Regency Earnings: Occupancy Gains and Strong Renewal Spreads Drive Better-Than-Anticipated Results

Third-quarter results for no-moat Regency Centers were better than expected, giving us confidence in our $76 fair value estimate. Same-store occupancy improved 20 basis points sequentially to 96.1% in the third quarter, better than our estimate of occupancy remaining flat. Re-leasing spreads were 9.3% in the third quarter. While that figure was slightly below our estimate of 10.6% higher rent terms, we view it as a very strong result for the quarter given that rent renewals, which typically see a lower spread than leases to new tenants, represented 86% of the square footage leased in the quarter. The 9.0% re-leasing spread on renewals in the third quarter was the highest figure reported by Regency since the first quarter of 2017. The company reported same-store revenue growth of 2.9% while same-store operating expenses remained flat, leading to same-store net operating income growth of 4.2% in the quarter. Regency reported core funds from operations of $1.03 per share for the third quarter, four cents better than our $0.99 estimate.