<PAGE>
FILED PURSUANT TO
RULE 424(b)(5)
FILE NO: 333-2546
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 10, 1997)
- -------------------------------------------------------------------------------
2,415,000 Shares
[LOGO OF REGENCY REALTY CORPORATION APPEARS HERE]
Common Stock
- -------------------------------------------------------------------------------
Regency Realty Corporation (the "Company") is a self-administered, self-
managed real estate investment trust ("REIT") which acquires, owns, develops
and manages neighborhood shopping centers in targeted infill markets in the
Southeast, the Mid-Atlantic and the lower Midwest. As of June 30, 1997, the
Company owned, directly or through joint ventures, 86 properties containing an
aggregate of approximately 9.4 million square feet of Company-owned gross
leasable area, including nine shopping centers in the process of development
or redevelopment.
All of the shares of common stock of the Company, par value $.01 per share
(the "Common Stock"), offered hereby (the "Offering") are being sold by the
Company. The Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "REG." The last reported sales price of the Common
Stock on the NYSE on July 10, 1997 was $27.75 per share. See "Price Range of
Common Stock and Dividends."
The shares of Common Stock are subject to certain restrictions on ownership
designed to preserve the Company's status as a REIT and a domestically-owned
REIT for federal income tax purposes. The Common Stock is not a suitable
investment for persons who are foreign investors, including entities that are
directly or indirectly owned by foreign investors. See "Capital Stock--
Restrictions on Ownership" and "Risk Factors--Unsuitable Investment for Non-
U.S. Investors" in the accompanying Prospectus.
A wholly owned subsidiary of Security Capital U.S. Realty (together with
Security Capital U.S. Realty, "SC-USREALTY") currently owns 42.9% of the
outstanding Common Stock of the Company and has the right to maintain its
percentage ownership of the Common Stock pursuant to certain participation
rights granted by the Company. SC-USREALTY has agreed to purchase 1,785,000
shares of Common Stock directly from the Company in a concurrent offering at
the public offering price. Upon consummation of this purchase, SC-USREALTY
will own 42.8% of the outstanding Common Stock. SC-USREALTY will have the
right to acquire up to 267,750 additional shares if the Underwriters exercise
their over-allotment option in full, as described below. See "Risk Factors--
Concentration of Ownership of Company Stock" in the accompanying Prospectus.
SEE "RISK FACTORS" ON PAGES 3 TO 6 OF THE ACCOMPANYING PROSPECTUS FOR A
DISCUSSION OF CERTAIN MATERIAL FACTORS WHICH SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................ $27.25 $1.43 $25.82
- --------------------------------------------------------------------------------
Total(3)................................. $65,808,750 $3,453,450 $62,355,300
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $176,500.
(3) The Company has granted the several Underwriters a 30-day over-allotment
option to purchase up to 362,250 additional shares of Common Stock on the
same terms and conditions as set forth above. If all such shares are
purchased by the Underwriters, the total Price to Public will be
$75,680,062, the total Underwriting Discounts and Commissions will be
$3,971,467 and the total Proceeds to Company will be $71,708,595. See
"Underwriting."
- -------------------------------------------------------------------------------
The shares of Common Stock are offered by the several Underwriters, subject to
delivery by the Company and acceptance by the Underwriters, to prior sale and
to withdrawal, cancellation or modification of the offer without notice.
Delivery of the shares to the Underwriters is expected to be made at the
office of Prudential Securities Incorporated, One New York Plaza, New York,
New York, on or about July 16, 1997.
PRUDENTIAL SECURITIES INCORPORATED
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
RAYMOND JAMES & ASSOCIATES, INC.
THE ROBINSON-HUMPHREY COMPANY, INC.
July 10, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE,
PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE
COMMON STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
appearing elsewhere in this Prospectus Supplement, in the accompanying
Prospectus and in the documents incorporated herein by reference. Unless
otherwise indicated, all information in this Prospectus Supplement assumes that
the Underwriters' over-allotment option will not be exercised.
THE COMPANY
The Company is a self-administered, self-managed REIT which acquires, owns,
develops and manages neighborhood shopping centers in targeted infill markets
in the Southeast, the Mid-Atlantic and the lower Midwest. As of June 30, 1997,
the Company owned, directly or through joint ventures, 86 properties, including
82 shopping centers, nine of which are in the process of development or
redevelopment, containing approximately 9.1 million square feet of Company-
owned gross leasable area ("GLA") and four suburban office buildings containing
approximately 300,000 square feet of GLA. Additionally, the Company had pending
the acquisition of Tamiami Trail, an additional shopping center in south
Florida. Sixty-seven of the Company's shopping centers (including Tamiami
Trail) are anchored by grocery stores. The Company believes that its portfolio
of grocery anchored shopping centers is one of the largest (measured by total
GLA) in the geographical areas in which it operates. Overall, the Company owns
and/or manages approximately 14.3 million square feet of total shopping center
GLA in 140 properties, which includes all of the shopping centers owned by the
Company and 54 properties owned by third parties. The Company's properties are
located in eight states, principally in Florida and Georgia. The Company's
shopping centers were approximately 95.0% leased and the suburban office
buildings were approximately 96.3% leased as of June 30, 1997.
In addition to the management of property for third parties, the Company also
provides site selection services for Stein Mart, an off-price retailer, and
several other retailers. The Company also is active in the build- to-suit
business for Eckerd Drug Stores and other retailers. The Company leases these
stores to the retailers on a triple net basis and typically sells the stores
following completion of construction.
Since the Company's initial public offering in October 1993, the Company has
successfully acquired 62 shopping centers containing an aggregate of
approximately 7.0 million square feet of GLA.
The Company's executive offices are located at 121 West Forsyth Street, Suite
200, Jacksonville, Florida 32202, and its telephone number is (904) 356-7000.
The Company operates additional offices in Ft. Lauderdale, Tampa and Stuart,
Florida and in Atlanta, Georgia.
S-3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered Hereby................ 2,415,000(1)
Common Stock to be acquired by SC-USREALTY
in Concurrent Offering.................... 1,785,000(2)
Common Stock to be Outstanding after the
Offering and Concurrent Offering.......... 21,966,527(1)(2)(3)
Use of Proceeds............................ To repay indebtedness outstanding under the
Company's revolving line of credit. See
"Use of Proceeds."
NYSE Symbol ............................... REG
</TABLE>
- --------
(1) Does not include 362,250 shares of Common Stock issuable if the
Underwriters exercise the over-allotment option in full.
(2) Does not include up to 267,750 shares of Common Stock if SC-USREALTY elects
to exercise its participation rights upon exercise, if any, by the
Underwriters of their over-allotment option.
(3) Excludes (i) 2,975,468 shares of Common Stock issuable upon conversion of
the Company's non-voting Class B Common Stock, (ii) 2,726,898 shares
subject to issuance under certain conditions pursuant to the Company's 1993
Long Term Omnibus Plan (of which 1,331,507 shares are subject to
outstanding options), (iii) an aggregate of 193,276 shares reserved for
issuance under the Company's 401(k) and Profit Sharing Plan and its Stock
Grant Plan, and (iv) 596,350 shares of Common Stock reserved for issuance
under the Company's Dividend Reinvestment and Stock Purchase Plan. Also
excludes an aggregate of 574,195 shares of Common Stock which, depending on
the circumstances, must or may be issued to the holders of limited
partnership interests ("OP Units") in the Company's subsidiary operating
partnerships, if such holders exercise their right to require the operating
partnerships to redeem their OP Units.
S-4
<PAGE>
RECENT DEVELOPMENTS
ACQUISITIONS
During the three months ended June 30, 1997, the Company acquired a total of
five neighborhood shopping centers with aggregate GLA of 881,625 square feet.
At that date, the Company had a binding contract to purchase Tamiami Trail, a
shopping center in south Florida with GLA of 110,867 square feet, which is
expected to close in mid-July 1997. The following table sets forth information
concerning these acquisitions:
<TABLE>
<CAPTION>
YEAR
DATE GLA BUILT/ PERCENT COMPLETED ANCHOR
ACQUIRED PROPERTY LOCATION (SQ.FT.)(1) RENOVATED LEASED(2) COST(3) TENANTS
----------- ----------------- ------------------ ----------- --------- --------- ----------- -----------------------
<C> <C> <C> <C> <C> <C> <C> <S>
04-15-97 Mainstreet Square Orlando, FL 107,159 1988 88.8% $ 5,855,234 Winn-Dixie, Walgreens
04-25-97 East Port Plaza Port St. Lucie, FL 232,270 1991 99.7% $14,907,688 Publix, Walgreens,
Kmart, Sears Homelife
06-06-97(4) Hyde Park Plaza Cincinnati, OH 374,537 1962/ 96.6% $42,974,500(4) Kroger, Barnes & Noble
1995 Bookstore, The Gap,
Walgreens, Thriftway
06-30-97 Rivermont Station Atlanta, GA 90,323 1996 100.0% $13,448,000 Harris Teeter, CVS
Drug, Blockbuster Video
06-30-97 Lovejoy Station Atlanta, GA 77,336 1995 95.0% $ 7,099,500 Publix
(5) Tamiami Trail Miami, FL 110,867 1987 93.0% $ 9,560,300 Publix, Eckerd Drugs
------- ----- -----------
Total/Weighted Average 992,492 96.3% $93,845,222
======= ===== ===========
</TABLE>
- --------
(1) All Company-owned GLA.
(2) As of June 30, 1997.
(3) Cash cost except as noted, including closing costs and reserves for
capital expenditures.
(4) Includes assumption of mortgage debt of $24,750,000 and the issuance of
general and limited partnership interests valued at $176,900.
(5) The Company has entered into an agreement for the acquisition of Tamiami
Trail which is expected to close in mid-July, 1997.
EQUITY FINANCING ACTIVITIES
On March 7, 1997, the Company acquired through a subsidiary operating
partnership substantially all the assets of Branch Properties, L.P.
("Branch"), a privately held real estate firm based in Atlanta, Georgia. The
acquired assets include 18 operating shopping centers and 8 development or
redevelopment shopping centers in Georgia, Florida, North Carolina, South
Carolina and Tennessee totalling approximately 2.5 million square feet of GLA.
The consideration included 3,373,801 OP Units, 155,797 shares of Common Stock
and the right to receive additional OP Units and shares based on an earn-out
(estimated at an aggregate maximum of 1,053,959 OP Units and shares). The OP
Units are redeemable on a one-for-one basis for shares of Common Stock. On
June 13, 1997, 3,027,080 OP Units were redeemed for an equal number of shares
of Common Stock, following shareholder approval of such redemption rights at
the Company's 1997 annual meeting of shareholders.
On June 26, 1997, SC-USREALTY purchased $41.8 million of Common Stock from
the Company at a price of $17.625 per share, completing the final stage of its
$132 million investment commitment made in June 1996 under its stock purchase
agreement with the Company. The net proceeds from the shares sold to SC-
USREALTY were used to repay indebtedness under the Company's revolving line of
credit. SC-USREALTY, which has participation rights entitling it to maintain
its percentage ownership of the Common Stock, has the right to acquire, at a
price of $22 1/8 per share, up to 1,750,000 shares (plus a pro-rata number
based on any earn-out consideration) in order to maintain its percentage
ownership position in connection with the Branch transaction. See "Risk
Factors--Concentration of Ownership of Company Stock" and "--Commitment to
Sell Shares at Below Offering Price" in the accompanying Prospectus.
S-5
<PAGE>
BUSINESS AND PROPERTIES
As of June 30, 1997, the Company (i) owned and operated 82 neighborhood
shopping centers and four suburban office complexes in the Southeast, Mid-
Atlantic and lower Midwest (including nine shopping centers under development
or redevelopment), and (ii) had pending the acquisition of an additional
neighborhood shopping center in south Florida, which is expected to close in
mid-July 1997 (collectively, the "Properties").
The 87 Properties consist of approximately 9.5 million square feet of
Company-owned GLA (including the 110,867 square feet to be acquired in the
Tamiami Trail acquisition). At June 30, 1997, the locations of Properties by
GLA were as follows:
<TABLE>
<CAPTION>
COMPANY OWNED PERCENT OF ANCHOR OWNED TOTAL GLA NUMBER OF
GLA (SQ.FT.) TOTAL GLA (SQ.FT.) (SQ.FT.) PROPERTIES
------------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Florida............. 5,014,431 52.6% 297,481 5,311,912 43
Georgia............. 2,569,964 27.0% -- 2,569,964 25
North Carolina...... 554,332 5.8% -- 554,332 6
Alabama............. 516,080 5.4% 42,848 558,928 5
Ohio................ 374,537 3.9% -- 374,537 1
Tennessee........... 202,477 2.1% -- 202,477 3
Mississippi......... 185,061 1.9% 54,962 239,623 2
South Carolina...... 117,631 1.3% -- 117,631 2
--------- ------ ------- --------- ---
Total.............. 9,534,513 100.0% 395,291 9,929,804 87
========= ====== ======= ========= ===
</TABLE>
The shopping center Properties average 111,280 square feet in size and
generally have one or more anchor tenants. The majority are anchored by Publix
(27), Winn-Dixie (13), Kroger (6) or Harris Teeter (4). In six of the shopping
centers the anchor space is owned by the anchor tenants, consisting of four
grocery stores and two Wal-Mart stores. To the extent that the shopping
centers are anchored by tenant-owned space, the Company can capitalize on the
customer drawing power and other advantages provided by these anchor tenants
while not bearing the leasing and operating risks associated with leasing
space to such tenants. In most instances, these stores reimburse the Company
for their share of common area maintenance expenses.
The following table sets forth, as of June 30, 1997, information as to
retail tenants which individually account for 1.0% or more of total rent from
the Properties:
<TABLE>
<CAPTION>
COMPANY PERCENT OF TOTAL PERCENT OF
LEASED GLA COMPANY TOTAL TOTAL
TENANT STORES (SQ. FT.) GLA RENT (1) RENT (2)
- ------ ------ --------- ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Publix.............. 27 1,167,614(3) 12.2% $9,775,009 9.9%
Winn-Dixie.......... 13 573,921 6.0% $4,004,676 4.0%
Kroger.............. 6 359,456 3.8% $3,095,298 3.1%
Harris Teeter....... 4 184,563 1.9% $2,576,534 2.6%
Walgreens........... 12 162,865 1.7% $2,176,875 2.2%
K-Mart.............. 4 341,264 3.6% $1,975,338 2.0%
Eckerd.............. 18 178,208(4) 1.9% $1,935,187 2.0%
Wal-Mart............ 5 393,487 4.1% $1,907,607 1.9%
Blockbuster......... 16 105,542(5) 1.1% $1,678,248 1.7%
AMC Theatres........ 1 72,616 0.8% $1,095,617 1.1%
Bruno's............. 3 119,840 1.3% $1,058,624 1.1%
</TABLE>
- --------
(1) Total rent includes annualized base rent, percentage rent, and
reimbursements for common area maintenance, real estate taxes, and
insurance.
(2) Based on annualized total rent on all the Properties.
(3) Includes 42,112 square feet occupied by Publix at Tamiami Trail.
(4) Includes 10,356 square feet occupied by Eckerd at Tamiami Trail.
(5) Includes 5,480 square feet occupied by Blockbuster at Tamiami Trail.
S-6
<PAGE>
The following table sets forth additional information concerning the
Properties as of June 30, 1997:
<TABLE>
<CAPTION>
GROSS
LEASABLE
YEAR AREA
YEAR BUILT/ (SQ. PERCENT
ACQUIRED RENOVATED* FT.) LEASED MAJOR TENANTS
-------- ---------- -------- ------- ----------------------------------
FLORIDA:
Jacksonville / North Florida:
<S> <C> <C> <C> <C> <C>
Bolton 1994 1988 172,938 97.4% Wal-Mart, Blockbuster
Plaza
Courtyard 1987 1987 67,794 97.7% Albertsons (a), Luria's (c)
Old St. 1996 1990 170,220 97.5% Publix, Eckerd Drugs, Waccamaw
Augustine
Plaza
Regency 1997 1992 218,665 99.0% CompUSA, Luria's (c), Office Depot
Court (b)
The Quad- 1984 1984-85 188,502 97.8% RS&H, Total System Service, GTE,
rant (o) Xerox, AmSouth Bank
Westland 1988 1988 36,304 91.5% Logistics Services
One (o)
Palm Har- 1996 1978/1991 168,448 99.6% Publix, Eckerd Drugs, Bealls,
bor Blockbuster
Anastasia 1993 1988 102,342 98.2% Publix
Plaza
Millhopper 1993 1974 84,444 99.4% Publix, Eckerd Drugs, Clothworld
Newberry 1994 1986 181,006 96.8% Publix, K-Mart, Jo-Ann Fabrics
Square
Carriage 1994 1978 76,833 84.4% TJ Maxx
Gate
South Mon- 1997 1998 80,214 82.0% Winn-Dixie, Eckerd Drugs
roe Com-
mons (d)
Village 1988 1988 105,827 91.3% Wal-Mart (a), Stein Mart,
Commons Ben Franklin, Shoe Station
(JV-10%)
Ensley 1997 1977 62,361 97.1% Delchamps
Square
(b)(JV-
50%)
Miami / Ft. Lauderdale:
Aventura 1994 1974 102,876 81.1% Publix, Eckerd Drugs
North Mi- 1993 1988 42,500 100.0% Publix, Eckerd Drugs
ami
Fairway 1985 1985 33,135 88.8% Tarmac of Florida
Executive
Center (o)
Palm 1997 1998 76,067 78.3% Winn Dixie
Trails
(d)
University 1990 1990 124,101 93.9% Albertsons (a), PetsMart,
Market Linen Supermarket
Place
Welleby 1996 1982 109,949 92.3% Publix, Walgreens
Berkshire 1994 1992 106,434 98.8% Publix, Walgreens
Commons
Tamiami 1997 1987 110,867 93.0% Publix, Eckerd Drugs, Blockbuster
Trail (f)
Orlando:
Mainstreet 1997 1988 107,159 88.8% Winn-Dixie, Walgreens
Square
Mariners 1997 1986 117,665 95.8% Winn-Dixie, Walgreens, Blockbuster
Village
Palm Beach / Treasure Coast:
Wellington 1995 1990 178,555 93.7% Winn-Dixie, Walgreens,
Market United Artists
Place
Wellington 1996 1992 105,150 93.1% Publix, Eckerd Drug
Town
Square
East Port 1997 1991 232,270 99.7% Publix, Walgreens, Kmart,
Plaza Sears Homelife
Tequesta 1996 1986 109,766 96.1% Publix, Walgreens
Shoppes
Chasewood 1992 1986 183,844 95.2% Publix, Walgreens, Ben Franklin
Plaza
Martin 1992 1988 48,932 70.3% 1st Bank of Indiantown
Downs
Shoppes
Martin 1996 1996 64,546 97.8% Publix
Downs
Town Cen-
ter
Martin 1992 1985 121,998 92.9% Coastal Care, Walgreens
Downs
Village
Center
Ocean 1992 1985 111,551 95.3% Publix, Coastal Care, Walgreens
Breeze
Ocean East 1996 1997 112,543 75.2% Stuart Fine Foods, Coastal Care
(d) (JV-
25%)
</TABLE>
- --------
Footnotes appear on page S-10.
S-7
<PAGE>
<TABLE>
<CAPTION>
GROSS
YEAR LEASABLE
YEAR BUILT/ AREA PERCENT
ACQUIRED RENOVATED* (SQ. FT.) LEASED MAJOR TENANTS
-------- ---------- --------- ------- -----------------------------
Tampa Bay Area:
<S> <C> <C> <C> <C> <C>
Peachland Prome- 1995 1991 82,082 96.9% Publix, Ace Hardware
nade
Market Place 1995 1983 90,296 98.1% Publix, Eckerd Drugs
Paragon Cable 1993 1993 40,298 100.0% Paragon Cable
Building (o)
Regency Square 1986 1986 341,751 89.7% Marshalls, Jo-Ann Fabrics,
at Brandon AMC Theaters, Lurias (c)
Staples, Michaels, TJ Maxx,
S&K Menswear
Seven Springs 1994 1986 162,580 95.1% Winn-Dixie, K-mart
Terrace Walk 1990 1990 50,926 96.3% Luria's (c)
Town Square (b) 1997 1986 42,969 100.0% Kash N Karry, Rite Aid
University Col- 1996 1984 106,627 98.7% Kash N Karry (a), Eckerd
lections Drug, Jo-Ann Fabrics
Village Center 1995 1980/1993 181,096 100.0% Publix, Walgreens, Stein Mart
--------- ------
5,014,431 94.2%
--------- ------
GEORGIA:
Atlanta:
Ashford 1997 1993 53,345 100.0% Barnes & Noble, Gradys
Place (b)
Braelin 1997 1991 225,922 100.0% Kroger, K-Mart
Village (b)(JV-
55%)
Briarcliff 1997 1962 39,201 100.0% Drug Emporium
LaVista (b)
Briarcliff 1997 1990 192,660 100.0% Uptons, TJ Maxx, Office Depot
Village (b)
Buckhead 1997 1984 55,227 96.3% Outback Steakhouse
Court (b)
Cambridge Square 1996 1979 68,725 85.9% Winn-Dixie, Big B Drugs
Cromwell 1997 1990 81,826 100.0% Haverty's, Big B Drugs
Square (b)
Cumming 400 (b) 1997 1994 126,899 100.0% Publix, Big Lots
Dunwoody 1997 1986 79,974 98.2% A&P, Eckerd Drugs
Hall (b)
Dunwoody 1997 1986 114,657 98.3% Bruno's
Village (b)
(JV-50%)
Loehmann's 1997 1986 137,635 86.9% Loehmann's, Eckerd Drugs
Plaza (b)
Lovejoy Station 1997 1995 77,336 95.0% Publix, Video Wonderland
Memorial 1997 1995 177,270 97.6% Publix, TJ Maxx,
Bend (b) Linen Supermarket
Orchard Square 1995 1987 85,940 89.8% A&P, Big B Drugs
Paces Ferry 1997 1987 61,693 95.1% Houstons, Blue Ridge
Plaza (b)
Powers Ferry 1997 1987 97,809 99.0% Harry's, Drugs for Less
Square (b)
Powers Ferry (b) 1997 1994 78,895 100.0% Publix, Big B Drug
Rivermont Sta- 1997 1996 90,323 100.0% Harris Teeter, CVS Drugs,
tion Blockbuster, Calico Corners
Roswell 1997 1997 147,555 93.2% Publix, Rhodes Furniture,
Village (b)(d) Eckerd Drugs, Hancock Fabrics
(JV-70%)
Russell Ridge 1994 1995 98,556 100.0% Kroger, Blockbuster
Sandy Plains 1996 1979/1992 168,513 79.3% Kroger, Revco, Blockbuster,
Village Ace Hardware
Sandy 1997 1997 76,625 86.7% Kroger, Blockbuster
Springs (b)(d)
Trowbridge 1997 1997 62,761 100.0% Publix
Crossing (b)(d)
(JV-55%)
</TABLE>
- --------
Footnotes appear on page S-10.
S-8
<PAGE>
<TABLE>
<CAPTION>
GROSS
YEAR LEASABLE
YEAR BUILT/ AREA PERCENT
ACQUIRED RENOVATED* (SQ. FT.) LEASED MAJOR TENANTS
-------- ---------- --------- ------- ---------------------------
Other Georgia Markets:
<S> <C> <C> <C> <C> <C>
LaGrange 1993 1989 76,327 94.9% Winn-Dixie, Eckerd Drugs
Marketplace
Parkway 1996 1983 94,290 94.3% Kroger
Station
--------- ------
2,569,964 95.4%
--------- ------
ALABAMA:
Birmingham:
Village In 1993 1987 69,300 97.8% Bruno's, Big B Drugs,
Trussville Movie Gallery
West County 1993 1987 129,155 100.0% Food World (a), Wal-Mart,
Marketplace Eckerd Drugs
Other Ala-
bama Mar-
kets:
Bonner's 1993 1985 87,280 100.0% Winn-Dixie, Wal-Mart
Point
Country Club 1993 1991 67,622 100.0% Winn-Dixie, Harco Drugs
The Market- 1993 1987 162,723 100.0% Winn-Dixie, Wal-Mart (c),
place Beall's
--------- ------
516,080 99.7%
--------- ------
NORTH CAROLINA:
Charlotte:
Carmel Com- 1997 1979 132,647 93.9% Fresh Market, Eckerd Drugs,
mons Blockbuster
City View 1996 1993 77,550 98.5% Winn-Dixie, Revco
Union Square 1996 1989 97,191 98.8% Harris Teeter, Revco,
Consolidated Theatres,
Blockbuster
Raleigh /
Durham:
Glenwood 1997 1983 42,864 100.0% Harris Teeter
Village(b)
Woodcroft 1996 1984 85,353 98.6% Food Lion, Kerr Drugs
Ashville:
Oakley Plaza 1997 1988 118,727 100.0% Bi-Lo, Baby Superstore,
Western Auto, Revco
--------- ------
554,332 97.9%
--------- ------
TENNESSEE:
Nashville:
Harpeth Vil- 1997 1998 69,110 78.9% Bruno's
lage (b)(d)
(JV-97%)
Marketplace 1997 1997 23,500 100.0% Office Max
(b)(d) (JV-
67%)
Peartree 1997 1997 109,867 99.1% Harris Teeter, Office Max,
Plaza (b) Eckerd Drugs
--------- ------
202,477 92.3%
--------- ------
SOUTH CAROLINA:
Charleston:
Beaufort 1997 1998 37,888 100.0% Publix
Crossing
(b)(d)
Merchants 1997 1997 79,743 78.6% Publix
Village
(b)(d)
--------- ------
117,631 85.5%
--------- ------
</TABLE>
- --------
Footnotes appear on page S-10.
S-9
<PAGE>
<TABLE>
<CAPTION>
GROSS
YEAR LEASABLE
YEAR BUILT/ AREA PERCENT
ACQUIRED RENOVATED* (SQ. FT.) LEASED MAJOR TENANTS
-------- ---------- --------- ------- ----------------------------------
<S> <C> <C> <C> <C> <C>
MISSISSIPPI:
Columbia Market- 1993 1988 136,002 97.0% Winn-Dixie, Wal-Mart
place
Lucedale Market- 1993 1989 49,059 100.0% Delchamps, Wal-Mart (a)
place
--------- ------
185,061 97.8%
--------- ------
OHIO:
Cincinnati:
Hyde Park Plaza 1997 1962/1995 374,537 96.6% Kroger, Thriftway, Barnes & Noble,
(JV-99%) The Gap, Walgreens
Jo-Ann Fabrics, Famous Footwear
--------- ------
Total/Weighted
Average 9,534,513 95.1%
========= ======
</TABLE>
- --------
* Year built or renovated for properties acquired in March 1997 from Branch
are approximations and are subject to further verification and revision.
(a) Anchor tenant that owns its own pad and building. Aggregate anchor-owned
space in the portfolio equals 395,000 square feet and is not included in
GLA above.
(b) Property acquired from Branch in March 1997.
(c) Closed store; however, as of June 30, 1997 the tenant was current in its
rent payments except for the Terrace Walk Luria's.
(d) Property currently under development or redevelopment.
(f) The Company has entered into an agreement for the acquisition of Tamiami
Trail which is expected to close in mid-July, 1997.
(JV) Property owned through a joint venture or partnership. Percentage
represents the Company's percentage interest. Excludes properties owned
by partnerships in which the interests of third party partners consist of
Common Stock equivalents.
(o) Suburban office building.
S-10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby, after deduction of the underwriting discounts and commissions and
estimated offering expenses, will be approximately $62.2 million ($71.5
million if the Underwriters' over-allotment option is exercised in full). The
net proceeds to the Company from the sale of 1,785,000 shares of Common Stock
being sold to SC-USREALTY in the concurrent offering, after deducting
estimated offering expenses, will be approximately $48.6 million ($55.9
million if SC-USREALTY elects to exercise its participation rights in full
upon exercise by the Underwriters of their over-allotment option in full). All
of the net proceeds from both offerings will be used by the Company to repay
borrowings outstanding under the Company's revolving line of credit, which
matures in May 1999 and had an interest rate of 7.18% per annum as of June 30,
1997 (floating rate of LIBOR plus 1.50%). Such borrowings were incurred in the
past year to finance the acquisition of shopping centers.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1997, on a historical and pro forma basis as adjusted to give effect to
(i) the acquisition of five Properties completed after March 31, 1997, (ii)
the pending acquisition of Tamiami Trail, and (iii) the completion of this
Offering and the concurrent offering to SC-USREALTY and the application of the
net proceeds as described under "Use of Proceeds."
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
(IN THOUSANDS)
AS
OUTSTANDING ADJUSTED
----------- --------
<S> <C> <C>
Debt:
Mortgage loans payable(1)................................ $200,049 $224,799
Line of credit(2)(3)(4).................................. 104,851 21,337
-------- --------
Total debt.............................................. 304,900 246,136
-------- --------
Redeemable partnership units (5).......................... 91,220 9,943
-------- --------
Stockholder's equity:
Preferred stock $.01 par value:
10,000,000 shares authorized;
no shares outstanding................................... -- --
Common stock $.01 par value:
150,000,000 shares authorized;
12,323,183 shares issued and
outstanding at March 31, 1997(3)(4)(5)(6)............... 123 219
Special common stock--10,000,000
shares authorized: Class B $.01
par value, 2,500,000
shares issued and outstanding........................... 25 25
Additional paid in capital (3)(4)(5)(6).................. 249,416 483,206
Distributions in excess of net income.................... (15,721) (15,721)
Stock loans.............................................. (2,504) (2,504)
-------- --------
Total stockholder's equity.............................. 231,339 465,225
-------- --------
Total capitalization................................... $627,459 $721,304
======== ========
</TABLE>
- --------
(1) Reflects assumption of approximately $24.8 million of mortgage debt in
connection with the acquisition of Hyde Park Plaza.
(2) Reflects (i) new borrowings of approximately $38.9 million used to acquire
three shopping centers during the period from April 1 through June 6, 1997
as more fully described in the Company's Current Report on
S-11
<PAGE>
Form 8-K dated June 6, 1997, and (ii) additional new borrowings of
approximately $30.1 million to acquire two shopping centers on June 30,
1997 and to consummate the pending acquisition of Tamiami Trail.
(3) Reflects application of net proceeds of $41.8 million from the issuance of
2,372,422 shares of Common Stock at $17.625 per share on June 26, 1997 to
SC-USREALTY in connection with the completion of SC-USREALTY's $132
million investment pursuant to a stock purchase agreement more fully
described in the Company's Form 10-K for the year ended December 31, 1996.
(4) Reflects application of net proceeds of $62.2 million from the issuance of
2,415,000 shares of Common Stock in the Offering (excluding shares of
Common Stock that may be issued upon exercise of the Underwriters' over-
allotment option). Also reflects application of net proceeds of $48.6
million from the issuance of 1,785,000 shares of Common Stock to SC-
USREALTY in the concurrent offering (excluding shares which SC-USREALTY
will have the right to acquire upon exercise, if any, by the Underwriters
of their over-allotment option).
(5) Reflects redemption of 3,027,080 OP Units for an equal number of shares of
Common Stock on June 13, 1997 pursuant to the approval of the issuance of
Common Stock for OP Units at the Company's annual meeting of shareholders
on June 12, 1997. Excludes (i) 574,195 shares of Common Stock that the
Company may issue in the future to holders who did not redeem their OP
Units as of June 13, 1997 and (ii) an estimated aggregate of 1,053,959 OP
Units and shares of Common Stock that are contingently issuable based upon
increased earnings of Properties and the performance of certain other
assets acquired in connection with the Branch transaction, as more fully
described in the Company's Current Report on Form 8-K dated March 7, 1997.
(6) Excludes (i) 2,975,468 shares of Common Stock issuable upon conversion of
the Company's non-voting Class B Common Stock, (ii) 2,726,898 shares
subject to issuance under certain conditions pursuant to the Company's
1993 Long Term Omnibus Plan (of which 1,331,507 shares are subject to
outstanding options), (iii) an aggregate of 193,276 shares reserved for
issuance under the Company's 401(k) and Profit Sharing Plan and its Stock
Grant Plan, and (iv) 596,350 shares of Common Stock reserved for issuance
under the Company's Dividend Reinvestment and Stock Purchase Plan. Also
excludes an aggregate of 574,195 shares of Common Stock which, depending
on the circumstances, must or may be issued to the holders of OP Units, if
such holders exercise their right to require the operating partnerships to
redeem their OP Units.
S-12
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Since the Company's initial public offering in October 1993, the Company's
Common Stock has been listed on the NYSE under the symbol "REG." The following
sets forth the high and low sales prices for the Common Stock for the periods
indicated, as reported by the NYSE, and the dividends per share paid by the
Company during each such period.
On July 10, 1997, the last reported sales price of the Common Stock on the
NYSE was $27.75.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
------- ------- ---------
<S> <C> <C> <C>
1994
First Quarter........................................ $18.875 $16.625 $.230
Second Quarter....................................... $18.500 $17.000 $.375
Third Quarter........................................ $17.750 $15.750 $.375
Fourth Quarter....................................... $17.500 $15.125 $.395
1995
First Quarter........................................ $17.125 $15.250 $.395
Second Quarter....................................... $18.375 $15.750 $.395
Third Quarter........................................ $18.125 $16.375 $.395
Fourth Quarter....................................... $17.500 $16.375 $.395
1996
First Quarter........................................ $17.500 $15.875 $.405
Second Quarter....................................... $21.125 $16.500 $.405
Third Quarter........................................ $22.375 $19.250 $.405
Fourth Quarter....................................... $26.250 $21.125 $.405
1997
First Quarter........................................ $28.000 $25.000 $.420
Second Quarter....................................... $28.125 $24.875 $.420
Third Quarter (through July 10th).................... $28.250 $27.125 (1)
</TABLE>
- --------
(1) A dividend for the third quarter has not yet been declared. It is
anticipated that purchasers of Common Stock in the Offering, as long as
they are holders on the record date, would be entitled to receive any
dividend declared for the third quarter.
In connection with the acquisition of five shopping centers during 1995, the
Company completed a $50 million private placement of 2,500,000 shares of non-
voting Class B Common Stock at $20 per share. The Class B Common Stock bears
per share dividends pari passu with the Common Stock equal to 103% of the
dividend that would be paid on the shares of Common Stock into which the
shares of Class B Common Stock are convertible. The Class B Common Stock is
convertible into 2,975,468 shares of Common Stock beginning on the third
anniversary of the issuance date, subject to the limitation that the holder
may not beneficially own more than 4.9% of the Company's outstanding Common
Stock except in certain circumstances.
Future dividends declared and paid by the Company will be at the discretion
of the Board of Directors of the Company and will depend on the actual cash
flow of the Company, its financial condition, capital requirements, the annual
distribution requirements under the REIT provisions of the Code, limitations
imposed by the financial covenants of the Company's outstanding debt, and such
other factors as the Board of Directors deems relevant.
Distributions by the Company to the extent of its current earnings and
profits for federal income tax purposes are taxable to shareholders as
ordinary dividend income (unless such distributions are designated as capital
gain distributions). Distributions in excess of earnings and profits generally
are treated as a non-taxable return of capital to the extent of a
shareholder's basis in the Common Stock. A return of capital distribution has
the effect of deferring taxation until a shareholder's sale of the Common
Stock. See "Federal Income Tax Considerations." The Company has determined
that approximately 77% of the distributions paid during 1996 represented
ordinary dividend income to its shareholders and approximately 23% represented
return of capital.
DIVIDEND REINVESTMENT PLAN
The Company has implemented a dividend reinvestment plan under which
shareholders may elect to automatically reinvest their dividends in shares of
Common Stock. The Company may, from time to time, repurchase shares of Common
Stock in the open market for purposes of fulfilling its obligations under this
dividend reinvestment plan or may elect to issue additional shares of Common
Stock.
S-13
<PAGE>
UNDERWRITING
Prudential Securities Incorporated, Goldman Sachs & Co., Smith Barney Inc.,
Raymond James & Associates, Inc. and The Robinson-Humphrey Company, Inc. (the
"Underwriters") have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement, to purchase from the Company the
number of shares of Common Stock set forth below opposite their names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Prudential Securities Incorporated............................ 483,000
Goldman, Sachs & Co. ......................................... 483,000
Smith Barney Inc. ............................................ 483,000
Raymond James & Associates, Inc. ............................. 483,000
The Robinson-Humphrey Company, Inc. .......................... 483,000
---------
Total...................................................... 2,415,000
=========
</TABLE>
The Company is obligated to sell, and the Underwriters are obligated to
purchase, all of the shares of Common Stock offered hereby, if any are
purchased.
The Underwriters have advised the Company that they propose to offer the
shares of Common Stock initially at the public offering price set forth on the
cover page of this Prospectus Supplement, that the Underwriters may allow to
selected dealers a concession of $0.82 per share; and that such dealers may
reallow a concession of $0.10 per share to certain other dealers. After the
initial public offering, the offering price and concessions may be changed by
the Underwriters.
The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus Supplement, to purchase up to 362,250
additional shares of Common Stock at the initial public offering price, less
the underwriting discounts and commissions, as set forth on the cover page of
this Prospectus Supplement. The Underwriters may exercise such option solely
for the purpose of covering over-allotments incurred in the sale of the shares
of Common Stock offered hereby. To the extent such option to purchase is
exercised, the Underwriters will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number set forth next to such Underwriter's name in the
preceding table bears to 2,415,000.
The Company has agreed to indemnify the several Underwriters or to
contribute to losses arising out of certain liabilities, including liabilities
under the Securities Act.
The Company and its directors and executive officers have agreed that they
will not, directly or indirectly, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, pledge, grant of
any option to purchase or other sale or disposition) of any shares of Common
Stock or other capital stock of the Company, or any securities convertible
into, or exchangeable or exercisable for, any shares of Common Stock or other
capital stock of the Company for a period of 90 days from the date of this
Prospectus Supplement, without the prior written consent of Prudential
Securities Incorporated on behalf of the Underwriters, except pursuant to (i)
this Offering, (ii) the Company's Dividend Reinvestment Plan, (iii) employee
benefit plans, including the Company's Long-Term Omnibus Plan, (iv) agreements
in effect on the date of this Prospectus Supplement, and (v) property
acquisitions for Common Stock or securities convertible, exchangeable or
exercisable for Common Stock so long as such shares of Common Stock may not be
sold during such 90-day lock-up period. Prudential Securities Incorporated may
in its sole discretion and at any time without notice, release all or any
portion of the securities subject to the lock-up agreements.
In connection with this Offering, certain Underwriters and selling group
members (if any) and their respective affiliates may engage in transactions
that stabilize, maintain or otherwise affect the market price of the Common
Stock. Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such persons may
bid for or purchase Common Stock for the purpose of
S-14
<PAGE>
stabilizing its market price. The Underwriters also may create a short
position for the account of the Underwriters by selling more shares of Common
Stock in connection with the Offering than they are committed to purchase from
the Company, and in such case may purchase shares of Common Stock in the open
market following completion of the Offering to cover all or a portion of such
short position. The Underwriters may also cover all or a portion of such short
position, up to 362,250 shares of Common Stock, by exercising the
Underwriters' over-allotment option referred to above. In addition, Prudential
Securities Incorporated, on behalf of the Underwriters, may impose "penalty
bids" under contractual arrangements with the Underwriters whereby it may
reclaim from an Underwriter (or any selling group member participating in the
Offering) for the account of the Underwriters, the selling concession with
respect to the shares of Common Stock that are distributed in the Offering but
subsequently purchased for the account of the Underwriters in the open market.
Any of the transactions described in this paragraph may result in the
maintenance of the price of the shares of Common Stock at a level above that
which might otherwise prevail in the open market. None of the transactions
described in this paragraph is required, and if they are undertaken, they may
be discontinued at any time.
S-15
<PAGE>
PROSPECTUS
Regency Realty Corporation
Common Stock
Regency Realty Corporation (the "Company"), may offer from time to time,
shares ("Shares") of the Company's common stock, par value $0.01 per share
("Common Stock"), at an aggregate offering price not to exceed U.S.
$131,617,500, in amounts, at prices and on terms to be determined at the time
of sale.
The number of any Shares offered pursuant to this Prospectus will be set forth
in an accompanying supplement to this Prospectus (a "Prospectus Supplement"),
together with the terms of the offering of such Shares and the initial price
and the net proceeds to the Company from the sale thereof.
The Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "REG." Any Common Stock offered pursuant to a
Prospectus Supplement will be listed on such exchange, subject to official
notice of issuance.
The Company may sell Shares directly or through agents, underwriters or
dealers designated from time to time. If any agents, underwriters, or dealers
are involved in the sale of the Shares, the names of such agents,
underwriters, or dealers and any applicable commissions or discounts and the
net proceeds to the Company from such sale will be set forth in the applicable
Prospectus Supplement.
This Prospectus may not be used to consummate sales of Shares unless
accompanied by a Prospectus Supplement.
SEE "RISK FACTORS" ON PAGES 3 THROUGH 6 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
SHARES OFFERED HEREBY.
THESE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 10, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports and other information
concerning the Company may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: New York Office, Seven World Trade Center, 13th
Floor, New York, New York 10048 and Chicago Office, Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material may also be obtained from the public reference section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants,
including the Company, that file electronically with the Commission. The
address of such Web site is http://www.sec.gov. In addition, the Company's
Common Stock is listed on the NYSE and similar information concerning the
Company can be inspected and copied at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
This Prospectus does not contain all the information set forth in the
Registration Statement and exhibits thereto which the Company has filed with
the Commission under the Securities Act of 1933, as amended (the "Securities
Act"), to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are hereby incorporated in this Prospectus by reference,
except as superseded or modified herein:
A. The Company's Annual Report on Form 10-K for the year ended December 31,
1996, including the Company's definitive proxy statement for its 1997
annual meeting of shareholders, to the extent specifically incorporated by
reference therein.
B. The Company's Current Report on Form 8-K dated December 31, 1996.
C. The Company's Current Report on Form 8-K dated March 7, 1997, as amended by
Form 8-K/A, 8-K/A-2 and 8-K/A-3.
D. The Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
E. The Company's Current Report on Form 8-K dated March 31, 1997.
F. The Company's Current Report on Form 8-K dated June 6, 1997.
G. The description of Common Stock contained in the Company's Registration
Statement on Form 8-A filed with the Commission on August 30, 1993, and
declared effective on October 29, 1993, including portions of the Company's
Registration Statement on Form S-11 (No. 33-67258) incorporated by
reference therein.
Each document filed by the Company subsequent to the date of this Prospectus
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior
to the termination of the offering of the Shares shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of the filing of such document. Any statement contained in a document
incorporated by reference shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any subsequently filed incorporated document or in an accompanying
Prospectus Supplement modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of any such person,
a copy of any document described above that has been incorporated in this
Prospectus by reference and not delivered with this Prospectus or any
preliminary Prospectus distributed in connection with the offering of the
Shares, other than exhibits to such document referred to above unless such
exhibits are specifically incorporated by reference herein. Requests should be
directed to Ms. Brenda Paradise, the Company's Director of Shareholder
Relations, 121 West Forsyth Street, Suite 200, Jacksonville, Florida 32202
(telephone: (904) 356-7000).
2
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following information in
conjunction with the other information contained in this Prospectus and the
applicable Prospectus Supplement before purchasing Shares. This Prospectus and
the accompanying Prospectus Supplement include certain statements that may be
deemed to be "forward-looking statements" within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act. All statements, other
than statements of historical facts, included in this Prospectus that address
activities, events or developments that the Company expects, believes or
anticipates will or may occur in the future, including such matters as future
capital expenditures, dividends and acquisitions (including the amount and
nature thereof), expansion and other development trends of the real estate
industry, business strategies, expansion and growth of the Company's
operations and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the Company
in light of its experience and its perception of historical trends, current
conditions, expected future developments and other factors it believes are
appropriate. Such statements are subject to a number of assumptions, risks and
uncertainties, including the risk factors discussed below, general economic
and business conditions, the business opportunities that may be presented to
and pursued by the Company, and changes in laws or regulations and other
factors, many of which are beyond the control of the Company. Prospective
investors are cautioned that any such statements are not guarantees of future
performance and that actual results or developments may differ materially from
those anticipated in the forward-looking statements.
SIGNIFICANT RELIANCE ON MAJOR TENANTS
As of June 30, 1997, including the pending acquisition of Tamiami Trail,
approximately 12.2%, 6.0% and 3.8% of the aggregate GLA owned by the Company
was leased to Publix, Winn-Dixie and Kroger, respectively, and annualized
rental revenues, including percentage rent, from these tenants represented
approximately 9.9%, 4.0% and 3.1%, respectively, of the rental revenues from
the properties owned by the Company as of that date. The Company could be
adversely affected in the event of the bankruptcy or insolvency of, or a
downturn in the business of, any of such tenants, or in the event that any of
such tenants does not renew its leases as they expire or renews at lower
rental rates. Vacated anchor space not only would reduce rental revenues if
not retenanted at the same rental rates but also could adversely affect the
entire shopping center because of the loss of the departed anchor tenant's
customer drawing power. Loss of customer drawing power also can occur through
the exercise of the right that most anchors have to vacate and prevent
retenanting by paying rent for the balance of the lease term, or the departure
of an anchor tenant that owns its own property.
Tenants may seek the protection of the bankruptcy laws, which could result
in the rejection and termination of their leases and thereby cause a reduction
in the cash flow available for distribution by the Company. Such reduction
could be material if a major tenant files bankruptcy.
GENERAL RISKS RELATING TO REAL ESTATE INVESTMENTS
Value of Real Estate Dependent on Numerous Factors. Real property
investments are subject to varying degrees of risk. Real estate values are
affected by a number of factors, including changes in the general economic
climate, local conditions (such as an oversupply of space or a reduction in
demand for real estate in an area), the quality and philosophy of management,
competition from other available space, and the ability of the owner to
provide adequate maintenance and insurance and to control variable operating
costs. Shopping centers, in particular, may be affected by changing
perceptions of retailers or shoppers regarding the safety, convenience and
attractiveness of the shopping center and by the overall climate for the
retail industry generally. Real estate values are also affected by such
factors as government regulations, interest rate levels, the availability of
financing and potential liability under, and changes in, environmental,
zoning, tax and other laws. As substantially all of the Company's income is
derived from rental income from real property, the Company's income and cash
flow would be adversely affected if a significant number of the Company's
tenants were unable to meet their obligations to the Company, or if the
Company were unable to lease on economically favorable
3
<PAGE>
terms a significant amount of space in its properties. In the event of default
by a tenant, the Company may experience delays in enforcing, and incur
substantial costs to enforce, its rights as landlord.
Equity real estate investments are relatively illiquid and therefore may
tend to limit the ability of the Company to react promptly in response to
changes in economic or other conditions. In addition, certain significant
expenditures associated with each equity investment (such as mortgage
payments, real estate taxes and maintenance costs) are generally not reduced
when circumstances cause a reduction in income from the investment.
Difficulties and Costs Associated with Renting Unleased and Vacated Space.
The ability of the Company to rent unleased or vacated space will be affected
by many factors, including certain covenants restricting the use of other
space at a property found in certain leases with shopping center tenants. Of
the existing leases for the Company's properties as of June 15, 1997 (the
latest date as of which information is available as of the date of this
Prospectus), leases covering approximately 504,518 square feet, 910,099 square
feet and 865,405 square feet (representing approximately 5.5%, 9.8% and 9.3%,
respectively, of the Company-owned GLA), will expire in the remainder of 1997,
1998 and 1999, respectively. If the Company is able to relet vacated space,
there is no assurance that rental rates will be equal to or in excess of
current rental rates. In addition, the Company may incur substantial costs in
obtaining new tenants, including leasing commissions and tenant improvements.
Restrictions on, and Risks of, Unsuccessful Development Activities. The
Company intends to selectively pursue development activities as opportunities
arise. Such development activities generally require various government and
other approvals, the receipt of which cannot be assured. The Company will
incur risks associated with any such development activities. These risks
include the risk that development opportunities explored by the Company may be
abandoned; the risk that construction costs of a project may exceed original
estimates, possibly making the project unprofitable; lack of cash flow during
the construction period; and the risk that occupancy rates and rents at a
completed project will not be sufficient to make the project profitable. In
case of an unsuccessful development project, the Company's loss could exceed
its investment in the project. Also, there are competitors seeking properties
for development, some of which may have greater resources than the Company.
ADVERSE EFFECT OF MARKET INTEREST RATES ON COMMON STOCK PRICES
One of the factors that may influence the trading price of the Company's
Common Stock is the annual dividend rate on the Common Stock as a percentage
of its market price. An increase in market interest rates may lead purchasers
of Shares to demand a higher annual dividend rate, which could adversely
affect the market price of the Common Stock and the Company's ability to raise
additional equity in the public markets.
UNCERTAINTY OF AVAILABILITY OF REFINANCING
The Company does not expect to generate sufficient funds from operations to
make balloon principal payments when due on its indebtedness. There can be no
assurance that the Company will be able to refinance such indebtedness or to
otherwise obtain funds to make such payments by selling assets or raising
equity. An inability to make such balloon payments when due could cause the
mortgage lenders to foreclose on the properties securing such indebtedness,
which would have a material adverse effect on the Company. In addition,
interest rates and other terms on any loans obtained to refinance such
indebtedness may be less favorable than the rates on the current indebtedness.
FEDERAL INCOME TAX CONSIDERATIONS
There are a number of issues associated with an investment in a REIT that
are related to the federal income tax laws, including, but not limited to, the
consequences of failing to continue to qualify as a REIT. See "Federal Income
Tax Considerations."
4
<PAGE>
CONCENTRATION OF OWNERSHIP OF COMPANY STOCK
Security Capital Holdings S.A. (together with its parent company, Security
Capital U.S. Realty, "SC-USREALTY") owned 7,618,500 shares of Common Stock as
of June 30, 1997, constituting 42.9% of the Common Stock outstanding on that
date. SC-USREALTY is the Company's single largest shareholder and has
participation rights entitling it to maintain its percentage ownership of the
Common Stock. SC-USREALTY has the right to nominate a proportionate number of
the directors of the Company's Board, rounded down to the nearest whole
number, based upon its ownership of outstanding shares of Common Stock, but
not to exceed 49% of the Board. Although certain standstill provisions
preclude SC-USREALTY from increasing its percentage interest in the Company
for a period of at least five years (subject to certain exceptions) and SC-
USREALTY is subject to certain limitations on its voting rights with respect
to its shares of Common Stock during that time, SC-USREALTY nonetheless has
substantial influence over the Company's affairs. This concentration of
ownership in one shareholder could be disadvantageous to other shareholders'
interests. The director nomination, voting and other rights granted to SC-
USREALTY, although subject to certain limitations during the standstill
period, may make it more difficult for other shareholders to challenge the
Company's director nominees, elect their own nominees as directors, or remove
incumbent directors and may render the Company a less attractive target for an
unsolicited acquisition by an outsider. If the standstill period or any
standstill extension term terminates, SC-USREALTY could be in a position to
control the election of the Board or the outcome of any corporate transaction
or other matter submitted to the shareholders for approval.
The Company has agreed to certain limitations on its operations, including
restrictions relating to (i) incurrence of total indebtedness exceeding 60% of
the gross book value of the Company's consolidated assets, (ii) investments in
properties other than shopping centers in specified states in the Southeastern
and Mid-Atlantic states and the southern regions of Indiana and Ohio, and
(iii) certain other matters. In addition, the Company has agreed to certain
limitations on the amount of assets that it owns indirectly through other
entities and the manner in which it conducts its business (including the type
of assets that it can acquire and own and the manner in which such assets are
operated). These limitations, which are intended to permit SC-USREALTY to
comply with certain requirements of the Internal Revenue Code of 1986 (the
"Code") and other countries' tax laws applicable to foreign investors, limit
somewhat the flexibility of the Company to structure transactions that might
otherwise be advantageous to the Company. Although the Company does not
believe that the limitations imposed on the Company's activities will
materially impair the Company's ability to conduct its business, there can be
no assurance that these limitations will not adversely affect the Company's
operations in the future.
COMMITMENT TO SELL SHARES AT BELOW OFFERING PRICE
Pursuant to its participation rights to acquire Common Stock at the same
price as shares issued to third parties, SC-USREALTY has the right to acquire
up to 1,750,000 shares of Common Stock by August 31, 1997 at a price of $22
1/8 per share in connection with the Company's acquisition of assets from
Branch in March 1997 in exchange for shares of Common Stock and OP Units
redeemable for Common Stock. SC-USREALTY's purchase of such shares, but not to
exceed 1,050,000 shares, may be deferred under certain circumstances until as
late as March 1998. SC-USREALTY also has the right to maintain its pro rata
ownership position by (i) purchasing shares at $22 1/8 if earn-out
consideration (estimated at an aggregate maximum of 1,053,959 OP Units and
shares) is issued following the first, second and third anniversaries of the
Branch acquisition, and (ii) purchasing shares at the then market price of the
Common Stock, upon the redemption of OP Units for Common Stock, provided that
SC-USREALTY did not exercise its participation rights at the time of issuance
of such OP Units.
UNSUITABLE INVESTMENT FOR NON-U.S. INVESTORS
Section 5.14 of the Company's Articles of Incorporation (the "Articles")
contains provisions designed to preserve the Company's status as a
domestically controlled REIT. Section 5.14 of the Articles prohibit the
issuance or transfer of the Company's capital stock if it would result in the
fair market value of all capital stock owned directly or indirectly by Non-
U.S. Persons (as defined in the Articles) to comprise 50% or more of the fair
market value of the Company's outstanding capital stock. For purposes of
applying this limitation,
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SC-USREALTY and its affiliates are presumed to be Non-U.S. Persons and to own
45% of the outstanding Common Stock on a fully diluted basis. Any shares
issued or transferred in violation of this restriction will be void, or if
such remedy is invalid, will be subject to the provisions for "Excess Shares"
described in "Capital Stock--Restrictions on Ownership." Accordingly, the
purchase of Shares in an offering is not a suitable investment for a Non-U.S.
Person (whether or not such person presently owns any shares of Common Stock)
or an entity owned directly or indirectly by a Non-U.S. Person.
ANTI-TAKEOVER EFFECT OF OWNERSHIP LIMIT, STAGGERED BOARD, PREFERRED STOCK,
FLORIDA BUSINESS CORPORATION ACT AND OF CERTAIN OTHER MATTERS
Ownership of more than 7% by value of the Company's outstanding capital
stock by certain persons has been restricted for the purpose of maintaining
the Company's qualification as a REIT, with certain exceptions. See "Capital
Stock--Restrictions on Ownership." This 7% limitation may discourage a change
in control of the Company and may also (i) deter tender offers for the capital
stock, which offers may be attractive to the shareholders, or (ii) limit the
opportunity for shareholders to receive a premium for their capital stock that
might otherwise exist if an investor attempted to assemble a block in excess
of 7% of the outstanding capital stock or to effect a change in control of the
Company. Additionally, the division of the Company's Board of Directors into
three classes with staggered three-year terms may have the effect of deterring
certain potential acquisitions of the Company because control of the Company's
Board of Directors could not be obtained at a single annual meeting of
shareholders.
The Company's Articles authorize the Board of Directors to issue up to
10,000,000 shares of Preferred Stock and 10,000,000 shares of Special Common
Stock and to establish the preferences and rights of any shares issued. The
issuance of Preferred Stock or Special Common Stock could have the effect of
delaying or preventing a change in control of the Company even if a change in
control were in the shareholders' interest. The provisions of the Florida
Business Corporation Act regarding control share acquisitions and affiliated
transactions could deter potential acquisitions of the Company by preventing
the acquiring party from voting the Common Stock it acquires or consummating a
merger or other extraordinary corporate transaction without the approval of
the disinterested shareholders.
POTENTIAL ENVIRONMENTAL LIABILITY
Under various federal, state and local laws, ordinances and regulations, an
owner or manager of real estate may be liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
Such laws often impose such liability without regard to whether the owner knew
of, or was responsible for, the presence of such hazardous or toxic
substances. The cost of any required remediation and the owner's liability
therefor could exceed the value of the property and/or the aggregate assets of
the owner. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's ability to sell or
rent such property or borrow using such property as collateral.
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THE COMPANY
The Company is a self-administered, self-managed REIT which acquires, owns,
develops and manages neighborhood and community shopping centers in targeted
infill markets in the Southeast, the Mid-Atlantic and the lower Midwest.
The Company's executive offices are located at 121 West Forsyth Street,
Suite 200, Jacksonville, Florida 32202, and its telephone number is (904) 356-
7000. The Company operates additional offices in Ft. Lauderdale, Tampa and
Stuart, Florida and in Atlanta, Georgia.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds from the sale of the Shares will be used for general corporate
purposes, which may include the repayment of outstanding indebtedness, the
acquisition of shopping centers as suitable opportunities arise, the expansion
and improvement of certain properties in the Company's portfolio and payment
of development costs for new centers.
CAPITAL STOCK
The authorized capital stock of the Company consists of 150,000,000 shares
of Common Stock, par value $0.01 per share, 10,000,000 shares of Special
Common Stock, par value $0.01 per share, and 10,000,000 shares of Preferred
Stock, par value $0.01 per share. The summary description of the Company's
capital stock set forth herein does not purport to be complete and is
qualified in its entirety by reference to the Company's Amended and Restated
Articles of Incorporation (the "Articles"). As of June 30, 1997, 17,766,527
shares of the Company's Common Stock and 2,500,000 shares of the Company's
Class B non-voting Common Stock (constituting a class of the Special Common
Stock) were issued and outstanding.
COMMON STOCK
The holders of the Company's Common Stock are entitled to one vote per share
on all matters voted on by shareholders, including elections of directors,
and, except as otherwise required by law or provided in any resolution adopted
by the Board of Directors with respect to any series of Preferred Stock
establishing the powers, designations, preferences and relative,
participating, option or other special rights of such series, the holders of
Common Stock exclusively possess all voting power. The Articles do not provide
for cumulative voting in the election of directors. Subject to any
preferential rights of any outstanding series of Preferred Stock, the holders
of Common Stock are entitled to such dividends as may be declared from time to
time by the Board of Directors from funds legally available therefor, and upon
liquidation are entitled to receive pro rata all assets of the Company
available for distribution to such holders. All shares of Common Stock offered
hereby, upon issuance against full payment of the purchase price therefor,
will be fully paid and nonassessable and the holders thereof will not have
preemptive rights. The Company's Common Stock is listed on the NYSE under the
symbol "REG."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is First Union
National Bank.
SPECIAL COMMON STOCK
Under the Company's Articles, the Board of Directors is authorized, without
further shareholder action, to provide for the issuance of up to 10 million
shares of Special Common Stock from time to time in one or more classes or
series. The Special Common Stock will bear dividends in such amounts as the
Board of Directors may determine with respect to each class or series. All
such dividends must be pari passu with dividends on the
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Common Stock. Upon the dissolution of the Company, the Special Common Stock
will participate pari passu with the Common Stock in liquidating
distributions. Shares of Special Common Stock will have one vote per share and
vote together with the holders of Common Stock (and not separately as a class
except where otherwise required by law), unless the Board of Directors creates
classes or series with more limited voting rights or without voting rights.
The Board will have the right to determine whether shares of Special Common
Stock may be converted into shares of any other class or series or be
redeemed, and, if so, the conversion or redemption price and the terms and
conditions of conversion or redemption, and to determine such other rights as
may be allowed by law. Holders of Special Common Stock will not be entitled,
as a matter of right, to preemptive rights. As all Special Common Stock is
expected to be closely held, it is anticipated that most classes or series
would be convertible into Common Stock for liquidity purposes. The Shares to
which this Prospectus relates do not include any Special Common Stock.
The Company has outstanding as of the date of this Prospectus 2,500,000
shares of a non-voting class of Special Common Stock in the form of Class B
Common Stock, which were issued in a private placement to an institutional
investor. The Class B Common Stock receives dividends pari passu with the
Common Stock at a rate equivalent to 1.03 times the Common Stock dividend rate
and participates pari passu with the Common Stock in any liquidation of the
Company. Beginning December 20, 1998, 1/6th of the Class B Common Stock
originally issued may be converted into Common Stock at the election of the
holder during any three-month period, but the holder may not at any time be
the beneficial owner of more than 4.9% of the outstanding Common Stock.
Accelerated conversion may take place in the event of certain extraordinary
occurrences, including certain changes in senior management. A total of
2,975,468 shares of Common Stock are issuable upon conversion of the Class B
Common Stock.
PREFERRED STOCK
Under the Company's Articles, the Board of Directors is authorized, without
further shareholder action, to provide for the issuance of up to 10,000,000
shares of Preferred Stock, par value $0.01 per share. The Preferred Stock
authorized by the Articles may be issued, from time to time, in one or more
series in such amounts and with such designations, powers, preferences or
other rights, qualifications, limitations and restrictions as may be fixed by
the Board of Directors. Under certain circumstances, the issuance of Preferred
Stock could have the effect of delaying, deferring or preventing a change of
control of the Company and may adversely affect the voting and other rights of
the holders of Common Stock. The Company has no shares of Preferred Stock
outstanding as of the date of this Prospectus.
RESTRICTIONS ON OWNERSHIP
Restrictions Relating to REIT Qualification. For the Company to qualify as a
REIT under the Code, not more than 50% in value of its outstanding capital
stock may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities) during the last half of a
taxable year, its stock must be beneficially owned (without reference to
attribution rules) by 100 or more persons during at least 335 days in a
taxable year of 12 months or during a proportionate part of a shorter taxable
year, and certain other requirements must be satisfied (see "Federal Income
Tax Considerations-Requirements for Qualification").
To assure that five or fewer individuals do not Beneficially Own (as defined
in the Company's Articles of Incorporation to include ownership through the
application of certain stock attribution provisions of the Code) more than 50%
in value of the Company's outstanding capital stock, the Company's Articles
provide that, subject to certain exceptions, no holder may own, or be deemed
to own (by virtue of certain of the attribution provisions of the Code), more
than 7% by value (the "Ownership Limit") of the Company's outstanding capital
stock. Certain existing holders specified in the Articles and those to whom
Beneficial Ownership of their capital stock is attributed, whose Beneficial
Ownership of capital stock exceeds the Ownership Limit ("Existing Holders"),
may continue to own such percentage by value of outstanding capital stock (the
"Existing Holder Limit") and may increase their respective Existing Holder
Limits through benefit plans of the Company, dividend reinvestment plans,
additional asset sales or capital contributions to the Company or acquisitions
from other
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Existing Holders, but may not acquire additional shares from such sources such
that the five largest Beneficial Owners of capital stock hold more than 49.5%
by value of the outstanding capital stock, and in any event may not increase
their respective Existing Holder Limits through acquisition of capital stock
from any other sources. In addition, because rent from a related tenant (any
tenant 10% of which is owned, directly or constructively, by the REIT) is not
qualifying rent for purposes of the gross income tests under the Code (see
"Federal Income Tax Considerations-Requirements for Qualification-Income
Tests"), the Articles provide that no Related Tenant Owner (a constructive
owner of stock in the Company who owns, directly or indirectly, a 10% interest
in any tenant of the Company) may own, or constructively own by virtue of
certain of the attribution provisions of the Code (which differ from the
attribution provisions applied to determine Beneficial Ownership), more than
9.8% by value of the outstanding capital stock of the Company (the "Related
Tenant Limit"). The Board of Directors may waive the Ownership Limit, the
Existing Holder Limit and the Related Tenant Limit if evidence satisfactory to
the Board of Directors and the Company's tax counsel is presented that such
ownership will not then or in the future jeopardize the Company's status as a
REIT. As a condition of such waiver, the Board of Directors may require
opinions of counsel satisfactory to it and/or an undertaking from the
applicant with respect to preserving the REIT status of the Company.
Preservation of Status as a Domestically Controlled REIT. Section 5.14 of
the Articles contains provisions designed to preserve the Company's status as
a domestically controlled REIT. Section 5.14 of the Articles prohibits the
issuance or transfer of the Company's capital stock if it would result in the
fair market value of all capital stock owned directly or indirectly by Non-
U.S. Persons (as defined in the Articles) to comprise 50% or more of the fair
market value of the Company's outstanding capital stock. For purposes of
applying this limitation, SC-USREALTY and its affiliates are presumed to be
Non-U.S. Persons and to own 45% of the outstanding Common Stock on a fully
diluted basis. A Non-U.S. Person is defined in the Articles as any person who
is not (i) a citizen or resident of the United States, (ii) a partnership or
corporation created or organized in the United States or under the laws of the
United States or any state therein (including the District of Columbia), or
(iii) any estate or trust (other than a foreign estate or trust) within the
meaning of Section 7701(a)(31) of the Code.
Any shares issued or transferred in violation of the foregoing restriction
will be void, or if such remedy is invalid, will be subject to the provisions
for "Excess Shares" described below. Accordingly, the purchase of Shares on
the Offering may not be a suitable investment for a Non-U.S. Person (whether
or not such person presently owns any shares of Common Stock).
Remedies. If (i) shares of capital stock in excess of the applicable
Ownership Limit, Existing Holder Limit, or Related Tenant Limit, or (ii)
shares which (a) would cause the REIT to be beneficially owned by fewer than
100 persons (without application of the attribution rules), (b) would result
in the Company being "closely held" within the meaning of Section 856(h) of
the Code, or (c) would result in the fair market value of capital stock owned
directly or indirectly (including capital stock presumed to be owned by SC-
USREALTY) by Non-U.S. Persons to comprise 50% of more of the fair market value
of the Company's outstanding capital stock, are issued or transferred to any
person or are retained by any person after becoming a Related Tenant Owner,
such issuance, transfer, or retention shall be null and void to the intended
holder, and the intended holder will have no rights to the stock. Capital
stock transferred, proposed to be transferred, or retained in excess of the
Ownership Limit, the Existing Holder Limit, or the Related Tenant Limit or
which would otherwise jeopardize the Company's REIT status or status as a
domestically controlled REIT ("excess shares") will be deemed held in trust on
behalf of and for the benefit of the Company. The Board of Directors will,
within six months after receiving notice of such actual or proposed transfer,
either (i) direct the holder of such shares to sell all shares held in trust
for the Company for cash in such manner as the Board of Directors directs, or
(ii) redeem such shares for a price equal to the lesser of (a) the price paid
by the holder from whom shares are being redeemed and (b) the average of the
last reported sales prices on the NYSE of the relevant class of capital stock
on the 10 trading days immediately preceding the date fixed for redemption by
the Board of Directors, or if such class of capital stock is not then traded
on the NYSE, the average of the last reported sales prices of such class of
capital stock (or, if sales prices are not reported, the average of the
closing bid and asked prices) on the 10 trading days immediately preceding
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the relevant date as reported on any exchange or quotation system over which
such class of capital stock may be traded, or if such class of capital stock
is not then traded over any exchange or quotation system, then the price
determined in good faith by the Board of Directors of the Company as the fair
market value of such class of capital stock on the relevant date. If the Board
of Directors directs the intended holder to sell the shares, the holder shall
receive such proceeds as the trustee for the Company and pay the Company out
of the proceeds of such sale all expenses incurred by the Company in
connection with such sale, plus any remaining amount of such proceeds that
exceeds the amount originally paid by the intended holder for such shares. The
intended holder shall not be entitled to distributions, voting rights or any
other benefits with respect to such excess shares except the amounts described
above. Any dividend or distribution paid to an intended holder on excess
shares pursuant to the Company's Articles of Incorporation must be repaid to
the Company upon demand.
Miscellaneous. All certificates representing capital stock will bear a
legend referring to the restrictions described above. The transfer
restrictions described above shall not preclude the settlement of any
transaction entered through the facilities of the NYSE.
The Articles provide that every shareholder of record of more than 5% of the
outstanding capital stock and every Actual Owner (as defined in the Articles)
of more than 5% of the outstanding capital stock held by a nominee must give
written notice to the Company of information specified in the Articles within
30 days after December 31 of each year. In addition, each Beneficial Owner of
capital stock and each person who holds capital stock for a Beneficial Owner
must provide to the Company such information as the Company may request, in
good faith, in order to determine the Company's status as a REIT.
The ownership limitations described above may have the effect of precluding
acquisition of control of the Company by a third party even if the Board of
Directors determines that maintenance of REIT status is no longer in the best
interests of the Company. The Board of Directors has the right under the
Articles (subject to contractual restrictions, including covenants made with
SC-USREALTY) to revoke the REIT status of the Company if the Board of
Directors determines that it is no longer in the best interest of the Company
to attempt to qualify, or to continue to qualify, as a REIT. In the event of
such revocation, the ownership limitations in the Articles will remain in
effect. Any change in the ownership limitations would require an amendment to
the Articles.
STAGGERED BOARD OF DIRECTORS
The Company's Articles and Bylaws divide the Board of Directors into three
classes of directors, with each class constituting approximately one-third of
the total number of directors and with classes serving staggered three-year
terms. The classification of directors has the effect of making it more
difficult for shareholders to change the composition of the Board of
Directors. The Company believes, however, that the longer time required to
elect a majority of a classified Board of Directors helps to insure continuity
and stability of the Company's management and policies.
The classification provisions could also have the effect of discouraging a
third party from accumulating large blocks of the Company's stock or
attempting to obtain control of the Company, even though such an attempt might
be beneficial to the Company and its shareholders. Accordingly, shareholders
could be deprived of certain opportunities to sell their shares of capital
stock at a higher market price than might otherwise be the case.
ADVANCE NOTICE PROVISIONS FOR SHAREHOLDER NOMINATIONS AND SHAREHOLDER
PROPOSALS
The Bylaws establish an advance notice procedure for shareholders to make
nominations of candidates for election as directors or to bring other business
before any meeting of shareholders of the Company. Any shareholder nomination
or proposal for action at an upcoming shareholder meeting must be delivered to
the Company no later than the deadline for submitting shareholder proposals
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934. The
presiding officer at any shareholder meeting is not required to recognize any
proposal or nomination which did not comply with such deadline.
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The purpose of requiring shareholders to give the Company advance notice of
nominations and other business is to afford the Board of Directors a
meaningful opportunity to consider the qualifications of the proposed nominees
or the advisability of the other proposed business and, to the extent deemed
necessary or desirable by the Board of Directors, to inform shareholders and
make recommendations about such qualifications or business, as well as to
provide a more orderly procedure for conducting meetings of shareholders.
Although the Bylaws do not give the Board of Directors any power to disapprove
timely shareholder nominations for the election of directors or proposals for
action, they may have the effect of precluding a contest for the election of
directors or the consideration of shareholder proposals if the proper
procedures are not followed, and of discouraging or deterring the third party
from conducting a solicitation of proxies to elect its own slate of directors
or to approve its own proposal.
CERTAIN PROVISIONS OF FLORIDA LAW
The Company is subject to several anti-takeover provisions under Florida law
that apply to a public corporation organized under Florida law unless the
corporation has elected to opt out of such provisions in its Articles of
Incorporation or (depending on the provision in question) its Bylaws. The
Company has not elected to opt out of these provisions. The Florida Business
Corporation Act (the "Florida Act") contains a provision that prohibits the
voting of shares in a publicly held Florida corporation which are acquired in
a "control share acquisition" unless the Board of Directors approves the
control share acquisition or the holders of a majority of the corporation's
voting shares (exclusive of shares held by officers of the corporation, inside
directors or the acquiring party) approve the granting of voting rights as to
the shares acquired in the control share acquisition. A control share
acquisition is defined as an acquisition that immediately thereafter entitles
the acquiring party to vote in the election of directors within each of the
following ranges of voting power: (i) one-fifth or more but less than one-
third of such voting power, (ii) one-third or more but less than a majority of
such voting power and (iii) a majority or more of such voting power.
The Florida Act also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range
of business combinations or other extraordinary corporate transactions with an
"interested shareholder" unless (i) the transaction is approved by a majority
of disinterested directors before the person becomes an interested
shareholder, (ii) the interested shareholder has owned at least 80% of the
Company's outstanding voting shares for at least five years, or (iii) the
transaction is approved by the holders of two-thirds of the Company's voting
shares other than those owned by the interested shareholder. An interested
shareholder is defined as a person who, together with affiliates and
associates, beneficially owns (as defined in Section 607.0901(1)(e), Florida
Statutes) more than 10% of the Company's outstanding voting shares.
LIMITATION OF LIABILITY OF DIRECTORS
The Florida Business Corporation Act provides that a director will not be
personally liable for monetary damages to the Company or any other person
except for liability for breach of such person's duties as a director
involving (1) a violation of criminal law (unless the director reasonably
believed his or her conduct was lawful or had no reasonable cause to believe
that it was unlawful), (2) a transaction from which the director derived an
improper personal benefit, or (3) an unlawful dividend or stock redemption.
However, equitable remedies such as an injunction or rescission continue to be
available against directors who breach their duty of care as directors.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of the
Company's officers and directors. The indemnification agreements require,
among other things, that the Company indemnify its officers and directors to
the fullest extent permitted by law, and advance to the officers and directors
all related expenses, subject to reimbursement if it is subsequently
determined that indemnification is not permitted. The Company must also
indemnify and advance all expenses incurred by officers and directors seeking
to enforce their rights under the indemnification agreements.
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PLAN OF DISTRIBUTION
The Shares may be sold in or outside the United States through underwriters
or dealers, directly to one or more purchasers, or through agents. The
Prospectus Supplement with respect to the Shares will set forth the terms of
the offering of the Shares, including the name or names of any underwriters,
dealers or agents, the purchase price of the Shares and the proceeds to the
Company from such sale, any delayed delivery arrangements, any underwriting
discounts and other items constituting underwriters' compensation, the public
offering price, and any discounts or concessions allowed or reallowed or paid
to dealers.
If underwriters are used in the sale of the Shares, the Shares may be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The Shares may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter(s) with respect to a
particular underwritten offering of Shares will be named in the Prospectus
Supplement relating to such offering, and if an underwriting syndicate is
used, the managing underwriter(s) will be set forth on the cover of such
Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement
relating thereto, the obligations of the underwriters or agents to purchase
the Shares will be subject to conditions precedent, and the underwriters will
be obligated to purchase all the Shares if any are purchased. The public
offering price and any discounts or concessions allowed or reallowed or paid
to dealers may be changed from time to time.
If dealers are utilized in the sale of Shares with respect to which this
Prospectus is delivered, such Shares will be sold to the dealers as
principals. The dealers may then resell such Shares to the public at varying
prices to be determined by such dealers at the time of resale. The names of
the dealers and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
Shares may be sold directly by the Company or through agents designated by
the Company from time to time at fixed prices, which may be changed, or at
varying prices determined at the time of sale. Any agent involved in the offer
or sale of the Shares with respect to which this Prospectus is delivered will
be named, and any commissions payable by the Company to such agent will be set
forth, in the Prospectus Supplement relating thereto. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a
best efforts basis for the period of its appointment.
In connection with the sale of the Shares, underwriters or agents may
receive compensation from the Company or from purchasers of Shares for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters, agents and dealers participating in the distribution of the
Shares may be deemed to be underwriters and any discounts or commissions
received by them from the Company and any profit on the resale of the Shares
by them may be deemed to be underwriting discounts or commissions under the
Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters, or dealers to solicit offers from certain types of
institutions to purchase Shares from the Company at the public offering price
set forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject only to those conditions set forth in the Prospectus
Supplement, and the Prospectus Supplement will set forth the commission
payable for solicitation of such contracts.
Agents, dealers, and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that such agents, dealers or
underwriters may be required to make with respect thereto. Agents, dealers and
underwriters may be customers of, engage in transactions with, or perform
services for the Company in the ordinary course of business.
The Common Stock currently trades on the NYSE, and any Shares offered hereby
will be listed on the NYSE, subject to an official notice of issuance.
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FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain federal income tax
considerations that may be relevant to a prospective holder of Shares. Foley &
Lardner, which has acted as tax counsel to the Company in connection with the
formation of the Company and the Company's election to be taxed as a REIT, has
reviewed the following discussion and is of the opinion that it fairly
summarizes the federal income tax considerations that are likely to be
material to a holder of Shares. This discussion and such opinion are based on
current law. As used in this section, the term "Company" refers to the Company
and all qualified subsidiaries (a wholly-owned subsidiary which is not treated
as a separate entity for federal income tax purposes) but excludes Regency
Realty Group, Inc. and Regency Realty Group II, Inc. and their subsidiaries
(collectively, the "Management Companies") (which are treated as separate
entities for federal income tax purposes, although its results are
consolidated with those of the Company for financial reporting purposes).
This summary does not discuss all aspects of taxation that may be relevant
to particular holders of Shares in light of the terms of the Shares acquired
by them or their own personal investments or tax circumstances, or to certain
types of holders (including insurance companies, tax-exempt organizations,
financial institutions or broker-dealers, foreign corporations and persons who
are not citizens or residents of the United States) subject to special
treatment under the federal income tax laws. This summary does not give a
detailed discussion of any state, local, or foreign tax considerations. This
summary is qualified in its entirety by the applicable Code provisions, rules
and regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as of the date hereof and all of which are
subject to change (which change may apply retroactively).
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS
SUPPLEMENT AS WELL AS HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP AND SALE OF SHARES IN AN
ENTITY ELECTING TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE,
OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
GENERAL
The Company made an election to be taxed as a REIT under Sections 856
through 860 of the Code commencing with its taxable year ending December 31,
1993. The Company believes that it has been organized and operated in such a
manner as to qualify for taxation as a REIT under the Code for such taxable
year and all subsequent taxable years to date, and the Company intends to
continue to operate in such a manner in the future. However, no assurance can
be given that the Company will operate in a manner so as to qualify or remain
qualified as a REIT.
The following sets forth only a summary of the material aspects of the Code
sections that govern the federal income tax treatment of a REIT and its
shareholders.
It is the opinion of Foley & Lardner that the Company has been organized in
conformity with the requirements for qualification and taxation as a REIT
commencing with the Company's taxable year that ended December 31, 1993 and
for all subsequent taxable years to date, and its method of operation will
enable it to continue to be taxed as a REIT. It must be emphasized that this
opinion is based on various assumptions and is conditioned upon certain
representations made by the Company as to factual matters including, but not
limited to, those set forth below in this discussion of "Federal Income Tax
Considerations," those concerning its business and properties, and certain
matters relating to the Company's manner of operation. Foley & Lardner is not
aware of any facts or circumstances that are inconsistent with these
representations and assumptions. The qualification and taxation as a REIT
depends upon the Company's ability to meet, through actual annual operating
results, the various income, asset, distribution, stock ownership and other
tests discussed below, the results of which will not be reviewed by nor be
under the control of Foley & Lardner. Accordingly, no assurance can be given
that the actual results of the Company's operation for any particular taxable
year will satisfy such requirements. For a discussion of the tax consequences
of failure to qualify as a real estate investment trust, see "--Failure to
Qualify."
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TAXATION OF THE COMPANY
As a REIT, the Company generally is not subject to federal corporate income
tax on its net income that is currently distributed to shareholders. This
treatment substantially eliminates the "double taxation" (at the corporate and
shareholder levels) that generally results from an investment in a
corporation. However, the Company will be subject to federal income tax in the
following circumstances. First, the Company will be taxed at regular corporate
rates on any undistributed REIT taxable income, including undistributed net
capital gains. Second, under certain circumstances, the Company may be subject
to the "corporate alternative minimum tax" on its items of tax preference.
Third, if the Company has (i) net income from the sale or other disposition of
"foreclosure property" (which is, in general, property acquired by the Company
by foreclosure or otherwise on default on a loan secured by the property)
which is held primarily for sale to customers in the ordinary course of
business or (ii) other non-qualifying net income from foreclosure property, it
will be subject to tax on such income at the highest corporate rate. Fourth,
if the Company has net income from "prohibited transactions" (which are, in
general, certain sales or other dispositions of property held primarily for
sale to customers in the ordinary course of business other than foreclosure
property), such income will be subject to a 100% tax. Fifth, if the Company
should fail to satisfy the 75% gross income test or the 95% gross income test
(as discussed below), and has nonetheless maintained its qualification as a
REIT because certain other requirements have been met, it will be subject to a
100% tax on the net income attributable to the greater of the amount by which
the Company fails the 75% or 95% test, multiplied by a fraction intended to
reflect the Company's profitability. Sixth, if the Company should fail to
distribute during each calendar year at least the sum of (i) 85% of its REIT
ordinary income for such year, (ii) 95% of its REIT capital gain net income
for such year, and (iii) any undistributed taxable income from prior years, it
will be subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed. Seventh, if during the 10-year period
(the "Recognition Period") beginning on the first day of the first taxable
year for which the Company qualified as a REIT, the Company recognizes gain on
the disposition of any asset held by the Company as of the beginning of such
Recognition Period, then, to the extent of the excess of (a) the fair market
value of such asset as of the beginning of such Recognition Period over (b)
the Company's adjusted basis in such asset as of the beginning of such
Recognition Period (the "Built-in Gain"), such gain will be subject to tax at
the highest regular corporate rate. Because the Company initially acquired its
properties in connection with its initial public offering in fully taxable
transactions, it is not anticipated that the Company will own any assets with
substantial Built-in Gain. Eighth, if the Company acquires any asset from a C
corporation (i.e., generally a corporation subject to full corporate-level
tax) in a transaction in which the basis of the asset in the Company's hands
is determined by reference to the basis of the asset (or any other property)
in the hands of the C corporation, and the Company recognizes gain on the
disposition of such asset during the Recognition Period beginning on the date
on which such asset was acquired by the Company, then, to the extent of the
Built-in Gain, such gain will be subject to tax at the highest regular
corporate rate. The result described above with respect to the recognition of
Built-in Gain during the Recognition Period assumes the Company will make an
election in accordance with Notice 88-19 issued by the IRS. In addition, the
Management Companies are taxed on their income at regular corporate rates.
REQUIREMENTS FOR QUALIFICATION
A REIT is defined in the Code as a corporation, trust or association: (1)
which is managed by one or more trustees or directors; (2) the beneficial
ownership of which is evidenced by transferable shares or by transferable
certificates of beneficial interest; (3) which would be taxable as a domestic
corporation, but for Sections 856 through 859 of the Code; (4) which is
neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) the beneficial ownership of which is held by 100
or more persons (determined without reference to any rules of attribution);
(6) not more than 50% in value of the outstanding stock of which is owned
during the last half of each taxable year, directly or indirectly, by or for
five or fewer individuals (as defined in the Code to include certain
entities); and (7) which meets certain income and asset tests described below.
Conditions (1) to (4), inclusive, must be met during the entire taxable year
and condition (5) must be met during at least 335 days of a taxable year of 12
months, or during a proportionate part of a taxable year of less than 12
months. The Company has previously issued sufficient shares to allow it to
satisfy conditions (5) and (6). The Company's Articles of Incorporation
provide restrictions regarding the transfer of its shares which are intended
to assist the Company in continuing to satisfy the stock ownership
requirements described in (5) and (6) above.
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Section 856(i) of the Code provides that a corporation, 100% of whose stock
is held by a REIT at all times during the corporation's existence, is a
"qualified REIT subsidiary." A qualified REIT subsidiary is not treated as a
separate corporation, and all assets, liabilities and items of income,
deduction and credit of a qualified REIT subsidiary are treated as assets,
liabilities and such items (as the case may be) of the REIT. Thus, in applying
the requirements described herein, the Company's qualified REIT subsidiaries
will be ignored, and all assets, liabilities and items of income, deduction
and credit of such subsidiaries will be treated as assets, liabilities and
items of the Company. The Company has not, however, sought or received a
ruling from the IRS that any of the Company's subsidiaries is a "qualified
REIT subsidiary." The Company currently owns a number of its properties either
directly, or indirectly, through qualified REIT subsidiaries. While this
summary generally does not address state tax consequences, some states may not
recognize a qualified REIT subsidiary, which could cause a subsidiary to be
taxed or could cause the Company to fail to qualify as a REIT under such state
law. Most of the properties which are not owned directly by qualified REIT
subsidiaries of the Company are held by property partnerships all the
interests in which are currently owned by qualified REIT subsidiaries or by
property partnerships with third parties in which the Company's interests are
owned by qualified REIT subsidiaries.
In the case of a REIT which is a partner in a partnership either directly or
indirectly through a qualified REIT subsidiary, Treasury Regulations provide
that the REIT will be deemed to own its proportionate share of the assets of
the partnership and will be deemed to be entitled to the income of the
partnership attributable to such share. In addition, the character of the
assets and gross income of the partnership will retain the same character in
the hands of the REIT for purposes of Section 856 of the Code, including
satisfying the gross income tests and asset tests. Thus, the Company's
proportionate share of the assets, liabilities and items of income of the
property partnerships through which the Company owns many of its properties
(the "Property Partnerships") (other than certain properties held by the
Management Companies), is treated as assets, liabilities and items of income
of the Company for purposes of applying the requirements described below.
Income Tests. In order for the Company to maintain its qualification as a
REIT, it must satisfy three gross income requirements annually. First, at
least 75% of the Company's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived directly or
indirectly from investments relating to real property or mortgages on real
property, including "rents from real property" and, in certain circumstances,
"interest," or from certain types of temporary investments.
Second, at least 95% of the Company's gross income (excluding gross income
from prohibited transactions) for each taxable year must be derived from real
estate investments and from dividends, interest and gain from the sale or
disposition of stock or securities or from any combination of the foregoing.
Third, short-term gain from the sale or other disposition of stock or
securities, gain from prohibited transactions and gain on the sale or other
disposition of real property held for fewer than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of the Company's gross income (including gross income from prohibited
transactions) for each taxable year.
Rents received by the Company qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
the following conditions are met. First, the amount of rent must not be based
in whole or in part on the income or profits derived by any person from such
property, although an amount received or accrued generally will not be
excluded from the term "rents from real property" solely by reason of being
based on a fixed percentage or percentages of receipts or sales. The Company
does not anticipate charging rent for any portion of any property that is
based in whole or in part on the income or profits of any person (except by
reason of being based on a percentage of receipts for sales, which is
permitted by the Code). Second, the Code provides that rents received from a
tenant will not qualify as "rents from real property" in satisfying the gross
income tests if (i) the Company directly or constructively owns a 10% or
greater interest in such tenant or (ii) any Related Tenant Owner, directly or
constructively owns 10% or more by value of the Company. Constructive
ownership is determined under the attribution rules of Section 318 of the
Code, as modified by Section 856(d)(5) of the Code. The Company does not
anticipate receiving rents from such a tenant. Additionally, pursuant to the
Articles of Incorporation, Related Tenant Owners are prohibited from acquiring
constructive ownership of more than 9.8% by value of the Company. Third, rent
attributable to personal property
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leased in connection with a lease of real property will not qualify if it is
greater than 15% of the total rent received under the lease. Fourth, the
Company generally must not operate or manage the property or furnish or render
services to the tenants of such property, other than through an independent
contractor from whom the Company derives no income. The independent contractor
requirement, however, does not apply to the extent services performed by the
Company are "usually or customarily rendered" in connection with the rental of
space for occupancy and are not otherwise considered "rendered to the
occupant." The Company provides certain services with respect to the
properties that the Company believes complies with the "usually or customarily
rendered" requirement. The Company will hire independent contractors from whom
the Company derives no income to perform such services, to the extent that the
performance of such services by the Company would cause amounts received from
its tenants to be excluded from rents from real property.
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends
in whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of
receipts or sales.
The Management Companies receive fees in consideration of the performance of
management and administrative services with respect to properties that are not
owned by the Company. Distributions received by the Company from the
Management Companies of their earnings do not qualify under the 75% gross
income test. The Company believes that the aggregate amount of the
distributions from the Management Companies together with all other non-
qualifying income in any taxable year will not cause the Company to exceed the
limits on non-qualifying income under the 75%, 95% and 30% gross income tests.
The Company believes that it has satisfied the 75% and 95% gross income
tests for taxable years ended prior to the date of this Prospectus and intends
to operate in such a manner so as to satisfy such tests in the future. If the
Company fails to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, it may nevertheless qualify as a REIT for such year if it is
entitled to relief under certain provisions of the Code. These relief
provisions generally will be available if the Company's failure to meet such
tests was due to reasonable cause and not due to willful neglect, the Company
attaches a schedule of the sources of its income to its federal income tax
return, and any incorrect information on the schedule was not due to fraud
with intent to evade tax. It is not possible to state whether in all
circumstances the Company would be entitled to the benefit of those relief
provisions. As discussed above, even if those relief provisions apply, a tax
would be imposed with respect to the excess net income.
Asset Tests. The Company, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets. First, at
least 75% of the value of the Company's total assets must be represented by
real estate assets (including (i) its allocable share of real estate assets
which are held by the Property Partnerships or which are held by "qualified
REIT subsidiaries" of the Company and (ii) stock or debt instruments held for
not more than one year purchased with the proceeds of a stock offering or
long-term (at least five years) debt offering of the Company), cash, cash
items and government securities. Second, not more than 25% of the value of the
Company's total assets may be represented by securities other than those in
the 75% asset class. Third, of the investments included in the 25% asset
class, the value of any one issuer's debt and equity securities owned by the
Company may not exceed (at the end of the quarter in which any of such
securities are acquired) 5% of the value of the Company's total assets and
(subject to limited exceptions) the Company may not own more than 10% of any
one issuer's outstanding voting securities.
The Company owns 100% of the non-voting preferred stock and 5% of the voting
common stock of Regency Realty Group, Inc. ("RRG 1") and a Property
Partnership owns 100% of the non-voting preferred stock and 5% of the voting
common stock of Regency Realty Group II, Inc. ("RRG 2"). The Company
represents that the value of the stock held by the Company in RRG 1 and RRG 2,
respectively, did not exceed, at the date that the Company acquired such stock
and for any applicable quarter prior to the date of this Prospectus, 5% of the
total value of the Company's assets. No independent appraisals have been
obtained to support the Company's estimate of value, however, and Foley &
Lardner, in issuing its opinion on the Company's qualification as a REIT, is
relying on the Company's representation as to the limited value of the stock
interests in RRG 1 and
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RRG 2. Although the Company plans to take steps to ensure that it will
continue to satisfy the 5% value test for any subsequent quarter with respect
to which retesting is to occur, there can be no assurance that such steps will
always be successful or will not require a reduction in the Company's overall
direct or indirect interest in the Management Companies. See "--Failure to
Qualify."
Annual Distribution Requirements. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gains dividends)
to its shareholders in an amount at least equal to: (a) the sum of (i) 95% of
the Company's "REIT taxable income" (computed without regard to the dividends
paid deduction and the Company's net capital gain) and (ii) 95% of the net
income (after tax), if any, from foreclosure property; minus (b) the sum of
certain items of non-cash income. In addition, if, during the applicable
Recognition Period, the Company disposes of any asset with Built-in Gain, the
Company will be required, pursuant to Treasury Regulations which have not yet
been promulgated, to distribute at least 95% of the Built-in Gain (after tax),
if any, recognized on the disposition of such asset. Such distribution must be
paid in the taxable year to which it relates, or in the following taxable year
if declared before the Company timely files its tax return for such prior year
and if paid on or before the first regular dividend payment date after such
declaration. To the extent that the Company does not distribute all of its net
capital gain or distributes at least 95%, but less than 100%, of its "REIT
taxable income," as adjusted, it will be subject to tax thereon at regular
ordinary and capital gains corporate tax rates. Furthermore, if the Company
should fail to distribute during each calendar year at least the sum of (i)
85% of its REIT ordinary income for such year, (ii) 95% of its REIT capital
gain income for such year and (iii) any undistributed taxable income from
prior periods, the Company will be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually distributed.
The Company intends to make timely distributions sufficient to satisfy this
annual distribution requirement in the future. It is possible that the
Company, from time to time, may not have sufficient cash or other liquid
assets to meet the 95% distribution requirement due to timing differences
between the actual receipt of income and the actual payment of deductible
expenses and the inclusion of such income and deduction of such expenses in
arriving at the taxable income of the Company, or if the amount of
nondeductible expenses such as principal amortization or capital expenditures
exceeds the amount of noncash deductions. In the event that such timing
differences occur, in order to meet the 95% distribution requirement, the
Company may find it necessary to arrange for short-term, or possibly long-
term, borrowings to permit the payment of required dividends or to pay
dividends in the form of taxable stock dividends.
Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a certain year by paying "deficiency
dividends" to shareholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year. Thus, the Company
may be able to avoid being taxed on amounts distributed as deficiency
dividends; however, the Company will be required to pay to the IRS interest
based upon the amount of any deduction taken for deficiency dividends.
FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable corporate alternative minimum tax) on its taxable
income at regular corporate rates. Such a failure could have an adverse effect
on the market value and marketability of the Company's stock. Distributions to
shareholders in any year in which the Company fails to qualify will not be
deductible by the Company nor will they be required to be made. In such event,
to the extent of current and accumulated earnings and profits, all
distributions to shareholders will be taxable as ordinary income, and, subject
to certain limitations of the Code, corporate distributees may be eligible for
the dividends received deduction. Unless entitled to relief under specific
statutory provisions, the Company will also be disqualified from taxation as a
REIT for the four taxable years following the year during which qualification
was lost. It is not possible to state whether the Company would be entitled to
such statutory relief.
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TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
As long as the Company qualifies as a REIT, distributions made to its
taxable domestic shareholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will result in ordinary
income. Corporate shareholders will not be entitled to the dividends received
deduction. Distributions that are designated as capital gains dividends will
be taxed as long-term capital gains (to the extent they do not exceed the
Company's actual net capital gain for the taxable year) without regard to the
period for which the shareholder has held its stock. However, corporate
shareholders may be required to treat up to 20% of certain capital gains
dividends as ordinary income. Distributions in excess of current and
accumulated earnings and profits will not be taxable to the extent that they
do not exceed the adjusted basis of the shareholder's shares, but rather will
reduce a shareholder's adjusted basis in such shares. To the extent that such
distributions exceed the adjusted basis of a shareholder's shares, they will
be included in income as long-term capital gain (or short-term capital gain if
the shares have been held for one year or less), assuming the shares are a
capital asset in the hands of the shareholder. In addition, any dividend
declared by the Company in October, November or December of any year payable
to a shareholder of record on a specific date in any such month shall be
treated as both paid by the Company and received by the shareholder on
December 31 of such year, provided that the dividend is actually paid by the
Company during January of the following calendar year.
Shareholders may not include any net operating losses or capital losses of
the Company in their individual income tax returns. In general, any loss upon
the sale or exchange of shares by a shareholder who has held such shares for
six months or less (after applying certain holding period rules) will be
treated as a long-term capital loss to the extent distributions from the
Company on such shares were required to be treated by such shareholder as
long-term capital gain.
TAXATION OF TAX-EXEMPT SHAREHOLDERS
In Revenue Ruling 66-106, 1966-1 C.B. 151, the IRS ruled that amounts
distributed by a REIT to a tax-exempt employees' pension trust did not
constitute UBTI. Revenue rulings are interpretive in nature and subject to
revocation or modification by the IRS. Based upon Revenue Ruling 66-106 and
the analysis therein, except as noted below, distributions to tax-exempt
shareholders should not constitute UBTI where (a) the shareholder has not
financed the acquisition of its shares with "acquisition indebtedness" within
the meaning of the Code, and (b) the shares are not used by the shareholder in
an unrelated trade or business.
Under the Omnibus Budget Reconciliation Act of 1993, certain pension trusts
holding more than 10% by value of a REIT at any time during a taxable year are
treated as having UBTI which bears the same ratio to the aggregate dividends
paid (or treated as paid) by the REIT to such trust as (i) the gross income of
the REIT (less any direct expenses related thereto) which would be treated as
UBTI if the REIT were a pension trust, bears to (ii) the gross income of the
REIT (less any direct expenses related thereto), but only if such ratio is at
least 5%. This rule for UBTI only applies to pension trusts investing in a
REIT which would have been considered "closely held" under Section 542(a)(2)
of the Code, had such section not been amended by the Omnibus Budget
Reconciliation Act of 1993. In addition, the rule only applies where at least
one pension trust holds more than 25% by value of the REIT or where one or
more pension trusts (each owning more than 10% by value of the REIT) hold in
aggregate more than 50% by value of the REIT.
OTHER TAX CONSEQUENCES
Some of the Company's investments are through the Property Partnerships.
These partnerships may involve special tax risks. Such risks include possible
challenge by the IRS of allocations of income and expense items, which could
affect the computation of taxable income of the Company, and the status of the
Property Partnerships as partnerships or entities that may be disregarded as
entities separate from their owners (as opposed to associations taxable as
corporations) for income tax purposes that may not constitute "qualified REIT
subsidiaries" under the Code. In the opinion of Foley & Lardner, which is
based on (i) analysis of the partnership agreements for each Property
Partnership, and (ii) the representations of the Company that such agreements
fully reflect all amendments and modifications to such agreements as of the
date of this Prospectus, the partnership
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allocations of income and expense items for the Property Partnerships
(classified as partnerships for federal income tax purposes) have substantial
economic effect under Section 704(b) of the Code and the Treasury Regulations
thereunder, and each of the Property Partnerships has been and will continue
to be treated for federal income tax purposes as (i) a partnership, (ii) a
qualified REIT subsidiary under the Code or (iii) an entity that may be
disregarded as an entity separate from its owner under Treasury Regulation
(S)301.7701-3. See "--Requirements for Qualification."
The Company and its shareholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its shareholders may not conform to the federal income tax consequences
discussed above. Consequently, prospective shareholders should consult their
own tax advisors regarding the effect of state and local tax laws on an
investment in the Company.
BACKUP WITHHOLDING
The Company will report to its domestic shareholders and to the IRS the
amount of dividends paid during each calendar year, and the amount of tax
withheld, if any. Under the backup withholding rules, a shareholder may be
subject to backup withholding at the rate of 31% with respect to dividends
paid unless such shareholder (a) is a corporation or another form of entity
exempt from backup withholding and, when required, demonstrates this fact, or
(b) provides a taxpayer identification number, certifies to no loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. A shareholder that does not
provide the Company with a correct taxpayer identification number may also be
subject to penalties imposed by the IRS. Any amount paid as backup withholding
will be creditable against the shareholder's income tax liability. In
addition, the Company may be required to withhold a portion of capital gain
distributions to any shareholders who fail to certify their non-foreign status
to the Company.
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ERISA CONSIDERATIONS
The following is a summary of material considerations arising under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
prohibited transactions provisions of Section 4975 of the Code that may be
relevant to a prospective purchaser. This discussion does not purport to deal
with all aspects of ERISA or Section 4975 of the Code that may be relevant to
particular shareholders (including plans subject to Title I of ERISA, other
retirement plans and Individual Retirement Accounts ("IRA's") subject to the
prohibited transaction provisions of Section 4975 of the Code, and
governmental plans or church plans that are exempt from ERISA and Section 4975
of the Code but that may be subject to the prohibited transaction provisions
of Section 503 of the Code and to state law requirements) in light of their
particular circumstances.
A FIDUCIARY MAKING THE DECISION TO INVEST IN SHARES ON BEHALF OF A
PROSPECTIVE PURCHASER WHICH IS AN EMPLOYEE BENEFIT PLAN, A TAX QUALIFIED
RETIREMENT PLAN, OR AN IRA IS ADVISED TO CONSULT ITS OWN LEGAL ADVISOR
REGARDING THE SPECIFIC CONSIDERATIONS ARISING UNDER ERISA, SECTIONS 4975 AND
503 OF THE CODE, AND STATE LAW WITH RESPECT TO THE PURCHASE, OWNERSHIP, OR
SALE OF THE SHARES BY SUCH PLAN OR IRA.
EMPLOYEE BENEFIT PLANS, TAX QUALIFIED RETIREMENT PLANS AND IRA'S
Each fiduciary of a pension, profit sharing, or other employee benefit plan
subject to Title I of ERISA (an "ERISA Plan") should carefully consider
whether an investment in the Shares is consistent with his fiduciary
responsibilities under ERISA. The fiduciary must make its own determination as
to whether an investment in the Shares (i) is permissible under the documents
governing the ERISA Plan, (ii) is appropriate for the ERISA Plan under the
general fiduciary standards of investment prudence and diversification, taking
into account the overall investment policy of the ERISA Plan and the
composition of the ERISA Plan's investment portfolio, and (iii) would result
in a nonexempt prohibited transaction under ERISA and the Code.
The fiduciary of an IRA or of a qualified retirement plan not subject to
Title I of ERISA because it is a governmental or church plan or because it
does not cover common law employees (a "Non-ERISA Plan") should consider that
such an IRA or Non-ERISA Plan may only make investments that are authorized by
the appropriate governing documents and under applicable state law. The
fiduciary should also consider the applicable prohibited transaction rules of
Sections 4975 and 503 of the Code.
STATUS OF THE REIT
The following section discusses certain principles that apply in determining
whether the fiduciary requirements of ERISA and the prohibited transaction
provisions of ERISA and the Code apply to an entity because one or more
investors in the entity's equity interests is an ERISA Plan or is a Non-ERISA
Plan or IRA subject to Section 4975 of the Code. An ERISA Plan fiduciary
should also consider the relevance of these principles to ERISA's prohibition
on improper delegation of control over or responsibility for "plan assets" and
ERISA's imposition of co-fiduciary liability on a fiduciary who participates
in, permits (by action or inaction) the occurrence of, or fails to remedy a
known breach by another fiduciary.
Under the Department of Labor regulations as to what constitutes assets of
an employee benefit plan (the "DOL Regulations"), if an ERISA Plan acquires an
equity interest in an entity, which interest is neither a "publicly offered
security" nor a security issued by an investment company registered under the
Investment Company Act of 1940, as amended, the ERISA Plan assets would
include, for purposes of the fiduciary responsibility provisions of ERISA,
both the equity interest and an undivided interest in each of the entity's
underlying assets unless certain specified exceptions apply. The DOL
Regulations define a publicly offered security as a security that is "widely
held," "freely transferable," and either part of a class of securities
registered under the Securities Exchange Act of 1934, or sold pursuant to an
effective registration statement under the Securities Act (provided the
securities are registered under the Securities Exchange Act of 1934 within 120
days after the end of the fiscal year of the issuer during which the offering
occurred). The equity Shares offered hereby will be sold in an offering
registered under the Securities Act and are registered under the Securities
Exchange Act of 1934.
20
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The DOL Regulations provide that a security is "widely held" only if it is
part of a class of securities that is owned by 100 or more investors
independent of the issuer and of one another. A security will not fail to be
"widely held" because the number of independent investors falls below 100 as a
result of events beyond the issuer's control. The Common Stock is "widely
held."
The DOL Regulations provide that whether a security is "freely transferable"
is a factual question to be determined on the basis of all relevant facts and
circumstances. The DOL Regulations further provide that when a security is
part of an offering in which the minimum investment is $10,000 or less, as is
the case with this offering, certain restrictions ordinarily will not, alone
or in combination, affect the finding that such securities are freely
transferable. The Company believes that restrictions imposed under the
Articles of Incorporation on the transfer of its capital stock are limited to
the restrictions on transfers generally permitted under the DOL Regulations
and are not likely to result in the failure of its capital stock to be "freely
transferable." The DOL Regulations only establish a presumption in favor of
the finding of free transferability, and, therefore, no assurance can be given
that the Department of Labor and the U.S. Treasury Department will not reach a
contrary conclusion.
Assuming that no facts and circumstances exist that restrict transferability
of such Shares other than as described in this Prospectus, Foley & Lardner has
rendered an opinion that under the DOL Regulations, the Shares will be
publicly offered securities and that the assets of the Company will not be
deemed to be "plan assets" of any ERISA Plan, IRA or Non-ERISA Plan that
invests in the Shares.
21
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock to which this Prospectus relates
and certain tax matters described under "Federal Income Tax Considerations"
and "ERISA Considerations" will be passed upon for the Company by Foley &
Lardner, Jacksonville, Florida. Attorneys with Foley & Lardner representing
the Company with respect to this offering beneficially owned approximately
4,100 shares of Common Stock as of the date of this Prospectus.
EXPERTS
The consolidated financial statements and schedule of Regency Realty
Corporation as of December 31, 1996 and 1995, and for the years ended December
31, 1996, 1995 and 1994 have been incorporated by reference herein and in the
registration statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing. To
the extent that KPMG Peat Marwick LLP audits and reports on consolidated
financial statements of Regency Realty Corporation issued at future dates, and
consents to the use of their report thereon, such consolidated financial
statements also will be incorporated by reference in the registration
statement in reliance upon their report and said authority.
The audited historical financial statements of Branch Properties, L.P.
incorporated in this Prospectus constituting part of the Registration
Statement by reference to the Current Report on Form 8-K/A-2 of the Company
dated March 7, 1997 (filed May 19, 1997) have been so incorporated in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
22
<PAGE>
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRE-
SENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR
ANY OF THE UNDERWRITERS. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANY-
ING PROSPECTUS CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO
BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DO THEY CONSTI-
TUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURI-
TIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SO-
LICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SO-
LICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT ANY IN-
FORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Supplement Summary.............................................. S-3
Recent Developments........................................................ S-5
Business and Properties.................................................... S-6
Use of Proceeds............................................................ S-11
Capitalization............................................................. S-11
Price Range of Common Stock and Dividends.................................. S-13
Underwriting............................................................... S-14
PROSPECTUS
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Risk Factors............................................................... 3
The Company................................................................ 7
Use of Proceeds............................................................ 7
Capital Stock.............................................................. 7
Plan of Distribution....................................................... 12
Federal Income Tax Considerations.......................................... 13
ERISA Considerations....................................................... 20
Legal Matters.............................................................. 22
Experts.................................................................... 22
</TABLE>
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PROSPECTUS SUPPLEMENT
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2,415,000 Shares
[LOGO OF REGENCY REALTY CORPORATION APPEARS HERE]
Common Stock
PRUDENTIAL SECURITIES INCORPORATED
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
RAYMOND JAMES & ASSOCIATES, INC.
THE ROBINSON-HUMPHREY COMPANY, INC.
July 10, 1997
