Regency Raises Outlook as Occupancy Strengthens
Nareit funds from operations increased 6.7% to $226.3 million in the second quarter.
Shopping-center owner Regency Centers (REG) raised its full-year earnings and property-income forecasts after occupancy strengthened, even as quarterly same-property growth lost momentum.
The quarter extended a split in Regency’s operating trajectory. Leased occupancy rose more quickly than in the first quarter and leasing volume increased, while same-property net operating income growth slowed for a second consecutive period.
Net income attributable to common shareholders rose 9.5% from a year earlier to $112.4 million, with diluted earnings increasing to $0.61 a share from $0.56. Net income declined from $125.1 million in the first quarter, and earnings fell from $0.68 a share. Nareit FFO rose to $1.21 a share from $1.16 a year earlier and edged up from $1.20 in the preceding quarter.
Same-property NOI increased 3.8%, slowing from 4.4% in the first quarter and 4.7% in the fourth quarter. Base-rent growth contributed 3.7 percentage points, slightly more than in the preceding period. The NOI margin narrowed 60 basis points to 69.6%, while the expense-recovery ratio improved 160 basis points to 89.7%.
Leased occupancy reached 96.9% at June 30, up 30 basis points sequentially and 40 basis points from a year earlier. Anchor occupancy rose to 98.4%, while shop occupancy increased to 94.4%. Regency completed 2.1 million square feet of comparable leasing, up from 1.5 million in the first quarter. Cash rent spreads narrowed to 10.4% from 12.1%, and straight-line spreads declined to 19.5% from 24.3%.
The development and redevelopment pipeline expanded to $680 million from $635 million at the end of March, retaining an estimated blended yield of about 9%. New project starts declined to $68 million from $73 million, while completions fell to $20 million from $42 million.
Regency now expects 2026 Nareit FFO of $4.84 to $4.88 a share, raising both ends of its prior range by one cent. Its Core Operating Earnings forecast increased by three cents at each end to $4.62 to $4.66 a share, and same-property NOI growth guidance rose to 3.7% to 4.1% from 3.25% to 3.75%.
The company also lifted its acquisition target to about $70 million from about $25 million and introduced approximately $5 million of disposition guidance. With leverage improving to 5.0 times trailing operating EBITDA, Regency entered the second half with more capital activity planned alongside a larger development pipeline.