Regency Feeling Heat From Retail Bankruptcies

November 06, 2019|Nicolas Foster (Via: COSTAR)

Confluence of Store Closures and Timing of Redevelopment Projects Are Weighing On the Retail REIT’s Near-Term Performance

Regency Centers said it has been affected by elevated retailer bankruptcies, including Barneys New York. (Getty Images)
Regency Centers said it has been affected by elevated retailer bankruptcies, including Barneys New York. (Getty Images)

Regency Centers reported results for the third quarter, saying it expects flat growth through 2020 as it focuses on addressing so called short-term headwinds driven by a confluence of retail bankruptcies cutting into revenue just as it is funding several large-scale redevelopments.

With Barneys closing all its U.S. stores, Regency President Lisa Palmer said in its third quarter earnings call that the company expects to see a dip of 60 basis points in regards to its net operating income (NOI) and core operating earnings from Barneys closing alone.

Regency owns 107 Seventh Ave., a retail condominium totaling 56,870 square feet in the Chelsea section of Manhattan leased entirely by Barneys New York.Palmer also stated she expects several other retailers, including Dress Barn, Pier 1 and the upscale cinema chain iPic Entertainment to close stores in Regency’s shopping centers next year.

At the same time, the REIT is planning to take an estimated $4 million of net operating income offline next year as it funds current and planned redevelopment projects. As a result, Palmer said the REIT expects 2019 same-property NOI of 2%, at the low end of its previous projected range of 2% to 2.5%.

However, Palmer also said the company is still seeing strong leasing activity and tenant demand. Regency signed about 1.7 million square feet within the third quarter. The tenant mix includes off-price retailers, like TJMaxx, fitness facilities such as Crunch Fitness, and non-traditional uses like medical space.

Palmer said they expect 2019 core operating earnings growth to come at the high-end of its 3% to 4% range. Palmer also said it will provide full year guidance for 2020 in its fourth quarter earnings release.

Year-to-date, Regency has closed on $281.6 million in acquisitions and $191.6 in depositions.  These transactions included the nearly $50 million purchase of Circle Marina Center in Long Beach, California. The company also sold the 102,000 square foot Bluebonnet Village in Baton Rouge, Louisiana for $14.2 million, or about $140 per square foot. The center includes a Rouses Market grocery store and an Office Depot.

Regency announced it will pay a quarterly dividend of $0.585 per share, or $2.34 annually. The dividend will be payable on November 22, 2019 to shareholders of record on November 12, 2019. Based on the October 30, 2019 closing price of $69.75, the company’s dividend yield is 3.35%, above the 10-Year Treasury rate for the same day of 1.78%.

Third Quarter Financials and Guidance
Regency reported a decrease in net income from $0.41 to $0.34 per share, or $69.7 million to $57.0 million, compared to the same quarter in 2018. NAREIT Funds from operations (FFO) for the third quarter were $0.99 per share at quarters end, or $166.1 million, compared to 163.5 million, or $0.96 per share for the same quarter last year.

Regency’s guidance estimates its net income Attributable to Common Stockholders to a range of $1.52 to $1.55 per share. The Company also estimates NAREIT FFO to be within a range of 3.84 to $3.87 per share, an increase of 0.79% and 0.52% on the low and high end respectively.

Regency Centers Corp. (NASDAQ: REG) is based in Jacksonville, Florida and owns 422 retail centers totaling approximately 57 million square feet.