Regency Centers' Q3 2025: Contradictions Emerge on Same-Store NOI Growth, Development Costs, Capital Recycling, Leasing Activity, and Development Yields

Guidance:

• 2025 same-property NOI growth expected 5.25%–5.5%; credit loss guidance narrowed to 50–75 bps.
• Raised full-year outlook: Nareit FFO growth mid-7%, core operating earnings mid-6%, and dividend increased >7%.
• Early 2026 outlook: same-property NOI mid-3%, total NOI mid-6% (including ~ $10M incremental NOI from in-process ground-up projects); Nareit FFO growth mid-4%.
• Balance sheet: leverage targeted ~5–5.5x; 2026 refinancing headwind estimated at ~100–150 bps; ~ $300M of starts expected in 2025.

Business Commentary:

• Strong Earnings and Same-Property NOI Growth:
• Regency Centers Corporation reported outstanding results, with strong same-property NOI growth and earnings growth.

• This was driven by robust tenant demand, leasing success, and favorable operating fundamentals.

• Capital Allocation and Development:

• The company allocated more than $750 million accretively into high-quality investment opportunities, starting over $300 million of projects by year-end.

• This strategic allocation is part of the company's strategy to create value through development and redevelopment, which is a key differentiator in the market.

• Tenant Health and Leasing Activity:

• Regency's same-property percent leased rate stands at 96.4%, with a strong demand from various retailer categories.

• The healthy tenant base and limited new supply in the market have contributed to sustained strong demand for high-quality retail space.

• Dividend Increase and Future Growth Outlook:

• The company increased its full-year earnings growth outlook and raised its dividend by more than 7%.
• This confidence in future growth is supported by a strong fundamental backdrop and sustained performance in its grocery-anchored shopping centers.

Sentiment Analysis:

Overall Tone: Positive

• Management: "proud to share another quarter of outstanding results" with "same-property NOI growth nearly 5%"; CFO: expects "same-property NOI growth of 5.25% to 5.5%" and raised FFO/core earnings outlook; CEO: "increasing our dividend by more than 7%" — all indicate confident execution and positive operational momentum.

Q&A:

• Question from Viktor Fediv (Scotiabank Global Banking and Markets, Research Division): Can you provide color on the 11-asset distribution with your JV partner and what options this opens for Regency?
  Response: The transaction let Regency acquire 5 assets at 100% (partner retains 6), enabling long-term ownership of high-quality centers and improved portfolio alignment while preserving the ongoing JV relationship.

• Question from Michael Goldsmith (UBS Investment Bank, Research Division): Please bridge the mid-3% same-property NOI outlook for 2026 and clarify whether credit loss expectations mean historically low bad debt will continue.
  Response: Credit losses are expected to remain at the historically low levels seen at the end of 2025, and 2026's mid-3% same-property NOI is primarily base-rent driven after 2025's unusually strong SNO absorption and recovery-rate tailwinds.

• Question from Cooper Clark (Wells Fargo Securities, LLC, Research Division): How should we think about development/redevelopment starts into 2026 and the mix between ground-up and redevelopment?
  Response: Regency expects continued development/redevelopment activity and a growing tilt toward ground-up development as in-process projects now outweigh redevelopments.

• Question from Samir Khanal (BofA Securities, Research Division): Why did new leasing skew more to anchors versus shops this quarter?
  Response: The higher anchor mix was a timing anomaly this quarter—more anchor transactions simply cleared the pipeline, not a structural change.

• Question from Ronald Kamdem (Morgan Stanley, Research Division): What are you seeing on cap rates/IRRs in the market and willingness to buy out JV partners?
  Response: Capital chasing retail has compressed cap rates into the low-5% area (sub-5.5% on core assets); Regency will pursue JV buyouts opportunistically but remain disciplined and selective.

• Question from Unknown Analyst ([ Sydney Rome ] with Barclays Bank): Do you expect rent spreads to continue at current elevated levels?
  Response: Management expects to sustain elevated cash and GAAP rent spreads and embedded contractual rent steps, emphasizing sustainable, long-term rent-step structures rather than a numeric target.

• Question from Todd Thomas (KeyBanc Capital Markets Inc., Research Division): Will the SNO pipeline and redevelopment contribute to 2026 same-property NOI and by how much?
  Response: 2026 mid-3% outlook includes further occupancy gains and a repeat of redevelopment-driven contribution (around the ~100 bps level seen in 2025), with fuller detail to be provided in February.

• Question from Craig Mailman (Citigroup Inc., Research Division): Is there room to push lease rates/occupancy higher and will you consider term loans to mitigate refinancing headwinds?
  Response: Management believes there is upside—particularly on anchors—to lift occupancy and is evaluating all financing options (term loans, bonds, converts) to manage a 2026 refinancing headwind estimated at ~100–150 bps.

• Question from Juan Sanabria (BMO Capital Markets Equity Research): Context for the 1 million sq ft pipeline and any unusual bad debt contributors this quarter?
  Response: The ~1M sq ft pipeline is consistent with prior quarters and populated by high-quality retailers; bad debt was unusually low due to collections (including on previously written-off receivables), and uncollectible lease income remains well below historical averages and is expected to stay low.

• Question from Michael Griffin (Evercore ISI Institutional Equities, Research Division): How do you underwrite development rents and why can Regency make projects pencil where others can't?
  Response: Execution relies on long-term grocer relationships, capital availability and development expertise—tight cost control and realistic pro-formas enable consistent accretive performance on ground-up projects.

• Question from Ravi Vaidya (Mizuho Securities USA LLC, Research Division): Why sell the Miami asset and what was the process?
  Response: Miami was deemed nonstrategic from a future-IRR standpoint; a competitive bidding process achieved attractive pricing and allowed recycling capital into higher-return acquisitions—overall recycling has been accretive.

• Question from Wesley Golladay (Robert W. Baird & Co., Research Division): Are grocers leading master-planned-community deals and do you target ~50% pre-leasing for starts?
  Response: Grocers and master-planned developers are synergistic partners; projects are highly de-risked with anchors often in place and pre-leasing is typically high (anchor-driven, not always exactly 50%), sometimes exceeding 90% before anchor openings.

• Question from Linda Yu Tsai (Jefferies LLC, Research Division): How much could the 1M sq ft in negotiation add to the SNO pipeline and will the SNO pipeline continue to compress into 2026?
  Response: Management expects further compression of the SNO pipeline into 2026 as occupancy normalizes, though outcomes could vary; the 1M sq ft in negotiation provides additional visibility to continued leasing/commencements.

• Question from Michael Mueller (JPMorgan Chase & Co, Research Division): Why provide 2026 commentary this early?
  Response: Providing early annual outlook in Q3 is standard practice for Regency to offer transparency ahead of full guidance and a more detailed plan in February.

• Question from Floris Gerbrand Van Dijkum (Ladenburg Thalmann & Co., Research Division): How much more can you push shop occupancy and what is your renewal retention rate?
  Response: Renewal retention averages ~75%; management sees additional upside to shop occupancy through proactive leasing, relocations and infill of high-quality operators.

• Question from Paulina Rojas-Schmidt (Green Street Advisors): How does retailer sentiment today compare to 2014/2018 and implications for occupancy?
  Response: Retailers now place renewed value on physical locations post-pandemic, supply remains constrained, and Regency's national development scale positions it to capitalize and push commenced occupancy higher.

Contradiction Point 1

Same-Store NOI Growth Expectations

It involves differing expectations for same-store NOI growth, which is a key performance indicator for investors and stakeholders.

What factors are driving the mid-3% same-property NOI growth guidance for 2026? - Michael Goldsmith(UBS Investment Bank)

2025Q3: For 2026, we expect mid-3% same-store NOI growth, and our SNO pipeline is expected to compress by 50 basis points and continue to compress into '26. - Michael Mas(CFO)

Can you explain the shift from occupancy to other components driving NOI growth? - Michael Goldsmith(UBS Investment Bank)

2025Q2: We expect SNOs to compress at 150 basis points for the second half of the year with a normalized run rate of 175 basis points. And our expectation for the full year is 125 basis points. - Michael Mas(CFO)

Contradiction Point 2

Development Costs and Market Conditions

It involves differing perspectives on development costs and market conditions, which are crucial for the company's ability to execute its development strategy and maintain profitability.

Can you provide an update on current cap rates, IRRs, and how they've trended in the acquisition market? Additionally, with the recent increase in JV transactions, is there growing incremental willingness to sell or buy these assets? - Samir Khanal (BofA Securities)

2025Q3: We have no cartel in the transaction market. We're seeing more activity from brokers, more activity from buyers. And there are more buyers than there were earlier in the year. - Nick Wibbenmeyer(CIO)

How has the market changed, and are there more or fewer acquirers? - Juan Sanabria (BMO Capital Markets)

2025Q1: The market is still early in facing volatility. Cap rates remain in the 5-6% range. There seems to be a pullback from public and international markets, but private capital remains active. - Nick Wibbenmeyer(CIO)

Contradiction Point 3

Capital Recycling and Investment Strategy

It involves the company's capital recycling strategy and investment priorities, which impact their financial management and future growth.

Can you explain the 11-asset distribution transaction with your joint venture partner? What strategic opportunities does this transaction create for Regency? - Viktor Fediv(Scotiabank Global Banking and Markets)

2025Q3: Regarding GRI, I would start with the fact that they've been a very, very good and long-term partner of ours, and our interests have been aligned for many, many years. - Nicholas Wibbenmeyer(CIO)

Can you discuss disposition guidance and how assets in that category are considered? - Michael Gorman(BTIG, LLC)

2025Q2: We will continue to balance the value of our portfolio with that of potential acquisitions. We will focus on accretive earnings and growth. - Michael Mas(CFO)

Contradiction Point 4

Leasing Activity and Tenant Health

It involves differing perspectives on leasing activity and the health of the tenant base, which are critical indicators for the company's financial performance and growth prospects.

Mike, you mentioned mid-3% same-property NOI growth for 2026. What environmental changes support this target, and can you explain the path to achieving it? Additionally, will the historically low bad debt levels mentioned by Lisa at the start of the call persist into next year, aligning with your 2025 expectations? - Michael Goldsmith (UBS)

2025Q3: We're expecting next year's credit loss provision to look a lot like '25 ended. - Michael Mas(CFO)

How is leasing activity progressing considering potential tariffs and higher tenant costs? - Samir Khanal (Bank of America)

2025Q1: We are positioned well due to our focus on essential goods, which are more resistant to economic uncertainty. Historically, our centers have shown resilience in downturns. - Lisa Palmer(CEO)

Contradiction Point 5

Development Yields

It involves the expected yields from development projects, which is crucial for understanding the company's financial performance and investment strategy.

Can you compare underwriting rents for anchor and small shop tenants to current market rents? What factors give Regency an edge in development, such as land basis or proximity to population centers in master-planned communities? - Michael Griffin(Evercore ISI Institutional Equities, Research Division)

2025Q3: No secret sauce. It's a lot of really, really hard work over years and years that build up to put us in the position we're in. - Nicholas Wibbenmeyer(Chief Investment Officer & President of West Region)

What are your 2025 development and redevelopment spending plans and the high-value projects? Will the blended yield on in-process projects remain at 9%? - Andrew Reale(Bank of America)

2024Q4: We are expecting to find another $250 million of opportunities for 2025. Ground-up development yields are expected to remain at 7%+, and redevelopment yields in the low double-digits, resulting in a blended yield of high single-digits. - Nick Wibbenmeyer(West Region President and Chief Investment Officer)