Business context and reporting period
Regency Centers Corporation and Regency Centers, L.P. filed this combined unaudited Form 10-Q for the quarter ended March 31, 2022. Regency is a REIT focused on grocery-anchored neighborhood and community shopping centers. At quarter-end, it owned 303 consolidated properties and held partial interests in 103 additional properties through unconsolidated partnerships; the portfolio comprised 51.3 million square feet. The Parent Company owned approximately 99.6% of the Operating Partnership.
Key financial results
Amounts are in millions except per-share data and where noted.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $303.4 | $274.7 |
| Operating expenses | $182.1 | $181.0 |
| Net income | $196.8 | $81.6 |
| Net income attributable to common stockholders | $195.2 | $80.7 |
| Diluted earnings per share | $1.14 | $0.47 |
| Cash provided by operating activities | $142.9 | $139.4 |
| Cash and restricted cash at quarter-end | $178.7 | $139.3 |
- Net income included a $101.9 million gain on real estate sales, compared with $11.7 million in Q1 2021. This materially boosted GAAP earnings.
- Nareit FFO attributable to common stock and unit holders was $178.2 million, versus $153.4 million; Core Operating Earnings were $166.9 million, versus $146.7 million. These are non-GAAP measures and supplement, not replace, GAAP results.
- Pro-rata same-property NOI excluding termination fees increased 7.8% to $219.3 million from $203.4 million. Management attributed growth to improved rent collections, higher occupancy, contractual rent increases, positive leasing spreads, and tenant recoveries.
- Portfolio occupancy was 93.9% at March 31, 2022, versus 92.2% a year earlier; same-property occupancy was 94.3%, versus 92.6%. Trailing-twelve-month rent spreads on comparable leasing transactions were positive 6.8%.
Debt, liquidity, and capital
- Total notes payable were $3.717 billion at March 31, 2022, slightly below $3.719 billion at year-end 2021. Debt consisted principally of $3.245 billion of fixed-rate unsecured debt, $356.5 million of fixed-rate mortgage loans, and $115.1 million of variable-rate mortgages. Weighted-average effective rates were 4.0%, 3.5%, and 3.3%, respectively.
- Unrestricted cash was $176.0 million; the $178.7 million cash-flow balance includes restricted cash. The $1.25 billion credit line had $1.241 billion of availability, net of letters of credit. The company reported no unsecured debt maturities until 2024 and said secured mortgage maturities over the next 12 months were manageable.
- Pro-rata net debt to trailing-twelve-month Operating EBITDAre was 4.9x, improving from 5.1x at December 31, 2021; fixed-charge coverage was 4.6x, up from 4.5x. Regency reported compliance with debt covenants.
- Operating cash flow exceeded cash dividends and distributions of $107.4 million during the quarter. Investing cash flow was positive $58.4 million, primarily reflecting $124.9 million of real estate sale proceeds; financing cash flow used $117.5 million.
- Development, redevelopment, and capital improvements used $53.6 million, up from $31.4 million a year earlier. Management estimated approximately $284.3 million of capital needs over the next 12 months after the April dividend, including construction, tenant improvements, partnership contributions, and debt repayment.
Changes, outlook, and risks
- Revenue rose $28.7 million year over year, led by base rent, tenant recoveries, improved percentage rent, and changes in lease collections. Operating expenses increased $1.1 million; general and administrative expense fell $2.5 million.
- Management said it believes available capital resources are sufficient for expected needs over the next year, drawing on operating cash flow, asset sales, credit facilities, and debt or equity markets. It noted future financing could carry higher rates. The filing provides no specific earnings or NOI guidance.
- Inflation, labor shortages, supply-chain constraints, higher construction costs, rising interest rates, and geopolitical and macroeconomic uncertainty could pressure tenants, development costs, demand, and borrowing costs. Management described mitigation efforts including fixed-cost construction contracts and advance material orders.
- Current development and redevelopment projects had estimated pro-rata costs of $348.3 million. Post-quarter, Regency completed an $88.5 million purchase of its partner’s interest in four RegCal properties and settled ATM forward sales for approximately $61.3 million net, which it said funded acquisitions.
- Environmental remediation liabilities were estimated at $11.0 million on a pro-rata basis. Management did not expect currently known litigation or environmental matters to have a material adverse effect, while cautioning that environmental estimates and exposures could change.
- The board declared a $0.625-per-share dividend on April 29, 2022, payable July 6, 2022. Management stated future dividends remain subject to board discretion.
Important facts for investors to verify
- How much of reported earnings growth is attributable to property-sale gains versus recurring operations; compare GAAP net income with FFO and Core Operating Earnings.
- Whether rent collections, occupancy, same-property NOI growth, and positive leasing spreads persist, particularly if tenant costs or consumer demand weaken.
- Debt maturities, variable-rate exposure, refinancing terms, and the company’s ability to preserve covenant compliance and liquidity as rates rise.
- Actual spending and returns on the $348.3 million project pipeline and the estimated $284.3 million of near-term capital needs, including construction-cost and timing risks.
- Completion and financing effects of post-quarter acquisitions and ATM settlements, and any changes in environmental remediation estimates or other contingencies.