Regency Centers Corporation reported financial and operating results for the period ended September 30, 2020, and provided a business update related to the COVID-19 pandemic.
Third Quarter 2020 Highlights
COVID-19 Business Update Highlights
“Regency’s dedicated teams around the country have remained committed to helping our tenants operate safely and successfully,” said Lisa Palmer, President and Chief Executive Officer. “Although there continues to be uncertainty in the current environment, we are encouraged by the increase in retailer confidence and continued resilience of our tenants and shoppers. This is evidenced not only by our significant progress on rent collections and deferral agreements, but also by increased leasing activity over the last quarter.”
Third Quarter 2020 Results
Regency reported Net Income for the third quarter of $12.7 million, or $0.07 per diluted share, compared to Net Income of $57.0 million, or $0.34 per diluted share, for the same period in 2019.
The Company reported Nareit FFO for the third quarter of $101.7 million, or $0.60 per diluted share, compared to $166.1 million, or $0.99 per diluted share, for the same period in 2019. On a pro-rata basis, Nareit FFO for the third quarter includes a $19.4 million early extinguishment of debt charge related to the September redemption of the 2022 notes, and a charge of $8.3 million for uncollectible straight line rent. The Company reported Core Operating Earnings for the third quarter of $117.4 million, or $0.69 per diluted share, compared to $153.8 million, or $0.91 per diluted share, for the same period in 2019. On a pro-rata basis, both Nareit FFO and Core Operating Earnings for the third quarter include a reduction of $28.5 million for uncollectible lease income, related to uncollected rent due to the COVID-19 pandemic. For additional detail, please refer to page(s) 32 and 33 of the third quarter 2020 supplemental disclosure.
Third quarter same property NOI, excluding termination fees, declined by 15.2% compared to the same period in 2019. The decline in same property NOI in the third quarter of 2020 was driven primarily by a higher rate of uncollectible lease income of $26.1 million in the same property pool, related to uncollected rent due to the COVID-19 pandemic.
As of September 30, 2020, Regency’s wholly-owned portfolio plus its pro-rata share of co-investment partnerships, was 92.9% leased. The same property portfolio was 93.4% leased, a decline of 110 basis points sequentially. Within the same property portfolio, anchor percent leased, which includes spaces greater than or equal to 10,000 square feet, was 96.0%, a decline of 90 basis points sequentially. Same property shop percent leased, which includes spaces less than 10,000 square feet, was 89.1%, a decline of 120 basis points sequentially.
For the three months ended September 30, 2020, Regency executed 1.4 million square feet of comparable new and renewal leases at blended rent spreads of +1.2%. For the trailing twelve months, the Company executed 6.0 million square feet of comparable new and renewal leases at blended rents spreads of +5.7%.
In the third quarter, Regency completed two redevelopment projects with combined pro-rata costs of $9.3 million. As of September 30, 2020, the Company had $238.0 million of in-process developments and redevelopments, with an estimated $102.3 million of remaining costs to complete. In light of the COVID-19 pandemic, the Company continues to evaluate scope, cost, tenancy, timing, and return on investment for all current pipeline projects to determine the most appropriate strategy for each.
Subsequent to third quarter-end, the Company sold Jefferson Square, a 36,000 square foot center located in La Quinta, CA, and Whole Foods at Swampscott, a 38,000 square foot single-tenant building located in Boston, MA. The combined gross sales price totaled $25.3 million.
Business Update Related to the COVID-19 Pandemic
Regency’s 414 shopping centers have remained operating throughout the pandemic and in compliance with government COVID-19 guidelines and mandates. As of October 31, 2020, approximately 97% of the Company’s tenants were open based on pro-rata ABR, although governmental restrictions on specific tenant businesses can change daily.
As of October 31, 2020 the Company had executed rent deferral agreements on over 1,300 leases. For deferrals executed to date, total deferred rent is $30.6 million, representing a weighted average deferral period of 3.0 months, with repayments beginning, on average, in December 2020.
As of October 31, 2020, the Company collected 86% of third quarter pro-rata base rent, and 89% including rent that is subject to executed deferral agreements. The Company collected 87% of October pro-rata base rent, and 88% including rent that is subject to executed deferral agreements. The Company also continues to make progress on second quarter receivables; as of October 31, 2020, the Company collected 77% of second quarter pro-rata base rent, and 86% including rent that is subject to executed deferral agreements.
Q2, Q3 & October Rent Collections As of October 31, 2020 | ||||||||||
Base Rent Collected | ||||||||||
Type* | Tenant Categories | % of Pro-rata ABR (as of 9/30/2020) | Q2 | Q3 | October | |||||
Essential – Retail/Services | Grocers, drugstores, mass merchandisers, banks, pet stores, office supplies, medical, etc. | 45% | 98% | 98% | 98% | |||||
Essential – Restaurants | 18% | 71% | 79% | 79% | ||||||
Quick Service | Fast food, QSRs, limited service | 12% | 73% | 84% | 84% | |||||
Full Service | Casual dining, table service, fine dining | 6% | 66% | 70% | 69% | |||||
Other Retail/Services | Apparel, Personal Service, professional service, fitness, other | 37% | 55% | 76% | 79% | |||||
Total Portfolio | 100% | 77% | 86% | 87% | ||||||
Total Portfolio Collections Including Executed Deferrals | 86% | 89% | 88% | |||||||
* Essential retailers defined as those that supply or provide consumers and essential businesses with any basic necessary goods and services; definition varies across municipalities. | ||||||||||
A presentation providing additional information regarding COVID-19 business updates and impacts is posted on the Company’s website at investors.regencycenters.com.
Balance Sheet
Regency maintains its long-standing commitment to balance sheet strength, and has ample financial flexibility amid the evolving impacts of the COVID-19 pandemic. As previously disclosed, on September 2, 2020, the Company redeemed its outstanding $300 million 3.75% Senior Unsecured Notes due 2022, resulting in a $19.4 million early extinguishment of debt charge in the third quarter of 2020. As of September 30, 2020, Regency has immediate liquidity of $1.5 billion, including a cash balance of approximately $281 million and no outstanding balance under its $1.25 billion revolving credit facility.
Regency has no unsecured maturities until 2022, with a net debt-to-operating EBITDAre ratio on a pro-rata basis of 5.9x as of September 30, 2020.
Dividend
On November 4, 2020, Regency’s Board declared a quarterly cash dividend on the Company’s common stock of $0.595 per share. The dividend is payable on January 5, 2021, to shareholders of record as of December 16, 2020.
Guidance
Due to the uncertainty and continuing disruption from COVID-19, the Company is not issuing guidance at this time, but will evaluate resumption of guidance in the future as the impact of COVID-19 on its tenants’ and the Company’s businesses is better understood.
Conference Call Information
To discuss Regency’s third quarter results and provide further business updates related to COVID-19, management will host a conference call on Friday, November 6, 2020, at 11:00 a.m. ET. Dial-in and webcast information is listed below.
Third Quarter 2020 Earnings Conference Call | |
Date: | Friday, November 6, 2020 |
Time: | 11:00 a.m. ET |
Dial#: | 877-407-0789 or 201-689-8562 |
Webcast: | investors.regencycenters.com |