United States
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-Q
(Mark One)
[X] For the quarterly period ended June 30, 2000
-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>
REGENCY CENTERS, L.P.
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Assets
Real estate investments
Land $ 558,246,567 538,881,578
Buildings and improvements 1,741,266,665 1,722,813,591
--------------- --------------
2,299,513,232 2,261,695,169
Less: accumulated depreciation 98,667,448 81,294,400
--------------- --------------
2,200,845,784 2,180,400,769
Properties in development 223,775,833 167,300,893
Operating properties held for sale 67,031,998 -
Investments in real estate partnerships 37,159,178 66,938,784
--------------- --------------
Net real estate investments 2,528,812,793 2,414,640,446
Cash and cash equivalents 34,137,423 50,964,920
Notes receivable 24,349,824 15,673,125
Tenant receivables, net of allowance for uncollectible accounts of
$2,278,852 and $1,883,547 at June 30, 2000 and
and December 31, 1999 27,695,633 30,884,172
Deferred costs, less accumulated amortization of
$7,443,698 and $5,498,619 at June 30, 2000
and December 31, 1999 12,814,929 11,272,866
Other assets 7,059,741 7,273,925
--------------- --------------
$ 2,634,870,343 2,530,709,454
=============== ==============
Liabilities and Partners' Capital
Liabilities:
Notes payable 687,633,803 713,787,207
Unsecured line of credit 340,000,000 247,179,310
Accounts payable and other liabilities 44,564,746 47,981,987
Tenants' security and escrow deposits 7,960,873 7,566,967
--------------- --------------
Total liabilities 1,080,159,422 1,016,515,471
--------------- --------------
Limited partners' interest in consolidated partnerships 9,211,036 11,108,994
--------------- --------------
Partners' Capital:
Series A preferred units, par value $50: 1,600,000 units
issued and outstanding at June 30, 2000 December 31, 1999 78,800,000 78,800,000
Series B preferred units, par value $100: 850,000 units
issued and outstanding at June 30, 2000 and December 31, 1999 82,799,720 82,799,720
Series C preferred units, par value $100: 750,000 units
issued and outstanding at June 30, 2000 and December 31, 1999 73,058,577 73,058,577
Series D preferred units, par value $100: 500,000 units
issued and outstanding at June 30, 2000 and December 31, 1999 49,157,977 49,157,977
Series E preferred units, par value $100: 700,000 units
issued and outstanding at June 30, 2000 68,242,763 -
General partner; 55,515,282 and 55,535,928 units outstanding
at June 30, 2000 and December 31, 1999 1,160,730,001 1,179,400,122
Limited partners; 1,552,325 and 1,863,604 units outstanding
at June 30, 2000 and December 31, 1999 32,710,847 39,868,593
--------------- --------------
Total partners' capital 1,545,499,885 1,503,084,989
--------------- --------------
Commitments and contingencies $ 2,634,870,343 2,530,709,454
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statements of Operations
For the Three Months ended June 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Revenues:
Minimum rent $ 58,980,010 55,273,317
Percentage rent 400,249 455,734
Recoveries from tenants 15,671,057 14,347,440
Service operations revenue 7,112,340 3,845,576
Equity in (loss) income of investments in
real estate partnerships (302,851) 1,395,100
--------------- --------------
Total revenues 81,860,805 75,317,167
--------------- --------------
Operating expenses:
Depreciation and amortization 13,632,191 11,460,840
Operating and maintenance 9,939,643 9,174,876
General and administrative 3,761,187 5,143,534
Real estate taxes 7,893,385 7,076,589
Other expenses 919,715 375,000
--------------- --------------
Total operating expenses 36,146,121 33,230,839
--------------- --------------
Interest expense (income):
Interest expense 17,232,670 16,168,053
Interest income (801,856) (639,929)
--------------- --------------
Net interest expense 16,430,814 15,528,124
--------------- --------------
Income before minority interests, gain and
provision on real estate investments 29,283,870 26,558,204
Gain on sale of operating properties 18,310 -
Provision for loss on operating properties held for sale (6,909,625) -
Minority interest of limited partners (236,881) (486,094)
--------------- --------------
Net income 22,155,674 26,072,110
Preferred unit distributions (6,942,014) (1,625,001)
--------------- --------------
Net income for common unitholders $ 15,213,660 24,447,109
=============== ==============
Net income per common unit:
Basic $ 0.26 0.41
=============== ==============
Diluted $ 0.26 0.41
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statements of Operations
For the Six Months ended June 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Revenues:
Minimum rent $ 116,789,042 90,840,110
Percentage rent 1,007,964 783,705
Recoveries from tenants 31,444,081 22,835,812
Service operations revenue 9,366,744 5,740,623
Equity in income of investments in
real estate partnerships 60,663 2,136,203
--------------- --------------
Total revenues 158,668,494 122,336,453
--------------- --------------
Operating expenses:
Depreciation and amortization 26,414,867 19,967,159
Operating and maintenance 19,734,821 15,467,382
General and administrative 8,257,266 8,780,893
Real estate taxes 15,537,879 11,448,099
Other expenses 919,715 525,000
--------------- --------------
Total operating expenses 70,864,548 56,188,533
--------------- --------------
Interest expense (income):
Interest expense 31,959,927 25,846,855
Interest income (1,631,223) (1,092,818)
--------------- --------------
Net interest expense 30,328,704 24,754,037
--------------- --------------
Income before minority interests, gain and
provision on real estate investments 57,475,242 41,393,883
Gain on sale of operating properties 18,310 -
Provision for loss on operating properties held for sale (6,909,625) -
Minority interest of limited partners (480,314) (747,033)
--------------- --------------
Net income 50,103,613 40,646,850
Preferred unit distributions (13,254,513) (3,250,002)
--------------- --------------
Net income for common unitholders $ 36,849,100 37,396,848
=============== ==============
Net income per common unit:
Basic $ 0.64 0.75
=============== ==============
Diluted $ 0.64 0.75
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statement of Changes in Capital
For the Six Months Ended June 30, 2000
(unaudited)
<TABLE>
<CAPTION>
Preferred General Limited Total
Units Partner Partners Capital
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1999 $ 283,816,274 1,179,400,122 39,868,593 1,503,084,989
Net income 13,254,513 35,663,606 1,185,494 50,103,613
Proceeds from the issuance of
preferred units, net 68,242,763 - - 68,242,763
Cash distributions for dividends (55,894,598) (1,812,630) (57,707,228)
Preferred unit distribution (13,254,513) - - (13,254,513)
Purchase of Regency stock and
corresponding units - (10,634,695) - (10,634,695)
Other contributions, net - 1,142,605 - 1,142,605
Units issued for acquisition
of real estate or investments in
real estate partnerships - 88,924 1,632,020 1,720,944
Units issued as a result of common
stock issued by Regency - 2,801,407 - 2,801,407
Units exchanged for common
stock of Regency - 8,737,878 (8,737,878) -
Reallocation of limited partners interest - (575,248) 575,248 -
---------------- ----------------- ------------------ ------------------
Balance June 30, 2000 $ 352,059,037 1,160,730,001 32,710,847 1,545,499,885
================ ================= ================== ===================
</TABLE>
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 50,103,613 40,646,850
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 26,414,867 19,967,159
Deferred financing cost and debt premium amortization 201,369 (82,187)
Services provided by Regency in exchange for units 2,778,735 1,713,727
Minority interest of limited partners 480,314 747,033
Equity in income of investments in real estate partnerships (60,663) (2,136,203)
Gain on sale of operating properties (18,310) -
Provision for loss on operating properties held for sale 6,909,625 -
Changes in assets and liabilities:
Tenant receivables 3,394,905 (8,445,600)
Deferred leasing commissions (2,967,981) (1,868,040)
Other assets (541,146) 901,448
Tenants' security deposits 246,194 77,215
Accounts payable and other liabilities (2,273,140) 8,848,048
---------------- ----------------
Net cash provided by operating activities 84,668,382 60,369,450
---------------- ----------------
Cash flows from investing activities:
Acquisition and development of real estate, net (134,998,735) (73,955,630)
Acquisition of Pacific, net of cash acquired - (9,046,230)
Acquisition of partners' interest in investments in real estate
partnerships, net of cash acquired (1,402,371) -
Investment in real estate partnerships (23,320,328) (10,104,935)
Capital improvements (5,711,716) (6,421,178)
Proceeds from sale of operating properties 7,491,870 -
Repayment of notes receivable 15,673,125 -
Distributions received from real estate partnership investments - 704,474
---------------- ----------------
Net cash used in investing activities (142,268,155) (98,823,499)
---------------- ----------------
Cash flows from financing activities:
Cash contributions from the issuance of Regency stock
and exchangeable partnership units 22,672 70,809
Repurchase of Regency stock and corresponding units (10,634,695) -
Net distributions to limited partners in consolidated partnerships (2,378,272) (458,450)
Distributions to preferred unit holders (13,254,513) (3,250,002)
Cash distributions for dividends (57,707,228) (42,204,292)
Other contributions (distributions), net 1,142,605 (7,494,502)
Net proceeds from from fixed rate unsecured loans - 249,845,300
Net proceeds from issuance of preferred units 68,242,763 -
Proceeds (repayment)of unsecured line of credit, net 92,820,690 (145,351,875)
Proceeds from mortgage loans 6,734,632 -
Repayment of mortgage loans (44,216,378) (15,000,200)
Deferred financing costs - (3,565,034)
---------------- ----------------
Net cash provided by financing activities 40,772,276 32,591,754
---------------- ----------------
Net decrease in cash and cash equivalents (16,827,497) (5,862,295)
Cash and cash equivalents at beginning of period 50,964,920 15,536,926
---------------- ----------------
Cash and cash equivalents at end of period $ 34,137,423 9,674,631
================ ================
</TABLE>
<PAGE>
REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2000 and 1999
(unaudited)
-continued-
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Supplemental disclosure of cash flow information -
cash paid for interest (net of capitalized interest of approximately
$5,960,000 and $3,935,000 in 2000 and 1999, respectively) $ 31,229,274 19,808,946
================ ================
Supplemental disclosure of non-cash transactions:
Mortgage loans assumed for the acquisition of Pacific and real estate $ - 411,184,783
================ ================
Exchangeable operating partnership units and common stock
issued for investments in real estate partnerships $ 329,948 1,949,020
================ ================
Exchangeable operating partnership units and common stock
issued for the acquisition of partners' interest in investments
in real estate partnerships $ 1,287,111 -
================ ================
Exchangeable operating partnership units, preferred and common
stock issued for the acquisition of Pacific and real estate $ 103,885 790,822,490
================ ================
Other liabilities assumed to acquire Pacific $ - 13,897,643
================ ================
Properties in development sold in exchange for notes receivable $ 24,349,824 -
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2000
(unaudited)
1. Summary of Significant Accounting Policies
(a) Organization and Principles of Consolidation
Regency Centers, L.P. ("RCLP" or "Partnership") is the primary
entity through which Regency Realty Corporation ("Regency" or
"Company"), a self-administered and self-managed real estate
investment trust ("REIT"), conducts substantially all of its
business and owns substantially all of its assets.
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. At June 30,
2000, Regency owns approximately 97% of the outstanding common
units ("Units") of the Partnership.
The Partnership's ownership interests are represented by Units, of
which there are five series of preferred Units, common Units owned
by the limited partners and common Units owned by Regency. Each
outstanding common Unit owned by a limited partner is
exchangeable, on a one share per one Unit basis, for the common
stock of Regency or for cash at Regency's election.
The accompanying consolidated financial statements include the
accounts of the Partnership, its wholly owned subsidiaries, and
its majority owned or controlled subsidiaries and partnerships.
All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
The financial statements 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 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, 1999 Form 10-K filed with the
Securities and Exchange Commission.
(b) Investments in Real Estate Partnerships
The Partnership accounts for all investments in which it owns less
than 50% and does not have controlling financial interest, using
the equity method.
(c) Reclassifications
Certain reclassifications have been made to the 1999 amounts to
conform to classifications adopted in 2000.
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2000
(unaudited)
2. Acquisition and Development of Shopping Centers
On June 30, 2000 the Partnership acquired the non-owned portion of nine
joint ventures, previously accounted for using the equity method, for
$4.4 million in cash, common stock and Units. As a result, these joint
ventures are wholly-owned by the Partnership and are consolidated for
financial reporting purposes.
On February 28, 1999, the Company acquired Pacific Retail Trust
("Pacific") for approximately $1.157 billion. The operating results of
Pacific 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 Pacific had occurred on January 1, 1999. Such pro forma
information reflects adjustments to 1) increase depreciation, interest
expense, and general and administrative costs, 2) adjust the weighted
average common units issued to acquire the properties. Pro forma revenues
would have been $145.0 million as of June 30, 1999. Pro forma net income
for common unitholders would have been $44.4 million as of June 30, 1999.
Pro forma basic net income per unit would have been $.73 as of June 30,
1999. Pro forma diluted net income per unit would have been $.73 as of
June 30, 1999. This data does not purport to be indicative of what would
have occurred had the Pacific acquisition been made on January 1, 1999,
or of results which may occur in the future.
3. Operating Properties Held for Sale
Periodically, the Partnership identifies operating properties that do not
fit its long term investment strategies and markets these assets for
sale. Operating properties held for sale are carried at the lower of cost
or fair value less cost to sell. Depreciation and amortization are
suspended during the period held for sale. At June 30, 2000, the
Partnership had six properties under contract for sale, and recorded a
provision for loss on the sale of $6.9 million. Under the terms of the
contract, which is rescindable, the sale is expected to close during the
fourth quarter of 2000.
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2000
(unaudited)
4. Segments
The Partnership was formed, and currently operates, for the purpose of 1)
operating and developing Partnership owned retail shopping centers
(Retail segment), and 2) providing services including property
management, leasing, brokerage, and construction and development
management for third-parties (Service operations segment). The
Partnership's reportable segments offer different products or services
and are managed separately because each requires different strategies and
management expertise. There are no material inter-segment sales or
transfers.
The Partnership assesses and measures operating results starting with Net
Operating Income for the Retail segment and Income for the Service
operations segment and converts such amounts into a performance measure
referred to as Funds From Operations ("FFO"). The operating results for
the individual retail shopping centers have been aggregated since all of
the Partnership's shopping centers exhibit highly similar economic
characteristics as neighborhood shopping centers, and offer similar
degrees of risk and opportunities for growth. FFO as defined by the
National Association of Real Estate Investment Trusts consists of 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 adjustments for unconsolidated
investments in real estate partnerships and joint ventures. The
Partnership further adjusts FFO by distributions made to holders of Units
that results in a diluted FFO amount. The Partnership considers diluted
FFO 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 diluted FFO on the same
basis. While management believes that diluted FFO is the most relevant
and widely used measure of the Partnership's performance, such amount
does not represent cash flow from operations as defined by generally
accepted accounting principles, should not be considered an alternative
to net income as an indicator of the Partnership's operating performance,
and is not indicative of cash available to fund all cash flow needs.
Additionally, the Partnership's calculation of diluted FFO, as provided
below, may not be comparable to similarly titled measures of other REITs.
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2000
(unaudited)
4. Segments (continued)
The accounting policies of the segments are the same as those described
in note 1. The revenues, diluted FFO, and assets for each of the
reportable segments are summarized as follows for the six month periods
ended June 30, 2000 and 1999. Assets not attributable to a particular
segment consist primarily of cash and deferred costs.
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenues:
Retail segment $ 149,301,750 116,595,830
Service operations segment 9,366,744 5,740,623
----------------- ----------------
Total revenues $ 158,668,494 122,336,453
================= ================
Funds from Operations:
Retail segment net operating income $ 114,047,360 89,680,349
Service operations segment income 9,366,744 5,740,623
Adjustments to calculate diluted FFO:
Interest expense (31,959,927) (25,846,855)
Interest income 1,631,223 1,092,818
General and administrative an d other (9,176,981) (9,305,893)
Non-real estate depreciation (600,781) (391,511)
Minority interests of limited partners (480,314) (747,033)
Minority interests in depreciation
and amortization (299,828) (359,452)
Share of joint venture depreciation
and amortization 933,589 286,549
Distributions on preferred units (13,254,513) (3,250,002)
---------------- ---------------
Funds from Operations - diluted 70,206,572 56,899,593
---------------- ---------------
Reconciliation to net income for common unitholders:
Real estate related depreciation
and amortization (25,832,396) (19,575,648)
Minority interests in depreciation
and amortization 299,828 359,452
Share of joint venture depreciation
and amortization (933,589) (288,549)
Provision for loss on operating properties
held for sale (6,909,625) -
Gain on sale of operating properties 18,310 -
-------------- ---------------
Net income available for common unitholders $ 36,849,100 37,396,848
============== ===============
June 30, December 31,
Assets (in thousands): 2000 1999
---------------------- ---- ----
Retail segment $ 2,401,461 2,344,092
Service operations segment 179,397 123,233
Cash and other assets 54,012 63,384
-------------- --------------
Total assets $ 2,634,870 2,530,709
============== ==============
</TABLE>
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2000
(unaudited)
5. Notes Payable and Unsecured Line of Credit
The Partnership's outstanding debt at June 30, 2000 and December 31, 1999
consists of the following (in thousands):
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Notes Payable:
Fixed rate mortgage loans $ 286,090 331,716
Variable rate mortgage loans 31,087 11,376
Fixed rate unsecured loans 370,457 370,696
------------- ------------
Total notes payable 687,634 713,788
Unsecured line of credit 340,000 247,179
------------- ------------
Total $ 1,027,634 960,967
============= ============
</TABLE>
During July, 2000, the Partnership modified the terms of its unsecured
line of credit (the "Line") by reducing the commitment to $625 million.
The Line matures in March 2002, but may be extended annually for one-year
periods. Borrowings under the Line bear interest at a variable rate based
on LIBOR plus a 1% spread (7.6875% at June 30, 2000), and is dependent on
the Company maintaining its investment grade rating. The Partnership is
required to comply and is in compliance with certain financial and other
covenants customary with this type of unsecured financing. The Line is
used primarily to finance the acquisition and development of real estate,
but is also available for general working capital purposes.
On April 15, 1999, the Partnership completed a $250 million unsecured
debt offering in two tranches. The Partnership issued $200 million 7.4%
notes due April 1, 2004, priced at 99.922% to yield 7.42%, and $50
million 7.75% notes due April 1, 2009, priced at 100%. The net proceeds
of the offering were used to reduce the balance of the Line.
As of June 30, 2000, scheduled principal repayments on notes payable and
the Line were as follows (in thousands):
<TABLE>
<CAPTION>
Scheduled
Principal Term Loan Total
Scheduled Payments by Year Payments Maturities Payments
------------ ------------ -----------
<S> <C> <C> <C>
2000 $ 2,876 6,004 8,880
2001 5,621 68,063 73,684
2002 (includes the Line) 4,943 384,098 389,041
2003 4,933 13,303 18,236
2004 5,327 199,882 205,209
Beyond 5 Years 36,888 284,912 321,800
Net unamortized debt premiums - 10,784 10,784
------------- ------------- -------------
$ 60,588 967,046 1,027,634
Total ============= ============= ==============
</TABLE>
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2000
(unaudited)
5. Notes Payable and Unsecured Line of Credit (continued)
Unconsolidated partnerships and joint ventures had mortgage loans payable
of $15.0 million at June 30, 2000, and the Partnership's proportionate
share of these loans was $6.2 million.
The fair value of the Partnership's notes payable and Line are estimated
based on the current rates available to the Partnership for debt of the
same remaining maturities. Variable rate notes payable and the Line are
considered to be at fair value since the interest rates on such
instruments reprice based on current market conditions. Notes payable
with fixed rates, that have been assumed in connection with acquisitions,
are recorded in the accompanying financial statements at fair value. The
Partnership considers the carrying value of all other fixed rate notes
payable to be a reasonable estimation of their fair value based on the
fact that the rates of such notes are similar to rates available to the
Partnership for debt of the same terms.
6. Regency's Stockholders' Equity and Partners' Capital
Allocation of profits and losses and distributions to unitholders 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 and the
Partnership. The proceeds from such transactions are the primary source
of capital from which the Partnership acquires and develops new real
estate.
On May 25, 2000, the Partnership issued $70 million of 8.75% Series E
Cumulative Redeemable Preferred Units ("Series E Preferred Units") to an
institutional investor in a private placement. The issuance involved the
sale of 700,000 Series E Preferred Units for $100.00 per unit. The Series
E Preferred Units, which may be called by the Partnership at par on or
after May 25, 2005 have no stated maturity or mandatory redemption, and
pay a cumulative, quarterly dividend at an annualized rate of 8.75%. At
any time after May 25, 2010, the Series E Preferred Units may be
exchanged for shares of 8.75% Series E Cumulative Redeemable Preferred
Stock ("Series E Preferred Stock") of the Company at an exchange rate of
one share of Series E Preferred Stock for one Series E Preferred Unit.
The Series E Preferred Units and Series E Preferred Stock are not
convertible into common stock of the Company. The net proceeds of the
offering were used to reduce the Line.
During 1999, the Board of Directors authorized the repurchase of
approximately $65.0 million of the Company's outstanding shares through
periodic open market transactions or privately negotiated transactions.
At June 30, 2000, the Company had completed the program by purchasing
3.25 million shares of which the majority of the funds came from the
Partnership.
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2000
(unaudited)
7. Earnings Per Unit
The following summarizes the calculation of basic and diluted earnings
per unit for the three month periods ended June 30, 2000 and 1999,
respectively (in thousands except per share data):
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Basic Earnings Per Unit (EPU) Calculation:
Weighted average units outstanding 55,507 58,040
============ ===========
Net income for common unitholders $ 15,214 24,447
Less: dividends paid on Class B common stock
Series 1 and Series 2 Preferred stock (699) (931)
============ ===========
Net income for Basic and Diluted EPU $ 14,514 23,516
============ ===========
Basic EPU $ .26 .41
============ ===========
Diluted Earnings Per Unit (EPU) Calculation:
--------------------------------------------
Weighted average units outstanding for
Basic EPU 55,507 58,040
Incremental units to be issued under common
stock options using the Treasury method 32 6
------------ -----------
Total diluted units 55,539 58,046
============ ===========
Diluted EPU $ .26 .41
============ ===========
</TABLE>
The Class B common stock dividends for 1999 are deducted from income in
computing earnings per unit since the proceeds of this offering were
transferred to and reinvested by the Partnership. In addition, the
Series 1 and Series 2 Preferred stock dividends are also deducted from
net income in computing earnings per unit since the properties acquired
with these preferred shares were contributed to the Partnership.
Accordingly, the payment of Class B common, Series 1 and Series 2
Preferred stock dividends are deemed to be preferential to the
distributions made to common unitholders.
<PAGE>
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2000
(unaudited)
7. Earnings Per Unit (continued)
The following summarizes the calculation of basic and diluted earnings
per unit for the six month periods ended June 30, 2000 and 1999,
respectively (in thousands except per share data):
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Basic Earnings Per Unit (EPU) Calculation:
Weighted average units outstanding 55,503 46,659
=========== ===========
Net income for common unitholders $ 36,849 37,397
Less: dividends paid on Class B common stock
Series 1 and Series 2 Preferred stock (1,399) (2,309)
=========== ==========
Net income for Basic and Diluted EPU $ 35,450 35,088
=========== ==========
Basic EPU $ .64 .75
=========== ==========
Diluted Earnings Per Unit (EPU) Calculation:
--------------------------------------------
Weighted average units outstanding for
Basic EPU 55,503 46,659
Incremental units to be issued under common
stock options using the Treasury method 16 3
---------- -----------
Total diluted units 55,519 46,662
========== ===========
Diluted EPU $ .64 .75
========== ===========
</TABLE>
The Class B common stock dividends for 1999 are deducted from income in
computing earnings per unit since the proceeds of this offering were
transferred to and reinvested by the Partnership. In addition, the
Series 1 and Series 2 Preferred stock dividends are also deducted from
net income in computing earnings per unit since the properties acquired
with these preferred shares were contributed to the Partnership.
Accordingly, the payment of Class B common, Series 1 and Series 2
Preferred stock dividends are deemed to be preferential to the
distributions made to common unitholders.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto of Regency Centers, L.P.
appearing elsewhere within.
Organization
Regency Realty Corporation ("Regency" or "Company") is a qualified real estate
investment trust ("REIT") which began operations in 1993. The Company invests in
real estate primarily through its general partnership interest in Regency
Centers, L.P., ("RCLP" or "Partnership"), an operating partnership in which the
Company currently owns approximately 97% of the outstanding common partnership
units ("Units"). Of the 222 properties included in the Company's portfolio at
June 30, 2000, 204 properties were owned either fee simple or through
partnership interests by the Partnership. At June 30, 2000, the Company had an
investment in real estate of approximately $2.8 billion of which $2.6 billion
was owned by the Partnership.
Shopping Center Business
The Partnership's principal business is owning, operating and developing grocery
anchored neighborhood infill retail shopping centers. The Partnership's
properties summarized by state and in order by largest holdings including their
gross leasable areas (GLA) follows:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -------------------
Location # Properties GLA %Leased * # Properties GLA % Leased *
-------- ------------ ---------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Florida 41 5,061,282 93.9% 39 4,859,031 93.7%
California 35 4,036,765 98.0% 36 3,858,628 98.2%
Texas 29 3,886,593 94.3% 29 3,849,549 94.2%
Georgia 25 2,551,965 96.6% 25 2,539,556 91.8%
Ohio 12 1,706,522 97.1% 13 1,822,854 98.1%
North Carolina 13 1,303,095 98.1% 12 1,241,639 97.9%
Washington 9 1,097,542 99.0% 9 1,066,962 98.1%
Colorado 10 897,788 98.4% 10 903,502 98.0%
Oregon 7 671,220 93.4% 7 616,070 94.2%
Arizona 5 419,924 98.6% 2 326,984 99.7%
Kentucky 2 305,307 90.4% 2 305,307 91.8%
Virginia 3 297,964 95.1% 2 197,324 96.1%
Tennessee 3 271,697 100.0% 3 271,697 98.9%
Michigan 3 251,200 94.7% 3 250,655 98.7%
Delaware 1 232,754 95.4% 1 232,754 96.3%
Illinois 1 178,600 86.4% 1 178,600 85.9%
South Carolina 2 162,056 97.0% 2 162,056 98.8%
Wyoming 1 87,925 - 1 75,000 -
Missouri 1 82,498 95.8% 1 82,498 95.8%
New Jersey 1 80,867 - - - -
------------- ------------ ------------ ---------- ------------ -----------
Total 204 23,583,564 95.9% 198 22,840,666 95.5%
============= ============ ============ ========== ============ ===========
</TABLE>
* Excludes properties under construction
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.
<PAGE>
The following table summarizes the four largest grocery tenants occupying the
Partnership's shopping centers at June 30, 2000:
<TABLE>
<CAPTION>
Grocery Anchor Number of % of % of Annualized Avg Remaining
Stores Total GLA Base Rent Lease Term
--------------- --------------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
Kroger 54 13.3% 11.6% 16 yrs
Publix 36 7.0% 4.8% 13 yrs
Safeway 29 6.0% 5.1% 12 yrs
Albertsons 12 2.6% 2.2% 14 yrs
</TABLE>
Winn Dixie announced the closing of a number of its stores related to its
corporate restructuring. The Partnership has 11 stores or 2.3% of total GLA.
Winn Dixie notified the Partnership that currently, only one store that is
located in a Regency shopping center will be closed. This shopping center is
currently under contract for sale and is recorded on the balance sheet as
operating properties held for sale.
Periodically, the Partnership identifies operating shopping centers that no
longer meet its long-term investment standards. Once identified, these
properties are segregated on the balance sheet as operating properties held for
sale, and are carried at the lower of cost or fair value less estimated selling
costs.
Acquisition and Development of Shopping Centers
The Partnership has implemented a growth strategy dedicated to developing
high-quality shopping centers and build to suit properties. This development
process can require 12 to 36 months from initial land or redevelopment
acquisition through construction and leaseup and finally stabilized income,
depending upon the size and type of project. Generally, anchor tenants begin
operating their stores prior to construction completion of the entire center,
resulting in rental income during the development phase. At June 30, 2000, the
Partnership had 54 projects under construction or undergoing major renovations,
which when complete will represent an investment of $484.1 million. Total cost
necessary to complete these developments is estimated to be $159.9 million and
will be expended through 2001. These developments are approximately 69% complete
and 76% leased. Of the developments currently in process, 25 projects were
started during 2000, which when complete will represent an investment of $160
million, and currently have an estimated cost to complete of $92.6 million.
On June 30, 2000 the Partnership acquired the non-owned portion of nine joint
ventures, previously accounted for using the equity method, for $4.4 million in
cash, common stock and Units. As a result, these joint ventures are wholly-owned
by the Partnership and are consolidated for financial reporting purposes.
On February 28, 1999, the Company acquired Pacific Retail Trust ("Pacific") for
approximately $1.157 billion. At the date of the acquisition, Pacific was
operating or had under development 71 retail shopping centers representing 8.4
million SF of gross leaseable area.
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 share and unit holders. Net cash provided by
operating activities was $84.7 million and $60.4 million for the six months
ended June 30, 2000 and 1999, respectively. The Partnership incurred recurring
and non-recurring capital expenditures (non-recurring expenditures pertain to
immediate building improvements on new acquisitions and anchor tenant
improvements on new leases) of $5.7 million and $6.4 million, during the six
months ended June 30, 2000 and 1999, respectively. The Partnership paid
scheduled principal payments of $3.3 million and $2.7 million during the six
months ended June 30, 2000 and 1999, respectively. The Partnership paid
distributions of $15.1 million and $4.7 million, during the six months ended
June 30, 2000 and 1999, respectively, to its common and preferred unitholders.
Management expects to meet long-term liquidity requirements for term debt
payoffs at maturity, non-recurring capital expenditures, 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 $142.3 million and $98.8 million, during 2000
and 1999, respectively, primarily for the acquisition and development of
shopping centers, and build to suit projects. Net cash provided by financing
activities was $40.8 and $32.6 million for the six months ended June 30, 2000
and 1999, respectively.
<PAGE>
During 1999, the Board of Directors authorized the repurchase of approximately
$65.0 million of the Company's outstanding shares through periodic open market
transactions or privately negotiated transactions. At June 30, 2000, the Company
had completed the program by purchasing 3.25 million shares of which the
majority of the funds came from the Partnership.
The Partnership's outstanding debt at June 30, 2000 and December 31, 1999
consists of the following (in thousands):
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Notes Payable:
Fixed rate mortgage loans $ 286,090 331,716
Variable rate mortgage loans 31,087 11,376
Fixed rate unsecured loans 370,457 370,696
-------------- --------------
Total notes payable 687,634 713,788
Unsecured line of credit 340,000 247,179
-------------- --------------
Total $ 1,027,634 960,967
============== ==============
</TABLE>
During July 2000, the Partnership modified the terms of its unsecured line of
credit (the "Line") by reducing the commitment to $625 million and extending the
term. The Line matures in March 2002, but may be extended annually for one-year
periods. Borrowings under the Line bear interest at a variable rate based on
LIBOR plus 1% (7.6875% at June 30, 2000), which is dependent on the Company
maintaining its investment grade rating. The Partnership is required to comply
and is in compliance with certain financial and other covenants customary with
this type of unsecured financing. The Line is used primarily to finance the
acquisition and development of real estate, but is also available for general
working capital purposes.
On April 15, 1999, the Partnership completed a $250 million unsecured debt
offering in two tranches. The Partnership issued $200 million 7.4% notes due
April 1, 2004, priced at 99.922% to yield 7.42%, and $50 million 7.75% notes due
April 1, 2009, priced at 100%. The net proceeds of the offering were used to
reduce the balance of the Line.
As of June 30, 2000, scheduled principal repayments on notes payable and the
Line for the next five years were as follows (in thousands):
<TABLE>
<CAPTION>
Scheduled
Principal Term Loan Total
Scheduled Payments by Year Payments Maturities Payments
----------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
2000 $ 2,876 6,004 8,880
2001 5,621 68,063 73,684
2002 (includes the Line) 4,943 384,098 389,041
2003 4,933 13,303 18,236
2004 5,327 199,882 205,209
Beyond 5 Years 36,888 284,912 321,800
Net unamortized debt premiums - 10,784 10,784
------------- ------------ -------------
Total $ 60,588 967,046 1,027,634
============= ============ =============
</TABLE>
Unconsolidated partnerships and joint ventures had mortgage loans payable of
$15.0 million at June 30, 2000, and the Partnership's proportionate share of
these loans was $6.2 million.
The Company qualifies and intends to continue to qualify as a REIT under the
Internal Revenue Code. As a REIT, the Company is allowed to reduce taxable
income by all or a portion of its distributions to stockholders. As
distributions have exceeded taxable income, no provision for federal income
taxes has been made. While the Company intends to continue to pay dividends to
its stockholders, the Company and the Partnership will reserve such amounts of
cash flow as it considers necessary for the proper maintenance and improvement
of the real estate portfolio, while still maintaining the Company's
qualification as a REIT.
<PAGE>
The Partnership intends to continue to acquire and develop shopping centers and
expects to meet the related capital requirements from borrowings on the Line.
The Partnership expects to repay the Line from time to time from additional
public and private equity or debt offerings, such as those transactions
previously completed. Because such acquisition and development activities are
discretionary in nature, they are not expected to burden the Partnership's
capital resources currently available for liquidity requirements. The
Partnership expects that cash provided by operating activities, unused amounts
available under the Line, and cash reserves are adequate to meet liquidity
requirements and costs necessary to complete properties in development.
Results from Operations
Comparison of the six months ended June 30, 2000 to 1999
Revenues increased $36.3 million or 29.7% to $158.7 million in 2000. The
increase was due to the Pacific acquisition, revenues from new developments that
began operating after June 30, 1999, and from same property growth in rental
rates and occupancy increases. Minimum rent increased $25.9 million or 28.6%,
and recoveries from tenants increased $8.6 million or 37.7%. At June 30, 2000,
the Partnership was operating or developing 204 shopping centers of which 168
centers were considered stabilized and 95.9% leased.
Other non-rental revenues includes fees earned as part of the Partnership's
service operations segment and includes property management and commissions
earned from third parties, and development related profits and fees earned from
the sales of shopping centers and build to suit properties to third parties.
Other non-rental revenues increased by $3.6 million to $9.4 million in 2000, or
65.0%. The increase was primarily due to a $5.6 million increase in development
related profits and fees, offset by a $1.9 million reduction in property
management fees.
Operating expenses increased $14.7 million or 26.1% to $70.9 million in 2000.
Combined operating and maintenance, and real estate taxes increased $8.4 million
or 31.0% during 2000 to $35.3 million The increase was due to the Pacific
acquisition, and expenses incurred by new developments that began operating
after June 30, 1999, and general increases in costs on the stabilized
properties. General and administrative expenses were $8.3 million during 2000
vs. $8.8 million in 1999 or 6.0% lower as a result of increased capitalization
of direct costs incurred during 2000 related to development activities.
Depreciation and amortization increased $26.4 million during 2000 or 32.3%
primarily due to the Pacific acquisition and developments that began operating
after June 30, 1999.
In June 2000, the Partnership identified six operating properties that do not
meet its long-term investment standards, and accordingly classified these
properties as operating properties held for sale on its balance sheet and ceased
the depreciation and amortization of these assets. In July 2000, the Partnership
entered into a rescindable contract, and reduced the carrying value of these
properties to the lower of cost or fair value, net of selling costs. The
reduction resulted in a $6.9 million provision for loss on operating properties
held for sale that was charged against net income at June 30, 2000. Under the
terms of the contract, the sale is expected to be completed during the fourth
quarter 2000.
Interest expense increased to $32.0 million in 2000 from $25.8 million in 1999,
or 23.6%. The increase was due to higher Libor rates, higher average balances on
the Line, the assumption of $402.6 million of debt of Pacific, the financing
cost of new developments that began operating after June 30, 1999, and the
higher fixed interest rate of the $250 million debt offering completed in April,
1999. Weighted average interest rates increased approximately 1% during 2000.
Preferred unit distributions increased $10.0 million to $13.3 million during
2000 as a result of the preferred units issued in September 1999 and May 2000.
Weighted average fixed rates of the preferred units were 8.72% at June 30, 2000
vs. 8.13% at June 30, 1999.
Net income for common unit holders was $36.8 million in 2000 vs. $37.4
million in 1999, a $.6 million or 1.4% decrease primarily a result of the
provision for loss on operating properties held for sale and the other reasons
as described above. Diluted earnings per unit in 2000 was $.64 vs. $.75 in 1999
a result of the decline in net income and the increased weighted average units
in 2000 issued in 1999 in connection with the acquisition of Pacific.
Comparison of the three months ended June 30, 2000 to 1999
Revenues increased $6.5 million or 8.7% to $81.9 million in 2000. Minimum rent
increased $3.7 million or 6.7%, and recoveries from tenants increased $1.3
million or 9.2%. The increase was due to revenues from new developments that
began operating after June 30, 1999, and from same property growth in rental
rates and occupancy increases as described in the six month comparison.
<PAGE>
Other non-rental revenues includes fees earned as part of the Partnership's
service operations segment and includes property management and commissions
earned from third parties, and development related profits and fees earned from
the sales of shopping centers and build to suit properties to third parties.
Other non-rental revenues increased by $3.3 million to $7.1 million in 2000, or
85.8%. The increase was primarily due to a $3.7 million increase in development
related profits and fees, offset by a $.4 million reduction in property
management fees.
Operating expenses increased $2.9 million or 8.8% to $36.1 million in 2000.
Combined operating and maintenance, and real estate taxes increased $1.6 million
or 9.8% during 2000 to $17.8 million. The increase was due primarily to expenses
incurred by new developments that began operating after June 30, 1999 and
general increases in operating costs on the stabilized properties. General and
administrative expenses were $3.8 million in 2000 vs. $5.1 million or 26.8%
lower as a result of increased capitalization of direct costs incurred during
2000 related to development activities. Depreciation and amortization increased
$2.2 million during 2000 or 19.0% primarily related to developments that began
operating after June 30, 1999.
In June 2000, the Partnership identified six operating properties that do not
meet its long-term investment standards, and accordingly classified these
properties as operating properties held for sale on its balance sheet and ceased
the depreciation and amortization of these assets. In July 2000, the Partnership
entered into a rescindable contract, and reduced the carrying value of these
properties to the lower of cost or fair value, net of selling costs. The
reduction resulted in a $6.9 million provision for loss on operating properties
held for sale that was charged against net income at June 30, 2000.
Interest expense increased to $17.2 million in 2000 from $16.2 million in 1999
or 6.6%. The increase was due to higher Libor rates, higher average balances on
the Line, and the financing cost of new developments that began operating after
June 30, 1999. Weighted average interest rates increased approximately 1% during
2000.
Preferred unit distributions increased $5.3 million to $6.9 million during 2000
as a result of the preferred units issued in September 1999 and May 2000.
Weighted average fixed rates of the preferred units were 8.72% at June 30, 2000
vs. 8.13% at June 30, 1999.
Net income for common unit holders was $15.2 million in 2000 vs. $24.4 million
in 1999, a $9.2 million or 37.8% decrease primarily a result of the provision
for loss on operating properties held for sale and the other reasons as
described above. Diluted earnings per unit in 2000 was $.26 vs. $.41 in 1999, a
result of the decline in net income.
New Accounting Standards and Accounting Changes
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities " (FAS 133), which is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. FAS 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. FAS 133
requires entities to recognize all derivatives as either assets or liabilities
in the balance sheet and measure those instruments at fair value. The
Partnership does not believe FAS 133 will materially effect its financial
statements.
Environmental Matters
The Partnership like others in the commercial real estate industry is subject to
numerous environmental laws and regulations. The operation of dry cleaning
plants at the Partnership's shopping centers is its 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. The Partnership has approximately 38 properties that
will require or are currently undergoing varying levels of environmental
remediation. These remediations are not expected to have a material financial
effect on the Company or the Partnership due to financial statement reserves and
various state-regulated programs that shift the responsibility and cost for
remediation to the state. 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 Company or
Partnership.
<PAGE>
Inflation
Inflation has remained relatively low during 2000 and 1999 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
The Partnership is exposed to interest rate changes primarily as a result of its
Line and long-term debt used to maintain liquidity and fund capital expenditures
and expansion of the Partnership's real estate investment portfolio and
operations. The Partnership's interest rate risk management objective is to
limit the impact of interest rate changes on earnings and cash flows and to
lower its overall borrowing costs. To achieve its objectives the Partnership
borrows primarily at fixed rates and may enter into derivative financial
instruments such as interest rate swaps, caps and treasury locks in order to
mitigate its interest rate risk on a related financial instrument. The
Partnership has not been party to any market risk sensitive instruments during
the reporting period ending June 30, 2000 and does not plan to enter into
derivative or interest rate transactions for speculative purposes.
Part II
Item 6 Exhibits and Reports on Form 8-K:
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None
<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: August 10, 2000 REGENCY CENTERS, L..P.
By: /s/ J. Christian Leavitt
---------------------------
Senior Vice President
and Chief Accounting Officer
