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 June 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 181,496,694 as of July 31, 2024.
EXPLANATORY NOTE
This Quarterly Report on Form 10-Q (this "Report") combines the quarterly reports on Form 10-Q for the quarter ended June 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 June 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 June 30, 2024 and December 31, 2023
1
Consolidated Statements of Operations for the periods ended June 30, 2024 and 2023
2
Consolidated Statements of Comprehensive Income for the periods ended June 30, 2024 and 2023
3
Consolidated Statements of Equity for the periods ended June 30, 2024 and 2023
4
Consolidated Statements of Cash Flows for the periods ended June 30, 2024 and 2023
6
8
9
10
Consolidated Statements of Capital for the periods ended June 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
46
Item 4.
Controls and Procedures
47
PART II - OTHER INFORMATION
Legal Proceedings
48
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
49
SIGNATURES
50
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 2024 and December 31, 2023
(in thousands, except share data)
2024
2023
Assets
(unaudited)
Net real estate investments:
Real estate assets, at cost
$
13,532,046
13,454,391
Less: accumulated depreciation
2,822,272
2,691,386
Real estate assets, net
10,709,774
10,763,005
Investments in sales-type lease, net
15,826
8,705
Investments in real estate partnerships
378,091
370,605
Net real estate investments
11,103,691
11,142,315
Properties held for sale, net
—
18,878
Cash, cash equivalents, and restricted cash, including $6,109 and $6,383 of restricted cash at June 30, 2024 and December 31, 2023, respectively
79,923
91,354
Tenant and other receivables, net
236,999
206,162
Deferred leasing costs, less accumulated amortization of $126,867 and $124,107 at June 30, 2024 and December 31, 2023, respectively
77,836
73,398
Acquired lease intangible assets, less accumulated amortization of $374,411 and $364,413 at June 30, 2024 and December 31, 2023, respectively
256,639
283,375
Right of use assets, net
323,015
328,002
Other assets
306,077
283,429
Total assets
12,384,180
12,426,913
Liabilities and Equity
Liabilities:
Notes payable, net
4,055,390
4,001,949
Unsecured credit facility
310,000
152,000
Accounts payable and other liabilities
357,232
358,612
Acquired lease intangible liabilities, less accumulated amortization of $208,900 and $211,067 at June 30, 2024 and December 31, 2023, respectively
380,505
398,302
Lease liabilities
243,318
246,063
Tenants' security, escrow deposits and prepaid rent
74,565
78,052
Total liabilities
5,421,010
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 June 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; 181,493,494 and 184,581,070 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively
1,815
1,846
Treasury stock at cost, 468,068 and 448,140 shares held at June 30, 2024 and December 31, 2023, respectively
(27,234
)
(25,488
Additional paid-in-capital
8,502,753
8,704,240
Accumulated other comprehensive income (loss)
5,135
(1,308
Distributions in excess of net income
(1,911,741
(1,871,603
Total shareholders' equity
6,795,728
7,032,687
Noncontrolling interests:
Exchangeable operating partnership units, aggregate redemption value of $68,390 and $74,199 at June 30, 2024 and December 31, 2023, respectively
40,738
42,195
Limited partners' interests in consolidated partnerships
126,704
117,053
Total noncontrolling interests
167,442
159,248
Total equity
6,963,170
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 June 30,
Six months ended June 30,
Revenues:
Lease income
347,845
304,458
700,951
613,259
Other property income
2,670
2,683
7,020
5,821
Management, transaction, and other fees
6,735
7,106
13,131
13,144
Total revenues
357,250
314,247
721,102
632,224
Operating expenses:
Depreciation and amortization
100,968
83,161
198,553
165,868
Property operating expense
59,491
54,394
122,765
105,416
Real estate taxes
45,478
38,509
89,785
76,986
General and administrative
24,238
25,065
50,370
50,345
Other operating expenses
3,066
1,682
5,709
1,185
Total operating expenses
233,241
202,811
467,182
399,800
Other expense, net:
Interest expense, net
43,178
36,956
86,046
73,349
Gain on sale of real estate, net of tax
(11,081
(81
(22,484
(331
Loss on early extinguishment of debt
180
Net investment income
(703
(1,742
(3,134
(3,469
Total other expense, net
31,394
35,133
60,608
69,549
Income before equity in income of investments in real estate partnerships
92,615
76,303
193,312
162,875
Equity in income of investments in real estate partnerships
12,314
11,869
24,275
23,785
Net income
104,929
88,172
217,587
186,660
Exchangeable operating partnership units
(601
(550
(1,243
(970
(1,660
(840
(3,902
(1,627
Net income attributable to noncontrolling interests
(2,261
(1,390
(5,145
(2,597
Net income attributable to the Company
102,668
86,782
212,442
184,063
Preferred stock dividends
(3,413
(6,826
Net income attributable to common shareholders
99,255
205,616
Net income attributable to common shareholders:
Per common share - basic
0.54
0.51
1.12
1.08
Per common share - diluted
1.07
Consolidated Statements of Comprehensive Income
(in thousands)
Other comprehensive income (loss):
Effective portion of change in fair value of derivative instruments:
Effective portion of change in fair value of derivative instruments
3,124
5,457
11,717
2,721
Reclassification adjustment of derivative instruments included in net income
(2,440
(1,649
(4,807
(3,141
Unrealized (loss) gain on available-for-sale debt securities
(1
(115
(120
77
Other comprehensive income (loss)
683
3,693
6,790
(343
Comprehensive income
105,612
91,865
224,377
186,317
Less: comprehensive income attributable to noncontrolling interests:
2,261
1,390
5,145
2,597
Other comprehensive income (loss) attributable to noncontrolling interests
284
347
(119
Comprehensive income attributable to noncontrolling interests
2,274
1,674
5,492
2,478
Comprehensive income attributable to the Company
103,338
90,191
218,885
183,839
Consolidated Statements of Equity
For the three months ended June 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 March 31, 2023
1,710
(25,699
7,856,426
3,927
(1,779,043
6,057,321
34,411
47,703
82,114
6,139,435
550
840
Other comprehensive income
Other comprehensive income before reclassification
4,886
32
424
456
5,342
Amounts reclassified from accumulated other comprehensive income
(1,477
(10
(162
(172
Deferred compensation plan, net
1,023
(1,023
Restricted stock issued, net of amortization
4,105
Common stock repurchased for taxes withheld for stock based compensation, net
(406
Common stock issued under dividend reinvestment plan
157
Common stock issued, net of issuance costs
Contributions from partners
1,428
Issuance of exchangeable operating partnership units
20,000
Distributions to partners
(941
Cash dividends declared:
Common stock/unit ($0.650 per share)
(111,145
(702
(111,847
Balance at June 30, 2023
(24,676
7,859,249
7,336
(1,803,406
6,040,213
54,281
49,292
103,573
6,143,786
Balance at March 31, 2024
1,848
(26,321
8,703,756
4,465
(1,889,037
7,019,711
41,606
116,702
158,308
7,178,019
601
1,660
2,955
18
150
168
3,123
(2,285
(14
(141
(155
Adjustment for noncontrolling interests
(8,694
8,694
(913
913
6,561
84
Common stock repurchased and retired
(33
(200,033
(200,066
166
1,529
(1,890
Preferred stock/unit
Common stock/unit ($0.670 per share)
(121,959
(1,473
(123,432
Balance at June 30, 2024
For the six months ended June 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
970
1,627
2,570
21
207
228
2,798
(2,794
(15
(332
(347
(215
215
8,922
8,924
(7,326
(3
(20,003
(20,006
299
3,205
(1,980
Common stock/unit ($1.300 per share)
(222,492
(1,184
(223,676
Balance at December 31, 2023
1,243
3,902
10,942
66
589
655
11,597
(4,499
(27
(281
(308
(1,746
1,746
13,135
13,137
(8,494
324
Common stock issued for exchangeable operating partnership units
529
(529
3,001
(6,254
Preferred stock
Common stock ($1.340 per share/unit)
(245,754
(2,210
(247,964
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 loan costs and debt premiums
6,232
2,983
Accretion of above and below market lease intangibles, net
(12,193
(13,842
Stock-based compensation, net of capitalization
12,539
8,854
(24,275
(23,785
Distribution of earnings from investments in real estate partnerships
32,440
31,869
Deferred compensation expense
2,695
2,940
Realized and unrealized gain on investments
(3,013
(3,376
Changes in assets and liabilities:
Tenant and other receivables
(3,565
(14,549
Deferred leasing costs
(6,311
(3,591
(13,793
(17,951
(9,776
6,091
(3,602
6,837
Net cash provided by operating activities
371,214
334,677
Cash flows from investing activities:
Acquisition of operating real estate
(45,208
Real estate development and capital improvements
(141,775
(100,114
Proceeds from sale of real estate
92,159
3,745
Proceeds from property insurance casualty claims
4,638
Issuance of notes receivable
(32,651
(4,000
Collection of notes receivable
3,004
(8,582
(3,109
Return of capital from investments in real estate partnerships
10,038
3,644
Dividends on investment securities
263
420
Acquisition of investment securities
(95,519
(2,748
Proceeds from sale of investment securities
99,490
10,751
Net cash used in investing activities
(114,143
(91,411
Cash flows from financing activities:
Net proceeds from common stock issuance
Repurchase of common shares in conjunction with equity award plans
(8,776
(7,621
Common shares repurchased through share repurchase program
Proceeds from sale of treasury stock
210
28
Contributions from non-controlling interests
1,225
Distributions to and redemptions of non-controlling interests
Distributions to exchangeable operating partnership unit holders
(1,479
(964
Dividends paid to common shareholders
(247,138
(222,275
Dividends paid to preferred shareholders
(6,825
Repayment of fixed rate unsecured notes
(250,000
Proceeds from issuance of fixed rate unsecured notes, net of debt discount
398,468
Proceeds from unsecured credit facilities
422,419
235,000
Repayment of unsecured credit facilities
(264,419
(235,000
Proceeds from notes payable
15,500
Repayment of notes payable
(88,069
(29,616
Scheduled principal payments
(6,121
(5,054
Payment of loan costs
(13,453
Net cash used in financing activities
(268,502
(268,934
Net decrease in cash and cash equivalents and restricted cash
(11,431
(25,668
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
43,108
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $3,176 and $2,534 in 2024 and 2023, respectively)
77,408
71,091
Cash paid for income taxes, net of refunds
6,405
573
Supplemental disclosure of non-cash transactions:
Common and Preferred stock, and exchangeable operating partnership dividends declaredbut not paid
125,709
111,847
Sale of leased asset in exchange for net investment in sales-type lease
2,808
Common stock issued for partnership units exchanged
Reallocation of equity upon acqusition of non-controlling interest
Exchangeable operating partnership units issued for acquisition of real estate
Change in accrued capital expenditures
3,094
9,011
Stock-based compensation capitalized
880
366
Contributions to investments in real estate partnerships
17,984
Common stock issued for dividend reinvestment in trust
604
617
Contribution of stock awards into trust
1,659
1,844
Distribution of stock held in trust
476
2,245
Change in fair value of securities
120
98
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 June 30, 2024 and December 31, 2023 with liquidation preference of $25 per unit
General partner's common units, 181,493,494 and 184,581,070 units issued and outstanding at June 30, 2024 and December 31, 2023, respectively
6,565,593
6,808,995
Limited partners' common units, 1,099,516 and 1,107,454 units issued and outstanding at June 30, 2024 and December 31, 2023 respectively
Total partners' capital
6,836,466
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
103,269
87,332
213,685
185,033
Preferred unit distributions
Net income attributable to common unit holders
99,856
206,859
Net income attributable to common unit holders:
Per common unit - basic
Per common unit - diluted
262
308
(125
1,669
1,102
4,210
1,502
Comprehensive income attributable to the Partnership
103,943
90,763
220,167
184,815
Consolidated Statements of Capital
General Partner Preferredand Common Units
LimitedPartners
TotalPartners’Capital
Noncontrolling Interests inLimited Partners’ Interest inConsolidated Partnerships
TotalCapital
6,053,394
6,091,732
4,918
Amounts reclassified from accumulated other comprehensive loss
(1,487
(112,788
Restricted units issued as a result of restricted stock issued by Parent Company, net of amortization
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
(249
6,032,877
6,094,494
7,015,246
7,061,317
2,973
(2,299
(125,322
Preferred units issued as a result of preferred stock issued by Parent Company, net of issuance costs
Common units repurchased and retired as a result of common stock repurchased and retired by Parent Company
250
Common units exchanged for common stock of Parent Company
6,790,593
TotalPartners'Capital
Noncontrolling Interests inLimited Partners' Interest inConsolidated Partnerships
6,089,425
6,131,474
2,591
(2,809
(225,656
(7,027
7,033,995
11,008
(4,526
(254,218
(8,170
Exchangeable operating partnership units converted to common stock of Parent Company
12
(Accretion) and amortization of above and below market lease intangibles, net
Common units repurchased through share repurchase program
(248,617
(223,239
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
Contributions from limited partners in consolidated partnerships
14
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
June 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 liabilities are $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 June 30, 2024, the Parent Company, the Operating Partnership, and their controlled subsidiaries on a consolidated basis owned 380 properties and held partial interests in an additional 101 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, current Middle East conflicts and wars, and the 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 June 30, 2024, no single tenant comprised 10% or more of our aggregate annualized base rent ("ABR"). As of June 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%, 20.6% and 11.0% 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-owed, 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 June 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 June 30, 2024, Regency held partial ownership interests in 119 properties through real estate partnerships, of which 18 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
276,831
270,674
Cash, cash equivalents and restricted cash
6,792
8,201
5,232
3,883
Deferred costs, net
2,504
2,494
Acquired lease intangible assets, net
7,184
12,099
18,398
44,377
1,791
893
Total Assets
318,732
342,621
Liabilities
Notes payable
32,973
33,211
6,785
29,919
Acquired lease intangible liabilities, net
10,946
21,456
1,139
1,239
19,280
21,433
Total Liabilities
71,123
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
3,895
3,487
7,856
6,945
Asset management services
1,620
1,648
3,222
3,277
Leasing services
Point in time
1,016
1,096
1,591
1,814
Other fees
204
875
462
1,108
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 $17.9 million and $18.5 million, as of June 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.
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2.
Real Estate Investments
The following tables detail the properties acquired for the periods set forth below:
Six months ended June 30, 2024
Date Purchased
Property Name
City/State
PropertyType
Regency Ownership
PurchasePrice (1)
DebtAssumed,Net ofDiscounts (1)
IntangibleAssets (1)
IntangibleLiabilities (1)
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
Total property acquisitions
53,500
Six months ended June 30, 2023
5/1/2023
Sienna Phase 1
Houston, TX
75%
5/18/2023
SunVet
Holbrook, NY
99%
24,140
26,835
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
62,126
142
3,065
11,081
81
22,484
331
Number of operating properties sold
Number of land parcels sold
Percent interest sold
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
167,062
Investments
50,656
51,992
Prepaid and other
54,341
40,635
Derivative assets
16,293
14,213
Furniture, fixtures, and equipment, net ("FF&E")
6,711
6,662
Deferred financing costs, net(1)
11,014
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%
358,158
449,615
Variable rate mortgage loans (1)
1/31/2032
4.2%
297,200
299,579
Fixed rate unsecured debt
3/15/2049
4.0%
3,400,032
3,252,755
Total notes payable, net
Unsecured credit facilities:
$1.5 Billion Line of Credit (the "Line") (2)
3/23/2028
6.2%
6.5%
Total unsecured credit facilities
Total debt outstanding
4,365,390
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.
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.
19
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)
5,052
53,108
58,160
2025
9,678
52,537
250,000
312,215
2026
9,920
147,850
200,000
357,770
2027
7,013
222,558
525,000
754,571
2028
5,312
36,570
610,000
651,882
Beyond 5 Years
7,956
106,089
2,150,000
2,264,045
Unamortized debt premium/(discount) and issuance costs
(8,285
(24,968
(33,253
44,931
610,427
3,710,032
The Company was in compliance as of June 30, 2024, with all financial and other covenants under its unsecured public and private placement debt and unsecured credit facilities.
6.
Derivative Financial Instruments
The Company may use derivative financial instruments, including interest rate 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 June 30, 2024 and December 31, 2023 is as follows:
Number of Instruments
Interest Rate Swaps
Notional amount
322,451
294,928
Number of instruments
Detail on the fair value of the Company's interest rate derivatives as of June 30, 2024 and December 31, 2023 is as follows:
Fair Value
Interest rate swaps classified as:
Derivative liabilities
(261
(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 June 30, 2024, does not have any derivatives that are not designated as hedges.
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.
20
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 June 30, 2024, the Company expects approximately $6.0 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
256,991
220,191
513,616
439,831
Variable lease income
86,082
74,337
178,372
155,118
Other lease related income, net:
Above/below market rent and tenant rent inducement amortization, net
7,441
8,751
13,264
14,616
Uncollectible straight-line rent (1)
(811
1,522
(1,210
2,100
Uncollectible amounts billable in lease (loss) income
(1,858
(3,091
1,594
Total lease income
The following table represents the components of Tenant and other receivables, net of amounts considered uncollectible, in the accompanying Consolidated Balance Sheets:
Tenant receivables
24,935
34,814
Straight-line rent receivables
147,409
138,590
Notes receivable
31,943
2,109
Other receivables(1)
32,712
30,649
Total tenant and other receivables
During the six months ended June 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:
31,552
Financial liabilities:
3,799,988
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 June 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 in the accompanying Consolidated Statements of Operations, and include unrealized gains of $0.7 million and unrealized gains of $1.4 million during the three months ended June 30, 2024 and 2023, respectively, and unrealized gains of $3.1 million and unrealized gains of $3.0 million during the six months ended June 30, 2024 and 2023, respectively.
22
Available-for-Sale Debt Securities
Available-for-sale debt securities consist of investments in certificates of deposit and 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 June 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:
36,901
Available-for-sale debt securities
13,755
Interest rate derivatives
66,949
30,048
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 June 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
Dividends Declared
On July 31, 2024, the Board:
Common Stock of the Parent Company
On July 31, 2024, the Board declared a common stock dividend of $0.67 per share, payable on October 3, 2024, to shareholders of record as of September 12, 2024.
On August 1, 2023, our Board declared a common stock dividend of $0.65 per share, payable on October 4, 2023, to shareholders of record as of September 14, 2023.
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 six months ended June 30, 2024 and 2023. As of June 30, 2024, $500 million of common stock remained available for issuance under this ATM equity 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 purchases, 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 six months ended June 30, 2024, the Company executed multiple trades by which it repurchased 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 purchases 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 the respective settlement dates. At June 30, 2024, $30.0 million remained available under the Repurchase Program.
24
During the six months ended June 30, 2023, the Company executed multiple trades to repurchase 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. All repurchased shares were retired on the respective settlement dates.
On July 31, 2024, the Board authorized and approved a new common stock repurchase program under which the Company may purchase up to $250 million of shares of the Company’s outstanding common stock (the “New Repurchase Program”). The New Repurchase Program replaces and supercedes, in all respects, the Repurchase Program noted above. Under the New Repurchase Program, the Company intends to repurchase shares through open market purchases 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.
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 six months ended June 30, 2024, 7,938 Partnership Units were converted to Parent Company common stock. During the six months ended June 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.
10.
Stock-Based Compensation
During the six months ended June 30, 2024, the Company granted 343,014 shares of restricted stock with a weighted-average grant-date fair value of $60.25 per share. During the six months ended June 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
183,703
170,990
184,188
171,100
Weighted average common shares outstanding for diluted EPS (1)
183,868
171,275
184,332
171,369
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 901,480 for the three months ended June 30, 2024 and 2023, and 1,100,305 and 822,346 for the six months ended June 30, 2024 and 2023, respectively.
25
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
184,803
171,891
185,288
171,922
Weighted average common units outstanding for diluted EPU (1)
184,968
172,176
185,433
172,192
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 June 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 $17.2 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 June 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 June 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, 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.
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 June 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 June 30, 2024, we had full or partial ownership interests in 481 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 56.9 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:
Refer to Item 1, Note 1 to Unaudited Consolidated Financial Statements.
Please also refer to the Risk Factors discussed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023, and the Risk Factors described in Part II, Item 1A of this Form 10-Q.
29
Executing on our Strategy
During the six months ended June 30, 2024, we had Net income attributable to common shareholders of $205.6 million as compared to $184.1 million during the six months ended June 30, 2023.
During the six months ended June 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
380
381
GLA
43,815
43,758
% Leased – Operating and Development
94.9
%
% Leased – Operating
95.3
95.4
Weighted average annual effective rent per square foot ("PSF"), net of tenant concessions.
$25.15
$24.67
30
The following table summarizes general information related to the unconsolidated properties owned in real estate investment partnerships in our portfolio:
101
13,065
13,067
96.4
96.6
% Leased –Operating
Weighted average annual effective rent PSF, net of tenant concessions
$24.20
$24.04
The following table summarizes Pro-rata occupancy rates of our combined consolidated and unconsolidated shopping center portfolio:
Percent Leased – All Properties
95.0
95.1
Anchor Space (spaces ≥ 10,000 SF)
96.9
96.7
Shop Space (spaces < 10,000 SF)
92.1
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
307
21.76
69.01
8.09
Renewal
62
1,911
19.56
0.13
0.09
Total Anchor Space Leases
78
2,218
19.86
9.65
1.20
Shop Space Leases
282
592
39.42
39.95
13.69
624
1,258
36.89
2.65
0.57
Total Shop Space Leases
906
1,850
37.70
14.59
4.77
Total Leases
984
4,068
27.98
11.90
2.82
251
19.44
47.72
5.42
1,300
16.50
0.48
0.08
60
1,551
16.97
8.14
0.94
272
577
41.38
13.18
510
873
36.92
1.62
0.60
782
1,450
37.92
17.44
5.60
842
27.09
12.63
3.19
The weighted-average base rent PSF on signed Shop Space leases during 2024 was $37.70 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 $35.05 PSF. New and renewal rent spreads, compared to prior rents on these same spaces leased, were positive at 8.9% for the six months ended June 30, 2024, compared to 9.2% for the six months ended June 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%
3.0%
TJX Companies, Inc.
74
3.6%
2.8%
Albertsons Companies, Inc.(2)
52
4.3%
2.7%
Amazon/Whole Foods
39
Kroger Co.(2)
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 June 30, 2024, tenants currently in bankruptcy and which continue to occupy space in our shopping centers represent an aggregate of 0.5% of our Pro-rata annual base rent, which is primarily related to the Rite Aid bankruptcy, which was filed in October 2023.
Results from Operations
Comparison of the three months ended June 30, 2024 and 2023:
Revenues changed as summarized in the following table:
Change
Base rent
245,476
213,977
31,499
Recoveries from tenants
84,805
74,748
10,057
Percentage rent
1,996
1,380
616
Uncollectible lease income
(1,515
Other lease income
5,865
2,799
Straight-line rent
4,120
2,879
1,241
(1,310
43,387
(13
(371
43,003
Total lease income increased $43.4 million primarily driven by the following contractually billable components of rent to the tenants per the lease agreements:
There were no significant changes in Other property income and Management, transaction, and other fees.
33
Changes in our operating expenses are summarized in the following table:
17,807
5,097
6,969
(827
1,384
30,430
Depreciation and amortization costs increased $17.8 million, mainly due to the following:
Property operating expense increased $5.1 million, mainly due to the acquisition of UBP.
Real estate taxes increased $7.0 million, mainly due to the acquisition of UBP.
There were no significant changes in General and administrative expenses.
Other operating expenses increased $1.4 million, mainly due to the acquisition of UBP.
The following table presents the components of other expense, net:
Interest on notes payable
46,864
37,177
9,687
Interest on unsecured credit facilities
1,704
1,342
362
Capitalized interest
(1,520
(1,284
(236
Hedge expense
148
109
(4,018
(388
(3,630
6,222
(11,000
1,039
Total other expense
(3,739
Interest expense, net increased $6.2 million primarily due to the following:
During the three months ended June 30, 2024, we recognized gains on sale of $11.1 million mainly from the sale of two operating properties and recognition of one sales type lease.
Net investment income decreased $1.0 million primarily driven by lower gains on investments held in the non-qualified deferred compensation plan and our captive insurance company.
There were no significant changes in Equity in income of investments in real estate partnerships.
34
The following represents the remaining components that comprise Net income attributable to common shareholders and unit holders:
16,757
Income attributable to noncontrolling interests
(871
15,886
12,473
Net income attributable to exchangeable operating partnership units
(51
12,524
Income attributable to noncontrolling interests increased $0.9 million, mainly due to the acquisition of UBP.
The $3.4 million increase in Preferred stock dividends is related to the preferred stock issued in connection with UBP acquisition.
Comparison of the six months ended June 30, 2024 and 2023:
489,611
426,907
62,704
169,828
145,974
23,854
9,803
8,410
1,393
(4,685
11,822
10,282
1,540
9,714
5,476
4,238
Above / below market rent and tenant rent inducement amortization, net
(1,352
87,692
1,199
88,878
Total lease income increased $87.7 million primarily driven by the following contractually billable components of rent to the tenants per the lease agreements:
35
Other property income increased $1.2 million primarily due to an increase in settlements in 2024.
There were no significant changes in Management, transaction, and other fees.
32,685
17,349
12,799
4,524
67,382
Depreciation and amortization costs increased $32.7 million, mainly due to the following:
Property operating expense increased $17.3 million, mainly due to the following:
Real estate taxes increased $12.8 million, mainly due to the acquisition of UBP.
Other operating expenses increased $4.5 million, mainly due to the following:
36
92,465
74,087
18,378
3,143
2,329
814
(3,176
(2,534
(642
258
219
(6,644
(752
(5,892
12,697
(22,153
335
(8,941
Interest expense, net increased $12.7 million primarily due to the following:
During the six months ended June 30, 2024, we recognized gains on sale of $22.5 million mainly from the sale of three operating properties and recognition of two sales type leases.
30,927
(2,548
28,379
21,553
(273
21,826
Income attributable to noncontrolling interests increased $2.5 million, mainly due to the acquisition of UBP.
The $6.8 million increase in Preferred stock dividends is related to the preferred stock issued in connection with UBP acquisition.
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.
37
Pro-rata Same Property NOI:
Pro-rata same property NOI, excluding termination fees/expenses, changed from the following major components:
242,916
236,506
6,410
484,674
471,981
12,693
84,453
82,706
1,747
167,423
161,583
5,840
2,302
1,759
543
10,189
9,346
843
Termination fees
1,121
686
435
2,562
5,403
(2,841
(2,204
(389
(1,815
(3,270
1,494
(4,764
3,409
2,946
463
6,537
5,811
726
2,000
2,117
(117
4,562
4,779
(217
Total real estate revenue
333,997
326,331
7,666
672,677
660,397
12,280
Operating and maintenance
55,464
55,626
112,013
108,239
3,774
Termination expense
(65
43,379
42,248
1,131
86,044
84,736
1,308
Ground rent
3,301
3,201
100
7,250
6,637
613
Total real estate operating expenses
102,079
101,075
1,004
205,312
199,612
5,700
Pro-rata same property NOI
231,918
225,256
467,365
460,785
6,580
Less: Termination fees
1,186
500
2,557
(2,846
Pro-rata same property NOI, excluding termination fees
230,732
224,570
6,162
464,808
455,382
9,426
Pro-rata same property NOI growth, excluding termination fees
2.7
2.1
Real estate revenue increased $7.7 million and $12.3 million, on a net basis, during the three and six months ended June 30, 2024 and 2023, respectively, as follows:
Total real estate operating expense increased $1.0 million and $5.7 million, on a net basis, during the three and six months ended June 30, 2024 and 2023, respectively, as follows:
38
Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure:
Our reconciliation of Net income attributable to common shareholders to Same Property NOI, on a Pro-rata basis, is as follows:
Less:
Other (1)
12,726
25,313
22,301
Plus:
Other operating expense
Other expense, net
Equity in income of investments in real estate excluded from NOI (2)
13,258
11,813
26,947
23,598
Preferred stock dividends and issuance costs
3,413
6,826
Pro-rata NOI
258,392
225,121
521,330
461,760
Less non-same property NOI
26,474
(135
53,965
975
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)
107,592
89,505
211,964
178,540
(11,080
(64
(22,488
(305
Nareit FFO attributable to common stock and unit holders
196,368
176,773
396,335
363,268
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
2,133
4,694
Certain Non Cash Items
(5,283
(1,784
(11,021
(4,173
Uncollectible straight-line rent
1,377
(1,755
2,033
(2,390
Above/below market rent amortization, net
(7,073
(8,554
(12,540
(14,219
Debt and derivative mark-to-market amortization
1,731
2,640
Core Operating Earnings
189,253
164,688
382,321
342,486
Reconciliation of Core Operating Earnings to AFFO:
Adjustments to reconcile to AFFO (1):
Operating capital expenditures
(33,886
(21,086
(54,738
(38,545
Debt cost and derivative adjustments
2,022
1,686
4,162
Stock-based compensation
4,662
9,302
AFFO
162,051
149,393
341,047
309,732
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, Regency priced a public offering of $400 million of senior unsecured notes due in 2034 (the “2024 Notes”) under our existing shelf registration filed with the SEC. The Notes were issued at 99.617% of par value with a coupon of 5.25%, and mature on January 15, 2034. We paid off $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 $230.7 million of secured loan maturities during the next 12 months, including 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 $73.8 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)
1,179,885
Maturity (2)
March 23, 2028
The declaration of dividends is determined quarterly by, and in the discretion of, our Board of Directors. On July 31, 2024, our Board of Directors:
40
While future dividends will be determined at the discretion of our Board of Directors, we plan 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 six months ended June 30, 2024 and 2023, we generated cash flow from operations of $371.2 million and $334.7 million, respectively, and paid $255.4 million in dividends to our common and preferred stock and unit holders, and $223.2 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 July of 2024, we estimate that we will require capital during the next 12 months of approximately $530.6 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 June 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 June 30, 2024, and expect to remain in compliance.
Summary of Cash Flow Activity
The following table summarizes net cash flows related to operating, investing, and financing activities of the Company:
36,537
(22,732
432
Net change in cash, cash equivalents, and restricted cash
14,237
Total cash, cash equivalents, and restricted cash
36,815
Net cash provided by operating activities:
Net cash provided by operating activities increased $36.5 million due to:
41
Net cash used in investing activities:
Net cash used in investing activities changed by $22.7 million as follows:
(41,661
88,414
(28,651
(5,473
6,394
(157
(92,771
88,739
Significant changes in investing activities include:
42
We plan to continue developing and redeveloping shopping centers for long-term investment. During the six months ended June 30, 2024, we deployed capital of $141.8 million for the development, redevelopment, and improvement of our real estate properties, comprised of the following:
Capital expenditures:
Land acquisitions
11,650
2,580
9,070
Building and tenant improvements
43,918
30,963
12,955
Redevelopment costs
48,364
42,745
5,619
Development costs
27,584
17,705
9,879
3,107
2,476
631
Capitalized direct compensation
7,152
3,645
3,507
141,775
100,114
41,661
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
Glenwood Green
Metro NYC
70%
Q1-22
46,172
247
187
92
Baybrook East - Phase 1B
50%
Q2-22
9,792
127
85
Sienna - Phase 1
Q2-23
9,409
409
56
The Shops at SunVet
Long Island, NY
86,872
170
511
Q1-24
68,277
155
440
Total Developments In-Process
220,522
672
328
43
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
Q2-19
59,854
64
94
Westbard Square Phase I
Bethesda, MD
Q2-21
39,500
126
79
Buckhead Landing
Atlanta, GA
30,859
152
73
Bloom on Third (fka Town and Country Center)
Los Angeles, CA
35%
Q4-22
24,525
51
Mandarin Landing
Jacksonville, FL
16,422
140
45
Serramonte Center - Phase 3
San Francisco, CA
36,989
1,072
Circle Marina Center
Q3-23
14,986
118
Avenida Biscayne
Miami, FL
Q4-23
22,743
Cambridge Square
15,002
70
Various Redevelopments
Various
83% - 100%
96,192
3,097
Total Redevelopments In-Process
357,072
4,919
Redevelopments Completed
Various Properties
14,773
588
Total Redevelopments Completed
Net cash flows from financing activities changed by $0.4 million during 2024, as follows:
Net proceeds from common stock issuances
(1,155
(180,060
1,776
Dividend payments and operating partnership distributions
(255,442
(32,203
Proceeds from unsecured credit facilities, net
158,000
382,968
Debt repayment
(344,190
(34,670
(309,520
(13,312
182
Significant financing activities during the six months ended June 30, 2024 and 2023, include the following:
44
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
2,722,697
2,689,993
1,007,387
984,027
1,624,520
1,595,271
582,847
565,822
Equity
1,098,177
1,094,722
424,540
418,205
Basis difference
(46,449
(47,600
Our equity method investments in real estate partnerships consist of the following:
Regency's Ownership
GRI - Regency, LLC (GRIR)
40%
141,659
144,371
Columbia Regency Retail Partners, LLC (Columbia I)
20%
6,825
7,045
Columbia Regency Partners II, LLC (Columbia II)
43,091
42,994
Columbia Village District, LLC
30%
6,192
6,123
Individual Investors
Ballard Blocks
60,739
62,140
Bloom on Third
44,040
42,074
Others
75,545
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)
1,872
7,008
8,880
4,047
6,094
148,461
154,555
49,157
7,393
255,081
42,800
305,274
101,344
7,576
32,800
40,376
13,669
4,267
246,605
250,872
92,027
6,688
771,324
778,012
293,128
Net unamortized loan costs, debt premium / (discount)
(9,736
(3,564
33,890
1,451,543
1,528,233
549,808
At June 30, 2024, our investments in real estate partnerships had notes payable of $1.5 billion maturing through 2034, of which 93.8% had a weighted average fixed interest rate of 3.8%. The remaining notes payable float with SOFR and had a weighted average variable interest rate of 7.4%, based on rates as of June 30, 2024. These fixed and variable rate notes payable are all non-recourse, and our Pro-rata share was $549.8 million as of June 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 receive fees as shown below:
Asset management, property management, leasing, and other transaction fees
13,130
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 June 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 June 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 $3.1 million per year based on $313.8 million of floating rate mortgage debt and floating rate line of credit balances outstanding at June 30, 2024.
Further, the table below incorporates only those exposures that exist as of June 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 June 30, 2024.
Thereafter
Fixed rate debt (1)
58,159
308,465
754,572
341,882
4,084,893
3,796,239
Average interest rate for all fixed rate debt (2)
4.00
4.02
4.03
4.13
4.10
4.36
Variable rate SOFR debt (1)
3,750
313,750
313,749
Average interest rate for all variable rate debt (2)
6.16
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 June 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 the quarter ended June 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 June 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 June 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)
April 1 through April 30, 2024
664
(1)
58.80
230,000
May 1 through May 31, 2024
1,612,989
59.61
1,612,873
133,862
June 1 through June 30, 2024
1,693,836
61.32
30,000
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 shares of the Company's outstanding common stock. The Company intends for repurchases, if any, to be through open market purchases 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 June 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 #
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.
August 2, 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