Tuesday, March 23, 2010

Regency Centers (REG) Q4 2009 Supplemental Information

Regency Centers (REG) has posted their fourth quarter 2009 financial supplement [pdf].

There are a number of interesting elements in the report:
  • Fourth quarter net operating income (NOI) was down 7.4% year over year, and the full year NOI was down 6.7%, meaning that the decline steepened in the most recent quarter.
  • During the quarter they acquired (their pro rata share) $116 million of property at an average 8.79% cap rate, and sold (their pro rata share) $136 million of property at an 8.12% cap rate. Additionally they sold $53 million of completed development properties at a 9% cap rate.
  • For the full year, the payout ratio of diluted FFO was 192% as opposed to 77% in 2008.
  • The fixed charge coverage ratios have also deteriorated since 2008.
NOI for the full year was $328 million.

Regency's NOI means its income from shopping centers, but Regency has additional sources of income that should be accounted for: property management fees, leasing commissions, etc. These totaled $40.5 million for the full year.

Of course, it has expenses that are not included in NOI either, especially general and administrative expenses. Counting only the operating, cash expenses, these non-NOI expenses were $56 million - greater than the non-NOI income by $15.5 million. (In 2008, the amounts were about $80 million for income and $51 million for expense.)

Regency has an enterprise value of $4.95 billion. Taking just the NOI for 2009 that implies a 6.6% cap rate. [If you subtract the $15.5 million that the side businesses lost, that implies a 6.3% cap rate. On the other hand, if you thought the side businesses could recover and sustainably make $30 million a year again, that would imply a cap rate of 7.2%.]

One thing that needs to be added in is the value of the development portfolio. They have a certain amount of square footage under development/construction that represents underutilized assets. I haven't put a number on this yet.

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