United States
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-Q
(Mark One)
[X] For the quarterly period ended September 30, 2000
-or-
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission File Number 1-12298
REGENCY REALTY CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-3191743
------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
(Address of principal executive offices) (Zip Code)
(904) 356-7000
(Registrant's telephone number, including area code)
Unchanged
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No[ ]
(Applicable only to Corporate Registrants)
As of November 6, 2000, there were 56,928,870 shares outstanding of the
Registrant's common stock.
<PAGE>
Part I
Item 1. Financial Statements
REGENCY REALTY CORPORATION
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Assets
Real estate investments:
Land $ 585,041,902 567,673,872
Buildings and improvements 1,865,609,460 1,834,279,432
--------------- ---------------
2,450,651,362 2,401,953,304
Less: accumulated depreciation 137,085,242 104,467,176
--------------- ---------------
2,313,566,120 2,297,486,128
Properties in development 258,683,760 167,300,893
Operating properties held for sale 124,098,255 -
Investments in real estate partnerships 66,159,432 66,938,784
--------------- ---------------
Net real estate investments 2,762,507,567 2,531,725,805
Cash and cash equivalents 36,870,913 54,117,443
Notes receivable 37,962,720 15,673,125
Tenant receivables, net of allowance for uncollectible accounts of
$3,257,390 and $1,883,547 at September 30, 2000 and
December 31, 1999 29,672,141 33,515,040
Deferred costs, less accumulated amortization of $12,285,823 and
$8,802,559 at September 30, 2000 and December 31, 1999 18,340,711 12,530,546
Other assets 7,710,185 7,374,019
--------------- ---------------
$ 2,893,064,237 2,654,935,978
=============== ===============
Liabilities and Stockholders' Equity
Liabilities:
Notes payable 894,733,544 764,787,207
Unsecured line of credit 305,000,000 247,179,310
Accounts payable and other liabilities 39,887,575 48,886,111
Tenants' security and escrow deposits 8,413,577 7,952,707
--------------- ---------------
Total liabilities 1,248,034,696 1,068,805,335
--------------- ---------------
Preferred units 375,438,252 283,816,274
Exchangeable operating partnership units 35,125,451 44,589,873
Limited partners' interest in consolidated partnerships 6,514,687 10,475,321
--------------- ---------------
Total minority interest 417,078,390 338,881,468
--------------- ---------------
Stockholders' equity:
Cumulative convertible preferred stock Series 1 and paid in capital $.01
par value per share: 542,532 shares authorized; 537,107 issued and
outstanding at September 30, 2000 and December 31, 1999, respectively;
liquidation preference $20.83 per share 12,528,032 12,528,032
Cumulative convertible preferred stock Series 2 and paid in capital $.01
par value per share: 1,502,532 shares authorized; 950,400 shares
issued and outstanding at September 30, 2000 and December 31, 1999,
respectively liquidation preference $20.83 per share 22,168,080 22,168,080
Common stock $.01 par value per share: 150,000,000 shares
authorized; 60,198,129 and 59,639,536 shares issued
at September 30, 2000 and December 31, 1999 601,981 596,395
Treasury stock; 3,284,947 and 2,715,851 shares held at September 30, 2000
and December 31, 1999, at cost (65,864,705) (54,536,612)
Additonal paid in capital 1,316,651,553 1,304,257,610
Distributions in excess of net income (47,298,641) (26,779,538)
Stock loans (10,835,149) (10,984,792)
--------------- ---------------
Total stockholders' equity 1,227,951,151 1,247,249,175
--------------- ---------------
Commitments and contingencies
$ 2,893,064,237 2,654,935,978
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
REGENCY REALTY CORPORATION
Consolidated Statements of Operations
For the Three Months ended September 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenues:
Minimum rent $ 65,487,039 59,410,015
Percentage rent 325,785 291,303
Recoveries from tenants 17,999,790 14,664,162
Service operations revenue 6,021,017 4,014,664
Equity in income of investments in
real estate partnerships 2,804,787 1,218,075
--------------- ---------------
Total revenues 92,638,418 79,598,219
--------------- ---------------
Operating expenses:
Depreciation and amortization 14,776,780 13,112,164
Operating and maintenance 11,992,681 10,733,732
General and administrative 4,996,685 4,795,323
Real estate taxes 9,004,241 7,835,440
Other expenses 830,000 375,000
--------------- ---------------
Total operating expenses 41,600,387 36,851,659
--------------- ---------------
Interest expense (income):
Interest expense 18,791,545 15,575,115
Interest income (1,160,925) (491,730)
--------------- ---------------
Net interest expense 17,630,620 15,083,385
--------------- ---------------
Income before minority interests 33,407,411 27,663,175
Minority interest preferred unit distributions (7,977,919) (2,334,376)
Minority interest of exchangeable partnership units (662,600) (769,851)
Minority interest of limited partners (186,203) 83,702
--------------- ---------------
Net income 24,580,689 24,642,650
Preferred stock dividends (699,459) (677,165)
--------------- ---------------
Net income for common stockholders $ 23,881,230 23,965,485
=============== ===============
Net income per share:
Basic $ 0.42 0.40
=============== ===============
Diluted $ 0.42 0.40
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
REGENCY REALTY CORPORATION
Consolidated Statements of Operations
For the Nine Months ended September 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenues:
Minimum rent $ 189,389,963 157,352,236
Percentage rent 1,378,246 1,179,302
Recoveries from tenants 51,081,827 39,042,943
Service operations revenue 15,387,761 9,755,287
Equity in income of investments in
real estate partnerships 2,865,450 3,354,278
--------------- ---------------
Total revenues 260,103,247 210,684,046
--------------- ---------------
Operating expenses:
Depreciation and amortization 43,163,768 34,893,216
Operating and maintenance 33,095,724 27,602,063
General and administrative 13,253,951 13,576,216
Real estate taxes 25,326,122 20,073,559
Other expenses 1,749,715 900,000
--------------- ---------------
Total operating expenses 116,589,280 97,045,054
--------------- ---------------
Interest expense (income):
Interest expense 52,681,417 43,567,458
Interest income (2,823,483) (1,612,733)
--------------- ---------------
Net interest expense 49,857,934 41,954,725
--------------- ---------------
Income before minority interests, gain and
provision on real estate investments 93,656,033 71,684,267
Gain on sale of operating properties 18,310 -
Provison for loss on operating properties held for sale (6,909,625) -
--------------- ---------------
Income before minority interests 86,764,718 71,684,267
Minority interest preferred unit distributions (21,232,432) (5,584,378)
Minority interest of exchangeable partnership units (1,848,094) (2,108,362)
Minority interest of limited partners (666,517) (663,331)
--------------- ---------------
Net income 63,017,675 63,328,196
Preferred stock dividends (2,098,377) (1,577,165)
--------------- ---------------
Net income for common stockholders $ 60,919,298 61,751,031
=============== ===============
Net income per share:
Basic $ 1.07 1.16
=============== ===============
Diluted $ 1.07 1.16
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
REGENCY REALTY CORPORATION
Consolidated Statement of Stockholders' Equity
For the Nine Months ended September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
Series 1 Series 2 Common Treasury
Preferred Stock Preferred Stock Stock Stock
--------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
Balance at
December 31, 1999 $ 12,528,032 22,168,080 596,395 (54,536,612)
Common stock issued as
compensation or purchased by
directors or officers, or issued
under stock options - - 1,606 -
Common stock cancelled
under stock loans - - 5 (239,674)
Common stock issued for
partnership units redeemed - - 3,940 -
Common stock issued to
acquire real estate - - 35 -
Reallocation of minority interest - - - -
Repurchase of common stock - - - (11,088,419)
Cash dividends declared:
Common stock ($.48 per share)
and preferred stock - - - -
Net income - - - -
-------------- -------------- ------------ --------------
Balance at
September 30, 2000 $ 12,528,032 22,168,080 601,981 (65,864,705)
============== ============== ============ ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REGENCY REALTY CORPORATION
Consolidated Statement of Stockholders' Equity
For the Nine Months ended September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
Additional Distributions Total
Paid In in exess of Stock Stockholders'
Capital Net Income Loans Equity
---------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Balance at
December 31, 1999 1,304,257,610 (26,779,538) (10,984,792) 1,247,249,175
Common stock issued as
compensation or purchased by
directors or officers, or issued
under stock options 3,665,194 - - 3,666,800
Common stock cancelled
under stock loans (55,829) - 149,643 (145,855)
Common stock issued for
partnership units redeemed 9,270,937 - - 9,274,877
Common stock issued to
acquire real estate 88,889 - - 88,924
Reallocation of minority interest (575,248) - - (575,248)
Repurchase of common stock - - - (11,088,419)
Cash dividends declared:
Common stock ($.48 per share)
and preferred stock - (83,536,778) - (83,536,778)
Net income - 63,017,675 - 63,017,675
-------------- -------------- -------------- ---------------
Balance at
September 30, 2000 1,316,651,553 (47,298,641) (10,835,149) 1,227,951,151
================ ============== ============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REGENCY REALTY CORPORATION
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 63,017,675 63,328,196
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 43,163,768 34,893,216
Deferred financing cost and debt premium amortization 554,273 347,204
Stock based compensation 3,592,406 1,921,831
Minority interest preferred unit distribution 21,232,432 5,584,378
Minority interest of exchangeable partnership units 1,848,094 2,108,362
Minority interest of limited partners 666,517 663,331
Equity in income of investments in real estate partnerships (2,865,450) (3,354,278)
Gain on sale of operating properties (18,310) -
Provision for loss on operating properties held for sale 6,909,625 -
Changes in assets and liabilities:
Tenant receivables 5,549,265 (9,368,533)
Deferred costs (5,385,197) (3,378,467)
Other assets (1,448,389) 1,439,804
Tenants' security and escrow deposits 313,158 711,577
Accounts payable and other liabilities (9,448,374) 5,347,438
---------------- ---------------
Net cash provided by operating activities 127,681,493 100,244,059
---------------- ---------------
Cash flows from investing activities:
Acquisition and development of real estate, net (238,488,759) (145,301,370)
Acquisition of Pacific, net of cash acquired - (9,046,230)
Acquistion of partners' interest in investments
in real estate partnerships, net of cash acquired (1,402,371) -
Investment in real estate partnerships (49,515,795) (23,714,109)
Capital improvements (12,920,698) (10,894,912)
Proceeds from sale of operating properties 7,491,870 -
Repayment of notes receivable 15,673,125 -
Distributions received from investments in real estate partnerships - 704,474
---------------- ---------------
Net cash used in investing activities (279,162,628) (188,252,147)
---------------- ---------------
Cash flows from financing activities:
Net proceeds from common stock issuance 22,476 105,809
Repurchase of common stock (11,088,419) -
Purchase of limited partner's interest in consolidated partnership (2,527,264) -
Redemption of partnership units (1,396,946) (1,377,523)
Net distributions to limited partners in consolidated partnerships (2,099,886) (940,763)
Distributions to exchangeable partnership unit holders (2,847,960) (2,576,197)
Distributions to preferred unit holders (21,232,432) (5,584,378)
Dividends paid to common stockholders (81,438,401) (67,978,066)
Dividends paid to preferred stockholders (2,098,377) (1,352,165)
Net proceeds from fixed rate unsecured notes 149,728,500 249,845,300
Net proceeds from issuance of preferred units 91,621,978 205,250,000
Proceeds (repayment) of unsecured line of credit, net 57,820,690 (245,051,875)
Proceeds from mortgage loans 8,118,953 2,555,836
Repayment of mortgage loans (40,881,096) (32,536,707)
Scheduled principal payments (4,785,445) (4,339,228)
Deferred financing costs (2,681,766) (4,346,828)
---------------- ---------------
Net cash provided by financing activities 134,234,605 91,673,215
---------------- ---------------
Net (decrease) increase in cash and cash equivalents (17,246,530) 3,665,127
Cash and cash equivalents at beginning of period 54,117,443 19,919,693
---------------- ---------------
Cash and cash equivalents at end of period $ 36,870,913 23,584,820
================ ===============
</TABLE>
<PAGE>
REGENCY REALTY CORPORATION
Consolidated Statements of Cash Flows
For the nine Months Ended September 30, 2000 and 1999
(unaudited)
continued
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Supplemental disclosure of cash flow information - cash paid for
interest (net of capitalized interest of approximately
$8,873,000 and $7,485,000 in 2000 and 1999, respectively) $ 59,643,181 43,333,640
================ ===============
Supplemental disclosure of non-cash transactions:
Mortgage loans assumed for the acquisition of Pacific and real estate $ 19,947,565 402,582,015
================ ===============
Exchangeable operating partnership units and common stock issued
for investments in real estate partnerships $ 329,948 1,949,020
================ ===============
Exchangeable operating partnership units and common stock
issued for the acquisition of partners' interest in investments
in real estate partnerships $ 1,287,111 -
================ ===============
Exchangeable operating partnership units, preferred and common
stock issued for the acquisition of Pacific and real estate $ 103,885 771,351,617
================ ===============
Other liabilities assumed to acquire Pacific $ - 13,897,643
================ ===============
Notes receivable taken in connection with sales of development properties $ 37,962,720 -
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
September 30, 2000
(unaudited)
1. Summary of Significant Accounting Policies
(a) Organization and Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Regency Realty Corporation, its wholly owned qualified
REIT subsidiaries, and its majority owned or controlled
subsidiaries and partnerships (the "Company" or "Regency"). All
significant intercompany balances and transactions have been
eliminated in the consolidated financial statements. The Company
owns approximately 97% of the outstanding common partnership units
("Units") of Regency Centers, L.P., ("RCLP" or the "Partnership")
and partnership interests ranging from 51% to 55% in two majority
owned real estate partnerships (the "Majority Partnerships"). The
equity interests of third parties held in RCLP and the Majority
Partnerships are included in the consolidated financial statements
as preferred or exchangeable operating partnership units and
limited partners' interests in consolidated partnerships. The
Company is a qualified real estate investment trust ("REIT") which
began operations in 1993.
The financial statements reflect all adjustments which are of a
normal recurring nature, and in the opinion of management, are
necessary to properly state the results of operations and
financial position. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted although management believes that the disclosures are
adequate to make the information presented not misleading. The
financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's
December 31, 1999 Form 10-K filed with the Securities and Exchange
Commission.
(b) Investments in Real Estate Partnerships
The Company accounts for all investments in which it owns less
than 50% and does not have controlling financial interest using
the equity method.
(c) Reclassifications
Certain reclassifications have been made to the 1999 amounts to
conform to classifications adopted in 2000.
2. Acquisition and Development of Shopping Centers
On August 3, 2000, the Company acquired the non-owned portion of two
properties in one joint venture for $2.5 million in cash. The net assets
of the joint venture were and continue to be consolidated by the Company.
Prior to acquiring the non-owned portion, the joint venture partner's
interest was reflected as limited partners' interest in consolidated
partnerships in the Company's financial statements.
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
September 30, 2000
(unaudited)
2. Acquisition and Development of Shopping Centers (continued)
On June 30, 2000 the Company acquired the non-owned portion of nine
properties in five joint ventures, previously accounted for using the
equity method, for $4.4 million in cash, common stock and Units. As a
result, these joint ventures are wholly-owned by the Company and are
consolidated for financial reporting purposes.
On February 28, 1999, the Company acquired Pacific Retail Trust
("Pacific") for approximately $1.157 billion. The operating results of
Pacific are included in the Company's consolidated financial statements
from the date each property was acquired. The following unaudited pro
forma information presents the consolidated results of operations as if
the acquisition of Pacific had occurred on January 1, 1999. Such pro
forma information reflects adjustments to 1) increase depreciation,
interest expense, and general and administrative costs, 2) adjust the
weighted average common shares, and common equivalent shares outstanding
issued to acquire the properties. Pro forma revenues would have been
$233.0 million as of September 30, 1999. Pro forma net income for common
stockholders would have been $68.2 million as of September 30, 1999. Pro
forma basic net income per share and pro forma diluted net income per
share would have been $1.14 and $1.14, respectively, as of September 30,
1999. This data does not purport to be indicative of what would have
occurred had the Pacific acquisition been made on January 1, 1999, or of
results which may occur in the future.
3. Operating Properties Held for Sale
Operating properties held for sale include properties that no longer fit
the Company's long-term investment strategies and properties acquired or
developed with the intent to sell. These properties are carried at the
lower of cost or fair value less the estimated cost to sell. Depreciation
and amortization are suspended during the period held for sale. During
the second quarter, the Company recorded a provision for loss on
operating properties held for sale of $6.9 million.
4. Segments
The Company was formed, and currently operates, for the purpose of 1)
operating and developing Company owned retail shopping centers (Retail
segment), and 2) providing services including property management and
commissions earned from third parties, and development related profits
and fees earned from the sales of shopping centers and build to suit
properties to third parties (Service operations segment). The Company's
reportable segments offer different products or services and are managed
separately because each requires different strategies and management
expertise. There are no material inter-segment sales or transfers.
The accounting policies of the segments are the same as those described
in note 1. The revenues, diluted FFO, and assets for each of the
reportable segments are summarized as follows for the nine month periods
ended September 30, 2000 and 1999. Assets not attributable to a
particular segment consist primarily of cash and deferred costs.
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
4. Segments (continued)
2000 1999
---- ----
<S> <C> <C>
Revenues:
Retail segment $ 244,715,486 200,928,759
Service operations segment 15,387,761 9,755,287
---------------- ------------------
Total revenues $ 260,103,247 210,684,046
================ ==================
Funds from Operations:
Retail segment net operating income $ 186,311,950 153,253,137
Service operations segment income 15,387,761 9,755,287
Adjustments to calculate diluted FFO:
Interest expense (52,681,417) (43,567,458)
Interest income 2,823,483 1,612,733
General and administrative and other (15,003,666) (14,476,216)
Non-real estate depreciation (970,908) (661,600)
Minority interest of limited partners (666,517) (663,331)
Minority interest in depreciation
and amortization (411,774) (433,578)
Share of joint venture depreciation
and amortization 1,102,167 461,768
Distributions on preferred units (21,232,432) (5,584,378)
---------------- ------------------
Funds from Operations - diluted 114,658,647 99,696,364
---------------- ------------------
Reconciliation to net income for common stockholders:
Real estate related depreciation
and amortization (42,211,170) (34,231,616)
Minority interest in depreciation
and amortization 411,774 433,578
Share of joint venture depreciation
and amortization (1,102,167) (461,768)
Provision for loss on operating properties
held for sale (6,909,625) -
Gain on sale of operating properties 18,310 -
Minority interest of exchangeable
partnership units (1,848,094) (2,108,362)
---------------- ------------------
Net income $ 63,017,675 63,328,196
================ ==================
Sept. 30, December 31,
Assets (in thousands): 2000 1999
---------------------- ---- ----
Retail segment $ 2,483,350 2,463,808
Service operations segment 346,792 117,106
Cash and other assets 62,922 74,022
---------------- ------------------
Total assets $ 2,893,064 2,654,936
================ ==================
</TABLE>
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
September 30, 2000
(unaudited)
5. Notes Payable and Unsecured Line of Credit
The Company's outstanding debt at September 30, 2000 and December 31,
1999 consists of the following (in thousands):
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Notes Payable:
Fixed rate mortgage loans $ 342,233 382,715
Variable rate mortgage loans 32,438 11,376
Fixed rate unsecured loans 520,063 370,696
-------------- ---------------
Total notes payable 894,734 764,787
Unsecured line of credit 305,000 247,179
-------------- ---------------
Total $ 1,199,734 1,011,966
============== ===============
</TABLE>
On August 29, 2000 the Company, through RCLP, completed a $150 million unsecured
debt offering with an interest rate of 8.45%. The notes were priced at 99.819%,
are due on September 1, 2010 and are guaranteed by the Company. The net proceeds
of the offering were used to reduce the balance of the unsecured line of credit
(the "Line").
During July, 2000, the Company modified the terms of its Line by reducing
the commitment to $625 million. The Line matures in March 2002, but may
be extended annually for one-year periods. Borrowings under the Line bear
interest at a variable rate based on LIBOR plus a 1% spread (7.625% at
September 30, 2000) compared to LIBOR plus a 1.075% spread (6.5125% at
September 30, 1999), and is dependent on the Company maintaining its
investment grade rating. The Company is required to comply and is in
compliance with certain financial and other covenants customary with this
type of unsecured financing. The Line is used primarily to finance the
acquisition and development of real estate, but is also available for
general working capital purposes.
On April 15, 1999 the Company, through RCLP, completed a $250 million
unsecured debt offering in two tranches. The Company, through RCLP, issued $200
million 7.4% notes due April 1, 2004, priced at 99.922% to yield 7.42%, and $50
million 7.75% notes due April 1, 2009, priced at 100%, each guaranteed by the
Company. The net proceeds of the offering were used to reduce the balance of the
Line.
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
September 30, 2000
(unaudited)
5. Notes Payable and Unsecured Line of Credit (continued)
As of September 30, 2000, scheduled principal repayments on notes payable
and the Line were as follows (in thousands):
<TABLE>
<CAPTION>
Scheduled
Principal Term Loan Total
Scheduled Payments by Year Payments Maturities Payments
--------------------------
-------------- --------------- ---------------
<S> <C> <C> <C>
2000 $ 1,462 56,985 58,447
2001 5,631 69,445 75,076
2002 (includes the Line) 4,955 349,094 354,049
2003 4,946 13,302 18,248
2004 5,342 199,890 205,232
Beyond 5 Years 36,604 441,782 478,386
Net unamortized debt premiums - 10,296 10,296
-------------- --------------- ---------------
Total $ 58,940 1,140,794 1,199,734
============== =============== ===============
</TABLE>
Unconsolidated partnerships and joint ventures had mortgage loans payable
of $14.9 million at September 30, 2000, and the Company's proportionate
share of these loans was $6.2 million.
The fair value of the Company's notes payable and Line are estimated
based on the current rates available to the Company for debt of the same
remaining maturities. Variable rate notes payable, and the Line, are
considered to be at fair value since the interest rates on such
instruments reprice based on current market conditions. Notes payable
with fixed rates, that have been assumed in connection with acquisitions,
are recorded in the accompanying financial statements at fair value. The
Company considers the carrying value of all other fixed rate notes
payable to be a reasonable estimation of their fair value based on the
fact that the rates of such notes are similar to rates available to the
Company for debt of the same terms.
6. Stockholders' Equity and Minority Interest
On September 8, 2000, the Company through RCLP issued $24 million of
8.75% Series F Cumulative Redeemable Preferred Units ("Series F Preferred
Units") to an institutional investor in a private placement. The issuance
involved the sale of 240,000 Series F Preferred Units for $100.00 per
unit. The Series F Preferred Units, which may be called by the
Partnership at par on or after September 8, 2005 have no stated maturity
or mandatory redemption, and pay a cumulative, quarterly dividend at an
annualized rate of 8.75%. At any time after September 8, 2010, the Series
F Preferred Units may be exchanged for shares of 8.75% Series F
Cumulative Redeemable Preferred Stock ("Series F Preferred Stock") of the
Company at an exchange rate of one share of Series F Preferred Stock for
one Series F Preferred Unit. The Series F Preferred Units and Series F
Preferred Stock are not convertible into common stock of the Company. The
net proceeds of the offering were used to reduce the Line.
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
September 30, 2000
(unaudited)
6. Stockholders' Equity and Minority Interest (continued)
On May 25, 2000, the Company through RCLP issued $70 million of 8.75%
Series E Cumulative Redeemable Preferred Units ("Series E Preferred
Units") to an institutional investor in a private placement. The issuance
involved the sale of 700,000 Series E Preferred Units for $100.00 per
unit. The Series E Preferred Units, which may be called by the
Partnership at par on or after May 25, 2005 have no stated maturity or
mandatory redemption, and pay a cumulative, quarterly dividend at an
annualized rate of 8.75%. At any time after May 25, 2010, the Series E
Preferred Units may be exchanged for shares of 8.75% Series E Cumulative
Redeemable Preferred Stock ("Series E Preferred Stock") of the Company at
an exchange rate of one share of Series E Preferred Stock for one Series
E Preferred Unit. The Series E Preferred Units and Series E Preferred
Stock are not convertible into common stock of the Company. The net
proceeds of the offering were used to reduce the Line.
During 1999, the Board of Directors authorized the repurchase of
approximately $65 million of the Company's outstanding shares through
periodic open market transactions or privately negotiated transactions.
At March 31, 2000 the Company had completed the program by purchasing
3.25 million shares.
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
September 30, 2000
(unaudited)
7. Earnings Per Share
The following summarizes the calculation of basic and diluted earnings
per share for the three month periods ended, September 30, 2000 and 1999,
respectively (in thousands except per share data):
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Basic Earnings Per Share (EPS) Calculation:
Weighted average common shares outstanding 56,895 59,572
============== ==============
Net income for Basic EPS $ 23,881 23,965
============== ==============
Basic EPS $ 0.42 0.40
============== ==============
Diluted Earnings Per Share (EPS) Calculation
Weighted average shares outstanding for Basic 56,895 59,572
EPS
Exchangeable operating partnership units 1,685 2,085
Incremental shares to be issued under common stock
options using the Treasury Method 103 5
-------------- --------------
Total diluted shares 58,683 61,662
============== ==============
Net income for Basic EPS $ 23,881 23,965
Add: minority interest of exchangeable partnership units 663 770
-------------- --------------
Net income for Diluted EPS $ 24,544 24,735
============== ==============
Diluted EPS $ 0.42 0.40
============== ==============
</TABLE>
The Preferred Series 1 and Series 2 stock are not included in the above
calculation because their effects are anti-dilutive.
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
September 30, 2000
(unaudited)
7. Earnings Per Share (continued)
The following summarizes the calculation of basic and diluted earnings
per share for the nine month periods ended, September 30, 2000 and 1999,
respectively (in thousands except per share data):
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Basic Earnings Per Share (EPS) Calculation:
Weighted average common shares outstanding 56,697 51,796
============== ==============
Net income for common stockholders $ 60,919 61,751
Less: dividends paid on Class B common stock - (1,410)
-------------- --------------
Net income for Basic EPS $ 60,919 60,341
============== ==============
Basic EPS $ 1.07 1.16
============== ==============
Diluted Earnings Per Share (EPS) Calculation
Weighted average shares outstanding for Basic 56,697 51,796
EPS
Exchangeable operating partnership units 1,909 1,979
Incremental shares to be issued under common stock
options using the Treasury Method 45 4
-------------- --------------
Total diluted shares 58,651 53,779
============== ==============
Net income for Basic EPS $ 60,919 60,341
Add: minority interest of exchangeable partnership units 1,848 2,109
-------------- --------------
Net income for Diluted EPS $ 62,767 62,450
============== ==============
Diluted EPS $ 1.07 1.16
============== ==============
</TABLE>
The Preferred Series 1 and Series 2 stock are not included in the above
calculation because their effects are anti-dilutive.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto of Regency Realty
Corporation ("Regency" or "Company") appearing elsewhere within.
Organization
The Company is a qualified real estate investment trust ("REIT") which began
operations in 1993. The Company invests in real estate primarily through its
general partnership interest in Regency Centers, L.P., ("RCLP" or "Partnership")
an operating partnership, in which the Company currently owns approximately 97%
of the outstanding common partnership units ("Units"). Of the 235 properties
included in the Company's portfolio at September 30, 2000, 217 properties were
owned either fee simple or through partnership interests by RCLP. At September
30, 2000, the Company had an investment in real estate of approximately $2.9
billion of which $2.8 billion was owned by RCLP.
Shopping Center Business
The Company's principal business is owning, operating and developing grocery
anchored neighborhood infill retail shopping centers. The Company's properties
summarized by state and in order by largest holdings including their gross
leasable areas (GLA) follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
Location # Properties GLA % Leased * # Properties GLA % Leased *
-------- ------------ --------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Florida 52 6,268,882 92.8% 48 5,909,534 91.7%
California 38 4,661,349 97.9% 36 3,858,628 98.2%
Texas 32 4,089,891 94.3% 29 3,849,549 94.2%
Georgia 27 2,729,150 95.0% 27 2,716,763 92.3%
Ohio 12 1,706,295 97.4% 13 1,822,854 94.0%
North Carolina 13 1,302,751 98.0% 12 1,241,639 97.9%
Washington 10 1,180,009 98.7% 9 1,066,962 98.1%
Colorado 10 897,788 98.7% 10 903,502 98.0%
Oregon 8 738,460 94.3% 7 616,070 94.2%
Alabama 5 516,062 97.9% 5 516,061 99.5%
Arizona 6 454,574 99.6% 2 326,984 99.7%
Tennessee 4 423,326 99.6% 3 271,697 98.9%
Missouri 2 369,045 95.8% 1 82,498 95.8%
Kentucky 2 304,347 90.7% 2 305,307 91.8%
Virginia 3 297,965 95.1% 2 197,324 96.1%
Michigan 3 251,212 94.7% 3 250,655 98.7%
Delaware 1 228,169 98.6% 1 232,754 96.3%
Mississippi 2 185,061 97.7% 2 185,061 96.6%
Illinois 1 178,601 86.4% 1 178,600 85.9%
South Carolina 2 162,056 98.2% 2 162,056 98.8%
New Jersey 1 88,867 - - - -
Wyoming 1 87,771 - 1 75,000 -
-------------- --------------- ---------------- -------------- --------------- -------------
Total 235 27,121,631 95.6% 216 24,769,498 95.0%
============== =============== ================ ============== =============== =============
</TABLE>
* Excludes properties under construction
The Company is focused on building a platform of grocery anchored neighborhood
shopping centers because grocery stores provide convenience shopping of daily
necessities, foot traffic for adjacent local tenants, and should withstand
adverse economic conditions. The Company's current investment markets have
continued to offer strong stable economies, and accordingly, the Company expects
to realize growth in net income as a result of increasing occupancy in the
portfolio, increasing rental rates, development and acquisition of shopping
centers in targeted markets, and redevelopment of existing shopping centers.
<PAGE>
The following table summarizes the four largest grocery tenants (based on
annualized base rent) occupying the Company's shopping centers at September 30,
2000:
<TABLE>
<CAPTION>
Grocery Anchor Number of % of % of Annualized Avg Remaining
Stores * Total GLA Base Rent Lease Term
--------------- ----------- ---------- ---------------- --------------
<S> <C> <C> <C> <C>
Kroger 57 12.3% 11.1% 16 yrs
Safeway 41 5.5% 4.9% 12 yrs
Publix 41 6.8% 4.8% 13 yrs
Albertsons 21 2.6% 2.3% 13 yrs
* Includes grocery owned stores
</TABLE>
Periodically, the Company identifies operating shopping centers that no longer
meet its long-term investment standards. Once identified, these properties are
segregated on the balance sheet as operating properties held for sale, and are
carried at the lower of cost or fair value less estimated selling costs.
Acquisition and Development of Shopping Centers
The Company has implemented a growth strategy dedicated to developing
high-quality shopping centers and build to suit properties. This development
process can require 12 to 36 months from initial land or redevelopment
acquisition through construction and leaseup and finally stabilized income,
depending upon the size and type of project. Generally, anchor tenants begin
operating their stores prior to construction completion of the entire center,
resulting in rental income during the development phase. At September 30, 2000,
the Company had 57 projects under construction or undergoing major renovations,
which when complete will represent an investment of $598.9 million. Total cost
necessary to complete these developments is estimated to be $240.0 million and
will be expended through 2001. These developments are approximately 63% complete
and 70% leased.
On August 3, 2000, the Company acquired the non-owned portion of two properties
in one joint venture for $2.5 million in cash. The net assets of the joint
venture were and continue to be consolidated by the Company. Prior to acquiring
the non-owned portion, the joint venture partner's interest was reflected as
limited partners' interest in consolidated partnerships in the Company's
financial statements.
On June 30, 2000, the Company acquired the non-owned portion of nine properties
in five joint ventures, previously accounted for using the equity method, for
$4.4 million in cash, common stock and Units. As a result, these joint ventures
are wholly-owned by the Company and are consolidated for financial reporting
purposes.
On February 28, 1999, the Company acquired Pacific Retail Trust ("Pacific") for
approximately $1.157 billion. At the date of the acquisition, Pacific was
operating or had under development 71 retail shopping centers representing 8.4
million SF of gross leaseable area.
Liquidity and Capital Resources
Management anticipates that cash generated from operating activities will
provide the necessary funds on a short-term basis for its operating expenses,
interest expense and scheduled principal payments on outstanding indebtedness,
recurring capital expenditures necessary to properly maintain the shopping
centers, and distributions to share and unit holders. Net cash provided by
operating activities was $127.7 million and $100.2 million for the nine months
ended September 30, 2000 and 1999, respectively. The Company incurred recurring
and non-recurring capital expenditures (non-recurring expenditures pertain to
immediate building improvements on new acquisitions and tenant improvements on
new leases) of $12.9 million and $10.9 million during the first nine months of
2000 and 1999, respectively. The Company paid scheduled principal payments of
$4.8 million and $4.3 million for the nine months ended September 30, 2000 and
1999, respectively. The Company paid dividends and distributions of $107.6
million and $77.5 million, for the nine months ended September 30, 2000 and
1999, respectively, to its share and unit holders.
<PAGE>
Management expects to meet long-term liquidity requirements for term debt
payoffs at maturity, non-recurring capital expenditures, and acquisition,
renovation and development of shopping centers from: (i) excess cash generated
from operating activities, (ii) working capital reserves, (iii) additional debt
borrowings, and (iv) additional equity raised in the private and public markets.
Net cash used in investing activities was $279.2 million and $188.3 million,
during 2000 and 1999, respectively, primarily for the acquisition and
development of shopping centers and build to suit projects. Net cash provided
by financing activities was $134.2 million and $91.7 for the nine months ended
September 30, 2000 and 1999, respectively.
During 1999, the Board of Directors authorized the repurchase of approximately
$65 million of the Company's outstanding shares through periodic open market
transactions or privately negotiated transactions. At March 31, 2000 the Company
had completed the program by purchasing 3.25 million shares.
The Company's outstanding debt at September 30, 2000 and December 31, 1999
consists of the following (in thousands):
2000 1999
---- ----
Notes Payable:
Fixed rate mortgage loans $ 342,233 382,715
Variable rate mortgage loans 32,438 11,376
Fixed rate unsecured loans 520,063 370,696
-------------- ---------------
Total notes payable 894,734 764,787
Unsecured line of credit 305,000 247,179
-------------- ---------------
Total $ 1,199,734 1,011,966
============== ===============
On September 8, 2000, the Company through RCLP issued $24 million of 8.75%
Series F Cumulative Redeemable Preferred Units ("Series F Preferred Units") to
an institutional investor in a private placement. The issuance involved the sale
of 240,000 Series F Preferred Units for $100.00 per unit. The Series F Preferred
Units, which may be called by the Partnership at par on or after September 8,
2005 have no stated maturity or mandatory redemption, and pay a cumulative,
quarterly dividend at an annualized rate of 8.75%. At any time after September
8, 2010, the Series F Preferred Units may be exchanged for shares of 8.75%
Series F Cumulative Redeemable Preferred Stock ("Series F Preferred Stock") of
the Company at an exchange rate of one share of Series F Preferred Stock for one
Series F Preferred Unit. The Series F Preferred Units and Series F Preferred
Stock are not convertible into common stock of the Company. The net proceeds of
the offering were used to reduce the unsecured line of credit (the "Line").
On August 29, 2000 the Company, through RCLP, completed a $150 million unsecured
debt offering with an interest rate of 8.45%. The notes were priced at 99.819%,
are due on September 1, 2010 and are guaranteed by the Company. The net proceeds
of the offering were used to reduce the balance of the unsecured line of credit
(the "Line").
During July, 2000, the Company modified the terms of the Line by reducing the
commitment to $625 million and extending the term. The Line matures in March
2002, but may be extended annually for one-year periods. Borrowings under the
Line bear interest at a variable rate based on LIBOR plus 1% (7.625% at
September 30, 2000) compared to LIBOR plus a 1.075% spread (6.5125% at September
30, 1999), which is dependent on the Company maintaining its investment grade
rating. The Company is required to comply and is in compliance with certain
financial and other covenants customary with this type of unsecured financing.
The Line is used primarily to finance the acquisition and development of real
estate, but is also available for general working capital purposes.
<PAGE>
On May 25, 2000, the Company issued $70 million of 8.75% Series E Cumulative
Redeemable Preferred Units ("Series E Preferred Units") to an institutional
investor in a private placement. The issuance involved the sale of 700,000
Series E Preferred Units for $100.00 per unit. The Series E Preferred Units,
which may be called by the Partnership at par on or after May 25, 2005 have no
stated maturity or mandatory redemption, and pay a cumulative, quarterly
dividend at an annualized rate of 8.75%. At any time after May 25, 2010, the
Series E Preferred Units may be exchanged for shares of 8.75% Series E
Cumulative Redeemable Preferred Stock ("Series E Preferred Stock") of the
Company at an exchange rate of one share of Series E Preferred Stock for one
Series E Preferred Unit. The Series E Preferred Units and Series E Preferred
Stock are not convertible into common stock of the Company. The net proceeds of
the offering were used to reduce the Line. During September 1999, the Company
issued similar preferred units in several series in the amount of $210.0 million
with an average fixed distribution rate of 8.93%. At September 30, 2000, the
face value of total preferred units issued was $384.0 million with an average
fixed distribution rate of 8.72% vs. $290.0 million with an average fixed
distribution rate of 8.71%% at September 30, 1999.
On April 15, 1999 the Company, through RCLP, completed a $250 million
unsecured debt offering in two tranches. The Company, through RCLP, issued $200
million 7.4% notes due April 1, 2004, priced at 99.922% to yield 7.42%, and $50
million 7.75% notes due April 1, 2009, priced at 100%, each guaranteed by the
Company. The net proceeds of the offering were used to reduce the balance of the
Line.
As of September 30, 2000, scheduled principal repayments on notes payable and
the Line were as follows (in thousands):
<TABLE>
<CAPTION>
Scheduled
Principal Term Loan Total
Scheduled Payments by Year Payments Maturities Payments
-------------------------- -------------- --------------- ---------------
<S> <C> <C> <C>
2000 $ 1,462 56,985 58,447
2001 5,631 69,445 75,076
2002 (includes the Line) 4,955 349,094 354,049
2003 4,946 13,302 18,248
2004 5,342 199,890 205,232
Beyond 5 Years 36,604 441,782 478,386
Net unamortized debt premiums - 10,296 10,296
-------------- --------------- ---------------
Total $ 58,940 1,140,794 1,199,734
============== =============== ===============
</TABLE>
Unconsolidated partnerships and joint ventures had mortgage loans payable of
$14.9 million at September 30, 2000, and the Company's proportionate share of
these loans was $6.2 million.
The Company qualifies and intends to continue to qualify as a REIT under the
Internal Revenue Code. As a REIT, the Company is allowed to reduce taxable
income by all or a portion of its distributions to stockholders. As
distributions have exceeded taxable income, no provision for federal income
taxes has been made. While the Company intends to continue to pay dividends to
its stockholders, it also will reserve such amounts of cash flow as it considers
necessary for the proper maintenance and improvement of its real estate, while
still maintaining its qualification as a REIT.
The Company intends to continue to acquire and develop shopping centers and
expects to meet the related capital requirements from borrowings on the Line.
The Company expects to repay the Line from time to time from additional public
and private equity or debt offerings, such as those transactions previously
completed. Because such acquisition and development activities are discretionary
in nature, they are not expected to burden the Company's capital resources
currently available for liquidity requirements. The Company expects that cash
provided by operating activities, unused amounts available under the Line, and
cash reserves are adequate to meet liquidity requirements and costs necessary to
complete properties in development.
<PAGE>
Results from Operations
Comparison of the nine months ended September 30, 2000 to 1999
Revenues increased $49.4 million or 23.5% to $260.1 million in 2000. The
increase was due to the Pacific acquisition, revenues from new developments that
began operating after September 30, 1999, and from same property growth in
rental rates and occupancy increases. Minimum rent increased $32.0 million or
20.4%, and recoveries from tenants increased $12.0 million or 30.8%. At
September 30, 2000, the Company was operating or developing 235 shopping centers
of which 187 centers were considered stabilized and 95.6% leased. At September
30, 1999, the stabilized properties were 95.8% leased. Rental rates grew by 7.3%
from renewal leases and new leases replacing previously occupied spaces in the
stabilized properties.
Service operations revenue includes fees earned as part of the Company's service
operations segment and includes property management and commissions earned from
third parties, and development related profits and fees earned from the sales of
shopping centers and build to suit properties to third parties. Service
operations revenue increased by $5.6 million to $15.4 million in 2000, or 57.7%.
The increase was primarily due to a $8.1 million increase in development related
profits and fees, offset by a $2.5 million reduction in property management
fees.
Operating expenses increased $19.5 million or 20.1% to $116.6 million in 2000.
Combined operating and maintenance and real estate taxes increased $10.7
million or 22.5% during 2000 to $58.4 million. The increase was due to the
Pacific acquisition, expenses incurred by new developments that began
operating after September 30, 1999, and general increases in costs on the
stabilized properties. General and administrative expenses were $13.3 million
during 2000 vs. $13.6 million in 1999 or 2.4% lower as a result of increased
capitalization of direct costs incurred during 2000 related to development
activities. Depreciation and amortization increased $8.3 million during 2000 or
23.7% primarily due to the Pacific acquisition and developments that began
operating after September 30, 1999.
Operating properties held for sale include properties held for
investment that no longer fit the Company's long-term investment strategies and
properties acquired or developed with the intent to sell. These properties are
carried at the lower of cost or fair value less the estimated cost to sell.
Depreciation and amortization are suspended during the period held for sale. At
June 30, 2000, the Company recorded a provision for loss on operating properties
held for sale of $6.9 million.
Interest expense increased to $52.7 million in 2000 from $43.6 million in 1999
or 20.9%. The increase was due to higher LIBOR rates, higher average balances on
the Line, the assumption of $402.6 million of debt of Pacific, the financing
cost of new developments that began operating after September 30, 1999, and the
higher fixed interest rate of the $250 million debt offering completed in April,
1999.
Preferred unit distributions increased $15.6 million to $21.2 million during
2000 as a result of the preferred units issued in 1999 and 2000. Weighted
average fixed rates of the preferred units were 8.72% at September 30, 2000 vs.
8.71% at September 30, 1999.
Net income for common stockholders was $60.9 million in 2000 vs. $61.8 million
in 1999, a $832,000 or 1.4% decrease primarily a result of the provision for
loss on operating properties held for sale and the other reasons as described
above. Diluted earnings per share in 2000 was $1.07 vs. $1.16 in 1999, a result
of the decline in net income and the increased weighted average shares in 2000
issued in connection with the acquisition of Pacific in 1999.
<PAGE>
Comparison of the three months ended September 30, 2000 to 1999
Revenues increased $13.0 million or 16.4% to $92.6 million in 2000. Minimum rent
increased $6.1 million or 10.2%, and recoveries from tenants increased $3.3
million or 22.8%. The increase was due to revenues from new developments that
began operating after September 30, 1999, and from same property growth in
rental rates and occupancy increases as described in the nine month comparison.
Service operations revenue includes fees earned as part of the Company's service
operations segment and includes property management and commissions earned from
third parties, and development related profits and fees earned from the sales of
shopping centers and build to suit properties to third parties. Service
operations revenue increased by $2.0 million to $6.0 million in 2000, or 50.0%.
The increase was primarily due to a $2.6 million increase in development related
profits and fees, offset by a $600,000 reduction in property management fees.
Operating expenses increased $4.7 million or 12.9% to $41.6 million in 2000.
Combined operating and maintenance, and real estate taxes increased $2.4 million
or 13.1% during 2000 to $21.0 million. The increase was due primarily to
expenses incurred by new developments that began operating after September 30,
1999 and general increases in operating costs on the stabilized properties.
General and administrative expenses were $5.0 million in 2000 vs. $4.8 million
in 1999 a 4.2% increase. Depreciation and amortization increased $1.7 million
during 2000 or 12.7% primarily related to developments that began operating
after September 30, 1999.
Interest expense increased to $18.8 million in 2000 from $15.6 million in 1999
or 20.7%. The increase was due to higher LIBOR rates, higher average balances on
the Line, and the financing cost of new developments that began operating after
September 30, 1999.
Preferred unit distributions increased $5.6 million to $8.0 million during 2000
as a result of the preferred units issued in 1999 and 2000. Weighted average
fixed rates of the preferred units were 8.72% at September 30, 2000 vs. 8.71% at
September 30, 1999.
Net income for common stockholders was $23.9 million in 2000 vs. $24.0 million
in 1999, a $100,000 decrease primarily a result of the reasons as described
above. Diluted earnings per share in 2000 was $0.42 vs. $0.40 in 1999, due to
the decrease in 2000 of the weighted average number of shares outstanding from
the stock repurchase program initiated in the fourth quarter of 1999.
New Accounting Standards and Accounting Changes
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities " (FAS 133), which is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. FAS 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. FAS 133
requires entities to recognize all derivatives as either assets or liabilities
in the balance sheet and measure those instruments at fair value. FAS 133 will
have no impact to the financial statements as the Company has no derivative
instruments.
Environmental Matters
The Company, like others in the commercial real estate industry, is subject to
numerous environmental laws and regulations and the operation of dry cleaning
plants at the Company's shopping centers is the principal environmental concern.
The Company believes that the dry cleaners are operating in accordance with
current laws and regulations and has established procedures to monitor their
operations. The Company has approximately 39 properties that will require or are
currently undergoing varying levels of environmental remediation. These
remediations are not expected to have a material financial effect on the Company
due to financial statement reserves and various state-regulated programs that
shift the responsibility and cost for remediation to the state. Based on
information presently available, no additional environmental accruals were made
and management believes that the ultimate disposition of currently known matters
will not have a material effect on the financial position, liquidity, or
operations of the Company.
<PAGE>
Inflation
Inflation has remained relatively low during 2000 and 1999 and has had a minimal
impact on the operating performance of the shopping centers; however,
substantially all of the Company's long-term leases contain provisions designed
to mitigate the adverse impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rentals based on tenants' gross
sales, which generally increase as prices rise, and/or escalation clauses, which
generally increase rental rates during the terms of the leases. Such escalation
clauses are often related to increases in the consumer price index or similar
inflation indices. In addition, many of the Company's leases are for terms of
less than ten years, which permits the Company to seek increased rents upon
re-rental at market rates. Most of the Company's leases require the tenants to
pay their share of operating expenses, including common area maintenance, real
estate taxes, insurance and utilities, thereby reducing the Company's exposure
to increases in costs and operating expenses resulting from inflation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
The Company is exposed to interest rate changes primarily as a result of its
Line and long-term debt used to maintain liquidity and fund capital expenditures
and expansion of the Company's real estate investment portfolio and operations.
The Company's interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flows and to lower its overall
borrowing costs. To achieve its objectives the Company borrows primarily at
fixed rates and may enter into derivative financial instruments such as interest
rate swaps, caps and treasury locks in order to mitigate its interest rate risk
on a related financial instrument. The Company has not been party to any market
risk sensitive instruments during the reporting period ending September 30, 2000
and does not plan to enter into derivative or interest rate transactions for
speculative purposes.
The Company's interest rate risk is monitored using a variety of techniques. The
table below presents the principal amounts maturing (in thousands), weighted
average interest rates of remaining debt, and the fair value of total debt (in
thousands), by year of expected maturity to evaluate the expected cash flows and
sensitivity to interest rate changes.
<TABLE>
<CAPTION>
Fair
2000 2001 2002 2003 2004 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate debt 58,413 42,671 49,049 18,248 205,232 478,387 852,000 862,296
Avg. interest rate for all 7.93% 7.92% 7.86% 7.84% 8.02% 8.19% - -
debt
Variable rate LIBOR debt 33 32,405 305,000 - - - 337,438 337,438
Avg. interest rate for all debt 7.60% 7.59% - - - - - -
</TABLE>
As the table incorporates only those exposures that exist as of December 31,
1999, it does not consider those exposures or positions which could arise after
that date. Moreover, because firm commitments are not presented in the table
above, the information presented therein has limited predictive value. As a
result, the Company's ultimate realized gain or loss with respect to interest
rate fluctuations will depend on the exposures that arise during the period, the
Company's hedging strategies at that time, and interest rates.
Forward Looking Statements
This report contains certain forward-looking statements (as such term is defined
in the Private Securities Litigation Reform Act of 1995) and information
relating to the Company that is based on the beliefs of the Company's
management, as well as, assumptions made by and information currently available
to management. When used in this report, the words "estimate," "project,"
"believe," "anticipate," "intend," "expect" and similar expressions are intended
to identify forward-looking statements. Such statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions; changes
in customer preferences; competition; changes in technology; the integration of
acquisitions, including Pacific; changes in business strategy; the indebtedness
of the Company; quality of management, business abilities and judgment of the
Company's personnel; the availability, terms and deployment of capital; and
various other factors referenced in this report. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. The Company does not undertake any obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
<PAGE>
Part II
Item 2 Changes in Securities and Use of Proceeds
(c) See the first paragraph of Note 6 to the Consolidated Financial Statements
included herein, which is incorporated by reference.
Item 6 Exhibits and Reports on Form 8-K:
(a) Exhibits
3 Restated Articles of Incorporation of Regency Realty Corporation as
amended to date.
10. Material Contracts
Wells Fargo Second Amended and Restated Credit Agreement
27. Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 6, 2000 REGENCY REALTY CORPORATION
By: /s/ J. Christian Leavitt
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Senior Vice President,
and Chief Accounting Officer
