United States
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-Q/A
(Mark One)
[X] For the quarterly period ended June 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 1-12298
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>
REGENCY CENTERS, L.P.
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Assets
Real estate investments, at cost:
Land $ 183,543,075 134,457,274
Buildings and improvements 653,450,521 467,730,009
Construction in progress - development for investment 9,947,030 13,427,370
Construction in progress - development for sale 21,186,446 20,173,039
------------ -----------
868,127,072 635,787,692
Less: accumulated depreciation 24,857,246 22,041,114
------------ -----------
843,269,826 613,746,578
Investments in real estate partnerships 22,401,368 999,730
------------ -----------
Net real estate investments 865,671,194 614,746,308
Cash and cash equivalents 7,997,662 14,642,429
Tenant receivables, net of allowance for
uncollectible accounts of $2,203,559
and $1,162,570 at June 30, 1998
and December 31, 1997, respectively 8,523,897 7,245,788
Deferred costs, less accumulated amortization
of $1,626,167 and $1,456,933 at June 30, 1998
and December 31, 1997, respectively 2,589,036 2,215,099
Other assets 2,764,023 2,299,521
----------- -----------
$ 887,545,812 641,149,145
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Mortgage loans payable 224,440,767 145,455,989
Acquisition and development line of credit 89,731,185 48,131,185
Accounts payable and other liabilities 14,484,214 9,972,065
Tenants' security and escrow deposits 2,255,767 1,854,700
----------- -----------
Total liabilities 330,911,933 205,413,939
----------- -----------
Limited partners' interest in consolidated partnerships
(note 2) 7,354,704 7,305,945
----------- -----------
Partners' Capital
Series A preferred units, par
value $50, 1,600,000 units issued and
outstanding at June 30, 1998 78,800,000 -
General partner; 23,253,059 and 21,822,226 units outstanding
at June 30, 1998 and December 31, 1997, respectively 448,879,503 415,112,127
Limited partners; 1,110,175 and 545,347 units outstanding
at June 30, 1998 and December 31, 1997, respectively 21,599,672 13,317,134
------------ -----------
Total partners' capital 549,279,175 428,429,261
------------ -----------
Commitments and contingencies
$ 887,545,812 641,149,145
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statements of Operations
For the Three Months ended June 30, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
---- -----
<S> <C> <C>
Revenues:
Minimum rent $ 20,137,351 14,163,423
Percentage rent 203,785 404,913
Recoveries from tenants 4,534,061 2,863,135
Management, leasing and brokerage fees 2,902,262 2,046,334
Equity in income (loss) of investments in
real estate partnerships 145,425 (9,654)
---------- ----------
Total revenues 27,922,884 19,468,151
---------- ----------
Operating expenses:
Depreciation and amortization 4,594,855 3,200,573
Operating and maintenance 3,326,494 2,755,616
General and administrative 3,829,341 2,995,008
Real estate taxes 2,304,500 1,344,411
---------- ----------
Total operating expenses 14,055,190 10,295,608
---------- ----------
Interest expense (income):
Interest expense 5,840,063 5,173,451
Interest income (615,226) (264,326)
----------- ---------
Net interest expense 5,224,837 4,909,125
----------- ---------
Income before minority interests and sale
of real estate investments 8,642,857 4,263,418
--------- ---------
Minority interest of limited partners (103,009) (214,406)
Gain on sale of real estate investments 508,678 -
-------- --------
Net income for unitholders $ 9,048,526 4,049,012
========= =========
Net income per unit:
Basic $ .32 .20
========= ==========
Diluted $ .31 .19
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statements of Operations
For the Six Months ended June 30, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
---- -----
<S> <C> <C>
Revenues:
Minimum rent $ 37,201,835 23,099,828
Percentage rent 622,899 526,799
Recoveries from tenants 8,344,603 5,127,636
Management, leasing and brokerage fees 5,406,368 3,687,525
Equity in income of investments in
real estate partnerships 146,411 17,137
--- ------- -----------
Total revenues 51,722,116 32,458,925
---------- -----------
Operating expenses:
Depreciation and amortization 8,740,321 5,151,973
Operating and maintenance 6,370,748 4,447,846
General and administrative 7,262,449 5,216,014
Real estate taxes 4,398,495 2,719,695
--------- ----------
Total operating expenses 26,772,013 17,535,528
---------- ----------
Interest expense (income):
Interest expense 9,249,580 7,631,828
Interest income (933,472) (423,016)
---------- ----------
Net interest expense 8,316,108 7,208,812
----------- ---------
Income before minority interests and sale
of real estate investments 16,633,995 7,714,585
---------- ---------
Minority interest of limited partners (200,159) (345,142)
Gain on sale of real estate investments 10,746,097 -
---------- ---------
Net income for unitholders $ 27,179,933 7,369,443
========== =========
Net income per unit:
Basic $ 1.04 .35
==== ===
Diluted $ 1.02 .32
==== ===
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 27,179,933 7,369,443
Adjustments to reconcile net income to net
Cash provided by operating activities:
Depreciation and amortization 8,740,321 5,151,973
Deferred financing cost and debt premium amortization (28,814) 441,004
Minority interest of limited partners 200,159 345,142
Equity in income of investments in
real estate partnerships (146,411) (17,137)
Gain on sale of real estate investments (10,746,097) -
Changes in assets and liabilities:
Tenant receivables (1,278,109) (1,175,630)
Deferred leasing commissions (477,146) (173,658)
Other assets (1,656,348) 712,327
Tenants' security deposits 401,067 689,406
Accounts payable and other liabilities 4,512,149 8,126,544
----------- -----------
Net cash provided by operating activities 26,700,704 21,469,414
------------ -----------
Cash flows from investing activities:
Acquisition and development of real estate (119,980,748) (113,482,333)
Investment in real estate partnerships (21,276,350) -
Capital improvements (1,878,993) (1,013,456)
Construction in progress for sale, net of reimbursement (1,013,407) (8,248,018)
Proceeds from sale of real estate investments 30,662,197 -
Distributions received from real
estate partnership investments 21,123 -
------------- ------------
Net cash used in investing activities (113,466,178) (122,743,807)
------------- ------------
Cash flows from financing activities:
Net proceeds from issuance of limited partnership units 7,667 2,255,140
Cash contributions from the issuance of Regency stock 9,685,435 68,275,213
Cash distributions for dividends (25,416,413) (13,719,745)
Other contributions (distributions), net 1,478,481 609,420
Proceeds from issuance of Series A preferred units 78,800,000 -
Proceeds from acquisition and
development line of credit, net 41,600,000 37,630,000
Proceeds from mortgage loans payable 7,345,000 15,148,753
Repayments of mortgage loans payable (32,763,104) (2,148,114)
Deferred financing costs (616,359) (510,471)
----------- -----------
Net cash provided by financing activities 80,120,707 107,540,196
------------ -----------
Net (decrease) increase in cash and cash equivalents (6,644,767) 6,265,803
------------- ------------
Cash and cash equivalents at beginning of period 14,642,429 6,466,899
------------ -----------
Cash and cash equivalents at end of period $ 7,997,662 12,732,702
=========== ===========
</TABLE>
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1998 and 1997
(unaudited)
-continued-
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Supplemental disclosure of non cash transactions:
Mortgage loans assumed from sellers of real estate at fair value $ 104,751,624 111,052,817
=========== ===========
Limited and general partnership units
issued to acquire real estate $ 28,963,411 94,769,706
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 1998
(Unaudited)
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
as of December 31, 1997 included in the Partnership's 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 June 30, 1998 and 1997.
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 1998
(unaudited)
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 its 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.
(f) Reclassifications
Certain reclassifications have been made to the 1997 amounts to
conform to classifications adopted in 1998.
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 1998
(unaudited)
2. Acquisitions of Shopping Centers
During the first six months of 1998, the Partnership acquired a total of 23
shopping centers for approximately $225.2 million (the "1998 Acquisitions"). 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 a development pipeline of 11 shopping
centers. Of the 32 centers to be acquired or developed, 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"). As of June 30, 1998, the Partnership has acquired all but
one of the shopping centers and all of the JV Properties. The Partnership's
investment in the properties acquired from Midland is $186.6 million at June 30,
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
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. Mortgage Loans Payable and Unsecured Line of Credit
The Partnership's outstanding debt at June 30, 1998 and December 31, 1997
consists of the following:
1998 1997
---- ----
Mortgage Loans Payable:
Fixed rate secured loans $189,995,742 114,615,011
Variable rate secured loans 12,679,515 30,840,978
Fixed rate unsecured loans 21,765,510 -
Unsecured line of credit 89,731,185 48,131,185
------------ -----------
Total $314,171,952 193,587,174
============ ===========
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 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
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 1998
(unaudited)
3. Mortgage Loans Payable and Unsecured Line of Credit (continued)
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
distribution 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. Unconsolidated partnerships and joint ventures had mortgage
loans payable of $62,727,120 at June 30, 1998, and the Partnership's
share of these loans was $25,447,514. 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 six months of 1998, the Partnership assumed mortgage
loans with a face value of $99,602,679 related to the acquisition of
shopping centers. The Partnership has recorded the loans at fair value
which created debt premiums of $5,148,945 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.
As of June 30, 1998, scheduled principal repayments on mortgage loans
payable and the unsecured line of credit were as follows:
1998 $ 8,325,724
1999 14,935,360
2000 99,525,400
2001 18,931,911
2002 38,654,417
Thereafter 128,998,937
-----------
Subtotal 309,371,749
Net unamortized debt premiums 4,800,203
-----------
Total $314,171,952
===========
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 1998
(unaudited)
4. Earnings Per Unit
The following summarizes the calculation of basic and diluted earnings
per unit for the three months ended, June 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 23,855 13,440
Net income for unitholders $ 9,049 4,049
Less: dividends paid on Regency Class B common stock 1,344 1,285
----- -----
Net income for Basic Earnings per Unit $ 7,705 2,764
===== =====
Basic Earnings per Unit $ .32 .20
=== ===
Diluted Earnings Per Unit (EPU) Calculation:
Weighted average units outstanding for Basic EPU 23,855 13,440
Incremental units to be issued under common
stock options using the Treasury method - 78
Contingent units for the acquisition
of real estate
519 1,138
------ ------
Total diluted units 24,374 14,656
====== ======
Diluted Earnings per Unit $ .32 .19
=== ===
</TABLE>
The Regency Class B common stock dividends are deducted from income in
computing earnings per unit since the proceeds of the sale by Regency of the
Class B common stock was transferred to and reinvested by the Partnership.
Accordingly, payment of such dividends is dependent upon the operations of the
Partnership.
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 1998
(unaudited)
4. Earnings Per Unit (continued)
The following summarizes the calculation of basic and diluted earnings
per unit for the six months ended, June 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 23,602 13,691
Net income for unitholders $ 27,180 7,369
Less: dividends paid on Regency Class B common stock 2,689 2,570
----- -----
Net income for Basic Earnings per Unit $ 24,491 4,799
====== =====
Basic Earnings per Unit $ 1.04 .35
===== ===
Diluted Earnings Per Unit (EPU) Calculation:
Weighted average units outstanding for Basic EPU 23,602 13,691
Incremental units to be issued under common
stock options using the Treasury method 27 89
Contingent units for the acquisition
of real estate 428 759
------ ------
Total diluted units 24,057 14,539
====== ======
Diluted Earnings per Unit $ 1.02 .33
==== ===
</TABLE>
The Regency Class B common stock dividends are deducted from income in
computing earnings per unit since the proceeds of the sale by Regency of the
Class B common stock was transferred to and reinvested by the Partnership.
Accordingly, payment of such dividends is dependent upon the operations of the
Partnership.
<PAGE>
PART II
Item 1. Legal Proceedings
None
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.
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 124 properties included in Regency's portfolio at June 30, 1998, 103
properties were owned either fee simple or through partnership interests by the
Partnership. At June 30, 1998, Regency had an investment in real estate, at
cost, of approximately $1.1 billion of which $891 million or 81% 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>
June 30, 1998 December 31, 1997
------------- -----------------
Location # Properties GLA % Leased # Properties GLA % Leased
-------- ------------ ----------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Florida 36 4,529,458 93.0% 35 4,168,458 93.5%
Georgia 25 2,538,711 91.3% 23 2,368,890 92.4%
North Carolina 12 1,241,784 97.2% 6 554,332 99.0%
Ohio 10 1,045,630 97.3% - - -
Texas 5 450,267 89.6% - - -
Colorado 5 451,949 81.1% - - -
Tennessee 4 295,257 93.7% 3 208,386 98.5%
Kentucky 1 205,060 96.1% - - -
South Carolina 1 79,723 95.0% 1 79,743 84.3%
Virginia 2 197,324 98.1% - - -
Michigan 1 85,478 99.0% - - -
Missouri 1 82,498 98.4% - - -
------------ ----------- ----------- ------------- ---------- ---------
Total 103 1,203,189 93.1% 68 7,379,778 93.6%
============ =========== =========== ============= ========== =========
</TABLE>
<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 * 36 15.5% 15.5% 20 yrs
Publix 26 8.3% 6.3% 13 yrs
Winn Dixie 11 3.6% 2.7% 13 yrs
Blockbuster 29 1.3% 2.1% 4 yrs
*includes properties under development scheduled for opening in 1998
and 1999. Excluding development properties, Kroger would represent
12.3% of GLA and 11.8% of annual base rent.
Acquisition and Development of Shopping Centers
During the first six months of 1998, the Partnership acquired a total of 23
shopping centers for approximately $225.2 million (the "1998 Acquisitions"). 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 a development pipeline of 11 shopping
centers. Of the 32 centers to be acquired or developed, 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"). As of June 30, 1998, the Partnership has acquired all but
one of the shopping centers and all of the JV Properties. The Partnership's
investment in the properties acquired from Midland is $186.6 million at June 30,
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
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.
<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 $26.7 million and $21.5 million for the six months ended June 30,
1998 and 1997. The Partnership paid distributions of $25.4 million and $13.7
million, during 1998 and 1997, respectively. In 1998, the Partnership increased
its quarterly distribution per Unit 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 $113.5 million and
$122.7 million, during 1998 and 1997, respectively. Net cash provided by
financing activities was $80.1 million and $107.5 million during 1998 and 1997,
respectively. At June 30, 1998, the Company had 20 shopping centers under
construction or undergoing major renovations. Total committed costs necessary to
complete the properties under development is estimated to be $46.7 million and
will be expended through June 1999.
The Partnership's outstanding debt at June 30, 1998 and December 31, 1997
consists of the following:
1998 1997
---- ----
Mortgage Loans Payable:
Fixed rate secured loans $189,995,742 114,615,011
Variable rate secured loans 12,679,515 30,840,978
Fixed rate unsecured loans 21,765,510 -
Unsecured line of credit 89,731,185 48,131,185
----------- -----------
Total $314,171,952 193,587,174
============ ===========
The weighted average interest rate on total debt at June 30, 1998 and 1997 was
7.4% 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 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.
<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.
Unconsolidated partnerships and joint ventures had mortgage loans payable of
$62,727,120 at June 30, 1998, and the Partnership's share of these loans was
$25,447,514. 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 six months of 1998, the Partnership assumed mortgage loans with
a face value of $99,602,679 related to the acquisition of shopping centers. The
Partnership has recorded the loans at fair value which created debt premiums of
$5,148,945 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.
As of June 30, 1998, scheduled principal repayments on mortgage loans payable
and the unsecured line of credit were as follows:
1998 $ 8,325,724
1999 14,935,360
2000 99,525,400
2001 18,931,911
2002 38,654,417
Thereafter 128,998,937
-----------
Subtotal 309,371,749
Net unamortized debt premiums 4,800,203
-----------
Total $ 314,171,952
===========
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.
<PAGE>
Results from Operations
Comparison of the Six Months Ended June 30, 1998 to 1997
Revenues increased $19.3 million or 59% to $51.7 million in 1998. The increase
was due primarily to the 1998 Acquisitions and 1997 Acquisitions. At June 30,
1998, the real estate portfolio contained approximately 11.2 million SF, was
93.1% leased and had average rents of $9.45 per SF. Minimum rent increased $14.1
million or 61%, and recoveries from tenants increased $3.2 million or 63%.
Revenues from property management, leasing, brokerage, and development services
provided on properties not owned by the Partnership were $5.4 million in 1998
compared to $3.7 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 Company sold four office buildings and a
parcel of land for $30.6 million, and recognized a gain on the sale of $10.7
million. As a result of these transactions the Company'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 $9.2 million or 53% to $26.8 million in 1998.
Combined operating and maintenance, and real estate taxes increased $3.6 million
or 50% during 1998 to $10.8 million. The increases are due to the 1998 and 1997
Acquisitions. General and administrative expenses increased 39% during 1998 to
$7.3 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 $3.6 million during 1998 or
70% primarily due to the 1998 and 1997 Acquisitions.
Interest expense increased to $9.2 million in 1998 from $7.6 million in 1997 or
21% 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 common stockholders was $27.2 million in 1998 vs. $7.4 million in
1997, a $19.8 million or 269% increase for the reasons previously described.
Diluted earnings per unit in 1998 was $1.02 vs. $0.32 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 9.5 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 June 30, 1998 to 1997
Revenues increased $8.5 million or 43% to $27.9 million in 1998. The increase
was due primarily to the 1998 Acquisitions and 1997 Acquisitions. Minimum rent
increased $6.0 million or 42%, and recoveries from tenants increased $1.7
million or 58%. Revenues from property management, leasing, brokerage, and
development services provided on properties not owned by the Partnership were
$2.9 million in 1998 compared to $2.0 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.
Operating expenses increased $3.8 million or 37% to $14.1 million in 1998.
Combined operating and maintenance, and real estate taxes increased $1.5 million
or 37% during 1998 to $5.6 million. The increases are due to the 1998 and 1997
Acquisitions. General and administrative expenses increased 28% during 1998 to
$3.8 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 $1.4 million during 1998 or
44% primarily due to the 1998 and 1997 Acquisitions.
Interest expense increased to $5.8 million in 1998 from $5.2 million in 1997 or
13% 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.
<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 its 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.
<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. 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.
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.
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.
<PAGE>
Item 5. Other Information
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 Regency Centers, L.P. (the
Partnership) as of June 30, 1998 as if the Partnership had completed the
acquisition of two additional shopping centers and completed the issuance of
$100 million senior term notes subsequent to period end. The following
unaudited pro forma consolidated statements of operations of the Partnership
are based upon the historical consolidated statements of operations for the
six-month period ended June 30, 1998 and the year ended December 31, 1997.
These statements are presented as if the Partnership had acquired all of its
properties as of January 1, 1997. These unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
Partnership's registration statement on Form 10 and quarterly report on Form
10-Q/A filed for the period ended June 30, 1998
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 June 30, 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.
<PAGE>
Regency Center, L.P.
Pro Forma Condensed Consolidated Balance Sheet
June 30, 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
Assets
<S> <C> <C> <C> <C>
Real estate investments, at cost $ 836,994 36,243 (a) 873,237
Construction in progress 31,133 - 31,133
Less: accumulated depreciation 24,857 - 24,857
------------ ---------- -----------
Real estate rental property, net 843,270 36,243 879,513
------------ ---------- -----------
Investments in real estate partnerships 22,401 - 22,401
------------ ---------- -----------
Net real estate investments 865,671 36,243 901,914
------------ ---------- -----------
Cash and cash equivalents 7,998 - 7,998
Tenant receivables, net of allowance for
uncollectible accounts 8,524 - 8,524
Deferred costs, less accumulated amortization 2,589 - 2,589
Other assets 2,764 1,250 (b) 4,014
------------ ---------- -----------
Total Assets $ 887,546 37,493 925,039
============ ========== ===========
Liabilities and Partners' Capital
Mortgage loans payable $ 224,441 - 224,441
Acquisition and development line of credit 89,731 (62,507) (a)(b) 27,224
Notes payable - 100,000 (b) 100,000
------------ ---------- -----------
Total debt 314,172 37,493 351,665
Accounts payable and other liabilities 14,484 - 14,484
Tenant's security and escrow deposits 2,256 - 2,256
------------ ---------- -----------
Total liabilities 330,912 37,493 368,405
------------ ---------- -----------
Limited partners' interest in consolidated partnerships 7,355 - 7,355
------------ ---------- -----------
Series A preferred units 78,800 - 78,800
General and limited operating partnership units 470,479 - 470,479
------------ ---------- -----------
Total partners' capital 549,279 - 549,279
------------ ---------- -----------
Total liabilities and partners' capital $ 887,546 37,493 925,039
============ ========== ===========
</TABLE>
See accompanying notes to pro forma condensed consolidated balance sheet.
<PAGE>
Regency Centers, L.P.
Notes to Pro Forma Condensed Consolidated Balance Sheet
June 30, 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 11 shopping centers under
development. The Partnership had acquired 20 of the 21 Midland shopping
centers prior to June 30, 1998 containing 2.0 million square feet for
approximately $167.1 million. Those shopping centers are included in the
Partnership's June 30, 1998 balance sheet. The one remaining shopping
center, Windmiller Farms, was acquired on July 15, 1998 using funds drawn
on the Line. The center was acquired for an aggregate purchase price of
$13.3 million which is reflected in the pro forma balance sheet.
Subsequent to June 30, 1998, the Partnership expects to acquire an
additional three properties under development for $41.3 million. In
addition, during 1998, the Partnership expects to pay $4.6 million 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 expects to pay contingent consideration
of $23.0 million. 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.
Expected
Acquisition Purchase
Date Price
--------------- -------------
Garner Festival October-98 $ 20,571
Nashboro October-98 7,260
Crooked Creek October-98 13,471
=============
$ 41,302
=============
In addition, the Partnership acquired one other shopping center for an
aggregate purchase price of $22.9 million which is reflected in the pro
forma balance sheet. The shopping center, Pike Creek Shopping Center, was
acquired on August 4, 1998 using funds drawn on the Line.
(b) Represents the proceeds from a $100 million debt offering completed July
15, 1998, less offering costs of 1.25%. At closing, the Company used the
net proceeds from the Offering ($98.8 million) for the repayment of the
balance outstanding on the Line and the remainder was used to offset the
$36.2 million borrowed on the Line for the acquisitions of Pike Creek and
Windmiller Farms. The Company has recorded $1.2 million of financing costs
as an "Other Asset" to be amortized over the term of the Notes.
<PAGE>
Regency Centers, L.P.
Pro Forma Consolidated Statements of Operations
For the Six Month Period Ended June 30, 1998
and the Year Ended December 31, 1997
(Unaudited)
(In thousands, except unit and per unit data)
<TABLE>
<CAPTION>
For the Six Month Period Ended June 30, 1998
Midland Acquisition Other
Historical Properties Properties Adjustments Pro Forma
(d) (e)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Minimum rent $ 37,202 3,913 3,026 (697) (i) 43,444
Percentage rent 623 - 154 (8) (i) 769
Recoveries from tenants 8,345 542 711 (67) (i) 9,531
Management, leasing and brokerage fees 5,406 - - - 5,406
Equity in income of investments in real
estate partnership 146 - - - 146
------------ ---------- --------- ---------- -------
51,722 4,455 3,891 (772) 59,296
------------ ---------- --------- ---------- -------
Operating expenses:
Depreciation and amortization 8,740 817 (f) 891 (f) (453) (i) 9,995
Operating and maintenance 6,371 283 331 (122) (i) 6,863
General and administrative 7,262 231 203 (25) (i) 7,671
Real estate taxes 4,398 488 481 (81) (i) 5,286
------------ ---------- --------- ---------- --------
26,771 1,819 1,906 (681) 29,815
------------ ---------- --------- ---------- --------
Interest expense (income):
Interest expense 9,250 2,646 (g) 2,135 (h) (2,834) (j) 11,197
Interest income (933) - - - (933)
------------ ---------- --------- ---------- --------
8,317 2,646 2,135 (2,834) 10,264
------------ ---------- --------- ---------- --------
Income before minority interest
and gain on sale of real
estate investments 16,634 (10) (150) 2,743 19,217
Gain on sale of real estate investments 10,746 - - (9,336) (i) 1,410
Minority interest (200) - - - (200)
------------ ---------- --------- ---------- --------
Net income 27,180 (10) (150) (6,593) 20,427
Preferred distributions - - - (3,250) (k) (3,250)
------------ ---------- --------- ---------- --------
Net income for unit holders $ 27,180 (10) (150) (9,843) 17,177
============ ========== ========= ========== ========
Net income per unit (note (l)):
Basic $ 1.04 $ 0.61
============ ========
Diluted $ 1.02 $ 0.60
============ ========
</TABLE>
See accompanying notes to pro forma consolidated statements of operations.
<PAGE>
Regency Centers, L.P.
Pro Forma Consolidated Statements of Operations
For the Six Month Period Ended June 30, 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 Properties Properties Adjustments Pro Forma
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(c) (d) (e)
Revenues:
Minimum rent $ 53,330 3,596 16,482 12,739 (4,136) (i) 82,011
Percentage rent 898 167 - 367 - 1,432
Recoveries from tenants 12,993 751 2,240 3,115 (548) (i) 18,551
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 16,221 (4,684) 111,084
--------- ------------ ---------- --------- ---------- ---------
Operating expenses:
Depreciation & amortization 11,905 972 2,994 (f) 3,364 (f) (855) (i) 18,380
Operating and maintenance 10,688 595 1,194 1,780 (1,260) (i) 12,997
General and administrative 9,964 683 1,042 878 (49) (i) 12,518
Real estate taxes 6,451 404 1,635 1,876 (447) (i) 9,919
--------- ------------ ---------- --------- ---------- ---------
39,008 2,654 6,865 7,898 (2,611) 53,814
--------- ------------ ---------- --------- ---------- ---------
Interest expense (income):
Interest expense 13,614 1,517 10,353 (g) 8,610 (h) (7,179) (j) 26,915
Interest income (935) (33) - - - (968)
--------- ------------ ---------- --------- ---------- ---------
12,679 1,484 10,353 8,610 (7,179) 25,947
--------- ------------ ---------- --------- ---------- ---------
Income before minority interest
and gain on sale of real
estate investments 23,564 1,436 1,504 (287) 5,106 31,323
Gain on sale of real estate investments 451 - - - (451) (i) -
Minority interest (505) (313) - - - (818)
--------- ------------ ---------- --------- ---------- ---------
Net income 23,510 1,123 1,504 (287) 4,655 30,505
Preferred distributions - - - - (6,500) (k) (6,500)
--------- ------------ ---------- --------- ---------- ---------
Net income for unit holders $ 23,510 1,123 1,504 (287) (1,845) 24,005
========= ============ ========== ========= ========== =========
Net income per unit (note (l)):
Basic $ 1.20 $ 1.23
========= =========
Diluted $ 1.12 $ 1.15
========== ==========
</TABLE>
See accompanying notes to pro forma consolidated statements of operations.
<PAGE>
Regency Centers, L.P.
Notes to Pro Forma Consolidated Statements of Operations
For the Six Month Period Ended June 30,
1998 and the Year ended December 31, 1997
(Unaudited)
(In thousands, except unit and per unit data)
(c) Reflects pro forma results of operations for the Branch Properties for
the period from January 1, 1997 to March 7, 1997 (acquisition date).
(d) Reflects revenues and certain expenses for the Midland Properties for the
period from January 1, 1998 to the earlier of the respective acquisition
date of the property or June 30, 1998, and for the year ended December 31,
1997.
<TABLE>
<CAPTION>
For the period ended June 30, 1998
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 Farms 7/15/98 $ 574 $ 90 $ 34 $ 71 $ 32
Franklin Square 4/29/98 414 56 52 31 32
St. Ann Square 4/17/98 217 44 18 35 12
East Point Crossing 4/29/98 268 52 16 35 17
North Gate Plaza 4/29/98 234 33 18 27 10
Worthington Park 4/29/98 281 68 22 40 19
Beckett Commons 3/1/98 113 7 6 14 4
Cherry Grove Plaza 3/1/98 239 11 13 22 21
Bent Tree Plaza 3/1/98 137 11 7 59 8
West Chester Plaza 3/1/98 130 12 13 42 7
Brookville Plaza 3/1/98 95 5 5 8 4
Lake Shores Plaza 3/1/98 123 10 5 16 6
Evans Crossing 3/1/98 116 4 5 8 6
Statler Square 3/1/98 164 15 13 1 8
Kernersville Plaza 3/1/98 120 4 8 8 8
Maynard Crossing 3/1/98 272 38 13 15 15
Shoppes at Mason 3/1/98 116 27 15 33 6
Lake Pine Plaza 3/1/98 152 13 10 8 9
Hamilton Meadows 3/1/98 148 42 10 15 7
----------- ----------- ---------- ------------- --------------
$ 3,913 $ 542 $ 283 $ 488 $ 231
=========== =========== ========== ============= =============
</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 Farms 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 Point Crossing 4/29/98 821 159 50 107 51
North Gate Plaza 4/29/98 718 100 56 84 32
Worthington Park 4/29/98 862 208 67 124 59
Beckett Commons 3/1/98 687 140 38 83 47
Cherry Grove Plaza 3/1/98 1,445 175 85 131 105
Bent Tree Plaza 3/1/98 786 130 64 59 48
West Chester Plaza 3/1/98 807 70 72 84 45
Brookville Plaza 3/1/98 571 42 34 50 30
Lake Shores Plaza 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>
<PAGE>
Regency Centers, L.P.
Notes to Pro Forma Consolidated Statements of Operations
For the Six Month Period Ended June 30,
1998 and the Year ended December 31, 1997
(Unaudited)
(In thousands, except unit and per unit data)
(e) Reflects revenues and certain expenses of the Acquisition Properties for
the period from January 1, 1998 to the earlier of the respective
acquisition date of the property or June 30, 1998, and for the year ended
December 31, 1997.
<TABLE>
<CAPTION>
For the period ended June 30, 1998
Property Acquisition Minimum Percentage Recoveries Operating and Real General and
Name Date Rent Rent from Tenants Maintenance Estate Taxes Administrative
--------- ----------- ----------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bloomingdale Square 2/11/98 $ 214 $ 6 $ 53 $ 25 $ 24 $ 21
Silverlake 6/3/98 346 - 60 36 36 18
Highland Square 6/17/98 516 51 86 46 79 60
Shoppes @ 104 6/19/98 620 - 133 72 79 28
Fleming Island 6/30/98 348 - 289 39 194 36
Pike Creek 8/4/98 982 97 90 113 69 40
----------- ----------- ---------- ------------- ------------- ------------
$ 3,026 $ 154 $ 711 $ 331 $ 481 $ 203
=========== =========== ========== ============= ============= ============
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31, 1997
Property Acquisition Minimum Percentage Recoveries Operating and Real General and
Name Date Rent Rent from Tenants Maintenance Estate Taxes Administrative
--------- ----------- ----------- ------------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Oakley Plaza 3/14/97 $ 142 $ - $ 14 $ 13 $ 13 $ 8
Mariner's Village 3/25/97 185 6 37 45 33 7
Carmel Commons 3/28/97 297 11 63 38 35 22
Mainstreet Square 4/15/97 193 - 34 42 30 15
East Port Plaza 4/25/97 543 - 107 96 65 33
Rivermont Station 6/30/97 642 - 124 65 56 34
Lovejoy Station 6/30/97 306 - 63 36 29 9
Tamiami Trails 7/10/97 508 - 163 124 66 30
Garden Square 9/19/97 671 - 232 144 99 50
Boynton Lakes Plaza 12/1/97 1,159 - 391 267 250 80
Pinetree Plaza 12/23/97 279 - 51 50 37 21
Bloomingdale Square 2/11/98 1,863 43 459 215 209 184
Silverlake 6/3/98 819 - 142 85 85 43
Highland Square 6/17/98 1,122 111 187 99 171 130
Shoppes @104 6/19/98 1,332 - 285 154 170 60
Fleming Island 6/30/98 698 - 581 79 388 72
Pike Creek 8/4/98 1,980 196 182 228 140 80
----------- ----------- ---------- ------------- ------------- ------------
$ 12,739 $ 367 $ 3,115 $ 1,780 $ 1,876 $ 878
=========== =========== ========== ============= ============= ============
</TABLE>
<PAGE>
Regency Centers, L.P.
Notes to Pro Forma Consolidated Statements of Operations
For the Six Month Period Ended June 30,
1998 and the Year ended December 31, 1997
(Unaudited)
(In thousands, except unit and per unit data)
(f) 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 six month period ended June
30, 1998 and year ended December 31, 1997 calculations reflect depreciation
expense on the properties from January 1, 1997 to the earlier of the
respective acquisition date of the property or June 30, 1998.
<TABLE>
<CAPTION>
For the period ended June 30, 1998
Property Building and Year Building Depreciation
Name Improvements Built/Renovated Useful Life Adjustment
-------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Bloomingdale Square $ 13,189 1987 30 $ 51
Silverlake Shopping Center 7,584 1988 31 103
Highland Square 9,049 1960 20 208
Shoppes @104 6,439 1990 33 91
Fleming Island 4,773 1994 37 64
Pike Creek 18,082 1981 24 374
-------------
Acquisition Properties pro forma
depreciation adjustment $ 891
=============
Midland Properties $ 131,065 Ranging from Ranging from
1986 to 1996 29 to 40 $ 817
=============
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31, 1997
Property Building and Year Building 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
Silverlake Shopping Center 7,584 1988 31 245
Highlands Square 9,049 1960 20 452
Shoppes @104 6,439 1990 33 195
Fleming Island 4,773 1994 37 129
Pike Creek 18,082 1981 24 753
-------------
Acquisition Properties pro forma
depreciation adjustment $ 3,364
=============
Midland Properties 131,065 Ranging from Ranging from
1986 to 1996 29 to 40 $ 2,994
=============
</TABLE>
<PAGE>
Regency Centers, L.P.
Notes to Pro Forma Consolidated Statements of Operations
For the Six Month Period Ended June 30,
1998 and the Year ended December 31, 1997
(Unaudited)
(In thousands, except unit and per unit data)
(g) 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 $97.0 million 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
six month period ended June 30, 1998 $ 2,646
=============
Pro forma interest adjustment for the
for the year ended December 31, 1997 $ 10,353
=============
(h) 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 six month period ended June 30, 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
six-month period ended June 30, 1998 $ 2,135
=============
Pro forma interest adjustment for the
year ended December 31, 1997 $ 8,610
=============
(i) In December, 1997, the Partnership sold one office building for $2.6
million and recognized a gain on the sale of $451,000. 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 $9.3
million. The adjustments to the pro forma 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 sales 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.
(j) To reflect (i) interest expense and loan cost amortization on the $100
million debt offering offset by (ii) the reduction of interest expense on
the Line and mortgage loans from the proceeds of the debt offering, the
issuance of the Series A preferred units and the proceeds from the sale of
the office buildings referred to in note (i).
Pro forma interest adjustment for the
six-month period ended June 30, 1998 $ (2,834)
=============
Pro forma interest adjustment for the
year ended December 31, 1997 $ (7,179)
=============
(k) To reflect the distribution on the offering of Series A preferred units
at an assumed annual rate of 8.125% for the six-month period ended June
30, 1998 and year ended December 31, 1997.
<PAGE>
Regency Centers, L.P.
Notes to Pro Forma Consolidated Statements of Operations
For the Six Month Period Ended June 30,
1998 and the Year ended December 31, 1997
(Unaudited)
(In thousands, except unit and per unit data)
(l) The following summarizes the calculation of basic and diluted earnings per
unit for the six-month period ended June 30, 1998 and the year ended
December 31, 1997:
<TABLE>
<CAPTION>
For the Six For the year
Months Ended Ended
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Basic Earnings Per Unit (EPU) Calculation:
Weighted average common units outstanding 23,602 15,327
============= =============
Net income for unit holders $ 17,177 $ 24,005
Less: dividends paid on Regency Class B common stock 2,689 5,140
------------- -------------
Net income for Basic and Diluted EPU $ 14,488 $ 18,865
============= =============
Basic EPU $ 0.61 $ 1.23
============= =============
Diluted Earnings Per Unit (EPU) Calculation:
Weighted average common units outstanding for Basic EPU 23,602 15,327
Incremental units to be issued under common
stock options using the Treasury method 27 80
Contingent units for the acquisition
of real estate 428 955
------------- -------------
Total Diluted Units 24,057 16,362
============= =============
Diluted EPU $ 0.60 $ 1.15
============= =============
</TABLE>
<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: October 20, 1998 REGENCY CENTERS, L.P.
By: /s/ J. Christian Leavitt
Vice President, Treasurer
and Secretary
<PAGE>
