United States
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-Q
(Mark One)
[X] For the quarterly period ended March 31, 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 May 9, 2000, there were 56,526,189 shares outstanding of the Registrant's
common stock.
<PAGE>
REGENCY REALTY CORPORATION
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------- ------
<S> <C> <C>
Assets
Real estate investments, at cost:
Land $ 584,491,570 567,673,872
Buildings and improvements 1,855,930,988 1,834,279,432
Construction in progress - development for investment 77,773,975 81,995,169
Construction in progress - development for sale 90,448,773 85,305,724
--------------- ----------------
2,608,645,306 2,569,254,197
Less: accumulated depreciation 117,449,619 104,467,176
--------------- ----------------
2,491,195,687 2,464,787,021
Investments in real estate partnerships 69,891,757 66,938,784
--------------- ----------------
Net real estate investments 2,561,087,444 2,531,725,805
Cash and cash equivalents 27,809,388 54,117,443
Notes receivable 19,511,432 15,673,125
Tenant receivables, net of allowance for uncollectible accounts of
$1,974,003 and $1,883,547 at March 31, 2000 and
December 31, 1999 28,628,118 33,515,040
Deferred costs, less accumulated amortization of $9,788,479 and
$8,802,559 at March 31, 2000 and December 31, 1999 12,937,357 12,530,546
Other assets 7,820,343 7,374,019
--------------- ----------------
$ 2,657,794,082 2,654,935,978
=============== ================
Liabilities and Stockholders' Equity
Liabilities:
Notes payable 763,523,192 764,787,207
Acquisition and development line of credit 275,179,310 247,179,310
Accounts payable and other liabilities 40,185,714 48,886,111
Tenants' security and escrow deposits 8,315,974 7,952,707
--------------- ----------------
Total liabilities 1,087,204,190 1,068,805,335
--------------- ----------------
Preferred units 283,816,274 283,816,274
Exchangeable operating partnership units 44,247,660 44,589,873
Limited partners' interest in consolidated partnerships 9,600,034 10,475,321
--------------- ----------------
Total minority interest 337,663,968 338,881,468
--------------- ----------------
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 March 31, 2000 and December 31, 1999;
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 March 31, 2000 and December 31, 1999
liquidation preference $20.83 per share 22,168,080 22,168,080
Common stock $.01 par value per share: 150,000,000 shares
authorized; 59,764,976 and 59,639,536 shares issued
at March 31, 2000 and December 31, 1999 597,650 596,395
Treasury stock; 3,254,151 and 2,715,851 shares held at March 31, 2000
and December 31, 1999, at cost (65,171,307) (54,536,612)
Additonal paid in capital 1,306,044,758 1,304,257,610
Distributions in excess of net income (32,312,347) (26,779,538)
Stock loans (10,928,942) (10,984,792)
--------------- ----------------
Total stockholders' equity 1,232,925,924 1,247,249,175
--------------- ----------------
Commitments and contingencies
$ 2,657,794,082 2,654,935,978
=============== ================
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
REGENCY REALTY CORPORATION
Consolidated Statements of Operations
For the Three Months ended March 31, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------ -------
<S> <C> <C>
Revenues:
Minimum rent $ 61,313,756 39,132,116
Percentage rent 659,517 410,446
Recoveries from tenants 16,610,464 9,243,148
Other non-rental revenues 2,254,404 1,895,047
Equity in income of investments in
real estate partnerships 363,514 741,103
--------------- ----------------
Total revenues 81,201,655 51,421,860
--------------- ----------------
Operating expenses:
Depreciation and amortization 13,761,765 9,411,274
Operating and maintenance 10,500,109 6,984,708
General and administrative 4,496,079 3,637,359
Real estate taxes 8,031,672 4,760,085
Other expenses - 150,000
--------------- ----------------
Total operating expenses 36,789,625 24,943,426
--------------- ----------------
Interest expense (income):
Interest expense 15,691,149 10,821,204
Interest income (843,000) (466,518)
--------------- ----------------
Net interest expense 14,848,149 10,354,686
--------------- ----------------
Income before minority interests 29,563,881 16,123,748
Minority interest preferred unit distributions (6,312,499) (1,625,001)
Minority interest of exchangeable partnership units (688,007) (578,205)
Minority interest of limited partners (243,433) (260,939)
--------------- ----------------
Net income 22,319,942 13,659,603
Preferred stock dividends (699,459) (204,000)
--------------- ----------------
Net income for common stockholders $ 21,620,483 13,455,603
=============== ================
Net income per share:
Basic $ 0.38 0.34
=============== ================
Diluted $ 0.38 0.34
=============== ================
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
REGENCY REALTY CORPORATION
Consolidated Statement of Stockholders' Equity
For the Three Months ended March 31, 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 - - 1,252 -
Common stock issued or (cancelled)
under stock loans - - (23) -
Common stock issued for
partnership units redeemed - - 26 -
Repurchase of common stock - - - (10,634,695)
Cash dividends declared:
Common stock ($.48 per share)
and preferred stock - - - -
Net income - - - -
------------- ------------- ----------- ---------------
Balance at
March 31, 2000 $ 12,528,032 22,168,080 597,650 (65,171,307)
============= ============= =========== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REGENCY REALTY CORPORATION
Consolidated Statement of Stockholders' Equity
For the Three Months ended March 31, 2000
(unaudited)
(continued)
<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 1,778,588 - - 1,779,840
Common stock issued or (cancelled)
under stock loans (55,827) - 55,850 -
Common stock issued for
partnership units redeemed 64,387 - - 64,413
Repurchase of common stock - - - (10,634,695)
Cash dividends declared:
Common stock ($.48 per share)
and preferred stock - (27,852,751) - (27,852,751)
Net income - 22,319,942 - 22,319,942
------------- ------------- ----------- ---------------
Balance at
March 31, 2000 1,306,044,758 (32,312,347) (10,928,942) 1,232,925,924
============== ============= ============ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REGENCY REALTY CORPORATION
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 22,319,942 13,659,603
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 13,761,765 9,411,274
Deferred financing cost and debt premium amortization 208,857 (34,967)
Stock based compensation 1,042,205 580,911
Minority interest preferred unit distribution 6,312,499 1,625,001
Minority interest of exchangeable partnership units 688,007 578,205
Minority interest of limited partners 243,433 260,939
Equity in income of investments in real estate partnerships (363,514) (741,103)
Changes in assets and liabilities:
Tenant receivables 4,886,922 (6,302,962)
Deferred leasing commissions (1,578,385) (586,166)
Other assets (760,440) 1,763,773
Tenants' security deposits 363,267 54,713
Accounts payable and other liabilities (7,974,985) 6,437,348
------------- -------------
Net cash provided by operating activities 39,149,573 26,706,569
------------- -------------
Cash flows from investing activities:
Acquisition and development of real estate (31,177,598) (13,601,894)
Acquisition of Pacific, net of cash acquired - (9,046,230)
Investment in real estate partnerships (2,589,459) (3,291,401)
Capital improvements (3,070,462) (2,608,266)
Construction in progress for sale, net of sales proceeds (8,981,356) (12,316,835)
Distributions received from real estate partnership investments - 704,474
------------- -------------
Net cash used in investing activities (45,818,875) (40,160,152)
------------- -------------
Cash flows from financing activities:
Net proceeds from common stock issuance 12,222 28,601
Cash paid for Company stock repurchase program (10,634,695) -
Net distributions to limited partners in consolidated partnerships (1,118,720) -
Distributions to exchangeable partnership unit holders (965,807) (580,402)
Distributions to preferred unit holders (6,312,499) (1,625,001)
Dividends paid to common stockholders (27,153,292) (12,972,452)
Dividends paid to preferred stockholders (699,459) (204,000)
Proceeds of acquisition and development
line of credit, net 28,000,000 52,148,125
Proceeds from mortgage loans 6,562,987 -
Repayment of mortgage loans (7,329,490) (8,915,732)
Deferred financing costs - (1,976,816)
------------- -------------
Net cash (used in) provided by financing activities (19,638,753) 25,902,323
------------- -------------
Net (decrease) increase in cash and cash equivalents (26,308,055) 12,448,740
Cash and cash equivalents at beginning of period 54,117,443 19,919,693
------------- -------------
Cash and cash equivalents at end of period $ 27,809,388 32,368,433
============= =============
</TABLE>
<PAGE>
REGENCY REALTY CORPORATION
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 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
$2,820,000 and $2,158,000 in 2000 and 1999, respectively) $ 13,196,588 9,334,581
================ ===============
Supplemental disclosure of non-cash transactions:
Mortgage loans assumed for the acquisition of Pacific and real estate $ - 396,682,000
================ ===============
Exchangeable operating partnership units, preferred and common
stock issued for the acquisition of Pacific and real estate $ - 775,283,215
================ ===============
Other liabilities assumed to acquire Pacific $ - 13,897,643
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
March 31, 2000
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 units of Regency
Centers, L.P., ("RCLP" or the "Partnership") and partnership
interests ranging from 51% to 93% in five 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) Reclassifications
Certain reclassifications have been made to the 1999 amounts to
conform to classifications adopted in 2000.
2. Acquisitions of Shopping Centers
On September 23, 1998, the Company entered into an Agreement of Merger
("Agreement") with Pacific Retail Trust ("Pacific"), a privately held
real estate investment trust. The Agreement, among other matters,
provided for the merger of Pacific into Regency, and the exchange of each
Pacific common or preferred share into 0.48 shares of Regency common or
preferred stock. The stockholders approved the merger at a Special
Meeting of Stockholders held February 26, 1999. On February 28, 1999, the
effective date of the merger, the Company issued equity instruments
valued at $770.6 million to the Pacific stockholders in exchange for
their outstanding common and preferred shares and units. The total cost
to acquire Pacific was approximately $1.157 billion based on the value of
Regency shares issued, including the assumption of $379 million of
outstanding debt and other liabilities of Pacific, and closing costs. The
price per share used to determine the purchase price was $23.325 based on
the five day average of the closing stock price of Regency's common stock
on the New York Stock Exchange immediately before, during
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
March 31, 2000
2. Acquisitions of Shopping Centers (continued)
and after the date the terms of the merger were agreed to and announced
to the public. The merger was accounted for as a purchase with the
Company as the acquiring entity.
During 1998, the Company acquired 43 shopping centers and joint ventures
for a total investment of $384.3 million ("1998 Acquisitions"). With
respect to these acquisitions, during 1999, the Company paid contingent
consideration valued at $9.0 million consisting of 69,555 Exchangeable
operating partnership units ("Units"), 3,768 shares of common stock, and
$7.0 million. In April 2000, the Company paid $5.0 million in cash as
partial contingent consideration related to the 1998 Acquisitions. In
addition, common stock and Units valued at $2.5 million may be issued
during the remainder of the year.
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 $74.2 million as of March
31, 1999. Pro forma net income for common stockholders would have been
$19.9 million as of March 31, 1999. Pro forma basic net income per share
would have been $.33 as of March 31, 1999. Pro forma diluted net income
per share would have been $.33 as of March 31, 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. 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,
leasing, brokerage, and construction and development management for
third-parties (Service operations segment). The Company had previously
operated four office buildings that were sold during 1998 and 1997
(Office buildings 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 Company assesses and measures operating results starting with Net
Operating Income for the Retail segment and Income for the Service
operations segment and converts such amounts into a performance measure
referred to as Funds From Operations ("FFO"). The operating results for
the individual retail shopping centers have been aggregated since all of
the Company's shopping centers exhibit highly similar economic
characteristics as neighborhood shopping centers, and offer similar
degrees of risk and opportunities for growth. FFO as defined by the
National Association of Real Estate Investment Trusts consists of net
income (computed in accordance with generally accepted accounting
principles) excluding gains (or losses) from debt restructuring and sales
of income producing property held for investment, plus depreciation and
amortization of real estate, and adjustments for unconsolidated
investments in real estate partnerships and joint ventures. The Company
further adjusts FFO by distributions made to holders of Units
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
March 31, 2000
3. Segments (continued)
and preferred stock that results in a diluted FFO amount. The Company
considers diluted FFO to be the industry standard for reporting the
operations of real estate investment trusts ("REITs"). Adjustments for
investments in real estate partnerships are calculated to reflect diluted
FFO on the same basis. While management believes that diluted FFO is the
most relevant and widely used measure of the Company's performance, such
amount does not represent cash flow from operations as defined by
generally accepted accounting principles, should not be considered an
alternative to net income as an indicator of the Company's operating
performance, and is not indicative of cash available to fund all cash
flow needs. Additionally, the Company's calculation of diluted FFO, as
provided below, may not be comparable to similarly titled measures of
other REITs.
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
March 31, 2000
3. Segments (continued)
The accounting policies of the segments are the same as those described
in note 1. The revenues, diluted FFO, and assets for each of the
reportable segments are summarized as follows for the three month periods
ended March 31, 2000 and 1999. Non-segment assets to reconcile to total
assets include cash and deferred costs.
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenues:
Retail segment $ 78,947,251 49,526,813
Service operations segment 2,254,404 1,895,047
------------- -------------
Total revenues 81,201,655 51,421,860
============= =============
Funds from Operations:
Retail segment net operating income $ 60,415,470 37,782,020
Service operations segment income 2,254,404 1,895,047
Adjustments to calculate diluted FFO:
Interest expense (15,691,149) (10,821,204)
Interest income 843,000 466,518
General and administrative (4,496,079) (3,787,359)
Non-real estate depreciation (268,316) (175,790)
Minority interest of limited partners (243,433) (260,939)
Minority interest in depreciation
and amortization (149,881) (181,594)
Share of joint venture depreciation
and amortization 387,583 99,193
Dividends on preferred units (6,312,499) (1,625,001)
------------- -------------
Funds from Operations - diluted 36,739,100 23,390,891
------------- -------------
Reconciliation to net income for common stockholders:
Real estate related depreciation
and amortization (13,493,449) (9,235,484)
Minority interest in depreciation
and amortization 149,881 181,594
Share of joint venture depreciation
and amortization (387,583) (99,193)
Minority interest of exchangeable
partnership units (688,007) (578,205)
------------- -------------
Net income $ 22,319,942 13,659,603
============= =============
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
Assets (in thousands): 2000 1999
---------------------- ---- ----
<S> <C> <C>
Retail segment $ 2,484,830 2,463,639
Service operations segment 136,419 123,233
Cash and other assets 36,545 68,064
------------- -------------
Total assets $ 2,657,794 2,654,936
============= =============
</TABLE>
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
March 31, 2000
4. Notes Payable and Acquisition and Development Line of Credit
The Company's outstanding debt at March 31, 2000 and December 31, 1999
consists of the following (in thousands):
2000 1999
---- ----
Notes Payable:
Fixed rate mortgage loans $ 375,037 382,715
Variable rate mortgage loans 17,909 11,376
Fixed rate unsecured loans 370,577 370,696
-------------- -------------
Total notes payable 763,523 764,787
Acquisition and development line of credit 275,179 247,179
-------------- -------------
Total $ 1,038,702 1,011,966
============== =============
During February, 1999, the Company modified the terms of its unsecured
acquisition and development line of credit (the "Line") by increasing the
commitment to $635 million. This credit agreement also provides for a
competitive bid facility of up to $250 million of the commitment amount.
Maximum availability under the Line is based on the discounted value of a
pool of eligible unencumbered assets (determined on the basis of
capitalized net operating income) less the amount of the Company's
outstanding unsecured liabilities. The Line matures in February 2001, but
may be extended annually for one year periods. Borrowings under the Line
bear interest at a variable rate based on LIBOR plus a specified spread,
(1.00% currently), which is dependent on the Company's 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. These financial covenants include among others (i)
maintenance of minimum net worth, (ii) ratio of total liabilities to
gross asset value, (iii) ratio of secured indebtedness to gross asset
value, (iv) ratio of EBITDA to interest expense, (v) ratio of EBITDA to
debt service and reserve for replacements, and (vi) ratio of unencumbered
net operating income to interest expense on unsecured indebtedness. The
Line is used primarily to finance the acquisition and development of real
estate, but is also available for general working capital purposes.
Mortgage loans are secured by certain real estate properties, and may be
prepaid subject to a prepayment of a yield-maintenance premium. Mortgage
loans are generally due in monthly installments of interest and principal
and mature over various terms through 2019. Variable interest rates on
mortgage loans are currently based on LIBOR plus a spread in a range of
125 basis points to 150 basis points. Fixed interest rates on mortgage
loans range from 7.04% to 9.5%.
During 1999, the Company assumed debt with a fair value of $402.6 million
related to the acquisition of real estate, which included debt premiums
of $4.1 million based upon the above market interest rates of the debt
instruments. Debt premiums are being amortized over the terms of the
related debt instruments, as an adjustment to interest expense.
On April 15, 1999 the Company, through RCLP, completed a $250 million
unsecured debt offering in two tranches. The Company issued $200 million
7.4% notes due April 1, 2004, priced at 99.922% to yield 7.42%, and $50
million 7.75% notes due April 1, 2009, priced at 100%. The net proceeds
of the offering were used to reduce the balance of the Line.
<PAGE>
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
March 31, 2000
4. Notes Payable and Acquisition and Development Line of Credit (continued)
As of March 31, 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 $ 4,294 86,995 91,289
2001 5,621 330,029 335,650
2002 4,943 44,097 49,040
2003 4,933 13,301 18,234
2004 5,327 199,874 205,201
Beyond 5 Years 36,886 290,389 327,275
Net unamortized debt premiums - 12,013 12,013
-------------- --------------- ---------------
Total $ 62,004 976,698 1,038,702
============== =============== ===============
</TABLE>
Unconsolidated partnerships and joint ventures had mortgage loans payable
of $50.0 million at March 31, 2000, and the Company's proportionate share
of these loans was $21.1 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.
5. Stockholders' Equity and Minority Interest
During 1999, the Board of Directors authorized the repurchase of up to
$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
March 31, 2000
6. Earnings Per Share
The following summarizes the calculation of basic and diluted earnings
per share for the three month period ended, March 31, 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 56,510 36,410
============== ==============
Net income for common stockholders $ 21,620 13,456
Less: dividends paid on Class B common stock - 1,175
-------------- --------------
Net income for Basic EPS $ 21,620 12,281
============== ==============
Basic EPS $ .38 .34
============== ==============
Diluted Earnings Per Share (EPS) Calculation
Weighted average shares outstanding for Basic EPS 56,510 36,410
Exchangeable operating partnership units 2,076 1,631
Contingent units or shares for the acquisition of real estate - 159
-------------- --------------
Total diluted shares 58,586 38,200
============== ==============
Net income for Basic EPS $ 21,620 12,281
Add: minority interest of exchangeable partnership units 688 578
-------------- --------------
Net income for Diluted EPS $ 22,308 12,859
============== ==============
Diluted EPS $ .38 .34
============== ==============
</TABLE>
The Preferred Series 1 and Series 2 stock and the Class B common 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 216 properties
included in the Company's portfolio at March 31, 2000, 198 properties were owned
either fee simple or through partnership interests by RCLP. At March 31, 2000,
the Company had an investment in real estate, at cost, of approximately $2.639
billion of which $2.538 billion or 96% was owned by RCLP.
Shopping Center Business
The Company's principal business is owning, operating and developing grocery
anchored neighborhood shopping centers which are located in infill locations or
high growth corridors. The Company's properties (both operating and under
construction) summarized by state and in order by largest holdings including
their gross leasable areas (GLA) follows:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
Location # Properties GLA % Leased * # Properties GLA % Leased *
-------- ------------ --------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Florida 49 6,058,893 92.5% 48 5,909,534 91.7%
California 35 3,894,539 97.9% 36 3,858,628 98.2%
Texas 29 3,876,334 93.7% 29 3,849,549 94.2%
Georgia 27 2,716,763 93.8% 27 2,716,763 92.3%
Ohio 13 1,832,774 92.8% 13 1,822,854 94.0%
North Carolina 12 1,241,639 97.8% 12 1,241,639 97.9%
Washington 9 1,080,792 98.8% 9 1,066,962 98.1%
Colorado 10 908,229 97.7% 10 903,502 98.0%
Oregon 7 671,220 94.0% 7 616,070 94.2%
Alabama 5 516,062 99.0% 5 516,061 99.5%
Arizona 2 326,984 98.6% 2 326,984 99.7%
Kentucky 2 305,307 89.8% 2 305,307 91.8%
Tennessee 3 271,697 99.5% 3 271,697 98.9%
Michigan 3 250,655 98.7% 3 250,655 98.7%
Delaware 1 232,754 96.3% 1 232,754 96.3%
Virginia 2 197,324 95.1% 2 197,324 96.1%
Mississippi 2 185,061 96.6% 2 185,061 96.6%
Illinois 1 178,600 86.4% 1 178,600 85.9%
South Carolina 2 162,056 98.8% 2 162,056 98.8%
Missouri 1 82,498 95.8% 1 82,498 95.8%
Wyoming 1 87,800 - 1 75,000 -
-------------- --------------- ---------------- -------------- --------------- -------------
Total 216 25,077,981 94.8% 216 24,769,498 95.0%
============== =============== ================ ============== =============== =============
</TABLE>
* Excludes properties under construction
<PAGE>
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.
The following table summarizes the four largest grocery tenants occupying the
Company's shopping centers at March 31, 2000:
<TABLE>
<CAPTION>
Number of % of % of Annualized Avg Remaining
Grocery Anchor Stores * Total GLA Base Rent Lease Term
--------------- ------------ ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Kroger 55 12.5% 10.9% 16 yrs
Publix 38 6.7% 4.5% 12 yrs
Safeway 33 5.0% 4.2% 11 yrs
Albertsons 19 2.7% 2.5% 14 yrs
</TABLE>
* Includes grocery owned stores
Acquisition and Development of Shopping Centers
On September 23, 1998, the Company entered into an Agreement of Merger
("Agreement") with Pacific Retail Trust ("Pacific"), a privately held real
estate investment trust. The Agreement, among other matters, provided for the
merger of Pacific into Regency, and the exchange of each Pacific common or
preferred share into 0.48 shares of Regency common or preferred stock. The
stockholders approved the merger at a Special Meeting of Stockholders held
February 26, 1999. At the time of the merger, Pacific owned 71 retail shopping
centers that were operating or under construction containing 8.4 million SF of
gross leaseable area. On February 28, 1999, the effective date of the merger,
the Company issued equity instruments valued at $770.6 million to the Pacific
stockholders in exchange for their outstanding common and preferred shares and
units. The total cost to acquire Pacific was approximately $1.157 billion based
on the value of Regency shares issued, including the assumption of $379 million
of outstanding debt and other liabilities of Pacific, and closing costs. The
price per share used to determine the purchase price was $23.325 based on the
five day average of the closing stock price of Regency's common stock on the New
York Stock Exchange immediately before, during and after the date the terms of
the merger were agreed to and announced to the public. The merger was accounted
for as a purchase with the Company as the acquiring entity.
During 1998, the Company acquired 43 shopping centers and joint ventures for a
total investment of $384.3 million ("1998 Acquisitions"). With respect to these
acquisitions, during 1999, the Company paid contingent consideration valued at
$9.0 million consisting of 69,555 Units, 3,768 shares of common stock, and $7.0
million. In April 2000, the Company paid $5.0 million in cash as partial
contingent consideration related to the 1998 Acquisitions. In addition, common
stock and Units valued at $2.5 million may be issued during the remainder of the
year.
Results from Operations
Comparison of March 31, 2000 to 1999
Revenues increased $29.8 million or 58% to $81.2 million in 2000. The increase
was due primarily to the Pacific acquisition in 1999. At March 31, 2000, the
total real estate portfolio contained approximately 25.1 million SF and was
92.9% leased. Minimum rent increased $22.2 million or 57%, and recoveries from
tenants increased $7.4 million or 80%. On a same property basis (excluding
Pacific) gross rental revenues increased $1.5 million or 3.8%, primarily due to
higher base rents. Other non-rental revenues from property management, leasing,
brokerage, and development services (service operation segment) provided on
properties not owned by the Company were $2.3 million and $1.9 million in 2000
and 1999, respectively. Operating expenses increased $11.8 million or 47% to
$36.8 million in 2000. Combined operating and maintenance, and real estate taxes
increased $6.8 million or 58% during 2000 to $18.5 million. The increases are
due to Pacific generating operating and maintenance expenses and real estate tax
increases of $6.7 million during 2000. On a same property basis, operating and
maintenance expenses and real estate taxes increased $86,000 or 1%. General and
administrative expenses increased 24% during 2000 to $4.5 million due to the
hiring of new employees and related office expenses necessary to manage the
shopping centers acquired during 1999. Depreciation and amortization increased
$4.4 million during 2000 or 46% primarily due to Pacific.
<PAGE>
Interest expense increased to $15.7 million in 2000 from $10.8 million in 1999
or 45% due to increased average outstanding loan balances related to the
assumption of debt for Pacific and the debt offerings completed in 1999.
Weighted average interest rates decreased .2% during 2000. See further
discussion under Acquisition and Development of Shopping Centers and Liquidity
and Capital Resources.
Net income for common stockholders was $21.6 million in 2000 vs. $13.5 million
in 1999, an $8.1 million or 60% increase for the reasons previously described.
Diluted earnings per share in 2000 was $.38 vs. $.34 in 1999.
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 $39.1 million and $26.7 million for the three months
ended March 31, 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 anchor tenant
improvements on new leases) of $3.1 million and $2.6 million, during 2000 and
1999, respectively. The Company paid scheduled principal payments of $1.7
million and $1.1 million during 2000 and 1999, respectively. The Company paid
dividends and distributions of $35.1 million and $15.4 million, during 2000 and
1999, respectively, to its share and unit holders.
Management expects to meet long-term liquidity requirements for term debt
payoffs at maturity, non-recurring capital expenditures, and acquisition,
renovation and development of shopping centers from: (i) excess cash generated
from operating activities, (ii) working capital reserves, (iii) additional debt
borrowings, and (iv) additional equity raised in the public markets. Net cash
used in investing activities was $45.8 million and $40.2 million, during 2000
and 1999, respectively, primarily for purposes discussed above under
Acquisitions and Development of Shopping Centers. Net cash used in financing
activities was $19.6 million for the three months ended March 31, 2000 and cash
provided by financing activities was $25.9 million for the three months ended
March 31, 1999. At March 31, 2000, the Company had 43 shopping centers or build
to suit projects under construction or undergoing major renovations, with costs
to date of $259.5 million. Total committed costs necessary to complete the
properties under development is estimated to be $141.0 million and will be
expended through 2000.
During 1999, the Board of Directors authorized the repurchase of up to $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 March 31, 2000 and December 31, 1999 consists
of the following (in thousands):
2000 1999
---- ----
Notes Payable:
Fixed rate mortgage loans $ 375,037 382,715
Variable rate mortgage loans 17,909 11,376
Fixed rate unsecured loans 370,577 370,696
-------------- ---------------
Total notes payable 763,523 764,787
Acquisition and development line of credit 275,179 247,179
-------------- ---------------
Total $ 1,038,702 1,011,966
============== ===============
During February, 1999, the Company modified the terms of its unsecured line of
credit (the "Line") by increasing the commitment to $635 million. This credit
agreement also provides for a competitive bid facility of up to $250 million of
the commitment amount. Maximum availability under the Line is based on the
discounted value of a pool of eligible unencumbered assets (determined on the
basis of capitalized net operating income) less the amount of the Company's
outstanding unsecured liabilities. The Line matures in February 2001, but may be
extended annually for one year periods. Borrowings under the Line bear interest
at a variable rate based on LIBOR plus a specified spread, (1.00% currently),
which is dependent on the Company's 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. These financial
covenants include among others (i) maintenance of minimum net worth, (ii) ratio
of total liabilities to gross asset value, (iii) ratio of secured indebtedness
to gross asset value, (iv) ratio of EBITDA to interest expense, (v) ratio of
EBITDA to debt service and reserve for replacements, and (vi) ratio of
unencumbered net operating income to interest expense on unsecured indebtedness.
The Line is used primarily to finance the acquisition and development of real
estate, but is also available for general working capital purposes.
<PAGE>
Mortgage loans are secured by certain real estate properties, and may be
prepaid, but could be subject to a yield-maintenance premium. Mortgage loans are
generally due in monthly installments of interest and principal and mature over
various terms through 2019. Variable interest rates on mortgage loans are
currently based on LIBOR plus a spread in a range of 125 basis points to 150
basis points. Fixed interest rates on mortgage loans range from 7.04% to 9.5%.
During 1999, the Company assumed debt with a fair value of $402.6 million
related to the acquisition of real estate, which included debt premiums of $4.1
million based upon the above market interest rates of the debt instruments. Debt
premiums are being amortized over the terms of the related debt instruments as
an adjustment to interest expense.
On April 15, 1999 the Company, through RCLP, completed a $250 million unsecured
debt offering in two tranches. The Company issued $200 million 7.4% notes due
April 1, 2004, priced at 99.922% to yield 7.42%, and $50 million 7.75% notes due
April 1, 2009, priced at 100%. The net proceeds of the offering were used to
reduce the balance of the Line.
As of March 31, 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 $ 4,294 86,995 91,289
2001 5,621 330,029 335,650
2002 4,943 44,097 49,040
2003 4,933 13,301 18,234
2004 5,327 199,874 205,201
Beyond 5 Years 36,886 290,389 327,275
Net unamortized debt premiums - 12,013 12,013
--------------- -------------- ----------------
Total $ 62,004 976,698 1,038,702
=============== ============== ================
</TABLE>
Unconsolidated partnerships and joint ventures had mortgage loans payable of
$50.0 million at March 31, 2000, and the Company's proportionate share of these
loans was $21.1 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's real estate portfolio grew substantially during 1999 as a result
of the Pacific acquisition. The Company intends to continue to acquire and
develop shopping centers in the near future, 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 completed in previous years. 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.
<PAGE>
New Accounting Standards and Accounting Changes
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities " (FAS 133), which is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. FAS 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. FAS 133
requires entities to recognize all derivatives as either assets or liabilities
in the balance sheet and measure those instruments at fair value. The Company
does not believe FAS 133 will materially effect its financial statements.
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 38 properties that will require or are
currently undergoing varying levels of environmental remediation. These
remediations are not expected to have a material financial effect on the Company
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.
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.
Year 2000 System Compliance
Management recognized the potential effect Year 2000 could have on the Company's
operations and, as a result, implemented a Year 2000 Compliance Project. The
project included an awareness phase, an assessment phase, a renovation phase,
and a testing phase of the data processing network, accounting and property
management systems, computer and operating systems, software packages, and
building management systems. The project also included surveying major tenants
and financial institutions. The Company's computer hardware, operating systems,
business systems, general accounting and property management systems and
principal desktop software applications are Year 2000 compliant. Additionally,
the Company did not incur and does not expect any business interruption as a
result of any of its customers or financial institutions not being Year 2000
compliant.
<PAGE>
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 March 31, 2000 and
does not plan to enter into derivative or interest rate transactions for
speculative purposes.
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>
Item 6 Exhibits and Reports on Form 8-K:
(a) Exhibits
10. Material Contracts
None
(b) Reports on Form 8-K
None
27. Financial Data Schedule
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 9, 2000 REGENCY REALTY CORPORATION
By: /s/ J. Christian Leavitt
Senior Vice President,
and Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM REGENCY
REALTY CORPORATION'S QUARTERLY REPORT FOR THE QUARTER ENDED 3/31/00
</LEGEND>
<CIK> 0000910606
<NAME> REGENCY REALTY CORPORATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 27,809,388
<SECURITIES> 0
<RECEIVABLES> 30,602,121
<ALLOWANCES> 1,974,003
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,678,537,063
<DEPRECIATION> 117,449,619
<TOTAL-ASSETS> 2,657,794,082
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 597,650
<OTHER-SE> 1,232,328,274
<TOTAL-LIABILITY-AND-EQUITY> 2,657,794,082
<SALES> 0
<TOTAL-REVENUES> 81,201,655
<CGS> 0
<TOTAL-COSTS> 18,531,781
<OTHER-EXPENSES> 13,761,765
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,691,149
<INCOME-PRETAX> 22,319,942
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,319,942
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,620,483
<EPS-BASIC> 0.38
<EPS-DILUTED> 0.38
</TABLE>
