While Regency Center has underperformed the market since its IPO, that's due entirely to its poor performance this year, as the stock has lost about a third of its value. If we rewind a few months to the end of 2019, we find that the REIT was comfortably ahead of the S&P 500 (generating a 10.5% total annualized return vs. 9.8% for the broader market). Thus, the REIT has shown that it can outperform the S&P 500, which is one of the keys to quickening the pace to $1 million.
What's not clear is whether the REIT can get back to its market-beating ways in the future. At the moment, times are tough in the retail sector because of COVID-19, which exacerbated the retail apocalypse. That's having an impact on Regency, which was evident during the second quarter. The REIT only collected 72% of the rent it billed during the period, though it does have deferral agreements in place that should boost that rate up to 77%. While those numbers improved in July (it collected 75% and has deferral agreements covering 79%), "there are still challenging times ahead," according to CEO Lisa Palmer.
It could be quite a while before collection rates trend closer to 100% again. On top of that, occupancy levels will likely fall because of tenant bankruptcies and store closures, which were already an issue because of the retail apocalypse. These headwinds could put some downward pressure on rental rates, which would negatively impact the REIT's FFO and ability to continue growing its dividend.
On a more positive note, Regency Centers has been investing money to develop new retail centers and redevelop old ones to adjust to the changing needs of the real estate sector. The company currently has $190 million in projects underway as it refreshes its retail portfolio. Meanwhile, it has several more potential projects in the pipeline to transform unused space into new retail locations and live, work, play, and stay properties that mix retail with dining, entertainment, residential, office space, and hotels. As it completes these projects, they should help boost the REIT's NOI and FFO, which are keys to creating shareholder value.
However, while those investments should eventually pay dividends, it could be quite some time before investors see a return because of all the headwinds facing retailers these days. That likely lag could impact the REIT's ability to get back to its outperforming ways.