Regency Centers Corporation (“Regency” or the “Company”) today announced
financial and operating results for the quarter ended June 30, 2014.
Financial Results
Regency reported Core Funds From Operations (“Core FFO”) for the second
quarter of $65.9 million, or $0.71 per diluted share, compared to $61.8
million, or $0.67 per diluted share, for the same period in 2013. For
the six months ended June 30, 2014 Core FFO was $130.0 million, or $1.41
per diluted share, compared to $120.1 million, or $1.32 per diluted
share, for the same period in 2013.
Funds From Operations (“FFO”) for the second quarter was $65.9 million,
or $0.71 per diluted share. For the same period in 2013, the Company
reported FFO of $62.1 million, or $0.68 per diluted share. For the six
months ended June 30, 2014 FFO was $131.4 million, or $1.42 per diluted
share, compared to $120.0 million, or $1.32 per diluted share, for the
same period in 2013.
Regency reported net income attributable to common stockholders (“Net
Income”) for the second quarter of $25.5 million, or $0.28 per diluted
share, compared to Net Income of $31.9 million, or $0.35 per diluted
share, for the same period in 2013. For the six months ended June 30,
2014 Net Income was $44.9 million, or $0.48 per diluted share, compared
to $47.4 million, or $0.52 per diluted share for the same period in 2013.
Operating Results
For the three months ended June 30, 2014, Regency’s results for wholly
owned properties plus its pro-rata share of co-investment partnerships
were as follows:
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Percent leased, same properties only: 95.3%
-
Percent leased, all properties: 95.0%
-
Increase in same property net operating income (“NOI”) over the same
period last year, excluding termination fees: 3.8%
-
Same space rental rate growth on a cash basis for spaces vacant less
than 12 months: 61.2% on new leases and 6.3% on renewal leases for a
blended average of 14.8%
-
Leasing transactions, including in-process developments (partnerships
at 100%): 380 new and renewal lease transactions for a total of 1.6
million square feet
For the six months ended June 30, 2014, Regency’s results for wholly
owned properties plus its pro-rata share of co-investment partnerships
were as follows:
-
Increase in same property NOI over the same period last year,
excluding termination fees: 3.3%
-
Same space rental rate growth on a cash basis for spaces vacant less
than 12 months: 42.5% on new leases and 7.1% on renewal leases for a
blended average of 13.6%
-
Leasing transactions, including in-process developments (partnerships
at 100%): 646 new and renewal lease transactions for a total of 2.7
million square feet
Portfolio Activity
Property Transactions
During the quarter, Regency sold a wholly owned, free-standing drug
store at a gross sales price of $2.4 million and a cap rate of 9.3%. The
Company also sold four co-investment properties for $66.7 million, with
Regency’s share of the gross sales price being $21.2 million,
representing a weighted average cap rate of 6.1%.
Subsequent to quarter end, Regency acquired one property, on a wholly
owned basis, for a gross purchase price of $19.0 million representing a
cap rate of 5.6%. Located in Lincoln Park, which is one of the most
affluent and densely populated neighborhoods of Chicago, Clybourn
Commons boasts outstanding 3-mile demographics, including a population
of 500,000 people with average household incomes of $113,000.
Developments and Redevelopments
At quarter end, the Company had seven projects in development with
estimated net development costs of $223.2 million. The in-process
developments were 53% funded and 86% leased and committed, including
retailer-owned square footage. Regency completed one project during the
quarter, representing $17.3 million in net development costs and a
projected yield of 9.6%. Juanita Tate Marketplace, located near downtown
Los Angeles, is 100% leased.
During the quarter, the Company started the development of one project.
Willow Oaks Crossing, a 70,000 square foot shopping center anchored by
Publix, is Regency’s first ground-up development in the Charlotte
market. The Company’s investment upon completion is estimated to be
$12.5 million with a projected yield of 8.5%.
Regency also had 19 redevelopment projects in process at quarter end
representing a total estimated incremental investment upon completion of
$93.1 million with estimated incremental yields on investment ranging
from 8% to 10%.
Proposal to Acquire AmREIT
As previously announced, on July 10, 2014 Regency made a proposal to
acquire AmREIT for $22 per share, in cash and/or stock. At the time of
the announcement, Regency’s proposal represented a 20% premium based on
the average closing price of AmREIT’s common stock over the prior 30 day
period.
Among other benefits, the proposed transaction would create significant
opportunities to leverage synergies to grow same property NOI. In
addition, because Regency has a strong balance sheet and considerable
financial flexibility, the combined company would have access to lower
cost capital to fund growth initiatives. The combined company would also
have a strong platform from which to drive additional value creation
through development and densification.
Regency is pleased that on July 29, 2014 AmREIT confirmed it will
commence a process to explore strategic alternatives. The Company
remains interested in a combination with AmREIT and looks forward to
participating in a fair and open process that could deliver significant
value to the shareholders of both Regency and AmREIT.
Capital Markets
Debt Offering
On May 16, 2014, Regency completed the sale of $250 million of 3.75%
senior unsecured notes maturing in June 2024. Together with the
transaction, Regency settled a portion of its forward starting interest
rate swaps (“Swaps”) resulting in the Company recognizing interest
expense at an effective rate of 3.60% in accordance with generally
accepted accounting principles. Regency has Swaps in place for a portion
of its 2015 planned issuance.
The Company sold these notes in the form of a “Green Bond” with net
proceeds used to fund, in whole or in part, Eligible Green Projects (as
defined in the prospectus supplement dated May 13, 2014) including the
acquisition, construction, development or redevelopment of these
projects. Regency was the first U.S. REIT to issue a “Green Bond,”
confirming the Company’s industry-leading commitment to do all that is
practical to reduce the environmental impact of developing and operating
shopping centers.
Term Loan Amendment
On June 27, 2014, Regency amended its existing senior unsecured term
loan facility (the "Term Loan"). The amendment established a new Term
Loan size of $165.0 million, extended the maturity date to June 27, 2019
and reduced the applicable interest rate. The Term Loan will bear
interest at LIBOR plus a ratings based margin of 1.15% per annum,
subject to adjustment from time to time based on changes to the
Company's corporate credit rating, and is subject to a fee of 0.20% per
annum on the undrawn balance. The Company has $75.0 million outstanding
and may elect to borrow up to an additional $90.0 million through August
31, 2015.
Rating Agencies
During the quarter, Moody’s affirmed the Company’s corporate credit
rating and senior unsecured ratings of Baa2, with a Positive outlook.
2014 Guidance
The Company updated certain components of its 2014 earnings guidance.
These changes are summarized below. Please refer to the Company’s second
quarter 2014 supplemental information package for the complete list of
updates.
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Full Year 2014 Guidance
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|
Previous Guidance
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Updated Guidance
|
Core FFO per diluted share
|
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$2.68 – $2.74
|
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$2.75 – $2.80
|
FFO per diluted share
|
|
$2.68 – $2.74
|
|
$2.75 – $2.80
|
Same property percent leased at period end (pro-rata)
|
|
94.5% - 95.5%
|
|
95.0% - 96.0%
|
Same property NOI growth without termination fees (pro-rata)
|
|
2.5% - 3.5%
|
|
3.0% - 3.7%
|
Acquisitions (pro-rata)
|
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$141,975
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$160,975
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Dispositions (pro-rata)
|
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$90,000 - $165,000
|
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$135,000 - $185,000
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Development and Redevelopment starts
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$130,000 - $240,000
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$175,000 - $240,000
|
Note: Data in thousands, except per share information
Dividend
On August 4, 2014, Regency’s Board of Directors declared a quarterly
cash dividend on the Company’s common stock of $0.47 per share. The
dividend is payable on September 3, 2014 to shareholders of record as of
August 20, 2014.
Conference Call Information
In conjunction with Regency’s second quarter results, the Company will
host a conference call on Thursday, August 7, 2014 at 2:00 p.m. EDT.
Dial-in and webcast information is listed below.
Replay
Webcast Archive: Investor
Relations page under Webcasts
& Presentations
Non-GAAP Disclosure
FFO is a commonly used measure of REIT performance, which the National
Association of Real Estate Investment Trusts (“NAREIT”) defines as net
income, computed in accordance with GAAP, excluding gains and losses
from dispositions of depreciable property, net of tax, excluding
operating real estate impairments, plus depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint
ventures. Regency computes FFO for all periods presented in accordance
with NAREIT's definition. Many companies use different depreciable lives
and methods, and real estate values historically fluctuate with market
conditions. Since FFO excludes depreciation and amortization and gains
and losses from depreciable property dispositions, and impairments, it
can provide a performance measure that, when compared year over year,
reflects the impact on operations from trends in occupancy rates, rental
rates, operating costs, acquisition and development activities, and
financing costs. This provides a perspective of the Company’s financial
performance not immediately apparent from net income determined in
accordance with GAAP. Thus, FFO is a supplemental non-GAAP financial
measure of the Company's operating performance, which does not represent
cash generated from operating activities in accordance with GAAP and
therefore, should not be considered an alternative for net income or as
a measure of liquidity. Core FFO is an additional performance measure
used by Regency as the computation of FFO includes certain non-cash and
non-comparable items that affect the Company's period-over-period
performance. Core FFO excludes from FFO, but is not limited to: (a)
transaction related gains, income or expense; (b) impairments on land;
(c) gains or losses from the early extinguishment of debt; and (d) other
non-core amounts as they occur. The Company provides a reconciliation of
FFO to Core FFO.
Reconciliation of Net Income Attributable to Common Stockholders to
FFO and Core FFO — Actual (in thousands)
For the Periods Ended June 30, 2014 and 2013
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Three Months Ended
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Year to Date
|
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2014
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2013
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2014
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2013
|
|
|
|
|
|
|
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Net Income Attributable to Common Stockholders
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$ 25,482
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31,864
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$ 44,872
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47,418
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Adjustments to reconcile to Funds From Operations:
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Depreciation and amortization (1)
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46,645
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42,287
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93,383
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84,568
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Provision for impairment (2)
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424
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-
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424
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-
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Gain on sale of operating properties, net of tax (2)
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(6,710)
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(12,099)
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(7,419)
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(12,099)
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Exchangeable operating partnership units
|
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53
|
70
|
|
95
|
109
|
|
|
|
|
|
|
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Funds From Operations
|
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65,894
|
62,122
|
|
131,355
|
119,996
|
|
|
|
|
|
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Dilutive effect of share-based awards
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(155)
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(155)
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(322)
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(317)
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Funds From Operations for calculating Diluted FFO per Share
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$ 65,739
|
61,967
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$ 131,033
|
119,679
|
|
|
|
|
|
|
|
Funds From Operations
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$ 65,894
|
62,122
|
|
$ 131,355
|
119,996
|
Adjustments to reconcile to Core Funds From Operations:
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|
|
|
|
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Development and acquisition pursuit costs (2)
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396
|
785
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1,711
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1,226
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Gain on sale of land (2)
|
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(424)
|
(1,090)
|
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(3,328)
|
(1,090)
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Provision for impairment to land
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-
|
-
|
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225
|
-
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Interest rate swap ineffectiveness (2)
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|
-
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(27)
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-
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(20)
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Early extinguishment of debt (2)
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41
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-
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41
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-
|
|
|
|
|
|
|
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Core Funds From Operations
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65,907
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61,790
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130,004
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120,112
|
|
|
|
|
|
|
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Dilutive effect of share-based awards
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(155)
|
(155)
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(322)
|
(317)
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Core Funds From Operations for calculating Diluted Core FFO per Share
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$ 65,752
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61,635
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$ 129,682
|
119,795
|
|
|
|
|
|
|
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Weighted Average Shares For Diluted FFO per Share
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92,151
|
91,664
|
|
92,151
|
90,976
|
|
|
|
|
|
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(1) Includes pro-rata share of unconsolidated co-investment
partnerships, net of pro-rata share attributable to noncontrolling
interests
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(2) Includes pro-rata share of unconsolidated co-investment
partnerships
|
Reported results are preliminary and not final until the filing of the
Company’s Form 10-Q with the SEC and, therefore, remain subject to
adjustment.
Reconciliation of Net Income Attributable to Common Stockholders to
FFO and Core FFO — Guidance
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Full Year
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FFO and Core FFO Guidance:
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2014
|
|
|
|
|
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Net income attributable to common stockholders
|
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$ 0.74
|
|
0.79
|
|
|
|
|
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Adjustments to reconcile net income to FFO:
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Depreciation and amortization
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2.09
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2.09
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Gain on sale of operating properties
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(0.08)
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(0.08)
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All other amounts
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0.00
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0.00
|
|
|
|
|
|
|
|
|
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Funds From Operations
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$ 2.75
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2.80
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|
|
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|
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Adjustments to reconcile FFO to Core FFO:
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Development and acquisition pursuit costs
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0.04
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0.04
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Gain on sale of land
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(0.04)
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(0.04)
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All other non-core amounts
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0.00
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0.00
|
|
|
|
|
|
|
|
|
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Core Funds From Operations
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$ 2.75
|
|
2.80
|
The Company has published forward-looking statements and additional
financial information in its second quarter 2014 supplemental
information package that may help investors estimate earnings for 2014.
A copy of the Company’s second quarter 2014 supplemental information
will be available on the Company's website at www.RegencyCenters.com
or by written request to: Investor Relations, Regency Centers
Corporation, One Independent Drive, Suite 114, Jacksonville, Florida,
32202. The supplemental information package contains more detailed
financial and property results including financial statements, an
outstanding debt summary, acquisition and development activity,
investments in partnerships, information pertaining to securities issued
other than common stock, property details, a significant tenant rent
report and a lease expiration table in addition to earnings and
valuation guidance assumptions. The information provided in the
supplemental package is unaudited and there can be no assurance that the
information will not vary from the final information in the Company’s
Form 10-Q for the quarter ended June 30, 2014. Regency may, but assumes
no obligation to, update information in the supplemental package from
time to time.
Additional Information About the Proposed Transaction and Where to
Find it
This press release and the communications reflected or referred to
herein do not constitute an offer to sell or the solicitation of an
offer to buy any securities or a solicitation of any vote or approval.
The foregoing materials relate to a business combination transaction
with AmREIT that has been proposed by Regency and that may become the
subject of a registration statement filed with the Securities and
Exchange Commission (SEC). This material is not a substitute for the
proxy statement/prospectus Regency would file with the SEC regarding the
proposed transaction if a negotiated transaction is reached with AmREIT
or for any other document that Regency may file with the SEC and send to
AmREIT's or Regency's stockholders in connection with the proposed
transaction. INVESTORS AND SECURITY HOLDERS OF REGENCY AND AMREIT ARE
URGED TO READ THE PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS
AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC
IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THOSE
DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. Such documents would be available free of charge through
the website maintained by the SEC at www.sec.gov
or by directing a request to the Regency Investor Relations Department,
One Independent Drive, Suite 114, Jacksonville, FL 32202. Copies of such
documents filed by Regency with the SEC also would be available free of
charge on Regency's website at www.regencycenters.com.
Regency and its directors and executive officers and other persons may
be deemed to be participants in the solicitation of proxies from
Regency's and AmREIT's stockholders in respect of the proposed
transaction. Information regarding Regency's directors and executive
officers can be found in Regency's definitive proxy statement filed with
the SEC on March 18, 2014. Additional information regarding the
interests of such potential participants will be included in any proxy
statement/prospectus and other relevant documents filed with the SEC in
connection with the proposed transaction if and when they become
available. All information in this communication concerning AmREIT,
including such information pertaining to its business, operations and
financial results, was obtained from public sources. In preparing this
communication, Regency has relied upon and assumed the accuracy and
completeness of such information, without assuming any responsibility
for independent verification thereof.
About Regency Centers Corporation (NYSE: REG)
With more than 50 years of experience, Regency is the preeminent
national owner, operator and developer of high-quality, grocery-anchored
neighborhood and community shopping centers. The Company’s portfolio of
328 retail properties encompasses over 43.8 million square feet located
in top markets throughout the United States, including co-investment
partnerships. Regency has developed 216 shopping centers since 2000,
representing an investment at completion of more than $3 billion.
Operating as a fully integrated real estate company, Regency is a
qualified real estate investment trust that is self-administered and
self-managed.
Forward-Looking Statements
Information set forth in this Press Release contains "forward-looking
statements" (as defined in Section 21E of the Exchange Act), which
reflect Regency's expectations regarding future events. The
forward-looking statements involve a number of risks, uncertainties and
other factors, many of which are outs Regency's control, that could
cause actual results to differ materially from those contained in the
forward-looking statements. Such risks and uncertainties relating to the
proposed transaction include, but are not limited to, AmREIT's possible
failure to accept Regency's proposal and enter into negotiations and/or
definitive agreements to effect the transaction, whether and when the
proposed transaction will be consummated, the possible change in
Regency's plans following the transaction, market and other expectations
with respect to Regency following the transaction, including regarding
future dividends, market evaluations and other statements that are not
historical facts.
The following additional factors, among others, could cause actual
results to differ materially from those set forth in the forward-looking
statements: the ability to obtain requisite stockholder and other
approvals for the transaction; market volatility; unexpected costs or
unexpected liabilities that may arise from the transaction, whether or
not consummated; Regency's ability to achieve the cost-savings and
synergies contemplated by the proposed transaction within the expected
time frame; ability to integrate AmREIT's portfolio and personnel; the
tenants of the respective parties; continuation or deterioration of
current market conditions; and future regulatory or legislative actions
that could adversely affect the companies. Additional factors that may
affect future results will be contained in Regency's filings with the
SEC from time to time. Regency disclaims any obligation to update and
revise statements contained in these materials based on new information
or otherwise. Please also refer to the documents filed by Regency with
the SEC, specifically the most recent reports on Forms 10-K and 10-Q,
which identify important risk factors which could cause actual results
to differ from those contained in the forward-looking statements.
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