Greetings, and welcome to the Regency Centers Corporation Third Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Laura Clark, Vice President of Capital Markets. Thank you, you may begin.

Good morning and welcome to Regency’s third quarter 2017 earnings conference call. Joining me today are Hap Stein, our Chairman and CEO; Lisa Palmer, our President and CFO; Mac Chandler, EVP of Investments; and Jim Thompson, EVP of Operations; Mike Mas, Managing Director of Finance; and Chris Leavitt, SVP and Treasurer. I would like to begin by stating that we may discuss forward-looking statements on this call. Such statements involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements. Please refer to our filings with the SEC, which identify important books factors that could cause actual results to differ from those contained in forward-looking statements. On today’s call, we will also reference certain non-GAAP financial measures. We provided a reconciliation of these measures to their comparable GAAP measures in our earnings release and financial supplements, which can be found on our Investor Relations website at regencycenters.com. Lastly, we will be hosting an Investor Day on January 11 in New York. Invitations with additional details are forthcoming and we look forward to seeing you there. I will now turn the call over to Hap.

Thanks, Laura. Good morning, everyone, and thank you for joining us. We are gratified to see that even with the more challenging retail environment, Regency’s portfolio continues to perform well with leasing levels over 96% and year-to-date same property NOI growth of 4%, evidence that Regency’s well-merchandised shopping centers, located in trade areas with substantial buying power, are positioned to attract better retailers, which are actively and selectively expanding their bricks-and-mortar footprint. In the ever-changing world of retail, it remains apparent that a well-located physical presence will continue to be critical to efficiently service customers. Following the close of Amazon’s acquisitions of Whole Foods, Whole Foods is reengaged and actively expanding, again. We believe this is a validation by the world’s preeminent online platform that bricks-and-mortar is a critical component to a retailer success. And winning grocers, retailers, restaurants and service providers want to be located with other better operators in centers conveniently located in neighborhood and communities with strong purchasing power. While certainly not immune to accelerated store closures, in a more deliberate manner, tenants are expanding. We remain extremely confident in Regency’s ability to sustain growth in same property NOI, earnings, NAV and shareholder value at or near the top of our peer group as we benefit from the following. First, owning a high-quality portfolio distinguished by trade areas with superior demographics and barriers to entry, highly productive grocers with average sales of $650 per square foot, relevant merchandising and place making, and a necessity service convenience and value focus. Second, a conservative balance sheet that will be critically important -- will be a critically important advantage in either allowing us to profit from compelling investment opportunities or endure challenging economic and financial conditions. And most important of all, Regency’s exceptional and deep team, guided by our special culture, coupled with our value add asset management development and redevelopment capabilities. Before I turn the call over to Jim, I want to let you know how fortunate we are that our properties and especially our people fared relatively well in Hurricanes Harvey and Irma, and how much we appreciate their extraordinary efforts that enabled us to keep operating and to recover so quickly. Jim?

Thank you, Hap, and good morning. As Hap indicated, in spite of store closures that are garnering headlines and a more deliberate pace new store openings, our portfolio continues to perform well as retailer demand for top-quality space remains healthy. In the third quarter, same property percent leased increased 20 basis points sequentially to 96.1%. The majority of this growth came from shop tenants where we experienced a 40 basis point increase in occupancy and at 92.5% leased. New rent spreads during the quarter were over 17% and we continue to have great success negotiating embedded rent steps in our new leasing transactions. Almost all new shop leases include annual rent steps averaging 2.5%. Tenant improvements and landlord work, as a percentage of average rent, continued to be in line with prior years. While move-outs remains at historic low levels, we are certainly aware of the potential for future store closures and are monitoring tenant performance and health. As you know, we’ve been in a heightened retail bankruptcy environment for nearly 3 years. During this time, Regency’s portfolio has continued to outperform posting same property NOI growth in excess of 3.5% with occupancy levels exceeding 96%. Our exposure to tenant bankruptcies and store closures has been minimal. And when we have received spaces back, we’ve had success in re-leasing to better operators at higher rents. We have leased or are in lease negotiation for nearly all of the spaces returned to us, following bankruptcy over the past 2 years. This year alone, out of our 9,000-plus tenants, we have only 21 store closures expected from BK [ph]. While we’re closely monitoring trends and have ongoing communication with our top retailers, our track record demonstrates the portfolio’s ability to withstand and succeed in this ever-evolving and challenging retail environment. I will now turn the call over to Mac.

Good morning, everyone. We continue to make excellent progress on developments and redevelopments, which were growing NOI and NAV and enhancing the quality of our portfolio. Our in-process projects are performing well and attracting strong retailer demand as evidenced by gains and percent leased. For example, The Village at Tustin Legacy in Orange County is 97% leased and committed. The majority of our tenants are now open including Starter Bros. and CVS, both of which reported strong brand openings. In addition, our 2 Whole Foods projects in the Northeast as well as our Wegmans project in Metro DC are approaching 90% leased and committed. And at Serramonte Center in the Bay Area, our 250,000 square foot expansion is substantially complete. All six of our new junior anchors have opened, traffic is up and the overall center is performing well. Subsequent to quarter end, we started Midtown East, a Wegmans’ anchored ground-up development in the affluent Midtown neighborhood of Raleigh. Midtown East will be Wegmans first store in the state of North Carolina. Regency’s first-class team continues to source compelling development opportunities and mine potential redevelopments, as starts were in line with expectations. Although the development landscape remains challenging, our industry-leading platform is well positioned to create value for both new development as well as redevelopment opportunities within our portfolio. We look forward to discussing future development and redevelopment opportunities in more detail at our Investor Day. Moving to dispositions and acquisitions. We are executing on our plan to sell 1% to 2% of our assets annually. Through October, we have closed approximately $45 million of properties and anticipate closing on an additional $180 million by only 2018. Looking back, we have been very successful implementing capital recycling to further enhance the quality of our portfolio by supplementing cash flow to…

Thank you, Mac. The team posted another really good quarter. And most importantly, I want to echo Hap’s comments, we are so grateful that our team members are safe following Hurricanes Harvey and Irma and that our property sustained minimal damage. And I also want to reiterate our thanks to the team for their amazing efforts following the hurricanes. In the third quarter, we did take a onetime charge of approximately $1.9 million or $0.01 per share related to repair and cleanup work caused by these hurricanes. Consistent with our practice for nearly 10 years, gains and losses in our captive insurance program have been excluded from same property NOI. Therefore, the charges incurred this quarter are excluded from same property NOI and given the non-comparable nature of events, the charges also added back to core FFO. Turning to 2017 guidance. We are maintaining our same property NOI growth of 3.2% to 4% for the full year. The lower growth rate in the fourth quarter is driven by an anticipated decline in percentage rent, driven by a handful of tenants, as well as the tough other income and bad debt expense comp. Although we have experienced a moderate increase in bad debt expense year-to-date, it’s important to remember that 2016 levels were far below historical norms and current projections are more in line with long-term averages. We have also decreased our net G&A guidance for the full year by approximately $4 million at the midpoint. With the merger, we plan to hire 70 new positions, but these additions took just a little bit longer to fill than initially expected. We have now filled these positions and expect next year’s net G&A to be in the $67 million range. Despite this delay in hiring, the merger integration has progressed extremely well. And at $67 million of net G&A in 2018, we will realize the $27 million in synergies. Lastly, we have raised our full year NAREIT FFO and core FFO guidance, reflecting the later timing of our dispositions this year and the lower than expected net G&A expense. This concludes our prepared remarks and we now welcome your questions.

[Operator Instructions] Our first question is coming from the line of Christy McElroy with Citigroup. Please proceed with your question.

This is Katy McConnell, on for Christy. Can you update us on the timing of anchor commencements, which are largely released at this point, and the CapEx that is involved in backfilling some of that space. And then maybe if you could talk about how you’re thinking about the potential for further tenant fallout as we go into 2018.

Katy, this is Lisa. I’ll let Jim handle more detail, if he wants to add some color. But just from a general perspective, if you think about -- when we look at our same property NOI growth, an important thing that we can see, which you all can see, is that our base rank growth contribution to that in the first half of the year was in the mid-3s and that’s accelerating in the back of the year to the high 3s. And some of that is driven by these anchor rent commencements. So I mean, I think, that that’s one of the key factors. And from the capitals, we’re seeing really healthy net effective rent growth. So even though it is taking some capital to prepare the boxes, we’re seeing rent growth at really, really healthy robust levels.

Yes. Katy, the only thing I would add is Sports Authority. We had five -- we have four leased and the fourth one will commence, all of them will commence rent by the end of this month. So we’re in good shape on our relets.

Our next question is coming from the line of Craig Schmidt with Bank of America. Please proceed with your question.

I just wondered, in terms of a feeling in the transaction market, it looks like you have a number of high-quality general markets closing soon. Are people more willing to strike deals before the end of the year? Or are you seeing little change in terms of just the cadence and appetite for transactions?

Thanks, Craig. This is Mac. There is a typical seasonality that goes with transactions where people do want to transact by the end of the year. I don’t see that being different this year versus past years. But there certainly is a steady appetite for people to transact both on buying and selling, so not a big shift that we’re seeing in that regard. So no, not a whole lot of color to add to that question.

And we are seeing some of the projections for holiday ‘17 that seem relatively robust to past years. Are you hearing any of that same sentiment when you deal with some of the retailers?

Well, in terms of retailer expansion, is that you’re talking about, Craig?

No. I just -- are they feeling better? I mean, we’ve heard that Halloween was up this year and that holiday 2017, depending on which estimate, anywhere from 3.5% to 4.5% sales?

It is early to tell. I think, when you look at the demand, our demand for space continues to be very robust. And that, to me, translates to retailers are doing -- continue to do business and are comfortable growing their business to the better spaces. I mean, they are being more deliberate. They are being more selective. But the successful operators and tenants are continuing to expand at a -- in pretty active pace.

Okay. And Hap, congratulations on the ULI Visionary Award.

Craig, thank you very much. It -- as you know, in my case, it really does take quite a team.

Yes. Well, it just means that because you’re such a great visionary, you’ll provide excellent guidance next quarter.

I’ll do whatever Lisa lets me do.

Our next question is coming from the line of Mike Mueller with JP Morgan.

I guess, a quick question on operating trends, meaning the same-store stats and occupancy and everything, really positive in your rent spreads there. Nice and healthy. But it looks like there was some moderation that occurred over the past several quarters, and just wondering what’s the color behind that? Is it just your things are good, but you’re just bumping up against tough comps? Does it feel like you’re in a level -- opposites level or we could see a little bit more on the moderation front? I mean, just any color there would be helpful?

Mike, good morning. I’ll answer on the same property NOI growth trend line, and then I’ll let Jim address rent spreads because I think that that’s -- those are the two areas that would appear to be moderating. I’ll reiterate what -- how I started with my answer to Christy or to Katy in that our base rent growth is actually accelerating throughout the year, so the same property NOI growth moderation that we’re seeing is some noise in some of the other line items. We’re up against tough comps for other income as well as bad debt expense, and we’re expecting a decline in percentage rent. And some of that -- once translated and transitioned the base rents, so that is driving some of that base rent growth, but we’ll take base rent growth -- we’ll take base rent over percentage rent any day. So we’re not necessarily seeing a moderation in same property NOI growth. It’s just timing throughout the year. I think, as you know, quarterly numbers are not going to be smooth. There is some lumpiness. We feel really good about our guidance range of 3.2% to 4%.

Yes. I think as to rent growth specifically, obviously, as I mentioned, our new growth was 17% for new deals and renewals were at 57%. And there’s a couple of things going on in renewal. We had a very large pool, almost 84% renewed this past quarter. Several anchors were embedded in that renewal pool that had flat option renewals which, obviously, drove the average down. When you kind of look at the deals we were able to negotiate, we were at 10% -- we drove at 10% rent growth number, which I’m very comfortable with and is consistent with expectation.

And at the same time, we know that we’re in a really challenging retail environment. And if we can achieve high single-digit rent spreads, we’ll be really happy with that.

We’ll take it.

Our next question is coming from the line of Wes Golladay with RBC Capital Markets.

Looking at your occupancy, it’s pretty high right now. Are you becoming more selective on who you allow into the center? And how is the quality of the demand overall versus prior years?

This is Jim. Again, I think the -- our pipeline is robust, continues to be very solid, so we are seeing good demand. Yes, we are -- we continue to be selective in our merchandising. I think that’s something we’ve taken a lot of pride in over time. So we continue to look for the best retailers in given categories and folks that, we believe, will be relevant in the future in this changing environment, and we’re finding good retail demand at this point.

Okay. And then some of the peers have commented on delayed tenant openings. Are you experiencing this to any degree?

As Hap mentioned, I think deals are taking longer from start to finish. A lot of negotiations. Good retailers -- know the good retailers and we feel like we’ve got good product and we know good retailers want to be in good product, and what that turns into is a detailed negotiation process.

Okay. And then, lastly, the company acquired, Equity One, they used to have a slide in their presentation called 50th birthday of grocery shopping centers, where they would get big upticks in this flat rents for the past 50 years. Are you seeing any of those roll next year or anything that will be meaningful on the new lease side?

Wes, this is Lisa. Just very generally, if you recall, when we first announced the merger and talked about the strategic benefits of the merger, one of the key items is the fact that we believe that it would be accretive to our same property NOI growth, which has proven out. And as a result of the fact that there was some embedded mark to market in the leases, and we are beginning to see some of those. Yes. And more to come for 2018, but expect that we’ll see some more benefit next year.

[Operator Instructions] Our next question is coming from the line of from Vince Tibone with Green Street Advisors.

The spread between physical and leased occupancy continues to widen in the quarter in a range wider than some of the recent norms. It’s -- this is usually partly driven by some the Sports Authority leases you mentioned earlier, but is that the only reason? And when we expect that spread to kind of tighten to where it has been in the past?

Again, I’ll let Jim give specific color, if he’d like to add after. But we’re at 240 basis points currently, we’re only at 220 a quarter, so it hasn’t increased that much. It would not be related to Sports Authority because those were already leased. So it will be related to some other new redevelopments that are underway because, if you will recall, we’re already 98% leased in our anchor boxes. So it’s 1 or 2 anchor deals, and Jim can talk about those. But we’ve, historically, we’ve been in a range of -- I think maybe once, 1 quarter we’ve had that 150. But we’re typically in the 200 -- 180 to 250 range, so it’s not out of the norm.

Right. Lisa hit on it. So it’s predominantly redevelopment with Serramonte being a big part of that, 40 basis points kind of baked into Serramonte. And then, obviously, the new leasing that we’ve done in the last quarter, too, adds to that number. The good news is, obviously, that’s a good tailwind going into 2018.

And then one more on just acquisitions. It sounds like all of them this year are going to be in coastal market. Is that solely where you’re focusing your external growth? Or would you consider acquisitions in high -- of high-quality assets in secondary markets? Like how do you think about what is the appropriate cap rate spread between coastal and non-coastal major markets?

So Vince, as you’re aware, our target markets include not only the gateway coastal markets, but also the standard markets and growth markets, so 24 terrific markets throughout the country. We really, really liked the canvas in which we are able to own, operate, buy and invest. And we would certainly buy and invest in -- and interested in a Raleigh as we would -- or a Denver as we would in a coastal market. Just where these opportunities -- most of which we’ve been able to negotiate on a negotiated basis, which we’re real pleased with. And to a certain extent, there is a difference between markets from a cap rate and from a development return standpoint, but you have other issues related to the quality of the trade area and a trade area with strong barriers to entry and population density and above average household income and a strong anchor, is going to portray pretty strongly in pretty much every market throughout the country, and we’re also looking at what’s the embedded growth rate that’s going to be there. From a development standpoint, it depends on the risk involved and where the project is and when we get involved from a return standpoint. I don’t know if you have anything that you want to add to that, Mac?

It’s really a case-by-case basis. It’s really almost more about the immediate trade area and the customers being served and the job growth, than it is the greater metro area. And that’s -- so we’re looking at all these different markets. And by having a local presence in these markets, that really gives us an advantage. Some of these -- four out of five acquisitions that we’re targeting were off market, as Hap said. So we’ve sourced these directly and we think that’s a real competitive advantage.

If I may, and Mike is far enough away from me that he can’t kick me. I don’t want to take any of our material that we plan to share at Investor Day. But we have done a lot of work for what we call our DNA project and would be very similar to what one house on the street has like a tabbed score. And we think that it’s, as Hap mentioned and Mac both mentioned, it’s really important the quality of the center and then that has to actually interact with the quality of the market. And we do have internal guidelines and thresholds and return thresholds related to those scores, if you will. So we do look at it that way and we will share more detail when we have are Investor Day in January.

Thank you. The next question is coming from the line of Linda Tsai with Barclays. Please proceed with your question.

In your opening remarks you discussed how Whole Foods is expanding post acquisition by Amazon. Do you have any color on how these stores might be different from when the stores were just owned by Whole Foods? What’s the Amazon influence, if you have any thoughts there?

Well, it’s -- Linda, this is Mac. It’s pretty early and they’re not -- they play their cards very close to the vest by design, so we don’t have a lot of great color to give you. What I can tell you is we’ve been working on a redevelopment in suburban Virginia, very good quality location. They confirmed that lease. They had time to think about it. They recently stepped up to it. So we’re seeing good positive signs about that, a lot of good body language, but you’re not going to get a lot of details at this point. But we have close relationship with them and their teams and their brokers throughout the markets, and they are engaged. So we’re working on future opportunities, but still too early to say if their format is going to change dramatically. We hear lots of little things, but we haven’t actually seen anything physically.

The Amazon acquisition of Whole Foods is a really good thing for Whole Foods. They’re reengaged. They’re expanding a combination, I’d say, robustly, but still on a very rational basis. So we feel very, very good about future prospects to continue to do business with a grocer who is a terrific anchor as far as attracting better shops, retailers, restaurants and service users.

And then any changes in the average length of leases that are being signed?

I’ve heard discussion about that from my friends in the industry talking about, but more on the mall and fashion, et cetera, but we have not seen anything to date with the community neighborhood retailers.

It appears there are no further questions at this time, so I’d like to pass the floor back over to Mr. Stein for any additional concluding comments.

We appreciate your interest and your involvement. And hopefully, you didn’t stay up too late watching the World Series last night and your team won or enjoyed what was a great World Series. Thank you very much. Take care. Enjoy the rest of the week. Bye-bye.

Ladies and gentlemen, this does conclude today’s teleconference. Again, we thank you for your participation and you may disconnect your lines at this time.