Credit Crunch Doesn't Slow Regency's Shopping-Center Buildout

Shopping-mall developer Regency Centers is having a great year, beating its own optimistic leasing projections by 10 percent and maintaining 95 percent occupancy while developing nearly 50 new projects. How do they pull this off? With plenty of cash.

The Jacksonville, Fla., REIT told analysts in a May 7 earnings call that it saw trouble coming last year and doubled down on fundamentals. While other developers found the credit window closed, Regency secured a $341.5 million, three-year bank credit line in March. That gives Regency close to $2 billion in capacity, CEO and Chairman Martin Stein told Shopping Center Business -- a billion in cash and bank lines, and another billion in coinvestment from such partners as MetLife, the Oregon Public Employees Retirement Fund, and the government of Singapore.

Regency owns 451 neighborhood and community shopping centers with above-average demographics, anchored by grocers or national retailers such as Target and Kohls. Another 48 are under construction. In previous recessions, President and COO Mary Lou Fiala noted, more than 90 percent of Regency's leasable space was held by tenants who showed flat to positive sales.

"While more cautious and deliberate, the top retailers need stores," chief investment officer Brian Smith said. "When they approve new locations, they count on them to be built."

Among the "very pleasant surprises" Smith described on the call are lower construction costs (down as much as 15 percent, weaker competitors, and lower land costs. "Entitlement difficulties are easing" as local governments compete more aggressively for retail tax revenues, Smith said. Higher-income households continue to spend money, and Regency looks for infill projects in high-population areas such as Magnolia, Tex., where a Target-anchored center will lure shoppers with an average household income of $118,000, according to Shopping Center Business.

In the first quarter, Regency leased 232,000 square feet, up 30 percent from a year ago. "This is a solid showing in any kind of market," Smith said.

Illustration: Site plan for Centerplace III of Greeley, Colo.