Is it Prudent to Hold Regency Centers Stock in Your Portfolio Now?

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, Regency Centers reported first-quarter 2025 NAREIT funds from operations (FFO) per share of $1.15, outpacing the Zacks Consensus Estimate of $1.14. The figure increased 6.5% from the prior-year quarter. Results reflected healthy leasing activity. It witnessed a year-over-year improvement in the same-property net operating income and base rents during the quarter.

Shares of REG have risen 20.4% in the past year, outperforming the industry's 6.2% growth. Analysts seem bullish on this Jacksonville, FL-based Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2025 FFO per share indicates a favorable outlook, as it has moved marginally upward over the past two months to $4.54.

What's Aiding REG?

Regency Centers has a high-quality open-air shopping center portfolio, with more than 80% grocery-anchored neighborhood and community centers. This focus on building a premium portfolio of grocery-anchored shopping centers is a strategic fit because such centers are usually necessity-driven and attract dependable traffic. Six of Regency Centers’ top 10 tenants are high-performing grocers. 

REG’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 42.3% (based on pro-rata ABR) of its portfolio as of March 31, 2025. Regency’s embedded rent escalators have also been a key driving factor behind its rent growth. 

Regency is making efforts to improve its portfolio with acquisitions and developments in key markets. In the first quarter of 2025, Regency acquired Brentwood Place Shopping Center, a premier retail destination in Brentwood, TN, for around $119 million at its share. The move aligns with the company’s efforts to improve its portfolio quality through investments in high-growth markets like Nashville. As of March 31, 2025, Regency Centers’ in-process development and redevelopment projects have estimated net project costs of around $499 million at the company’s share. 

Regency Centers is focused on strengthening its balance sheet. This retail REIT had $1.2 billion of capacity under its revolving credit facility and approximately $78.5 million of cash and equivalents as of March 31, 2025. As of the same date, its pro-rata net debt and preferred stock-to-operating EBITDAre ratio was 5.3, while the fixed charge coverage ratio was 4.3. REG also enjoys a large pool of unencumbered assets. As of March 31, 2025, 89.4% of its wholly-owned real estate assets were unencumbered. With a high percentage of such assets, the company can enjoy access to the secured and unsecured debt markets and maintain availability on the line. 

Solid dividend payouts are the biggest attraction for REIT investors, and Regency Centers is committed to boosting shareholder wealth. 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. Given the company’s solid operating platform, scope for growth and decent financial position compared to that of the industry, this dividend rate is expected to be sustainable over the long run. 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. Particularly, the efforts of online retailers in recent years to go deeper into the grocery business have emerged as a concern for this REIT that focuses on building a premium portfolio of grocery-anchored shopping centers. Consequently, this is expected to adversely impact the market share for brick-and-mortar stores. 

Further, an elevated 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.

Despite the Federal Reserve announcing rate cuts late in 2024, the interest rate is still high and is a concern for Regency Centers. Elevated rates imply high borrowing costs for the company, which can hinder its ability to acquire or develop its real estate holdings. Interest expenses for the first quarter of 2025 jumped 12% year over year to $48 million. Moreover, as of March 31, 2025, Regency’s consolidated debt was approximately $4.64 billion.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are VICI Properties VICI and W.P. Carey WPC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for VICI’s 2025 FFO per share is pinned at $2.34, suggesting year-over-year growth of 3.5%.

The Zacks Consensus Estimate for WPC’s 2025 FFO per share stands at $4.88, indicating an increase of 3.8% from the year-ago reported figure.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research