Regency Centers Corp. REG seems well-poised to benefit from its portfolio of premium open-air shopping centers. The company is witnessing solid demand for its centers amid a healthy retail real estate environment, driving leasing activity, occupancy levels and rent growth. Also, its focus on building a high-quality portfolio of grocery-anchored shopping centers and an encouraging development pipeline bodes well. A healthy balance sheet provides financial flexibility for portfolio expansion.

Analysts seem bullish on this Jacksonville, FL-based Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for this retail real estate investment trust’s (REIT) 2024 funds from operations (FFO) per share indicates a favorable outlook as it has moved marginally upward over the past week to $4.27.

Shares of REG have gained 20.4% in the past six months, outperforming the industry's 16.6% growth. Given its solid fundamentals and positive estimate revisions, the stock is likely to keep performing well in the quarters ahead.

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What's Aiding REG?

Regency Centers has a high-quality open-air shopping center portfolio, with more than 80% grocery-anchored neighborhood and community centers. Its premium shopping centers are situated in affluent suburban areas and near the urban trade areas where consumers have high spending power, enabling the company to attract top grocers and retailers.

Amid these tailwinds, Regency Centers is witnessing healthy demand for its centers, fueling higher leasing activity and rental growth. In the third quarter of 2024, the company executed 1.8 million square feet of comparable new and renewal leases at a blended cash rent spread of 9.3%.

Regency Centers is making efforts to improve its portfolio with acquisitions and developments in key markets. In October 2024, REG acquired University Commons in Austin, TX, a 2.2 million square feet property anchored by H-E-B for around $14 million, at the company's share. In the third quarter of 2024, it started new development and redevelopment projects worth around $100 million, at the company’s share.Given the company’s prudent financial management, it is well-poised to explore growth opportunities.

Regency Centers maintains a healthy balance sheet position. As of Sept. 30, 2024, this retail REIT had nearly $1.5 billion of capacity under its revolving credit facility. As of the same date, its pro-rata net debt and preferred stock to operating EBITDAre was 5.2X. The company’s investment-grade credit ratings of A3 and BBB+ from Moody’s and S&P Global, respectively, render it access to the debt market at favorable costs.

Solid dividend payouts are the biggest attraction for REIT investors and Regency Centers is committed to boosting shareholder wealth. In November 2024, the company declared a quarterly cash dividend payment on its common stock of 70.5 cents, an increase of 5.2% from the prior quarter's dividend. From 2014 to the third quarter of 2024, its dividend witnessed a CAGR of 3.74%. In the last five years, the company has increased its dividend five times. Check Regency Centers’ dividend history here.

What’s Hurting REG?

The market is witnessing a shift in retail shopping from brick-and-mortar stores to internet sales. This is expected to adversely impact the market share of retail REITs, including Regency Centers.

Further, a high interest rate environment may dampen consumer sentiments, affecting demand for retail space. This is likely to lead to a lesser scope for the company to increase rents and hurt occupancy growth.

Regency Centers properties in California and Florida accounted for 23.4% and 20.4%, respectively, of its annual base rents as of Sept. 30, 2024. This makes the company’s operating results and financial conditions susceptible to any unfavorable fluctuations in these markets.

Other Stocks to Consider

Some other top-ranked stocks from the retail REIT sector are  Brixmor Property Group BRX and Tanger Inc. SKT, each carrying a Zacks Rank of #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Brixmor Property Group’s 2024 FFO per share is $2.14, indicating 4.9% growth from the prior-year quarter’s tally.

The Zacks Consensus Estimate for Tanger’s ongoing year’s FFO per share is pegged at $2.11, implying year-over-year growth of 7.6%.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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