Regency Centers Q2 Earnings Call Highlights

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Regency Centers (NASDAQ:REG) reported second-quarter operating momentum marked by higher occupancy, rent growth and an expanded development pipeline, prompting the grocery-anchored shopping center owner to raise elements of its full-year outlook.

Chief Executive Officer Lisa Palmer said the company generated strong net operating income, or NOI, and earnings growth during the quarter, supported by leasing demand, its tenant mix and capital allocation across development, redevelopment and acquisitions. She said Regency now expects core operating earnings per share growth to exceed 5% for the full year.

Occupancy and Leasing Reach New Highs

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East Region President and Chief Operating Officer Alan Roth said same-property NOI increased 3.8% in the second quarter, primarily driven by base-rent growth. The company’s same-property leased rate approached 97%, while commenced occupancy rose 20 basis points during the quarter.

Roth said Regency’s retention rate was 84%, while cash rent spreads exceeded 10% and GAAP rent spreads were nearly 20%. The company continued to include annual rent escalators in nearly all newly signed leases, which Roth described as an important source of future base-rent growth.

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Leasing demand remained broad across grocery, health and wellness, restaurants, personal services and value-oriented retail, according to Roth. He said limited availability of quality retail space has strengthened Regency’s negotiating position with tenants.

“Tenant sales growth is widespread throughout the portfolio, foot traffic is showing steady increases, and accounts receivables remain below historical averages,” Roth said, describing the tenant base as healthy.

The company’s spread between leased and commenced occupancy, or its signed-not-open pipeline, stood at roughly 240 basis points. Roth said historical stabilized levels have been closer to 180 basis points, indicating additional runway for occupancy gains as signed tenants begin paying rent.

Development Pipeline Expands

Regency raised its expectations for 2026 development and redevelopment starts and now expects them to approach $400 million. Year to date, the company has begun more than $140 million of new projects.

One second-quarter project was The Berkeley at Durbin Park, a $55 million ground-up development in a Jacksonville, Florida, suburb. The project is expected to be anchored by Whole Foods and TJ Maxx.

Chief Investment Officer Nick Wibbenmeyer said Regency’s $680 million in-process development pipeline is nearly 80% leased and is expected to generate blended returns of 9%. He also cited early openings at Trader Joe’s at Golden Hills in Central California and Kroger at Westchester Plaza in Cincinnati.

Management emphasized that the development platform allows Regency to build shopping centers at returns that exceed market acquisition cap rates, rather than relying exclusively on asset purchases for external growth. Palmer said the company has confidence it can sustain or grow its development activity based on its local and national relationships, execution experience and access to capital.

Wibbenmeyer said Regency has reduced its land held for future development in recent years while expanding its development program. He said the company generally seeks to control sites through contracts and delay closing until projects have been substantially de-risked through entitlements, anchor preleasing and construction bids.

Guidance and Balance Sheet

Chief Financial Officer Mike Mas said Regency increased the midpoint of its same-property NOI growth outlook by 40 basis points, driven by higher expectations for commenced occupancy and stronger expense recoveries following annual reconciliations. The revised outlook calls for total NOI growth in the mid-6% range and core operating earnings-per-share growth above 5%.

Mas said lease termination fees are excluded from Regency’s same-property NOI metric. A major electric-vehicle operator decided not to open 11 locations that had been part of a package deal, Roth said. Regency will collect rent through year-end and received a termination fee equal to four years of rent, while it is already pursuing replacement tenants for eight of the 11 spaces.

The company also reduced its outlook for non-cash revenue, reflecting lower below-market rent amortization and higher straight-line rent reserves. Mas said one lease conversion to cash accounting had an outsized impact, although the tenant remains current on cash payments. He said the changes do not reduce Regency’s cash-flow outlook.

Regency’s balance sheet remains A-rated, with leverage at the lower end of its 5 times to 5.5 times target range, according to Mas. The company projected free cash flow of roughly $180 million to $190 million this year and said it had nearly full availability under its $1.5 billion revolving credit facility.

Selective Acquisition Approach

Management said the acquisition market remains active and competitive, particularly for grocery-anchored shopping centers. Wibbenmeyer said cap rates that had been in the mid-5% range are now, in some cases, beginning with a 4, reflecting aggressive private-capital demand.

Regency said it will remain selective on acquisitions, prioritizing trade-area quality, tenant quality, future growth potential and accretive financing. The company has capacity to use balance-sheet capital, debt, equity and joint ventures when appropriate.

Palmer said joint ventures are evaluated based on whether they provide access to capital, opportunities or expertise. Regency continues to have capacity with its long-term Oregon partnership, she said.

On grocery retail, Palmer said Regency has not seen developments in its portfolio or discussions with grocer tenants that would alter its long-term view of the sector. Management also clarified that Kroger’s announced transaction with Giant Eagle has minimal implications for Regency because the company does not own Giant Eagle locations and has only limited potential market overlap in Columbus, Ohio.

About Regency Centers (NASDAQ:REG)

Regency Centers Corporation is a publicly traded real estate investment trust (REIT) specializing in the ownership, operation and development of grocery-anchored shopping centers. Focused on everyday needs retail, the company's portfolio is strategically concentrated in high-growth, densely populated markets across the United States. By aligning its properties with essential retailers, Regency Centers delivers stable income streams and drives sustained value for shareholders.

Founded in 1963 and headquartered in Jacksonville, Florida, Regency Centers began as a single shopping center developer before evolving into one of the largest owners of grocery-center real estate.

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