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Regency (REG) Updates on Property Transactions, Investment Pipeline

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Regency Centers Corporation (REG - Free Report) recently updated on its fourth-quarter 2020 property transactions. The company also announced about its recent financing activity and a review of the investment pipeline.

Particularly, during the fourth quarter, Regency sold five shopping centers for a total of $77.8 million at the company’s share. This included the sale of Jefferson Square and Whole Foods at Swampscott for $25.3 million.

The other three shopping centers that were sold for a total of $52.5 million, included Stonebrook Plaza situated in a suburb of Chicago, IL, Old Connecticut Path, located in a suburb of Boston, MA, and South Bay Village, positioned in a suburb of Los Angeles, CA. Both Stonebrook Plaza and Old Connecticut Path were owned by joint ventures in which Regency had 40% and 30% share, respectively. Apart from these, Regency sold three land parcels for an aggregate of $8.1 million at the company’s share.

Moreover, following a detailed review of its extensive future pipeline of value-add development and redevelopment projects, and management’s decision of not pursuing certain projects or components of projects, Regency estimates a write-off of certain prior capitalized pre-development costs in a range of $7-$9 million for the fourth quarter. This included the anticipated write-off of $5.3 million at Serramonte Center because of revised scope.

Nevertheless, the company also addressed its obligations, repaying the $265-million term loan due January 2022 in January 2021. This move, backed by cash available, led to no unsecured debt maturities until 2024. In addition, in conjunction, the company terminated interest rate swap contracts, which resulted in a $2.5-million early extinguishment of debt charge recognized in fourth-quarter 2020.

Notably, the market is witnessing a shift in retail shopping from brick-and-mortar stores to internet sales. This is leading to retailers reconsidering their footprint and opting for store closures, thereby resulting in lesser demand for retail real estate space and casting a pall on retail landlords, including Macerich (MAC - Free Report) , Simon Property (SPG - Free Report) and Kimco (KIM - Free Report) among others.

The recent efforts of online retailers to go deeper into the grocery business have emerged as a concern for Regency that focuses on building a premium portfolio of grocery-anchored shopping centers. Further, retailers unable to cope with competition are filing bankruptcies. Move outs, store closures and bankruptcies of retailers are likely to result in pricing pressure on base rent, and erode the company’s revenues in the near term. Also, rent relief and deferral requests from its tenants because of the pandemic-related chaos are likely to hurt cash flows.

Shares of this Zacks Rank #4 (Sell) company have depreciated 26.5% over the past year compared with the industry’s decline of 13.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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