispositions.

  • Rivertowns Square (Dobbs Ferry, NY) – As previously disclosed, the
    Company acquired Rivertowns Square, a 116,000 square foot retail
    shopping center, anchored by Brooklyn Market, for a gross purchase
    price of $68.9 million.
  • Crossroads Commons II (Boulder, CO) – Regency and a co-investment
    partner acquired Crossroads Commons II, a 20,000 square foot retail
    shops building adjacent to the Company's existing co-investment
    property, Crossroads Commons, anchored by Whole Foods. Regency's
    pro-rata share of the purchase price is $2.1 million.
  • Regency sold three shopping centers during the quarter. The properties
    were all located in Florida in the markets of Palm Coast, Fort Myers,
    and Orlando.

Subsequent to quarter end, Regency sold three wholly-owned properties
for a combined gross sales price of $106.9 million. Magnolia Shoppes is
located in Fort Myers, FL, and anchored by Regal Cinemas. Indio Towne
Center, located in Indio, CA, is anchored by 24 Hour Fitness, Party
City, and formally Toys R Us. East Washington Place is located in
Petaluma, CA, and anchored by Sprouts, Dick's Sporting Goods, TJ Maxx,
and HomeGoods. On a year-to-date basis, including the property sales
subsequent to quarter end, the Company has sold properties for a
combined gross sales price of $142.9 at a weighted average cap rate of
7.9%.

Developments and Redevelopments

During the second quarter, the Company started four redevelopment
projects and completed two development projects. The completed
development projects have a combined cost of $110.9 million and are
expected to yield an average return of 7.0%.

At quarter end, the Company had 21 properties in development or
redevelopment with combined, estimated net development costs of $348.5
million. In-process development projects were a combined 60% funded and
78% leased, and are expected to yield an average return of 7.3%.

Capital Markets

On April 2, 2018, the Company redeemed its $150 million 6.0% notes
originally due on June 15, 2020, including a make-whole premium of $10.5
million. Regency used proceeds from its February 28, 2018, $300 million
4.125% notes offering due 2028, to repay the notes in full.

Dividend

On July 31, 2018, Regency's Board declared a quarterly cash dividend on
the Company's common stock of $0.555 per share. The dividend is payable
on August 29, 2018, to shareholders of record as of August 15, 2018.

2018 Guidance

The Company has updated certain components of its 2018 earnings
guidance. Please refer to the Company's second quarter 2018 supplemental
information package for a complete list of updates.

2018 Guidance
    Previous Guidance     Updated Guidance
Net Income Attributable to Common Stockholders ("Net Income")   $1.33 - $1.38     $1.32 - $1.36
NAREIT Funds From Operations ("NAREIT FFO") per diluted share   $3.74 - $3.79     $3.75 - $3.79
Operating Funds from Operations ("Operating FFO") per diluted share   $3.49 - $3.54     $3.50 - $3.54
Same Property Net Operating Income ("SPNOI") Growth excluding
termination fees (pro-rata)
  2.40% - 3.25%     2.75% - 3.25%

Conference Call Information

To discuss Regency's second quarter results, the Company will host a
conference call on Friday, August 3, 2018, at 11:00 a.m. EDT. Dial-in
and webcast information is listed below.

Second Quarter Earnings Conference Call
Date:       Friday, August 3, 2018
Time: 11:00 a.m. EDT
Dial#: 877-407-0789 or 201-689-8562
Webcast:

investors.regencycenters.com

Replay

Webcast Archive: Investor
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Non-GAAP Disclosure

The Company uses certain non-GAAP performance measures, in addition to
the required GAAP presentations, as it believes these measures improve
the understanding of the Company's operational results. Regency manages
its entire real estate portfolio without regard to ownership structure,
although certain decisions impacting properties owned through
partnerships require partner approval. Therefore, the Company believes
presenting its pro-rata share of operating results regardless of
ownership structure, along with other non-GAAP measures, makes
comparisons of other REITs' operating results to the Company's more
meaningful. Management continually evaluates the usefulness, relevance,
limitations, and calculation of the Company's reported non-GAAP
performance measures to determine how best to provide relevant
information to the public, and thus such reported measures could change.

NAREIT FFO is a commonly used measure of REIT performance, which the
National Association of Real Estate Investment Trusts ("NAREIT") defines
as net income, computed in accordance with GAAP, excluding gains and
losses from dispositions of depreciable property, net of tax, excluding
operating real estate impairments, plus depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint
ventures. Regency computes NAREIT FFO for all periods presented in
accordance with NAREIT's definition. Many companies use different
depreciable lives and methods, and real estate values historically
fluctuate with market conditions. Since NAREIT FFO excludes depreciation
and amortization and gains and losses from depreciable property
dispositions, and impairments, it can provide a performance measure
that, when compared year over year, reflects the impact on operations
from trends in occupancy rates, rental rates, operating costs,
acquisition and development activities, and financing costs. This
provides a perspective of the Company's financial performance not
immediately apparent from net income determined in accordance with GAAP.
Thus, NAREIT FFO is a supplemental non-GAAP financial measure of the
Company's operating performance, which does not represent cash generated
from operating activities in accordance with GAAP and therefore, should
not be considered a substitute measure of cash flows from operations.

Operating FFO is an additional performance measure that excludes from
NAREIT FFO: (i) transaction related income or expenses; (ii) impairments
on land; (iii) gains or losses from the early extinguishment of debt;
(iv) certain non-cash components of earnings derived from above and
below market rent amortization, straight-line rents, and amortization of
mark-to-market of debt adjustments; and (v) other amounts as they occur.
The Company believes Operating FFO, which excludes certain non-cash and
non-comparable items from the computation of NAREIT FFO that affect the
Company's period-over-period performance, is useful to investors because
it is more reflective of the core operating performance of its portfolio
of properties. The Company provides a reconciliation of Net Income to
NAREIT FFO and Operating FFO for actual results.

Reconciliation of Net (Loss) Income Attributable to Common
Stockholders to NAREIT FFO and Operating FFO - Actual (in thousands)

For the Periods Ended June 30, 2018 and 2017  

Three Months Ended

   

Year to Date

2018

 

2017

2018

 

2017

Reconciliation of Net Income (Loss) to NAREIT FFO:
 
Net Income (Loss) Attributable to Common Stockholders $ 47,841 48,368 $ 100,500 15,144
Adjustments to reconcile to NAREIT Funds From Operations(1):
Depreciation and amortization (excluding FF&E) 97,189 100,144 193,386 167,589
Provision for impairment to operating properties 12,440 - 28,494 -
Gain on sale of operating properties (246 ) (5,054 ) (348 ) (5,065 )

Exchangeable operating partnership units

  100     104     212     85  

 

NAREIT Funds From Operations

$ 157,324     143,562   $ 322,244     177,753  

 

Reconciliation of NAREIT FFO to Operating FFO:

 

NAREIT Funds From Operations

$ 157,324 143,562 $ 322,244 177,753

Adjustments to reconcile to Operating Funds From Operations(1):

Acquisition pursuit and closing costs

-

111

-

137

Gain on sale of land

(869 ) (2,446 ) (976 ) (2,850 )

Provision for impairment to land

93 - 93 -

Loss on derivative instruments and hedge ineffectiveness

-

(6 )

-

(14 )

Early extinguishment of debt

11,010 12,404 11,172 12,404

Interest on bonds for period from notice to redemption

- - 600 -

Merger related costs

- 4,676 - 74,408

Merger related debt offering interest

- - - 975

Preferred redemption costs

- - - 9,369
Straight line rent, net (4,749 ) (5,403 ) (8,830 ) (8,768 )
Above/below market rent amortization, net (11,378 ) (8,593 ) (19,801 ) (12,313 )
Debt premium/discount amortization   (897 )   (1,012 )   (1,795 )   (1,653 )
 

Operating Funds From Operations

$ 150,534     143,293   $ 302,707     249,448  
 
 
Weighted Average Shares For Diluted Earnings per Share 169,682 170,421 170,291 148,931
 
Weighted Average Shares For Diluted FFO and Operating FFO per Share 170,032 170,743 170,641 149,170
 
 
(1) Includes pro-rata share of unconsolidated
co-investment partnerships, net of pro-rata share attributable to
noncontrolling interests.
 

Same property NOI is a key non-GAAP measure used by management in
evaluating the operating performance of Regency's properties. The
Company provides a reconciliation of net income to pro-rata same
property NOI.

Reconciliation of Net Income Attributable to Common Stockholders to
Pro-Rata Same Property NOI - as adjusted Actual (in thousands)

For the Periods Ended June 30, 2018 and 2017  

Three Months Ended

   

Year to Date

2018

 

2017

2018

 

2017

 
Net Income (Loss) Attributable to Common Stockholders $ 47,841 48,368 $ 100,500 15,144
Less:
Management, transaction, and other fees (6,887 ) (6,601 ) (14,045 ) (13,307 )
Gain on sale of real estate (1,123 ) (4,366 ) (1,219 ) (4,781 )
Other (1) (17,634 ) (15,064 ) (31,807 ) (23,262 )
Plus:
Depreciation and amortization 89,105 92,230 177,629 152,284
General and administrative 16,776 16,746 34,382 34,419
Other operating expense, excluding provision for doubtful accounts 1,480 5,697 1,917 76,643
Other expense (income) 61,048 46,924 114,016 73,026
Equity in income of investments in real estate excluded from NOI (2) 15,669 12,377 30,762 26,710
Net income attributable to noncontrolling interests 748 680 1,554 1,332
Preferred stock dividends and issuance costs   -     1,125     -     12,981  
NOI 207,023 198,116 413,689 351,189
 
Less non-same property NOI (3) (5,599 ) (3,642 ) (8,751 ) (4,901 )
Plus same property NOI for non-ownership periods of Equity One (4) - - - 43,323
           
Same Property NOI as adjusted $ 201,424     194,474   $ 404,938     389,611  
 
Same Property NOI as adjusted without Termination Fees $ 202,686     194,450   $ 405,148     389,107  
 
Same Property NOI as adjusted without Termination Fees or
Redevelopments
$ 179,769     175,675   $ 359,971     351,368  

 

(1)

  Includes straight-line rental income and expense, net of reserves,
above and below market rent amortization, other fees, and
noncontrolling interests.

(2)

Includes non-NOI expenses incurred at our unconsolidated real estate
partnerships, such as, but not limited to, straight-line rental
income, above and below market rent amortization, depreciation and
amortization, and interest expense.

(3)

Includes revenues and expenses attributable to Non-Same Property,
Projects in Development, corporate activities, and noncontrolling
interests.

(4)

Refer to page ii of the Company's second quarter 2018 supplemental
package for Same Property NOI detail for the non-ownership periods
of Equity One.
 

Reported results are preliminary and not final until the filing of the
Company's Form 10-Q with the SEC and, therefore, remain subject to
adjustment.

Reconciliation of Net Income Attributable to Common Stockholders to
NAREIT FFO and Operating FFO — Guidance (per diluted share)

  Full Year
NAREIT FFO and Operating FFO Guidance:   2018
Low       High
 
Net income attributable to common stockholders $ 1.32 1.36
 
Adjustments to reconcile net income to NAREIT FFO:
Depreciation and amortization 2.26 2.26
Provision for impairment 0.17 0.17
         
 
NAREIT Funds From Operations $ 3.75         3.79  
 
 
Adjustments to reconcile NAREIT FFO to Operating FFO:
Gain on sale of land (0.01 ) (0.01 )
Early extinguishment of debt 0.07 0.07
Other non-comparable costs 0.01 0.01
Straight line rent, net (0.10 ) (0.10 )
Market rent amortization, net (0.20 ) (0.20 )
Debt mark-to-market (0.02 ) (0.02 )
         
 
Operating Funds From Operations $ 3.50         3.54  
 

The Company has published forward-looking statements and additional
financial information in its second quarter 2018 supplemental
information package that may help investors estimate earnings for 2018.
A copy of the Company's second quarter 2018 supplemental information
will be available on the Company's website at www.RegencyCenters.com
or by written request to: Investor Relations, Regency Centers
Corporation, One Independent Drive, Suite 114, Jacksonville, Florida,
32202. The supplemental information package contains more detailed
financial and property results including financial statements, an
outstanding debt summary, acquisition and development activity,
investments in partnerships, information pertaining to securities issued
other than common stock, property details, a significant tenant rent
report and a lease expiration table in addition to earnings and
valuation guidance assumptions. The information provided in the
supplemental package is unaudited and there can be no assurance that the
information will not vary from the final information in the Company's
Form 10-Q for the quarter ended June 30, 2018. Regency may, but assumes
no obligation to, update information in the supplemental package from
time to time.

About Regency Centers Corporation (NYSE:REG)

Regency Centers is the preeminent national owner, operator, and
developer of shopping centers located in affluent and densely populated
trade areas. Our portfolio includes thriving properties merchandised
with highly productive grocers, restaurants, service providers, and
best-in-class retailers that connect to their neighborhoods,
communities, and customers. Operating as a fully integrated real estate
company, Regency Centers is a qualified real estate investment trust
(REIT) that is self-administered, self-managed, and an S&P 500 Index
member. For more information, please visit regencycenters.com.

Forward-looking statements involve risks and uncertainties. Actual
future performance, outcomes and results may differ materially from
those expressed in forward-looking statements. Please refer to the
documents filed by Regency Centers Corporation with the SEC,
specifically the most recent reports on Forms 10-K and 10-Q, which
identify important risk factors which could cause actual results to
differ from those contained in the forward-looking statements.

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