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Basch Report
Jax Daily Record Thursday, May 13, 202105:10 AM EST

Regency Centers Corp. CEO sees ‘clear tail winds’

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The shopping center operator is an indicator of the retail economy.
by: Mark Basch Contributing Writer

For many years, CSX Corp.’s earnings reports have been a bellwether for the U.S. economy.

The Jacksonville-based railroad is one of the first big companies to issue its reports every quarter, so its freight data and outlook offer advance clues to the economy’s direction.

Now as the retail industry recovers from the COVID-19 pandemic, another Jacksonville-based company’s earnings are becoming an indicator of broad trends.

Regency Centers Corp. operates 399 retail properties across the country, many of which are neighborhood shopping centers anchored by supermarkets.

As Regency reported first-quarter earnings last week, company officials said more customers are visiting its properties as pandemic conditions improve, indicating a brighter retail outlook.

“We’ve seen a continued trend toward easing tenant restrictions, which is especially impactful to our California properties,” CEO Lisa Palmer said May 7 in Regency’s quarterly conference call with analysts.

“Some categories and geographies still continue to lag but overall, we are on an improving trajectory,” she said.

“Foot traffic in our portfolio as a whole has recovered to 90% of 2019 levels in April while in some regions, it’s close to 100%,” said Chief Operating Officer Jim Thompson.

“The West region still lags on foot traffic and collections but is gradually catching up to the other regions and remains our greatest opportunity to drive future upside,” he said.

While some people are concerned about the future of brick-and-mortar retailers, Palmer said the pandemic highlighted the attraction of its shopping centers.

“We believe there are clear tail winds for our company and our sector as the pandemic has shined a spotlight on our business in a positive way,” she said.

“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,” she said.

Regency’s retail properties were 92.5% leased at the end of the first quarter.

The company said it had collected 93% of first-quarter rents owed by its tenants as of May 3. 

In comparison, at the peak of pandemic-related shutdowns, Regency had collected 62% of April rents a month after the end of the 2020 first quarter.

Regency reported funds from operations (earnings excluding noncash charges) of 90 cents a share, down from 98 cents in the first quarter of 2020.

However, the company increased its FFO forecast for the full year to $3.33 to $3.43 a share, up from its previous forecast of $2.96 to $3.14.

Mortgage activity boosts Fidelity

Fidelity National Financial Inc. also is a bellwether company, as the Jacksonville-based title insurer’s results reflect the state of the real estate industry.

Fidelity said last week that first-quarter adjusted earnings from continuing operations more than doubled to $1.56 a share, from 73 cents the previous year.

“We continue to benefit from low interest rates, driving strong (mortgage) origination demand and the continued rebound in commercial real estate activity,” President Mike Nolan said in Fidelity’s conference call May 7.

Fidelity’s title insurance revenue rose 33% and total revenue nearly doubled to $3.1 billion, helped by investment gains.

FIS upgrades earnings forecast

Financial technology company Fidelity National Information Services Inc., or FIS, reported a slight gain in first-quarter earnings but increased its forecast for the full year.

FIS, which was spun off from Fidelity National Financial, reported adjusted earnings rose by 2 cents a share in the first quarter to $1.30.

However, the company raised its full-year forecast from $6.20 to $6.40 a share to a range of $6.35 to $6.55.

“We are quickly becoming one of only eight companies in the S&P 500 with revenues approaching $14 billion, growing more than 7%, with an already high and expanding mid-40s EBITDA margins,” CEO Gary Norcross said in FIS’ conference call May 6.

EBITDA is earnings before interest, taxes, depreciation and amortization.

“With our strong start to the year, we expect accelerating organic revenue growth and strong earnings throughout 2021, giving us the confidence to raise our full year guidance,” Norcross said.

Black Knight earnings rise

Mortgage technology company Black Knight Inc., another company spun off from Fidelity, reported strong gains in first-quarter earnings and also increased its forecast.

Adjusted earnings rose by 9 cents a share to 56 cents and revenue jumped 20% to $349.7 million.

The company increased its earnings forecast range for the full year from $2.11 to $2.22 a share to $2.16 to $2.24.

Jacksonville-based Black Knight is the dominant company in its field, providing processing services for 61% of all U.S. first mortgages as of March 31.

Rayonier AM looks to its biofuture

Rayonier Advanced Materials Inc. announced a deal last month to sell its lumber and newsprint facilities to sharpen its focus on its core cellulose specialty fibers business.

As the Jacksonville-based company reported earnings last week, it sharpened its focus further for investors, saying it hopes to use its plants as “biorefineries” that produce alternatives to petroleum-based products.

“At the core of our manufacturing processes are our cellulose pulp products, but we know that much more can be done with these assets,” CEO Paul Boynton said in Rayonier AM’s conference call May 5.

“These investments into our biofuture will add to our product diversity and our financial growth,” he said.

Rayonier AM reported a first-quarter net loss of 43 cents a share, which it attributed mainly to noncash income tax charges.

Ironically, lumber was the company’s most profitable business in the quarter due to surging prices, producing $61 million in operating income. That was more than the total operating income of $55 million.

Rayonier seeks Wildlight growth

Rayonier Inc., which split up with Rayonier AM seven years ago, reported lower first-quarter earnings.

The timber and real estate company had net income of 8 cents a share, down from adjusted earnings of 20 cents the previous year.

Rayonier saw little residential real estate activity in its Wildlight community in Nassau County, where the company is headquartered. 

The company reported sales of only three residential lots in Wildlight in the first quarter.

Chief Financial Officer Mark McHugh said Rayonier expects activity to pick up the rest of the year. He said the February announcement of a new Publix-anchored shopping center in Wildlight is an indication of the development’s potential growth.

“We believe that as this community continues to get more established, interest from builders will continue to grow,” he said.

Tiptree confident in Fortegra

A week after pulling a planned initial public offering for subsidiary Fortegra Group Inc., Tiptree Inc. officials spoke briefly about it during its quarterly conference call May 6.

“Although last week we decided to hold off on proceeding with the IPO, what has been made clear throughout this process that both 2020 and first quarter 2021 results demonstrate is the distinctly attractive value of Fortegra’s business platforms,” Executive Chairman Michael Barnes said.

Jacksonville-based specialty insurance company Fortegra is the major operating subsidiary of New York-based holding company Tiptree. 

The company said two months ago it hoped it could unlock value in Fortegra with the IPO.

Barnes did not say if Tiptree will try the Fortegra IPO again.

“We believe that Fortegra will ultimately be rewarded for the growth profile and durability of its model and we will continue to explore all available options to support Fortegra’s growth and achieve our stated objectives,” he said.

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