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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10/A-2
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
REGENCY CENTERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 59-3429602
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
121 WEST FORSYTH STREET, SUITE 200 (904) 356-7000
JACKSONVILLE, FLORIDA 32202 (Registrant's telephone No.)
(Address of principal executive offices) (zip code)
Securities registered pursuant to Section 12(b) of the Act: None.
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Title of each class Name of each exchange on which
to be so registered: each class is to be registered:
NOT APPLICABLE NOT APPLICABLE
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Securities registered pursuant to Section 12(g) of the Act:
Class B Units of Partnership Interest
(Title of class)
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TABLE OF CONTENTS
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Item 1. Business....................................................................................... 1
Item 2. Financial Information.......................................................................... 7
Item 3. Properties..................................................................................... 15
Item 4. Security Ownership of Certain Beneficial Owners and Management................................. 24
Item 5. Directors and Executive Officers of the Registrant............................................. 25
Item 6. Executive Compensation......................................................................... 25
Item 7. Certain Relationships.......................................................................... 25
Item 8. Legal Proceedings.............................................................................. 26
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Shareholder Matters.................................................................... 26
Item 10. Recent Sales of Unregistered Securities........................................................ 27
Item 11. Description of Registrant's Securities To Be Registered........................................ 28
Item 12. Indemnification of Directors and Officers...................................................... 30
Item 13. Consolidated Financial Statements and Supplementary Data....................................... 30
Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........... 30
Item 15. Financial Statements and Exhibits.............................................................. 30
SIGNATURES................................................................................................... 33
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ITEM 1. BUSINESS
ORGANIZATION AND SHOPPING CENTER BUSINESS
Regency Centers, L.P. (the "Partnership") is a limited partnership which
acquires, owns, develops and manages neighborhood and community shopping centers
in targeted infill markets in the eastern half of the United States. As a result
of the formation of the Partnership in 1996 and the subsequent consolidation of
substantially all of its neighborhood and community shopping centers in early
1998, the Partnership is the primary entity through which Regency Realty
Corporation (the "Company," "Regency" or the "General Partner") owns its
properties and through which the Company intends to expand its ownership and
operation of properties. Regency is a real estate investment trust ("REIT"), the
common stock of which is traded on the New York Stock Exchange. The Company
believes that the tax deferral advantages offered by the Partnership increase
the attractiveness of the Partnership's units as consideration for property
acquisitions.
As of March 31, 1998, the Partnership owned, directly or through joint
ventures, 100 of the Company's 121 properties, containing approximately 10.7
million square feet of Partnership-owned GLA. As of March 31, 1998, the Company
had an investment in real estate of approximately $991.8 million, of which
$779.0 million was attributable to the Partnership.
As of March 31, 1998, the Company owned 121 shopping centers with 60% of
the Company's 13.4 million square feet of GLA located in Georgia and Florida and
the Partnership owned 100 shopping centers with 62% of the Partnership's 10.7
million square feet of GLA located in Georgia and Florida. As of March 31, 1998,
the Company's shopping centers (excluding centers under development) were
approximately 94.5% leased and the Partnership's shopping centers (excluding
centers under development) were approximately 95.2% leased.
OPERATING AND INVESTMENT PHILOSOPHY
The Company's and the Partnership's key operating and investment objective
is to create long-term shareholder value by (i) continuing to grow their high
quality real estate portfolio of grocery-anchored neighborhood shopping centers
in attractive infill markets, (ii) maximizing the value of the portfolio through
implementation of their Retail Operating System, a system that incorporates
research-based investment strategies and value-added leasing and management
systems, and (iii) utilizing conservative financial management and their
substantial capital base to access the most cost effective capital to fund their
growth.
Management believes that the key to achieving its objective is its single
focus on, and growing critical mass of, quality grocery-anchored neighborhood
shopping centers. In the opinion of management, the Partnership's premier
platform of shopping centers in targeted markets, its proprietary research
capabilities, its value enhancing Retail Operating System, its cohesive and
experienced management team and its access to competitively priced capital
enable it to maintain a competitive advantage over other operators.
The Partnership believes that ownership of the approximately 30,000
shopping centers throughout the United States is highly fragmented, with less
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than 10% owned by REITs, and that many centers are held by unsophisticated and
undercapitalized owners. As a result, the Partnership believes that an
opportunity exists for it to be a consolidating force in the industry. In
addition, the Partnership believes that through proprietary demographic research
and targeting, its portfolio and tenant mix can be customized for and marketed
to national and regional retailers, thereby producing greater sales and a value-
added shopping environment for both retailer and shopper.
The Partnership's shopping center properties feature some of the most
attractive characteristics in the industry: an average age of seven years, an
average remaining grocery-anchor lease term of 15 years and an average grocery-
anchor size of 48,000 square feet (45% of the square footage of the grocery-
anchored centers on average).
GROCERY-ANCHORED INFILL STRATEGY
The Partnership's investment strategy is focused on grocery-anchored infill
shopping centers. Infill locations are situated in densely populated residential
communities where there are significant barriers to entry, such as zoning
restrictions, growth management laws or limited availability of sites for
development or expansions. The Partnership is focused on building a platform of
grocery-anchored neighborhood shopping centers because grocery stores provide
convenience shopping for daily necessities, generate foot traffic for adjacent
"side shop" tenants and should be better able to withstand adverse economic
conditions. By developing close relationships with the leading supermarket
chains, the Partnership believes it can attract the best "side shop" merchants
and enhance revenue potential. Based on Partnership research, at March 31, 1998,
66 of the Partnership's shopping centers were anchored by the grocery store with
the first or second leading market share, as measured by total market sales.
RESEARCH DRIVEN MARKET SELECTION
The Partnership has identified 35 markets in the eastern half of the United
States as its target markets. These markets were selected because, in general,
they offer greater growth in population, household income and employment than
the national averages. In addition, the Partnership believes that it can achieve
"critical mass" in these markets (defined as owning or managing four to five
shopping centers) and that it can generate sustainable competitive advantages,
through long-term leases to the predominant grocery-anchor and other barriers to
entry from competition. Within these markets, the Partnership's research staff
further defines and selects submarkets and trade areas based on additional
analysis of the above data. The Partnership then identifies target properties
and their owners (including development opportunities) within these submarkets
and trade areas based on three-mile radius demographic data and ranks potential
properties for purchase. The properties currently owned by the Partnership are
in submarkets with an average three-mile population of 69,000, average household
income of $62,000 and projected five-year population growth of 12%.
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RETAIL OPERATING SYSTEM
The Partnership's value-added operating strategy is driven by its Retail
Operating System which is characterized by: (i) proactive leasing and
management; (ii) value enhancing remerchandising initiatives; (iii) the
Partnership's "preferred customer initiative"; (iv) a customer driven
development and redevelopment program; and (v) proven management expertise.
PROACTIVE LEASING AND MANAGEMENT. Leasing and management efforts are
strengthened by the Partnership's integrated approach to property management.
Property managers are an integral component of the acquisition and integration
teams. Thorough, candid tenant interviews by property managers during
acquisition due diligence allow the Partnership to quickly assess both problem
areas as well as opportunities for revenue enhancement prior to closing.
Property managers are responsible not only for the general operations of their
centers, but also for coordinating leasing efforts, thereby aligning their
interests with the Partnership's. In addition, the Partnership's information
systems allow managers to spot future lease expirations and to proactively
market and remerchandise spaces several years in advance of such expirations.
VALUE ENHANCING REMERCHANDISING INITIATIVES. The Partnership believes that
certain shopping centers underserve their customers, reducing foot traffic and
negatively affecting the tenants located in the shopping center. In response,
the Partnership is initiating a remerchandising program which is directed at
obtaining the optimum mix of tenants offering goods, personal services and
entertainment and dining options in each of its shopping centers. By re-
tenanting shopping centers with tenants that more effectively service the
community, the Partnership expects to increase sales, and therefore the value,
of its shopping centers.
PREFERRED CUSTOMER INITIATIVE. The Partnership has established a preferred
customer initiative with dedicated personnel whose goal is to establish new and
strengthen existing strategic relationships with successful retailers at the
national, regional and local levels. The Partnership achieves this goal by
establishing corporate relationships, negotiating standard lease forms and
working with the preferred customers to match expansion plans with future
availability in the Partnership's shopping centers. Retail trends and the
operating performance of these preferred customers are monitored. The benefits
of the preferred customer initiative are expected to improve the merchandising
and performance of the shopping centers, establish brand recognition among
leading operators, reduce turnover of tenants and reduce vacancies. The
Partnership currently has identified and is developing relationships with 45
preferred customers, including Radio Shack, GNC, Hallmark Cards, Mailboxes, Etc.
and Starbucks Coffee, and continues to target additional tenants with which to
establish preferred customer relationships.
CUSTOMER-DRIVEN DEVELOPMENT AND REDEVELOPMENT PROGRAM. The Partnership's
development and redevelopment program is primarily conducted in close
cooperation with its major customers, including Kroger, Publix and Eckerd. The
Partnership uses its development capabilities to service these customer's growth
needs by building or re-developing modern properties with state of the art
supermarket formats that generate higher returns for the Partnership under new
long-term leases. During 1997, the Partnership began development on 20 retail
projects, including new developments, redevelopments and build-to-suits. Upon
completion, the Partnership will have invested $77.4 million in these projects.
In 1998, the Partnership has begun development on 19 retail projects, including
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new developments, redevelopments and build-to-suits. Upon completion, the
Partnership will have invested $154.0 million in these projects. The Partnership
manages its development risk by obtaining signed anchor leases prior to the
commencement of construction.
ACQUISITION TRACK RECORD
The Partnership has grown its asset base significantly through acquisitions
in recent years, acquiring properties totaling $101.7 million, $346.0 million
and $128.8 million in 1996 and 1997 and through March 31, 1998 respectively.
These acquisitions have allowed the Partnership to diversify geographically from
its predominantly Florida-based portfolio and have enabled it to establish a
presence in many of its target markets. Upon identifying an acquisition target,
the Partnership utilizes expertise from all of its functional areas, including
acquisitions, due diligence and property management, not only to determine the
appropriate purchase price, but also to develop a business plan for the center
and to design an integration plan for the management of the center. The
Partnership believes that its established acquisition and integration procedures
produce higher returns on its portfolio, reduce risk and position the
Partnership to capitalize on consolidation in the shopping center industry.
CAPITAL STRATEGY
The Partnership and the Company intend to maintain a conservative capital
structure designed to enhance access to capital on favorable terms, to allow
growth through development and acquisition and to promote future earnings
growth. Neither the Partnership's nor the Company's organizational documents
limit the amount of debt that may be incurred; however the Partnership has
adopted a policy of limiting total indebtedness to 50% of total assets at cost
and maintaining a minimum debt service coverage ratio of 2:1. The Board of
Directors of the Company may amend this policy at any time without the approval
of the shareholders of the Company or the limited partners of the Partnership.
Debt service coverage ratio is defined as EBITDA (as defined below) divided by
interest expense plus preferred distributions. As of March 31, 1998, the
Partnership had indebtedness equal to 38.8% of total assets at cost and a debt
service coverage ratio of 4.8:1. On a pro forma basis, after giving effect to
the issuance by the Partnership of $80.0 million 8.125% Series A Cumulative
Redeemable Preferred Units in June 1998 (the "Series A Preferred Units") and
$100.0 million 7-1/8% Notes Due July 20, 2005 in July 1998 (the "Notes" and
collectively with the Series A Preferred Units, the "Financings") and the
application of the proceeds therefrom, as of March 31, 1998, the Partnership
would have had indebtedness equal to 36.2% of total assets at cost and a debt
service coverage ratio of 3.0:1. As used herein, "EBITDA" means earnings before
interest expense, taxes (excluding taxes pertaining to the brokerage
operations), depreciation, amortization and minority interests. EBITDA is
computed as income from operations before minority interest plus interest
expense, non-recurring gains and losses from the sale of operating real estate,
depreciation and amortization. The Partnership believes that in addition to cash
flows and net income, EBITDA is a useful financial performance measurement for
assessing its operating performance because, together with net income and cash
flows, EBITDA provides investors with an additional basis to
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evaluate the ability of the Partnership to incur and service debt and to fund
acquisitions and other capital expenditures.
Since the Company's initial public offering in 1993, the Partnership and
the Company have financed their growth in part through a series of public and
private offerings of Regency equity and Partnership units totaling, as of June
1, 1998, approximately $464.6 million, including the Partnership's utilization
of its units as consideration for acquisitions.
As described above, the Partnership issued $80.0 million of Preferred Units
in a private placement on June 25, 1998 and issued $100.0 million of Notes in a
private placement on July 20, 1998. The Partnership applied the net proceeds
therefrom to retire indebtedness under its $300.0 million unsecured revolving
line of credit (the "Line") with a group of commercial banks.
The Partnership had an outstanding balance under the Line of approximately
$90.2 million as of March 31, 1998. At that time, the Partnership also had
mortgage loans outstanding of $212.0 million that were secured by 38 properties.
On a pro forma basis, after giving effect to the Financings and the application
of the net proceeds therefrom, as of March 31, 1998, the Partnership would have
had $300.0 million available under the Line.
SC-USREALTY ALLIANCE
In June 1996, Regency entered into a strategic alliance with Security
Capital Holdings, S.A. (together with its parent company, Security Capital U.S.
Realty, "SC-USREALTY") as a result of which SC-USREALTY became Regency's
principal shareholder. In addition to SC-USREALTY's initial investment in 1996,
SC-USREALTY has participated in subsequent Regency equity issuances (including
in connection with the Branch acquisition and a common stock offering in 1997)
pursuant to participation rights. As a result, SC-USREALTY beneficially owned
46.1% (39.4% including convertible securities on a fully diluted basis) of
Regency's outstanding common stock as of June 30, 1998. Upon consummation of the
proposed merger of Pacific Retail Trust into the Company discussed below (see
"--Proposed Merger"), SC-USREALTY will own approximately 59.3% of the Company's
outstanding common stock (52.5% on a fully diluted basis). Pursuant to an
amendment to its stockholders agreement with the Company, which includes
provisions limiting its stock ownership for a specific period of time,
SC-USREALTY will have the right to own up to 60% of the Company's common stock
on a fully diluted basis. In connection with its investment, SC-USREALTY has
placed two of its nominees on Regency's thirteen-member Board of Directors.
SC-USREALTY endeavors to obtain strategic ownership positions in leading
value-added real estate operating companies in the United States. SC-USREALTY's
investments focus on real estate operating companies in which opportunities
exist to enhance asset cash flow by combining a strategically focused asset
portfolio with synergistic marketing and other strategies that meet the needs of
customers. The Company's relationship with SC-USREALTY combines SC-USREALTY's
commitment to in-depth market research, tested operating systems and access to
global capital with the Company's market presence, operating skills and grocery-
anchored real estate platform. This relationship provides the Company with
access to financial and strategic resources and differentiates the Company from
its competitors in the retail shopping center industry.
SC-USREALTY seeks to maximize its shareholders' returns primarily by
acquiring and managing significant strategic investment positions in real estate
operating companies based in the United States. SC-USREALTY seeks to identify
potential strategic investment positions through rigorous fundamental research
focused on the U.S. real estate industry, business niches and specific
companies. By investing substantial capital and obtaining board and board
committee representation, consultation rights and other rights, SC-USREALTY
seeks to plan an active role in developing and implementing a long-term, focused
operating strategy and value-added operating system for each of its strategic
investment positions. SC-USREALTY also has non-strategic investment positions,
or special opportunity positions, primarily in publicly-traded U.S. real estate
operating companies where it research identifies attractive intermediate-term
investment opportunities. SC-USREALTY's objective is to have 75%-90% of its
assets invested in strategic investment positions and 10%-25% of its assets
invested in special opportunity positions.
See Item 7 ("Certain Relationships") for information concerning SC-
USREALTY's stockholders agreement with the Company.
MATTERS RELATING TO THE REAL ESTATE BUSINESS, THE PARTNERSHIP'S RAPID GROWTH AND
THE PARTNERSHIP STRUCTURE
The Partnership is subject to certain business risks arising in connection
with owning real estate which include, among others, (1) a change in the general
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economic climate and local conditions, such as an oversupply of space or a
reduction in demand for real estate in an area, (2) the bankruptcy or insolvency
of, or a downturn in the business of, any of its anchor tenants, (3) the
possibility that such tenants will not renew their leases as they expire, (4)
vacated anchor space affecting the entire shopping center because of the loss of
the departed anchor tenant's customer drawing power, (5) risks relating to
leverage, including uncertainty that the Partnership will be able to refinance
its indebtedness, floating rate debt and the risk of higher interest rates, (6)
the Partnership's inability to satisfy its cash requirements for operations and
the possibility that the Partnership may be required to borrow funds to enable
Regency to meet distribution requirements in order to maintain its qualification
as a REIT, (7) potential liability for unknown or future environmental matters
and costs of compliance with the Americans with Disabilities Act, (8) the risk
of uninsured losses (such as from hurricanes) and (9) the risk that the
Partnership's development activities will be unsuccessful. Unfavorable economic
conditions could also result in the inability of tenants in certain retail
sectors to meet their lease obligations and otherwise could adversely affect the
Partnership's ability to attract and retain desirable tenants. The Partnership
believes that the shopping centers are relatively well positioned to withstand
adverse economic conditions since they typically are anchored by grocery stores,
drug stores and discount department stores that offer day-to-day necessities
rather than luxury goods.
The Partnership is also subject to risks due to its extensive growth
through acquisitions. This expansion has placed significant demands on its
operational, administrative and financial resources. The continued growth of
the Partnership's real estate portfolio can be expected to continue to place a
significant strain on its resources. The Partnership's future performance will
depend in part on its ability to successfully attract and retain qualified
management personnel to manage the growth and operations of the Partnership's
business and to finance such acquisitions.
Regency's acquisition of properties through the Partnership in exchange for
interests in the Partnership may permit certain tax deferral advantages to
limited partners who contribute properties to the Partnership. Since properties
contributed to the Partnership may have unrealized gain attributable to the
difference between the fair market value and adjusted tax basis in such
properties prior to contribution, the sale of such properties could cause
adverse tax consequences to the limited partners who contributed such
properties. Although generally Regency, as the general partner of the
Partnership, has no obligation to consider the tax consequences of its actions
to any limited partner, there can be no assurance that the Partnership will not
acquire properties in the future subject to material restrictions designed to
minimize the adverse tax consequences to the limited partners who contribute
such properties. Such restrictions could result in significantly reduced
flexibility to manage Partnership assets.
PROPOSED MERGER
On September 23, 1998, the Company entered into an Agreement and Plan of
Merger with Pacific Retail Trust, a Maryland real estate investment trust which
owns and operates a portfolio of grocery and drug store anchored neighborhood
shopping centers in the western United States ("Pacific Retail"). SC-USREALTY,
the Company's major shareholder, owns 69.9% of the outstanding stock of Pacific
Retail. Upon consummation of the merger, Pacific Retail shareholders, including
SC-USREALTY, will receive .48 share of Regency stock for each share of Pacific
Retail stock owned immediately prior to the merger. As a result of the merger,
the Company will own 194 shopping centers in 22 states and Washington, D.C.
COMPETITION
There are numerous shopping center developers, real estate companies and
other owners of real estate that compete with the Partnership in seeking retail
tenants to occupy vacant space, for the acquisition of shopping centers, and for
the development of new shopping centers. The Partnership believes that its
competition in the real estate industry is highly fragmented with less than 10%
owned by REITs, and that many centers are held by unsophisticated and
undercapitalized owners. As a result, the Company believes that an opportunity
exists for it to be a consolidating force in the industry.
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CHANGES IN POLICIES
Regency's Board of Directors determines Regency's and the Partnership's
policies with respect to certain activities, including debt capitalization,
growth, distributions, Regency's REIT status, and investment and operating
policies. The Board of Directors has no present intention to amend or revise
these policies. However, the Board of Directors may do so at any time without a
vote of Regency's stockholders or the Partnership's limited partners.
EMPLOYEES
The Partnership's headquarters are located in Jacksonville, Florida.
Regency presently maintains nine offices in which it conducts management and
leasing activities located in Florida, Georgia, North Carolina, Ohio, and
Missouri. As of March 31, 1998, the Partnership had approximately 255 employees
and believes that relations with its employees are good.
ITEM 2. FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
The following table sets forth Selected Financial Data on a historical
basis for the three months ended March 31, 1997 and March 31, 1998 and for the
five years ended December 31, 1997, for the Partnership and the commercial real
estate business of The Regency Group, Inc. ("TRG" or "Regency Properties"), the
predecessor of the Company. This information should be read in conjunction with
the Consolidated Financial Statements of the Partnership (including the related
notes thereto) and "Management's Discussion and Analysis of the Financial
Condition and Results of Operations," each included elsewhere in this
Registration Statement. The historical Selected Financial Data for the
Partnership for the four year period ended December 31, 1997, and for the period
from July 9, 1993 to December 31, 1993, have been derived from audited financial
statements. The historical Selected Financial Data for the Regency Properties
as of November 5, 1993 has been derived from audited financial statements. The
data presented for the three-month periods ended March 31, 1997 and March 31,
1998 are derived from unaudited financial statements and include, in the opinion
of management, all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the data for such periods. The results for the
three-month period ended March 31, 1998 are not necessarily indicative of the
results to be expected for the full fiscal year.
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REGENCY
REGENCY CENTERS, LP. PROPERTIES
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THREE MONTHS ENDED PERIOD PERIOD
MARCH 31, YEAR ENDED DECEMBER 31, ENDED ENDED
------------------- --------------------------------------- Dec. 31, Nov. 5,
1998 1997 1997 1996 1995 1994 1993 1993(1)
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(Unaudited)
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(In thousands of dollars, except per unit data)
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OPERATING DATA:
Revenues:
Rental revenue.................... $ 21,294 $ 11,323 $ 67,221 $ 24,899 $ 14,362 $10,209 $ 954 $ 3,938
Management, leasing & brokerage
fees............................ 2,504 1,641 7,997 3,444 2,426 2,332 534 2,247
Equity in income of
investments in real
estate partnerships............. 1 27 33 70 4 17 3 18
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Total revenues................. 23,799 12,991 75,251 28,413 16,792 12,558 1,491 6,203
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Operating expenses:
Operating, maintenance & real
estate taxes.................... 5,139 3,068 17,139 7,211 4,130 3,279 406 2,275
General and administrative........ 3,433 2,221 9,964 6,049 4,895 4,531 736 2,835
Depreciation and amortization..... 4,145 1,921 11,905 4,345 2,573 1,895 167 963
-------- -------- -------- -------- -------- ------- ------- -------
Total operating expenses....... 12,717 7,210 39,008 17,605 11,598 9,705 1,309 6,073
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Interest expense, net of
interest income................. 3,091 2,330 12,679 5,866 4,398 2,276 (74) 1,766
-------- -------- -------- -------- -------- ------- ------- -------
Income (loss) before minority
interest and gain on
sale of real estate
investments..................... 7,991 3,451 23,564 4,942 796 577 256 ( 1,636)
Minority interest...................... (97) (131) (505) -- -- -- -- 126
Gain on sale of real estate investments
and other income..................... 10,237 -- 451 -- -- -- -- 2,725
-------- -------- -------- -------- -------- ------- ------- -------
Net income........................ 18,131 3,320 23,510 4,942 796 577 256 1,215
Net income for unit holders....... $ 18,131 $ 3,320 $ 23,510 $ 4,942 $ 796 $ 577 $ 256 $ 1,215
======== ======= ======== ======== ======== ======= ======= =======
Earnings per unit:
Basic........................... $ 0.71 $ 0.20 $ 1.20 $ 0.19 $ 0.04 $ 0.09 $ 0.07 n/a
======== ======== ========= ======== ======== ======= ======= =======
Diluted......................... $ 0.70 $ 0.20 $ 1.12 $ 0.19 $ 0.04 $ 0.09 $ 0.07 n/a
======== ========= ========= ======== ======== ======= ======= =======
BALANCE SHEET DATA:
Real estate investments at cost........ $779,008 $ 519,472 $636,787 $257,066 $149,735 $92,649 $41,484 -
Total assets........................... 776,211 523,499 641,149 258,184 145,997 90,404 40,262 -
Total debt............................. 302,259 241,336 193,587 107,982 55,686 56,998 2,521 -
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__________
(1) Such Combined Financial Statements have been prepared to reflect the
historical combined operations of the Regency Properties associated with
the ownership of the properties and the management, leasing, acquisition,
development and brokerage business acquired by the Company from TRG on
November 5, 1993 in connection with the Company's initial public offering
completed November 5, 1993.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of the Partnership appearing
elsewhere herein. This Registration Statement contains certain forward-looking
statements and information relating to Regency and the Partnership that is based
on the beliefs of the management of Regency and the Partnership, as well as
assumptions made by and information currently available to the management of
Regency and the Partnership. When used in this Registration Statement, the words
"estimate," "project," "believe," "anticipate," "intend," "expect" and similar
expressions are intended to identify forward-looking statements. Such statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions; changes in customer preferences; competition; changes in technology;
the integration of any acquisitions, including the Branch and Midland
Acquisitions (each as defined herein); changes in business strategy; the
indebtedness of the Partnership; quality of management, business abilities and
judgment of the Partnership's personnel; the availability, terms and deployment
of capital; and various other factors referenced in this Registration Statement.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. To the extent documents
incorporated by reference in this filing contain references to the safe harbor
for forward looking statements, such safe harbor is not available to the
Partnership.
SHOPPING CENTER BUSINESS
The Partnership's principal business is owning, operating and developing
grocery-anchored neighborhood infill shopping centers in the eastern half of the
United States. Infill locations are situated in densely populated residential
communities where there are significant barriers to entry, such as zoning
restrictions, growth management laws, or limited availability of sites for
development or expansions.
ACQUISITION AND DEVELOPMENT OF SHOPPING CENTERS
The Partnership acquired 12 shopping centers during 1996 (the "1996
Acquisitions") for $101.7 million. The Partnership acquired 36 shopping centers
during 1997 (the "1997 Acquisitions") for $346.0 million. The 1997 Acquisitions
include the acquisition of 26 shopping centers from Branch for $232.4 million in
March 1997 (the "Branch Acquisition"). The real estate acquired from Branch (the
"Branch Properties") included 100% fee simple interests in 20 shopping centers,
and also partnership interests (ranging from 50% to 93%) in four partnerships
with outside investors that owned six shopping centers. The Partnership also
acquired the third party property management contracts of Branch on
approximately three million square feet of shopping center GLA that generate
management fees and leasing commission revenues. During March 1998, the
principals of Branch received 721,997 additional earn-out units and shares of
common stock from the Partnership and the Company and may receive additional
units and shares after the second and third anniversaries of the Branch closing,
based on the performance of certain properties. The future earn-out is limited
to an aggregate of 298,064 units and shares.
In January, 1998, the Partnership entered into an agreement to acquire the
shopping centers from various entities comprising the Midland Group ("Midland")
9
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consisting of 21 shopping centers plus a development pipeline of 11 shopping
centers. Of the 32 centers to be acquired or developed (the "Midland
Acquisition" or "Midland Properties"), 31 are anchored by Kroger, or its
affiliate. Eight of the shopping centers included in the development pipeline
will be owned through a joint venture in which the Partnership will own less
than a 50% interest upon completion of construction (the "JV Properties"). The
Partnership acquired 13 of the Midland shopping centers during March, 1998 for
approximately $111 million. As of June 30, 1998, the Partnership has acquired
all but one of the shopping centers and all of the JV Properties. The
Partnership acquired the one remaining operating shopping center during July,
1998 and expects to acquire the remaining three development shopping centers
during the third quarter of 1998. As of June 30, 1998, the Partnership's total
investment in the properties acquired from Midland was 186.6 million. During
1998, 1999 and 2000, including all payments made to date, the Partnership will
pay approximately $213 million for the 32 properties, including the assumption
of debt, and in addition may pay contingent consideration of up to an estimated
$23 million through the issuance of Partnership units and the payment of cash.
Whether contingent consideration will be issued, and if issued, the amount of
such consideration, will depend on the satisfaction during 1998, 1999 and 2000
of performance criteria relating to the assets acquired from Midland. For
example, if a property acquired as part of Midland's development pipeline
satisfies specified performance criteria at closing and when development is
completed, the transferors of the property will be entitled to additional
Partnership units based on the development cost of the properties and their net
operating income. Transferors who redeemed their Partnership units for cash at
the initial Midland closing will receive any contingent future consideration in
cash rather than units.
During the first quarter of 1998, the Partnership acquired a total of 14
shopping centers for approximately $128.8 million (the "1998 Acquisitions"),
which includes the 13 properties acquired from Midland.
LIQUIDITY AND CAPITAL RESOURCES
Management anticipates that cash generated from operating activities will
provide the necessary funds on a short-term basis for its operating expenses,
interest expense and scheduled principal payments on outstanding indebtedness,
recurring capital expenditures necessary to properly maintain the shopping
centers, and distributions to unit holders. Net cash provided by operating
activities was $13.0 million for the three months ended March 31, 1998, and
$30.1 million, $8.0 million, and $4.4 million for the years ended December 31,
1997, 1996 and 1995.
Management expects to meet long-term liquidity requirements for debt maturities,
and acquisition, renovation and development of shopping centers from: (i) excess
cash generated from operating activities, (ii) working capital reserves, (iii)
additional debt borrowings, and (iv) additional equity raised in the public
markets. Net cash used in investing activities was $47.7 million for the three
months ended March 31, 1998 and $150.3 million, $107.3 million and $57.1 million
during 1997, 1996 and 1995, respectively. Net cash provided by financing
activities was $25.7 million for the three months ended March 31, 1998, and was
$128.4 million, $104.5 million and $53.2 million during 1997, 1996 and 1995,
respectively. At March 31, 1998, the Partnership had 20 shopping centers under
construction or undergoing major renovations. Total committed costs necessary
to complete the properties under development is estimated to be $65.0 million
and will be expended through June 1999.
The Partnership's outstanding debt at March 31, 1998 and December 31, 1997 and
1996 consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ---------------- ----------------
Mortgage Loans Payable:
<S> <C> <C> <C>
Fixed rate secured loans $173,560,907 114,615,011 34,281,064
Variable rate secured loans 38,466,843 30,840,978 -
Fixed rate unsecured loans - - -
Unsecured line of credit 90,231,185 48,131,185 73,701,185
------------ ----------- -----------
Total $302,258,935 193,587,174 107,982,249
============ =========== ===========
</TABLE>
The weighted average interest rate on total debt at March 31, 1998 and December
31, 1997 and 1996 was 7.3%, 7.7% and 7.8%, respectively. The Partnership's debt
is typically cross-defaulted, but not cross-collateralized, and includes usual
and customary affirmative and negative covenants.
The Partnership is a party to a credit agreement dated as of March 27, 1998,
providing for an unsecured line of credit (the "Line") from a group of lenders
currently consisting of Wells Fargo Bank, National Association, First Union
National Bank, Wachovia Bank, N.A., NationsBank, N.A., AmSouth Bank, Commerzbank
AG, Atlanta Branch, PNC Bank, National Association, and Star Bank, N.A. This
credit agreement modified the terms of the Partnership's existing line of credit
by increasing the commitment to $300 million, reducing the interest rate, and
incorporating a competitive bid facility of up to $150 million of the commitment
amount. Maximum availability under the Line is based on the discounted value of
a pool of eligible unencumbered assets (determined on the basis of capitalized
net operating income) less the amount of the Partnership's and its subsidiaries'
outstanding unsecured liabilities. The Line matures in May 2000, but may be
extended annually for one year periods. Borrowings under the Line bear interest
at a variable rate based on LIBOR plus a specified spread, (.875% currently),
which is dependent on the Partnership's investment grade rating. The
Partnership's ratings are currently Baa2 from Moody's Investor Service, BBB from
Duff and Phelps, and BBB- from Standard and Poors. The Partnership is required
to comply with certain financial and other covenants customary with this type of
unsecured financing. These financial covenants include (i) maintenance of
minimum net worth, (ii) ratio of total liabilities to gross asset value, (iii)
ratio of secured indebtedness to gross asset value, (iv) ratio of EBITDA to
interest expense, (v) ratio of EBITDA to debt service and reserve for
replacements, and (vi) ratio of unencumbered net operating income to interest
expense on unsecured indebtedness. The Line is used primarily to finance the
acquisition and development of real estate, but is available for general working
capital purposes.
Mortgage loans are secured by certain real estate properties, but generally may
be prepaid subject to a prepayment of a yield-maintenance premium.
Unconsolidated partnerships and joint ventures had mortgage loans payable of
$9,850,128 at March 31, 1998, and the Partnership's share of these loans was
$1,714,101. Mortgage loans are generally due in monthly installments of
interest and principal and mature over various terms through 2018. Variable
interest rates on mortgage loans are currently based on LIBOR plus a spread in a
range of 125 basis points to 150 basis points. Fixed interest rates on mortgage
loans range from 7.04% to 9.8%.
As of March 31, 1998, scheduled principal repayments on mortgage loans payable
were as follows:
<TABLE>
<S> <C>
1998 $ 23,248,924
1999 14,561,785
2000 15,038,369
2001 22,110,182
2002 29,367,477
Thereafter 107,701,013
------------
Total 212,027,750
============
</TABLE>
Regency qualifies and intends to continue to qualify as a REIT under the
Internal Revenue Code. As a REIT, Regency is allowed to reduce taxable income
by all or a portion of its distributions to stockholders. Since Regency's
distributions have exceeded its taxable income, Regency has made no provision
for federal income taxes. While the Partnership intends to continue to pay
distributions such that Regency can continue to pay dividends to its
stockholders, the Partnership will reserve such amounts of cash flow as it
considers necessary for the proper maintenance and improvement of its real
estate, while still allowing Regency to maintain its qualification as a REIT.
RESULTS FROM OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 TO
Three Months Ended March 31, 1997
Revenues increased $10.8 million, or 83%, from $13.0 million for the first
three months of 1997 to $23.8 million for the first three months of 1998. The
increase was primarily the result of the 1997 Acquisitions and the Midland
Acquisition. At March 31, 1998, the real estate portfolio contained
approximately 10.7 million square feet and was 93.5% leased. Minimum rent
increased $8.1 million, or 91%, and recoveries from tenants increased $1.5
million, or 68%, for the first three months of 1998 compared to the first three
months of 1997. Revenues from property management, leasing, brokerage and
development services provided on properties not owned by the Partnership were
$2.5 million for the first three months of 1998 compared to $1.6 million for the
first three months of 1997, the increase was due to fees earned from third
property management and leasing contracts acquired as part of the Branch
Acquisition and the Midland Acquisition. At March 31, 1998, the Partnership
managed shopping centers and office buildings owned entirely by third parties
containing approximately 6.1 million square feet.
During the first quarter of 1998, the Partnership sold three office
buildings and a parcel of land for $26.7 million, and recognized a gain on the
sale of $10.2 million. The Partnership sold its one remaining office building
during the second quarter of 1998, resulting in the Partnership's real estate
portfolio being comprised entirely of neighborhood shopping centers. The
proceeds from the sale were applied toward the purchase price of the 1998
Acquisitions.
Operating expenses increased $5.5 million, or 76%, to $12.7 million for the
first three months of 1998. Combined operating and maintenance expenses and real
estate taxes increased $2.1 million, or 68%, during the first three months of
1998 to $5.1 million. The increases are due to the 1997 Acquisitions and the
Midland Acquisition. General and administrative expense increased 55% during the
first three months of 1998 to $3.4 million due to the hiring of new employees
10
<PAGE>
and related office expenses necessary to manage the 15 shopping centers acquired
in the Midland Acquisition. Depreciation and amortization increased $2.2 million
during the first three months of 1998, or 116%, primarily due to the 1997
Acquisitions and the Midland Acquisition.
Interest expense increased to $3.4 million in the first three months of
1998 from $2.5 million in the first three months of 1997, or 37%, due primarily
to increased average outstanding loan balances related to the financing of the
1997 and 1996 Acquisitions on the Line and the assumption of debt, as discussed
under "-Acquisition and Development of Shopping Centers" above and "--Liquidity
and Capital Resources" below.
COMPARISON OF 1997 TO 1996
Revenues increased $46.8 million, or 165%, to $75.3 million in 1997. The
increase was due primarily to the 1997 Acquisitions and 1996 Acquisitions. At
December 31, 1997, the real estate portfolio contained approximately 7.1 million
square feet and was 93.6% leased. Minimum rent increased $32.8 million, or 160%,
and recoveries from tenants increased $8.7 million, or 204%. Revenues from
property management, leasing, brokerage and development services provided on
properties not owned by the Partnership were $8.0 million in 1997 compared to
$3.4 million in 1996, due to fees earned from third party property management
and leasing contracts acquired as part of the Branch Acquisition. At December
31, 1997, the Partnership managed shopping centers and office buildings owned
entirely by third parties containing approximately 4.4 million square feet as
compared with 1.2 million square feet at December 31, 1996.
Operating expenses increased $21.4 million, or 122%, to $39.0 million in
1997. Combined operating and maintenance expenses and real estate taxes
increased $9.9 million, or 138%, during 1997 to $17.1 million. The increases are
due to the 1997 and 1996 Acquisitions. General and administrative expense
increased 65% during 1997 to $10.0 million due to the hiring of new employees
and related office expenses necessary to manage the 52 shopping centers acquired
during 1996 and 1997, as well as the 44 shopping centers that the Partnership
began managing for third parties during 1997. Depreciation and amortization
increased $7.6 million during 1997, or 174%, primarily due to the 1997 and 1996
Acquisitions.
Interest expense increased to $13.6 million in 1997 from $6.5 million in
1996, or 110%, due primarily to increased average outstanding loan balances
related to the financing of the 1997 and 1996 Acquisitions on the Line and the
assumption of debt, as discussed under "--Acquisition and Development of
Shopping Centers" above and "--Liquidity and Capital Resources" below.
COMPARISON OF 1996 TO 1995
Revenues increased $11.6 million, or 69.2%, to $28.4 million in 1996. The
increase was due primarily to the 1996 Acquisitions discussed above and six
shopping centers purchased during 1995 for $53.3 million ("1995 Acquisitions").
At December 31, 1996, the real estate portfolio contained approximately 3.5
million square feet and was 95.3% leased. Minimum rent increased $8.5 million,
or 70%, and recoveries from tenants increased $2.0 million, or 87%. Revenues
from property management, leasing, brokerage and development services provided
on properties not owned by the partnership were $3.4 million in 1996 compared to
$2.4 million in 1995, due to fees earned on build-to-suit development activity.
11
<PAGE>
At December 31, 1996 and 1995, the Partnership managed shopping centers and
office buildings owned entirely by third parties containing approximately 1.2
million square feet.
Operating expenses increased $6.0 million, or 52%, to $17.6 million in
1996. Combined operating and maintenance expenses and real estate taxes
increased $3.1 million, or 75%, during 1996 to $7.2 million. General and
administrative expense increased 24% during 1996 to $6.0 million due to the
hiring of new employees and related office expenses necessary to manage the 20
shopping centers acquired during 1995 and 1996. Depreciation and amortization
increased $1.8 million during 1996, or 69%, primarily due to the 1996 and 1995
Acquisitions and three new anchor tenants who opened during 1996.
Interest expense increased to $6.5 million in 1996 from $4.8 million in
1995, or 35%, due primarily to increased average outstanding loan balances
related to the 1996 and 1995 Acquisitions. Outstanding debt at December 31, 1996
was $108.0 million as opposed to $55.7 million at year-end 1995.
12
<PAGE>
ACCOUNTING STANDARDS AND ACCOUNTING CHANGES
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS
130"), which is effective for years beginning after December 15, 1997. FAS 130
establishes standards for reporting total comprehensive income in financial
statements, and requires that companies explain the differences between total
comprehensive income and net income. Management has adopted this statement in
1998. No differences between total comprehensive income and net income existed
in the interim financial statements reported at March 31, 1998 and 1997.
FASB issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("FAS
131"), which is effective for years beginning after December 15, 1997. FAS 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. Management does not believe that FAS 131 will affect
its current disclosures.
Effective March 19, 1998, the Emerging Issues Task Force ("EITF") ruled in
Issue 97-11, "Accounting for Internal Costs Relating to Real Estate Property
Acquisitions", that only internal costs of identifying and acquiring non-
operating properties that are directly identifiable with the acquired properties
should be capitalized, and that all internal costs associated with identifying
and acquiring operating properties should be expensed as incurred. The
Partnership had previously capitalized all costs associated with the acquisition
of operating properties as a cost of the real estate. The Partnership has
adopted EITF 97-11 effective March 19, 1998. During 1997, the Partnership
capitalized $1.5 million of internal costs related to acquiring operating
13
<PAGE>
properties. Through the effective date of EITF 97-11, the Partnership has
capitalized $474,000 of internal acquisition costs in 1998. For the remainder of
1998, the Partnership expects to incur $1.1 million internal costs related to
acquiring operating properties, which will be expensed.
On May 22, 1998, the EITF reached a consensus on issue 98-9 "Accounting for
Contingent Rent in Interim Financial Periods." The EITF has stated that lessors
should defer recognition of contingent rental income that is based on meeting
specified targets until those specified targets are met, rather than recognizing
it ratably throughout the year. The Partnership has previously recognized
contingent rental income (i.e., percentage rent) ratably over the year based on
the historical trends of its tenants. The Partnership has adopted Issue 98-9
prospectively and has ceased the recognition of contingent rents until such time
as its tenants have achieved their specified targets. The Partnership believes
this will affect the interim period in which percentage rent is recognized;
however, it will not have a material impact on the annual recognition of
percentage rent.
ENVIRONMENTAL MATTERS
The Partnership, like others in the commercial real estate industry, is
subject to numerous environmental laws and regulations affecting the ownership
and operation of real property. Dry cleaning facilities at the Partnership's
shopping centers are a significant environmental concern. Certain of the
Partnership's properties have been impacted by the dry cleaning operations of
tenants or by other sources, and the Partnership is currently investigating or
remediating contamination at these properties. The Partnership believes that the
tenant dry cleaners are presently operating in accordance with current laws and
regulations and has established procedures to monitor their operations. Based on
information presently available, no additional environmental accruals have been
made, and management believes that the ultimate disposition of currently known
matters will not have a material adverse effect on the financial position,
liquidity or results of operations of the Partnership. However, there can be no
assurance that current remediation estimates and liability accruals for these
matters will not change or that the future environmental compliance or remedial
obligations arising out of known or currently undiscovered matters will not have
a material adverse effect on the Partnership's business, financial condition or
results of operations.
INFLATION
Inflation has remained relatively low during 1998 and 1997 and has had a
minimal impact on the operating performance of the shopping centers. However,
substantially all of the Partnership's long-term leases contain provisions
designed to mitigate the adverse impact of inflation. Such provisions include
clauses enabling the Partnership to receive percentage rentals based on tenants'
gross sales, which generally increase as prices rise, and/or escalation clauses,
which generally increase rental rates during the terms of the leases. Such
escalation clauses are often related to increases in the consumer price index or
similar inflation indices. In addition, many of the Partnership's leases are for
terms of less than ten years, which permits the Partnership to seek increased
rents upon re-rental at market rates. Most of the Partnership's leases require
the tenants to pay their share of operating expenses, including common area
maintenance, real estate taxes, insurance and utilities, thereby reducing the
Partnership's exposure to increases in costs and operating expenses resulting
from inflation.
14
<PAGE>
YEAR 2000 COMPLIANCE
Management recognizes the potential effect Year 2000 may have on the Company's
and the Partnership's operations and, as a result, has implemented a Year 2000
Compliance Project. The term "Year 2000 compliant" means that the software,
hardware, equipment, goods or systems utilized by, or material to the physical
operations, business operations, or financial reporting of an entity will
properly perform date sensitive functions before, during and after the year
2000.
The Company's Year 2000 Compliance Project includes an awareness phase, an
assessment phase, a renovation phase, and a testing phase of our data processing
network, accounting and property management systems, computer and operating
systems, software packages, and building management systems. The project also
includes surveying our major tenants and financial institutions. Total costs
incurred to date associated with the Company's Year 2000 compliance project have
been reflected in the Company's income statement throughout 1997 and 1998, and
were approximately $250,000.
The Company's computer hardware, operating systems, general accounting and
property management systems and principal desktop software applications are Year
2000 compliant as certified by the various vendors. We are currently testing
these systems, and expect to complete the testing phase by December 31, 1998.
Based on initial testing, management does not anticipate any Year 2000 issues
that will materially impact operations or operating results.
An assessment of the Company's building management systems has been completed.
This assessment has resulted in the identification of certain lighting,
telephone, and voice mail systems that may not be Year 2000 compliant. While we
have not yet begun renovations, management believes that the cost of upgrading
these systems will not exceed $500,000. It is anticipated that the renovation
and testing phases will be complete by June 30, 1999.
The Company has surveyed its major tenants and financial institutions to
determine the extent to which the Company is vulnerable to third parties'
failure to resolve their Year 2000 issues. The Company will be able to more
adequately assess its third party risk when responses are received from the
majority of the entities contacted.
Management believes its planning efforts are adequate to address the Year 2000
Issue and that its risk factors are primarily those that it cannot directly
control, including the readiness of its major tenants and financial
institutions. Failure on the part of these entities to become Year 2000
compliant could result in disruption in the Company's cash receipt and
disbursement functions. There can be no guarantee, however, that the systems of
unrelated entities upon which the Company's operations rely will be corrected on
a timely basis and will not have a material adverse effect on the Company.
The Company does not have a formal contingency plan or a timetable for
implementing one. Contingency plans will be established, if they are deemed
necessary, after the Company has adequately assessed the impact on operations
should third parties fail to properly respond to their Year 2000 issues.
ITEM 3. PROPERTIES
The Partnership's properties and the Company's properties are summarized by
state, including their GLA, as of March 31, 1998 as follows:
<TABLE>
<CAPTION>
Partnership COMPANY
------------------------------------- -------------------------------------
LOCATION # PROPERTIES GLA % Leased(1) # PROPERTIES GLA % LEASED(1)
-------- ------------ ---------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Florida 34 4,154,104 93.8% 44 5,310,720 91.9%
Georgia 25 2,540,304 92.9% 27 2,717,511 93.2%
North Carolina 12 1,239,667 96.8% 12 1,239,667 96.8%
Ohio 9 945,610 97.5% 11 1,575,530 93.9%
Alabama 0 C -- 5 516,080 99.9%
Texas 5 464,552 86.1% 5 464,552 86.1%
Tennessee 4 295,257 90.2% 4 295,257 90.2%
Mississippi 0 C -- 2 185,061 97.8%
Colorado 5 441,049 82.8% 5 441,049 82.8%
Virginia 2 197,324 98.1% 2 197,324 98.1%
Kentucky 1 205,060 93.1% 1 205,060 93.1%
South Carolina 1 79,743 88.7% 1 79,743 88.7%
Michigan 1 85,478 99.0% 1 85,478 99.0%
Missouri 1 82,498 99.8% 1 82,498 99.8%
--- ---------- ---- --- ---------- ----
TOTAL 100 10,730,646 93.5% 121 13,395,530 92.9%
=== ========== ==== === ========== ====
</TABLE>
__________________________
(1) Includes 14 properties under development If centers under development were
excluded, as of March 31, 1998, the Partnership's shopping centers would be
95.2% leased and the Company's shopping centers would be 94.5% leased.
As of March 31, 1998, 38.7% of the Partnership's total GLA was located in
Florida, 23.7% in Georgia and 11.6% in North Carolina. Under the Company's
stockholders agreement with SC-USREALTY, as presently in effect, without SC-
USREALTY's prior consent, the Company and its subsidiaries, including the
Partnership, may not invest more than 10% of their assets on a consolidated
basis outside the states listed on the table above, plus West Virginia,
Maryland, the District of Columbia and the southern region of Indiana, without
SC-USREALTY's consent. However, on September 23, 1998, the Company entered into
a merger agreement with Pacific Retail Trust, a privately-held REIT with
properties in Texas, California, Oregon, Washington, Colorado and Arizona. The
merger agreement provides for Pacific Retail Trust to merge into the Company.
The Company anticipates that the properties it acquires from Pacific Retail
Trust will be transferred to the Partnership immediately following the closing,
which presently is expected to take place at year-end 1998. SC-USREALTY has
entered into an amendment to its stockholders agreement with the Company, which
will take effect simultaneously with the closing of the merger, permitting the
Company and its subsidiaries to acquire shopping center properties of less than
350,000 square feet throughout the entire U.S. Consummation of the merger is
subject to, among other things, approval of the shareholders of both the Company
and Pacific Retail Trust and lender consents.
Except for the geographic limitations presently in effect with SC-USREALTY,
neither the company nor the partnership has limitations or targets with respect
to the geographic concentration of its properties by state. The Company and the
Partnership identify targeted investments in infill locations in densely
populated residential communities where there are significant barriers to entry
and where properties would not compete with existing properties owned by the
Company or its subsidiaries.
The following table summarizes the largest tenants occupying the
Partnership's shopping centers and the Company's shopping centers based upon
percentage of total annual rent exceeding 1% at March 31, 1998:
15
<PAGE>
<TABLE>
<CAPTION>
PARTNERSHIP COMPANY
------------------------------------------------- ----------------------------------------------
% OF TOTAL % OF TOTAL
PARTNER- RENT(1) % OF Company- RENT(1) % OF
SHIP- (IN PARTNERSHIP OWNED (IN COMPANY
TENANT GLA OWNED GLA MILLIONS) RENT(1) GLA GLA MILLIONS) RENT(1)
------ --------- --------- ---------- ----------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kroger(2) 1,413,570 13.2% $11.6 13.4% 1,482,570 11.1% $11.9 10.7%
Publix 1,068,110 10.0 7.0 8.1% 1,249,521 9.3% 7.8 7.1%
Winn Dixie 411,003 3.9 2.7 3.1% 687,513 5.1% 4.7 4.3%
Blockbuster 179,838 1.7 2.6 3.0% 186,338 1.4% 2.7 2.5%
K-Mart 427,743 4.0 2.2 2.6% 427,743 3.2% 2.2 2.0%
Harris Teeter 184,563 1.7 2.2 2.6% 184,563 1.4% 2.2 2.0%
Eckerd 148,211 1.4 1.3 1.5% 198,325 1.5% 1.6 1.4%
Walgreens 122,365 1.2 1.2 1.3% 177,365 1.3% 1.6 1.4%
Wal-Mart 224,169 2.1 1.0 1.2% 486,168 3.6% 2.0 1.8%
CVS Drugs 94,206 0.9 0.8 0.9% 103,206 0.8% 0.8 0.7%
</TABLE>
_____________________________
(1) Rent includes annual base rent, annual percentage rent and annualized
reimbursements for common area maintenance, real estate taxes and insurance
as of March 31, 1998.
(2) Excludes 11 Kroger-anchored shopping centers under development. If
included, percentage of Partnership-owned GLA would be 19.5% and percentage
of Partnership rent would be 20.5%. If included, percentage of Company-
owned GLA would be 16.2% and percentage of Company rent would be 16.5%.
The Partnership's leases have lease terms generally ranging from three to
five years for tenant space under 5,000 square feet. Leases greater than 10,000
square feet generally have lease terms in excess of five years, mostly comprised
of anchor tenants with leases generally ranging from five to 40 years. Many of
the anchor leases contain provisions allowing the tenant the option of extending
the term of the lease at expiration. The Partnership's leases provide for the
monthly payment in advance of fixed minimum rentals and for the payment of
additional rents calculated as a percentage of the tenant's sales (in some
cases), the tenant's pro rata share of real estate taxes, insurance and common
area maintenance expenses and reimbursement for utility costs if not directly
metered. The following table sets forth for all occupied leases in place as of
June 30, 1998, a schedule of the Partnership's lease expirations for the next
ten years, assuming that no tenants exercise renewal options:
<TABLE>
<CAPTION>
FUTURE
PERCENT OF BASE PERCENT OF
TOTAL GLA RENT UNDER TOTAL
EXPIRING CURRENTLY EXPIRING BASE
LEASE EXPIRATION YEAR GLA Occupied Leases Rent(2)
--------------------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
(1)....................... 89,144 0.9% $ 910,569 0.9%
1998...................... 411,827 4.1 5,247,617 5.3
1999...................... 806,004 8.0 9,255,584 9.4
2000...................... 712,092 7.0 8,333,714 8.4
2001...................... 845,221 8.4 10,050,718 10.2
2002...................... 1,028,305 10.2 10,888,764 11.0
2003...................... 552,124 5.5 6,042,302 6.1
2004...................... 291,777 2.9 2,779,954 2.8
2005...................... 164,717 1.6 1,697,464 1.7
2006...................... 484,189 4.8 3,926,680 4.0
2007...................... 367,624 3.6 3,541,174 3.6
--------- ---- ----------- ----
10 Yr Total........ 5,753,024 56.9% $62,674,540 63.3%
========= ==== =========== ====
</TABLE>
______________
16
<PAGE>
(1) Leased currently under month-to-month rent or in process of renewal.
(2) Total minimum rent includes current minimum rent and future contractual
rent steps for all properties, but excludes additional rent such as
percentage rent, common area maintenance, real estate taxes and insurance
reimbursements.
See the property table below and also see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for further
information about the Partnership's properties.
The following table describes the Partnership's properties and the
Company's properties not owned by the Partnership at March 31, 1998:
<TABLE>
<CAPTION>
YEAR GROSS
YEAR CON- LEASABLE PERCENTAGE GROCERY GROCERY DRUG OTHER
PROPERTY NAME ACQUIRED STRUCTED(1) AREA (GLA) LEASED (2) GLA ANCHOR STORE ANCHORS (8)
- ------------- -------- ----------- ---------- ---------- ------- ------------ ---------- -------------
FLORIDA
JACKSONVILLE/NORTH FLORIDA
- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anastasia Shopping Plaza 1993 1988 102,342 98.3% 4 8,555 Publix -- --
Bolton Plaza 1994 1988 172,938 98.6% -- -- -- Wal-Mart
Carriage Gate 1994 1978 76,833 90.4% -- -- -- TJ Maxx
Courtyard (3) 1987 1987 67,794 44.6% 6 6,446 Albertson's (4) -- --
Ensley Square (5) 1997 1977 62,361 97.1% 4 7,786 Delchamps -- --
Millhopper (3) 1993 1974 84,444 85.9% 3 7,244 Publix Eckerd --
Newberry Square 1994 1986 181,006 99.0% 3 9,795 Publix Kmart
Old St. Augustine Plaza 1996 1990 170,220 98.2% 4 2,112 Publix Eckerd Waccamaw
Palm Harbor 1996 1991 168,448 98.8% 4 5,254 Publix Eckerd Bealls
Pine Tree Plaza (6) 1997 1998 60,488 82.4% 3 7,888 Publix -- --
Regency Court 1997 1992 218,665 97.6% -- -- -- CompUSA,
Office Depot,
Sports
Authority
South Monroe Commons (6) 1996 1998 80,214 86.5% 4 8,466 Winn-Dixie Eckerd --
Village Commons (7) 1988 1988 105,895 97.5% -- -- -- Wal-Mart (4),
Stein Mart
TAMPA/ORLANDO
- -------------------------------
Bloomingdale 1998 1987 267,935 98.1% 3 9,795 Publix Eckerd Wal-Mart,
Beall's
Mainstreet Square 1997 1988 107,159 89.9% 5 6,000 Winn-Dixie Walgreen's --
Mariner's Village 1997 1986 117,665 95.6% 4 5,500 Winn-Dixie Walgreen's --
Market Place-St. Petersburg 1995 1983 90,296 100.0% 3 6,464 Publix Eckerd --
Paragon Cable Building 1993 1993 40,298 100.0% -- -- -- --
OTHER
TENANTS (9)
-------------
FLORIDA
JACKSONVILLE/NORTH FLORIDA
- --------------------------
Anastasia Shopping Plaza Hallmark, Schmagel's Bagels, Mailboxes Etc.
Bolton Plaza Radio Shack, Payless Shoes, Mailboxes and More
Carriage Gate Brueggers Bagels, Bedfellows, Alterations, Etc.
Courtyard (3) Olan Mills, Heavenly Ham, Beauty Warehouse
Ensley Square (5) Radio Shack, Hallmark, AmSouth Bank
Millhopper (3) Whitney's Bridal, Chesapeake Bagel, Book Gallery
Newberry Square H & R Block, Cato Fashions, Olan Mills
Old St. Augustine Plaza Mail Boxes, Etc., Hallmark, Hair Cuttery
Palm Harbor Mail Boxes, Etc., Hallmark, Merle Norman
Pine Tree Plaza (6) N/A
Regency Court H & R Block, Mail Boxes, Etc., Loop Restaurant
South Monroe Commons (6) Rent-A-Center, H & R Block
Village Commons (7) Mail Boxes, Etc., GNC, Payless Shoes
TAMPA/ORLANDO
- -------------------------------
Bloomingdale Radio Shack, H&R Block, Lucky Chinese
Mainstreet Square Rent-A-Center, Allstate Insurance, Northwest Financial
Mariner's Village Supercuts
Market Place-St. Petersburg Mailboxes, Etc., Weight Watchers, Republic Bank
Paragon Cable Building n/a
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
YEAR GROSS
YEAR CON- LEASABLE PERCENTAGE GROCERY GROCERY DRUG OTHER
PROPERTY NAME ACQUIRED STRUCTED(1) AREA (GLA) LEASED (2) GLA ANCHOR STORE ANCHORS (8)
- ------------- -------- ----------- ---------- ---------- ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peachland Promenade 1995 1991 82,082 97.4% 48,890 Publix Ace Hardware
Regency Square at Brandon (3) 1986 1986 341,751 82.6% -- -- -- TJ Maxx, AMC,
Staples,
Marshalls,
Michaels
Seven Springs 1994 1986 162,580 93.1 35,000 Winn-Dixie -- Kmart
Terrace Walk (3) 1990 1990 50,926 56.8 -- -- -- --
Town Square 1997 1986 42,969 100.0 14,074 Kash 'N Karry Rite Aid
University Collections 1996 1984 106,627 93.8 40,143 Kash 'N Karry Eckerd
(4)
Village Center-Tampa 1995 1993 181,096 98.7 36,434 Publix Walgreen's Stein Mart
WEST PALM BEACH/
Treasure Coast
- ---------------------------
Boynton Lakes Plaza 1997 1993 130,724 91.0 44,000 Winn-Dixie Walgreen's --
Chasewood Plaza (3) 1992 1986 141,034 89.6 39,795 Publix Walgreen's --
Chasewood Storage (3) 1992 1986 42,810 99.9 -- -- --
East Port Plaza 1997 1991 231,656 99.4 42,112 Publix Walgreen's Kmart, Sears
Homelife
Martin Downs Village Center (3) 1992 1985 121,998 92.7 -- -- Walgreen's Coastal Care
Martin Downs Village
Shoppes (3)(6) 1992 1988 48,932 95.6 -- -- -- --
Ocean Breeze (3) 1992 1985 111,551 93.2 36,464 Publix Walgreen's Coastal Care
Ocean East (5) 1996 1997 112,894 63.4 38,100 Stuart's Fine -- Coastal Care
Foods
Tequesta Shoppes 1996 1986 109,766 92.8 39,795 Publix Walgreen's --
Town Center at Martin Downs 1996 1996 64,546 100.0 56,146 Publix -- --
Wellington Market Place 1995 1990 178,555 91.9 46,475 Winn-Dixie Walgreen's United Artists
Wellington Town Square 1996 1982 105,150 94.9 36,464 Publix Eckerd --
MIAMI/FT. LAUDERDALE
- ---------------------------
Aventura (3) 1994 1974 102,876 90.5 35,908 Publix Eckerd Humana
Berkshire Commons 1994 1992 106,434 99.9 65,537 Publix Walgreen's --
Garden Square 1997 1991 90,258 96.3 42,112 Publix Eckerd --
North Miami (3) 1993 1988 42,500 100.0 32,000 Publix Eckerd --
Palm Trails Plaza (6) 1997 1998 76,067 85.0 59,562 Winn-Dixie -- --
Tamiami Trail 1997 1987 110,867 93.8 42,112 Publix Eckerd --
University Market Place 1990 1990 129,121 61.1 63,139 Albertson's (4) -- Linens
Super-
market
Welleby 1996 1982 109,949 89.5 46,779 Publix Walgreen's --
--------- -----
Subtotal/Weighted Average 5,310,720 91.9%
(Florida) --------- -----
OTHER
TENANTS (9)
----------
Peachland Promenade Ace Hardware, State Farm, Inc., Subway
Regency Square at Brandon (3) Pak Mail, Lens Crafters, Famous Footware
Seven Springs Subway, H & R Block, State Farm
Terrace Walk (3) Olan Mills
Town Square Baskin Robbins, Mailboxes, Etc., Hallmark
University Collections Hallmark, Pak Mail, Dockside Imports
Village Center - Tampa Hallmark, Pak Mail, Mens Warehouse
WEST PALM BEACH
- ---------------------------
Boynton Lakes Plaza Radio Shack, Baskin Robbins, Dunkin Donuts
Chasewood Plaza (3) Hallmark, GNC, Supercuts
Chasewood Storage (3)
East Port Plaza H&R Block, Pak Mail, Subway
Martin Downs Village Center (3) Burger King, Hallmark, Barnett Bank
Martin Downs Village Shoppes (3)(6) Mailbox Plus, Allstate
Ocean Breeze (3) Mailboxes, Etc. Barnett Bank, Martin Memorial
Ocean East (5) Nations Bank, Mail Boxes, Etc. Martin Memorial
Tequesta Shoppes Hallmark, Mailboxes Etc, Radio Shack
Town Center at Martin Downs Mail Boxes, Etc., Barnett Bank, Martin Memorial
Wellington Marketplace Pak Mail, Subway, Papa John's, Manhattan Bagel
Wellington Town Square Hallmark, Mail Boxes, Etc., Coldwell Banker
MIAMI/ FT.LAUDERDALE
- ---------------------------
Aventura (3) Pak Mail, Bank United, City of Aventura
Berkshire Commons H & R Block, Century 21, Postal Station
Garden Square Blockbuster, Subway, Bell South Mobility
North Miami (3) N/A
Palm Trails Plaza (6) Sal's Pizza, Dry Cleaners
Tamiami Trail Mail Boxes, Etc., Radio Shack, Pizza Hut
University Market Place H & R Block, Mail Boxes, Etc., Olan Mills
Welleby Pizza Hut, H & R Block, Mail Boxes Plus
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
YEAR GROSS
YEAR CON- LEASABLE PERCENTAGE GROCERY GROCERY DRUG OTHER
PROPERTY NAME ACQUIRED STRUCTED(1) AREA (GLA) LEASED (2) GLA ANCHOR STORE ANCHORS(8)
- ------------- -------- ----------- ---------- ---------- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GEORGIA
- ---------------------------
ATLANTA
- ---------------------------
Ashford Place 1997 1993 53,345 100.0% -- -- -- Pier 1 Imports
Braelin Village (5) 1997 1991 226,522 98.8 63,986 Kroger -- Kmart
Briarcliff LaVista 1997 1962 39,201 100.0 -- -- Drug --
Emporium
Briarcliff Village 1997 1990 192,660 90.0 -- -- Eckerd TJ Maxx,
Office Depot
Buckhead Court 1997 1984 55,227 95.8 -- -- -- Outback
Steakhouse
Cambridge Square 1996 1979 68,725 79.6 32,000 Winn-Dixie -- --
Cromwell Square 1997 1990 81,826 83.6 -- -- CVS Drug Haverty's
Furniture
Cumming 400 1997 1994 126,899 100.0 56,146 Publix -- Big Lots
Delk Spectrum (3)(5) 1998 1991 100,880 100.0 45,044 A&P -- --
Dunwoody Hall 1997 1986 79,974 99.0 34,632 A&P Eckerd --
Dunwoody Village (5) 1997 1975 114,657 96.3 26,950 Bruno's -- --
Evans Crossing 1998 1993 76,580 100.0 62,580 Kroger -- --
Loehmann's Plaza 1997 1986 137,635 86.6 -- -- Eckerd Loehmann's
Lovejoy Station 1997 1995 77,336 100.0 47,955 Publix -- --
Memorial Bend 1997 1995 177,278 86.5 56,146 Publix -- TJ Maxx
Orchard Square 1995 1987 85,940 89.8 36,990 A&P CVS Drug --
Paces Ferry Plaza 1997 1987 61,693 100.0 -- -- -- --
Powers Ferry Square 1997 1987 97,809 100.0 7,216 Harry's Drugs for --
Less
Powers Ferry Village 1997 1994 78,995 100.0 47,955 Publix CVS Drug --
Rivermont Station 1997 1996 90,267 100.0 58,261 Harris Teeter CVS Drug --
Roswell Village (6) 1997 1997 144,071 86.8 37,888 Publix Eckerd Ace Hardware
Russell Ridge 1994 1995 98,556 100.0 63,296 Kroger -- --
Sandy Plains Village 1996 1992 168,513 76.9 60,009 Kroger -- Ace Hardware
Sandy Springs Village 1997 1997 48,245 100.0 41,354 Kroger -- --
Trowbridge Crossing (5) (6) 1997 1997 64,060 89.9 37,888 Publix -- --
OTHER MARKETS
- ---------------------------
LaGrange Marketplace (3) 1993 1989 76,327 93.6 46,733 Winn-Dixie Eckerd --
Parkway Station (5) 1996 1983 94,290 92.9 42,130 Kroger -- --
--------- -----
Subtotal/Weighted
Average (Georgia) 2,717,511 -----
--------- 93.2%
-----
OTHER
TENANTS (9)
-------
GEORGIA
- ---------------------------
ATLANTA
- ---------------------------
Ashford Place Baskin Robbins, Mail Boxes, Etc., Merle Norman
Braelinn Village (5) Baskin Robbins, Mail Boxes, Etc., Manhattan Bagel
Briarcliff LaVista Supercuts
Briarcliff Village Subway, Famous Footware, The Hair Cuttery
Buckhead Court Hallmark, Bellsouth Mobility
Cambridge Square Papa John's, AAA Mail & Package, Wachovia
Cromwell Square First Union
Cumming 400 Pizza Hut, Hair Cuttery, Famous Footware
Delk Spectrum (3)(5) GNC, Mailboxes, Etc., Wolf Camera
Dunwoody Hall Texaco, Blimpie, Nations Bank
Dunwoody Village (5) Federal Express, Jiffy Lube, Hallmark
Evans Crossing Subway, Hair Cuttery
Loehman's Plaza Mail Boxes, Etc., GNC, H & R Block
LoveJoy Station State Farm, Blockbuster, Pizza Hut
Memorial Bend GNC, Pizza Hut, H & R Block
Orchard Square Mail Boxes Unlimited, State Farm
Paces Ferry Plaza Chapter 11 Bookstore, Sherwin Williams
Powers Ferry Square Domino's Pizza, Dunkin Donuts
Powers Ferry Village Mail Boxes, Etc., South Trust Bank, Blimpie
Rivermont Station GNC, Pak Mail, Wolf Camera
Roswell Village (6) Hallmark, Pizza Hut, Schlotzyky's Deli
Russell Ridge Pizza Hut, Pak Mail, Hallmark
Sandy Plains Village Mail Boxes, Etc., Subway, H & R Block
Sandy Springs Village American Speedy Printing, Sandy Springs Schwinn
Trowbridge Crossing (5)(6) Domino's Pizza, Postal Services, Hair Cuttery
OTHER MARKETS
- ---------------------------
LaGrange Marketplace (3) Little Caesar's, It's Fashions, One Price Clothing
Parkway Station (5) Olan Mills, Pizza Hut, H&R Block
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR GROSS
YEAR CON- LEASABLE PERCENTAGE GROCERY GROCERY DRUG OTHER
PROPERTY NAME ACQUIRED STRUCTED(1) AREA (GLA) LEASED (2) GLA ANCHOR STORE ANCHORS (8)
- ------------- -------- ----------- ---------- ---------- ------- ------- ----- -------
NORTH CAROLINA
- ---------------------------
CHARLOTTE
- ---------------------------
Carmel Commons 1997 1979 132,647 95.7% 14,300 Fresh Market Eckerd Piece Goods
City View 1996 1993 77,550 98.5 44,000 Winn-Dixie CVS Drug --
Union Square 1996 1989 97,191 100.0 33,000 Harris Teeter CVS Drug Consolidated
Theatres
RALEIGH/DURHAM
- ---------------------------
Bent Tree Plaza 1998 1994 79,503 100.0 54,153 Kroger -- --
Garner Square (6)(7) 1998 1998 221,650 94.7 57,590 Kroger United
-- Artists,
Office Max,
Petsmart
Glenwood Village 1997 1983 42,864 100.0 27,764 Harris Teeter -- --
Lake Pine Plaza 1998 1997 87,690 100.0 57,590 Kroger -- --
Maynard Crossing 1998 1997 122,814 100.0 55,973 Kroger -- --
Southpoint Crossing (6)(7) 1998 1998 101,088 80.4 59,160 Kroger -- --
Woodcroft 1996 1984 85,353 98.5 26,752 Food Lion Eckerd True Value
ASHEVILLE
- ------------------------------
Oakley Plaza 1997 1988 118,727 100.0 42,317 Bi-Lo CVS Drug Baby
Superstore
WINSTON-SALEM
- ------------------------------
Kernersville Marketplace 1998 1997 72,590 100.0 57,590 Kroger -- --
--------- -----
Subtotal/Weighted
Average (North --------- -----
Carolina)
1,239,667 96.8%
--------- -----
OTHER
TENANTS
--------
NORTH CAROLINA
- ---------------------------
CHARLOTTE
- ---------------------------
Carmel Commons Little Caesar's, Radio Shack, Blimpie's
City View Little Caesar's, City Library, Willie's Music
Union Square Subway, Mail Boxes, Etc., TCBY
RALEIGH/DURHAM
- ---------------------------
Bent Tree Plaza (6)(7) Pizza Hut, Manhattan Bagel, Parcel Plus
Garner Square Mail Boxes, Etc., Friedman's, Ritz Camera
Glenwood Village Domino's PIzza, Theradbenders II, Simple Pleasures
Lake Pine Plaza GNC, H & R Block
Maynard Crossing Hallmark, Mail Boxes, Etc., GNC
Southpoint Crossing (6) (7) Wolf Camera, GNC, Manhattan Bagel
Woodcroft Domino's Pizza, Subway, Allstate Insurance
ASHEVILLE
- ---------------------------
Oakley Plaza Little Caesar's, Subway, Life Uniform
WINSTON - SALEM
- ---------------------------
Kernersville Marketplace Mail Boxes, Etc., Little Caesar's, Great Clips
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
YEAR GROSS
YEAR CON- LEASABLE PERCENTAGE GROCERY GROCERY DRUG OTHER
PROPERTY NAME ACQUIRED STRUCTED(1) AREA (GLA) LEASED (2) GLA ANCHOR STORE ANCHORS(8)
- ------------- -------- ----------- ---------- ---------- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OHIO
- ------------------------------
CINCINNATI
- ------------------------------
Beckett Commons 1998 1995 80,434 100.0% 57,590 Kroger -- --
Cherry Grove 1998 1997 186,040 92.6 66,879 Kroger CVS Drug TJ Maxx,
Hancock
Fabrics
Hyde Park Plaza (3)(5) 1997 1995 374,743 96.3 138,592 Kroger, Walgreen's Barnes &
Thriftway Noble,
Old Navy,
Micheals
COLUMBUS
- ------------------------------
East Pointe 1998 1993 86,520 100.0 59,120 Kroger Stein Mart,
The
Limited, S&K
Menswear
North Gate Plaza 1998 1996 85,100 94.2 62,000 Kroger --
Kingsdale (3)(6) 1997 1998 255,177 77.3 55,000 Big Bear Stein Mart,
The
Limited, S&K
Menswear
Windmiller Plaza-Pickerington 1998 1997 119,192 97.1 75,240 Kroger Sears Hardware
HAMILTON
- ------------------------------
Hamilton Meadows 1998 1989 126,251 100.0 67,216 Kroger K-Mart
WESTCHESTER
- ------------------------------
Westchester Plaza 1998 1988 88,181 98.4 66,523 Kroger -- --
WORTHINGTON
- ------------------------------
Worthington 1998 1991 93,092 100.0 52,337 Kroger CVS Drug --
--------- -----
Subtotal/Weighted --------- -----
Average (Ohio) 1,575,530 93.9%
--------- -----
COLORADO
- -------------------------------
COLORADO SPRINGS
- -------------------------------
Cheyenne Meadows (5)(6) 1998 1998 89,130 88.5% 69,105 King Soopers -- --
Monument (6)(7) 1998 1998 85,313 81.9 69,913 King Soopers -- --
Woodman Plaza (6)(7) 1998 1998 97,913 71.4 69,913 King Soopers -- --
DENVER
- -------------------------------
Lloyd King Center (5)(6) 1998 1998 83,380 91.6 61,000 King Soopers -- --
Stroh Ranch (6)(7) 1998 1998 85,313 81.9 69,913 King Soopers -- --
--------- -----
Subtotal/Weighted
Average (Colorado) 441,049 82.8%
--------- -----
<PAGE>
OTHER
TENANTS (9)
--------------
OHIO
- ------------------------------
CINCINNATI
- ------------------------------
Beckett Commons Mail Boxes, Etc., Subway
Cherry Grove GNC, Hallmark, Sally Beauty Supply
Hyde Park Plaza (3)(5) H & R Block, Radio Shack, Hallmark
COLUMBUS
- ---------------------------
East Pointe Mail Boxes, Etc., Hallmark, Liberty Mutual
North Gate Plaza Domino's Pizza, GNC, Great Clips
Kingsdale (3) (6) Hallmark, Lens Crafters, Boston Market
Windmiller Plaza-Pickerington Radio Shack, Sears Optical, Great Clips
HAMILTON
- ---------------------------
Hamilton Meadows H & R Block, GNC, Radio Shack
WESTCHESTER
- ---------------------------
Westchester Plaza Pizza Hut, Subway, GNC
WORTHINGTON
- ---------------------------
Worthington Little Caesar's, Hallmark, Radio Shack
COLORADO
- ---------------------------
COLORADO SPRINGS
- ---------------------------
Cheyenne Meadows (5)(6) Hallmark, Blimpie Subs, Cost Cutters
Monument (6) (7) Cost Cutter's, Pak Mail
Woodman Plaza (6) (7) Cost Cutters
DENVER
- ---------------------------
Lloyd King Center (5)(6) GNC, Cost Cutters, Hollywood Video
Stroh Ranch (6) (7) Cost Cutters, Post Net, Dry Clean Station
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
YEAR GROSS
YEAR CON- LEASABLE PERCENTAGE GROCERY GROCERY DRUG OTHER
PROPERTY NAME ACQUIRED STRUCTED(1) AREA (GLA) LEASED (2) GLA ANCHOR STORE ANCHORS(8)
- ------------- -------- ----------- ---------- ---------- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TENNESSEE
- --------------------------------
NASHVILLE
- --------------------------------
Harpeth Village (5)(6) 1997 1998 70,091 95.4% 54,510 Bruno's -- --
Marketplace (5) 1997 1997 23,500 100.0 -- -- -- Office Max
Murphreesburo (5) 1998 1998 86,871 70.5 61,224 Kroger -- --
Nashboro Village (6)(7) 1998 1998 86,871 70.5 61,224 Kroger -- --
Peartree Village 1997 1997 -- -- 654,538 Harris Teeter Eckerd Office Max
114,795 100.0
Subtotal/Weighted -- --
Average (Tennessee) 295,257 90.2%
SOUTH CAROLINA
- --------------------------------
Merchants Village (6) 1997 1997 79,743 88.7% 37,888 Publix -- --
- --------------------------------
KENTUCKY
- --------------------------------
Franklin Square 1998 1988 205,060 93.1% 50,499 Kroger Rite Aid JC Penney,
Goody's
MICHIGAN
- --------------------------------
Lakeshore 1998 1996 85,478 99.0% 49,465 Kroger Rite Aid --
MISSOURI
- --------------------------------
St. Ann Square 1998 1986 82,498 99.8% 43,483 National -- --
TEXAS
- --------------------------------
DALLAS
- --------------------------------
Bethany Lake (6)(7) 1998 1998 92,674 63.0% 58,374 Kroger -- --
Preston Brook-Frisco (6)(7) 1998 1998 86,132 70.7 60,932 Kroger -- --
Shiloh Springs (6)(7) 1998 1997 81,932 93.9 60,932 Kroger -- --
ARLINGTON
- --------------------------------
Creekside (5) 1998 1997 85,642 100.0 60,932 Kroger -- --
- --------------------------------
SOUTHLAKE
- --------------------------------
Village Center-Southlake (5) 1998 1997 118,172 100.0 60,932 Kroger -- --
--------- -----
Subtotal/Weighted
Average (Texas) --------- 86.1%
464,552 -----
<PAGE>
OTHER
TENANTS (9)
-------
TENNESSEE
- ---------------------------
NASHVILLE
- ---------------------------
Harpeth Villager (5)(6) Mail Boxes, Etc., Heritage Cleaners, Cat's Music
Marketplace (5) N/A
Murphreesboro (5)
Nashboro Village (6) (7) Hallmark, Fantastic Sam's, Cellular Sales
Peartree Village Hollywood Video, AAA Auto Club, Royal Thai
SOUTH CAROLINA
- ---------------------------
Merchants Village (6) Hallmark, Mail Boxes, Etc., Hollywood Video
KENTUCKY
- ---------------------------
Franklin Square Hallmark, Mail Boxes, Etc., Radio Shack
MICHIGAN
- ---------------------------
Lakeshore Hallmark, Moy's Chinese, Baskin Robbins
MISSOURI
- ---------------------------
St. Ann Square Great Clips, US Navy, US Marines
TEXAS
- ---------------------------
DALLAS
- ---------------------------
Bethany Lake (6) (7) Boss Cleaners, Mr. Parcel, TGF Haircutters
Preston Brook-Frisco (6)(7) Radio Shack, Coldwell Banker
Shiloh Springs (6) (7) GNC, Great Clips
ARLINGTON
- ---------------------------
Creekside (5) Hollywood Video, CICI's Pizza, Fantastic Sam's
SOUTHLAKE
- ---------------------------
Village Center - Southlake (5) Radio Shack, Papa Johns, Smoothie King
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
YEAR GROSS
YEAR CON- LEASABLE PERCENTAGE GROCERY GROCERY DRUG OTHER
PROPERTY NAME ACQUIRED STRUCTED(1) AREA (GLA) LEASED (2) GLA ANCHOR STORE ANCHORS(8)
------------- -------- ----------- ---------- ---------- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VIRGINIA
- --------------------------------
Brookville Plaza 1998 1991 63,664 100.0% 52,864 Kroger -- --
Statler Square 1998 1996 133,660 97.2 65,003 Kroger CVS Drug Staples
--------- -----
Subtotal/Weighted
Average (Virginia) 197,324 98.1%
--------- ----
ALABAMA
- --------------------------------
BIRMINGHAM
- --------------------------------
Villages of Trussville (3) 1993 1987 69,300 100.0% 38,380 Bruno's CVS Drug --
West County Marketplace (3) 1993 1987 129,155 100.0 42,848 Food World (4) Eckerd Wal-Mart
- --------------------------------
MONTGOMERY
- --------------------------------
Country Club (1) 1993 1991 67,622 99.6 35,922 Winn-Dixie Harco --
- --------------------------------
ROANOKE/ALEXANDER CITY
- --------------------------------
Bonner's Point (1) 1993 1985 87,280 100.0 34,700 Winn-Dixie -- Wal-Mart
Marketplace-Alexander City (3) 1993 1987 162,723 100.0 47,668 Winn-Dixie --
'97
Subtotal/Weighted Average 516,080 99.9%
(Alabama) ======= =====
MISSISSIPPI
- --------------------------------
Columbia Marketplace (3) 1993 1988 136,002 97.0% 41,895 Winn-Dixie -- Wal-Mart
Lucedale Marketplace (3) 1993 1989 49,059 100.0 35,059 Delchamps -- Wal-Mart (4)
Subtotal/Weighted Average 185,061 97.8%
(Mississippi)
Total/Weighted Average 13,395,530 92.9%
========== =====
OTHER
TENANTS (9)
-------
VIRGINIA
- ---------------------------
Brookville Plaza H & R Block, House of Frames, Jenny Craig
Statler Square Little Caesar's, H & R Block, Hair Cuttery
ALABAMA
- ---------------------------
BIRMINGHAM
- ---------------------------
Villages of Trussville (3) Little Caesar's, Cellular One, Mattress Max
West County Marketplace (3) Domino's Pizza, GNC, Cato Plus
MONTGOMERY
- ---------------------------
Country Club (1) Little Caesar's, Subway, Taco Bell
ROANOAKE/ALEXANDER CITY
- ---------------------------
Bonner's Point (1) Subway, Domino's Pizza, It's Fashion
Marketplace-Alexander City (3) Domino's Pizza, Subway, Hallmark
MISSISSIPPI
- ---------------------------
Columbia Marketplace (3) Subway, Radio Shack, Cato
Lucedale Marketplace (3) Subway, Video Junction, Byrd's Cleaners
</TABLE>
23
<PAGE>
- -------------------------
(1) Or latest renovation.
(2) Includes development properties. If development properties are excluded,
the total percentage leased would be 95.2% for Partnership shopping centers
and 94.5% for Company shopping centers.
(3) Company-owned property not owned by the Partnership.
(4) Tenant owns its own building.
(5) Owned by a partnership with outside investors in which the Partnership (or
the Company in the case of a property referred to in note (3) above) or an
affiliate is the general partner.
(6) Property under development or redevelopment.
(7) Owned by a joint venture in which the Partnership owns less than a 100%
interest.
(8) Other Anchors are defined as non-grocery and non-drug stores whose square
footage is greater than 10,000 square feet.
(9) Other tenants are presented in order to provide a representative sample of
the Partnership's tenant base other than Grocery, Drug, and Other Anchors.
Other Tenants are generally defined as any tenant that is not a grocery
store, drug store, or included under Other Anchors, and generally have
total GLA less than 5,000 square feet.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Partnership interests in the Partnership are represented by Units, of which
there are (i) Series A Preferred Units, (ii) Original Limited Partnership Units
(including Class A Units), all of which were issued in connection with the
Branch Acquisition, (iii) Class 2 Units, all of which were issued in connection
with the Midland Acquisition, and (iv) Class B Units, all of which are owned by
Regency. With the exception of certain Class B Units, all of the Units
represent limited partner interests. The General Partner, as the holder of
Class B Units, has broad powers to manage the affairs of the Partnership. The
Series A Preferred Units, the Original Limited Partnership Units and the Class 2
Units have limited voting rights and have no right to vote for or control the
management of the Partnership. Each class of limited partnership interest may
be entitled to vote only with respect to certain issuances of additional limited
partnership interests, certain amendments to the Partnership Agreement and, in
the case of the Series A Preferred Units, the merger or consolidation of the
Partnership or the sale of substantially all of the Partnership's assets under
certain circumstances.
24
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Information known to the Partnership with respect to beneficial ownership
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended)
of more than 5% of the outstanding Class B Units as of July 31, 1998 is as
follows:
NO. OF UNITS
CLASS BENEFICIAL OWNER BENEFICIALLY OWNED % OF CLASS
- --------------------------------------------------------------------------------
Class B Units Regency Realty Corporation 21,550,259 100%
121 W. Forsyth St., Suite 200
Jacksonville, Florida 32202
SECURITY OWNERSHIP OF MANAGEMENT
The Partnership has no directors or executive officers and is managed by
Regency as the general partner of the Partnership. Other than J. Alexander
Branch III (11,147 Original Limited Partnership Units) and Lee S. Wielansky
(68,810 Class 2 Units), no director or executive officer of Regency personally
owns any Units of the Partnership as of July 31, 1998.
Information concerning the beneficial ownership of shares of common stock
of Regency by its directors and executive officers, as well as by persons
believed to be the beneficial owner of more than 5% of Regency's outstanding
common stock, is hereby incorporated by reference to the information contained
in Regency's definitive proxy statement for its 1998 Annual Meeting of
Shareholders under the caption "Voting Securities."
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership is managed by Regency as the general partner of the
Partnership. The information required by this item is hereby incorporated by
reference to the material appearing under Item 10, "Directors and Executive
Officers of the Registrant," in Regency's Annual Report on Form 10-K for the
year ended December 31, 1997.
ITEM 6. EXECUTIVE COMPENSATION
The Partnership is managed by Regency as the general partner of the
Partnership. Consequently, the information required by this item is reflected
in and is hereby incorporated by reference to the information contained in
Regency's definitive proxy statement for its 1998 Annual Meeting of Shareholders
under the caption "Executive Compensation."
ITEM 7. CERTAIN RELATIONSHIPS
The Partnership is managed by Regency as the general partner of the
Partnership. The information required by this item is hereby incorporated by
25
<PAGE>
reference to the information contained in Regency's definitive proxy statement
for its 1998 Annual Meeting of Shareholders under the caption "Certain
Transactions."
STOCKHOLDERS AGREEMENT WITH SC-USREALTY
General
The Company and SC-USREALTY are parties to a stockholders agreement dated as of
July 10, 1996, as amended. The Company and SC-USREALTY have entered into a
third amendment to the stockholders agreement that will take effect
simultaneously with the pending merger of Pacific Retail Trust into the Company.
See Item 3 ("Properties").
SC-USREALTY has agreed in the stockholders agreement to a "standstill" which
expires on September 10, 2001 and is renewable for additional one year terms
thereafter. A "standstill" is an agreement by a shareholder to refrain from
changing its position. As part of its standstill, SC-USREALTY has agreed not to
acquire additional Company shares and not to take certain actions relating to
management or control, such as replacing members of the Company's Board of
Directors. The stockholders agreement also gives SC-USREALTY certain rights
such as the right to nominate directors, to participate in equity offerings by
the Company and to be consulted on certain significant actions. In addition,
the Company has also agreed to certain restrictions in the stockholders
agreement including the amount of debt it can incur and the types of investments
it can make.
Limit on Ownership of the Company Common Stock during Standstill
Under the stockholders agreement, during its standstill SC-USREALTY is
prohibited from beneficially owning more than 45% of the outstanding Company
Common Stock on a fully diluted basis. The amendment will permit SC-USREALTY to
exchange all of its Pacific Retail Trust shares in the merger by limiting SC-
USREALTY's ownership of Company Common Stock during the term of its standstill
to 60% on a fully diluted basis until such time as SC-USREALTY's ownership of
Company Common Stock falls below 45% on a fully diluted basis for a continuous
period of 180 days, at which time the limit will be reduced from 60% to 49% on a
fully diluted basis. SC-USREALTY will own approximately 52.5% of the
outstanding Company Common Stock on a fully diluted basis upon completion of the
merger with Pacific Retail Trust.
Board Representation
Under the stockholders agreement, SC-USREALTY has the right (but not the
obligation) to name five nominees to the Company's 13-person Board of Directors,
which is proportionate to its ownership of Company Common Stock. SC-USREALTY
presently has two representatives on the Company's Board. The amendment
provides that at and after the first election of directors to occur after the
merger and until SC-USREALTY no longer owns 15% (as opposed to 20% under the
present stockholders agreement) of the outstanding Company Common Stock on a
fully diluted basis for a continuous period of 180 days, or until any earlier
expiration of the standstill provisions of the stockholders agreement, SC-
USREALTY will have the right to nominate the greater of (1) three (as opposed to
two under the present stockholders agreement) and (2) that number of directors
corresponding to the percentage of Company Common Stock owned by SC-USREALTY,
but not more than 49% of the Board, rounded down to the nearest whole number.
If its standstill ends but SC-USREALTY continues to own at least 15% (as opposed
to 20% under the present stockholders agreement) of the outstanding Company
Common Stock on a fully diluted basis for a continuous period of 180 days, SC-
USREALTY will have the right to nominate the lesser of (1) three directors (as
opposed to two under the present stockholders agreement), and (2) the number
corresponding to the percentage of Company Common Stock owned by SC-USREALTY.
Voting
On most matters, during the term of its standstill, SC-USREALTY must vote its
shares at its option either (1) in accordance with the recommendation of the
Company's Board or (2) proportionately in accordance with the vote of the other
holders of Company Common Stock. Under the stockholders agreement, SC-USREALTY
may, however, vote all its shares in its own discretion with respect to the
election of its nominees to the Board and all its shares up to 40% (49% under
the amendment) of the outstanding shares of Company Common Stock in its own
discretion with respect to votes requiring the approval of holders of a majority
of the outstanding shares on (i) any amendment to the Company's Articles or
bylaws which would reasonably be expected to materially adversely affect SC-
USREALTY and (ii) any merger, consolidation, sale of a material amount of
assets, recapitalization, liquidation, or similar action out of the ordinary
course of business, or the issuance of securities to a person which requires
shareholder approval under the rules of the New York Stock Exchange.
Participation Rights
SC-USREALTY generally has the right under the stockholders agreement to purchase
additional equity securities (at the same price offered to other purchasers)
each time that the Company sells additional shares of capital stock (or options
or other rights to acquire capital stock), in order to preserve SC-USREALTY's
pro rata ownership of the Company, except that it may not purchase more than
37.5% of the securities offered. Under the amendment, the percentage of
securities offered that SC-USREALTY may purchase in any offering by the Company
will be increased from 37.5% to 49%.
Investments in Shopping Center Properties
The amendment will extend to the geographic region in which the Company may
operate and in which SC-USREALTY's investment activities are restricted from a
defined portion in the U.S. where the Company's current properties are located
to the entire U.S. The effect of this amendment will be to permit the Company
to invest in shopping centers of less than 350,000 square feet located anywhere
in the U.S. The amendment also will restrict SC-USREALTY and its controlled
affiliates from directly or indirectly owning, purchasing, developing or
otherwise acquiring shopping centers anywhere in the U.S. except through their
investment in (1) the Company, (2) other shopping center companies in which SC-
USREALTY is not represented on the board of directors and does not participate
in the management of such other company, and (3) shopping centers representing
an incidental part of a portfolio investment provided that they are offered to
the Company upon acquisition and, if not then purchased by the Company, again
upon resale.
Limitations on Foreign Ownership
Section 5.14 of the Company's Articles of Incorporation presently
invalidates any issuance or transfer of shares that would (1) result in 5% or
more of the fair market value of the Company's outstanding capital stock being
owned directly or indirectly by Non-U.S. Persons (as defined in the Articles),
excluding SC-USREALTY and its affiliates, or (2) result in 50% or more of such
fair market value being held by Non-U.S. Persons, including SC-USREALTY and its
affiliates. SC-USREALTY has the right to waive any of these restrictions. Non-
U.S. Persons who hold 5% or more by value of the outstanding capital stock of a
domestically controlled REIT may not be required to pay any U.S. federal income
tax on any gain when they sell such stock. At the request of SC-USREALTY, the
Company's Board of Directors has proposed amendments to Section 5.14, subject to
consummation of the Pacific Retail Trust merger, to expressly permit SC-USREALTY
and its affiliates to increase their ownership limit to 60% of the Company's
Common Stock on a fully diluted basis, even though the Company will cease to be
a domestically controlled REIT as a result of the merger. SC-USREALTY owns
approximately 69.9% of Pacific Retail Trust's outstanding capital stock and will
own approximately 52.5% of the Company's outstanding Common Stock on a fully
diluted basis after the merger. The proposed amendments to Section 5.14 of the
Company's Articles will prohibit transfers of the Company's stock by any person
other than SC-USREALTY and certain related parties that would result in such
stock being owned directly or indirectly by Non-U.S. Persons so long as Non-U.S.
Persons own 50% or more of the fair market value of the Company's outstanding
capital stock. In order to enable continuing maintenance of the Company's status
as a domestically controlled REIT in the future once ownership by Non-U.S.
Persons drops below 50% by value of the Company's outstanding capital stock, the
proposed amendments to Section 5.14 of the Company's Articles also will
invalidate issuances and transfers of shares thereafter by persons other than
SC-USREALTY and its affiliates that would (1) result in 4.9% or more of the fair
market value of the Company's outstanding capital stock being owned directly or
indirectly by Non-U.S. Persons, other than SC-USREALTY and its affiliates, or
(2) result in 50% or more of such fair market value being owned directly or
indirectly by Non-U.S. Persons, including SC-USREALTY and its affiliates (who
will be presumed to be Non-U.S. Persons).
ITEM 8. LEGAL PROCEEDINGS
The Partnership is not presently involved in any litigation nor, to its
knowledge, is any litigation threatened against the Partnership, except for
routine litigation arising in the ordinary course of business such as "slip and
fall" litigation which is expected to be covered by insurance. In the opinion
of management of Regency, such litigation is not expected to have a material
adverse effect on the business, financial condition or results of operations of
the Partnership.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS
There is no established public trading market for the Units, and Units may
be transferred only with the consent of the general partner as provided in the
Second Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement"). As of July 31, 1998, Regency was the only holder of Class B Units,
and there were approximately 72 holders of record of other Units, determined in
accordance with Rule 12g5-1 under the Securities Exchange Act of 1934, as
amended. To the Partnership's knowledge, there have been no bids for the Units
and, accordingly, there is no available information with respect to the high and
low quotation of the Units for any quarter since January 1996. Each outstanding
Unit other than Class B Units and Series A Preferred Units is exchangeable, on a
one share per Unit basis, for the common stock of Regency.
At the present time, (i) there are no Units subject to outstanding options
or warrants to purchase, or securities convertible into, Units of the
Partnership, although additional units may be issued in payment of contingent
consideration for the Branch and Midland Acquisitions and (ii) there are no
Units that have been, or are proposed to be publicly offered by the Partnership.
The Partnership Agreement provides that the Partnership will make priority
distributions of Available Cash (as defined in the Partnership Agreement) first
to Series A Preferred Units on each March 31, June 30, September 30 and December
31 in a distribution amount equal to 8.125% of the original capital contribution
per Series A Preferred Unit. Subject to the prior right of the holders of
Series A Preferred Units to receive all distributions accumulated on such Units
in full, at the time of each distribution to holders of common stock of Regency
distributions of Available Cash will then be made to the holders of Original
Limited Partnership Units, first, and to the holders of Class 2 Units, second,
in an amount per Unit identical to the amount that is distributed with respect
to each share of common stock. The Partnership Agreement provides that all
remaining Available Cash will be distributed to the general partner. The
following table sets forth the quarterly distributions paid by the Partnership
to its limited partners (other than holders of Series A Preferred Units) with
respect to each full quarterly period for which Regency or its affiliate has
been the general partner of the Partnership.
26
<PAGE>
DISTRIBUTION
QUARTER ENDED PER LP UNIT
- ------------- -------------
March 31, 1998................................................. $0.44
December 31, 1997.............................................. 0.44
September 30, 1997............................................. 0.42
June 30, 1997.................................................. 0.42
Under the loan agreement governing the Line, distributions may not exceed
95% of funds from operations ("FFO") based on the immediately preceding four
quarters. The Partnership considers FFO, as defined by the National Association
of Real Estate Investment Trusts, as net income (computed in accordance with
generally accepted accounting principles) excluding gains (or losses) from debt
restructuring and sales of income producing property held for investment, plus
depreciation and amortization of real estate, and after adjustments for
unconsolidated investments in real estate partnerships and joint ventures, to be
the industry standard for reporting the operations of real estate investment
trusts ("REITs"). Adjustments for investments in real estate partnerships are
calculated to reflect FFO on the same basis. In the event of any monetary
default, the Partnership will not make distributions to partners.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
The Partnership has engaged in the following sales of unregistered
securities, each based upon Rule 506 of the Securities Act:
On March 7, 1997, the Partnership acquired substantially all of the assets
of Branch in exchange for the issuance of 3,888,699 Original Limited Partnership
and Class A Units, valued for purposes of such transaction at $22.125 per Unit,
the fair market value of the Regency common stock on the date the terms of the
Branch transaction were reached. Pursuant to the Branch Acquisition, the
principals of Branch could receive additional Units and shares of Regency common
stock after the first, second and third anniversaries of the Branch closing
based on the performance of certain properties, up to an aggregate of 1,020,061
Units. On March 23, 1998, in connection with the first anniversary of the
Branch closing, the Partnership issued 721,997 additional Units representing
property earn-outs pursuant to the Branch transaction, also valued at $22.125
per Unit.
On March 11, 1998, the Partnership acquired substantially all of the assets
of the Midland Group, in exchange for cash plus the issuance of 392,163 Class 2
Units, valued for purposes of such transaction at $26.5813. Certain equity
owners of the Midland Group may also be entitled to receive contingent
consideration in the form of Units on the first, second and third anniversaries
of the Midland closing, also valued at $26.5813 per Unit.
On June 25, 1998, the Partnership issued $80,000,000 8.125% Series A
Cumulative Redeemable Preferred Units to Belair Capital Fund, LLC.
On July 20, 1998, the Partnership sold an aggregate of $100,000,000 7-1/8%
Notes due July 20, 2005 to Goldman Sachs & Co., Morgan Stanley & Co.
Incorporated and PaineWebber Incorporated in a private placement pursuant to
27
<PAGE>
Section 4(2) of the Securities Act at a purchase price equal to 99.758% of the
face value of the Notes, less an underwriting discount of 0.625%. Such initial
purchasers agreed to resell the Notes only to qualified institutional buyers
pursuant to Rule 144A under the Securities Act, to institutional accredited
investors in a manner exempt from registration under the Securities Act or to
non-U.S. persons in compliance with Regulation S under the Securities Act.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The securities registered by this Registration Statement are the general
partnership interests in the Partnership represented by Class B Units, all of
which are held by the Company and are subordinate to the limited partnership
interests of the Partnership. All Units acquired by the Company (and any of its
affiliates that acquire interests in the Partnership) will be Class B Units;
provided, however, that Units acquired by the Company upon the exercise by
limited partners of redemption rights will be limited partnership interests
represented by Class B Units. The following is a summary of certain provisions
of the Partnership Agreement and is subject to, and qualified in its entirety
by, the Partnership Agreement, which has been filed as an exhibit to this
Registration Statement.
DISTRIBUTIONS
The holders of Series A Preferred Units are entitled to a preferred payment
of quarterly distributions at the rate of 8.125% of the original capital
contribution per Unit. Likewise, before the General Partner or any of its
affiliates will be entitled to any distributions of operating cash flow
("Available Cash"), each Original Limited Partner and holder of Class 2 Units
(the "Additional Limited Partners") must receive an amount equal to such
partner's Cumulative Unpaid Priority Distribution Account (as defined in the
Partnership Agreement), together with an amount thereon accruing at the prime
rate plus 2% per annum (the "Cumulative Unpaid Accrued Return Account").
However, once the holders of Series A Preferred Units, first, Original Limited
Partners, second, and the Additional Limited Partners, third, have received an
amount per Unit equal to the cash dividend paid on the common stock (together
with any amounts in such partners' Cumulative Unpaid Priority Distribution
Account and Cumulative Unpaid Accrued Return Account), the Limited Partners will
not be entitled to any further distributions of Available Cash from the
Partnership, and the remainder will be paid to the General Partner and any of
its affiliates that acquire Units.
The General Partner is required to restore any negative balance in its
capital account upon liquidation of the Partnership. As a general rule, the
General Partner will not be required to contribute funds to the Partnership in
order to avoid arrearages in distributions of Available Cash. Conversely, to
the extent that the Partnership's properties produce substantially more cash
flow per Unit than the cash dividend on the common stock during the same period,
the General Partner and its affiliates will be entitled to 100% of the excess.
28
<PAGE>
POWERS OF THE GENERAL PARTNER
The Partnership Agreement grants the General Partner broad powers to manage
the business of the Partnership. The General Partner has agreed in Section
7.1(h) of the Partnership Agreement to use its reasonable best efforts as a
fiduciary to manage the Partnership's business to prevent arrearages in
distributions of Available Cash. However, Section 7.8(b) of the Partnership
Agreement provides that, except as expressly otherwise provided, the General
Partner is under no obligation to consider the separate interests of the Limited
Partners in deciding whether to take any actions which the General Partner has
undertaken in good faith on behalf of the Partnership. There are also numerous
other provisions granting authority to the General Partner to take actions for
specified reasons regardless of the consequences to the Limited Partners. For
example, Section 7.9(d) of the Partnership Agreement authorizes actions by the
General Partner undertaken in the good faith belief that such actions are
necessary to protect Regency's continued qualification as a REIT or to avoid the
incurrence by Regency of taxes under the Code. While section 7.1(a)(iii) of the
Partnership Agreement requires the General Partner to use reasonable efforts to
effect dispositions of the Partnership's assets in non-taxable exchanges under
Section 1031 of the Code, section 7.1(f) of the Partnership Agreement permits
the General Partner to take actions permitted under the Partnership Agreement
even though such actions could result in income tax liability to the Limited
Partners.
Under Section 7.1(a)(iii) of the Partnership Agreement, the General Partner
is authorized to encumber assets of the Partnership for loans made to the
General Partner, the proceeds of which are not required to be contributed to or
loaned to the Partnership. However, Regency is required to make capital
contributions to the Partnership where necessary (up to the amount of debt
service and closing costs paid by the Partnership with respect to any such loan)
to enable the Partnership to make the maximum permitted quarterly distribution
of Available Cash.
Section 7.8(b) of the Partnership Agreement acknowledges Regency's
contractual commitment to SC-USREALTY that Regency take actions so as to avoid
classification of SC-USREALTY as a "passive foreign investment company" as
defined in Section 1296 of the Code. In general, this obligation will require,
among other things, that (i) the Partnership manage its assets directly through
employees of the Partnership and not through employees of Affiliates, (ii) that
SC-USREALTY own (within the meaning of Section 1296(c) of the Code) at least
27.5% by value of Regency's capital stock at the end of each quarter, and (iii)
that the General Partner maintain at least a 75% interest in the capital or
profits of the Partnership.
TRANSFER RESTRICTIONS
The Partnership Agreement provides that the General Partner may not
transfer its general partnership interest (other than to an affiliate of the
General Partner) or withdraw as general partner other than under certain
conditions in connection with a merger, consolidation or other business
combination or transaction with or into another person or sale of all or
substantially all of its assets, or any reclassification or recapitalization.
The General Partner may transfer all or any of its limited partnership interests
to any party without the consent of the Partnership or any other partner.
29
<PAGE>
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware Revised Uniform Limited Partnership Act provides that a
limited partnership has the power to indemnify and hold harmless any partner or
other person from and against any and all claims and demands whatsoever, subject
to such standards and restrictions, if any, as are set forth in its partnership
agreement.
The Partnership Agreement provides that the General Partner shall not be
liable for monetary damages to the Partnership or the Limited Partners for
losses sustained or liabilities incurred as a result of errors in judgment or of
any act or omission if the General Partner acted in good faith. The Partnership
Agreement also provides for the indemnification of the General Partner, a
Limited Partner, a director or officer of the Partnership and affiliates of the
General Partner or Partnership acting in good faith on behalf of the Partnership
as determined by the General Partner in its good faith judgment other than for
any action by such person involving fraud, willful misconduct or gross
negligence.
ITEM 13. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Pro Forma Condensed Consolidated Financial Statements" on
page P-1 of this Form 10 and "Index to Financial Statements" on page F-1 of this
Form 10.
The Partnership's Form 10-Q filed November 16, 1998, and incorporated
herein by reference, updates the financial statements and pro forma financial
information of the Partnership through September 30, 1998.
The financial information for acquired properties required by Rule 3-14 of
Regulation S-X is included in the following Form 8-K reports of Regency Realty
Corporation and incorporated herein by reference:
Form 8-K Report of Regency Realty Corporation filed July 4, 1998 as
amended by Form 8-K/A filed March 19, 1998;
Form 8-K Report of Regency Realty Corporation filed July 20, 1998;
Form 8-K Report of Regency Realty corporation filed October 7, 1998.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.
See "Index to Pro Forma Condensed Consolidated Financial Statements"
on page P-1 of this Form 10 and "Index to Financial Statements" on
page F-1 of this Registration Statement on Form 10.
(B) EXHIBITS:
The following exhibits are included in this Registration Statement on
Form 10:
3.1 Second Amended and Restated Agreement of Limited Partnership of
Regency Centers, L.P., dated as of March 5, 1998, incorporated by
reference to Exhibit 10(a) to the Company's Current Report on Form 8-
K/A filed March 19, 1998
3.2 Amendment No. 1 to Second Amended and Restated Agreement of Limited
Partnership Relating to 8.125% Series A Cumulative Redeemable
Preferred Units
30
<PAGE>
4.1 Amended and Restated Redemption Agreement dated as of March 5, 1998 by
and among Regency Centers, L.P., Regency Realty Corporation and the
limited partners party thereto, incorporated by reference to Exhibit
10(c) to the Company's Current Report on Form 8-K/A filed March 19,
1998
10.1 Credit Agreement dated as of March 27, 1998 among Regency Centers,
L.P., as the Borrower, Regency Realty Corporation, as the Parent, the
financial institutions party thereto, as the Lenders, and Wells Fargo
Bank, N.A., as the Agent, incorporated by reference to Exhibit 10(c)
to the Company's Quarterly Report on Form 10-Q filed May 15, 1998.
10.2 Indenture dated as of July 20, 1998 among Regency Centers, L.P., the
Guarantors named therein and First Union National Bank, as trustee
31
<PAGE>
10.3 Exchange and Registration Rights Agreement dated as of July 15, 1998
among Regency Centers, L.P., the Guarantors named therein and the
Purchasers named therein
21.1 Subsidiaries of the Registrant
27.1 Financial Data Schedule
99.1 The following sections of Regency Realty Corporation's definitive
proxy statement for its 1998 Annual Meeting of Shareholders, which
sections are incorporated by reference to such Proxy Statement:
(a) The section captioned "Voting Securities" at pages 1 through 3.
(b) The section captioned "Executive Compensation at pages 18 through
21.
(c) The section captioned "Certain Transactions" at pages 21 through
23.
99.2 The following sections of Regency Realty Corporation's Annual Report
on Form 10-K for the year ended December 31, 1997, which sections are
incorporated by reference to such Annual Report:
(a) The response to item 10, "Directors and Executive Officers of the
Registrant."
99.3 The Partnership's Form 10-Q/A filed October 20, 1998.
*99.4 The Partnership's Form 10-Q for the quarter ended September 30, 1998.
99.5 The following Form 8-K Reports of Regency Realty Corporation:
Form 8-K Report of Regency Realty Corporation filed July 4, 1998
as amended by Form 8-K/A filed March 19, 1998;
Form 8-K Report of Regency Realty Corporation filed July 20, 1998;
Form 8-K Report of Regency Realty corporation filed October 7,
1998.
- ----------------
* Filed herewith
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this amended registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
REGENCY CENTERS, L.P.
By: REGENCY REALTY CORPORATION,
its general partner
Date: November 19, 1998 By: /s/ J. Christian Leavitt
-------------------------------------
J. Christian Leavitt, Vice President,
Secretary, Treasurer and Principal
Accounting Officer
33
<PAGE>
REGENCY CENTERS, L.P.
INDEX TO PRO FORM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pro Form Condensed Consolidated Balance Sheet
as of March 31, 1998 (unaudited)................................. P-3
Notes to Pro Forma Condensed Consolidated Balance
Sheet as of March 31, 1998 (unaudited)........................... P-4
Pro Forma Consolidated Statements of Operations
for the three month period ended March 31, 1998
and the year ended December 31, 1997 (unaudited)................. P-5
Notes to Pro Forma Consolidated Statements of
Operations for the three month period ended March 31, 1998
and the year ended December 31, 1997 (unaudited)................. P-7
P-1
<PAGE>
REGENCY CENTERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet is
based upon the historical consolidated balance sheet of the Partnership as of
March 31, 1998 as if the Partnership had completed the acquisition of all the
Midland Properties and the Financings as of that date. The following unaudited
pro forma consolidated statements of operations of the Partnership are based
upon the historical consolidated statements of operations for the three-month
period ended March 31, 1998 and the year ended December 31, 1997, and are
presented as if the Partnership had acquired the Branch Properties, the
Midland Properties, the additional 12 grocery-anchored shopping centers
acquired in 1997 and 1998 (the "Acquisition Properties") and had completed the
Financings as of January 1, 1997. These unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
Consolidated Financial Statements of the Partnership included elsewhere in
this Registration Statement.
The unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of what the actual financial position or results of
operations of the Partnership would have been at March 31, 1998 or December
31, 1997 assuming the transactions had been completed as set forth above, nor
does it purport to represent the financial position or results of operations
of the Partnership in future periods.
P-2
<PAGE>
REGENCY CENTERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MIDLAND OTHER
HISTORICAL PROPERTIES (A) ADJUSTMENTS PRO FORMA
---------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Real estate investments,
at cost................. $737,251 $56,100 $ -- $793,351
Construction in progress. 40,765 -- -- 40,765
Less: accumulated depre-
ciation................ 20,812 -- -- 20,812
-------- ------- --------- --------
Real estate rental
property, net......... 757,204 56,100 -- 813,304
-------- ------- --------- --------
Investments in real es-
tate partnerships....... 992 -- -- 992
-------- ------- --------- --------
Net real estate invest-
ments.................. 758,196 56,100 -- 814,296
-------- ------- --------- --------
Cash and cash equiva-
lents................... 5,556 -- 36,777 (b) 42,333
Tenant receivables, net
of allowance for
uncollectible accounts.. 7,651 -- -- 7,651
Deferred costs, less ac-
cumulated amortization.. 2,570 -- -- 2,570
Other assets............. 2,238 -- 1,250 (b) 3,488
-------- ------- --------- --------
Total Assets........... $776,211 $56,100 $ 38,027 $870,338
======== ======= ========= ========
LIABILITIES AND PARTNERS'
CAPITAL
Mortgage loans payable... $212,028 $31,732 $ (25,774)(b) $217,986
Acquisition and develop-
ment line of credit..... 90,231 24,368 (114,599)(b)(c) --
Notes offered hereby..... -- -- 100,000 (b) 100,000
-------- ------- --------- --------
Total debt............. 302,259 56,100 (40,373) 317,986
Tenants' security and es-
crow deposits........... 2,049 -- -- 2,049
Accounts payable and
other liabilities....... 8,881 -- -- 8,881
-------- ------- --------- --------
Total liabilities...... 313,189 56,100 (40,373) 328,916
-------- ------- --------- --------
Limited partners' inter-
est in consolidated
partnerships............ 7,246 -- -- 7,246
-------- ------- --------- --------
Series A
preferred units......... -- -- 80,000 (c) 80,000
General and limited
partnership
units................... 455,776 -- (1,600)(c) 454,176
-------- ------- --------- --------
Total partners' capi-
tal................... 455,776 -- 78,400 534,176
-------- ------- --------- --------
Total liabilities and
partners' capital... $776,211 $56,100 $ 38,027 $870,338
======== ======= ========= ========
</TABLE>
See accompanying notes to pro forma condensed consolidated balance sheet.
P-3
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
(IN THOUSANDS)
(a) Acquisitions of Shopping Centers:
In January 1998, the Partnership entered into an agreement to acquire
shopping centers from various entities comprising the Midland Group
consisting of 21 shopping centers plus eleven shopping centers under
development. The Partnership acquired 13 of the Midland shopping centers
during March 1998 containing 1.3 million square feet for approximately
$111,000. Those shopping centers are included in the Partnership's March 31,
1998 balance sheet. Subsequent to March 31, 1998, the Partnership has
acquired or will acquire six additional shopping centers for $56,100 and
during August 1998, expects to acquire an additional three properties under
development for $41,300. In addition, during 1998, the Partnership expects
to pay $4,600 in additional costs related to joint venture investments and
other transaction costs related to acquiring the various shopping centers
from Midland, and during 1999 and 2000 may pay contingent consideration of
$23,000. The following table sets forth the aggregate purchase price for
East Point, Maxtown, Worthington, Franklin Square, Windmiller and St. Ann
Square, which were acquired or will be acquired subsequent to March 31,
1998.
<TABLE>
<CAPTION>
PURCHASE
PRICE
--------
<S> <C>
East Point.......................... $ 8,215
Maxtown............................. 7,712
Worthington......................... 10,691
Franklin Square..................... 11,375
Windmiller.......................... 11,464
St. Ann Square...................... 6,653
-------
$56,100
=======
</TABLE>
The following table represents the properties under development which the
Partnership expects to acquire from Midland upon completion of construction
during 1998. These properties are not included in these pro forma condensed
consolidated financial statements.
<TABLE>
<CAPTION>
EXPECTED
ACQUISITION PURCHASE
DATE PRICE
----------- --------
<S> <C> <C>
Garner Festival....................................... Aug-98 20,571
Nashboro.............................................. Aug-98 7,260
Crooked Creek......................................... Aug-98 13,471
-------
$41,302
=======
</TABLE>
(b) Represents the proceeds from the offering of the Notes less offering costs
of 1.25%. The Partnership used the net proceeds from the offering of the
Notes in the amount of $98,800, for (a) the repayment of the balance
outstanding on the Line ($36,200 on the pro forma basis presented herein
after giving effect to the repayment described below in connection with the
Offering of the Series A Preferred Units (the "Preferred Offering"), and (b)
the repayment of existing mortgage loans ($25,800) and, for purposes of
these pro forma financial statements, will retain the remainder ($36,800) as
cash and cash equivalents to be used to complete the Midland Acquisition.
The $1,200 of financing costs will be recorded as an "Other Asset" to be
amortized over the term of the Notes. The mortgage loans were repaid during
April 1998 without any premium or penalty, had average interest rates of
7.14% and were to mature from November 1998 to December 2001.
(c) Represents the proceeds from the offering of the Series A Preferred Units,
less offering costs of 2%. At closing, the Partnership used the net proceeds
from the Preferred Offering, in the amount of $78,400, for the repayment of
outstanding balances on the Line.
P-4
<PAGE>
REGENCY CENTERS, L.P.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
-----------------------------------------------------------------
MIDLAND ACQUISITION OTHER
HISTORICAL PROPERTIES (E) PROPERTIES (F) ADJUSTMENTS PRO FORMA
---------- -------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimum rent........... $17,064 $3,332 $214 $ (697)(j) $19,913
Percentage rent........ 419 -- -- (8)(j) 411
Recoveries from
tenants............... 3,811 410 47 (67)(j) 4,201
Management, leasing and
brokerage fees........ 2,504 -- -- -- 2,504
Equity in income of
investments in real
estate partnerships... 1 -- -- -- 1
------- ------ ---- -------- -------
23,799 3,742 261 (772) 27,030
------- ------ ---- -------- -------
Operating expenses:
Depreciation and
amortization.......... 4,145 676(g) 49(g) (453)(j) 4,417
Operating and
maintenance........... 3,044 228 42 (122)(j) 3,192
General and
administrative........ 3,433 180 -- (25)(j) 3,588
Real estate taxes...... 2,094 385 24 (81)(j) 2,422
------- ------ ---- -------- -------
12,716 1,469 115 (681) 13,619
------- ------ ---- -------- -------
Interest expense (income):
Interest expense....... 3,410 2,058(h) 133(i) (895)(k) 4,706
Interest income........ (318) -- -- -- (l) (318)
------- ------ ---- -------- -------
3,092 2,058 133 (895) 4,388
------- ------ ---- -------- -------
Income before minority
interest and gain on
sale of real estate
investments........... 7,991 215 13 804 9,023
Gain on sale of real es-
tate investments....... 10,237 -- -- (9,336)(j) 901
Minority interest....... (97) -- -- -- (97)
------- ------ ---- -------- -------
Net income............. 18,131 215 13 (8,532) 9,827
Preferred distribu-
tions........... -- -- -- (1,625)(m) (1,625)
------- ------ ---- -------- -------
Net income for unit
holders............... $18,131 $ 215 $ 13 $(10,157) $ 8,202
======= ====== ==== ======== =======
Net income per unit
(note (n)):
Basic.................. $ 0.71 $ 0.29
======= =======
Diluted................ $ 0.70 $ 0.29
======= =======
</TABLE>
See accompanying notes to pro forma consolidated statements of operations.
P-5
<PAGE>
REGENCY CENTERS, L.P.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------------------------------
BRANCH MIDLAND ACQUISITION OTHER
HISTORICAL PROPERTIES(D) PROPERTIES (E) PROPERTIES (F) ADJUSTMENTS PRO FORMA
---------- ------------- -------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Minimum rent........... $53,330 $3,596 $16,482 $6,834 $(4,136)(j) $76,106
Percentage rent........ 898 167 -- 17 -- 1,082
Recoveries from
tenants............... 12,993 751 2,240 1,701 (548)(j) 17,137
Management, leasing and
brokerage fees........ 7,997 1,060 -- -- -- 9,057
Equity in income of
investments in real
estate partnerships... 33 -- -- -- -- 33
------- ------ ------- ------ ------- -------
75,251 5,574 18,722 8,552 (4,684) 103,415
------- ------ ------- ------ ------- -------
Operating expenses:
Depreciation and
amortization.......... 11,905 972 2,994(g) 1,590(g) (855)(j) 16,606
Operating and
maintenance........... 10,688 595 1,194 1,604 (1,260)(j) 12,821
General and
administrative........ 9,964 683 1,042 -- (49)(j) 11,640
Real estate taxes...... 6,451 404 1,635 925 (447)(j) 8,968
------- ------ ------- ------ ------- -------
39,008 2,654 6,865 4,119 (2,611) 50,035
------- ------ ------- ------ ------- -------
Interest expense (income):
Interest expense....... 13,614 1,517 10,353(h) 4,385(i) (5,091)(k) 24,778
Interest income........ (935) (33) -- -- -- (l) (968)
------- ------ ------- ------ ------- -------
12,679 1,484 10,353 4,385 (5,091) 23,810
------- ------ ------- ------ ------- -------
Income before minority
interest and gain on
sale of real estate
investments........... 23,564 1,436 1,504 48 3,018 29,570
Gain on sale of real
estate investments..... 451 -- -- -- (451)(j) --
Minority interest....... (505) (313) -- -- -- (818)
------- ------ ------- ------ ------- -------
Net income............. 23,510 1,123 1,504 48 2,567 28,752
Preferred distribu-
tions................... -- -- -- -- (6,500)(m) (6,500)
------- ------ ------- ------ ------- -------
Net income for unit
holders............... $23,510 $1,123 $ 1,504 $ 48 $(3,933) $22,252
======= ====== ======= ====== ======= =======
Net income per unit
(note (n)):
Basic.................. $ 1.20 $ 1.12
======= =======
Diluted................ $ 1.12 $ 1.05
======= =======
</TABLE>
See accompanying notes to pro forma consolidated statements of operations.
P-6
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(d) Reflects pro forma results of operations for the Branch Properties for the
period from January 1, 1997 to March 7, 1997 (acquisition date).
(e) Reflects revenues and certain expenses for the Midland Properties for the
period from January 1, 1998 to the earlier of respective acquisition date
of the property or March 31, 1998 and for the year ended December 31,
1997.
<TABLE>
<CAPTION>
FOR THE PERIOD FROM JANUARY 1, 1998
TO THE ACQUISITION DATE
---------------------------------------
PROPERTY ACQUISITION MINIMUM RECOVERIES OPERATING AND REAL GENERAL AND
NAME DATE RENT FROM TENANTS MAINTENANCE ESTATE TAXES ADMINISTRATIVE
-------- ----------- ------- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Windmiller.............. 7/15/98 $ 289 $ 45 $ 17 $ 36 $ 16
Franklin Square......... 4/29/98 303 19 27 25 13
St. Ann Square.......... 4/17/98 184 3 17 -- 5
East Pointe............. 4/29/98 223 19 15 46 8
Maxtown Road............ 4/29/98 181 51 12 46 22
Worthington............. 4/29/98 227 74 17 61 7
Beckett Commons......... 3/1/98 113 7 6 14 4
Cherry Grove............ 3/1/98 239 11 13 22 21
Bent Tree Plaza......... 3/1/98 137 11 7 59 8
Westchester Plaza....... 3/1/98 130 12 13 42 7
Brookville Plaza........ 3/1/98 95 5 5 -- 4
Lakeshore............... 3/1/98 123 10 5 -- 6
Evans Crossing.......... 3/1/98 116 4 5 -- 6
Statler Square.......... 3/1/98 164 15 13 1 8
Kernersville Plaza...... 3/1/98 120 4 8 -- 8
Maynard Crossing........ 3/1/98 272 38 13 -- 15
Shoppes at Mason........ 3/1/98 116 27 15 33 6
Lake Pine Plaza......... 3/1/98 152 13 10 -- 9
Hamilton Meadows........ 3/1/98 148 42 10 -- 7
------ ---- ---- ---- ----
$3,332 $410 $228 $385 $180
====== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------
PROPERTY ACQUISITION MINIMUM RECOVERIES OPERATING AND REAL GENERAL AND
NAME DATE RENT FROM TENANTS MAINTENANCE ESTATE TAXES ADMINISTRATIVE
-------- ----------- ------- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Windmiller.............. 7/15/98 $ 1,157 $ 181 $ 69 $ 143 $ 64
Franklin Square......... 4/29/98 1,270 171 158 94 98
St. Ann Square.......... 4/17/98 741 149 60 119 42
East Pointe............. 4/29/98 821 159 50 107 51
Maxtown Road............ 4/29/98 718 100 56 84 32
Worthington............. 4/29/98 862 208 67 124 59
Beckett Commons......... 3/1/98 687 140 38 83 47
Cherry Grove............ 3/1/98 1,445 175 85 131 105
Bent Tree Plaza......... 3/1/98 786 130 64 59 48
Westchester Plaza....... 3/1/98 807 70 72 84 45
Brookville Plaza........ 3/1/98 571 42 34 50 30
Lakeshore............... 3/1/98 759 156 55 96 32
Evans Crossing.......... 3/1/98 613 84 34 50 33
Statler Square.......... 3/1/98 913 76 43 54 60
Kernersville Plaza...... 3/1/98 605 58 29 51 33
Maynard Crossing........ 3/1/98 1,367 133 78 95 104
Shoppes at Mason........ 3/1/98 644 56 61 65 38
Lake Pine Plaza......... 3/1/98 827 93 54 51 46
Hamilton Meadows........ 3/1/98 889 59 87 95 75
------- ------ ------ ------ ------
$16,482 $2,240 $1,194 $1,635 $1,042
======= ====== ====== ====== ======
</TABLE>
P-7
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(f) Reflects revenues and certain expenses of the Acquisition Properties for
the periods from January 1, 1998 and 1997 to the respective acquisition
date of the property.
<TABLE>
<CAPTION>
FOR THE PERIOD FROM JANUARY 1, 1998 TO THE ACQUISITION DATE
------------------------------------------------------------------------------
PROPERTY ACQUISITION MINIMUM PERCENTAGE RECOVERIES OPERATING AND REAL
NAME DATE RENT RENT FROM TENANTS MAINTENANCE ESTATE TAXES
-------- ----------- ------------ ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bloomingdale
Square............... 2/11/98 $ 214 $ -- $ 47 $ 42 $ 24
------- ------------ ----------- ----------- ----------- -----------
$ 214 $ -- $ 47 $ 42 $ 24
============ =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM JANUARY 1, 1997 TO THE ACQUISITION DATE
--------------------------------------------------------------------------
PROPERTY ACQUISITION MINIMUM PERCENTAGE RECOVERIES OPERATING AND REAL
NAME DATE RENT RENT FROM TENANTS MAINTENANCE ESTATE TAXES
-------- ----------- ------------ ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Oakley Plaza............ 3/14/97 $ 142 $ -- $ 14 $ 21 $ 13
Mariner's Village....... 3/25/97 185 6 37 52 33
Carmel Commons.......... 3/28/97 297 11 63 61 35
Mainstreet Square....... 4/15/97 193 -- 34 57 30
East Port Plaza......... 4/25/97 543 -- 107 129 65
Rivermont Station....... 6/30/97 642 -- 124 99 56
Lovejoy Station......... 6/30/97 306 -- 63 45 29
Tamiami Trails.......... 7/10/97 508 -- 163 154 66
Gardens Square.......... 9/19/97 671 -- 232 194 99
Boynton Lakes Plaza..... 12/1/97 1,159 -- 391 347 250
Pinetree Plaza.......... 12/23/97 279 -- 51 71 37
Bloomingdale Square..... 2/11/98 1,909 -- 422 376 212
------------ ---------- ------------ ------------ ----------
$ 6,834 $ 17 $ 1,701 $ 1,604 $ 925
============ ========== ============ ============ ==========
</TABLE>
(g) Depreciation expense is based on the estimated useful life of the
properties acquired. For properties under construction, depreciation
expense is calculated from the date the property is placed in service
through the end of the period. In addition, the calculation reflects
depreciation expense on the properties for the year ended December 31,
1997 and for the period from January 1, 1998 to the earlier of the
respective acquisition date or March 31, 1998.
<TABLE>
<CAPTION>
FOR THE PERIOD FROM JANUARY 1, 1998 TO THE ACQUISITION DATE
------------------------------------------------------
PROPERTY BUILDING AND YEAR PROPERTY DEPRECIATION
NAME IMPROVEMENTS BUILT/RENOVATED USEFUL LIFE ADJUSTMENT
-------- ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Bloomingdale Square.. $ 13,189 1987 30 $ 49
====
Midland Properties... $180,435 Ranging from Ranging from
1986 to 1996 29 to 40 $676
====
</TABLE>
P-8
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM JANUARY 1, 1997 TO THE ACQUISITION DATE
-----------------------------------------------------------
PROPERTY BUILDING AND YEAR PROPERTY DEPRECIATION
NAME IMPROVEMENTS BUILT/RENOVATED USEFUL LIFE ADJUSTMENT
-------- ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Oakley Plaza............ $ 6,428 1988 31 $41
Mariner's Village....... 5,979 1986 29 47
Carmel Commons.......... 9,335 1979 22 101
Mainstreet Square....... 4,581 1988 31 43
East Port Plaza......... 8,179 1991 34 76
Rivermont Station....... 9,548 1996 39 121
Lovejoy Station......... 5,560 1995 38 73
Tamiami Trails.......... 7,598 1987 30 133
Garden Square........... 7,151 1991 34 151
Boynton Lakes Plaza..... 9,618 1993 36 244
Pinetree Plaza.......... 3,057 1982 25 120
Bloomingdale Square..... 13,189 1987 30 440
Acquisition Properties --------
pro forma depreciation
adjustment............ $ 1,590
=======
Midland Properties...... $180,435 Ranging from Ranging from $ 2,994
1986 to 1996 29 to 40 =======
(h) To reflect interest expense on the Line required to complete the
acquisition of the Midland Properties at the average interest rate afforded
the Partnership (6.525%) and the assumption of $97,000 of debt. For
properties under construction, interest expense is calculated from the date
the property is placed in service through the end of the period.
Pro forma interest adjustment for the three-month period ended
March 31, 1998................................................... $ 2,058
=======
Pro forma interest adjustment for the year ended December 31,
1997............................................................. $10,353
=======
(i) To reflect interest expense on the Line required to complete the acquisition
of the Acquisition Properties at the average interest rate afforded the
Partnership (6.525%). The three-month period ended March 31, 1998 and year
ended December 31, 1997 calculation reflects interest expense on the
properties from January 1, 1997 to the respective acquisition date of the
property.
Pro forma interest adjustment for the three-month period ended
March 31, 1998................................................... $ 133
=======
Pro forma interest adjustment for the year ended December 31,
1997............................................................. $ 4,385
=======
</TABLE>
P-9
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(j) In December 1997, the Partnership sold one office building for $2,600 and
recognized a gain on the sale of $451. During the first quarter of 1998, the
Partnership sold three office buildings and a parcel of land for $26,700,
and recognized a gain on the sale of $9,300. The adjustments to the pro
forma consolidated statements of operations reflect the reversal of the
revenues and expenses from the office buildings generated during 1997 and
1998, including the gains on the sale of the office buildings as if the sale
had been completed on January 1, 1997.
The Partnership believes that excluding the results of operations and gains
related to the office buildings sold is necessary for an understanding of
the continuing operations of the Partnership as the Partnership does not
intend to own, operate or sell office buildings in the future.
(k) To reflect (i) interest expense and loan cost amortization on the Notes
offset by (ii) the reduction of interest expense on the Line and mortgage
loans from the proceeds of the offering of the Notes, the issuance of the
Series A Preferred Units and the proceeds from the sale of the office
buildings referred to in note (j).
<TABLE>
<S> <C>
Pro forma interest adjustment for the three-month period ended
March 31, 1998................................................... $ (895)
=======
Pro forma interest adjustment for the year ended December 31,
1997............................................................. $(5,091)
=======
</TABLE>
(l) Proforma interest income earned has not been reflected in these
Consolidated Pro Forma Statements of Operations for available proceeds in
excess of the amounts needed to pay down the Line and mortgage loans. Pro
forma interest income on the excess proceeds, assuming a 5% interest
rate, would have amounted to $1,600 and $400 for the year ended
December 31, 1997 and the three months ended March 31, 1998,
respectively.
(m) To reflect the distribution on the Series A Preferred Units at an annual
rate of 8.125% for the three-month period ended March 31, 1998 and year
ended December 31, 1997.
P-10
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(n) The following summarizes the calculation of basic and diluted earnings
per unit for the three-month period ended March 31, 1998 and the year
ended December 31, 1997:
<TABLE>
<CAPTION>
FOR THE THREE FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Basic earnings per unit (EPU) calculation:
Weighted average common units outstanding. 23,496 15,327
======= =======
Net income for unit holders............... $ 8,202 $22,252
Regency Class B common stock dividends.... (1,344) (5,140)
------- -------
Net income for Basic and Diluted EPU...... $ 6,858 $17,112
======= =======
Basic EPU.................................. $ 0.29 $ 1.12
======= =======
Diluted earnings per unit (EPU) calculation:
Weighted average common units outstanding
per basic EPU............................ 23,496 15,327
Incremental shares to be issued under
common stock options using the Treasury
method................................... 54 80
Contingent units or shares for the
acquisition of real estate............... 334 955
------- -------
Total diluted units...................... 23,884 16,362
======= =======
Diluted EPU................................ $ 0.29 $ 1.05
======= =======
</TABLE>
P-11
<PAGE>
REGENCY CENTERS, L.P.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Regency Centers, L.P.
<TABLE>
<S> <C>
Independent Auditors' Report........................................... F-2
Consolidated Balance Sheets as of March 31, 1998 (unaudited) and
December 31, 1997 and 1996 ........................................... F-3
Consolidated Statements of Operations for the three months ended March
31, 1998 and 1997 (unaudited) and the years ended December 31, 1997,
1996 and 1995 ........................................................ F-4
Consolidated Statements of Changes in Capital for the three months
ended March 31, 1998 (unaudited) and the years ended December 31,
1997, 1996 and 1995................................................... F-5
Consolidated Statements of Cash Flows for the three months ended March
31, 1998 and 1997 (unaudited) and the years ended December 31, 1997,
1996 and 1995......................................................... F-6
Notes to Consolidated Financial Statements............................. F-8
Financial Statement Schedule
Independent Auditors' Report on Financial Statement
Schedule.......................................................... S-1
Schedule III - Regency Centers, L.P. Combined Real Estate and
Accumulated Depreciation - December 31, 1997...................... S-2
All other schedules are omitted because they are not applicable or because
information required therein is shown in the financial statements or notes
thereto.
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Unit Holders of Regency Centers, L.P.
and the Board of Directors of Regency Realty Corporation:
We have audited the accompanying consolidated balance sheets of Regency
Centers, L.P. (the "Partnership") as of December 31, 1997 and 1996, and the
related consolidated statements of operations, changes in capital and cash
flows for each of the years in the three-year period ended December 31, 1997.
These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Partnership as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Jacksonville, Florida
June 9, 1998
F-2
<PAGE>
REGENCY CENTERS, L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
Real estate investments, at cost (notes
2, 4, 5 and 9):
Land................................... $161,686,129 $134,457,274 $ 55,713,109
Buildings and improvements............. 575,565,348 467,730,009 196,957,090
Construction in progress--development
for investment........................ 18,988,365 13,427,370 1,665,144
Construction in progress--development
for sale.............................. 21,776,546 20,173,039 1,695,062
------------ ------------ ------------
778,016,388 635,787,692 256,030,405
Less: accumulated depreciation......... 20,812,516 22,041,114 11,669,690
------------ ------------ ------------
757,203,872 613,746,578 244,360,715
Investments in real estate partnerships
(note 3).............................. 992,122 999,730 1,035,107
------------ ------------ ------------
Net real estate investments........... 758,195,994 614,746,308 245,395,822
Cash and cash equivalents (note 4)...... 5,556,513 14,642,429 6,466,899
Tenant receivables, net of allowance for
uncollectible accounts of $1,357,948,
$1,162,570 and $832,091 at March 31,
1998 and December 31, 1997 and 1996,
respectively........................... 7,651,036 7,245,788 3,608,727
Deferred costs, less accumulated
amortization of $1,352,682, $1,456,933
and $788,108 at March 31, 1998 and
December 31, 1997 and 1996,
respectively........................... 2,569,952 2,215,099 1,538,874
Other assets............................ 2,237,699 2,299,521 1,173,286
------------ ------------ ------------
$776,211,194 $641,149,145 $258,183,608
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage loans payable (note 4)........ $212,027,750 $145,455,989 $ 34,281,064
Acquisition and development line of
credit (note 5)....................... 90,231,185 48,131,185 73,701,185
Accounts payable and other liabilities. 8,881,063 9,972,065 5,489,236
Tenants' security and escrow deposits.. 2,049,465 1,854,700 987,902
------------ ------------ ------------
Total liabilities..................... 313,189,463 205,413,939 114,459,387
------------ ------------ ------------
Limited partners' interest in
consolidated partnerships (note 2)..... 7,245,598 7,305,945 --
------------ ------------ ------------
Partners' capital:
General partner; 22,695,394,
21,822,226 and 10,282,575 units
outstanding at March 31, 1998,
December 31, 1997 and 1996,
respectively 433,087,436 415,112,127 143,724,221
Limited partners; 1,008,706 and
545,347 units outstanding at
March 31, 1998 and December 31,
1997, respectively. No units
outstanding at December 31, 1996 22,705,597 13,317,134 -
--------------------------------------
Total partners' capital 455,776,133 428,429,261 143,724,221
--------------------------------------
Commitments and contingencies (notes 9,
11 and 12)
$776,211,194 $641,149,145 $258,183,608
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
REGENCY CENTERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
----------------------- -------------------------------------
1998 1997 1997 1996 1995
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenues:
Minimum rent (note 9).. $17,064,484 $ 8,936,405 $53,330,305 $20,537,939 $12,065,182
Percentage rent........ 419,114 121,886 897,686 91,233 18,494
Recoveries from
tenants............... 3,810,543 2,264,502 12,993,162 4,269,126 2,278,539
Management, leasing and
brokerage fees........ 2,504,106 1,641,191 7,996,714 3,444,287 2,425,733
Equity in income of
investments in real
estate partnerships
(note 3).............. 985 26,791 33,311 69,990 4,226
----------- ---------- ----------- ----------- -----------
Total revenues........ 23,799,232 12,990,775 75,251,178 28,412,575 16,792,174
----------- ---------- ----------- ----------- -----------
Operating expenses:
Depreciation and
amortization.......... 4,145,466 1,921,334 11,904,788 4,344,985 2,573,278
Operating and
maintenance........... 3,044,254 1,692,230 10,688,596 4,528,222 2,769,756
General and
administrative (note
10)................... 3,433,108 2,221,006 9,963,928 6,048,141 4,894,432
Real estate taxes...... 2,093,995 1,375,284 6,451,058 2,683,144 1,360,435
----------- ---------- ----------- ----------- -----------
Total operating
expenses............. 12,716,823 7,209,854 39,008,370 17,604,492 11,597,901
----------- ---------- ----------- ----------- -----------
Interest expense
(income):
Interest expense....... 3,409,517 2,488,443 13,613,704 6,475,909 4,799,577
Interest income........ (318,246) (158,690) (934,473) (609,892) (401,531)
----------- ---------- ----------- ----------- -----------
Net interest expense.. 3,091,271 2,329,753 12,679,231 5,866,017 4,398,046
----------- ---------- ----------- ----------- -----------
Income before minority
interest and gain on
sale of real estate
investments.......... 7,991,138 3,451,168 23,563,577 4,942,066 796,227
Gain on sale of real
estate investments..... 10,237,419 -- 450,902 -- --
Minority interest....... (97,149) (130,735) (504,957) -- --
----------- ---------- ----------- ----------- -----------
Net income............ $18,131,408 $3,320,433 $23,509,522 $ 4,942,066 $ 796,227
=========== ========== =========== =========== ===========
Net income per unit
(note 7):
Basic.................. $ 0.71 $ 0.20 $ 1.20 $ 0.19 $ 0.04
=========== ========== =========== =========== ===========
Diluted................ $ 0.70 $ 0.20 $ 1.12 $ 0.19 $ 0.04
=========== ========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
REGENCY CENTERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
<TABLE>
<CAPTION>
PREDECESSOR GENERAL LIMITED TOTAL
EQUITY PARTNER PARTNERS CAPITAL
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance December 31,
1994................... $ 30,385,480 $ -- $ -- $ 30,385,480
Net income............. 796,227 -- -- 796,227
Cash contributions from
the issuance of
Regency stock......... 49,515,522 -- -- 49,515,522
Cash distributions for
dividends............. (10,760,237) -- -- (10,760,237)
Other contributions
(distributions), net.. 15,925,801 -- -- 15,925,801
------------- ------------ ------------ ------------
Balance December 31,
1995................... 85,862,793 -- -- 85,862,793
Net income............. 4,942,066 -- -- 4,942,066
Cash contributions from
the issuance of
Regency stock......... 63,617,263 -- -- 63,617,263
Cash distributions for
dividends............. (16,196,364) -- -- (16,196,364)
Other contributions
(distributions), net.. 5,498,463 -- -- 5,498,463
------------- ------------ ------------ ------------
Balance December 31,
1996................... 143,724,221 -- -- 143,724,221
Reclassification of
predecessor equity
upon formation of the
Partnership........... (143,724,221) 143,724,221 -- --
Net income............. -- 21,467,699 2,041,823 23,509,522
Units issued for
acquisitions of real
estate................ -- -- 98,635,846 98,635,846
Cash contributions from
the issuance of
Regency stock......... -- 227,501,120 -- 227,501,120
Cash distributions for
dividends............. -- (35,093,345) (1,900,288) (36,993,633)
Other contributions
(distributions), net.. -- (27,947,815) -- (27,947,815)
Units exchanged for
common stock of
Regency............... -- 85,460,247 (85,460,247) --
------------- ------------ ------------ ------------
Balance December 31,
1997................... -- 415,112,127 13,317,134 428,429,261
Net income............. -- 17,537,084 594,324 18,131,408
Cash contributions from
the issuance of
Regency stock......... -- 6,769 -- 6,769
Cash distributions for
dividends............. -- (12,219,915) (276,876) (12,496,791)
Other contributions
(distributions), net.. -- (4,560,723) -- (4,560,723)
Units issued for
acquisitions of real
estate................ -- -- 26,266,209 26,266,209
Units exchanged for
common stock of
Regency............... -- 14,155,883 (14,155,883) --
Reallocation of limited
partners interest..... -- 3,036,211 (3,036,211) --
------------- ------------ ------------ ------------
Balance March 31, 1998
(unaudited)............ $ -- $433,067,436 $ 22,708,697 $455,776,133
============= ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
REGENCY CENTERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------------- ---------------------------------------
1998 1997 1997 1996 1995
------------ ------------ ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income.............. $ 18,131,408 $ 3,320,433 $ 23,509,522 $ 4,942,066 $ 796,227
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization.......... 4,145,466 1,921,334 11,904,788 4,344,985 2,573,278
Deferred financing
cost amortization..... 135,221 93,290 434,826 227,026 115,215
Debt premium
amortization.......... (76,341) -- -- -- --
Minority interest...... 97,149 130,735 504,957 -- --
Equity in income of
investments in real
estate partnerships... (985) (26,791) (33,311) (69,990) (4,226)
Gain on sale of real
estate investments.... (10,237,419) -- (450,902) -- --
Changes in assets and
liabilities:
(Increase) decrease
in tenant
receivables.......... 229,608 1,560,191 (3,637,071) (2,532,102) 231,969
Increase (decrease)
in deferred leasing
commissions.......... 341,020 (40,777) (849,786) (254,073) (261,351)
Increase (decrease)
in other assets...... 60,473 (400,398) (1,703,970) (644,864) (477,270)
(Decrease) increase
in tenants' security
deposits............. (41,953) 516,069 866,798 427,192 285,581
Increase (decrease)
in accounts payable
and other
liabilities.......... 205,177 1,727,267 (432,171) 1,601,729 1,142,629
------------ ------------ ------------ ------------ -----------
Net cash provided by
operating
activities......... 12,988,824 8,801,353 30,113,680 8,041,969 4,402,052
------------ ------------ ------------ ------------ -----------
Cash flows from
investing activities:
Acquisition,
development and
improvements of real
estate................ (74,475,438) (50,478,519) (153,030,917) (106,611,222) (57,093,867)
Investment in real
estate partnership.... -- -- -- (881,309) --
Distributions received
from real estate
partnership
investments........... 8,593 -- 68,688 231,581 12,146
Proceeds from sale of
real estate........... 26,734,955 -- 2,645,229 -- --
------------ ------------ ------------ ------------ -----------
Net cash used in
investing
activities.......... (47,731,890) (50,478,519) (150,317,000) (107,260,950) (57,081,721)
------------ ------------ ------------ ------------ -----------
Cash flows from
financing activities:
Cash contributions from
the issuance of
Regency stock......... 6,769 26,000,012 227,501,120 63,617,263 49,515,522
Cash distributions for
dividends............. (12,496,791) (5,787,475) (36,993,633) (16,196,364) (10,760,237)
Other contributions
(distributions), net.. (4,560,723) (544,094) (27,947,815) 5,498,463 15,925,801
Proceeds or (repayment)
from acquisition and
development line of
credit, net........... 42,100,000 31,150,000 (25,570,000) 51,361,382 (18,736,629)
Proceeds from mortgage
loans payable......... 1,774,207 -- 15,972,920 1,518,331 17,773,540
Repayments of mortgage
loans payable......... (574,690) (3,098,454) (24,015,293) (583,130) (349,263)
Deferred financing
costs................. (591,622) (351,416) (568,449) (762,771) (215,043)
------------ ------------ ------------ ------------ -----------
Net cash provided by
financing
activities......... 25,657,150 47,368,573 128,378,850 104,453,174 53,153,691
------------ ------------ ------------ ------------ -----------
Net (decrease)
increase in cash and
cash equivalents.... (9,085,916) 5,691,407 8,175,530 5,234,193 474,022
------------ ------------ ------------ ------------ -----------
Cash and cash
equivalents at
beginning of period.... 14,642,429 6,466,899 6,466,899 1,232,706 758,684
------------ ------------ ------------ ------------ -----------
Cash and cash
equivalents at end of
period................. $ 5,556,513 $ 12,158,306 $ 14,642,429 $ 6,466,899 $ 1,232,706
============ ============ ============ ============ ===========
</TABLE>
F-6
<PAGE>
REGENCY CENTERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------ ----------------------------------
1998 1997 1997 1996 1995
----------- ------------ ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Supplemental disclosure
of cash flow
information--cash paid
for interest (net of
capitalized interest
of approximately
$1,064,000, $257,000,
$1,896,000, $381,000,
and $285,000 for the
three months ended
March 31, 1998 and
1997 and years ended
December 31, 1997,
1996 and 1995,
respectively)......... $ 3,158,926 $ 2,273,822 $ 13,247,209 $5,999,587 $4,776,868
=========== ============ ============ ========== ==========
Supplemental disclosure
of non cash
transactions:
Mortgage loans assumed
from sellers of real
estate............... $65,448,585 $105,302,169 $117,698,966 -- --
=========== ============ ============ ========== ==========
General and limited
partnership units
issued to acquire
real estate.......... $26,266,209 $ 94,769,706 $ 98,635,846 -- --
=========== ============ ============ ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Principles of Consolidation
Regency Centers, L.P. (the "Partnership") is the primary entity through
which Regency Realty Corporation ("Regency"), a self-administered and self-
managed real estate investment trust ("REIT"), conducts substantially all of
its business and owns substantially all of its assets. In 1993, Regency was
formed for the purpose of managing, leasing, brokering, acquiring, and
developing shopping centers. The Partnership also provides management,
leasing, brokerage and development services for real estate not owned by
Regency (i.e., owned by third parties).
The Partnership was formed in 1996 for the purpose of acquiring certain real
estate properties. The historical financial statements of the Partnership
reflect the accounts of the Partnership since its inception, together with the
accounts of certain predecessor entities (including Regency Centers, Inc., a
wholly-owned subsidiary of Regency through which Regency owned a substantial
majority of its properties), which were merged with and into the Partnership
as of February 26, 1998.
The Partnership has a total of 22,367,573 units outstanding at December 31,
1997. Units are issued for several purposes, including (i) the acquisition of
real estate from third parties, (ii) the contribution of real estate by Regency,
and (iii) the contribution of cash by Regency. Regency owns approximately 97.5%
of such units and is the General Partner in the Partnership. Units not owned by
Regency are exchangeable for Regency's common stock on a one for one basis and
units are paid the same amount of distributions as such units would have
received had they been exchanged for common stock of Regency. The Limited
Partners are holders of units that have not yet exchanged for Regency common
stock. Regency has the right to assume the Partnership's obligation to exchange
units and anticipates exercising such right when units are presented for
exchange. Upon such exchange, Regency's ownership in the Partnership increases
and the Limited Partners interest decreases.
The accompanying consolidated financial statements include the accounts of
the Partnership, its wholly owned subsidiaries, and its majority owned
subsidiaries and partnerships. All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
(b) Revenues
The Partnership leases space to tenants under agreements with varying terms.
Leases are accounted for as operating leases with minimum rent recognized on a
straight-line basis over the term of the lease regardless of when payments are
due. Accrued rents are included in tenant receivables. Minimum rent has been
adjusted to reflect the effects of recognizing rent on a straight line basis.
Certain of the lease agreements contain provisions which provide additional
rents based on tenants' sales volume. Substantially all of the lease
agreements provide for reimbursement of the tenants' share of real estate
taxes and certain common area maintenance ("CAM") costs. These additional
rents are reflected on the accrual basis. Management, leasing, brokerage and
development fees are recognized as revenue when earned.
(c) Real Estate Investments
Land, buildings and improvements are recorded at cost. All direct and
indirect costs clearly associated with the acquisition, development and
construction of real estate projects owned by the Partnership are capitalized
as buildings and improvements, while maintenance and repairs which do not
improve or extend the useful lives of the respective assets are reflected in
operating and
F-8
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
maintenance expense. The property cost includes the capitalization of interest
expense incurred during construction in accordance with generally accepted
accounting principles.
Depreciation is computed using the straight line method over estimated
useful lives up to forty years for buildings and improvements, term of lease
for tenant improvements, and five to seven years for furniture and equipment.
(d) Income Taxes
The Partnership is not liable for federal income taxes and each partner
reports its allocable share of income and deductions on its respective return;
accordingly no provision for income taxes is required in the consolidated
financial statements.
Regency Realty Group, Inc. and Regency Realty Group II, Inc., two of the
Partnership's subsidiaries, file separate tax returns and are subject to
Federal and State income taxes. The two companies had combined taxable income
of $277,227 and $150,674 for the years ended December 31, 1997 and 1996,
respectively and incurred a taxable loss for the year ended December 31, 1995.
Regency Realty Group, Inc. had a net operating loss carryforward of $1,057,644
at December 31, 1997, and accordingly paid no income tax in 1997 and 1996. No
income tax benefit has been recorded for the net operating loss carryforwards.
Regency Realty Group II, Inc. paid $330,441 in Federal and State income tax in
1997, and had no operations prior to 1997.
At December 31, 1997, the net book basis of real estate assets exceeded the
tax basis by approximately $25.4 million, primarily due to the difference
between the cost basis of the assets acquired and their carryover basis
recorded for tax purposes. At December 31, 1996, the tax basis exceeded the
book basis by approximately $7.5 million primarily due to higher depreciation
expense for book purposes.
(e) Deferred Costs
Deferred costs consist of internal and external commissions associated with
leasing the rental property and loan costs incurred in obtaining financing
which are limited to initial direct and incremental costs. The net leasing
commission balance was $1,089,557 and $546,995 at December 31, 1997 and 1996,
respectively. The net loan cost balance was $1,125,542 and $991,879 at
December 31, 1997 and 1996, respectively. Such costs are deferred and
amortized using the straight-line method over the terms of the respective
leases and loans.
(f) Fair Value of Financial Instruments
The fair value of the Partnership's mortgage loans payable and acquisition
and development line of credit are estimated based on the current rates
available to the Partnership for debt of the same remaining maturities.
Therefore, the Partnership considers their carrying value to be a reasonable
estimation of their fair value.
(g) Earnings Per Unit
The Partnership adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share," on December 31, 1997. This
statement governs the computation,
F-9
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
presentation, and disclosure requirements for earnings per share for entities
with publicly held common stock. The Partnership has applied the provisions of
SFAS No. 128 to its calculation of basic and diluted earnings per unit.
Earnings per unit are based on the weighted average number of units
outstanding during each year (see note 7).
(h) Cash and Cash Equivalents
Any instruments which have an original maturity of ninety days or less when
purchased are considered cash equivalents.
(i) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Partnership's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(j) Impairment of Long-Lived Assets
The Partnership adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
on January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets.
Adoption of this Statement did not have a material impact on the Partnership's
financial position, results of operations or liquidity.
(k) Stock Option Plan
Prior to January 1, 1996, Regency and the Partnership accounted for its
stock option plan in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. As such, compensation expense would be recorded on
the date of grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, Regency and the Partnership
adopted SFAS No. 123, "Accounting for Stock-Based Compensation," which permits
entities to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
allows entities to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income and pro forma earnings per share disclosures for
employee stock option grants made in 1995 and future years as if the fair-
value-based method defined in SFAS No. 123 had been applied. Regency and the
Partnership have elected to continue to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
(l) Allocation of Expenses
All general and administrative expenses incurred by Regency and the
Partnership have been paid by the Partnership. All other expenses have been
allocated between Regency and the Partnership
F-10
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
based upon the direct relationship to the real estate asset for which they
were incurred. The Partnership provides property management services for the
real estate properties within the Partnership as well as other entities, and
earns a fee for these services. Such fees are recorded as management fee
revenue for third parties or as a reduction of general and administrative
expenses for properties owned by Regency. These fees are charged based on a
percentage of total revenues, as defined.
(m) Interim Unaudited Financial Statements
The accompanying interim financial statements have been prepared by the
Partnership, without audit, and in the opinion of management reflect all
normal recurring adjustments necessary for a fair presentation of results for
the unaudited interim periods presented. Certain information in footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
(n) Recent Accounting Pronouncements
Effective March 19, 1998, the Emerging Issues Task Force ("EITF") ruled in
Issue 97-11, "Accounting for Internal Costs Relating to Real Estate Property
Acquisitions," that only internal costs of identifying and acquiring non-
operating properties that are directly identifiable with the acquired
properties should be capitalized, and that all internal costs associated with
identifying and acquiring properties should be expensed as incurred. The
Partnership had previously capitalized direct costs associated with the
acquisition of operating properties as a cost of the real estate. The
Partnership has adopted EITF 97-11 effective March 19, 1998. During 1997, the
Partnership capitalized approximately $1.5 million of internal costs related
to acquiring operating properties. Through the effective date of EITF 97-11,
the Partnership has capitalized $474,000 of internal acquisition costs. For
the remainder of 1998, the Partnership expects to incur $1.1 million of
internal costs related to acquiring properties, which will be expensed.
2. ACQUISITIONS OF SHOPPING CENTERS
On March 7, 1997, the Partnership acquired substantially all of the assets
of Branch Properties, L.P. ("Branch"), a privately held real estate firm based
in Atlanta, Georgia, for $232.4 million. The assets acquired from Branch
included 100% fee simple interests in 19 operating shopping centers and one
center under development, and also partnership interests (ranging from 50% to
93%) in four partnerships with outside investors that owned four operating
shopping centers and two centers under development. The Partnership also
assumed the third party property management contracts of Branch on
approximately three million square feet of shopping center GLA that generate
management fees and leasing commission revenues.
At closing and during 1997, the Partnership issued 3,728,224 units in
exchange for the assets acquired and the liabilities assumed from Branch. The
Units are redeemable on a one-for-one basis in exchange for shares of Regency
common stock. On June 13, 1997, 3,027,080 partnership units were converted to
Regency common stock. The purchase price of Branch, as recorded in the
Partnership's consolidated financial statements, includes approximately $100.1
million for Units issued (based upon $26.85, the fair market value of
Regency's common stock on the date the acquisition was publicly announced),
$27.3 million in cash, $7.8 million for transaction costs and to establish
reserves, and
F-11
<PAGE>
REGENCY CENTERS, L.P.
NOTES CONSOLIDATED TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
2. ACQUISITIONS OF SHOPPING CENTERS, CONTINUED
$97.2 million of assumed debt. Limited partners' interest in consolidated
partnerships of $7,910,253 was recorded for the four partnerships with outside
investors.
Additional units may be issued on the fifteenth day after the first, second
and third anniversaries of the closing (each an "Earn-Out Closing"), based on
the performance of the properties acquired (the "Property Earn-Out"). The
formula for the Property Earn-Out provides for calculating increases in value
on a property-by-property basis, based on increases in net income of the year
of calculation. The Property Earn-Out is limited to 721,997 units at the first
Earn-Out Closing and 1,020,061 units at all Earn-Out Closings (including the
first Earn-Out Closing). During March 1998, the Partnership issued 721,997
units valued at $18.2 million to the partners of Branch (based upon fair
market value of Regency's common stock at the time of issuance).
Including the acquisition of the properties from Branch, the Partnership
acquired or completed development of 36 shopping centers in 1997 and 12
shopping centers in 1996 (the "Acquisitions") accounted for as purchases, at
cost totaling approximately $346.0 million and $101.7 million, respectively,
through the issuance of units, assumed mortgage loans and cash. The operating
results are included in the Partnership's consolidated financial statements
from the date each property was acquired. The following unaudited pro forma
information presents the consolidated results of operations as if the
Acquisitions had occurred on January 1, 1996, after giving effect to certain
adjustments including depreciation expense, additional general and
administration costs, interest expense on new debt incurred, and an increase
in the weighted average operating partnership units issued to acquire the
shopping centers as if units had been issued on January 1, 1996. Pro forma
revenues would have been $107.3 million and $90.5 million in 1997 and 1996,
respectively. Pro forma net income for unit holders would have been $24.1
million and $7.4 million in 1997 and 1996, respectively. Diluted pro forma net
income per unit would have been $1.16 per unit and $0.21 per unit in 1997 and
1996, respectively. This data does not purport to be indicative of what would
have occurred had the Acquisitions been made on January 1, 1996, or of results
which may occur in the future.
In January 1998, the Partnership entered into an agreement to acquire the
shopping centers from various entities comprising the Midland Group
("Midland") consisting of 21 shopping centers plus 11 shopping centers under
development. Of the 32 centers to be acquired or developed, 31 are anchored by
Kroger or its affiliate. Eight of the shopping centers under development will
be owned through a joint venture in which the Partnership will own less than a
50% interest upon completion of construction. The Partnership acquired 13 of
the Midland shopping centers containing 1.3 million square feet for
approximately $111 million during March 1998. During 1998, 1999 and 2000,
including all payments made to date, the Partnership will pay approximately $213
million for the 32 properties, including the assumption of debt, and in addition
may pay contingent consideration of up to an estimated $23 million through the
issuance of Partnership units and the payment of cash. Whether contingent
consideration will be issued, and if issued, the amount of such consideration,
will depend on the satisfaction during 1998, 1999 and 2000 of performance
criteria relating to the assets acquired from Midland. For example, if a
property acquired as part of Midland's development pipeline satisfies specified
performance criteria at closing and when development is completed, the
transferors of the property will be entitled to additional Partnership units
based on the development cost of the properties and their net operating income.
Transferors who redeemed their Partnership units for cash at the initial Midland
closing will receive any contingent future consideration in cash rather than
units.
3. INVESTMENTS IN REAL ESTATE PARTNERSHIPS
The Partnership accounts for all investments in which it owns less than 50%
using the equity method. The Partnership has a 10% investment in Village
Commons Shopping Center and during 1996 acquired a 25% investment in Ocean
East Mall. The Partnership's combined investment in these two partnerships was
$999,730 and $1,035,107 at December 31, 1997 and 1996, respectively. Net
income is allocated in accordance with each of the partnership agreements.
F-12
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
4. MORTGAGE LOANS PAYABLE
At December 31, 1997 and 1996, the following mortgage loans payable have been
assigned by Regency to the Partnership since they are secured by real estate
rental property which is included within the Partnership:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
7.04% to 7.97% mortgage notes, payable in monthly
installments of $206,108, including principal and
interest, maturing from December 15, 2000 to
December 15, 2010................................ $29,064,254 $ --
7.60% to 8.01% mortgage notes, payable in monthly
principal installments of $39,646 plus interest
maturing from June 28, 2001 to August 17, 2002... 22,005,752 22,465,410
7.92% to 8.95% mortgage notes, payable in monthly
installments of $117,628, including principal and
interest, maturing from October 1, 2005 to August
1, 2009.......................................... 13,282,672 --
8.40% mortgage note, payable in monthly
installments of $102,646, including principal and
interest, maturing on June 1, 2017............... 12,916,746 --
7.84% mortgage note, payable in monthly
installments of $92,119, including principal and
interest, maturing on September 1, 2005.......... 12,490,525 --
9.80% mortgage note, payable in monthly
installments of $73,899, including principal and
interest, maturing on February 1, 1999........... 7,892,935 8,000,421
7.94% mortgage note, payable in monthly
installments of $52,214, including principal and
interest, maturing on December 21, 2002.......... 6,612,868 --
9.75% mortgage note, payable in monthly
installments of $55,630, including principal and
interest, maturing on January 1, 1998............ 5,864,972 --
8.625% mortgage note, payable in monthly
installments of $23,225, including principal and
interest, maturing on June 1, 2003............... 2,295,238 --
7.90% to 8.10% mortgage notes, payable in monthly
installments of $21,595, including principal and
interest, maturing from April 1, 2012 to June 1,
2017............................................. 2,189,049 --
6.987% to 7.863% (LIBOR + 1.25%) mortgage notes,
interest only, payable monthly maturing from
November 30, 1998 to June 12, 2000............... 24,122,500 --
</TABLE>
F-13
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
4. MORTGAGE LOANS PAYABLE, CONTINUED
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Construction notes payable, interest only payable
monthly at LIBOR + 1.5% and Prime + .25% maturing
December 2001.................................... 4,682,835 1,518,331
7.375% (LIBOR + 1.5%) mortgage note, payable in
monthly principal installments of $4,438,
maturing on August 1, 1998....................... 2,035,643 --
8.72% mortgage note, rate adjusts annually,
payable in monthly installments of $23,105,
including principal and interest, paid in full
during 1997...................................... -- 2,296,902
------------ -----------
Total mortgage loans payable...................... $145,455,989 $34,281,064
============ ===========
</TABLE>
Principal maturities on the mortgage loans are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1998................................. $ 27,048,272
1999................................. 9,386,671
2000................................. 13,488,153
2001................................. 14,452,126
2002................................. 18,712,015
Thereafter........................... 62,368,752
------------
Total................................ $145,455,989
============
</TABLE>
As part of its borrowing arrangements, the Partnership is expected to
maintain escrow balances for the payment of real estate taxes on the mortgaged
properties. Escrow balances recorded as cash and cash equivalents were
$1,394,612 and $96,353 at December 31, 1997 and 1996, respectively.
In conjunction with the acquisition of the Midland properties during the
first quarter of 1998, the Partnership assumed mortgage loans of $66,191,790.
The mortgage loans have interest rates in a range of 7.2% to 9.6%, and mature
from June 10, 1999 to December 10, 2007. Principal and interest payments are
due monthly on the loans.
5. ACQUISITION AND DEVELOPMENT LINE OF CREDIT
At December 31, 1997, Regency had a $150 million unsecured revolving line of
credit which is used to finance real estate acquisitions and developments
which are included within the Partnership. Accordingly, Regency has assigned
this line of credit to the Partnership. The interest rate is based upon LIBOR
plus 1.5% with interest only for two years, and if then terminated, becomes a
two year term loan maturing in May 2000 with principal due in seven equal
quarterly installments. During March 1998, the line terms were modified by
increasing the commitment to $300 million, reducing the interest rate and
incorporating a competitive bid facility of up to $150 million of the
commitment amount. The borrower may request a one year extension of the
interest only revolving period annually in May of each year.
F-14
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
6. REGENCY STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
Allocation of profits and losses and distributions to unit holders are made
in accordance with the partnership agreement. Distributions to Limited
Partners are made in the same amount as the dividends declared and paid on
Regency common stock. Distributions to the General Partner are made at the
General Partner's discretion.
The following represent equity transactions initiated by Regency. The
proceeds from such transactions are the primary source of capital from which
the Partnership acquires and develops new real estate.
On June 11, 1996, Regency entered into a Stockholders Agreement (the
"Agreement") with Security Capital Holdings S.A. (together with its parent
company Security Capital U.S. Realty, "SC-USREALTY") granting it certain
rights such as purchasing Regency common stock, nominating representatives to
Regency's Board of Directors, and subjecting SC-USREALTY to certain
restrictions including voting and ownership restrictions. The Agreement
primarily granted SC-USREALTY (i) the right to acquire 7,499,400 shares for
approximately $132 million and also participation rights entitling it to
purchase additional equity in Regency, at the same price as that offered to
other purchasers, each time that Regency sells additional shares of capital
stock or options or other rights to acquire capital stock, in order to
preserve SC-USREALTY's pro rata ownership position; and (ii) the right to
nominate a proportionate number of directors on Regency's Board, rounded down
to the nearest whole number, based upon SC-USREALTY's percentage ownership of
outstanding common stock (but not to exceed 49% of the Board). As of December
31, 1997, SC-USREALTY has acquired all of the 7,499,400 shares related to the
Agreement. In connection with the units and shares of Regency common stock
issued in exchange for Branch's assets (see note 2, Acquisitions of Shopping
Centers), SC-USREALTY acquired 1,750,000 shares during August and December,
1997 at $22.125 per share in accordance with their rights as provided for in
the Agreement.
For a period of at least five years (subject to certain exceptions), SC-
USREALTY is precluded from, among other things, (i) acquiring more than 45% of
the outstanding Regency common stock on a diluted basis, (ii) transferring
shares without Regency's approval in a negotiated transaction that would
result in any transferee beneficially owning more than 9.8% of Regency's
capital stock, or (iii) acting in concert with any third parties as part of a
13D group. Subject to certain exceptions, SC-USREALTY is required to vote its
shares either as recommended by the Board of Directors or proportionately in
accordance with the vote of the other shareholders.
On July 11, 1997, Regency sold 2,415,000 shares to the public at $27.25 per
share. In connection with that offering, SC-USREALTY purchased an additional
1,785,000 shares at $27.25 directly from Regency. On August 11, 1997, the
Underwriters exercised the over-allotment option and Regency issued an
additional 129,800 shares to the public and 95,939 shares to SC-USREALTY at
$27.25 per share. Total proceeds from the sale of common stock to the public
and SC-USREALTY of approximately $117 million net of offering expenses was
used to reduce the balance of the Partnership's line of credit.
Regency completed a $50 million private placement by issuing 2,500,000
shares of non-voting Class B common stock to a single investor on December 20,
1995 (the "Private Placement"). The proceeds from the Private Placement were
used to acquire five shopping centers. Regency initially issued $18,250,000 of
Series B preferred stock on October 26, 1995 to fund the acquisition of a
shopping center. These shares were subsequently converted into Class B common
stock. The Class B common stock is convertible into 2,975,468 shares of common
stock beginning on the third
F-15
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
6. REGENCY STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL, CONTINUED
anniversary of the issuance date, subject to certain limitations defined in
the agreement. The dividend on each share of Class B common stock is payable
when and if declared by the Board of Directors pari passu with any dividend on
the common stock of Regency.
7. EARNINGS PER UNIT
The following summarizes the calculation of basic and diluted earnings per
unit for the years ended, December 31, 1997, 1996 and 1995 (in thousands
except per unit data):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
Basic earnings per unit ("EPU") calculation:
Weighted average common units outstanding............. 15,327 5,191 4,712
======= ====== ======
Net income............................................ $23,510 $4,942 $ 796
Less dividends paid on Class B common stock and
preferred stock...................................... 5,140 3,937 591
------- ------ ------
Net income for Basic and Diluted EPU.................. $18,370 $1,005 $ 205
======= ====== ======
Basic EPU.............................................. $ 1.20 $ 0.19 $ 0.04
======= ====== ======
Diluted EPU calculation:
Weighted average units outstanding per basic EPU...... 15,327 5,191 4,712
Incremental shares to be issued under common stock
options using the Treasury method.................... 80 3 --
Contingent units or shares for the acquisition of real
estate............................................... 955 -- --
------- ------ ------
Total diluted units................................... 16,362 5,194 4,712
======= ====== ======
Diluted EPU............................................ $ 1.12 $ 0.18 $ 0.04
======= ====== ======
</TABLE>
The Class B common stock dividends and the preferred stock dividends are
deducted from net income in computing earnings per unit since the proceeds of
these offerings were transferred to and reinvested by the Partnership.
Accordingly, payment of such dividends is dependent upon the operations of the
Partnership.
8. LONG-TERM STOCK INCENTIVE PLANS
Regency is committed to contribute to the Partnership all proceeds from the
exercise of options or other stock-based awards granted under Regency's Stock
Option and Incentive Plan. Regency's ownership in the Partnership will be
increased based on the amount of proceeds contributed to the Partnership.
In 1993, Regency adopted a Long Term Omnibus Plan (the "Plan") pursuant to
which the Board of Directors may grant stock and stock options to officers,
directors and other key employees. The Plan provides for the issuance of up to
12% of Regency's common shares outstanding not to exceed 3 million shares of
authorized but unissued common stock. Stock options are granted with an
exercise price equal to the stock's fair market value at the date of grant.
All stock options granted have ten year terms, and with respect to officers
and other key employees, become fully exercisable after five years from the
date of grant, and with respect to directors, become fully exercisable after
one year.
F-16
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
8. LONG-TERM STOCK INCENTIVE PLANS, CONTINUED
At December 31, 1997, there were approximately 1.3 million shares available
for grant under the Plan. The per share weighted-average fair value of stock
options granted during 1997 and 1996 was $3.26 and $3.04 on the date of grant
using the Black Scholes option-pricing model with the following weighted-average
assumptions: 1997--expected dividend yield 6.3%, risk-free interest rate of
6.3%, expected volatility 21%, and an expected life of 5.7 years; 1996--expected
dividend yield 6.6%, risk-free interest rate of 5.9%, expected volatility 21%,
and an expected life of five years. The Partnership applies APB Opinion No. 25
in accounting for this Plan and, accordingly, no compensation cost has been
recognized for its stock options in the consolidated financial statements.
Had the Partnership determined compensation cost based on the fair value at
the grant date for its stock options under SFAS No. 123, the Partnership's net
income would have been reduced to the pro forma amounts indicated below (in
thousands except per unit data):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ----
<S> <C> <C> <C>
Net income as reported................................... $23,510 $4,942 $796
Net income per unit:
Basic.................................................. 1.20 0.19 0.04
Diluted................................................ 1.12 0.19 0.04
Pro forma net income..................................... 21,884 4,932 796*
Net income per unit:
Basic.................................................. 1.09 0.19 0.04
Diluted................................................ 1.02 0.19 0.04
</TABLE>
* The options granted during 1995 were issued on December 31, 1995 and
accordingly had no effect to income.
Pro forma net income for unitholders reflects only options granted in 1997,
1996 and 1995. Therefore, the full impact of calculating compensation cost for
stock options under SFAS No. 123 is not reflected in the pro forma net income
for unitholders amounts presented above because compensation cost is reflected
over the options' vesting period and compensation cost for options granted
prior to January 1, 1995 is not considered.
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding, December 31, 1994................... 191,000 $19.16
Granted......................................... 6,000 17.25
Forfeited....................................... (11,000) 19.25
--------- ------
Outstanding, December 31, 1995................... 186,000 19.09
Granted......................................... 12,000 24.67
--------- ------
Outstanding, December 31, 1996................... 198,000 19.43
Granted......................................... 1,252,276 25.39
Forfeited....................................... (7,000) 23.54
Exercised....................................... (124,769) 19.25
--------- ------
Outstanding, December 31, 1997................... 1,318,507 $25.08
========= ======
</TABLE>
F-17
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
8. LONG-TERM STOCK INCENTIVE PLANS, CONTINUED
The following table presents information regarding all options outstanding
at December 31, 1997.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF REMAINING RANGE OF WEIGHTED AVERAGE
OPTIONS OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICES EXERCISE PRICE
------------------- ---------------- --------------- ----------------
<S> <C> <C> <C>
61,231 6.1 years $16.75--19.25 $18.77
1,155,800 9.0 years 25.25 25.25
101,476 6.8 years 26.25--27.75 26.99
--------- --------- ------------- ------
1,318,507 8.7 years $16.75--27.75 25.08
========= ========= ============= ======
</TABLE>
The following table presents information regarding options currently
exercisable at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF RANGE OF WEIGHTED AVERAGE
OPTIONS EXERCISABLE EXERCISE PRICES EXERCISE PRICE
------------------- --------------- ----------------
<S> <C> <C>
61,231 $16.75--19.25 $18.77
240,500 25.25--26.25 25.27
76,476 26.88 26.88
------- ------------- ------
378,207 $16.75--26.88 $24.54
======= ============= ======
</TABLE>
Also as part of the Plan, in 1993 and 1996, certain officers purchased
common stock at fair market value directly from Regency, of which 90% and 95%,
respectively, was financed by a stock purchase loan provided by the Plan.
These recourse loans are fully secured by stock, bear interest at fixed rates
of 7.34% to 7.79% and mature after ten years. The Board of Directors may
authorize the forgiveness of all or a portion of the principal balance based
on Regency's achievement of specified financial objectives, and total
stockholder return performance targets. During 1997, 1996 and 1995, $601,516,
$646,598 and $379,418 was forgiven, respectively, and is included as a charge
to income on the Partnership's consolidated statements of operations. Regency
also has a performance based restricted stock plan for officers whereby a
portion of the shares authorized under the Plan may be granted upon the
achievement of certain total stockholder return performance targets. Shares
granted under the plan become fully vested by January 1, 2000. During 1997 and
1996, related to the restricted stock plan, Regency allocated $259,600 and
$809,400, respectively, to the Partnership, which has been offset against
income on the Partnership's consolidated statement of operations.
9. OPERATING LEASES
The Partnership's properties are leased to tenants under operating leases
with expiration dates extending to the year 2041. Future minimum rent under
noncancelable operating leases as of December 31, 1997, excluding tenant
reimbursements of operating expenses and excluding additional contingent
rentals based on tenants' sales volume are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ------------
<S> <C>
1998......................... $ 63,513,327
1999......................... 57,715,603
2000......................... 51,604,223
2001......................... 41,306,315
2002......................... 35,169,738
Thereafter................... 253,648,003
------------
Total........................ $502,957,209
============
</TABLE>
F-18
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
At December 31, 1997, the real estate portfolio as a whole was approximately
93.6% leased.
9. OPERATING LEASES, CONTINUED
The shopping centers' tenant base includes primarily national and regional
supermarkets, drug stores, discount department stores and other retailers and,
consequently, the credit risk is concentrated in the retail industry. During
1997, there was one tenant which individually represented 10.51% of the
combined minimum rent, no other tenants individually exceeded 10%. The
combined annualized rent from the Partnership's four largest retail tenants
represented approximately 21% of annualized minimum rent at December 31, 1997.
10. RELATED PARTY TRANSACTIONS
The Partnership provides management, leasing, and brokerage services for
certain commercial real estate properties of The Regency Group, Inc. ("TRG"),
a corporation wholly-owned by certain officers and stockholders of Regency,
and its affiliates. Fees for such services are charged to TRG based on current
market rates. From time to time, certain personnel of the Partnership may
provide administrative services to TRG, pursuant to an agreement. The cost of
such services are reimbursed by TRG based on percentage allocations of
management time and general overhead made in compliance with applicable
regulations of the Internal Revenue Service.
11. CONTINGENCIES
The Partnership like others in the commercial real estate industry, is
subject to numerous environmental laws and regulations and the operation of
dry cleaning plants at the Partnership's shopping centers is the principal
environmental concern. The Partnership believes that the dry cleaners are
operating in accordance with current laws and regulations and has established
procedures to monitor their operations. While the Partnership has registered
the plants located in Florida under a state funded program designed to
substantially fund the clean up, if necessary, of any environmental issues,
the owner or operator is not relieved from the ultimate responsibility for
clean up. The Partnership also has established due diligence procedures to
identify and evaluate potential environmental issues on properties under
consideration for acquisition. In connection with acquisitions during 1997 and
1996, the Partnership established environmental reserves of $1,944,633 and
$600,000, respectively. While it is not possible to predict with certainty,
management believes that the reserves are adequate to cover future clean-up
costs related to these sites. The Partnership's policy is to accrue
environmental clean-up costs when it is probable that a liability has been
incurred and that amount is reasonably estimable. Based on information
presently available, no additional environmental accruals were made and
management believes that the ultimate disposition of currently known matters
will not have a material effect on the financial position, liquidity or
operations of the Partnership.
F-19
<PAGE>
REGENCY CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
12. SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED)
Presented below is a summary of the consolidated quarterly financial data for
the years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- -------------- ------------- --------------
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C>
1997:
Revenues................ $12,991 19,468 21,027 22,216
Net income.............. 3,320 4,028 7,624 8,538
Basic net income per
unit................... 0.20 0.20 0.35 0.37
Diluted net income per
unit................... 0.20 0.19 0.33 0.35
1996:
Revenues................ $ 5,965 6,213 7,478 8,757
Net income.............. 1,315 1,276 1,837 514
Basic net income per
unit................... 0.06 0.06 0.16 (0.08)
Diluted net income per
unit................... 0.06 0.06 0.16 (0.08)
</TABLE>
F-20
<PAGE>
Independent Auditors' Report
On Financial Statement Schedule
-------------------------------
The Unit Holders of Regency Centers, L.P.
and the Board of Directors of Regency Realty Corporation:
Under date of June 9, 1998 we reported on the consolidated balance sheets of
Regency Centers, L.P. as of December 31, 1997 and 1996, and the related
consolidated statements of operations, changes in capital, and cash flows for
each of the years in the three-year period ended December 31, 1997, as contained
in the report on Form 10. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedule as listed in the accompanying index on page F-1 of the report
on Form 10. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits.
In our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Jacksonville, Florida
June 9, 1998
S-1
<PAGE>
REGENCY CENTERS, L.P.
Combined Real Estate and Accumulated Depreciation
December 31 ,1997
<TABLE>
<CAPTION>
Schedule III
Initial Cost Total Cost
------------------------------- Cost Capitalized ------------------------------
Building & Subsequent to Building &
Land Improvements Acquisition Land Improvements
---- ------------ ----------- ---- ------------
<S> <C> <C> <C> <C> <C>
Anastasia Shopping Plaza 1,072,451 3,617,493 112,404 1,072,451 3,729,897
Ashford Place 2,803,998 9,943,994 79,313 2,803,998 10,023,307
Berkshire Commons 2,294,960 8,151,236 36,131 2,294,960 8,187,367
Bolton Plaza 2,660,227 6,209,110 1,168,755 2,634,663 7,403,429
Boynton Lakes 2,783,000 10,043,027 - 2,783,000 10,043,027
Braelin Village 4,191,214 12,389,585 29,000 4,191,214 12,418,585
Briarcliff LaVista 694,120 2,462,819 - 694,120 2,462,819
Briarcliff Village 4,597,018 16,303,813 - 4,597,018 16,303,813
Buckhead Court 1,737,569 6,162,941 101,703 1,737,569 6,264,644
Cambridge Square 792,000 2,916,034 9,503 792,000 2,925,537
Carmel Commons 2,466,200 8,903,187 394,450 2,466,200 9,297,637
Carriage Gate 740,960 2,494,750 973,938 740,960 3,468,688
City View 1,207,204 4,341,304 23,534 1,207,204 4,364,838
Cromwell Square 1,771,892 6,285,288 - 1,771,892 6,285,288
Cumming 400 2,374,562 8,420,776 1,506 2,374,562 8,422,282
Dunwoody Hall 1,819,209 6,450,922 13,824 1,819,209 6,464,746
Dunwoody Village 2,326,063 7,216,045 107,404 2,326,063 7,323,449
East Port Plaza 3,257,023 11,611,363 98,247 3,257,023 11,709,610
Ensley Square 915,493 3,120,928 - 915,493 3,120,928
Garden Square 2,073,500 7,614,748 5,250 2,073,500 7,619,998
Glenwood Village 1,194,198 4,235,476 48,930 1,194,198 4,284,406
Harpeth Village 2,283,874 5,559,498 - 2,283,874 5,559,498
Loehmann's Plaza 3,981,525 14,117,891 - 3,981,525 14,117,891
Lovejoy Station 1,540,000 5,581,468 1,654 1,540,000 5,583,122
Mainstreet Square 1,274,027 4,491,897 9,666 1,274,027 4,501,563
Mariner's Village 1,628,000 5,907,835 106,970 1,628,000 6,014,805
Marketplace 546,831 2,189,267 - 546,831 2,189,267
Marketplace - Murphreesburo 2,432,942 1,755,643 1,813,070 2,432,942 3,568,713
Market Place - St. Petersburg 1,287,000 4,662,740 145,115 1,287,000 4,807,855
Memorial Bend 3,256,181 11,546,660 - 3,256,181 11,546,660
Merchants Village 1,054,306 3,162,919 - 1,054,306 3,162,919
</TABLE>
<TABLE>
<CAPTION>
Total Cost,
Net of
Accumulated Accumulated
Total Depreciation Depreciation Mortgages
----- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Anastasia Shopping Plaza 4,802,348 454,375 4,347,973 -
Ashford Place 12,827,305 270,924 12,556,381 4,737,136
Berkshire Commons 10,482,327 833,858 9,648,469 7,892,935
Bolton Plaza 10,038,092 703,549 9,334,543 -
Boynton Lakes 12,826,027 - 12,826,027 -
Braelin Village 16,609,799 303,120 16,306,679 12,490,525
Briarcliff LaVista 3,156,939 59,584 3,097,355 1,667,855
Briarcliff Village 20,900,831 438,272 20,462,559 13,439,036
Buckhead Court 8,002,213 150,456 7,851,757 -
Cambridge Square 3,717,537 72,374 3,645,163 -
Carmel Commons 11,763,837 173,087 11,590,750 -
Carriage Gate 4,209,648 544,405 3,665,243 2,377,489
City View 5,572,042 162,095 5,409,947 -
Cromwell Square 8,057,180 168,957 7,888,223 4,518,368
Cumming 400 10,796,844 226,366 10,570,478 6,489,309
Dunwoody Hall 8,283,955 173,531 8,110,424 -
Dunwoody Village 9,649,512 138,770 9,510,742 5,864,972
East Port Plaza 14,966,633 221,661 14,744,972 -
Ensley Square 4,036,421 60,018 3,976,403 -
Garden Square 9,693,498 47,723 9,645,775 6,612,868
Glenwood Village 5,478,604 102,842 5,375,762 2,295,238
Harpeth Village 7,843,372 - 7,843,372 4,682,835
Loehmann's Plaza 18,099,416 379,505 17,719,911 10,000,000
Lovejoy Station 7,123,122 69,796 7,053,326 -
Mainstreet Square 5,775,590 89,814 5,685,776 -
Mariner's Village 7,642,805 111,949 7,530,856 -
Marketplace 2,736,098 154,947 2,581,151 2,286,946
Marketplace - Murphreesburo 6,001,655 76,255 5,925,400 2,035,643
Market Place - St. Petersburg 6,094,855 245,981 5,848,874 -
Memorial Bend 14,802,841 279,358 14,523,483 8,545,536
Merchants Village 4,217,225 67,584 4,149,641 -
</TABLE>
(*) The year acquired or year constructed is in Item 3.
Properties in the Company's Form 10.
<PAGE>
REGENCY CENTERS, L.P.
Combined Real Estate and Accumulated Depreciation
December 31, 1997
<TABLE>
<CAPTION>
Schedule III
-continued-
Initial Cost Total Cost
-------------------------------- Cost Capitalized --------------------------------
Building & Subsequent to Building &
Land Improvements Acquisition Land Improvements
---- ------------ ----------- ---- ------------
<S> <C> <C> <C> <C> <C>
Newberry Square 2,341,460 8,466,651 671,840 2,341,460 9,138,491
Oakley Plaza 1,772,540 6,406,975 20,481 1,772,540 6,427,456
Old St. Augustine Plaza 2,047,151 7,355,162 36,833 2,047,151 7,391,995
Orchard Square 1,155,000 4,135,353 248,460 1,155,000 4,383,813
Paces Ferry Plaza 2,811,522 9,967,557 222,957 2,811,522 10,190,514
Palm Harbour 2,899,928 10,998,230 315,287 2,899,928 11,313,517
Paragon Cable Building 570,000 2,472,537 - 570,000 2,472,537
Peachland Promenade 1,284,562 5,143,564 58,119 1,284,562 5,201,683
Peartree Village 5,196,653 8,732,711 4,408,150 5,196,653 13,140,861
Pine Tree Plaza 539,000 1,995,927 - 539,000 1,995,927
Powers Ferry Square 3,607,647 12,790,749 6,762 3,607,647 12,797,511
Powers Ferry Village 1,190,822 4,223,606 - 1,190,822 4,223,606
Quadrant 2,342,823 15,541,967 1,315,295 2,343,699 16,856,386
Regency Court 3,571,337 12,664,014 3,480 3,571,337 12,667,494
Rivermont Station 2,887,213 10,445,109 - 2,887,213 10,445,109
Roswell Village 2,304,345 6,777,200 - 2,304,345 6,777,200
Russell Ridge 2,153,214 0 6,546,957 2,215,341 6,484,830
Sandy Plains Village 2,906,640 10,412,440 1,635 2,906,640 10,414,075
Sandy Springs Village 733,126 2,565,411 65,000 733,126 2,630,411
Seven Springs 1,737,994 6,290,048 1,424,083 1,757,441 7,694,684
Tamiami Trails 2,046,286 7,462,646 - 2,046,286 7,462,646
Tequesta Shoppes 1,782,000 6,426,042 120,447 1,782,000 6,546,489
Town Center at Martin Downs 1,364,000 4,985,410 7,903 1,364,000 4,993,313
Town Square 438,302 1,555,481 - 438,302 1,555,481
Trowbridge Crossing 910,263 1,914,551 - 910,263 1,914,551
Union Square 1,578,654 5,933,889 108,926 1,578,654 6,042,815
University Collection 2,530,000 8,971,597 90,249 2,530,000 9,061,846
University Marketplace 3,250,562 7,044,579 2,209,804 3,532,046 8,972,899
Village Center 3,010,586 10,799,316 295,220 3,010,585 11,094,537
Welleby Plaza 1,496,000 5,371,636 253,171 1,496,000 5,624,807
Wellington Market Place 5,070,384 13,308,972 222,784 5,070,384 13,531,756
Wellington Town Square 1,914,000 7,197,934 574,179 1,914,000 7,772,113
Westland One 198,344 1,747,391 60,445 198,344 1,807,836
Woodcroft Shopping Center 1,419,000 5,211,981 312,251 1,419,000 5,524,232
----------- ----------- ---------- ----------- -----------
134,118,905 443,187,293 24,881,085 134,457,274 467,730,009
=========== =========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Total Cost,
Net of
Accumulated Accumulated
Total Depreciation Depreciation Mortgages
----- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Newberry Square 11,479,951 1,072,541 10,407,410 6,656,968
Oakley Plaza 8,199,996 126,236 8,073,760 -
Old St. Augustine Plaza 9,439,146 209,150 9,229,996 -
Orchard Square 5,538,813 219,788 5,319,025 -
Paces Ferry Plaza 13,002,036 269,031 12,733,005 5,065,000
Palm Harbour 14,213,445 393,904 13,819,541 -
Paragon Cable Building 3,042,537 242,120 2,800,417 -
Peachland Promenade 6,486,245 420,484 6,065,761 4,280,979
Peartree Village 18,337,514 196,402 18,141,112 12,916,746
Pine Tree Plaza 2,534,927 0 2,534,927 -
Powers Ferry Square 16,405,158 309,526 16,095,632 -
Powers Ferry Village 5,414,428 102,184 5,312,244 2,949,686
Quadrant 19,200,085 4,356,804 14,843,281 -
Regency Court 16,238,831 306,445 15,932,386 5,732,000
Rivermont Station 13,332,322 130,374 13,201,948 -
Roswell Village 9,081,545 125,446 8,956,099 -
Russell Ridge 8,700,171 445,001 8,255,170 6,403,370
Sandy Plains Village 13,320,715 368,719 12,951,996 -
Sandy Springs Village 3,363,537 56,976 3,306,561 -
Seven Springs 9,452,125 868,180 8,583,945 -
Tamiami Trails 9,508,932 77,983 9,430,949 -
Tequesta Shoppes 8,328,489 216,001 8,112,488 -
Town Center at Martin Down 6,357,313 135,242 6,222,071 -
Town Square 1,993,783 37,632 1,956,151 1,525,500
Trowbridge Crossing 2,824,814 36,818 2,787,996 1,800,000
Union Square 7,621,469 211,085 7,410,384 -
University Collection 11,591,846 270,068 11,321,778 -
University Marketplace 12,504,945 1,553,812 10,951,133 -
Village Center 14,105,122 577,869 13,527,253 -
Welleby Plaza 7,120,807 336,416 6,784,391 -
Wellington Market Place 18,602,140 767,986 17,834,154 -
Wellington Town Square 9,686,113 292,551 9,393,562 -
Westland One 2,006,180 391,646 1,614,534 -
Woodcroft Shopping Center 6,943,232 135,538 6,807,694 -
----------- ---------- ----------- -----------
602,187,283 22,041,114 580,146,169 143,266,940
=========== ========== =========== ===========
</TABLE>
(*) The year acquired or year constructed is in Item 3.
Properties in the Company's Form 10.
<PAGE>
REGENCY CENTERS, L.P.
Combined Real Estate and Accumulated Depreciation
December 31, 1997
Schedule III
-continued-
Depreciation and amortization of the Company's investment in buildings and
improvements reflected in the statement of operations is calculated over the
estimated useful lives of the assets as follows:
Buildings and improvements up to 40 years
The aggregate cost for Federal income tax purposes was approximately
$568,586,056 at December 31, 1997.
The changes in total real estate assets for the period ended December 31, 1997
and 1996:
1997 1996
------------ -----------
Balance, beginning of period 252,670,199 149,419,123
Developed or acquired properties 348,747,973 101,924,556
Sale of property (2,907,503) -
Improvements 3,676,614 1,326,520
------------ -----------
Balance, end of period $ 602,187,283 252,670,199
============ ===========
The changes in accumulated depreciation for the period ended December 31, 1997
and 1996:
1997 1996
----------- ----------
Balance, beginning of period 11,669,690 7,647,935
Sale of property (713,176) -
Depreciation for period 11,084,600 4,021,755
----------- ----------
Balance, end of period $22,041,114 11,669,690
=========== ==========
<PAGE>
EXHIBIT 99.4
United States
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-Q
(Mark One)
[X] For the quarterly period ended September 30, 1998
-or-
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission File Number 0-24763
REGENCY CENTERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 59-3429602
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
(Address of principal executive offices) (Zip Code)
(904) 356-7000
(Registrant's telephone number, including area code)
Unchanged
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
<PAGE>
Item 1. Financial Statements
REGENCY CENTERS, L.P.
Consolidated Balance Sheets
September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Assets
Real estate investments, at cost:
Land $ 201,611,212 134,457,274
Buildings and improvements 716,286,569 467,730,009
Construction in progress - development for investment 7,220,442 13,427,370
Construction in progress - development for sale 16,727,205 20,173,039
----------------- ---------------
941,845,428 635,787,692
Less: accumulated depreciation 30,092,439 22,041,114
----------------- ---------------
911,752,989 613,746,578
Investments in real estate partnerships 24,812,813 999,730
----------------- ---------------
Net real estate investments 936,565,802 614,746,308
Cash and cash equivalents 13,069,033 14,642,429
Tenant receivables, net of allowance for uncollectible accounts
of $2,093,924 and $1,162,570 at September 30, 1998
and December 31, 1997, respectively 13,331,237 7,245,788
Deferred costs, less accumulated amortization of
$1,905,716 and $1,456,933 at September 30, 1998
and December 31, 1997, respectively 3,721,370 2,215,099
Other assets 5,547,600 2,299,521
----------------- ---------------
$ 972,235,042 641,149,145
================= ===============
Liabilities and Partners' Capital
Liabilities:
Notes payable 338,278,896 145,455,989
Acquisition and development line of credit 45,931,185 48,131,185
Accounts payable and other liabilities 23,726,388 9,972,065
Tenants' security and escrow deposits 2,419,249 1,854,700
----------------- ---------------
Total liabilities 410,355,718 205,413,939
----------------- ---------------
Limited partners' interest in consolidated partnerships (note 2) 7,469,749 7,305,945
----------------- ---------------
Partners' Capital:
Series A preferred units, par value $50, 1,600,000 units
issued and outstanding at September 30, 1998 78,800,000 -
General partner; 23,585,493 and 21,822,226 common units outstanding
at September 30, 1998 and December 31, 1997, respectively 454,666,241 415,112,127
Limited partners; 1,077,808 and 545,357 common units outstanding
at September 30, 1998 and December 31, 1997, respectively 20,943,334 13,317,134
----------------- ---------------
Total partners' capital 554,409,575 428,429,261
----------------- ---------------
Commitments and contingencies
$ 972,235,042 641,149,145
================= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statements of Operations
For the Three Months ended September 30, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues:
Minimum rent $ 22,354,064 14,922,153
Percentage rent 91,356 162,301
Recoveries from tenants 5,080,325 3,338,465
Management, leasing and brokerage fees 2,616,945 2,601,076
Equity in income of investments in
real estate partnerships 364,778 2,557
----------------- --------------
Total revenues 30,507,468 21,026,552
----------------- ---------------
Operating expenses:
Depreciation and amortization 5,328,129 3,255,958
Operating and maintenance 3,654,505 3,042,856
General and administrative 3,375,878 2,545,387
Real estate taxes 2,612,111 1,822,347
----------------- --------------
Total operating expenses 14,970,623 10,666,548
----------------- ---------------
Interest expense (income):
Interest expense 5,272,968 2,782,220
Interest income (405,787) (263,266)
----------------- ---------------
Net interest expense 4,867,181 2,518,954
----------------- ---------------
Income before minority interests and sale
of real estate investments 10,669,664 7,841,050
----------------- ---------------
Minority interest of limited partners (189,385) (220,589)
Loss on sale of real estate investments (8,871) -
----------------- ---------------
Net income 10,471,408 7,620,461
Preferred unit distribution (1,733,333) -
----------------- ---------------
Net income for unitholders 8,738,075 7,620,461
================= ===============
Net income per common unit:
Basic $ 0.30 0.35
================= ===============
Diluted $ 0.30 0.33
================= ===============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statements of Operations
For the Nine Months ended September 30, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues:
Minimum rent $ 59,555,899 38,021,981
Percentage rent 714,255 689,100
Recoveries from tenants 13,424,928 8,466,101
Management, leasing and brokerage fees 8,023,313 6,288,601
Equity in income of investments in
real estate partnerships 511,189 19,694
----------------- ---------------
Total revenues 82,229,584 53,485,477
----------------- ---------------
Operating expenses:
Depreciation and amortization 14,068,450 8,407,931
Operating and maintenance 10,025,253 7,490,702
General and administrative 10,638,327 7,761,401
Real estate taxes 7,010,606 4,542,042
----------------- ---------------
Total operating expenses 41,742,636 28,202,076
----------------- ---------------
Interest expense (income):
Interest expense 14,522,548 10,414,048
Interest income (1,339,259) (686,282)
----------------- ---------------
Net interest expense 13,183,289 9,727,766
----------------- ---------------
Income before minority interests and sale
of real estate investments 27,303,659 15,555,635
----------------- ---------------
Minority interest of limited partners (389,544) (565,731)
Gain on sale of real estate investments 10,737,226 -
----------------- ---------------
Net income 37,651,341 14,989,904
Preferred unit distribution (1,733,333) -
----------------- ---------------
Net income available for common unit holders 35,918,008 14,989,904
================= ===============
Net income per common unit:
Basic $ 1.34 0.67
================= ===============
Diluted $ 1.31 0.63
================= ===============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 37,651,341 14,989,904
Adjustments to reconcile net income to net
Cash provided by operating activities:
Depreciation and amortization 14,068,450 8,407,931
Deferred financing cost and debt premium amortization (366,616) -
Minority interest of limited partners 389,544 565,731
Equity in income of investments in real estate partnerships (511,189) (19,694)
Gain on sale of real estate investments (10,737,226) -
Changes in assets and liabilities:
Tenant receivables (6,085,449) 515,449
Deferred leasing commissions (1,260,601) (406,449)
Other assets (4,975,156) (824,376)
Tenants' security deposits 564,549 363,657
Accounts payable and other liabilities 12,020,990 4,663,184
--------------- ---------------
Net cash provided by operating activities 40,758,637 28,255,337
--------------- ---------------
Cash flows from investing activities:
Acquisition and development of real estate (178,953,026) (130,993,385)
Investment in real estate partnerships (23,337,738) -
Capital improvements (3,650,658) (1,863,824)
Construction in progress for sale, net of reimbursement 3,445,834 (8,094,704)
Proceeds from sale of real estate investments 30,662,197 -
Distributions received from real estate partnership investments 35,844 50,000
--------------- ---------------
Net cash used in investing activities (171,797,547) (140,901,913)
--------------- ---------------
Cash flows from financing activities:
Net proceeds from issuance of limited partnership units 7,694 2,255,140
Cash contributions from the issuance of Regency stock 9,733,060 208,356,926
Contributions from limited partners in consolidated partnerships 164,785 -
Cash distributions for preferred units (1,733,333) -
Cash distributions for dividends (38,783,993) (24,733,456)
Other contributions (distributions), net 12,195,873 1,860,910
Net proceeds from issuance of Series A preferred units 78,800,000 -
Net proceeds from term notes 99,758,000 -
Repayment of acquisition and development line of credit, net (2,200,000) (69,870,000)
Proceeds from mortgage loans payable 7,345,000 14,649,706
Repayment of mortgage loans payable (34,576,785) (14,905,241)
Deferred financing costs (1,244,787) (564,586)
--------------- ---------------
Net cash provided by financing activities 129,465,514 117,049,399
--------------- ---------------
Net (decrease) increase in cash and cash equivalents (1,573,396) 4,402,823
Cash and cash equivalents at beginning of period 14,642,429 6,466,899
--------------- ---------------
Cash and cash equivalents at end of period $ 13,069,033 10,869,722
=============== ===============
</TABLE>
5
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Supplemental disclosure of non-cash transactions:
Mortgage loans assumed from sellers of real estate $ 121,166,552 117,698,966
============== ===============
Limited and general partnership units
issued to acquire real estate $ 35,389,254 94,769,706
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 1998
1. Summary of Significant Accounting Policies
(a) Organization and Principles of Consolidation
Regency Centers, L.P. (the Partnership) is the primary entity
through which Regency Realty Corporation ("Regency"), a self-
administered and self-managed real estate investment trust
("REIT"), conducts substantially all of its business and owns
substantially all of its assets. In 1993, Regency was formed for
the purpose of managing, leasing, brokering, acquiring, and
developing shopping centers. The Partnership also provides
management, leasing, brokerage and development services for real
estate not owned by Regency (i.e., owned by third parties).
The Partnership was formed in 1996 for the purpose of acquiring
certain real estate properties. The historical financial
statements of the Partnership reflect the accounts of the
Partnership since its inception, together with the accounts of
certain predecessor entities (including Regency Centers, Inc., a
wholly-owned subsidiary of Regency through which Regency owned a
substantial majority of its properties), which were merged with
and into the Partnership as of February 26, 1998.
The accompanying interim unaudited financial statements (the
"Financial Statements") include the accounts of the Partnership,
and its majority owned subsidiaries and partnerships. All
significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
The Financial Statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission, and
reflect all adjustments which are of a normal recurring nature,
and in the opinion of management, are necessary to properly state
the results of operations and financial position. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although management
believes that the disclosures are adequate to make the information
presented not misleading. The Financial Statements should be read
in conjunction with the financial statements and notes thereto
included in the Partnership's December 31, 1997 Form 10 filed with
the Securities and Exchange Commission.
(b) Statement of Financial Accounting Standards No. 130
The Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("FAS 130"), which is effective for fiscal
years beginning after December 15, 1997. FAS 130 establishes
standards for reporting total comprehensive income in financial
statements, and requires that Companies explain the differences
between total comprehensive income and net income. Management has
adopted this statement in 1998. No differences between total
comprehensive income and net income existed in the interim
financial statements reported at September 30, 1998 and 1997.
7
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 1998
1. Summary of Significant Accounting Policies--(continued)
(c) Statement of Financial Accounting Standards No. 131
The FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related
Information" ("FAS 131"), which is effective for fiscal years
beginning after December 15, 1997. FAS 131 establishes standards
for the way that public business enterprises report information
about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim financial reports. Management does
not believe that FAS 131 will effect its current disclosures.
(d) Emerging Issues Task Force Issue 97-11
Effective March 19, 1998, the Emerging Issues Task Force (EITF)
ruled in Issue 97-11, "Accounting for Internal Costs Relating to
Real Estate Property Acquisitions", that only internal costs of
identifying and acquiring non-operating properties that are
directly identifiable with the acquired properties should be
capitalized, and that all internal costs associated with
identifying and acquiring operating properties should be expensed
as incurred. The Partnership had previously capitalized direct
costs associated with the acquisition of operating properties as a
cost of the real estate. The Partnership has adopted EITF 97-11
effective March 19, 1998. During 1997, the Partnership capitalized
approximately $1.5 million of internal costs related to acquiring
operating properties. Through the effective date of EITF 97-11,
the Partnership has capitalized $474,000 of internal acquisition
costs. For the remainder of 1998, the Partnership expects to incur
$1.1 million of internal costs related to acquiring operating
properties which will be expensed.
(e) Emerging Issues Task Force Issue 98-9
On May 22, 1998, the EITF reached a consensus on Issue 98-9
"Accounting for Contingent Rent in Interim Financial Periods". The
EITF has stated that lessors should defer recognition of
contingent rental income that is based on meeting specified
targets until those specified targets are met and not ratably
throughout the year. The Partnership has previously recognized
contingent rental income (i.e. percentage rent) ratably over the
year based on the historical trends of its tenants. The
Partnership has adopted Issue 98-9 prospectively and has ceased
the recognition of contingent rents until such time as their
tenants have achieved its specified target. The Partnership
believes this will affect the interim period in which percentage
rent is recognized, however it will not have a material impact on
the annual recognition of percentage rent.
(f) Reclassifications
Certain reclassifications have been made to the 1997 amounts to
conform to classifications adopted in 1998.
8
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 1998
2. Acquisitions of Shopping Centers
During the first nine months of 1998, the Partnership acquired 26
shopping centers for approximately $303.2 million (the "1998
Acquisitions"). In January, 1998, the Partnership entered into an
agreement to acquire 32 shopping centers from various entities comprising
the Midland Group ("Midland") Of the 32 centers to be acquired or
developed, 31 are anchored by Kroger, or its affiliate. The Partnership
currently owns 20 of the shopping centers fee simple and 12
through joint ventures. All of the shopping centers included in the
development pipeline are owned through various joint ventures in which
the Partnership owns less than a 50% interest (the "JV Properties"). The
Partnership's investment in the properties acquired from Midland is
$220.4 million at September 30, 1998. The Partnership expects to acquire
the un-owned interests in two of the JV Properties for approximately
$20.7 million prior to year-end. During 1998, 1999 and 2000, including
all payments made to date, the Partnership will pay approximately $241
million for the properties, including the assumption of debt, and in
addition may pay contingent consideration of up to an estimated $23
million, through the issuance of Partnership units and the payment of
cash. Whether contingent consideration will be issued, and if issued, the
amount of such consideration, will depend on the satisfaction during
1998, 1999, and 2000 of performance criteria relating to the assets
acquired from Midland. For example, if a property acquired as part of
Midland's development pipeline satisfies specified performance criteria
at closing and when development is completed, the transferors of the
property may be entitled to additional Partnership units based on the
development cost of the properties and their net operating income.
Transferors who received cash at the initial Midland closing will receive
contingent future consideration in cash rather than units.
In March, 1997, the Partnership acquired 26 shopping centers from Branch
Properties ("Branch") for $232.4 million. Additional Units and shares of
common stock may be issued after the first, second and third
anniversaries of the closing with Branch (each an "Earn-Out Closing"),
based on the performance of the properties acquired. The formula for the
earn-out provides for calculating any increases in value on a
property-by-property basis, based on any increases in net income for the
properties acquired, as of February 15 of the year of calculation. The
earn-out is limited to 721,997 Units at the first Earn-Out Closing and
1,020,061 Units for all Earn-Out Closings (including the first Earn-Out
Closing). During March, 1998, the Partnership issued 721,997 Units and
shares valued at $18.2 million to the partners of Branch.
3. Notes Payable and Unsecured Line of Credit
The Partnership's outstanding debt at September 30, 1998 and December 31,
1997 consists of the following:
1998 1997
---- ----
Notes Payable:
Fixed rate mortgage loans $ 204,218,450 114,615,011
Variable rate mortgage loans 12,620,514 30,840,978
Fixed rate unsecured loans 121,439,932 -
Unsecured line of credit 45,931,185 48,131,185
----------- -----------
Total $ 384,210,081 193,587,174
=========== ===========
During March, 1998, the Partnership modified the terms of its unsecured
line of credit (the "Line") by increasing the commitment to $300 million,
reducing the interest rate, and incorporating a competitive bid facility
of up to $150 million of the commitment amount. Maximum availability
under the Line is subject to a pool of unencumbered assets which cannot
have an aggregate value less
9
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 1998
3. Notes Payable and Unsecured Line of Credit (continued)
than 175% of the amount of the Partnership's outstanding unsecured
liabilities. The Line matures in May 2000, but may be extended annually
for one year periods. Borrowings under the Line bear interest at a
variable rate based on LIBOR plus a specified spread, (.875% currently),
which is dependent on the Partnership's investment grade rating. The
Partnership's ratings are currently Baa2 from Moody's Investor Service,
BBB from Duff and Phelps, and BBB- from Standard and Poors. The
Partnership is required to comply with certain financial covenants
consistent with this type of unsecured financing. The Line is used
primarily to finance the acquisition and development of real estate, but
is available for general working capital purposes.
On June 29, 1998, the Partnership issued $80 million of 8.125% Series A
Cumulative Redeemable Preferred Units ("Series A Preferred Units") to an
institutional investor in a private placement. The issuance involved the
sale of 1.6 million Series A Preferred Units for $50.00 per unit. The
Series A Preferred Units, which may be called by the Partnership at par
on or after June 25, 2003, have no stated maturity or mandatory
redemption, and pay a cumulative, quarterly dividend at an annualized
rate of 8.125%. At any time after June 25, 2008, the Series A Preferred
Units may be exchanged for shares of 8.125% Series A Cumulative
Redeemable Preferred Stock of Regency at an exchange rate of one share of
Series A Preferred Stock for one Series A Preferred Unit. The Series A
Preferred Units and Series A Preferred Stock are not convertible into
common stock of Regency. The net proceeds of the offering were used to
reduce the Partnership's bank line of credit.
On July 17, 1998 the Partnership completed a $100 million private
offering of term notes at an effective interest rate of 7.17%. The
Notes were priced at 162.5 basis points over the current yield for seven
year US Treasury Bonds. The net proceeds of the offering will be used to
repay borrowings under the line of credit.
Mortgage loans are secured by certain real estate properties, but
generally may be prepaid subject to a prepayment of a yield-maintenance
premium. Mortgage loans are generally due in monthly installments of
interest and principal and mature over various terms through 2018.
Variable interest rates on mortgage loans are currently based on LIBOR
plus a spread in a range of 125 basis points to 150 basis points.
Fixed interest rates on mortgage loans range from 7.04% to 9.8%.
During the first nine months of 1998, the Partnership assumed mortgage
loans with a face value of $112,124,875 related to the acquisition of
shopping centers. The Partnership has recorded the loans at fair value
which created debt premiums of $9,041,677 related to assumed debt based
upon the above market interest rates of the debt instruments. Debt
premiums are being amortized over the terms of the related debt
instruments.
Unconsolidated partnerships and joint ventures had mortgage loans payable
of $74,905,055 at September 30, 1998, and the Partnership's share of
these loans was $31,250,636.
10
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 1998
3. Notes Payable and Unsecured Line of Credit (continued)
As of September 30, 1998, scheduled principal repayments on notes payable
and the unsecured line of credit were as follows:
1998 $ 8,359,366
1999 15,058,956
2000 55,880,179
2001 19,026,352
2002 38,742,477
Thereafter 238,970,935
-----------
Subtotal 376,038,265
Net unamortized debt premiums 8,171,816
-----------
Total $ 384,210,081
===========
4. Earnings Per Unit
The following summarizes the calculation of basic and diluted earnings
per unit for the three months ended, September 30, 1998 and 1997 (in
thousands except per unit data):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Basic Earnings Per Unit (EPU) Calculation:
Weighted average units outstanding 24,404 18,148
Net income for unitholders $ 8,738 7,620
Less: dividends paid on Class B common stock 1,344 1,285
----- -----
Net income for Basic Earnings per Unit $ 7,394 6,335
===== =====
Basic Earnings per Unit $ .30 .35
=== ===
Diluted Earnings Per Unit (EPU) Calculation:
Weighted average units outstanding for Basic EPU 24,404 18,148
Incremental units to be issued under common
stock options using the Treasury method - 83
Contingent units for the acquisition
of real estate 492 1,151
------ ------
Total diluted units 24,896 19,382
====== ======
Diluted Earnings per Unit $ .30 .33
=== ===
</TABLE>
The Class B common stock dividends are deducted from income in computing
earnings per unit since the proceeds of this offerings was transferred to
and reinvested by the Partnership. Accordingly, payment of such dividends
is dependent upon the operations of the Partnership.
11
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 1998
4. Earnings Per Unit (continued)
The following summarizes the calculation of basic and diluted earnings
per unit for the nine months ended, September 30, 1998 and 1997 (in
thousands except per unit data):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Basic Earnings Per Unit (EPU) Calculation:
Weighted average units outstanding $ 23,872 16,516
Net income for unitholders $ 35,918 14,990
Less: dividends paid on Class B common stock 4,033 3,855
----- -----
Net income for Basic Earnings per Unit $ 31,885 11,135
====== ======
Basic Earnings per Unit $ 1.34 .67
==== ===
Diluted Earnings Per Unit (EPU) Calculation:
Weighted average units outstanding for Basic EPU 23,872 16,516
Incremental units to be issued under common
stock options using the Treasury method - 87
Contingent units for the acquisition
of real estate 418 1,151
------ ------
Total diluted units 24,290 17,754
====== ======
Diluted Earnings per Unit $ 1.31 .63
==== ===
</TABLE>
The Class B common stock dividends are deducted from income in
computing earnings per unit since the proceeds of this offerings was
transferred to and reinvested by the Partnership. Accordingly, payment of
such dividends is dependent upon the operations of the Partnership.
12
<PAGE>
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (dollar amounts in thousands).
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto of Regency Centers, L.P.
("RCLP" or the "Partnership") appearing elsewhere in this Form 10-Q, and with
the Partnership's Form 10 filed August 7, 1998. Certain statements made in the
following discussion may constitute forward-looking statements which involve
unknown risks and uncertainties of business and economic conditions pertaining
to the operation, acquisition, or development of shopping centers including the
retail business sector, and may cause actual results of the Partnership in the
future to significantly differ from any future results that may be implied by
such forward-looking statements. These forward-looking statements are based on
current expectations, estimates and projections about the industry and markets
in which the Company operates, management's beliefs and assumptions made by
management.
Organization
RCLP is the primary entity through which Regency Realty Corporation ("Regency"),
a self-administered and self-managed real estate investment trust ("REIT")
conducts substantially all of its business and owns substantially all of its
assets. In 1993, Regency was formed for the purpose of managing, leasing,
brokering, acquiring, and developing shopping centers. The Partnership also
provides management, leasing, brokerage and development services for real estate
not owned by Regency (i.e., owned by third parties).
Of the 125 properties included in Regency's portfolio at September 30, 1998, 104
properties were owned either fee simple or through partnership interests by the
Partnership. At September 30, 1998, Regency had an investment in real estate, at
cost, of approximately $1.2 billion of which $967 million or 82% was owned by
the Partnership.
Shopping Center Business
The Partnership's principal business is owning, operating and developing grocery
anchored neighborhood infill shopping centers. Infill refers to shopping centers
within a targeted investment market offering sustainable competitive advantages
such as barriers to entry resulting from zoning restrictions, growth management
laws, or limited new competition from development or expansions. The
Partnership's properties summarized by state including their gross leasable
areas (GLA) follows:
<TABLE>
<CAPTION>
Location September 30, 1998 December 31, 1997
-------- ------------------ -----------------
# Properties GLA % Leased # Properties GLA % Leased
------------ ------------- -------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Florida 36 4,580,112 92.5% 35 4,168,458 93.5%
Georgia 25 2,537,552 90.7% 23 2,368,890 92.4%
North Carolina 12 1,241,784 97.7% 6 554,332 99.0%
Ohio 10 1,045,630 96.7% - - -
Texas 5 451,227 89.4% - - -
Colorado 5 447,663 84.3% - - -
Tennessee 4 295,257 98.7% 3 208,386 98.5%
Kentucky 1 205,060 95.6% - - -
South Carolina 1 79,723 100.0% 1 79,743 84.3%
Virginia 2 197,324 99.5% - - -
Michigan 1 85,478 99.0% - - -
Delaware 1 232,752 95.5% - - -
Missouri 1 82,498 99.8% - - -
------------ ------------- --------- ------------ --------- --------
Total 104 11,482,060 93.1% 68 7,379,778 93.6%
============ ============= ========= ============ ========= ========
</TABLE>
13
<PAGE>
The Partnership is focused on building a platform of grocery anchored
neighborhood shopping centers because grocery stores provide convenience
shopping of daily necessities, foot traffic for adjacent local tenants, and
should withstand adverse economic conditions. The Partnership's current
investment markets have continued to offer strong stable economies, and
accordingly, the Partnership expects to realize growth in net income as a result
of increasing occupancy in the portfolio, increasing rental rates, development
and acquisition of shopping centers in targeted markets, and redevelopment of
existing shopping centers. The following table summarizes the four largest
tenants occupying the Partnership's shopping centers:
Average
Grocery Anchor Number of % of % of Annual Remaining Lease
Stores Total GLA Base Rent Term
Kroger * 35 18.2% 18.0% 20 yrs
Publix 26 10.7% 8.4% 13 yrs
Winn Dixie 11 4.8% 3.5% 13 yrs
Blockbuster 29 1.6% 2.5% 4 yrs
*includes properties under development scheduled for opening in 1998
and 1999. Excluding development properties, Kroger would represent
15.4% of GLA and 14.9% of annual base rent.
Acquisition and Development of Shopping Centers
During the first nine months of 1998, the Partnership acquired 26 shopping
centers for approximately $303.2 million (the "1998 Acquisitions"). In January,
1998, the Partnership entered into an agreement to acquire 32 shopping centers
from various entities comprising the Midland Group ("Midland"). Of the 32
centers to be acquired or developed, 31 are anchored by Kroger, or its
affiliate. The Partnership currently owns 20 of the shopping centers fee simple
and 12 through joint ventures. All of the shopping centers included in the
development pipeline are owned through various joint ventures in which the
Partnership owns less than a 50% interest (the "JV Properties"). The
Partnership's investment in the properties acquired from Midland is $220.4
million at September 30, 1998. The expects to acquire the un-owned interests in
two of the JV Properties for approximately $20.7 million prior to year-end.
During 1998, 1999 and 2000, including all payments made to date, the Partnership
will pay approximately $241 million for the properties, including the assumption
of debt, and in addition may pay contingent consideration of up to an estimated
$23 million, through the issuance of Partnership units and the payment of cash.
Whether contingent consideration will be issued, and if issued, the amount of
such consideration, will depend on the satisfaction during 1998, 1999, and 2000
of performance criteria relating to the assets acquired from Midland. For
example, if a property acquired as part of Midland's development pipeline
satisfies specified performance criteria at closing and when development is
completed, the transferors of the property may be entitled to additional
Partnership units based on the development cost of the properties and their net
operating income. Transferors who received cash at the initial Midland closing
will receive contingent future consideration in cash rather than units.
The Partnership acquired 36 shopping centers during 1997 (the "1997
Acquisitions") for approximately $346.1 million. The 1997 Acquisitions include
the acquisition of 26 shopping centers from Branch Properties ("Branch") for
$232.4 million in March, 1997. The real estate acquired from Branch included
100% fee simple interests in 20 shopping centers, and also partnership interests
(ranging from 50% to 93%) in four partnerships with outside investors that owned
six shopping centers. The Partnership was also assigned the third party property
management contracts of Branch on approximately 3 million SF of shopping center
GLA that generate management fees and leasing commission revenues. Additional
Units and shares of common stock may be issued after the first, second and third
anniversaries of the closing with Branch (each an "Earn-Out Closing"), based on
the performance of the properties acquired. The formula for the earn-out
provides for calculating any increases in value on a property-by-property basis,
based on any increases in net income for the properties acquired, as of February
15 of the year of calculation. The earn-out is limited to 721,997 Units at the
first Earn-Out Closing and 1,020,061 Units for all Earn-Out Closings (including
the first Earn-Out Closing). During March, 1998, the Partnership issued 721,997
Units and shares valued at $18.2 million to the partners of Branch.
14
<PAGE>
Liquidity and Capital Resources
Management anticipates that cash generated from operating activities will
provide the necessary funds on a short-term basis for its operating expenses,
interest expense and scheduled principal payments on outstanding indebtedness,
recurring capital expenditures necessary to properly maintain the shopping
centers, and distributions to unit holders. Net cash provided by operating
activities was $40.8 million and $28.2 million for the nine months ended
September 30, 1998 and 1997, respectively. The Partnership paid distributions of
$40.5 million and $24.7 million, during 1998 and 1997, respectively. In 1998,
the Partnership increased its quarterly distribution to $.44 per unit vs. $.42
per unit in 1997, had more outstanding units in 1998 vs. 1997; and accordingly,
expects distributions paid during 1998 to increase substantially over 1997.
Management expects to meet long-term liquidity requirements for debt maturities,
and acquisition, renovation and development of shopping centers from: (i) excess
cash generated from operating activities, (ii) working capital reserves, (iii)
additional debt borrowings, and (iv) additional equity raised in the public
markets. Net cash used in investing activities was $171.8 million and $140.9
million, during 1998 and 1997, respectively, as discussed above in Acquisitions
and Development of Shopping Centers. Net cash provided by financing activities
was $129.4 million and $117 million during 1998 and 1997, respectively. At
September 30, 1998, the Partnership had 14 shopping centers under construction
or undergoing major renovations. Total committed costs necessary to complete the
properties under development is estimated to be $35.1 million and will be
expended through August 1999.
The Partnership's outstanding debt at September 30, 1998 and December 31, 1997
consists of the following:
1998 1997
---- ----
Notes Payable:
Fixed rate mortgage loans $ 204,218 114,615
Variable rate mortgage loans 12,621 30,841
Fixed rate unsecured loans 121,440 -
Unsecured line of credit 45,931 48,131
---------- --------
Total $ 384,210 193,587
========== ========
The weighted average interest rate on total debt at September 30, 1998 and 1997
was 7.5% and 7.4% respectively. The Partnership's debt is typically
cross-defaulted, but not cross-collateralized, and includes usual and customary
affirmative and negative covenants.
The Partnership is a party to a credit agreement dated as of March 27, 1998,
providing for an unsecured line of credit (the "Line") from a group of lenders
currently consisting of Wells Fargo Bank, National Association, First Union
National Bank, Wachovia Bank, N.A., NationsBank, N.A., AmSouth Bank, Commerzbank
AG, Atlanta Branch, PNC Bank, National Association, and Star Bank, N.A. This
credit agreement modified the terms of the Partnership's prior line of credit by
increasing the commitment to $300 million, reducing the interest rate, and
incorporating a competitive bid facility of up to $150 million of the commitment
amount. Maximum availability under the Line is based on the discounted value of
a pool of eligible unencumbered assets (determined on the basis of capitalized
net operating income) less the amount of the Partnership's outstanding unsecured
liabilities. The Line matures in May 2000, but may be extended annually for one
year periods. Borrowings under the Line bear interest at a variable rate based
on LIBOR plus a specified spread, (.875% currently), which is dependent on the
Partnership's investment grade rating. The Partnership's ratings are currently
Baa2 from Moody's Investor Service, BBB from Duff and Phelps, and BBB- from
Standard and Poors. The Partnership is required to comply with certain financial
and other covenants customary with this type of unsecured financing. These
financial covenants include (i) maintenance of minimum net worth, (ii) ratio of
total liabilities to gross asset value, (iii) ratio of secured indebtedness to
gross asset value, (iv) ratio of EBITDA to interest expense, (v) ratio of EBITDA
to debt service and reserve for replacements, and (vi) ratio of unencumbered net
operating income to interest expense on unsecured indebtedness. The Line is used
primarily to finance the acquisition and development of real estate, but is
available for general working capital purposes.
15
<PAGE>
On June 29, 1998, the Partnership issued $80 million of 8.125% Series A
Cumulative Redeemable Preferred Units ("Series A Preferred Units") to an
institutional investor in a private placement. The issuance involved the sale of
1.6 million Series A Preferred Units for $50.00 per unit. The Series A Preferred
Units, which may be called by the Partnership at par on or after June 25, 2003,
have no stated maturity or mandatory redemption, and pay a cumulative, quarterly
dividend at an annualized rate of 8.125%. At any time after June 25, 2008, the
Series A Preferred Units may be exchanged for shares of 8.125% Series A
Cumulative Redeemable Preferred Stock of Regency at an exchange rate of one
share of Series A Preferred Stock for one Series A Preferred Unit. The Series A
Preferred Units and Series A Preferred Stock are not convertible into common
stock of Regency. The net proceeds of the offering were used to reduce the
Partnership's bank line of credit.
On July 17, 1998 the Partnership completed a $100 million private offering of
term notes at an effective interest rate of 7.17%. The Notes were priced at
162.5 basis points over the current yield for seven year US Treasury Bonds. The
net proceeds of the offering will be used to repay borrowings under the line of
credit.
Mortgage loans are secured by certain real estate properties, but generally may
be prepaid subject to a prepayment of a yield-maintenance premium. Mortgage
loans are generally due in monthly installments of interest and principal and
mature over various terms through 2018. Variable interest rates on mortgage
loans are currently based on LIBOR plus a spread in a range of 125 basis points
to 150 basis points. Fixed interest rates on mortgage loans range from 7.04% to
9.8%.
During the first nine months of 1998, the Partnership assumed mortgage loans
with a face value of $112.1 million related to the acquisition of shopping
centers. The Partnership has recorded the loans at fair value which created debt
premiums of $9 million related to assumed debt based upon the above market
interest rates of the debt instruments. Debt premiums are being amortized over
the terms of the related debt instruments.
Unconsolidated partnerships and joint ventures had mortgage loans payable of
$74.9 million at September 30, 1998, and the Partnership's share of these loans
was $31.2 million.
As of September 30, 1998, scheduled principal repayments on notes
payable and the unsecured line of credit were as follows:
1998 $ 8,359
1999 15,059
2000 55,880
2001 19,026
2002 38,742
Thereafter 238,972
-------
Subtotal 376,038
Net unamortized debt premiums 8,172
-------
Total $ 384,210
=======
Regency qualifies and intends to continue to qualify as a REIT under the
Internal Revenue Code. As a REIT, Regency is allowed to reduce taxable income by
all or a portion of its distributions to stockholders. Since Regency's
distributions have exceeded it's taxable income, Regency has made no provision
for federal income taxes. While the Partnership intends to continue to pay
distributions such that Regency can continue to pay dividends to its
stockholders, the Partnership will reserve such amounts of cash flow as it
considers necessary for the proper maintenance and improvement of its real
estate, while still allowing Regency to maintain its qualification as a REIT.
16
<PAGE>
Results from Operations
Comparison of the Nine Months Ended September 30, 1998 to 1997
Revenues increased $28.7 million or 54% to $82.2 million in 1998. The increase
was due primarily to the 1998 and 1997 Acquisitions. At September 30, 1998, the
real estate portfolio contained approximately 11.5 million SF, was 93.1% leased
and had average rents of $9.35 per SF. Minimum rent increased $21.5 million or
57%, and recoveries from tenants increased $5.0 million or 59%. Revenues from
property management, leasing, brokerage, and development services provided on
properties not owned by the Partnership were $8.0 million in 1998 compared to
$6.3 million in 1997, the increase due primarily to fees earned from third party
property management and leasing contracts acquired as part of the acquisition of
Branch. During 1998, the Partnership sold four office buildings and a parcel of
land for $30.7 million, and recognized a gain on the sale of $10.7 million. As a
result of these transactions the Partnership's real estate portfolio is
comprised entirely of neighborhood shopping centers. The proceeds from the sale
were applied toward the purchase of the 1998 acquisitions.
Operating expenses increased $13.5 million or 48% to $41.7 million in 1998.
Combined operating and maintenance, and real estate taxes increased $5.0 million
or 42% during 1998 to $17.0 million. The increases are due to the 1998 and 1997
Acquisitions. General and administrative expenses increased 37% during 1998 to
$10.6 million due to the hiring of new employees and related office expenses
necessary to manage the shopping centers acquired during 1998 and 1997, as well
as, the shopping centers that the Partnership began managing for third parties
during 1998 and 1997. Depreciation and amortization increased $5.7 million
during 1998 or 67% primarily due to the 1998 and 1997 Acquisitions.
Interest expense increased to $14.5 million in 1998 from $10.4 million in 1997
or 40% due to increased average outstanding loan balances related to the
financing of the 1998 and 1997 Acquisitions on the Line and the assumption of
debt.
Net income for unitholders was $35.9 million in 1998 vs. $15.0 million in 1997,
a $20.9 million or 140% increase for the reasons previously described. Diluted
earnings per unit in 1998 was $1.31 vs. $0.63 in 1997 due to the increase in net
income combined with the dilutive impact from the increase in weighted average
common units and equivalents of 6.5 million primarily due to the acquisition of
Branch and Midland, the issuance of units to SC-USREALTY during 1997, and the
public offering completed in July, 1997.
Comparison of the Three Months Ended September 30, 1998 to 1997
Revenues increased $9.5 million or 45% to $30.5 million in 1998. The increase
was due primarily to the 1998 and 1997 Acquisitions. Minimum rent increased $7.4
million or 50%, and recoveries from tenants increased $1.7 million or 52%.
Revenues from property management, leasing, brokerage, and development services
provided on properties not owned by the Partnership were $2.6 million in 1998
and 1997.
Operating expenses increased $4.3 million or 40% to $15.0 million in 1998.
Combined operating and maintenance, and real estate taxes increased $1.4 million
or 29% during 1998 to $6.3 million. The increases are due to the 1998 and 1997
Acquisitions. General and administrative expenses increased 33% during 1998 to
$3.4 million due to the hiring of new employees and related office expenses
necessary to manage the shopping centers acquired during 1998 and 1997, as well
as, the shopping centers that the Partnership began managing for third parties
during 1997. Depreciation and amortization increased $2.1 million during 1998 or
64% primarily due to the 1998 and 1997 Acquisitions.
Interest expense increased to $5.3 million in 1998 from $2.8 million in 1997 or
90% due to increased average outstanding loan balances related to the financing
of the 1998 and 1997 Acquisitions on the Line and the assumption of debt.
New Accounting Standards and Accounting Changes
The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"),
which is effective for fiscal years beginning after December 15, 1997. FAS 130
establishes standards for reporting total comprehensive income in financial
statements, and requires that Companies explain the differences between total
comprehensive income and net income. Management has adopted this statement in
1998. No differences between total comprehensive income and net income existed
in the interim financial statements reported at June 30, 1998 and 1997.
17
<PAGE>
The FASB issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("FAS
131"), which is effective for fiscal years beginning after December 15, 1997.
FAS 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports. Management does not believe that FAS 131
will effect its current disclosures.
Effective March 19, 1998, the Emerging Issues Task Force (EITF) ruled in Issue
97-11, "Accounting for Internal Costs Relating to Real Estate Property
Acquisitions", that only internal costs of identifying and acquiring
non-operating properties that are directly identifiable with the acquired
properties should be capitalized, and that all internal costs associated with
identifying and acquiring operating properties should be expensed as incurred.
The Partnership had previously capitalized direct costs associated with the
acquisition of operating properties as a cost of the real estate. The
Partnership has adopted EITF 97-11 effective March 19, 1998. During 1997, the
Partnership capitalized approximately $1.5 million of internal costs related to
acquiring operating properties. Through the effective date of EITF 97-11, the
Partnership has capitalized $474,000 of internal acquisition costs. For the
remainder of 1998, the Partnership expects to incur $1.1 million internal costs
related to acquiring operating properties which will be expensed.
On May 22, 1998, the EITF reached a consensus on Issue 98-9 "Accounting for
Contingent Rent in Interim Financial Periods". The EITF has stated that lessors
should defer recognition of contingent rental income that is based on meeting
specified targets until those specified targets are met and not ratably
throughout the year. The Partnership has previously recognized contingent rental
income (i.e. percentage rent) ratably over the year based on the historical
trends of its tenants. The Partnership has adopted Issue 98-9 prospectively and
has ceased the recognition of contingent rents until such time as their tenants
have achieved its specified target. The Partnership believes this will effect
the interim period in which percentage rent is recognized, however it will not
have a material impact on the annual recognition of percentage rent.
Environmental Matters
The Partnership like others in the commercial real estate industry, is subject
to numerous environmental laws and regulations and the operation of dry cleaning
plants at the Partnership's shopping centers is the principal environmental
concern. The Partnership believes that the dry cleaners are operating in
accordance with current laws and regulations and has established procedures to
monitor their operations. Based on information presently available, no
additional environmental accruals were made and management believes that the
ultimate disposition of currently known matters will not have a material effect
on the financial position, liquidity, or operations of the Partnership.
Inflation
Inflation has remained relatively low during 1998 and 1997 and has had a minimal
impact on the operating performance of the shopping centers, however,
substantially all of the Partnership's long-term leases contain provisions
designed to mitigate the adverse impact of inflation. Such provisions include
clauses enabling the Partnership to receive percentage rentals based on tenants'
gross sales, which generally increase as prices rise, and/or escalation clauses,
which generally increase rental rates during the terms of the leases. Such
escalation clauses are often related to increases in the consumer price index or
similar inflation indices. In addition, many of the Partnership's leases are for
terms of less than ten years, which permits the Partnership to seek increased
rents upon re-rental at market rates. Most of the Partnership's leases require
the tenants to pay their share of operating expenses, including common area
maintenance, real estate taxes, insurance and utilities, thereby reducing the
Partnership's exposure to increases in costs and operating expenses resulting
from inflation.
18
<PAGE>
Year 2000 System Compliance
Management recognizes the potential effect Year 2000 may have on the
Partnership's operations and, as a result, has implemented a Year 2000
Compliance Project. The term "Year 2000 compliant" means that the software,
hardware, equipment, goods or systems utilized by, or material to the physical
operations, business operations, or financial reporting of an entity will
properly perform date sensitive functions before, during and after the year
2000.
The Partnership's Year 2000 Compliance Project includes an awareness phase, an
assessment phase, a renovation phase, and a testing phase of our data processing
network, accounting and property management systems, computer and operating
systems, software packages, and building management systems. The project also
includes surveying our major tenants and financial institutions.
The Partnership's computer hardware, operating systems, general accounting and
property management systems and principal desktop software applications are Year
2000 compliant as certified by the various vendors. We are currently testing
these systems, and expect to complete the testing phase by December 31, 1998.
Based on initial testing, Management does not anticipate any Year 2000 issues
that will materially impact operations or operating results. Total costs
incurred to date associated with the Partnership's Year 2000 compliance project
have been reflected in the Partnership's income statement throughout 1997 and
1998, and were approximately $250,000.
An assessment of the Partnership's building management systems has been
completed. This assessment has resulted in the identification of certain
lighting, telephone, and voice mail systems that may not be Year 2000 compliant.
While we have not yet begun renovations, Management believes that the cost of
upgrading these systems will not exceed $500,000. It is anticipated that the
renovation and testing phases will be complete by June 30, 1999.
The Partnership has surveyed its major tenants and financial institutions to
determine the extent to which the Partnership is vulnerable to third parties'
failure to resolve their Year 2000 issues. The Partnership will be able to more
adequately assess its third party risk when responses are received from the
majority of the entities contacted.
Management believes its planning efforts are adequate to address the Year 2000
Issue and that its risk factors are primarily those that it cannot directly
control, including the readiness of its major tenants and financial
institutions. Failure on the part of these entities to become Year 2000
compliant could result in disruption in the Partnership's cash receipt and
disbursement functions. There can be no guarantee, however, that the systems of
unrelated entities upon which the Partnership's operations rely will be
corrected on a timely basis and will not have a material adverse effect on the
Partnership.
The Partnership does not have a formal contingency plan or a timetable for
implementing one. Contingency plans will be established, if they are deemed
necessary, after the Partnership has adequately assessed the impact on
operations should third parties fail to properly respond to their Year 2000
issues.
19
<PAGE>
PART II
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Item 10. Material contracts
Reports on Form 8-K:
A report on Form 8-K was filed on October 7, 1998 reporting
under Item 5. Acquisition of Pike Creek Shopping Center to
include audited Statement of Revenues and Certain Expenses as
of December 31, 1997, as well as, pro forma condensed
consolidated financial statements of operations for the six
months ended June 30, 1998 and the year ended December 31,
1997.
27. Financial Data Schedule
September 30, 1998
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 16, 1998 REGENCY CENTERS, L.P.
By: /s/ J. Christian Leavitt
Vice President, Treasurer
and Secretary
21
<PAGE>
[ARTICLE] 5
[CIK] 0001066247
[NAME] REGENCY CENTERS, LP
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] SEP-30-1998
[CASH] 13,069,033
[SECURITIES] 0
[RECEIVABLES] 15,425,161
[ALLOWANCES] 2,093,924
[INVENTORY] 0
[CURRENT-ASSETS] 0
[PP&E] 966,658,241
[DEPRECIATION] 30,092,439
[TOTAL-ASSETS] 972,235,042
[CURRENT-LIABILITIES] 0
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 0
[OTHER-SE] 554,409,575
[TOTAL-LIABILITY-AND-EQUITY] 972,235,042
[SALES] 0
[TOTAL-REVENUES] 82,229,584
[CGS] 0
[TOTAL-COSTS] 17,035,859
[OTHER-EXPENSES] 14,068,450
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 14,522,548
[INCOME-PRETAX] 35,918,008
[INCOME-TAX] 0
[INCOME-CONTINUING] 35,918,008
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 35,918,008
[EPS-PRIMARY] 1.34
[EPS-DILUTED] 1.31
</TABLE>
