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Hap Stein

Regency Centers still interested in buying AmREIT

By Mark Basch, Contributing Writer

Regency Centers Corp. CEO Hap Stein said last week that he was not discouraged when AmREIT Inc. rejected his company’s unsolicited buyout offer.

During Regency’s quarterly conference call with analysts, Stein said he is hoping to be able to reach an agreement with AmREIT. Regency made the unsolicited offer after AmREIT refused to negotiate, but Regency’s offer seemed to open the door to a negotiated deal.

“We were pleased when last week on July 29, AmREIT confirmed it will commence a process to explore strategic alternatives. We expect that this process will be fair, open and robust,” Stein said.

“We look forward to participating and receiving adequate information to make this compelling combination a reality,” he said.

Houston-based AmREIT is much smaller than Jacksonville-based Regency, which operates 328 retail properties across the country.

AmREIT operates only 33 properties but they are located in attractive high-growth markets in Texas and in Atlanta. That makes AmREIT an enticing acquisition target.

“The combination would offer significant benefits to shareholders of both companies,” Stein said.

AmREIT rejected Regency’s unsolicited offer of $22 a share, but news of the offer last month increased AmREIT’s trading price above $22. It was trading above $23 last week, indicating that investors are expecting a merger agreement at least at that level.

Stein said Regency will only make an offer that makes sense and creates value for its shareholders.

He also said “this process will not divert our team’s focus on growing net operating income, delivering high-quality developments and redevelopments and maintaining a rock-solid balance sheet.”

Regency last week reported core second-quarter funds from operations of 71 cents a share, 4 cents higher than the second quarter of 2013 and also 4 cents higher than the average forecast of analysts surveyed by Thomson Financial.

Funds from operations are basically earnings excluding depreciation and amortization expenses and are considered the key metric for evaluating real estate companies.

The company’s net operating income at properties owned for more than a year grew by 3.8 percent in the quarter.

Regency’s portfolio of properties, consisting mainly of grocery-anchored shopping centers, was 95 percent leased at the end of the quarter.

Stein called the second quarter results “extremely gratifying.”

Regency’s stock rose $1.17 to $54.99 Thursday after its strong report.

Patriot earnings up in quarter

Patriot Transportation Holding Inc. last week reported earnings of 36 cents a share in the third quarter ended June 30, 5 cents higher than last year. Revenue for the transportation and real estate company rose 15.5 percent to $41.2 million.

Jacksonville-based Patriot said its results were helped by gains from land sales and lower interest expenses due to the prepayment of mortgages.

Operating earnings in the company’s developed property rentals segment rose 9.3 percent in the quarter, but operating profit in its trucking business fell 21.3 percent, due to lower revenue per mile, higher health and accident claims, higher fuel expense and costs associated with the use of out-of -town drivers.

“Our focus remains the same as we continue to work on improving our margins in the trucking company by reducing costs and pushing for much-needed price increases from our customer base, and the real estate company (is) continuing to focus on turning non-revenue producing properties into cash or revenue-producing properties,” CEO Tom Baker said in Patriot’s conference call with investors.

Patriot has been working on a plan to split up its transportation and real estate businesses into two separate public companies.

Chief Financial Officer John Milton said during the conference call that the company expects to file its plans for the split with the Securities and Exchange Commission within the next couple of weeks.

The company expects to complete the spinoff plan within six to nine months.

Gannett announces split-up plan

Spinoffs seem to be all the rage these days.

After doubling the size of its broadcasting division with two acquisitions in the past year, Gannett Co. Inc. last week announced what many investors have been waiting for: a split of its broadcasting and newspaper divisions into separate companies.

Gannett’s group of 46 television stations, which includes WTLV TV-12 and WJXX TV-25 in Jacksonville, will join with its digital division to form one company that has not yet been named.

Its publishing business, which includes USA Today and 81 local daily U.S. newspapers, will retain the Gannett name.

Operating income in the broadcasting division, excluding the impact of the acquisitions, grew by 29.6 percent in the second quarter, while the publishing division’s operating income dropped by 37.5 percent.

Gannett said the company’s existing debt will be retained by the broadcasting and digital company, while the struggling publishing division will be virtually debt free.

Operating income in the digital division was basically flat in the second quarter. As Gannett announced the split-up plan, it also announced it is beefing up its digital division with the acquisition of the remaining 73 percent of Cars.com it does not already own. The company’s other major holding in the digital division is online jobs site CareerBuilder.com.

St. Joe profits from RiverTown sale

The St. Joe Co.’s sale of its RiverTown community in St. Johns County made the company profitable during the second quarter.

St. Joe recorded a pre-tax gain of $26 million when it completed the sale of the 4,057-acre community to Mattamy Homes on April 2, the company said in its quarterly report last week.

The company’s net pre-tax income for the quarter was $23.3 million. After taxes, St. Joe finished with net income of $14.6 million, or 16 cents a share.

The RiverTown community was St. Joe’s last tie to Northeast Florida. The company moved its headquarters from Jacksonville to WaterSound in the Florida Panhandle in 2010.

Following the RiverTown sale and a major timberland sale in the first quarter, the real estate development company is left with 182,000 acres of land located mainly between Tallahassee and Destin.

Interline plans re-branding initiative

Interline Brands Inc. last week reported a second-quarter net loss of $38.6 million, after a non-cash $67.5 million write-off of trademark assets.

The Jacksonville-based company, which markets maintenance, repair and operations products, said the write-off was related to a re-branding initiative, in which the company plans to consolidate several brands under a new national brand name.

Interline said it will unveil the new brand for its institutional customers later this year.

In the second quarter, Interline’s sales rose 4.9 percent to $425.5 million. Operating income rose 7.7 percent to $18.7 million.

Two analysts downgrade Web.com

At least two analysts downgraded Jacksonville-based Web.com Group Inc. after the company’s disappointing second-quarter financial report.

Robert Peck of SunTrust Robinson Humphrey downgraded the stock from “buy” to “neutral” and BWS Financial analyst Hamed Khorsand downgraded it from “buy” to “hold.”

Web.com, which provides website development services for businesses, fell $6.43 to $20.12 on Aug. 1 after reporting revenue that was lower than its own forecasts. The stock traded below $20 for much of last week.

“After a multi-year run of crisp execution, we are disappointed/ surprised by the second-quarter revenue miss and reset of expectations,” Peck said in his research note.

“We genuinely believe in this management team and we view valuation as supportive, thus we do not believe a negative rating is warranted. However, we believe it will take time to regain execution footing and we see risk of further cuts to forward estimates,” he said.

Stein Mart sales rise

Stein Mart Inc. last week reported that total sales in July rose 0.9 percent to $75.3 million and comparable-store sales for the month rose 0.8 percent.

For the entire second quarter ended Aug. 2, total sales rose 2.5 percent to $298.1 million and comparable-store sales – sales at stores open for more than one year – rose 1.3 percent.

The Jacksonville-based fashion retailer said this was its ninth consecutive quarter of positive comparable-store sales, which are considered a key indicator of a retailer’s performance.

“We continue to have a positive outlook for 2014 as the underlying fundamentals of our business and growth strategies remain in place,” CEO Jay Stein said in a news release.

Credit unions plan merger

Two Jacksonville credit unions announced a merger agreement last week.

Duval Federal Credit Union, with four branches and $51 million in assets, plans to merge into 121 Financial Credit Union, which has eight branches and $448 million

in assets.

The merged institution, which will keep the 121 Financial name, will have about 160 employees. The credit unions said there will be no layoffs because of the merger.

Duval Federal was chartered in 1935 originally as a credit union for City of Jacksonville employees, and 121 Financial was also started in 1935 to serve telecommunications employees in Northeast Florida

Coach stock rises despite down quarter

Coach Inc. reported another quarter of declining sales and earnings but this time, Wall Street was happy with the news.

The handbag and fashion accessories company, which has a major distribution center in Jacksonville, reported earnings of 59 cents in the fourth quarter ended June 28, down from 89 cents the previous year.

Total sales in the quarter fell 7 percent to $1.14 billion and North American sales dropped 16 percent.

However, Coach’s earnings beat the average analysts’ forecast of 53 cents, according to Thomson.

Coach’s stock, which has been trading at its lowest levels in four years recently, rose $1.49 to $35.80 Tuesday after earnings report.

PHH reports loss

In its first quarterly report as a pure mortgage banking company, PHH Corp. last week reported a second-quarter loss from core operations of 31 cents a share.

“Assuming current market conditions and interest rate levels persist, we expect to report negative core earnings on a consolidated basis through the first half of 2015,” CEO Glen Messina said in PHH’s conference call with analysts.

“However, with the expected implementation of our re-engineering initiatives over the next six to 12 months, we would anticipate reporting positive core earnings for the second half of 2015,” he said.

PHH sold off its other business, fleet management services, last month. The company maintains mortgage operations centers at its headquarters in New Jersey and in Jacksonville.

SunTrust and Fifth Third rated top picks

After evaluating second-quarter earnings reports from the banking industry, Sterne, Agee & Leach analysts rated two banks with a major presence in Jacksonville among their top picks: SunTrust Banks Inc. and Fifth Third Bancorp.

“SunTrust’s core businesses and reputation in the marketplace remain favorable. We believe improving demographic trends in the company’s Southeast markets will translate into a higher valuation consistent with what SunTrust experienced pre-crisis,” analyst Terry McEvoy wrote in the Sterne, Agee report.

Fifth Third “is well positioned for above-peer balance sheet growth given its operating footprint,” McEvoy said.

“The sequential improvement in credit trends with commercial net charge-offs down 68 percent was a big positive takeaway

from second-quarter results,” he said.

He also said Fifth Third trades at the lowest price-to-earnings ratio among large-cap banks despite forecasts of strong earnings growth.

mbasch@baileypub.com

(904) 356-2466

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