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DATE

  • Wednesday, July 30, 2025, at 11 a.m. EDT

CALL PARTICIPANTS

  • President and Chief Executive Officer — Lisa Palmer
  • Chief Financial Officer — Mike Mas
  • East Region President and Chief Operating Officer — Alan Roth
  • West Region President and Chief Investment Officer — Nick Wibbenmeyer
  • Senior Vice President, Capital Markets — Christy McElroy

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TAKEAWAYS

  • Same-property NOI Growth: Same-property NOI growth exceeded 7%, with base rent contributing 4.5% and supported by improved leasing, elevated recoveries, accelerated rent commencements, and favorable bankruptcy resolutions.
  • Leased and Commenced Occupancy: Commenced occupancy increased by 40 basis points sequentially, while a 260-basis-point lease-to-commence spread represents a $38 million S&O pipeline.
  • Leasing Spreads: Achieved 10% cash rent spreads and nearly 20% GAAP rent spreads on new and renewal leases, reflecting embedded contractual rent steps in most agreements.
  • Capital Deployment: Over $600 million deployed year to date, including the acquisition of the five-property R&D portfolio in Orange County, California for $357 million, which is 97% leased and totals over 600,000 square feet.
  • Development Pipeline: Executing on a $500 million active pipeline, with blended project returns exceeding 9%, and nearly $50 million in new projects started year-to-date; majority of new investment targeted at ground-up developments.
  • Financing and Balance Sheet: Issued $400 million of seven-year bonds at a 5% coupon, pre-funding the November unsecured bond maturity and preserving an A credit rating from both Moody’s and S&P; leverage remains within the 5.0x-5.5x target range.
  • Earnings Guidance: Raised full-year same-property NOI growth forecast to 4.5%-5% (up 115 basis points at the midpoint) for 2025, NAREIT FFO per share by $0.06 (full-year growth north of 7%), and core operating EPS by $0.05 (growth above 6%), with tighter credit loss guidance of 75-85 basis points for the full year.
  • Asset Dispositions: Maintaining $75 million sales guidance, primarily a single grocery-anchored center at a 5.5% cap rate, as disclosed, with additional nonstrategic assets included.
  • Capital Availability: Nearly full capacity on a $1.5 billion credit facility and $100 million of unsettled equity to settle in the second half of the year, providing ongoing flexibility for pipeline and acquisition funding.
  • Credit Losses and Tenant Health: Revised credit loss assumptions downward due to clarified bankruptcy outcomes, with accounts receivable over 90 days at historical lows.

SUMMARY

Regency Centers (REG 0.77%) explicitly raised its core operating and NAREIT FFO guidance for FY2025 following outperformance across all major operating metrics, underpinned by record-low move-outs and strong rent spreads. Management emphasized the strategic significance of the off-market Orange County portfolio acquisition, which introduces long-term, accretive earnings, and leverages UPREIT structuring for competitive advantage without elevating net leverage. Execution on both ground-up and redevelopment projects is described as on schedule and on budget, with attractive blended returns above 9% for projects in progress. Company leadership highlighted that sustained high occupancy, robust tenant demand, and favorable expense recoveries have de-risked leasing commencements for the current year and supported improved expense recovery rates through rising average commenced occupancy. Capital structure remains stable, with disciplined access to low-cost debt and nearly full revolver capacity ensuring operational and investment flexibility.

  • Chief Financial Officer Mas said, we are raising our current year earnings guidance. citing outperformance and greater visibility for the year.
  • Management indicated blended development investment yields continue at or above 7%, with a projected annual start rate of at least $250 million, mainly in ground-up projects.
  • Management commented regarding the Orange County acquisition, signaling complete market control in the master-planned community.
  • In response to recent bankruptcies, Mas stated that improved clarity on outcomes allowed us to lower our eye level there in a very positive way. for credit loss forecasts.
  • The company reported the R&D acquisition is expected to deliver a growth rate north of 3% going forward, despite already being 97% leased, with near-term upside from small redevelopments.
  • Leasing activity is supported by high occupancy costs that tenants remain willing and able to absorb, with contractual rent steps becoming prevalent in new leases.
  • There are no planned acquisitions remaining in the Rancho Mission Viejo master plan, as REG now owns all existing retail, but management anticipates future partnership opportunities on additional phases.
  • Chief Investment Officer Wibbenmeyer described the current portfolio acquisition environment as experiencing a marginal pickup in block. opportunities, though REG’s organic development strategy does not depend on external acquisitions for growth.

INDUSTRY GLOSSARY

  • NOI (Net Operating Income): Property-level income from operations before depreciation, amortization, and corporate-level expenses, used to assess operational performance of real estate assets.
  • S&O Pipeline (Signed & Not Opened Pipeline): Aggregate base rent represented by executed leases for tenants yet to commence occupancy and begin rent payments.
  • UPREIT: A structure—Umbrella Partnership Real Estate Investment Trust—that allows property owners to contribute assets in exchange for partnership units, providing tax deferral and liquidity options.
  • GAAP Rent Spread: The percentage difference between new/renewal rent executed and expiring rent, measured on a GAAP accounting basis and reflecting both base rent changes and contractual step-ups.
  • Cap Rate (Capitalization Rate): The ratio of property net operating income to its acquisition price, used to evaluate the attractiveness and yield of real estate investments.

Full Conference Call Transcript

Christy McElroy: Good morning, and welcome to Regency Centers Corporation's Second Quarter 2025 Earnings Conference Call. Joining me today are Lisa Palmer, President and Chief Executive Officer; Mike Mas, Chief Financial Officer; Alan Roth, East Region President and Chief Operating Officer; and Nick Wibbenmeyer, West Region President and Chief Investment Officer. As a reminder, today's discussion may contain forward-looking statements about the company's views on future business and financial performance, including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties. It's possible that actual results may differ materially from those suggested by these forward-looking statements we may make.

Factors and risks that could cause actual results to differ materially from these statements may be included in our presentation today and are described in more detail in our filings with the SEC, specifically in our most recent Form 10-K and 10-Q filings. In our discussion today, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted to our Investor Relations website. Please note that we also have posted a presentation on our website with additional information, including disclosures related to forward earnings guidance. Our caution on forward-looking statements also applies to these presentation materials.

As a reminder, given the number of participants we have on the call today, we respectfully ask that you limit your questions to one and then rejoin the queue with any additional follow-up questions. Lisa?

Lisa Palmer: Thank you, Christy. Good morning, everyone. We are pleased to deliver another quarter of excellent results, driven by both internal and external growth. This is highlighted by the strength of our operating fundamentals and our accretive capital allocation. On the operating side, we're having a phenomenal year. We continue to outperform on all metrics, demonstrated by strong same-property NOI growth and total NOI growth. In the second quarter, we had great success commencing rents for tenants in our S&O pipeline, achieved record low shop move-outs, and sustained robust leasing activity with strong rent growth. Our investments team is also firing on all cylinders, sourcing high-quality opportunities, and deploying more than $600 million of capital year to date.

Most recently, we were excited to announce the acquisition of five outstanding shopping centers located in a premier community in South Orange County, California. Strategically, this transaction checks all of our boxes. It's accretive to earnings, quality, and growth while enhancing our presence in this supply-constrained Southern California market. During the second quarter, we also released our annual corporate responsibility report, highlighting our progress and future strategic direction. Our ongoing commitment to corporate responsibility in support of our business objectives remains a foundational strategy for Regency. The many achievements noted in the report reflect the dedication and efforts of our entire team.

Given the strength in our results, substantial progress in leasing, and opportunistic capital allocation, along with greater visibility for the remainder of the year, core operating earnings, and NAREIT FFO, Regency's distinct strategic advantages continue to differentiate our company and position us favorably for future growth. Our high-quality, grocery-anchored shopping centers located in desirable suburban trade areas provide essential retail offerings focused on necessity, service, convenience, and value. Our well-established national development platform allows us to drive substantial value creation, and our strong balance sheet with low leverage and dependable access to low-cost capital enables our team to continue to pursue and successfully execute on strategic growth opportunities.

We are only halfway through 2025, and I am so proud of our team's accomplishments so far. I look forward to building on this success for the remainder of this year into 2026 and beyond. Alan?

Alan Roth: Thank you, Lisa, and good morning, everyone. Our team achieved outstanding second-quarter operating results, highlighted by same-property NOI growth exceeding 7%, with base rent being the largest contributor at 4.5%. As discussed on last quarter's call, we had anticipated above-trend growth in the second quarter, and we delivered even better results, which were driven by a multitude of positive factors, including robust leasing activity, record low shop move-outs, favorable bankruptcy outcomes, accelerated rent commencement timing on a few key anchor tenants, and meaningful improvement in our expense recovery rates.

We maintained our same-property leased rate and continued to grow shop occupancy as our high-quality properties are commanding strong tenant demand from a wide range of categories, including grocers, restaurants, health and wellness, off-price, and personal services. Our team is seizing every opportunity to enhance merchandising as leading retailers recognize that high-quality, well-located space is in short supply. It is in centers like ours where these best-in-class retailers are achieving exceptional results. We continue to commence tenants within our F&O pipeline at a rapid pace, driving our commenced occupancy rate higher by another 40 basis points quarter over quarter. At the same time, we are also continuing to backfill the pipeline with new leases.

Our lease-to-commence occupancy spread was 260 basis points at quarter-end, representing an S&O pipeline of $38 million of incremental base rent. We continue to drive rent growth higher in the quarter for both new and renewal leasing, achieving cash rent spreads of 10% and GAAP rent spreads of nearly 20%. Our GAAP spreads demonstrate our ability to not only drive mark-to-market rent increases when signing new and renewal leases but also reflect our continued success embedding meaningful contractual rent steps in the majority of our leases. In summary, I'm really proud of our results, and I'm even more proud of the work of our incredible team to achieve them.

We are capitalizing on persistent demand for our best-in-class shopping centers and the phenomenal operating trends that exist in our sector as we upgrade our merchandising and drive NOI higher. With current year lease commencements largely derisked, we are full speed ahead on continuing to build our future lease pipeline as we drive momentum and sustain growth opportunities well into 2026. Nick?

Nick Wibbenmeyer: Thank you, Alan, and good morning, everyone. We've maintained a robust pace of investment activity, with more than $600 million of accretive capital deployment so far this year. Our investments platform is unequaled by our ability to acquire, redevelop, and importantly, develop ground-up best-in-class shopping centers. As Lisa mentioned, we recently had a tremendous opportunity to lean into acquiring. Last week, we closed on a five-asset portfolio within the Rancho Mission Viejo master plan community in Orange County, California, for $357 million. The R&D portfolio, as we refer to it, is 97% leased and includes more than 600,000 square feet of high-quality retail GLA in one of Southern California's most sought-after suburban submarkets.

Strategically positioned at primary intersections with strong trade area demographics and anchored by high-performing grocers, the transaction is well aligned with Regency's capital allocation strategy. Accretive to our growth, earnings, and overall portfolio quality, as well as leverage neutral to our balance sheet. Furthermore, our UPREIT structure provided us a competitive advantage in the transaction, offering tax planning optionality to the seller as well as an opportunity to participate in our future success through the ownership of our operating partnership units. We also assumed $150 million of below-market debt with an average term to maturity of about twelve years.

In addition to the acquisition of these exceptional assets, we continue to successfully execute on our $500 million in-process development and redevelopment pipeline. Consistent with the fundamental strength that exists throughout our operating portfolio, leasing activity for these projects is robust. And blended project returns exceed 9%. Importantly, our team is completing projects on time and on budget. We are also making significant progress sourcing incremental opportunities, especially in our ground-up development program. While overall supply growth in our sector remains limited, we continue to find more than our fair share of attractive projects as the leading national developer of high-quality open-air shopping centers. We have started nearly $50 million of new projects this year.

And after two consecutive years of $250 million or more of starts, we continue to have visibility to at least that level in 2025. With the majority of the investment in ground-up development. Leading grocers and retailers across the country are demonstrating a strong commitment to expand in our markets and partner with us on the high-quality centers we are developing. In closing, our team is energized and is taking advantage of the flywheel momentum we built within our investments to source new opportunities. As a result, we continue to see substantial activity across the board in acquisitions, redevelopment, and ground-up development, fueled by our best-in-class team, sector-leading balance sheet, substantial free cash flow, and access to capital.

We look forward to announcing additional exciting investments in the near future. Mike?

Mike Mas: Thank you, Nick, and good morning, everyone. As you've heard from Lisa, Alan, and Nick, Regency delivered exceptional results again this quarter. Our same-property NOI and earnings growth surpassed our expectations, and we are grateful for our team's hard work in delivering these results. Following this strong first-half performance, combined with greater conviction on our outlook for the remainder of the year, we are raising our current year earnings guidance. I'll refer you to pages five and six in our earnings presentation while I highlight some key guidance changes. We raised our same-property NOI growth range to 4.5% to 5%, up 115 basis points at the midpoint.

We raised our NAREIT FFO range by $0.06 per share at the midpoint, now representing full-year growth of more than 7%. And we raised our core operating earnings per share by $0.05 at the midpoint, representing growth north of 6%. The increase to same-property NOI guidance was fundamentally driven by higher average commenced occupancy, from higher shop retention rates, combined with strong lease commencement activity. Additionally, and as a follow-on impact of the elevated occupancy, together with the completion of our annual reconciliation process, we are benefiting from higher expense recovery rates, further amplifying NOI growth.

Lastly, with greater clarity on the outcomes related to some of the more high-profile bankruptcies this year, we are also narrowing our credit loss guidance to 75 to 85 basis points. While the increase to same-property NOI was the largest contributor to our overall earnings guidance range, our accretive investment activity is also moving the earnings needle even higher, including the accretion expected to be generated by our recently announced R&D portfolio acquisition. We've also substantially derisked our capital raising plan for the year, following the successful execution of our $400 million bond offering in May. We issued seven-year notes at a 5% coupon, allowing us to prefund our November unsecured bond maturity.

This issuance demonstrates our clear cost of capital advantage as we remain the only shopping center REIT with an A credit rating from both Moody's and S&P. Our leverage is comfortably within our target range of five to five and a half times and will remain so even taken into consideration the portfolio acquisition, which was funded on an effective leverage-neutral basis. We continue to generate significant levels of free cash flow, have nearly full availability on our $1.5 billion credit facility, and still have $100 million of unsettled equity from our forward ATM issuance late last year, which we will settle in the second half of the year. We will now open for questions.

Operator: Our first question comes from Samir Khanal with Bank of America. Please proceed with your question.

Samir Khanal: Good morning, everybody. I guess, Mike, as you alluded, very strong print for same-store in the quarter. Certainly, a big contributor was the base rent. But also saw some positive contributions from recoveries, other income, and percentage rent. So walk us through kind of how you're thinking about the contribution from the various components into the second half as we think about the same-store NOI cadence? Thanks.

Mike Mas: Sure. Hey, Samir. Good morning. Yeah. So last quarter, we spent a little bit of time talking about the known deceleration in the growth rate that we are seeing in the numbers. And that hasn't changed. However, what I would add to that is the second quarter was exceptional on a couple of other line items, which kind of just raised the entire sea level. But that bias to the second half of the year being a little lower than the midpoint still exists. What's going on here? As you said, base rent will contribute, has been, and will continue to be the largest contributor.

But some of the credit loss elements are where that bias is happening in the back half of the year. As we know, we have now more certainty, and we know that the BK move-outs from Party City, from Joanne, from Rite Aid, these will be back half of the year elements. We also have uncollectible lease income. The first half of the year has been incredibly low, below our historical averages. We are planning for a slightly higher level of ULI in the back half of the year. I will share that we're planning for still below historic levels, but higher than the first half, which is putting a little pressure on that growth rate.

Lastly, there's a comp in the prior year from an uncollectible lease income perspective. Again, very low in the back half of last year. So comping to a little bit higher this year in our expectations. And in the second quarter uniquely, there is some percentage rent that shifted into the quarter from the first quarter, there's other income, which by definition is a bit of an uneven line item, and we had a little bit of froth in the second quarter. And then, lastly, tried to color it up in the prepared remarks but our reconciliations. Again, this is a testament to the team and just rent-paying occupancy being higher.

It exceeded our expectations on our ability to not only collect rent on a prior year basis but also to continue to collect recoveries, I should say, on a prior year basis and collect recoveries going forward, which has increased our eye level there. I hope that helps on the growth rate and the trajectory. But I also hope it doesn't take away from the fact that we've had an incredible first half of the year. And we're looking forward to continuing that momentum.

Samir Khanal: Thanks a lot.

Christy McElroy: Thanks, Samir.

Operator: Our next question comes from Michael Goldsmith with UBS. Please proceed with your question.

Michael Goldsmith: Good morning. Thanks all for taking my question. Question is just about the same property NOI growth algorithm. You have a wonderful chart in your presentation that outlines the different drivers. You know, which is driving, you know, the 7% plus in property NOI growth. During the quarter. Like as we think about it going forward, like you know, occupancy is kind of at peak leased occupancies, maybe still a little bit of room on the commence can you just talk about kind of the shift away from occupancy into some of the other components of the same property NOI growth algorithm to kind of make up for that.

And I know Alan mentioned in his comments just continued meaningful contractual rent steps in a majority of releases, if you could touch on that as well. Thank you.

Mike Mas: Yeah. Let me just start from, hey, Michael. It's Mike. From the algorithm perspective, I'll let Alan provide some color. If he thinks it's necessary. One, I appreciate you recognizing the disclosure. Pretty proud of it. The team does a great job. Sharing that. On a perspective basis, you're right. We continue to see continued runway on a commenced occupancy perspective. While we are at peak levels of percent leased, we have not reached peak levels of commenced. And that gives us confidence as we move to the second half of this year and into 2026 that we have a continued, what I would call, above-trend growth profile or opportunity ahead of Regency, and we're excited for that.

I'll let Alan speak to the S&O pipeline in a few seconds, but we should see that continue to compress in a very positive way. And then lastly, from an algorithm standpoint, let me share that redevelopments have been and we are expecting them to continue to be quite positive for our same property NOI growth metric. We've talked about in the past, '25 will have well, you know, north of a 100 basis points positive, in impact to our same property growth rate. And, actually, as we sit here today, I think that may replicate into 2026. We've done an exceptional job starting and delivering and working on our redevelopment business.

And the prospects for that to continue to be positive to NOI growth. I think, will continue in the next year.

Alan Roth: Yeah. Michael, I'll just color up the S&O piece. And, you know, I would just say our team is continuing to make really great progress bringing rent online as I mentioned in the opening remarks. But I'm even more proud of continuing to backfill that pipeline with additional signed leases. The process is working just in terms of getting our tenants to start plans early, proactively fitting out our spaces to make them more marketable, ordering equipment in advance, all leading to some accelerated rent commencement date. From a normalized run rate, I think we've mentioned we expect that a stabilized basis, S&O will be up at about 175 basis points.

But the compression we had this quarter it's a great thing, particularly when it's in conjunction with percent commence going up, which it did 40 basis points. So teams clicking on all cylinders on that front, and I hope that number continues to compress certainly over time.

Christy McElroy: Thanks, Michael.

Michael Goldsmith: Thank you.

Operator: Our next question comes from Greg McGinnis with Scotiabank. Please proceed with your question.

Viktor Fediv: Hello. This is Viktor Fediv on with Greg McGinnis. I'd like to dig into this SoCal acquisition to better understand transaction markets through these plans. So who are you competing with for the asset? And from your perspective, what gave you competitive edge into successfully executing the deal?

Nick Wibbenmeyer: Greg, this is Nick. Appreciate the question. You know, this is one of those opportunities that I can really sort of pound our chest that it was truly off-market. And so the seller is a family that's owned these properties literally since the 1800s. They've owned tens of thousands of acres throughout Southern California that they've been master planning and developing now for generations. And they chose us, and they came to us really for three primary reasons at our discussions with them. First and foremost, the quality of our currency matters. And so the UPREIT transaction was really important to them from a tax optionality standpoint moving forward on their side.

And the quality of the currency they were getting in return was really critical given they are now a large shareholder of Regency Centers Corporation. And so we appreciate their commitment to our platform and their ownership now in our company. So beyond the quality of our currency, the quality of our operations matters. Again, they have a very vested interest in this community, not only in what they've done to develop it to date, but there's future development on the horizon, residential, to the east of these projects. And they live and shop in these communities. They're very, very proud of these shopping centers.

And so the quality of the operator taking over these shopping centers to make sure they are best in class moving forward was critical to them. And then last but not least, there are future development opportunities within the future phases of their master plan development. And so the opportunity to partner with them on future developments mattered. And so really, when they prioritized those three items, the only company they felt like checked all three of those boxes was us. And so, we're very proud to have engaged with them, came up with a quality transaction for all parties involved.

Lisa Palmer: I just need to come over top just for a second and just say I'm really proud of the team because it took many throughout our organization to make this happen. It certainly didn't happen overnight as you can imagine. And just did everything Nick said in terms of why the sellers were comfortable and wanted to transact with Regency, and that goes to the people and to our strategy and to the company that we've built. So grateful to the whole team, grateful to the sellers.

Viktor Fediv: Got it. Thank you.

Operator: Our next question comes from Steve Sakwa with Evercore ISI. Please proceed with your question.

Steve Sakwa: Yes. Thanks. Good morning. Could you maybe expound on the development opportunities? You know, it seems like development yields are quite high for you guys. The acquisition yields. And I'm just curious if there's, you know, incremental discussions you're having with the national retailers about new developments.

Nick Wibbenmeyer: Yeah. Appreciate the question, Steve. Again, it's Nick. As we've been articulating, I think now for quite a few quarters, we continue to see demand from best-in-class grocers growing their physical presence in the markets that we do business. And so we continue to have very active conversations with those key we're bullish on our ability to find those opportunities. They are very difficult. I'll reinforce that. It is challenging to find these deals. But we are best in class given our relationships, our expertise, and our capital. Our teams just continue to do a tremendous job coast to coast partnering with these grocers and putting these deals together. And so we're bullish.

As we've talked about, we delivered or started $250 million the last two years. And as I said in the prepared remarks, we expect to start that much this year or even maybe beyond that. And we do expect the majority of that to be in ground-up developments given the success our team has had. And in terms of yields, as you've seen, we're in that 7% range, 7% plus, and I would expect us to maintain that yield, eyesight for the time being.

Christy McElroy: Thanks, Steve.

Operator: Our next question comes from Craig Mailman with Citi. Please proceed with your question.

Nick Wibbenmeyer: Thanks. It's Nick here with Craig. You touched on the better expense recovery rates in the quarter and net OpEx dropped meaningfully quarter over quarter. So how sustainable is that going forward? Or do you expect a reversal?

Mike Mas: There's a it'll decelerate from a recovery rate perspective going forward. Again, because of the one there is a one-time element to the second quarter being that we completed our annual reconciliation process. So not to get too much in the weeds there, but that results in a little bit of prior year recognition that exceeded our estimates that we booked at the end of last year. The rough number there is maybe a million dollars of kinda one-time baked into the second quarter. I do we do anticipate that this recovery rate basically will fall maybe by 100 basis points if you're using Q2 as a run rate.

Going forward, but that again, the average in-place occupancy is really what's driving this higher rate of recovery for us. That average in-place occupancy last quarter we were talking about that potentially moving by 75 basis points or more in 2025. Now as we see here today, given the success we had in the second quarter, we're seeing that move by north of 100 basis points in 2025. That significant change in average commenced occupancy is what's driving the fundamental increase in our expense recoveries.

Nick Wibbenmeyer: Thanks, Nick.

Operator: Our next question comes from Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.

Todd Thomas: Hi, thanks. I wanted to go back to the SoCal acquisition. Do you have any rights to participate in future developments or future acquisition opportunities with the sellers in SoCal within that master plan community? And then you highlighted that it's accretive to Regency's core growth rate. Can you just provide some additional detail on the growth opportunity within the portfolio, which is 97% leased? What's the upside related to? And is there any incremental CapEx or reinvestment capital anticipated in order to generate that outsized growth?

Nick Wibbenmeyer: Sure. Todd, let me start with your second question. Yes, we're really excited about the future growth of that portfolio. As you articulated, it is 97% leased. However, we do think there's upside in some of the rents that are in the near term. And there are some small redevelopment opportunities. There's currently a vacant Rite Aid in the Sendero market that we anticipate redeveloping. The soon-to-be vacated CVS further north in the Bridge Park. And so small redevelopments within that portfolio, but, again, exactly what we do every day in our core portfolio. And so we do expect that growth rate to be north of 3%, moving forward.

And so although that portfolio has been really well taken care of, really well operated, there's still opportunity for growth within it, which is what we're excited about. In terms of your first question, I'll start with the acquisitions first. No. We don't have the ability to acquire more within that master plan community because the answer is simple. We bought all of their assets that currently exist. And so that's what we were so excited about within this acquisition. We own all of the retail servicing these phenomenal master plan developments. And so knowing that we really do control that market is what we're excited about.

Then in terms of future development, there are plans for future development, especially on the residential side. Again, which is just gonna bring more demand to the existing assets. But we do anticipate the potential for future retail and we have had discussions and very positive dialogue about participating and partnering to everybody's benefit on those projects in the future.

Christy McElroy: Thanks, Todd.

Operator: Our next question comes from Haendel St. Juste with Mizuho Securities. Please proceed with your question.

Haendel St. Juste: Hey there. Good morning. You guys mentioned plans to settle the $100 million remaining forwards in the second half of the year. So I guess I was curious what your thoughts or plans were for that capital. I think most of us presume it's for development or redevelopment, but also was curious kinda what your appetite for more potential acquisitions could be near term. Thank you.

Mike Mas: Hey, Haendel. It's Mike. Yeah. To reiterate our plans, we would we're gonna settle that in the second half of the year. We have to settle it contractually by call it, November, early December, and we will do that. What we're seeing it's all fungible from a use of proceeds perspective. We view it as just additional added capacity for us to continue to grow our development pipeline to continue to find accretive acquisition opportunities. So it goes into that bucket.

I will say, there does appear to be some of the momentum building on our ability to roll up down REIT transactions, smaller joint ventures where we can take advantage of rolling up and our understanding of those assets and buying the unowned portions of those shopping centers. So that is maybe a near-term direct use of that capital. But on balance, I would just view it as added capacity.

Christy McElroy: Thanks, Haendel.

Operator: Our next question comes from Cooper Clark with Wells Fargo. Please proceed with your question.

Cooper Clark: Great. Thank you for taking the question. Could you provide thoughts on farther portfolios style deals from here and where you're seeing portfolio cap rates for single asset transactions as we think about the SoCal acquisition and the upward revision to acquisition cap rates and guidance?

Nick Wibbenmeyer: Sure. Let me speak first, Cooper. Good morning. This is Nick. To what we're just seeing in the market in general, and then Mike may color up a little bit of just how to think of the cap rate related to R&D. And so still seeing overall a lot of demand in our sector. So no question. There's capital that's very interested in owning irreplaceable grocery-anchored assets throughout the country. And so whether that's single assets or portfolio quality assets, depending on the growth profile into the low sixes. And so been here over the last couple of quarters given the capital flow and interest in our sector for all of the reasons you're hearing flow through our operating results.

And so we continue to be competitive. And as we've always said, the really good news about our business plan is we don't have to buy things to meet our growth objectives. Given our development and redevelopment program. But when those opportunities present themselves, where we feel like we can acquire assets that are equal or better than our quality and growth profile and that we can fund accretively, we are ready to move. And R&D is a perfect example of that.

Christy McElroy: Thanks, Cooper.

Operator: Our next question comes from Juan Sanabria with BMO Capital Markets. Please proceed with your question.

Juan Sanabria: Good morning. Just hoping you could talk a little bit about the tenant health on the small shop side. You said that the turnover was less than expected. I guess, is that why do you attribute that to? And how are tenants feeling about tariffs, particularly on the small shop side where there, I think, there's less maybe ability to pass cost fewer to have negotiating leverage with suppliers.

Alan Roth: Historic lows. Our sales are up for our retailers. And our pipeline, particularly on the new lease side, remains very strong. So your question about the health of the tenant, it's very strong in our portfolio and very proud of the discipline and intentional approach how we're managing that. Retention rate was about 77%. It's a little bit higher than we typically see. And, again, I think that's a little bit of a supply constraint. That you're seeing out there coupled with productive stores for them. But you know, for us, cycling through and enhancing merchandise has always been a key thing for us. So we're hearing nothing but really positive feedback from our existing tenant base.

And as they think through your tariff question, you know, they're time-tested operators. They know how to operate and be agile through uncertain times. And, you know, I suspect if the time comes where they need to negotiate with suppliers, they will. If they need to consider sourcing goods elsewhere, they will. If it's passing through some expense to the consumer, they will. They're gonna evaluate all the levers that need to be done, and I don't believe they're sitting back. They're evaluating those things now, and many are making changes right now. So feedback is positive. In pipeline, that's coming behind. It remains very positive.

Lisa Palmer: Yeah. I would just reiterate what we've been saying for many years. We are con if you think about our product type, no one really no one knows. There's no consensus on what the impact will be of policies. What we do know is that we have a really high-quality portfolio. You just mentioned we have our the health of our tenants. Is really strong. And we have we are in good suburban trade areas. And we with the focus on essential needs, value, convenience, daily necessities, we feel really good about the future opportunities and growth within our portfolio. The consumers not only are our tenants resilient, the consumer is also very resilient.

And we continue to see that with all of the trends in our portfolio, foot traffic, tenant sales, etcetera. Feel really good about it.

Christy McElroy: Thank you, Juan.

Operator: Our next question comes from Rich Hightower with Barclays Bank. Please proceed with your question.

Rich Hightower: Hi. Good morning, everybody. Thanks for taking the question. A lot of good questions so far. But I think just to maybe just to follow-up on the tightening of the credit loss assumption for 2025. Obviously, that's a good sign. But any indications on maybe potentially troubled tenants for '26 even notwithstanding the comments just now about very strong tenant health. Any sort of leading indicators there?

Mike Mas: Hey, Rich. Let me just speak to the guidance. And the change a little bit, and then Alan can jump into it from a Tenet Health perspective. I appreciate you helping us reiterate that we did kinda narrow and lessen our outlook for credit loss and I would like to remind everyone when we speak of credit loss at Regency, it is a combination both of move-outs from bankruptcies or lost base rent together with uncollectible lease income or traditionally bad debt expense. I'd say both of those elements have declined in our outlook for the year. The BK outlook is what declined the most.

And if you think about what's occurred over the last three months, it's just a lot of clarity. We've had a lot more clarity come to us through the outcomes of these bankruptcy proceedings. And we now know that, which stores we will lose and which we won't and when. And the timing and that certainty is what allowed us to lower our eye level there in a very positive way. As an example, we learned in May that CVS was taking four of the Rite Aid positions in our Pacific Northwest portfolio. So that is a change to our plan and allowing us to lower our eye level.

I mean, I know if we have much more to add, beyond what Alan already shared from an Outlook perspective. Our tenants are extraordinarily healthy. The AR that we're looking at greater than ninety days is a historical, historically low levels. We would continue to anticipate a retention rate roughly in the 75 to 80 base point range. Tenants will move out. So that element of the business plan won't change. Active asset management will continue. Well, we are always looking to upgrade our merchandising mix and ensure that we're providing the best product for our consumer. And but at the same time, there's gonna be back filings. It is an element of our business. Tenants will fail.

Regency does better than most. In those outcomes. We retain in reorganizations, we retain a lot of our tenancies. And when and those that we don't retain we release pretty quickly and at oftentimes higher rents.

Rich Hightower: Great. Thank you.

Operator: Our next question comes from Wes Golladay with Baird. Please proceed with your question.

Wes Golladay: Hello, everyone. Just wanna talk about the earlier commitments of a few tenants. Were those primarily junior anchors? And are they just looking to open a season earlier?

Alan Roth: Oh, Wes, I'm assuming you're talking about earlier commencement of rent. Yes. It was a couple of anchor tenants that, in fact, we were just able to accelerate openings is really what it boils down to. And I think, again, that's a testament to driving a very efficient process. Being front and center visible, and partnering with our retailers to get them open.

Christy McElroy: Wes, did that answer your question?

Wes Golladay: Yeah. Well, just a yeah. Was it just the ability to get it open, or were they kinda pushing to say, hey. We wanna open instead of maybe fall. We wanna get open for the summer. Is it was anything like that going on?

Alan Roth: No. I don't there was no again, I think it's always interest our line. The sooner we can get it open, the quicker we can get our consumer in, the faster we can generate sales, which is a real win-win for all of us. I really just don't have much more to add to it than that, Wes. It was just a good partnership, and I think that is one thing that we pride ourselves on is working together with our customer, which is our retailer, our tenant. And doing everything we can to get them open sooner.

Wes Golladay: Okay. Thank you.

Operator: Our next question comes from Ki Bin Kim with Truist Securities. Please proceed with your question.

Ki Bin Kim: Thank you. Just a couple quick ones on leasing. The renewal spread this quarter 17.2% on a GAAP basis. Can you remind me, does that include options or not? And what would that spread look like without options? And just second question, just over time, any lessons learned on how much you can stretch occupancy costs in your better quality assets? I realize it's probably higher for those assets, but has that elasticity changed at all over time? Thank you.

Alan Roth: Ki Bin, good morning. So to answer your first question, yes, it does include options. And our negotiated renewal rates are absolutely higher when you're excluding the option rate from that metric. Your second question was on it was basically on our ability to push occupancy cost. I'm happy to take it. Because I've spoken about this in on other calls and in and in most meetings. There's clearly there's been limited supply. And so the supply-demand equation, we've talked about it, is in our favor today. It has to be win-win. Alan used those used that term as well. Our tenants need to be successful for us to be successful. But they know that there's limited supply.

We know that there's limited supply. So they again, they're better operators. They're time-tested. And they continue to invest in their business and to really find other ways to eliminate costs in their business so that they can afford higher occupancy costs. So, yes, we're absolutely pushing. It's why you continue to see the really strong contractual rent steps that the team is that the team's getting in our leases in addition to the rent spreads upon expiration.

Christy McElroy: Thank you, Ki Bin.

Operator: Our next question comes from Mike Mueller with JPMorgan. Please proceed with your question.

Mike Mueller: Yeah, hi. In the comments, you specifically mentioned work to source new developments. And looking at the sub, it's about a $50.50 split today between ground-up and redevelopment investment. Do you think that's about where the mix is going to stay for the next three to five years and how deep is the pre-debt pipeline?

Nick Wibbenmeyer: Sure. Mike, good morning. Appreciate the question. Look. The reality is, as I articulate a little bit ago, we continue to find success in the ground-up program. And so I do think just given where our occupancy is going, redevelopments, we are always gonna be a core part of our business. We're gonna constantly be pruning for our portfolio for opportunities to invest capital accretively. And so I don't wanna take away from those efforts. But when you talk about a spend rate and a start rate in the $250 million plus range, I do think as you look forward, the majority of that will start to come from ground-up developments.

And I think, again, this year, you'll see that flip in terms of our starts as we round the third and fourth quarter here.

Christy McElroy: Thanks, Mike.

Operator: Our next question comes from Floris van Dijkum with Ladenburg Thalmann. Please proceed with your question.

Floris van Dijkum: Hey, thanks for taking my question. So, Lisa, I mean, I've heard you talk about the favorable supply and demand and, obviously, one of the best operating environments in history or certainly recent history. Has your thinking changed on what your peak occupancy, both leased and physical, can be? And how much more room do you think there is? And certainly, some of your peers have, you know, been achieving higher occupancy levels, leased occupancy than you guys. Which historically you've led the sector. Has your thinking changed on how much more room you have to occupancy levels higher?

Lisa Palmer: Absolutely. And we are continuing to do that. And I feel good that I mean, we're already surpassing prior peaks. You know, Alan has often said records are made to be broken, and we continue to break them. So our thinking has changed, and we do believe that we can continue to push higher. And I do believe that the percent leased is highly correlated with the quality of a portfolio. Ours is very well leased, but at the same time, you can't look at it in isolation. Nick just mentioned that the focus on redevelopments and intense asset management. And when you do redevelop, often there will be strategic vacancy. And so that may cloud the numbers some.

But there's no question that we believe that we can continue to surpass and hold higher levels of percent leased than we have in past history.

Nick Wibbenmeyer: There is no ceiling, Floris.

Lisa Palmer: And 100% might be a ceiling. Yeah. And we are very comfortable and absolutely committed to also taking space offline when it's accretive to the redevelopment, as Lisa had mentioned.

Christy McElroy: Good question. Thank you, Floris.

Operator: The second part of Cooper's question. So how do you think about the magnitude potential for more larger scale OP unit deals? Sounds like this one took years to come together. It was pretty unique in terms of the scale and quality. So it'd be helpful for you to frame how other transactions like this may be out there and how you balance taking the good with the bad in portfolio transactions. Thank you.

Lisa Palmer: Yeah. Let me start, Nick. And you can maybe speak to the specifics of the deal. It's really Jamie, it's really an M&A type of mindset. When you come across these opportunities. I don't I don't wanna do I mean, they don't they don't come around that often nor does large-scale M&A. And but the mindset's largely the same. We're partnering. There's a give and a get. We are selling our portfolio. They are selling their assets. We are buying their assets. They're buying our portfolio. We have, we bring to that a mindset of what is our value? What is our we balance that with what is our perception of their value. Their cash flows.

And you move from there. By the way, those cash flows would include in this particular case, the value of the below-market debt that they're bringing to the equation as well. And, you know, for just to reiterate, that's four to 4.2% coupon for twelve years, which has value to it. And then I think to speak to the point that Nick made earlier, Regency can be a magnet and we are very attractive to a seller. Anyone with a down rate can an up rig, sorry, can provide tax protection.

But the ability to partner with us and see the value of the combined organization going forward and the growth potential of not only those assets but the balance of the portfolio. We think separates Regency as we continue to look for more opportunities.

Nick Wibbenmeyer: And I just add from the question about how do we balance portfolio it's what we always say. I'll just reiterate it. Whether it's a single asset whether it's a portfolio of five properties, or whether it's a company, is the transaction accretive to earnings? Is it neutral or accretive to our future growth rate? And is it neutral or accretive to the quality of the portfolio? And if it checks those boxes, we have the ability to execute and we do. Successfully.

Mike Mas: Yeah. And just on sorry. I want to come back, I wanna get some points out there hopefully are pretty clear to our disclosure. But, you know, we're getting a, you know, a penny to this year's earnings, which again is only a half year's worth of ownership. So you double that. We're at $0.02 pennies accretion. On a relatively small portfolio with respect to the quantum of Regency's assets. It just, again, speaks to the quality of this trade. I think it was a pretty special transaction. We're very proud to have our new unit holders. I know they're proud of the outcome. That we've accomplished together. And we're excited to see these properties grow.

Christy McElroy: Thanks, Jamie.

Operator: Our next question comes from Paulina Rojas with Green Street Advisors. Please proceed with your question.

Paulina Rojas: Good morning. I found it interesting that you increased your exposure to California. Already, you're top state by ABR. Do you have any strategic plans to increase or reduce exposure to other US markets? Or should I think about future acquisitions and really almost like a 100% driven by granular trade area and property considerations?

Lisa Palmer: Paulina, let me try to address what I believe I heard. With regards to really just portfolio diversification and exposure to markets. We really like the markets in which we operate. We really like the diversification, you know, national exposure. We have talked about that there are potentially some markets that we would like to expand into to grow further, like our acquisition in Nashville earlier this year. We and we will continue to invest incrementally in the markets that we like. If, again, if it checks all of those boxes, if we are able to find compelling opportunities that are accretive to earnings, accretive to growth, accretive to quality.

And again, we are confident and comfortable with our portfolio diversification. We don't have outsized exposure to any one MSA.

Christy McElroy: Thanks, Paulina.

Operator: Our next question comes from Michael Gorman with BTIG. Please proceed with your question.

Michael Gorman: Yeah. Thanks. Good morning. Understanding it's a smaller component, can we maybe just reverse the acquisition discussion and talk about the disposition guidance? And how we think about that $75 million. And are those assets that are no longer accretive to Regency's growth profile? Or are these assets that have maybe moved out of the quality spectrum, whether it's demographics or geography or tenant base that's in those assets, kind of how are you thinking about what's in that bucket? And using that for a funding source going forward? Thanks.

Mike Mas: Yeah. Appreciate it, Mike. So we, the guidance is unchanged. We've been forecasting $75 million of sales. We did drop the cap rate this quarter on those to five and a half now that we have some more clarity on the transaction. But frankly, it's largely one asset. Where we see a lower growth potential in the balance of the Regency portfolio. And by the way of cap rate that we're disclosing, you can tell we're getting pretty full value for that. So call it a flattish grocery-anchored shopping center. That we would be disposing of that we see. We just don't see the growth potential there any longer, relative to Regency.

But the other tidbits of the guidance would include smaller pieces of the portfolio that are just nonstrategic. So we picked up some small office buildings in the UPP portfolio. That we are moving to dispose of given that they just don't align with our strategy.

Lisa Palmer: And to reiterate what Nick said earlier about being in the position that we do not need to acquire anything. To achieve our growth objectives given our exceptional development platform. We also don't need to sell anything. But when we have an opportunity to dispose of something that as Mike said, either nonstrategic or the growth rate is not on par with what we expect for the whole portfolio and able to invest those funds accretively we'll capitalize on that opportunity. We believe that it fortifies future NOI growth. And always have believed that.

Christy McElroy: Thanks, Michael.

Operator: Our next question comes from Ronald Kamdem with Morgan Stanley. Please proceed with your question.

Ronald Kamdem: Hey, this is just a quick follow-up just on the acquisition environment. Is this just a one-off, or is this sort of a notable shift where you think over the next couple of years?

Nick Wibbenmeyer: Hey, Ron. Good morning. I appreciate the question. This is Nick. Yeah. Look. The reality is sellers come out when they see demand picking up. And so as I articulated earlier, there is demand for core grocery-anchored shopping centers from the investment community. And so I do think that is bringing some sellers out that are testing that market. And so as we look at what's on the market right now, I would say it's up from a year ago. And we're a little bit in that summer low right now where people are gonna wait until after Labor Day to call for offers, and I do think another group of assets will come out after Labor Day.

And so I do think we are seeing a marginal pickup in block. But as we've articulated on this call several times, gonna chase the ones that make sense for us and lean in on those. But the good news is we don't have to find those to make to make our earnings, growth that we're projecting.

Lisa Palmer: Yeah. To be really clear, while we say we don't need to, we like to. Because and we've been very successful. And if you look at our track record for acquiring compelling outstanding shopping centers that check all of those boxes, we have a cost of capital advantage. We have a platform advantage. And when we're able to find those opportunities, we've been able to execute successfully. And I expect that we'll continue to do so.

Christy McElroy: Thanks, Greg.

Ronald Kamdem: Thanks so much.

Operator: We've reached the end of the question and answer session. I'd now like to turn the call back over to Lisa Palmer for closing comments.

Lisa Palmer: Thanks so much, Rob. Thank you all for your interest in Regency, and have a great day.

Operator: This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.