Regency Centers Corporation

Greetings and welcome to the Regency Centers Corporation third quarter 2021 earnings call. At this time, all participants are in 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. Please note this conference is being recorded. I will now turn the conference over to your host, Christy McElroy, Senior Vice President for Capital Markets. You may begin.

Good morning, and welcome to Regency Center's Third 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's 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 Form 10-K and 10-Q filings. 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 disclosures related to forward earnings guidance and the impact of COVID-19 on the company's business. Our caution on forward-looking statements also applies to these presentation materials. Lisa?

Thank you, Christy, and good morning, everyone. Thank you so much for joining us. We feel really good about the progress that we've made toward recovery and also with the improvement we're seeing in our operating trends. Our third quarter results are reflective of a healthy environment for open-air, grocery-anchored shopping centers. And not only are we feeling closer to normal, but we're excited about what the future holds. I'm also really pleased to report that despite the recent concern about potential impacts from the Delta variant, we've continued to make meaningful progress on rent collections, narrowing the gap further as nearly all of our tenants are in a position to pay us full current rent. Steady retailer demand is driving strong leasing activity, which, combined with reduced tenant move-outs, has moved the needle in occupancy. We've also had success maintaining leverage in our lease negotiations, driving contractual rent growth and remaining prudent on CapEx while further improving our rent spreads. Our team has been working really hard to drive deals that will lead to long-term growth in the value of our assets. As a result of these positive trends and an increased pace of improvement, we're again raising full-year guidance for 2021. In recent quarters, we've discussed that we believe the recovery of NOI back to 2019 levels would likely occur in the second half of 2022 on an annualized basis. But given the rate of progress we've seen in recent months, we are now pulling that forward to the first half of 2022. We've also increased our dividend by 5%, a reflection of our confidence in a return to sustained growth over the long term. You'll recall, and I know you're probably sick of this, but I can't possibly remind you enough, that we never cut our dividend during the pandemic. We are committed to growing our dividend while also accretively investing our sector-leading free cash flow to drive solid total returns for our shareholders. And that's a good segue into our investment and capital allocation strategy, where we remain on our front foot. The private transaction markets are competitive. They remain competitive. And we've continued to see downward pressure on cap rates as more buyers have emerged for high-quality, well-located, grocery-anchored centers. But our strong balance sheet and access to low-cost capital provide a competitive advantage that allows us to be opportunistic. And we do have a long track record of investing with discipline on a leverage-neutral and earnings-accretive basis. Our pipeline is active, and we continue to see good opportunities. With that, we just announced that we're under contract to acquire Blakeney Shopping Center, a dominant grocery-anchored community town center in South Charlotte. This is a high-quality, well-leased center with strong demographics and a tenant mix that fits well with our strategy. Our Southeast team is excited to bring this exceptional asset into the Regency portfolio, and we expect the transaction to close this month. The addition of high-quality centers like Blakeney, along with our development and redevelopment program, are important to portfolio enhancement. At the same time, we remain committed to selling centers that are lower growth or non-strategic, or when it's clear to us that maximizing the value of a property involves a predominantly non-retail use. For example, our recent sale of the former Sears box adjacent to our Hancock Center in Austin was in that last bucket, where we determined that its highest and best use was medical office. The addition of this office component and the traffic that it will generate to our site will enhance the value of this well-leased center where HEB is currently expanding its highly productive store, but our best risk-reward proposition is to invest capital into strong grocery-anchored neighborhood and community retail, which is the bread and butter of Regency strategy. This commitment to portfolio enhancement has proven to and will continue to fortify our future NOI growth. In closing, our shopping centers are well positioned to benefit from long-term migration and flexible work trends that favor suburban trade areas. And we are actively positioning our portfolio to thrive today and into the future. If the industry has learned anything over the last 18 months, during which we saw hyper-accelerated digital commerce and fulfillment and distribution challenges, it's that having brick-and-mortar locations close to where consumers live is critical to retailer success. Jim?