Mike Mas - SVP of Capital Markets Hap Stein - Chairman & CEO Lisa Palmer - President & CFO Mac Chandler - EVP, Development Jim Thompson - EVP, Operations.

Jay Carlington - Green Street Advisors Jeff Donnelly - Wells Fargo Rich Moore - RBC Capital Markets Anthony Hau - SunTrust Greg Schweitzer - Deutsche Bank Chris Lucas - CapitalOne Securities.

Greetings and welcome to the Regency Centers Corporation First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to turn the conference over to your host Mike Mas..

Good afternoon, and welcome to Regency's first quarter 2016 earnings conference call.

Joining me today are Hap Stein, our Chairman and CEO; Lisa Palmer, our President and Chief Financial Officer; Mac Chandler, Executive Vice President of Development; Jim Thompson, Executive Vice President of Operations; and Chris Leavitt, Senior Vice President and Treasurer.

Before we begin, I'd like to address forward-looking statements that may be discussed on the call. Forward-looking statements involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements.

Please refer to the documents filed by Regency Centers Corporation with the SEC, specifically the most recent reports on Forms 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements.

We also request that callers observe a two-question limit during the Q&A portion of our call in order to give everyone a chance to participate. If you have additional questions, please rejoin the queue. I will now turn the call over to Hap..

Thanks Mike. Good afternoon and thank you for joining us. Regency's team continues to execute well on the critical components of our well-honed strategy. The underlying fundamentals of our portfolio remain very healthy.

This is evident by growth in core FFO per share of 8%, strong rate growth in occupancy and same property NOI growth of 4% for the seventh consecutive quarter. We continue to reap the benefits from the quality of our portfolio amplified by the tail winds of favorable market conditions.

Retail supply remains tight while demand for space in prime locations continues at a rational pace. We are experiencing particularly strong demand from quality quick-serve restaurants, health & fitness users, leading traditional grossers, discount para retailers and pet stores.

And while the fundamentals are healthy for most of the retail, restaurants and service companies, they are represented in our centers, fallout from industry store rationalization will continue.

We are now obviously witnessing this play out in the sporting goods sector which include a bankruptcy filing of the sports authority in Eastern Mountain Sports. While there will likely be some impact or end of life growth, the quality of our real estate affords us the ability to cap on these opportunities in the long run.

We are placing a struggling operator with the more productive line, has been and always will be better for a long term NOI growth rate.

Turning to development, our industry leading local teams continue to source compelling new development and re-development opportunities building the pipeline that positions us to start and deliver average of $200 million or more of exceptional projects.

This quarter we started one ground up project in Houston, located in a master plan community that includes Exxon's World Headquarters. A large scale re-development near Aventura Mall near Miami and completed two whole food centers one in D.C. and one in Dallas. As I said before the development business is not for novices.

And the environment remains competitive for the limited opportunities that made our criteria. With that said I believe we have the right team to capitalize on the expansion especially investing class traditional grossers.

They continue to find investment opportunities supported by this expansion with demand from shop and category leading junior anchor retailers. As I look forward as we have a keen eye on the mature state of recovery, and understand the volatile nature of the capital markets, I am confident we are well positioned to continue our positive momentum.

Will we find ourselves in a pro-longed recovery or an economic downturn or whether the pace of rationalization accelerates, my confident stems from the outstanding quality of our portfolio, our disciplined and proven development capabilities, our rock solid balance sheet and our extremely talented team focused on growing shareholder value.

Lisa?.

Thank you Hap and good afternoon everyone. NAREIT FFO for the quarter was $0.86 per share. This includes approximately $7 million of gains on land parcels as well as pursue costs related to acquisition activity which I will address later.

These items together with expected additional acquisition pursue costs are incorporated into our new NAREIT FFO per share guidance range of $3.22 to $3.28. This is an increase of $0.04 at both ends. As Hap noticed Core FFO for the first quarter increased 8% for the first quarter of 2015 and same property NOI growth once again exceeded 4%.

Consistent with prior quarter's base rank continues to be the largest contributing factor. We do expect the property to analyze moderate throughout the moderate of the year as we expect higher costs for commenced, camera conciliations and the potential impact of the recently announced bankruptcies.

I also want to caution that the second quarter has the potential to fall below the bottom end of our guidance range. As the second quarter is the quarter where the majority of our prior year reconciliations are finalized. So with that said, our full year 2016 same property growth guidance remains unchanged at 2 and 3 quarters at 3.5%.

With respect to the recently announced bankruptcies the legal process remain fluid. Between sports authority and Easter Mountain Sports we have five locations at risk. We fully reserve against any unpaid pre-petition reg.

After second situation specifically released two-tenths and studying the competitive positions of our impacted locations we developed what appears to be reasonable set of functions and probabilities supporting our same property growth rate range.

These assumptions included combination of accepted and rejected leases but do not include the scenarios of full-loss at every location. From an occupancy standpoint the same property portfolio rose back above 96% lease with shop base right at 92% lease. Move outs and bad debts remain low and we avoid the usual first quarter seasonal dip in occupancy.

This is a very good proxy for the underlying portfolio. As our portfolio achieved higher occupancy levels we are able to be very selective with merchandizing and leverage pricing power through better steps and strong releasing stretch. In fact, rent growth for new lease assigned during the first quarter was 50%.

This is primarily due to the release of one of our Haggen bosses that we purchase out of bankruptcy. ‘ We released it to one top specially grossers in Southern California.

It's another classic example of where bad news is great news when you have the opportunity to re-merchandize or redevelop quality real estates as we have accomplished time and time again. Turning now to the capital markets activity. We seek out to enhance our balance sheet by astutely accessing capital to efficiently fund investments.

As we did with the forward offering completed in March. To that end we are leased to share some high level information on our pending acquisition activity as well as offer our general guidance on when we intend to draw down our forward equity. We currently have great visibility in the two acquisition opportunities.

The first includes the retail portion of an iconic mixed-use property in Metro D.C. strategically located in island scenario which most of you do know that is one of the premier neighborhoods in that region. Consistent with our mixed use strategy we are partnering with Avalon Bay one of the most well respected in the industry.

They will own and operate the residential component. The resale featured several key anchors and many leases below market, they are exceptional analyzed growth potential for even further upside redevelopment.

The second opportunity is located outside Seattle in a highly desirable sub-market that will augment our platform which is already deep in that market. This property will be a perfect addition to our North West portfolio. Combined this acquisition should approximate $325 million in total purchase price.

And we expect to close on each before the end of the second quarter. For each closing we intend to draw down a portion of our forward equity offering while at the same time expanding our existing term loan facility to provide for an additional $100 million of debt capital.

Our new amended term loan will have similar pricing of what it has today but will mature in 2022 adding 2.5 years to the existing maturity date. The remaining forward equity proceeds will be available for additional acquisitions between now and June of next year. Finally, we closed on another great shopping center during the quarter.

Garden City Park located on Long Island not only increases our presence in metro New York but also presented us with an immediate redevelopment opportunity. This well located center offers significant upside with below market rent and re merchandizing potential. We plan to begin work on the redevelopment within the next 60 days.

Most importantly of all, the NOI growth on levered IRR to Garden City and the two pending acquisitions are accretive to our portfolio. To wrap it up I am very pleased with these quarter's results and the accomplishments our team has achieved. I thank you for listening and we now open for questions..

Thank you. [Operator Instructions] Our first question comes from Jay Carlington with Green Street Advisors, please proceed with your question..

Hey thanks for taking the question.

I guess just a follow up on Sports Authority in Eastern Mountain, can you give a little bit more color on the assumptions you are expecting there? How that impacts same property on a wide growth in 2016?.

Sure I will address what happened in the first quarter and then I will let Jim talk about with individual stores in what we are comfortable with saying in public anyways. So in my prepared remarks hopefully you heard that we do fully reserve all unpaid pre-petition rent. So for the first quarter that was approximately $250,000.

If you look at that in isolation, its' less than 20 basis points. However, obviously you can't really look at that in isolation, we evaluate the health of all our tenants and the remaining tenants in maybe Eastern Mountain Sports and few others that are struggling a little bit are extremely healthy.

And going forward obviously I said in my prepared remarks, that we are assuming we already know for example one location that was a closed on our list but others, we just have a list of assumptions as to when that store may close if at all and we are assuming that some of them may be accepted.

So again just to reiterate, those assumptions are incorporated into the range in 2 or 3 quarters right now, I am not sure I am giving you that much more detail today..

Okay.

So maybe as a quick follow up, you mentioned the Q2 weakness you are expecting here, is some of that more Sports Authority or that's more the comps that are effecting that?.

It's all free, higher comps from percent, the higher comps from camera reconciliation and then there is also the bankruptcies..

And maybe switching gears on the acquisition, is there a rough slit you can give on Seattle and D.C.

in terms of the size and then can you maybe talk about what type of IRR you are underwriting for those acquisitions?.

So we increased our guidance to 340 and we have already closed on one property in the first quarter so basically the Seattle asset, we are not allowed to disclose the purchase price for the market common clarity at this time. Once we close on that we will be able to do that.

So I would tell you that the Seattle asset is in the range of $35 million to $40 million per purchase price and then in terms of under-writing I would just again reemphasize that the NOI growth and the IRR composed are creative to our portfolio and also I will give you some color for current market.

As of this quality today if you were to talk to some of the brokers in the market, they will tell you that Gateway markets, they are trading at 5.5% of unlevered IRRs.

And in market common ours is 75 to 100 basis points north of that and for the Seattle asset add another 100 blips to that so we feel very good about these acquisitions and the returns we are getting and we are able to add value with the expertise and talent that we have from our team.

The Long Island is even better than that, double-digit IRRs, unleveraged, all unleveraged..

Okay. Thank you..

Our next question comes from Jeff Donnelly with Wells Fargo Securities. Please proceed with your question..

Good afternoon folks, question on leasing trends. I am curious about leasing trends specifically for inline spaces.

Are you able to break that our for us for new and renewal away from the activity?.

Yes, on the shop space leasing we are basically 12.1% growth on the new and on the renewal I guess 12%, on the renewal per shop space and shop space is smaller than 10,000..

And maybe, I am curious how you are thinking about maximum occupancy your next goal because you are pretty close to 92% on small shop leasing and wondering if there is as far as you can push it or is there another goal post Regency is going to set where it wants to be?.

Many of you probably heard me say this before, we own 212 properties today, though 212 was the whole portfolio that we owned back in 2006 which was our priority and that same pool of properties for 2006 and 2007 was 96.7% and 96.6% lease so basically maintaining percent lease above 96.5% for over four quarters at least.

So I do think we have a little bit more runway and you can't underestimate how much we have improved the quality of the portfolio from 10 years ago..

Was that shop occupancy or overall occupancy?.

That's overall occupancy. So the shop occupancy was north of 92%..

Okay.

Understood and one other follow up, I think Regency has about 50 properties located outside of top 50 MSAs, it's not a big part of value or big part of base rent but many of those properties have rents that are inline or even above the base rent of your top 50 markets so do you see those assets or markets as a source of funds down the road or it just strikes me that they might have a weaker return on investment profile in your top 50 assets?.

I believe one of those markets is Raleigh Durham which is outside of top 50 markets Jeff and we see a very good not only about the portfolio but the portfolio in Raleigh or the upside of that so I mean you have to be careful about where that might be, so I feel good about the upside throughout the portfolio and we are all continuing to evaluate as we have proven in the past to sell those assets and shopping centers who have lower long term growth profile.

And the only other color I would add to that is often the - the university town will be outside of the top 50 and we have enjoyed significant growth in a lot of those assets as well..

That's great. Thank you..

Our next question comes from Lena [ph] with J P Morgan. Please proceed with your question..

Hi, what are your plans for refinancing your perpetual preferred coming due next year?.

The perpetual preferred doesn't actually have a maturity date, that's what we really like about it so we have no intentions right now to either call next year but no plans to do that right now. That's the thing we really like about preferred stock..

And the call option which is our period..

Okay. Got it thanks..

Our next question comes from Rich Moore with RBC Capital Markets, please proceed with your question..

Hello guys, good afternoon, first thing Lisa I am curious that you guys have always been Core FFO sort of place and I am really big on using NAREIT FFO but I get used to the idea that I was supposed to use Core FFO for Regency and now you are citing NAREIT FFO, are you switching the focus to NAREIT FFO, which I think would be great by the way but I am just curious if you are?.

Appreciate your opinion, over the last year probably longer we have been providing both and providing guidance on both. We think both are relative metrics and as long as we provide all of the information and are fully [ph] so that you all see what is in Core FFO and what is not, we'll continue to report both..

Yes, Rich we noted NAREIT FFO in press releases because we updated that range so we only update the ranges that are impacted..

Yes, okay thank you and then I am curious on Houston, we have heard all this concern about Houston and it clearly hasn't come to pass and you guys have roughly 5% or so of AVR there, how is Houston doing if I was to start another project there and do you have any specific like same growth metrics for the market or anything you can share specifically on Houston?.

Yes, on our portfolio itself it's one of our stronger portfolio. We have got 7 out of 10 properties that are located in master plan communities. Out of that portfolio we are 98.7% leased today.

Q1 we are seeing 6.6% property NOI growth so we feel very good about that market, retailers are pressing strong sales which continue to drive expansion and we are real comfortable with the market today. Yes, this is - it's part of the reason why we like the Springwoods, it shows similar characteristics. It's got - being a master plan community.

It's anchored by one of the top grossers in long term base and we have seen results. We have got great producing activity or 71% lease-to-date following [indiscernible] 8% so we love that and we think that's why we are really in Houston and we would love to see more opportunities similar to this one..

Okay.

Good thank you and I sort of had the same question as a follow up on the San Francisco, Oakland MSA as well because now that's the new hot spot where San Francisco is going to become the new ghost town because of the technology and I wonder if you guys are seeing any softness there?.

Yes, I think I can speak to that. This is Mac and we are not, I think that's the large part because of our centers.

We have great centers, they are with big grossers, and they are necessity based retailer for the large part so part of what makes them unique is tremendous [indiscernible] in the past cycles so it's very supply constrained and are performing really quite well and we're not going to lose about that market, it's one of our best portfolios..

Okay. Great thanks guys..

Thanks Rich..

Our next question comes from Anthony Hau with SunTrust, please proceed with your question..

Good afternoon guys the story in part of this call so someone maybe already asked this question but can you comment on why the lease occupancy went down by 200 bips?.

Sure, this is Mac. It's pretty simple in that case, we actually signed a lease with a hair salon and prior to us delivering the space to them they ran into some trouble at some other locations and they basically backed out of the lease and we have backups we are already talking to so..

It's not about the whole thing on where we are on the leasing standpoint even though the center has just been completed..

Yes, the Whole Foods opened last month and they are doing tremendous, well above their projections. If you get a chance, this side of the North Orange County, it is one of our best developed, best looking asset and that's merchandise asset so we are 90% leased.

We could have reached really two or three times over, we have turned away a lot of cash so we have been very patient and we held out a couple of spaces and we really see no issues getting those spaces leased up. So if you are in Southern California please take a chance to stop by..

One last question, I know that Sports Authority didn't have a huge impact on the portfolio and hence you guys have only three stores but have you guys adjusted those stores ready and are there any potential upsides for those boxes?.

Yes, we have already talked about those properties, I will let Jim talk about the real estate..

In general I wouldn't expect to see a lot of upside but at the end of the day we are comfortable with the real estate, there will be good demand for our retail spaces..

As we said in our prepared remarks, to replace the struggling operator with a better operator is going to be better for the long term..

Okay. Thank you so much..

Our next question comes from Greg Schweitzer from Deutsche Bank, please proceed with your question..

Hi everyone, just going back to - just apologize if I missed the spec.

in terms of the upside from the market leases that you mentioned with the retail component almost fully leased, when do some of those leases rollover where you could realize those gains?.

We have retailed the entire Basin building which has some upside as well, I don't Greg if you have had an opportunity to visit the center, and it's across the street. No, that's what we are buying so there are different parts within the center.

The main retail component is anchored by Barnes & Noble and I will agree when I said the prepared remarks, that would be half the example of where bad news would be great news. As we would love to get that space back.

But the center was built a little over 10 years ago, we would expect we are going to really realize some of that growth profit, it will certainly increase over the next 12 months but I think you will see the bigger step certainly in 2018 as when we start to see growth in the underlying..

And then on the potential redevelopment that you mentioned could you share any details on the scope or what you are thinking about there?.

It’s really early in the process and there are many different alternatives so it's a little too early to share much detail but it is a potential to be retail and perhaps multifamily shop, could be all retail, there could be a potential of moving some of the candidates to that, the other existing candidates to that location but it's way too early.

We could lease it till one year though..

Okay. Thanks a lot..

Our next question is Chris Lucas from CapitalOne Securities. Please proceed with your question..

Yes, hi good afternoon everyone, just a follow up on market comments, is there an office component to that I believe is that correct?.

So we really are evaluating the different alternatives as to what we may do with that parcel and no decisions have been made. No matter what we do there will be significant offices from what is existing there today..

Can you guys disclose what the relationship is, is it sort of percentage ownership between you and Avalon at this point, has it been discussed?.

Go for it Mike..

Chris it's not the way we have seen it, written about, talked about as a joint venture and although technically we will close as JV the idea is to kind of minimize immediately so we will have to make a structure out of it. So we will have physical and legal ownership of only our component.

We can't at this point in time unfortunately talk about purchased price details and the difference between the multifamily retail and looking forward to doing that on closing and you will release a press release at that time..

We will get all the economic benefits from the retail and Avalon will get all the economic benefits from the multifamily and we expect to have the thing before the end of the year..

I would like to reiterate, as Mac said, as you know typically we are not releasing the purchase price prior to closing so as soon as that happens more than happy to share that information publicly..

Can I just go back and tie though the office building ownership into that? Kind of where does that?.

That is 100% ours..

That is yours that is your upside?.

Correct..

Thank you that's all I needed..

We look at that as a vacant building with significant amount of upstart..

There are no further questions at this time, I would like to turn the call back to Hap Stein for closing comments..

We appreciate your time wish you a great rest of the week and a terrific weekend. Thank you very much..