Investing.com -- S&P Global Ratings has upgraded all ratings for Regency Centers Corp (NASDAQ: REG )., including the issuer credit rating, to 'A-' from 'BBB+' based on the company's strong operating performance and financial metrics. The upgrade is supported by the company's high-quality, grocery-anchored portfolio and healthy retail fundamentals.

The stable outlook reflects S&P Global Ratings' expectation that Regency will sustain its solid performance due to healthy sector fundamentals and maintain its conservative balance sheet. The company is expected to continue operating with an S&P Global Ratings-adjusted debt to EBITDA in the low-5x area.

Regency's commitment to maintaining a conservative balance sheet has been demonstrated over the years. The company's S&P Global Ratings-adjusted debt to EBITDA was 5.1x as of the end of 2024, compared with 5.3x the previous year. Despite a slight deterioration in the company's S&P Global Ratings-adjusted fixed-charge coverage to 4.1x from 4.6x due to higher interest rates and slightly higher debt levels, it remains strong compared to its peers.

The company's financial policy is supported by its prudent investment strategy. Regency is expected to spend approximately $250 million on development and redevelopment and achieve net external growth of approximately $60 million in 2025. Over the past few years, the company has funded investment opportunities using a combination of internally generated cash flows, asset sales, equity issuance, and debt. In the fourth quarter, Regency entered into forward sale agreements totaling $100 million of equity through its at-the-market (ATM) program, with proceeds to fund future investments.

Regency's credit metrics compare favorably with those of its peers with similar anchor scores, leading to a positive one-notch comparable rating analysis adjustment to our 'bbb+' anchor score on Regency.

Regency's high-quality, grocery-anchored portfolio is expected to continue to perform well due to solid retail fundamentals. In 2024, Regency's same-property net operating income (NOI) grew 3.6% compared with the previous year. This growth was supported by a 100-basis-point improvement in its year-over-year same-property lease rate to 96.7% and strong rental rate spreads of 9.5% on a blended-cash basis.

Tenant demand for Regency’s properties remains strong, with record high levels of same property percent leased (96.7%) and same property shop percent leased (94.1%) achieved during the fourth quarter. Despite a recent increase in retail bankruptcies, Regency’s exposure remains limited and the company is well-positioned to re-lease vacated spaces at higher rental rates.

In 2025, S&P Global Ratings projects low-single-digit percent same-property NOI growth, in line with the company’s guidance of 3.2%-4.0%. Base rent increases, the commencement of rent from redevelopment projects, and mark-to-market adjustments from new leases are expected to support this growth. The company has $497 million of projects in process as of December 31, 2024, with additional starts likely in 2025.

S&P Global Ratings could consider lowering the rating on Regency if the company adopts a less conservative financial policy or if its operating performance deteriorates significantly. On the other hand, the rating could be raised if Regency significantly increases its scale, outperforms peers in operating performance, and operates with a more conservative financial policy.

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