Regency Centers Posts Steady Quarter; Raises Guidance

Regency Centers Corp. REG did not hit the ball out of the park with SSNOI of +1%, sequentially flat occupancy and leasing spreads were also a little weaker this quarter. However it was reassuring to see an increase in SSNOI forecast in guidance and management's comments on 'continued improvement in fundamentals'. Citi continues to like Buy rated Regency in the shopping centre space and rate the portfolio, NOI upside exists as shop leasing conditions improve further. REG's revised recurring FFO guidance for 2010 was increased 5c at the low end to $2.35-$2.40 citing improving fundamentals. Headline FFO guidance was narrowed to $2.25-$2.30, versus Citi's current 2010 estimate and consensus at $2.33. REG's FFO of 61c for 3Q was 1c ahead of Citi's estimate and 4c above the street. 4 properties of about $34m total spend were completed in the quarter. The in process pipeline ($575m) has an expected stabilized yield of 6.8% and a completion yield of 5.5%, while projects completed but not yet stabilized ($243m) have a current yield of 5.9% and a stabilised yield of 7.8%. As asset values continue to improve, there is probably now limited value destruction from the development pipeline. Citi has a Buy rating and a $47.50 PT on REG REG closed Wednesday at $43.50