United States
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-Q
(Mark One)
[X] For the quarterly period ended March 31, 2001
-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 CENTERS 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 10, 2001, there were 57,488,885 shares outstanding of the Registrant's
common stock.
Independent Accountants' Review Report
The Shareholders and Board of Directors
Regency Centers Corporation:
We have reviewed the consolidated balance sheet of Regency Centers Corporation
as of March 31, 2001, and the related consolidated statements of operations and
cash flows for the three-month periods ended March 31, 2001 and 2000 and the
consolidated statement of stockholders' equity for the three-month period ended
March 31, 2001. These consolidated financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Regency Centers Corporation as of December 31, 2000, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended (not presented herein); and in our report dated January 30,
2001, we expressed an unqualified opinion on those consolidated financial
statements.
/s/ KPMG LLP
KPMG LLP
Jacksonville, Florida
May 11, 2001
REGENCY CENTERS CORPORATION
Consolidated Balance Sheets
March 31, 2001 and December 31, 2000
(unaudited)
2001 2000
---- ----
Assets Real estate investments:
Land $ 573,264,744 564,089,984
Buildings and improvements 1,839,382,266 1,813,554,881
---------------- --------------
2,412,647,010 2,377,644,865
Less: accumulated depreciation 162,622,517 147,053,900
---------------- --------------
2,250,024,493 2,230,590,965
Properties in development 317,614,274 296,632,730
Operating properties held for sale 169,266,551 184,150,762
Investments in real estate partnerships 77,984,292 85,198,279
---------------- --------------
Net real estate investments 2,814,889,610 2,796,572,736
Cash and cash equivalents 52,676,997 100,987,895
Notes receivable 53,640,640 66,423,893
Tenant receivables, net of allowance for uncollectible accounts of
$5,165,285 and $4,414,085 at March 31, 2001 and
December 31, 2000, respectively 27,336,927 39,407,777
Deferred costs, less accumulated amortization of $14,502,673 and
$13,910,018 at March 31, 2001 and December 31, 2000, respectively 25,835,134 21,317,141
Other assets 7,158,564 10,434,298
---------------- --------------
$ 2,981,537,872 3,035,143,740
================ ==============
Liabilities and Stockholders' Equity
Liabilities:
Notes payable $ 1,051,605,731 841,072,156
Unsecured line of credit 221,000,000 466,000,000
Accounts payable and other liabilities 65,600,818 75,460,304
Tenants' security and escrow deposits 8,349,916 8,262,885
---------------- --------------
Total liabilities 1,346,556,465 1,390,795,345
---------------- --------------
Preferred units 375,403,652 375,407,777
Exchangeable operating partnership units 33,443,772 34,899,813
Limited partners' interest in consolidated partnerships 3,710,614 8,625,839
---------------- --------------
Total minority interest 412,558,038 418,933,429
---------------- --------------
Stockholders' equity:
Series 2 cumulative convertible preferred stock and paid in
capital, $01 par value per share: 1,502,532 shares authorized;
1,487,507 shares issued and outstanding at March 31, 2001 and
December 31, 2000; liquidation preference $20.83 per share 34,696,112 34,696,112
Common stock $.01 par value per share: 150,000,000 shares
authorized; 60,832,086 and 60,234,925 shares issued
at March 31, 2001 and December 31, 2000; respectively 608,321 602,349
Treasury stock; 3,373,315 and 3,336,754 shares held at March 31, 2001
and December 31, 2000, respectively, at cost (67,600,416) (66,957,282)
Additonal paid in capital 1,321,223,634 1,317,668,173
Distributions in excess of net income (57,201,963) (51,064,870)
Stock loans (9,302,319) (9,529,516)
---------------- --------------
Total stockholders' equity 1,222,423,369 1,225,414,966
---------------- --------------
Commitments and contingencies
$ 2,981,537,872 3,035,143,740
================ ==============
See accompanying notes to consolidated financial statements
REGENCY CENTERS CORPORATION
Consolidated Statements of Operations
For the Three Months ended March 31, 2001 and 2000
(unaudited)
2001 2000
---- ----
Revenues:
Minimum rent $ 66,059,373 61,313,756
Percentage rent 1,113,425 659,517
Recoveries from tenants 19,204,399 16,610,464
Service operations revenue 5,449,347 2,254,404
Equity in income of investments in
real estate partnerships 1,165,199 363,514
------------------ ---------------
Total revenues 92,991,743 81,201,655
------------------ ---------------
Operating expenses:
Depreciation and amortization 15,895,916 13,761,765
Operating and maintenance 12,311,475 10,500,109
General and administrative 4,315,174 4,496,079
Real estate taxes 9,633,633 8,031,672
Other expenses 1,379,332 -
------------------ ---------------
Total operating expenses 43,535,530 36,789,625
------------------ ---------------
Interest expense (income):
Interest expense 19,337,143 15,691,149
Interest income (1,977,301) (843,000)
------------------ ---------------
Net interest expense 17,359,842 14,848,149
------------------ ---------------
Income before minority interests and gain on
sale of operating properties 32,096,371 29,563,881
Gain on sale of operating properties 68,658 -
------------------ ---------------
Income before minority interests 32,165,029 29,563,881
Minority interest preferred unit distributions (8,368,751) (6,312,499)
Minority interest of exchangeable partnership units (560,668) (688,007)
Minority interest of limited partners (89,786) (243,433)
------------------ ---------------
Net income 23,145,824 22,319,942
Preferred stock dividends (733,837) (699,459)
------------------ ---------------
Net income for common stockholders $ 22,411,987 21,620,483
================== ===============
Net income per share:
Basic $ 0.39 0.38
================== ===============
Diluted $ 0.39 0.38
================== ===============
See accompanying notes to consolidated financial statements
REGENCY CENTERS CORPORATION
Consolidated Statement of Stockholders' Equity
For the Three Months Ended March 31, 2001
(unaudited)
Additional Distributions Total
Series 2 Common Treasury Paid In in exess of Stock Stockholders'
Preferred Stock Stock Stock Capital Net Income Loans Equity
--------------- ----------- ----------- -------------- ------------ ----------- -------------
Balance at
December 31, 2000 $ 34,696,112 602,349 (66,957,282) 1,317,668,173 (51,064,870) (9,529,516) 1,225,414,966
Common stock issued net, as
compensation for directors
or officers, or issued under
stock options - 5,513 (643,134) 2,564,391 - - 1,926,770
Common stock cancelled
under stock loans - 5 - (227,202) - 227,197 -
Common stock issued for
partnership units exchanged - 454 - 1,218,272 - - 1,218,726
Cash dividends declared:
Common stock ($.50 per share)
and preferred stock - - - - (29,282,917) - (29,282,917)
Net income - - - - 23,145,824 - 23,145,824
-------------- ----------- ------------ --------------- ------------- ------------ -------------
Balance at
March 31, 2001 $ 34,696,112 608,321 (67,600,416) 1,321,223,634 (57,201,963) (9,302,319) 1,222,423,369
============== =========== ============ =============== ============= ============ =============
See accompanying notes to consolidated financial statements.
REGENCY CENTERS CORPORATION
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2001 and 2000
(unaudited)
2001 2000
---- ----
Cash flows from operating activities:
Net income $ 23,145,824 22,319,942
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 15,895,916 13,761,765
Deferred loan cost and debt premium amortization 134,890 208,857
Stock based compensation 1,209,536 1,042,205
Minority interest preferred unit distribution 8,368,751 6,312,499
Minority interest of exchangeable partnership units 560,668 688,007
Minority interest of limited partners 89,786 243,433
Equity in income of investments in real estate partnerships (1,165,199) (363,514)
Gain on sale of operating properties (68,658) -
Changes in assets and liabilities:
Tenant receivables 11,955,230 4,886,922
Deferred leasing costs (1,762,012) (1,578,385)
Other assets 2,928,231 (760,440)
Tenants' security and escrow deposits 26,407 363,267
Accounts payable and other liabilities (9,130,158) (7,974,985)
------------------ ------------------
Net cash provided by operating activities 52,189,212 39,149,573
------------------ ------------------
Cash flows from investing activities:
Acquisition and development of real estate, net (28,960,418) (40,158,954)
Acquistion of partners' interest in investments
in real estate partnerships, net of cash acquired 1,547,043 -
Investment in real estate partnerships (7,151,192) (2,589,459)
Capital improvements (2,771,477) (3,070,462)
Repayment of notes receivable 14,394,060 -
Distributions received from investments in real estate partnerships 4,220,959 -
------------------ ------------------
Net cash used in investing activities (18,721,025) (45,818,875)
------------------ ------------------
Cash flows from financing activities:
Net (costs) or proceeds from common stock issuance (33,236) 12,222
Repurchase of common stock - (10,634,695)
Net distributions to limited partners in consolidated partnerships (5,005,010) (1,118,720)
Distributions to exchangeable partnership unit holders (797,983) (965,807)
Distributions to preferred unit holders (8,368,751) (6,312,499)
Dividends paid to common stockholders (28,549,080) (27,153,292)
Dividends paid to preferred stockholders (733,837) (699,459)
Net proceeds from fixed rate unsecured notes 215,450,373 -
Additional costs from issuance of preferred units (4,125) -
(Repayment) proceeds of unsecured line of credit, net (245,000,000) 28,000,000
Proceeds from notes payable 32,039 6,562,987
Repayment of notes payable (7,257,743) (5,678,996)
Scheduled principal payments (1,485,620) (1,650,494)
Deferred loan costs (26,112) -
------------------ ------------------
Net cash used in financing activities (81,779,085) (19,638,753)
------------------ ------------------
Net decrease in cash and cash equivalents (48,310,898) (26,308,055)
Cash and cash equivalents at beginning of period 100,987,895 54,117,443
------------------ ------------------
Cash and cash equivalents at end of period $ 52,676,997 27,809,388
================== ==================
REGENCY CENTERS CORPORATION
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2001 and 2000
(unaudited)
continued
2001 2000
---- ----
Supplemental disclosure of cash flow information -
cash paid for interest (net of capitalized interest
of approximately $5,210,000 and $2,820,000 in 2001
and 2000, respectively) $ 16,461,634 13,196,588
================== ==================
Notes receivable taken in connection with sales of
development properties $ 1,610,807 -
================== ==================
See accompanying notes to consolidated financial statements.
REGENCY CENTERS CORPORATION
Notes to Consolidated Financial Statements
March 31, 2001
1. Summary of Significant Accounting Policies
(a) Organization and Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Regency Centers Corporation, its wholly owned
qualified REIT subsidiaries, and its majority owned or controlled
subsidiaries and partnership (the "Company" or "Regency"). All
significant intercompany balances and transactions have been
eliminated in the consolidated financial statements. The Company
owns approximately 98% of the outstanding common units ("Units")
of Regency Centers, L.P., ("RCLP" or the "Partnership") and a
50.01% partnership interest in a majority owned real estate
partnership (the "Majority Partnership"). Regency invests in
retail shopping centers through its partnership interest in
RCLP. All of the acquisition, development, operations and
financing activity of Regency including the issuance of Units or
preferred units are executed by RCLP. The equity interests of
third parties held by RCLP and the Majority Partnership are
included in the consolidated financial statements as preferred
or exchangeable operating partnership units ("Units") and limited
partners' interest in consolidated partnerships. The Company is a
qualified real estate investment trust ("REIT") which began
operations in 1993 as Regency Realty Corporation. In February
2001, the Company changed its name to Regency Centers Corporation.
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 accounting principles generally accepted in the United States
of America 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, 2000 Form 10-K filed with
the Securities and Exchange Commission.
(b) Real Estate Investments
Land, buildings and improvements are recorded at cost. All direct
and indirect costs clearly associated with the acquisition,
development and construction of real estate projects are
capitalized as buildings and improvements.
Maintenance and repairs which do not improve or extend the useful
lives of the respective assets are reflected in operating and
maintenance expense. The property cost includes the capitalization
of interest expense incurred during construction based on average
outstanding expenditures.
Depreciation is computed using the straight line method over
estimated useful lives of up to forty years for buildings and
improvements, term of lease for tenant improvements, and three to
seven years for furniture and equipment.
REGENCY CENTERS CORPORATION
Notes to Consolidated Financial Statements
March 31, 2001
(b) Real Estate Investments (continued)
Operating properties held for sale include properties that no
longer meet the Company's long-term investment standards such as
expected growth in revenue or market dominance. Once identified
and marketed for sale, these properties are segregated on the
balance sheet as operating properties held for sale. The Company
also develops shopping centers and stand-alone retail stores for
resale. Once completed, these developments are also included in
operating properties held for sale. Operating properties held for
sale are carried at the lower of cost or fair value less estimated
selling costs. Depreciation and amortization are suspended during
the period held for sale.
The Company reviews its real estate investments for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
(c) Reclassifications
Certain reclassifications have been made to the 2000 amounts to
conform to classifications adopted in 2001.
2. 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 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 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
accounting principles generally accepted
REGENCY CENTERS CORPORATION
Notes to Consolidated Financial Statements
March 31, 2001
2. Segments (continued)
in the United States of America, 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.
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, 2001 and 2000. Assets not attributable to a particular
segment consist primarily of cash and deferred costs.
REGENCY CENTERS CORPORATION
Notes to Consolidated Financial Statements
March 31, 2001
2. Segments (continued)
2001 2000
---- ----
Revenues:
---------
Retail segment $ 87,542,396 78,947,251
Service operations segment 5,449,347 2,254,404
------------------ --------------------
Total revenues $ 92,991,743 81,201,655
================== ====================
Funds from Operations:
----------------------
Retail segment net operating income $ 65,665,946 60,415,470
Service operations segment income 5,449,347 2,254,404
Adjustments to calculate diluted FFO:
Interest expense (19,337,143) (15,691,149)
Interest income 1,977,301 843,000
General and administrative and other (5,694,506) (4,496,079)
Non-real estate depreciation (389,032) (268,316)
Minority interest of limited partners (89,786) (243,433)
Gain on sale of operating properties (68,658) -
Minority interest in depreciation
and amortization - (149,881)
Share of joint venture depreciation
and amortization 134,435 387,583
Distributions on preferred units (8,368,751) (6,312,499)
------------------ --------------------
Funds from Operations - diluted 39,279,153 36,739,100
------------------ --------------------
Reconciliation to net income for common
stockholders:
Real estate related depreciation
and amortization (15,506,884) (13,493,449)
Minority interest in depreciation
and amortization - 149,881
Share of joint venture depreciation
and amortization (134,435) (387,583)
Gain on sale of operating properties 68,658 -
Minority interest of exchangeable
operating partnership units (560,668) (688,007)
------------------ --------------------
Net income $ 23,145,824 22,319,942
================== ====================
March 31, December 31,
Assets (in thousands): 2001 2000
---------------------- ---- ----
Retail segment $ 2,475,125 2,454,476
Service operations segment 420,742 447,929
Cash and other assets 85,671 132,739
------------------ --------------------
Total assets $ 2,981,538 3,035,144
================== ====================
REGENCY CENTERS CORPORATION
Notes to Consolidated Financial Statements
March 31, 2001
3. Investments in Real Estate Partnerships
The Company uses the equity method to account for all investments in
which it owns less than 50% and does not have a controlling financial
interest. The Company's combined investment in these partnerships was
$78.0 million and $85.2 million at March 31, 2001 and December 31, 2000,
respectively. Net income is allocated to the Company in accordance with
the respective partnership agreements.
On December 31, 2000, the Company contributed $4.5 million to Columbia
Regency Retail Partners, LLC ("Columbia") representing a 10% equity
interest. Subsequent to March 31 2001, the Company contributed $24.3
million and increased its ownership to a 20% equity interest.
4. Notes Payable and Unsecured Line of Credit
The Company's outstanding debt at March 31, 2001 and December 31, 2000
consists of the following (in thousands):
2001 2000
---- ----
Notes Payable:
Fixed rate mortgage loans $ 268,722 270,491
Variable rate mortgage loans 33,354 40,640
Fixed rate unsecured loans 749,530 529,941
-------------- ---------------
Total notes payable 1,051,606 841,072
Unsecured line of credit 221,000 466,000
-------------- ---------------
Total $ 1,272,606 1,307,072
============== ===============
Subsequent to March 31, 2001, the Company modified the terms of its line
of credit (the "Line") by reducing the commitment to $600 million,
reducing the interest rate spread from 1.0% to .85% and extending the
maturity date to April 2004. Interest rates paid on the Line during the
three months ended March 31, 2001 and 2000 were based on LIBOR plus 1.0%
or 6.1875% and 7.125%, respectively. The spread that the Company pays on
the Line is dependent upon maintaining specific investment grade ratings.
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 January 22, 2001 the Company, through RCLP, completed a $220 million
unsecured debt offering with an interest rate of 7.95%. The notes were
priced at 99.867%, are due on January 15, 2011 and are guaranteed by the
Company. The net proceeds of the offering were used to reduce the balance
of the Line.
REGENCY CENTERS CORPORATION
Notes to Consolidated Financial Statements
March 31, 2001
4. Notes Payable and Unsecured Line of Credit (continued)
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 135 basis points. Fixed interest rates on mortgage
loans range from 7.04% to 9.5%.
As of March 31, 2001, scheduled principal repayments on notes payable and
the Line were as follows (in thousands):
Scheduled
Principal Term Loan Total
Scheduled Payments by Year Payments Maturities Payments
-------------------------- -------------- --------------- ---------------
2001 $ 4,241 60,322 64,563
2002 4,946 44,092 49,038
2003 4,691 22,866 27,557
2004 (includes the Line) 5,066 420,905 425,971
2005 3,883 148,040 151,923
Beyond 5 Years 182,483 361,752 544,235
Unamortized debt premiums - 9,319 9,319
-------------- --------------- ---------------
Total $ 205,310 1,067,296 1,272,606
============== =============== ===============
Unconsolidated partnerships and joint ventures had mortgage loans payable
of $14.2 million at March 31, 2001, and the Company's proportionate share
of these loans was $5.8 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. Fixed rate loans
assumed in connection with real estate 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.
REGENCY CENTERS CORPORATION
Notes to Consolidated Financial Statements
March 31, 2001
5. Stockholders' Equity and Minority Interest
At March 31, 2001, the face value of total preferred units issued was
$384 million with an average fixed distribution rate of 8.72% vs. $290
million with an average fixed distribution rate of 8.71% at March 31,
2000.
Terms and conditions of the Preferred Units are summarized as follows:
Units Issue Issuance Distribution Callable
Series Issued Price Amount Rate By Company
- -------------- ------------- --------------- ----------------- ---------------- -----------------
Series A 1,600,000 $ 50.00 $ 80,000,000 8.125% 06/25/03
Series B 850,000 100.00 85,000,000 8.750% 09/03/04
Series C 750,000 100.00 75,000,000 9.000% 09/03/04
Series D 500,000 100.00 50,000,000 9.125% 09/29/04
Series E 700,000 100.00 70,000,000 8.750% 05/25/05
Series F 240,000 100.00 24,000,000 8.750% 09/08/05
------------- -----------------
4,640,000 $ 384,000,000
============= =================
REGENCY CENTERS CORPORATION
Notes to Consolidated Financial Statements
March 31, 2001
6. Earnings Per Share
The following summarizes the calculation of basic and diluted earnings
per share for the three month periods ended March 31, 2001 and 2000 (in
thousands except per share data):
2001 2000
------------- --------------
Basic Earnings Per Share (EPS) Calculation:
-------------------------------------------
Weighted average common shares
outstanding 57,205 56,510
============= ==============
Net income for Basic EPS $ 22,412 21,620
============= ==============
Basic EPS $ 0.39 0.38
============= ==============
Diluted Earnings Per Share (EPS) Calculation
--------------------------------------------
Weighted average shares outstanding
for
Basic EPS 57,205 56,510
Exchangeable operating partnership units 1,642 2,076
Incremental shares to be issued under
common stock options using the Treasury
method 165 -
------------- --------------
Total diluted shares 59,012 58,586
============= ==============
Net income for Basic EPS $ 22,412 21,620
Add: minority interest of exchangeable
operating partnership units 561 688
------------- --------------
Net income for Diluted EPS $ 22,973 22,308
============= ==============
Diluted EPS $ 0.39 0.38
============= ==============
The Series 2 preferred stock is not included in the above calculation
because the effect is anti-dilutive.
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
Centers Corporation ("Regency" or "Company") appearing elsewhere within.
Organization
- ------------
Regency is a qualified real estate investment trust ("REIT") which
began operations in 1993. Regency had previously operated under the name Regency
Realty Corporation, but changed its name to Regency Centers Corporation in
February 2001 to more appropriately acknowledge its brand and position in the
shopping center industry. Regency invests in retail shopping centers through its
partnership interest in Regency Centers, L.P., ("RCLP") an operating partnership
in which Regency currently owns approximately 98% of the outstanding common
partnership units ("Units"). The acquisition, development, operations and
financing activity of Regency including the issuance of Units or preferred units
is executed by RCLP.
Shopping Center Business
- ------------------------
Regency is a national owner, operator and developer of primarily
grocery-anchored neighborhood retail shopping centers. Regency's retail
properties summarized by state and in order by largest holdings including their
gross leasable areas (GLA) are as follows:
March 31, 2001 December 31, 2000
Location # Properties GLA % Leased * # Properties GLA % Leased *
------------ --------- ---------- ------------ ----------- ----------
Florida 54 6,552,276 93.0% 55 6,558,734 92.7%
California 38 4,710,142 98.6% 39 4,922,329 98.4%
Texas 33 4,118,666 93.8% 33 4,125,058 94.2%
Georgia 26 2,561,411 94.0% 26 2,553,041 95.2%
Ohio 14 1,869,825 96.8% 13 1,760,955 96.7%
North Carolina 13 1,302,751 97.9% 13 1,302,751 97.4%
Washington 9 1,095,640 95.5% 10 1,180,020 95.8%
Colorado 10 897,610 97.7% 10 897,788 97.9%
Oregon 9 779,203 93.3% 9 776,853 91.7%
Arizona 8 519,945 97.9% 8 522,014 97.9%
Alabama 5 516,062 96.7% 5 516,062 97.9%
Tennessee 10 493,860 99.7% 10 493,860 99.7%
Virginia 6 419,440 96.3% 6 419,440 95.3%
Missouri 2 370,095 95.8% 2 369,045 95.8%
Kentucky 5 336,547 100.0% 5 325,347 100.0%
Illinois 2 300,162 91.6% 1 178,601 86.4%
Michigan 3 274,987 94.3% 3 274,987 94.1%
Delaware 2 239,077 98.6% 2 239,077 98.6%
Mississippi 2 185,061 98.2% 2 185,061 97.7%
South Carolina 4 183,872 98.5% 4 183,872 97.4%
New Jersey 3 112,514 100.0% 3 112,514 100.0%
Wyoming 1 87,771 - 1 87,777 -
Pennsylvania 1 6,000 100.0% 1 6,000 100.0%
-------------- --------------- ---------------- -------------- --------------- -------------
Total 260 27,932,917 95.4% 261 27,991,186 95.4%
============== =============== ================ ============== =============== =============
* Excludes pre-stabilized properties under development
The table on the previous page includes properties owned by joint
ventures in which Regency has an ownership position. Historically, Regency
excluded single tenant properties from the table, but beginning with March 31,
2001 began including these properties. Amounts reported for December 31, 2000
have been restated to include these properties for comparative purposes.
Regency 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. Regency's current investment
markets have continued to offer stable economies, and accordingly, Regency
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 Regency's shopping centers at March 31, 2001:
Grocery Number of % of % of Annualized Average Remaining
Anchor Stores Total GLA Base Rent Lease Term
------ ------ --------- --------- ----------
Kroger 58 11.9% 10.3% 16 yrs
Publix 44 7.2% 5.1% 12 yrs
Safeway 42 5.5% 4.6% 12 yrs
Albertsons 21 2.5% 2.2% 13 yrs
Number of stores includes tenant owned stores.
All reported amounts above include properties owned through joint
ventures.
Acquisition and Development of Shopping Centers
- -----------------------------------------------
Regency has implemented a growth strategy dedicated to developing
high-quality shopping centers. This development process can require 12 to 36
months from initial land or redevelopment acquisition through construction and
lease-up 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 March 31, 2001, Regency had 51 projects under
construction or undergoing major renovations, which when complete will represent
an investment of $724 million. Total cost necessary to complete these
developments is estimated to be $322 million and will be expended through 2002.
These developments are approximately 45% complete and over 62% pre-leased.
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 $52.2 million and $39.1 million for the three months
ended March 31, 2001 and 2000, respectively. During the first three months of
2001 and 2000, respectively, Regency incurred capital expenditures of $2.8
million and $3.1 million, paid scheduled principal payments of $1.5 million and
$1.7 million, and paid dividends and distributions of $38.3 million and $35.1
million to its share and unit holders.
Management expects to meet long-term liquidity requirements for
maturing debt, 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 $18.7 million and $45.8 million during
the first three months
of 2001 and 2000, respectively, primarily for the purposes discussed under
Acquisition and Development of Shopping Centers. Net cash used in financing
activities was $81.8 million and $19.6 million for the three months ended
March 31, 2001 and 2000, respectively, primarily related to proceeds from the
debt offering completed during 2001 further discussed below.
Regency's outstanding debt at March 31, 2001 and December 31, 2000
consists of the following (in thousands):
2001 2000
---- ----
Notes Payable:
Fixed rate mortgage loans $ 268,722 270,491
Variable rate mortgage loans 33,354 40,640
Fixed rate unsecured loans 749,530 529,941
-----------------------------
Total notes payable 1,051,606 841,072
Unsecured line of credit 221,000 466,000
-----------------------------
Total $ 1,272,606 1,307,072
=============================
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 135
basis points. Fixed interest rates on mortgage loans range from 7.04% to 9.5%.
Subsequent to March 31, 2001, the Company modified the terms of
its line of credit (the "Line") by reducing the commitment to $600 million,
reducing the interest rate spread from 1.0% to .85% and extending the maturity
date to April 2004. Interest rates paid on the Line during the three months
ended March 31, 2001 and 2000 were based on LIBOR plus 1.0% or 6.1875% and
7.125%, respectively. The spread that the Company pays on the Line is dependent
upon maintaining specific investment grade ratings. 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 January 22, 2001 the Company, through RCLP, completed a $220
million unsecured debt offering with an interest rate of 7.95%. The notes were
priced at 99.867%, are due on January 15, 2011 and are guaranteed by the
Company. The net proceeds of the offering were used to reduce the balance of the
Line.
At March 31, 2001, the face value of total preferred units issued was
$384 million with an average fixed distribution rate of 8.72% vs. $290 million
with an average fixed distribution rate of 8.71% at March 31, 2000.
As of March 31, 2001, scheduled principal repayments on notes payable
and the Line were as follows (in thousands):
Scheduled
Principal Term Loan Total
Scheduled Payments by Year Payments Maturities Payments
-------------------------- -------------- --------------- ---------------
2001 $ 4,241 60,322 64,563
2002 4,946 44,092 49,038
2003 4,691 22,866 27,557
2004 (includes the Line) 5,066 420,905 425,971
2005 3,883 148,040 151,923
Beyond 5 Years 182,483 361,752 544,235
Unamortized debt premiums - 9,319 9,319
-------------- --------------- ---------------
Total $ 205,310 1,067,296 1,272,606
============== =============== ===============
Unconsolidated partnerships and joint ventures had mortgage loans
payable of $14.2 million at March 31, 2001, and Regency's proportionate share of
these loans was $5.8 million.
Regency believes it qualifies and intends to qualify as a REIT under
the Internal Revenue Code. As a REIT, Regency 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 Regency 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.
Regency's real estate portfolio has grown substantially as a result of
the development activity discussed above. Regency 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. Regency expects to repay the
Line from time to time from additional public and private equity or debt
offerings and from proceeds from the sale of real estate. Because acquisition
and development activities are discretionary in nature, they are not expected to
burden Regency's capital resources currently available for liquidity
requirements. Regency expects that cash provided by operating activities, unused
amounts available under the Line, and cash reserves are adequate to meet
liquidity requirements.
Results from Operations
Comparison of the three months ended March 31, 2001 to 2000
Revenues increased $11.8 million or 15% to $93.0 million in 2001. The
increase was due primarily to revenues from newly completed developments that
only partially operated during 2000, and from growth in rental rates at the
operating properties. Minimum rent increased $4.7 million or 8%, and recoveries
from tenants increased $2.6 million or 16%. At March 31, 2001, Regency was
operating or developing 260 retail properties. Regency identifies its properties
as either development properties or stabilized properties. Development
properties are defined as properties that are in the construction and initial
lease-up process that are not yet 93% leased and occupied. Stabilized properties
are all properties not identified as development. At March 31, 2001, Regency had
209 stabilized properties that were 95.4% leased. At December 31, 2000,
stabilized properties were 95.4% leased. In 2001, rental rates grew by 10.4%
from renewal leases and new leases replacing previously occupied spaces in the
stabilized properties.
Service operations revenue includes fees earned in Regency's service
operations segment which includes property management and leasing commissions
earned from third parties, and development profits earned from the sale of
shopping centers, build to suit
properties, and land to third parties. Service operations revenue increased by
$3.2 million to $5.4 million in 2001, or 142%. The increase was primarily due to
a $3.0 million increase in development profits.
Operating expenses increased $6.7 million or 18% to $43.5 million in
2001. Combined operating and maintenance, and real estate taxes increased $3.4
million or 18% during 2001 to $21.9 million. The increase was primarily due to
expenses incurred by newly completed developments that only partially operated
during 2000, and general increases in operating expenses on the stabilized
properties. General and administrative expenses were $4.3 million during 2001
vs. $4.5 million in 2000 or 4% lower. Depreciation and amortization increased
$2.1 million during 2001 or 16% primarily due to developments that only
partially operated during 2000.
Interest expense increased to $19.3 million in 2001 from $15.7 million
in 2000 or 23%. The increase was primarily due to higher debt balances and a
higher percentage of outstanding debt with fixed interest rates, which are
generally higher than variable interest rates. Regency had $1.3 billion and $1.0
billion of outstanding debt at March 31, 2001 and 2000, respectively. On March
31, 2001, 80% of outstanding debt had fixed interest rates vs. 72% on March 31,
2000.
Preferred unit distributions increased $2.1 million to $8.4 million
during 2001 as a result of the preferred units issued in 2001 and the second and
third quarters of 2000. Average fixed distribution rates of the preferred units
were 8.72% at March 31, 2001 vs. 8.71% at March 31, 2000.
Net income for common stockholders was $22.4 million in 2001 vs. $21.6
million in 2000, or a 4% increase. Diluted earnings per share was $.39 in 2001
vs. $.38 in 2000, or 2.6% higher as a result of the increase in net income.
New Accounting Standards and Accounting Changes
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities, an Amendment to FASB Statement No. 133" ("FAS 138"),
which was effective for the Company on January 1, 2001. FAS 138 and FAS 133
establish accounting and reporting standards for derivative instruments and
hedging activities. FAS 138 and FAS 133 require entities to recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. FAS 138 and FAS 133 had no impact to the
financial statements as Regency has no derivative instruments.
Environmental Matters
- ---------------------
Regency, like others in the commercial real estate industry, is subject
to numerous environmental laws and regulations. The operation of dry cleaning
plants at Regency's shopping centers is the principal environmental concern.
Regency believes that the tenants who operate these plants do so in accordance
with current laws and regulations and has established procedures to monitor
their operations. Additionally, Regency uses all legal means to cause tenants to
remove dry cleaning plants from its shopping centers. Where available, Regency
has applied and been accepted into state sponsored environmental programs.
Regency has a blanket environmental insurance policy that covers it against
third party liabilities and remediation costs on shopping centers that currently
have no known environmental contamination. Regency has also placed environmental
insurance on specific properties with known contamination in order to mitigate
its environmental risk. Management believes that the ultimate disposition of
currently known environmental matters will not have a material effect on the
financial position, liquidity, or operations of Regency.
Inflation
- ---------
Inflation has remained relatively low during 2001 and 2000 and has had
a minimal impact on the operating performance of the shopping centers; however,
substantially all of Regency's long-term leases contain provisions designed to
mitigate the adverse impact of inflation. Such provisions include clauses
enabling Regency 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 Regency's leases are for terms of less
than ten years, which permits Regency to seek increased rents upon re-rental at
market rates. Most of Regency's leases require the tenants to pay their share of
operating expenses, including common area maintenance, real estate taxes,
insurance and utilities, thereby reducing Regency's exposure to increases in
costs and operating expenses resulting from inflation.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
Market Risk
- -----------
Regency is exposed to interest rate changes primarily as a result of
its line of credit and long-term debt used to maintain liquidity and fund
capital expenditures and expansion of Regency's real estate investment portfolio
and operations. Regency'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 Regency 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. Regency has no plans to enter into derivative
or interest rate transactions for speculative purposes, and at March 31, 2001,
Regency did not have any borrowings hedged with derivative financial
instruments.
Regency'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.
Fair
2001 2002 2003 2004 2005 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----
Fixed rate debt 36,759 43,864 13,303 199,905 148,041 567,061 1,008,933 1,018,252
Average interest rate for all
debt 7.93% 7.89% 7.87% 8.00% 8.09% 8.12% - -
Variable rate LIBOR debt 23,563 228 9,563 221,000 - - 254,354 254,354
Average interest rate for all
debt 6.52% 6.52% 6.46% - - - - -
As the table incorporates only those exposures that exist as of March
31, 2001, it does not consider those exposures or positions, which could arise
after that date. Regency's ultimate realized gain or loss with respect to
interest rate fluctuations will depend on the exposures that arise during the
period, Regency's hedging strategies at that time, and interest rates.
Forward Looking Statements
- --------------------------
This report on Form 10-Q contains certain forward-looking statements
under the federal securities law. These statements are based on current
expectations, estimates, and projections about the industry and markets in which
Regency Centers Corporation operates, management's beliefs, and assumptions.
Forward-looking statements are not guarantees of future performance and involve
certain risks and uncertainties, which are difficult to predict. Actual
operating results may be affected by changes in national and local economic
conditions, competitive market conditions, obtaining governmental approvals and
meeting development schedules, and other factors cited in our reports filed with
the SEC and therefore, may differ materially from what is expressed or
forecasted in this report.
Part II
Item 2 Changes in Securities and Use of Proceeds
None
Item 6 Exhibits and Reports on Form 8-K:
(a) Exhibits
10. Material Contracts
None
15. Letter Regarding Unaudited Interim Financial Information
(b) Reports on Form 8-K
Form 8-K filed on February 12, 2001 for Regency Realty Corporation and
Form 8-KA filed on February 12, 2001 for Regency Centers Corporation
on Item 5. Other Events reflecting the name change to Regency Centers
Corporation which was effective on February 12, 2001.
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 14, 2001 REGENCY CENTERS CORPORATION
By: /s/ J. Christian Leavitt
-------------------------
Senior Vice President,
and Chief Accounting Officer
Exhibit 15
The Board of Directors
Regency Centers Corporation
Re: Registration Statement Nos. 333-930, 333-52089,
333-44724, 333-24971, 333-55062 and 333-58966
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated May 11, 2001 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
/s/ KPMG LLP
KPMG LLP
Jacksonville, Florida
May 11, 2001