Regency Centers Gains Unexpected Rise in Stock Prices

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Byline: MARK BASCH

Given Regency Centers Corp.'s history of reliably paying dividends to shareholders, last week's announcement of a dividend cut should have hurt the stock. And not only did Regency cut the dividend, it also said first-quarter earnings would be lower than they were last year and that it was selling new shares of stock, which would dilute the value of existing shares.

But the Jacksonville-based shopping center developer's stock rose $2.34 to $36.46 on Tuesday, a day after the announcement.

Basically, all of the negative news was pretty much expected by the market, so the late Monday announcement had little impact on the stock. Regency's stock had already fallen from $46.70 at the end of 2008 and from a 52-week high of $82.43 in September.

"Given that its peers' operating performance should be at least as bad as Regency's, and that the market appears to be discounting this prospect, we are reluctant to downgrade the stock, so we maintain our hold rating," said William Acheson, analyst for The Benchmark Co., in a research note last week.

Actually, Regency's performance wasn't that bad. Its expected first-quarter earnings of 26 cents to 28 cents a share are down from 38 cents last year, and its funds from operations of 76 cents to 78 cents a share are down from 87 cents.

Regency's portfolio of 413 properties was 93.3 percent leased as of March 31, compared with 93.8 percent on Dec. 31.

But the most noteworthy item announced by Regency was the dividend cut. As a real estate investment trust, Regency pays out most of its earnings directly to shareholders as a cash dividend. The company had a record of increasing its dividend every year since it went public in 1994, reaching $2.90 a share last year.

But in the first quarter this year, Regency announced it was holding the quarterly dividend steady at 72.5 cents. That had some analysts speculating that a dividend cut was coming. On Monday, Regency said its management is recommending that the board of directors cut the quarterly dividend to 46.25 cents a share.

Regency also sold 10 million new shares of stock last week at $32.50 each.

Acheson said there is a positive to last week's announcements.

"On the plus side, the stock offering, dividend cut and several debt deals appear to take care of Regency's funding needs through 2011," he wrote.

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