JACKSONVILLE, FL-Regency Centers Corp., the locally based retail REIT heavily weighted in grocery-anchored and community shopping centers, posted favorable second-quarter sales results after Wednesday’s market close. But whether it can maintain that pace in future quarters will depend greatly on its primary tenants.

Executives discussed the company’s 4% annualized gain in funds from operations during a Thursday morning conference call. They pointed out that future results would rely largely on economic conditions and a rebound in the nation’s housing market.

“We are working in very challenging times,” says Brian Smith, chief investment officer of Regency Centers. He believes the REIT’s well-located shopping centers with desirable anchor tenants will fare much better once residential real estate returns to an up cycle.

Regency Centers posted FFO of $68.3 million in this year’s second quarter, compared to $65.8 million for the same period in 2007. Net income for common stockholders was $31.9 million for the quarter, down 28% from a year earlier.

Other favorable signs for Regency Centers include 95% overall occupancy for its 443 centers nationwide, including Florida, where many of its properties are located. It also reports an 82% rate of renewals for current leases, although same-store net operating income growth declined slightly over the year to 2.2% for the second quarter.

Regency Centers results appear to reflect those of its primary tenant base, especially grocery, pharmacy and discount chains, which are also faring well through the ongoing economic downturn. For instance, Lakeland-based Publix Super Markets this week posted a 3.5% sales gain in the second quarter, along with a 3.5% profit decline.

Regency Centers’ FFO for the second quarter, amounting to 97 cents per share, bested analysts’ expectations by several pennies, though they are hesitant to rally the REIT’s stock. “We would look for a pullback before becoming more constructive on the shares,” noted Chris Lucas with Robert W. Baird & Co., which maintains its “neutral/average risk” rating.

All of Regency Centers’ executive board was present for Thursday’s conference call, with one notable exception. President and COO Mary Lou Fiala, this year’s chairwoman of the International Council of Shopping Centers, was unable to attend due to what was described as stomach flu.

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