Regency Centers Corporation (REG) — 2021 Form 10-K
Business context and reporting period
Annual report for the fiscal year ended December 31, 2021; financial comparisons are primarily with 2020. Regency is a U.S. REIT that owns, operates, acquires, develops and redevelops grocery-anchored shopping centers. At year-end, it had interests in 405 properties totaling 51.2 million square feet of gross leasable area; pro-rata area was 42.6 million square feet. The filing combines Regency Centers Corporation and its operating partnership, which owns substantially all assets and conducts substantially all operations.
Key financial metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | $1.166 billion | $1.016 billion |
| Net income attributable to common stockholders | $361.4 million | $44.9 million |
| Diluted earnings per share | $2.12 | $0.26 |
| Nareit FFO attributable to common stock and unit holders | $688.7 million | $502.0 million |
| Core Operating Earnings | $631.2 million | $505.2 million |
| Net cash provided by operating activities | $659.4 million | $499.1 million |
| Cash, cash equivalents and restricted cash at year-end | $95.0 million | $378.5 million |
- Pro-rata same-property NOI, excluding termination fees and expenses, rose 16.2% to $842.7 million. Total portfolio occupancy was 94.1%, versus 92.3%; same-property occupancy was 94.3%, versus 92.9%.
- Pro-rata net debt to trailing-twelve-month Operating EBITDAre improved to 5.1x from 6.0x; fixed-charge coverage increased to 4.5x from 3.6x.
- Year-end notes payable were $3.719 billion, primarily fixed-rate; no unsecured credit-facility borrowings were outstanding. The $1.25 billion revolver had approximately $1.241 billion available, net of letters of credit. Unrestricted cash was $93.1 million.
- Most wholly owned real estate assets—89.4%—were unencumbered. The company reported no unsecured debt maturities until 2024; $5.8 million of consolidated mortgage debt matured in 2022. Its pro-rata share of unconsolidated partnership debt maturities in 2022 was approximately $98.9 million.
- The filing does not provide a single clearly stated consolidated operating-margin measure.
Material changes versus 2020
- Revenue increased $150.0 million, primarily reflecting improved rent collection and lower uncollectible lease income, plus increased management and transaction fees.
- Net income rose sharply from the pandemic-affected 2020 comparison. 2020 included a $132.1 million goodwill impairment and $117.0 million of uncollectible lease income; 2021 included $84.4 million of real-estate impairment charges and $91.1 million of gains on real-estate sales.
- Collections of previously reserved rent supported 2021 results: the company recorded a net positive $23.5 million of uncollectible lease income, compared with a net charge of $82.4 million in 2020. Approximately 99% of base rent billed in fourth-quarter 2021 had been collected by February 7, 2022.
- Leasing activity increased to 1,979 new and renewal transactions covering 7.0 million pro-rata square feet, versus 1,511 transactions and 5.8 million square feet in 2020. Trailing-twelve-month rent spreads were positive 5.5%, up from 2.2%.
- Cash from operations increased $160.3 million. Investing outflows increased, chiefly because Regency spent $392.1 million acquiring operating real estate, including its purchase of the remaining interest in a seven-property portfolio. Financing outflows increased, including repayment of a $265 million term loan and higher distributions.
Outlook, management commentary, risks and unusual items
- Management said demand for quality neighborhood centers remained strong and leasing improved as the economy recovered. It noted that collections could remain below pre-pandemic averages and that rent growth may face pressure from inflation and tenants’ rising costs.
- Management estimated approximately $368.5 million of capital needs over the next 12 months, including construction and committed tenant costs, partnership contributions and maturing debt. It expects to fund needs through operating cash flow, property sales, debt financing and equity when markets are favorable.
- Development and redevelopment projects in progress had estimated pro-rata costs of $307.3 million at year-end. Projects completed during 2021 had estimated net costs of $67.6 million and an average stabilized yield of 9.0%. Inflation, labor shortages and supply-chain constraints could raise costs or delay completion.
- The board declared a $0.625-per-share dividend payable April 5, 2022. Future dividends remain at the board’s discretion and depend on operating cash flow, financial condition, capital needs and REIT requirements.
- Key risks include COVID-19 variants and tenant credit, inflation and labor/supply constraints, e-commerce and changing shopping behavior, anchor or shop tenant failures, and geographic concentration: Florida and California accounted for 22.1% and 28.2% of 2021 NOI, respectively. Coastal weather, climate change, insurance availability and environmental remediation are additional risks.
- The $84.4 million impairment related to two Potrero shopping centers; the auditor identified real-estate impairment valuation as a critical audit matter. Known environmental remediation liabilities were accrued at $9.0 million pro rata. Management said pending litigation and known environmental matters were not expected to have a material adverse effect.
- No specific forward earnings or FFO guidance is provided in the supplied filing text.
Important facts for investors to verify
- Whether rent collections and tenant credit quality continue to improve, and whether deferred rent is ultimately collected.
- How much of the 2021 earnings rebound reflects sustainable property operations versus prior-reserve recoveries, property-sale gains and other nonrecurring items; review GAAP results alongside FFO and Core Operating Earnings reconciliations.
- Whether occupancy, rent spreads and same-property NOI growth are maintained as leases roll over and operating expenses rise.
- Execution, costs and expected returns of development and redevelopment projects, including the disclosed $368.5 million near-term capital requirement.
- Debt maturities and refinancing needs in consolidated and unconsolidated ventures, covenant headroom, and the effect of interest rates and the LIBOR transition.
- Exposure to California and Florida, Potrero property valuation assumptions, environmental obligations and the adequacy and cost of property insurance.