Regency Centers Corp. REG seems well-poised to gain from its strategically located premium portfolio of grocery-anchored shopping centers. Strategic buyouts and an encouraging development pipeline bode well for long-term growth. A healthy balance sheet provides financial flexibility for portfolio expansion. However, growing e-commerce adoption, elevated interest rates and a concentrated portfolio raise concerns.

Last month, this retail real estate investment trust (REIT) reported fourth-quarter 2024 NAREIT funds from operations (FFO) per share of $1.09, outpacing the Zacks Consensus Estimate of $1.07. The results reflected healthy leasing activity. It witnessed a year-over-year improvement in the same property net operating income (NOI) and base rents during the quarter.

Analysts seem bullish on this Jacksonville, FL-based Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for its 2025 FFO per share indicates a favorable outlook as it has moved marginally upward over the past week to $4.53.

Shares of Regency have risen 3% in the past three months, against the industry's 3.7% decline. Given its solid fundamentals and positive estimate revisions, the stock is likely to keep performing well in the quarters ahead.

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What's Aiding REG?

Regency’s premium shopping centers are situated in affluent suburban areas and near the urban trade areas where consumers have high spending power, enabling the company to attract top grocers and retailers. Anchor tenants comprised 42.4% (based on pro-rata ABR) of its portfolio as of Dec. 31, 2024.

Moreover, the company has a high-quality open-air shopping center portfolio, with more than 80% grocery-anchored neighborhood and community centers, which ensures dependable traffic. The focus on necessity, service, convenience and value retailers serving the essential needs of the communities provides Regency with a strategic advantage.

Regency Centers is making efforts to improve its portfolio via acquisitions and developments in key markets. In 2024, Regency acquired properties for a total value of $92 million at the company’s share. During the fourth quarter of 2024, the REIT commenced new development and redevelopment projects with estimated net project costs of $35 million in total, bringing total project starts for the year 2024 to $258 million. Given the company’s prudent financial management, it is well-poised to explore growth opportunities.

Regency Centers maintains a healthy balance sheet position. As of Dec. 31, 2024, this retail REIT had nearly $1.4 billion of capacity under its revolving credit facility. As of the same date, its pro-rata net debt and preferred stock to operating EBITDAre was 5.2X. In February 2025, S&P Global Ratings raised its credit ratings to ‘A-’ with a stable outlook for the company, resulting in a boost to lenders’ confidence. Moreover, investment-grade credit ratings of A3 from Moody’s render it access to the debt market at favorable costs.

Solid dividend payouts are the biggest attraction for REIT investors, and Regency Centers is committed to boosting shareholder wealth. In November 2024, the company declared a quarterly cash dividend payment on its common stock of 70.5 cents, an increase of 5.2% from the prior quarter's dividend. From 2014 to the fourth quarter of 2024, the company’s dividend witnessed a CAGR of 3.7%. In the last five years, the company has increased its dividend four times. Check Regency Centers’ dividend history here.

What’s Hurting REG?

The market is witnessing a shift in retail shopping from brick-and-mortar stores to internet sales. This is expected to adversely impact the market share of retail REITs, including Regency Centers.

Further, a high interest rate environment may dampen consumer sentiments, affecting demand for retail space. This is likely to lead to a lesser scope for the company to increase rents and hurt occupancy growth.

Regency Centers’ properties in California and Florida accounted for 23.1% and 18.9%, respectively, of its annual base rents as of Dec. 31, 2024. This makes the company’s operating results and financial conditions susceptible to any unfavorable fluctuations in these markets.

Other Stocks to Consider

Some other top-ranked stocks from the retail REIT sector are Essential Properties Realty Trust EPRT and Tanger Inc. SKT, each carrying a Zacks Rank of #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Essential Properties Realty Trust’s 2025 FFO per share is pegged at $1.89, indicating 8.6% growth from the prior-year quarter’s tally.

The Zacks Consensus Estimate for Tanger’s ongoing year’s FFO per share is pegged at $2.26, implying year-over-year growth of 6.1%.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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