SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
Washington, DC 20549
FORM 8-K/A-2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 7, 1997
REGENCY REALTY CORPORATION
(Exact name of registrant as specified in its charter)
Florida 1-12298 59-3191743
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (904)-356-7000
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
A. BRANCH PROPERTIES, L.P. AND PREDECESSOR
Audited Financial Statements for
the year ended December 31, 1996
B. Pro Forma Financial Information
<PAGE>
BRANCH PROPERTIES, L.P.
AND PREDECESSOR
INDEX TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
FINANCIAL STATEMENTS Page
Report of Independent Accountants...................................... 1
Consolidated Balance Sheets as of December 31, 1996 and 1995........... 2
Consolidated/Combined Statements of Operations for the years
ended December 31, 1996, 1995 and 1994.............................. 3
Consolidated/Combined Statements of Partners' and Owners' Equity
for the years ended December 31, 1996, 1995 and 1994................ 4
Consolidated/Combined Statements of Cash Flows for the year
ended December 31, 1996, the periods from December 19, 1995,
through December 31, 1995, January 1, 1995 through
December 18, 1995 and the year ended December 31, 1994.............. 5
Notes to Financial Statements.......................................... 6
<PAGE>
March 14, 1997
To the Participants and Administrator of the
President Baking Company, Inc. Merit Plan
Page 1
REPORT OF INDEPENDENT ACCOUNTANTS
March 7, 1997
To the Partners of Branch Properties, L.P.
In our opinion, the accompanying consolidated balance sheets and the related
consoli dated/combined statements of operations, of partners' and owners'
equity, and of cash flows present fairly, in all material respects, the
financial position of Branch Properties, L.P. and Predecessor (the "Company") at
December 31, 1996 and 1995 and the results of their operations for each of the
three years in the period ended December 31, 1996 and their cash flows for the
year ended December 31, 1996, the periods from December 19, 1995 through
December 31, 1995, January 1, 1995 through December 18, 1995 and the year ended
December 31, 1994 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Atlanta, Georgia
1
<PAGE>
BRANCH PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
- -------------------------------------------------------------------------------
December 31,
1996 1995
ASSETS
Investment in real estate
Land $ 45,422 $ 35,383
Buildings and land improvements 110,738 85,540
Tenant improvements 837 625
Furniture, fixtures and equipment 1,497 1,253
--------- ---------
158,494 122,801
Less: accumulated depreciation and amortization (12,891) (10,180)
--------- ---------
Operating real estate assets 145,603 112,621
Developments held for resale, including $7,553
under construction 11,365 -
Construction in progress 16,983 -
--------- ---------
173,951 112,621
Cash and cash equivalents 325 1,468
Tenant receivables 2,194 1,553
Deferred charges, net 1,489 1,016
Other assets 4,837 2,436
Investment in unconsolidated property partnership 937 898
--------- --------
Total assets $ 183,733 $ 119,992
========= ========
LIABILITIES AND PARTNERS' EQUITY
Notes payable $ 119,096 $ 81,277
Security deposits and unearned rents 701 369
Accounts payable and accrued expenses 7,030 2,679
Other liabilities 1,530 182
--------- --------
128,357 84,507
Minority interest in consolidated property
partnerships 6,915 5,538
Commitments and contingencies - -
Partners' equity 48,461 29,947
--------- --------
Total liabilities and partners' equity $ 183,733 $ 119,992
========= =========
See accompanying notes to the financial statements.
2
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
CONSOLIDATED/COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
- -------------------------------------------------------------------------------
Predecessor
Branch Year ended
Properties, LP December 31,
1996 1995 1994
Revenues
Rental $ 16,599 $ 12,270 $ 8,762
Tenant reimbursements 3,254 2,398 1,442
Third-party management 3,627 3,758 4,471
Acquisition and development 828 1,201 1,928
Other income, net 321 398 995
--------- --------- ---------
Total revenues 24,629 20,025 17,598
--------- --------- ---------
Expenses
Property operating and maintenance 3,558 2,572 1,918
Third-party management 3,097 3,969 4,120
Acquisition and development 953 1,176 1,418
Real estate taxes 1,596 1,192 868
Interest 7,366 6,534 3,962
Depreciation and amortization 3,165 2,382 1,811
General and administrative 2,547 830 551
Formation expenses 108 1,274 -
Minority interest in consolidated/
combined property partnerships 482 211 (14)
--------- --------- --------
Total expenses 22,872 20,140 14,634
--------- --------- --------
Income (loss) before extraordinary item 1,757 (115) 2,964
Extraordinary item (76) (1,385) -
--------- --------- --------
Net income (loss) $ 1,681 $ (1,500) $ 2,964
========= ========= =========
See accompanying notes to the financial statements.
3
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
CONSOLIDATED/COMBINED STATEMENTS OF PARTNERS' AND OWNERS' EQUITY
(Dollars in Thousands)
- -------------------------------------------------------------------------------
General Limited Predecessor
Partner Partners Equity Total
Predecessor
PARTNERS' AND OWNERS' EQUITY,
DECEMBER 31, 1993 $ - $ - $15,951 $15,951
Capital contributions - - 5,528 5,528
Capital distributions - - (4,833) (4,833)
Deemed capital contributions - - 329 329
Net income - - 2,964 2,964
------- ------ ------ ------
PARTNERS' AND OWNERS' EQUITY,
DECEMBER 31, 1994 - - 19,939 19,939
Capital contributions - - 606 606
Capital distributions - - (2,830) (2,830)
Deemed capital distributions - - (152) (152)
Distributions of net capital of
Initial Properties to partners
and owners in conjunction with
the Business Combination - - (3,800) (3,800)
loss (1,500) (1,500)
------- ------ ------ ------
PARTNERS' AND OWNERS' EQUITY,
DECEMBER 18, 1995 - - 12,263 12,263
Branch Properties, L.P.
Reclassification of predecessor
equity in connection with
the Business Combination (2,497) 14,760 (12,263) -
Proceeds from Equity Commitment,
net of offering costs of $1,075 - 7,033 - 7,033
Units issued in satisfaction of
notes payable and other liabilities - 2,830 - 2,830
Acquisition of unaffiliated
interests and non-controlled
interests where cash
consideration was involved - 7,821 - 7,821
------- ------ ------ ------
PARTNERS' EQUITY,
DECEMBER 31, 1995 (2,497) 32,444 - 29,947
Adjustment to acquisition of
unaffiliated interests where
cash consideration was
involved at December 19, 1995 - (1,340) - (1,340)
Capital contributions - 66 - 66
Capital distributions paid (216) (3,684) - (3,900)
Capital distributions declared (72) (1,328) - (1,400)
Subordinate units issued to
certain key employees - 150 - 150
Proceeds from Equity Commitment - 23,257 - 23,257
Net income 86 1,595 - 1,681
-------- -------- ------- -------
PARTNERS' EQUITY, DECEMBER 31, 1996 $(2,699) $51,160 $ - $48,461
======== ======= ======= =======
See accompanying notes to the financial statements.
4
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
CONSOLIDATED/COMBINED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Branch Properties,
L.P. Predecessor
--------------------------- -----------------------------
Period from Period from
December 19, January 1,
1995 1995
Year ended through through Year ended
December 31, December 31, December 18, December 31,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,681 $ - $(1,500) $ 2,964
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities
Depreciation 3,112 - 2,226 1,669
Amortization 282 - 607 368
Bad debt expense 277 - - -
Write-off of deferred financing
and leasing costs 76 - 234 -
(Gain) on sale of real estate assets (95) (69) -
Minority interest in consolidated
/combined property partnerships 482 - 211 (14)
Equity in net income of
unconsolidated property
partnership (39) - (7) -
Subordinate units issued to
key employees 150 - - -
Changes in assets, (increase) decrease
Developments held for resale (13,865) - - -
Tenant receivables (918) - (620) (318)
Deferred charges (163) - (225) (95)
Other assets (2,401) - (385) (662)
Changes in liabilities, increase (decrease)
Security deposits and unearned rents 332 - 84 108
Accounts payable and accrued expenses 1,009 (1,361) 2,558 (508)
Other liabilities 1,348 - (109) 1,034
------- ------ ----- -----
Net cash provided by (used in)
operating activities (8,732) (1,361) 3,005 4,546
------ ------ ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Construction of real estate
assets, net of payables (19,314) - (1,371) (3,399)
Acquisition of shopping centers (25,274) - (5,358) (22,975)
Tenant improvements (206) - (229) (442)
Proceeds from sale of real estate assets 3,364 - 693 -
Investment in unconsolidated
property partnership - - (891) -
Purchase of non-controlled
interests of certain
investors in the Initial Properties - (1,994) - -
Other capital expenditures (888) - (657) (343)
------- ------ ------ -------
Net cash (used in) investing activities (42,318) (1,994) (7,813) (27,159)
------- ------ ------ -------
</TABLE>
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
CONSOLIDATED/COMBINED STATEMENTS OF CASH FLOWS
Continued
(Dollars in Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Branch Properties,
L.P. Predecessor
--------------------------- -----------------------------
Period from Period from
December 19, January 1,
1995 1995
Year ended through through Year ended
December 31, December 31, December 18, December 31,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of financing costs (518) (453) (386) (371)
Debt proceeds 59,984 36,286 37,013 25,978
Debt payments (28,439) (36,230) (31,699) (6,519)
Deemed capital (distributions) contributions (152) 329
Contributions from minority interest
in consolidated/combined property
partnerships - - 2,320 3,021
Distributions to minority interests
in consolidated/combined property
partnerships (543) - - -
Capital contributions 66 - 606 5,528
Capital distributions (3,900) - (2,830) (4,833)
Distributions of net capital of
Initial Properties to partners
and owners in conjunction with the
Business Combination - (1,813) (1,987) -
Proceeds from the Equity Commitment 23,257 8,108 - -
Payment of offering costs - (1,075) - -
------- ------ ------ ------
Net cash provided by financing activities 49,907 4,823 2,885 23,133
------- ------ ------ -------
Net increase (decrease) in
cash and cash equivalents (1,143) 1,468 (1,923) 520
Cash and cash equivalents, beginning of period 1,468 - 1,923 1,403
------- ------ ------ ------
Cash and cash equivalents, end of period $ 325 $1,468 $ - $ 1,923
====== ====== ====== =======
</TABLE>
See accompanying notes to the financial statements.
5
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- ------------------------------------------------------------------------------
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization and formation of the company
Branch Properties, L.P. ("BPL"), a limited partnership, was formed in the
State of Georgia on October 20, 1995 by the partners/shareholders of the
Branch Group ("BG" or "Predecessor") for the purpose of continuing the
shopping center and management company operations then being conducted by
BG. At that date, BG was not a legal entity but rather a combination of 14
partnership and corporate entities which collectively owned 15 neighborhood
and community shopping centers (the "Initial Properties") and the
management, leasing, acquisition and development businesses of Branch and
Associates, Branch Realty Management, Inc. and certain other affiliates (the
"Branch Entities") which had varying ownership interests in common.
On December 19, 1995, the Initial Properties and the Branch Entities were
transferred to BPL in exchange for partnership units and the assumption of
debt and other liabilities. Concurrently, BPL received a commitment from an
investor for $40,000 of equity (the "Equity Commitment") and obtained a
$50,000 thirty-five month term facility (the "Term Facility") and a $30,000
master commitment (the "Master Commitment") from a bank. These transactions
are collectively referred to herein as the "Business Combination".
The net proceeds from the Business Combination of $43,319, which represents
$7,033 from the Equity Commitment, $4,803 from the Term Facility, $13,700
from the Master Commitment and $17,783 from the refinancing of certain debt
arrangements of the Initial Properties, were used as follows: (i) $37,535 to
repay debt on the Initial Properties (including prepayment penalties and
accrued interest), (ii) $1,994 to acquire non-controlled interests of
certain investors in the Initial Properties, (iii) $1,813 distributed to
certain owners of the Initial Properties, (iv) $1,977 to fund certain
reserves and to pay other expenses incurred in connection with the formation
of BPL, consisting primarily of financial advisory, legal and accounting
fees ("Formation Expenses").
As referred to herein, "The Company" shall mean BPL or BG, its Predecessor.
Basis of presentation
For the periods after the Business Combination, the accompanying
consolidated financial statements include the accounts of BPL. For the
periods prior to the Business Combination, the accompanying combined
financial statements reflect the combined accounts of the Predecessor. The
results of operations for the period from December 19, 1995 through December
31, 1995 were not significant and have been reflected in the statement of
operations of the Predecessor.
The Business Combination was structured to allow the partners and owners of
the entities in BG to receive partnership interests ("Units") in BPL.
Purchase accounting was applied to the acquisition of all unaffiliated
entities and certain non-controlled interests in affiliated entities in
which cash consideration was paid. The acquisition of all other interests
was accounted for as
6
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- ------------------------------------------------------------------------------
a reorganization of entities under common control and, accordingly, has been
reflected at historical cost in a manner similar to that in pooling of
interests accounting.
During 1996, the Company sold a shopping center for a net price of
approximately $2,993. Since the property was included in the Initial
Properties, the basis assigned as of the date of the Business Combination
was adjusted based on the sales price ultimately received. The effect of the
adjustment in the amount of $1,340 was recorded as a reduction in equity.
All significant inter-entity or intercompany balances and transactions have
been eliminated in consolidation/combination. The financial statements of
the Company have been adjusted for the effect of minority interests in
certain shopping centers. Equity interests in property partnerships of 50%
or less are presented using the equity method of accounting.
Certain items in the consolidated/combined financial statements have been
reclassified for comparative purposes.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business
The Company is engaged in the management, operation, leasing, investment,
acquisition and development of neighborhood and community shopping centers
primarily located in the southeastern United States. The Company provides
services for shopping centers it owns and for centers owned by third parties
and affiliated entities.
The Company owned nineteen operating shopping centers at December 31, 1996
and seventeen operating shopping centers at December 31, 1995 with total
leasable space of 1,897,238 and 1,675,100, respectively. The centers were
97.10% and 96.57% leased at December 31, 1996 and 1995, respectively. At
December 31, 1996 approximately 81%, 17%, and 2% (on a gross leasable area
basis) of BPL's operating properties are located in the Atlanta,
north/central Florida, and Raleigh metropolitan areas, respectively.
Revenue recognition
Minimum rental income is recognized on a straight-line basis over the term
of the lease regardless of when payments are due. Accrued straight-line
rents receivable of $811 and $503 at December 31, 1996 and 1995,
respectively, are included in tenant receivables. Certain lease agreements
contain provisions which provide for additional rents based on tenants'
sales volume and reimbursement of the tenants' share of real estate taxes,
certain common area maintenance and other costs. These additional rents and
reimbursements are reflected on the accrual basis.
7
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- ------------------------------------------------------------------------------
Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all
investments purchased with an original maturity of three months or less to
be cash equivalents.
Deferred charges
Included in deferred charges are certain expenditures related to the
financing and leasing of the shopping centers. Financing costs are amortized
using the interest method over the terms of the related debt. Amortization
of deferred financing costs is included in interest expense on the
statements of operations. Leasing costs are amortized over the terms of the
related leases.
Real estate assets and depreciation
Real estate assets are stated at cost. Ordinary repairs and maintenance are
expensed as incurred; major replacements and improvements are capitalized
and depreciated over their estimated useful lives. Depreciation is computed
on a straight-line basis over the useful lives of the assets (building and
related land improvements - 20-40 years; furniture, fixtures and equipment -
5-7 years). Tenant improvements are depreciated over the terms of the
related leases.
Sales of investments in real estate and developments held for resale are
recognized at closing.
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." FAS 121 requires that
long-lived assets to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review
for recoverability, the entity estimates the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of
the expected future cash flows (undiscounted and without interest charges)
is less than the carrying amount of the asset, an impairment loss is
recognized. Otherwise an impairment loss is not recognized. Measurement of
an impairment loss that an entity expects to hold and use is used in the
fair value of the asset. Developments held for resale are recorded at the
lower of carrying amount or fair value less disposition costs. The adoption
of FAS 121 had no significant effect on the consolidated financial
statements of the Company.
General and administrative expenses
Certain general and administrative expenses are allocated to property
operating and maintenance, third-party management and acquisition and
development expenses based on the relative payroll costs included in each
category.
Interest and real estate taxes
Interest and real estate taxes incurred during the construction period are
capitalized and amortized over the lives of the constructed assets. Interest
paid (net of capitalized amounts of $811, $230 and $440 during 1996, 1995
and 1994) aggregated $7,117, $6,042 and $3,567 for the years ended December
31, 1996, 1995 and 1994, respectively.
8
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- ------------------------------------------------------------------------------
Interest rate swap agreements
Swap receipts and payments under interest rate swap agreements designated as
a hedge are recognized as adjustments to interest expense when earned or
incurred and are reflected as operating activities in the statement of cash
flows.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Partners' capital contributions, distributions and profit and loss with
respect to BPL Partners' capital contributions, distributions and profit and
loss are allocated in accordance with the partnership agreement.
In conjunction with the Business Combination, the partnership issued 360,000
and 4,305,537 of Priority Units to the general and limited partners,
respectively and 500,000 and 100,000 of Subordinated Units to the general
and limited partners, respectively. Additional Priority Units may be issued
to certain partners in the Initial Properties subject to the achievement of
certain operating results. The initial capital contributed by each partner
in the Business Combination has been allocated as specified in the
partnership agreement. The issuance of additional Units is subject to
certain restrictions as defined in the partnership agreement.
In October 1996, the General Partner issued 187,500 Subordinated Units to
certain key employees of which 37,500 vest and become nonforfeitable one
year from the occurrence of a REIT transaction as defined in the partnership
agreement. The Company recognized compensation expense of $150,000 in 1996
based on the estimated value of vested units.
Distributions of Net Operating Cash Flow and Net Proceeds from Capital
Transactions (as defined) will generally be made in accordance with the
Partnership Agreement which provides for stated preferred returns to
Priority Unit holders.
Allocation of net income and loss generally follows the allocation of
distributions of Net Operating Cash Flow as outlined above.
Owners' capital contributions, distributions and profit and loss with
respect to entities included in BG Owners' capital contributions,
distributions and profit and loss are allocated in accordance with the terms
of individual partnership agreements. Generally these items are allocated in
proportion to the respective ownership interests. Certain agreements also
provide for a preference return to certain partners.
9
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- ------------------------------------------------------------------------------
Deemed capital contributions and distributions
Branch and Associates (an entity included in BG) had historically made
advances to its partners using funds not required for the operation of the
shopping centers. In addition, Branch and Associates held a 99% limited
partnership interest in Branch Investment Partners, L.P. ("BIP"), which
owned Cumming 400 shopping center (one of the Initial Properties). BIP
contributed the assets and liabilities of Cumming 400 and certain other
partnership interests to the Company; however BIP also held other assets and
liabilities which were not part of the Business Combination. The
consolidated/combined financial statements have been adjusted for all
periods to eliminate the advances to its partners and the net assets and
related income of BIP not included in the Business Combination. The changes
in net assets eliminated, the related investment and interest income, and
advances have been reflected as deemed capital distributions or
contributions. Management believes that this results in a more meaningful
presentation of BG's historical operating results and financial position
since these net assets and advances were not included in the Business
Combination and will not be part of the Company's ongoing future operations.
Accordingly, the following amounts have been eliminated from the combined
financial statements:
December 31,
1995 1994
Net liabilities eliminated at end of period $ (185) $ (185)
Net liabilities eliminated at beginning of period (185) (244)
-------- ---------
(59)
Investment and interest income (93) 380
Net (advances) repayments during the period (59) 8
--------- -------
Deemed capital (distributions) contributions $ (152) $ 329
--------- --------
3. DEFERRED CHARGES
Deferred charges consist of the following:
December 31,
1996 1995
Deferred financing costs $ 1,013 $ 729
Leasing costs 827 370
------- --------
1,840 1,099
Less: accumulated amortization (351) (83)
------- --------
$ 1,489 $ 1,016
------- --------
10
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- ------------------------------------------------------------------------------
4. TRANSACTIONS WITH AFFILIATES
The Company provides management, acquisition, leasing and financial services
to various entities in which certain owners of the Company have an interest.
Financial services are also provided to the owners of the Company. Fees
received for such services are as follows:
December 31,
1996 1995 1994
Acquisition fees $ - $ 2 $ 390
Management fees 779 799 698
Financial services fees 166 239 197
Leasing commissions 204 455 224
Acquisition fees are earned from services provided to affiliates in
connection with the purchase of real estate and range from 3% to 5% of the
purchase price. Management fees are earned from managing the day to day
operation of properties at 3% to 5% of gross rent collected. Financial
services fees are earned from providing tax preparation and related
services. Leasing commissions are earned as a result of leasing activities
provided to various properties by the Company and generally range from 2.5%
to 5% of gross rents collected.
In connection with the Equity Commitment, the Company is required to pay a
monthly administrative fee to a unitholder of the Company. During 1996,
these fees totalled $300.
5. NOTES PAYABLE
Notes payable at December 31, 1996 and 1995 are comprised of the following:
December 31,
1996 1995
Mortgage notes payable $ 80,662 $ 59,857
Master commitment 13,055 13,700
Term facility 18,303 4,803
Other construction notes payable 4,080 -
Build-to-suit facility 1,946 -
Line of credit 741 2,500
Other notes payable 309 417
------- -------
$ 119,096 $ 81,277
------- -------
11
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- ------------------------------------------------------------------------------
Mortgage notes payable
Mortgage notes payable are comprised of 14 loans at December 31, 1996. The
mortgage notes payable are generally due in monthly installments of
principal and interest or interest only and mature at various dates through
2012.
Interest rates on fixed rate mortgage notes payable aggregating $66,539 at
December 31, 1996 range from 7.04% to 9.75% (weighted average of 8.00% at
December 31, 1996). Interest rates on variable rate mortgage notes payable
aggregating $14,123 at December 31, 1996 averaged 6.58% and are generally
based on prime and/or LIBOR indices. At December 31, 1996, the prime rate
was 8.25% and LIBOR ranged from 5.7375% to 5.8188% for one, three, six and
twelve month indices.
Master commitment
The Master Commitment represents a $30,000 commitment from a bank to provide
funding for development of and/or term financing for the acquisition of
shopping centers. The Company may draw on the Master Commitment in amounts
not to exceed 75% of the lesser of the actual cost or value of each shopping
center financed. Interest on loans made under the Master Commitment is
payable monthly at rates generally based on prime and/or LIBOR. The Master
Commitment also contains restrictions on borrowings based on certain
performance tests as defined in the debt agreement. At December 31, 1996 the
rate on the two outstanding loans was approximately 7.63%. The loans mature
in 1999.
Term facility
The Term Facility represents a $50,000 credit facility from a bank to
provide funding for the acquisition or refinancing of shopping centers.
Interest on loans made under the Term Facility is payable monthly at rates
generally based on prime and/or LIBOR. The Term Facility also contains
restrictions on borrowings based on certain performance tests as defined in
the debt agreement. At December 31, 1996 the rate on the four outstanding
loans was approximately 7.09%. The loans mature in November 1998.
Other construction notes payable
Other construction notes payable represent three construction loans to fund
development of three shopping centers. Two of the notes with an aggregate
principal balance of $2,380 require monthly payments of interest only at
rates generally based on prime and/or LIBOR. At December 31, 1996 the rate
on the loans was approximately 7.49%. One note with a principal balance of
$2,208 matures during 1998. The other note with a balance of $172 matures in
2001. The remaining construction note in the amount of $1,700 is payable to
a unitholder of the Company at a fixed rate of 9.00%. Interest and principal
are due at maturity in June of 1997.
Build-to-suit facility
The build-to-suit facility represents a $15,000 credit facility from a bank
to provide funding for the construction of certain retail projects. Interest
on loans made under the build-to-suit facility
12
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- ------------------------------------------------------------------------------
is payable monthly at rates generally based on prime and/or LIBOR. The
build-to-suit facility also contains restrictions on borrowings based on
certain performance tests as defined in the debt agreement. At December 31,
1996 the rate on the four outstanding loans was approximately 7.59%. The
loans mature at various dates during 1997.
Line of credit
The Company maintains a $3,000 line of credit with a bank to fund general
business operations. The line is renewable annually. Interest is payable
monthly at rates based on prime and/or LIBOR.
Other notes payable
Other notes payable at December 31, 1996 represent various loans due in
monthly installments of principal and interest at rates ranging from 8.28%
to 13.67%. The notes are collateralized by the related furniture, fixtures
and equipment.
Interest rate swap agreements
During 1995, the Company entered into three interest rate swap agreements to
protect the Company from fluctuations in interest rates on its variable rate
debt. At December 31, 1996, the agreements had notional amounts of $1,650,
$5,100 and $1,250 with maturity dates of June 12, 1998, June 12, 2000 and
June 12, 1998 and fixed rates of 6.08%, 6.25%, and 6.08%, respectively.
Notional amounts do not quantify risk or represent assets or liabilities of
the Company, but are used in the calculation of interest payments under the
contracts. These financial instruments are with a major financial
institution, the credit worthiness of which is subject to continuing review
and full performance is expected.
Extraordinary item
The extraordinary items resulted from mortgage prepayment penalties of
$1,142 in 1995 and the write-off of deferred financing costs of $76 and $243
in 1996 and 1995, respectively.
The aggregate maturities of the above mortgages and other notes payable
based on the existing terms discussed above are as follows:
1997 $ 5,628
1998 37,148
1999 14,028
2000 12,750
2001 1,228
2002 and thereafter 48,314
-------
$ 119,096
-------
13
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- ------------------------------------------------------------------------------
Pledged assets
All real estate assets included in the accompanying balance sheet are
pledged as collateral on the above mortgages and notes payable.
6. INVESTMENT IN UNCONSOLIDATED PROPERTY PARTNERSHIP
As described in Note 1, the Company's interest in a 50% or less owned
property partnership is included in the financial statements using the
equity method of accounting. At December 31, 1996 and 1995, the Company
effectively held a 30% interest in Roswell Village, Ltd.
7. SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
The following items did not provide or use cash during 1996 and accordingly
are not reflected in the statement of cash flows:
The Company assumed a loan in the amount of $8,774 during 1996 in
connection with the purchase of a shopping center.
The Company granted a minority interest in two shopping center properties
in exchange for a parcel of land and certain development services in the
amount of $1,439.
The Company sold two developments held for resale whereby the purchaser
assumed debt of $2,500.
The Company declared and accrued a distribution of $1,400 at December 31,
1996.
The following items did not provide or use cash during 1995 and accordingly
are not reflected in the statement of cash flows.
As a result of the application of purchase accounting for the exchange of
units for property interest in connection with the Business Combination,
real estate assets increased by $10,643, deferred charges decreased by
$1,000, tenant receivables decreased by $1,822 and partners' equity
increased by $7,821.
The Company assumed two loans totaling $7,570 during 1995 in connection
with the purchase of shopping centers.
In conjunction with the Business Combination, $2,830 of Units were issued
in satisfaction of $1,830 of unsecured notes payable and $1,000 of other
liabilities.
See Notes 1 and 2 for discussion of additional non-cash investing and
financing activities.
14
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- ------------------------------------------------------------------------------
8. OPERATING LEASES
The shopping centers are leased to tenants under operating leases with
expiration dates extending to the year 2018. Future minimum rentals under
noncancelable operating leases, excluding tenant reimbursements of operating
expenses and additional contingent rentals based on tenants' sales volume,
as of December 31, 1996 are as follows:
1997 $ 17,086
1998 14,853
1999 12,067
2000 10,410
2001 7,902
2002 and thereafter 48,304
Minimum rents, as presented in the consolidated/combined statements of
operations for the three years ended December 31, 1996, contain
straight-line adjustments for rental revenue increases over the terms of the
respective lease agreements in accordance with generally accepted accounting
principles. The aggregate rental revenue increases resulting from the
straight-line adjustments for the years ended December 31, 1996, 1995 and
1994 were $308, $251 and $189, respectively.
No single tenant collectively accounts for more than 10% of the Company's
total rental revenues.
9. INCOME TAXES
BPL is a partnership and is not subject to Federal and state income taxes.
Accordingly, no recognition has been given to income taxes in the
accompanying consolidated financial statements of BPL since the income or
loss is to be included in the tax returns of the individual partners. BPL's
tax return is subject to examination by federal and state taxing
authorities. If such examinations result in adjustments to distributive
shares of taxable income or loss, the tax liability of the partner's would
be adjusted accordingly.
Two of the entities included in the combined financial statements of BG are
foreign corporations and are subject to Federal and state income taxes;
however, the amounts accrued or paid for income taxes were not material in
relation to the combined financial statements. All other entities included
in the combined financial statements of BG are either partnerships or S
Corporations and are not subject to Federal and state income taxes.
Accordingly, no recognition has been given to income taxes in the
accompanying financial statements of BG since the income or loss of the
other entities is to be included in the tax returns of the individual
owners. The tax returns of the other entities are subject to examination by
Federal and state taxing authorities.
15
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- ------------------------------------------------------------------------------
If such examinations result in adjustments to distributive shares of taxable
income or loss, the tax liability of the owners of the other entities would
be adjusted accordingly.
10. PROFIT SHARING PLAN
The employees of the Company are eligible to participate in a profit sharing
plan pursuant to Section 401(k) of the Internal Revenue Code. The Company
matches 25% of the participant's contributions to the plan up to a maximum
of 4% of compensation. Contributions of $25, $25 and $24 were made for the
years ended December 31, 1996, 1995 and 1994, respectively.
11. COMMITMENTS AND CONTINGENCIES
Office and equipment leases
BPL is party to office and equipment operating leases with terms expiring in
years 1995 through 2001. Future minimum lease payments for noncancelable
office and equipment leases at December 31, 1996 are as follows:
1997 $ 368
1998 337
1999 340
2000 347
2001 175
The Company incurred $365, $408 and $370 of rent expense for the years ended
December 31, 1996, 1995 and 1994, respectively.
Contingencies
BPL is party to various legal actions which are incidental to its business.
Management believes that these actions will not have a materially adverse
effect on the consolidated financial statements.
Purchase commitments
At December 31, 1996, the Company had entered into agreements to acquire two
additional shopping centers for an aggregate purchase price of $16,440. The
acquisition of both centers was completed by January 31, 1997 and was funded
with $9,800 of new debt and $6,940 from the Equity Commitment. In addition,
at December 31, 1996, the Company had entered into an agreement to acquire
land for future development at an aggregate purchase price of $820, which
was completed by February 28, 1997.
16
<PAGE>
BRANCH PROPERTIES, L.P. AND PREDECESSOR
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- ------------------------------------------------------------------------------
12. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by
management using available market information and appropriate valuation
methodologies. Considerable judgment is necessary to interpret market data
and develop estimated fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts Branch could realize on
disposition of the financial instruments. The use of different assumptions
and/or estimation methodologies may have a material effect on the estimated
fair value amounts.
Cash equivalents, tenant receivables, other assets, accounts payable,
accrued expenses, mortgages and notes payable, interest rate swap agreements
and other liabilities are carried at amounts which reasonably approximate
their fair values.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 1996 and 1995.
Although management is not aware of any factors that would significantly
affect the reasonable fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since
that date and current estimates of fair value may differ significantly from
the amounts presented herein.
13. SUBSEQUENT EVENTS
As discussed in Note 2, certain partners in the Initial Properties have the
right to earn additional Priority Units subject to the achievement of
certain operating results. On January 1, 1997, the Company issued a total of
38,044 Priority Units in satisfaction of this obligation.
On February 28, 1997, the Company drew the remaining balance of the Equity
Commitment in the amount of $1,135.
On March 7, 1997, the Company transferred substantially all of its assets to
Regency Realty Corporation in exchange for approximately $97,831 in common
stock and/or common stock equivalents and the assumption of approximately
$122,144 of debt (net of minority interests). In addition, the unitholders
of the Company have the right to earn additional shares subject to certain
performance criteria as defined in the Contribution Agreement between the
parties.
17
<PAGE>
B. Pro Forma Financial Information
REGENCY REALTY CORPORATION
Pro Forma Consolidating Financial Statements
The following unaudited pro forma financial statements reflect (i) the
acquisition of the real estate and other assets of Branch Properties, L.P.
("Branch") by the Company, (ii) the assumption of the outstanding debt and other
liabilities of Branch, and (iii) the issuance of additional common stock of the
Company, the proceeds to be used for the partial reduction of outstanding debt
assumed. Such pro forma information is based upon the historical results of the
Company and Branch for the year ended December 31, 1996. These pro forma
financial statements should be read in conjunction with the December 31, 1996
financial statements and notes thereto of Branch included elsewhere in this Form
8-K, and the financial statements of the Company filed as part of its December
31, 1996 Form 10-K with the Securities and Exchange Commission. These unaudited
pro forma financial statements are not necessarily indicative of what the actual
financial position and results of operations of the Company would have been
assuming the transactions as set forth above, nor does it purport to represent
the financial position or results of operations of future periods.
Background of the Acquisition
On March 7, 1997, the Company acquired, through its partnership, Regency Retail
Partnership, L.P. (the "Partnership") of which a subsidiary of the Company is
the sole general partner, substantially all the assets of Branch, a privately
held real estate firm based in Atlanta, Georgia. The assets acquired from Branch
include 26 shopping centers totaling approximately 2,496,921 SF of gross
leasable area including 473,682 SF currently under development or redevelopment.
The Partnership acquired (i) a 100% fee simple interest in 19 of these operating
properties and (ii) partnership interests (ranging from 30% to 97%) in 4
partnerships with outside investors that own the remaining seven properties.
Purchase Price
The Partnership issued 3,373,801 units of limited partnership interest (the
"Units") and the Company issued 155,797 shares of Common Stock in exchange for
the assets acquired and the liabilities assumed from Branch. The Units will be
redeemable on a one-for-one basis in exchange for shares of Common Stock,
subject to approval of the conversion rights by the Company's shareholders at
the Company's 1997 annual meeting. The Company and Branch agreed to the Units
and shares to be issued based upon a purchase price of approximately $78 million
(3,529,598 combined Units and shares at $22.125, the fair market value of the
Company's Common Stock on the date the terms of the acquisition were reached)
plus the assumption of Branch's existing liabilities. On the date the
acquisition was publicly announced, the average fair market value of the
Company's common stock had risen to $26.85 per share. Accordingly, the purchase
price of Branch as reflected in the pro forma financial statements was increased
to approximately $100 million (3,529,598 Units and shares at $26.85 and
approximately $5 million in related transaction costs) plus the assumption of
Branch's existing liabilities.
Additional Purchase Price
Additional Units and shares of Common Stock may be issued on the fifteenth day
after the first, second and third anniversaries of the closing (each an
"Earn-Out Closing"), based on the performance of certain of the Partnership's
properties (the "Property Earn-Out"), and additional shares of Common Stock may
be issued at the first and second Earn-Out Closings based on revenues earned
from third party management and leasing contracts (the "Third Party Earn-Out"
estimated to be approximately $750,000). The formula for the Property Earn-Out
provides for calculating any increases in value on a property-by-property basis,
based on any increases in net income for certain properties in the Partnership's
portfolio as of February 15 of the year of calculation. The Property Earn-Out is
limited to $15,974,188 at the first Earn-Out Closing and $22,568,851 at all
Earn-Out Closings (including the first Earn-Out Closing).
<PAGE>
Regency Realty Corporation
Pro Forma Consolidating Balance Sheet
December 31, 1996
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Regency Retail L.P. ("Partnership")
---------------------------------------- Regency
Branch Pro Forma Partnership Regency Other Realty Corp.
Properties L.P. Adjustments Pro Forma Realty Corp. Adjustments Pro Forma
--------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Real estate rental property, at cost $ 156,997 56,425 (a) 213,422 390,673 - 604,095
Less: accumulated depreciation 12,891 - 12,891 26,213 - 39,104
-------------- ----------- ----------- ------------ ----------- ----------
Real estate rental property, net 144,106 56,425 200,531 364,460 - 564,991
-------------- ----------- ----------- ------------ ----------- ----------
Construction in progress 28,575 - 28,575 1,695 - 30,270
Investments in unconsolidated
real estate partnerships 710 - 710 1,035 - 1,745
Investment in Regency Retail, L.P. - - - - 26,000 (c) -
4,183 (d)
(30,183)(e)
-------------- ----------- ----------- ------------ ----------- ----------
Total investments in real estate, net 173,391 56,425 229,816 367,190 - 597,006
-------------- ----------- ----------- ------------ ----------- ----------
Cash and cash equivalents 325 - 325 8,293 - 8,618
Accounts receivable and other assets 10,017 (4,866)(a) 5,151 11,041 - 16,192
-------------- ----------- ----------- ------------ ----------- ----------
$ 183,733 51,559 235,292 386,524 - 621,816
============== =========== =========== ============ =========== ==========
Liabilities and Stockholders' Equity
Securitized mortgage loan $ - - - 51,000 - 51,000
Other mortgage loans 119,096 (25,728)(b) 93,368 46,906 - 140,274
Acquisition and development
line of credit - - - 73,701 - 73,701
-------------- ----------- ----------- ------------ ----------- ----------
Total Notes Payable 119,096 (25,728) 93,368 171,607 - 264,975
Tenant security and escrow deposits 701 - 701 1,382 - 2,083
Accounts payable & other liabilities 8,560 5,250 (a) 13,538 6,301 - 19,839
(272)(b)
-------------- ----------- ----------- ------------ ----------- ----------
Total Liabilities 128,357 (20,750) 107,607 179,290 - 286,897
-------------- ----------- ----------- ------------ ----------- ----------
Minority Interests in Consolidated
Partnerships 6,915 - 6,915 - - 6,915
-------------- ----------- ----------- ------------ ----------- ----------
Redeemable Partnership Units 48,461 46,309 (a) 120,770 508 (30,183)(e) 91,095
26,000 (b)
-------------- ----------- ----------- ------------ ----------- ----------
Stockholders' Equity
Common stock and additional paid in capital - - - 223,212 26,000 (c) 253,395
4,183 (d)
Distributions in excess of net income - - - (16,486) - (16,486)
-------------- ----------- ----------- ------------ ----------- ----------
Total Stockholders' Equity - - - 206,726 30,183 236,909
-------------- ----------- ----------- ------------ ----------- ----------
$ 183,733 51,559 235,292 386,524 - 621,816
============== =========== =========== ============ =========== ==========
</TABLE>
See notes to pro forma consolidating balance sheet
<PAGE>
Regency Realty Corporation
Notes to Pro Forma Consolidating Balance Sheet
(Unaudited)
(In thousands, except share and per share data)
Adjustments to Pro Forma Consolidating Balance Sheet - Regency Retail L.P.
("Partnership") Pro Forma
(a) To reflect the allocation of the total purchase price of $100,020 and the
assumption of existing liabilities including outstanding debt and tenant
security deposits. The total purchase price is comprised of $94,770
resulting from the issuance of 3,529,598 redeemable partnership units
("Units") in the Partnership, and additional liabilities incurred of
$5,250. The Units are valued based upon $26.85 per share, which is the
average closing price of Regency's common stock shortly before and after
the date of the acquisition announcement. The additional liabilities
incurred as part of the transaction are comprised of $750 for the issuance
of Units in the future as part of the agreement, $2,750 for legal,
accounting, consultants, real estate transfer costs, and other costs
related to the acquisition, and $1,750 for severance payments to existing
Branch employees to be terminated. The total purchase price has been
allocated to the assets and liabilities based upon estimated fair market
value.
(b) To reflect a partial paydown of existing mortgage loans ($25,728) and the
partial payment of other liabilities ($272) from proceeds of new Units
issued (1,175,142) to Regency for cash.
Other Adjustments to Pro Forma Consolidating Balance Sheet - Regency Realty
Corporation
(c) To reflect the issuance of 1,475,178 Regency common shares at $17.625 to a
stockholder (Security Capital) for cash and the subsequent investment of
the proceeds by Regency into additional Units of the Partnership.
(d) To reflect the redemption of 155,797 Units into Regency common stock at
$26.85 per share. The Unit holders may redeem their units for Regency
common stock subject to stockholder approval at the meeting expected to be
held during May, 1997; however, the Unit holders are not obligated to
redeem their units for Regency common stock. Outstanding Units not yet
redeemed for Regency common stock of 3,373,801 are shown as minority
interest in the pro forma consolidated financial statements until they
exercise their redemption right.
(e) To reflect the elimination of Regency's investment in the Partnership
(initial investment of $26,000 plus the market value of 155,727 Units
redeemed for Regency common stock.)
<PAGE>
Regency Realty Corporation
Pro Forma Consolidating Statement of Operations
For the Year Ended December 31, 1996
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Regency Retail L.P. ("Partnership")
---------------------------------- Regency
Branch Pro Forma Partnership Regency Consolidation Realty Corp.
Properties L.P Adjustments Pro Forma Realty Corp. Adjustments Pro Forma
-------------- ----------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Real estate operation revenues:
Minimum rent $ 16,449 - 16,449 34,706 - 51,155
Percentage rent 150 - 150 998 - 1,148
Recoveries from tenants 3,254 - 3,254 7,729 - 10,983
Other recoveries and income 321 - 321 - - 321
Acquisition and development fees 828 - 828 70 - 898
Leasing and brokerage 2,748 - 2,748 2,782 - 5,530
Management fees 879 - 879 592 - 1,471
Equity income of unconsolidated
partnerships - - - 70 - 70
-------------- ----------- ----------- ------------ ----------- ----------
Total real estate operation revenues 24,629 - 24,629 46,947 - 71,576
-------------- ----------- ----------- ------------ ----------- ----------
Real estate operation expenses:
Depreciation and amortization 3,165 1,976 (b) 5,141 8,758 - 13,899
Operating and maintenance 7,608 - 7,608 7,656 - 15,264
General and administrative 2,547 - 2,547 6,048 - 8,595
Real estate taxes 1,596 - 1,596 4,409 - 6,005
-------------- ----------- ----------- ------------ ----------- ----------
Total real estate operation expenses 14,916 1,976 16,892 26,871 - 43,763
-------------- ----------- ----------- ------------ ----------- ----------
Other expense (income)
Interest expense 7,366 (2,144)(a) 5,222 10,777 - 15,999
Interest income - - - (666) - (666)
Branch formation expenses 108 - 108 - - 108
-------------- ----------- ----------- ------------ ----------- ----------
Net other expense 7,474 (2,144) 5,330 10,111 - 15,441
-------------- ----------- ----------- ------------ ----------- ----------
Minority interest in consolidated (482) - (482) - (1,298) (c) (1,780)
property partnerships
-------------- ----------- ----------- ------------ ---------- ----------
Income before extraordinary item 1,757 168 1,925 9,965 (1,298) 10,592
from continuing operations
Preferred stock dividends - - - (58) - (58)
-------------- ----------- ----------- ------------ ---------- ----------
Income before extraordinary item
for common stockholders $ 1,757 168 1,925 9,907 (1,298) 10,534
============== =========== =========== ============ =========== ==========
Earnings per share (note (d)):
Primary $ 0.77
==========
Fully diluted $ 0.75
==========
</TABLE>
See notes to pro forma consolidating statement of operations
<PAGE>
Regency Realty Corporation
Notes to Pro Forma Consolidating Statements of Operations
(Unaudited)
(a) To reflect a reduction in interest expense due to the issuance of
additional Units to Regency for cash and the subsequent paydown of certain
outstanding mortgage loans in the amount of $25.7 million. (based on
weighted average rate of 8.33% on current outstanding debt).
(b) To reflect an increase in depreciation expense due to the increased
carrying value of the real estate rental property acquired as part of this
transaction.
December 31,
1996
---------------
Operating real estate assets, net 144,106,000
Purchase price allocation to real
estate investment 56,424,706
---------------
Adjusted book value 200,530,706
Estimated % of book value
allocated to depreciable property 78%
---------------
Depreciation basis of real estate investment 156,413,951
Estimated average useful life 32
---------------
Annual depreciation expense 4,887,936
Depreciation expense recorded 2,912,294
===============
Pro Forma depreciation adjustment 1,975,642
===============
(c) Minority interest in Regency Retail L.P.
At closing, the Company invested $26 million in the Partnership in
exchange for Units, and issued 155,797 shares of Common stock. For
purposes of determining minority interest, the Company owned 32.6% of the
outstanding Units in the Partnership. If approved by the Company's
shareholders, the outstanding Units held by minorities will be redeemable
for Common stock. Minority interest has been reflected in the pro forma
income statement as if the outstanding Units have not been redeemed.
<PAGE>
Regency Realty Corporation
Notes to Pro Forma Consolidating Statements of Operations
(Unaudited)
(d) Earnings per Share
December 31,
1996
---------------
Primary Common Shares and Per Share Calculation:
Regency - weighted average shares outstanding 10,341,239
Units redeemed for Regency common stock 155,797
Units redeemable for Regency common
stock upon shareholder approval 3,373,801
Redeemable Units issuable in the
future not contingent 33,898
Issuance of Regency common stock to stockholder 1,475,178
---------------
Total Primary Shares 15,379,913
---------------
Income from continuing operations
before extraordinary item
for common stockholders 10,534,443
Minority Interest in Partnership 1,297,915
---------------
Income for Primary Shareholders 11,832,358
---------------
Primary earnings per share $ 0.77
===============
Fully Diluted Common Shares and Per Share Calculation:
Contingent Units or common stock that 1,020,061
could be issued to previous Branch owners
in 1998, 1999, and 2000 if
earned per the terms of the
Contribution Agreement (note 1).
---------------
Total Fully Diluted Shares 16,399,974
---------------
Required increase in income from real
estate operations necessary to
earn contingent shares, less
applicable depreciation on
increased purchase price. 438,718
---------------
Income from continuing operations
before extraordinary item for common
stockholders for computation
of fully diluted earnings per share 12,271,076
===============
Fully diluted earnings per share $ 0.75
===============
Note 1: Since issuance of additional consideration is contingent upon
increased earnings, net income has been adjusted to give effect to the
increase in earnings specified by the Contribution Agreement that
results in the largest potential dilution, and outstanding shares have
been adjusted to include those shares contingently issuable upon
attainment of the increased earnings level.
<PAGE>
SIGNATURES
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 hereunto duly authorized.
REGENCY REALTY CORPORATION
(registrant)
March 20, 1997 By: /s/ J. Christian Leavitt
--------------------------------------
J. Christian Leavitt
Secretary and Treasurer
