SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 3)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only (as
permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Regency Realty Corporation
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
Regency Realty Corporation
_______________
NOTICE AND PROXY STATEMENT
_______________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 12, 1997
TO THE HOLDERS OF COMMON STOCK:
PLEASE TAKE NOTICE that the annual meeting of shareholders of Regency
Realty Corporation (the "Company") will be held on Thursday, June 12,
1997, at 2:00 P.M., local time, at the Omni Jacksonville Hotel, 245 Water
Street, Jacksonville, Florida.
The meeting will be held for the following purposes:
1. To elect two Class III directors and three Class I directors to
serve terms expiring at the annual meeting of shareholders to be
held in 1999 and 2000, respectively, and until their successors
have been elected and qualified.
2. To consider and vote on the issuance of Common Stock in
connection with transactions (collectively, the "Transaction" or
the "Branch Transaction") contemplated by a Contribution
Agreement and Plan of Reorganization among the Company, Branch
Properties, L.P. ("Branch") and Branch Realty, Inc. pursuant to
which the Company has acquired substantially all of Branch's
assets in exchange for shares of Common Stock and units of
limited partnership interest that are redeemable for Common
Stock.
3. To consider and vote on a proposed amendment to the Company's
Articles of Incorporation that would permit the Company's major
beneficial shareholder, Security Capital U.S. Realty and its
subsidiary (collectively, "Security Capital"), to waive the
presumption that Security Capital owns 45% of the outstanding Common
Stock, on a fully diluted basis, which waiver is necessary in order
to permit the redemption of limited partnership interests for
Common Stock pursuant to the Transaction by limited partners
who, directly or indirectly, are Non-U.S. Persons (as defined in
the Articles of Incorporation).
4. To consider and vote on a proposed amendment to the Company's
Articles of Incorporation that would increase the number of
authorized shares of Common Stock from 25 million to 150 million
shares.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The shareholders of record at the close of business on April 7, 1997
will be entitled to vote at the annual meeting.
It is hoped you will be able to attend the meeting, but in any event
we would appreciate your dating, signing and returning the enclosed proxy
as promptly as possible. If you are able to be present at the meeting,
you may revoke your proxy and vote in person.
By Order of the Board of Directors,
/s/ J. Christian Leavitt
J. Christian Leavitt
Secretary and Treasurer
Dated: May 14, 1997
<PAGE>
TABLE OF CONTENTS
Page
VOTING SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Standstill . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PROPOSAL 1: ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . 6
Compensation Committee Report on Executive Compensation . . . . 13
Comparative Stock Performance . . . . . . . . . . . . . . . . . 16
Executive Compensation . . . . . . . . . . . . . . . . . . . . . 17
Compensation Committee Interlocks and Insider Participation . . 19
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . 19
PROPOSAL 2: APPROVAL OF ISSUANCE OF COMMON STOCK IN
CONNECTION WITH THE BRANCH TRANSACTION . . . . . . . . . . 22
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . 23
Consideration for Stock Issuances . . . . . . . . . . . . . . . 23
Terms of the Branch Transaction . . . . . . . . . . . . . . . . 26
Redemption of Units for Common Stock . . . . . . . . . . . . . . 27
Capital Contribution from Security Capital . . . . . . . . . . . 28
Related Transactions . . . . . . . . . . . . . . . . . . . . . . 28
Reasons for the Branch Transaction . . . . . . . . . . . . . . . 29
Reasons for and Effect of the Stock Issuances . . . . . . . . . 29
PROPOSAL 3: APPROVAL OF AMENDMENT TO SECTION 5.14 OF THE ARTICLES OF
INCORPORATION TO AUTHORIZE FORMER BRANCH PARTNERS
WHO ARE NON-U.S. PERSONS TO ACQUIRE COMMON STOCK . . . . . 33
PROPOSAL 4: PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO
AUTHORIZE AN ADDITIONAL 150 MILLION SHARES
OF COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . 34
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . 35
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . 35
ANNUAL REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
EXPENSES OF SOLICITATION . . . . . . . . . . . . . . . . . . . . . . 36
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . 36
EXHIBIT A - ARTICLES OF AMENDMENT
<PAGE>
Regency Realty Corporation
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
_______________
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD JUNE 12, 1997
This Proxy Statement and the enclosed form of proxy are first being
sent to shareholders of Regency Realty Corporation on or about May 12,
1997 in connection with the solicitation by the Company's Board of
Directors of proxies to be used at the 1997 annual meeting of shareholders
of the Company. The meeting will be held on Thursday, June 12, 1997, at
2:00 P.M., local time, at the Omni Jacksonville Hotel, 245 Water Street,
Jacksonville, Florida.
The Board of Directors has designated Joan W. Stein and Martin E.
Stein, Jr., and each or either of them, as proxies to vote the shares of
Common Stock solicited on its behalf. If the enclosed form of proxy is
executed and returned, it may nevertheless be revoked at any time insofar
as it has not been exercised by (i) giving written notice to the Secretary
of the Company, (ii) delivery of a later dated proxy, or (iii) attending
the meeting and voting in person. The shares represented by the proxy
will be voted unless the proxy is mutilated or otherwise received in such
form or at such time as to render it not votable.
If necessary, the holders of the proxies may vote in favor of a
proposal to adjourn the meeting to permit further solicitation of proxies
in order to obtain sufficient votes to approve any of the matters being
considered at the meeting. If the meeting is adjourned for any reason, at
any subsequent reconvening of the meeting all proxies may be voted in the
same manner as such proxies would have been voted at the original
convening of the meeting (except for any proxies that have heretofore
effectively been revoked or withdrawn).
VOTING SECURITIES
The record of shareholders entitled to vote was taken at the close of
business on April 7, 1997. At such date, the Company had outstanding and
entitled to vote 12,323,183 shares of Common Stock, $.01 par value. Each
share of Common Stock entitles the holder to one vote. Holders of a
majority of the outstanding Common Stock must be present in person or
represented by proxy to constitute a quorum at the annual meeting.
The Company is a Florida corporation the principal shareholders of
which consist of members the Stein family, who founded the Company, and
the Company's major investor, Security Capital. The following table shows
certain information relating to the beneficial ownership as of April 7, 1997
of (i) each person known to the Company to be the beneficial owner of more
than 5% of the Company's Common Stock, which is the only outstanding class
of voting securities of the Company, (ii) each director and nominee,
(iii) each of the named executive officers shown in the Summary Compensation
Table elsewhere in this proxy statement, and (iv) all directors and
executive officers as a group. Except as otherwise indicated, the share-
holders listed exercise sole voting and dispositive power over the
shares.
Percent
Amount and Nature of of Voting
Beneficial Owner(1) Beneficial Ownership Securities(2)
Security Capital U.S. 5,246,078 42.6%
Realty(3)
Alliance Capital 623,700 5.1%
Management, L.P.(4)
Joan W. Stein(5) 586,461(6)(7))
Martin E. Stein, Jr.(5) 712,216(6)(8)(9)) 5.8%(10)
Richard W. Stein(11) 578,146(6)(12))
Robert L. Stein(13) 583,552(6)(14))
John D. Baker II(15) 575,645(6))
Edward L. Baker 12,271(16) *
A.R. Carpenter 10,623(16) *
J. Dix Druce, Jr. 10,039(16) *
Albert Ernest, Jr. 9,617(16) *
Douglas S. Luke 12,123(16) *
Paul E. Szurek 4,078(16) *
J. Marshall Peck 4,728(16) *
J. Alexander Branch III 67,616(17)
Mary Lou Rogers(18) -- --
Robert S. Underhill(18) -- --
Bruce M. Johnson 58,717(9)(19) *
Robert C. Gillander, Jr. 55,180(19) *
James D. Thompson 47,952(19) *
Richard E. Cook(20) 54,857(19)
All directors, nominees 1,026,384(21) 8.2%
for director and
executive officers as a
group (a total of 17
persons)
________________________
* Less than one percent.
(1) Information presented in this table and related notes has been
obtained from the beneficial owner and from reports filed by the
beneficial owner with the Securities and Exchange Commission pursuant
to Section 13 of the Securities Act of 1934.
(2) The percentages shown on the above table do not take into account the
shares of Common Stock issuable upon conversion of the Company's
Class B Non-Voting Stock (the "Class B Stock"). The Company has
outstanding a total of 2,500,000 shares of Class B Stock held by a
single institutional investor which are convertible into Common Stock
at the holder's option beginning December 20, 1998, subject to
certain numerical limitations, including a requirement that
conversion not result in the holder being the beneficial owner of
more than 4.9% of the Company's outstanding Common Stock. The Class
B Stock will be immediately convertible into Common Stock in full
upon the occurrence of certain extraordinary events or defaults,
including certain changes in management. A total of 2,975,468 shares
of Common Stock are issuable upon conversion of the Class B Stock.
Based on the number of shares of Common Stock outstanding on the
record date for the annual meeting (and assuming no other changes),
the 2,975,468 shares of Common Stock issuable upon conversion of the
Class B Stock would constitute approximately 19.4% of the Common
Stock outstanding immediately following conversion.
(3) The business address of Security Capital U.S. Realty is 69, route
d'Esch, L-1470 Luxembourg.
(4) The business address of Alliance Capital Management, L.P. is 1345
Avenue of the Americas, New York, New York 10105.
(5) The business address of Joan W. Stein and Martin E. Stein, Jr. is 121
West Forsyth Street, Suite 200, Jacksonville, Florida 32202.
(6) Includes 160,263 shares held through The Regency Group, Inc. The
named individual is deemed to have shared voting and investment power
over these shares by virtue of testamentary trusts and a voting trust
of which the Steins and John D. Baker, II are trustees, which trusts
own 100% of the voting stock of The Regency Group, Inc. Also
includes: 307,147 shares and 108,235 shares owned through two family
partnerships, The Regency Group II and Regency Square II,
respectively. The general partners of The Regency Group II and
Regency Square II are the Steins and a testamentary trust of which
the Steins and Mr. Baker are trustees.
(7) Also includes 10,816 shares owned individually by Joan W. Stein.
(8) Also includes: 91,266 shares owned by Martin E. Stein, Jr.,
individually; 40,000 shares subject to presently exercisable options
held by Martin E. Stein, Jr.; 4,000 shares held by a trust of which
Martin E. Stein, Jr. is the beneficiary; and 1,305 shares held for
the benefit of Martin E. Stein, Jr.'s minor children over which he
has sole voting and dispositive power.
(9) Excludes 46,691 shares held by the Company's 401(k) plan, of which
Messrs. Martin E. Stein, Jr. and Johnson are trustees. The trustees
have shared voting power over these shares.
(10) The 712,216 shares over which Martin E. Stein, Jr. has sole or shared
voting and investment power as described in notes (6) and (8)
represent, in the aggregate, 5.8% of the outstanding voting
securities of the Company. Percentages are omitted for the other
members of the Stein family and John D. Baker, II to avoid double
counting.
(11) The business address of Richard W. Stein is 1650 Prudential Drive,
Suite 304, Jacksonville, Florida 32207.
(12) Also includes 2,501 shares owned individually by Richard W. Stein.
(13) Robert L. Stein's business address is 1610 Independent Square,
Jacksonville, Florida 32202.
(14) Also includes 3,407 shares owned by Robert L. Stein, individually;
2,000 shares subject to presently exercisable options held by Robert
L. Stein; and 2,500 shares held for the benefit of Robert L. Stein's
minor children, over which he has sole voting and dispositive power.
(15) Mr. Baker's business address is 155 E. 21st Street, Jacksonville,
Florida 32206.
(16) Includes the following shares covered by presently exercisable
options: Mr. Baker, 5,000 shares; Mr. Carpenter, 5,000 shares; Mr.
Druce, 5,000 shares; Mr. Ernest, 5,000 shares; Mr. Luke, 5,000
shares; Mr. Szurek, 3,000 shares; and Mr. Peck, 3,000 shares.
(17) Excludes 80,309 shares issuable upon redemption of limited
partnership units held by Mr. Branch and 2,228 shares issuable upon
redemption of limited partnership units held by Mr. Branch's wife as
trustee for the benefit of their children.
(18) Nominee for director.
(19) Includes the following shares covered by presently exercisable
options: Mr. Johnson, 16,000 shares; Mr. Gillander, 16,000 shares;
Mr. Thompson, 14,000 shares; and Mr. Cook, 16,000 shares.
(20) Mr. Cook resigned as Senior Vice President, Development, effective
January 31, 1997.
(21) Includes 119,000 shares subject to presently exercisable options.
The following chart illustrates in schematic form the ownership
structure of the Company and the limited partnership created in connection
with the acquisition of Branch's assets that is described under Proposal
2.
[The material to be delivered to shareholders contains an organization
chart, the textual entries of which appear below.]
Security Capital
U.S. Realty
100%
Security Capital Alliance Capital
Stein Family Holdings, S.A. Management, L.P.
5.8% 42.6% 5.1%
Regency Realty Corporation
(the "Company")
100%
Regency Atlanta, Inc.
Former limited
partners of Branch,
including Opportunity
General Capital Partners II
Partner Limited Partnership
Limited
Partners(1)
Regency Retail Partnership, L.P.
Assets acquired from Branch Properties, L.P.
______________________________
NOTE: All percentages relate to Common Stock.
(1) The limited partners hold Units that are redeemable, subject to
certain conditions, on a one-for-one basis, for shares of Common
Stock. As of the date of this Proxy Statement, there are 3,373,801
Units outstanding (exclusive of Units that may be issued pursuant to
earn-outs and in related transactions described below).
Standstill
Security Capital has agreed to a five-year "standstill" (renewable
for additional one-year terms) in its Stockholders Agreement with the
Company, as amended. A "standstill" is an agreement by a shareholder to
refrain from changing its position, most frequently involving an agreement
not to acquire additional shares and/or not to take certain actions
relating to management or control, such as replacing one or more members
of the board of directors. Under the terms of Security Capital's
standstill, Security Capital may not, among other things, (i) acquire more
than 45% of the Company's outstanding Common Stock on a fully diluted
basis, (ii) transfer shares in a negotiated transaction that would result
in any transferee beneficially owning more than 9.8% of the Company's
capital stock unless the Company approves the transfer, in its sole
discretion, (iii) act in concert with any third parties as part of a 13D
group, or (iv) seek to change the composition or size of the Board of
Directors (except as provided in the Stockholders Agreement with respect
to Security Capital's representation on the Board). During the standstill
term, Security Capital is generally required to vote its shares of Common
Stock in accordance with the recommendation of the Company's Board of
Directors or proportionally in accordance with the vote of the other
holders of the Common Stock except with respect to the election of
Security Capital's nominees to the Company's Board (as to which Security
Capital can vote its shares in its sole discretion) and with respect to
any amendment to the Company's Articles of Incorporation or Bylaws that
would reasonably be expected to materially adversely affect Security
Capital and certain extraordinary matters (as to which Security Capital
may vote Common Stock owned by it up to 40% of the outstanding shares in
its sole discretion).
Security Capital's standstill requires it to vote at the annual
meeting for the Board of Directors' nominees (other than Security
Capital's representatives) or vote proportionally for such nominees in
accordance with the vote of the other shareholders. Security Capital has
signed a voting agreement in connection with the Branch Transaction in
which it has agreed to vote in favor of Proposal 2 (issuance of Common
Stock in connection with the Branch Transaction) and Proposal 3 (amendment
of Articles of Incorporation with respect to Non-U.S. Persons). See
"Proposal 2--Vote Required." Under its standstill, Security Capital (i)
is required to vote those shares owned by it in excess of 40% of the
outstanding shares (or approximately 2.6% of the outstanding shares) in
favor of Proposal 4 (to increase the number of authorized shares of Common
Stock) or proportionally as the holders of the remaining shares vote with
respect to Proposal 4, and (ii) is permitted to vote those shares owned by
it up to 40%, in its sole discretion, with respect to Proposal 4.
Security Capital's standstill will terminate automatically prior to
the end of its stated term upon the occurrence of certain events,
including the acquisition by another person or group of 9.8% or more of
the voting power of the Company's outstanding voting securities. Based on
notices of redemption received as of the date of this Proxy Statement from
persons who acquired redemption rights in connection with the Branch
Transaction, Opportunity Capital Partners II Limited Partnership, a
Maryland limited partnership ("OCP"), is expected to have beneficial
ownership of more than 9.8% of the Common Stock following the exercise by
it of redemption rights pursuant to the Branch Transaction (assuming that
shareholders approve Proposal 2). See "Proposal 2--Redemption of Units
for Common Stock." Security Capital has agreed that the standstill will
not be terminated by OCP's exercise of redemption rights so long as the
shares acquired by OCP as a result of such exercise are held directly and
beneficially by OCP. The waiver of the termination of the standstill also
extends to (i) 225,930 shares beneficially owned for various managed
accounts by ABKB/LaSalle Securities Limited, an affiliate of OCP's general
partner ("ABKB/LaSalle") (including 32,200 shares held in a discretionary
account for the benefit of OCP's limited partner), but only to the extent
that such shares are continuously held in each such account, and (ii) up
to 4.9% of the outstanding Common Stock beneficially owned as a result of
the conversion of Class B Stock, which is beneficially owned by an
affiliate of ABKB/LaSalle for another client. However, the waiver will
terminate as to all the shares described above if OCP, ABKB/LaSalle, any
other affiliate of OCP, or any member of a group of which OCP is a member
acquires beneficial ownership of any additional voting securities of the
Company or takes any other actions that would otherwise result in the
termination of the standstill.
During the standstill period, OCP has agreed with the Company that
OCP will not, and OCP and ABKB/LaSalle have agreed that they will not
cause other managed accounts for OCP's limited partner (collectively with
OCP, the "OCP Accounts") to acquire additional shares (i) so long as OCP
continues to beneficially own more than 9.8% of the Common Stock, on a
fully diluted basis, or (ii) thereafter if, after giving effect to the
acquisitions, the OCP Accounts would own more than 9.8% of the Common
Stock, on a fully diluted basis. However, neither ABKB/LaSalle nor any of
its affiliates is so bound with respect to any of their other clients or
accounts. Accordingly, if ABKB/LaSalle becomes the beneficial owner of
any shares that are not exempted from the standstill waiver as described
above (or if any of the exempted shares are transferred between
ABKB/LaSalle affiliates even though their aggregate beneficial ownership
does not increase), then all shares beneficially owned by OCP,
ABKB/LaSalle and their affiliates will be counted in determining whether
Security Capital's standstill has terminated. If after any such event
such persons then beneficially own more than 9.8% of the outstanding
Common Stock, the standstill will terminate, and Security Capital will not
be restricted in the voting of the shares that it owns or in any other
action that it might take as a shareholder of the Company.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Amended and Restated Articles of Incorporation divide
the Board of Directors into three classes, as nearly equal in number as
possible. At the meeting, two Class III directors will be elected to
serve for a term of two years and until their successors are elected and
qualified, and three Class I directors will be elected to serve for a term
of three years and until their successors are elected and qualified. The
Board of Directors has nominated J. Alexander Branch III, who was recently
elected to the Board in connection with the Branch Transaction (see
"Proposal 2"), and Robert S. Underhill, who has been nominated for a seat
being vacated by J. Marshall Peck, to stand for election as Class III
directors. The Board of Directors also has nominated Douglas S. Luke to
stand for re-election as a Class I director and Richard W. Stein and Mary
Lou Rogers to stand for election as Class I directors to fill seats being
vacated by Robert L. Stein and Paul E. Szurek, respectively. Directors
will be elected by a plurality of votes cast by shares entitled to vote at
the meeting.
The accompanying proxy will be voted, if authority to do so is not
withheld, for the election as directors of each of the Board's nominees.
Each nominee is presently available for election. If any nominee should
become unavailable, which is not now anticipated, the persons voting the
accompanying proxy may in their discretion vote for a substitute.
Information concerning all incumbent directors and all nominees for
director, based on data furnished by them, is set forth below. Martin E.
Stein, Jr. and Richard W. Stein are brothers, and Joan W. Stein is their
mother. Mr. Underhill and Ms. Rogers have been nominated by Security
Capital as its representatives to the Company's Board of Directors
pursuant to a Stockholders Agreement between the Company and Security
Capital, which gives Security Capital the right, under certain
circumstances, to nominate for election by shareholders its proportionate
share of the members of the Board (but generally not fewer than two, nor
more than 49% of the directors). OCP has the right to nominate one member
to the Company's Board of Directors so long as it retains the units of
limited partnership interest received by it in the Branch Transaction or
the shares of Common Stock for which such units are redeemed. See
"Proposal 2--Redemption of Units for Common Stock." The Company expects
that OCP will select a nominee after the annual meeting, in which case the
Board of Directors will elect OCP's nominee to the Board, pending the
Company's 1998 annual meeting. It is anticipated that OCP's nominee, when
selected, will be a Class II director.
The Board of Directors of the Company recommends a vote "for"
the election of each of its nominees. Proxies solicited by the Board will
be so voted unless shareholders specify in their proxies a contrary
choice.
Shares of
Company
Common Stock
Year Owned
Class/ Positions with the First Beneficially
Current Company; Principal Became as of
Term Occupations During Director March 1, 1997
Expires Past Five Years; of the (% of
Name Age (1) Other Directorships Company Class)(2)
Joan W. Stein*+ Class Chairman of the 1993 586,461(3)
(68) III Board and Director (4.8%)
1999 of the Company;
Chairman since 1968
of The Regency
Group, Inc. ("TRG"),
which transferred
substantially all
the assets of its
real estate division
to the Company upon
the closing of the
Company's initial
public offering in
November 1993;
retired as a
director of Barnett
Bank of
Jacksonville, N.A.
in 1995.
Martin E. Stein, Class II President, Chief 1993 712,216(3)(4)
Jr.*+ 1998 Executive Officer (5.8%)
(44) and Director of the
Company; President
and Chief Executive
Officer of TRG since
1988 and President
of TRG's real estate
division since 1981;
director of FRP
Properties, Inc., a
publicly held
transportation and
real estate company.
Richard W. Stein Class I President and Chief 578,146(3)
(41) nominee Executive Officer of (4.7%)
(for Palmer & Cay of
term Florida, Inc., an
expiring insurance agency,
2000) since 1993;
Executive Vice
President and
director of TRG,
1989 to present.
Douglas S. Luke# Class I Director of the 1993 12,123(5)
(55) 1997 Company; President
and Chief Executive
Officer since 1991
of WLD Enterprises,
Inc., a Ft.
Lauderdale, Florida
based diversified
private investment
and management
company with
interests in
securities, real
estate and operating
businesses; managing
director of
Rothschild
Inc./Rothschild
Ventures from 1987
to 1990; director of
DNA Plant Technology
Corporation, an
agricultural
biotechnology
corporation, Orbital
Sciences
Corporation, a space
systems company, and
Westvaco
Corporation, a
diversified paper
and chemicals manu-
facturing company.
Mary Lou Rogers Class I Managing Director of N/A --
(45) nominee Security Capital
(for Strategic Group
term Incorporated, an
expiring affiliate of
2000) Security Capital,
since March 1997,
responsible for
developing retail
operating systems
for retailing-related
initiatives for
Security Capital
Strategic Group
Incorporated's
clients; Senior
Vice President,
Director of Stores-
New England, for
Macy's
East/Federated
Department Stores
from 1994 to March
1997; Senior Vice
President, Director
of Stores for Henri
Bendels from 1993 to
1994; Senior Vice
President, Regional
Director of Stores
for the Burdines
Division of
Federated Department
Stores, from 1991 to
1993.
A. R. Class II Director of the 1993 10,623(5)
Carpenter~+ 1998 Company; President
(55) and Chief Executive
Officer (since
January 1992) of CSX
Transportation,
Inc., with which he
has held a variety
of positions since
1962, including
Executive Vice
President-Sales and
Marketing (from 1989
to 1992); director
of Barnett Banks,
Inc., a Jacksonville
based bank holding
company, and its
affiliate, Barnett
Bank of
Jacksonville, N.A.,
Florida Rock
Industries, Inc.,
Stein Mart, Inc., a
Jacksonville based
discount retailer,
and American
Heritage Life
Insurance Company.
J. Dix Druce, Class II Director of the 1993 10,039(5)
Jr.# 1998 Company; President
(49) and director of Life
Service Corp., Inc.,
a life insurance
management company,
since 1988; Chairman
of the Board and
President of
American Merchants
Life Insurance
Company and its
parent, AML
Acquisition Company,
since October 1992;
President and
director (Chairman
from May 1989 to
July 1991) of
National Farmers
Union Life Insurance
Company from 1987 to
1991; President and
director of Loyalty
Life Insurance
Company and NFU
Acquisition Company
from 1987 to 1991;
director of American
National Bank of
Florida.
Edward L. Class Director of the 1993 12,271(5)
Baker~+ III Company; Chairman of
(62) 1999 the Board of Florida
Rock Industries,
Inc., a publicly
held construction
materials company
listed on the
American Stock
Exchange, and its
affiliate, FRP
Properties, Inc.,
since May 1989 and
President from 1967
to May 1989;
director of American
Heritage Life
Insurance Company,
based in
Jacksonville,
Florida, and Flowers
Industries, a
producer of baked
goods located in
Thomasville,
Georgia.
J. Alexander 1997 Founder, Chairman 1997 67,616
Branch III Class and Chief Executive
(55) III Officer for more
nominee than five years of
(for Branch Properties,
term L.P. and
expiring predecessors, prior
1999) to the transfer by
it of substantially
all its assets to a
partnership
controlled by the
Company.
Albert Ernest, Class Director of the 1993 9,617(5)
Jr.~+ III Company; President
(66) 1999 of Albert Ernest
Enterprises, a
consulting and
investment firm;
director of Barnett
Banks, Inc., from
1982 until 1991,
President and Chief
Operating Officer
from November 1988
until his retirement
in 1991, and Vice
Chairman from 1984
to 1988; director of
Florida Rock
Industries, Inc.,
and its affiliate,
FRP Properties,
Inc., Stein Mart,
Inc., a publicly
held discount
apparel chain based
in Jacksonville,
Florida, Emerald
Funds and Wickes
Lumber Co., a
publicly held
retailer and
distributor of
building materials.
Robert S. Class Senior Vice N/A --
Underhill III President of
(41) nominee Security Capital
(for Strategic Group,
term Inc., from 1995 to
expiring present, where he is
1999) responsible for
researching
corporate and
portfolio
acquisitions; Senior
Vice President,
LaSalle Partners
Limited, a real
estate investment
firm, from 1993 to
1994; and Vice
President of its
affiliate, LaSalle
Partners
International, from
1990 to 1993.
_________________________
* Member of the Executive Committee, any meeting of which also must
include any one of the outside directors.
# Member of the Audit Committee.
~ Member of the Compensation Committee.
+ Member of the Nominating Committee.
(1) The Company's Amended and Restated Articles of Incorporation divide
the Board of Directors into three classes, as nearly equal in number
as possible, with directors elected for three-year terms.
(2) Where percentage is not indicated, amount is less than 0.1% of total
outstanding Common Stock. Unless otherwise noted, all shares are
owned directly, with sole voting and dispositive powers.
(3) Includes 160,263 shares held through The Regency Group, Inc. The
named individual is deemed to have shared voting and investment power
over these shares by virtue of testamentary trusts and a voting trust
of which the Steins and John D. Baker, II are trustees, which trusts
own 100% of the voting stock of The Regency Group, Inc. Also
includes 307,147 shares and 108,235 shares held through two family
partnerships, The Regency Group II and Regency Square II,
respectively. The general partners of The Regency Group II and
Regency Square II are the Steins, and a testamentary trust of which
the Steins and Mr. Baker are trustees.
(4) Includes 40,000 shares subject to presently exercisable options.
(5) Includes 5,000 shares subject to presently exercisable options.
Board of Directors and Standing Committees. Regular meetings of the
Board of Directors are held five times a year. The Board held five
regular meetings and two special meetings during 1996. All directors
attended at least 75% of all meetings of the Board and Board committees on
which they served during 1996.
The Board of Directors has established four standing committees: an
Executive Committee, an Audit Committee, a Compensation Committee and a
Nominating Committee, which are described below. Members of these
committees will be elected annually at the regular Board meeting held in
conjunction with the annual shareholders' meeting.
Executive Committee. The Executive Committee presently is comprised
of Joan W. Stein (Chairman) and Martin E. Stein, Jr. plus any one outside
director. The Executive Committee met one time during 1996. The
Executive Committee is authorized by the resolutions establishing the
committee to handle ministerial matters requiring Board approval. The
Executive Committee may not exercise functions reserved under Florida law
for the full Board of Directors and, in addition, may not declare
dividends.
Audit Committee. The Audit Committee presently is comprised of
Messrs. Druce, Luke and Szurek, none of whom is an officer of the Company.
Regular meetings of the Audit Committee are held twice a year. The Audit
Committee met twice during 1996. The principal responsibilities of and
functions generally performed by the Audit Committee are reviewing the
Company's internal controls and the objectivity of its financial
reporting, making recommendations regarding the Company's employment of
independent auditors, and reviewing the annual audit with the auditors.
Nominating Committee. The Nominating Committee presently is
comprised of Albert Ernest, Jr. (Chairman), Joan W. Stein, Martin E.
Stein, Jr., Edward L. Baker, and A.R. Carpenter. The Nominating
Committee, which makes nominations for election of directors, also has
responsibility for accepting nominations from shareholders. The Nominating
Committee met once during 1996. The Company's Bylaws require that any
nominations by shareholders be delivered to the Company no later than the
deadline for submitting shareholder proposals. See "Shareholder
Proposals."
Compensation Committee. The Compensation Committee presently is
comprised of Messrs. Ernest (Chairman), Baker, Carpenter and Peck. The
Compensation Committee held three meetings during 1996 to review 1995
performance and to review and approve changes to the Company's current
executive compensation plans. This Committee has the responsibility of
approving the compensation arrangements for senior management of the
Company, including annual bonus and long term compensation. It also
recommends to the Board of Directors adoption of any compensation plans in
which officers and directors of the Company are eligible to participate,
as well as makes grants of employee stock options and other stock awards
under the Company's Long Term Omnibus Plan.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the
"Committee") is responsible for evaluating and establishing levels of
executive compensation and administering the Company's benefit plans. The
Committee also provides review and commentary on non-executive
compensation programs.
Compensation Philosophy. The Company's executive compensation
program has been designed to attract, motivate, reward and retain key
executives who are capable of enhancing the Company's financial
performance in a competitive industry and building a premier operating
company. The Company's philosophy for compensating executive officers is
that an incentive-based compensation system tied to the Company's
financial performance will best align the interest of its executives with
the objectives of the Company. In accordance with this philosophy, the
Company has adopted a compensation system that is based on the Company's
operational performance and the creation of shareholder value.
The Committee reviews the Company's executive compensation program
based upon market information of other comparable operating companies.
Such review also involves evaluation of the Company's corporate
performance for the prior year, and the Company's future business plan.
From time to time the Company has retained compensation consulting firms
to assist it in structuring the Company's executive compensation. In
1996, the Company retained FPL Associates ("FPL") who assisted the
Committee in reviewing compensation levels for 1997. FPL was selected
based on its experience in designing compensation plans for other
successful companies, which include REITs. After review of the executive
compensation plan, relevant market data, 1996 corporate performance, and
the 1997 business plan, the Committee addressed the key components of the
Company's executive compensation system consisting of base salary, annual
bonus, stock options, a performance stock plan, and a stock purchase plan.
Base Salaries. Base salaries for executive officers are determined
by evaluating the responsibilities of the position held and the experience
of the individual, and by reference to the competitive marketplace for
executive talents, including a comparison to the market consensus of base
salaries for comparable positions. Annual salary adjustments are
determined by evaluating the performance of each executive officer taking
into account current and new responsibilities, current market consensus
for the position held, and such other factors as the Committee may deem
appropriate.
Annual Bonus. All of the Company's executive officers are eligible
for an annual bonus based on a targeted percentage of the individual's
base salary (currently 25% to 45% depending on the position held). Each
officer's bonus target is tied to a scale that adjusts the bonus target up
or down based on the achievement of predetermined levels in funds from
operations per share ("FFO per share"). In 1997, the Committee approved
the payment of 110% of targeted bonuses to executive officers as a result
of achieving FFO per share of $2.01 for the year ended December 31, 1996,
which exceeded the Company's 1996 objective.
The Committee may at its discretion approve additional bonus awards
for significant strengthening of the Company's overall capital structure.
During 1996, the Company completed a strategic alliance with Security
Capital whereby Security Capital agreed to purchase up to approximately
$132 million in Common Stock by June, 1997. At December 31, 1996, the
market value of the Company's Common Stock increased to approximately $358
million from $168 million at December 31, 1995, and included a 61.6% total
return to shareholders during 1996. This increase reduced the Company's
ratio of debt to total market capitalization to 32.4% from 40.8% at
December 31, 1995, and significantly increased the Company's available
capital for new investments. Additionally, the Company reduced its
borrowing costs on variable rate debt with the refinancing of its line of
credit. As a result of the positive impact of these transactions, the
Committee approved additional bonuses to executive officers equal to 50%
of targeted bonuses. The Committee required that all bonuses be paid 45%
in cash and 55% in the Company's Common Stock.
Stock Purchase Plan. To encourage stock ownership by management, the
Company has implemented a stock purchase plan ("SPP") whereby the Company
may make loans to executive officers and other key employees to acquire
Common Stock directly from the Company. These recourse loans are secured
by the stock purchased. Five percent of an executive's original balance
of the SPP loans is to be forgiven on each anniversary of the loan through
the tenth anniversary provided that the employee remains employed with the
Company. Additionally, the Committee may approve the forgiveness of
additional amounts of all SPP loans based on the Company's achievement of
predetermined performance goals which include growth in FFO, and total
shareholder return. As a result of exceeding the FFO per share target and
achieving a total shareholder return in excess of 20%, the Committee
approved an additional 15% forgiveness of the SPP loans.
Stock Options. No stock options were granted to officers during
1996. In January, 1997, the Board of Directors granted 1,183,200 stock
options to key employees under the Company's existing long-term Omnibus
Plan, with an exercise price of $25.25 per share, the fair market value at
the date of grant, many of which are subject to stock purchases by the key
employee. The options will expire after ten years, and become fully
exercisable after five years.
Performance Stock Plan. The Company has a performance stock program
whereby each executive officer can earn a specified number of shares of
restricted Common Stock as a result of achieving a compounded annual total
return to shareholders of 15% over a three year period beginning with the
average closing price of the fourth quarter of 1994. Any restricted stock
earned vests over three years following the grant date provided the
executive remains employed by the Company. At December 31, 1996, the
first measurement date, cumulative shareholder return as determined by the
plan was 66.4%. Accordingly, 40% of performance shares authorized under
the plan were granted.
Compensation Deduction Limitation. In 1993, Congress enacted Section
162(m) of the Internal Revenue Code, which prevents publicly held
corporations from deducting compensation expenses in excess of $1 million
paid to a chief executive officer or any of the other four most highly
compensated officers unless such compensation is performance-based. The
Company's compensation program does not currently provide for compensation
levels to which this limit would apply. In any event, the Committee
intends that all compensation to which the limit would otherwise apply
(including compensation from the exercise of options) will be performance-
based so as to be deductible under Section 162(m).
CEO Compensation. The Committee's policies for the CEO's
compensation are the same as the Company's other executive officers. For
1997, the CEO's base compensation was increased to $275,000 which,
according to market data utilized, is the median market consensus for the
position. The CEO serves under a rolling three-year employment agreement
(see "Executive Compensation -- Employment Agreements"). In accordance
with the Company's compensation plan, the CEO received a bonus of
$225,000, which was paid 45% in cash and 55% in stock, and $186,338 of
stock loan forgiveness under the SPP. The Committee believes that the
Company performed well for 1996 as evidenced by the achievement of its
operating objectives, significant strengthening of the Company's overall
financial position, and the total return realized by its shareholders.
REGENCY REALTY CORPORATION
COMPENSATION COMMITTEE
Albert Ernest, Jr., Chairman
Edward L. Baker
A. R. Carpenter
J. Marshall Peck
Comparative Stock Performance
The following graph compares the cumulative total shareholder return
on the Company's Common Stock with the cumulative total return of the S&P
500 Index and the NAREIT All Equity Index (excluding health care REITs)
since October 29, 1993, the first date on which the Common Stock began
trading on the New York Stock Exchange following the Company's initial
public offering, assuming the reinvestment of any dividends and assuming
the investment of $100 in each.
COMPARE CUMULATIVE RETURN
AMONG REGENCY REALTY CORP.,
S&P 500 INDEX AND NAREITY EQUITY INDEX*
Oct. 29, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1993 1993 1994 1995 1996
Regency Realty Corp. $100.00 $ 86.36 $ 94.35 $106.74 $179.84
NAREIT Equity Index $100.00 $ 94.83 $ 97.67 $111.55 $152.16
S&P 500 Index $100.00 $100.25 $101.57 $139.75 $171.83
Executive Compensation
The following table summarizes the compensation paid or accrued by
the Company for services rendered during fiscal 1996, 1995 and 1994 to the
Company's Chief Executive Officer and to the Company's four most highly
compensated executive officers whose total salary and bonus exceeded
$100,000 during the year ended December 31, 1996.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation Compensation
Restricted Securities
Name & Principal Cash Stock Stock Underlying SPP Loan All Other
Position Year Salary(1) Bonus(2) Bonus(2) Awards(3) Options/SARs Awards(4) Compensation(5)
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Martin E. Stein, Jr. 1996 $252,391 $102,250 $123,750 $168,000 0 $186,338 $34,439
President and Chief 1995 240,000 56,760 86,640 0 0 103,950 23,331
Executive Officer 1994 230,000 1,000 94,500 0 0 69,300 11,868
Bruce M. Johnson 1996 145,076 52,750 63,250 84,000 0 84,083 19,753
Executive Vice 1995 135,000 29,560 42,840 0 0 41,580 14,142
President and Chief 1994 123,000 1,000 46,370 0 0 27,720 12,019
Financial Officer
Robert C. Gillander, 1996 137,500 50,005 59,895 73,500 0 80,502 18,266
Jr. 1995 125,000 25,000 36,000 0 0 41,580 13,175
Executive Vice 1994 116,000 1,000 40,320 0 0 27,720 11,736
President,
Investments
James D. Thompson 1996 129,826 47,350 56,650 68,250 0 71,185 17,929
Executive Vice 1995 121,000 25,840 37,260 0 0 36,383 12,930
President, 1994 116,000 1,000 40,320 0 0 24,256 11,648
Operations
Richard E. Cook 1996 125,114 31,000 30,000 68,250 0 74,535 17,038
Senior Vice 1995 121,000 23,560 33,840 0 0 41,580 12,930
President, 1994 116,000 1,000 40,320 0 0 27,720 12,040
Development(6)
_________________________
(1) Includes amounts deferred under the 401(k) feature of the Company's
profit sharing plan.
(2) Bonuses for the year ended December 31, 1996 were paid 45% in cash
and 55% in stock; for the year ended December 31, 1995 were paid 40%
in cash and 60% in stock; and for the year ended December 31, 1994
were paid 100% in stock.
(3) Consists of the fair market value of restricted stock awards on
December 31, 1996, the date of grant. Awards vest 34%, 33% and 33%
on the first, second and third anniversary date of the grant provided
that the executive is employed by the Company or any affiliate on the
date of vesting, except that Mr. Cook's award could vest in full in
January 1998, subject to the provisions of his termination agreement.
The executive is entitled to dividends and voting rights on unvested
shares. Unvested shares, representing the full amount of the awards
listed above, held by the named executives as of the date of this
Proxy Statement are as follows: Mr. Stein, 6,400 shares; Mr.
Johnson, 3,200 shares; Mr. Gillander, 2,800 shares; Mr. Thompson,
2,600 shares; and Mr. Cook, 6,500 shares.
(4) Represents amounts earned by the named executive officers in the form
of loan forgiveness in accordance with the terms of Stock Purchase
Plan that is part of the Company's 1993 Long Term Omnibus Plan.
(5) Consists of (a) contributions in the form of stock to the Company's
profit sharing and 401(k) plan for 1996, 1995 and 1994, the non-
401(k) portion of which was based on the attainment of predetermined
levels of funds from operations per share, and stock bonuses in the
amount equal to what would have been contributed to the 401(k) plan
in the absence of applicable IRS limitations: Mr. Stein, $33,629,
$22,521 and $11,448; Mr. Johnson, $18,943, $13,332 and $11,448; Mr.
Gillander, $13,456, $12,365 and $11,448; Mr. Thompson, $17,119,
$12,120 and $11,448; and Mr. Cook, $16,228, $12,120 and $11,448; and
(b) excess term life insurance premiums for 1996, 1995 and 1994: Mr.
Stein, $810, $810 and $420; Mr. Johnson, $810, $810 and $571; Mr.
Gillander, $810, $810 and $288; Mr. Thompson, $810, $810 and $200 and
Mr. Cook, $810, $810 and $592.
(6) Mr. Cook resigned from the Company effective January 31, 1997.
</TABLE>
Employment Agreements. The Company has entered into a three-year
employment agreement with Martin E. Stein, Jr., the Company's President
and Chief Executive Officer, providing for an annual base salary and
participation in the Company's executive compensation plans on the same
terms as other executive officers. The agreement, which was effective in
October 1993, will be renewed automatically for an additional year on each
anniversary date thereof so that the remaining term will be three years,
unless either party gives written notice of non-renewal. The agreement
provides for Mr. Stein to receive base salary and incentive compensation
for the remainder of the term of the agreement in the event that he is
terminated, his responsibilities are materially reduced or the Company's
headquarters are relocated from Jacksonville, Florida as a result of a
sale, merger or other change of control of the Company. The Company has
entered into agreements with its executive officers that provide for the
payment of salary and benefits for a specified period in the event of a
change of control only. A change of control is defined to include a
change in at least one-third of the directors (unless recommended by a
majority of the continuing directors), the acquisition by any person of at
least 30% of the combined voting power of the Company's outstanding
securities unless pursuant to transactions approved by a majority of the
continuing directors, certain mergers, and a sale of substantially all the
Company's assets.
Options. The following table sets forth information concerning the
value of unexercised options as of December 31, 1996 held by the
executives named in the Summary Compensation Table above. No options were
exercised during 1996.
OPTION YEAR-END VALUES TABLE
Value of Unexercised
Number of Unexercised In-the-Money Options at
Options at December 31, 1996 December 31, 1996
Name Exercisable/Unexercisable Exercisable/Unexercisable
Martin E. Stein, 40,000 (E) / 0 (U) $280,000
Jr.
Bruce M. Johnson 16,000 (E) / 0 (U) 112,000
Robert C. 16,000 (E) / 0 (U) 112,000
Gillander, Jr.
James D. Thompson 14,000 (E) / 0 (U) 98,000
Richard E. Cook 16,000 (E) / 0 (U) 112,000
_________________________
Stock Purchase Plan Loans. To further align the interest of
management with the Company's shareholders, the Company has implemented a
stock purchase plan ("SPP") as part of its Long-Term Omnibus Plan to
encourage stock ownership by management. Management purchased 226,000
shares under this program during 1993 and 1996 at fair market value at the
time of purchase. The stock purchases were funded by SPP loans from the
Company (averaging 92% of the purchase price) and cash provided directly
from management. The current SPP loans outstanding are fully secured by a
portion of the stock purchased, have full recourse to management, are
interest only (due quarterly) with fixed rates of interest of 7.34% to
7.79%, and mature in 10 years. As part of the program, a portion of the
loans may be forgiven annually based on Company FFO performance, and total
shareholder return.
The following table sets forth as of March 1, 1997, the amounts
outstanding under the SPP loan program from each of the Company's
executive officers.
SPP Loan
Balance Largest Balance
Executive Officer March 1, 1997 Since January 1, 1996
Martin E. Stein, $651,662 $838,000
Jr.
Bruce M. Johnson 314,767 398,850
Robert C. 294,479 374,981
Gillander, Jr.
James D. Thompson 261,896 333,081
Richard E. Cook 163,645 335,200
Compensation of Directors. In 1996, the Company paid an annual fee
of $17,000 to each of its directors, other than the Chairman and the
President, plus $2,500 per year for service on a Board committee ($3,000
per year for chairing a committee). Directors' fees are currently paid in
shares of Common Stock, unless the director elects to receive all or any
portion of the fees in cash. Non-employee directors also receive
non-qualified options to purchase 1,000 shares of Common Stock at the end
of each year and may elect to participate in a stock purchase matching
program that provides for a total stock value match of up to $10,000 per
year. The options vest one year after grant and have a term of ten years
and an exercise price equal to the greater of the fair market value of the
Common Stock on the date of grant or the average trading price of the
Common Stock on the 20 business days preceding the date of grant.
Compensation Committee Interlocks
and Insider Participation
During the year ended December 31, 1996, Martin E. Stein, President
and Chief Executive Officer of the Company, served on the board of
directors of FRP Properties, Inc. Edward L. Baker, Chairman of the Board
of FRP Properties, Inc. is a member of the Company's Compensation
Committee.
Certain Transactions
The Audit Committee of the Board of Directors is responsible for
evaluating the appropriateness of all related-party transactions.
Company Option on TRG Properties. TRG and Joan W. Stein, Martin E.
Stein, Jr. and Robert L. Stein (who are directors of the Company, and
together with Richard W. Stein, the "Steins") have retained interests in
properties that were determined not to be appropriate for ownership by the
Company initially because their transfer is restricted or because they
lack cash flow or are of a type presently inconsistent with the Company's
investment objectives. Upon consummation of the Company's initial public
offering in 1993, TRG granted options to the Company for all of the
properties (the "Option Properties") that TRG has the right to option and
that are likely to become suitable for Company investment, e.g., land that
can be developed into shopping centers or suburban office buildings. One
of the Option Properties consists of a 19-story downtown office building
in Fort Lauderdale, Florida ("BBP"), as to which the Company has been
granted a right of first refusal. The remaining Option Properties consist
of land in Florida that does not produce any cash flow. The Company has
an option to purchase any of these properties, in whole or in part, for
development as a Company property at a price equal to the sum of (i) 85%
of the appraised value of the property multiplied by the percentage
interest of TRG in the partnership that owns the property, plus (ii) 100%
of the appraised value of the property multiplied by the percentage
interest of any existing third party partners who also own an interest in
the property.
Management Services for TRG and its Affiliates. The Company, through
its affiliate Regency Realty Group, Inc. (the "Management Company"),
provides management and leasing services for BBP, and also will receive
brokerage fees for arranging the sale of any of the Option Properties, in
the event the Company does not acquire them, and development fees for
providing development services for the Option Properties that consist of
land held for sale. These arrangements are intended to give the Company
the economic benefit from the management, leasing, brokerage and
development activities with respect to such properties. All of such
services are provided on terms and conditions no less favorable to the
Management Company than the terms and conditions on which the Management
Company provides similar services to third parties. The Audit Committee
of the Board of Directors is required to review annually the terms and
conditions on which such services are provided. During the year ended
December 31, 1996, TRG paid the Management Company an aggregate of
$413,199 for such services. The Management Company also will receive
incentive compensation for developing certain Option Properties for others
and for arranging the sale of certain Option Properties as to which the
Company elects not to exercise its options in the form of a share of TRG's
net proceeds from such activities in excess of specified levels.
Administrative Services for TRG and its Affiliates. From time to
time, certain personnel of the Company or its subsidiaries provide risk
management, accounting, office space and other services to TRG and certain
of its affiliates, including the Steins, pursuant to an administrative
services agreement entered into in November 1993. The cost of such
services are reimbursed by TRG based on percentage allocations of
management time and general overhead made in compliance with applicable
regulations of the Internal Revenue Service. The Audit Committee of the
Board of Directors is required to review annually the cost allocations
made pursuant to the administrative services agreement. During the year
ended December 31, 1996, $95,000 was reimbursed to the Company under this
agreement.
Cost Sharing Arrangement with Management Company. The Company
manages, leases and develops its own properties under employee and cost
sharing arrangements with the Management Company. TRG owns 95% of the
voting common stock of the Management Company, and the Company owns 100%
of the Management Company's non-voting preferred stock and 5% of its
voting common stock. The cost sharing arrangements are based on
allocations of management time and general overhead made on an
arm's-length basis and in compliance with applicable regulations of the
Internal Revenue Service. All such cost sharing arrangements must be
reviewed annually by the Audit Committee of the Board of Directors, and
any changes in such arrangements must be approved by a majority of the
Company's independent directors. Under generally accepted accounting
principles, all items of income and expense of the Management Company are
consolidated with the Company and included in the Company's financial
statements, net of inter-company transactions.
Limited Partnership Agreement with WLD Enterprises, Inc. The
Company, through its subsidiary RRC JV One, Inc., has entered into a
limited partnership with WLD Realty, Ltd. known as Regency Ocean East
Partnership, Ltd. in which the Company, as general partner, owns a
twenty-five percent (25%) interest and WLD Realty, Ltd., as limited
partner, owns a seventy-five percent (75%) interest. Douglas S. Luke, a
director of the Company, is President and Chief Executive Officer of WLD
Enterprises, Inc. ("WLD"), an affiliate of WLD Realty, Ltd., and also owns
a 3.85% interest in WLD Realty, Ltd. The purpose of the partnership is to
operate Ocean East, a Florida shopping center. Each partner contributed
their pro rata share of capital on the closing date, January 31, 1996.
Future distributions from the operations of the shopping center will be
made pro rata until each partner has achieved a cumulative internal rate
of return of 12%, then distributions will be 50% to each partner. In the
event of sale or refinancing, distributions to each partner after return
of capital will be pro rata and after an IRR of 18% will be 50% to each
partner. In the opinion of the Board of Directors, the terms of the
partnership agreement are at least as favorable as those that could be
obtained from entering into a partnership with an unrelated party.
Consulting Services from Security Capital Affiliate. Security
Capital Investment Research, Inc. ("SCII"), an affiliate of Security
Capital, provides consulting services from time to time on an as-needed
basis to the various entities in which Security Capital has invested.
During the year ended December 31, 1996, the Company accrued consulting
fees and expenses to SCII of approximately $95,000, primarily for due
diligence assistance in connection with the Branch Transaction.
Other. Richard W. Stein, a nominee for director and the son and
brother, respectively, of Joan W. Stein, the Company's Chairman, and
Martin E. Stein, Jr., the Company's President and a director, is President
and Chief Executive Officer, and a director of Palmer & Cay/Carswell,
Inc., an independent insurance agency. During the year ended December 31,
1996, the Company obtained insurance through Palmer & Cay/Carswell for
which Palmer & Cay/Carswell received commissions in the aggregate amount
of approximately $127,000.
PROPOSAL 2: APPROVAL OF ISSUANCE OF COMMON STOCK IN
CONNECTION WITH THE BRANCH TRANSACTION
General
On March 7, 1997, the Company acquired, through a limited partnership
(the "Partnership") of which a subsidiary of the Company is the sole
general partner, substantially all of the assets of Branch Properties,
L.P. ("Branch"), a privately held real estate firm based in Atlanta,
Georgia, pursuant to a Contribution Agreement and Plan of Reorganization
dated February 10, 1997 (the "Contribution Agreement"). The transactions
contemplated by the Contribution Agreement (including those described
below under "--Related Transactions") are referred to collectively as the
"Transaction" or the "Branch Transaction." As initial consideration for
the assets acquired from Branch, the Partnership issued 3,373,801 units of
limited partnership interest (the "Units"), and the Company issued 155,797
shares of Common Stock, in a private placement to Branch's partners. The
Units are redeemable on a one-for-one basis for shares of Common Stock,
subject to certain conditions. See "--Redemption of Units for Common
Stock." The Board of Directors is seeking shareholder approval for the
issuance of up to approximately 4,825,600 shares of Common Stock, $0.01
par value, in connection with the Transaction, pursuant to rules of the
New York Stock Exchange (the "NYSE"). It is not possible to determine the
exact number of shares issuable in connection with the Branch Transaction
because a portion of such shares is tied to earn-outs described below.
Paragraph 312.03 of the NYSE Listed Company Manual provides that
shareholder approval is required prior to the issuance of common stock in
certain instances, including when the number of shares of common stock to
be issued in a transaction or series of transactions, other than a public
offering for cash, would equal at least 20% of the number of shares of
common stock outstanding before such issuance. The shares of Common Stock
issued, or issuable upon redemption of the Units issued, at the initial
closing with Branch (an aggregate of 3,529,598 shares), constituted
approximately 32.4% of the shares of Common Stock outstanding immediately
before such closing. The total number of shares issued or issuable in
connection with the Transaction, including two related transactions
described below, pursuant to earn-outs described below and upon the
redemption of Units at the election of the Unit holders, is estimated to
be approximately 4,825,600 (collectively, the "Stock Issuances"). If the
Company were to issue Common Stock in connection with the Transaction,
including the redemption of Units, in excess of the 20% limitation without
shareholder approval, the NYSE would have the authority to de-list the
Common Stock from trading on the NYSE. Shareholder approval of the Stock
Issuances is not required by Florida law or the Company's Articles of
Incorporation or Bylaws.
The Transaction has already been closed, and therefore, shareholder
approval is not a condition to the consummation thereof. However, in the
unexpected event that shareholders do not approve the Stock Issuances at
the annual meeting, only 2,122,981 shares will be accepted for listing on
the NYSE. In such event, the Partnership will be required to redeem for
cash, at a per Unit price (the "Value") equal to the closing price of the
Common Stock on the NYSE on the 10 consecutive trading days preceding the
date of the Partnership's receipt of a notice of redemption, those Units
submitted for redemption which otherwise would be redeemable for non-
listed shares. Additionally, the Company will be required to redeem, at
the Value thereof, any shares issued pursuant to the Transaction which
have not been accepted for listing as a result of the failure of
shareholders to approve the Stock Issuances.
Vote Required
The affirmative vote of a majority of the total votes cast, provided
that the number of total votes cast represents over 50% of the shares of
Common Stock issued and outstanding, is required to approve the Stock
Issuances. For this purpose, broker non-votes and abstentions will not be
counted. Under rules of the NYSE, the 155,797 shares of Common Stock
issued in the Transaction in connection with a "C" reorganization of
Branch's general partner must be voted with respect to the Stock Issuances
in the same proportion as the shares voted by all the other shareholders
on such matter.
As a condition to the closing of the Transaction, directors, officers
and principal shareholders of the Company, who as of the record date
beneficially owned 6,105,014 shares, constituting approximately 50.2% of
the outstanding Common Stock (exclusive of the 155,797 shares issued at
the Branch closing, which must be voted proportionately as all other
shares are voted), signed a voting agreement pursuant to which they have
agreed to vote all of their shares in favor of the Stock Issuances and the
proposed amendment to the Articles of Incorporation set forth in Proposal
3, thereby assuring shareholder approval thereof. The following persons
signed the voting agreement: Joan W. Stein, Chairman of the Board of the
Company, Martin E. Stein, Jr., President and a director, Robert L. Stein,
a director, Richard W. Stein, a nominee for director, Security Capital, a
major shareholder, Bruce M. Johnson, Executive Vice President, Robert C.
Gillander, Jr., Senior Vice President, James D. Thompson, Senior Vice
President, A. Chester Skinner, III, Vice President, and Robert L. Miller,
Jr., Vice President.
Approval of this Proposal 2 is not a condition to the approval of
Proposal 3 (amendment of Section 5.14 of the Articles of Incorporation),
but the approval of Proposal 3 is a condition to the approval of this
Proposal 2.
The Company's Board of Directors voted unanimously in favor of the
Stock Issuances and recommends that the Company's shareholders vote in
favor thereof. Proxies will be voted in favor of the Stock Issuances
unless shareholders specify in their proxies a contrary choice.
Consideration for Stock Issuances
The consideration for the Stock Issuances consists or will consist of
(i) the assets acquired from Branch and (ii) the Units which were issued
in exchange for the assets acquired from Branch and which are submitted
for redemption from time to time. Of the shares constituting the Stock
Issuances, 155,797 shares were issued at the closing of the Branch
Transaction in connection with a C reorganization of Branch's general
partner, in exchange for the general partner's interest in Branch's
assets. The direct consideration for the remaining Stock Issuances will
consist of the Units that were issued at the Branch closing to the other
partners of Branch in exchange for their interests in Branch's assets and
Units proposed to be issued to certain other investors in property
partnerships acquired from Branch which are described below under "--
Related Transactions." These Units are redeemable, subject to certain
conditions, on a one-for-one basis for shares of Common Stock. See "--
Redemption of Units for Common Stock."
The assets acquired from Branch include 18 existing shopping centers
totalling approximately 1.9 million square feet of gross leasable area and
8 shopping centers currently being developed or redeveloped that will have
approximately 700,000 square feet, located in Georgia, Florida, Tennessee,
South Carolina and North Carolina. In addition, the Company acquired,
through a non-qualified REIT subsidiary ("New Management Company"),
Branch's third party development business, including build-to-suit
projects for the CVS drug store chain, and third party management and
leasing contracts for approximately 4 million square feet of shopping
centers owned by third party investors (collectively, the "Third Party
Management Business").
Terms of the Branch Transaction
Consideration. The Partnership issued 3,373,801 Units and the
Company issued 155,797 shares of Common Stock in exchange for the assets
acquired from Branch. Additional earn-out Units and shares may be issued,
as further described below, subject to the satisfaction of certain
performance conditions. The Units are entitled to priority distributions
from operating cash flow of the Partnership equal to the per share cash
dividend on the Common Stock.
In determining the aggregate consideration for the assets acquired
from Branch, the Company considered such factors as the historical and
expected cash flow of the properties, nature of the tenancies and terms of
the leases in place, occupancy rates, opportunities for alternative and
new tenancies, current operating costs, physical condition and location,
and the anticipated impact of the acquisition on the Company's financial
results. The Company took into consideration capitalization rates at
which it believes other shopping centers have recently sold, but
determined the acquisition price based on the factors described above. No
separate independent appraisals were obtained for the assets. The Company
also took into consideration historical and anticipated revenues from the
Third Party Management Business, but based on the fact that the third
party management contracts it acquired from Branch are generally
terminable on relatively short notice, a significant portion of the
consideration for the Third Party Management Business will be paid in the
form of earn-out consideration, which is further described below.
Based on the above factors, the Company (i) arrived at an aggregate
consideration of $78,092,181 for Branch's net equity in the assets
transferred to the Company and (ii) divided that amount by $22-1/8 (the
"Unit Price") in order to arrive at the number of Units and shares of
Common Stock issued at the closing (excluding earn-out Units and shares
described below). The Unit Price is based on the trading price of the
Common Stock in early November 1996, at the time that Branch and Regency
agreed to negotiate further terms of the transaction. In addition, the
Partnership assumed indebtedness encumbering the assets in the aggregate
principal amount of approximately $112 million, net of minority interest.
Based on the Unit Price and assuming that (i) the maximum Property Earn-
Out (as defined below) of $22,568,851 will be achieved, and (ii) the Third
Party Earn-Out (as defined below) will be $750,000, the aggregate
consideration for Branch's net equity in the assets transferred to the
Company will be $101,411,065.
On February 7, 1997, the last trading day prior to public
announcement of the Transaction, the high and low sale prices of the
Common Stock on the NYSE were $26.75 and $26.50, respectively.
Earn-Out Consideration. Additional Units and Common Stock may be
issued on the fifteenth day after the first, second and third
anniversaries of the closing (each an "Earn-Out Closing"), based on the
performance of certain of the Partnership's properties (the "Property
Earn-Out"), and additional shares of Common Stock may be issued at the
first and second Earn-Out Closings based on revenues from the Third Party
Management Business (the "Third Party Earn-Out"). The formula for the
Property Earn-Out provides for calculating any increases in deemed value
("Increased Value") on a property-by-property basis, based on any
increases in net operating income for certain properties in the
Partnership's portfolio as of February 15 of the year of calculation. The
Increased Value will be divided by the Unit Price to determine the number
of additional Units and shares to be issued at the Earn-Out Closings. The
Property Earn-Out is limited to $15,974,188 at the first Earn-Out Closing
and $22,568,851 at all Earn-Out Closings (including the first Earn-Out
Closing).
The Third Party Earn-Out will be calculated by dividing the Unit
Price into a specified percentage of total revenues from the Third Party
Management Business accrued during the preceding calendar year, other than
development fees for CVS projects. Management anticipates that the total
Third Party Earn-Out will be approximately $750,000.
Other. For additional information concerning the Transaction, see
the Company's Form 8-K dated March 7, 1997 and its Form 8-K/A dated March
20, 1997, which are incorporated herein by reference. See "Incorporation
of Certain Documents by Reference."
Redemption of Units for Common Stock
Beginning as of 5:00 p.m. Eastern time on the first business day
following the earlier to occur of (i) approval by the Company's
shareholders of the Transaction and the amendment to Section 5.14 of the
Company's Articles of Incorporation that is the subject of Proposal 3, or
(ii) the first anniversary of the Closing (the "First Redemption Date"),
Unit holders have the right to require the Partnership, at any time and
from time to time, to redeem any Units held by them in exchange for shares
of Common Stock, on a one-for-one basis, subject to certain anti-dilution
adjustments to take account of stock splits, stock dividends and the like
with respect to the Common Stock. After the 420th day after the closing
(the "Option Date"), the General Partner may elect to pay the redemption
price in shares or in cash equal to the Value of the shares that would
otherwise have been issued upon the exercise of redemption rights, or in a
combination of shares and cash. If the redemption date occurs on or
before the Option Date, the General Partner is required to pay the
redemption price in shares, except as otherwise specifically provided in
the Partnership Agreement. The exercise of redemption rights is subject
to transfer restrictions in the Company's Articles of Incorporation, which
are designed to preserve the Company's status as a REIT and as a
domestically controlled REIT under the Internal Revenue Code. See
"Proposal 3."
Former Branch partners have been given the right to elect to exercise
redemption rights prospectively on the first possible date for
redemptions. As of the date of this Proxy Statement, former Branch
partners holding approximately 2,824,000 Units in the aggregate have
submitted notices of redemption, electing to redeem all the Units held by
them on the first possible date for redemption and also electing to
redeem, immediately upon issuance, any Units issued to them at any Earn-
Out Closing. Assuming that shareholders approve the Transaction and the
proposed amendment to the Articles of Incorporation that is the subject of
Proposal 3, all such Units will be redeemed, and an equal number of shares
of Common Stock will be issued to such persons, as of 5:00 p.m. on June
13, 1997, the first business day following the date of the annual
meeting.
OCP received 1,723,830 Units at the closing and has submitted a
notice to redeem all such Units for Common Stock on the first business day
after shareholder approval of the Stock Issuances (or the first business
day after the first anniversary of the closing, whichever is earlier).
The shares issuable to OCP upon such redemption are expected to constitute
11.1% of the outstanding Common Stock immediately following such
redemption (after giving effect to the redemption of Units of other Unit
holders who are expected to redeem on the same date).
Capital Contribution from Security Capital
The Company has contributed approximately $26 million cash to the
Partnership to reduce outstanding debt encumbering the properties acquired
from Branch by $25.7 million and to pay initial transaction costs. Cash
requirements for the transaction have been provided by the sale on March
3, 1997 of 1,475,178 shares of Common Stock for an aggregate price of $26
million to Security Capital, pursuant to a Stock Purchase Agreement dated
as of June 11, 1997, as amended. The transactions contemplated by the
Stock Purchase Agreement were described in the Company's definitive proxy
statement for, and approved by shareholders at, a special meeting of
shareholders held on September 10, 1996.
As described in such proxy statement, in order to preserve Security
Capital's pro rata ownership of the Company, Security Capital has
participation rights entitling it to purchase additional equity in the
Company, at the same price as that offered to other purchasers, each time
that the Company sells additional shares of capital stock or options or
other rights to acquire capital stock. In connection with the Units and
shares of Common Stock issued in exchange for Branch's assets on March 7,
1997 and the proposed issuance of additional Units in two related
transactions discussed below (see "--Related Transactions"), Security
Capital had the right to acquire up to 3,771,622 shares of Common Stock at
a price of $22-1/8 per share. However, pursuant to Amendment No. 1 to its
Stockholders Agreement with the Company, Security Capital has elected (i)
to waive such rights with respect to all but 1,750,000 shares (or such
lesser number, not less than 850,000 shares, as will not result in the
Company ceasing to be a domestically controlled real estate investment
trust), (ii) to initially defer its rights with respect to the 1,750,000
shares to no later than August 31, 1997, and (iii) to defer its rights
with respect to any such shares, not to exceed 1,050,000 shares, that
remain unpurchased on August 31, 1997 to no later than the first Earn-Out
Closing, in order to permit Unit holders who are Non-U.S. Persons (as
defined in the Company's Articles of Incorporation) to redeem their Units
for Common Stock. See "Proposal 3." Security Capital's participation
rights remain in effect, at $22-1/8 per share, with respect to Units and
shares issued at the Earn-Out Closings, and also remain in effect, at a
price equal to the then market price of the Common Stock, with respect to
shares issued upon the redemption of Units for Common Stock provided that
Security Capital did not exercise its participation rights at the time of
issuance of such Units.
Related Transactions
The Company also has committed to issue a total of 138,626 Units to
two investors who have provided funds for the development of one of the
development properties acquired from Branch and who had the right to
become limited partners of Branch upon the completion of the property.
The additional Units are expected to be issued in May 1997 and will be
redeemable for Common Stock on a one-for-one basis beginning in March
1998. The Company also is negotiating with two other investors to issue
additional Units (estimated at approximately 100,000 Units, which will be
redeemable on a one-for-one basis for Common Stock) in exchange for their
interests in one of the property partnerships acquired from Branch.
Reasons for the Branch Transaction
Management of the Company believes that the Transaction has enabled
the Company to acquire a major presence in the Atlanta market, including
management personnel, through a single acquisition instead of on a
property-by-property basis. Management believes that many of the
properties acquired from Branch are "in fill" properties located in or
near affluent neighborhoods where additional development opportunities for
neighborhood and community shopping centers are limited. Additionally,
the Transaction is expected to cement the Company's relationship with
Publix Super Markets, which anchors 24 of the Company's shopping centers,
including 6 centers acquired from Branch.
In addition, the Company acquired, through its indirect interest in
New Management Company, a significant portfolio of third party management
contracts, as well as five build-to-suit projects for the CVS drugstore
chain. Management hopes that the third party management business acquired
from Branch (while generally terminable on short notice) not only will
provide a continuing source of revenues but also will create opportunities
for other management, leasing and development activities and possible
opportunities for raising additional capital.
Management also believes that the Transaction will help accelerate
the Company's goal of attaining the "critical mass" necessary to access
capital markets consistently on favorable terms. REITs with total assets
of at least $500 million are often viewed as having better access to
capital and growth opportunities. As a result of the Transaction,
Regency's total assets have grown from approximately $386 million to
approximately $622 million.
Reasons for and Effect of the Stock Issuances
The Branch Transaction was structured as a non-taxable contribution
of assets to the Partnership in order to permit Branch's former partners
to defer federal income taxes that they would have incurred had Branch's
assets been transferred to the Company in exchange for cash or Common
Stock. Making the Units issued in the Transaction redeemable for Common
Stock allows the Unit holders to redeem their Units for a marketable
investment, which will be a taxable event to the Unit holders, at a time
of their own choosing after shareholder approval of the Stock
Issuances.
The Board of Directors believes that the issuance of Common Stock in
lieu of cash upon redemption of the Units will enhance the Company's
capital structure and allow it to maintain its existing debt-to-equity
ratios. In the unlikely event that shareholders fail to approve the Stock
Issuances, the required cash redemption, on the first anniversary of the
Branch closing, of Units that would otherwise be redeemed on that date for
non-NYSE-listed Common Stock will result in very significant cash
requirements that either will necessitate the incurrence of additional
debt or the raising of funds in a public stock offering.
The following table sets forth the capitalization of the Company as
of December 31, 1996 on a pro forma basis ("Acquisition Pro Forma") giving
effect to (i) the Branch Transaction and (ii) the sale of $26 million of
Common Stock to Security Capital. The Company invested the proceeds of
the $26 million in the Partnership in exchange for 30.4% of the
Partnership, which was then used to reduce the outstanding debt of the
Partnership by $25.7 million. Subject to shareholder approval, the Units
issued to Branch are redeemable for shares of Common Stock. See "--
Redemption of Units for Common Stock." In the event that shareholders do
not approve the redemption for Common Stock, the Unit holders exercising
redemption rights will receive a portion of their redemption price in
Common Stock (subject to the NYSE's 20% limitation) and the balance in
cash, after the first anniversary of the acquisition. Therefore, in
addition to the Acquisition Pro Forma presented, two pro forma redemption
methods are also presented to reflect the potential redemption of 100% of
the Units issued to Branch: (1) 100% Common Stock ("Equity Redemption
Method"), and (2) a combination of Common Stock and cash ("Debt Redemption
Method").
December 31, 1996
Pro Forma Unit Redemptions
(In thousands)
Acquisition Equity Debt
Pro Forma Method Method*
Mortgage loans payable $191,274 $191,274 $191,274
Acquisition and development 73,701 73,701 111,469
line of credit ------- ------- -------
Total outstanding debt 264,975 264,975 302,743
------- ------- -------
Limited partner's interest in
operating partnerships 91,095 508 508
------- ------- -------
Stockholders' Equity
Common stock $.01 par value
per share: 277 310 296
25,000,000 shares
authorized
Special common stock -
10,000,000
shares authorized:
Class B $.01 par value 25 25 25
per share
Additional paid in capital 253,093 343,647 305,892
Distributions in excess of
net income and Other (16,485) (16,485) (16,485)
-------- -------- --------
Total stockholders' equity 236,910 327,497 289,729
------- ------- -------
Total capitalization $592,980 $592,980 $592,980
Debt to Total Capitalization 44.7% 44.7% 51.1%
Earnings Per Share:
Primary $0.77 $0.77 $0.63
Fully Diluted $0.75 $0.75 $0.63
________________
* Prior to receiving shareholder approval, the Company can issue up to
20% of its Common shares outstanding immediately prior to the Branch
acquisition closing, or 2,122,981 Common shares (the "20%
Limitation") in exchange for Units exercising redemption rights. At
closing, 155,797 Common shares were issued as part of the
Transaction, increasing the Company's percentage interest in the
Partnership to 32.6%. Currently, 1,967,184 Common shares are
available under the 20% Limitation.
As indicated in the earnings per share information in the above
table, the issuance of Common Stock upon redemption of the Units is
expected to have an anti-dilutive effect on earnings per share compared with
paying a portion of the redemption price in cash using borrowed funds. Pay-
ment of the redemption price in cash in order to comply with the NYSE's 20%
Limitation would require the incurrence of additional indebtedness and
result in additional interest expense, unless the Company raises funds in a
public or private offering for the payment of the redemption price in cash.
The issuance of Common Stock upon redemption of Units will dilute the voting
percentage interests of the existing holders of Common Stock. The Common
Stock issued upon redemption of Units will not be entitled to preemptive
rights.
PROPOSAL 3: APPROVAL OF AMENDMENT TO SECTION 5.14 OF THE ARTICLES OF
INCORPORATION TO AUTHORIZE FORMER BRANCH PARTNERS WHO ARE NON-U.S.
PERSONS TO ACQUIRE COMMON STOCK
Pursuant to the Company's Contribution Agreement with Branch, the
Board of Directors is seeking shareholder approval of a proposed amendment
to Section 5.14 of the Company's Articles of Incorporation to enable
former Branch partners who are Non-U.S. Persons as defined in the Articles
of Incorporation (the "Foreign Partners"), to redeem their Units for
Common Stock.
Approximately 39% of the outstanding Units are held by the Foreign
Partners. However, Section 5.14 of the Company's Articles of
Incorporation as currently in effect restricts the direct or indirect
acquisition by Non-U.S. Persons of shares of the Company's capital stock
if, as a result of such acquisition, the Company would fail to qualify
under the Internal Revenue Code as a domestically controlled REIT,
assuming that Security Capital (a Luxembourg corporation) and its
affiliates, are non-U.S. Persons and own 45% of the Company's Common Stock
on a fully diluted basis (the "45% Presumption"). Acquisitions of capital
stock that violate this provision are deemed null and void.
The 45% Presumption was adopted in September 1996 as part of the
Company's Articles of Incorporation in order to help protect the Company's
status as a domestically controlled REIT under the Internal Revenue Code.
Certain Non-U.S. Persons, including Security Capital, who own shares in a
domestically controlled REIT are entitled to certain favorable tax
treatment with respect to such shares. The presumption that Security
Capital and its affiliates are non-U.S. Persons and own 45% of the Common
Stock on a fully diluted basis was adopted in order to allow Security
Capital to exercise its stock purchase and participation rights, which
give it the right to acquire up to approximately 44% of the Company's
outstanding Common Stock on a fully diluted basis.
The proposed amendment to Section 5.14 of the Articles of
Incorporation, a copy of which is included as part of Exhibit A, would
authorize Security Capital to waive the 45% Presumption. In connection
with the initial closing under the Contribution Agreement, Security
Capital has agreed to waive the 45% Presumption, subject to the adoption
of the proposed amendment to Section 5.14 and to the satisfaction of
certain other conditions, in order to facilitate the Transaction by making
it possible for Foreign Partners to redeem their Units for Common Stock
without violating Section 5.14. The waiver will be limited to the Foreign
Investors and generally will not be transferable. Under the proposed
amendment, an acquisition of Company stock is likely to continue to be an
unsuitable investment for Non-U.S. Persons except for the acquisition of
Common Stock in redemption of Units by Foreign Partners entitled to the
benefit of Security Capital's waiver.
Security Capital's waiver of the 45% Presumption will enable the
Foreign Partners to redeem their Units for Common Stock, which they
generally would not be permitted to do absent such waiver. The Company is
expected to remain a domestically controlled REIT in spite of such waiver.
Such waiver will not affect the Company's qualification as a REIT, even
if, contrary to expectation, the waiver were to result in the Company
ceasing to be a domestically controlled REIT. Qualification as a REIT
does not depend on the extent to which the REIT's capital stock is owned
by U.S. Persons. Security Capital will have no authority as a result of
the adoption of Proposal 3 to waive the Company's REIT status or to take
action that would result in the Company's disqualification as a REIT.
The affirmative vote of a majority of the total votes cast by
shareholders with respect to Proposal 3 is required to approve the
proposed amendment to Section 5.14 of the Articles of Incorporation. For
this purpose, broker non-votes and abstentions will not be counted. As
noted above, officers, directors and principal shareholders beneficially
owning approximately 50.2% of the outstanding Common Stock (exclusive of
the 155,797 shares issued at the Branch closing, which must be voted
proportionately as all other shares are voted) have entered into a voting
agreement in which they have agreed to vote all shares beneficially owned
by them in favor of Proposal 3, thereby assuring shareholder approval
thereof. See "Proposal 2 -- Vote Required."
Approval of this Proposal 3 is a condition to the approval of
Proposal 2 (the Branch Transaction), but approval of Proposal 2 is not a
condition to the approval of this Proposal 3.
The Company's Board of Directors voted unanimously in favor of the
proposed amendment to Section 5.14 of the Articles of Incorporation and
recommends that the Company's shareholders vote in favor thereof. Proxies
will be voted in favor of the proposed amendment unless shareholders
specify in their proxies a contrary choice.
PROPOSAL 4: PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO
AUTHORIZE AN ADDITIONAL 150 MILLION SHARES OF COMMON STOCK
The Board of Directors also has proposed that Article 4.1 of the
Company's Articles of Incorporation be amended to increase the number of
authorized shares of Common Stock from 25 million to 150 million shares.
As of the date of this Proxy Statement, the Company had outstanding
12,323,183 shares of Common Stock and additionally had reserved for
issuance an additional 12,613,099 shares as part of the Security Capital
Agreement, upon the conversion of the Class B Stock, in connection with
the Branch Transaction, issuance of restricted stock to officers, exercise
of outstanding stock options held by officers, directors and key
employees, and upon the redemption of units of an unrelated limited
partnership. The Articles of Incorporation also authorize 10 million
shares of Special Common Stock, which are issuable by the Board of
Directors in separate classes or series and of which 2,500,000 shares are
outstanding in the form of Class B Stock (which is non-voting). The Board
of Directors believes that it is in the best interest of the Company to
have sufficient authorized but unissued Common Stock to enable the Company
to respond quickly to acquisition opportunities, raise capital in public
offerings, and offer stock-based compensation to key employees.
The text of the proposed amendment is included as part of Exhibit A.
The additional authorized shares may be used for any proper corporate
purpose approved by the Board of Directors, subject only to such
shareholder approval requirements as may be imposed by the NYSE or, in the
case of executive compensation, the Internal Revenue Code. The
availability of additional authorized shares would enable the Board of
Directors to act with flexibility and dispatch when favorable
opportunities arise to enhance the Company's capital structure.
Additional shares may be issued in connection with acquisitions of
properties or businesses, public offerings for cash, employee benefit
plans, and stock dividends. The issuance of additional shares of Common
Stock will likely result in dilution of the interests of existing
shareholders. The Company has no present plans, agreements, commitments,
undertakings or proposals with respect to the issuance and sale of
additional authorized shares of Common Stock except with respect to the
shares reserved for future issuance as described above, except for
proposed acquisitions of four shopping centers in three separate
transactions in exchange for an estimated aggregate of 437,000 shares of
Common Stock (including shares issuable upon the conversion of limited
partnership interests). Shareholders do not have preemptive rights to
purchase any additional shares issued except for the participation rights
of Security Capital described elsewhere herein. See "Proposal 2--Capital
Contribution from Security Capital."
The affirmative vote of a majority of the total votes cast on
Proposal 4 is required to approve the proposed Amendment to Section 4.1
increasing the number of authorized shares of Common Stock from 25 million
to 150 million. For this purpose, broker non-votes and abstentions will
not be counted.
The Company's Board of Directors recommends a vote "FOR" the proposal
to amend Section 4.1 of the Articles of Incorporation to increase the
number of authorized shares of Common Stock to 150 million. All proxies
solicited by the Board of Directors will be so voted unless shareholders
specify in their proxies a contrary choice.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of KPMG Peat Marwick LLP
to serve as the independent certified public accountants for the Company
for the current fiscal year ending December 31, 1997. That firm has
served as the auditors for the Company since 1993. Representatives of
KPMG Peat Marwick LLP are expected to be present at the annual meeting of
shareholders and will be accorded the opportunity to make a statement, if
they so desire, and to respond to appropriate questions.
OTHER MATTERS
The Board of Directors does not know of any other matters to come
before the meeting; however, if any other matters properly come before the
meeting, it is the intention of the persons designated as proxies to vote
in accordance with their best judgment on such matters. If any other
matter should come before the meeting, action on such matter will be
approved if the number of votes cast in favor of the matter exceeds the
number opposed.
SHAREHOLDER PROPOSALS
Regulations of the Securities and Exchange Commission require proxy
statements to disclose the date by which shareholder proposals must be
received by the Company in order to be included in the Company's proxy
materials for the next annual meeting. In accordance with these
regulations, shareholders are hereby notified that if they wish a proposal
to be included in the Company's proxy statement and form of proxy relating
to the 1998 annual meeting, a written copy of their proposal must be
received at the principal executive offices of the Company no later than
February 12, 1998. To ensure prompt receipt by the Company, proposals
should be sent certified mail return receipt requested. Proposals must
comply with the proxy rules relating to shareholder proposals in order to
be included in the Company's proxy materials.
ANNUAL REPORT
A copy of the Company's Annual Report for the year ended December 31,
1996 accompanies this Proxy Statement. Additional copies may be obtained
by writing to Brenda Paradise, the Company's Director of Shareholder
Relations, at the Company's principal executive offices, at 121 West
Forsyth Street, Suite 200, Jacksonville, Florida 32202.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. The
Company does not expect to pay any compensation for the solicitation of
proxies but may reimburse brokers and other persons holding stock in their
names, or in the names of nominees, for their expenses for sending proxy
material to principals and obtaining their proxies.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act") are hereby incorporated in this Proxy Statement by
reference, except as superseded or modified herein:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996; and
2. The Company's Periodic Report on Form 8-K dated March 7, 1997,
as amended by Form 8-K/A filed on March 20, 1997 and Form
8-K/A-2 filed on May 12, 1997.
Each document filed by the Company subsequent to the date of this
Proxy Statement pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act and prior to the date on which the annual meeting is held
shall be deemed to be incorporated in this Proxy Statement 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 Proxy Statement
to the extent that a statement contained herein or any subsequently filed
incorporated document 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 Proxy Statement.
The Company will provide without charge to each person to whom this
Proxy Statement is delivered, upon written or oral request of such person
and by first class mail or other equally prompt means within one business
day of receipt of such request, a copy of any document described above
that has been incorporated by reference in this Proxy Statement (excluding
exhibits to such document unless such exhibits are specifically
incorporated by reference therein). 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).
Dated: May 14, 1997
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, POSTAGE FOR WHICH HAS
BEEN PROVIDED. YOUR PROMPT RESPONSE WILL BE APPRECIATED.
<PAGE>
EXHIBIT A
ARTICLES OF AMENDMENT
OF
REGENCY REALTY CORPORATION
This corporation was incorporated on July 8, 1993 effective July 9,
1993 under the name Regency Realty Corporation. Pursuant to Sections
607.1001, 607.1003, 607.1004 and 607.1006, Florida Business Corporation
Act, amendments to the Articles of Incorporation, as restated on November
4, 1996, were approved by the Board of Directors at a meeting held on
January 27, 1997 and adopted by the shareholders of the corporation on
_______________, 1997. The only voting group entitled to vote on the
adoption of the amendment to the Articles of Incorporation consists of the
holders of the corporation's common stock. The number of votes cast by
such voting group was sufficient for approval by that voting group. The
Restated Articles of Incorporation of the Company are hereby amended as
follows (amended language is underscored):
Section 4.1 is amended to read as follows:
"Section 4.1 Authorized Capital. The maximum number of
shares of stock which the corporation is authorized to have
outstanding at any one time is one hundred seventy million
(170,000,000) shares (the "Capital Stock") divided into classes
as follows:
3. Ten million (10,000,000) shares of preferred
stock having a par value of $0.01 per share (the "Preferred
Stock"), and which may be issued in one or more classes or
series as further described in Section 4.2;
4. One hundred fifty million (150,000,000) shares of
voting common stock having a par value of $0.01 per share
(the "Common Stock"); and
5. Ten million (10,000,000) shares of common stock
having a par value of $0.01 per share (the "Special Common
Stock") and which may be issued in one or more classes or
series as further described in Section 4.4.
All such shares shall be issued fully paid and non assessable."
Section 5.14 is hereby amended in its entirety to read as follows:
"Section 5.14 Certain Transfers to Non-U.S. Persons Void.
Any Transfer of shares of Capital Stock of the Corporation to
any Person (other than a Special Shareholder) that results in
the fair market value of the shares of Capital Stock of the
Corporation owned directly and indirectly by Non-U.S. Persons to
comprise 50% or more of the fair market value of the issued and
outstanding shares of Capital Stock of the Corporation (de-
termined, until the 15% Termination Date (as defined in the
Stockholders Agreement), if any, by assuming that the Special
Shareholders (i) are Non-U.S. Persons and (ii) own (A) a
percentage of the outstanding shares of Common Stock of the
Corporation equal to 45%, on a fully diluted basis, and (B) a
percentage of the outstanding shares of each class of Capital
Stock of the Corporation (other than Common Stock) equal to the
quotient obtained by dividing the sum of its actual ownership
thereof and, without duplication of shares included in clause
(A), the shares it has a right to acquire by the number of
outstanding shares of such class (clauses (i) and (ii) are
referred to collectively as the "Presumption") shall be void ab
initio to the fullest extent permitted under applicable law and
the intended transferee shall be deemed never to have had an
interest therein. If the foregoing provision is determined to
be void or invalid by virtue of any legal decision, statute,
rule or regulation, then the shares held or purported to be held
by the transferee shall, automatically and without the necessity
of any action by the Board of Directors or otherwise, (i) be
prohibited from being voted at any time such securities result
in the fair market value of the shares of Capital Stock of the
Corporation owned directly and indirectly by Non-U.S. Persons to
comprise 50% or more of the fair market value of the issued and
outstanding shares of Capital Stock of the Corporation (de-
termined, until the 15% Termination Date, if any, by applying
the Presumption, (ii) not be entitled to dividends with respect
thereto, (iii) be considered held in trust by the transferee for
the benefit of the Corporation and shall be subject to the
provisions of Section 5.3(c) as if such shares of Capital Stock
were the subject of a Transfer that violates Section 5.2, and
(iv) not be considered outstanding for the purpose of
determining a quorum at any meeting of shareholders. The Special
Shareholders may, in their sole discretion, with prior notice to
and the approval of the Board of Directors, waive in writing all
or any portion of the Presumption, on such terms and conditions
as they in their sole discretion determine.
IN WITNESS WHEREOF, the undersigned Executive Vice President of this
corporation has executed these Articles of Amendment this ______ day of
_________________, 1997.
_____________________________
Bruce M. Johnson
Executive Vice President
<PAGE>
REGENCY REALTY CORPORATION
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
JUNE 12, 1997
The undersigned, having received the Notice of Annual Meeting of
Shareholders and Proxy Statement, appoints Joan W. Stein and Martin E.
Stein, Jr., and each or either of them, as proxies, with full power of
substitution and resubstitution, to represent the undersigned and to vote
all shares of Common Stock of Regency Realty Corporation which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of
the Company to be held on June 12, 1997, and any and all adjournments
thereof, in the manner specified.
1. Election of Directors nominated by the Board of Directors-Class III:
J. Alexander Branch III and Robert S. Underhill; Class I: Douglas S.
Luke, Mary Lou Rogers and Richard W. Stein.
[_] FOR all [_] WITHHOLD INSTRUCTION: To withhold authority
nominees AUTHORITY to vote for any individual nominee,
listed to vote for write that nominee's name on the
(except as all nominees space provided below.)
marked to to the right. ___________________________________________
the contrary
to the
right).
2. Issuance of Common Stock in connection with Branch Transaction.
NOTE: approval of Proposal 2 is conditioned on approval of Proposal
3, but not vice versa.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Amendment to Section 5.14 of Articles of Incorporation to permit
certain waivers.
[_] FOR [_] AGAINST [_] ABSTAIN
4. Amendment to Section 4.1 of Articles of Incorporation increasing
authorized Common Stock to 150 million shares.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued and to be SIGNED and dated on the reverse side.)
(Continued from reverse side)
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED,
WILL BE VOTED "FOR" EACH PROPOSAL.
Should any other matters requiring a vote of the shareholders arise,
the above named proxies are authorized to vote the same in accordance
with their best judgment in the interest of the Company. The Board
of Directors is not aware of any matter which is to be presented for
action at the meeting other than the matters set forth herein.
Dated: __________________________________, 1997
___________________________________(SEAL)
___________________________________(SEAL)
(Please sign exactly as name or names appear hereon. Executors,
administrators, trustees or other representatives should so indicate
when signing.)
<PAGE>
APPENDIX
Independent Auditors' Report
The Shareholders and Board of Directors
Regency Realty Corporation:
We have audited the accompanying consolidated balance sheets of Regency
Realty Corporation as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three year period ended December 31,
1996. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Regency Realty Corporation as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in
the three year period ended December 31, 1996 in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Certified Public Accountants
Jacksonville, Florida
January 27, 1997, except for Note 11,
as to which the date is March 7, 1997
<PAGE>
APPENDIX
REPORT OF INDEPENDENT ACCOUNTANTS
March 7, 1997
To the Partners of Branch Properties, L.P.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated/combined statements of operations, of partners' and
owners' equity, and of cash flows present fairly, in all material
respects, the financial position of Branch Properties, L.P. and
Predecessor (the "Company") at December 31, 1996 and 1995 and the results
of their operations for each of the three years in the period ended
December 31, 1996 and their cash flows for the year ended December 31,
1996, the periods from December 19, 1995 through December 31, 1995,
January 1, 1995 through December 18, 1995 and the year ended December 31,
1994 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluat-
ing the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Atlanta, Georgia
