UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-12298 (Regency Centers Corporation)
Commission File Number 0-24763 (Regency Centers, L.P.)
REGENCY CENTERS CORPORATION
REGENCY CENTERS, L.P.
(Exact name of registrant as specified in its charter)
florida (REGENCY CENTERS CORPORATION)
59-3191743
Delaware (REGENCY CENTERS, L.P)
59-3429602
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
One Independent Drive, Suite 114
Jacksonville, Florida 32202
(904) 598-7000
(Address of principal executive offices) (zip code)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Regency Centers Corporation
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $0.01 par value
REG
The Nasdaq Stock Market LLC
6.250% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share
REGCP
5.875% Series B Cumulative Redeemable Preferred Stock, par value $0.01 per share
REGCO
Regency Centers, L.P.
None
N/A
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Regency Centers Corporation Yes ☒ No ☐ Regency Centers, L.P. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Regency Centers Corporation:
Large accelerated filer
☒
Accelerated filer
☐
Emerging growth company
Non-accelerated filer
Smaller reporting company
Regency Centers, L.P.:
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Regency Centers Corporation Yes ☐ No ☐ Regency Centers, L.P. Yes ☐ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Regency Centers Corporation Yes ☐ No ☒ Regency Centers, L.P. Yes ☐ No ☒
The number of shares outstanding of Regency Centers Corporation's common stock was 184,779,092 as of May 1, 2024.
EXPLANATORY NOTE
This Quarterly Report on Form 10-Q (this "Report") combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2024, of Regency Centers Corporation and Regency Centers, L.P. Unless stated otherwise or the context otherwise requires, references to "Regency Centers Corporation" or the "Parent Company" mean Regency Centers Corporation and its controlled subsidiaries and references to "Regency Centers, L.P." or the "Operating Partnership" mean Regency Centers, L.P. and its controlled subsidiaries. The terms "the Company," "Regency Centers," "Regency," "we," "our," and "us" as used in this Report mean the Parent Company and the Operating Partnership, collectively.
The Parent Company is a real estate investment trust ("REIT") and the general partner of the Operating Partnership. As the sole general partner of the Operating Partnership, the Parent Company has exclusive control of the Operating Partnership's day-to-day management. The Operating Partnership's capital includes general and limited common partnership units ("Common Units"). As of March 31, 2024, the Parent Company owned approximately 99.4% of the Common Units in the Operating Partnership. The remaining Common Units, which are all limited Common Units, are owned by third party investors. In addition to the Common Units, the Operating Partnership has also issued two series of preferred units: the 6.250% Series A Cumulative Redeemable Preferred Units (the “Series A Preferred Units”) and the 5.875% Series B Cumulative Redeemable Preferred Units (the “Series B Preferred Units”). The Parent Company currently owns all of the Series A Preferred Units and Series B Preferred Units. The Series A Preferred Units and Series B Preferred Units are sometimes referred to collectively as the “Preferred Units."
The Company believes combining the quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into this single report provides the following benefits:
Management operates the Parent Company and the Operating Partnership as one business. The management of the Parent Company consists of the same individuals as the management of the Operating Partnership. These individuals are officers of the Parent Company, and officers and employees of the Operating Partnership.
The Company believes it is important to understand the key differences between the Parent Company and the Operating Partnership in the context of how the Parent Company and the Operating Partnership operate as a consolidated company. The Parent Company is a REIT, whose only material asset is its ownership of Common and Preferred Units of the Operating Partnership. As a result, the Parent Company does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership. Except for $200 million of unsecured private placement debt, the Parent Company does not hold any indebtedness, but guarantees all of the unsecured debt of the Operating Partnership. The Operating Partnership, directly or indirectly, is also the co-issuer and guarantor of the $200 million Parent Company’s unsecured private placement debt referenced above. The Operating Partnership holds all the assets of the Company and ownership of the Company's subsidiaries and equity interests in its joint ventures. Except for net proceeds from public equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for Common Units or Preferred Units, the Operating Partnership generates all other capital required by the Company's business. These sources include the Operating Partnership's operations, its direct or indirect incurrence of indebtedness, and the issuance of Common Units and Preferred Units.
Shareholders' equity, partners' capital, and noncontrolling interests are the main areas of difference between the Consolidated Financial Statements of the Parent Company and those of the Operating Partnership. The Operating Partnership's capital includes the Common Units and the Preferred Units. The limited partners' Common Units in the Operating Partnership owned by third parties are accounted for in partners' capital in the Operating Partnership's financial statements and outside of shareholders' equity in noncontrolling interests in the Parent Company's financial statements. The Preferred Units owned by the Parent Company are eliminated in consolidation in the accompanying consolidated financial statements of the Parent Company and are classified as preferred units of the general partner in the accompanying consolidated financial statements of the Operating Partnership.
In order to highlight the differences between the Parent Company and the Operating Partnership, there are sections in this Report that separately discuss the Parent Company and the Operating Partnership, including separate financial statements, controls and procedures sections, and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure for the Parent Company and the Operating Partnership, this Report refers to actions or holdings as being actions or holdings of the Company.
As general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have assets other than its investment in the Operating Partnership. Therefore, while shareholders' equity and partners' capital differ as discussed above, the assets and liabilities of the Parent Company and the Operating Partnership are the same on their respective financial statements.
TABLE OF CONTENTS
Form 10-Q
Report Page
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023
1
Consolidated Statements of Operations for the periods ended March 31, 2024 and 2023
2
Consolidated Statements of Comprehensive Income for the periods ended March 31, 2024 and 2023
3
Consolidated Statements of Equity for the periods ended March 31, 2024 and 2023
4
Consolidated Statements of Cash Flows for the periods ended March 31, 2024 and 2023
5
7
8
9
Consolidated Statements of Capital for the periods ended March 31, 2024 and 2023
10
11
Notes to Consolidated Financial Statements
13
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
25
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
42
Item 4.
Controls and Procedures
PART II - OTHER INFORMATION
Legal Proceedings
Item 1A.
Risk Factors
43
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
SIGNATURES
45
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 2024 and December 31, 2023
(in thousands, except share data)
2024
2023
Assets
(unaudited)
Net real estate investments:
Real estate assets, at cost
$
13,456,499
13,454,391
Less: accumulated depreciation
2,748,712
2,691,386
Real estate assets, net
10,707,787
10,763,005
Investments in sales-type lease, net
11,532
8,705
Investments in real estate partnerships
368,709
370,605
Net real estate investments
11,088,028
11,142,315
Properties held for sale, net
33,572
18,878
Cash, cash equivalents, and restricted cash, including $5,401 and $6,383 of restricted cash at March 31, 2024 and December 31, 2023, respectively
230,101
91,354
Tenant and other receivables, net
229,407
206,162
Deferred leasing costs, less accumulated amortization of $125,643 and $124,107 at March 31, 2024 and December 31, 2023, respectively
77,484
73,398
Acquired lease intangible assets, less accumulated amortization of $364,829 and $364,413 at March 31, 2024 and December 31, 2023, respectively
266,831
283,375
Right of use assets, net
326,047
328,002
Other assets
399,433
283,429
Total assets
12,650,903
12,426,913
Liabilities and Equity
Liabilities:
Notes payable, net
4,387,181
4,001,949
Unsecured credit facility
30,000
152,000
Accounts payable and other liabilities
344,641
358,612
Acquired lease intangible liabilities, less accumulated amortization of $202,474 and $211,067 at March 31, 2024 and December 31, 2023, respectively
389,908
398,302
Lease liabilities
245,235
246,063
Tenants' security, escrow deposits and prepaid rent
75,919
78,052
Total liabilities
5,472,884
5,234,978
Commitments and contingencies
—
Equity:
Shareholders' equity:
Preferred stock $0.01 par value per share, 30,000,000 shares authorized; 9,000,000 and shares issued and outstanding, in the aggregate, in Series A and Series B at March 31, 2024 and December 31, 2023 with liquidation preference of $25 per share
225,000
Common stock $0.01 par value per share, 220,000,000 shares authorized; 184,774,486 and 184,581,070 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
1,848
1,846
Treasury stock at cost, 452,690 and 448,140 shares held at March 31, 2024 and December 31, 2023, respectively
(26,321
)
(25,488
Additional paid-in-capital
8,703,756
8,704,240
Accumulated other comprehensive income (loss)
4,465
(1,308
Distributions in excess of net income
(1,889,037
(1,871,603
Total shareholders' equity
7,019,711
7,032,687
Noncontrolling interests:
Exchangeable operating partnership units, aggregate redemption value of $66,587 and $74,199 at March 31, 2024 and December 31, 2023, respectively
41,606
42,195
Limited partners' interests in consolidated partnerships
116,702
117,053
Total noncontrolling interests
158,308
159,248
Total equity
7,178,019
7,191,935
Total liabilities and equity
See accompanying notes to consolidated financial statements.
Consolidated Statements of Operations
(in thousands, except per share data)
Three months ended March 31,
Revenues:
Lease income
353,106
308,801
Other property income
4,350
3,138
Management, transaction, and other fees
6,396
6,038
Total revenues
363,852
317,977
Operating expenses:
Depreciation and amortization
97,585
82,707
Property operating expense
63,274
51,022
Real estate taxes
44,307
38,477
General and administrative
26,132
25,280
Other operating expenses (income)
2,643
(497
Total operating expenses
233,941
196,989
Other expense, net:
Interest expense, net
42,868
36,393
Gain on sale of real estate, net of tax
(11,403
(250
Loss on early extinguishment of debt
180
Net investment income
(2,431
(1,727
Total other expense, net
29,214
34,416
Income before equity in income of investments in real estate partnerships
100,697
86,572
Equity in income of investments in real estate partnerships
11,961
11,916
Net income
112,658
98,488
Exchangeable operating partnership units
(642
(420
(2,242
(787
Net income attributable to noncontrolling interests
(2,884
(1,207
Net income attributable to the Company
109,774
97,281
Preferred stock dividends
(3,413
Net income attributable to common shareholders
106,361
Net income per common share - basic
0.58
0.57
Net income per common share - diluted
Consolidated Statements of Comprehensive Income
(in thousands)
Other comprehensive income (loss):
Effective portion of change in fair value of derivative instruments:
Effective portion of change in fair value of derivative instruments
8,593
(2,736
Reclassification adjustment of derivative instruments included in net income
(2,367
(1,492
Unrealized (loss) gain on available-for-sale debt securities
(119
192
Other comprehensive income (loss)
6,107
(4,036
Comprehensive income
118,765
94,452
Less: comprehensive income attributable to noncontrolling interests:
2,884
1,207
Other comprehensive income (loss) attributable to noncontrolling interests
334
(403
Comprehensive income attributable to noncontrolling interests
3,218
804
Comprehensive income attributable to the Company
115,547
93,648
Consolidated Statements of Equity
For the three months ended March 31, 2024 and 2023
Noncontrolling Interests
PreferredStock
CommonStock
TreasuryStock
AdditionalPaid InCapital
AccumulatedOtherComprehensiveIncome (Loss)
Distributionsin Excess ofNet Income
TotalShareholders'Equity
ExchangeableOperatingPartnershipUnits
LimitedPartners'Interest inConsolidatedPartnerships
TotalNoncontrollingInterests
TotalEquity
Balance at December 31, 2022
1,711
(24,461
7,877,152
7,560
(1,764,977
6,096,985
34,489
46,565
81,054
6,178,039
420
787
Other comprehensive loss
Other comprehensive income before reclassification
(2,316
(11
(217
(228
(2,544
Amounts reclassified from accumulated other comprehensive loss
(1,317
(5
(170
(175
Deferred compensation plan, net
(1,238
1,238
Restricted stock issued, net of amortization
4,817
4,819
Common stock repurchased for taxes withheld for stock based compensation, net
(6,920
Common stock repurchased and retired
(3
(20,003
(20,006
Common stock issued under dividend reinvestment plan
142
Contributions from partners
1,777
Distributions to partners
(1,039
Cash dividends declared:
Common stock/unit ($0.650 per share)
(111,347
(482
(111,829
Balance at March 31, 2023
1,710
(25,699
7,856,426
3,927
(1,779,043
6,057,321
34,411
47,703
82,114
6,139,435
Balance at December 31, 2023
642
2,242
Other comprehensive income
7,987
48
439
487
8,474
Amounts reclassified from accumulated other comprehensive income
(2,214
(13
(140
(153
(833
833
6,574
6,576
(8,578
158
Common stock issued for exchangeable operating partnership units
529
(529
1,472
(4,364
Preferred stock
Common stock ($0.670 per share/unit)
(123,795
(737
(124,532
Balance at March 31, 2024
Consolidated Statements of Cash Flows
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred loan costs and debt premiums
2,762
1,490
Accretion of above and below market lease intangibles, net
(5,287
(5,478
Stock-based compensation, net of capitalization
6,294
4,810
(11,961
(11,916
Distribution of earnings from investments in real estate partnerships
16,960
14,524
Deferred compensation expense
2,089
1,448
Realized and unrealized gain on investments
(2,358
(1,674
Changes in assets and liabilities:
Tenant and other receivables
1,220
6,710
Deferred leasing costs
(3,714
(672
(15,724
(12,631
(19,410
(20,858
(2,133
5,401
Net cash provided by operating activities
167,758
162,099
Cash flows from investing activities:
Real estate development and capital improvements
(60,850
(44,569
Proceeds from sale of real estate
30,033
3,603
Proceeds from property insurance casualty claims
4,110
Issuance of notes receivable
(29,830
Collection of notes receivable
1,561
(4,156
(604
Return of capital from investments in real estate partnerships
3,152
Dividends on investment securities
122
187
Acquisition of investment securities
(92,527
(2,171
Proceeds from sale of investment securities
6,049
4,504
Net cash used in investing activities
(142,336
(39,050
Cash flows from financing activities:
Repurchase of common shares in conjunction with equity award plans
(8,730
(7,066
Common shares repurchased through share repurchase program
Proceeds from sale of treasury stock
210
Contributions from limited partners in consolidated partnerships
738
Distributions to limited partners in consolidated partnerships
Distributions to exchangeable operating partnership unit holders
(742
Dividends paid to common shareholders
(123,507
(111,085
Dividends paid to preferred shareholders
Proceeds from issuance of fixed rate unsecured notes, net of debt discount
398,468
Proceeds from unsecured credit facilities
132,419
115,000
Repayment of unsecured credit facilities
(254,419
(85,000
Proceeds from notes payable
15,500
Repayment of notes payable
(7,597
(28,306
Scheduled principal payments
(3,183
(2,836
Payment of loan costs
(13,289
(141
Net cash provided by (used in) financing activities
113,325
(123,682
Net increase (decrease) in cash and cash equivalents and restricted cash
138,747
(633
Cash and cash equivalents and restricted cash at beginning of the period
68,776
Cash and cash equivalents and restricted cash at end of the period
68,143
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $1,656 and $1,250 in 2024 and 2023, respectively)
47,981
44,107
Cash paid for income taxes, net of refunds
6,070
112
Supplemental disclosure of non-cash transactions:
Common and Preferred stock, and exchangeable operating partnership dividends declaredbut not paid
126,807
111,829
Right of use assets obtained in exchange for new operating lease liabilities
829
Sale of leased asset in exchange for net investment in sales-type lease
703
Common stock issued for partnership units exchanged
Change in accrued capital expenditures
1,619
10,596
Stock-based compensation capitalized
434
155
231
Common stock issued for dividend reinvestment in trust
301
303
Contribution of stock awards into trust
1,048
1,201
Distribution of stock held in trust
476
265
Change in fair value of securities
118
243
6
(in thousands, except unit data)
Liabilities and Capital
Capital:
Partners' capital:
Preferred units $0.01 par value per unit, 30,000,000 units authorized; 9,000,000 units issued and outstanding, in the aggregate, in Series A and Series B at March 31, 2024 and December 31, 2023 with liquidation preference of $25 per unit
General partner's common units, 184,774,486 and 184,581,070 units issued and outstanding at March 31, 2024 and December 31, 2023, respectively
6,790,246
6,808,995
Limited partners' common units, 1,099,516 and 1,107,454 units issued and outstanding at March 31, 2024 and December 31, 2023 respectively
Total partners' capital
7,061,317
7,074,882
Noncontrolling interest: Limited partners' interests in consolidated partnerships
Total capital
Total liabilities and capital
(in thousands, except per unit data)
Net income attributable to the Partnership
110,416
97,701
Preferred unit distributions
Net income attributable to common unit holders
107,003
Net income per common unit - basic
Net income per common unit - diluted
299
(387
2,541
400
Comprehensive income attributable to the Partnership
116,224
94,052
Consolidated Statements of Capital
General Partner Preferredand Common Units
LimitedPartners
TotalPartners'Capital
Noncontrolling Interests inLimited Partners' Interest inConsolidated Partnerships
TotalCapital
6,089,425
6,131,474
Other comprehensive loss before reclassification
(2,327
(1,322
(112,868
Restricted units issued as a result of restricted stock issued by Parent Company, net of amortization
Common units repurchased and retired as a result of common stock repurchased and retired by Parent Company
Common units repurchased as a result of common stock repurchased by Parent Company, net of issuances
(6,778
6,053,394
6,091,732
7,033,995
8,035
(2,227
(128,896
(8,420
Exchangeable operating partnership units converted to common stock of Parent Company
7,015,246
(Accretion) and amortization of above and below market lease intangibles, net
Common units repurchased through share repurchase program
(124,249
(111,567
Dividends paid to preferred unit holders
Common stock issued by Parent Company for partnership units exchanged
Common stock issued by Parent Company for dividend reinvestment plan
12
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
March 31, 2024
1.
Organization and Significant Accounting Policies
General
Regency Centers Corporation (the "Parent Company") began its operations as a REIT in 1993 and is the general partner of Regency Centers, L.P. (the "Operating Partnership"). The Parent Company primarily engages in the ownership, management, leasing, acquisition, development, and redevelopment of shopping centers through the Operating Partnership and has no other assets other than through its investment in the Operating Partnership. Its only liabilities are $200 million of unsecured private placement notes, which are co-issued and guaranteed by the Operating Partnership. The Parent Company guarantees all of the unsecured debt of the Operating Partnership.
As of March 31, 2024, the Parent Company, the Operating Partnership, and their controlled subsidiaries on a consolidated basis owned 381 properties and held partial interests in an additional 101 properties through unconsolidated Investments in real estate partnerships (also referred to as "joint ventures" or "investment partnerships").
Basis of Presentation
The information included in this Report should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2023, as certain disclosures in this Report that would duplicate those included in such Annual Report on Form 10-K are not included in these consolidated financial statements. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented. These adjustments are considered to be of a normal recurring nature.
Acquisition of Urstadt Biddle Properties Inc.
On August 18, 2023, the Company acquired Urstadt Biddle Properties Inc. ("UBP") which was accounted for as an asset acquisition. Under the terms of the merger agreement, each share of Urstadt Biddle common stock and Urstadt Biddle Class A common stock was converted into 0.347 of a share of common stock of the Parent Company. Additionally, each share of UBP’s 6.25% Series H Cumulative Redeemable Preferred Stock and 5.875% Series K Cumulative Redeemable Preferred Stock was converted into one share of Parent Company Series A preferred stock and Parent Company Series B preferred stock, respectively.
As a result of the acquisition, the Company acquired 74 properties representing 5.3 million square feet of GLA, including 10 properties held through real estate partnerships. See the Company's audited Annual Report on Form 10-K for the year ended December 31, 2023 for further disclosure regarding the acquisition transaction.
Risks and Uncertainties
The success of the Company's tenants in operating their businesses and their corresponding ability to pay rent continue to be influenced by current economic challenges, which may impact their cost of doing business, including but not limited to the impact of inflation, the cost and availability of labor, increasing energy prices and interest rates, and access to credit. Additionally, geopolitical and macroeconomic challenges, including the war involving Russia and Ukraine, current Middle East conflicts and wars, and the economic conflicts with China, as well as the slowing of its economy, could impact aspects of the U.S. economy and, therefore, consumer spending. The policies implemented by the U.S. government to address these and related issues, including changes by the Board of Governors of the Federal Reserve System of its benchmark federal funds rate, increases in federal government spending, and economic sanctions and tariffs, could result in adverse impacts on the U.S. economy, including a slowing of growth and potentially a recession, thereby impacting consumer spending, tenants' businesses, and/or decreasing future demand for space in shopping centers. The potential impact of current macroeconomic and geopolitical challenges on the Company's financial condition, results of operations, and cash flows is subject to change and continues to depend on the extent and duration of these risks and uncertainties. See Item 1A of Part I of the Company's Annual Report on Form 10-K for a more detailed discussion of the Risk Factors potentially impacting the Company's business and results of operations.
Consolidation
The Company consolidates properties that are wholly-owned, and properties where it owns less than 100% but holds a controlling financial interest in the partnerships. Controlling financial interest is determined using an evaluation based on accounting standards related to the consolidation of Variable Interest Entities ("VIEs") and voting interest entities.
Ownership of the Parent Company
The Parent Company has a single class of common stock and two series of preferred stock outstanding.
Ownership of the Operating Partnership
The Operating Partnership's capital includes Common Units and Preferred Units. As of March 31, 2024, the Parent Company owned approximately 99.4% of the outstanding Common Units, with the remaining Common Units held by third parties ("Exchangeable operating partnership units" or "EOP units"). The Parent Company currently owns all of the Preferred Units.
Real Estate Partnerships
As of March 31, 2024, Regency held partial ownership interests in 119 properties through real estate partnerships, of which 18 are consolidated. Regency's partners include institutional investors, real estate developers and/or operators, and passive investors (the "Partners" or "Limited Partners"). These partnerships have been established to own and operate real estate properties. The Company’s involvement with these entities is through its ownership and management of the properties. The entities were deemed VIEs primarily because the unrelated investors do not have substantive kick-out rights to remove the general or managing partner by a vote of a simple majority or less, and they do not have substantive participating rights. Regency has variable interests in these entities through its equity ownership, with Regency being the primary beneficiary in certain of these real estate partnerships. Regency consolidates the partnerships into its financial statements for which it is the primary beneficiary and reports the limited partners' interests as noncontrolling interests. For those partnerships which Regency is not the primary beneficiary and does not have a controlling financial interest, but has significant influence, Regency recognizes its equity investments in them in accordance with the equity method of accounting.
The assets of these partnerships are restricted to use by the respective partnerships and cannot be reached by general creditors of the Company. Similarly, the obligations of the partnerships are backed by, and can only be settled through the assets of these partnerships or by additional capital contributions by the partners.
The carrying amounts of VIEs' assets and liabilities included in the Company's consolidated financial statements, exclusive of the Operating Partnership, are as follows:
December 31, 2023
276,484
270,674
Cash, cash equivalents and restricted cash
8,324
8,201
4,777
3,883
Deferred costs, net
2,406
2,494
Acquired lease intangible assets, net
11,284
12,099
44,102
44,377
1,574
893
Total Assets
348,951
342,621
Liabilities
Notes payable
33,092
33,211
31,853
29,919
Acquired lease intangible liabilities, net
21,103
21,456
1,112
1,239
21,482
21,433
Total Liabilities
108,642
107,258
14
Revenues, and Tenant and other Receivables
Other property income includes parking fees and other incidental income from the properties and is generally recognized at the point in time that the performance obligation is met. Income within Management, transaction, and other fees on the Consolidated Statements of Operations is primarily derived from contracts with the Company's real estate partnerships. The primary components of these revenue streams, the timing of satisfying the performance obligations, and amounts are as follows:
Timing of satisfaction of performance obligations
Management, transaction, and other fees:
Property management services
Over time
3,961
3,458
Asset management services
1,602
1,629
Leasing services
Point in time
574
718
Other fees
259
233
Total management, transaction, and other fees
The accounts receivable for management, transactions, and other fees, which are included within Tenant and other receivables in the accompanying Consolidated Balance Sheets, are $16.5 million and $18.5 million, as of March 31, 2024 and December 31, 2023, respectively.
Recent Accounting Pronouncements
The following table provides a brief description of recently adopted accounting pronouncements and impact on our financial statements:
Standard
Description
Earlier of Effective Date or the Date of adoption
Effect on the financial statements or other significant matters
Recently adopted:
ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
The amendments are aimed at enhancing the disclosures public entities provide regarding significant segment expenses so that investors can “better understand an entity’s overall performance” and assess “potential future cash flows.”
January 1, 2024
The standard became effective for the Company on January 1, 2024 and the required disclosures for the Company will begin with its Annual Report on Form 10-K for the fiscal year ending December 31, 2024. The adoption and implementation of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures.
ASU 2023-09 requires public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold.
January 1, 2025
The Company will review the extent of new disclosures necessary prior to implementation. Other than additional disclosure, the adoption of this ASU is not expected to have a material impact on the Company's financial position and/or results of operations.
15
2.
Real Estate Investments
The table below details properties acquired during the three months ended March 31, 2024:
Three months ended March 31, 2024
Date Purchased
Property Name
City/State
PropertyType
Regency Ownership
PurchasePrice (1)
DebtAssumed,Net ofDiscounts (1)
IntangibleAssets (1)
IntangibleLiabilities (1)
Consolidated
2/23/2024
The Shops at Stone Bridge
Cheshire, CT
Development
100%
8,000
Total consolidated
The Company had no property acquisitions during the three months ended March 31, 2023.
3.
Property Dispositions and Assets Held for Sale
The following table provides a summary of consolidated shopping centers and land parcels sold during the periods set forth below:
(in thousands, except number sold data)
Net proceeds from sale of real estate investments
2,923
11,403
250
Number of operating properties sold
Number of land parcels sold
Percent interest sold
As of March 31, 2024 the Company had one property held for sale. As of December 31, 2023 the Company had one property held for sale that was subsequently sold during the period as noted in the table above. There were no liabilities associated with the properties classified as held for sale. The following table presents the assets associated with the properties classified as held for sale:
Land and improvements
27,003
9,120
Buildings and improvements
9,425
12,551
(2,928
(3,461
Real estate, net
33,500
18,210
Other assets, net
72
668
Assets associated with real estate assets held for sale
16
4.
Other Assets
The following table represents the components of Other assets in the accompanying Consolidated Balance Sheets as of the dates set forth below:
Goodwill
167,062
Investments(1)
140,587
51,992
Prepaid and other
56,937
40,635
Derivative assets
16,711
14,213
Furniture, fixtures, and equipment, net ("FF&E")
6,424
6,662
Deferred financing costs, net(2)
11,712
2,865
Total other assets
5.
Notes Payable and Unsecured Credit Facilities
The Company's outstanding debt, net of unamortized debt premium (discount) and debt issuance costs, consisted of the following as of the dates set forth below:
MaturingThrough
WeightedAverageContractualRate
WeightedAverageEffectiveRate
Notes payable:
Fixed rate mortgage loans
6/1/2037
3.8%
4.4%
439,864
449,615
Variable rate mortgage loans (1)
1/31/2032
4.2%
298,375
299,579
Fixed rate unsecured debt
3/15/2049
4.0%
4.1%
3,648,942
3,252,755
Total notes payable, net
Unsecured credit facilities:
$1.5 Billion Line of Credit (the "Line") (2)
3/23/2028
6.3%
6.7%
Total unsecured credit facilities
Total debt outstanding
4,417,181
4,153,949
On January 8, 2024, the Company priced a public offering of $400 million of senior unsecured notes due in 2034, and the notes were issued on January 18, 2024 at 99.617% of par value with a coupon of 5.250%.
On January 18, 2024, the Company entered into a Sixth Amended and Restated Credit Agreement (the "Credit Agreement"), with the financial institutions party thereto, as lenders, and Wells Fargo Bank, National Association, as Administrative Agent. The Credit Agreement provides for an unsecured revolving credit facility in the amount of $1.50 billion for a term of four years (plus two six-month extension options) and includes an accordion feature which permits the borrower to request increases in the size of the revolving loan facility by up to an additional $1.50 billion. The interest rate on the revolving credit facility is equal to the Secured Overnight Financing Rate ("SOFR") plus a margin that is determined based on the borrower’s long-term unsecured debt ratings and ratio of indebtedness to total asset value. At the time of the closing, the effective interest rate was SOFR plus a credit spread adjustment of 10 basis points plus a margin of 72.5 basis points. The Credit Agreement also incorporates sustainability-linked adjustments to the interest rate, which provide for upward or downward adjustments to the applicable margin if the Company achieves, or fails to achieve, certain specified targets based on Scope 1 and Scope 2 emission standards as set forth in the Credit Agreement. At the time of the closing, a 1 basis point downward sustainability-linked adjustment to the interest rate was applicable.
17
Scheduled principal payments and maturities on notes payable and unsecured credit facilities were as follows:
Scheduled Principal Payments and Maturities by Year:
ScheduledPrincipalPayments
MortgageLoanMaturities
UnsecuredMaturities (1)
Total
2024 (2)
7,989
133,580
250,000
391,569
2025
9,678
52,537
312,215
2026
9,920
147,848
200,000
357,768
2027
7,013
222,558
525,000
754,571
2028
5,312
36,570
330,000
371,882
Beyond 5 Years
7,956
106,092
2,150,000
2,264,048
Unamortized debt premium/(discount) and issuance costs
(8,814
(26,058
(34,872
47,868
690,371
3,678,942
The Company was in compliance as of March 31, 2024, with all financial and other covenants under its unsecured public and private placement debt and unsecured credit facilities.
6.
Derivative Financial Instruments
The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors, and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company's operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative transactions or purposes other than mitigation of interest rate risk. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with quality credit ratings. The Company does not anticipate that any of the counterparties will fail to meet their obligations.
The Company's objectives in using interest rate derivatives are to attempt to stabilize interest expense where possible and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
Detail on the Company's interest rate derivatives outstanding as of March 31, 2024 and December 31, 2023 is as follows:
Number of Instruments
Interest Rate Swaps
Notional amount
323,678
294,928
Number of instruments
Detail on the fair value of the Company's interest rate derivatives as of March 31, 2024 and December 31, 2023 is as follows:
Fair Value
Interest rate swaps classified as:
Derivative liabilities
(393
(1,335
These derivative financial instruments are all interest rate swaps, which are designated and qualify as cash flow hedges. The Company does not use derivatives for trading or speculative purposes and, as of March 31, 2024, does not have any derivatives that are not designated as hedges.
The changes in the fair value of derivatives designated and qualifying as cash flow hedges are recorded in Accumulated other comprehensive income ("AOCI") and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
18
The following table represents the effect of the derivative financial instruments on the accompanying Consolidated Financial Statements:
Location and Amount of Gain (Loss) Recognized in OCI on Derivative
Location and Amount of Gain (Loss) Reclassified from AOCI into Income
Total amounts presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded
Interest rate swaps
Interest income
As of March 31, 2024, the Company expects approximately $6.4 million of accumulated comprehensive income on derivative instruments in AOCI, including the Company's share from its Investments in real estate partnerships, to be reclassified into earnings during the next 12 months.
7.
Leases
Substantially all of the Company's leases are classified as operating leases. The Company's Lease income is comprised of both fixed and variable income. Fixed and in-substance fixed lease income includes stated amounts per the lease contract, which are primarily related to base rent, and in some cases stated amounts for common area maintenance ("CAM"), real estate taxes, and insurance (collectively, "Recoverable Costs"). Income for these amounts is recognized on a straight-line basis.
Variable lease income includes the following two main items in the lease contracts:
The following table provides a disaggregation of lease income recognized as either fixed or variable lease income based on the criteria specified in ASC Topic 842:
Operating lease income
Fixed and in-substance fixed lease income
256,626
219,641
Variable lease income
92,290
80,780
Other lease related income, net:
Above/below market rent and tenant rent inducement amortization, net
5,823
5,865
Uncollectible straight-line rent (1)
(400
578
Uncollectible amounts billable in lease (loss) income
(1,233
1,937
Total lease income
19
The following table represents the components of Tenant and other receivables, net of amounts considered uncollectible, in the accompanying Consolidated Balance Sheets:
Tenant receivables
27,357
34,814
Straight-line rent receivables
144,022
138,590
Notes receivable
30,634
2,109
Other receivables(1)
27,394
30,649
Total tenant and other receivables
During three months ended March 31, 2024 the Company issued a note receivable in the amount of $29.8 million at an interest rate of 6.9% maturing in January 2027, secured by a grocery-anchored shopping center.
8.
Fair Value Measurements
(a) Disclosure of Fair Value of Financial Instruments
All financial instruments of the Company are reflected in the accompanying Consolidated Balance Sheets at amounts which, in management's estimation, reasonably approximate their fair values, except those instruments listed below:
CarryingAmount
Financial assets:
Notes receivable(1)
Financial liabilities:
4,143,622
3,763,152
Unsecured credit facilities(1)
The above fair values represent management's estimate of the amounts that would be received from selling those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants as of March 31, 2024, and December 31, 2023, respectively. These fair value measurements maximize the use of observable inputs which are classified within Level 2 of the fair value hierarchy. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company's own judgments about the assumptions that market participants would use in pricing the asset or liability.
The Company develops its judgments based on the best information available at the measurement date, including expected cash flows, appropriate risk-adjusted discount rates, and available observable and unobservable inputs. Service providers involved in fair value measurements are evaluated for competency and qualifications on an ongoing basis. As considerable judgment is often necessary to estimate the fair value of these financial instruments, the fair values presented above are not necessarily indicative of amounts that will be realized upon disposition of the financial instruments.
(b) Recurring Fair Value
The following financial instruments are measured at fair value on a recurring basis:
Securities
The Company has investments in marketable securities that are included within Other assets on the accompanying Consolidated Balance Sheets. The fair value of the securities was determined using quoted prices in active markets, which are considered Level 1 inputs of the fair value hierarchy. Changes in the value of securities are recorded within Net investment income in the accompanying Consolidated Statements of Operations, and include unrealized gains of $2.4 million and $1.6 million during the three months ended March 31, 2024 and 2023, respectively.
20
Available-for-Sale Debt Securities
Available-for-sale debt securities consist of investments in certificates of deposit and corporate bonds, and are recorded at fair value using either recent trade prices for the identical debt instrument or comparable instruments by issuers of similar industry sector, issuer rating, and size, to estimate fair value, which are considered Level 2 inputs of the fair value hierarchy. Unrealized gains or losses on these debt securities are recognized through Other comprehensive income.
Interest Rate Derivatives
The fair value of the Company's interest rate derivatives is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its interest rate swaps. As a result, the Company determined that its interest rate swaps valuation in its entirety is classified in Level 2 of the fair value hierarchy.
The following tables present the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis:
Fair Value Measurements as of March 31, 2024
Quoted Prices in Active Markets for Identical Assets
Significant Other Observable Inputs
Significant Unobservable Inputs
Balance
(Level 1)
(Level 2)
(Level 3)
Assets:
126,225
Available-for-sale debt securities
14,362
Interest rate derivatives
157,298
31,073
Fair Value Measurements as of December 31, 2023
37,039
14,953
66,205
29,166
21
9.
Equity and Capital
Preferred Stock of the Parent Company
Terms and conditions of the preferred stock outstanding are summarized as follows:
Preferred Stock Outstanding as of March 31, 2024 and December 31, 2023
Date of Issuance
Shares Issued and Outstanding
Liquidation Preference
Distribution Rate
Callable By Company
Series A
8/18/2023
4,600,000
115,000,000
6.250%
On demand
Series B
4,400,000
110,000,000
5.875%
On or after 10/1/2024
9,000,000
225,000,000
Dividends Declared
On May 1, 2024, the Board:
Common Stock of the Parent Company
On May 1, 2024, the Board declared a common stock dividend of $0.67 per share, payable on July 3, 2024, to shareholders of record as of June 12, 2024. On May 2, 2023, our Board of Directors declared a common stock dividend of $0.65 per share, payable on July 6, 2023, to shareholders of record as of June 14, 2023.
At the Market ("ATM") Program
Under the Parent Company's ATM program, as authorized by the Board, the Parent Company may sell up to $500 million of common stock at prices determined by the market at the time of sale. The timing of sales, if any, will be dependent on market conditions and other factors. No sales occurred under the ATM program during both the three months ended March 31, 2024, and 2023. As of March 31, 2024, $500 million of common stock remained available for issuance under this ATM equity program.
Stock Repurchase Program
The Board has authorized a common stock repurchase program under which the Company may purchase, from time to time, up to a maximum of $250 million of its outstanding common stock through open market purchases, and/or in privately negotiated transactions (referred to as the "Repurchase Program"). The timing and price of stock repurchases, if any, will be dependent upon market conditions and other factors. The stock repurchased, if not retired, would be treated as treasury stock. The Board's authorization for this Repurchase Program will expire on February 7, 2025, unless modified, extended or earlier terminated by the Board.
During the three months ended March 31, 2024, the Company made no repurchases. At March 31, 2024, $230.0 million remained available under this Repurchase Program.
During the three months ended March 31, 2023, the Company executed multiple trades to repurchase 349,519 common shares under the Repurchase Program for a total of $20.0 million at a weighted average price of $57.22 per share. All repurchased shares were retired on the respective settlement dates.
22
Preferred Units of the Operating Partnership
The number of Series A Preferred Units and Series B Preferred Units, respectively, issued by the Operating Partnership is equal to the number of Series A Preferred Stock and Series B Preferred Stock, respectively, issued by the Parent Company.
Common Units of the Operating Partnership
Common Units are issued, or redeemed and retired, for each share of the Parent Company stock issued or redeemed, or retired, as described above. During the three months ended March 31, 2024, 7,938 Partnership Units were converted to Parent Company common stock. No such conversions took place during the three months ended March 31, 2023.
10.
Stock-Based Compensation
During the three months ended March 31, 2024, the Company granted 322,159 shares of restricted stock with a weighted-average grant-date fair value of $60.31 per share. The Company records stock-based compensation expense within General and administrative expenses in the accompanying Consolidated Statements of Operations, and recognizes forfeitures as they occur.
11.
Earnings per Share and Unit
Parent Company Earnings per Share
The following summarizes the calculation of basic and diluted earnings per share:
Numerator:
Net income attributable to common shareholders - basic
Net income attributable to common shareholders - diluted
Denominator:
Weighted average common shares outstanding for basic EPS
184,678
171,212
Weighted average common shares outstanding for diluted EPS (1)
184,770
171,494
Net income per common share – basic
Net income per common share – diluted
The effect of the assumed conversion of the EOP units and certain other convertible units had an anti-dilutive effect upon the calculation of net income to the common shareholders per share. Accordingly, the impact of such assumed conversions has not been included in the determination of diluted net income per share calculations. Weighted average EOP units outstanding were 1,101,104 and 741,433 for the three months ended March 31, 2024 and 2023, respectively.
Operating Partnership Earnings per Unit
The following summarizes the calculation of basic and diluted earnings per unit ("EPU"):
Net income attributable to common unit holders - basic
Net income attributable to common unit holders - diluted
Weighted average common units outstanding for basic EPU
185,779
171,953
Weighted average common units outstanding for diluted EPU (1)
185,872
172,235
Net income per common unit – basic
Net income per common unit – diluted
23
The effect of the assumed conversion of certain other convertible units had an anti-dilutive effect upon the calculation of net income to the common unit holders per share. Accordingly, the impact of such assumed conversions has not been included in the determination of diluted net income per unit calculations.
12.
Commitments and Contingencies
Litigation
The Company is a party to litigation and other disputes that arise in the ordinary course of business. While the outcome of any particular lawsuit or dispute cannot be predicted with certainty, in the opinion of management, the Company's currently pending litigation and disputes are not expected to have a material adverse effect on the Company's consolidated financial position, results of operations, or liquidity of the Company taken as a whole as of March 31, 2024.
Environmental
The Company is subject to numerous environmental laws and regulations. With respect to applicability to the Company, these pertain primarily to chemicals historically used by certain current and former dry cleaning tenants, the existence of asbestos in older shopping centers, older underground petroleum storage tanks and other historic land uses. The Company believes that the ultimate disposition of currently known environmental matters will not have a material effect on its financial position, liquidity, or operations. The Company can give no assurance that existing environmental studies with respect to its shopping centers have revealed all potential environmental contaminants; that its estimate of liabilities will not change as more information becomes available; that any previous owner, occupant or tenant did not create any material environmental condition not known to the Company; that the current environmental condition of the shopping centers will not be affected by tenants and occupants, by the condition of nearby properties, or by unrelated third parties; and that changes in applicable environmental laws and regulations or their interpretation will not result in additional environmental liability to the Company.
The Company had accrued liabilities of $15.9 million and $16.5 million for environmental remediation, which are included in Accounts payable, and other liabilities on the Company’s Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023, respectively.
Letters of Credit
The Company has the right to issue letters of credit under the Line up to an aggregate amount not to exceed $50.0 million, which reduces the credit availability under the Line. These letters of credit are primarily issued as collateral on behalf of its captive insurance subsidiary and to facilitate the construction of development projects. The Company had $8.5 million in letters of credit outstanding as of both March 31, 2024 and December 31, 2023.
24
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements in this document regarding anticipated financial, business, legal or other outcomes including business and market conditions, outlook and other similar statements relating to Regency's future events, developments, or financial or operational performance or results, are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as "may," "will," "could," "should," "would," "expect," "estimate," "believe," "intend," "forecast," "project," "plan," "anticipate," "guidance," and other similar language. However, the absence of these or similar words or expressions does not mean a statement is not forward-looking. While we believe these forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance these expectations will be attained, and it is possible actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties.
Our operations are subject to a number of risks and uncertainties including, but not limited to, risk factors described in our Securities and Exchange Commission ("SEC") filings, our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Form 10-K") under Item 1A. "Risk Factors" and in Part II, Item 1A. "Risk Factors" in this Report. When considering an investment in our securities, you should carefully read and consider these risks, together with all other information in our most recent 2023 Form 10-K, subsequent Quarterly Reports on Form 10-Q, and our other filings with and submissions to the SEC. If any of the events described in the risk factors actually occur, our business, financial condition or operating results, as well as the market price of our securities, could be materially adversely affected. Forward-looking statements are only as of the date they are made, and Regency undertakes no duty to update its forward-looking statements, whether as a result of new information, future events or developments or otherwise, except as and to the extent required by law.
Non-GAAP Measures
In addition to the required Generally Accepted Accounting Principles ("GAAP") presentations, we use and report certain non-GAAP measures as we believe these measures improve the understanding of our operational results. We believe these non-GAAP measures provide useful information to our Board of Directors, management and investors regarding certain trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, purposes of determining management incentive compensation and budgeting, forecasting and planning purposes. We continually evaluate the usefulness, relevance, limitations, and calculation of our reported non-GAAP measures to determine how best to provide relevant information to the public, and thus such reported measures could change.
We do not consider non-GAAP measures an alternative to financial measures determined in accordance with GAAP, rather they supplement GAAP measures by providing additional information we believe to be useful to our shareholders. The principal limitation of these non-GAAP measures is that they may exclude significant expense and income items that are required by GAAP to be recognized in our Consolidated Financial Statements. In addition, they reflect the exercise of management's judgment about which expense and income items are excluded or included in determining these non-GAAP measures. In order to compensate for these limitations, reconciliations of the non-GAAP measures we use to their most directly comparable GAAP measures are provided. Non-GAAP measures should not be relied upon in evaluating the financial condition, results of operations, or future prospects of the Company.
Defined Terms
The following terms, as defined, are commonly used by management and the investing public to understand and evaluate our operational results, and are included in this document:
Companies use different depreciable lives and methods, and real estate values historically fluctuate with market conditions. Since Nareit FFO excludes depreciation and amortization and gains on sale and impairments of real estate, it provides a performance measure that, when compared year over year, reflects the impact on operations from trends in percent leased, rental rates, operating costs, acquisition and development activities, and financing costs. This provides a perspective of our financial performance not immediately apparent from net income determined in accordance with GAAP. Thus, Nareit FFO is a supplemental non-GAAP financial measure of our operating performance, which does not represent cash generated from operating activities in accordance with GAAP; and, therefore, should not be considered a substitute measure of cash flows from operations. We provide a reconciliation of Net Income Attributable to Common Shareholders to Nareit FFO.
We provide Pro-rata financial information because we believe it assists investors and analysts in estimating our economic interest in our consolidated and unconsolidated partnerships, when read in conjunction with our reported results under GAAP. We believe presenting our Pro-rata share of assets, liabilities, operating results, and other metrics, along with certain other non-GAAP measures, makes comparisons of our operating results to those of other REITs more meaningful. The Pro-rata information provided is not, nor is it intended to be, presented in accordance with GAAP. The Pro-rata supplemental details of assets and liabilities and supplemental details of operations reflect our proportionate economic ownership of the assets, liabilities, and operating results of the properties in our portfolio.
The Pro-rata information is prepared on a basis consistent with the comparable consolidated amounts and is intended to more accurately reflect our proportionate economic interest in the assets, liabilities, and operating results of properties in our portfolio. We do not control the unconsolidated investment partnerships, and the Pro-rata presentations of the assets and liabilities, and revenues and expenses do not represent our legal claim to such items. The partners are entitled to profit or loss allocations and distributions of cash flows according to the operating agreements, which generally provide for such allocations according to their invested capital. Our share of invested capital establishes the ownership interests we use to prepare our Pro-rata share.
The presentation of Pro-rata information has limitations which include, but are not limited to, the following:
26
Because of these limitations, the Pro-rata financial information should not be considered independently or as a substitute for our financial statements as reported under GAAP. We compensate for these limitations by relying primarily on our GAAP financial statements, using the Pro-rata information as a supplement.
Overview of Our Strategy
Regency Centers Corporation began operations as a publicly-traded REIT in 1993. All of our operating, investing, and financing activities are performed through our Operating Partnership, Regency Centers, L.P. and its wholly-owned subsidiaries, and through our real estate partnerships. As of March 31, 2024, the Parent Company owned approximately 99.4% of the outstanding Common Units and 100% of the Preferred Units of the Operating Partnership.
We are a preeminent national owner, operator, and developer of neighborhood and community shopping centers predominantly located in suburban trade areas with compelling demographics. As of March 31, 2024, we had full or partial ownership interests in 482 retail properties. Our properties are high-quality neighborhood and community shopping centers primarily anchored by market leading grocers and principally located in suburban markets within the country's most desirable metro areas and contain approximately 57.0 million square feet ("SF") of gross leasable area ("GLA"). Our mission is to create thriving environments for retailers and service providers to connect with surrounding neighborhoods and communities. Our vision is to elevate quality of life as an integral thread in the fabric of our communities. Our portfolio includes thriving properties merchandised with highly productive grocers, restaurants, service providers, and best-in-class retailers that connect with their neighborhoods, communities, and customers.
Our values:
Our goals are to:
27
Refer to Item 1, Note 1 to Unaudited Consolidated Financial Statements.
Please also refer to the Risk Factors discussed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023, and the Risk Factors described in Part II, Item 1A of this Form 10-Q.
Executing on our Strategy
During the three months ended March 31, 2024, we had Net income attributable to common shareholders of $106.4 million as compared to $97.3 million during the three months ended March 31, 2023.
During the three months ended March 31, 2024:
We continued our development and redevelopment of high quality shopping centers:
We maintained liquidity and financial flexibility to cost effectively fund investment opportunities and debt maturities:
28
Property Portfolio
The following table summarizes general information related to the consolidated properties in our portfolio:
(GLA in thousands)
Number of Properties
381
GLA
43,947
43,758
% Leased – Operating and Development
95.0
%
94.9
% Leased – Operating
95.4
95.3
Weighted average annual effective rent per square foot ("PSF"), net of tenant concessions.
$24.74
$24.67
The following table summarizes general information related to the unconsolidated properties owned in real estate investment partnerships in our portfolio:
101
13,066
13,067
96.0
96.6
% Leased –Operating
Weighted average annual effective rent PSF, net of tenant concessions
$24.88
$24.04
The following table summarizes Pro-rata occupancy rates of our combined consolidated and unconsolidated shopping center portfolio:
Percent Leased – All Properties
95.1
Anchor Space (spaces ≥ 10,000 SF)
96.8
96.7
Shop Space (spaces < 10,000 SF)
92.1
92.4
The following table summarizes leasing activity, including our Pro-rata share of activity within the portfolio of our real estate partnerships (totals as a weighted average PSF):
LeasingTransactions
SF (inthousands)
Base RentPSF
TenantAllowanceand LandlordWork PSF
LeasingCommissionsPSF
Anchor Space Leases
New
241
21.59
52.82
8.10
Renewal
29
851
21.00
0.29
0.05
Total Anchor Space Leases
40
1,092
21.13
11.91
1.83
Shop Space Leases
136
286
37.65
38.66
13.10
285
573
37.27
3.66
0.61
Total Shop Space Leases
421
859
37.40
15.33
4.77
Total Leases
461
1,951
28.29
13.41
3.13
Three months ended March 31, 2023
67
14.24
41.74
7.69
399
15.01
0.40
0.19
466
14.90
6.37
1.27
121
217
36.88
33.10
12.21
260
447
35.20
0.75
0.54
664
35.75
11.33
4.36
405
1,130
27.14
9.28
3.08
The weighted-average base rent PSF on signed Shop Space leases during 2024 was $37.40 PSF, which is higher than the weighted average annual base rent PSF of all Shop Space leases due to expire during the next 12 months of $33.81 PSF. New and renewal rent spreads, compared to prior rents on these same spaces leased, were positive at 8.5% for the three months ended March 31, 2024, compared to 5.5% for the three months ended March 31, 2023.
Significant Tenants and Concentrations of Credit Risk
We seek to reduce our operating and leasing risks through geographic diversification of our properties and by avoiding dependence on any single property, market, or tenant. Based on percentage of annualized base rent, the following table summarizes our most significant tenants, of which four of the top five are grocers:
Tenant
Number ofStores
Percentage ofCompany-owned GLA (1)
Percentage ofAnnual Base Rent (1)
Publix
68
6.4%
3.0%
Albertsons Companies, Inc.
53
4.7%
2.9%
TJX Companies, Inc.
73
2.8%
Amazon/Whole Foods
39
2.7%
Kroger Co.
52
2.6%
Bankruptcies and Credit Concerns
Our management team devotes significant time to researching and monitoring consumer preferences and trends, customer shopping behaviors, changes in delivery methods, shifts to e-commerce, and changing demographics in order to anticipate the challenges and opportunities impacting our industry. We seek to mitigate these potential impacts through maintaining a high quality portfolio, diversifying our tenant mix, replacing less successful tenants with stronger operators, anchoring our centers with market leading grocery stores that drive customer traffic, and investing in suburban trade areas with compelling demographic populations benefiting from high levels of disposal income. The potential for a recession and the severity and duration of any economic downturn could negatively impact our existing tenants and their ability to continue to meet their lease obligations.
Although base rent is derived from long-term lease contracts, tenants that file for bankruptcy generally have the legal right to reject any or all of their leases and close related stores. Any unsecured claim we hold against a bankrupt tenant for unpaid rent might be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. As a result, it is likely that we would recover substantially less than the full value of any unsecured claims we hold. Additionally, we may incur significant expense to adjudicate our claim and significant downtime to re-lease the vacated space. In the event that a tenant with a significant number of leases in our shopping centers files for bankruptcy and rejects its leases, we could experience a significant reduction in our revenues. Tenants who are currently in bankruptcy and continue to occupy space in our shopping centers represent an aggregate of 0.6% of our Pro-rata annual base rent, which is primarily related to Rite Aid who filed in October 2023.
Results from Operations
Comparison of the three months ended March 31, 2024 and 2023:
Revenues changed as summarized in the following table:
Change
Base rent
244,135
212,930
31,205
Recoveries from tenants
85,023
71,226
13,797
Percentage rent
7,807
7,030
777
Uncollectible lease income
(3,170
Other lease income
5,957
7,216
(1,259
Straight-line rent
5,594
2,597
2,997
Above / below market rent and tenant rent inducement amortization, net
(42
44,305
1,212
358
45,875
30
Total lease income increased $44.3 million primarily driven by the following contractually billable components of rent to the tenants per the lease agreements:
Other property income increased $1.2 million primarily due to an increase in settlements in 2024.
There were no significant changes in Management, transaction, and other fees.
Changes in our operating expenses are summarized in the following table:
14,878
12,252
5,830
852
3,140
36,952
Depreciation and amortization costs increased $14.9 million, mainly due to the following:
Property operating expense increased $12.3 million, as follows:
Real estate taxes increased $5.8 million, mainly due to acquisition of UBP.
There were no significant changes in General and administrative expenses.
31
Other operating expenses (income) increased $3.1 million, mainly due to the following:
The following table presents the components of other expense, net:
Interest on notes payable
45,601
36,909
8,692
Interest on unsecured credit facilities
1,439
987
452
Capitalized interest
(1,656
(1,250
(406
Hedge expense
109
(2,625
(362
(2,263
6,475
(11,153
(704
(5,202
Interest expense, net increased $6.5 million primarily due to the following:
During the three months ended March 31, 2024, we recognized gains on sale of $11.4 million mainly from sale of one operating property and recognition of one sales type lease. During the three months ended March 31, 2023, we recognized gains on sale of $0.3 million from one land parcel.
There were no significant changes in Net investment income.
Total equity in income of investments in real estate partnerships changed as follows:
Regency'sOwnership
GRI - Regency, LLC ("GRIR")
40.00%
9,126
9,130
(4
Columbia Regency Retail Partners, LLC ("Columbia I")
20.00%
428
458
(30
Columbia Regency Partners II, LLC ("Columbia II")
589
528
61
Columbia Village District, LLC
30.00%
511
453
58
Other investments in real estate partnerships
11.80% - 66.67%
1,307
1,347
(40
Total equity in income of investments in real estate partnerships
The following represents the remaining components that comprise Net income attributable to common shareholders and unit holders:
14,170
Income attributable to noncontrolling interests
(1,677
12,493
9,080
Net income attributable to exchangeable operating partnership units
(222
9,302
Income attributable to noncontrolling interests increased $1.7 million, mainly due to acquisition of UBP.
The $3.4 million increase in Preferred stock dividends is related to the preferred stock issued in connection with UBP acquisition.
32
Supplemental Earnings Information
We use certain non-GAAP measures, in addition to certain performance metrics determined under GAAP, as we believe these measures improve the understanding of the operating results. We believe these non-GAAP measures provide useful information to our Board of Directors, management and investors regarding certain trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, purposes of determining management incentive compensation and budgeting, forecasting and planning purposes. We provide Pro-rata financial information because we believe it assists investors and analysts in estimating our economic interest in our consolidated and unconsolidated real estate partnerships, when read in conjunction with our reported results under GAAP. We believe presenting our Pro-rata share of operating results, along with other non-GAAP measures, may assist in comparing our operating results to other REITs. We continually evaluate the usefulness, relevance, limitations, and calculation of our reported non-GAAP measures to determine how best to provide relevant information to the public, and thus such reported non-GAAP measures could change. See "Non-GAAP Measures" at the beginning of this Management's Discussion and Analysis.
We do not consider non-GAAP measures as an alternative to financial measures determined in accordance with GAAP, rather they supplement GAAP measures by providing additional information we believe to be useful to our shareholders. The principal limitation of these non-GAAP measures is they may exclude significant expense and income items that are required by GAAP to be recognized in our Consolidated Financial Statements. In addition, they reflect the exercise of management's judgment about which expense and income items are excluded or included in determining these non-GAAP measures. In order to compensate for these limitations, reconciliations of the non-GAAP measures we use to their most directly comparable GAAP measures are provided, including as set forth below. Non-GAAP measures should not be relied upon in evaluating the financial condition, results of operations, or future prospects.
Pro-rata Same Property NOI:
Pro-rata same property NOI, excluding termination fees/expenses, changed from the following major components:
242,684
236,363
6,321
83,192
79,069
4,123
7,982
7,671
311
Termination fees
1,443
4,717
(3,274
(1,036
1,879
(2,915
3,136
2,872
264
2,575
2,663
(88
Total real estate revenue
339,976
335,234
4,742
Operating and maintenance
56,734
52,744
3,990
Termination expense
70
42,789
42,606
183
Ground rent
3,949
3,436
513
Total real estate operating expenses
103,542
98,786
4,756
Pro-rata same property NOI
236,434
236,448
(14
Less: Termination fees
1,373
(3,344
Pro-rata same property NOI, excluding termination fees
235,061
231,731
3,330
Pro-rata same property NOI growth, excluding termination fees
1.4
Real estate revenue increased $4.7 million during the three months ended March 31, 2024, as follows:
Total real estate operating expense increased $4.8 million as follows:
33
Same Property Roll-forward:
Our same property pool includes the following property count, Pro-rata GLA, and changes therein:
PropertyCount
Beginning same property count
394
42,135
389
41,383
Acquired properties owned for entirety of comparable periods
441
771
Developments that reached completion by beginning of earliest comparable period presented
175
Disposed properties
(1
(93
SF adjustments (1)
123
(6
Change in intended property use
Properties under or being repositioned for redevelopment
103
Ending same property count
42,884
395
42,148
Nareit FFO, Core Operating Earnings and AFFO:
Our reconciliation of net income attributable to common stock and unit holders to Nareit FFO, to Core Operating Earnings, and to AFFO is as follows:
(in thousands, except share information)
Reconciliation of Net income attributable to common shareholders to Nareit FFO
Adjustments to reconcile to Nareit FFO: (1)
Depreciation and amortization (excluding FF&E)
104,372
89,035
(11,408
(241
Nareit FFO attributable to common stock and unit holders
199,967
186,495
Reconciliation of Nareit FFO to Core Operating Earnings
Nareit Funds From Operations
Adjustments to reconcile to Core Operating Earnings: (1)
Not Comparable Items
Merger transition costs
2,561
Certain Non Cash Items
(5,738
(2,389
Uncollectible straight-line rent
656
(635
Above/below market rent amortization, net
(5,467
(5,665
Debt and derivative mark-to-market amortization
909
(8
Core Operating Earnings
193,068
177,798
Reconciliation of Core Operating Earnings to AFFO:
Adjustments to reconcile to AFFO (1):
Operating capital expenditures
(20,852
(17,459
Debt cost and derivative adjustments
2,140
1,672
Stock-based compensation
4,640
AFFO
178,996
166,830
34
Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure:
Our reconciliation of Net income attributable to common shareholders to Same Property NOI, on a Pro-rata basis, is as follows:
Less:
Other (1)
12,587
9,502
Plus:
Other operating expense
Other expense, net
Equity in income of investments in real estate excluded from NOI (2)
13,689
11,785
Preferred stock dividends and issuance costs
3,413
Pro-rata NOI
262,938
236,639
Less non-same property NOI
26,504
191
Liquidity and Capital Resources
We use cash flows generated from operating, investing, and financing activities to strengthen our balance sheet, finance our development and redevelopment projects, fund our investment activities, and maintain financial flexibility. A significant portion of our cash from operations is distributed to our common shareholders in the form of dividends in order to maintain our status as a REIT.
Except for $200 million of private placement debt, our Parent Company has no capital commitments other than its guarantees of the commitments of our Operating Partnership. All remaining debt is held by our Operating Partnership, its subsidiaries, or by our real estate partnerships. The Operating Partnership is a co-issuer and a guarantor of the $200 million of outstanding debt of our Parent Company. The Parent Company will from time to time access the capital markets for the purpose of issuing new equity, and will simultaneously contribute all of the offering proceeds to the Operating Partnership in exchange for additional partnership units.
We continually assess our available liquidity and our expected cash requirements, including monitoring our tenant rent collections. We have access to and draw on multiple financing sources to fund our operations and our long-term capital needs, including the requirements of our in process and planned developments, redevelopments, other capital expenditures, and the repayment of debt. We expect to meet these needs by using a combination of the following: cash flow from operations after funding our common stock and preferred stock dividends, borrowings from our Line, proceeds from the sale of real estate, mortgage loan and unsecured bank financing, distributions received from our real estate partnerships, and when the capital markets are favorable, proceeds from the sale of equity securities or the issuance of new unsecured debt. We continually evaluate alternative financing options, and we believe we can obtain new financing on reasonable terms, although likely at higher interest rates than that of our debt currently outstanding, due to the current interest rate environment.
On January 8, 2024, Regency priced a public offering of $400 million of senior unsecured notes due in 2034 (the “2024 Notes”) under our existing shelf registration filed with the SEC. The Notes mature on January 15, 2034, and were issued at 99.617% of par value with a coupon of 5.25%. We have $250 million of unsecured debt maturing in June 2024, which we intend to pay off by utilizing the proceeds available from the 2024 Notes. In addition, we have $196.1 million of secured loan maturities during the next 12 months, including maturities within our unconsolidated real estate partnerships, which we intend to refinance or pay-off as they mature. Based upon our available cash balance, sources of capital, our current credit ratings, and the number of high quality, unencumbered properties we own, we believe our available capital resources are sufficient to meet our expected capital needs for the next year, although, in the longer term, we can provide no assurances.
35
In addition to our $224.7 million of unrestricted cash, we have the following additional sources of capital available:
ATM program
Original offering amount
500,000
Available capacity
Line of credit
Total commitment amount
1,500,000
Available capacity (1)
1,462,285
Maturity (2)
March 23, 2028
The declaration of dividends is determined quarterly by our Board of Directors. On May 1, 2024, our Board of Directors:
While future dividends will be determined at the discretion of our Board of Directors, we plan to continue paying an aggregate amount of distributions to our stock and unit holders that, at a minimum, meet the requirements to continue qualifying as a REIT for federal income tax purposes. We have historically generated sufficient cash flow from operations to fund our dividend distributions. During the three months ended March 31, 2024 and 2023, we generated cash flow from operations of $167.8 million and $162.1 million, respectively, and paid $127.7 million in dividends to our common and preferred stock and unit holders, and $111.6 million in dividends to our common stock and unit holders, in the same respective periods.
We currently have development and redevelopment projects in various stages of construction, along with a pipeline of potential projects for future development or redevelopment. After funding our common and preferred stock dividend payments in April of 2024, we estimate that we will require capital during the next 12 months of approximately $715.5 million related to leasing commissions, tenant improvements, in-process developments and redevelopments, capital contributions to our real estate partnerships, and repaying maturing debt. These capital requirements are being impacted by inflation resulting in increased costs of construction materials, labor, and services from third party contractors and suppliers. In response, we have implemented mitigation strategies such as entering into fixed cost construction contracts, pre-ordering materials, and other planning efforts. Further, continued challenges from permitting delays and labor shortages may extend the time to completion of these projects.
If we start new developments or redevelopments, commit to property acquisitions, repay debt prior to maturity, declare future dividends, or repurchase shares of our common stock, our cash requirements will increase. If we refinance maturing debt, our cash requirements will decrease.
We endeavor to maintain a high percentage of unencumbered assets. As of March 31, 2024, 87.6% of our wholly-owned real estate assets were unencumbered. Our low level of encumbered assets allows us to more readily access the secured and unsecured debt markets and to maintain borrowing capacity on the Line. Our trailing 12 month fixed charge coverage ratio, including our Pro-rata share of our partnerships, was 4.5x and 4.7x for the periods ended March 31, 2024, and December 31, 2023, respectively, and our Pro-rata net debt and Preferred Stock-to-operating EBITDAre ratio on a trailing 12 month basis was 5.4x during the same periods.
Our Line and unsecured debt require that we remain in compliance with various covenants, which are described in the Notes to Consolidated Financial Statements included in our 2023 Form 10-K. The debt assumed in conjunction with the UBP acquisition contain covenants that are consistent with our existing debt covenants. We were in compliance with these covenants at March 31, 2024, and expect to remain in compliance.
36
Summary of Cash Flow Activity
The following table summarizes net cash flows related to operating, investing, and financing activities of the Company:
5,659
(103,286
237,007
Net change in cash, cash equivalents, and restricted cash
139,380
Total cash, cash equivalents, and restricted cash
161,958
Net cash provided by operating activities:
Net cash provided by operating activities increased $5.7 million due to:
Net cash used in investing activities:
Net cash used in investing activities changed by $103.3 million as follows:
(16,281
26,430
(3,552
(65
(90,356
1,545
Significant changes in investing activities include:
37
We plan to continue developing and redeveloping shopping centers for long-term investment. During the three months ended March 31, 2024, we deployed capital of $60.9 million for the development, redevelopment, and improvement of our real estate properties, comprised of the following:
Capital expenditures:
Land acquisitions
7,836
Building and tenant improvements
17,914
14,998
2,916
Redevelopment costs
19,938
20,610
Development costs
9,113
5,847
3,266
1,622
1,224
398
Capitalized direct compensation
4,427
1,890
2,537
60,850
44,569
16,281
The following table summarizes our development projects in-process and completed:
(in thousands, except cost PSF)
Market
Ownership (3)
StartDate
EstimatedStabilizationYear (1)
Estimated / Actual NetDevelopmentCosts (2) (3)
GLA (3)
Cost PSFof GLA (2) (3)
% of Costs Incurred
Developments In-Process
Glenwood Green
Metro NYC
70%
Q1-22
46,172
247
85
Baybrook East - Phase 1B
Houston, TX
50%
Q2-22
10,384
77
135
79
Sienna - Phase 1
75%
Q2-23
9,409
409
The Shops at SunVet
Long Island, NY
86,872
167
520
Q1-24
67,387
435
Total Developments In-Process
220,224
669
329
38
The following table summarizes our redevelopment projects in process and completed:
Start Date
Estimated Stabilization Year (1)
Estimated NetProject Costs (2) (3)
Redevelopments In-Process
The Abbot
Boston, MA
Q2-19
59,854
64
93
Westbard Square Phase I
Bethesda, MD
Q2-21
39,499
126
Buckhead Landing
Atlanta, GA
30,859
152
Bloom on Third (fka Town and Country Center)
Los Angeles, CA
35%
Q4-22
24,525
51
Mandarin Landing
Jacksonville, FL
16,422
140
Serramonte Center - Phase 3
San Francisco, CA
36,989
1,072
Circle Marina Center
Q3-23
14,986
Avenida Biscayne
Miami, FL
Q4-23
22,743
Cambridge Square
15,002
Various Redevelopments
Various
20% - 100%
66,020
1,969
47
Total Redevelopments In-Process
326,899
3,791
Redevelopments Completed
Various Properties
3,055
63
90
Total Redevelopments Completed
Net cash used in financing activities
Net cash flows from financing activities changed by $237.0 million during 2024, as follows:
(1,664
20,006
734
Dividend payments and operating partnership distributions
(127,662
(16,095
(Repayment of) Proceeds from unsecured credit facilities, net
(122,000
(152,000
382,968
Debt repayment, including early redemption costs
(10,780
(31,142
20,362
(13,148
Proceeds from sale of treasury stock, net
208
Significant financing activities during the three months ended March 31, 2024 and 2023, include the following:
Investments in Real Estate Partnerships
The following table is a summary of the unconsolidated combined assets and liabilities of our real estate partnerships and our Pro-rata share:
Combined
Regency's Share (1)
(dollars in thousands)
Number of real estate partnerships
Regency's ownership
12% - 67%
Number of properties
2,697,962
2,689,993
987,364
984,027
1,609,140
1,595,271
571,632
565,822
Equity
1,088,822
1,094,722
415,732
418,205
Basis difference
(47,023
(47,600
Our equity method investments in real estate partnerships consist of the following:
Regency's Ownership
GRI - Regency, LLC (GRIR)
142,238
144,371
Columbia Regency Retail Partners, LLC (Columbia I)
6,946
7,045
Columbia Regency Partners II, LLC (Columbia II)
43,103
42,994
6,155
6,123
Individual Investors
Ballard Blocks
49.90%
61,718
62,140
Bloom on Third
35.00%
43,099
42,074
Others (1)
65,450
65,858
Total Investment in real estate partnerships
Notes Payable - Investments in Real Estate Partnerships
Scheduled principal repayments on notes payable held by our investments in real estate partnerships were as follows:
UnsecuredMaturities
Regency’sPro-RataShare
2024 (1)
2,775
7,008
9,783
4,312
6,094
147,064
153,158
48,443
7,393
239,397
44,800
291,590
92,308
7,576
32,800
40,376
13,669
4,267
246,605
250,872
92,027
6,688
771,324
778,012
293,128
Net unamortized loan costs, debt premium / (discount)
(10,355
(3,780
34,793
1,433,843
1,513,436
540,107
At March 31, 2024, our investments in real estate partnerships had notes payable of $1.5 billion maturing through 2034, of which 94.8% had a weighted average fixed interest rate of 3.8%. The remaining notes payable float with SOFR and had a weighted average variable interest rate of 7.3%, based on rates as of March 31, 2024. These fixed and variable rate notes payable are all non-recourse, and our Pro-rata share was $540.1 million as of March 31, 2024. As notes payable mature, they are expected to be repaid from proceeds from new borrowings and/or partner capital contributions. Refinancing debt at maturity in the current interest rate environment could result in higher interest expense in future periods if rates remain elevated.
We believe that our partners are financially sound and have sufficient capital or access thereto to fund future capital requirements. In the event that a real estate investment partner is unable to fund its share of the capital requirements of the real estate partnership, we would have the right, but not the obligation, to loan the defaulting partner the amount of its capital call which would be secured by the partner's membership interest.
Management fee income
In addition to earning our Pro-rata share of net income or loss in each of these real estate partnerships, we receive fees as shown below:
Asset management, property management, leasing, and other transaction fees
Critical Accounting Estimates
There have been no material changes in our Critical Accounting Estimates from the information provided in the "Critical Accounting Estimates" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K.
Environmental Matters
We are subject to numerous environmental laws and regulations, which primarily pertain to chemicals historically used by certain current and former dry cleaning and gas station tenants and the existence of asbestos in older shopping centers. We believe that the relatively few tenants who currently operate dry cleaning plants or gas stations do so in accordance with current laws and regulations. Generally, we endeavor to require tenants to remove dry cleaning plants from our shopping centers or convert them to more environmentally friendly systems, in accordance with the terms of our leases. We carry an environmental insurance policy for certain third-party liabilities and, in certain circumstances, remediation costs on shopping centers for currently unknown contamination. We have also secured environmental insurance policies, where appropriate, on a relatively small number of specific properties with known contamination, in order to mitigate our environmental risk. We monitor the shopping centers containing environmental issues and in certain cases voluntarily remediate the sites. We also have legal obligations to remediate certain sites and we are in the process of doing so.
41
As of March 31, 2024, we had accrued liabilities of $15.9 million for our consolidated environmental remediation, including our Investments in real estate partnerships. We believe that the ultimate remediation of currently known environmental matters will not have a material effect on our financial position, cash flows, or results of operations. We can give no assurance that existing environmental studies on our shopping centers have revealed all potential environmental contamination; that our estimate of liabilities will not change as more information becomes available; that any previous owner, occupant or tenant did not create any material environmental condition not known to us; that the current environmental condition of the shopping centers will not be affected by tenants and occupants, by the condition of nearby properties, or by unrelated third parties; or that changes in applicable environmental laws and regulations or their interpretation will not result in additional environmental liability to us.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We continuously monitor the capital markets and evaluate our ability to issue new debt, to repay maturing debt, or to fund our commitments. We continue to believe, in light of our credit ratings, the available capacity under our unsecured credit facility, and the number of high quality, unencumbered properties that we own which could collateralize borrowings, we will be able to successfully issue new secured or unsecured debt to fund maturing debt obligations. It is uncertain the degree to which capital market volatility and rising interest rates will adversely impact the interest rates on any new debt that we may issue. Please also refer to the Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023, discussed in Item 1A of Part I thereof, and the Risk Factors described in Part II, Item 1A of this Form 10-Q.
Item 4. Controls and Procedures
Controls and Procedures (Regency Centers Corporation)
Under the supervision and with the participation of the Parent Company's management, including its chief executive officer and chief financial officer, the Parent Company conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, the Parent Company's chief executive officer and chief financial officer concluded that its disclosure controls and procedures were effective as of the end of the periods covered by this quarterly report on Form 10-Q to ensure information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Parent Company in the reports it files or submits is accumulated and communicated to management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
There have been no changes in the Parent Company's internal controls over financial reporting identified in connection with this evaluation that occurred during the three months ended March 31, 2024 which have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Controls and Procedures (Regency Centers, L.P.)
Under the supervision and with the participation of the Operating Partnership's management, including the chief executive officer and chief financial officer of its general partner, the Operating Partnership conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act. Based on this evaluation, the chief executive officer and chief financial officer of its general partner concluded that its disclosure controls and procedures were effective as of the end of the periods covered by this quarterly report on Form 10-Q to ensure information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Operating Partnership in the reports it files or submits is accumulated and communicated to management, including the chief executive officer and chief financial officer of its general partner, as appropriate, to allow timely decisions regarding required disclosure.
There have been no changes in the Operating Partnership's internal controls over financial reporting identified in connection with this evaluation that occurred during the three months ended March 31, 2024 which have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 1. Legal Proceedings
See Note 12 — Commitments and Contingencies in the Notes for discussion regarding material legal proceedings and contingencies. Except as set forth in such discussion, there have been no material developments in legal proceedings as reported in Item 3. “Legal Proceedings” of our 2023 Form 10-K.
Item 1A. Risk Factors
There have been no material changes from the risk factors disclosed in Item 1A. of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Annual Report”).
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended March 31, 2024, we issued 7,938 shares of common stock of Regency Centers Corporation in connection with the redemption of common units of Regency Centers, L.P. in reliance on the exemption from registration requirements of the Securities Act of 1933, as amended, afforded by Section 4(a) (2) thereof. There were no other unregistered sales of equity securities during the three months ended March 31, 2024.
The following table represents information with respect to purchases by the Parent Company of its common stock, by month, during the three months ended March 31, 2024:
Period
Total number of shares purchased (1)
Average price paid per share (1)
Total number of shares purchased as part of publicly announced plans or programs (2)
Maximum number or approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands) (2)
January 1 through January 31, 2024
15,891
62.21
230,000
February 1 through February 29, 2024
118,032
63.42
March 1 through March 31, 2024
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans
During the fiscal quarter ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1 under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as those terms are defined in Item 408 of Regulation S-K).
Item 6. Exhibits
In reviewing any agreements included as exhibits to this Report, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company, its subsidiaries or other parties to the agreements. Each agreement contains representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. We acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, we are responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Report not misleading. Additional information about the Company may be found elsewhere in this Report and the Company's other public filings, which are available without charge through the SEC's website at http://www.sec.gov. Unless otherwise indicated below, the Commission file number to the exhibit is No. 001-12298 (Regency Centers Corporation) and 000-24763 (Regency Centers, L.P.).
Ex #
Instruments defining the rights of securities holders, including indentures
4.1
Seventh Supplemental Indenture dated as of January 18, 2024 to the Indenture dated as of December 5, 2001 among RCLP, Regency, as guarantor, and U.S. Bank Trust Company, National Association, as trustee. (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed on January 18, 2024)
4.2
Form of Global Note for 5.250% Notes due 2034 of Regency Centers, L.P. (incorporated by reference to Exhibit 4.3 to the Company’s Form 8-K filed on January 18, 2024)
4.3
Guarantee of Regency Centers Corporation (included in the Global Note filed as Exhibit 4.2)
Material Contracts
10.1
Sixth Amended and Restated Credit Agreement, dated as of January 18, 2024, by and among Regency Centers, L.P., as borrower, Regency Centers Corporation, as guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and certain lenders party thereto.(incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on January 18, 2024)
31.
Rule 13a-14(a)/15d-14(a) Certifications
31.1
Rule 13a-14 Certification of Chief Executive Officer for Regency Centers Corporation.
31.2
Rule 13a-14 Certification of Chief Financial Officer for Regency Centers Corporation.
31.3
Rule 13a-14 Certification of Chief Executive Officer for Regency Centers, L.P.
31.4
Rule 13a-14 Certification of Chief Financial Officer for Regency Centers, L.P.
32.
Section 1350 Certifications
32.1 *
18 U.S.C. § 1350 Certification of Chief Executive Officer for Regency Centers Corporation.
32.2 *
18 U.S.C. § 1350 Certification of Chief Financial Officer for Regency Centers Corporation.
32.3 *
18 U.S.C. § 1350 Certification of Chief Executive Officer for Regency Centers, L.P.
32.4 *
18 U.S.C. § 1350 Certification of Chief Financial Officer for Regency Centers, L.P.
101.
Interactive Data Files
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema with embedded linkbases document
104.
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*
Furnished, not filed.
44
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
May 3, 2024
By:
/s/ Michael J. Mas
Michael J. Mas, Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/ Terah L. Devereaux
Terah L. Devereaux, Senior Vice President, Chief Accounting Officer (Principal Accounting Officer)
Regency Centers Corporation, General Partner