Executive Summary / Key Takeaways

• Regency Centers, a premier owner and developer of grocery-anchored shopping centers in affluent suburban markets, is capitalizing on robust retail fundamentals and limited new supply to drive strong operational performance.
• Recent results highlight accelerating Same Property NOI growth, fueled by record-high occupancy, positive rent spreads (8.1% cash, ~19% GAAP in Q1 2025), embedded rent steps, and the successful commencement of its substantial Signed Not Occupied (SNO) pipeline ($46M incremental ABR as of Q1 2025).
• The company's sector-leading development and redevelopment platform ($498.5M in-process as of Q1 2025) is a key differentiator, providing accretive returns (blended yields exceeding 9%) and clear visibility to future NOI growth as projects deliver, including an expected outsized contribution to Same Property NOI in 2025.
• A fortress balance sheet, validated by A-level credit ratings from S&P and Moody's, provides significant liquidity ($1.22B available on Line as of Q1 2025) and capital allocation flexibility, enabling opportunistic investments like the Q2 2024 share repurchase at an attractive implied cap rate (~7%) relative to private market values (5.5%-6.5%).
• While macroeconomic uncertainty and retail churn persist, Regency's focus on essential, convenience-oriented retail in resilient trade areas, coupled with proactive asset management and a manageable credit risk exposure (75-100 bps guidance for 2025), positions it to outperform through economic cycles.

A Foundation Built on Essential Retail and Suburban Strength

Regency Centers Corporation, operating primarily through its Operating Partnership, Regency Centers, L.P., has long been a prominent force in the U.S. retail real estate landscape. Its strategic focus centers on owning, operating, and developing high-quality neighborhood and community shopping centers. These properties are intentionally located in desirable suburban trade areas characterized by compelling demographics, and a significant portion are anchored by market-leading grocers. This deliberate positioning caters to essential, non-discretionary consumer needs, emphasizing service, convenience, and value – a model that has proven resilient across various economic backdrops.

The company's history is marked by a disciplined approach to portfolio curation and value creation. Unlike competitors heavily reliant on enclosed malls or single-tenant net leases, Regency has cultivated expertise in the multi-tenant, open-air format. This has shaped its operational strategies, its approach to tenant relationships, and its investment priorities. The company's mission to create thriving environments that connect retailers with their communities is more than just a slogan; it's a strategic principle that underpins its merchandising mix and property management philosophy.

In the competitive retail REIT sector, Regency stands out. Direct competitors like Kimco Realty (KIM), Brixmor Property Group (BRX), Simon Property Group (SPG), and Realty Income (O) each have distinct focuses. While KIM and BRX also concentrate on open-air centers, REG often targets more affluent, higher-density suburban locations, which typically command higher rents and offer greater stability. SPG primarily operates enclosed malls and premium outlets, a different segment with its own set of challenges and opportunities. O specializes in single-tenant net lease properties, a model that prioritizes income stability over operational control and multi-tenant synergy.

Regency's competitive advantage in this landscape stems from several factors. Its long-standing presence and national platform provide scale benefits, including deep relationships with national and regional retailers, particularly grocers, who are key drivers of foot traffic. The company's operational platform leverages these relationships and employs advanced digital tools for tenant management, contributing to operational efficiency and potentially reducing processing times compared to less integrated competitors. This focus on operational excellence supports higher occupancy rates and effective expense recovery. Furthermore, Regency's development and redevelopment capabilities represent a significant moat, allowing it to create high-quality supply in supply-constrained markets, a capability few peers can match at scale.

Operational Momentum and Embedded Growth

The strategic focus on high-quality, essential retail in strong markets is translating into robust operational performance. Recent results underscore the strength of tenant demand and Regency's ability to capture value. For the three months ended March 31, 2025, Lease Income increased to $371.1 million from $353.1 million in the prior year period, contributing to total revenues of $380.9 million, up from $363.9 million. Net Operating Income (NOI) for the quarter reached $273.5 million, a notable increase from $262.9 million in Q1 2024, representing approximately 4.03% growth.

This growth is fundamentally driven by strong leasing activity and improving occupancy. As of March 31, 2025, the total property portfolio was 96.3% leased, with the Same Property portfolio also standing at 96.5% leased. Shop Space (under 10,000 SF) occupancy reached 93.1%, building on prior record highs. Management commentary consistently highlights robust demand across various categories, including grocers, restaurants, health & wellness, and off-price retailers.

Regency is effectively translating this demand into higher rents. Cash rent spreads on new and renewal leases were a healthy 8.1% in Q1 2025. More significantly, GAAP rent spreads were approximately 19%, reflecting not only mark-to-market gains but also the company's success in embedding meaningful contractual rent steps (averaging 2% across all leases in Q2 2024, with a record 2.7% on new leases). This combination of initial rent increases and contractual escalations provides a clear path for future base rent growth.

A key indicator of future operational performance is the Signed Not Occupied (SNO) pipeline. As of Q1 2025, this pipeline represented $46 million of incremental annual base rent. Management emphasizes that a significant portion of this pipeline is scheduled to commence rent in the near term, providing a strong tailwind for increasing rent-paying occupancy and contributing meaningfully to NOI growth, particularly in 2025. The Same Property commenced rate stood at 96.5% as of March 31, 2025, indicating room for further activation of the SNO pipeline.

Operational expenses, such as Property operating expense ($68.5M in Q1 2025 vs $63.3M in Q1 2024) and Real estate taxes ($46.4M vs $44.3M), saw increases, partly due to higher recoverable costs and assessments. However, the improvement in occupancy also leads to higher tenant recoveries, helping to offset these increases and contributing positively to net operating income. General and administrative expenses saw a decrease, partly influenced by non-recurring items and overhead capitalization related to development activity.

The Development Platform: A Differentiated Growth Engine

Beyond the performance of its existing portfolio, Regency's development and redevelopment platform is a critical component of its investment thesis and a significant differentiator in the retail REIT sector. In an environment characterized by limited new retail supply, the ability to create high-quality assets in desirable locations provides a unique avenue for accretive growth.

Management views development and redevelopment as the best use of its levered free cash flow, consistently targeting blended returns exceeding 9% on these projects. As of March 31, 2025, the company had approximately $498.5 million of estimated pro-rata project costs in its in-process development and redevelopment pipeline. This includes significant ground-up developments like The Shops at SunVet ($92.8M estimated cost) and The Shops at Stone Bridge ($68.3M), as well as substantial redevelopments such as Bloom on Third ($24.5M) and Serramonte Center - Phase 3 ($37.0M).
The pace of new starts remains robust, with management confident in maintaining an annual plan pace of $250 million of project starts. This builds on the momentum from 2024, where the company started nearly $260 million in projects, the highest level in nearly two decades, with almost half in new ground-up developments, achieving blended yields exceeding 10%. The successful execution of these projects is a testament to the team's expertise, deep industry relationships (particularly with grocers who are anchor tenants in many projects), and the company's access to capital.

As these projects are completed and leased up, they transition into the operating portfolio, contributing to NOI growth. Management specifically anticipates an outsized benefit to Same Property NOI growth in 2025 from the delivery of completed redevelopment projects, with a positive contribution likely to exceed 100 basis points – double what would be expected in a typical year. This clear visibility into future growth from the development pipeline provides a compelling element to the investment story.

Fortress Balance Sheet and Opportunistic Capital Allocation

A cornerstone of Regency's strategy and a key competitive advantage is its strong balance sheet and ample liquidity. This financial strength provides the flexibility to fund the development pipeline, pursue opportunistic investments, and weather potential economic volatility.

The company holds A-level credit ratings from both S&P and Moody's, a distinction management proudly notes makes Regency the only shopping center REIT with A credit ratings from either agency. This reflects the quality and stability of its income stream and its conservative financial management. As of March 31, 2025, the company's leverage remained within its targeted range of 5x to 5.5x net debt and preferred to EBITDA.

Liquidity is robust, with $1.22 billion available on its $1.5 billion unsecured credit facility as of March 31, 2025. The company also has access to the public equity markets, with $400 million of common stock available for issuance under its ATM program (after accounting for a forward equity offering). This liquidity is crucial for funding the estimated $856.2 million in capital needs over the next 12 months, which include leasing costs, tenant improvements, development/redevelopment spend, JV contributions, and debt maturities.

Regency actively manages its debt maturity profile. While $430.3 million of loans mature in the next 12 months (including the pro-rata JV share), the company intends to refinance or pay these off using available liquidity or new financing. In May 2025, the Operating Partnership priced a $400 million offering of senior unsecured notes due 2032 with a 5.00% coupon, demonstrating continued access to the unsecured debt markets. The company also utilizes interest rate derivatives to mitigate interest rate risk on variable-rate debt.

The strong balance sheet enables opportunistic capital allocation. In Q2 2024, recognizing a significant disconnect between public and private market valuations, Regency executed a $200 million share repurchase, buying shares at an implied cap rate of approximately 7% compared to private market values for similar quality assets in the 5.5% to 6.5% range. This action was viewed as accretive to earnings and a strategic use of capital.

The company also continues to pursue accretive acquisitions, such as Brentwood Place in Q1 2025, a high-quality community center in a desirable Nashville submarket.

Outlook and Risks

Regency is reaffirming its 2025 earnings outlook, which implies continued strong performance. The guidance midpoint suggests growth in NAREIT FFO of nearly 6% and Same Property NOI growth of 3.6%. This outlook is supported by the embedded growth from the SNO pipeline commencement, the delivery of development and redevelopment projects (particularly the outsized contribution to Same Property NOI from redevelopments), and continued positive leasing trends. Management anticipates moving rent-paying occupancy by 75 to 100 basis points in 2025, a significant driver of this growth.

However, the macroeconomic environment presents potential challenges. Evolving political, economic, trade, and immigration policies, including tariffs, inflation, labor shortages, and supply chain disruptions, could impact tenant businesses and their ability to pay rent. Geopolitical conflicts also add to uncertainty. While Regency's focus on essential retail in resilient markets provides a degree of insulation, it is not immune.

Retail churn and tenant bankruptcies remain a risk. Management maintains a watchful eye on its tenant base, noting that while recent high-profile bankruptcies have had limited exposure in Regency's portfolio (often only 0 or 1 location), tenant failures are an inherent part of the business. The 2025 credit loss guidance is set at a historical average of 75 to 100 basis points, acknowledging the speculative nature of future tenant distress. The potential merger between Kroger (KR) and Albertsons (ACI), involving the divestiture of 11 owned Regency locations, is being monitored, though management is comfortable with the underlying lease obligations and real estate quality.

Construction costs and potential permitting delays could impact the development pipeline, although the company employs mitigation strategies like fixed-cost contracts and pre-ordering materials. While the transaction market is seeing increased activity, compelling acquisition opportunities at attractive yields remain limited, requiring disciplined underwriting.

Conclusion

Regency Centers is a high-quality retail REIT positioned for continued growth, underpinned by its strategic focus on essential, grocery-anchored centers in affluent suburban markets. The company is effectively leveraging strong market fundamentals, characterized by robust tenant demand and limited new supply, to drive operational excellence, evidenced by high occupancy, strong rent growth, and a significant SNO pipeline.

The investment thesis is further strengthened by Regency's differentiated development and redevelopment platform, which provides a visible runway for future NOI growth at attractive returns. This value creation engine, combined with a fortress balance sheet and strategic capital allocation capabilities, allows Regency to play offense and pursue accretive opportunities even in an uncertain environment. While macroeconomic risks and retail churn are inherent, the company's resilient portfolio positioning, proactive management, and manageable credit exposure provide confidence in its ability to navigate challenges and deliver on its positive 2025 outlook. For investors seeking exposure to high-quality retail real estate with embedded growth drivers and a strong financial foundation, Regency Centers presents a compelling case.