EQUITY ONE INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

Commission File No. 001-13499

EQUITY ONE, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)

1696 N.E. Miami Gardens Drive
N. Miami Beach, Florida 33179
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)

(305) 947-1664
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)

Maryland 52-1794271
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

- --------------------------------------------------------------------------------

Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2 of the Exchange). Yes [X] No

Applicable only to Corporate Issuers:

As of the close of business on October 30, 2003, 68,410,331 shares of the
Company's common stock, par value $0.01 per share, were issued and outstanding.

EQUITY ONE, INC.

FORM 10-Q

INDEX

PART I - FINANCIAL INFORMATION
------------------------------

Item 1. Condensed Consolidated Financial Statements and Notes Page
------

Condensed Consolidated Balance Sheets
As of September 30, 2003 and December 31, 2002 (unaudited)....... 1

Condensed Consolidated Statements of Operations
For the three and nine-month periods ended September 30, 2003
and 2002 (unaudited)............................................. 3

Condensed Consolidated Statements of Comprehensive Income
For the three and nine-month periods ended September 30, 2003
and 2002 (unaudited)............................................. 5

Condensed Consolidated Statement of Stockholders' Equity
For the nine-month period ended September 30, 2003 (unaudited)... 6

Condensed Consolidated Statements of Cash Flows
For the nine-month periods ended September 30, 2003 and
2002 (unaudited)................................................. 7

Notes to the Condensed Consolidated Financial Statements
(unaudited)...................................................... 9

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 21

Item 3. Quantitative and Qualitative Disclosures about Market Risk....... 30

Item 4. Controls and Procedures.......................................... 32

PART II - OTHER INFORMATION
---------------------------

Item 1. Legal Proceedings ............................................... 32

Item 2. Changes in Securities and Use of Proceeds ....................... 33

Item 3. Defaults upon Senior Securities ................................. 33

Item 4. Submission of Matters to a Vote of Security Holders ............. 33

Item 5. Other Information ............................................... 33

Item 6. Exhibits and Reports on Form 8-K ................................ 34

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements and Notes

EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
(UNAUDITED)
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------

September 30, December 31,
2003 2002
------------------ ----------------
ASSETS

PROPERTIES:

Income producing......................................................... $ 1,557,967 $ 682,941
Less: accumulated depreciation........................................... (59,274) (40,433)
---------------- ----------------
1,498,693 642,508

Construction in progress and land held for development................... 42,185 35,923
Properties held for sale................................................. 10,543 -
---------------- ----------------

Properties, net....................................................... 1,551,421 678,431

CASH AND CASH EQUIVALENTS................................................... - 2,944

CASH HELD IN ESCROW......................................................... - 5,933

ACCOUNTS AND OTHER RECEIVABLES, NET......................................... 10,105 7,053

INVESTMENTS IN AND ADVANCES TO JOINT VENTURES............................... 2,869 10,021

GOODWILL ................................................................... 22,535 2,276

OTHER ASSETS................................................................ 36,244 23,411
---------------- ----------------

TOTAL....................................................................... $ 1,623,174 $ 730,069
================ ================
(continued)

1

EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
(UNAUDITED)
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------

September 30, December 31,
2003 2002
----------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:

NOTES PAYABLE

Mortgage notes payable..................................................... $ 441,453 $ 332,143
Unsecured revolving credit facilities...................................... 138,000 -
Secured revolving credit facilities........................................ - 23,000
Unsecured senior notes payable............................................. 150,000 -
----------------- ----------------
729,453 355,143
Unamortized premium on notes payable....................................... 23,047 -
----------------- ----------------
Total notes payable..................................................... 752,500 355,143

OTHER LIABILITIES
Accounts payable and accrued expenses...................................... 35,335 14,760
Tenant security deposits................................................... 7,054 4,342
Other liabilities.......................................................... 2,173 1,724
----------------- ----------------
Total liabilities....................................................... 797,062 375,969
----------------- ----------------
MINORITY INTEREST............................................................ 12,755 3,869
----------------- ----------------

COMMITMENTS AND CONTINGENT LIABILITIES

STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value - 10,000 shares authorized but unissued... - -
Common stock, $0.01 par value - 100,000 shares authorized, 68,316 and 3 5
34,540 shares issued and outstanding for 2003 and 2002, respectively.... 68 34
Additional paid-in capital................................................. 828,147 355,450
Retained earnings.......................................................... 541 5,969
Accumulated other comprehensive loss....................................... (1,994) (46)
Unamortized restricted stock compensation.................................. (10,413) (4,375)
Notes receivable from issuance of common stock............................. (3,607) (7,112)
----------------- ----------------
Total stockholders' equity.............................................. 813,357 350,231
----------------- ----------------
TOTAL......................................................................... $ 1,623,174 $ 730,069
================= ================

See accompanying notes to the condensed consolidated financial statements. (Concluded)

2

EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------

Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
RENTAL REVENUE:

Minimum rents......................................... $ 39,503 $ 19,019 $ 105,708 $ 54,407
Expense recoveries.................................... 10,698 5,572 29,247 16,790
Termination fees...................................... 304 284 801 518
Percentage rent payments.............................. 324 112 1,800 1,327
------------- ------------- ------------- -------------
Total rental revenue............................... 50,829 24,987 137,556 73,042
------------- ------------- ------------- -------------
COSTS AND EXPENSES:
Property operating expenses........................... 14,136 7,414 38,416 21,554
Interest expense...................................... 10,167 5,208 28,598 16,616
Amortization of deferred financing fees............... 259 169 853 582
Rental property depreciation and amortization......... 7,535 3,428 19,576 9,953
General and administrative expenses................... 2,737 1,435 7,936 5,020
------------- ------------- ------------- -------------
Total costs and expenses.......................... 34,834 17,654 95,379 53,725
------------- ------------- ------------- -------------

INCOME BEFORE OTHER INCOME AND EXPENSES, DISCONTINUED
OPERATIONS AND MINORITY INTEREST...................... 15,995 7,333 42,177 19,317

OTHER INCOME AND EXPENSES:
Investment income..................................... 66 452 940 1,257
Other income.......................................... 48 48 138 183
Equity in loss of joint ventures...................... (54) (19) (117) (9)
Gain (loss) on extinguishment of debt................. - 1,520 (623) 1,520
------------- ------------- ------------- -------------

INCOME BEFORE DISCONTINUED OPERATIONS AND MINORITY
INTEREST.............................................. 16,055 9,334 42,515 22,268
------------- ------------- ------------- -------------
DISCONTINUED OPERATIONS:
Income from operations of sold properties............. 212 526 953 2,245
Gain on disposal of income producing properties....... 1,209 1,091 3,083 8,194
------------- ------------- ------------- -------------
Total income from discontinued operations........... 1,421 1,617 4,036 10,439
------------- ------------- ------------- -------------

INCOME BEFORE MINORITY INTEREST.......................... 17,476 10,951 46,551 32,707
MINORITY INTEREST........................................ (227) (25) (606) (76)
------------- ------------- ------------- -------------

NET INCOME............................................... $ 17,249 $ 10,926 $ 45,945 $ 32,631
============= ============= ============= =============
(Continued)

3

EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------

Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
2003 2002 2003 2002
------------- ------------- ------------- ------------
EARNINGS PER SHARE:

BASIC EARNINGS PER SHARE
Income before discontinued operations................... $ 0.25 $ 0.27 $ 0.73 $ 0.69
Income from discontinued operations..................... 0.02 0.05 0.07 0.32
------------- ------------- ------------- ------------
Total basic earnings per share........................ $ 0.27 $ 0.32 $ 0.80 $ 1.01
============= ============= ============= ============

NUMBER OF SHARES USED IN COMPUTING
BASIC EARNINGS PER SHARE................................ 63,777 33,926 57,348 32,195
============= ============= ============= ============

DILUTED EARNINGS PER SHARE
Income before discontinued operations................... $ 0.25 $ 0.27 $ 0.72 $ 0.68
Income from discontinued operations..................... 0.02 0.05 0.07 0.32
------------- ------------- ------------- ------------

Total diluted earnings per share...................... $ 0.27 $ 0.32 $ 0.79 $ 1.00
============= ============= ============= ============

NUMBER OF SHARES USED IN COMPUTING
DILUTED EARNINGS PER SHARE.............................. 65,523 34,785 58,977 32,956
============= ============= ============= ============

See accompanying notes to the condensed consolidated financial statements. (Concluded)

4

EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------

Three Months Ended Nine Months Ended
September 30, June 30,
-------------------------- --------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------

NET INCOME............................................. $ 17,249 $ 10,926 $ 45,945 $ 32,631

OTHER COMPREHENSIVE INCOME (LOSS):
Net unrealized holding gain (loss) on securities
available for sale............................... - (19) 47 9
Change in fair value of cash flow hedges........... (1,995) - (1,995) -
---------- ---------- ---------- ----------
COMPREHENSIVE INCOME................................... $ 15,254 $ 10,907 $43,997 $ 32,640
========== ========== ========== ==========

See accompanying notes to the condensed consolidated financial statements.

5

EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2003
(UNAUDITED)
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------

Accumulated Notes
Other Unamortized Receivable
Additional Comprehensive Restricted from the Total
Common Paid-In Retained (Loss)/ Stock Issuance of Stockholders'
Stock Capital Earnings Income Compensation Common Stock Equity
--------- --------- --------- ----------- ----------- ------------- ------------

BALANCE,
JANUARY 1, 2003.......... $ 345 $ 355,450 $ 5,969 $ (46) $ (4,375) $ (7,112) $ 350,231

Issuance of common
stock:
IRT transaction....... 175 231,562 - - - - 231,737

Other issuances....... 163 242,795 - - (6,038) 3,505 240,425

Stock issuance costs.. - (1,660) - - - - (1,660)

Net income............... - - 45,945 - - - 45,945

Dividends paid........... - - (51,373) - - - (51,373)

Change in fair value of
cash flow hedges....... - - - (1,995) - - (1,995)

Net unrealized holding
gain on securities
available for sale...... - - - 47 - - 47
--------- --------- --------- ---------- ---------- ------------ -----------
BALANCE,
SEPTEMBER 30, 2003.......$ 683 $ 828,147 $ 541 $ (1,994) $ (10,413) $ (3,607) $ 813,357
========= ========= ========= ========== ========== ============ ===========

See accompanying notes to the condensed consolidated financial statements.

6

EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------

Nine Months Ended
September 30,
-----------------------------------
2003 2002
---------------- ---------------

OPERATING ACTIVITIES:
Net income............................................................... $ 45,945 $ 32,631
Adjustments to reconcile net income to net cash provided by
operating activities:
Straight line rent adjustment........................................ (1,212) (313)
Provision for losses on accounts receivable.......................... 359 (258)
Amortization of premium on notes payable............................. (2,465) -
Amortization of deferred financing fees.............................. 853 582
Rental property depreciation and amortization........................ 19,576 9,953
Depreciation and amortization included in discontinued operations.... 130 351
Amortization of restricted stock..................................... 1,851 1,176
Equity in loss of joint ventures..................................... 117 9
Loss (gain) on extinguishment of debt................................ 623 (1,520)
Gain on securities available for sale................................ (9) (13)
Minority interest in earnings of consolidated subsidiaries........... 606 76
Gain on disposal of real estate...................................... (3,083) (8,194)
Changes in assets and liabilities:
Accounts and other receivables....................................... (1,459) 989
Other assets......................................................... (6,438) (4,224)
Accounts payable and accrued expenses................................ 5,975 5,704
Tenant security deposits............................................. 503 203
Other liabilities.................................................... (283) (400)
---------------- ---------------
Net cash provided by operating activities................................ 61,589 36,752
---------------- ---------------
INVESTING ACTIVITIES:
Additions to and purchase of properties............................... (139,447) (68,706)
Proceeds from disposal of properties and joint venture interests...... 13,733 19,468
Decrease in cash held in escrow....................................... 12,897 1,715
Distributions received from joint ventures............................ 940 630
Proceeds from repayments of notes receivable.......................... 2,808 669
Increase in deferred leasing costs.................................... (2,719) (831)
Sale of securities available for sale................................. 977 637
Cash used in the purchase of IRT...................................... (189,382) -
Cash acquired in the IRT acquisition.................................. 1,756 -

---------------- ---------------
Net cash used in investing activities.................................... (298,437) (46,418)
---------------- ---------------
FINANCING ACTIVITIES:
Repayments of mortgage notes payable.................................. (54,369) (41,911)
Borrowings under mortgage notes payable............................... - 6,097
Net borrowings under revolving credit facilities...................... 115,000 9,098
Repayment of revolving credit facility assumed in the IRT merger...... (8,000) -
Increase in deferred financing costs.................................. (1,075) (1,102)
Proceeds from stock subscription and issuance of common stock......... 232,544 65,828
Stock issuance costs.................................................. (1,660) (1,332)
Repayment of notes receivable from issuance of common stock........... 3,505 -
Cash dividends paid to stockholders................................... (51,373) (26,432)
Distributions to minority interest.................................... (668) (76)
---------------- ---------------

Net cash provided by financing activities................................ 233,904 10,170
---------------- ---------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS..................... (2,944) 504

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................... 2,944 906
---------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................. $ - $ 1,410
================ ===============
(Continued)

7

EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------

Nine Months Ended
September 30,
------------------------------
2003 2002
------------ -----------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of amount capitalized.................... $ 27,003 $ 17,241
============ ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Change in unrealized holding gain on securities available for sale... $ 47 $ 9
============ ===========
Change in fair value of cash flow hedges............................. $ (1,995) -
============ ===========
Issuance of restricted stock......................................... $ 7,534 $ 3,900
============ ===========
Receivable from sale of joint venture interest....................... $ 6,762
============
Common stock issued for note receivable.............................. $ 1,534
===========
Note receivable from sale of property................................ $ 3,900
===========

The Company acquired all of the outstanding common stock of IRT for
$763,047, including transaction costs:

Fair value of assets acquired, including goodwill................. $ 763,047
Assumption of liabilities, unsecured senior notes and mortgage
notes payable................................................... (319,598)
Fair value adjustment of unsecured senior notes and mortgage
notes payable................................................... (22,330)
Common stock issued............................................... (231,737)
------------
Cash paid for IRT acquisition, including transaction costs........ $ 189,382
============

The Company acquired and assumed the mortgage on the acquisition of
a rental property :

Fair value of rental property..................................... $ 50,463
Assumption of mortgage note payable............................... (27,502)
Fair value adjustment of mortgage note payable.................... (3,182)
------------
Cash paid for rental property..................................... $ 19,779
============

See accompanying notes to the condensed consolidated financial (Concluded)
statements.

8

EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
(In thousands, except per share amounts)

1. Organization

Equity One, Inc. operates as a self-managed real estate investment trust
("REIT") that principally acquires, renovates, develops and manages community
and neighborhood shopping centers located predominantly in high growth markets
in the southern United States. These shopping centers are primarily anchored by
supermarkets or other necessity-oriented retailers such as drug stores or
discount retail stores.

The condensed consolidated financial statements include the accounts of
Equity One, Inc. and its wholly-owned subsidiaries and those partnerships of
which the Company has financial and operating control. Equity One, Inc. and
subsidiaries are hereinafter referred to as "the consolidated companies" or "the
Company." The Company has a 50% investment in two joint ventures of which the
Company is not the primary beneficiary and, accordingly, uses the equity method
of accounting for these joint ventures.

As of September 30, 2003, the Company's portfolio of neighborhood shopping
centers anchored by national and regional supermarket chains and other necessity
oriented retailers such as drug stores or discount stores is located in twelve
states in the southern United States and consists of 182 properties,
encompassing 126 supermarket-anchored shopping centers, nine drug store-anchored
shopping centers, 40 other retail-anchored shopping centers, one self-storage
facility, one industrial property, and five retail developments, as well as
non-controlling interests in two joint ventures which own and operate commercial
real estate properties.

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company's management in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions of Form 10-Q and Article 10 of
Regulation S-X of the U.S. Securities and Exchange Commission (the "SEC").
Accordingly, these unaudited condensed consolidated financial statements do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included. The results of operations for the
three and nine-month periods ended September 30, 2003 are not necessarily
indicative of the results that may be expected for the full year. These
unaudited condensed consolidated financial statements should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in this Form 10-Q and with Management's
Discussion and Analysis of Financial Condition and Results of Operations and
audited financial statements and related footnotes for the year ended December
31, 2002, included in the Company's Current Report on Form 8-K, filed with the
SEC on September 19, 2003.

The preparation of condensed consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates.

All significant intercompany transactions and balances have been eliminated
in consolidation.

Certain amounts as previously reported have been reclassified to conform to
the current period's presentation.

3. IRT Merger

On February 12, 2003, the Company completed a statutory merger with IRT
Property Company ("IRT"). As a result of the merger, the Company acquired 93
properties that comprise an aggregate of approximately 10,041

9

square feet of gross leasable area. The aggregate purchase price for the
acquisition was $763,047 (including transaction costs and assumed debt),
consisting of the payment of $189,382 in cash, the issuance of 17,490 shares of
the Company's common stock valued at $231,737 and the assumption of $341,928 of
outstanding debt, premium on notes payable, and other liabilities. The Company
has recorded $20,259 of goodwill as a result of the acquisition. The acquisition
of IRT was accounted for using the purchase method and the results of IRT are
included in the Company's financial statements from the date of its acquisition.
The fair values assigned to the identifiable tangible and intangible assets and
liabilities are preliminary as the Company is evaluating the fair values and
allocation of costs. Management does not believe that any future adjustment
would have a material effect on the Company's financial position or results of
operations.

The following unaudited supplemental pro forma information is presented to
reflect the effects of the IRT acquisition and related transactions, and the
impact on the Company's results, as if the transactions had occurred on January
1, 2002. The pro forma information includes the acquisition of IRT, the issuance
of common stock related to the IRT transaction, the private placement of common
stock and the borrowing under the revolving credit facility. The pro forma
financial information is presented for informational purposes only and may not
be indicative of what the actual results of operations would have been had the
acquisition occurred as indicated, nor does it purport to represent the results
of the operations for future periods:

Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
2003 2002 2003 2002
-------------- ------------- -------------- -------------

Pro forma revenues................................ $ 50,829 $ 47,573 $ 148,041 $ 140,651
============== ============= ============== =============
Pro forma income before discontinued operations... $ 15,828 $ 15,717 $ 44,361 $ 41,138
============== ============= ============== =============
Pro forma net income.............................. $ 17,249 $ 19,682 $ 48,305 $ 54,600
============== ============= ============== =============
Pro forma earnings per share:
Basic earnings per share:
Income before discontinued operations......... $ 0.25 $ 0.27 $ 0.77 $ 0.73
Income from discontinued operations........... 0.02 0.07 0.07 0.24
-------------- ------------- -------------- -------------
Total basic earnings per share............ $ 0.27 $ 0.34 $ 0.84 $ 0.97
============== ============= ============== =============
Diluted earnings per share:
Income before discontinued operations........ $ 0.25 $ 0.26 $ 0.76 $ 0.72
Income from discontinued operations.......... 0.02 0.07 0.07 0.23
-------------- ------------- -------------- -------------
Total diluted earnings per share.......... $ 0.27 $ 0.33 $ 0.83 $ 0.95
============== ============= ============== =============

4. Rental Property

Income producing property is stated at cost and includes all costs related
to acquisition, development and construction, including tenant improvements,
interest incurred during development, costs of pre-development and certain
direct and indirect costs of development. Costs incurred during the
predevelopment stage are capitalized once management has identified a site,
determined that the project is feasible and it is probable that the Company will
be able to proceed with the project. Expenditures for ordinary maintenance and
repairs are expensed to operations as they are incurred. Significant renovations
and improvements, which improve or extend the useful life of assets, are
capitalized.

Income producing properties are individually evaluated for impairment when
various conditions exist that may indicate that it is probable that the sum of
expected future cash flows (on an undiscounted basis) from a property is less
than its historical net cost basis. Upon determination that a permanent
impairment has occurred, the Company records an impairment charge equal to the
excess of historical cost basis over fair value. In addition, the Company writes
off costs related to predevelopment projects when it determines that it will no
longer pursue the project.

10

Depreciation expense is computed using the straight-line method over the
estimated useful lives of the assets, as follows:

Land improvements 40 years
Buildings 30-40 years
Building improvements 5-40 years
Tenant improvements Over the terms of the related lease
Equipment 5-7 years

Total interest expense capitalized to land held for development and
construction in progress was $715 and $576 for the three months ended September
30, 2003 and 2002, respectively, and $1,982 and $1,755 for the nine months ended
September 30, 2003 and 2002, respectively.

Acquisitions of properties are accounted for using the purchase method and,
accordingly, the results of operations are included in the Company's results of
operations from the respective dates of acquisition. The Company uses various
valuation methods to allocate the purchase price of acquired property between
land, buildings and improvements, equipment, and other identifiable intangibles
such as lease origination costs and acquired leases and any debt assumed. The
Company's allocation of the purchase prices for the acquisitions consummated
during 2003 is preliminary and is subject to change.

5. Property Held for Sale

As of September 30, 2003, one shopping center and two outparcels were
classified as property held for sale.

6. Investments in and Advances to Joint Ventures

A summary of the Company's investments in and advances to joint ventures at
September 30, 2003 and December 31, 2002 is as follows (all investments in
unconsolidated entities are accounted for under the equity method):

Entity Location Ownership 2003 2002
- ---------------------------- -------------------------- ------------- ------------- -------------

PG Partners................. Palm Beach Gardens, FL 50.0% $ 2,641 $ 2,823
Parcel F, LLC............... Palm Beach Gardens, FL 50.0% 228 228
Oak Square JV*.............. Gainesville, FL - - 1,243
CDG (Park Place) LLC**...... Plano, TX - - 5,727
------------- -------------
Total investments in and advances to joint ventures......................... $ 2,869 $ 10,021
============= =============

* As of September 30, 2003, the Company has sold its interest in this joint
venture.
** As of September 30, 2003, the property held by the joint venture has been
sold.

A summary of unaudited financial information for all joint ventures being
reported on the equity method of accounting is as follows:

As of As of
September 30, 2003 December 31, 2002
--------------------- --------------------

Assets:
Rental properties, net................ $ 12,188 $ 47,309
Cash and cash equivalents............. - 690
Other assets.......................... 579 1,170
--------------------- --------------------
Total assets.......................... $ 12,767 $ 49,169
===================== ====================

Liabilities and Ventures' Equity:
Mortgage notes........................ $ 12,902 $ 44,625
Other liabilities..................... 285 651
Ventures' (deficit) equity............ (420) 3,893
--------------------- --------------------
Total ................................ $ 12,767 $ 49,169
===================== ====================

11

The Company's investments in joint ventures, as reported on the condensed
consolidated balance sheets, differ from its proportionate share of the joint
ventures' underlying net assets due to basis differentials and advances. The
basis differential of approximately $3,000 is being depreciated over the useful
lives of the related assets.

Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------

Revenues:
Rental revenues.................... $ 965 $ 1,769 $ 4,753 $ 5,376
Other revenues..................... 1 - 4 10
------------ ------------ ------------ ------------
Total revenues................... 966 1,769 4,757 5,386
------------ ------------ ------------ ------------
Expenses:
Operating expenses................. 163 425 1,090 1,250
Interest expense................... 377 733 1,777 2,207
Depreciation....................... 163 304 732 931
Other expense...................... 21 55 142 126
------------ ------------ ------------ ------------
Total expenses................... 724 1,517 3,741 4,514
------------ ------------ ------------ ------------
Net income $ 242 $ 252 $ 1,016 $ 872
============ ============ ============ ============

The Company's equity in income
(loss) of joint ventures reported in:
Continuing operations............ $ (54) $ (19) $ (117) $ (9)
============ ============ ============ ============
Discontinued operations.......... $ 175 $ 145 $ 625 $ 445
============ ============= ============ ============

Significant accounting policies used by the unconsolidated joint ventures
are similar to those used by the Company.

7. Borrowings

Each of the existing mortgage loans is secured by a mortgage on one or more
of the Company's properties. Certain of the mortgage loans involving an
aggregate principal balance of approximately $209,000 contain prohibitions on
transfers of ownership which may have been violated by the Company's previous
issuances of common stock or in connection with past acquisitions and may be
violated by transactions involving the Company's capital stock in the future. If
a violation were established, it could serve as a basis for a lender to
accelerate amounts due under the affected mortgage. To date, no lender has
notified the Company that it intends to accelerate its mortgage. Based on
discussions with various lenders, current credit market conditions and other
factors, the Company believes that the mortgages will not be accelerated.
Accordingly, the Company believes that the violations of these prohibitions will
not have a material adverse impact on the Company's results of operations or
financial condition.

On February 7, 2003, the Company entered into a $340,000 unsecured
revolving credit facility with a syndicate of banks for which Wells Fargo Bank,
National Association is the sole lead arranger and administrative agent. This
facility bears interest at the Company's option at (i) LIBOR plus 0.65% to
1.35%, depending on the credit ratings of the Company's senior unsecured long
term notes or (ii) at the greater of (x) Wells Fargo's prime rate and (y) the
Federal Funds Rate plus 0.5%. The facility also includes a competitive bid
option which allows the Company to conduct auctions among the participating
banks for borrowings in an amount not to exceed $150,000, a $25,000 swing line
facility for short term borrowings, a $20,000 letter of credit commitment and
may, at the request of the Company, be increased up to a total commitment of
$400,000. The facility expires February 12, 2006 with a one year extension
option. In addition, the facility contains customary covenants, including
financial covenants regarding debt levels, total liabilities, interest coverage,
EBITDA levels, unencumbered properties, permitted investments and others. The
facility also prohibits stockholder distributions in excess of 95% of funds from
operations calculated at the end of each fiscal quarter for the four fiscal
quarters then ending. Notwithstanding this limitation, the Company can make
stockholder distributions to avoid income taxes on asset sales. If a default
under

12

the facility exists, the Company's ability to pay dividends would be limited to
the amount necessary to maintain the Company's status as a REIT unless the
default is a payment default or bankruptcy event in which case the Company would
be prohibited from paying any dividends. The facility is guaranteed by most of
the Company's wholly-owned subsidiaries. As of September 30, 2003, the Company
had $138,000 outstanding on this credit facility. The weighted average interest
rate of as of September 30, 2003 was 2.17%, including the effect of the interest
rate hedges.

As a result of the Company's merger with IRT, the Company assumed IRT's
obligations relating to $150,000 principal amount of senior notes, bearing
interest at fixed interest rates ranging from 7.25% to 7.84% and maturing
between 2006 and 2012. The interest rate of one series of these senior notes is
subject to a 50 basis point increase if the Company does not maintain an
investment grade debt rating. These notes have also been guaranteed by most of
the Company's wholly-owned subsidiaries. Also, as part of the Company's merger
with IRT, the Company assumed $135,397 of mortgage notes payable.

As of September 30, 2003, the Company had a $5,000 unsecured credit
facility, none of which is outstanding, with City National Bank of Florida. This
facility also provides collateral for $1,378 in outstanding letters of credit.

8. Consolidating Financial Information

As of September 30, 2003, most of the Company's subsidiaries, including IRT
Partners L.P., have guaranteed the Company's indebtedness under the unsecured
senior debt. The guarantees are joint and several and full and unconditional.

Guarantors
-------------------------
Condensed Balance Sheet IRT Non
Equity Combined Partners, Guaran- Eliminating Consolidated
One, Inc. Subsidiaries LP tors Entries Equity One
---------- ------------ ---------- ---------- ---------- ------------
As of September 30, 2003

ASSETS
Properties, net................ $ 516,904 $ 509,446 $ 183,649 $ 341,422 $ - $ 1,551,421
Investment in affiliates....... 435,752 - - - (435,752) -
Other assets................... 29,619 26,180 3,300 12,654 - 71,753
---------- ---------- ---------- ---------- ---------- -----------
Total ....................... $ 982,275 $ 535,626 $ 186,949 $ 354,076 $(435,752) $ 1,623,174
========== ========== ========== ========== ========== ===========
LIABILITIES
Mortgage notes payable......... $ 82,232 $ 145,253 $ 34,555 $ 179,413 $ - $ 441,453
Unsecured revolving credit
facilities................... 138,000 - - - - 138,000
Unsecured senior notes, net.... 150,000 - - - - 150,000
Unamortized premium on notes
payable...................... 15,115 3,129 4,803 - - 23,047
Other liabilities.............. 16,420 13,952 3,426 10,764 - 44,562
---------- ---------- ---------- ---------- ---------- -----------
Total liabilities............ 401,767 162,334 42,784 190,177 - 797,062
---------- ---------- ---------- ---------- ---------- -----------

MINORITY INTEREST................. - - - - 12,755 12,755

STOCKHOLDER'S EQUITY
Total stockholders' equity..... 580,508 373,292 144,165 163,899 (448,507) 813,357
---------- ---------- ---------- ---------- ---------- -----------

Total......................... $ 982,275 $ 535,626 $ 186,949 $ 354,076 $(435,752) $ 1,623,174
========== ========== ========== ========== ========== ===========

13

Guarantors
-----------------------------
Condensed Statement of Operations Equity One, Combined IRT Non Consolidated
Inc. Subsidiaries Partners, LP Guarantors Equity One
------------ ------------- ------------ ------------ -------------
For the Three Months Ended September 30, 2003

RENTAL REVENUE:
Minimum rents.................................. $ 13,044 $ 12,814 $ 4,660 $ 8,985 $ 39,503
Expense recoveries............................. 3,165 3,127 1,417 2,989 10,698
Termination fees............................... 108 26 17 153 304
Percentage rent payments....................... 194 81 23 26 324
------------ ------------- ----------- ------------ -------------
Total rental revenue......................... 16,511 16,048 6,117 12,153 50,829
------------ ------------- ----------- ------------ -------------

COSTS AND EXPENSES:
Property operating expenses.................... 4,312 4,036 1,724 4,064 14,136
Interest expense............................... 3,684 2,348 591 3,544 10,167
Amortization of deferred financing fees........ 149 66 - 44 259
Rental property depreciation and amortization 2,399 2,657 799 1,680 7,535
General and administrative expenses............ 2,630 92 15 - 2,737
------------ ------------- ----------- ------------ -------------
Total costs and expenses..................... 13,174 9,199 3,129 9,332 34,834
------------ ------------- ----------- ------------ -------------
INCOME BEFORE OTHER INCOME AND EXPENSES,
DISCONTINUED OPERATIONS AND MINORITY INTEREST.. 3,337 6,849 2,988 2,821 15,995

OTHER INCOME AND EXPENSES:
Investment income.............................. (67) 131 - 2 66
Other income................................... 7 24 - 17 48
Equity in loss of joint ventures............... - (54) - - (54)
------------ ------------ ---------- ------------ -------------

INCOME BEFORE DISCONTINUED OPERATIONS AND MINORITY
INTEREST....................................... 3,277 6,950 2,988 2,840 16,055
------------ ------------- ----------- ------------ -------------
DISCONTINUED OPERATIONS
Income from operations of sold properties...... - 212 - - 212
Gain on disposal of income producing
properties................................... - 1,209 - - 1,209
------------ ------------- ----------- ------------ -------------
Total income from discontinued operations.... - 1,421 - - 1,421
------------ ------------- ----------- ------------ -------------

INCOME BEFORE MINORITY INTERST................... 3,277 8,371 2,988 2,840 17,476

MINORITY INTEREST................................ - (25) (164) (38) (227)
------------ ------------- ----------- ------------ -------------
NET INCOME....................................... $ 3,277 $ 8,346 $ 2,824 $ 2,802 $ 17,249
============ ============= =========== ============ =============

14

Guarantors
----------------------------
Condensed Statement of Operations Equity One Combined IRT Non Consolidated
Inc. Subsidiaries Partners, LP Guarantors Equity One
---------- ------------ ------------- ----------- ------------
For the Nine Months Ended September 30, 2003

RENTAL REVENUE:
Minimum rents................................. $ 33,161 $ 36,159 $ 11,797 $ 24,591 $105,708
Expense recoveries............................ 7,806 10,154 3,371 7,916 29,247
Termination fees.............................. 172 383 22 224 801
Percentage rent payments...................... 472 419 303 606 1,800
---------- ---------- ---------- ----------- ----------
Total rental revenue....................... 41,611 47,115 15,493 33,337 137,556
---------- ---------- ---------- ----------- ----------
COSTS AND EXPENSES:
Property operating expenses.................. 11,153 11,866 4,406 10,991 38,416
Interest expense............................. 9,646 6,727 1,563 10,662 28,598
Amortization of deferred financing fees...... 458 246 1 148 853
Rental property depreciation and amortization 5,737 7,322 1,949 4,568 19,576
General and administrative expenses.......... 7,845 75 16 - 7,936
---------- ---------- ---------- ----------- ----------
Total costs and expenses................... 34,839 26,236 7,935 26,369 95,379
---------- ---------- ---------- ----------- ----------

INCOME BEFORE OTHER INCOME AND EXPENSES,
DISCONTINUED OPERATIONS AND MINORITY INTEREST. 6,772 20,879 7,558 6,968 42,177

OTHER INCOME AND EXPENSES:
Investment income............................ 333 523 71 13 940
Other income................................. 72 49 - 17 138
Equity in loss of joint ventures............. - (117) - - (117)
Loss on extinguishment of debt............... - (513) - (110) (623)
---------- ---------- ---------- ----------- ----------

INCOME BEFORE DISCONTINUED OPERATIONS AND MINORITY
INTEREST..................................... 7,177 20,821 7,629 6,888 42,515
---------- ---------- ---------- ----------- ----------
DISCONTINUED OPERATIONS
Income from operations of sold properties.... - 953 - - 953
Gain on disposal of income producing
properties................................. - 3,083 - - 3,083
---------- ---------- ---------- ----------- ----------

Total income from discontinued operations.. - 4,036 - - 4,036
---------- ---------- ---------- ----------- ----------

INCOME BEFORE MINORITY INTEREST................. 7,177 24,857 7,629 6,888 46,551

MINORITY INTEREST............................... - (488) - (118) (606)
---------- ---------- ---------- ----------- ----------

NET INCOME...................................... $ 7,177 $ 24,369 $ 7,629 $ 6,770 $45,945
========== ========== ========== =========== ==========

15

9. Stockholders' Equity and Earnings Per Share

The following table reflects the change in number of shares of common stock
outstanding for the nine months ended September 30, 2003:

Common Options
Stock Exercised Total
------------ ------------- ------------

Board of Directors............................. 24* 16 40*
Officers....................................... 403* 269 672*
Employees and other............................ 35* 381 416*
Exercise of OP units........................... 262 - 262
IRT acquisition................................ 17,490 - 17,490
Private placement.............................. 6,911 - 6,911
Security offerings............................. 6,000 - 6,000
Dividend Reinvestment and Stock Purchase Plan.. 1,986 - 1,986
------------ ------------- ------------
Total.................................. 33,111 666 33,777
============ ============= ============

* Reflects shares of "restricted stock" which are subject to
forfeiture and vest over periods from two to five years.

The following table sets forth the computation of basic and diluted shares
used in computing earnings per share for the three and nine-month periods ended
September 30, 2003 and 2002:

Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ----------------------------
2003 2002 2003 2002
------------- ------------- ------------- ------------

Denominator for basic earnings per share -
weighted average shares ....................... 63,777 33,926 57,348 32,195
------------- ------------- ------------- ------------

Walden Woods Village, Ltd......................... 94 94 94 94
Unvested restricted stock ........................ 492 389 490 268
Convertible partnership units .................... 734 262 619 262
Stock options (using treasury method)............. 426 114 426 137
------------- ------------- ------------- ------------
Subtotal...................................... 1,746 859 1,629 761
------------- ------------- ------------- ------------
Denominator for diluted earnings per share -
weighted average shares........................ 65,523 34,785 58,977 32,956
============= ============= ============= ============

10. Accounting for Stock Options

The Company applies the intrinsic value method as prescribed by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations in measuring stock-based compensation, including
options. Accordingly, no compensation expense has been recognized for options
granted under the Company's compensation plan as no grants were made at less
than market value. Had compensation expense been determined based upon the fair
value at the grant date for awards under the Plan consistent with SFAS No. 123,
Accounting for Stock-Based Compensation, the Company's net income and earnings
per share on a pro forma basis would have been:

16

Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- --------------------------------
2003 2002 2003 2002
-------------- --------------- -------------- --------------

Net Income As reported............... $ 17,249 $ 10,926 $ 45,945 $ 32,631

Stock based employee
compensation expense
included in reported
net income............. - - - -

Total stock based
employee compensation
expense determined
under fair value
based method for all
awards................. 279 419 614 557
-------------- --------------- -------------- --------------
Pro forma................. $ 16,971 $ 10,507 $ 45,331 $ 32,074
============== =============== ============== ==============
Basic earnings per
share As reported............... $ 0.27 $ 0.32 $ 0.80 $ 1.01
============== =============== ============== ==============
Pro forma................. $ 0.27 $ 0.31 $ 0.79 $ 1.00
============== =============== ============== ==============

Diluted earnings
per share As reported............... $ 0.27 $ 0.32 $ 0.79 $ 1.00
============== =============== ============== ==============

Pro forma................. $ 0.26 $ 0.30 $ 0.78 $ 0.98
============== =============== ============== ==============

11. Loans to Executives

As a result of certain provisions of the Sarbanes-Oxley Act of 2002, the
Company is generally prohibited from making loans to directors and executive
officers. Prior to the adoption of the Sarbanes-Oxley Act of 2002, the Company
had loaned $7,112 to various executives in connection with their exercise of
options to purchase shares of the Company's common stock of which $3,505 has
been repaid during 2003. The notes bear interest at a rate of 5%. Interest only
is payable quarterly and the principal is due between 2006 and 2009. In
accordance with the provisions of the Sarbanes-Oxley Act of 2002, there have
been no material modifications to any of the terms of the loans granted to our
executives.

12. Minority Interest

On December 30, 1998, a wholly owned subsidiary of the Company, Equity One
(Walden Woods) Inc. (the "Walden Woods General Partner"), formed a limited
partnership, in which a retail shopping center was contributed by its owners
(the "Walden Woods Minority Partners"), and the Walden Woods General Partner
contributed 93.656 shares of Company common stock at an agreed-upon price of
$10.30 per share. Based on this per share price and the net asset value of the
property contributed by the Walden Woods Minority Partners, each of the partners
received 93.656 limited partnership units. The Company and the Walden Woods
Minority Partners have entered into an agreement (the "Redemption Agreement")
whereby the Walden Woods Minority Partners can request that the Company purchase
either their limited partnership units or any shares of Company common stock
which they have received in exchange for their limited partnership units at a
price of $10.30 per unit or per share no earlier than two years, nor later than
fifteen years, after the exchange date of January 1, 1999. As a result of the
Redemption Agreement, the minority interest has been presented in the
accompanying condensed consolidated balance sheet. In addition, under the terms
of the limited partnership agreement, the Walden Woods Minority Partners do not
have an interest in the common stock of the Company except to the extent of
dividends declared on such common stock. Accordingly, a preference in earnings
has been allocated to the Walden Woods Minority Partners to the extent of the
dividends declared. The 93.656 shares of common stock of the Company held by the
consolidated limited partnership are not considered outstanding in the
calculation of basic earnings per share.

17

On December 5, 2000, a wholly owned subsidiary of the Company, Equity One
(North Port) Inc., entered into a limited partnership (the "Shoppes of North
Port, Ltd.") as a general partner. An income producing shopping center was
contributed by its owners (the "North Port Minority Partners") and the Company
contributed an income producing property to a limited liability wholly owned by
the Shoppes of North Port, Ltd. Both the North Port Minority Partners and the
general partner were issued 261.850 operating partnership units ("OPUs") based
on the net value of the properties contributed. The North Port Minority Partners
had the right to redeem their OPUs for the Company's common stock on a
one-for-one basis or for cash at an agreed upon price of $11.00 per share no
earlier than December 10, 2001, nor later than three and one half years
thereafter. The North Port Minority Partners received a preferred quarterly
distribution equal to a 9% annual return on their initial capital contribution
through December 31, 2002. On January 1, 2003, the preferred distribution was
reduced to a 3% annual return on their initial capital contribution. This amount
is reflected as interest expense in the condensed consolidated financial
statements. During July 2003, North Port Minority Partners redeemed their OPUs
in exchange for 261.850 shares of the Company's common stock.

The Company is the general partner of IRT Partners L.P. ("LP") and
maintains an indirect partnership interest through its wholly-owned subsidiary,
IRT Management Company. LP was formed in order to enhance the acquisition
opportunities of the Company through a downREIT structure. This structure offers
potential sellers of properties the ability to make a tax-deferred sale of their
real estate properties in exchange for limited partnership units ("OP Units") of
LP. As of September 30, 2003, there were 734.266 OP Units outstanding held by
partners not affiliated with the Company. LP is obligated to redeem each OP Unit
held by a person other than the Company, at the request of the holder, for cash
equal to the fair market value of a share of the Company's common stock at the
time of such redemption, provided that the Company may elect to acquire any such
OP Unit presented for redemption for one share of common stock. Such limited
partnership interest of 5.59% of LP are held by persons unaffiliated with the
Company and are reflected as a minority interest in the consolidated
subsidiaries in the accompanying condensed consolidated balance sheets.

The Company also records a minority interest for the limited partners'
share of equity in two separate general partnerships in which it controls and is
the primary beneficiary. The two partnerships in which the Company has a
partnership interest are Venice Plaza (75% interest) and North Village Center
(49% interest). The minority interest has been presented in the accompanying
condensed consolidated balance sheet.

13. Dispositions

The Company has adopted SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, effective January 1, 2002, and has included the
operations of properties sold and held for sale, as well as the gain on sale of
sold properties, as discontinued operations for all periods presented. The
Company expects to reclassify historical operating results whenever necessary in
order to comply with the requirements of SFAS No. 144.

The following table reflects the properties being reported in discontinued
operations for the three and nine-month periods ended September 30, 2003 and
2002:

Square Feet/ Gross Sales Gain On
Property Location Date Sold Acres Price Sale
- ---------------------------- ------------------ ------------- ------------- ----------- -----------
2003 Dispositions
- ----------------------------

Eckerd..................... Leesburg, FL February 12,739 $ 4,050 $ 326
Eckerd..................... Melbourne, FL February 10,908 2,715 177
----------- -----------
First quarter 2003................................................................. 6,765 503
----------- -----------
Pompano.................... Pompano Beach, FL April 80,697 3,400 470
Huntcrest-Outparcels....... Huntcrest, GA May 2.94 acres 1,686 -
Oak Square Joint Venture... Gainesville, FL June n/a 2,230 901
Second quarter 2003................................................................ 7,316 1,371
----------- -----------
CDG (Park Place) LLC JV.... Plano, TX September n/a 4,434 1,209
Heritage Walk.............. Milledgeville, GA Under contract 151,191 10,000 -
----------- -----------
Third quarter 2003................................................................. 14,434 1,209
----------- -----------
Total .......................................................................... $ 28,515 $ 3,083
=========== ===========

18

Property Location Date Sold Acres Price Sale
-------------------------- -------------------- ------------ ------------- ------------ -----------
2002 Dispositions
--------------------------

Equity One Office.......... Miami Beach, FL February 28,780 $ 6,050 $ 4,396
Olive land................. Miami, FL February 6.79 acres 1,900 694
Benbrook................... Fort Worth, TX February 247,422 2,590 1,032
Montclair apartments....... Miami Beach, FL September 9,375 2,450 981
Shoppes of Westburry....... Miami, FL July 33,706 5,220 167
Forest Edge................ Orlando, FL July 68,631 3,475 561
Northwest Crossing......... Dallas, TX September 33,366 2,350 363
McMinn Plaza............... Athens, TN November 107,200 6,200 951
Woodforest................. Houston, TX December 12,741 1,850 119
------------ -----------
Total.......................................................................... $ 32,085 $ 9,264
============ ===========

The Company classified the results of operations from the properties sold
during 2002 and 2003 as income from discontinued operations in the accompanying
condensed consolidated statements of operations. The effect of the adoption of
SFAS No. 144 on the condensed consolidated statements of operations is shown
below.

Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2003 2002 2003 2002
----------- ------------ ----------- ------------

Rental revenue................................... $ 273 $ 744 $954 $ 3,271
----------- ------------ ----------- ------------

Property operating expenses...................... 66 153 167 791
Interest expense................................. 131 47 328 262
Amortization of deferred financing fees.......... - 59 1 67
Rental property depreciation and amortization.... 39 104 130 351
----------- ------------ ----------- ------------

Total expenses................................... 236 363 626 1,471
----------- ------------ ----------- ------------

Equity in income of joint ventures............... 175 145 625 445
----------- ------------ ----------- ------------

Income from discontinued operations.............. $ 212 $ 526 $953 $ 2,245
=========== ============ =========== ============

14. Debt Extinguishment

For the nine months ended September 30, 2003, the Company prepaid various
mortgage notes payable and incurred prepayment fees of $623. The Company has
adopted SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment
of FASB Statement No. 13, and Technical Corrections, and is reporting the loss
on extinguishment of debt as part of ordinary income as it no longer meets the
criteria for extraordinary gain (loss) accounting treatment.

15. New Accounting Pronouncements and Changes

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections
which rescinds FASB Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that Statement, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. It also
rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor
Carriers, and amends FASB Statement No. 13, Accounting for Leases. Finally SFAS
No. 145 amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under
changed conditions. The provisions related to the rescission of FASB Statement
No. 4 and its amendment Statement No. 64 is effective for fiscal years beginning
after May 15, 2002. The Company adopted SFAS No. 145 as of July 2002 and has
reflected gains (losses) from extinguishment of debt as part of ordinary income.

In November 2002, FASB issued FASB Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantee's of Indebtedness of Other's (an

19

interpretation of FASB Statements No. 5, 57 and 107 and rescission of FASB
Interpretation No. 34). FIN 45 clarifies the requirements of FASB Statement No.
5, Accounting for Contingencies. It requires that upon issuance of a guarantee,
the guarantor must recognize a liability for the fair value of the obligation it
assumes under that guarantee regardless of whether or not the guarantor receives
separate identifiable consideration (i.e., a premium). The Company adopted the
new disclosure requirements, which are effective beginning with 2002 calendar
year-end financials. FIN 45's provisions for initial recognition and measurement
are effective on a prospective basis to guarantees issued or modified after
December 31, 2002. The adoption of FIN 45 did not have a material impact on the
Company's financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. This Statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation and amends the disclosure
requirement of SFAS No. 123, Accounting for Stock-Based Compensation, to require
prominent disclosure in both annual and interim financial statements about the
effect of the method used on reported results. SFAS No. 148 is effective for
financial statements issued for fiscal years ending after December 15, 2002 and,
as it relates to Opinion No. 28, Interim Financial Reporting, the interim
periods beginning after December 15, 2002, although earlier application is
encouraged. The Company applies the intrinsic value method as prescribed by
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations in measuring stock-based compensation.
The Company has adopted the disclosure requirements of SFAS No. 148 in its
financial statements.

In January 2003, FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"), an interpretation of ABR 51. FIN 46
provides guidance on identifying entities for which control is achieved through
means other than through voting rights, variable interest entities ("VIE"), and
how to determine when and which business enterprises should consolidate the VIE.
In addition, FIN 46 requires both the primary beneficiary and all other
enterprises with a significant variable interest in a VIE to make additional
disclosures. The transitional disclosure requirements will take effect almost
immediately and are required for all financial statements issued after January
31, 2003. The consolidated provisions of FIN 46 are effective immediately for
variable interests in VIEs created after January 31, 2003. For variable
interests in VIEs created before February 1, 2003, the provisions of FIN 46 are
effective for the first interim or annual period ending after December 15, 2003.
The Company has evaluated the effect of FIN 46 and has determined where it is
the primary beneficiary and has consolidated those VIE's. Where the Company has
determined it is not the primary beneficiary of the VIE, it reports the VIE
under the equity method. The Company has not become a party to any VIE's during
2003.

In April 2003, FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which clarifies the accounting
and reporting for derivative instruments, including derivative instruments that
are embedded in contracts. This statement is effective for contracts entered
into or modified after June 30, 2003. The Company adopted this pronouncement
beginning July 1, 2003. The adoption of SFAS No. 149 did not have a material
impact on the Company's financial condition or results of operations.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This statement
establishes standards for the classification and measurement of financial
instruments that possess characteristics similar to both liability and equity
instruments. SFAS No. 150 also addresses the classification of certain financial
instruments that include an obligation to issue equity shares. On October 29,
2003, the FASB voted to defer, for an indefinite period, the application of the
guidance in FASB Statement No. 150, Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity. The FASB decided to defer
the application of the aspect of Statement 150 until it could consider some of
the resulting implementation issues.

16. Commitments and Contingencies

As of September 30, 2003, the Company has pledged letters of credit
totaling $1,433 as additional security for certain financings and other
activities.

The Company is subject to litigation in the normal course of business, none
of which in the opinion of management will have a material adverse effect on the
financial condition or results of operations of the Company.

20

Following the execution of the merger agreement with IRT in October 2002,
three IRT shareholders filed three separate purported class action and
derivative suits in the Superior Court of Cobb County, State of Georgia, against
IRT, IRT's board of directors and Equity One alleging claims of breach of
fiduciary duty by the defendant directors, unjust enrichment and irreparable
harm. The complaints sought declaratory relief, an order enjoining consummation
of the merger, and unspecified damages. Although the Georgia court did not grant
the plaintiffs the equitable relief requested and permitted the completion of
the merger, two of these lawsuits, Greaves v. IRT Property Company, et. al. and
Phillips v. IRT Property Company, et. al., were still pending following the
merger. The third lawsuit was voluntarily dismissed. Following the execution in
August 2003 of a settlement agreement among the parties to the lawsuits, on
September 23, 2003, the superior court approved dismissals with prejudice of
these two lawsuits. All settlement related costs were paid by IRT's former
insurance carrier.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

The following discussion should be read in conjunction with the Company's
unaudited Condensed Consolidated Financial Statements, including the notes
thereto, which are included elsewhere herein and the Company's audited
Consolidated Financial Statements and notes thereto for the year ended December
31, 2002 and Management's Discussion and Analysis of Financial Condition and
Results of Operations appearing in the Company's Current Report on Form 8-K
filed September 19, 2003. The results of operations for an interim period may
not give a true indication of results for the year.

Unless the context otherwise requires, all references to "we," "our," "us,"
"Equity One," and the "Company" in this report refer collectively to Equity One
Inc., and its subsidiaries, including joint ventures.

RESULTS OF OPERATIONS

On February 12, 2003, Equity One, Inc. and IRT Property Company completed a
statutory merger. The transaction has been accounted for as a purchase and the
results of Equity One include the activity of IRT for the period February 12,
2003 through September 30, 2003.

Three Months Ended September 30, 2003 Compared to Three Months Ended
September 30, 2002

Total rental revenue increased by $25.8 million, or 103.4%, to $50.8
million in 2003 from $25.0 million in 2002. The following factors accounted for
this difference:

o The acquisition of IRT increased revenue by approximately $22.9
million;

o Properties acquired during 2003 increased revenue by approximately
$2.7 million; and

o Other property rental revenue increased by $270,000 related to an
increase in expense recoveries.

Property operating expenses increased by $6.7 million, or 90.7%, to $14.1
million for 2003 from $7.4 million in 2002. The following factors accounted for
this difference:

o The acquisition of IRT increased operating expenses by approximately
$6.1 million;

21

o Properties acquired during 2003 increased operating expenses by
approximately $737,000; and

o Other property operating expenses decreased by $153,000.

Rental property depreciation and amortization increased by $4.1 million, or
119.8%, to $7.5 million for 2003 from $3.4 million in 2002. The following
factors accounted for this difference:

o The acquisition of IRT increased depreciation and amortization by
approximately $3.2 million;

o Properties acquired during 2003 increased depreciation and
amortization by approximately $483,000; and

o Other property depreciation and amortization increased by
approximately $471,000.

Interest expense increased by $5.0 million, or 95.2%, to $10.2 million for
2003 from $5.2 million in 2002. This difference was primarily due to:

o An increase in interest expense of $4.3 million as a result of the
assumption of mortgage loans and senior unsecured debt in the
acquisition of IRT;

o Interest incurred on the debt related to the acquisition of properties
during 2003 of $784,000;

o An increase in revolving credit facility interest of $581,000
primarily related to the acquisition of IRT and payoff of various
mortgage loans; and

o These increases to interest expense were partially offset by an
increase in capitalized interest of $139,000 related to development
activity and the payoff of various loans decreasing interest expense
by $526,000.

General and administrative expenses increased by $1.3 million, or 90.7%, to
$2.7 million for 2003 from $1.4 million in 2002. Compensation and employer
related expenses increased by $795,000 and other general office expenses
increased by $505,000. These expense increases were due to the increase in
staffing resulting from the IRT acquisition.

Investment income decreased by $386,000 due to the principal repayments
received on notes receivable.

During 2002, we settled a mortgage note at a discount and recognized a gain
on the extinguishment of debt of $1.5 million.

We sold a property held in a joint venture and have one property that is
held for sale for the three month period ended September 30, 2003, the operating
results of $212,000 are being reflected as income from operations of sold
properties. The sale by the joint venture produced a gain of $1.2 million for
2003. The 2002 discontinued operations reflect a reclassification of operations
for properties sold during 2002 and 2003. We recognized a gain of $1.1 million
in 2002 related to a gain on the disposal of properties sold during 2002.

Minority interest increased by $202,000 due to minority interests assumed
in the acquisition of IRT.

As a result of the foregoing, net income increased by $6.3 million, or
57.9%, to $17.2 million for 2003 from $10.9 million in 2002.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended
September 30, 2002

Total rental revenue increased by $64.6 million, or 88.3%, to $137.6
million in 2003 from $73.0 million in 2002. The following factors accounted for
this difference:

o The acquisition of IRT increased revenue by approximately $58.4
million;

o Properties acquired during 2002 increased revenue by approximately
$3.7 million;

o Properties acquired during 2003 increased revenue by approximately
$2.7 million; and

o Other property rental revenue decreased by $243,000 related to a
decrease in percentage rent and expense recoveries.

Property operating expenses increased by $16.8 million, or 78.2%, to $38.4
million for 2003 from $21.6 million in 2002. The following factors accounted for
this difference:

22

o The acquisition of IRT increased operating expenses by approximately
$16.4 million;

o Properties acquired during 2002 increased operating expenses by
approximately $1.2 million;

o Properties acquired during 2003 increased operating expenses by
$737,000; and

o Other property operating expenses decreased by $1.4 million.

Rental property depreciation and amortization increased by $9.6 million, or
96.7%, to $19.6 million for 2003 from $10.0 million in 2002. The following
factors accounted for this difference:

o The acquisition of IRT increased depreciation and amortization by
approximately $7.6 million;

o Properties acquired during 2002 increased depreciation and
amortization by approximately $476,000;

o Properties acquired during 2003 increased depreciation and
amortization by $483,000; and

o Other property depreciation and amortization increased by
approximately $1.1 million.

Interest expense increased by $12.0 million, or 72.1%, to $28.6 million for
2003 from $16.6 million in 2002. This difference was primarily due to: o An
increase in interest expense of $11.2 million as a result of the assumption of
mortgage loans and senior unsecured debt in the acquisition of IRT;

o Interest incurred on the debt related to the acquisition of properties
made during 2002 of $1.1 million;

o An increase in line of credit interest of $1.4 million primarily
relating to the acquisition of IRT; and

o These increases to interest expenses were partially offset by an
increase in capitalized interest of $200,000 related to development
activity and the payoff of various loans decreasing interest expense
by $1.5 million.

General and administrative expenses increased by $2.9 million, or 58.1%, to
$7.9 million for 2003 from $5.0 million in 2002. Compensation and employer
related expenses increased by $2.5 million and other general office expenses
increased by $969,000. These expense increases were partially due to the
increase in staffing resulting from the IRT acquisition. There was a decrease of
$569,000 relating to the write off of pre-acquisition costs in 2002.

Investment income decreased by $317,000 due to the principal repayments
received on notes receivable.

During 2003, we repaid various mortgage notes payable and incurred
prepayment fees of $623,000. During 2002, we settled a mortgage note at a
discount and recognized a gain on the extinguishment of debt of $1.5 million.

We sold four properties, a property held by a joint venture and a joint
venture interest during 2003, the associated operating results of $953,000 is
reflected as income from operations of sold properties for the nine-month period
ended September 30, 2003. The sale of these properties and the joint venture
interest produced a gain of $3.1 million for 2003. The 2002 discontinued
operations reflect a reclassification of the operations for properties sold
during 2002 and 2003. We recognized a gain of $8.2 million in 2002 related to
the disposal of properties.

Minority interest increased by $530,000 due to minority interests assumed
in the acquisition of IRT.

As a result of the foregoing, net income increased by $13.3 million, or
40.8%, to $45.9 million for 2003 from $32.6 million in 2002.

23

FUNDS FROM OPERATIONS

We believe Funds From Operations ("FFO") (combined with the primary GAAP
presentations) is a useful supplemental measure of our operating performance
that is a recognized metric used extensively by the real estate industry, in
particular, REITs. Accounting for real estate assets using historical cost
accounting under accounting principles generally accepted in the United States
of America ("GAAP") assumes that the value of real estate diminishes predictably
over time. The National Association of Real Estate Investment Trusts ("NAREIT")
stated in its April 2002 White Paper on Funds from Operations "since real estate
values...have historically risen or fallen with market conditions, many industry
investors have considered presentations of operating results for real estate
companies that use historical cost accounting to be insufficient by themselves."

FFO, as defined by NAREIT, is "net income (computed in accordance with
GAAP), excluding (gains or losses) from sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect funds from operations on the same basis." We believe that
financial analysts, investors and stockholders are better served by the clearer
presentation of comparable period operating results generated from our FFO
measure. Our method of calculating FFO may be different from methods used by
other REITs and accordingly, may not be comparable to such other REITs.

FFO is presented to assist investors in analyzing our performance and to
provide an indication of our ability to fund capital expenditures, distribution
requirements and other cash needs. FFO (i) does not represent cash flow from
operations as defined by GAAP, (ii) is not indicative of cash available to fund
all cash flow needs and liquidity, including the ability to make distributions,
and (iii) should not be considered as an alternative to net income (which is
determined in accordance with GAAP) for purposes of evaluating our operating
performance. We believe net income is the most directly comparable GAAP measure
to FFO.

The following table illustrates the calculation of FFO for the three and
nine-month periods ended September 30, 2003 and 2002:

Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
2003 2002 2003 2002
------------ ----------- ---------- -----------

Net income ............................................. $ 17,249 $ 10,926 $ 45,945 $ 32,631
Adjustments:
Rental property depreciation and amortization, 7,574 3,532 19,706 10,304
including discontinued operations................
Gain on disposal of income producing properties..... (1,209) (1,091) (3,083) (8,194)
Minority interest................................... 227 25 606 76
Other Items:
Interest on convertible partnership units .......... 64 43 194 -
Pro-rata share of real estate depreciation from
joint ventures................................... 83 152 383 466
------------ ---------- ---------- -----------
Funds from operations .................................. $ 23,924 $ 13,608 $ 63,600 $ 35,477
============ ========== ========== ===========

FFO increased by $10.3 million, or 75.8%, to $23.9 million for the three
months ended September 30, 2003, from $13.6 million for the comparable period of
2002. FFO increased by $28.1 million, or 79.3%, to $63.6 million for the nine
months ended September 30, 2003, from $35.5 million for the comparable period of
2002. The increase is primarily the result of the inclusion of IRT's results for
the current period and 2002 and 2003 acquisitions, and the increases in income
described above.

24

The following table reflects the reconciliation of FFO per diluted share to
earnings per diluted share, the most directly comparable GAAP measure, for the
periods presented:

Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- ------------------------------
2003 2002 2003 2002
-------------- ------------- -------------- ------------

Earnings per diluted share*.................. $ 0.27 $ 0.32 $ 0.79 $ 1.00
Adjustments:
Rental property depreciation and
amortization, including discontinued
operations................................ 0.12 0.10 0.33 0.31
Gain on disposal of income producing
properties............................... (0.02) (0.03) (0.05) (0.25)
Pro-rata share of real estate
depreciation of joint ventures........... - - 0.01 0.02
------------ ----------- ------------ ------------

Funds from operations per diluted share...... $ 0.37 $ 0.39 $ 1.08 $ 1.08
============ =========== ============ ============

* Earnings per diluted share reflect the add-back of interest on convertible
partnership units and the minority interest(s) in earnings of consolidated
subsidiaries which are convertible to shares of our common stock.

CASH FLOW

Net cash provided by operations of $61.6 million for the nine months ended
September 30, 2003 included: (i) net income of $45.9 million, (ii) adjustments
for non-cash and gain on sale items which increased cash flow by $17.4 million,
offset by an increase in operating assets over operating liabilities of $1.7
million, compared to net cash provided by operations of $36.8 million for the
nine months ended September 30, 2002, which included (i) net income of $32.6
million, (ii) adjustments for non-cash items which increased cash flow by $1.8
million, and (iii) an increase in operating liabilities over operating assets of
$2.4 million.

Net cash used in investing activities of $298.4 million for the nine months
ended September 30, 2003 included: (i) the acquisition of one parcel of land
held for future development, an outparcel, a grocery store building at one of
our existing centers and four shopping centers for $116.9 million, (ii)
construction, development and other capital improvements of $22.5 million and
(iii) the acquisition of IRT for $187.6 million, net of cash received, and (iv)
increased leasing costs of $2.7 million, offset by (a) proceeds from the sale of
four properties and a joint venture interest of $13.7 million, (b) proceeds from
escrowed funds on sale of properties to utilize tax deferred exchanges for $12.9
million, (c) proceeds from payment of notes receivable of $2.8 million and (d)
proceeds from other sources of $1.9 million. These amounts should be compared to
net cash used in investing activities of $46.4 million for the nine months ended
September 30, 2002 which included: (i) the acquisition of two drugstores, four
shopping centers and three parcels of land for $59.4 million (ii) construction,
development and other capital improvements of $9.3 million, and (iii) increased
leasing costs of $831,000, offset by proceeds from the sale of three properties
of $19.5 million and proceeds from escrow and other sources of $3.6 million.

Net cash provided by financing activities of $233.9 million for the nine
months ended September 30, 2003 included: (i) net borrowings on the revolving
credit facilities of $115.0 million, less the pay down of $8.0 million on the
credit facility assumed in the IRT merger, (ii) net proceeds from the issuance
of common stock of $230.9 million, and (iii) proceeds from repayment of notes
receivable of $3.5 million, offset by (a) the payoff of nine mortgage notes for
$48.4 million and monthly principal payments on mortgage notes of $6.0 million,
(b) cash dividends paid to common stockholders of $51.4 million, and (c) other
miscellaneous uses of $1.7 million, compared to net cash used by financing
activities of $10.2 million for the nine months ended September 30, 2002 which
included: (i) net proceeds from issuance of common stock of $64.5 million, (ii)
net borrowings on the revolving credit facilities of $9.1 million and (iii) new
mortgage note borrowings of $6.1 million, offset by (a) the payoff of ten
mortgage notes for $37.7 million and monthly principal payments on mortgage
notes of $4.2 million, (b) cash dividends paid to common stockholders of $26.4
million, and (c) other miscellaneous uses of $1.2 million.

25

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal demands for liquidity are maintenance expenditures,
repairs, property taxes and tenant improvements relating to rental properties,
leasing costs, acquisition and development activities, debt service and
repayment obligations and distributions to its stockholders. The principal
sources of funding for the Company's operations are operating cash flows, the
issuance of equity and debt securities, the placement of mortgage loans and
periodic borrowings under the Company's revolving credit facilities.

DEBT

On February 7, 2003, the Company entered into a $340.0 million unsecured
revolving credit facility with a syndicate of banks for which Wells Fargo Bank,
National Association is the sole lead arranger and administrative agent. This
facility bears interest at the Company's option at (i) LIBOR plus 0.65% to
1.35%, depending on the credit ratings of the Company's senior unsecured long
term notes or (ii) at the greater of (x) Wells Fargo's prime rate and (y) the
Federal Funds Rate plus 0.5%. The facility also includes a competitive bid
option which allows the Company to conduct auctions among the participating
banks for borrowings in an amount not to exceed $150.0 million, a $25.0 million
swing line facility for short term borrowings, a $20.0 million letter of credit
commitment and may, at the request of the Company, be increased up to a total
commitment of $400.0 million. The facility expires February 12, 2006 with a one
year extension option. In addition, the facility contains customary covenants,
including financial covenants regarding debt levels, total liabilities, interest
coverage, EBITDA levels, unencumbered properties, permitted investments and
others. The facility also prohibits stockholder distributions in excess of 95%
of funds from operations calculated at the end of each fiscal quarter for the
four fiscal quarters then ending. Notwithstanding this limitation, the Company
can make stockholder distributions to avoid income taxes on asset sales. If a
default under the facility exists, the Company`s ability to pay dividends would
be limited to the amount necessary to maintain the Company's status as a REIT
unless the default is a payment default or bankruptcy event in which case the
Company would be prohibited from paying any dividends. The facility is
guaranteed by most of the Company's wholly-owned subsidiaries. As of September
30, 2003, the Company had $138 million outstanding on this credit facility. The
weighted average interest rate as September 30, 2003 was 2.17%.

As of September 30, 2003, the Company had a $5.0 million unsecured credit
facility with City National Bank of Florida. This facility also secures $1.4
million in outstanding letters of credit.

Our revolving credit facility balances as of September 30, 2003 and
December 31, 2002 consisted of the following:

September 30, December 31,
2003 2002
----------------- --------------
(in thousands)

Revolving Credit Facilities
Wells Fargo (unsecured) ................................ $ 138,000 -
City National Bank ..................................... - -
Wells Fargo (secured) .................................. - $ 23,000
----------------- --------------
Total revolving credit facilities ................... $ 138,000 $ 23,000
================= ==============

As of September 30, 2003, the gross availability under the various credit
facilities was approximately $345 million, resulting in additional borrowing
capacity of $205.6 million, net of letters of credit.

26

Our mortgage and unsecured senior notes payable balances as of September
30, 2003 and December 31, 2002 consisted of the following:

September 30, December 31,
2003 2002
------------------ -----------------
(in thousands)

Mortgage and Unsecured Senior Notes Payable
Fixed rate mortgage loans.............................. $ 441,453 $ 307,508
Unsecured senior notes payable......................... 150,000 -
Variable rate mortgage loans........................... - 24,635
Unamortized premium on notes payable................... 23,047 -
------------------ -----------------

Total mortgage and unsecured senior notes payable... $ 614,500 $ 332,143
================== =================

As a result of the Company's merger with IRT, the Company assumed IRT's
obligations relating to $150.0 million principal amount of senior notes, bearing
interest at fixed annual interest rates ranging from 7.25% to 7.84% and maturing
between 2006 and 2012. The interest rate of one series of these senior notes is
subject to a 50 basis point increase if the Company does not maintain an
investment grade debt rating. These notes have also been guaranteed by most of
the Company's wholly-owned subsidiaries. Also, as part of the Company's merger
with IRT, the Company assumed $135.4 million of mortgage notes payable.

Each of the existing mortgage loans is secured by a mortgage on one or more
of certain of the Company's properties. Certain of the mortgage loans involving
an aggregate principal balance of approximately $209 million contain
prohibitions on transfers of ownership which may have been violated by the
Company's previous issuances of common stock or in connection with past
acquisitions and may be violated by transactions involving the Company's capital
stock in the future. If a violation were established, it could serve as a basis
for a lender to accelerate amounts due under the affected mortgage. To date, no
lender has notified the Company that it intends to accelerate its mortgage.
Based on discussions with various lenders, current credit market conditions and
other factors, the Company believes that the mortgages will not be accelerated.
Accordingly, the Company believes that the violations of these prohibitions will
not have a material adverse impact on the Company's results of operations or
financial condition.

As of September 30, 2003, our total debt of $729.5 million, divided by our
gross real estate assets of $1.6 billion equals 45.3 %.

As of September 30, 2003, scheduled principal amortization and the balances
due at the maturity of our various notes payable and revolving credit facilities
(excluding unamortized premium on notes payable) are as follows (in thousands):

Fixed Rate Revolving Total
Mortgage Unsecured Credit Principal Balance
Year Notes Senior Notes Facilities Due at Maturity
------------------ ------------ --------------- -------------- ------------------

2003.............. $ 2,156 $ - $ - $ 2,156
2004.............. 8,954 - - 8,954
2005.............. 36,595 - - 36,595
2006.............. 34,412 50,000 138,000 222,412
2007.............. 12,604 75,000 - 87,604
Thereafter........ 346,732 25,000 - 371,732
--------------- --------------- -------------- ------------------
Total......... $ 441,453 $ 150,000 $ 138,000 $ 729,453
=============== =============== ============== ==================

Our debt level could subject us to various risks, including the risk that
our cash flow will be insufficient to meet required payments of principal and
interest, and the risk that the resulting reduced financial flexibility could
inhibit our ability to develop or improve our rental properties, withstand
downturns in our rental income or take

27

advantage of business opportunities. In addition, because we currently
anticipate that only a small portion of the principal of our indebtedness will
be repaid prior to maturity, it is expected that it will be necessary to
refinance the majority of our debt. Accordingly, there is a risk that such
indebtedness will not be able to be refinanced or that the terms of any
refinancing will not be as favorable as the terms of our current indebtedness.

DEVELOPMENT ACTIVITY

We are currently redeveloping a portion of Oakbrook Square shopping center
in Palm Beach Gardens, Florida to accommodate a new Homegoods store, a new
out-parcel and the re-leasing of a portion of the in-line space. We have
commenced the complete redevelopment of Crossroads Square (formerly known as
University Mall) in Pembroke Pines, Florida, incorporating a new Lowe's home
improvement store, a new Eckerd drug store and the refurbishing of the remainder
of the center. We have begun construction of a new 46,000 square foot L.A.
Fitness Sports Club as part of an anticipated 120,000 square foot addition to
our Shops at Skylake in North Miami Beach, Florida. We have commenced the
development of a new 25,000 square foot CVS drug store-anchored center across
the street from our Plaza Alegre shopping center in Miami, Florida. We are also
in the process of reconfiguring and re-leasing the former Winn Dixie space at
our Walden Woods shopping center in Plant City, Florida to accommodate a 20,000
square foot Dollar Tree store, a 13,000 square foot Aaron Rents store and 13,500
square feet of local space. In addition, we are in the process of completely
renovating and re-leasing the former Publix space at our Gulf Gate shopping
center in Naples, Florida to accommodate a 36,000 square foot Big Lots. Lastly,
we are in the initial redevelopment phase of Salerno Village in Stuart, Florida
to accommodate a new and expanded Winn Dixie supermarket. This development is
scheduled for completion the second quarter of 2004.

As of September 30, 2003, in order to complete the construction of our
active development and redevelopment projects, we have committed to fund
estimated construction costs of approximately $13.8 million. These obligations
are related to construction contracts and are generally due as the work is
performed. We expect to fund the costs of the development of these projects from
cash generated from our operations, borrowings under our various revolving
credit facilities and other sources of cash.

EQUITY

On January 23, 2002, we filed a universal shelf registration statement with
the Securities and Exchange Commission, which will permit us, from time to time,
to offer and sell various types of securities, including common stock, preferred
stock, debt securities, depositary shares and warrants, up to a value of $250
million.

On February 12, 2003, the Company completed a private placement of 6.911
million shares of its common stock. Three affiliated investors, Alony Hetz
Properties & Investments, Ltd., Silver Maple (2001), Inc. and M.G.N. (USA) Inc.
purchased 1.6 million, 1.0 million, and 4.3 million shares of common stock,
respectively, at $13.50 per share. The net proceeds of $93 million in cash were
used to fund a portion of the cost of the acquisition of IRT. The foregoing
issuances were made pursuant to exemption under Section 4(2) of the Securities
Act of 1933, as amended.

In May 2003, we completed the sale of 3.0 million shares of common stock at
a price of $16.22 per share in an underwritten public offering. The net proceeds
of $48.7 million from the stock offering were used for general corporate
purposes, including the repayment of debt, ongoing development activities and
the acquisition of additional shopping centers.

In July 2003, we filed a second universal shelf registration statement with
the Securities and Exchange Commission, which will permit us, from time to time,
to offer and sell various types of securities, including common stock, preferred
stock, debt securities, depositary shares and warrants, up to a value of $600
million. The registration statement provides us additional flexibility in
accessing capital markets to fund future growth and for general corporate
purposes. In conjunction with the $155 million balance from our prior universal
shelf registration, and after taking into account our public offering in
September 2003 of $52 million, we now have approximately $703 million of
availability under our existing shelf registration statements.

In September 2003, we completed the sale of 3.0 million shares of common
stock at a price of $17.05 per share in an underwritten public offering. The net
proceeds of $51.2 million from the stock offering were used for general
corporate purposes, including the repayment of debt and, ongoing development
activities.

28

For the three months ended September 30, 2003, we issued 1.2 million shares
of our common stock at prices ranging from $16.58 to $16.82 per share and for
the nine months ended September 30, 2003, we issued 2.0 million shares of common
stock at prices ranging from $12.76 to $16.85 per share pursuant to our Divided
Reinvestment and Stock Purchase Plan. As of September 30, 2003, we have 3.0
million shares remaining for sale under our Dividend Reinvestment and Stock
Purchase Plan.

FUTURE CAPITAL REQUIREMENTS

We believe, based on currently proposed plans and assumptions relating to
our operations, that our existing financial arrangements, together with cash
generated from our operations, will be sufficient to satisfy our cash
requirements for a period of at least twelve months. In the event that our plans
change, our assumptions change or prove to be inaccurate or cash flows from
operations or amounts available under existing financing arrangements prove to
be insufficient to fund our expansion and development efforts or to the extent
we discover suitable acquisition targets the purchase price of which exceeds our
existing liquidity, we would be required to seek additional sources of
financing. There can be no assurance that any additional financing will be
available on acceptable terms or at all, and any future equity financing could
be dilutive to existing stockholders. If adequate funds are not available, our
business operations could be materially adversely affected.

DISTRIBUTIONS

We believe that we qualify and intend to qualify as a REIT under the
Internal Revenue Code. As a REIT, we are allowed to reduce taxable income by all
or a portion of our distributions to stockholders. As distributions have
exceeded taxable income, no provision for federal income taxes has been made.
While we intend to continue to pay dividends to our stockholders, we also will
reserve such amounts of cash flow as we consider necessary for the proper
maintenance and improvement of our real estate and other corporate purposes,
while still maintaining our qualification as a REIT.

INFLATION

Most of our leases contain provisions designed to partially mitigate the
adverse impact of inflation. Such provisions include clauses enabling us to
receive percentage rents based on tenant gross sales above predetermined levels,
which rents generally increase as prices rise, or escalation clauses which are
typically related to increases in the Consumer Price Index or similar inflation
indices. Most of our leases require the tenant to pay its share of operating
expenses, including common area maintenance, real estate taxes and insurance,
thereby reducing our exposure to increases in costs and operating expenses
resulting from inflation.

Our financial results are affected by general economic conditions in the
markets in which our properties are located. An economic recession, or other
adverse changes in general or local economic conditions could result in the
inability of some existing tenants to meet their lease obligations and could
otherwise adversely affect our ability to attract or retain tenants. The
properties are typically anchored by supermarkets, drug stores and other
consumer necessity and service retailers which typically offer day-to-day
necessities rather than luxury items. These types of tenants, in our experience,
generally maintain more consistent sales performance during periods of adverse
economic conditions.

CAUTIONARY STATEMENT RELATING TO FORWARD LOOKING STATEMENTS

Certain matters discussed in this Quarterly Report on Form 10-Q contain
"forward-looking statements" for purposes of Section 27A of the Securities Act
of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements are based on current expectations and
are not guarantees of future performance.

All statements other than statements of historical facts are
forward-looking statements, and can be identified by the use of forward-looking
terminology such as "may," "will," "might," "would," "expect," "anticipate,"
"estimate," "would," "could," "should," "believe," "intend," "project,"
"forecast," "target," "plan," or "continue" or the negative of these words or
other variations or comparable terminology, are subject to certain risks, trends
and uncertainties that could cause actual results to differ materially from
those projected. Because these statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied
29

by the forward-looking statements. We caution you not to place undue reliance on
those statements, which speak only as of the date of this report.

Among the factors that could cause actual results to differ materially are:

o general economic conditions, competition and the supply of and demand
for shopping center properties in our markets;

o management's ability to successfully combine and integrate the
properties and operations of separate companies that we have acquired
in the past or may acquire in the future;

o interest rate levels and the availability of financing;

o potential environmental liability and other risks associated with the
ownership, development and acquisition of shopping center properties;

o risks that tenants will not take or remain in occupancy or pay rent;

o greater than anticipated construction or operating costs;

o inflationary and other general economic trends;

o the effects of hurricanes and other natural disasters; and

o other risks detailed from time to time in the reports filed by us with
the Securities and Exchange Commission.

Except for ongoing obligations to disclose material information as required
by the federal securities laws, we undertake no obligation to release publicly
any revisions to any forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The primary market risk to which the Company has exposure is interest rate
risk. Changes in interest rates can affect the Company's net income and cash
flows. As changes in market conditions occur, interest rates can either increase
or decrease, interest expense on the variable component of the Company's debt
will move in the same direction. With respect to our mortgage and senior
unsecured notes payable, changes in interest rates generally do not affect the
Company's interest expense as these notes payable are predominantly at
fixed-rates for extended terms with a weighted average life of 6.6 years, and
4.2 years, respectively. Because the Company has the intent to hold its existing
fixed rate notes payable either to maturity or until the sale of the associated
property, there is believed to be no interest rate market risk on the Company's
results of operations or its working capital position. The Company's possible
risk is from increases in long-term interest rates that may occur over a period
of several years, as this may decrease the overall value of its real estate.

The Company estimates the fair market value of its long term, fixed rate
mortgage loans using discounted cash flow analysis based on current borrowing
rates for similar types of debt. At September 30, 2003, the fair value of the
fixed rate mortgage loans was estimated to be $495.1 million compared to the
carrying value amount of $441.5 million, excluding the unamortized premium on
notes payable. If the weighted average interest rate on the Company's fixed rate
debt were 100 basis points lower or higher than the current weighted average
rate of 7.43%, the fair market value would be $465.1 million and $421.4 million,
respectively.

The Company estimates the fair market value of its senior unsecured fixed
rate debt using discounted cash flow analysis based on current borrowing rates
for similar types of debt. At September 30, 2003, the fair value of its senior
unsecured fixed rate debt was estimated to be $168.4 million compared to the
carrying value amount of $150.0 million, excluding unamortized premium on notes
payable. If the weighted average interest rate on the Company's fixed rate debt
were 100 basis points lower or higher than the current weighted average rate of
7.55%, the fair market value would be $155.3 million and $144.8 million,
respectively.

30

At September 30, 2003, the Company's variable rate debt balance consisted
of $138.0 million of revolving credit facilities, of which $70.0 million has
been hedged under interest rate swaps pursuant to which the Company pays fixed
interest rates and $68.0 million remains subject to changes in interest rates.
If the weighted average interest rate on the unhedged portion of the Company's
variable rate debt were 100 basis points higher or lower, annual interest
expense would increase or decrease by approximately $680,000. At September 30,
2003, the fair value of the $70 million that is fixed under interest rate hedges
was estimated to be $70.2 million.

In the normal course of business, we are exposed to the effect of interest
rate changes that could affect our results of operations or cash flows. We limit
these risks by following established risk management policies and procedures,
including the use of a variety of derivative financial instruments to manage or
hedge interest rate risk. We do not enter into derivative instruments for
speculative purposes. We require that the hedging derivative instruments be
effective in reducing interest rate risk exposure. This effectiveness is
essential to qualify for hedge accounting. Changes in the hedging instrument's
fair value related to the effective portion of the risk being hedged are
included in accumulated other comprehensive income or loss. In those cases,
hedge effectiveness criteria also require that it be probable that the
underlying transaction occurs.

Hedges that meet these hedging criteria are formally designated as cash
flow hedges at the inception of the derivative contract. When the terms of an
underlying transaction are modified, or when the underlying hedged item ceases
to exist, the change in the fair value of the derivative instrument is marked to
market with the change included in net income in each period until the
derivative instrument matures. Additionally, any derivative instrument used for
risk management that becomes ineffective is marked to market.

We do not anticipate non-performance by any of our counterparties. Net
interest differentials to be paid or received under a swap contract and/or
collar agreement are included in interest expense as incurred or earned.

Interest rate hedges that are designated as cash flow hedges hedge the
future cash outflows on debt. Interest rate swaps that convert variable payments
to fixed payments, interest rate caps, floors, collars and forwards are cash
flow hedges. The unrealized gains or losses in the fair value of these hedges
are reported on the balance sheet and included in accounts payable and accrued
expenses with a corresponding adjustment to either accumulated other
comprehensive income or loss or in earnings depending on the hedging
relationship. If the hedging transaction is a cash flow hedge, then the
offsetting gains or losses are reported in accumulated other comprehensive
income or loss. Over time, the unrealized gains or losses held in accumulated
other comprehensive income or loss will be recognized in earnings consistent
with when the hedged items are recognized in earnings.

In conjunction with our policy to reduce interest rate risk, we have
entered into interest rate swaps to hedge the variability of monthly cash
outflows attributable to changes in LIBOR. Under the swaps, we receive LIBOR
based payments and pay a fixed rate. A summary of the terms of the derivative
instruments, as of September 30, 2003, and a reconciliation of the fair value
and adjustments to accumulated other comprehensive loss (in thousands) are as
follows:

Hedge type......................................................... Cash Flow Cash Flow
Description........................................................ Swap T-lock
Range of notional amounts.......................................... $10,000 - $50,000 $ 25,000
Total.......................................................... $70,000 $100,000
Range of interest rates............................................ 1.38% - 2.3975% 3.10% - 3.46%
Range of maturity dates............................................ 2/12/04 - 2/12/06 11/12/08 - 11/13/08
Total accumulated other comprehensive loss at December 31, 2002.... - -
Change in fair value for the nine months ended September 30, 2003.. $ (244) $ (1,751)
------------------ -------------------
Total accumulated other comprehensive loss at September 30, 2003... $ (244) $ (1,751)
================== ===================

The estimated fair value of our financial instruments has been determined
by us, using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that we could realize in a current market exchange. The use of different market
assumptions or estimation methodologies may have a material effect on the
estimated fair value amounts.

31

For purposes of the Securities and Exchange Commission's market risk
disclosure requirements, we have estimated the fair value of our financial
instruments at September 30, 2003. The fair value estimates presented herein are
based on pertinent information available to management as of September 30, 2003.
Although management is not aware of any factors that would significantly affect
the estimated fair value amounts as of September 30, 2003, future estimates of
fair value and the amounts which may be paid or realized in the future may
differ significantly from amounts presented below. The Company's revolving
credit facilities are sensitive to changes in interest rates. The T-locks were
terminated in October 2003 at an estimated cost to the Company of $80,000.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to provide
reasonable assurance that information required to be disclosed in our Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms,
and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
Also, we have investments in certain unconsolidated entities. As we do not
control or manage these entities, our disclosure controls and procedures with
respect to such entities are necessarily substantially more limited than those
we maintain with respect to our consolidated subsidiaries.

As required by Rule 13a-15(b) under the Securities and Exchange Act of
1934, we carried out an evaluation, under the supervision and with the
participation of management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on the foregoing, our Chief Executive
Officer and Chief Financial Officer concluded that, as of the end of the period
covered by this report, our disclosure controls and procedures were effective at
the reasonable assurance level to ensure that information required to be
disclosed by us in reports that we file under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in SEC
rules and forms.

There have been no changes in our internal controls over financial
reporting during the quarter ended September 30, 2003, that have materially
affected, or are reasonably likely to materially affect, our internal controls
over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Neither the Company nor the Company's properties are subject to any
material litigation. The Company and its properties may be subject to routine
litigation and administrative proceedings arising in the ordinary course of
business which collectively is not expected to have a material adverse affect on
the business, financial condition, results of operations or cash flows of the
Company.

Following the execution of the merger agreement with IRT in October 2002,
three IRT shareholders filed three separate purported class action and
derivative suits in the Superior Court of Cobb County, State of Georgia, against
IRT, IRT's board of directors and Equity One alleging claims of breach of
fiduciary duty by the defendant directors, unjust enrichment and irreparable
harm. The complaints sought declaratory relief, an order enjoining consummation
of the merger, and unspecified damages. Although the Georgia court did not grant
the plaintiffs the equitable relief requested and permitted the completion of
the merger, two of these lawsuits, Greaves v. IRT Property Company, et. al. and
Phillips v. IRT Property Company, et. al., were still pending following the
merger. The third lawsuit was voluntarily dismissed. Following the execution in
August 2003 of a settlement agreement

32

among the parties to the lawsuits, on September 23, 2003, the superior court
approved dismissals with prejudice of these two lawsuits. All settlement related
costs were paid by IRT's former insurance carrier.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

Effective as of September 15, 2003, we entered into amendments to the
employment agreements with each of Chaim Katzman, our chairman of the board and
chief executive officer, and Doron Valero, our president and chief operating
officer. These amendments provided for the following modifications:

o This highest cash bonus payable under the agreements was increased
from 120% to 150% of the executive's base salary;

o The number of shares of restricted stock granted under the employment
agreements as long-term compensation was increased by 124,000 shares
in the case of Mr. Katzman and 60,000 shares in the case of Mr. Valero
and these shares vest in four installments over the remaining term of
the agreements;

o In the case of "high performance" for any year (defined to be the
achievement by the Company of 150% of performance targets set by the
compensation committee of the board) the executive would receive an
additional bonus equal to $300,000 in the case of Mr. Katzman and
$200,000 in the case of Mr. Valero, in each case payable in shares of
common stock, and in the case of "super performance" for any year
(defined to be the achievement by the Company of 200% of performance
targets set by the compensation committee of the board) the executive
would receive an additional bonus equal to $850,000 in the case of Mr.
Katzman and $400,000 in the case of Mr. Valero, in each case payable
in shares of common stock valued in accordance with the agreements;

o If Mr. Katzman's employment is terminated "without cause" or if in the
event that Mr. Katzman resigns or is terminated within one year
following a "change of control," he will be entitled, in addition to
the payment of 2.99 times his then-current base salary and most recent
bonus as provided in his existing agreement, to a cash payment equal
to 2.99 times the "value" (determined in accordance with the terms of
the amendment) of a pro-rata portion of his annual long-term
compensation; and

o If Mr. Valero resigns or is terminated within one year following a
"change of control," he will be entitled, in addition to the payment
of 2.99 times his then-current base salary and most recent bonus as
provided in his existing agreement, to a cash payment equal to 2.99
times the "value" (determined in accordance with the terms of the
amendment) of a pro-rata portion of his annual long-term compensation.

33

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

10.1 First Amendment to Amended and Restated Employment Agreement with
Chaim Katzman.

10.2 First Amendment to Amended and Restated Employment Agreement with
Doron Valero.

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended and Section 302
of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended and Section 302
of the Sarbanes-Oxley Act of 2002.

32 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934,
as amended and 18 U.S.C. 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K:

During the quarterly period ended September 30, 2003, the Company filed the
following reports on Form 8-K:

(i) Two reports on Form 8-K each dated September 19, 2003 under Item 5
and 7.

(ii) Report on Form 8-K dated September 23, 2003 under Item 5 and 7.

34

SIGNATURES

Pursuant to the requirements 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.

Date: November 10, 2003 EQUITY ONE, INC.

/s/ HOWARD M. SIPZNER
--------------------------------------------

Howard M. Sipzner
Chief Financial Officer
(Principal Accounting and Financial Officer)

36

INDEX TO EXHIBITS
-----------------

Exhibits Description
- -------- -----------

10.1 First Amendment to Amended and Restated Employment Agreement with
Chaim Katzman.

10.2 First Amendment to Amended and Restated Employment Agreement with
Doron Valero.

31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as amended
and Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as amended
and Section 302 of the Sarbanes-Oxley Act of 2002.

32 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14(b) under the Securities Exchange
Act of 1934, as amended and 18 U.S.C. 1350, as created by Section
906 of the Sarbanes-Oxley Act of 2002.