Zacks_Analysts' Blog : Regency's FFO Marginally Beats - Analyst Blog

Regency Centers Corporation (REG), a real estate investment trust (REIT), reported third quarter 2011 FFO (funds from operations) of $56.0 million or 62 cents per share, compared to $51.7 million or 62 cents in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Excluding non-recurring items, recurring FFO for the reported quarter was $54.9 million or 61 cents per share compared to $50.4 million or 60 cents in the year-ago period. The recurring FFO beat the Zacks Consensus Estimate by a penny.

The company reported total revenue of $119.5 million in third quarter 2011, compared to $115.6 million in the year-ago quarter. Total revenue for the reported quarter was in sync with the Zacks Consensus Estimate.

During the reported quarter, Regency witnessed a 0.2% rise on a year-over-year basis in same-store net operating income (NOI) excluding termination fees, with a rental rate growth of 0.5%. The company executed a total of 478 new and renewal lease transactions during the quarter, spanning 2.1 million square feet. The same-store portfolio of the company was 93.0% leased at quarter-end.

During third quarter 2011, Regency completed 2 projects worth $23.5 million of net development costs. As of September 30, 2011, the company had 22 projects under development (96% funded and 87% leased) at an estimated total cost of $378.9 million.

Regency purchased 2 wholly-owned properties for $90.3 million at a cap rate of 5.8% during the reported quarter. The company also acquired 2 additional properties through its co-investment partnerships for $41.5 million at a cap rate of 6.6%, out of which its own share was $9.4 million.

The company sold 3 wholly-owned properties during the quarter for $17.7 million at a weighted average cap rate of 8.7%. In addition, Regency sold a co-investment operating property for $18.2 million at a cap rate of 7.5%. The company also sold a land out-parcel with its joint venture partner for $4.5 million.

Regency maintains a conservative capital structure and follows a self-funding capital strategy to fund its growth, which includes disposal of non-strategic assets and a continued focus on industry-leading co-investment partnership programs.

During the reported quarter, the company refinanced its $600 million unsecured revolving credit facility. The credit facility is scheduled to expire in September 2015 with a one-year extension option and bears an annual interest rate of LIBOR plus 150 basis points. At quarter-end, Regency had cash and cash equivalents of about $21.2 million with a debt of $2.0 billion.

With relatively modest results, the company narrowed its fiscal 2011 FFO guidance from the earlier range of $2.45 - $2.55 per share to $2.45 - $2.51 per share.

We maintain our long-term ‘Neutral’ recommendation for Regency, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Federal Realty Investment Trust (FRT), one of Regency's peers.