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Is it Wise to Hold on to Regency Centers (REG) Stock Now?

Regency Centers Corp. REG is well-poised to gain from its well-located premium shopping centers in the affluent suburban areas and near urban trade areas, where consumers have high spending power. Also, a healthy balance-sheet position aids its growth.

Regency focuses on building a premium portfolio of grocery-anchored shopping centers which are necessity driven by nature. This ensures that it enjoys dependable traffic. Also, its portfolio has a good tenant mix which helps it generate steady rental revenues. Moreover, with more people moving into the suburbs, Regency’s suburban-shopping-center portfolio is likely to be benefitted as the best-in-class operators are opening new locations in high-quality centers.

Regency holds a high-quality open-air shopping center portfolio, with 80% grocery-anchored neighborhood and community centers. Further, REG’s focus on necessity, service, convenience and value retailers serving the essential needs of the communities provides it with an unequaled strategic advantage.

To enhance its portfolio, REG has been undertaking acquisitions and developmental activities. During first-quarter 2022, it commenced more than $50 million of development and redevelopment projects and completed redevelopment projects with combined costs of approximately $9 million, each at the company’s share. As of Mar 31, 2022, Regency Centers’ in-process development and redevelopment projects had estimated net project costs of $348 million and an estimated $150 million of remaining costs to complete these projects, each at the company’s share. Given its prudent financial management, the company is well-poised to capitalize on growth opportunities.

Further, Regency enjoys  financial flexibility and focuses on further strengthening its balance-sheet position. As of Mar 31, 2022, it had full capacity under its $1.2-BILLION revolving credit facility. REG has no unsecured debt maturities until 2024. It also enjoys a large pool of unencumbered assets providing it easy access to the secured and unsecured debt markets and maintaining availability on the line. Investment-grade credit ratings of BBB+/Baa1, with stable outlooks from S&P Global and Moody's, render the company favorable access to debt.

Analysts seem bullish on this Zacks Rank #3 (Hold) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share indicates a favorable outlook for the company, as the same has moved 1.8% northward over the past month. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, over the recent years, the adoption of e-commerce by consumers has lowered the demand for the retail real estate space. Particularly, the recent effort of online retailers to go deeper into the grocery business has reduced the demand for physical stores and intensified competition. Owing to this, retailers are either opting for store closures or filing for bankruptcies, adding to REG’s concerns.

Further, most of Regency’s properties are concentrated in select markets of California and Florida, which accounted for 28.2% and 22.1% of its 2021 net operating income (NOI) from consolidated properties and pro-rata share from unconsolidated properties, respectively. Thus, the geographic concentration of Regency’s properties exposes it to risks related to the supply of or demand for retail space, market saturation, the migration trend of businesses and residents, as well as climatic threats.

Shares of REG have lost 16.7% in the past three months compared with the industry’s decline of 18.2%.

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Stocks to Consider

Some better-ranked stocks in the REIT sector are National Retail Properties NNN, Kite Realty Group Trust KRG and SITE Centers Corp. SITC.

The Zacks Consensus Estimate for National Retail Properties’ 2022 FFO per share has moved 1.3% upward in the past month to $3.17. NNN presently carries a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for Kite Realty’s 2022 FFO per share has moved 1.1% upward in the past month to $1.80. KRG presently carries a Zacks Rank #2.

The Zacks Consensus Estimate for SITE Centers' ongoing year’s FFO per share has been raised 1.8% over the past two months to $1.14. SITC carries a Zacks Rank #2, currently.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Regency Centers Corporation (REG): Free Stock Analysis Report
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SITE CENTERS CORP. (SITC): Free Stock Analysis Report
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