REG - Regency Centers: Ongoing FFO Growth Can Lift Shares If Interest Rates Stop Rising

2024-06-05 10:04:02 ET

Summary

• Regency Centers' stock has underperformed due to elevated interest rates, but its operating results have been strong.
• The company operates open-air locations anchored by grocery stores, which helps drive foot traffic and protect against e-commerce pressure.
• Regency has a well-diversified tenant base, strong leasing rates, and a path for meaningful growth in the next two years.
• With a $50 million backlog in leased-not-commenced rents, 2025 results should have a meaningful tailwind, which can lift shares.

Shares of Regency Centers ( REG ) have been an underperformer over the past year as elevated interest rates have weighed on real estate stocks. I last covered REG in January , rating shares a “buy,” but performance has been disappointing with the stock losing 7% while the market has rallied by 11%. Interestingly, the current FFO analyst estimate of $4.18 is slightly above my $4.15 forecast, meaning underperformance has been driven by multiple compression rather than poor operating results. This raises the question of whether this valuation pressure will persist or if ongoing results can gradually lift shares....

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