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Jax Daily Record Monday, May 5, 201412:00 PM EST

Internet-resistant tenants keep Regency growing

by: Mark Basch Contributing Writer

Two decades after its initial public offering, Regency Centers Corp. is in some ways a very different company than it was when it went public, particularly when you look at its growth.

However, Jacksonville-based Regency’s basic strategy — focusing on development and management of high-quality grocery-anchored shopping centers — is still the same, although the reasons for that strategy may have changed a bit.

“It’s nice to have a portfolio that’s necessity-driven and largely resistant to the Internet,” Regency President Brian Smith told shareholders at Friday’s annual meeting at the Ponte Vedra Inn & Club.

Regency’s properties are anchored by retailers like supermarkets and restaurants that people have to go out and visit. Those retailers don’t have to worry about losing customers to Internet-based businesses.

Smith said only about 2 percent of Regency’s tenants are businesses that are vulnerable to the Internet.

That gives Regency’s tenants staying power. The company’s shopping centers were 94.5 percent leased at the end of the year.

When Regency went public in 1993, the Internet was largely unknown, but the company was also touting the necessity-driven nature of its tenants as a key part of its strategy.

Regency would point out that supermarkets are somewhat resistant to recessions because people still need to buy food in good times and bad, so grocery-anchored shopping centers should be more stable than other types of malls.

Regency has demonstrated its staying power since the IPO. Chairman and CEO Martin “Hap” Stein told shareholders that the company has grown from 30 properties producing funds from operations of $12 million 20 years ago to 328 properties across the country producing funds from operations of $241 million last year.

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

As it grew, Regency has become much more valuable to shareholders. Its market capitalization — the total value of its shares in the stock market — has grown from $200 million two decades ago to $7 billion, Stein said.

“The company has gone through a remarkable transformation since our initial public offering,” he said.

Regency has produced a total annual return for shareholders, including cash dividends, of 11.5 percent a year since the IPO, beating not only indexes of real estate stocks but also the Standard & Poor’s 500 over that period, Stein said.

Stein said Regency is one of only 18 of the 45 real estate investment trust stocks that went public in 1993 to still be around today, so he is confident that the company’s formula has proven to be a success for shareholders.

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