Regency Centers' Q4 Results and 2022 Guidance Give Us Confidence in Our Outlook for Shopping Centers

Regency Centers reported fourth-quarter results that were mixed compared with our expectations, though we didn’t see anything that would materially alter our $75 fair value estimate for the no-moat company. Same-store occupancy increased 50 basis points sequentially to 94.3%, slightly better than our estimate of a 30-basis-point improvement. Re-leasing spreads jumped to 12.9% after being at 5% or less over the past seven quarters. While that significantly beat our estimate of just 1.9% growth, the outperformance is driven by rents on leases to new tenants, which can vary wildly from quarter to quarter, being up 45.6% while new leases to existing tenants were up 4.1%, which is probably more indicative of where market rents are moving. Same-store net operating income increased 15.2%, which was slightly better than our estimate of 13.7% growth. Regency reported core funds from operations of $0.92 per share in the fourth quarter, missing our $0.99 estimate. However, the miss was mostly due to Regency collecting a lower amount of previously owed rent than we had anticipated. Since we assumed that line item would normalize in 2022, the miss doesn’t affect our forecasts for the company.