Regency Centers Corporation — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless otherwise stated. Regency is a REIT owning, operating, leasing, and developing grocery-anchored shopping centers. At quarter-end, it owned 293 consolidated properties and held partial interests in 113 additional properties through real estate partnerships. Financial amounts below are in U.S. dollars.
Financial performance and key metrics
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Total revenue | $274.7 million | $283.7 million; down 3.2% |
| Lease income | $266.4 million | $274.5 million; down $8.2 million |
| Operating expenses | $181.0 million | $182.6 million |
| Net income (loss) | $81.6 million | $(24.8) million |
| Net income (loss) attributable to common stockholders | $80.7 million | $(25.3) million |
| Diluted earnings (loss) per share | $0.47 | $(0.15) |
| Nareit FFO attributable to common stock and unit holders | $153.4 million | $166.1 million; down 7.7% |
| Pro-rata same-property NOI, excluding termination fees | $202.1 million | Down 1.6% |
| Cash from operating activities | $139.4 million | $125.7 million |
The GAAP earnings improvement primarily reflects the absence of the $132.1 million goodwill impairment recorded in Q1 2020. Q1 2021 also included $11.7 million of gains on real estate sales, compared with $38.0 million in the prior-year quarter. Same-property NOI declined mainly because of reduced rent commencements, tenant move-outs, and bankruptcies related to the pandemic. The filing does not provide a directly comparable GAAP operating-margin measure as a headline metric.
Balance sheet, debt, and liquidity
- Total assets were $10.63 billion and total liabilities were $4.58 billion at March 31, 2021, versus $10.94 billion and $4.88 billion, respectively, at December 31, 2020.
- Total debt was $3.65 billion, down from $3.92 billion at year-end. Regency repaid its $265 million term loan in January; no unsecured credit-facility borrowings remained at quarter-end.
- Cash, cash equivalents, and restricted cash were $139.3 million, including $2.1 million restricted; unrestricted cash was reported as $137.2 million. Cash declined $239.1 million during the quarter, with financing cash outflows of $385.3 million.
- The amended $1.25 billion credit facility matures March 23, 2025, with two six-month extension options. Available capacity was approximately $1.24 billion, net of letters of credit. The company also had $500 million available under its ATM equity program.
- Management reported covenant compliance and expected to remain compliant. Pro-rata net debt to trailing-twelve-month Operating EBITDAre was 5.9x, compared with 6.0x at December 31, 2020; fixed-charge coverage was 3.6x at both dates.
- There were no unsecured debt maturities until 2024. Management estimated approximately $264.9 million of capital needs over the next 12 months for debt maturities not expected to be refinanced, committed tenant improvements, development and redevelopment, and partnership contributions.
Portfolio, changes, and capital allocation
- The combined portfolio was 92.2% leased at March 31, compared with 92.3% at December 31, 2020; same-property occupancy was 92.5%, versus 93.0%.
- Regency completed 450 new and renewal leasing transactions covering 1.4 million pro-rata square feet. Trailing-twelve-month rent spreads were 1.2%, compared with 7.4% in Q1 2020. Management also reported slightly positive 0.2% spreads on comparable signed leases in the quarter.
- Approximately 93% of base rent billed for Q1 had been collected through May 3, 2021. Operating cash flow increased year over year, while development and capital-improvement spending fell to $31.4 million from $56.3 million.
- Regency sold four operating properties and one land parcel, receiving $53.9 million in proceeds, and had no consolidated shopping-center acquisitions in the quarter. It had 13 development or redevelopment projects in process, with estimated pro-rata costs of $326.8 million.
- Cash dividends paid to common stockholders and unit holders were approximately $101.0 million. The Board declared a $0.595-per-share dividend on May 5, payable July 6, 2021. A $250 million share-repurchase program was authorized; no shares had been bought under that program by quarter-end.
Outlook, risks, and unusual items
- The filing provides no specific earnings or FFO guidance. Management expects rent collections to remain below pre-pandemic levels for the foreseeable future, though collections had improved from their Q2 2020 low. It expects adequate capital resources for anticipated needs over the next 12 months.
- COVID-19 continues to create uncertainty around collections, tenant viability, move-outs, leasing demand, and rent concessions. Downtown centers reliant on workers returning to offices were lagging in recovery. Management said further concessions or legal actions may be necessary, and deferred rents may not all be collected.
- Management cautioned that continued pandemic effects could worsen leverage and coverage ratios, weaken demand and rents, and increase bankruptcies, vacancies, and tenant-related costs. Future capital-market conditions and financing terms are also uncertain.
- Environmental remediation liabilities were accrued at $7.8 million for Regency’s pro-rata share, including partnership investments. Management did not expect currently known environmental matters or ordinary-course litigation to have a material adverse effect, but noted outcomes and estimates remain uncertain.
- Other notable comparisons include higher general and administrative expense, up $7.6 million, partly reflecting deferred-compensation valuation changes and incentive compensation; and lower depreciation and amortization, down $12.0 million. The 2020 comparison included substantial goodwill impairment.
Important facts for investors to verify
- Track rent collections, tenant concessions, bankruptcies, and whether collection rates recover toward historical levels.
- Assess the trend in same-property NOI, occupancy, leasing spreads, and the difference between reported FFO and GAAP earnings.
- Review development and redevelopment costs, completion schedules, expected leasing, and the estimated $264.9 million of near-term capital needs.
- Confirm credit-facility availability, debt maturities, covenant headroom, and the trajectory of leverage and fixed-charge coverage.
- Monitor the recoverability of deferred rent and environmental accruals, as well as any material changes in pandemic-related risks or capital-market access.