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Regency Centers Corp. REG seems well-poised to gain from its strategically located premium portfolio of grocery-anchored shopping centers. Strategic buyouts and an encouraging development pipeline bode well for long-term growth. A healthy balance sheet provides financial flexibility for portfolio expansion. However, growing e-commerce adoption, elevated interest rates and a concentrated portfolio raise concerns.
Last month, Regency Centers reported first-quarter 2025 NAREIT funds from operations (FFO) per share of $1.15, outpacing the Zacks Consensus Estimate of $1.14. The figure increased 6.5% from the prior-year quarter. Results reflected healthy leasing activity. It witnessed a year-over-year improvement in the same-property net operating income and base rents during the quarter.
Shares of REG have risen 20.4% in the past year, outperforming the industry's 6.2% growth. Analysts seem bullish on this Jacksonville, FL-based Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2025 FFO per share indicates a favorable outlook, as it has moved marginally upward over the past two months to $4.54.
Image Source: Zacks Investment Research
What's Aiding REG?
Regency Centers has a high-quality open-air shopping center portfolio, with more than 80% grocery-anchored neighborhood and community centers. This focus on building a premium portfolio of grocery-anchored shopping centers is a strategic fit because such centers are usually necessity-driven and attract dependable traffic. Six of Regency Centers’ top 10 tenants are high-performing grocers.
REG’s premium shopping centers are situated in affluent suburban areas and near the urban trade areas where consumers have high spending power, enabling the company to attract top grocers and retailers. Anchor tenants comprised 42.3% (based on pro-rata ABR) of its portfolio as of March 31, 2025. Regency’s embedded rent escalators have also been a key driving factor behind its rent growth.
Regency is making efforts to improve its portfolio with acquisitions and developments in key markets. In the first quarter of 2025, Regency acquired Brentwood Place Shopping Center, a premier retail destination in Brentwood, TN, for around $119 million at its share. The move aligns with the company’s efforts to improve its portfolio quality through investments in high-growth markets like Nashville. As of March 31, 2025, Regency Centers’ in-process development and redevelopment projects have estimated net project costs of around $499 million at the company’s share.
Regency Centers is focused on strengthening its balance sheet. This retail REIT had $1.2 billion of capacity under its revolving credit facility and approximately $78.5 million of cash and equivalents as of March 31, 2025. As of the same date, its pro-rata net debt and preferred stock-to-operating EBITDAre ratio was 5.3, while the fixed charge coverage ratio was 4.3. REG also enjoys a large pool of unencumbered assets. As of March 31, 2025, 89.4% of its wholly-owned real estate assets were unencumbered. With a high percentage of such assets, the company can enjoy access to the secured and unsecured debt markets and maintain availability on the line.
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. Given the company’s solid operating platform, scope for growth and decent financial position compared to that of the industry, this dividend rate is expected to be sustainable over the long run. Check Regency Centers’ dividend history here.