The Basch Report: Regency sees opportunity in retailer bankruptcies

Shopping center developer moving from NYSE to Nasdaq.


  • By Mark Basch
  • | 5:20 a.m. November 1, 2018
  • | 5 Free Articles Remaining!
 Jim Thompson, executive vice president of operations for Regency Centers Corp., said recent store closures will impact near-term results, but create redevelopment opportunities long-term.
Jim Thompson, executive vice president of operations for Regency Centers Corp., said recent store closures will impact near-term results, but create redevelopment opportunities long-term.
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Jacksonville-based shopping center developer Regency Centers Corp. is losing a handful of tenants because of recent bankruptcy filings by once-thriving retail chains.

However, Regency officials said during their quarterly conference call Friday that bankruptcy-related store closures are creating opportunities.

“While these bankruptcies will certainly impact near- term results, more importantly the remerchandising and redevelopment opportunities triggered by recapturing this real estate will positively impact our shopping centers over the long term,” said Jim Thompson, executive vice president of operations.

Regency’s portfolio of more than 400 properties, mostly anchored by supermarkets, was 95.4 percent leased at the end of the third quarter.

Thompson said Regency had five Toys R Us locations, two Kmarts and one Sears store in its portfolio. Kmart is part of Sears Holdings Corp., which filed for Chapter 11 bankruptcy last month.

Regency also has 25 Mattress Firm stores in its shopping centers, and five of those leases have been rejected as the parent company reorganizes in a Chapter 11 bankruptcy, he said.

CEO Hap Stein reiterated what he has been saying in previous conference calls, that successful retailers are investing in their stores to retain customers despite competition from Internet sales.

Even e-commerce giant Amazon.com “has announced an aggressive rollout of bricks-and-mortar locations, and this is in addition to the large investment in Whole Foods,” Stein said.

Regency reported operating funds from operations (a key earnings metric for real estate companies like Regency) of 89 cents a share for the third quarter, up from 87 cents a year earlier.

Regency also announced Monday that it is transferring its stock listing from the New York Stock Exchange to Nasdaq, effective Nov. 13. The stock will continue to trade under the same ticker symbol, “REG.”

Laura Clark, vice president of capital markets for Regency, said by email the switch is a “prudent decision” that will provide cost savings for the company.

Landstar seeing organic growth

Landstar System Inc. will reach its 30th birthday at the end of this year and to celebrate, the Jacksonville-based trucking company expects to report about $1 billion in organic revenue growth for the year.

That will bring total revenue for 2018 to more than $4.5 billion, CEO Jim Gattoni said in Landstar’s quarterly conference call last week.

Third-quarter revenue rose 27 percent to $1.2 billion and earnings per share rose by 62 cents to $1.63.

“In our view, the overall environment for Landstar continues to be strong,” Gattoni said.

“I expect the record-breaking pace of the company’s 2018 financial performance to continue through the fourth quarter.”

Gattoni projected fourth-quarter earnings of $1.56 to $1.62 a share, up from fourth-quarter 2017 earnings of $1.54, which included a one-time 46-cent tax benefit.

Landstar was formed in Connecticut in 1988 as a holding company for several trucking businesses. It went public in 1993 and moved its headquarters to Jacksonville in 1997.

Foley sees ‘bump’ from Stewart deal

After announcing an agreement in March to buy Stewart Information Services Corp., Jacksonville-based Fidelity National Financial Inc. continues with the long regulatory approval process for the merger that may not be completed until mid-2019.

When the merger of the two title insurance companies is completed, Fidelity Chairman Bill Foley expects it to benefit Fidelity stockholders because Stewart is performing well.

“If you noticed, Stewart held their revenue in the third quarter and actually improved their margins. So, we’re going to get a bump from that,” Foley said during Fidelity’s quarterly conference call last week.

“We’re really pleased with the way the Stewart employees and the Stewart corporate staff have responded to the acquisition. It’s like they had lost their way for a few years, and the board was a little bit dysfunctional and they had some hedge funds that wanted to sell their positions, so it didn’t become the family company that it used to be,” he said.

“They’ve got a 10 percent market share, and we think we can hold most of that market share and expand it.”

Fidelity has about a 32 percent share of the U.S. title insurance market, and the approval process is taking a long time because regulators are expected to require divestitures of some of the merged operations to reduce the market share.

Fidelity reported third-quarter adjusted earnings of 78 cents a share, up from 63 cents the previous year.

Drone Aviation completes $1.7 million delivery

Drone Aviation Holding Corp.’s quarterly report filed with the SEC last week showed revenue of $995,838 in the first nine months of this year and a net loss or $3.9 million, or 43 cents a share.

However, the Jacksonville-based company also said it delivered a tactical aerostat to the U.S. Department of Defense valued at more than $1.7 million.

Drone Aviation did not say when it will recognize revenue from completion of that defense contract.

Anheuser-Busch cuts dividend

Anheuser-Busch InBev SA’s stock dropped to its lowest level in six years last week after the beermaker cut its annual dividend in half.

The Belgium-based company which operates 12 U.S. breweries, including one in North Jacksonville, said it is cutting its dividend from 3.60 euros to 1.80 (about $2.05) this year.

That sent its stock down as much as $9.37 last Thursday to $72.88, its lowest price since June 2012.

Anheuser-Busch InBev dominates the U.S. beer market. However, beer sales to retailers in the U.S. declined by 1.6 percent in the first nine months of this year, and its U.S. market share declined by 0.45 percentage points. It did not give its total market share figure.

The company said its iconic Budweiser and Bud Light brands are performing better than past years but continue to lose a small percentage of market share.

“The premium and premium light segments remain under pressure, as consumers trade up to higher price tiers,” the company said in a news release.

Total revenue for the company fell by 3.5 percent to $40.4 billion in the nine-month period.

Mantle Ridge’s CSX stake reaches 5.1 percent

Hedge fund Mantle Ridge, which partnered with the late Hunter Harrison last year to push a management shakeup at CSX Corp., is now CSX’s third-largest shareholder, according to recent Securities and Exchange Commission filings.

With investors required to file with the SEC if they acquire more than 5 percent of a company’s stock, Mantle Ridge said in a filing last week that it now has 5.1 percent of CSX’s stock.

The fund didn’t acquire more shares. It owns about 42.76 million CSX shares, the same amount it had in the spring when CSX filed its annual proxy statement.

However, CSX’s outstanding shares have dropped from about 879 million in the spring to 844 million, so Mantle Ridge’s stake has increased from 4.8 percent to 5.1 percent.

Mantle Ridge CEO Paul Hilal joined CSX’s board of directors when Harrison was installed as CEO in March 2017.

The largest CSX stockholder is the Vanguard Group with 7.6 percent of the stock, followed by BlackRock Inc. with 5.7 percent, according to the proxy statement.

Capital Research Group Investors was the largest stockholder listed in the proxy with 10.1 percent. However, the Los Angeles investment firm said in an SEC filing three weeks ago that it has reduced its stake to 4.6 percent. Investors also are required to file with the SEC when their stake in a company falls below 5 percent.
 

 

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