Regency Centers Corporation Q3 FY2025 earnings call

• Strong same-property NOI growth and earnings growth driven by leasing success, healthy tenants, and capital allocation. - Successfully executed capital allocation strategy with over $750 million invested in high-quality opportunities. - Started over $170 million of development and redevelopment projects in Q3, with year-to-date total over $220 million. - Same-property percent leased rate at 96.4%, leasing pipeline robust with interest from various retailers. - Tenant base healthy with low bad debt and strong sales strength. - Raised full-year earnings growth outlook and increased dividend by more than 7%.

Same-property NOI grew nearly 5% with base rent growth at 4.7% as the primary contributor. The investments team deployed more than $750 million of capital into high-quality opportunities including acquisitions, ground-up development, and redevelopment. Year-end expected starts around $300 million, bringing total starts over the past 3 years to $800 million. Revenue contribution details weren't explicitly broken down by specific product segments beyond the overall performance of shopping centers.

• Raised full-year earnings growth outlook. - Same-property NOI growth expected to be 5.25% to 5.5% with credit loss guidance range decreased to 50 to 75 basis points. - 2026 same-property NOI growth expected in the mid-3% area, total NOI growth mid-6%, Nareit FFO growth mid-4%. - Anticipates approximately $10 million of incremental NOI from ground-up development projects in 2026. - Dividend increased by more than 7% this quarter.

• Market conditions affecting acquisitions, with cap rates becoming more competitive. - Potential differences between actual results and forward-looking statements due to various risks and uncertainties. - Risks associated with development and redevelopment execution, including challenges in sourcing attractive opportunities in a limited new supply environment.

Q: Can you provide some color on this 11 asset distribution transaction with your JV partner? What options does this transaction open actually for Regency?

A: Nicholas Wibbenmeyer stated that the JV partner has been a good long-term partner, the portfolio aligns with strategy, this allowed a mini DIK, with Regency now owning 5 assets at 100% and expecting the partnership to continue.

Q: What's changing from the environment that you're seeing there? Or can you help bridge to get to the 2026 same-property NOI growth mid-3%?

A: Michael Mas said 2026 credit loss provision expected to look like 2025, and 2025's growth was from high commenced occupancy and recovery rate benefit, with 2026 mid-3% growth being good on top of 2025's growth.

Q: How should we be thinking about the potential on development and redevelopment starts into next year, considering an increasingly competitive transaction market and strong leasing?

A: Nicholas Wibbenmeyer said they continue to find more than fair share of investment opportunities, expect to continue, and the split is leaning into ground-up development with in-process developments outweighing redevelopments.

Q: Just looking at your net effective rent page, why the mix has gone up for anchors?

A: Alan Roth said it's just coincidental timing with more anchor transactions coming through the queue in Q3.

Q: On acquisitions, just what are you guys seeing in the market and how that's trended?

A: Nicholas Wibbenmeyer said cap rates are lower with capital flowing into the sector, and they continue to invest wisely in line with business plan.

Q: I was wondering if you could give a little bit of color on what your expectations are for rent spreads?

A: Alan Roth said proud of the trajectory, with shop transactions having high embedded rent steps and teams embracing long-term approach.

Q: I just wanted to revisit the mid-3% same-property NOI comments. Do you expect a further contribution from the SNO pipeline in 2026?

A: Michael Mas said there's opportunity to close the occupancy gap and deliver on redevelopments, with 2025 contribution from redevelopments repeating in 2026.

Q: As we think about the breadcrumbs you laid out for next year for same-store and implicitly total NOI growth and maybe even FFO. Is there room to push that lease rate higher?

A: Alan Roth said there's upside in occupancy, especially on the anchor front with strong demand and limited supply.

Q: I guess a 2-part question. One, you mentioned $1 million square foot pipeline in your prepared remarks. Just curious if you could contextualize that historically? And is that being skewed by some of these anchor opportunities?

A: Alan Roth said the 1 million square foot pipeline is consistent with prior quarters, not skewed by anchors, and full of quality retailers. Michael Mas talked about lower bad debt due to higher collections from tenants.

Q: On the developments, I'm curious if you can give us a sense of where you're underwriting rents, both for anchor and small shop versus where current rents are in the market?

A: Nicholas Wibbenmeyer said it's a result of hard work, relationships with grocers, capital allocation, and expertise, with teams understanding both cost and income sides of pro formas.

Q: I wanted to ask about capital recycling. Can you offer more commentary on the decision to sell the asset in Miami?

A: Nicholas Wibbenmeyer said they sell nonstrategic assets, the Miami asset had future IRR not aligning with market, there were many bidders, and capital recycling is accretive.

Q: I just want to go back to the developments. You're doing a lot more, it looks like this quarter with master planned communities or next to master planned communities. Are the grocers leading you there?

A: Nicholas Wibbenmeyer said it's all above, with grocers, master plan developers, and derisking through pre-leasing, with projects like Ellis Village and The Village at Seven Pines showing strong pre-leasing.

Q: A 2-parter regarding your snow pipeline. The 1 million square feet of leases in negotiation, any initial thoughts on how much that could further contribute to your snow pipeline?

A: Michael Mas said there's setup to compress snow pipeline into 2026, but occupancy normalization could lead to regular leasing activity.

Q: I guess, Mike, what's prompting you to talk about '26 this early?

A: Michael Mas said it's a practice to provide forward guidance at this point in the year, similar to past years.

Q: My question is sort of related to the occupancy. Obviously, you're 10 basis points off your peak in both leased and commenced. How much more can you push occupancy in your shop?

A: Alan Roth said renewal retention is around 75%, and the team is creative in leasing, with examples like relocating successful tenants to unlock space.