November 06, 2019|
Confluence of Store Closures and Timing of Redevelopment Projects Are Weighing On the Retail REIT’s Near-Term Performance
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.