Regency Centers Corporation

Greetings and welcome to Regency Centers Corporation first quarter 2021 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Christy McElroy. Please, thank you. You may begin.

Good morning, and welcome to Regency Center's first quarter 2021 earnings conference call. Joining me today are Lisa Palmer, President and Chief Executive Officer, Mike Moss, Chief Financial Officer, Jim Thompson, Chief Operating Officer, and Chris Levitt, SVP and Treasurer. As a reminder, today's discussion may contain forward-looking statements about the company's views of future business and financial performance, including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties. It is possible that actual results may differ materially from those suggested by the forward-looking statements we may make. Factors and risks that could cause actual results to differ materially from these statements may be included in our presentation today and are described in more detail in our filings with the SEC, specifically in our most recent 10-K. In our discussion today, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials which are posted on our investor relations website. Please note that we have also posted a presentation on our website with additional information, including additional disclosures related to forward earnings guidance and the impact of COVID-19 on the company's business. Lisa.

Thank you, Christy, and good morning, everyone. Thank you so much for joining us at the end of what I know has been a long week in earnings season. It's also been a long and oftentimes difficult past year. But as a company and an industry, we've really come so far. First, as always, I'd like to thank the entire team here at Regency. I'm really proud and appreciative of what we've been able to accomplish over the last year. A quarter ago when we spoke to you, we were facing rising restrictions in parts of the country, contributing to continued uncertainty about the future. We were gaining ground but still playing defense. As I sit here today, I'm really pleased to report that we've turned a corner over the last three months. We are encouraged by continued improvement in the retail environment and in the health of our tenants. And you can see the evidence of that in our first quarter results, as well as in our revised forward earnings guidance. We've seen a continued trend toward easing tenant restrictions, which is especially impactful to our California properties. Some categories and geographies still continue to lag, but overall, we are on an improving trajectory. These lifting restrictions that allow our tenants to open and operate are having the waterfall effect of improving foot traffic and tenant sales as consumers are reengaging when they're able to. And in turn, we are collecting more rent and have seen an improving trend of rent collection. Mike will discuss this in greater detail, but the main drivers of our earnings guidance increase results from this improvement we expect higher collections on cash basis tenants as well as some additional recovery of 2020 rent that we had previously reserved and we are also encouraged by continued demand with regards to leasing thinking a bit longer term we believe there are clear tailwinds for our company and our sector as the pandemic has shined a spotlight on our business in a positive way As we all have experienced the world with e-commerce retail sales spiking meaningfully, our tenants will clearly see and appreciate the value of the last mile distribution capabilities that their stores in our centers offer. And after spending months at home facing restrictions on interaction, consumers have a new appreciation for the environment and convenience of our open air neighborhood and community centers. But all that said, our heads aren't here in the Jacksonville sands. We acknowledge and appreciate that real challenges in brick-and-mortar retail still exist, and there will continue to be shrinking of retail GLA in the U.S., but well-located, well-operated centers like we own will still be a critical component of the retail ecosystem, meeting the demands of retailers, service providers, and consumers. This renewed appreciation from both sides fortifies the long-term need for physical locations close to consumers' homes. And then also, the micro migration that's occurring. With more people moving into the suburbs, this should provide a long-term benefit to our suburban shopping center portfolio, as should a more permanent shift toward part-time remote work, increasing daytime population foot traffic close to the consumers' homes. Finally, As the macroeconomic and retail environment has shifted toward a definitive trajectory of improvement, as a company, we have pivoted from defense to offense. We are on our front foot. We are focusing on growth, not just organically, but putting capital to work externally. We are well positioned to take advantage of opportunities. We continue to have one of the best balance sheets in the sector with low leverage, full revolver capacity, and access to low-cost capital. Additionally, as you know, I like to remind you, even with no reduction in our dividend throughout the pandemic, we are generating solid free cash flow, which we expect will only continue to grow with our revised outlook. From this position of strength, we continue to focus on value creation within our development and redevelopment pipeline. Recall that we added two new ground-up projects to our in-process pipeline a quarter ago, and in the near future, we expect to add a couple more. With the success we've seen with phase one of Carytown, we plan to move forward with phase two. We also plan to move our mixed-use, multi-phase West Bard project in Bethesda, Maryland into the in-process pipeline. To finish up, we are still on the recovery path back to our 2019 NOI, but the pace on that path feels better. The environment is healthier and more certain today, And as a result, we have greater conviction and are more positive in our outlook. We are pivoting to offense. We remain bullish on open-air, grocery-anchored neighborhood and community centers. As I've heard several times over the past month or so, today is better than yesterday, and I'm confident that tomorrow will be better than today.