Regency Centers(REG) - 2023 Q3 - Quarterly Report

Explanatory Note This section clarifies the combined reporting structure for Regency Centers Corporation and its Operating Partnership, which are managed as a single business entity Combined Reporting Structure This report combines quarterly filings for Regency Centers Corporation, a REIT and general partner, and its controlled subsidiary, Regency Centers, L.P., which holds all company assets and conducts business operations - Regency Centers Corporation (Parent Company) is a REIT and the general partner of the Operating Partnership, owning approximately 99.4% of its Common Units as of September 30, 2023[7] - The Parent Company's only material asset is its ownership of the Operating Partnership, which holds all company assets, incurs most debt, and generates capital for business operations[9] - The primary differences in consolidated financial statements between the two entities are in shareholders' equity versus partners' capital and the treatment of noncontrolling interests, while assets and liabilities remain identical[10][13] PART I - FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited consolidated financial statements for both Regency Centers Corporation and Regency Centers, L.P. for the periods ended September 30, 2023, and 2022, including balance sheets, statements of operations, comprehensive income, equity/capital, cash flows, and detailed notes Regency Centers Corporation Financial Statements Consolidated financial statements for Regency Centers Corporation show total assets increased to $12.4 billion as of September 30, 2023, from $10.9 billion at year-end 2022, with total revenues growing to $962.9 million for the nine months ended September 30, 2023, while net income decreased to $273.1 million due to a 2022 gain on sale Regency Centers Corporation - Key Financial Data (in thousands of US Dollars) | Financial Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total Revenues | $962,862 | $909,505 | | Net Income Attributable to Common Shareholders | $273,139 | $387,602 | | Diluted EPS | $1.57 | $2.26 | | Total Assets (as of period end) | $12,381,414 | N/A | | Total Liabilities (as of period end) | $5,149,887 | N/A | | Total Equity (as of period end) | $7,231,527 | N/A | Regency Centers Corporation - Cash Flow Summary (Nine Months Ended, in thousands of US Dollars) | Cash Flow Activity | Sep 30, 2023 | Sep 30, 2022 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $547,685 | $528,242 | | Net Cash used in Investing Activities | ($231,527) | ($111,867) | | Net Cash used in Financing Activities | ($303,864) | ($356,418) | Regency Centers, L.P. Financial Statements The financial statements for Regency Centers, L.P. mirror the Parent Company's assets and liabilities, totaling $12.4 billion and $5.1 billion respectively, with net income attributable to common unit holders at $274.6 million for the nine months ended September 30, 2023 - The assets and liabilities of the Operating Partnership are identical to those of the Parent Company, as the Operating Partnership holds all the assets of the consolidated company[13][35] Regency Centers, L.P. - Key Financial Data (in thousands of US Dollars) | Financial Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total Revenues | $962,862 | $909,505 | | Net Income Attributable to Common Unit Holders | $274,629 | $389,296 | | Diluted EPU | $1.57 | $2.26 | | Total Assets (as of period end) | $12,381,414 | N/A | | Total Liabilities (as of period end) | $5,149,887 | N/A | | Total Capital (as of period end) | $7,231,527 | N/A | Notes to Consolidated Financial Statements Notes detail accounting policies and financial components, including the $1.14 billion UBP acquisition, real estate investments, debt structure, lease income, fair value measurements, and equity activities like dividends and stock repurchases - On August 18, 2023, the company completed its acquisition of Urstadt Biddle Properties Inc. (UBP) in an all-stock transaction[57][58] UBP Acquisition Purchase Price Allocation (in thousands of US Dollars) | Allocation Category | Amount | | :--- | :--- | | Real estate assets | $1,415,777 | | Cash, accounts receivable and other assets | $51,902 | | Lease intangible assets | $128,663 | | Total assets acquired | $1,596,342 | | Notes payable | $284,706 | | Accounts payable, accrued expenses, and other liabilities | $37,500 | | Lease intangible liabilities | $69,583 | | Total liabilities assumed | $391,789 | | Non-controlling interest | $64,492 | | Total purchase price | $1,140,061 | - During the nine months ended September 30, 2023, the company repurchased 349,519 common shares for $20.0 million under its repurchase program, with $230.0 million remaining available[100] - On November 2, 2023, the Board declared a common stock dividend of $0.67 per share, an increase from the previous rate[97] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strategy, performance, and financial condition, highlighting the UBP acquisition, 2.0% pro-rata same property NOI growth, 9.2% positive rent spreads, and a strong balance sheet with $1.2 billion available credit and a 5.5x net debt-to-EBITDAre ratio Overview of Strategy and Recent Performance Regency focuses on high-quality, grocery-anchored shopping centers, achieving 2.0% pro-rata same property NOI growth and executing 4.8 million square feet of leases with a 9.2% positive rent spread, resulting in a 94.6% total portfolio leased rate as of September 30, 2023 - The company's strategy is to own and manage a portfolio of high-quality neighborhood and community shopping centers primarily anchored by market-leading grocers in desirable US metro areas[123][128] - Completed the acquisition of UBP, adding 74 properties and 5.3 million square feet of GLA[129][131] Leasing and Occupancy Highlights (Nine Months Ended Sep 30, 2023) | Metric | Value | | :--- | :--- | | Pro-rata Same Property NOI Growth (ex-termination fees) | 2.0% | | Total Leases Executed (Pro-rata SF) | 4.8 million | | Rent Spreads (New & Renewal) | +9.2% | | Total Portfolio % Leased | 94.6% | | Same Property % Leased | 95.4% | Results of Operations Q3 2023 total revenues increased by $26.6 million to $330.6 million, driven by the UBP acquisition and same-property growth, while nine-month net income fell due to a 2022 gain on sale, though Core Operating Earnings increased to $516.5 million Q3 2023 vs Q3 2022 Revenue and Expense Changes (in thousands of US Dollars) | Item | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $330,638 | $303,989 | $26,649 | | Total Operating Expenses | $211,339 | $188,995 | $22,344 | - The increase in Q3 2023 base rent was primarily driven by $11.8 million from the UBP acquisition and a $6.5 million net increase from same properties[142] Nareit FFO and Core Operating Earnings (in thousands of US Dollars) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Nareit FFO | $546,048 | $526,268 | | Core Operating Earnings | $516,475 | $491,591 | Liquidity and Capital Resources The company maintains strong liquidity with $74.4 million in unrestricted cash and $1.16 billion available on its credit line, a 5.5x pro-rata net debt-to-EBITDAre ratio, and $547.7 million in operating cash flow, with no unsecured debt maturities until June 2024 Available Capital Sources (as of Sep 30, 2023, in thousands of US Dollars) | Source | Available Capacity | | :--- | :--- | | ATM Program | $500,000 | | Line of Credit | $1,164,720 | - Pro-rata net debt and Preferred Stock-to-operating EBITDAre ratio was 5.5x on a trailing 12-month basis as of September 30, 2023[177] - The company has in-process development and redevelopment projects with total estimated pro-rata costs of $440.0 million[130][186] - As of September 30, 2023, 85.7% of wholly-owned real estate assets were unencumbered, providing financial flexibility[177] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company monitors capital markets and debt management, expecting to issue new debt for maturing obligations, but acknowledges that market volatility and rising interest rates could increase new debt costs - The company believes it can successfully issue new debt to fund maturing obligations, but acknowledges that rising interest rates will likely make new debt more expensive than current outstanding debt[171][196] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal controls over financial reporting during the third quarter - The chief executive officer and chief financial officer of both the Parent Company and the Operating Partnership concluded that disclosure controls and procedures were effective as of the end of the reporting period[197][199] - No changes in internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, internal controls were identified during the third quarter of 2023[198][200] PART II - OTHER INFORMATION This section provides additional information not covered in Part I, including legal proceedings, risk factors, equity sales, and other disclosures Item 1. Legal Proceedings A complaint filed by a purported UBP stockholder in connection with the merger was resolved during the quarter, with no other material developments in legal proceedings reported - Litigation related to the UBP acquisition, where a stockholder alleged breaches of fiduciary duty and disclosure failures, was resolved during the quarter with an immaterial payment[108] Item 1A. Risk Factors No material changes to risk factors from the 2022 Annual Report, except for those in the Form S-4 for the UBP acquisition and a new risk factor concerning potential adverse effects from banking and financial services industry instability - A new risk factor was identified regarding potential adverse effects from instability in the banking and financial services industry, which could impair access to capital for the company, its tenants, and partners[203][204] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2023, the company issued 3,340 common shares to redeem Operating Partnership common units under a registration exemption and repurchased shares for employee tax withholding, with $230 million remaining in the stock repurchase program - Issued 3,340 shares of common stock in connection with the redemption of L.P. common units, exempt from registration under Section 4(a)(2) of the Securities Act[206] Issuer Purchases of Equity Securities (Q3 2023, in US Dollars) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Value of Shares Remaining in Program (US Dollars) | | :--- | :--- | :--- | :--- | | July 2023 | — | $— | $230,000,000 | | August 2023 | 341 | $65.01 | $230,000,000 | | September 2023 | 649 | $63.11 | $230,000,000 | Item 5. Other Information Executive Chairman Martin E. Stein Jr. adopted a new Rule 10b5-1 trading plan for up to 50,000 shares, and the company entered into new indemnification agreements with directors and executive officers on November 2, 2023 - On September 13, 2023, Executive Chairman Martin E. Stein Jr. terminated a previous Rule 10b5-1 trading plan and adopted a new one for the sale of up to 50,000 shares of common stock[210] - On November 2, 2023, the Company entered into new indemnification agreements with all current members of its Board of Directors and its executive officers[211] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including equity distribution agreements, the UBP merger agreement, articles of incorporation, material contracts, and various SEC-required certifications