Regency Centers Earnings: Continued Occupancy Gains With Small-Shop Occupancy Reaching Record Level

First-quarter results for Regency Centers were mixed compared with our expectations, though we didn't see anything that would materially change our $74 fair value estimate for the no-moat company. Same-store occupancy improved 20 basis points sequentially to 95.8%, better than our estimate of a 40-basis-point sequential decline. Re-leasing spreads were solid at 8.5% in the first quarter, in line with the company's average over the past 10 quarters but slightly below our estimate of new rents being 10.5% than prior rental terms. While base rent grew a solid 2.7% in the first quarter, base rent growth has been decelerating since the fourth quarter of 2022. Same-store revenue was only up 1.4% in the quarter in part due to lower lease termination fees, which we view as a positive for the company, and higher uncollectible lease income deductions, which we view as a negative. Combined with same-store operating expenses growing 4.8%, Regency reported flat growth for same-store net operating income in the first quarter, below our estimate of 3.8% growth. However, when termination income and the collection of previously owed rent are excluded, same-store NOI grew 2.1% in the quarter. Additionally, non-same-store NOI was higher than we anticipated, and interest expenses were lower than our estimate, leading to Regency reporting core funds from operations of $1.04 per share that beat our estimate of $1.01 for the first quarter.