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 September 30, 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 181,505,396 as of October 30, 2024.
EXPLANATORY NOTE
This Quarterly Report on Form 10-Q (this "Report") combines the quarterly reports on Form 10-Q for the quarter ended September 30, 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 September 30, 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 September 30, 2024 and December 31, 2023
1
Consolidated Statements of Operations for the periods ended September 30, 2024 and 2023
2
Consolidated Statements of Comprehensive Income for the periods ended September 30, 2024 and 2023
3
Consolidated Statements of Equity for the periods ended September 30, 2024 and 2023
4
Consolidated Statements of Cash Flows for the periods ended September 30, 2024 and 2023
6
8
9
10
Consolidated Statements of Capital for the periods ended September 30, 2024 and 2023
11
13
Notes to Consolidated Financial Statements
15
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
27
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
47
Item 4.
Controls and Procedures
48
PART II - OTHER INFORMATION
Legal Proceedings
49
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
50
SIGNATURES
51
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 2024 and December 31, 2023
(in thousands, except share data)
2024
2023
Assets
(unaudited)
Net real estate investments:
Real estate assets, at cost
$
13,620,602
13,454,391
Less: accumulated depreciation
2,894,010
2,691,386
Real estate assets, net
10,726,592
10,763,005
Investments in sales-type lease, net
16,056
8,705
Investments in real estate partnerships
387,413
370,605
Net real estate investments
11,130,061
11,142,315
Properties held for sale, net
—
18,878
Cash, cash equivalents, and restricted cash, including $4,822 and $6,383 of restricted cash at September 30, 2024 and December 31, 2023, respectively
114,831
91,354
Tenant and other receivables, net
240,114
206,162
Deferred leasing costs, less accumulated amortization of $128,881 and $124,107 at September 30, 2024 and December 31, 2023, respectively
78,206
73,398
Acquired lease intangible assets, less accumulated amortization of $384,600 and $364,413 at September 30, 2024 and December 31, 2023, respectively
242,529
283,375
Right of use assets, net
323,660
328,002
Other assets
297,178
283,429
Total assets
12,426,579
12,426,913
Liabilities and Equity
Liabilities:
Notes payable, net
4,365,007
4,001,949
Unsecured credit facility
30,000
152,000
Accounts payable and other liabilities
389,055
358,612
Acquired lease intangible liabilities, less accumulated amortization of $214,684 and $211,067 at September 30, 2024 and December 31, 2023, respectively
372,627
398,302
Lease liabilities
245,107
246,063
Tenants' security, escrow deposits and prepaid rent
80,586
78,052
Total liabilities
5,482,382
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 shares issued and outstanding, in the aggregate, in Series A and Series B at September 30, 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; 181,502,569 and 184,581,070 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively
1,815
1,846
Treasury stock at cost, 473,471 and 448,140 shares held at September 30, 2024 and December 31, 2023, respectively
(27,638
)
(25,488
Additional paid-in-capital
8,509,021
8,704,240
Accumulated other comprehensive loss
(5,374
(1,308
Distributions in excess of net income
(1,935,358
(1,871,603
Total shareholders' equity
6,767,466
7,032,687
Noncontrolling interests:
Exchangeable operating partnership units, aggregate redemption value of $79,212 and $74,199 at September 30, 2024 and December 31, 2023, respectively
40,890
42,195
Limited partners' interests in consolidated partnerships
135,841
117,053
Total noncontrolling interests
176,731
159,248
Total equity
6,944,197
7,191,935
Total liabilities and equity
The accompanying notes are an integral part of the financial statements.
Consolidated Statements of Operations
(in thousands, except per share data)
Three months ended September 30,
Nine months ended September 30,
Revenues:
Lease income
349,057
320,921
1,050,008
934,180
Other property income
4,444
2,638
11,464
8,459
Management, transaction, and other fees
6,765
7,079
19,896
20,223
Total revenues
360,266
330,638
1,081,368
962,862
Operating expenses:
Depreciation and amortization
100,955
87,505
299,508
253,373
Property operating expense
60,477
59,227
183,242
164,643
Real estate taxes
45,729
40,171
135,514
117,157
General and administrative
25,073
20,903
75,443
71,248
Other operating expenses
3,654
3,533
9,363
4,718
Total operating expenses
235,888
211,339
703,070
611,139
Other expense, net:
Interest expense, net
47,022
38,807
133,068
112,156
Gain on sale of real estate, net of tax
(11,360
(184
(33,844
(515
Loss on early extinguishment of debt
180
Net investment (income) loss
(1,372
1,020
(4,506
(2,449
Total other expense, net
34,290
39,643
94,898
109,192
Income before equity in income of investments in real estate partnerships
90,088
79,656
283,400
242,531
Equity in income of investments in real estate partnerships
13,488
12,517
37,763
36,302
Net income
103,576
92,173
321,163
278,833
Exchangeable operating partnership units
(593
(520
(1,836
(1,490
(1,514
(933
(5,416
(2,560
Net income attributable to noncontrolling interests
(2,107
(1,453
(7,252
(4,050
Net income attributable to the Company
101,469
90,720
313,911
274,783
Preferred stock dividends
(3,413
(1,644
(10,239
Net income attributable to common shareholders
98,056
89,076
303,672
273,139
Net income attributable to common shareholders:
Per common share - basic
0.54
0.50
1.66
1.58
Per common share - diluted
1.57
Consolidated Statements of Comprehensive Income
(in thousands)
Other comprehensive (loss) income:
Effective portion of change in fair value of derivative instruments:
Effective portion of change in fair value of derivative instruments
(9,305
4,606
2,412
7,327
Reclassification adjustment of derivative instruments included in net income
(2,306
(2,161
(7,113
(5,302
Unrealized gain (loss) on available-for-sale debt securities
415
(292
295
(215
Other comprehensive (loss) income
(11,196
2,153
(4,406
1,810
Comprehensive income
92,380
94,326
316,757
280,643
Less: comprehensive income attributable to noncontrolling interests:
2,107
1,453
7,252
4,050
Other comprehensive (loss) income attributable to noncontrolling interests
(687
54
(340
(65
Comprehensive income attributable to noncontrolling interests
1,420
1,507
6,912
3,985
Comprehensive income attributable to the Company
90,960
92,819
309,845
276,658
Consolidated Statements of Equity
For the three months ended September 30, 2024 and 2023
Noncontrolling Interests
PreferredStock
CommonStock
TreasuryStock
AdditionalPaid InCapital
AccumulatedOtherComprehensiveIncome
Distributionsin Excess ofNet Income
TotalShareholders'Equity
ExchangeableOperatingPartnershipUnits
LimitedPartners'Interest inConsolidatedPartnerships
TotalNoncontrollingInterests
TotalEquity
Balance at June 30, 2023
1,710
(24,676
7,859,249
7,336
(1,803,406
6,040,213
54,281
49,292
103,573
6,143,786
520
933
Other comprehensive income
Other comprehensive income before reclassification
4,026
25
263
288
4,314
Amounts reclassified from accumulated other comprehensive income
(1,927
(11
(223
(234
Deferred compensation plan, net
(405
405
Restricted stock issued, net of amortization
5,465
Common stock repurchased for taxes withheld for stock based compensation, net
125
Common stock issued under dividend reinvestment plan
162
Common stock issued for partnership units exchanged
198
(198
Common stock issued, net of issuance costs
136
818,408
818,544
Issuance of preferred stock
Contributions from partners
69,625
Distributions to partners
(3,191
Cash dividends declared:
Preferred stock (Series A: $0.390625 per share/unit; Series B: $0.367200 per share/unit)
Common stock ($0.650 per share/unit)
(119,968
(703
(120,671
Balance at September 30, 2023
(25,081
8,684,012
9,435
(1,834,298
7,060,914
53,914
116,699
170,613
7,231,527
Balance at June 30, 2024
(27,234
8,502,753
5,135
(1,911,741
6,795,728
40,738
126,704
167,442
6,963,170
593
1,514
(8,357
(53
(480
(533
(8,890
(2,152
(14
(140
(154
Adjustment for noncontrolling interests
(1,305
1,305
(404
404
6,674
119
170
206
(206
11,424
(3,181
Common stock ($0.670 per share/unit)
(121,673
(1,473
(123,146
Balance at September 30, 2024
For the nine months ended September 30, 2024 and 2023
AccumulatedOtherComprehensiveIncome (Loss)
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
1,490
2,560
6,596
46
470
516
7,112
(4,721
(26
(555
(581
(620
620
14,387
14,389
(7,201
Common stock repurchased and retired
(3
(20,003
(20,006
461
818,398
818,534
Issuance of exchangeable operating partnership units
20,000
72,830
(5,171
Common stock ($1.950 per share/unit)
(342,460
(1,887
(344,347
Balance at December 31, 2023
1,836
5,416
2,585
109
122
2,707
(6,651
(41
(421
(462
(9,999
8,694
9,999
(2,150
2,150
19,809
19,811
(8,375
(33
(200,033
(200,066
494
Common stock issued for exchangeable operating partnership units
735
(735
14,425
(9,435
Preferred stock (Series A: $1.171875 per share/unit;Series B: $1.101600 per share/unit)
Common stock ($2.010 per share/unit)
(367,427
(3,683
(371,110
5
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 financing costs and debt premiums
9,754
5,124
Amortization of above and below market lease intangibles, net
(17,383
(21,573
Stock-based compensation, net of capitalization
18,829
14,203
(37,763
(36,302
Distribution of earnings from investments in real estate partnerships
49,987
48,451
Deferred compensation expense
3,615
2,148
Realized and unrealized gain on investments
(4,439
(2,252
Changes in assets and liabilities:
Tenant and other receivables
(8,736
(3,094
Deferred leasing costs
(7,643
(7,705
(10,738
(7,577
13,881
20,875
2,442
3,696
Net cash provided by operating activities
598,813
547,685
Cash flows from investing activities:
Acquisition of operating real estate
(45,205
(2,033
Acquisition of UBP, net of cash acquired of $14,143 in 2023
(80,488
Real estate development and capital improvements
(235,284
(158,982
Proceeds from sale of real estate
103,626
10,338
Proceeds from property insurance casualty claims
5,257
Issuance of notes receivable
(32,651
(4,000
Collection of notes receivable
3,052
(25,771
(9,118
Return of capital from investments in real estate partnerships
12,859
3,644
Dividends on investment securities
296
571
Acquisition of investment securities
(99,035
(5,206
Proceeds from sale of investment securities
103,785
13,747
Net cash used in investing activities
(209,071
(231,527
Cash flows from financing activities:
Net proceeds from common stock issuance
Repurchase of common shares in conjunction with equity award plans
(8,776
(7,653
Common shares repurchased through share repurchase program
Proceeds from sale of treasury stock
210
62
Contributions from non-controlling interests
6,533
3,167
Distributions to and redemptions of non-controlling interests
Distributions to exchangeable operating partnership unit holders
(2,215
(1,666
Dividends paid to common shareholders
(368,999
(332,627
Dividends paid to preferred shareholders
Repayment of fixed rate unsecured notes
(250,000
Proceeds from issuance of fixed rate unsecured notes, net of debt discount
722,860
Proceeds from unsecured credit facilities
527,419
442,000
Repayment of unsecured credit facilities
(649,419
(365,000
Proceeds from notes payable
12,000
46,500
Repayment of notes payable
(110,862
(60,257
Scheduled principal payments
(8,716
(7,977
Payment of financing costs
(16,560
(411
Net cash used in financing activities
(366,265
(303,864
Net increase in cash and cash equivalents and restricted cash
23,477
12,294
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
81,070
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $4,812 and $4,026 in 2024 and 2023, respectively)
137,367
116,686
Cash paid for income taxes, net of refunds
7,114
728
Supplemental disclosure of non-cash transactions:
Common and Preferred stock, and exchangeable operating partnership dividends declaredbut not paid
126,085
122,946
Right of use assets obtained in exchange for new operating lease liabilities
1,271
32,002
Sale of leased asset in exchange for net investment in sales-type lease
2,846
8,510
UBP Acquisition:
Notes payable assumed in acquisition, at fair value
284,706
Non-controlling interest assumed in acquisition, at fair value
64,492
Common stock exchanged for UBP shares
818,530
Preferred stock exchanged for UBP shares
199
Reallocation of equity upon acquisition of non-controlling interest
Exchangeable operating partnership units issued for acquisition of real estate
Change in accrued capital expenditures
8,837
20,967
Stock-based compensation capitalized
1,383
638
Contributions to investments in real estate partnerships
18,242
Contributions from limited partners in consolidated partnerships
7,891
Common stock issued for dividend reinvestment in trust
918
905
Contribution of stock awards into trust
1,749
1,961
Distribution of stock held in trust
476
2,245
Change in fair value of securities
215
7
(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 September 30, 2024 and December 31, 2023 with liquidation preference of $25 per unit
General partner's common units, 181,502,569 and 184,581,070 units issued and outstanding at September 30, 2024 and December 31, 2023, respectively
6,547,840
6,808,995
Limited partners' common units, 1,096,659 and 1,107,454 units issued and outstanding at September 30, 2024 and December 31, 2023 respectively
Total partners' capital
6,808,356
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
102,062
91,240
315,747
276,273
Preferred unit distributions
Net income attributable to common unit holders
98,649
89,596
305,508
274,629
Net income attributable to common unit holders:
Per common unit - basic
Per common unit - diluted
Other comprehensive income (loss) attributable to noncontrolling interests
40
(312
(85
894
973
5,104
2,475
Comprehensive income attributable to the Partnership
91,486
93,353
311,653
278,168
Consolidated Statements of Capital
General Partner Preferredand Common Units
LimitedPartners
TotalPartners’Capital
Noncontrolling Interests inLimited Partners’ Interest inConsolidated Partnerships
TotalCapital
6,032,877
6,094,494
4,051
Amounts reclassified from accumulated other comprehensive loss
(1,938
(123,862
Restricted units issued as a result of restricted stock issued by Parent Company, net of amortization
Preferred units issued as a result of preferred stock issued by Parent Company, net of issuance costs
Common units issued as a result of common stock issued by Parent Company, net of issuance costs
Common units repurchased as a result of common stock repurchased by Parent Company, net of issuances
287
Common units exchanged for common stock of Parent Company
7,051,479
7,114,828
6,790,593
6,836,466
(8,410
(2,166
(126,327
289
6,772,840
TotalPartners'Capital
Noncontrolling Interests inLimited Partners' Interest inConsolidated Partnerships
6,089,425
6,131,474
6,642
(4,747
(349,518
Common units repurchased and retired as a result of common stock repurchased and retired by Parent Company
(6,740
7,033,995
2,598
(6,692
(8,694
(380,545
(7,881
Exchangeable operating partnership units converted to common stock of Parent Company
12
Common units repurchased through share repurchase program
(371,214
(334,293
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
14
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
September 30, 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 indebtedness consists of $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 September 30, 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 102 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 newly issued Parent Company 6.25% Series A Cumulative Redeemable Preferred Stock ("Parent Company Series A preferred stock") and 5.875% Series B Cumulative Redeemable Preferred Stock ("Parent Company Series B preferred stock"), respectively (collectively referred to as the "Preferred Stock").
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, the current Middle East conflicts and wars, and 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 or decreases 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.
Investment Risk Concentrations
As of September 30, 2024, no single tenant comprised 10% or more of our aggregate annualized base rent ("ABR"). As of September 30, 2024, the Company had three geographic concentrations that accounted for at least 10.0% of our aggregate ABR.
Real estate properties located in California, Florida and the New York-Newark-Jersey City core-based statistical area accounted for 23.4%, 20.4% and 12.1% of ABR respectively. As a result, this geographic concentration of our portfolio makes it potentially more susceptible to adverse weather or economic events that impact these locations.
Consolidation
In addition to properties that are wholly-owned, the Company consolidates properties where it owns less than 100% but holds a controlling financial interest in the entity. 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 currently 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 September 30, 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 September 30, 2024, Regency held partial ownership interests in 121 properties through real estate partnerships, of which 19 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 directly 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
299,767
270,674
Cash, cash equivalents and restricted cash
16,734
8,201
5,786
3,883
Deferred costs, net
2,545
2,494
Acquired lease intangible assets, net
6,719
12,099
18,273
44,377
1,215
893
Total Assets
351,039
342,621
Liabilities
Notes payable
32,851
33,211
10,490
29,919
Acquired lease intangible liabilities, net
10,784
21,456
1,176
1,239
19,324
21,433
Total Liabilities
74,625
107,258
16
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 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
3,909
3,591
11,765
10,536
Asset management services
1,693
1,623
4,915
4,900
Leasing services
Point in time
946
889
2,537
2,703
Other fees
217
976
679
2,084
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 $18.8 million and $18.5 million, as of September 30, 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 consolidated financial statements.
17
2.
Real Estate Investments
The following tables detail the properties acquired for the periods set forth below:
Nine months ended September 30, 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
5/3/2024
Compo Acres North shopping center
Westport, CT
Operating
45,500
5,360
2,175
7/16/2024
Jordan Ranch Market
Houston, TX
50%
15,784
8/21/2024
Oakley Shops at Laurel Fields
Oakley, CA
2,120
Total consolidated
71,404
Unconsolidated
8/30/2024
East Greenwich Square
East Greenwich, RI
70%
46,650
5,127
1,877
Total unconsolidated
Total property acquisitions
118,054
10,487
4,052
Nine months ended September 30, 2023
5/1/2023
Sienna Phase 1
75%
2,695
5/18/2023
SunVet
Holbrook, NY
99%
24,140
26,835
9/19/2023
Old Town Square
Chicago, IL
20%
27,510
3,625
503
54,345
3.
Property Dispositions
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
11,409
6,593
103,568
9,658
11,360
184
33,844
515
Number of operating properties sold
Number of land parcels sold
Percent interest sold
18
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
166,739
167,062
Investments
51,691
51,992
Prepaid and other
51,086
40,635
Derivative assets
9,511
14,213
Furniture, fixtures, and equipment, net ("FF&E")
7,888
6,662
Deferred financing costs, net(1)
10,263
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
3.9%
4.4%
359,056
449,615
Variable rate mortgage loans (1)
1/31/2032
4.2%
4.3%
283,292
299,579
Fixed rate unsecured debt
3/15/2049
4.1%
3,722,659
3,252,755
Total notes payable, net
Unsecured credit facilities:
$1.5 Billion Line of Credit (the "Line") (2)
3/23/2028
5.8%
6.1%
Total unsecured credit facilities
Total debt outstanding
4,395,007
4,153,949
Significant financing activity during 2024 includes:
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. The Credit Agreement was further amended on July 8, 2024 to update the baseline metric used to calculate sustainability-linked performance targets.
19
On June 17, 2024, the Company paid off $250 million of unsecured public debt that had matured, utilizing a portion of the proceeds from the January 2024 public debt offering, and the Company paid off a $78.3 million fixed rate mortgage loan.
On August 12, 2024, the Company priced a public offering of $325 million of senior unsecured notes due in 2035, and the notes were issued on August 15, 2024 at 99.813% of par value with a coupon of 5.1%.
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)
2,461
30,315
32,776
2025
9,678
52,537
250,000
312,215
2026
9,920
147,849
200,000
357,769
2027
7,013
222,558
525,000
754,571
2028
5,312
36,570
330,000
371,882
Beyond 5 Years
7,956
118,086
2,475,000
2,601,042
Unamortized debt premium/(discount) and issuance costs
(7,907
(27,341
(35,248
42,340
600,008
3,752,659
The Company was in compliance as of September 30, 2024, with all debt covenants.
6.
Derivative Financial Instruments
The Company may use derivative financial instruments, including interest 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 September 30, 2024 and December 31, 2023 is as follows:
Number of Instruments
Interest Rate Swaps
Notional amount
308,488
294,928
Number of instruments
Detail on the fair value of the Company's interest rate derivatives as of September 30, 2024 and December 31, 2023 is as follows:
Fair Value
Interest rate swaps classified as:
Derivative liabilities
(1,994
(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 September 30, 2024, does not have any derivatives that are not designated as hedges.
20
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.
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 September 30, 2024, the Company expects approximately $1.4 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
258,185
235,489
771,800
675,320
Variable lease income
85,617
77,901
263,991
233,019
Other lease related income, net:
Above/below market rent and tenant rent inducement amortization, net
5,726
8,118
18,990
22,734
Uncollectible straight-line rent (1)
(129
(1,340
2,149
Uncollectible amounts billable in lease (loss) income
(342
(636
(3,433
958
Total lease income
21
The following table represents the components of Tenant and other receivables, net of amounts considered uncollectible, in the accompanying Consolidated Balance Sheets:
Tenant receivables
26,887
34,814
Straight-line rent receivables
152,319
138,590
Notes receivable
32,038
2,109
Other receivables(1)
28,870
30,649
Total tenant and other receivables
During the nine months ended September 30, 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:
32,413
Financial liabilities:
4,267,554
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 September 30, 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) loss in the accompanying Consolidated Statements of Operations, and include unrealized gains of $1.4 million and unrealized losses of $1.0 million during the three months ended September 30, 2024 and 2023, respectively, and unrealized gains of $4.5 million and $2.4 million during the nine months ended September 30, 2024 and 2023, respectively.
22
Available-for-Sale Debt Securities
Available-for-sale debt securities consist of investments in 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 September 30, 2024
Quoted Prices in Active Markets for Identical Assets
Significant Other Observable Inputs
Significant Unobservable Inputs
Balance
(Level 1)
(Level 2)
(Level 3)
Assets:
37,913
Available-for-sale debt securities
13,778
Interest rate derivatives
61,202
23,289
Fair Value Measurements as of December 31, 2023
37,039
14,953
66,205
29,166
23
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 September 30, 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
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 nine months ended September 30, 2024 and 2023. As of September 30, 2024, $500 million of common stock remained available for issuance under this ATM Program.
Stock Repurchase Program
On February 8, 2023, the Board authorized a common stock repurchase program under which the Company may purchase up to a maximum of $250 million of its outstanding common stock through open market transactions, and/or in privately negotiated transactions (referred to as the "Repurchase Program"). The timing and price of stock repurchases, if any, are dependent upon market conditions and other factors. The stock repurchased, if not retired, is be treated as treasury stock. The Board's authorization for the Repurchase Program was to expire on February 7, 2025, unless modified, extended or earlier terminated by the Board in its discretion. During the nine months ended September 30, 2024, the Company executed multiple trades, repurchasing 3.3 million common shares under the Repurchase Program for a total of $200 million at a weighted average price of $60.48 per share. These shares were repurchased through open market transactions in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act of 1934 (the "Exchange Act"). All repurchased shares were retired on their respective settlement dates.
During the nine months ended September 30, 2023, the Company executed multiple trades, repurchasing 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. These shares were repurchased through open market transactions in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act. All repurchased shares were retired on their respective settlement dates.
On July 31, 2024, the Board authorized a new common stock repurchase program under which the Company may purchase up to $250 million of shares of its outstanding common stock (the "New Repurchase Program"). The New Repurchase Program replaces and supercedes, in all respects, the Repurchase Program. Under the New Repurchase Program, the Company may repurchase shares through open market transactions in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act. The Board's authorization for the New Repurchase Program expires on June 30, 2026, unless modified, extended or earlier terminated by the Board in its discretion. Any common stock repurchased, if not retired, will be treated as treasury stock. At September 30, 2024, $250.0 million remained available under the New Repurchase Program.
24
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 nine months ended September 30, 2024, 10,795 Partnership Units were converted to Parent Company common stock. During the nine months ended September 30, 2023 the Operating Partnership issued 338,704 exchangeable operating partnership units, valued at $20.0 million, as partial purchase price consideration for a development property. In addition, 3,340 unrelated Partnership Units were converted to Parent Company common stock during the same period in 2023.
10.
Stock-Based Compensation
During the nine months ended September 30, 2024, the Company granted 350,391 shares of restricted stock with a weighted-average grant-date fair value of $60.35 per share. During the nine months ended September 30, 2023, the Company granted 301,099 shares of restricted stock with a weighted-average grant-date fair value of $68.29 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
181,498
177,344
183,281
173,212
Weighted average common shares outstanding for diluted EPS (1)
181,772
178,231
183,448
173,711
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 1,099,516 and 1,080,101 for the three months ended September 30, 2024 and 2023, and 1,100,039 and 909,527 for the nine months ended September 30, 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
182,597
178,424
184,381
174,121
Weighted average common units outstanding for diluted EPU (1)
182,872
179,311
184,548
174,621
Net income per common unit – basic
Net income per common unit – diluted
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 September 30, 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, 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 contamination; 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 $18.4 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 September 30, 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 $10.9 million and $8.5 million in letters of credit outstanding as of September 30, 2024 and December 31, 2023, respectively.
26
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, which include 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 real estate 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:
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.
28
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 September 30, 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 September 30, 2024, we had full or partial ownership interests in 483 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 57.2 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:
Executing on our Strategy
During the nine months ended September 30, 2024, we had Net income attributable to common shareholders of $303.7 million as compared to $273.1 million during the nine months ended September 30, 2023.
29
During the nine months ended September 30, 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:
Property Portfolio
The following table summarizes general information related to the consolidated properties in our portfolio:
(GLA in thousands)
Number of Properties
381
GLA
43,946
43,758
% Leased – Operating and Development
95.5
%
94.9
% Leased – Operating
95.8
95.4
Weighted average annual effective rent per square foot ("PSF"), net of tenant concessions.
$25.41
$24.67
The following table summarizes general information related to the unconsolidated properties owned in real estate investment partnerships in our portfolio:
102
101
13,226
13,067
96.6
% Leased –Operating
Weighted average annual effective rent PSF, net of tenant concessions
$24.47
$24.04
30
The following table summarizes Pro-rata occupancy rates of our combined consolidated and unconsolidated shopping center portfolio:
Percent Leased – All Properties
95.6
95.1
Anchor Space (spaces ≥ 10,000 SF)
97.7
96.7
Shop Space (spaces < 10,000 SF)
92.3
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
723
19.73
53.17
6.28
Renewal
104
2,871
18.03
0.34
0.10
Total Anchor Space Leases
133
3,594
18.37
10.97
1.34
Shop Space Leases
439
890
39.50
42.61
13.99
931
1,819
37.57
2.34
0.61
Total Shop Space Leases
1,370
2,709
38.21
15.57
5.00
Total Leases
1,503
6,303
26.89
12.95
2.92
513
19.96
46.57
4.33
79
2,090
16.90
0.45
2,603
17.50
9.54
0.93
417
830
37.83
38.90
12.13
791
1,386
37.37
1.49
0.64
1,208
2,216
37.54
15.50
4.94
1,310
4,819
26.71
12.28
2.78
The weighted-average base rent PSF on signed Shop Space leases during 2024 was $38.21 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 $35.64 PSF. New and renewal rent spreads, compared to prior rents on these same spaces leased, were positive at 9.0% for the nine months ended September 30, 2024, compared to 9.2% for the nine months ended September 30, 2023.
31
Significant Tenants
We seek to reduce our operating and leasing risks by avoiding dependence on any single 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
67
6.0%
2.9%
Albertsons Companies, Inc.(2)
53
2.8%
TJX Companies, Inc.
74
3.6%
Amazon/Whole Foods
39
2.7%
Kroger Co.(2)
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 grocers 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, in a tenant bankruptcy situation 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. At September 30, 2024, tenants currently in bankruptcy and which continue to occupy space in our shopping centers represent an aggregate of 0.3% of our Pro-rata annual base rent.
32
Results from Operations
Comparison of the three months ended September 30, 2024 and 2023:
Revenues changed as summarized in the following table:
Change
Base rent
246,531
227,347
19,184
Recoveries from tenants
84,795
76,973
7,822
Percentage rent
2,155
1,868
Uncollectible lease income
294
Other lease income
5,029
4,558
471
Straight-line rent
5,163
2,693
2,470
Above/below market rent amortization, net
(2,392
28,136
1,806
(314
29,628
Total lease income increased by $28.1 million primarily due to the following:
Other property income of $1.8 million increased primarily due to an increase in business interruption proceeds received in 2024.
There were no significant changes in Management, transaction, and other fees.
33
Changes in our operating expenses are summarized in the following table:
13,450
1,250
5,558
4,170
121
24,549
Depreciation and amortization costs increased by $13.5 million, mainly due to the following:
There were no significant changes in Property operating expense.
Real estate taxes increased by $5.6 million, mainly due to:
General and administrative costs increased by $4.2 million, mainly due to the following:
There were no significant changes in Other operating expenses.
The following table presents the components of other expense, net:
Interest on notes payable
46,365
39,000
7,365
Interest on unsecured credit facilities
3,640
1,574
2,066
Capitalized interest
(1,636
(1,492
(144
Hedge expense
245
(1,592
(384
(1,208
8,215
(11,176
Total other expense
(5,353
Interest expense, net, increased by $8.2 million primarily due to the following:
34
During the three months ended September 30, 2024, we recognized gains on sale of $11.4 million mainly from the sale of one operating property.
Net investment income increased by $2.4 million primarily driven by $1.7 million increase in gains on investments held in the non-qualified deferred compensation plan, which has an offsetting expense in General and administrative expenses noted above, and $0.7 million increase in gains on other corporate investments.
There were no significant changes in 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:
11,403
Income attributable to noncontrolling interests
(654
10,749
(1,769
8,980
Net income attributable to exchangeable operating partnership units
(73
9,053
There were no significant changes in Income attributable to noncontrolling interests.
The $1.8 million increase in Preferred stock dividends is related to the preferred stock issued in connection with UBP acquisition. The current period includes a full quarter of dividends as compared to a partial (pro-rated) quarter included for the comparable period in 2023, as the UBP acquisition was completed mid-quarter on August 18, 2023.
Comparison of the nine months ended September 30, 2024 and 2023:
736,142
654,254
81,888
254,623
222,947
31,676
11,958
10,278
1,680
(4,391
16,851
14,840
2,011
14,877
8,169
6,708
Above / below market rent amortization, net
(3,744
115,828
3,005
(327
118,506
Total lease income increased by $115.8 million primarily due to the following:
35
Other property income increased by $3.0 million primarily due to business interruption insurance proceeds received in 2024.
46,135
18,599
18,357
4,195
4,645
91,931
Depreciation and amortization costs increased by $46.1 million, mainly due to the following:
Property operating expense increased by $18.6 million, mainly due to the following:
36
Real estate taxes increased by $18.4 million, mainly due to the following:
General and administrative costs increased by $4.2 million mainly due to the following:
Other operating expenses increased by $4.6 million, mainly due to the acquisition of UBP.
138,830
113,087
25,743
6,783
3,903
2,880
(4,813
(4,026
(787
328
175
(8,235
(1,136
(7,099
20,912
(33,329
Net investment income
(2,057
(14,294
Interest expense, net increased by $20.9 million primarily due to the following:
During the nine months ended September 30, 2024, we recognized gains on sale of $33.8 million mainly from the sale of four operating properties and recognition of two sales type leases.
Net investment income increased by $2.1 million primarily driven by $1.6 million increase in gains on investments held in the non-qualified deferred compensation plan which have an offsetting expense in General and administrative costs noted above and $0.5 million increase in gains on other corporate investments.
37
42,330
(3,202
39,128
(8,595
30,533
(346
30,879
Income attributable to noncontrolling interests increased $3.2 million, mainly due to the acquisition of UBP.
The $8.6 million increase in Preferred stock dividends is related to the preferred stock issued in connection with the UBP acquisition.
The current period reflects nine months of dividends, in contrast to one and a half months in the comparable period of 2023.
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.
Pro-rata Same Property NOI:
Pro-rata same property NOI, excluding termination fees/expenses, changed from the following major components:
244,170
238,142
6,028
728,514
709,809
18,705
83,090
81,096
1,994
250,468
242,647
7,821
2,287
2,208
12,476
11,554
922
Termination fees
636
1,037
(401
3,199
6,441
(3,242
(487
(25
(3,757
1,033
(4,790
3,415
3,292
123
9,949
9,092
857
3,830
2,023
1,807
8,390
6,803
1,587
Total real estate revenue
336,941
327,336
9,605
1,009,239
987,379
21,860
Operating and maintenance
54,251
56,374
(2,123
166,137
164,489
1,648
Termination expense
43,565
41,263
2,302
129,494
125,890
3,604
Ground rent
3,537
3,700
(163
10,788
10,337
451
Total real estate operating expenses
101,353
101,337
306,424
300,716
5,708
Pro-rata same property NOI
235,588
225,999
9,589
702,815
686,663
16,152
Less: Termination fees
3,194
(3,247
Pro-rata same property NOI, excluding termination fees
234,952
224,962
9,990
699,621
680,222
19,399
Pro-rata same property NOI growth, excluding termination fees
4.4
2.9
38
Total real estate revenue increased by $9.6 million and $21.9 million, on a net basis, during the three and nine months ended September 30, 2024 and 2023, respectively, as follows:
Total real estate operating expenses increased by $5.7 million, on a net basis, during the nine months ended September 30, 2024 and 2023, respectively, as follows:
Reconciliation of Pro-rata Same Property NOI to Net Income Attributable to Common Shareholders:
Our reconciliation of Net income attributable to common shareholders to Same Property NOI, on a Pro-rata basis, is as follows:
Less:
Other (1)
12,115
12,016
37,428
34,317
Plus:
Other operating expense
Other expense, net
Equity in income of investments in real estate excluded from NOI (2)
12,492
11,668
39,439
35,266
Preferred stock dividends and issuance costs
3,413
1,644
10,239
Pro-rata NOI
261,160
236,330
782,490
698,090
Less non-same property NOI
25,572
10,331
79,675
11,427
Nareit FFO, Core Operating Earnings and AFFO:
Our reconciliation of net income attributable to common shareholders 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)
107,801
94,011
319,765
272,551
(11,365
(827
(33,853
(1,132
Nareit FFO attributable to common stock and unit holders
195,085
182,780
591,420
546,048
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
2,375
1,511
7,069
Certain Non Cash Items
(5,886
(3,142
(16,907
(7,315
Uncollectible straight-line rent
(134
92
1,899
(2,298
(5,370
(7,919
(17,910
(22,138
Debt and derivative mark-to-market amortization
667
4,333
Core Operating Earnings
187,763
173,989
570,084
516,475
Reconciliation of Core Operating Earnings to AFFO:
Adjustments to reconcile to AFFO (1):
Operating capital expenditures
(36,430
(26,638
(91,168
(65,183
Debt cost and derivative adjustments
1,690
6,269
5,049
Stock-based compensation
4,776
4,199
14,078
13,123
AFFO
158,216
153,240
499,263
469,464
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, we priced a public offering of $400 million of senior unsecured notes due in 2034 (the "January 2024 Notes") under our existing shelf registration statement filed with the SEC. The January 2024 Notes were issued at 99.617% of par value with a coupon of 5.25%, and will mature on January 15, 2034. Additionally, on August 12, 2024, we priced a public offering of $325 million of senior unsecured notes due in 2035 (the "August 2024 Notes") under our existing shelf registration statement filed with the SEC. The August 2024 Notes were issued at 99.813% of par value with a coupon of 5.10%, and will mature on January 15, 2035.
We redeemed $250 million of senior unsecured notes that matured in June 2024, and our next maturity of senior unsecured notes occurs in November 2025. We have $103.5 million of secured loan maturities during the next 12 months, including Regency's pro-rata share of 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.
In addition to our $110.0 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)
1,459,885
Maturity (2)
March 23, 2028
The declaration of dividends is determined quarterly by, and in the discretion of, our Board of Directors ("Board"). We expect 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 nine months ended September 30, 2024 and 2023, we generated cash flows from operating activities of $598.8 million and $547.7 million, respectively, and paid $381.5 million in dividends to our common and preferred stock and unit holders, and $334.3 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 planning, design and construction, along with a pipeline of potential projects for future development or redevelopment. After funding our common and preferred stock dividend payments in October of 2024, we estimate that we will require capital during the next 12 months of approximately $460.7 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 September 30, 2024, 88.1% 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 Line and unsecured debt require that we remain in compliance with various customary financial covenants, which are described in the Notes to Consolidated Financial Statements included in our 2023 Form 10-K. We were in compliance with these covenants at September 30, 2024, and expect to remain in compliance.
41
Summary of Cash Flow Activity
The following table summarizes net cash flows related to operating, investing, and financing activities of the Company:
51,128
22,456
(62,401
Net change in cash, cash equivalents, and restricted cash
11,183
Total cash, cash equivalents, and restricted cash
33,761
Net cash provided by operating activities:
Net cash provided by operating activities increased $51.1 million due to:
Net cash used in investing activities:
Net cash used in investing activities changed by $22.5 million as follows:
(43,172
Acquisition of UBP, net of cash acquired
80,488
(76,302
93,288
(28,651
(16,653
9,215
(275
(93,829
90,038
Significant changes in investing activities include:
42
We plan to continue developing and redeveloping shopping centers for long-term investment. During the nine months ended September 30, 2024, we deployed capital of $235.3 million for the development, redevelopment, and improvement of our real estate properties, comprised of the following:
Capital expenditures:
Land acquisitions
13,882
2,580
11,302
Building and tenant improvements
76,002
58,549
17,453
Redevelopment costs
85,287
57,384
27,903
Development costs
45,370
30,613
14,757
4,709
3,931
778
Capitalized direct compensation
10,034
5,925
4,109
235,284
158,982
76,302
43
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
Baybrook East - Phase 1B
Q2-2022
9,792
77
127
87
Sienna Grande - Phase 1
Q2-2023
9,409
409
69
The Shops at SunVet
Long Island, NY
91,159
536
Q1-2024
68,277
155
440
Q3-2024
23,006
81
284
Bay Area, CA
34,984
78
449
Total Developments In-Process
236,627
584
Developments Completed
Glenwood Green
Metro NYC
Q1-2022
45,382
249
182
Total Developments Completed
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
Q2-2019
59,854
94
Westbard Square Phase I
Bethesda, MD
Q2-2021
39,500
Buckhead Landing
Atlanta, GA
30,859
84
Bloom on Third
Los Angeles, CA
35%
Q4-2022
24,525
Mandarin Landing
Jacksonville, FL
16,422
55
Serramonte Center - Phase 3
San Francisco, CA
36,989
Circle Marina Center
Q3-2023
14,986
60
Avenida Biscayne
Miami, FL
Q4-2023
22,743
Cambridge Square
15,002
Anastasia Plaza
St. Augustine, FL
15,607
East Meadow Plaza - Phase 1
11,736
Various Redevelopments
Various
83% - 100%
93,487
Total Redevelopments In-Process
381,710
Redevelopments Completed
Various Properties
31,261
95
Total Redevelopments Completed
44
Net cash used in financing activities:
Net cash flows from financing activities changed by $62.4 million during 2024, as follows:
Net proceeds from common stock issuances
(4
(1,123
(180,060
3,366
Dividend payments and operating partnership distributions
(381,453
(47,160
(Repayment of) Proceeds from unsecured credit facilities, net
(122,000
77,000
(199,000
734,860
688,360
Debt repayment
(369,578
(68,234
(301,344
Payment of loan costs
(16,149
148
Significant financing activities during the nine months ended September 30, 2024 and 2023, include the following:
45
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% - 83%
12% - 67%
Number of properties
2,772,964
2,689,993
1,044,870
984,027
1,669,155
1,595,271
611,583
565,822
Equity
1,103,809
1,094,722
433,287
418,205
Basis difference
(45,874
(47,600
Our equity method investments in real estate partnerships consist of the following:
Regency's Ownership
GRI - Regency, LLC (GRIR)
40%
137,536
144,371
Columbia Regency Partners II, LLC (Columbia II) (1)
49,388
50,039
Columbia Village District, LLC
30%
6,361
6,123
Individual Investors
Ballard Blocks
60,424
62,140
44,174
42,074
Others
89,530
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)
1,055
7,008
8,063
3,818
6,727
147,512
154,239
49,031
7,393
263,220
42,800
313,413
105,320
7,576
32,800
40,376
13,669
4,267
246,605
250,872
92,027
6,688
797,323
804,011
311,328
Net unamortized loan costs, debt premium / (discount)
(9,137
(3,372
33,706
1,485,331
1,561,837
571,821
At September 30, 2024, our investments in real estate partnerships had notes payable of $1.6 billion maturing through 2034, of which 93.4% had a weighted average fixed interest rate of 3.9%. The remaining notes payable float with SOFR and had a weighted average variable interest rate of 7.3%, based on rates as of September 30, 2024. These fixed and variable rate notes payable are all non-recourse, and our Pro-rata share was $571.8 million as of September 30, 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 earned fees as shown below:
Asset management, property management, leasing, and other transaction fees
6,322
19,465
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to two significant components of interest rate risk:
The table below presents the principal cash flows, weighted average interest rates of remaining debt, and the fair value of total debt as of September 30, 2024. For variable rate mortgages and unsecured credit facilities for which we have interest rate swaps in place to fix the interest rate, they are included in the Fixed rate debt section below at their all-in fixed rate. The table is presented by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes. Although the average interest rate for variable rate debt is included in the table, those rates represent rates that existed as of September 30, 2024, and are subject to change. In addition, we continually assess the market risk for floating rate debt and believe that an increase of 100 basis points in interest rates would decrease future earnings and cash flows by approximately $0.3 million per year based on $33.8 million of floating rate mortgage debt and floating rate line of credit balances outstanding at September 30, 2024.
Further, the table below incorporates only those exposures that exist as of September 30, 2024, and does not consider exposures or positions that could arise after that date or obligations repaid before maturity. Since firm commitments are not presented, the table has limited predictive value. As a result, our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, our hedging strategies at that time, and actual interest rates.
The table below presents the principal cash flow payments associated with our outstanding debt by year, weighted average interest rates on debt outstanding at each year-end, and fair value of total debt as of September 30, 2024.
Thereafter
Fixed rate debt (1)
32,775
308,465
754,572
341,882
4,396,505
4,263,804
Average interest rate for all fixed rate debt (2)
4.09
4.11
4.13
4.24
4.23
4.47
Variable rate SOFR debt (1)
3,750
33,750
Average interest rate for all variable rate debt (2)
5.88
5.78
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 quarter ended September 30, 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 quarter ended September 30, 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
There were no unregistered sales of equity securities during the three months ended September 30, 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 September 30, 2024:
Period
Total number of shares purchased
Average price paid per share
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)
July 1 through July 31, 2024
(1)
August 1 through August 31, 2024
September 1 through September 30, 2024
678
72.39
On July 31, 2024, the Board authorized and approved a new common stock repurchase program that replaces and supercedes, in all respects, the current program noted above. Under the new program we may repurchase up to $250 million in shares of our outstanding common stock. We intend for repurchases, if any, to be through open market transactions in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act. The new program expires on June 30, 2026, unless modified, extended or earlier terminated by the Board at its discretion.
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 September 30, 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
First Amendment to Sixth Amended and Restated Credit Agreement (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on July 10, 2024)
4.2
Form of Global Note (incorporated by reference reference to Exhibit 4.1 to the Form 8-K file on August 12, 2024)
4.3
Guarantee of Regency Centers Corporation (incorporated by reference reference to Exhibit 4.2 to the Form 8-K filed August 12, 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.
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.
November 1, 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