The operator introduces the Regency Centers Corporation First Quarter 2024 Earnings Conference Call and reminds participants that the call is being recorded. Host Christy McElroy introduces the speakers and mentions that the discussion may contain forward-looking statements and non-GAAP financial measures. She also reminds listeners to refer to the company's filings with the SEC for more information. The caution on forward-looking statements also applies to the presentation materials posted on the company's website.

Lisa Palmer, CEO of Regency Centers, discusses the company's strong performance in the last quarter, driven by high leasing activity and strong demand from tenants. The company has a large pipeline of executed leases, which will contribute to future growth. Palmer also highlights the success of the company's value creation pipeline, which includes sustained development activity and partnerships with top retailers. The company expects to continue its success in 2025 and beyond with a similar level of development and redevelopment starts.

Regency's strong balance sheet and liquidity position allows them to sustain a value creation pipeline, remain opportunistic in their capital allocation, and consistently grow their dividend. This has been recognized by Moody's with a credit rating upgrade to A3, making Regency the only REIT in the open-air shopping center sector with an A rating. This is a result of their operational excellence, unique strategic advantages, and commitment to corporate responsibility. The strength of their portfolio and trade areas, along with their strong leasing activity, will continue to drive growth for the business.

Despite some challenges, the demand for space in our centers has remained strong and we have been able to secure higher rents and lease rates. Our same property lease rate and shop lease rate both reached record highs in the first quarter. Our base rent growth has been boosted by new shop leases, and while our commenced occupancy rate has declined due to anchor move-outs, we have strategically recaptured a Walmart store and secured a new lease with Target that will bring significant value to the center. This is just one example of our successful approach to creating value within our portfolio.

Despite a disconnect between lease occupancy and rent-paying occupancy, the company is taking advantage of opportunities to re-lease vacated space with upgraded stores and at higher rents. This has resulted in a 370-basis-point delta between same property leased and commenced occupancy rates, representing an incremental $50 million in annual base rent. The company has a strong pipeline of executed leases and consistent demand from a variety of categories. Cash re-leasing spreads were over 8% in the first quarter, with both GAAP and net effect of rent spreads in the mid-teens. The company's team is energized by the strong leasing activity and limited supply of high quality retail space.

The company is looking forward to reaping the benefits of their record-high SNO pipeline and increasing occupancy. They have several new projects in progress, including a $67 million development anchored by Whole Foods. They also have several anchor openings, such as Target and ShopRite, and are seeing significant leasing demand. They have over $500 million in process, with a 9% blended return, and plan to complete over $200 million in projects in 2024. Exciting new tenants are also opening soon at their existing properties.

The private transactions market is showing increased activity and low cap rates. The company is actively seeking acquisition opportunities and is focused on sourcing accretive investments. They have a strong pipeline for development and redevelopment projects, with a target of $1 billion over the next five years. The company is partnering with leading grocers and has a strong development team, free cash flow, and balance sheet to drive value creation.

In the first quarter, the company reported NAREIT FFO of $1.08 per share and core operating earnings of $1.04 per share. Same property NOI growth, excluding term fees and COVID period reserve collections, was 2.1%. The company's same property leased occupancy rate increased by 20 basis points to 95.8%, reflecting a strong leasing environment. First quarter earnings were also boosted by timing-related items and straight-line rent. The company's new AFFO disclosure highlights its ability to grow dividends and invest in its business for future earnings growth.

The company has added a disclosure to provide transparency and allow for better comparison with peers. Their NAREIT FFO outlook has been raised by a penny and their same property NOI growth remains unchanged. They have adjusted their full year transactions outlook and have highlighted some tailwinds that will impact their growth in the future, including a pipeline of executed leases that will result in increased NOI and earnings in 2025.

The company has been focusing on redevelopment projects and expects to see positive growth in same property NOI and overall NOI. They have a strong balance sheet and are not affected by current market volatility. They have a lot of liquidity and are on track to generate free cash flow this year. The first question from the conference call was about the benefits of these initiatives.

Lisa Palmer and Lizzy Doykan are discussing the first quarter earnings of the company. Lizzy is asking if there were any unexpected benefits or accretion from the B in the first quarter. Mike Mas responds by saying that the company had a solid quarter and met their plan, with some timing issues affecting their forward run rate. These issues include seasonal impacts on percentage rent and timing issues with the Mount same property portfolio, but they do not change their outlook for the year. The company raised NAREIT FFO by a penny.

The company has made incremental improvements to their revenue plan, including increased non-cash revenue due to improved straight-line rents and a mark-to-market adjustment. They have not modified their same property growth range and are confident in their outlook for the rest of the year. They are still looking for external growth opportunities that align with their investment strategy, which includes above-average quality in merchandising mix, tenants, and demographics.

The company has had success with both their acquisition and development strategies, and they continue to find opportunities. They have a talented development team, access to capital, and strong relationships with top retailers and developers. Same property NOI growth was 2.1% in the quarter, with a tough bad debt comparison of 60 basis points. Going forward, they expect base rent growth to be in the high 2% range, with next year being about 100 basis points above trend. They have confidence in their 2% to 2.5% guide range for the rest of 2024.

The speaker is discussing the company's expected growth rate and the impact of redevelopment projects on the same property growth rate. They clarify that the previous year's anomaly was a positive contribution from redevelopment deliveries. They express confidence in the pipeline and the team's leasing efforts, and expect to see significant growth in 2025. The other speaker emphasizes that Regency has consistently high long-term growth rates due to their strategic approach.

The speaker is discussing the company's strategic advantages and how they expect to rise to the top of the sector in 2025. They also mention the SNO pipeline, which has recently taken a step up and is currently sitting at 370 basis points or $50 million. They express confidence in their leasing team's ability to continue leasing at a high rate and expect the commenced occupancy rate to increase. They provide some numbers to help understand the impact of the SNO pipeline, with 65% of leases commencing by year end and $14 million expected to be recognized in earnings in 2024.

In response to a question about the company's strategy for increasing rents and improving merchandise mix, Alan Roth explains that Regency has always prioritized long-term asset management. He gives examples of recent decisions to replace office supply stores with higher-quality tenants, and expects this approach to continue. He also mentions that Urstadt, a recent acquisition, could potentially provide additional lease-up opportunities.

Nick Wibbenmeyer and Alan Roth discuss the performance of the Urstadt portfolio, which is meeting expectations and delivering on accretion. The team is doing a remarkable job and there is a focus on leasing and expanding the platform. There are also some small redevelopment projects in progress.

The speaker is responding to a question about the increase in new leases, tenant allowances, and landlord work as a percentage of new base rent. They explain that there has not been a significant shift in the market, but there was a slight elevation this quarter due to one turnkey relocation and four anchor transactions. They also reiterate their strategy of being judicious with leasing capitals and mention that they have $75 million of dispositions remaining, with the two so far being in Florida.

The speaker, Nick Wibbenmeyer, responds to a question about the recent sale of non-core properties in Florida. He clarifies that the decision was not driven solely by the attractive pricing and market in Florida, but rather a strategic move to fortify their growth profile and potentially sell non-core assets at attractive cap rates. He also mentions that the company is always looking for opportunities to recycle capital into more creative opportunities. In regards to future dispositions, he states that they will continue to sell assets at attractive cap rates but it is not a strategic decision to exit Florida. The next question is about the recent acquisition of a shopping center in Westport, Connecticut.

The company recently acquired a new asset in the Northeast and is excited to add it to their portfolio. They competed in an on-market process and their reputation and presence in the market helped them secure the asset. They are also looking for more opportunities across the country to add value to shopping centers. The company is confident in their same-store growth due to their sign-not-lease pipeline and the overall health of their tenants. They believe transaction volume will remain steady and are looking to take advantage of any opportunities that arise.

Lisa Palmer, Mike, and Alan discuss the strong leasing success and results of the company, with records being broken and the percent leased continuously increasing. They also mention the real visibility to rent that will commence and the success of the redevelopment pipeline. They address concerns about softness in demand for medical leasing, stating that their current medical exposure is 7% of ABR and they are comfortable with its growth. They also mention signing 20 new medical leases in the first quarter.

The speaker discusses the company's investments in various medical facilities, including a new ground lease with a primary care operator. They also mention that urgent care facilities make up less than 1% of their rental income and that they have a strict vetting process for all operators. In terms of CapEx, the company expects it to remain around 11% of NOI in the long run, with potential increases during periods of high activity.

The team is careful with their capital spending and tries to get the best deals for their investments. They plan to generate free cash flow to reinvest in their development and redevelopment business. They will also use available capital to buy properties like the one in Westport. The company has increased their dispositions to partly fund the Westport acquisition, but this is not necessary as they have enough free cash flow and balance sheet capacity. They plan to continue with their strategy of maximizing rent while limiting leasing capital, which has been successful in driving FFO growth.

The company has over $300 million in investment capacity and is looking to prune some non-core assets in order to create a more durable income stream and earnings growth. They have visibility on the $25 million they plan to add, and the other $70 million in transactions are known and expected to occur by the end of the third quarter.

Lisa Palmer and the rest of the team at the company announced a new addition in the second quarter, Tamarack, which was not yet included in the transactions list. Ki Bin Kim from Truist asked about the impact of smaller basket sizes and stretched consumers on tenant demand. Lisa responded that while the macroeconomic future is uncertain, they have high-quality centers and expect them to continue to perform well due to their value, convenience, and service offerings. She also mentioned that stress for time is an important factor, which is seen in the success of their medical properties.

The speaker discusses the positive impact of having shopping centers near people's homes and the demand for suburban shopping centers. They also mention their successful development strategy and the challenges of finding new opportunities, but express confidence in their team's ability to continue finding them.

Regency's development and redevelopment programs have been successful, with yields ranging between 7% and 9%. They expect to continue this success and have a strong pipeline of opportunities, both from existing properties and new developments like Cheshire. The renewed appreciation for physical stores and the rise of omnichannel shopping have created tailwinds for their business.

The speaker acknowledges that development has been a key factor in the company's success for the past 28 years and credits their experienced team and strong relationships for this. They expect to see continued growth in both ground-up development and redevelopments in the future, as they have the capital and team to take advantage of opportunities in both areas.

Floris Van Dijkum asks about return thresholds for redevelopment opportunities compared to current market acquisitions. Nick Wibbenmeyer reiterates the 7-9% target for developments and explains that acquisitions will vary based on future growth potential. Lisa Palmer adds that historically, the company has aimed for a 150 basis point spread over market value upon completion. Linda Tsai asks about the 39 anchors that have signed but not yet commenced, specifically how many are grocers and if the current grocer penetration of over 80% could increase. Alan Roth does not have the exact number but confirms there are several grocers among the signed anchors.

The company is excited about the opening of their first Whole Foods daily shop in Manhattan, as well as two Publix deals in Atlanta. The company plans to continue focusing on grocery-anchored shopping centers and does not expect a significant change in this strategy. The Stone Bridge development is part of a larger master plan community, which the company sees as a competitive advantage.

The speaker discusses the importance of retail amenities and high-quality grocers in master plan developments. They mention their success in partnering with master plan developers and highlight their focus on infill communities with high demand and rents. The speaker also mentions specific examples of successful projects and their continued focus on this type of development.

The company's recent call suggests that everything is going well, but there is confusion about why the strong first quarter performance did not lead to a bigger increase in guidance. The CFO explains that the timing of certain income streams and the front-loading of certain expenses in the first quarter are the reasons for this. However, the company's strong leasing and development momentum has increased their confidence in future growth, including a 100-basis-point contribution to same property NOI from redevelopment by 2025. This was not mentioned in the previous quarter, indicating the company's increased conviction for the end of 2024 and full year 2025.

The speaker, RJ Milligan, is asking a question about Regency's AFFO calculation and how they differentiate between redevelopment CapEx and maintenance CapEx. Mike Mas, the speaker for Regency, responds by saying that they encourage looking at the calculation on a look-through basis and that they designate a project as a redevelopment if it involves densifying the site, adding GLA, and significantly repositioning the asset within the market. He also suggests comparing Regency to other companies by putting all their redevelopment capital in one category for a more accurate comparison.

Lisa Palmer discusses the Kroger Albertsons merger and its potential impact on the company. She states that the merger has not affected their operations and they continue to have good relationships with both companies. She believes that the merger will result in a stronger and more competitive grocer, and even if the merger does not happen, the stores are still productive and will continue to operate in their portfolio.

The speaker, Anthony Powell, thanks Ms. Palmer for her previous statement and the operator announces that there are no further questions. Ms. Palmer then thanks everyone for joining and wishes them a great weekend. The operator concludes the call.

This summary was generated with AI and may contain some inaccuracies.