Regency Centers Corporation — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. Regency is a U.S. REIT that owns, operates, develops, and redevelops predominantly grocery-anchored neighborhood and community shopping centers. The filing combines the parent company and operating partnership; their assets and liabilities are the same on a consolidated basis.
Business context and portfolio
- At year-end, Regency had full or partial interests in 482 properties totaling 56.8 million square feet of gross leasable area; its pro-rata share was 48.6 million square feet.
- Portfolio occupancy was 95.1%, versus 94.8% at year-end 2022; same-property occupancy was 95.7%, versus 95.1%.
- On August 18, 2023, Regency completed its all-stock acquisition of Urstadt Biddle Properties (UBP). It acquired 74 properties, including interests in 10 partnership properties, representing 5.3 million square feet. The reported purchase price was $1.14 billion; UBP results are included from the closing date.
Financial performance and condition
| Metric | FY2023 | FY2022 |
|---|---|---|
| Total revenue | $1,322.5 million | $1,224.0 million |
| Net income attributable to common shareholders | $359.5 million | $482.9 million |
| Diluted earnings per share | $2.04 | $2.81 |
| Nareit FFO attributable to common stock and unit holders | $736.1 million | $707.8 million |
| Core Operating Earnings | $700.9 million | $660.8 million |
| Net cash provided by operating activities | $719.6 million | $655.8 million |
- Revenue rose 8.0%, with lease income up $96.5 million. Growth reflected UBP and other property additions, higher same-property rent, occupancy and recoveries, and development and redevelopment contributions.
- Common-shareholder net income fell despite revenue growth, principally because FY2022 included $109.0 million of gains on real estate sales, compared with $0.7 million in FY2023. FY2023 also included $5.1 million of preferred dividends following the UBP transaction.
- Pro-rata same-property NOI, excluding termination fees and expenses, increased 1.7% to $901.8 million. Management attributed growth to rent steps, occupancy, positive leasing spreads and completed redevelopments; higher recoverable operating costs and property taxes partly offset revenue gains.
- Regency completed 1,839 new and renewal leasing transactions covering 6.9 million pro-rata square feet. Comparable rent spreads were 10.0%, versus 7.4% in 2022. The average rent on 2023 new leases was $29.89 per square foot.
- Year-end total assets were $12.43 billion, including $10.76 billion of net real estate assets. Total liabilities were $5.23 billion.
- Debt outstanding was $4.15 billion, comprising $4.00 billion of notes payable and $152 million drawn on the unsecured credit facility. Net debt-to-operating EBITDAre was 5.4x on a pro-rata trailing-12-month basis, versus 5.0x in 2022; fixed-charge coverage was 4.7x, versus 4.6x.
- Cash, cash equivalents and restricted cash totaled $91.4 million, of which $85.0 million was unrestricted. Available line capacity was approximately $1.09 billion at year-end; a January 2024 amendment increased facility capacity to $1.5 billion and extended maturity to March 2028, with two six-month extension options.
- Common and preferred stock and unit distributions totaled $458.8 million in 2023, versus $430.1 million in 2022. Year-end debt was predominantly fixed-rate or hedged; the filing states less than 1% of outstanding debt was unhedged variable-rate debt.
Material changes, outlook and risks
- UBP materially enlarged the portfolio and affected year-over-year comparisons. The acquisition involved 13.568 million common shares valued at $818.5 million, converted preferred stock of $225.0 million, $39.3 million of debt repaid at closing and $57.2 million of transaction costs. Integration and realization of expected benefits remain execution risks.
- Development and redevelopment projects in process had estimated pro-rata costs of $468.1 million at year-end, versus $300.9 million a year earlier. Projects completed in 2023 represented $87.4 million of estimated net costs and an average stabilized yield of 8.7%.
- Management estimated approximately $677.8 million of capital needs over the next 12 months for leasing costs, tenant improvements, projects, partnership contributions and maturing debt. It cited construction inflation, permitting delays and labor shortages, and described fixed-cost contracts and early material orders as mitigation measures.
- The company priced $400 million of 5.25% senior unsecured notes due 2034 in January 2024, intending to use proceeds partly to repay $250 million of unsecured debt maturing in June 2024. It also expected $148.3 million of secured mortgage maturities over the next 12 months to be refinanced or repaid.
- No specific numerical FY2024 earnings or NOI guidance is provided in the supplied filing text. Management said it expects capital resources to meet needs for the next year, while offering no assurance regarding the longer term; new financing may carry higher rates.
- Key risks include higher interest rates and refinancing costs, recession and tenant credit or leasing pressure, retail changes including e-commerce, acquisition integration, construction costs and delays, and geographic exposure to severe weather, climate impacts and rising insurance costs. California and Florida account for significant portfolio exposure.
- Tenants in bankruptcy occupying space represented 0.5% of pro-rata annual base rent, primarily related to Rite Aid. Pro-rata environmental remediation liabilities accrued were $19.4 million; management did not expect currently known matters to have a material financial effect. Ordinary-course litigation was not expected to be material.
- KPMG issued unqualified opinions on the financial statements and internal controls. The audit identified real estate hold-period/impairment assessments and fair-value measurements for UBP-acquired properties as critical audit matters.
Most important facts for investors to verify
- How much of reported revenue, FFO and NOI growth reflects UBP, and whether acquisition integration and expected benefits are tracking to plan.
- Same-property NOI and leasing performance, including rent spreads, occupancy, recoveries and tenant improvement costs as the acquired portfolio enters comparable periods.
- Liquidity and refinancing execution for 2024 maturities, the use of January 2024 note proceeds, and the impact of higher borrowing costs on interest expense and coverage.
- Whether the $677.8 million capital requirement, development pipeline costs and expected project yields remain achievable amid inflation, labor and permitting constraints.
- Tenant credit exposure, including Rite Aid, and portfolio concentration, insurance availability and potential climate-related costs.
- Reconciliations of GAAP results to FFO, Core Operating Earnings and pro-rata measures; these supplemental non-GAAP measures are not substitutes for GAAP results or operating cash flow.