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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1998
( ) 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 (I.R.S. Employer
incorporation or organization) identification No.)
121 West Forsyth Street, Suite 200 (904) 356-7000
Jacksonville, Florida 32202 (Registrant's telephone No.)
(Address of principal
executive offices) (zip code)
Securities registered pursuant to Section 12(b)
of the Act:
Common Stock, $.01 par value
(Title of Class)
New York Stock Exchange
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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 and (2) has been subject to such filing requirements for
the past 90 days. YES (X) NO ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
The aggregate market value of the voting and non-voting common stock held by
non-affiliates of the Registrant was approximately $463,468,086 based on the
closing price on the New York Stock Exchange for such stock on March 10, 1999.
The approximate number of shares of Registrant's voting common stock outstanding
was 57,831,620 as of March 10, 1999.
Documents Incorporated by Reference
Portions of the Registrant's Proxy Statement in connection with its 1999 Annual
Meeting of Shareholders are incorporated by reference in Part III.
TABLE OF CONTENTS
Form 10-K
Item No. Report Page
- -------- -----------
PART I
1. Business...................................................................1
2. Properties.................................................................5
3. Legal Proceedings.........................................................12
4. Submission of Matters to a Vote of Security Holders.......................12
PART II
5. Market for the Registrant's Common Equity and Related Shareholder
Matters...................................................................12
6. Selected Consolidated Financial Data......................................14
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.....................................................15
7a. Quantitative and Qualitative Disclosures About Market Risk................22
8. Consolidated Financial Statements and Supplementary Data..................22
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure......................................................22
PART III
10. Directors and Executive Officers of the Registrant........................23
11. Executive Compensation....................................................23
12. Security Ownership of Certain Beneficial Owners and Management............24
13. Certain Relationships and Related Transactions............................24
PART IV
14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.........24
PART I
Item 1. Business
Regency Realty Corporation ("Regency" or "Company") acquires, owns, develops and
manages neighborhood shopping centers in targeted infill markets. As of December
31, 1998, Regency owned, directly or indirectly, 129 properties in the eastern
half of the United States, containing approximately 14.7 million square feet of
gross leasable area ("GLA").
As of December 31, 1998, Regency had an investment in real estate of
approximately $1.3 billion and approximately 58% of Regency's GLA was located in
Georgia and Florida. Regency's shopping centers (excluding centers under
development) were approximately 93% leased as of December 31, 1998.
On February 26, 1999, Regency's shareholders approved the merger of Pacific
Retail Trust ("Pacific") into the Company in a stock for stock transaction (0.48
Regency share for 1 Pacific share). At December 31, 1998, Pacific owned 71
retail shopping centers that are operating or under construction containing 8.4
million SF of GLA. The total cost to acquire Pacific is expected to be $1.157
billion based on the value of Regency shares issued, the assumption of $379
million of outstanding debt and other liabilities, and estimated transaction
costs. Pacific's shopping centers are located primarily in California and Texas.
The Company, a Florida corporation organized in 1993, commenced operations as a
real estate investment trust (REIT) in 1993 with the completion of its initial
public offering, and was the successor to the real estate business of The
Regency Group, Inc. which had operated since 1963.
Regency formed Regency Centers, L.P. (RCLP), a limited partnership and a public
registrant, in 1996, and consolidated substantially all of its retail shopping
centers into RCLP during 1998. RCLP is now the primary entity through which
Regency owns its properties and through which Regency intends to expand its
ownership and operation of retail shopping centers. At December 31, 1998,
Regency owned approximately 96% of the outstanding operating partnership units
of RCLP. Regency, the general partner of RCLP, fully controls the operating and
investing decisions and activities of RCLP, and accordingly, the following
discussion of Regency's business also includes the business of RCLP.
Operating and Investment Philosophy
Regency's key operating and investment objective is to create long-term
shareholder value by:
o growing its high quality real estate portfolio of grocery-anchored
neighborhood shopping centers in attractive infill markets,
o maximizing the value of the portfolio through its "Retail
Operating System," developed in conjunction with Security Capital
Holdings, S.A. ("SC-USREALTY"), which incorporates research based
investment strategies, value-added leasing and management systems,
and customer-driven development programs, and
o using conservative financial management and Regency's substantial
capital base to access the most cost effective capital to fund
Regency's growth.
Management believes that the key to achieving its objective is its single focus
on, and growing critical mass of, quality grocery-anchored neighborhood shopping
centers. In the opinion of management, Regency's premier platform of shopping
centers in targeted markets, its proprietary research capabilities, its value
enhancing Retail Operating System, its cohesive and experienced management team
and its access to competitively priced capital enable it to maintain a
competitive advantage over other operators.
Regency believes that ownership of the approximately 30,000 shopping centers
throughout the United States is highly fragmented, with less than 10% owned by
REITs, and that many centers are held by unsophisticated and undercapitalized
owners. Regency has identified approximately 1,000 centers in its target markets
as potential acquisition opportunities, of which less than 10% are owned by
REITs. As a result, Regency believes that an opportunity exists for it to be a
consolidating force in the industry. In addition, Regency believes that through
proprietary demographic research and targeting, its portfolio and tenant mix can
be customized for and marketed to national and regional retailers, thereby
producing greater sales and a value-added shopping environment for both retailer
and shopper.
Regency's shopping center properties feature some of the most attractive
characteristics in the industry:
o an average age of 8 years,
o an average remaining grocery-anchor lease term of 14 years, and
o an average grocery-anchor size of 49,000 square feet (43% of the
square footage of the grocery-anchored centers on average).
Grocery-Anchored Infill Strategy
Regency focuses its investment strategy on grocery-anchored infill shopping
centers. Infill locations are situated in densely populated residential
communities where there are significant barriers to entry, such as zoning
restrictions, growth management laws or limited availability of sites for
development or expansions. Regency is focused on building a platform of
grocery-anchored neighborhood shopping centers because grocery stores provide
convenience shopping for daily necessities, generate foot traffic for adjacent
"side shop" tenants and should be better able to withstand adverse economic
conditions. By developing close relationships with the leading supermarket
chains, Regency believes it can attract the best "side shop" merchants and
enhance revenue potential.
Research Driven Market Selection
Regency has identified 21 markets in the eastern half of the United States as
target markets. These markets were selected because, in general, they offer
greater growth in population, household income and employment than the national
averages. In addition, Regency believes that it can achieve "critical mass" in
these markets (defined as owning or managing 4 to 5 shopping centers) and that
it can generate sustainable competitive advantages, through long-term leases to
the predominant grocery-anchor and other barriers to entry from competition.
Within these markets, Regency's research staff further defines and selects
submarkets and trade areas based on additional analysis of the above data.
Regency then identifies target properties and their owners (including
development opportunities) within these submarkets and trade areas based on
3-mile radius demographic data and ranks potential properties for purchase. The
properties currently owned by Regency are in submarkets with an average 3-mile
population of 69,000, average household income of $62,000 and projected 5-year
population growth of 12%.
Retail Operating System
Regency's Retail Operating System drives its value-added operating strategy.
Its Retail Operating System is characterized by:
o proactive leasing and management;
o value enhancing remerchandising initiatives;
o Regency's "preferred customer initiative"; and
o a customer-driven development and redevelopment program.
a) Proactive leasing and management
Regency's integrated approach to property management strengthens its leasing and
management efforts. Property managers are an integral component of the
acquisition and integration teams. Thorough, candid tenant interviews by
property managers during acquisition due diligence allow Regency to quickly
assess both problem areas as well as opportunities for revenue enhancement prior
to closing. Property managers are responsible not only for the general
operations of their centers, but also for coordinating leasing efforts, thereby
aligning their interests with Regency's. In addition, Regency's information
systems allow managers to spot future lease expirations and to proactively
market and remerchandise spaces several years in advance of such expirations.
b) Value enhancing remerchandising initiatives
Regency believes that certain shopping centers under serve their customers,
reducing foot traffic and negatively affecting the tenants located in the
shopping center. In response, Regency is initiating a remerchandising program
directed at obtaining the optimum mix of tenants offering goods, personal
services and entertainment and dining options in each of its shopping centers.
By re-tenanting shopping centers with tenants that more effectively service the
community, Regency expects to increase sales, and therefore the value of its
shopping centers.
c) Preferred customer initiative
Regency has established a preferred customer initiative with dedicated personnel
whose goal is to establish new or strengthen existing strategic relationships
with successful retailers at the national, regional and local levels. Regency
achieves this goal by establishing corporate relationships, negotiating standard
lease forms and working with the preferred customers to match expansion plans
with future availability in Regency's shopping centers. Regency monitors retail
trends and the operating performance of these preferred customers. Management
expects the benefits of the preferred customer initiative to improve the
merchandising and performance of the shopping centers, establish brand
recognition among leading operators, reduce turnover of tenants and reduce
vacancies. Regency currently has identified and is developing relationships with
45 preferred customers, including Radio Shack, GNC, Hallmark Cards, Mailboxes,
Etc. and Starbucks Coffee, and continues to target additional tenants with which
to establish preferred customer relationships.
d) Customer-driven development and redevelopment program
Regency conducts its development and redevelopment program in close cooperation
with its major customers, including Kroger, Publix and Eckerd. Regency uses its
development capabilities to service its customer's growth needs by building or
re-developing modern properties with state of the art supermarket formats that
generate higher returns for Regency under new long-term leases. In 1998, Regency
began development on 21 retail projects, including new developments,
redevelopments and build-to-suits and upon completion, Regency will have
invested $152 million in these projects. During 1997, Regency began development
on 16 retail projects, including new developments, redevelopments and
build-to-suits and upon completion, Regency will have invested $87 million in
these projects. Regency manages its development risk by obtaining signed anchor
leases prior to beginning construction.
Acquisition Track Record
Regency has grown its asset base significantly through acquisitions over the
last several years, acquiring properties totaling $384.3 million in 1998, $395.7
million in 1997 and $107.1 million in 1996. Through these acquisitions, Regency
has diversified geographically from its predominantly Florida-based portfolio
and established a presence in many of its target markets. Upon identifying an
acquisition target, Regency utilizes expertise from all of its functional areas,
including acquisitions, due diligence and property management, to determine the
appropriate purchase price and to develop a business plan for the center and
design an integration plan for the management of the center. Regency believes
that its established acquisition and integration procedures produce higher
returns on its portfolio, reduce risk and position Regency to capitalize on
consolidation in the shopping center industry.
Capital Strategy
Regency intends to maintain a conservative capital structure designed to enhance
access to capital on favorable terms, to allow growth through development and
acquisition and to promote future earnings growth, however, neither Regency
Realty Corporation's nor Regency Centers, L.P.'s organizational documents limit
the amount of debt that may be incurred. Limitations have been established
within the covenants of certain loan agreements related to the Partnership's
line of credit and medium term notes.
As of December 31, 1998, Regency had secured and unsecured debt of $309.2
million and $238.9 million, respectively. Substantially all of Regency's debt is
cross-defaulted, but not cross-collateralized. Pursuant to Regency's $300
million unsecured line of credit (increased to $635 million with the merger of
Pacific Retail Trust), Regency is required to comply, and is complying with
certain financial and other covenants customary with this type of unsecured
financing. These financial covenants include (1) maintenance of minimum net
worth, (2) ratio of total liabilities to gross asset value, (3) ratio of secured
indebtedness to gross asset value, (4) ratio of EBITDA to interest expense, (5)
ratio of EBITDA to debt service and reserve for replacements, and (6) ratio of
unencumbered net operating income to interest expense on unsecured indebtedness.
In addition, Regency may not enter into a negative pledge agreement with another
lender and may not incur other floating rate debt in excess of 25% of gross
asset value without interest rate protection. The line is used primarily to
finance the acquisition and development of real estate, but is also available
for general working capital purposes.
Since Regency's initial public offering in 1993, Regency has financed its growth
in part through a series of public and private offerings of Regency equity and
RCLP units totaling, as of December 31, 1998, approximately $677 million,
including the utilization by RCLP of its units as consideration for
acquisitions. RCLP units (with the exception of Series A preferred units) issued
and owned by limited partners are convertible into Regency common stock on a one
for one basis, and receive quarterly distributions equal to the dividends paid
on each Regency common share.
Risk Factors Relating to Ownership of Regency Common Stock
The Company is subject to certain business risks arising in connection with
owning real estate which include, among others:
o the bankruptcy or insolvency of, or a downturn in the business
of, any of its major tenants could reduce cash flow,
o the possibility that such tenants will not renew their leases as
they expire or renew at lower rental rates could reduce cash flow,
o vacated anchor space will affect the entire shopping center
because of the loss of the departed anchor tenant's customer
drawing power,
o poor market conditions could create an over supply of space or a
reduction in demand for real estate in markets where the Company
owns shopping centers,
o the Company's rapid growth could place strains on its resources,
o risks relating to leverage, including uncertainty that the Company
will be able to refinance its indebtedness, and the risk of higher
interest rates,
o unsuccessful development activities could reduce cash flow,
o the Company's inability to satisfy its cash requirements for
operations and the possibility that the Company may be required to
borrow funds to meet distribution requirements in order to
maintain its qualification as a REIT,
o potential liability for unknown or future environmental matters
and costs of compliance with the Americans with Disabilities Act,
o the risk of uninsured losses, and
o unfavorable economic conditions could also result in the inability
of tenants in certain retail sectors to meet their lease
obligations and otherwise could adversely affect the Company's
ability to attract and retain desirable tenants.
Compliance with Governmental Regulations
Under various federal, state and local laws, ordinances and regulations, an
owner or manager of real estate may be liable for the costs of removal or
remediation of certain hazardous or toxic substances on such property. These
laws often impose liability without regard to whether the owner knew of, or was
responsible for, the presence of the hazardous or toxic substances. The cost of
required remediation and the owner's liability for remediation could exceed the
value of the property and/or the aggregate assets of the owner. The presence of
such substances, or the failure to properly remediate such substances, may
adversely affect the owner's ability to sell or rent the property or borrow
using the property as collateral. Regency has approximately 31 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.
Competition
The Company believes the ownership of shopping centers is highly fragmented,
with less than 10% owned by REITs. Regency faces competition from other REITs in
the acquisition, ownership and leasing of shopping centers as well as from
numerous small owners. Regency competes for the development of shopping centers
with other REITs engaged in development activities as well as with local,
regional and national real estate developers. Regency develops properties by
applying its proprietary research methods to identify development and leasing
opportunities and by pre-leasing an average of 85% of a center before beginning
construction. Regency competes for the acquisition of properties through
proprietary research that identifies opportunities in markets with high barriers
to entry and higher-than-average population growth and household income. Regency
seeks to maximize rents per square foot by establishing relationships with
supermarket chains that are first or second in their markets and leasing
non-anchor space in multiple centers to national or regional tenants. There can
be no assurance, however, that other real estate owners or developers will not
utilize similar research methods and target the same markets and anchor tenants
that Regency targets or that such entities will successfully control these
markets and tenants to the exclusion of Regency.
Changes in Policies
The Company's Board of Directors determines policies with respect to certain
activities, including its debt capitalization, growth, distributions, REIT
status, and investment and operating strategies. The Board of Directors has no
present intention to amend or revise these policies. However, the Board of
Directors may do so at any time without a vote of the Company's stockholders.
Employees
The Company's headquarters are located in Jacksonville, Florida. The Company
presently maintains offices in which it conducts management and leasing
activities located in Florida, Georgia, North Carolina, Ohio, and Missouri. As
of December 31, 1998, the Company had approximately 240 employees and believes
that relations with its employees are good.
Item 2. Properties
The Company's properties summarized by state including their gross
leasable areas (GLA) follows:
Location December 31, 1998 December 31, 1997
-------- ----------------- -----------------
# Properties GLA % Leased # Properties GLA % Leased
------------ --- -------- ------------ --- --------
Florida 46 5,728,347 91.4% 45 5,267,894 91.5%
Georgia 27 2,737,590 93.1% 25 2,539,507 92.4%
Ohio 13 1,786,521 93.4% 2 629,920 89.1%
North Carolina 12 1,239,783 98.3% 6 554,332 99.0%
Alabama 5 516,060 99.0% 5 516,080 99.9%
Texas 5 479,900 84.7% - - -
Colorado 5 447,569 89.4% - - -
Tennessee 4 295,179 96.8% 3 208,386 98.5%
Virginia 2 197,324 97.7% - - -
Mississippi 2 185,061 97.6% 2 185,061 96.9%
Michigan 2 177,929 81.5% - - -
South Carolina 2 162,056 100.0% 1 79,743 84.3%
Delaware 1 232,752 94.8% - - -
Kentucky 1 205,060 95.6% - - -
Illinois 1 178,600 86.9% - - -
Missouri 1 82,498 99.8% - - -
------------- ---------- ------- ------------ --------- ------
Total 129 14,652,229 92.9% 89 9,980,923 92.8%
============= ========== ======= ============ ========= ======
The following table summarizes the largest tenants occupying the Company's
shopping centers based upon a percentage of total annualized base rent exceeding
.5% at December 31, 1998:
Summary of Principal Tenants > .5% of Annualized Base Rent
(including Properties Under Development)
% to Company % of Annualized # of
Tenant SF Owned GLA Rent Base Rent Stores
------ -- ------------ ---- --------------- ------
Kroger 2,180,363 14.9% $18,496,049 13.8% 36
Publix 1,439,762 9.8% 9,254,154 6.9% 33
Winn Dixie 748,329 5.1% 5,131,795 3.8% 16
Blockbuster 214,818 1.5% 3,163,928 2.4% 35
K-Mart 507,645 3.5% 2,615,359 2.0% 6
Harris Teeter 187,363 1.3% 2,261,650 1.7% 4
Walgreens 206,795 1.4% 2,070,754 1.5% 15
Wal-Mart 486,168 3.3% 1,993,728 1.5% 6
Eckerd 218,305 1.5% 1,670,155 1.2% 22
A & P 116,666 0.8% 866,593 0.6% 3
CVS Drugs 103,206 0.7% 818,721 0.6% 11
Albertsons 55,377 0.4% 630,772 0.5% 1
Delchamps 82,845 0.6% 613,122 0.5% 2
The Company's leases have lease terms generally ranging from three to five years
for tenant space under 5,000 square feet. Leases greater than 10,000 square feet
generally have lease terms in excess of five years, mostly comprised of anchor
tenants. Many of the anchor leases contain provisions allowing the tenant the
option of extending the term of the lease at expiration. The Company's leases
provide for the monthly payment in advance of fixed minimum rentals, additional
rents calculated as a percentage of the tenant's sales, the tenant's pro rata
share of real estate taxes, insurance, and common area maintenance expenses, and
reimbursement for utility costs if not directly metered. The following table
sets forth a schedule of lease expirations for the next ten years, assuming that
no tenants exercise renewal options:
Future
Percent of Minimum Percent of
Lease Total Rent Total
Expiration Expiring Company Expiring Minimum
Year GLA GLA Leases Rent (2)
---- --- --- ------ --------
(1) 88,448 0.7% $941,247 0.8%
1999 933,156 7.5% $10,973,054 9.0%
2000 892,964 7.2% $10,484,173 8.6%
2001 1,163,072 9.3% $13,710,368 11.3%
2002 1,212,519 9.7% $13,155,318 10.8%
2003 992,177 8.0% $10,360,431 8.5%
2004 492,469 4.0% $4,018,968 3.3%
2005 254,877 2.0% $2,644,771 2.2%
2006 598,066 4.8% $4,993,560 4.1%
2007 435,154 3.5% $3,853,728 3.2%
2008 759,825 5.9% $5,311,987 4.3%
--------------------------------------------------------
10 Yr Total 7,822,727 60.7% 80,447,605 65.5%
--------------------------------------------------------
(1) leased currently under month to month rent or in process of renewal
(2) total minimum rent includes current minimum rent and future contractual
rent steps for all properties, but excludes additional rent such as
percentage rent, common area maintenance, real estate taxes and insurance
reimbursements.
See the property table below and also see Item 7, Management's Discussion and
Analysis for further information about the Company's properties.
Gross
Year Leasable
Year Con- Area Percent Grocery
Property Name Acquired structed (1) (GLA) Leased (2) Anchor
- -------------------------------------------------------------------------------------------------------------
FLORIDA
Jacksonville /
North Florida
Anastasia 1993 1988 102,342 95.1% Publix
Bolton Plaza 1994 1988 172,938 100.0% --
Carriage Gate 1994 1978 76,833 100.0% --
Courtyard (3) 1993 1987 67,794 45.8% Albertsons(4)
Ensley Square (5) 1997 1977 62,361 100.0% Delchamps
Fleming Island 1998 1994 80,205 98.9% Publix
Highlands Square (6) 1998 1999 226,682 87.1% Publix/Winn-Dixie
Millhopper (3) 1993 1974 84,064 97.0% Publix
Newberry Square 1994 1986 180,524 98.0% Publix
Old St. Augustine Plaza 1996 1990 170,220 98.2% Publix
Palm Harbour 1996 1991 171,891 94.6% Publix
Pine Tree Plaza (6) 1997 1999 60,752 94.1% Publix
Regency Court 1997 1992 218,665 78.3% --
South Monroe 1996 1998 80,187 97.0% Winn-Dixie
Tampa / Orlando
Beneva 1998 1987 141,532 97.1% Publix
Bloomingdale Square 1998 1987 267,935 99.0% Publix
Mainstreet Square 1997 1988 107,159 90.5% Winn-Dixie
Mariner's Village 1997 1986 117,665 94.4% Winn-Dixie
Market Place - St. Petersburg 1995 1983 90,296 100.0% Publix
Peachland Promenade 1995 1991 82,082 96.5% Publix
Regency Square 1993 1986 341,446 87.3% --
at Brandon (3)
Seven Springs 1994 1986 162,580 93.1% Winn-Dixie
Terrace Walk (3) 1993 1990 50,926 40.4% --
Town Square 1997 1986 42,969 40.2% --
University Collections 1996 1984 106,627 96.8% Kash N Karry(4)
Village Center-Tampa 1995 1993 181,110 95.5% Publix
West Palm Beach /
Treasure Coast
Boynton Lakes Plaza 1997 1993 130,724 91.0% Winn-Dixie
Chasewood Plaza (3) 1993 1986 141,034 87.5% Publix
Chasewood Storage (3) 1993 1986 42,810 99.9% --
East Port Plaza 1997 1991 235,842 94.9% Publix
Martin Downs Village Center(3) 1993 1985 121,956 90.9% --
Martin Downs 1993 1998 49,773 94.0% --
Village Shop (3)(6)
Ocean Breeze (3) 1993 1985 111,551 83.9% Publix
Ocean East (5) 1996 1997 112,894 60.5% Stuart Foods
Tequesta Shoppes 1996 1986 109,766 92.9% Publix
Town Center at Martin Downs 1996 1996 64,546 93.5% Publix
Wellington Market Place 1995 1990 178,155 94.1% Winn-Dixie
Wellington Town Square 1996 1982 105,150 98.2% Publix
Miami / Ft. Lauderdale
Aventura (3) 1994 1974 102,876 96.4% Publix
Berkshire Commons 1994 1992 106,534 99.8% Publix
Garden Square 1997 1991 90,258 97.1% Publix
North Miami (3) 1993 1988 42,500 100.0% Publix
Palm Trails Plaza 1997 1998 76,067 95.9% Winn-Dixie
Shoppes @ 104 1998 1990 108,189 95.4% Winn Dixie
Tamiami Trail 1997 1987 110,867 100.0% Publix
University Market Place 1993 1990 129,121 73.3% Albertsons(4)
Welleby 1996 1982 109,949 93.5% Publix
------------------------------
Subtotal/Weighted
Average(Florida) 5,728,347 91.4%
------------------------------
GEORGIA
Atlanta
Ashford Place 1997 1993 53,345 100.0% --
Braelin Village (5) 1997 1991 226,522 98.8% Kroger
Briarcliff LaVista 1997 1962 39,201 100.0% --
Briarcliff Village (6) 1997 1990 192,660 89.0% Publix
Buckhead Court 1997 1984 55,227 93.9% --
Cambridge Square 1996 1979 68,725 77.8% --
Cromwell Square 1997 1990 81,826 81.7% --
Cumming 400 1997 1994 126,899 94.8% Publix
Delk Spectrum (3)(5) 1998 1991 100,880 100.0% A&P
Dunwoody Hall 1997 1986 82,525 97.6% A&P
Dunwoody Village (5) 1997 1975 114,657 94.1% Ingles
Loehmann's Plaza 1997 1986 137,635 90.8% --
Lovejoy Station 1997 1995 77,336 98.3% Publix
Memorial Bend 1997 1995 182,778 93.9% Publix
Orchard Square 1995 1987 85,940 94.6% A&P
Paces Ferry Plaza 1997 1987 61,693 91.4% --
Powers Ferry Square 1997 1987 97,809 96.1% Harry's
Powers Ferry Village 1997 1994 78,995 100.0% Publix
Rivermont Station 1997 1996 90,267 100.0% Harris Teeter
Roswell Village (6) 1997 1997 143,980 97.2% Publix
Russell Ridge 1994 1995 98,556 96.6% Kroger
Sandy Plains Village 1996 1992 175,034 94.4% Kroger
Sandy Springs Village 1997 1997 48,245 11.2% --
Trowbridge Crossing (5) 1997 1997 62,558 86.8% Publix
Other Markets
Evans Crossing 1998 1993 83,680 100.0% Kroger
LaGrangeMarketplace(3) 1993 1989 76,327 95.5% Winn-Dixie
Parkway Station (5) 1996 1983 94,290 94.5% Kroger
------------------------------
Subtotal/Weighted
Average(Georgia) 2,737,590 93.1%
------------------------------
OHIO
Cincinnati
Beckett Commons 1998 1995 80,434 100.0% Kroger
Cherry Grove 1998 1997 186,040 93.5% Kroger
Hamilton Meadows 1998 1989 126,251 97.8% Kroger(4)
Hyde Park Plaza (5) 1997 1995 374,743 97.4% Kroger/Winn-Dixie
Shoppes at Mason 1998 1997 80,880 95.1% Kroger
Silverlake 1998 1988 100,245 91.0% Kroger
Westchester Plaza 1998 1988 88,181 100.0% Kroger
Columbus
East Pointe 1998 1993 86,520 100.0% Kroger
Kingsdale (3)(6) 1997 1999 259,011 73.0% Big Bear
North Gate/(Maxtown) 1998 1996 85,100 95.9% Kroger
Park Place 1998 1988 106,832 96.2% Big Bear
Windmiller Plaza 1998 1997 119,192 97.1% Kroger
Worthington 1998 1991 93,092 100.0% Kroger
------------------------------
Subtotal/Weighted
Average(Ohio) 1,786,521 93.4%
------------------------------
NORTH CAROLINA
Asheville
Oakley Plaza 1997 1988 118,727 98.7% Bi-Lo
Charlotte
Carmel Commons 1997 1979 132,648 95.3% Fresh Market
City View 1996 1993 77,550 100.0% Winn-Dixie
Union Square 1996 1989 97,191 100.0% Harris Teeter
Raleigh / Durham
Bent Tree Plaza 1998 1994 79,503 100.0% Kroger
Garner Town Square 1998 1998 221,450 100.0% Kroger
Glenwood Village 1997 1983 42,864 100.0% Harris Teeter
Lake Pine Plaza 1998 1997 87,690 97.6% Kroger
Maynard Crossing 1998 1997 122,813 100.0% Kroger
Southpoint Crossing (7) 1998 1998 101,404 89.4% Kroger
Woodcroft 1996 1984 85,353 100.0% Food Lion
Winston-Salem
Kernersville Marketplace 1998 1997 72,590 100.0% Kroger
------------------------------
Subtotal/Weighted
Average(North Carolina) 1,239,783 98.3%
- -------------------------------------------------------------------------------------------------------------
ALABAMA
Birmingham
Villages of Trussville (3) 1993 1987 69,280 97.7% Bruno's
West County Marketplace (3) 1993 1987 129,155 100.0% Food World (4)
Montgomery
Country Club (3) 1993 1991 67,622 96.3% Winn-Dixie
Other Markets
Bonner's Point (3) 1993 1985 87,280 98.6% Winn-Dixie
Marketplace - 1993 1987 162,723 100.0% Winn-Dixie
Alexander City (3)
------------------------------
Subtotal/Weighted
Average(Alabama) 516,060 99.0%
------------------------------
COLORADO
Colorado Springs
Cheyenne Meadows (5) 1998 1998 89,085 97.6% King Soopers
Jackson Creek (6)(7) 1998 1999 85,259 89.4% Kroger
Woodman Plaza (6)(7) 1998 1998 103,313 70.4% King Soopers
Denver
Lloyd King Center (5) 1998 1998 83,286 98.4% King Soopers
Stroh Ranch (6)(7) 1998 1998 86,626 95.2% King Soopers
------------------------------
Subtotal/Weighted
Average(Colorado) 447,569 89.4%
------------------------------
TEXAS
Dallas
Bethany Lake (5)(6) 1998 1998 91,674 68.3% Kroger
Creekside (5) 1998 1998 96,816 94.2% Kroger
Preston Brook - Frisco (5)(6) 1998 1998 91,373 77.8% Kroger
Shiloh Springs (7) 1998 1998 81,865 94.0% Kroger
Village Center - Southlake (5) 1998 1998 118,172 88.6% Kroger
------------------------------
Subtotal/Weighted
Average(Texas) 479,900 84.7%
------------------------------
TENNESSEE
Nashville
Harpeth Village (5) 1997 1998 70,091 100.0% Albertsons
Marketplace - 1997 1997 23,500 100.0% --
Murphreesburo (5)
Nashboro Village (7) 1998 1998 86,793 89.1% Kroger
Peartree Village 1997 1997 114,795 100.0% Harris Teeter
------------------------------
Subtotal/Weighted
Average(Tennessee) 295,179 96.8%
------------------------------
VIRGINIA
Brookville Plaza 1998 1991 63,664 97.6% Kroger
Statler Square 1998 1996 133,660 97.7% Kroger
------------------------------
Subtotal/Weighted
Average(Virginia) 197,324 97.7%
------------------------------
MISSISSIPPI
Columbia Marketplace(3) 1993 1988 136,002 98.7% Winn-Dixie
Lucedale Marketplace(3) 1993 1989 49,059 94.7% Delchamps
------------------------------
Subtotal/Weighted
Average(Mississippi) 185,061 97.6%
------------------------------
MICHIGAN
Lakeshore 1998 1996 85,478 99.0% Kroger
Waterford 1998 1998 92,451 65.3% Kroger
------------------------------
Subtotal/Weighted
Average(Michigan) 177,929 81.5%
------------------------------
SOUTH CAROLINA
Merchants Village 1997 1997 79,723 100.0% Publix
Queensborough (5) 1998 1993 82,333 100.0% Publix
------------------------------
Subtotal/Weighted
Average(South Carolina) 162,056 100.0%
-----------------------------
DELAWARE
Pike Creek 1998 1981 232,752 94.8% Acme
KENTUCKY
Franklin Square 1998 1988 205,060 95.6% Kroger
ILLINOIS
Hinsdale Lake Commons 1998 1986 178,600 86.9% Dominick's
MISSOURI
St. Ann Square 1998 1986 82,498 99.8% National
------------------------------
Total Weighted Average 14,652,229 92.9%
==============================
Drug Store & Other
Property Name Other Anchors Tenants
- ----------------------------------------------------------------------------------------------------------------------
FLORIDA
Jacksonville /
North Florida
Anastasia -- Hallmark, Schmagel's Bagels, Mailboxes
Bolton Plaza Wal-Mart Radio Shack, Payless Shoes, Mailboxes
Carriage Gate TJ Maxx Brueggers Bagels, Bedfellows, Alterations
Courtyard (3) -- Olan Mills, Heavenly Ham, Beauty Warehouse
Ensley Square (5) -- Radio Shack, Hallmark, Amsouth Bank
Fleming Island -- Mail Boxes, Etc., Radio Shack, GNC
Highlands Square (6) Eckerd, Consolidated Stores Hair Cuttery, Rent Way, Precision Printing
Millhopper (3) Eckerd Book Gallery, Postal Svc., Chesapeake Bagel
Newberry Square Kmart H & R Block, Cato Fashions, Olan Mills
Old St. Augustine Plaza Eckerd, Waccamaw Mail Boxes, Etc., Hallmark, Hair Cuttery
Palm Harbour Eckerd, Bealls Mail Boxes, Etc., Hallmark, Meale Norman
Pine Tree Plaza (6) -- Great Clips, CiCi's Pizza, Soupersalad
Regency Court CompUSA, Office Depot H & R Block, Mail Boxes Etc.
Sports Authority Loop Restaurant
South Monroe Eckerd Rent-A-Center, H & R Block
Tampa / Orlando
Beneva Walgreen's Stride Rite, GNC, Subway
Bloomingdale Square Eckerd, Wal-Mart, Beall's Radio Shack, H&R Block, Hallmark
Mainstreet Square Walgreen's Rent-A-Center, Discount Auto Parts, Norwest
Mariner's Village Walgreen's Supercuts. Pak Mail, Allstate Insurance
Market Place - St. Petersburg Eckerd Mail Boxes, Etc., Republic, Weight Watchers
Peachland Promenade Ace Hardware State Farm, Subway, GNC
Regency Square TJ Maxx, AMC, Pak Mail, Lens Crafter
at Brandon (3) Staples, Marshalls Famous Footware
Seven Springs Kmart State Farm, Subway, H & R Block
Terrace Walk (3) -- Olan Mills, Norwest, Cellular Mart
Town Square -- Baskin Robbins, Coldwell Banker, Hallmark
University Collections Eckerd Hallmark, Pak Mail, Dockside Imports
Village Center-Tampa Walgreen's, Stein Mart Hallmark, Pak Mail, Mens Warehouse
West Palm Beach /
Treasure Coast
Boynton Lakes Plaza Walgreen's Radio Shack, Baskin Robbins, Dunkin Donuts
Chasewood Plaza (3) Walgreen's Hallmark, GNC, Supercuts
Chasewood Storage (3) --
East Port Plaza Walgreen's, Kmart, Sears H & R Block, Pak Mail, Subway
Martin Downs Village Center(3) Coastal Care Burger King, Hallmark, Barnett Bank
Martin Downs Walgreen's Mailbox Plus, Allstate, Optical Outlet
Village Shop (3)(6)
Ocean Breeze (3) Walgreen's, Coastal Care Mail Boxes, Barnett Bank, World Travel
Ocean East (5) Coastal Care Mail Boxes, Nations Bank, Ocean Cleaners
Tequesta Shoppes Walgreen's Mail Boxes, Etc., Hallmark, Radio Shack
Town Center at Martin Downs -- Mail Boxes, Health Exchange, Champs Hair
Wellington Market Place Walgreen's, United Artists Pak Mail, Subway, Papa John's
Wellington Town Square Eckerd Mail Boxes, Hallmark, Coldwell Banker
Miami / Ft. Lauderdale
Aventura (3) Eckerd, Humana Pak Mail, Bank United, City of Aventura
Berkshire Commons Walgreen's H & R Block, Century 21, Postal Station
Garden Square Eckerd Subway, GNC, Hair Cuttery
North Miami (3) Eckerd
Palm Trails Plaza -- Mail Boxes, Sal's Pizza, Personnel One
Shoppes @ 104 Rite Aid Mail Boxes Etc., GNC, Pet Superstore
Tamiami Trail Eckerd Mail Boxes, Etc., Radio Shack, Pizza Hut
University Market Place -- H & R Block, Mail Boxes Etc., Olan Mills
Welleby Walgreen's H & R Block, Mail Boxes Plus, Pizza Hut
Subtotal/Weighted
Average(Florida)
GEORGIA
Atlanta
Ashford Place Pier 1 Imports Baskin Robbin, Mail Boxes Merle Norman
Braelin Village (5) Kmart Baskin Robbins, Mail Boxes Etc.,
Manhattan Bagel
Briarcliff LaVista Drug Emporium Supercuts, Trust Company Bank
Briarcliff Village (6) Eckerd, TJ Maxx, Office Depot Subway, Hair Cuttery, Famous Footware
Buckhead Court -- Hallmark, Bellsouth Mobility
Outback Steakhouse
Cambridge Square -- Papa John's, AAA Mail & Pkg., Wachovia
Cromwell Square CVS Drug First Union, Bellsouth Mobility
Haverty's Furniture Hancock Fabrics
Cumming 400 Big Lots Pizza Hut, Hair Cuttery, Autozone
Delk Spectrum (3)(5) -- Mail Boxes, Etc., GNC, Wolf Camera
Dunwoody Hall Eckerd Texaco, Blimpie, Nations Bank
Dunwoody Village (5) -- Federal Express, Jiffy Lube, Hallmark
Loehmann's Plaza Eckerd, Loehmann's Mail Boxes, Etc., GNC, H & R Block
Lovejoy Station -- State Farm, Pizza Hut, Supercuts
Memorial Bend TJ Maxx Pizza Hut, GNC, H & R Block
Orchard Square CVS Drug Mail Boxes Unlimited, State Farm, Remax
Paces Ferry Plaza -- Chapter 11 Bookstore, Banksouth
Sherwin Williams
Powers Ferry Square Drugs for Less Domino's Pizza, Dunkin Donuts, Supercuts
Powers Ferry Village CVS Drug Mail Boxes, Etc., Southtrust Bank, Blimpies
Rivermont Station CVS Drug Pak Mail, GNC, Wolf Camera
Roswell Village (6) Eckerd, Ace Hardware Hallmark, Pizza Hut, Scholtzyky's
Russell Ridge -- Pizza Hut, Pak Mail, Hallmark
Sandy Plains Village Ace Hardware H & R Block, Mail Boxes Etc., Subway
Sandy Springs Village -- Air Touch
Trowbridge Crossing (5) -- Domino's, Postal Services, Hair Cuttery
Other Markets
Evans Crossing -- Subway, Hair Cuttery, Dollar Tree
LaGrangeMarketplace(3) Eckerd Lee's Nails, It's Fashions, One Price Clothing
Parkway Station (5) -- H & R Block, Pizza Hut, Olan Mills
Subtotal/Weighted
Average(Georgia)
OHIO
Cincinnati
Beckett Commons -- Mail Boxes, Etc., Subway, Taco Bell
Cherry Grove CVS Drug, TJ Maxx GNC, Hallmark, Sally Beauty Supply
Hancock Fabrics
Hamilton Meadows Kmart Radio Shack, H&R Block, GNC
Hyde Park Plaza (5) Walgreen's, Micheals Radio Shack, H&R Block, Hallmark
Barnes & Noble, Old Navy
Shoppes at Mason -- Pizza Hut, GNC, Great Clips
Silverlake -- Radio Shack, H&R Block, Great Clips
Westchester Plaza -- Pizza Hut, Subway, GNC
Columbus
East Pointe -- Mail Boxes, Etc., Hallmark, Liberty Mutual
Kingsdale (3)(6) Stein Mart, Limited Hallmark, Sherwin Williams
S&K Menswear Famous Footware
North Gate/(Maxtown) -- Domino's Pizza, GNC, Great Clips
Park Place -- Mail Boxes, Etc., Domino's, Subway
Windmiller Plaza Sears Hardware Radio Shack, Sears Optical, Great Clips
Worthington CVS Drug Little Caesar's, Hallmark, Radio Shack
Subtotal/Weighted
Average(Ohio)
NORTH CAROLINA
Asheville
Oakley Plaza CVS Drug, Western Auto Little Caesar's, Subway
Baby Superstore Life Uniform
Charlotte
Carmel Commons Eckerd, Piece Goods Little Caesar's, Radio Shack, Blimpies
City View VS Drug, Public Library Little Caesar's, Bellsouth, Willie's
Union Square CVS Drug Mail Boxes, Etc., Subway, TCBY
Consolidated Theatres
Raleigh / Durham
Bent Tree Plaza Pizza Hut, Manhattan Bagel, Parcel Plus
Garner Town Square United Artists, Office Max Sears Optical, Friedman's Jewelers
Petsmart H & R Block
Glenwood Village -- Domino's Pizza, Threadbenders II
Lake Pine Plaza -- H & R Block, GNC, Great Clips
Maynard Crossing -- Mail Boxes, Etc., GNC, Hallmark
Southpoint Crossing (7) -- Wolf Camera, GNC, Manhattan Bagel
Woodcroft Eckerd, True Value Domino's Pizza, Subway, Allstate
Winston-Salem
Kernersville Marketplace -- Mail Boxes, Little Caesar's, Great Clips
Subtotal/Weighted
Average(North Carolina)
ALABAMA
Birmingham
Villages of Trussville (3) CVS Drug Head Start, Cellular One, Mattress Max
West County Marketplace (3) Harco, Wal-Mart Domino's Pizza, GNC, Cato Plus
Montgomery
Country Club (3) Rite Aid Radio Shack, Subway, Beltone
Other Markets
Bonner's Point (3) Wal-Mart Subway, Domino's Pizza, It's Fashion
Marketplace - Wal-Mart Domino's Pizza, Subway, Hallmark
Alexander City (3)
Subtotal/Weighted
Average(Alabama)
COLORADO
Colorado Springs
Cheyenne Meadows (5) -- Hallmark, Nail Center, Cost Cutters
Jackson Creek (6)(7) -- Cost Cutters, Polo Cleaners
Woodman Plaza (6)(7) -- Cost Cutters
Denver
Lloyd King Center (5) -- GNC, Cost Cutters, Hollywood Video
Stroh Ranch (6)(7) -- Cost Cutters, Post Net, Dry Clean Station
Subtotal/Weighted
Average(Colorado)
TEXAS
Dallas
Bethany Lake (5)(6) -- Boss Cleaners, Mr. Parcel, Fantastic Sams
Creekside (5) -- Hollywood Video, CICI's,Fantastic Sams
Preston Brook - Frisco (5)(6) -- Coldwell Banker
Shiloh Springs (7) -- GNC, Great Clips, Cardsmart
Village Center - Southlake (5) -- Radio Shack, Papa Johns, Smoothie King
Subtotal/Weighted
Average(Texas)
TENNESSEE
Nashville
Harpeth Village (5) -- Mail Boxes, Etc., Heritage Cleaners, Cat's
Marketplace - Office Max Shoe Carnival
Murphreesburo (5)
Nashboro Village (7) -- Hallmark, Fantastic Sams, Cellular
Peartree Village Eckerd, Office Max Hollywood Video, AAA Auto, Royal Thai
Subtotal/Weighted
Average(Tennessee)
VIRGINIA
Brookville Plaza -- H&R Block, House of Frames, Jenny Craig
Statler Square CVS Drugs, Staples Hallmark, H & R Block, Hair Cuttery
Subtotal/Weighted
Average(Virginia)
MISSISSIPPI
Columbia Marketplace(3) Wal-Mart GNC, Radio Shack, Cato
Lucedale Marketplace(3) Wal-Mart(4) Subway, First Family Financial, Byrd's Cleaners
Subtotal/Weighted
Average(Mississippi)
MICHIGAN
Lakeshore Rite Aid Hallmark, Subway, Baskin Robins
Waterford --
Subtotal/Weighted
Average(Michigan)
SOUTH CAROLINA
Merchants Village -- Mail Boxes, Hollywood Video, Hallmark
Queensborough (5) -- Mail Boxes, Etc., Supercuts, Pizza Hut
Subtotal/Weighted
Average(South Carolina)
DELAWARE
Pike Creek Eckerd, K-mart Radio Shack, H & R Block, TCBY
KENTUCKY
Franklin Square Rite Aid, JC Penney Mail Boxes, Baskin Robbins, Kay Jewelers
ILLINOIS
Hinsdale Lake Commons Ace Hardware Hallmark, McDonalds, Fannie Mae
MISSOURI
St. Ann Square Vic Tanny Great Clips, US Navy, US Marines
Total Weighted Average
- -------------------------------------------------------
(1) Or latest renovation
(2) Includes development properties. If development properties are excluded,
the total percentage leased would be 94.6% for Partnership shopping centers
and 94.0% for Company shopping centers.
(3) Company-owned property not owned by the the Partnership.
(4) Tenant owns its own building.
(5) Owned by a partnership with outside investors in which the Partnership
(or the Company in the case of a property referred to in note (3)
above) or an affiliate is the general partner.
(6) Property under development or redevelopment.
(7) Owned by a joint venture in which the Partnership owns less than a 100%
interest.
Item 3. Legal Proceedings
The Company is, from time to time, a party to legal proceedings which arise in
the ordinary course of its business. The Company is not currently involved in
any litigation nor, to management's knowledge, is any litigation threatened
against the Company, the outcome of which would, in management's judgement based
on information currently available, have a material adverse effect on the
financial position or results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted for shareholder vote during the fourth quarter of
1998.
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters
The Company's common stock is traded on the New York Stock Exchange ("NYSE")
under the symbol "REG". The Company currently has approximately 3,500
shareholders. The following table sets forth the high and low prices and the
cash dividends declared on the Company's common stock by quarter for 1998 and
1997. All amounts are in thousands except per share data.
1998 1997
----------------------------------- -----------------------------------
Cash Cash
High Low Dividends High Low Dividends
Price Price Declared Price Price Declared
----- ----- --------- ----- ----- --------
March 31 $ 27.812 24.750 .44 28.000 25.000 .42
June 30 26.687 24.062 .44 28.125 24.875 .42
September 30 26.500 20.500 .44 28.250 24.875 .42
December 31 23.437 20.250 .44 28.000 24.250 .42
The following describes the registrant's sales of unregistered securities
during the periods covered by this report, each sold in reliance on Rule 506 of
the Securities Act.
During 1998, the Company acquired 32 shopping centers from various entities
comprising the Midland Group ("Midland"). The Company's investment in the
properties acquired from Midland is $236.6 million at December 31, 1998. As
part of the acquisition of Midland, the Company issued 425,982 Operating
Partnership Units ("Units") of Regency Centers, L.P. to the Midland principals.
Units are exchangeable into Regency common stock on a one for one basis. In
addition, during 1999 and 2000, the Company may pay contingent consideration of
up to an estimated $23 million, through the issuance of Units and the payment of
cash. The amount of such consideration, if issued, will depend on the
satisfaction of certain performance criteria relating to the assets acquired
from Midland. Transferors who received cash at the initial Midland closing will
receive contingent future consideration in cash rather than Units. The
acquisition of Midland is discussed further in note 2, Acquisitions of Shopping
Centers, of the notes to the 1998 consolidated financial statements.
On June 29, 1998, the Company through RCLP issued $80 million of 8.125%
Series A Cumulative Redeemable Preferred Units ("Series A Preferred Units") to
Belair Capital Fund LLC in a private placement. The issuance involved the sale
of 1.6 million Series A Preferred Units for $50.00 per unit. The Series A
Preferred Units, which may be called by the Company at par on or after June 25,
2003, have no stated maturity or mandatory redemption, and pay a cumulative,
quarterly dividend at an annualized rate of 8.125%. At any time after June 25,
2008, the Series A Preferred Units may be exchanged for shares of 8.125% Series
A Cumulative Redeemable Preferred Stock of the Company at an exchange rate of
one share of Series A Preferred Stock for one Series A Preferred Unit. The
Series A Preferred Units and Series A Preferred Stock are not convertible into
common stock of the Company.
In November 1998, the Company acquired Park Place shopping center in
exchange for 79,466 Units of Regency Centers, L.P. valued at $26 per Unit plus
the assumption of debt secured by Park Place.
The Company acquired 35 shopping centers during 1997 (the "1997 Acquisitions")
for approximately $395.7 million. Included in the 1997 Acquisitions are 26
shopping centers acquired from Branch Properties ("Branch") for $232.4 million.
During 1998, the Company issued 721,997 additional Units and shares of common
stock valued at $18.2 million to Branch as contingent consideration for the
satisfaction of certain performance criteria of the properties acquired. The
Company expects to issue the remaining contingent consideration, 298,064 Units,
during 1999. In connection with the Units and shares of common stock issued to
Branch in March 1998, SC-USREALTY acquired 435,777 shares at $22.125 per share
in accordance with their rights to purchase common stock. The acquisition of
Branch is discussed further in note 2, Acquisitions of Shopping Centers, of the
notes to the 1998 consolidated financial statements.
The Company intends to pay regular quarterly distributions to its common
shareholders. Future distributions will be declared and paid at the discretion
of the Board of Directors, and will depend upon cash generated by operating
activities, the Company's financial condition, capital requirements, annual
distribution requirements under the REIT provisions of the Internal Revenue Code
of 1986, as amended, and such other factors as the Board of Directors deems
relevant. The Company anticipates that for the foreseeable future cash available
for distribution will be greater than earnings and profits due to non-cash
expenses, primarily depreciation and amortization, to be incurred by the
Company. Distributions by the Company to the extent of its current and
accumulated earnings and profits for federal income tax purposes will be taxable
to shareholders as ordinary dividend income. Distributions in excess of earnings
and profits generally will be treated as a non-taxable return of capital. Such
distributions have the effect of deferring taxation until the sale of a
shareholder's common stock. In order to maintain its qualification as a REIT,
the Company must make annual distributions to shareholders of at least 95% of
its taxable income. Under certain circumstances, which management does not
expect to occur, the Company could be required to make distributions in excess
of cash available for distributions in order to meet such requirements. The
Company currently maintains the Regency Realty Corporation Dividend Reinvestment
and Stock Purchase Plan which enables its shareholders to automatically reinvest
distributions as well as make voluntary cash payments towards the purchase of
additional shares.
The Company declares quarterly cash dividends on the 2.5 million Class B common
shares outstanding. At December 31, 1998 the Class B common was owned by a
single shareholder. During 1998 a distribution of $.5378 per share was paid
quarterly. The 2.5 million Class B common shares are convertible into 2,975,468
common shares, subject to certain ownership limitations.
Under the loan agreement with the lenders of the Company's line of credit,
distributions may not exceed 95% of Funds from Operations ("FFO") based on the
immediately preceding four quarters. FFO is defined in accordance with the
NAREIT definition as described under Item 7., Management's Discussion and
Analysis. Also in the event of any monetary default, the Company will not make
distributions to shareholders.
Item 6. Selected Consolidated Financial Data
(in thousands, except per share data and number of properties)
The following table sets forth Selected Financial Data on a historical basis for
the five years ended December 31, 1998, for the Company. This information should
be read in conjunction with the financial statements of the Company (including
the related notes thereto) and Management's Discussion and Analysis of the
Financial Condition and Results of Operations, each included elsewhere in this
Form 10-K. This historical Selected Financial Data has been derived from the
audited financial statements.
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Operating Data:
Revenues:
Rental revenues $ 130,487 88,855 43,433 31,555 25,673
Management, leasing and
brokerage fees 11,863 8,448 3,444 2,426 2,332
Equity in income of investments
in real estate partnerships 946 33 70 4 17
------------- ----------- ----------- ----------- ------------
Total revenues 143,296 97,336 46,948 33,985 28,022
------------- ----------- ----------- ----------- ------------
Operating expenses:
Operating, maintenance and real
estate taxes 30,844 22,904 12,065 8,683 7,140
General and administrative 15,064 9,964 6,048 4,894 4,531
Depreciation and amortization 25,046 16,303 8,059 5,854 5,266
------------- ----------- ----------- ----------- ------------
Total operating expenses 70,954 49,171 26,172 19,431 16,937
------------- ----------- ----------- ----------- ------------
Interest expense, net of income 26,829 18,667 10,811 8,969 5,701
------------- ----------- ----------- ----------- ------------
Income before minority interests and sale of
real estate investments 45,513 29,498 9,965 5,585 5,384
Gain on sale of real estate investments 10,726 451 - - -
------------- ----------- ----------- ----------- ------------
Income before minority interests 56,239 29,948 9,965 5,585 5,384
Minority interest of exchangeable
operating partnership units (1,826) (2,042) - - -
Minority interest of limited partners (464) (505) - - -
Minority interest preferred unit distribution (3,359) - - - -
------------- ----------- ----------- ----------- ------------
Net income 50,590 27,402 9,965 5,585 5,384
Preferred stock dividends - - 58 591 283
----------- ----------- ------------
============= ===========
Net income for common stockholders $ 50,590 $27,402 9,907 4,994 5,101
============= =========== =========== =========== ============
Earnings per share:
Basic $ 1.80 1.28 0.82 0.75 0.80
============= =========== =========== =========== ============
Diluted $ 1.75 1.23 0.82 0.75 0.80
============= =========== =========== =========== ============
Other Data:
Common stock outstanding including
Class B common if converted 28,464 26,967 13,590 9,704 6,455
Exchangeable operating partnership units
outstanding 1,361 574 29 - -
Company owned gross leasable area 14,652 9,981 5,512 3,981 3,182
Number of properties (at end of period) 129 89 50 36 30
Ratio of earnings to fixed 2.1 2.3 1.8 1.5 1.7
charges
Balance Sheet Data:
Real estate investments at cost $ 1,250,332 $834,402 393,403 279,046 217,539
Total assets 1,240,107 826,849 386,524 271,005 214,082
Total debt 548,126 278,050 171,607 115,617 107,998
Stockholders' equity 550,741 513,627 206,726 147,007 101,760
Item 7. 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 96%
of the outstanding common partnership units ("Units"). Of the 129 properties
included in the Company's portfolio at December 31, 1998, 109 properties were
owned either fee simple or through partnerships interests by RCLP. At December
31, 1998, the Company had an investment in real estate, at cost, of
approximately $1.3 billion of which $1.1 billion or 86% was owned by RCLP.
Shopping Center Business
- ------------------------
The Company's principal business is owning, operating and developing grocery
anchored neighborhood infill shopping centers. Infill refers to shopping
centers within a targeted investment market offering sustainable competitive
advantages such as barriers to entry resulting from zoning restrictions, growth
management laws, or limited new competition from development or expansions. The
Company's properties summarized by state and in order by largest holdings
including their gross leasable areas (GLA) follows:
Location December 31, 1998 December 31, 1997
-------- ----------------- -----------------
# Properties GLA % Leased # Properties GLA % Leased
------------ --- -------- ------------ --- --------
Florida 46 5,728,347 91.4% 45 5,267,894 91.5%
Georgia 27 2,737,590 93.1% 25 2,539,507 92.4%
Ohio 13 1,786,521 93.4% 2 629,920 89.1%
North Carolina 12 1,239,783 98.3% 6 554,332 99.0%
Alabama 5 516,060 99.0% 5 516,080 99.9%
Texas 5 479,900 84.7% - - -
Colorado 5 447,569 89.4% - - -
Tennessee 4 295,179 96.8% 3 208,386 98.5%
Virginia 2 197,324 97.7% - - -
Mississippi 2 185,061 97.6% 2 185,061 96.9%
Michigan 2 177,929 81.5% - - -
South Carolina 2 162,056 100.0% 1 79,743 84.3%
Delaware 1 232,752 94.8% - - -
Kentucky 1 205,060 95.6% - - -
Illinois 1 178,600 86.9% - - -
Missouri 1 82,498 99.8% - - -
------------- ---------- ------- ------------ --------- ------
Total 129 14,652,229 92.9% 89 9,980,923 92.8%
============= ========== ======= ============ ========= ======
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 December 31, 1998:
Grocery Number of % of % of Annualized Avg Remaining
Anchor Stores Total GLA Base Rent Lease Term
------- --------- --------- --------------- -------------
Kroger 36 14.9% 13.8% 19 yrs
Publix 33 9.8% 6.9% 13 yrs
Winn-Dixie 16 5.1% 3.8% 13 yrs
Harris Teeter 4 1.3% 1.7% 11 yrs
Acquisition and Development of Shopping Centers
- -----------------------------------------------
During 1998, the Company acquired 31 shopping centers fee simple for
approximately $355.9 million and also invested $28.4 million in 12 joint
ventures ("JV Properties"), for a total investment of $384.3 million in 43
shopping centers ("1998 Acquisitions"). Included in the 1998 Acquisitions are 32
shopping centers acquired from various entities comprising the Midland Group
("Midland"). Of the 32 Midland centers, 31 are anchored by Kroger, and 12 are
owned through joint ventures in which the Company's ownership interest is 50% or
less. The Company's investment in the properties acquired from Midland is $236.6
million at December 31, 1998. The Company expects to acquire all of the
interests in two of the JV Properties for approximately $20.3 million during
1999 which will increase its total investment in the Midland properties to
$256.9 million. In addition, during 1999 and 2000, the Company may pay
contingent consideration of up to an estimated $23 million, through the issuance
of Partnership units and the payment of cash. The amount of such consideration,
if issued, will depend on the satisfaction of certain performance criteria
relating to the assets acquired from Midland. Transferors who received cash at
the initial Midland closing will receive contingent future consideration in cash
rather than units.
The Company acquired 35 shopping centers during 1997 (the "1997 Acquisitions")
for approximately $395.7 million. Included in the 1997 Acquisitions are 26
shopping centers acquired from Branch Properties ("Branch") for $232.4 million.
During 1998, the Company issued 721,997 additional Units and shares of common
stock valued at $18.2 million to Branch as contingent consideration for the
satisfaction of certain performance criteria of the properties acquired. The
Company expects to issue the remaining contingent consideration, 298,064 Units,
during 1999.
Results from Operations
- -----------------------
Comparison of 1998 to 1997
Revenues increased $46.0 million or 47% to $143.3 million in 1998. The increase
was due primarily to the 1998 and 1997 Acquisitions providing increases in
revenues of $37.5 million during 1998. At December 31, 1998, the real estate
portfolio contained approximately 14.7 million SF and was 92.9% leased. Minimum
rent increased $33.3 million or 47%, and recoveries from tenants increased $7.5
million or 45%. On a same property basis (excluding the 1998 and 1997
Acquisitions, and the office portfolio sold during 1998) gross rental revenues
increased $3.4 million or 6.7%, primarily due to higher base rents. Revenues
from property management, leasing, brokerage, and development services (service
operation segment) provided on properties not owned by the Company were $11.9
million in 1998 compared to $8.4 million in 1997, the increase due primarily to
increased brokerage fees and increased activity in construction and development
for third parties. During 1998, the Company sold four office buildings and a
parcel of land for $30.7 million, and recognized a gain on the sale of $10.7
million. As a result of these transactions the Company's real estate portfolio
is comprised entirely of retail shopping centers. The proceeds from the sale
were used to reduce the balance of the line of credit.
Operating expenses increased $21.8 million or 44% to $71.0 million in 1998.
Combined operating and maintenance, and real estate taxes increased $7.9 million
or 35% during 1998 to $30.8 million. The increases are due to the 1998 and 1997
Acquisitions generating operating and maintenance expenses and real estate tax
increases of $9.4 million during 1998, partially offset by the sale of the
office buildings. On a same property basis, operating and maintenance expenses
and real estate taxes increased $100,000 or 1%. General and administrative
expenses increased 51% during 1998 to $15.1 million due to the hiring of new
employees and related office expenses necessary to manage the shopping centers
acquired during 1998 and 1997, as well as, the shopping centers the Company
began managing for third parties during 1998 and 1997. Depreciation and
amortization increased $8.7 million during 1998 or 54% primarily due to the 1998
and 1997 Acquisitions.
Interest expense increased to $28.8 million in 1998 from $19.7 million
in 1997 or 46% due to increased average outstanding loan balances related to the
financing of the 1998 and 1997 Acquisitions on the Line and the assumption of
debt. Weighted average interest rates increased 0.1% during 1998. See further
discussion under Acquisition and Development of Shopping Centers and Liquidity
and Capital Resources.
Net income for common stockholders was $50.6 million in 1998 vs. $27.4
million in 1997, a $23.2 million or 85% increase for the reasons previously
described. Diluted earnings per share in 1998 was $1.75 vs. $1.23 in 1997 due to
the increase in net income combined with the dilutive impact from the increase
in weighted average common shares and equivalents of 7.2 million primarily due
to the acquisition of Branch and Midland, the issuance of shares to SC-USREALTY
during 1998 and 1997, and the public offering completed in July, 1997. (see
notes 2, 6 and 7, to the 1998 consolidated financial statements for related
discussions).
Comparison of 1997 to 1996
Revenues increased $50.4 million or 107% to $97.3 million in 1997. The increase
was due primarily to the 1997 Acquisitions and properties acquired in 1996 (the
"1996 Acquisitions") providing increases in revenues of $49.8 million during
1997. At December 31, 1997, the real estate portfolio contained approximately 10
million SF and was 92.8% leased. Minimum rent increased $35.4 million or 102%,
and recoveries from tenants increased $8.9 million or 115%. On a same property
basis (excluding the 1997 and 1996 Acquisitions) revenues increased $925,000 or
2%, primarily due to higher percentage rents and operating expense recoveries
from tenants. Revenues from property management, leasing, brokerage, and
development services provided on properties not owned by the Company were $8.4
million in 1997 compared to $3.4 million in 1996, the increase due to fees
earned from third party property management and leasing contracts acquired as
part of the acquisition of Branch.
Operating expenses increased $23.0 million or 88% to $49.2 million in 1997.
Combined operating and maintenance, and real estate taxes increased $10.8
million or 89% during 1997 to $22.9 million. The increases are due to the 1997
and 1996 Acquisitions generating operating and maintenance expenses, and real
estate tax increases of $10.6 million during 1997. On a same property basis,
operating and maintenance expenses and real estate taxes increased $226,000, or
2%. General and administrative expense increased 64.7% during 1997 to $10.0
million due to the hiring of new employees and related office expenses necessary
to manage the 52 shopping centers acquired during 1996 and 1997, as well as, the
44 shopping centers that the Company began managing for third parties during
1997. Depreciation and amortization increased $8.2 million during 1997 or 102%
primarily due to the 1997 and 1996 Acquisitions generating $7.7 million in
depreciation and amortization.
Interest expense increased to $19.7 million in 1997 from $11.5 million
in 1996 or 71% due primarily to increased average outstanding loan balances
related to the financing of the 1997 and 1996 Acquisitions on the Line and the
assumption of debt. Weighted average interest rates decreased 0.2% during 1997.
See further discussion under Acquisition and Development of Shopping Centers and
Liquidity and Capital Resources.
Net income for common stockholders was $27.4 million in 1997 vs. $9.9
million in 1996, a $17.5 million or 177% increase for the reasons previously
described. Diluted earnings per share in 1997 was $1.23 vs. $0.82 in 1996, an
increase of 50% due to the increase in net income combined with the dilutive
impact from the increase in weighted average common shares and equivalents of
12.4 million primarily due to the Acquisition of the Branch Properties, the
issuance of shares to SC-USREALTY, and the public offering discussed previously.
Funds from Operations
The Company considers funds from operations ("FFO"), as defined by the National
Association of Real Estate Investment Trusts as 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 after
adjustments for unconsolidated investments in real estate partnerships and joint
ventures, 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 FFO on the same basis. While management
believes that 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 FFO, as provided below, may
not be comparable to similarly titled measures of other REITs.
FFO increased by 50% from 1997 to 1998 as a result of the activity discussed
above under "Results of Operations". FFO for the periods ended December 31,
1998, 1997 and 1996 are summarized in the following table (in thousands):
1998 1997 1996
---- ---- ----
Net income for common stockholders $ 50,590 27,402 9,907
Add (subtract):
Real estate depreciation and amortization 24,529 15,671 8,049
Gain on sale of operating property (9,824) (451) -
Minority interests in net income of
Exchangeable partnership units
1,826 2,042 -
----------- --------- ---------
Funds from operations $ 67,121 44,664 17,956
=========== ========= =========
Cash flow provided by (used in):
Operating activities $ 65,002 43,044 16,004
Investing activities (236,393) (188,533) (109,842)
Financing activities 174,725 153,782 98,730
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 $65 million and $43 million for the twelve months ended
December 31, 1998 and 1997, 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 $8.3 million and $5.2 million, during 1998 and
1997, respectively. The Company paid scheduled principal payments of $3.4
million and $2.2 million during 1998 and 1997, respectively. The Company paid
dividends and distributions of $54.9 million and $35.9 million, during 1998 and
1997, 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 $236.4 million and $188.5 million, during 1998
and 1997, respectively, primarily for purposes discussed above under
Acquisitions and Development of Shopping Centers. Net cash provided by financing
activities was $174.7 million and $153.8 million during 1998 and 1997,
respectively, primarily related to the proceeds from the preferred unit and debt
offerings completed during 1998, and the proceeds from the common stock offering
in 1997, further discussed below. At December 31, 1998, the Company had 12
shopping centers under construction or undergoing major renovations, with costs
to date of $121.7 million. Total committed costs necessary to complete the
properties under development is estimated to be $47.4 million and will be
expended through 1999.
The Company's outstanding debt at December 31, 1998 and 1997 consists of the
following (in thousands):
1998 1997
---- ----
Notes Payable:
Fixed rate mortgage loans $ 298,148 199,078
Variable rate mortgage loans 11,051 30,841
Fixed rate unsecured loans 121,296 -
------- -------
Total notes payable 430,495 229,919
Acquisition and development line of credit 117,631 48,131
------- -------
Total $ 548,126 278,050
======= =======
The weighted average interest rate on total debt at December 31, 1998 and 1997
was 7.4% and 7.3%, respectively. The Company's debt is typically
cross-defaulted, but not cross-collateralized, and includes usual and customary
affirmative and negative covenants.
The Company is a party to a credit agreement dated as of March 27, 1998,
providing for an unsecured line of credit (the "Line") from a group of
lenders currently consisting of Wells Fargo, First Union, Wachovia Bank,
NationsBank, AmSouth Bank, Commerzbank AG, PNC Bank, and Star Bank. This credit
agreement provides for a $300 million commitment, and incorporates a competitive
bid facility of up to $150 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 May 2000, 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, (.875% currently), which is dependent on the
Company's investment grade rating. The Company's ratings are currently Baa2 from
Moody's Investor Service, BBB from Duff and Phelps, and BBB- from Standard and
Poors. 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.
On February 26, 1999, the Company entered into an agreement with the
various banks that provide the Line to increase the unsecured commitment amount
to $635 million.
On June 29, 1998, the Company through RCLP issued $80 million of 8.125%
Series A Cumulative Redeemable Preferred Units ("Series A Preferred Units") to
an institutional investor, Belair Capital Fund, LLC, in a private placement. The
issuance involved the sale of 1.6 million Series A Preferred Units for $50.00
per unit. The Series A Preferred Units, which may be called by the Company at
par on or after June 25, 2003, have no stated maturity or mandatory redemption,
and pay a cumulative, quarterly dividend at an annualized rate of 8.125%. At any
time after June 25, 2008, the Series A Preferred Units may be exchanged for
shares of 8.125% Series A Cumulative Redeemable Preferred Stock of the Company
at an exchange rate of one share of Series A Preferred Stock for one Series A
Preferred Unit. The Series A Preferred Units and Series A Preferred Stock are
not convertible into common stock of the Company. The net proceeds of the
offering were used to reduce the Line.
On July 17, 1998 the Company, through RCLP, completed a $100 million
offering of seven year term notes at an effective interest rate of 7.17%. The
Notes were priced at 162.5 basis points over the current yield for seven year US
Treasury Bonds. The net proceeds of the offering were used to reduce the balance
of the Line.
Mortgage loans are secured by certain real estate properties, but generally 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 2018. 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
9.8%.
During 1998, the Company assumed mortgage loans with a fair value of $132.8
million related to the acquisition of shopping centers, which includes debt
premiums of $12.4 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 of December 31, 1998, scheduled principal repayments on notes payable and the
Line for the next five years were as follows (in thousands):
Scheduled
Principal Term Loan Total
Scheduled Payments by Year Payments Maturities Payments
-------------------------- --------- ---------- --------
1999 $ 3,771 21,579 25,350
2000 3,996 174,674 178,670
2001 3,911 41,928 45,839
2002 3,098 44,117 47,215
2003 2,914 13,291 16,205
Beyond 5 Years 17,811 206,607 224,418
Net unamortized debt
payments - 10,429 10,429
------- ------- -------
Total $ 35,501 512,625 548,126
======= ======= =======
Unconsolidated partnerships and joint ventures had mortgage loans payable of
$76.7 million at December 31, 1998, and the Company's proportionate share of
these loans was $34.4 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 has grown substantially during 1998 as a
result of the acquisitions and development discussed above. 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 and debt offerings, such as those completed during 1997 and
1998. 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.
Pacific Retail Trust Merger
- ---------------------------
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, provides 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 are 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 is expected to be $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 estimated closing
costs of $7.5 million. The price per share used to determine the purchase price
is $23.325 based on the five day average of the closing stock price of Regency's
common stock as listed 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 will be accounted for as a purchase with the Company as the
acquiring entity.
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, 1999. 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. g.
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 31 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 1998 and 1997 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 recognizes the potential effect Year 2000 may have on the Company's
operations and, as a result, has implemented a Year 2000 Compliance Project. The
term "Year 2000 compliant" means that the software, hardware, equipment, goods
or systems utilized by, or material to the physical operations, business
operations, or financial reporting of an entity will properly perform date
sensitive functions before, during and after the year 2000.
The Company's Year 2000 Compliance Project includes an awareness phase, an
assessment phase, a renovation phase, and a testing phase of our data processing
network, accounting and property management systems, computer and operating
systems, software packages, and building management systems. The project also
includes surveying our major tenants and financial institutions. Total costs
incurred to date associated with the Company's Year 2000 compliance project have
been reflected in the Company's income statement throughout 1998 and 1997, and
were approximately $250,000.
The Company's computer hardware, operating systems, general accounting and
property management systems and principal desktop software applications are Year
2000 compliant as certified by the various vendors. We are currently testing
these systems, and expect to complete the testing phase by June 30, 1999. Based
on initial testing, Management does not anticipate any Year 2000 issues that
will materially impact operations or operating results.
An assessment of the Company's building management systems has been completed.
This assessment has resulted in the identification of certain lighting,
telephone, and voice mail systems that may not be Year 2000 compliant. While we
have not yet begun renovations, Management believes that the cost of upgrading
these systems will not exceed $500,000. It is anticipated that the renovation
and testing phases will be complete by June 30, 1999, and the Company expects to
be compliant upon completion of these phases.
The Company has surveyed its major tenants and financial institutions to
determine the extent to which the Company is vulnerable to third parties'
failure to resolve their Year 2000 issues. The Company will be able to more
adequately assess its third party risk when responses are received from the
majority of the entities contacted.
Management believes its planning efforts are adequate to address the Year 2000
issue and that its risk factors are primarily those that it cannot directly
control, including the readiness of its major tenants and financial
institutions. Failure on the part of these entities to become Year 2000
compliant could result in disruption in the Company's cash receipt and
disbursement functions. There can be no guarantee, however, that the systems of
unrelated entities upon which the Company's operations rely will be corrected on
a timely basis and will not have a material adverse effect on the Company.
The Company does not have a formal contingency plan or a timetable for
implementing one. Contingency plans will be established, if they are deemed
necessary, after the Company has adequately assessed the impact on operations
should third parties fail to properly respond to their Year 2000 issues.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
- -----------
The Company 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 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 no plans to enter
into derivative or interest rate transactions for speculative purposes, and at
December 31, 1998, the Company did not have any borrowings hedged with
derivative financial instruments.
The Company's interest rate risk is monitored using a variety of techniques. The
table below presents the principal amounts maturing (in thousands), weighted
average interest rates of remaining debt, and the fair value of total debt (in
thousands), by year of expected maturity to evaluate the expected cash flows and
sensitivity to interest rate changes.
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----
Fixed rate debt $23,243 60,907 37,027 47,215 16,205 224,418 409,014 419,444
Average interest rate for all debt 7.83% 7.75% 7.91% 7.87% 7.70% 7.62% - -
Variable rate LIBOR debt 2,107 117,763 8,813 - - - 128,682 128,682
Average interest rate for all debt 6.16% 6.16% 6.55% - - - - -
As the table incorporates only those exposures that exist as of December 31,
1998, it does not consider those exposures or positions which could arise after
that date. Moreover, because firm commitments are not presented in the table
above, the information presented therein has limited predictive value. As a
result, the Company's ultimate realized gain or loss with respect to interest
rate fluctuations will depend on the exposures that arise during the period, the
Company's hedging strategies at that time, and interest rates.
Forward Looking Statements
- --------------------------
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe
harbor for forward-looking statements made by or on behalf of the Company. The
Company and its representatives may from time to time make written or oral
statements that are "forward-looking," including statements contained in this
report and other filings with the Securities and Exchange Commission and in
reports to the Company's stockholders. All statements that express expectations
and projections with respect to future matters, including the launching or
prospective development of new business initiatives; anticipated yields on real
estate acquisitions or developments; "Year 2000" remediation efforts; and
environmental remediation efforts, are forward-looking within the meaning of the
Act. Such statements involve unknown risks and uncertainties of business and
economic conditions pertaining to the operation, acquisition, or development of
shopping centers including the retail business sector, and may cause actual
results of the Company in the future to significantly differ from any future
results that may be implied by such forward-looking statements.
Item 8. Consolidated Financial Statements and Supplementary Data
The Consolidated Financial Statements and supplementary data included in this
Report are listed in Part IV, Item 14(a).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning the directors of the Company is incorporated herein by
reference to the Company's definitive proxy statement to be filed with the
Securities and Exchange Commission within 120 days after the end of the fiscal
year covered by this Form 10-K with respect to its 1999 Annual Meeting of
Shareholders. The following table provides information concerning the executive
officers of the Company
Executive Officer Positions with the Company
(Age) Principal Occupations During the Past Five Years
----------------- ------------------------------------------------
Martin E. Stein, Jr. Chairman, Chief Executive Officer, and Director
(age 46) of the Company since its initial public offering in
October 1993; previously President of the Company's
predecessor real estate division since 1976.
MaryLou Rogers President and Chief Operating Officer since
(age 47) January, 1999 and Director of the Company since
March, 1997; Managing Director - Security Capital
U.S. Realty Strategic Group From March 1997 to
January 1999; Senior Vice President and
Director of Stores, New England - Macy's East/
Federated Department Stores from 1994 to March
1997; various retailing positions since joining
Macy's in 1977, including Senior Vice President
for Federated's Burdines Division and Henri
Bendel.
James G. Buis Managing Director - Southwestern U.S. Investments
(age 54) of the Company since February 1999; Managing
Director - Pacific Retail Trust from October,
1995 to February 1999; Executive Vice President
- Madison Property Corporation from 1993 to
October, 1995; Executive Vice President -
Rosewood Property Company from 1989 to 1993;
Retail Partner - Lincoln Property Company from
1979 to 1989.
John S. Delatour Managing Director - Western U.S. Operations of the
(age 40) Company since February, 1999; Managing Director -
Pacific Retail Trust from June, 1996 to February
1999; Senior Vice President - Lincoln Property
Company from 1983 to June, 1996.
Robert C. Gillander Managing Director - Eastern U.S. Investments of the
(age 45) Company since its initial public offering in
October 1993, and Vice President of the
Company's predecessor real estate division
since 1978.
Bruce M. Johnson Managing Director and Chief Financial Officer of
(age 51) the Company since its initial public offering in
October 1993, and Executive Vice President of
the Company's predecessor real estate division
since 1979.
Brian M. Smith Managing Director - Pacific Investments of the
(age 44) Company since February, 1999; Managing Director -
Pacific Retail Trust from February, 1997 to
February 1999; Senior Vice President - Lowe
Enterprises, Inc. from 1994 to February 1997;
Managing Director - Trammell Crow Company from
1983 to 1994.
James D. Thompson Managing Director - Eastern Operations of the
(age 42) Company since its initial public offering in
October 1993, and Vice President of the Company's
predecessor real estate division since 1981.
Lee S. Wielansky Managing Director - Investments and Director of the
(age 48) Company since March 1998; President and Chief
Executive Officer - Midland Development Group
from 1983 to March 1998.
Item 11. Executive Compensation
Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
end of the fiscal year covered by this Form 10-K with respect to its 1999 Annual
Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owner and Management
Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
end of the fiscal year covered by this Form 10-K with respect to its 1999 Annual
Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
end of the fiscal year covered by this Form 10-K with respect to its 1999 Annual
Meeting of Shareholders.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statements and Financial Statement Schedules:
The Company's 1998 financial statements and financial statement schedule,
together with the report of KPMG LLP dated February 1, 1999, except for Note 13
as to which the date is March 1, 1999, are listed on the index immediately
preceding the financial statements at the end of this report.
(b) Reports on Form 8-K:
None
(c) Exhibits:
2. Agreement and Plan of Merger dated as of September 23, 1998 between
Regency Realty Corporation and Pacific Retail Trust (incorporated by
reference to Exhibit 2.1 to the registration statement on Form S-4 of
Regency Realty Corporation, No. 333-65491)
3. Articles of Incorporation
# (i) Restated Articles of Incorporation of Regency Realty
Corporation as amended.
#(ii) Restated Bylaws of Regency Realty Corporation.
4. (a) See exhibits 3(i) and 3(ii) for provisions of the Articles of
Incorporation and Bylaws of Regency Realty Corporation defining
rights of security holders.
(b) Indenture dated July 20, 1998 between Regency Centers, L.P., the
guarantors named therein and First Union National Bank, as trustee
(incorporated by reference to Exhibit 4.1 to the registration
statement on Form S-4 of Regency Centers, L.P., No. 333-63723).
10. Material Contracts
~*(a) Regency Realty Corporation 1993 Long Term Omnibus Plan
~*(b) Form of Stock Purchase Award Agreement
~*(c) Form of Management Stock Pledge Agreement, relating to the
Stock Purchase Award Agreement filed as Exhibit 10(b)
~*(d) Form of Promissory Note, relating to the Stock Purchase Award
Agreement filed as Exhibit 10(b)
~*(e) Form of Option Award Agreement for Key Employees
~*(f) Form of Option Award Agreement for Non-Employee Directors
~*(g) Annual Incentive for Management Plan
~*(h) Form of Director/Officer Indemnification Agreement
~*(i) Form of Non-Competition Agreement between Regency Realty
Corporation and Joan W. Stein, Robert L. Stein, Richard W.
Stein, the Martin E. Stein Testamentary Trust A and the
Martin E. Stein Testamentary Trust B.
~*(j) Form of Employment Agreement with Martin E. Stein, Jr.
~*** (k) Form of Employment Agreements entered into with the following
executive officers:
(i) Bruce M. Johnson
(ii) Robert C. Gillander, Jr.
(iii) James D. Thompson
(l) The following documents, all dated November 5, 1993,
relating to a $51 million loan from Salomon Brothers
Inc. to corporations and subsidiaries wholly owned by
the Company.
** (i) Loan Agreement between RSP IV Criterion, Ltd.,
Regency Rosewood Temple Terrace, Ltd., Treasure
Coast Investors, Ltd., Landcom Regency Mandarin,
Ltd., RRC FL SPC, Inc., RRC AL SPC, Inc., RRC MS
SPC, Inc., and RRC GA SPC, Inc.(as borrowers) and
RRC Lender, Inc. (as lender)
** (ii) Promissory Note in the original principal amount of
$51 million
** (iii) Undertaking executed by the Registrant and RRC FL
SPC, Inc., RRC AL SPC, Inc., RRC MS SPC, Inc., and
RRC GA SPC, Inc.
** (iv) Certificate Purchase Agreement between RRC Lender,
Inc. (as seller) and Salomon Brothers, Inc. (as
lender)
(m) The following documents relating to the purchase by Security
Capital U.S. Realty and Security Capital Holdings, S.A. of up
to 45% of the Registrant's outstanding common stock:
++ (i) Stock Purchase Agreement dated June 11, 1996.
++ (ii) Stockholders' Agreement dated July 10, 1996.
+++ (A) First Amendment of Stockholders' Agreement dated
February 10, 1997.
(B) Amendment No. 2 to Stockholders' Agreement dated
December 4, 1997 (incorporated by reference to
Exhibit 6.2 to Schedule 13D/A filed by Security
Capital U.S. Realty on December 11, 1997)
++ (iii) Registration Rights Agreement dated July 10, 1996.
+ (n) Stock Grant Plan adopted on January 31, 1994 to grant stock to
employees.
~@ (o) Criteria for Restricted Stock Awards under 1993 Long Term
Omnibus Plan.
~@ (p) Form of 1996 Stock Purchase Award Agreement.
~@ (q) Form of 1996 Management Stock Pledge Agreement relating to the
Stock Purchase Award Agreement filed as Exhibit 10(p).
~@ (r) Form of Promissory Note relating to 1996 Stock Purchase Award
Agreement filed as Exhibit 10(p).
+++ Filed as an exhibit to the Company's Form 8-K report filed
March 14, 1997 and incorporated herein by reference.
@ Filed as an exhibit to the Company's Form 10-K filed March 25,
1997 and incorporated herein by reference.
@@ Included as an exhibit to the Company's Form 10-Q filed May 15,
1997 and incorporated herein by reference.
@@@ Included as an exhibit to the Company's Form 8-K/A report filed
March 19, 1998 and incorporated herein by reference.
@@@ (s) Second Amended and Restated Agreement of Limited Partnership of
Regency Centers, L.P.
(t) Amendment No. 1 to the Second Amended and Restated Agreement of
Limited Partnership of Regency Centers, L.P. (incorporated by
reference to Exhibit 3.2 to the Registration Statement on Form
10 of Regency Centers, L.P.)
(u) Amended and Restated Credit Agreement dated as of February 26,
1999 by and among Regency Centers, L.P., a Delaware limited
partnership (the "Borrower"), Regency Realty Corporation, a
Florida corporation (the "Parent"), each of the financial
institutions initially a signatory hereto together with their
assignees, (the "Lenders"), and Wells Fargo Bank, National
Association, as contractual representative of the Lenders to
the extent and in the manner provided.
(v) Assignment and Acceptance Agreement dated as of February 26,
1999 by and among Regency Centers, L.P., Regency Realty
Corporation and Wells Fargo Bank, National Association, as
Agent.
- -------------------------
~ Management contract or compensatory plan or arrangement filed
pursuant to S-K 601(10)(iii)(A).
# Included as an exhibit to the Company's Form 10-Q filed August 11,
1997 and incorporated herein by reference.
* Included as an exhibit to the Pre-effective Amendment No. 2 to the
Company's S-11 filed October 5, 1993, and incorporated herein by
reference
** Included as an exhibit to the Company's Form 10-Q filed December 13,
1993, and incorporated herein by reference
*** Included as an exhibit to the Company's Form 10-Q filed November 14,
1996, and incorporated herein by reference
+ Included as an exhibit to the Company's Form 10-Q filed May 12, 1994,
and incorporated herein by reference
++ Filed as appendices to the Company's definitive proxy statement dated
August 2, 1996 and incorporated herein by reference.
+++ Filed as an exhibit to the Company's Form 8-K report filed March 14,
1997 and incorporated herein by reference.
@ Filed as an exhibit to the Company's Form 10-K filed March 25, 1997
and incorporated herein by reference.
@@ Included as an exhibit to the Company's Form 10-Q filed May 15, 1997
and incorporated herein by reference.
@@@ Included as an exhibit to the Company's Form 8-K/A report filed
March 19, 1998 and incorporated herein by reference.
21. Subsidiaries of the Registrant
23. Consent of KPMG LLP
27. Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REGENCY REALTY CORPORATION
Date: March 12, 1999 By: /s/ Martin E. Stein, Jr.
-----------------------------------------
Martin E Stein, Jr., Chairman of the Board
and Chief Executive Officer
Date: March 12, 1999 By: /s/ Bruce M. Johnson
------------------------------------------
Bruce M. Johnson, Managing Director and
Principal Financial Officer
Date: March 12, 1999 By: /s/ J. Christian Leavitt
------------------------------------------
J. Christian Leavitt, Senior Vice
President, Finance and Principal
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Date: March 12, 1999 /s/ Martin E. Stein, Jr.
---------------------------------------------
Martin E. Stein, Jr., Chairman of the Board
and Chief Executive Officer
Date: March 12, 1999 /s/ Mary Lou Rogers
---------------------------------------------
Mary Lou Rogers, President, Chief Operating
Officer and Director
Date: March 12, 1999 /s/ Thomas B. Allin
---------------------------------------------
Thomas B. Allin, Director
Date: March 12, 1999 /s/ Raymond L. Bank
---------------------------------------------
Raymond L. Bank, Director
Date: March 12, 1999 /s/ A. R. Carpenter
---------------------------------------------
A. R. Carpenter, Director
Date: March 12, 1999 /s/ Jeffrey A. Cozad
---------------------------------------------
Jeffrey A. Cozad, Director
Date: March 12, 1999 /s/ J. Dix Druce, Jr.
---------------------------------------------
J. Dix Druce, Jr., Director
Date: March 12, 1999 /s/ John T. Kelley
---------------------------------------------
John T. Kelley, Director
Date: March 12, 1999 /s/ Douglas S. Luke
---------------------------------------------
Douglas S. Luke, Director
Date: March 12, 1999 /s/ John C. Schweitzer
---------------------------------------------
John C. Schweitzer, Director
Date: March 12, 1999 /s/ Lee Wielansky
---------------------------------------------
Lee Wielansky, Director
Date: March 12, 1999 /s/ Terry N. Worrell
---------------------------------------------
Terry N. Worrell, Director
REGENCY REALTY CORPORATION
INDEX TO FINANCIAL STATEMENTS
Regency Realty Corporation
Independent Auditors' Report F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997, and 1996 F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997, and 1996 F-6
Notes to Consolidated Financial Statements F-8
Financial Statement Schedule
Independent Auditors' Report on Financial Statement Schedule S-1
Schedule III - Regency Realty Corporation Combined Real Estate and
Accumulated Depreciation - December 31, 1998 S-2
All other schedules are omitted because they are not applicable or
because information required therein is shown in the financial
statements or notes thereto.
F-2
Independent Auditors' Report
The Shareholders and Board of Directors
Regency Realty Corporation:
We have audited the accompanying consolidated balance sheets of Regency Realty
Corporation as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Regency Realty
Corporation as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998 in conformity with generally accepted accounting
principles.
KPMG LLP
Jacksonville, Florida
February 1, 1999, except for Note 13,
as to which the date is March 1, 1999
F-3
REGENCY REALTY CORPORATION
Consolidated Balance Sheets
December 31, 1998 and 1997
1998 1997
---- ----
Assets
Real estate investments, at cost (notes 2, 5 and 9):
Land $ 257,669,018 177,245,784
Buildings and improvements 925,514,995 622,555,583
Construction in progress - development for investment 15,647,659 13,427,370
Construction in progress - development for sale 20,869,915 20,173,039
------------------ ------------------
1,219,701,587 833,401,776
Less: accumulated depreciation 58,983,738 40,795,801
------------------ ------------------
1,160,717,849 792,605,975
Investments in real estate partnerships (note 4) 30,630,540 999,730
------------------ ------------------
Net real estate investments 1,191,348,389 793,605,705
Cash and cash equivalents 19,919,693 16,586,094
Tenant receivables, net of allowance for uncollectible accounts of
$1,787,686 and $1,162,570 at December 31, 1998 and
1997, respectively 16,758,917 9,546,584
Deferred costs, less accumulated amortization of $5,295,336 and
$3,842,914 at December 31, 1998 and 1997, respectively 6,872,023 4,252,991
Other assets 5,208,278 2,857,217
------------------ ------------------
$ 1,240,107,300 826,848,591
================== ==================
Liabilities and Stockholders' Equity
Liabilities:
Notes payable (note 5) 430,494,910 229,919,242
Acquisition and development line of credit (note 5) 117,631,185 48,131,185
Accounts payable and other liabilities 19,936,424 11,597,232
Tenants' security and escrow deposits 3,110,370 2,319,941
------------------ ------------------
Total liabilities 571,172,889 291,967,600
------------------ ------------------
Series A preferred units (note 6) 78,800,000 -
Exchangeable operating partnership units (notes 2 and 6) 27,834,330 13,777,156
Limited partners' interest in consolidated partnerships 11,558,618 7,477,182
------------------ ------------------
118,192,948 21,254,338
------------------ ------------------
Stockholders' equity (notes 2, 6, 7 and 8):
Common stock $.01 par value per share: 150,000,000 shares
authorized; 25,488,989 and 23,992,037 shares issued and
outstanding at December 31, 1998 and 1997 254,889 239,920
Special common stock - 10,000,000 shares authorized:
Class B $.01 par value per share, 2,500,000
shares issued and outstanding 25,000 25,000
Additional paid in capital 578,466,708 535,498,878
Distributions in excess of net income (19,395,744) (20,494,893)
Stock loans (8,609,390) (1,642,252)
------------------ ------------------
Total stockholders' equity 550,741,463 513,626,653
------------------ ------------------
Commitments and contingencies (notes 9, 10 and 13)
$ 1,240,107,300 826,848,591
================== ==================
See accompanying notes to consolidated financial statements.
F-4
REGENCY REALTY CORPORATION
Consolidated Statements of Operations
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Revenues:
Minimum rent (note 9) $ 103,365,322 70,102,765 34,705,905
Percentage rent 3,012,105 2,151,379 997,981
Recoveries from tenants 24,109,519 16,600,925 7,729,404
Management, leasing and brokerage fees 11,862,784 8,447,615 3,444,287
Equity in income of investments in
real estate partnerships (note 4) 946,271 33,311 69,990
---------------- ---------------- ----------------
Total revenues 143,296,001 97,335,995 46,947,567
---------------- ---------------- ----------------
Operating expenses:
Depreciation and amortization 25,046,001 16,303,159 8,058,643
Operating and maintenance 18,455,672 14,212,555 7,655,934
General and administrative 15,064,148 9,963,926 6,048,140
Real estate taxes 12,388,521 8,691,576 4,409,460
---------------- ---------------- ----------------
Total operating expenses 70,954,342 49,171,216 26,172,177
---------------- ---------------- ----------------
Interest expense (income):
Interest expense 28,786,431 19,667,483 11,476,555
Interest income (1,957,575) (1,000,227) (666,031)
---------------- ---------------- ----------------
Net interest expense 26,828,856 18,667,256 10,810,524
---------------- ---------------- ----------------
Income before minority interests and sale
of real estate investments 45,512,803 29,497,523 9,964,866
Gain on sale of real estate investments 10,725,975 450,902 -
---------------- ---------------- ----------------
Income before minority interest 56,238,778 29,948,425 9,964,866
Minority interest of exchangeable partnership units (1,826,273) (2,041,823) -
Minority interest of limited partners (464,098) (504,947) -
Minority interest preferred unit distribution (3,358,333) - -
---------------- ---------------- ----------------
Net income 50,590,074 27,401,655 9,964,866
Preferred stock dividends - - (57,721)
---------------- ---------------- ----------------
Net income for common stockholders $ 50,590,074 27,401,655 9,907,145
================ ================ ================
Net income per share (note 7):
Basic $ 1.80 1.28 0.82
================ ================ ================
Diluted $ 1.75 1.23 0.82
================ ================ ================
See accompanying notes to consolidated financial statements
F-5
REGENCY REALTY CORPORATION
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1998, 1997 and 1996
Class B Additional Distributions Total
Preferred Common Common Paid In in excess of Stock Stockholders'
Stock Stock Stock Capital Net Income Loans Equity
----------- --------- -------- ------------- ------------ ------------ --------------
Balance at
December 31, 1995 $ 1,916,268 67,287 25,000 155,221,241 (8,073,188) (2,150,034) 147,006,574
Common stock issued to
SC-USREALTY (note 6) - 36,518 - 63,373,745 - - 63,410,263
Common stock issued as
compensation, purchased by
directors or officers, or issued
under stock options - 1,401 - 2,570,506 - (1,273,000) 1,298,907
Series A Preferred stock converted
to common stock (1,916,268) 943 - 1,915,339 - - 14
Partial forgiveness of
stock loans - - - - - 918,601 918,601
Cash dividends declared:
Preferred stock - - - - (57,721) - (57,721)
Common stock, $1.62 per share - - - - (15,815,727) - (15,815,727)
Net income - - - - 9,964,866 - 9,964,866
----------- --------- -------- ------------- ------------ ------------ -------------
Balance at
December 31, 1996 $ - 106,149 25,000 223,080,831 (13,981,770) (2,504,433) 206,725,777
Common stock issued to
SC-USREALTY (note 6) - 75,135 - 158,475,802 - - 158,550,937
Common stock issued in
secondary offering, net - 25,448 - 65,487,586 - - 65,513,034
Common stock issued as
compensation, purchased by
directors or officers, or issued
under stock options - 1,359 - 3,026,241 - - 3,027,600
Common stock issued for
partnership units redeemed - 30,271 - 81,246,827 - - 81,277,098
Common stock issued to
acquire real estate (note 2) - 1,558 - 4,181,591 - - 4,183,149
Partial forgiveness or
repayment of stock loans - - - - - 862,181 862,181
Cash dividends declared:
Common stock, $1.68 per share - - - - (33,914,778) - (33,914,778)
Net income - - - - 27,401,655 - 27,401,655
----------- --------- -------- ------------- ------------ ------------ -------------
Balance at
December 31, 1997 $ - 239,920 25,000 535,498,878 (20,494,893) (1,642,252) 513,626,653
Common stock issued to
SC-USREALTY (note 6) - 4,358 - 9,637,208 - - 9,641,566
Common stock issued as
compensation, purchased by
directors or officers, or issued
under stock options - 4,208 - 10,746,701 - (7,409,151) 3,341,758
Common stock issued for
partnership units redeemed - 752 - 1,670,631 - - 1,671,383
Common stock issued to
acquire real estate (note 2) - 5,651 - 14,263,472 - - 14,269,123
Reallocation of minority interest - - - 6,649,818 - - 6,649,818
Partial forgiveness or
repayment of stock loans - - - - - 442,013 442,013
Cash dividends declared:
Common stock, $1.76 per share - - - - (49,490,925) - (49,490,925)
Net income - - - - 50,590,074 - 50,590,074
----------- --------- -------- ------------- ------------ ------------ -------------
Balance at
December 31, 1998 $ - 254,889 25,000 578,466,708 (19,395,744) (8,609,390) 550,741,463
=========== ========= ======== ============= ============ ============ =============
See accompanying notes to consolidated financial statements.
F-6
REGENCY REALTY CORPORATION
Consolidated Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Cash flows from operating activities:
Net income $ 50,590,074 27,401,655 9,964,866
Adjustments to reconcile net income to net
Cash provided by operating activities:
Depreciation and amortization 25,046,001 16,303,159 8,058,643
Deferred financing cost and debt premium amortization (822,276) 907,224 699,424
Stock based compensation 2,422,547 2,561,139 2,940,414
Minority interest of redeemable partnership units 1,826,273 2,041,823 -
Minority interest preferred unit distribution 3,358,333 - -
Minority interest of limited partners 464,098 504,947 -
Equity in income of investments in real estate partnerships (946,271) (33,311) (69,990)
Gain on sale of real estate investments (10,725,975) (450,902) -
Changes in assets and liabilities:
Tenant receivables (5,143,938) (3,596,964) (2,660,656)
Deferred leasing commissions (2,337,253) (1,120,184) (585,889)
Other assets (4,059,535) (1,641,108) (1,019,637)
Tenants' security deposits 517,396 480,743 405,158
Accounts payable and other liabilities 4,811,991 (314,001) (1,728,414)
---------------- ----------------- -----------------
Net cash provided by operating activities 65,001,465 43,044,220 16,003,919
---------------- ----------------- -----------------
Cash flows from investing activities:
Acquisition and development of real estate (229,348,139) (162,244,207) (102,933,980)
Investment in real estate partnerships (29,068,392) - (881,309)
Capital improvements (8,325,492) (5,226,138) (2,898,250)
Construction in progress for sale, net of reimbursement (696,876) (23,776,953) (3,360,206)
Proceeds from sale of real estate investments 30,662,197 2,645,229 -
Distributions received from real estate partnership investments 383,853 68,688 231,581
---------------- ----------------- -----------------
Net cash used in investing activities (236,392,849) (188,533,381) (109,842,164)
---------------- ----------------- -----------------
Cash flows from financing activities:
Net proceeds from common stock issuance 10,225,529 225,094,980 63,617,263
Proceeds from issuance of partnership units 7,694 2,255,140 -
Distributions to partnership unit holders (2,023,132) (1,954,375) (16,846)
Contributions from limited partners in consolidated partnerships 4,289,995 - -
Net distributions to limited partners in consolidated partnerships (672,656) (1,124,480) -
Distributions to preferred unit holders (3,358,333) - -
Dividends paid to stockholders (49,490,925) (33,914,778) (16,179,518)
Net proceeds from issuance of Series A preferred units 78,800,000 - -
Net proceeds from term notes 99,758,000 - -
Proceeds (repayment) of acquisition and development
line of credit, net 69,500,000 (25,570,000) 51,361,382
Proceeds from mortgage loans payable 7,345,000 15,972,920 1,518,331
Repayment of mortgage loans payable (37,354,368) (26,408,932) (808,068)
Deferred financing costs (2,301,821) (568,449) (762,771)
---------------- ----------------- -----------------
Net cash provided by financing activities 174,724,983 153,782,026 98,729,773
---------------- ----------------- -----------------
Net increase in cash and cash equivalents 3,333,599 8,292,865 4,891,528
Cash and cash equivalents at beginning of year 16,586,094 8,293,229 3,401,701
---------------- ----------------- -----------------
Cash and cash equivalents at end of year $ 19,919,693 16,586,094 8,293,229
================ ================= =================
Supplemental disclosure of cash flow information - cash paid
for interest (net of capitalized interest of approximately
$3,417,000, $1,896,000 and $381,000 in 1998, 1997 and 1996,
respectively) $ 24,693,895 18,631,091 10,598,841
================ ================= =================
Supplemental disclosure of non-cash transactions:
Mortgage loans assumed to acquire real estate $ 132,832,342 142,448,966 3,918,752
================ ================= =================
Exchangeable operating partnership units and common
stock issued to acquire real estate $ 37,023,849 96,380,706 525,332
================ ================= =================
See accompanying notes to consolidated financial statements.
F-8
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
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 96% of the outstanding common units of Regency
Centers, L.P. ("RCLP" or the "Partnership" formerly known as
Regency Retail Partnership, L.P.) 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 exchangeable
operating partnership units and limited partners' interests in
consolidated partnerships, respectively. The Company is a
qualified real estate investment trust ("REIT") which began
operations in 1993.
(b) Revenues
The Company leases space to tenants under agreements with varying
terms. Leases are accounted for as operating leases with minimum
rent recognized on a straight-line basis over the term of the
lease regardless of when payments are due. Accrued rents are
included in tenant receivables. Minimum rent has been adjusted to
reflect the effects of recognizing rent on a straight line basis.
Substantially all of the lease agreements contain provisions which
provide additional rents based on tenants' sales volume
(contingent or percentage rent) or reimbursement of the tenants'
share of real estate taxes and certain common area maintenance
(CAM) costs. These additional rents are reflected on the accrual
basis. On May 22, 1998, the Emerging Issues Task Force (EITF)
reached a consensus on Issue 98-9 "Accounting for Contingent Rent
in Interim Financial Periods". The EITF has stated that lessors
should defer recognition of contingent rent that is based on
meeting specified targets until those specified targets are met
and not ratably throughout the year. The Company has previously
recognized contingent rent ratably over the year based on the
historical trends of its tenants. Although the EITF subsequently
reversed its original consensus related to contingent rent, the
Company has adopted the provisions of Issue 98-9 prospectively and
has ceased the recognition of contingent rents until such time as
its tenants have achieved their specified target. The effect of
the adoption was not material to the financial statements during
1998, since most of the Company's tenants had met their specified
targets prior to year end and contingent rents were appropriately
recognized.
Management, leasing, brokerage and development fees are recognized
as revenue when earned.
F-9
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
(c) 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 owned by the
Company are capitalized as buildings and improvements except for
operating properties acquired. Effective March 19, 1998, the EITF
ruled in Issue 97-11, "Accounting for Internal Costs Relating to
Real Estate Property Acquisitions", that only internal costs of
identifying and acquiring non-operating properties that are
directly identifiable with the acquired properties should be
capitalized, and that all internal costs associated with
identifying and acquiring operating properties should be expensed
as incurred. The Company had previously capitalized direct costs
associated with the acquisition of operating properties as a cost
of the real estate. The Company has adopted EITF 97-11 effective
March 19, 1998. During 1997, the Company capitalized approximately
$1.5 million of internal costs related to acquiring operating
properties. Through the effective date of EITF 97-11, the Company
has capitalized $855,000 of internal acquisition costs. For the
remainder of 1998, the Company incurred approximately $1.5 million
of internal costs related to acquiring operating properties which
was expensed.
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 in accordance
with generally accepted accounting principles.
Depreciation is computed using the straight line method over
estimated useful lives up to forty years for buildings and
improvements, term of lease for tenant improvements, and five to
seven years for furniture and equipment.
(d) Income Taxes
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 in the
accompanying consolidated financial statements.
Earnings and profits, which determine the taxability of dividends
to stockholders, differ from net income reported for financial
reporting purposes primarily because of different depreciable
lives and bases of rental properties and differences in the timing
of recognition of earnings upon disposition of properties.
Regency Realty Group, Inc., the Company's management company
subsidiary ("RRG"), is subject to Federal and State income taxes
and files separate tax returns. RRG had taxable income of
$1,052,233, $918,763 and $0 for the years ended December 31, 1998,
1997 and 1996, respectively. RRG incurred Federal and State income
tax of $344,833 and $327,021 in 1998 and 1997, respectively, and
paid no tax in 1996.
F-10
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
(d) Income Taxes (continued)
At December 31, 1998 and 1997, the net book basis of real estate
assets exceeds the tax basis by approximately $122 million and
$39.6 million, respectively, primarily due to the difference
between the cost basis of the assets acquired and their carryover
basis recorded for tax purposes.
The following summarizes the tax status of dividends paid during
the years ended December 31 (unaudited):
1998 1997 1996
---- ---- ----
Dividend per share $1.76 1.68 1.62
Ordinary income 71% 85% 77%
Capital gain 2% - -
Return of capital 27% 15% 23%
(e) Deferred Costs
Deferred costs consist of internal and external commissions
associated with leasing the rental property and loan costs
incurred in obtaining financing which are limited to initial
direct and incremental costs. The net leasing commission balance
was $3.3 and $1.7 million at December 31, 1998 and 1997,
respectively. The net loan cost balance was $3.5 and $2.5 million
at December 31, 1998 and 1997, respectively. Such costs are
deferred and amortized over the terms of the respective leases and
loans.
(f) Earnings Per Share
The Company applies the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share" to the
computation, presentation, and disclosure requirements of earnings
per share. Basic net income per share of common stock is computed
based upon the weighted average number of common shares
outstanding during the year. Diluted net income per share also
includes common share equivalents for stock options, exchangeable
partnership units, and Class B common stock when dilutive. See
note 7 for the calculation of earnings per share.
(g) Cash and Cash Equivalents
Any instruments which have an original maturity of ninety days or
less when purchased are considered cash equivalents.
(h) Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities, at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
F-11
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
(i) Impairment of Long-Lived Assets
The Company applies the provisions of SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of". This Statement requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to
be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the fair
value of the assets. Adoption of this Statement did not have a
material impact on the Company's financial position, results of
operations, or liquidity.
(j) Stock Option Plan
The Company applies the provisions of SFAS No. 123, "Accounting
for Stock Based Compensation", which allows companies a choice in
the method of accounting for stock options. Entities may recognize
as expense over the vesting period the fair value of all
stock-based awards on the date of grant or SFAS No. 123 also
permits entities to continue to apply the provisions of APB
Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants
made as if the fair-value-based method defined in SFAS No. 123 had
been applied. APB Opinion No. 25 "Accounting for Stock Issued to
Employees", and related interpretations states that compensation
expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price.
The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of
SFAS No. 123.
(k) Statement of Financial Accounting Standards No. 131
The FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related
Information" ("FAS 131"), which is effective for fiscal years
beginning after December 15, 1997. FAS 131 establishes standards
for the way that public business enterprises report information
about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim and annual financial reports. The
Company adopted FAS 131 as disclosed in note 3.
(l) Reclassifications
Certain reclassifications have been made to the 1997 amounts to
conform to classifications adopted in 1998.
F-12
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
2. Acquisitions of Shopping Centers
During 1998, the Company acquired 31 shopping centers fee simple
for approximately $355.9 million and also invested $28.4 million in 12
joint ventures ("JV Properties"), for a total investment of $384.3
million in 43 shopping centers ("1998 Acquisitions"). Included in the
1998 Acquisitions are 32 shopping centers acquired from various entities
comprising the Midland Group ("Midland"). Of the 32 Midland centers, 31
are anchored by Kroger, and 12 are owned through joint ventures in which
the Company's ownership interest is 50% or less. The Company's investment
in the properties acquired from Midland is $236.6 million at December 31,
1998. The Company expects to acquire all of the interests in two of the
JV Properties for approximately $20.3 million during 1999 which will
increase its total investment in the Midland properties to $256.9
million. In addition, during 1999 and 2000, the Company may pay
contingent consideration of up to an estimated $23 million, through the
issuance of Partnership units and the payment of cash. The amount of such
consideration, if issued, will depend on the satisfaction of certain
performance criteria relating to the assets acquired from Midland.
Transferors who received cash at the initial Midland closing will receive
contingent future consideration in cash rather than units.
The Company acquired 35 shopping centers during 1997 (the "1997
Acquisitions") for approximately $395.7 million. Included in the 1997
Acquisitions are 26 shopping centers acquired from Branch Properties
("Branch") for $232.4 million. During 1998, the Company issued 721,997
additional Units and shares of common stock valued at $18.2 million to
Branch as contingent consideration for the satisfaction of certain
performance criteria of the properties acquired. The Company expects to
issue the remaining contingent consideration, 298,064 Units, during 1999.
The operating results of the 1998 and 1997 Acquisitions 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 all 1998 and 1997
Acquisitions had occurred on January 1, 1997. Such pro forma information
reflects adjustments to 1) increase depreciation, interest expense, and
general and administrative costs, 2) remove the office buildings sold,
and 3) adjust the weighted average common shares, and common equivalent
shares outstanding issued to acquire the properties. Pro forma revenues
would have been $156.4 and $144.4 million in 1998 and 1997, respectively.
Pro forma net income for common stockholders would have been $44.5 and
$28.0 million in 1998 and 1997, respectively. Pro forma basic net income
per share would have been $1.55 and $1.31 in 1998 and 1997, respectively.
Pro forma diluted net income per share would have been $1.52 and $1.22,
in 1998 and 1997, respectively. This data does not purport to be
indicative of what would have occurred had the Acquisitions been made on
January 1, 1997, or of results which may occur in the future.
F-13
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
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, all of which have been 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 and Office Buildings segments 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 considers 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 FFO on the same basis. While management believes that 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 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, FFO, and assets for each of the reportable
segments are summarized as follows for the years ended as of December 31,
1998, 1997, and 1996. Non-segment assets to reconcile to total assets
include cash, accounts receivable and deferred financing costs.
F-14
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
3. Segments (continued)
1998 1997 1996
---- ---- ----
Revenues:
Retail segment $ 130,900,785 84,203,386 39,004,931
Service operations segment 11,862,784 8,447,615 3,444,287
Office buildings segment 532,432 4,684,994 4,498,349
================ ================ =================
Total revenues $ 143,296,001 97,335,995 46,947,567
================ ================ =================
Funds from Operations:
Retail segment net operating income $ 100,239,863 63,056,124 28,652,114
Service operations segment income 11,862,784 8,447,615 3,444,287
Office buildings segment net operating income 349,161 2,928,125 2,785,772
Adjustments to calculate consolidated FFO:
Interest expense (28,786,431) (19,667,483) (11,476,555)
Interest income 1,957,575 1,000,227 666,031
Earnings from recurring land sales 901,853 - -
General and administrative (15,064,148) (9,963,926) (6,048,140)
Non-real estate depreciation (679,740) (406,113) (49,200)
Minority interests of limited partners (464,098) (504,947) -
Minority interests in depreciation
and amortization (526,018) (285,280) -
Share of joint venture depreciation
and amortization 688,686 59,038 39,626
Dividends on preferred shares and units (3,358,333) 0 (57,721)
---------------- ---------------- -----------------
Funds from Operations 67,121,154 44,663,380 17,956,214
---------------- ---------------- -----------------
Reconciliation to net income for common
stockholders:
Real estate related depreciation
and amortization (24,366,261) (15,897,046) (8,009,443)
Minority interests in depreciation
and amortization 526,018 285,280 -
Share of joint venture depreciation
and amortization (688,686) (59,038) (39,626)
Earnings from property sales 9,824,122 450,902 -
Minority interests of exchangeable
partnership units (1,826,273) (2,041,823) -
---------------- ---------------- -----------------
Net income available for common
stockholders $ 50,590,074 27,401,655 9,907,145
================ ================ =================
As of December 31
Assets (in thousands): 1998 1997 1996
---------------------- ---- ---- ----
Retail segment $ 1,170,478 754,174 342,900
Service operations segment 20,870 20,173 1,695
Office buildings segment - 19,258 21,559
Cash and other assets 48,759 33,244 20,370
================ ================ =================
Total assets $ 1,240,107 826,849 386,524
================ ================ =================
F-15
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
4. Investments in Real Estate Partnerships
The Company accounts for all investments in which it owns less than 50%
and does not have controlling financial interest, using the equity
method. The Company's combined investment in these partnerships was $30.6
million and $999,730 at December 31, 1998 and 1997, respectively. Net
income is allocated in accordance with each of the partnership
agreements.
5. Notes Payable and Acquisition and Development Line of Credit
The Company's outstanding debt at December 31, 1998 and 1997 consists of
the following (in thousands):
1998 1997
---- ----
Notes Payable:
Fixed rate mortgage loans $ 298,148 199,078
Variable rate mortgage loans 11,051 30,841
Fixed rate unsecured loans 121,296 -
------- -------
Total notes payable 430,495 229,919
Acquisition and development
line of credit 117,631 48,131
------- -------
Total $ 548,126 278,050
======= =======
The Company has an acquisition and development line of credit (the
"Line") which provides for a commitment up to $300 million, and
incorporates a competitive bid facility of up to $150 million of the
commitment amount. Maximum availability under the Line is based on the
discounted value of a pool of eligible unencumbered assets less the
amount of the Company's outstanding unsecured liabilities. The Line,
which is unsecured, matures in May 2000, 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, (.875% currently), which is
dependent on the Company's investment grade rating. The interest rate on
the Line was 6.56% at December 31, 1998. The Company's ratings are
currently Baa2 from Moody's Investor Service, BBB from Duff and Phelps,
and BBB- from Standard and Poors. The Company is required to comply, and
is in compliance, with certain financial 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 July 17, 1998 the Company through RCLP, completed a $100 million
offering of seven year term notes at an effective interest rate
of 7.17%. The Notes were priced at 162.5 basis points over the current
yield for seven year US Treasury Bonds. The notes are unsecured and
mature on July 15, 2005. The net proceeds of the offering were used to
repay borrowings under the Line.
Mortgage loans are secured by certain real estate properties, but
generally 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 2018.
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 9.8%.
F-16
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
5. Notes Payable and Acquisition and Development Line of Credit (continued)
During 1998, the Company assumed mortgage loans with a fair value of
$132.8 million related to the acquisition of shopping centers, which
includes debt premiums of $12.4 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 of December 31, 1998, scheduled principal repayments on notes payable
and the Line were as follows (in thousands):
Scheduled
Scheduled Principal Term Loan Total
Payments by Year Payments Maturities Payments
---------------- --------- ---------- --------
1999 $ 3,771 21,579 25,350
2000 3,996 174,674 178,670
2001 3,911 41,928 45,839
2002 3,098 44,117 47,215
2003 2,914 13,291 16,205
Beyond 5 Years 17,811 206,607 224,418
Net unamortized debt
payments - 10,429 10,429
------- ------- -------
Total $ 35,501 512,625 548,126
======= ======= =======
Unconsolidated partnerships and joint ventures had mortgage loans payable
of $76.7 million at December 31, 1998, and the Company's proportionate
share of these loans was $34.4 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 Company's
Line, are considered to be at fair value since the interest rates on such
instruments reprice based on current market conditions. Notes payable
with fixed rates, that have been assumed in connection with acquisitions,
are recorded in the accompanying financial statements at fair value. The
Company considers the carrying value of all other fixed rate notes
payable to be a reasonable estimation of their fair value based on the
fact that the rates of such notes are similar to rates available to the
Company for debt of the same terms.
6. Stockholders' Equity
On June 11, 1996, the Company entered into a Stockholders Agreement (the
"Agreement") with SC-USREALTY granting it certain rights such as
purchasing common stock, nominating representatives to the Company's
Board of Directors, and subjecting SC-USREALTY to certain restrictions
including voting and ownership restrictions. The Agreement primarily
granted SC-USREALTY (i) the right to acquire 7,499,400 shares for
approximately $132 million and also participation rights entitling it
to purchase additional equity in the Company, at the same price as that
offered to other purchasers, each time that the Company sells additional
shares of capital stock or options or other rights to acquire capital
stock, in order to preserve SC-USREALTY's pro rata ownership position;
and (ii) the right to nominate a
F-17
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
6. Stockholders' Equity (continued)
proportionate number of directors on the Company's Board, rounded down
to the nearest whole number, based upon SC-USREALTY's percentage
ownership of outstanding common stock (but not to exceed 49% of the
Board). SC-USREALTY has acquired all of the 7,499,400 shares
related to the Agreement. In connection with the Units and shares of
common stock issued in exchange for Branch's assets. SC-USREALTY acquired
1,750,000 shares during August and December, 1997 at $22.125 per share in
accordance with their rights as provided for in the Agreement. In
connection with the Units and shares of common stock issued for Branch in
March 1998, SC-USREALTY acquired 435,777 shares at $22.125 per share in
accordance with their rights as provided for in the Agreement. The
acquisition of Branch is discussed further in note 2.
For a period of at least five years (subject to certain exceptions),
SC-USREALTY is precluded from, among other things, (i) acquiring more
than 45% of the outstanding common stock on a diluted basis, (ii)
transferring shares without the Company's approval in a negotiated
transaction that would result in any transferee beneficially owning more
than 9.8% of the Company's capital stock, or (iii) acting in concert with
any third parties as part of a 13D group. Subject to certain exceptions,
SC-USREALTY is required to vote its shares either as recommended by the
Board of Directors or proportionately in accordance with the vote of the
other stockholders.
On July 11, 1997, the Company sold 2,415,000 shares to the public at
$27.25 per share. In connection with that offering, SC-USREALTY purchased
an additional 1,785,000 shares at $27.25 directly from the Company. On
August 11, 1997, the Underwriters exercised the over-allotment option and
the Company issued an additional 129,800 shares to the public and 95,939
shares to SC-USREALTY at $27.25 per share. Total proceeds from the sale
of common stock to the public and SC-USREALTY of approximately $117
million net of offering expenses was used to reduce the balance of the
Line.
In connection with the acquisition of shopping centers, RCLP has issued
Exchangeable Operating Partnership Units to limited partners convertible
on a one for one basis into shares of common stock of the Company. There
are currently 1,361,396 Exchangeable Operating Partnership Units
outstanding.
On June 29, 1998, the Company through RCLP issued $80 million of 8.125%
Series A Cumulative Redeemable Preferred Units ("Series A Preferred
Units") to an institutional investor in a private placement. The
issuance involved the sale of 1.6 million Series A Preferred Units
for $50.00 per unit. The Series A Preferred Units, which may be called by
the Partnership at par on or after June 25, 2003, have no stated maturity
or mandatory redemption, and pay a cumulative, quarterly dividend at an
annualized rate of 8.125%. At any time after June 25, 2008, the Series A
Preferred Units may be exchanged for shares of 8.125% Series A Cumulative
Redeemable Preferred Stock of the Company at an exchange rate of one
share of Series A Preferred Stock for one Series A Preferred Unit. The
Series A Preferred Units and Series A Preferred Stock are not convertible
into common stock of the Company. The net proceeds of the offering were
used to reduce the acquisition and development line of credit.
F-18
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
7. Earnings Per Share
The following summarizes the calculation of basic and diluted earnings
per share for the years ended, December 31, 1998, 1997 and 1996 (in
thousands except per share data):
1998 1997 1996
---- ---- ----
Basic Earnings Per Share (EPS) Calculation:
Weighted average common shares outstanding 25,150 17,424 7,331
======= ======= ======
Net income for common $ 50,590 27,402 9,907
stockholders
Less: dividends paid on Class B common stock
5,378 5,140 3,879
------- ------- ------
Net income for Basic EPS 45,212 22,262 6,028
======= ======= ======
Basic EPS $ 1.80 1.28 .82
======= ======= ======
Diluted Earnings Per Share (EPS)
Calculation:
Weighted average shares outstanding
for Basic EPS 25,150 17,424 7,331
Exchangeable operating partnership units 1,223 1,243 18
Incremental shares to be issued under common
stock options using the Treasury method 14 80 3
Contingent units or shares for the acquisition
of real estate 511 955 -
------- ------- ------
Total diluted shares 26,898 19,702 7,352
======= ======= ======
Net income for Basic EPS $ 45,212 22,262 6,028
Add: minority interest of exchangeable
partnership units 1,826 2,042 -
------- ------- ------
Net income for Diluted EPS 47,038 24,304 6,028
======= ======= ======
Diluted EPS $ 1.75 1.23 .82
======= ======= ======
Class B common stock is not included in the above calculation because
it is anti-dilutive.
8. Long-Term Stock Incentive Plans
In 1993, the Company adopted a Long-Term Omnibus Plan (the "Plan")
pursuant to which the Board of Directors may grant stock and stock
options to officers, directors and other key employees. The Plan provides
for the issuance of up to 12% of the Company's common shares outstanding
not to exceed 3.0 million shares. Stock options are granted with an
exercise price equal to the stock's fair market value at the date of
grant. All stock options granted have ten year terms, and with respect to
F-19
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
8. Long-Term Stock Incentive Plans (continued)
officers and other key employees, become fully exercisable after four
years from the date of grant, and with respect to directors, become
fully exercisable after one year.
At December 31, 1998, there were approximately 300,000 shares available
for grant under the Plan. The per share weighted-average fair value of
stock options granted during 1998 and 1997 was $2.22 and $3.26 on the
date of grant using the Black Scholes option-pricing model with the
following weighted-average assumptions: 1998 - expected dividend yield
7.5%, risk-free interest rate of 4.8%, expected volatility 21%, and an
expected life of 6.5 years; 1997 - expected dividend yield 6.3%,
risk-free interest rate of 6.3%, expected volatility 21%, and an expected
life of 5.7 years; The Company applies APB Opinion No. 25 in accounting
for its Plan and, accordingly, no compensation cost has been recognized
for its stock options in the consolidated financial statements.
Had the Company determined compensation cost based on the fair value at
the grant date for its stock options under SFAS No. 123, the Company's
net income for common stockholders would have been reduced to the pro
forma amounts indicated below (in thousands except per share data):
Net income for
Common stockholders 1998 1997 1996
------------------- ---- ---- ----
As reported: $50,590 $27,402 $9,907
Net income per share:
Basic $ 1.80 $ 1.28 $ 0.82
Diluted $ 1.75 $ 1.23 $ 0.82
Pro forma: $49,565 $25,777 $9,897
Net income per share:
Basic $ 1.76 $ 1.18 $ 0.82
Diluted $ 1.71 $ 1.15 $ 0.82
Pro forma net income for common stockholders reflects only
options granted subsequent to the issuance of SFAS 123 in
1995. Therefore, the full impact of calculating compensation
cost for stock options under SFAS No. 123 is not reflected in
the pro forma net income for common stockholders amounts
presented above because compensation cost is reflected over
the options' vesting period and compensation cost for options
granted prior to January 1, 1995 is not considered.
F-20
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
8. Long-Term Stock Incentive Plans (continued)
Stock option activity during the periods indicated is as follows:
Weighted
Average
Number of Exercise
Shares Price
--------- --------
Outstanding, December 31, 1995 186,000 $ 19.09
Granted 12,000 24.67
---------
Outstanding, December 31, 1996 198,000 19.43
---------
Granted 1,252,276 25.39
Forfeited (7,000) 23.54
Exercised (124,769) 19.25
---------
Outstanding, December 31, 1997 1,318,507 25.08
---------
Granted 741,265 24.39
Forfeited (123,495) 25.33
Exercised (227,700) 24.97
---------
Outstanding, December 31, 1998 1,708,577 $ 24.71
=========
The following table presents information regarding all options outstanding at
December 31, 1998.
Weighted
Average Weighted
Number of Remaining Range of Average
Options Contractual Exercise Exercise
Outstanding Life Prices Price
----------- ----------- -------- --------
51,731 5.0 years $ 16.75 - 19.25 $ 18.93
1,231,578 8.6 years 22.25 - 25.25 24.26
425,268 8.4 years 26.19 - 27.75 26.69
----------- --------- ----------------- ------------
1,708,577 8.5 years $ 16.75 - 27.75 $ 24.71
=========== ========= ================= ============
F-21
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
8. Long-Term Stock Incentive Plans (continued)
The following table presents information regarding options currently
exercisable at December 31, 1998:
Weighted
Number of Range of Average
Options Exercise Exercise
Exercisable Prices Price
----------- -------- ---------
51,731 $ 16.75 - 19.25 $ 18.93
98,300 25.25 25.25
88,881 26.25 - 27.75 26.99
------ ------------- --------
238,912 $ 16.75 - 27.75 $ 24.53
======= ================== ========
Also as part of the Plan, in 1993, 1996 and 1998, certain officers and
employees purchased common stock at fair market value directly from the
Company, of which 90%, 95% and 95%, respectively, was financed by a stock
purchase loan provided by the Plan. These recourse loans are fully
secured by stock, bear interest at fixed rates of 6% to 7.79% and mature
after ten years. The Board of Directors may authorize the forgiveness of
all or a portion of the principal balance based on the Company's
achievement of specified financial objectives, and total stockholder
return performance targets. During 1998, 1997, and 1996, $662,196,
$601,516, and $646,598 was forgiven, respectively, and is included as a
charge to income on the consolidated statements of operations. The
Company also has a performance based restricted stock plan for officers
whereby a portion of the shares authorized under the Plan may be granted
upon the achievement of certain total stockholder return performance
targets. Shares granted under the plan become fully vested by January 1,
2000. During 1998, 1997 and 1996, the Company charged $250,000, $259,600
and $809,400 to income on the consolidated statement of operations
related to the restricted stock plan. In addition, the Company provided
it's officers, directors and employees with other stock based
compensation totaling $1.5, $1.7, and $1.5 million during 1998, 1997 and
1996, respectively.
9. Operating Leases
The Company's properties are leased to tenants under operating leases
with expiration dates extending to the year 2028. Future minimum rent
under noncancelable operating leases as of December 31,1998, excluding
tenant reimbursements of operating expenses and excluding additional
contingent rentals based on tenants' sales volume are as follows:
Year ending December 31, Amount
1999 110,538,266
2000 105,061,943
2001 89,224,053
2002 74,990,466
2003 64,644,898
Thereafter 481,164,703
------------
Total $ 925,624,329
============
F-22
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
9. Operating Leases (continued)
At December 31, 1998, the real estate portfolio as a whole was
approximately 93% leased.
The shopping centers' tenant base includes primarily national and
regional supermarkets, drug stores, discount department stores and other
retailers and, consequently, the credit risk is concentrated in the
retail industry. There were no tenants which individually represented 10%
or more of the Company's combined minimum rent. The combined annualized
rent from the Company's four largest retail tenants represented
approximately 26.9% of annualized base rent at December 31, 1998.
10. Contingencies
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. While the Company has
registered the plants located in Florida under a state funded program
designed to substantially fund the clean up, if necessary, of any
environmental issues, the owner or operator is not relieved from the
ultimate responsibility for clean up. The Company also has established
due diligence procedures to identify and evaluate potential environmental
issues on properties under consideration for acquisition. In connection
with acquisitions during 1998 and 1997, the Company has established
environmental reserves which amounted to $2.2 million and $1.9 million at
December 31, 1998 and 1997, respectively. While it is not possible to
predict with certainty, management believes that the reserves are
adequate to cover future clean-up costs related to these sites. The
Company's policy is to accrue environmental clean-up costs when it is
probable that a liability has been incurred and that amount is reasonably
estimable. 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.
11. Market and Dividend Information (Unaudited)
The Company's common stock is traded on the New York Stock Exchange
("NYSE") under the symbol "REG". The Company currently has approximately
3,500 shareholders. The following table sets forth the high and low
prices and the cash dividends declared on the Company's common stock by
quarter for 1998 and 1997. All amounts are in thousands except per share
data.
1998 1997
----------------------------------- -----------------------------------
Cash Cash
High Low Dividends High Low Dividends
Price Price Declared Price Price Declared
----- ----- --------- ----- ----- --------
March 31 $ 27.812 24.750 .44 28.000 25.000 .42
June 30 26.687 24.062 .44 28.125 24.875 .42
September 30 26.500 20.500 .44 28.250 24.875 .42
December 31 23.437 20.250 .44 28.000 24.250 .42
F-23
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
12. Summary of Quarterly Financial Data (Unaudited)
Presented below is a summary of the consolidated quarterly financial data
for the years ended December 31, 1998 and 1997 (amounts in thousands,
except per share data):
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1998:
Revenues $ 30,909 35,187 37,199 40,001
Net income for
common stockholders 19,556 10,798 10,061 10,175
Net income per share:
Basic .74 .38 .34 .35
Diluted .72 .36 .34 .34
1997:
Revenues $ 17,733 24,626 26,790 28,187
Net income for
common stockholders 4,037 4,727 8,743 9,895
Net income per share:
Basic .25 .26 .34 .37
Diluted .25 .26 .32 .35
13. Subsequent Event
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,
provides 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 are 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 is $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 estimated closing
costs of $7.5 million. The price per share used to determine the purchase
price is $23.325 based on the five day average of the closing stock price
of Regency's common stock as listed 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 will be accounted
for as a purchase with the Company as the acquiring entity.
On February 26, 1999, the Company entered into an agreement with
the various banks that provide the Line to increase the unsecured
commitment amount to $635 million.
S-1
Independent Auditors' Report
On Financial Statement Schedule
The Shareholders and Board of Directors
Regency Realty Corporation
Under date of February 1, 1999, except for Note 13 as to which the date is March
1, 1999, we reported on the consolidated balance sheets of Regency Realty
Corporation as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1998, as contained in the
annual report on Form 10-K for the year 1998. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related financial statement schedule as listed in the accompanying index on page
F-1 of the annual report on Form 10-K for the year 1998. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Jacksonville, Florida
February 1, 1999
S-2
Schedule III
REGENCY REALTY CORPORATION
Combined Real Estate and Accumulated Depreciation
December 31, 1998
Initial Cost Total Cost
---------------------------- Cost Capitalized ------------------------------------------
Building & Subsequent to Building &
Land Improvements Acquisition Land Improvements Total
----------- ------------ ---------------- ---------- -------------- ------------
ANASTASIA SHOPPING PLAZA 1,072,451 3,617,493 159,607 1,072,451 3,777,100 4,849,551
ASHFORD PLACE 2,803,998 9,943,994 (761,970) 2,583,998 9,402,024 11,986,022
AVENTURA SHOPPING CENTER 2,751,094 9,317,790 157,829 2,751,094 9,475,619 12,226,713
BECKETT COMMONS 1,625,242 5,844,871 - 1,625,242 5,844,871 7,470,113
BENEVA 2,483,547 8,851,199 - 2,483,547 8,851,199 11,334,746
BENT TREE PLAZA 1,927,712 6,659,082 - 1,927,712 6,659,082 8,586,794
BERKSHIRE COMMONS 2,294,960 8,151,236 76,079 2,294,960 8,227,315 10,522,275
BLOOMINGDALE 3,861,759 14,100,891 - 3,861,759 14,100,891 17,962,650
BOLTON PLAZA 2,660,227 6,209,110 1,219,398 2,634,664 7,454,071 10,088,735
BONNERS POINT 859,854 2,878,641 166,034 859,854 3,044,675 3,904,529
BOYNTON LAKES PLAZA 2,783,000 10,043,027 37,669 2,783,000 10,080,696 12,863,696
BRAELINN VILLAGE EQUIPORT 4,191,214 12,389,585 876,936 4,191,214 13,266,521 17,457,735
BRIARCLIFF LA VISTA 694,120 2,462,819 - 694,120 2,462,819 3,156,939
BRIARCLIFF VILLAGE 4,597,018 16,303,813 334,677 4,597,018 16,638,490 21,235,508
BROOKVILLE PLAZA 1,208,012 4,205,994 - 1,208,012 4,205,994 5,414,006
BUCKHEAD COURT 1,737,569 6,162,941 1,229,361 1,627,569 7,502,302 9,129,871
CAMBRIDGE SQUARE 792,000 2,916,034 59,747 792,000 2,975,781 3,767,781
CARMEL COMMONS 2,466,200 8,903,187 1,526,996 2,466,200 10,430,183 12,896,383
CARRIAGE GATE 740,960 2,494,750 1,101,049 740,960 3,595,799 4,336,759
CENTER OF SEVEN SPRINGS 1,737,994 6,290,048 1,452,432 1,757,440 7,723,034 9,480,474
CHASEWOOD PLAZA 1,675,000 11,390,727 4,500,773 2,476,486 15,090,014 17,566,500
CHERRY GROVE 3,533,146 12,710,297 - 3,533,146 12,710,297 16,243,443
CITY VIEW SHOPPING CENTER 1,207,204 4,341,304 46,444 1,207,204 4,387,748 5,594,952
COLUMBIA MARKETPLACE 1,280,158 4,285,745 177,291 1,280,158 4,463,036 5,743,194
COUNTRY CLUB 1,105,201 3,709,452 87,739 1,105,201 3,797,191 4,902,392
COURTYARD SHOPPING CENTER 1,761,567 4,187,039 263,527 1,761,567 4,450,566 6,212,133
CROMWELL SQUARE 1,771,892 6,285,288 27,249 1,771,892 6,312,537 8,084,429
CUMMING 400 2,374,562 8,420,776 134,871 2,374,562 8,555,647 10,930,209
DELK SPECTRUM 2,984,577 11,048,896 - 2,984,577 11,048,896 14,033,473
DUNWOODY HALL 1,819,209 6,450,922 329,740 1,819,209 6,780,662 8,599,871
DUNWOODY VILLAGE 2,326,063 7,216,045 2,064,462 2,326,063 9,280,507 11,606,570
EAST POINTE 1,868,120 6,742,983 - 1,868,120 6,742,983 8,611,103
EAST PORT PLAZA 3,257,023 11,611,363 164,282 3,257,023 11,775,645 15,032,668
ENSLEY SQUARE 915,493 3,120,928 410,219 915,493 3,531,147 4,446,640
EVANS CROSSING 1,468,743 5,123,617 - 1,468,743 5,123,617 6,592,360
FLEMING ISLAND 3,076,701 6,291,505 - 3,076,701 6,291,505 9,368,206
FRANKLIN SQUARE 2,584,025 9,379,749 - 2,584,025 9,379,749 11,963,774
GARDEN SQUARE 2,073,500 7,614,748 361,367 2,136,135 7,913,480 10,049,615
GARNER FESTIVAL 5,591,099 19,897,197 - 5,591,099 19,897,197 25,488,296
GLENWOOD VILLAGE 1,194,198 4,235,476 81,175 1,194,198 4,316,651 5,510,849
HAMILTON MEADOWS 2,034,566 6,582,429 - 2,034,566 6,582,429 8,616,995
HARPETH VILLAGE FIELDSTONE 2,283,874 5,559,498 3,537,926 2,283,874 9,097,424 11,381,298
HIGHLAND SQUARE 2,615,250 9,359,722 - 2,615,250 9,359,722 11,974,972
HINSDALE LAKE COMMONS 4,217,840 15,039,854 - 4,217,840 15,039,854 19,257,694
HYDE PARK 9,240,000 33,340,181 2,625,631 9,735,102 35,470,710 45,205,812
KERNERSVILLE PLAZA 1,741,562 6,081,020 - 1,741,562 6,081,020 7,822,582
KINGSDALE SHOPPING CENTER 3,866,500 14,019,614 153,027 3,866,500 14,172,641 18,039,141
LAGRANGE MARKETPLACE 983,923 3,294,003 98,595 983,923 3,392,598 4,376,521
LAKE PINE PLAZA 2,008,110 6,908,986 - 2,008,110 6,908,986 8,917,096
LAKESHORE 1,617,940 5,371,499 - 1,617,940 5,371,499 6,989,439
LOEHMANNS PLAZA 3,981,525 14,117,891 11,371 3,981,525 14,129,262 18,110,787
LOVEJOY STATION 1,540,000 5,581,468 1,654 1,540,000 5,583,122 7,123,122
LUCEDALE MARKETPLACE 641,565 2,147,848 64,089 641,565 2,211,937 2,853,502
MAINSTREET SQUARE 1,274,027 4,491,897 34,392 1,274,027 4,526,289 5,800,316
MARINERS VILLAGE 1,628,000 5,907,835 134,497 1,628,000 6,042,332 7,670,332
MARKETPLACE ST PETE 1,287,000 4,662,740 223,490 1,287,000 4,886,230 6,173,230
MARKETPLACE CENTER OLD FORT 2,432,942 1,755,643 1,813,070 2,432,942 3,568,713 6,001,655
MARTIN DOWNS VILLAGE CENTER 2,000,000 5,133,495 2,981,179 2,437,664 7,677,010 10,114,674
MARTIN DOWNS VILLAGE SHOPPES 700,000 1,207,861 879,527 817,135 1,970,253 2,787,388
MAXTOWN ROAD (NORTHGATE) 1,753,136 6,244,449 - 1,753,136 6,244,449 7,997,585
MAYNARD CROSSING 4,066,381 14,083,800 - 4,066,381 14,083,800 18,150,181
MEMORIAL BEND SHOPPING CENTER 3,256,181 11,546,660 1,481,282 3,366,181 12,917,942 16,284,123
MERCHANTS VILLAGE 1,054,306 3,162,919 3,185,485 1,054,306 6,348,404 7,402,710
MILLHOPPER 1,073,390 3,593,523 928,847 1,073,390 4,522,370 5,595,760
NEWBERRY SQUARE 2,341,460 8,466,651 784,841 2,341,460 9,251,492 11,592,952
NORTH MIAMI SHOPPING CENTER 603,750 2,021,250 85,433 603,750 2,106,683 2,710,433
OAKLEY PLAZA 1,772,540 6,406,975 65,103 1,772,540 6,472,078 8,244,618
OCEAN BREEZE 1,250,000 3,341,199 2,424,031 1,527,400 5,487,830 7,015,230
OLD ST AUGUSTINE PLAZA 2,047,151 7,355,162 233,330 2,047,151 7,588,492 9,635,643
ORCHARD SQUARE 1,155,000 4,135,353 252,060 1,155,000 4,387,413 5,542,413
PACES FERRY PLAZA 2,811,522 9,967,557 1,627,529 2,811,622 11,594,986 14,406,608
PALM HARBOUR SHOPPING VILLAGE 2,899,928 10,998,230 1,058,599 2,899,928 12,056,829 14,956,757
PALM TRAILS PLAZA 2,438,996 5,818,523 - 2,438,996 5,818,523 8,257,519
PARAGON BRANDON JV 570,000 2,472,537 (3,042,537) - - -
PARK PLACE 2,231,745 7,974,362 - 2,231,745 7,974,362 10,206,107
PARKWAY STATION 1,123,200 4,283,917 142,744 1,123,200 4,426,661 5,549,861
PEACHLAND PROMENADE 1,284,562 5,143,564 61,087 1,284,561 5,204,652 6,489,213
PEARTREE VILLAGE 5,196,653 8,732,711 10,122,933 5,196,653 18,855,644 24,052,297
PIKE CREEK 5,077,406 18,860,183 - 5,077,406 18,860,183 23,937,589
PINE TREE PLAZA 539,000 1,995,927 (84,927) 539,000 1,911,000 2,450,000
POWERS FERRY SQUARE 3,607,647 12,790,749 3,253,948 3,607,647 16,044,697 19,652,344
POWERS FERRY 1,190,822 4,223,606 19,564 1,190,822 4,243,170 5,433,992
QUADRANT AT SOUTHPOINT I 2,342,823 15,541,967 (17,884,790) - - -
QUEENSBOROUGH 1,826,000 6,501,056 - 1,826,000 6,501,056 8,327,056
REGENCY COURT 3,571,337 12,664,014 285,562 3,571,337 12,949,576 16,520,913
REGENCY SQUARE BRANDON 577,975 18,156,719 7,542,763 4,491,461 21,785,996 26,277,457
RIVERMONT STATION 2,887,213 10,445,109 79,795 2,887,213 10,524,904 13,412,117
ROSWELL VILLAGE 2,304,345 6,777,200 181,066 2,304,345 6,958,266 9,262,611
RUSSELL RIDGE 2,153,214 - 6,565,264 2,215,341 6,503,137 8,718,478
SANDY PLAINS VILLAGE 2,906,640 10,412,440 433,698 2,906,640 10,846,138 13,752,778
SANDY SPRINGS VILLAGE 733,126 2,565,411 168,915 733,126 2,734,326 3,467,452
SHOPPES @ 104 2,651,000 9,523,429 - 2,651,000 9,523,429 12,174,429
SHOPPES AT MASON 1,576,656 5,357,855 - 1,576,656 5,357,855 6,934,511
SILVERLAKE 2,004,860 7,161,869 - 2,004,860 7,161,869 9,166,729
SOUTH MONROE 1,200,000 6,566,974 - 1,200,000 6,566,974 7,766,974
SOUTH POINTE CROSSING - 13,000 - - 13,000 13,000
ST ANN SQUARE 1,541,883 5,597,282 - 1,541,883 5,597,282 7,139,165
STATLER SQUARE 2,227,819 7,479,952 - 2,227,819 7,479,952 9,707,771
TAMIAMI TRAILS 2,046,286 7,462,646 108,330 2,046,286 7,570,976 9,617,262
TEQUESTA SHOPPES 1,782,000 6,426,042 235,213 1,782,000 6,661,255 8,443,255
TERRACE WALK 1,196,286 2,935,683 105,916 1,196,286 3,041,599 4,237,885
THE MARKETPLACE 1,211,605 4,056,242 2,840,716 1,758,434 6,350,129 8,108,563
TOWN CENTER AT MARTIN DOWNS 1,364,000 4,985,410 17,547 1,364,000 5,002,957 6,366,957
TOWN SQUARE 438,302 1,555,481 1,501,322 768,302 2,726,803 3,495,105
TROWBRIDGE CROSSING EQUIPORT 910,263 1,914,551 1,050,010 910,263 2,964,561 3,874,824
UNION SQUARE SHOPPING CENTER 1,578,654 5,933,889 386,260 1,578,656 6,320,147 7,898,803
UNIVERSITY COLLECTION 2,530,000 8,971,597 108,317 2,530,000 9,079,914 11,609,914
UNIVERSITY MARKETPLACE 3,250,562 7,044,579 2,409,463 3,532,046 9,172,558 12,704,604
VILLAGE CENTER 6 3,885,444 10,799,316 337,899 3,885,444 11,137,215 15,022,659
VILLAGE IN TRUSSVILLE 973,954 3,260,627 109,895 973,954 3,370,522 4,344,476
WELLEBY 1,496,000 5,371,636 346,882 1,496,000 5,718,518 7,214,518
WELLINGTON MARKET PLACE 5,070,384 13,308,972 319,657 5,070,384 13,628,629 18,699,013
WELLINGTON TOWN SQUARE 1,914,000 7,197,934 609,258 1,914,000 7,807,192 9,721,192
WEST COUNTY 1,491,462 4,993,155 126,744 1,491,462 5,119,899 6,611,361
WESTCHESTER PLAZA 1,857,048 6,456,178 - 1,857,048 6,456,178 8,313,226
WESTLAND I 198,344 1,747,391 (1,945,735) - - -
WINDMILLER PLAZA PHASE I 2,620,355 11,190,526 - 2,620,355 11,190,526 13,810,881
WOODCROFT SHOPPING CENTER 1,419,000 5,211,981 384,592 1,419,000 5,596,573 7,015,573
WORTHINGTON PARK CENTRE 3,346,203 10,053,858 - 3,346,203 10,053,858 13,400,061
--------------------------------------------------------------------------------------------
253,680,855 871,635,824 57,867,342 257,669,018 925,514,995 1,183,184,013
============================================================================================
Total Cost
Net of
Accumulated Accumulated
Depreciation Depreciation Mortgages
-------------- ------------ ---------
ANASTASIA SHOPPING PLAZA 575,105 4,274,446 -
ASHFORD PLACE 580,642 11,405,380 4,651,887
AVENTURA SHOPPING CENTER 2,111,008 10,115,705 8,602,768
BECKETT COMMONS 128,560 7,341,553 -
BENEVA - 11,334,746 -
BENT TREE PLAZA 148,955 8,437,839 5,615,296
BERKSHIRE COMMONS 1,062,021 9,460,254 7,784,755
BLOOMINGDALE 300,874 17,661,776 -
BOLTON PLAZA 928,470 9,160,265 -
BONNERS POINT 535,045 3,369,484 1,613,000
BOYNTON LAKES PLAZA 251,445 12,612,251 -
BRAELINN VILLAGE EQUIPORT 729,122 16,728,613 12,356,039
BRIARCLIFF LA VISTA 139,030 3,017,909 1,649,897
BRIARCLIFF VILLAGE 968,021 20,267,487 13,282,120
BROOKVILLE PLAZA 103,342 5,310,664 3,668,969
BUCKHEAD COURT 389,391 8,740,480 -
CAMBRIDGE SQUARE 151,176 3,616,605 -
CARMEL COMMONS 434,794 12,461,589 -
CARRIAGE GATE 735,440 3,601,319 -
CENTER OF SEVEN SPRINGS 1,115,924 8,364,550 -
CHASEWOOD PLAZA 2,660,845 14,905,655 8,000,000
CHERRY GROVE 265,335 15,978,108 -
CITY VIEW SHOPPING CENTER 273,129 5,321,823 -
COLUMBIA MARKETPLACE 679,672 5,063,522 2,586,000
COUNTRY CLUB 563,066 4,339,326 2,264,000
COURTYARD SHOPPING CENTER 1,228,647 4,983,486 1,378,000
CROMWELL SQUARE 372,007 7,712,422 4,464,426
CUMMING 400 501,697 10,428,512 6,419,476
DELK SPECTRUM 304,219 13,729,254 8,138,553
DUNWOODY HALL 387,763 8,212,108 -
DUNWOODY VILLAGE 459,895 11,146,675 7,264,800
EAST POINTE 129,414 8,481,689 5,267,546
EAST PORT PLAZA 534,694 14,497,974 -
ENSLEY SQUARE 206,478 4,240,162 -
EVANS CROSSING 117,619 6,474,741 4,379,981
FLEMING ISLAND 78,219 9,289,987 3,522,104
FRANKLIN SQUARE 198,248 11,765,526 9,136,752
GARDEN SQUARE 244,096 9,805,519 6,516,686
GARNER FESTIVAL 124,404 25,363,892 -
GLENWOOD VILLAGE 257,101 5,253,748 2,211,233
HAMILTON MEADOWS 167,943 8,449,052 5,612,141
HARPETH VILLAGE FIELDSTONE 213,202 11,168,096 -
HIGHLAND SQUARE 135,556 11,839,416 3,942,071
HINSDALE LAKE COMMONS 31,394 19,226,300 -
HYDE PARK 1,381,919 43,823,893 24,750,000
KERNERSVILLE PLAZA 123,771 7,698,811 5,218,476
KINGSDALE SHOPPING CENTER 447,889 17,591,252 -
LAGRANGE MARKETPLACE 510,946 3,865,575 1,645,000
LAKE PINE PLAZA 144,204 8,772,892 5,986,557
LAKESHORE 113,706 6,875,733 3,729,331
LOEHMANNS PLAZA 835,982 17,274,805 -
LOVEJOY STATION 209,663 6,913,459 -
LUCEDALE MARKETPLACE 340,083 2,513,419 1,390,000
MAINSTREET SQUARE 204,362 5,595,954 -
MARINERS VILLAGE 273,727 7,396,605 -
MARKETPLACE ST PETE 375,700 5,797,530 -
MARKETPLACE CENTER OLD FORT 167,760 5,833,895 1,986,409
MARTIN DOWNS VILLAGE CENTER 1,298,279 8,816,395 4,150,000
MARTIN DOWNS VILLAGE SHOPPES 337,325 2,450,063 1,313,000
MAXTOWN ROAD (NORTHGATE) 107,300 7,890,285 5,440,112
MAYNARD CROSSING 286,993 17,863,188 11,711,134
MEMORIAL BEND SHOPPING CENTER 696,953 15,587,170 8,335,963
MERCHANTS VILLAGE 196,291 7,206,419 -
MILLHOPPER 932,895 4,662,865 2,401,000
NEWBERRY SQUARE 1,366,907 10,226,045 -
NORTH MIAMI SHOPPING CENTER 605,557 2,104,876 1,160,000
OAKLEY PLAZA 290,343 7,954,275 -
OCEAN BREEZE 929,096 6,086,134 2,805,000
OLD ST AUGUSTINE PLAZA 440,733 9,194,910 -
ORCHARD SQUARE 332,356 5,210,057 -
PACES FERRY PLAZA 630,953 13,775,655 -
PALM HARBOUR SHOPPING VILLAGE 700,457 14,256,300 -
PALM TRAILS PLAZA 84,337 8,173,182 -
PARAGON BRANDON JV - - -
PARK PLACE 33,228 10,172,879 -
PARKWAY STATION 319,124 5,230,737 -
PEACHLAND PROMENADE 571,096 5,918,117 -
PEARTREE VILLAGE 673,528 23,378,769 12,777,420
PIKE CREEK 226,061 23,711,528 12,442,166
PINE TREE PLAZA 48,350 2,401,650 -
POWERS FERRY SQUARE 798,322 18,854,022 -
POWERS FERRY 238,707 5,195,285 2,917,943
QUADRANT AT SOUTHPOINT I - - -
QUEENSBOROUGH 13,544 8,313,512 -
REGENCY COURT 718,475 15,802,438 -
REGENCY SQUARE BRANDON 6,100,596 20,176,861 12,000,000
RIVERMONT STATION 395,653 13,016,464 -
ROSWELL VILLAGE 300,168 8,962,443 -
RUSSELL RIDGE 633,539 8,084,939 -
SANDY PLAINS VILLAGE 640,709 13,112,069 -
SANDY SPRINGS VILLAGE 131,641 3,335,811 -
SHOPPES @ 104 138,509 12,035,920 -
SHOPPES AT MASON 111,748 6,822,763 3,925,611
SILVERLAKE 104,315 9,062,414 -
SOUTH MONROE 54,424 7,712,550 -
SOUTH POINTE CROSSING - 13,000 -
ST ANN SQUARE 143,068 6,996,097 4,972,117
STATLER SQUARE 157,923 9,549,848 5,472,654
TAMIAMI TRAILS 275,743 9,341,519 -
TEQUESTA SHOPPES 385,668 8,057,587 -
TERRACE WALK 624,306 3,613,579 683,000
THE MARKETPLACE 857,541 7,251,022 2,647,000
TOWN CENTER AT MARTIN DOWNS 260,896 6,106,061 -
TOWN SQUARE 97,568 3,397,537 -
TROWBRIDGE CROSSING EQUIPORT 109,285 3,765,539 1,800,000
UNION SQUARE SHOPPING CENTER 374,850 7,523,953 -
UNIVERSITY COLLECTION 502,408 11,107,506 -
UNIVERSITY MARKETPLACE 1,826,835 10,877,769 -
VILLAGE CENTER 6 878,291 14,144,368 -
VILLAGE IN TRUSSVILLE 529,193 3,815,283 1,775,000
WELLEBY 554,962 6,659,556 -
WELLINGTON MARKET PLACE 1,127,296 17,571,717 -
WELLINGTON TOWN SQUARE 486,760 9,234,432 -
WEST COUNTY 844,740 5,766,621 3,190,000
WESTCHESTER PLAZA 172,301 8,140,925 5,815,752
WESTLAND I - - -
WINDMILLER PLAZA PHASE I 141,017 13,669,864 -
WOODCROFT SHOPPING CENTER 299,819 6,715,754 -
WORTHINGTON PARK CENTRE 192,029 13,208,032 4,967,081
------------------------------------------------
58,983,738 1,124,200,275 297,736,226
================================================
REGENCY REALTY CORPORATION
Combined Real Estate and Accumulated Depreciation
December 31, 1998
Depreciation and amortization of the Company's investment in buildings and
improvements reflected in the statement of operation is calculated over the
estimated useful lives of the assets as follows:
Buildings and improvements up to 40 years
The aggregate cost for Federal income tax purposes was approximately
$1.029 billion at December 31, 1998.
The changes in total real estate assets for the period ended December 31,
1998, 1997 and 1996:
1998 1997 1996
--------------- -------------- ------------
Balance, beginning of period 799,801,367 389,007,481 278,731,167
Developed or acquired properties 399,305,955 408,475,251 107,378,064
Sale of property (24,248,801) (2,907,503) -
Improvements 8,325,492 5,226,138 2,898,250
---------------- -------------- ------------
Balance, end of period 1,183,184,013 799,801,367 389,007,481
================ ============== ============
The changes in accumulated depreciation for the period ended December 31,
1998, 1997 and 1996:
1998 1997 1996
--------------- -------------- ------------
Balance, beginning of period 40,795,801 26,213,225 18,631,310
Sale of property (5,121,929) (713,176) -
Depreciation for period 23,309,866 15,295,752 7,581,915
--------------- -------------- ------------
Balance, end of period 58,983,738 40,795,801 26,213,225
=============== ============== ============