Fitch Ratings, the global credit rating firm, has reaffirmed the credit rating of BBB for Regency Centers Corporation (REG - Analyst Report), a real estate investment trust (REIT). The BBB-rating denotes a fairly stable outlook with a relatively strong credit quality, low default risk, and adequate capacity to meet current financial commitments.
While reaffirming Regency’s credit rating, Fitch has considered its high quality asset portfolio, solid past operating performance, strong liquidity, adequate debt service coverage, manageable debt maturity schedule and its ability to access capital from varied sources.
Jacksonville, Florida-based Regency owns, operates and develops grocery-anchored retail shopping centers in the U.S. The average household income in the markets in which Regency has a significant presence is over $100,000. With properties in high income, high-barrier markets, Regency’s retail strip center portfolio is among the best in the sector, which allows it to continually perform at the top-end of its peer group.
Regency maintains a conservative capital structure and follows a self-funding capital strategy to fund its growth, which includes disposal of non-strategic assets and a continued focus on industry-leading co-investment partnership programs.
During fourth quarter 2011, the company closed a $250 million unsecured term loan to increase its liquidity and fund its huge development pipeline. The five-year term loan is scheduled to mature in December 2016 and includes an accordion feature that would enable Regency to repay it fully before maturity without any prepayment charges.
At year-end 2011, Regency had cash and cash equivalents of about $17.5 million with a debt of $2.0 billion. Pro rata leverage (net debt divided by recurring operating EBITDA) was 6.4x at year-end 2011 compared to 6.7x at year-end 2010. In addition, pro-rata fixed-charge coverage ratio was 1.9x at year-end 2011, which was unchanged from that of the year-earlier period.
We presently have a Neutral rating on Regency, which currently has a Zacks #3 Rank that translates into a short-term Hold recommendation. We also have a Neutral recommendation and a Zacks #3 Rank for Kimco Realty Corporation (KIM - Analyst Report), a competitor of Regency.