Regency Centers Corporation REG is well-poised to gain from its strategically located portfolio of premium shopping centers. Its focus on grocery-anchored shopping centers ensures dependable traffic. Strategic buyouts and an encouraging development pipeline bode well for long-term growth.
Last month, Regency Centers announced that S&P Global Ratings (“S&P”) raised its credit ratings to ‘A-’ with a stable outlook. The rating upgrade is a testament to its long-term track record of cash flow growth and balance sheet strength, which have enabled the company’s stakeholders to create value and provide stability through cycles.
Analysts seem bullish about this Zacks Rank #2 (Buy) company, with the Zacks Consensus Estimate for its 2025 funds from operations (FFO) per share being raised marginally over the past month to $4.53.
Over the past six months, shares of this retail REIT have fallen 2.2% compared with the industry's 9.2% decline.
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Factors That Make Regency Centers a Solid Pick
Healthy Leasing Activity and Improving Base Rent: Regency Centers’ premium shopping centers are situated in affluent suburban areas and near the urban trade areas where consumers have high spending power, enabling them to attract top grocers and retailers. The company’s focus on necessity, service, convenience and value retailers serving the essential needs of the communities provides it with a strategic advantage.
Anchor tenants (tenants renting spaces greater than or equal to 10,000 square feet) comprised 42.4% (based on pro-rata ABR) of its portfolio as of Dec. 31, 2024. Regency Centers executed around 2.3 million square feet of comparable new and renewal leases in the fourth quarter of 2024.
Also, Regency Centers’ embedded rent escalators have been a key driving factor behind its rent growth. In the fourth quarter, same-property base rents contributed 3.3% to same-property net operating income (NOI) growth.
Grocery Anchored Tenant Base: In uncertain times, the grocery component has benefited retail REITs, and Regency Centers has numerous industry-leading grocers such as Publix, Kroger, Albertsons Companies ACI, TJX Companies TJX, Inc., and Amazon/Whole Foods as tenants. It has a high-quality open-air shopping center portfolio, with more than 80% grocery-anchored neighborhood and community centers. Six of its top 10 tenants are high-performing grocers.
Expansion Efforts: To enhance its portfolio, REG has been undertaking acquisitions and developmental activities. Given its prudent financial management, it is well-poised to capitalize on growth opportunities.
In 2024, Regency acquired properties for a total value of $92 million at the company’s share. During the fourth quarter of 2024, the REIT commenced new development and redevelopment projects with estimated net project costs of $35 million in total, bringing total project starts for 2024 to $258 million. Following the company’s impressive execution in 2024, management expects to drive a similar level of success in 2025.
Balance Sheet Strength: Regency Centers enjoys financial flexibility and focuses on strengthening its balance sheet position. This retail REIT had nearly $1.4 billion of capacity under its revolving credit facility and approximately $61.9 million of cash and equivalents as of Dec. 31, 2024. As of the same date, its pro-rata net debt and preferred stock-to-operating EBITDAre ratio was 5.2, while the fixed charge coverage ratio was 4. The company has a well-laddered debt maturity schedule, aiming to have less than nearly 15% of total debt maturing in any given year.
The company also enjoys a large pool of unencumbered assets, which provides it easy access to the secured and unsecured debt markets. As of Dec. 31, 2024, 88.6% of its wholly owned real estate assets were unencumbered.
Steady Dividend Payouts: Solid dividend payouts are the biggest attraction for REIT investors and Regency Centers is committed to boosting shareholder wealth. From 2014 to the fourth quarter of 2024, the company’s dividend witnessed a CAGR of 3.7%. In the last five years, the company has increased its dividend four times. Therefore, given its solid operating platform, the scope for growth and its decent financial position compared with the industry, this dividend rate is expected to be sustainable over the long run.
Other Stocks to Consider
Some other top-ranked stocks from the retail REIT sector are Essential Properties Realty Trust EPRT and Acadia Realty Trust AKR, each carrying a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Acadia Realty Trust’s 2025 FFO per share has moved marginally northward over the past week to $1.35.
The Zacks Consensus Estimate for Essential Properties Realty Trust’s 2025 FFO per share has increased marginally over the past month to $1.89.
Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.
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