Martin Stein Jr., chairman & CEO, Brian Smith, president & COO and Diane Ortolano, director of investor relations, are presenting for Regency Centers Corp. at NAREIT's REIT Week.
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Below are notes from the session.
11:47: Stein: From my perspective, the positive leasing activity that we've experienced in the last several quarters continued and was highlighted even more so at ICSC. The key thing for ICSC is how much of that leasing activity—which included small shop spaces and bigger spaces—is going to be converted into signed leases? … Our move-outs are moving to more historically norms. If leasing activity converts to signed leases, then I think ICSC will have been a success and take a step for us getting to our objective of 93 percent leased.
11:48: Smith: We had 35 percent more meetings. … And they were less “meet and greets.” There were no talks of rent reductions. There were a few relationship meetings. … We had many meetings to figure out how we could do multiple. We had nine meetings like that with heads of real estate. … There was a lot of talk about development. All retailers with ambitious expansion plans are looking to development because there is none going on.
11:50: Smith: In the case of the properties we've developed, they're all grocery-anchored centers in mature markets with low vacancies. … All of those have limited shop space. Going forward, that's what you'll see as well. … Our guidance is up to $75 million in new starts. They may not all happen this year. One may slip to next year. … The average shop leasing space is 11,000 square feet. We may have a bigger pipeline next year—up to $100 million.
11:53: Smith: (In response to competition in grocery market.) If you go back eight years ago, 90 percent of all food sales were done by the traditional grocers. It's down to 70 percent now. … That's gone to Walmart or Target. … It's come from the grocers competing with Walmart on price. … Fortunately, our demographic is not one that competes with Walmart. … If anything, it's come from the second-tier grocers and independent grocers.
11:55: Stein: (In response to question about investment sales climate.) Our investment strategy is tied to capital recycling. … We are trading properties where there is a risk of NOI going down and buying high-quality asset where prospects of NOI growth are strong. … The silver lining to the ocean of capital is that we're seeing more shopping centers that meet our criteria in a long time. Pricing isn't so good. … But some of capital that's out there is making its way down to the centers we're trying to sell.
11:57: Smith: There is a notion of capital chasing A-quality properties. But you are seeing more of it chasing the Bs. … So you're seeing the cap rates go down on B properties as well. In Southern California, the As are trading in the low 5s.
12:00: Smith: The As are being dominated by the pension funds. What you are seeing on the Cs … you are going to have individual buyers local to that market that can focus on that market and manage it better than the institutions. There are always going to be people that think they can do a better job and get more value out of it than others can.
12:05: Smith: (In response to question about tenant sales trends.) Overall, things are much more positive. … From grocers, sales are positive, especially from Whole Foods and the higher-end grocers. … A global comment that would be appropriate is that sales are improving.
12:08: Stein: (In response to question about Internet sales.) Obviously Blockbuster has been affected by Internet sales and we have gone from over 100 Blockbusters a year-and-a-half ago to … 28 today. We've been very successful at replacing them with better tenants and in many cases better rents. … We have one Borders and half-a-dozen Barnes & Noble. In most of those cases, badwould be good news for the shopping center. … If you own great real estate and have great locations, that is going to address issues like Internet sales and competition from Walmart.
12:10: Smith: (In response to question about using technology.) We're replacing all of our leasing signs and adding to them QR codes. … It will immediately send them to our Web site and give them property-level information and notify our leasing guys that someone is interested. … We've optimized our Web-site so it's compatible with mobile devices.
12:12: Stein: (In response to question about office supply stores.) Where we own really good real estate, there is a risk there, those will be stores they want to keep. But if they go totally extinct, other retailers will want that space.