Morgan Stanley analysts upgraded Regency Centers (NASDAQ:REG) from Equalweight to Overweight, raising the price target from $62.00 to $75.00.

The analysts highlighted the high quality of Regency Centers’ portfolio in the open-air center sector, noting its impressive rent per square foot ($24.25) and occupancy rate (94.6%). While the expected organic growth of around 2.9% aligns with industry peers, the analysts pointed out that the market underestimates the company’s potential for external growth. This potential is backed by what they consider the sector’s strongest balance sheet.

Their confidence is further bolstered by a recent visit to REG’s market showcase in Jacksonville, the company’s headquarters. There, the analysts gained greater conviction in the management’s ability to achieve long-term same-store net operating income (SS-NOI) organic growth of 2.5-3.0%. Additionally, they believe that Regency Centers can grow its Funds From Operations (FFO) by 4-4.5% annually, by reinvesting free cash flow on a leverage-neutral basis.

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