Regency Centers Earnings: High Re-Leasing Spreads Slightly Offset by Operating Expense Growth

Third-quarter results for Regency Centers were relatively in line with our expectations, leading us to reaffirm our $76 fair value estimate for the no-moat company. Same-store occupancy improved 20 basis points sequentially and 70 basis points year over year to 95.4%. Re-leasing spreads were strong with new rent terms 9.3% higher than expiring rent terms, relatively in line with our estimate of an 8.8% re-leasing spread for the third quarter. As a result, same-store revenue increased 3.3%. However, same-store operating expenses grew even faster at 5.9%, though that is down from the 7.6% growth reported in the second quarter. Therefore, Regency reported same-store net operating income growth of 2.9% in the third quarter that was slightly below our estimate of 3.3% growth. The company reported core funds from operations of $0.97 per share in the third quarter, which is a penny below our $0.98 estimate for the quarter but three cents better than the $0.94 figure the company reported in the third quarter of 2022.