Regency Centers(REG) - 2021 Q3 - Quarterly Report

Form 10-Q Cover Page and Explanatory Notes Cover Page This report is the quarterly filing for Regency Centers Corporation and its operating partnership, Regency Centers, L.P., as of September 30, 2021, with the company meeting accelerated filer criteria - Regency Centers Corporation and Regency Centers, L.P. filed their quarterly report as of September 30, 2021[1] - Regency Centers Corporation is designated as a large accelerated filer, while Regency Centers, L.P. is a non-accelerated filer[3] - As of November 4, 2021, Regency Centers Corporation had 171,213,003 shares of common stock outstanding[5] EXPLANATORY NOTE This report consolidates the quarterly filings of Regency Centers Corporation (parent) and Regency Centers, L.P. (operating partnership) to provide a unified business view, with the parent, a REIT and general partner, holding approximately 99.6% equity in the operating partnership, which constitutes its primary asset - This report consolidates the quarterly filings of Regency Centers Corporation (parent) and Regency Centers, L.P. (operating partnership) to provide a unified business view and enhance efficiency[7][9][14] - The parent company is a Real Estate Investment Trust (REIT) and the general partner of the operating partnership, holding approximately 99.6% equity in the operating partnership as of September 30, 2021[8] - The parent company's sole material asset is its interest in the operating partnership, which holds all company assets and generates most of the required capital[10][13] PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for Regency Centers Corporation and its operating partnership, Regency Centers, L.P., as of September 30, 2021, including balance sheets, statements of operations, comprehensive income, equity/capital, and cash flows, along with detailed notes Regency Centers Corporation Consolidated Financial Statements Regency Centers Corporation's consolidated financial statements show a slight decrease in total assets but an increase in total equity as of September 30, 2021, with net income and EPS significantly growing in the first nine months of 2021, alongside a substantial increase in operating cash flow Regency Centers Corporation Consolidated Balance Sheet Key Data (in thousands of dollars) | Indicator | September 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :------------- | | Assets: | | | | Real estate assets, net | $9,152,806 | $9,107,750 | | Cash and cash equivalents and restricted cash | $362,685 | $378,450 | | Total assets | $10,853,903 | $10,936,904 | | Liabilities and Equity: | | | | Notes payable | $3,749,273 | $3,658,405 | | Unsecured credit facilities | $— | $264,679 | | Total liabilities | $4,710,439 | $4,878,757 | | Total stockholders' equity | $6,070,721 | $5,984,912 | | Total equity | $6,143,464 | $6,058,147 | Regency Centers Corporation Consolidated Statements of Operations Key Data (in thousands of dollars, except per share data) | Indicator | September 30, 2021 (3 months) | September 30, 2020 (3 months) | September 30, 2021 (9 months) | September 30, 2020 (9 months) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Total revenues | $307,375 | $242,944 | $869,237 | $757,715 | | Net income | $118,848 | $13,310 | $297,305 | $8,101 | | Net income attributable to common stockholders | $117,406 | $12,688 | $293,552 | $6,402 | | Earnings per share - Basic | $0.69 | $0.07 | $1.73 | $0.04 | | Earnings per share - Diluted | $0.69 | $0.07 | $1.72 | $0.04 | Regency Centers Corporation Consolidated Statements of Cash Flows Key Data (in thousands of dollars) | Indicator | September 30, 2021 (9 months) | September 30, 2020 (9 months) | | :-------------------------------- | :-------------------- | :-------------------- | | Net cash provided by operating activities | $508,478 | $374,589 | | Net cash used in investing activities | $(1,571) | $(65,522) | | Net cash used in financing activities | $(522,672) | $(143,753) | | Cash and cash equivalents and restricted cash, end of period | $362,685 | $280,876 | Regency Centers, L.P. Consolidated Financial Statements Regency Centers, L.P.'s consolidated financial statements mirror those of its parent, Regency Centers Corporation, in assets and liabilities, reflecting its role as the operating entity holding all assets, while also showing significant growth in net income and earnings per unit for the first nine months of 2021, with consistent cash flow activities Regency Centers, L.P. Consolidated Statements of Operations Key Data (in thousands of dollars, except per unit data) | Indicator | September 30, 2021 (3 months) | September 30, 2020 (3 months) | September 30, 2021 (9 months) | September 30, 2020 (9 months) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Total revenues | $307,375 | $242,944 | $869,237 | $757,715 | | Net income | $118,848 | $13,310 | $297,305 | $8,101 | | Net income attributable to common unitholders | $117,925 | $12,745 | $294,867 | $6,431 | | Earnings per unit - Basic | $0.69 | $0.07 | $1.73 | $0.04 | | Earnings per unit - Diluted | $0.69 | $0.07 | $1.72 | $0.04 | - Regency Centers, L.P.'s consolidated balance sheet is identical to Regency Centers Corporation's consolidated balance sheet in terms of assets and liabilities, reflecting the parent company's consolidation of the operating partnership[38] - The operating partnership's cash flow activities are consistent with the parent company, showing a significant increase in net cash from operating activities, a decrease in net cash used in investing activities, and an increase in net cash used in financing activities[53] Notes to Unaudited Consolidated Financial Statements The financial statement notes provide detailed information on the company's organizational structure, significant accounting policies, COVID-19 impact, real estate investments, debt, derivatives, leases, fair value measurements, equity and capital, stock-based compensation, earnings per share, and commitments and contingencies, notably including the acquisition of seven operating properties and repayment of $265 million in term loans in 2021 1. Organization and Significant Accounting Policies This section outlines Regency Centers Corporation's role as a REIT and its operating partnership, detailing its ownership of 298 properties and interests in 104 joint venture properties as of September 30, 2021, while also addressing the ongoing impact of COVID-19 on rent collection and tenant credit risk, with collection rates steadily improving in 2021, and explaining the company's accounting policies for consolidated entities and real estate partnerships - As of September 30, 2021, the company and its controlled subsidiaries collectively owned 298 properties and held partial interests in an additional 104 properties through unconsolidated real estate partnerships[60] - The COVID-19 pandemic continues to impact the company's business, with rent collection rates, though below pre-pandemic levels, steadily increasing in 2021, reaching approximately 98% of billed base rent collected as of September 30, 2021[62][134] - The parent company owns approximately 99.6% of the outstanding common partnership units of the operating partnership, which it classifies as permanent equity[64] 2. Real Estate Investments This section details the company's acquisition of consolidated shopping centers in the first nine months of 2021, including seven operating properties for a total purchase price of $222 million, which included the assumption of $111.175 million in debt Consolidated Shopping Center Acquisitions in the First Nine Months of 2021 (in thousands of dollars) | Purchase Date | Property Name | City/State | Property Type | Purchase Price | Net Debt Assumed | Intangible Assets | Intangible Liabilities | | :------- | :------- | :------- | :------- | :------- | :----------- | :------- | :------- | | July 30, 2021 | Willa Springs | Winter Springs, FL | Operating | $34,500 | $17,682 | $1,562 | $643 | | August 1, 2021 | Dunwoody Hall | Dunwoody, GA | Operating | $32,000 | $14,612 | $2,255 | $973 | | August 1, 2021 | Alden Bridge | Woodlands, TX | Operating | $43,000 | $27,529 | $3,198 | $2,308 | | August 1, 2021 | Hasley Canyon Village | Castaic, CA | Operating | $31,000 | $16,941 | $2,037 | $— | | August 1, 2021 | Shiloh Springs | Garland, TX | Operating | $19,500 | $— | $1,825 | $1,079 | | August 1, 2021 | Bethany Park Place | Allen, TX | Operating | $18,000 | $10,800 | $996 | $1,732 | | August 1, 2021 | Blossom Valley | Mountain View, CA | Operating | $44,000 | $23,611 | $2,895 | $732 | | Total | | | | $222,000 | $111,175 | $14,768 | $7,467 | - The properties acquired in 2021 were part of a seven-property portfolio from a USAA partnership, in which the company previously held a 20% equity interest[70] 3. Property Dispositions This section outlines the company's disposition of consolidated shopping centers and land in the first nine months of 2021, totaling six operating properties and four land parcels, which generated net proceeds of $131.861 million and a gain on sales of $38.198 million Consolidated Shopping Center and Land Dispositions (in thousands of dollars, except number of dispositions) | Indicator | September 30, 2021 (3 months) | September 30, 2020 (3 months) | September 30, 2021 (9 months) | September 30, 2020 (9 months) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net proceeds from real estate investments sold | $24,284 | $9,925 | $131,861 | $125,539 | | Net gain on sales of real estate (after tax) | $6,719 | $3,237 | $38,198 | $48,690 | | Number of operating properties sold | — | — | 6 | 3 | | Number of land parcels sold | 3 | 4 | 4 | 8 | - As of September 30, 2021, the company had one operating property and one land parcel classified as held for sale[71] 4. Other Assets This section lists the components of other assets, including goodwill, investments, prepaid expenses, furniture, fixtures and equipment, and deferred financing costs, with net goodwill decreasing to $169.56 million as of September 30, 2021, from the end of 2020 Other Assets Components (in thousands of dollars) | Indicator | September 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :------------- | | Goodwill, net | $169,560 | $173,868 | | Investments | $62,958 | $60,692 | | Prepaid expenses and other | $25,026 | $17,802 | | Furniture, fixtures and equipment, net | $5,487 | $6,560 | | Deferred financing costs, net | $8,021 | $2,524 | | Total other assets | $271,052 | $261,446 | - In 2020, the company recognized a goodwill impairment charge of $132.2 million due to market disruptions from the COVID-19 pandemic[74] 5. Notes Payable and Unsecured Credit Facilities This section details the company's outstanding debt, including fixed-rate mortgage notes, variable-rate mortgage notes, and fixed-rate unsecured notes, noting that unsecured credit facilities were fully repaid as of September 30, 2021, and that the company repaid $265 million in term loans and amended its credit agreement in 2021 to maintain $1.25 billion in borrowing capacity Outstanding Debt Components (in thousands of dollars) | Indicator | September 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :------------- | | Notes payable: | | | | Fixed-rate mortgage notes | $362,237 | $272,750 | | Variable-rate mortgage notes | $144,140 | $146,046 | | Fixed-rate unsecured notes | $3,242,896 | $3,239,609 | | Unsecured credit facilities: | | | | Revolving credit facility | $— | $— | | Term loans | $— | $264,679 | | Total outstanding debt | $3,749,273 | $3,923,084 | - In January 2021, the company fully repaid its $265 million term loan and cash settled related interest rate swaps[77] - On February 9, 2021, the company entered into an amended credit agreement, maintaining $1.25 billion in borrowing capacity and extending the maturity date to March 23, 2025[77] - As of September 30, 2021, the company was in compliance with all financial covenants and expects to remain compliant over the next 12 months[75] 6. Derivative Financial Instruments The company uses derivative financial instruments, such as interest rate swaps, to hedge interest rate risk associated with borrowings, aiming to stabilize interest expense, with all derivatives designated as cash flow hedges and not used for speculative purposes; as of September 30, 2021, approximately $3.7 million of accumulated comprehensive loss is expected to be reclassified from AOCI to earnings within the next 12 months - The company primarily uses interest rate swaps as part of its interest rate risk management strategy to increase stability of interest expense and manage interest rate volatility[77] - All derivative financial instruments are designated and qualify as cash flow hedges, and the company does not use derivatives for trading or speculative purposes[79] - As of September 30, 2021, the company expects approximately $3.7 million of accumulated comprehensive loss to be reclassified from AOCI to earnings within the next 12 months[80] 7. Leases All company leases are classified as operating leases, with lease revenue comprising fixed and variable components; for the first nine months of 2021, fixed and substantially fixed lease revenue totaled $594.471 million, and variable lease revenue was $195.538 million, with the company electing not to apply lease modification accounting for COVID-19 related rent concessions and continuing tenant negotiations Operating Lease Revenue Breakdown (in thousands of dollars) | Indicator | September 30, 2021 (3 months) | September 30, 2020 (3 months) | September 30, 2021 (9 months) | September 30, 2020 (9 months) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Fixed and substantially fixed lease revenue | $201,183 | $200,020 | $594,471 | $607,429 | | Variable lease revenue | $62,810 | $60,535 | $195,538 | $186,952 | | Other lease-related revenue, net | $19,190 | $(26,014) | $36,381 | $(62,751) | | Total lease revenue | $283,303 | $234,541 | $826,390 | $731,630 | - The company elected not to apply lease modification accounting for COVID-19 related rent concessions, instead treating them as part of the existing contract[85] - As of September 30, 2021, tenant receivables were $24.21 million, and straight-line rent receivables were $95.588 million[84] 8. Fair Value Measurements This section discloses the fair value measurements of the company's financial instruments, including notes payable, unsecured credit facilities, securities, available-for-sale debt securities, and interest rate derivatives, with most fair values determined using market observable inputs (Level 2) and credit valuation adjustments assessed for derivatives Carrying Value vs. Fair Value of Financial Liabilities (in thousands of dollars) | Indicator | September 30, 2021 Carrying Value | September 30, 2021 Fair Value | December 31, 2020 Carrying Value | December 31, 2020 Fair Value | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Notes payable | $3,749,273 | $4,171,212 | $3,658,405 | $4,102,382 | | Unsecured credit facilities | $— | $— | $264,679 | $265,226 | Assets and Liabilities by Fair Value Hierarchy (in thousands of dollars) | Indicator | September 30, 2021 Balance | Level 1 (Quoted prices in active markets) | Level 2 (Observable inputs) | Level 3 (Unobservable inputs) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Assets: | | | | | | Securities | $47,353 | $47,353 | $— | $— | | Available-for-sale debt securities | $15,605 | $— | $15,605 | $— | | Liabilities: | | | | | | Interest rate derivatives | $(4,265) | $— | $(4,265) | $— | - The fair value of the company's interest rate derivatives is determined using discounted cash flow analysis, primarily utilizing observable market inputs and assessing credit valuation adjustments[91][93] 9. Equity and Capital This section discloses common stock dividends, the At-The-Market (ATM) offering program, and the stock repurchase program; the board declared a $0.625 per share common stock dividend on November 3, 2021, while under the ATM program, the company settled 1,332,142 shares in September 2021 for approximately $82.5 million net proceeds, with about $64 million in remaining shares to be settled, and a $250 million stock repurchase program was authorized but no shares were repurchased as of September 30, 2021 - The company's Board of Directors declared a common stock dividend of $0.625 per share on November 3, 2021, payable on January 5, 2022[95] - Under the ATM program, the company settled 1,332,142 shares of common stock in September 2021, generating approximately $82.5 million in net proceeds used for operating property acquisitions[99] - As of September 30, 2021, $350.4 million of common stock remained available for issuance under the ATM program, with approximately $64 million in remaining shares to be settled[100][101] - The company's Board of Directors authorized a common stock repurchase program of up to $250 million on February 3, 2021, but no repurchases were made as of September 30, 2021[102] 10. Stock-Based Compensation For the nine months ended September 30, 2021, the company granted 358,607 shares of restricted stock with a weighted-average grant date fair value of $46.52 per share, with related expenses recognized in "General and administrative expenses" - For the first nine months of 2021, the company granted 358,607 shares of restricted stock with a weighted-average grant date fair value of $46.52 per share[104] - The company recognizes stock-based compensation expense in "General and administrative expenses" on its consolidated statements of operations[104] 11. Earnings per Share and Unit This section summarizes the calculation of earnings per share (EPS) for Regency Centers Corporation and earnings per unit (EPU) for Regency Centers, L.P., showing that for the first nine months of 2021, basic and diluted EPS for the parent were $1.73 and $1.72, respectively, and basic and diluted EPU for the operating partnership were $1.73 and $1.72, both representing significant increases from 2020 Regency Centers Corporation Earnings per Share (in thousands of dollars, except per share data) | Indicator | September 30, 2021 (3 months) | September 30, 2020 (3 months) | September 30, 2021 (9 months) | September 30, 2020 (9 months) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Income attributable to common stockholders - Basic | $117,406 | $12,688 | $293,552 | $6,402 | | Income attributable to common stockholders - Diluted | $117,406 | $12,688 | $293,552 | $6,402 | | Diluted earnings per share | $0.69 | $0.07 | $1.72 | $0.04 | Regency Centers, L.P. Earnings per Unit (in thousands of dollars, except per unit data) | Indicator | September 30, 2021 (3 months) | September 30, 2020 (3 months) | September 30, 2021 (9 months) | September 30, 2020 (9 months) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Income attributable to common unitholders - Basic | $117,925 | $12,745 | $294,867 | $6,431 | | Income attributable to common unitholders - Diluted | $117,925 | $12,745 | $294,867 | $6,431 | | Diluted earnings per unit | $0.69 | $0.07 | $1.72 | $0.04 | 12. Commitments and Contingencies This section discusses the company's litigation, environmental matters, and letter of credit commitments, with management believing that existing litigation and environmental issues will not materially adversely affect its financial condition, operating results, or liquidity, and $9.4 million in outstanding letters of credit as of September 30, 2021 - The company believes that existing litigation will not have a material adverse effect on its financial condition, results of operations, or liquidity[109] - The company faces environmental laws and regulations related to chemicals used by dry cleaner tenants and asbestos in older shopping centers, but believes the ultimate disposition will not have a material impact[110] - As of September 30, 2021, the company had $9.4 million in outstanding letters of credit, primarily used as collateral for self-insurance programs and construction for development projects[111] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's detailed discussion and analysis of the company's financial condition and operating results, covering forward-looking statements, non-GAAP measures, strategy overview, strategic execution outcomes, property portfolio, significant tenant risks, comparative operating results, supplemental earnings information, and liquidity and capital resources, highlighting significant growth in net income and same property net operating income for the first nine months of 2021 and robust balance sheet and financing performance Forward-Looking Statements This section contains forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995 and other federal securities laws, concerning the company's future financial, business, and legal outcomes, which are based on reasonable assumptions but are subject to risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update them unless required by law - Forward-looking statements in the report concern the company's future financial, business, legal, or other results and are subject to various risks and uncertainties[112] - The company does not guarantee the achievement of forward-looking statements, and actual results may differ materially from expectations due to risk factors[112][113] Non-GAAP Measures The company uses non-GAAP measures such as Core Operating Earnings, Nareit Funds From Operations (FFO), Net Operating Income (NOI), and pro-rata financial information to better understand operating results and financial condition; these metrics supplement, but do not replace, GAAP data and have limitations, thus requiring evaluation in conjunction with GAAP financial statements - The company uses non-GAAP measures (e.g., Core Operating Earnings, Nareit FFO, NOI, and pro-rata information) to enhance understanding of operating results and for management incentives and budgeting[114][115][118][159] - Nareit FFO measures REIT performance by excluding gains and impairments on real estate sales, depreciation, and amortization, offering a perspective on financial performance distinct from GAAP net income[117] - Pro-rata financial information aims to reflect the company's economic interest in consolidated and unconsolidated partnerships but has limitations and should not substitute GAAP financial statements[118][119][121] Overview of Our Strategy Regency Centers Corporation's strategy is to be the premier owner, operator, and developer of shopping centers, focusing on high-quality, grocery-anchored community centers, committed to creating shareholder value through disciplined development, a conservative capital structure, leading ESG practices, and an exceptional team - As of September 30, 2021, the company owned or had partial ownership in 402 retail properties, primarily anchored by market-leading grocery stores[122] - The company's mission is to be the premier owner, operator, and developer of shopping centers, creating shareholder value through high-quality properties, disciplined development, a conservative capital structure, ESG practices, and an exceptional team[123][124] Results of Executing on our Strategy In the first nine months of 2021, the company achieved significant strategic execution results, with net income attributable to common stockholders substantially increasing to $293.6 million, same property net operating income (excluding termination fees) growing by 16.4%, and improved leasing volume and occupancy rates, while maintaining a conservative balance sheet and ample liquidity through debt repayment, credit agreement amendments, and ATM program utilization Key Strategic Execution Results for the First Nine Months of 2021 | Indicator | September 30, 2021 (9 months) | September 30, 2020 (9 months) | | :-------------------------------- | :-------------------- | :-------------------- | | Net income attributable to common stockholders | $293.6 million | $6.4 million | | Pro-rata same property NOI (excluding termination fees) growth | 16.4% | | - The company completed 1,489 new and renewal lease transactions, covering 5.1 million square feet, with a positive rent spread of 2.3%[126] - As of September 30, 2021, the total portfolio leased rate was 93.5%, and the same property portfolio leased rate was 93.8%, both higher than December 31, 2020[126] - The company repaid $265 million in term loans and amended its credit agreement, maintaining $1.25 billion in borrowing capacity[126] - As of September 30, 2021, the company's pro-rata net debt to operating EBITDAre ratio was 5.0 times, down from 6.0 times as of December 31, 2020[126] Property Portfolio This section provides an overview of the company's consolidated and unconsolidated property portfolio, including property count, gross leasable area (GLA), and occupancy rates; as of September 30, 2021, the total portfolio leased rate was 93.4%, with anchor space at 96.4% and shop space at 88.5%, and for the first nine months of 2021, the company completed 5.074 million square feet of leasing activity at a weighted average base rent of $23.95 per square foot Consolidated Property Portfolio Overview (GLA in thousands of square feet) | Indicator | September 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :------------- | | Number of properties | 298 | 297 | | GLA | 37,235 | 37,029 | | Leased rate – Operating and in development | 93.4% | 92.2% | | Leased rate – Operating | 93.5% | 92.3% | | Weighted average annual effective rent (per square foot) | $23.09 | $22.90 | Pro-Rata Consolidated and Unconsolidated Shopping Center Portfolio Leased Rates | Indicator | September 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :------------- | | Leased rate – All properties | 93.4% | 92.3% | | Anchor space | 96.4% | 95.1% | | Shop space | 88.5% | 87.5% | Summary of Leasing Activity for the First Nine Months of 2021 (GLA in thousands of square feet) | Lease Type | Number of Lease Transactions | Area (thousands of sq ft) | Base Rent (per sq ft) | Tenant Allowances and Landlord Work (per sq ft) | Leasing Commissions (per sq ft) | | :-------------------------------- | :------------- | :-------------------- | :-------------------- | :-------------------------------- | :-------------------- | | Anchor Leases | | | | | | | New | 19 | 366 | $12.02 | $35.69 | $4.93 | | Renewals | 92 | 2,219 | $14.64 | $0.65 | $0.19 | | Shop Space Leases | | | | | | | New | 415 | 726 | $34.01 | $26.58 | $8.79 | | Renewals | 963 | 1,763 | $34.01 | $1.81 | $0.78 | | Total Leases | 1,489 | 5,074 | $23.95 | $7.29 | $1.96 | Significant Tenants and Concentrations of Risk The company mitigates operating and leasing risks through geographic diversification and avoiding reliance on a single property, market, or tenant; its top four tenants are all grocery stores, with Publix and Kroger having the highest concentrations, while the COVID-19 pandemic continues to affect tenant operations and rent collection, though base rent collection rates recovered to 98% in Q3 2021, and the company closely monitors retail trends and tenant performance to address potential bankruptcy and store closure risks - The company mitigates operating and leasing risks through geographic diversification and by avoiding reliance on a single property, market, or tenant[130] Significant Tenants and Their Proportions (as of September 30, 2021) | Tenant | Number of Stores | % of Company-Owned GLA | % of Annualized Base Rent | | :-------------------------------- | :------------- | :-------------------- | :-------------------- | | Publix | 68 | 7.4% | 3.5% | | Kroger | 53 | 7.5% | 3.3% | | Albertsons Companies | 45 | 4.6% | 3.0% | | Amazon/Whole Foods | 35 | 2.8% | 2.6% | | TJX Companies | 60 | 3.4% | 2.5% | - The COVID-19 pandemic led to an increase in tenant bankruptcies in 2020, which slowed in 2021; as of November 1, 2021, approximately 98% of billed base rent for Q3 2021 had been collected[131][134] Results from Operations This section provides a detailed comparison of operating results for the third quarters and first nine months of 2021 and 2020, highlighting the company's significant revenue growth and net income improvement in 2021, driven by higher rent collection, increased straight-line rent, and growth in management, transaction, and other fees, including $13.6 million in incentive income, alongside decreased depreciation and amortization and reduced interest expense, noting the large goodwill impairment and debt early extinguishment charges in 2020 Comparison of the three months ended September 30, 2021 and 2020 Total revenues for the third quarter of 2021 increased by $64.431 million year-over-year, primarily driven by a $48.8 million increase in lease revenues and a $13.529 million increase in management, transaction, and other fees, including $13.6 million in incentive income, while net income attributable to common stockholders surged from $12.688 million in 2020 to $117.406 million in 2021, with total operating expenses decreasing by $9.574 million and net interest expense falling by $4.801 million Total Revenue Change (in thousands of dollars) | Indicator | September 30, 2021 (3 months) | September 30, 2020 (3 months) | Change | | :-------------------------------- | :-------------------- | :-------------------- | :----- | | Lease revenues | $283,303 | $234,541 | $48,762 | | Other property revenues | $4,401 | $2,261 | $2,140 | | Management, transaction and other fees | $19,671 | $6,142 | $13,529 | | Total revenues | $307,375 | $242,944 | $64,431 | - The increase in lease revenues was primarily due to favorable changes in uncollected rent revenue (an increase of $35.3 million), an increase in straight-line rent (an increase of $11.0 million), and an increase in tenant recoveries (an increase of $1.5 million)[138] - Management, transaction, and other fees increased by $13.5 million, including $13.6 million in incentive income recognized for exceeding partnership return thresholds[139] Operating Expense Change (in thousands of dollars) | Indicator | September 30, 2021 (3 months) | September 30, 2020 (3 months) | Change | | :-------------------------------- | :-------------------- | :-------------------- | :----- | | Depreciation and amortization | $75,459 | $84,808 | $(9,349) | | Operating and maintenance | $43,468 | $41,345 | $2,123 | | General and administrative | $17,789 | $19,582 | $(1,793) | | Real estate taxes | $35,779 | $35,938 | $(159) | | Other operating expenses | $812 | $1,208 | $(396) | | Total operating expenses | $173,307 | $182,881 | $(9,574) | - Net interest expense decreased by $4.8 million, primarily due to the redemption of $300 million in senior unsecured notes in September 2020 and the repayment of $265 million in term loans in January 2021[142][146] Comparison of the nine months ended September 30, 2021 and 2020 Total revenues for the first nine months of 2021 increased by $111.522 million year-over-year, primarily driven by a $94.8 million increase in lease revenues and a $14.335 million increase in management, transaction, and other fees, while net income attributable to common stockholders surged from $6.402 million in 2020 to $293.552 million in 2021, with total operating expenses decreasing by $20.146 million and net interest expense falling by $9.864 million, noting a $132.1 million goodwill impairment recognized in 2020 Total Revenue Change (in thousands of dollars) | Indicator | September 30, 2021 (9 months) | September 30, 2020 (9 months) | Change | | :-------------------------------- | :-------------------- | :-------------------- | :----- | | Lease revenues | $826,390 | $731,630 | $94,760 | | Other property revenues | $9,428 | $7,001 | $2,427 | | Management, transaction and other fees | $33,419 | $19,084 | $14,335 | | Total revenues | $869,237 | $757,715 | $111,522 | - The increase in lease revenues was primarily due to favorable changes in uncollected rent revenue (an increase of $84.1 million) and an increase in straight-line rent (an increase of $25.3 million)[149] - Management, transaction, and other fees increased by $14.3 million, including $13.6 million in incentive income recognized for exceeding partnership return thresholds[150] Operating Expense Change (in thousands of dollars) | Indicator | September 30, 2021 (9 months) | September 30, 2020 (9 months) | Change | | :-------------------------------- | :-------------------- | :-------------------- | :----- | | Depreciation and amortization | $226,935 | $259,161 | $(32,226) | | Operating and maintenance | $135,616 | $123,746 | $11,870 | | General and administrative | $58,263 | $54,489 | $3,774 | | Real estate taxes | $107,392 | $108,618 | $(1,226) | | Other operating expenses | $2,687 | $5,025 | $(2,338) | | Total operating expenses | $530,893 | $551,039 | $(20,146) | - In the first nine months of 2020, the company recognized a goodwill impairment charge of $132.1 million due to significant adverse market and economic impacts from the COVID-19 pandemic[154] Supplemental Earnings Information This section provides supplemental earnings information, including adjustments for pro-rata same property Net Operating Income (NOI), same property rollforward data, Nareit FFO, and Core Operating Earnings; for the first nine months of 2021, pro-rata same property NOI (excluding termination fees) increased by 16.4%, and Nareit FFO and Core Operating Earnings also significantly increased, primarily due to improved rent collection rates and adjustments for non-cash items Pro-Rata Same Property NOI In the third quarter of 2021, pro-rata same property Net Operating Income (excluding termination fees) increased by 24.4% to $215.424 million; for the first nine months, it grew by 16.4% to $632.91 million, primarily driven by significant improvements in uncollected rent revenue and increased tenant recoveries Pro-Rata Same Property Net Operating Income (excluding termination fees) (in thousands of dollars) | Indicator | September 30, 2021 (3 months) | September 30, 2020 (3 months) | Change | September 30, 2021 (9 months) | September 30, 2020 (9 months) | Change | | :-------------------------------- | :-------------------- | :-------------------- | :----- | :-------------------- | :-------------------- | :----- | | Pro-rata same property NOI | $217,456 | $174,489 | $42,967 | $637,318 | $549,054 | $88,264 | | Less: Termination fees | $2,032 | $1,353 | $679 | $4,408 | $5,490 | $(1,082) | | Pro-rata same property NOI (excluding termination fees) | $215,424 | $173,136 | $42,288 | $632,910 | $543,564 | $89,346 | | Growth Rate (excluding termination fees) | | | 24.4% | | | 16.4% | - Uncollected rent revenue decreased by $38.8 million and $92.8 million in the third quarter and first nine months of 2021, respectively, primarily due to the recovery of previously reserved amounts and improved current collection rates[164] - Tenant recoveries increased by $1.1 million and $8.8 million in the third quarter and first nine months of 2021, respectively, mainly due to higher current operating expenses and improved tenant recovery rates[163] Same Property Rollforward This section provides rollforward data for the same property portfolio's property count and Gross Leasable Area (GLA); as of September 30, 2021, the same property count was 394 with a GLA of 41.312 million square feet, an increase from year-end 2020, primarily including acquired properties and completed development projects Same Property Portfolio Rollforward Data (GLA in thousands of square feet) | Indicator | September 30, 2021 Number of Properties | September 30, 2021 GLA | September 30, 2020 Number of Properties | September 30, 2020 GLA | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Beginning same property count | 393 | 40,228 | 396 | 40,525 | | Acquired properties owned for entire comparable period | 2 | 924 | 5 | 315 | | Completed development projects | 6 | 683 | 3 | 553 | | Disposed properties | (7) | (407) | (3) | (427) | | Ending same property count | 394 | 41,312 | 398 | 40,522 | - The 2021 adjustments include the acquisition of an 80% interest in seven properties from a USAA partnership, with 20% already included in the same property portfolio[166] Nareit FFO and Core Operating Earnings This section provides reconciliation tables from net income attributable to common stockholders and unitholders to Nareit FFO, and from Nareit FFO to Core Operating Earnings; for the first nine months of 2021, Nareit FFO was $514.468 million and Core Operating Earnings were $482.076 million, both significantly increased from 2020, primarily due to improved net income and adjustments for non-cash items Nareit FFO and Core Operating Earnings Reconciliation (in thousands of dollars, except share information) | Indicator | September 30, 2021 (3 months) | September 30, 2020 (3 months) | September 30, 2021 (9 months) | September 30, 2020 (9 months) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net income attributable to common stockholders | $117,406 | $12,688 | $293,552 | $6,402 | | Nareit FFO | $192,611 | $101,698 | $514,468 | $372,498 | | Core Operating Earnings | $163,883 | $107,907 | $482,076 | $381,452 | - The increase in Nareit FFO is primarily attributable to adjustments for depreciation and amortization, goodwill impairment (in 2020), and gains on sales of real estate[167] - Adjustments for Core Operating Earnings include non-comparable and non-cash items such as early extinguishment of debt, incentive income, straight-line rent, uncollected straight-line rent, and market rent amortization[167] Same Property NOI Reconciliation This section provides a reconciliation table from net income attributable to common stockholders to pro-rata same property Net Operating Income; for the first nine months of 2021, pro-rata same property Net Operating Income was $637.318 million, a significant increase from 2020, reflecting improved operating performance Reconciliation from Net Income to Pro-Rata Same Property NOI (in thousands of dollars) | Indicator | September 30, 2021 (3 months) | September 30, 2020 (3 months) | September 30, 2021 (9 months) | September 30, 2020 (9 months) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net income attributable to common stockholders | $117,406 | $12,688 | $293,552 | $6,402 | | Pro-rata same property NOI | $217,456 | $174,489 | $637,318 | $549,054 | - Reconciliation items include subtracting management, transaction, and other fees, and other non-NOI revenues, and adding back depreciation and amortization, general and administrative expenses, other operating expenses, other expenses (income), and equity in earnings of unconsolidated real estate partnerships excluded from NOI[169] Liquidity and Capital Resources This section discusses the company's liquidity and capital resources strategy, including leveraging cash flow from operations, property sales, and debt and equity financing to meet long-term capital needs; the company has ample available capital resources, including $359.4 million in unrestricted cash and $1.240619 billion in available capacity under its credit facility, sufficient to meet capital requirements for the next 12 months, and also details cash flow activities, real estate partnership investments, and management fee income General The company utilizes cash flows from operating, investing, and financing activities to strengthen its balance sheet, fund development and redevelopment projects, support investment activities, and maintain financial flexibility; it anticipates approximately $363 million in capital requirements for the next 12 months and believes its existing cash balance, capital sources, and credit ratings are sufficient to meet these needs, with 88.7% of its wholly-owned real estate assets unencumbered as of September 30, 2021 - The company utilizes cash flow from operations, property sales, mortgage and unsecured bank financing, and equity issuances to meet long-term capital needs[173] - As of September 30, 2021, the company had $359.4 million in unrestricted cash and $1.240619 billion in available capacity under its credit facility[175] - The company anticipates approximately $363 million in capital requirements for the next 12 months, primarily for construction, development, and redevelopment projects, and repayment of maturing debt[177] - As of September 30, 2021, 88.7% of the company's wholly-owned real estate assets were unencumbered, and its fixed charge coverage ratio and net debt to operating EBITDAre ratio had improved[178] Summary of Cash Flow Activity For the first nine months of 2021, net cash provided by operating activities increased by $133.9 million, net cash used in investing activities decreased by $64 million, and net cash used in financing activities increased by $378.919 million; these changes primarily reflect improved rent collection rates, reduced investments in real estate development and capital improvements, increased proceeds from real estate sales, and debt repayment and equity issuance activities Summary of Cash Flow Activity (in thousands of dollars) | Indicator | September 30, 2021 (9 months) | September 30, 2020 (9 months) | Change | | :-------------------------------- | :-------------------- | :-------------------- | :----- | | Net cash provided by operating activities | $508,478 | $374,589 | $133,889 | | Net cash used in investing activities | $(1,571) | $(65,522) | $63,951 | | Net cash used in financing activities | $(522,672) | $(143,753) | $(378,919) | | Net (decrease) increase in cash and cash equivalents and restricted cash | $(15,765) | $165,314 | $(181,079) | - Net cash provided by operating activities increased by $133.9 million, primarily due to improved rent collection rates[182][183] - Net cash used in investing activities decreased by $64 million, mainly due to a $28.5 million reduction in real estate development and capital improvement investments, and a $63.214 million increase in capital recovered from real estate partnerships[182][184][186] - Net cash used in financing activities increased by $378.919 million, primarily due to the repayment of $265 million in unsecured credit facilities in 2021, compared to the issuance of $598.83 million in unsecured notes in 2020[191][192] Investments in Real Estate Partnerships This section outlines the company's investments in unconsolidated partnerships, including their pro-rata assets and liabilities; as of September 30, 2021, total investments in real estate partnerships amounted to $379.704 million, with these partnerships holding $1.4 billion in notes payable, 93.2% of which are fixed-rate, and the company's pro-rata share of this debt is $517.518 million Summary of Unconsolidated Partnership Balance Sheets and Regency's Pro-Rata Share (in thousands of dollars) | Indicator | September 30, 2021 Consolidated | December 31, 2020 Consolidated | September 30, 2021 Regency's Share | December 31, 2020 Regency's Share | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Number of joint ventures | 15 | 17 | | | | Number of properties | 104 | 114 | | | | Assets | $2,793,429 | $3,067,227 | $1,003,943 | $1,086,874 | | Liabilities | $1,563,899 | $1,687,587 | $556,348 | $577,001 | | Equity | $1,229,530 | $1,379,640 | $447,595 | $509,873 | | Investments in real estate partnerships | | | $379,704 | $467,155 | - As of September 30, 2021, real estate partnerships held $1.4 billion in notes payable, with 93.2% at a weighted average fixed interest rate of 3.7%, and the company's pro-rata share of this debt is $517.518 million[196] - The company expects its partners to be in good financial standing and capable of meeting future capital requirements[197] Management fee income In addition to its pro-rata net income or loss from partnerships, the company earns management, property management, leasing, and other transaction fees; for the first nine months of 2021, these fees totaled $33.392 million, including a $13.6 million incentive fee recognized upon acquiring an interest in a USAA partnership Management Fee Income (in thousands of dollars) | Indicator | September 30, 2021 (3 months) | September 30, 2020 (3 months) | September 30, 2021 (9 months) | September 30, 2020 (9 months) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Asset management, property management, leasing and other transaction fees | $19,662 | $6,130 | $33,392 | $19,134 | - Upon acquiring an interest in a USAA partnership, the company recognized a $13.6 million incentive fee as consideration for exceeding partnership return thresholds[198] Recent Accounting Pronouncements The company adopted ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which had no material impact on its financial statements, and ASU 2021-05, "Leases (Topic 842): Lessors – Certain Leases with Variable Lease Payments," is expected to be adopted in January 2022 and is also not anticipated to have a material impact - The adoption of ASU 2019-12, "Income Taxes," did not have a material impact on the company's financial position, results of operations, or cash flows[68] - ASU 2021-05, "Leases," is expected to be adopted in January 2022 and is not anticipated to have a material impact on the company's financial position, results of operations, or cash flows[68] Environmental Matters The company is subject to various environmental laws and regulations, primarily concerning chemicals used by dry cleaner tenants and asbestos in older shopping centers; as of September 30, 2021, the company has accrued a pro-rata liability of $7.4 million for environmental remediation and believes existing environmental issues will not materially impact its financial condition, liquidity, or operating results - The company is subject to environmental laws and regulations related to chemicals used by dry cleaner tenants and asbestos in older shopping centers[200] - As of September 30, 2021, the company has accrued a pro-rata liability of $7.4 million for environmental remediation[201] - The company believes the ultimate disposition of existing environmental matters will not have a material adverse effect on its financial condition, liquidity, or results of operations[201] Inflation/Deflation Despite historically low inflation, recent increases in U.S. inflation could negatively impact tenants, operating costs, and construction costs; most of the company's long-term leases include provisions requiring tenants to pay a pro-rata share of operating expenses, mitigating inflation's effects, however, during periods of deflation or economic weakness, minimum and percentage rents and recovery rates may decline - Recent increases in U.S. inflation could negatively impact tenants, operating costs, and construction costs[202] - Most of the company's long-term lease contracts include provisions requiring tenants to pay a pro-rata share of operating expenses, mitigating the negative effects of inflation[202] - During periods of deflation or economic weakness, minimum and percentage rents may decrease, and operating expense recovery rates may also be reduced[202] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company continuously monitors capital markets and assesses its ability to issue new debt, repay maturing debt, or fulfill commitments; despite capital market volatility due to the pandemic, the company believes its credit ratings, available capacity under unsecured credit facilities, and high-quality, unencumbered properties enable successful new debt issuance to meet debt obligations, with no material changes in market risk disclosures from its 2020 10-K report - The company continuously monitors capital markets and believes its credit ratings, credit facility capacity, and unencumbered properties enable successful new debt issuance to meet debt obligations[203] - There are no material changes in the quantitative and qualitative disclosures about market risk in this quarterly report compared to the company's 10-K report for the year ended December 31, 2020[203] Item 4. Controls and Procedures Management of both Regency Centers Corporation and Regency Centers, L.P., including the Chief Executive Officer and Chief Financial Officer, evaluated and determined their disclosure controls and procedures were effective as of the end of the reporting period, with no changes identified in this quarterly report that materially affected internal control over financial reporting - Regency Centers Corporation's Chief Executive Officer and Chief Financial Officer certified that their disclosure controls and procedures were effective as of the end of the reporting period[204] - The Chief Executive Officer and Chief Financial Officer of the general partner of Regency Centers, L.P. certified that their disclosure controls and procedures were effective as of the end of the reporting period[206] - No changes materially affecting internal control over financial reporting were identified in this quarterly report[205][208] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is a party to various legal proceedings arising in the ordinary course of business, but management believes no current litigation will have a material adverse effect on the company's financial condition or operating results - The company is a party to various legal proceedings arising in the ordinary course of business[209] - Management believes that no current litigation will have a material adverse effect on the company's financial condition or results of operations[209] Item 1A. Risk Factors The risk factors disclosed in this quarterly report are consistent with those presented in the company's 10-K report for the year ended December 31, 2020, with no material changes - The risk factors disclosed in this quarterly report are consistent with those presented in the company's 10-K report for the year ended December 31, 2020, with no material changes[210] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on the company's common stock repurchases during the third quarter of 2021, primarily for paying withholding taxes related to restricted stock vesting; the board authorized a $250 million common stock repurchase program on February 3, 2021, but no shares were repurchased under this program as of September 30, 2021 Common Stock Repurchase Information for Q3 2021 | Period | Total Number of Shares Repurchased | Average Price Paid per Share | | :-------------------------------- | :------------- | :-------------------- | | July 1 to July 31, 2021 | — | $— | | August 1 to August 31, 2021 | 286 | $66.39 | | September 1 to September 30, 2021 | 437 | $69.04 | - The repurchased shares were used to satisfy withholding taxes related to the vesting of employee restricted stock[212] - The company's Board of Directors authorized a common stock repurchase program of up to $250 million, but no repurchases were made as of September 30, 2021[212] Item 3. Defaults Upon Senior Securities The company did not experience any defaults upon senior securities during this reporting period - The company did not experience any defaults upon senior securities during this reporting period[213] Item 4. Mine Safety Disclosures This disclosure item is not applicable to the company - The mine safety disclosure item is not applicable to the company[213] Item 5. Other Information No other information requiring disclosure was present during this reporting period - No other information requiring disclosure was present during this reporting period[214] Item 6. Exhibits This section lists the exhibits filed with the report, including Rule 13a-14(a)/15d-14(a) and Section 1350 certifications, and interactive data files; terms in the exhibits' agreements are provided for informational purposes only, should not be considered factual statements, and may be qualified by disclosures - The exhibit list includes Rule 13a-14(a)/15d-14(a) and Section 1350 certifications, as well as interactive data files[219] - The terms in the exhibit agreements are provided for informational purposes only, should not be considered factual statements, and may be qualified by disclosures[215][218] SIGNATURES This report was signed by authorized representatives of Regency Centers Corporation and Regency Centers, L.P. on November 5, 2021, including Chief Financial Officer Michael J. Mas and Senior Vice President and Treasurer J. Christian Leavitt - This report was signed by authorized representatives of Regency Centers Corporation and Regency Centers, L.P. on November 5, 2021[221][222] - Signatories include Michael J. Mas, Executive Vice President and Chief Financial Officer, and J. Christian Leavitt, Senior Vice President and Treasurer[222][223]