Company Reports

Regency Centers is one of the largest shopping center REITs, with 482 properties spread across more than 20 major US metro areas following the completion of the Urstadt Biddle acquisition in August 2023. Regency's portfolio is filled with high-quality assets located in population-dense, affluent markets. The company focuses on owning grocery-anchored centers, with over 80% of properties featuring a grocery anchor and grocery stores representing slightly more than 20% of annual base rent. Regency's grocery anchors are strong draws to the centers as they produce sales per square foot well above the national average and are very healthy with low occupancy costs. The rest of the portfolio contains a substantial number of service-oriented tenants that are naturally resistant to e-commerce pressures.

Regency Centers reported core funds from operations of $1.16 per share and same-store net operating income growth of 3.8% for the second quarter.

Regency Centers is one of the largest shopping center REITs, with 481 properties spread across more than 20 major US metro areas following the completion of the Urstadt Biddle acquisition in August 2023. Regency's portfolio is filled with high-quality assets located in population-dense, affluent markets. The company focuses on owning grocery-anchored centers, with over 80% of properties featuring a grocery anchor and grocery stores representing slightly more than 20% of annual base rent. Regency's grocery anchors are strong draws to the centers as they produce sales per square foot well above the national average and are very healthy with low occupancy costs. The rest of the portfolio contains a substantial number of service-oriented tenants that are naturally resistant to e-commerce pressures.

Regency Centers reported core funds from operations of $1.16 per share and same-store net operating income growth of 4.4% for the first quarter.

Regency Centers is one of the largest shopping center REITs, with 481 properties spread across more than 20 major US metro areas following the completion of the Urstadt Biddle acquisition in August 2023. Regency's portfolio is filled with high-quality assets located in population-dense, affluent markets. The company focuses on owning grocery-anchored centers, with over 80% of properties featuring a grocery anchor and grocery stores representing slightly more than 20% of annual base rent. Regency's grocery anchors are strong draws to the centers as they produce sales per square foot well above the national average and are very healthy with low occupancy costs. The rest of the portfolio contains a substantial number of service-oriented tenants that are naturally resistant to e-commerce pressures.

Regency Centers reported core funds from operations of $1.12 per share and same-store net operating income growth of 4.7% for the fourth quarter.

Regency Centers reported core funds from operations of $1.09 per share and same-store net operating income growth of 4.8% for the third quarter.

Regency Centers is one of the largest shopping center REITs, with 483 properties spread across more than 20 major US metro areas following the completion of the Urstadt Biddle acquisition in August 2023. Regency's portfolio is filled with high-quality assets located in population-dense, affluent markets. The company focuses on owning grocery-anchored centers, with over 80% of properties featuring a grocery anchor and grocery stores representing slightly more than 20% of annual base rent. Regency's grocery anchors are strong draws to the centers as they produce sales per square foot well above the national average and are very healthy with low occupancy costs. The rest of the portfolio contains a substantial number of service-oriented tenants that are naturally resistant to e-commerce pressures.

Regency Centers reported core funds from operations of $1.10 per share and same-store net operating income growth of 7.5% for the second quarter.

Regency Centers reported core funds from operations of $1.09 per share and same-store net operating income growth of 4.3% for the first quarter.

Regency Centers is one of the largest shopping center REITs, with 482 properties spread across more than 20 major US metropolitan areas following the completion of the Urstadt Biddle acquisition in August 2023. Regency's portfolio is filled with high-quality assets located in population-dense, affluent markets. The company focuses on owning grocery-anchored centers, with over 80% of properties featuring a grocery anchor and grocery stores representing slightly more than 20% of annual base rent. Regency's grocery anchors are strong draws to the centers as they produce sales per square foot well above the national average and are very healthy with low occupancy costs. The rest of the portfolio contains a substantial number of service-oriented tenants that are naturally resistant to e-commerce pressures.

Regency Centers reported fourth-quarter results that were in line with our expectations, leading us to reaffirm our $80 fair value estimate for the no-moat company. Same-store occupancy improved 60 basis points sequentially to 96.7%, the highest figure the company has reported in over a decade. Re-leasing spreads remain solid at 10.8%, in line with our 10.7% estimate for the quarter. Same-store revenue increased 2.8% while same-store operating expenses only rose 0.6%, leading to same-store net operating income growth of 3.8%. However, excluding the effect of termination fees and redevelopment properties same-store NOI growth was 3.0% in the fourth quarter, in line with our 2.9% estimate. Regency reported core funds from operations of $1.04 per share in the fourth quarter, matching our estimate.

Over the past few years, we have observed an inverse relationship between share prices in the REIT sector and interest-rate movements. We believe a major reason is that all commercial real estate valuations are connected to interest rates. Capitalization rates directly indicate the return expectations for a real estate investment and expectations for risk and growth. Historically, we have observed that commercial real trades at cap rates consistently spread above the 10-year US Treasury. If interest rates rise, investors will require a higher return, and thus a higher cap rate, to accept the risk associated with an investment in a real estate asset. Since return expectations have held relatively steady for most real estate sectors over the past few years, higher cap rates translate to falling prices for real estate.

Regency Centers is one of the largest shopping center REITs, with 483 properties spread across more than 20 major US metropolitan areas following the completion of the Urstadt Biddle acquisition in August 2023. Regency's portfolio is filled with high-quality assets located in population-dense, affluent markets. The company focuses on owning grocery-anchored centers, with over 80% of properties featuring a grocery anchor and grocery stores representing slightly more than 20% of annual base rent. Regency's grocery anchors are strong draws to the centers as they produce sales per square foot well above the national average and are very healthy with low occupancy costs. The rest of the portfolio contains a substantial number of service-oriented tenants that are naturally resistant to e-commerce pressures.

Third-quarter results for no-moat Regency Centers were better than expected, giving us confidence in our $76 fair value estimate. Same-store occupancy improved 20 basis points sequentially to 96.1% in the third quarter, better than our estimate of occupancy remaining flat. Re-leasing spreads were 9.3% in the third quarter. While that figure was slightly below our estimate of 10.6% higher rent terms, we view it as a very strong result for the quarter given that rent renewals, which typically see a lower spread than leases to new tenants, represented 86% of the square footage leased in the quarter. The 9.0% re-leasing spread on renewals in the third quarter was the highest figure reported by Regency since the first quarter of 2017. The company reported same-store revenue growth of 2.9% while same-store operating expenses remained flat, leading to same-store net operating income growth of 4.2% in the quarter. Regency reported core funds from operations of $1.03 per share for the third quarter, four cents better than our $0.99 estimate.

The REIT sector in the US offers many companies that should see relatively stable cashflow growth over the next several years. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years with many reaching historical levels of net operating income growth, the REIT sector underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that is due to the sector’s negative correlation with interest rates, as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. Still, we still view many of companies in the US REIT sector as being undervalued as the companies should continue to produce solid long-term growth.

Despite a rally over the past two months, we still view the US REIT sector as being undervalued. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors led combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years, with many reaching historical levels of net operating income growth, the REIT sector has underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that the cause has been due to the sector's negative correlation with interest rates as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. We believe that US REITs will continue to see share price movements that are inverse of interest rate movements.

Regency Centers reported second-quarter results that were relatively in line with our estimates, leading us to reaffirm our $76 fair value estimate for the no-moat company. Same-store occupancy remained at 95.8% quarter over quarter. Re-leasing spreads were 9.2% in the second quarter, which was slightly better than the 8.5% figure reported in the first quarter but slightly below our estimate of new rents being 10.2% higher than prior rent terms. Base rent increased 2.7% and same-store revenue increased 2.3% in the second quarter. However, same-store operating expenses only increased 1.0%, so same-store net operating income, or NOI, grew 3.0%, which was slightly better than our estimate of 2.5% growth. Regency reported core funds from operations, or FFO, of $1.02 per share, which matched our estimate for the quarter and was 7.0% higher than the $0.96 figure the company reported in the second quarter of 2023.

Regency Centers is one of the largest shopping center REITs, with 482 properties spread across more than 20 major US metropolitan areas following the completion of the Urstadt Biddle acquisition in August 2023. Regency's portfolio is filled with high-quality assets located in population-dense, affluent markets. The company focuses on owning grocery-anchored centers, with over 80% of properties featuring a grocery anchor and grocery stores representing slightly more than 20% of annual base rent. Regency's grocery anchors are strong draws to the centers as they produce sales per square foot well above the national average and are very healthy with low occupancy costs. The rest of the portfolio contains a substantial number of service-oriented tenants that are naturally resistant to e-commerce pressures.

The US REIT sector remains significantly undervalued, in our perspective. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past two years, with many REITs reaching historical levels of net operating income growth, the sector has underperformed the broader equity markets over the past two years. We believe that the cause has been the sector’s negative correlation with interest rates as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, we don’t believe that higher rates significantly change our fair value estimates for the sector. Additionally, interest rates are down from the October 2023 highs, and REIT share prices have generally inversely followed the movements of the US 10-year Treasury.