Regency Centers Corp. Q1 FY2024 earnings call

• Lisa Palmer highlighted a solid quarter with healthy leasing fundamentals, robust tenant demand, and strong rent growth, noting the ability to re-lease space with upgraded merchandising at higher rents and a large pipeline of executed leases. - Alan Roth discussed strong leasing activity, with same-property percent leased rate at 95.8%, shop lease rate at 93.5%, and successful re-leasing despite anchor move-outs. - Nick Wibbenmeyer mentioned active development and redevelopment pipelines, with over $0.5 billion in process, nearly 90% leased, and plans to complete over $200 million of projects in 2024, including recent anchor openings. - Mike Mas highlighted first quarter results, including Nareit FFO of $1.08 per share and core operating earnings of $1.04 per share, with same-property NOI growth excluding term fees and COVID period reserve collections at 2.1%, and adjustments to guidance including a $0.01 increase in Nareit FFO outlook.

In the first quarter, Regency Centers saw strong leasing fundamentals. The same-property percent leased rate increased by 20 basis points to 95.8%, with the shop lease rate up 10 basis points sequentially to reach 93.5%. Base rent growth in 2024 is benefiting from shop commencement activity. The same-property leased occupancy rate is 95.8%, and the shop lease rate is at a record high. The company's pipeline of executed leases is larger than ever, with a 370 basis point delta between same property leased and commenced occupancy rates, equivalent to $50 million of annual base rent.

• Nareit FFO outlook raised by $0.01 at the midpoint. - Same-property NOI growth guidance remains unchanged at 2% to 2.5%, excluding term fees and COVID period reserve collections. - Adjusted full year transactions outlook, including a $46 million acquisition and modestly increased dispositions guidance. - Expectations of same-property NOI benefiting from redevelopment activity and growth accelerating into 2025, with positive contribution to same-property NOI likely exceeding 100 basis points next year. - Plan to complete over $200 million of in-process development and redevelopment projects in 2024.

• Macro-economic uncertainties and volatility in the debt capital markets. - Impact of recent moves in treasuries on acquisition opportunities. - Uncertainty regarding the outcome of mergers and acquisitions involving key tenants like the Kroger-Albertsons merger and its potential impact on operations.

Q: Any benefit to same-store flowing through in the first quarter and if there were any upside or additional sources of accretion exceeding expectations?

A: Michael Mas discussed timing issues such as percentage rent being seasonal and impacting forward run rate, but the outlook for the year remains unchanged.

Q: On the SNO pipeline, what's the trajectory and how quickly can it be monetized?

A: Michael Mas expressed confidence in the leasing team's ability, with 65% of the SNO pipeline leases expected to commence by year-end, adding to conviction in 2025 growth.

Q: On the decision to improve merchandise mix and increase rents, how is it driven and if it could offset growth in 2025?

A: Alan Roth stated it's a long-term view of intense asset management, with examples of replacing stores with higher-quality tenants and expecting this to continue.

Q: On the Urstadt portfolio performance and if it creates tough comp issues next year?

A: Michael Mas said the Urstadt portfolio is performing on plan, with about 1.5 points of accretion expected, and timing noise leveling off by year-end.

Q: On acquisitions, how the $46 million addition came about and impact of rate moves?

A: Nick Wibbenmeyer discussed the exciting acquisition in Westport, Connecticut, and that while treasuries have moved, the team is still opportunistic in seeking acquisition opportunities.

Q: On retailers like Starbucks, McDonald's, and grocers' smaller basket sizes, what's seen on the ground?

A: Lisa Palmer noted high-quality centers and trade areas are expected to absorb macro pressures, with a structural tailwind for suburban shopping centers due to convenience and service needs.

Q: On CapEx as a percentage of NOI and impact on AFFO growth?

A: Michael Mas stated CapEx run rate is around 11%, and it's expected to remain consistent, with judicious use of capital driving AFFO growth.