Regency Centers Corporation ( REG)

Q3 2011 Earnings Call

November 4, 2011 10:00 am ET

Executives

Lisa Palmer - SVP, Capital Markets

Hap Stein - Chairman and CEO

Brian Smith - President and COO

Bruce Johnson - CFO

Chris Leavitt - SVP and Treasurer

Analysts

Nathan Isbee - Stifel Nicolaus

Quentin Velleley - Citi

Craig Schmidt - Bank of America Merrill Lynch

Christy McElroy - UBS

Jay Habermann - Goldman Sachs

Paul Morgan - Morgan Stanley

Michael Mueller - JPMorgan

Jeff Donnelly - Wells Fargo

Rich Moore - RBC Capital Markets

Chris Lucas - Robert Baird

Cedrik Lachance - Green Street Advisors

R.J. Milligan - Raymond James

Ari Friedman - Cobalt Capital

Presentation

Operator

At this time, I would like to welcome everyone to the Regency Centers Corporation third quarter 2011 earnings conference. (Operator Instructions) I would now like to turn the conference over to Ms. Lisa Palmer, Senior Vice President, Capital Markets.

Lisa Palmer

Good morning, everyone. On the call this morning are Hap Stein, Chairman and CEO; Brian Smith, President and COO; Bruce Johnson, CFO; and Chris Leavitt, Senior Vice President and Treasurer.

Before we start this morning, I'd like to address forward-looking statements that may be discussed on the call. Forward-looking statements involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in these forward-looking statements. Please refer to the documents filed by Regency Centers Corporation with the SEC, specifically the most recent reports on Forms 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements.

Bruce?

Bruce Johnson

Thank you, Lisa, and good morning. Since the SEC recently advised NAREIT that it now takes no position on the inclusion or exclusion of impairments in FFO. NAREIT reiterated this week that in accordance with the definition of FFO, impairment charges should be excluded. As such, we have begun excluding impairment charges from FFO this quarter.

Recurring FFO for the third quarter was $0.61 per share. Total FFO was $0.62 per share for the quarter. Third quarter's same-property NOI growth was a minus-0.2%. Excluding termination fees, this growth was a positive 0.2%. Same-property percent leased increased 80 basis points to 93%. Likewise, non-rent pay in pre-leased GLA increased by about the same amount, delaying some of the benefit from leasing activity in NOI growth.

Other income increased by $2.5 million over the second quarter. As we've always reported in the past, our captive insurance profits are recognized in the third quarter based upon the claims experienced from the prior year. This is not considered the same-property income, but is included in other income and impacts NOI.

Account receivable continued to improve with a total on pro rata basis down nearly $5 million from the second quarter as tenants continue to pay real estate tax and CAM balances built in the prior quarter. Total AR over 90 days is now 0.7% of revenues compared to 1.1% at September 2010.

Our liquidity position remained strong. In September, we closed on the refinancing of $600 million credit facility. The facility has a four-year term with a one year extension option. The interest rate is LIBOR plus 125 with the facility fee of 25 basis points.

We are currently documenting a $250 million term loan to refinance December and January bond maturities. The loan will carry a five-year term at attractive pricing similar to that of our recently closed credit facility.

As we execute our capital recycling plan, this term loan will provide the flexibility to buy assets or pay down debt. Loan execution is anticipated in November with funding in January.

In August, we locked rate on a $193 million of mortgage debt to refinance the maturities in our GRI partnership. The refinanced debt matures in 2022 and carries an interest rate of 4.5%. With this refinancing and the term loan, we have handled essentially all of our 2012 maturities.

Looking ahead for the year, we have tightened guidance range of recurring FFO to $2.34 to $2.40 and total FFO per share to $2.45 to $2.51. For the fourth quarter, we expect recurring FFO to be in a range of $0.58 to $0.64 per share.

Brian?

Brian Smith

Thank you, Bruce, and good morning. We continue to experience robust leasing activity which points to future improvement in fundamentals. Total leasing for the operating portfolio was 2.1 million square feet.

In context, you could look back over the past six years and not see a quarter with close to 2 million square feet of leasing. The 590,000 square feet of new leasing was the most ever registered and only the second time we've leased over 500,000 square feet with last quarter being the first time.

Move-outs have been improving since mid-2009 and are still above historic norms, an encouraging sign that move-outs are trending toward pre-recession levels as small shut move-outs were meaningfully lower than recent quarters. Additionally, we released every one of the five largest anchor move-outs we experienced. The strong leasing resulted in positive absorption of 140,000 square feet. It means two consecutive quarters of positive absorption.

The 1.5 million square feet of renewal leasing was more than we've even in a quarter. As a result of this leasing progress and a favorable impact on occupancy from dispositions, we're now 93% leased on a same property basis. We had occupancy gains in all size ranges. Spaces less than 5,000 square feet registered a 50 basis point increase or total of a 100 basis points over the past two quarters, and we're 85% leased in that section.

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