EQUITY ONE, INC. - FORM 10-Q

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 - EQUITY ONE, INC.	eqy-10qx6302014exhibit311.htm
EX-32.1 - EXHIBIT 32.1 - EQUITY ONE, INC.	eqy-10qx6302014exhibit321.htm
EX-31.2 - EXHIBIT 31.2 - EQUITY ONE, INC.	eqy-10qx6302014exhibit312.htm
EX-12.1 - EXHIBIT 12.1 - EQUITY ONE, INC.	eqy-10qx6302014exhibit121.htm
EXCEL - IDEA: XBRL DOCUMENT - EQUITY ONE, INC.	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended June 30, 2014



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

For the transition period from ___________ to ___________

Commission file number 001-13499

EQUITY ONE, INC.

________________________________________________________________________________

(Exact name of Registrant as specified in its charter)



Maryland		52-1794271
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1600 N.E. Miami Gardens Drive North Miami Beach, FL		33179
(Address of principal executive offices)		(Zip Code)
(305) 947-1664 Registrant’s telephone number, including area code

_______________________________

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý Accelerated filer o Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No ý

As of August 5, 2014, the number of outstanding shares of Common Stock, par value $0.01 per share, of the Registrant was 119,836,588.



	EQUITY ONE, INC. AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q QUARTER ENDED JUNE 30, 2014

	TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	Page
	Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2014 and December 31, 2013	2
	Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2014 and 2013	3
	Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the three and six months ended June 30, 2014 and 2013	4
	Condensed Consolidated Statement of Equity (unaudited) for the six months ended June 30, 2014	5
	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2014 and 2013	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	54
Item 4.	Controls and Procedures	55

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	57
	Signatures	58

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

EQUITY ONE, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets June 30, 2014 and December 31, 2013 (Unaudited) (In thousands, except share par value amounts)

	June 30, 2014			December 31, 2013
ASSETS
Properties:
Income producing	$	3,097,700		$	3,153,131
Less: accumulated depreciation	(359,658		)	(354,166		)
Income producing properties, net	2,738,042			2,798,965
Construction in progress and land held for development	169,916			104,464
Properties held for sale	53,162			13,404
Properties, net	2,961,120			2,916,833
Cash and cash equivalents	29,316			25,583
Cash held in escrow and restricted cash	33,616			10,912
Accounts and other receivables, net	13,709			12,872
Investments in and advances to unconsolidated joint ventures	82,310			91,772
Loans receivable, net	—			60,711
Goodwill	6,180			6,377
Other assets	227,314			229,599
TOTAL ASSETS	$	3,353,565		$	3,354,659

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Notes payable:
Mortgage notes payable	$	408,554		$	430,155
Unsecured senior notes payable	731,136			731,136
Term loan	250,000			250,000
Unsecured revolving credit facilities	133,000			91,000
	1,522,690			1,502,291
Unamortized premium on notes payable, net	4,607			6,118
Total notes payable	1,527,297			1,508,409
Other liabilities:
Accounts payable and accrued expenses	51,107			44,227
Tenant security deposits	8,602			8,928
Deferred tax liability	12,382			11,764
Other liabilities	175,144			177,383
Liabilities associated with properties held for sale	281			33
Total liabilities	1,774,813			1,750,744
Redeemable noncontrolling interests	989			989
Commitments and contingencies	—			—
Stockholders' equity:
Preferred stock, $0.01 par value – 10,000 shares authorized but unissued	—			—
Common stock, $0.01 par value – 150,000 shares authorized, 117,997 and 117,647 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively	1,180			1,176
Additional paid-in capital	1,700,834			1,693,873
Distributions in excess of earnings	(330,834		)	(302,410		)
Accumulated other comprehensive (loss) income	(672		)	2,544
Total stockholders’ equity of Equity One, Inc.	1,370,508			1,395,183
Noncontrolling interests	207,255			207,743
Total equity	1,577,763			1,602,926
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY	$	3,353,565		$	3,354,659

See accompanying notes to the condensed consolidated financial statements.

EQUITY ONE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations For the three and six months ended June 30, 2014 and 2013 (Unaudited) (In thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
REVENUE:
Minimum rent	$	66,295		$	60,949		$	136,546		$	121,336
Expense recoveries	19,631			19,675			39,391			38,266
Percentage rent	933			628			3,114			2,665
Management and leasing services	584			484			1,213			898
Total revenue	87,443			81,736			180,264			163,165
COSTS AND EXPENSES:
Property operating	22,613			22,241			44,399			43,897
Depreciation and amortization	27,666			22,797			53,933			44,530
General and administrative	8,872			9,673			19,786			18,567
Total costs and expenses	59,151			54,711			118,118			106,994
INCOME BEFORE OTHER INCOME AND EXPENSE, TAX AND DISCONTINUED OPERATIONS	28,292			27,025			62,146			56,171
OTHER INCOME AND EXPENSE:
Investment income	28			2,209			199			4,413
Equity in income of unconsolidated joint ventures	1,268			615			9,529			1,050
Other income	5			162			2,846			162
Interest expense	(16,086		)	(16,701		)	(32,986		)	(33,937		)
Amortization of deferred financing fees	(601		)	(603		)	(1,200		)	(1,209		)
Gain on extinguishment of debt	—			107			1,074			107
Impairment loss	(13,892		)	(2,662		)	(13,892		)	(2,662		)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE TAX AND DISCONTINUED OPERATIONS	(986		)	10,152			27,716			24,095
Income tax provision of taxable REIT subsidiaries	(79		)	(7		)	(612		)	(21		)
(LOSS) INCOME FROM CONTINUING OPERATIONS	(1,065		)	10,145			27,104			24,074
DISCONTINUED OPERATIONS:
Operations of income producing properties	167			1,276			(65		)	3,523
(Loss) gain on disposal of income producing properties	(144		)	25,663			3,152			36,859
Impairment loss	—			(128		)	—			(128		)
Income tax provision of taxable REIT subsidiaries	—			(779		)	—			(860		)
INCOME FROM DISCONTINUED OPERATIONS	23			26,032			3,087			39,394
Gain on sale of operating properties	1,141			—			883			—
NET INCOME	99			36,177			31,074			63,468
Net income attributable to noncontrolling interests - continuing operations	(2,511		)	(2,511		)	(7,212		)	(5,204		)
Net loss (income) attributable to noncontrolling interests - discontinued operations	1			(28		)	3			(33		)
NET (LOSS) INCOME ATTRIBUTABLE TO EQUITY ONE, INC.	$	(2,411	)	$	33,638		$	23,865		$	58,231

(LOSS) EARNINGS PER COMMON SHARE - BASIC:
Continuing operations	$	(0.02	)	$	0.06		$	0.17		$	0.16
Discontinued operations	—			0.22			0.03			0.33
	$	(0.02	)	$	0.28		$	0.20		$	0.49
Number of Shares Used in Computing Basic (Loss) Earnings per Share	117,813			117,385			117,744			117,209
(LOSS) EARNINGS PER COMMON SHARE - DILUTED:
Continuing operations	$	(0.02	)	$	0.06		$	0.17		$	0.16
Discontinued operations	—			0.22			0.03			0.33
	$	(0.02	)	$	0.28		$	0.20		$	0.49
Number of Shares Used in Computing Diluted (Loss) Earnings per Share	117,813			117,749			117,981			117,535
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.22		$	0.22		$	0.44		$	0.44

See accompanying notes to the condensed consolidated financial statements.

EQUITY ONE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive (Loss) Income

For the three and six months ended June 30, 2014 and 2013

(Unaudited)

(In thousands)



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
NET INCOME	$	99		$	36,177		$	31,074		$	63,468
OTHER COMPREHENSIVE (LOSS) INCOME:
Net amortization of interest rate contracts included in net income	15			15			31			31
Net unrealized (loss) gain on interest rate swaps ⁽¹⁾	(3,226		)	6,813			(4,955		)	7,363
Net loss on interest rate swaps reclassified from accumulated other comprehensive income into interest expense	866			885			1,708			1,804
Other comprehensive (loss) income	(2,345		)	7,713			(3,216		)	9,198
COMPREHENSIVE (LOSS) INCOME	(2,246		)	43,890			27,858			72,666
Comprehensive income attributable to noncontrolling interests	(2,510		)	(2,539		)	(7,209		)	(5,237		)
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO EQUITY ONE, INC.	$	(4,756	)	$	41,351		$	20,649		$	67,429

⁽¹⁾ This amount includes our share of our unconsolidated joint ventures' net unrealized (losses) gains of $(101) and $(262) for the three and six months ended June 30, 2014, respectively, and $43 and $0 for the same periods during 2013, respectively.

See accompanying notes to the condensed consolidated financial statements.

EQUITY ONE, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Equity

For the six months ended June 30, 2014

(Unaudited)

(In thousands)



	Common Stock				Additional Paid-In Capital			Distributions in Excess of Earnings			Accumulated Other Comprehensive (Loss) Income			Total Stockholders' Equity of Equity One, Inc.			Noncontrolling Interests			Total Equity
	Shares		Amount		Additional Paid-In Capital			Distributions in Excess of Earnings			Accumulated Other Comprehensive (Loss) Income			Total Stockholders' Equity of Equity One, Inc.			Noncontrolling Interests			Total Equity
BALANCE AT DECEMBER 31, 2013	117,647		$	1,176	$	1,693,873		$	(302,410	)	$	2,544		$	1,395,183		$	207,743		$	1,602,926
Issuance of common stock	359		4		4,848			—			—			4,852			—			4,852
Repurchase of common stock	(9	)	—		(205		)	—			—			(205		)	—			(205		)
Share-based compensation expense	—		—		2,194			—			—			2,194			—			2,194
Restricted stock reclassified from liability to equity	—		—		117			—			—			117			—			117
Net income	—		—		—			23,865			—			23,865			7,209			31,074
Dividends declared on common stock	—		—		—			(52,289		)	—			(52,289		)	—			(52,289		)
Distributions to noncontrolling interests	—		—		—			—			—			—			(6,927		)	(6,927		)
Purchase of noncontrolling interest	—		—		7			—			—			7			(770		)	(763		)
Other comprehensive loss	—		—		—			—			(3,216		)	(3,216		)	—			(3,216		)
BALANCE AT JUNE 30, 2014	117,997		$	1,180	$	1,700,834		$	(330,834	)	$	(672	)	$	1,370,508		$	207,255		$	1,577,763

See accompanying notes to the condensed consolidated financial statements.

EQUITY ONE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2014 and 2013 (Unaudited) (In thousands)

	Six Months Ended June 30,
	2014			2013
OPERATING ACTIVITIES:
Net income	$	31,074		$	63,468
Adjustments to reconcile net income to net cash provided by operating activities:
Straight line rent adjustment	(1,739		)	(961		)
Accretion of below market lease intangibles, net	(11,881		)	(6,140		)
Amortization of below market ground lease intangibles	298			298
Equity in income of unconsolidated joint ventures	(9,529		)	(1,050		)
Gain on change in control of interests	(2,807		)	—
Income tax provision of taxable REIT subsidiaries	612			881
(Decrease) increase in allowance for losses on accounts receivable	(675		)	1,453
Amortization of premium on notes payable, net	(1,262		)	(1,331		)
Amortization of deferred financing fees	1,200			1,209
Depreciation and amortization	54,908			48,427
Share-based compensation expense	1,980			3,165
Amortization of derivatives	31			31
Gain on sale of real estate	(4,035		)	(36,859		)
(Gain) loss on extinguishment of debt	(1,074		)	575
Operating distributions from joint ventures	—			111
Impairment loss	13,892			2,790
Changes in assets and liabilities, net of effects of acquisitions and disposals:
Accounts and other receivables	(3		)	(1,553		)
Other assets	(4,684		)	(6,972		)
Accounts payable and accrued expenses	5,098			(1,883		)
Tenant security deposits	(45		)	(352		)
Other liabilities	(741		)	(3,789		)
Net cash provided by operating activities	70,618			61,518

INVESTING ACTIVITIES:
Acquisition of income producing properties	(85,901		)	(37,000		)
Additions to income producing properties	(9,173		)	(7,113		)
Additions to construction in progress	(33,423		)	(17,758		)
Deposits for the acquisition of income producing properties	(425		)	(1,150		)
Proceeds from sale of real estate and rental properties	56,298			173,022
Increase in cash held in escrow	(22,704		)	(10,258		)
Purchase of below market leasehold interest	—			(25,000		)
Increase in deferred leasing costs and lease intangibles	(2,757		)	(4,527		)
Investment in joint ventures	(289		)	(4,266		)
Repayments of (advances to) joint ventures	27			(143		)
Distributions from joint ventures	16,232			1,595
Investment in loans receivable	—			(12,000		)
Repayment of loans receivable	60,526			28,659
Net cash (used in) provided by investing activities	(21,589		)	84,061

EQUITY ONE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2014 and 2013 (Unaudited) (In thousands)

	Six Months Ended June 30,
	2014			2013
FINANCING ACTIVITIES:
Repayments of mortgage notes payable	$	(31,964	)	$	(31,323	)
Net borrowings (repayments) under revolving credit facilities	42,000			(47,000		)
Proceeds from issuance of common stock	4,852			8,176
Repurchase of common stock	(205		)	(348		)
Payment of deferred financing costs	—			(6		)
Stock issuance costs	—			(94		)
Dividends paid to stockholders	(52,289		)	(52,105		)
Purchase of noncontrolling interest	(763		)	(18,917		)
Distributions to redeemable noncontrolling interests	—			(680		)
Distributions to noncontrolling interests	(6,927		)	(5,041		)
Net cash used in financing activities	(45,296		)	(147,338		)

Net increase (decrease) in cash and cash equivalents	3,733			(1,759		)
Cash and cash equivalents at beginning of the period	25,583			27,416
Cash and cash equivalents at end of the period	$	29,316		$	25,657

SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION:
Cash paid for interest (net of capitalized interest of $2,172 and $1,646 in 2014 and 2013, respectively)	$	34,718		$	36,891

We acquired upon acquisition of certain income producing properties:
Income producing properties	$	102,288		$	38,418
Intangible and other assets	7,625			5,967
Intangible and other liabilities	(12,589		)	(7,385		)
Assumption of mortgage notes payable	(11,423		)	—
Cash paid for income producing properties	$	85,901		$	37,000

Non-cash investing information:
Investment in loan receivable	$	—		$	8,500

See accompanying notes to the condensed consolidated financial statements.

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2014

(Unaudited)

1. Organization and Basis of Presentation

Organization

We are a real estate investment trust, or REIT, that owns, manages, acquires, develops and redevelops shopping centers and retail properties located primarily in supply constrained suburban and urban communities. We were organized as a Maryland corporation in 1992, completed our initial public offering in May 1998, and have elected to be taxed as a REIT since 1995.

As of June 30, 2014, our consolidated shopping center portfolio comprised 135 properties, including 113 retail properties and six non-retail properties totaling approximately 14.6 million square feet of gross leasable area, or GLA, 11 development or redevelopment properties with approximately 1.8 million square feet of GLA upon completion, and five land parcels. As of June 30, 2014, our consolidated shopping center occupancy was 94.2% and included national, regional and local tenants. Additionally, we had joint venture interests in 18 retail properties and two office buildings totaling approximately 3.2 million square feet of GLA.

Basis of Presentation

The condensed consolidated financial statements include the accounts of Equity One, Inc. and its wholly-owned subsidiaries and those other entities in which we have a controlling financial interest, including where we have been determined to be a primary beneficiary of a variable interest entity ("VIE") in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"). Equity One, Inc. and its subsidiaries are hereinafter referred to as "the consolidated companies," the "Company," "we," "our," "us" or similar terms. All significant intercompany transactions and balances have been eliminated in consolidation. Certain prior-period data have been reclassified to conform to the current period presentation. Certain operations have been classified as discontinued, and the associated results of operations and financial position are separately reported for all periods presented. Information in these notes to the condensed consolidated financial statements, unless otherwise noted, does not include the accounts of discontinued operations.

The condensed consolidated financial statements included in this report are unaudited. In our opinion, all adjustments considered necessary for a fair presentation have been included, and all such adjustments are of a normal recurring nature. The results of operations for the three and six month periods ended June 30, 2014 and 2013 are not necessarily indicative of the results that may be expected for a full year.

Our unaudited condensed consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions of Form 10-Q. Accordingly, these unaudited condensed consolidated financial statements do not contain certain information included in our annual financial statements and notes. The condensed consolidated balance sheet as of December 31, 2013 was derived from audited financial statements included in our 2013 Annual Report on Form 10-K but does not include all disclosures required under GAAP. These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission (the "SEC") on March 3, 2014.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Concentration of Credit Risk

A concentration of credit risk arises in our business when a national or regionally-based tenant occupies a substantial amount of space in multiple properties owned by us. In that event, if the tenant suffers a significant downturn in its business, it may become unable to make its contractual rent payments to us, exposing us to potential losses in rental revenue, expense recoveries, and percentage rent. Further, the impact may be magnified if the tenant is renting space in multiple locations. Generally, we do not obtain security from our national or regionally-based tenants in support of their lease obligations to us. We regularly monitor our tenant base to assess potential concentrations of credit risk. As of June 30, 2014, our largest tenant is comprised of a related group of grocers, which includes Albertsons, Shaw's, and Star Market and accounted for approximately 510,956 square feet, or

approximately 3.2%, of our GLA and approximately $9.4 million, or 3.6%, of our annual minimum rent. As of June 30, 2014, we had outstanding receivables from Albertsons, Shaw's, and Star Market of approximately $62,000.

Recent Accounting Pronouncements

In February 2013, the FASB issued Accounting Standards Update ("ASU") No. 2013-04, "Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force)." ASU No. 2013-04 requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. ASU No. 2013-04 also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. ASU No. 2013-04 is effective for fiscal years, and interim periods within those years, after December 15, 2013. The adoption and implementation of this ASU did not have a material impact on our results of operations, financial condition or cash flows.

In July 2013, the FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force)." ASU No. 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists and is intended to eliminate diversity in practice. ASU No. 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption and implementation of this ASU did not have a material impact on our results of operations, financial condition or cash flows.

In April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU No. 2014-08 amends the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity's operations and financial results. The amendments require expanded disclosures for discontinued operations that would provide users of financial statements with more information about the assets, liabilities, revenues, and expenses of discontinued operations and disclosure of the pretax profit or loss of individually significant components of an entity that do not qualify for discontinued operations reporting. ASU No. 2014-08 is to be applied prospectively to all disposals (or classifications as held for sale) of components of an entity and all businesses or nonprofit activities that, on acquisition, are classified as held for sale that occur within fiscal years, and interim periods within those years, beginning after December 15, 2014. We have elected to early adopt the provisions of ASU No. 2014-08 beginning January 1, 2014. The adoption and implementation of this ASU resulted in the operations of certain current period dispositions being classified within continuing operations in our condensed consolidated statements of operations. The adoption did not have an impact on our financial position or cash flows. The disclosures required by this ASU have been incorporated in the notes included herein.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers." ASU No. 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards ("IFRS") that removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, provides more useful information to users of financial statements through improved disclosure requirements and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. ASU No. 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Companies can choose to apply the ASU using either the full retrospective approach or a modified retrospective approach. We are currently evaluating both methods of adoption and the impact, if any, that the adoption of this ASU will have on our condensed consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12, "Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force)." ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU No. 2014-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Earlier adoption is permitted. The amendments can be applied either prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards. We expect to apply the ASU prospectively and do not expect the adoption to have an impact on our condensed consolidated financial statements as our existing share-based payment awards do not fall within the scope of this ASU.

3. Acquisitions

The following table provides a summary of acquisition activity during the six months ended June 30, 2014:



Date Purchased	Property Name	City	State	Square Feet/Acres		Purchase Price		Mortgage Assumed
						(In thousands)
January 31, 2014	Williamsburg at Dunwoody - Outparcel ⁽²⁾	Dunwoody	GA	0.14	⁽¹⁾	$	350	$	—
January 23, 2014	Talega Village Center ^{(2) (3)}	San Clemente	CA	102,282		23,000		11,353
January 16, 2014	Westwood Shopping Center	Bethesda	MD	101,584		65,012		—
January 16, 2014	Westwood Center II ⁽²⁾	Bethesda	MD	53,293		15,000		—
Total						$	103,362	$	11,353

^{______________________________________________}

⁽¹⁾In acres.

⁽²⁾ The purchase price has been preliminarily allocated to real estate assets acquired and liabilities assumed, as applicable, in accordance with our accounting policies for business combinations. The purchase price and related accounting will be finalized after our valuation studies are complete.

⁽³⁾Property was acquired through the acquisition of our joint venture partners' interests in the property. See Note 5 for further discussion.

The aggregate purchase price of the above property acquisitions have been preliminarily allocated as follows:



	Amount			Weighted Average Amortization Period
	(In thousands)			(In years)
Land	$	86,911		N/A
Land improvements	2,209			9.4
Buildings	17,670			33.2
Tenant improvements	1,160			5.5
Above-market leases	1,315			5.4
In-place lease interests	5,424			10.7
Lease origination costs	97			6.9
Leasing commissions	789			21.5
Below-market leases	(12,040		)	19.5
Above-market debt assumed	(70		)	7.8
Other acquired liabilities	(103		)	N/A
	$	103,362

During the three and six months ended June 30, 2014, we did not recognize any material measurement period adjustments related to prior or current year acquisitions.

In conjunction with the acquisitions of Westwood Shopping Center and Westwood Center II, we entered into reverse Section 1031 like-kind exchange agreements with a third party intermediary, which, for a maximum of 180 days, allow us to defer for tax purposes, gains on the sale of other properties identified and sold within this period. Until the earlier of the termination of the exchange agreements or 180 days after the respective acquisition dates, the third party intermediary is the legal owner of the entities which own these properties; however, we control the activities that most significantly impact each property and retain all of the economic benefits and risks associated with each property. Therefore, at the date of acquisition, we determined that we were the primary beneficiary of these VIEs and consolidated the properties and their operations as of their acquisition date. Legal ownership of Westwood Shopping Center and Westwood Center II was transferred to us by the third party intermediary in July 2014.

During the three and six months ended June 30, 2014, we expensed transaction-related costs in connection with completed or pending property acquisitions of approximately $142,000 and $1.5 million, respectively, and $617,000 and $718,000 for the same periods in 2013, respectively, which are included in general and administrative costs in the condensed consolidated statements of operations.

4. Dispositions

The following table provides a summary of disposition activity during the six months ended June 30, 2014:

Date Sold

Property Name

Region

City

State

Square

Feet /Acres

Gross Sales

Price

Income producing property sold

(In thousands)

June 30, 2014

Riverside Square ⁽¹⁾

South Florida

Coral Springs

103,241

12,380

June 30, 2014

Oaktree Plaza ⁽¹⁾

South Florida

North Palm Beach

23,745

4,000

June 17, 2014

Sunpoint Shopping Center ⁽¹⁾

North Florida

Ruskin

132,374

7,250

April 7, 2014

Salerno Village Square ⁽¹⁾

South Florida

Stuart

77,677

8,646

March 27, 2014

Daniel Village ⁽¹⁾

Southeast

Augusta

172,438

10,125

February 27, 2014

Brawley Commons ⁽¹⁾

Southeast

Charlotte

119,189

5,450

⁽²⁾

January 15, 2014

Stanley Marketplace

Southeast

Stanley

53,228

3,875

January 10, 2014

Oak Hill Village

North Florida

Jacksonville

78,492

6,850

Total

58,576

^{______________________________________________}

⁽¹⁾ The results of operations for these properties are included in continuing operations in the condensed consolidated statements of operations for all periods presented.

⁽²⁾The property was encumbered by a $6.5 million mortgage loan which matured on July 1, 2013. In conjunction with the sale of the property, the lender accepted the proceeds from the sale as full repayment of the loan.

As part of our strategy to upgrade and diversify our portfolio and recycle our capital, we have sold or are in the process of selling certain non-core properties and are currently evaluating opportunities to sell certain additional non-core properties located primarily in the southeastern United States and north and central Florida. Although we have not committed to a disposition plan with respect to certain of these assets, we may consider disposing of such properties if pricing is deemed to be favorable. If the market values of these assets are below their carrying values, it is possible that the disposition of these assets could result in impairments or other losses. Depending on the prevailing market conditions and historical carrying values, these impairments and losses could be material.

Upon the adoption of ASU No. 2014-08 on January 1, 2014, operations of properties held for sale and operating properties sold during the current period that were not previously classified as held for sale and/or reported as discontinued operations are reported in continuing operations as they do not represent a strategic shift that has or will have a major effect on our operations and financial results. Prior to the adoption of ASU No. 2014-08, we reported the operations and financial results of properties held for sale and operating properties sold as discontinued operations.

The results of operations for six of the properties sold during the six months ended June 30, 2014 and six properties classified as held for sale in 2014 in our South Florida region (Shoppes of Andros Isles), North Florida region (Forest Village, Mariners Crossing, New Smyrna Beach and Shoppes of North Port) and Southeast region (Smyth Valley Crossing) are included in continuing operations in the condensed consolidated statements of operations for all periods presented as they do not qualify as discontinued operations under the amended guidance. Subsequent to period end, we closed on the sale of the six properties classified as held for sale noted above, which had an aggregate net book value of $47.3 million as of June 30, 2014, for a gross sales price of $55.3 million. The related assets and liabilities of the properties are presented as held for sale in our condensed consolidated balance sheet as of June 30, 2014.

We have six properties in our Southeast and North Florida regions which had an aggregate net book value of $17.1 million as of June 30, 2014, under contract for an estimated gross sales price of $22.1 million. These contracts are in various stages of due diligence, and the properties have not met the criteria to be classified as held for sale.

Discontinued Operations

The results of operations for two of the properties sold (Stanley Marketplace and Oak Hill) and one property in our South Florida region (Summerlin Square), with a net book value of $6.1 million, classified as held for sale as of December 31, 2013, are presented as discontinued operations in the condensed consolidated statements of operations for all periods presented as they were classified as held for sale prior to the adoption of ASU No. 2014-08.

During the three and six months ended June 30, 2013, we sold twenty properties and two outparcels in our Southeast, South Florida, North Florida and West Coast regions for an aggregate sales price of $188.0 million. The results of operations for these properties are presented as discontinued operations in the condensed consolidated statements of operations for the three and six months ended June 30, 2013.

The components of income and expense relating to discontinued operations for the three and six months ended June 30, 2014 and 2013 are shown below:



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(In thousands)
Rental revenue	$	185		$	4,455		$	147		$	11,474
Expenses:
Property operating expenses	15			1,782			203			4,149
Depreciation and amortization	—			1,185			—			2,691
General and administrative expenses	3			6			9			9
Operations of income producing properties	167			1,482			(65		)	4,625
Interest expense	—			(208		)	—			(424		)
(Loss) gain on disposal of income producing properties	(144		)	25,663			3,152			36,859
Impairment loss	—			(128		)	—			(128		)
Loss on extinguishment of debt	—			—			—			(682		)
Income tax provision	—			(779		)	—			(860		)
Other income	—			2			—			4
Income from discontinued operations	23			26,032			3,087			39,394
Net loss (income) attributable to noncontrolling interests	1			(28		)	3			(33		)
Income from discontinued operations attributable to Equity One, Inc.	$	24		$	26,004		$	3,090		$	39,361



SUPPLEMENTAL INFORMATION:
Additions to income producing properties	$	—	$	260	$	—	$	403
Increase in deferred leasing costs and lease intangibles	$	—	$	299	$	—	$	501
Straight line rent revenue	$	125	$	29	$	—	$	240
Amortization of above market lease intangibles, net	$	—	$	138	$	—	$	271

5. Investments in Joint Ventures

The following is a summary of the composition of investments in and advances to unconsolidated joint ventures in the condensed consolidated balance sheets:



				Investment Balance
Joint Venture ⁽¹⁾	Number of Properties	Location	Ownership	June 30, 2014		December 31, 2013
Investments in unconsolidated joint ventures:				(In thousands)
GRI-EQY I, LLC ⁽²⁾	10	GA, SC, FL	10.0%	$	12,660	$	12,912
G&I Investment South Florida Portfolio, LLC	3	FL	20.0%	3,693		3,480
Madison 2260 Realty LLC	1	NY	8.6%	526		634
Madison 1235 Realty LLC	1	NY	20.1%	820		820
Talega Village Center JV, LLC ⁽³⁾	1	CA	100.0%	—		2,828
Vernola Marketplace JV, LLC ⁽⁴⁾	1	CA	50.5%	303		6,468
Parnassus Heights Medical Center ⁽⁵⁾	1	CA	50.0%	19,796		19,791
Equity One JV Portfolio, LLC ⁽⁶⁾	6	FL, MA, NJ	30.0%	43,938		44,237
Total				81,736		91,170
Advances to unconsolidated joint ventures				574		602
Investments in and advances to unconsolidated joint ventures				$	82,310	$	91,772

^{______________________________________________}

⁽¹⁾ All unconsolidated joint ventures are accounted for under the equity method except for the Madison 2260 Realty LLC and Madison 1235 Realty LLC joint ventures, which are accounted for under the cost method.

⁽²⁾ The investment balance as of June 30, 2014 and December 31, 2013 is presented net of deferred gains of $3.3 million for both periods associated with the disposition of assets by us to the joint venture.

⁽³⁾ We purchased our joint venture partners' interests in January 2014 and now own 100% of this entity. Prior to our acquisition, our effective interest was 48% when considering the 5% noncontrolling interest held by Vestar Development Company.

⁽⁴⁾ Our effective interest is 48% when considering the 5% noncontrolling interest held by Vestar Development Company. As described below, the property held by the joint venture was sold in January 2014.

⁽⁵⁾ On July 2, 2014, we entered into an agreement with our joint venture partner in which both parties agreed to dissolve the joint venture and distribute the property in kind to the existing members at the current ownership percentages. Accordingly, the Parnassus Heights Medical Center will be held as a tenancy-in-common, and we will continue to account for our ownership interest under the equity method.

⁽⁶⁾ The investment balance as of June 30, 2014 and December 31, 2013 is presented net of a deferred gain of approximately $376,000 for both periods associated with the disposition of assets by us to the joint venture.

Equity in income of unconsolidated joint ventures totaled $1.3 million and $9.5 million for the three and six months ended June 30, 2014, respectively, and totaled $615,000 and $1.1 million, respectively, for the same periods in 2013. Management fees and leasing fees earned by us associated with these joint ventures, which are included in management and leasing services revenue in the accompanying condensed consolidated statements of operations, totaled approximately $584,000 and $1.2 million for the three and six months ended June 30, 2014, respectively, and $484,000 and $898,000 for the same periods in 2013, respectively.

As of June 30, 2014 and December 31, 2013, the aggregate carrying amount of the debt of our unconsolidated joint ventures accounted for under the equity method was $250.0 million and $286.0 million, respectively, of which our aggregate proportionate share was $54.7 million and $72.5 million, respectively.

In January 2014, we acquired Rockwood Capital's and Vestar Development Company's interests in Talega Village Center JV, LLC, the owner of Talega Village Center, a 102,000 square foot grocery-anchored shopping center located in San Clemente, California, for an additional investment of $6.2 million. Immediately prior to acquisition, we remeasured the fair value of our equity interest in the joint venture using a discounted cash flow analysis and recognized a gain of $2.8 million, including $561,000 attributable to a noncontrolling interest, which is included in other income in our condensed consolidated statement of operations for the six months ended June 30, 2014.

In January 2014, the property held by Vernola Marketplace JV, LLC was sold for $49.0 million, including the assumption of the existing mortgage of $22.9 million by the buyer. In connection with the sale, the joint venture recognized a gain of $14.7 million, of which our proportionate share was $7.4 million, including $1.6 million attributable to the noncontrolling interest, and we received distributions totaling $13.7 million, including $1.9 million that was distributed to the noncontrolling interest. The remaining investment balance as of June 30, 2014 represents our interest in the remaining cash held by the joint venture.

6. Variable Interest Entities

Included within our consolidated operating properties as of June 30, 2014 are two properties, Westwood Shopping Center and Westwood Center II, which are owned by subsidiaries of a Section 1031 like-kind exchange intermediary. The agreements governing the operation of these entities provide us with the power to direct the activities that most significantly impact these entities' economic performance. The entities were deemed VIEs primarily because they do not have sufficient equity at risk to finance their activities without additional subordinated financial support from other parties. Additionally, we determined that the equity investor does not possess the characteristics of a controlling financial interest. Therefore, we concluded that we are the primary beneficiary of the VIEs as a result of our having the power to direct the activities that most significantly impact their economic performance and the obligation to absorb losses, as well as the right to receive benefits, that could be potentially significant to the VIEs. In July 2014, legal ownership of these entities was transferred to us by the qualified intermediary and, as such, the entities are no longer considered VIEs.

Our consolidated operating properties as of December 31, 2013 included three Westwood Complex parcels that were owned at the time by a subsidiary of a qualified intermediary. Legal ownership of this entity was transferred to us by the qualified intermediary during the first quarter of 2014, and, as such, the entity is no longer considered a VIE.

The majority of the operations of these VIEs are funded with cash flows generated from the properties. We have not provided financial support to any of these VIEs that we were not previously contractually required to provide; our contractual commitments consist primarily of funding any capital expenditures, including tenant improvements, which are deemed necessary to continue to operate the entities and any operating cash shortfalls that the entities may experience.

7. Loans Receivable

In October 2012, we purchased a $95.0 million mortgage loan secured by the Westwood Complex, a 22-acre site located in Bethesda, Maryland that consists of 214,767 square feet of retail space, a 211,020 square foot apartment building, and a 62-unit assisted living facility. The loan bore interest at 5.0% per annum and had a stated maturity date of January 15, 2014. Concurrent with the loan transaction, we also entered into a purchase contract to acquire the complex for an aggregate purchase price of $140.0 million. The purchase contract contemplated closing dates for the various parcels that comprise the complex that were the earlier of January 15, 2014 or upon the seller's identification of a property (or properties) which it could purchase with the proceeds from the sale of the parcels. To the extent that the closing dates under the purchase contract occurred prior to January 15, 2014, the parties agreed that the applicable portions of the mortgage loan collateralized by such parcels would be repaid on the respective closing dates. Based on our initial assessment of the structure of the transaction, we determined that the entities that owned the parcels within the complex that we had yet to legally acquire were VIEs and that we were not the primary beneficiary of these entities as we did not have the power to direct the activities that most significantly impacted their economic performance.

In March 2013, we also funded a $12.0 million mezzanine loan to an entity that indirectly owned a portion of the Westwood Complex. The loan was secured by the entity's indirect ownership interests in the complex, bore interest at 5.0% per annum, and was scheduled to mature on the earlier of June 1, 2013 or our acquisition of certain parcels comprising the complex pursuant to the aforementioned purchase contract. During May 2013, the loan agreement was amended to extend the maturity date to the earlier of January 15, 2014 or our acquisition of the parcels indirectly securing the mezzanine loan. We determined that the borrower was a VIE and that we held a variable interest in the entity through our investment in the loan; however, we concluded that we were not the primary beneficiary of the entity because we did not have the power to direct the activities that most significantly impacted its economic performance.

As of December 31, 2013, five of the seven parcels that comprise the Westwood Complex had been acquired. In connection with the acquisitions, $40.7 million of the $95.0 million mortgage loan and $5.8 million of the $12.0 million mezzanine loan were repaid by the respective borrowers and the entities holding these parcels were no longer considered VIEs.

In January 2014, we acquired the two remaining parcels for an aggregate gross purchase price of $80.0 million. Concurrent with the acquisitions, the outstanding principal balance of the $95.0 million mortgage loan and the $12.0 million mezzanine loan were repaid in full by the respective borrowers, and the entities holding these parcels were no longer considered VIEs. The aggregate gross purchase price was funded by proceeds from the loan repayments as well as an additional $19.5 million cash investment, thereby bringing our total investment in the Westwood Complex to $140.0 million.

8. Other Assets

The following is a summary of the composition of the other assets in the condensed consolidated balance sheets:



	June 30, 2014		December 31, 2013
	(In thousands)
Lease intangible assets, net	$	113,125	$	117,200
Leasing commissions, net	38,222		38,296
Prepaid expenses and other receivables	30,283		26,763
Straight-line rent receivables, net	22,648		21,490
Deferred financing costs, net	7,147		8,347
Deposits and mortgage escrows	8,652		7,763
Furniture, fixtures and equipment, net	4,030		4,406
Fair value of interest rate swaps	810		2,944
Deferred tax asset	2,397		2,390
Total other assets	$	227,314	$	229,599

9. Borrowings

Mortgage Notes Payable

As of June 30, 2014, the weighted-average interest rate of our fixed rate mortgage notes payable was 5.95%.

In connection with the acquisition of our joint venture partners' interests in Talega Village Center during January 2014, we assumed a mortgage loan with a principal balance of $11.4 million. The loan bears interest at 5.01% per annum and has a stated maturity date of October 1, 2036; however, both the lender and the borrower have the right to accelerate the maturity date of the loan to October 1, 2021, October 1, 2026 or October 1, 2031.

During the six months ended June 30, 2014, we prepaid mortgage loans of $22.5 million which bore a weighted average interest rate of 6.1%.

Included in mortgage notes payable as of December 31, 2013 is a mortgage note payable related to Brawley Commons located in Charlotte, North Carolina. The property was encumbered by a $6.5 million mortgage loan which matured on July 1, 2013 and remained unpaid as of December 31, 2013. In February 2014, we sold the property to a third party for $5.5 million and the lender accepted this amount as full repayment of the loan, resulting in the recognition of a net gain on extinguishment of debt of $882,000.

Unsecured Senior Notes

As of June 30, 2014, the weighted-average interest rate of our unsecured senior notes was 5.02%.

Unsecured Revolving Credit Facilities

Our primary credit facility is with a syndicate of banks and provides $575.0 million of unsecured revolving credit. As of June 30, 2014, we had drawn $133.0 million against the facility, which bore interest at a weighted-average rate of 1.32% per annum. As of December 31, 2013, we had drawn $91.0 million against the facility, which bore interest at a rate of 1.30% per annum. The facility also includes a facility fee applicable to the lending commitments thereunder, which fee was 0.25% per annum as of June 30, 2014. The facility expires on September 30, 2015, with a one year extension at our option, subject to certain conditions.

We also have a $5.0 million unsecured credit facility, for which there was no drawn balance as of June 30, 2014 and December 31, 2013. The facility bears interest at the one month LIBOR index rate plus 1.25% per annum and expires November 7, 2014.

As of June 30, 2014, giving effect to the financial covenants applicable to these credit facilities, the maximum available to us thereunder was approximately $499.0 million, net of outstanding letters of credit with an aggregate face amount of $2.6 million, of which $133.0 million was drawn.

Term Loan and Interest Rate Swaps

At times, we use derivative instruments, including interest rate swaps, to manage our exposure to variable interest rate risk. In this regard, we enter into derivative instruments that qualify as cash flow hedges and do not enter into such instruments for speculative purposes. As of June 30, 2014, we had three interest rate swaps which convert the LIBOR rate applicable to our $250.0 million term loan to a fixed interest rate, providing an effective fixed interest rate under the loan agreement of 3.17% per annum. The swaps are designated and qualified as cash flow hedges and have been recorded at fair value. The swap agreements mature on February 13, 2019, which is the maturity date of the term loan. As of June 30, 2014, the fair value of one of our interest rate swaps consisted of an asset of $810,000, which is included in other assets, and the fair value of the remaining interest rate swaps consisted of a liability of $921,000, which is included in accounts payable and accrued expenses in our condensed consolidated balance sheet. As of December 31, 2013, the fair value of our interest rate swaps was an asset of $2.9 million, which is included in other assets in our condensed consolidated balance sheet. The effective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into interest expense as interest is incurred on the related variable rate debt. Within the next 12 months, we expect to reclassify $3.2 million as an increase to interest expense.

10. Other Liabilities

The following is a summary of the composition of other liabilities in the condensed consolidated balance sheets:



	June 30, 2014		December 31, 2013
	(In thousands)
Lease intangible liabilities, net	$	166,196	$	167,777
Prepaid rent	8,406		9,450
Other	542		156
Total other liabilities	$	175,144	$	177,383

During the six months ended June 30, 2014, we recognized a $4.4 million net termination benefit, which is included in minimum rent in the accompanying condensed consolidated statement of operations, in relation to our property located at 101 7th Avenue in New York from the acceleration of the accretion of a below market lease liability upon the tenant vacating the space and rejecting the lease in connection with a bankruptcy filing.

11. Income Taxes

We elected to be taxed as a REIT under the Internal Revenue Code (the "Code"), commencing with our taxable year ended December 31, 1995. It is our intention to adhere to the organizational and operational requirements to maintain our REIT status. As a REIT, we generally will not be subject to corporate level federal income tax, provided that distributions to our stockholders equal at least the amount of our REIT taxable income as defined under the Code. We are required to pay U.S. federal and state income taxes on our net taxable income, if any, from the activities conducted by our taxable REIT subsidiaries ("TRSs"), which include IRT Capital Corporation II ("IRT"), DIM Vastgoed, N.V. ("DIM"), Southeast US Holdings, B.V. and C&C Delaware, Inc. Accordingly, the only provision for federal income taxes in our condensed consolidated financial statements relates to our consolidated TRSs.

Although DIM is organized under the laws of the Netherlands, it pays U.S. corporate income tax based on its operations in the United States. Pursuant to the tax treaty between the U.S. and the Netherlands, DIM is entitled to the avoidance of double taxation on its U.S. income. Thus, it pays virtually no taxes in the Netherlands. As of June 30, 2014, DIM had federal and state net operating loss carry forwards of $4.8 million and $2.2 million, respectively, which begin to expire in 2027. As of June 30, 2014, IRT had federal and state net operating loss carry forwards of $2.0 million and $1.6 million, respectively, which begin to expire in 2030.

We believe that we have appropriate support for the tax positions taken on our tax returns and that our accruals for the tax liabilities are adequate for all years still subject to tax audit, which include all years after 2009.

12. Noncontrolling Interests

The following is a summary of the noncontrolling interests in consolidated entities included in the condensed consolidated balance sheets:



	June 30, 2014		December 31, 2013
	(In thousands)
Walden Woods Village, Ltd. ⁽¹⁾	$	989	$	989
Total redeemable noncontrolling interests	$	989	$	989

CapCo	$	206,145	$	206,145
DIM	1,033		1,081
Vestar/EQY Talega LLC ⁽²⁾	—		147
Vestar/EQY Vernola LLC ⁽³⁾	50		341
Vestar/EQY Canyon Trails LLC⁽⁴⁾	27		29
Total noncontrolling interests included in total equity	$	207,255	$	207,743

^{______________________________________________}

⁽¹⁾ This entity owns Walden Woods Shopping Center.

⁽²⁾ This entity held our interest in Talega Village Center JV, LLC. We acquired our joint venture partners' interest in January 2014. See Note 5 for further discussion.

⁽³⁾ This entity holds our interest in Vernola Marketplace JV, LLC. The property held by the joint venture was sold in January 2014.

⁽⁴⁾ This entity held our interest in Canyon Trails Towne Center. The property held by the joint venture was sold in December 2013.

Noncontrolling interests represent the portion of equity that we do not own in certain entities that we consolidate. We account for and report our noncontrolling interests in accordance with the provisions under the Consolidation Topic of the FASB ASC.

13. (Loss) Earnings Per Share

The following summarizes the calculation of basic EPS and provides a reconciliation of the amounts of net (loss) income available to common stockholders and shares of common stock used in calculating basic EPS:



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(In thousands, except per share amounts)
(Loss) income from continuing operations	$	(1,065	)	$	10,145		$	27,104		$	24,074
Gain on sale of operating properties	1,141			—			883			—
Net income attributable to noncontrolling interests - continuing operations	(2,511		)	(2,511		)	(7,212		)	(5,204		)
(Loss) income from continuing operations attributable to Equity One, Inc.	(2,435		)	7,634			20,775			18,870
Allocation of continuing income to participating securities	(224		)	(63		)	(438		)	(306		)
(Loss) income from continuing operations available to common stockholders	(2,659		)	7,571			20,337			18,564

Income from discontinued operations	23			26,032			3,087			39,394
Net loss (income) attributable to noncontrolling interests - discontinued operations	1			(28		)	3			(33		)
Income from discontinued operations attributable to Equity One, Inc.	24			26,004			3,090			39,361
Allocation of income from discontinued operations to participating securities	—			(230		)	—			(356		)
Income from discontinued operations available to common stockholders	24			25,774			3,090			39,005
Net (loss) income available to common stockholders	$	(2,635	)	$	33,345		$	23,427		$	57,569

Weighted average shares outstanding — Basic	117,813			117,385			117,744			117,209

Basic (loss) earnings per share available to common stockholders:
Continuing operations	$	(0.02	)	$	0.06		$	0.17		$	0.16
Discontinued operations	—			0.22			0.03			0.33
(Loss) earnings per common share — Basic	$	(0.02	)	$	0.28		$	0.20		$	0.49

The following summarizes the calculation of diluted EPS and provides a reconciliation of the amounts of net (loss) income available to common stockholders and shares of common stock used in calculating diluted EPS:



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(In thousands, except per share amounts)
(Loss) income from continuing operations	$	(1,065	)	$	10,145		$	27,104		$	24,074
Gain on sale of operating properties	1,141			—			883			—
Net income attributable to noncontrolling interests - continuing operations	(2,511		)	(2,511		)	(7,212		)	(5,204		)
(Loss) income from continuing operations attributable to Equity One, Inc.	(2,435		)	7,634			20,775			18,870
Allocation of continuing income to participating securities	(224		)	(64		)	(438		)	(308		)
(Loss) income from continuing operations available to common stockholders	(2,659		)	7,570			20,337			18,562

Income from discontinued operations	23			26,032			3,087			39,394
Net loss (income) attributable to noncontrolling interests - discontinued operations	1			(28		)	3			(33		)
Income from discontinued operations attributable to Equity One, Inc.	24			26,004			3,090			39,361
Allocation of income from discontinued operations to participating securities	—			(229		)	—			(354		)
Income from discontinued operations available to common stockholders	24			25,775			3,090			39,007
Net (loss) income available to common stockholders	$	(2,635	)	$	33,345		$	23,427		$	57,569

Weighted average shares outstanding — Basic	117,813			117,385			117,744			117,209
Stock options using the treasury method	—			364			205			326
Non-participating restricted stock using the treasury method	—			—			6			—
Executive Incentive Plan shares using the treasury method	—			—			26			—
Weighted average shares outstanding — Diluted	117,813			117,749			117,981			117,535

Diluted (loss) earnings per share available to common stockholders:
Continuing operations	$	(0.02	)	$	0.06		$	0.17		$	0.16
Discontinued operations	—			0.22			0.03			0.33
(Loss) earnings per common share — Diluted	$	(0.02	)	$	0.28		$	0.20		$	0.49

The computation of diluted EPS for the three months ended June 30, 2014 did not include 2.9 million shares of common stock, issuable upon the exercise of outstanding options, at prices ranging from $11.59 to $26.66 as the effect would be anti-dilutive. The computation of diluted EPS for the six months ended June 30, 2014 did not include 1.6 million shares of common stock, issuable upon the exercise of outstanding options, at prices ranging from $22.78 to $26.66, because the option prices were greater than the average market prices of our common shares during the period. The computation of diluted EPS for the three and six months ended June 30, 2013 did not include 945,000 and 1.4 million shares of common stock, respectively, issuable upon the exercise of outstanding options, at prices ranging from $24.45 to $26.66 and $24.12 to $26.66, respectively, because the option prices were greater than the average market prices of our common shares during these respective periods.

The computation of diluted EPS for both the three and six months ended June 30, 2014 and 2013 did not include the 11.4 million joint venture units held by Liberty International Holdings Limited ("LIH"), which are redeemable by LIH for cash or, solely at our option, shares of our common stock on a one-for-one basis, subject to certain adjustments. These convertible units were not included in the diluted weighted average share count because their inclusion is anti-dilutive.

14. Share-Based Payments

The following table presents stock option activity during the six months ended June 30, 2014:



	Shares Under Option		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(In thousands)				(In years)	(In thousands)
Outstanding at January 1, 2014	2,985		$	21.53
Granted	200		22.87
Exercised	(272	)	17.49
Forfeited or expired	(60	)	23.14
Outstanding at June 30, 2014	2,853		$	21.97	4.0	$	6,011
Exercisable at June 30, 2014	2,603		$	21.96	3.5	$	5,641

The fair value of the option grant was estimated on the grant date using the Black-Scholes-Merton pricing model with the following assumptions:



Dividend yield	3.8	%
Risk-free interest rate	2.0	%
Expected option life (years)	6.25
Expected volatility	39.8	%

The following table presents information regarding restricted stock activity during the six months ended June 30, 2014:



	Unvested Shares			Weighted Average Grant-Date Fair Value
	(In thousands)
Unvested at January 1, 2014	857			$	17.37
Granted	149			22.74
Vested	(83	)		19.06
Forfeited	—			—
Unvested at June 30, 2014	923		*	$	18.09

^{______________________________________________}

* Does not include 800,000 shares of restricted stock awarded to certain executives which are subject to performance vesting conditions and are not entitled to vote or receive dividends during the performance period.

During the six months ended June 30, 2014, we granted 149,080 shares of restricted stock that are subject to forfeiture and vest over periods from 0 to 4 years. We measure compensation expense for restricted stock awards based on the fair value of our common stock at the date of grant and charge such amounts to expense ratably over the vesting period on a straight-line basis. The total grant-date value of the 82,770 shares of restricted stock that vested during the six months ended June 30, 2014 was approximately $1.6 million.

Share-based compensation expense, which is included in general and administrative expenses in the accompanying condensed consolidated statements of operations, is summarized as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(In thousands)
Restricted stock expense	$	20		$	1,490		$	1,776		$	3,031
Stock option expense	322			110			401			253
Employee stock purchase plan discount	9			6			17			9
Total equity-based expense	351			1,606			2,194			3,293
Restricted stock classified as a liability	26			39			131			39
Total expense	377			1,645			2,325			3,332
Less amount capitalized	(164		)	(80		)	(345		)	(167		)
Net share-based compensation expense	$	213		$	1,565		$	1,980		$	3,165

As of June 30, 2014, we had $15.1 million of total unrecognized compensation expense related to unvested and restricted share-based payment arrangements (unvested options and restricted shares) granted under our Amended and Restated Equity One 2000 Executive Incentive Compensation Plan. This expense is expected to be recognized over a weighted-average period of 2.8 years.

Employment Related Agreements

Jeffrey Olson

In March 2014, Jeffrey Olson, our former Chief Executive Officer, informed us that he would not be renewing his employment agreement which was set to expire on December 31, 2014. On June 2, 2014, we entered into a Separation of Employment Agreement with Mr. Olson which resulted in a modification of the terms of his outstanding equity awards such that 58,240 shares of restricted stock that were scheduled to vest on December 31, 2014 are now scheduled to vest on August 29, 2014 and the post-employment window in which Mr. Olson can exercise his vested stock options was extended from three months to six months. In addition, the service and market conditions related to Mr. Olson's long-term incentive plan award ("LTIP") that was scheduled to vest on December 31, 2014 were modified such that the award is now scheduled to vest on August 29, 2014, subject to the market conditions being met. The modification of Mr. Olson’s stock options resulted in additional compensation expense of $232,000, as determined using a Black-Scholes-Merton model, which was recognized on the modification date as the options had previously vested. As a result of Mr. Olson’s separation and the related modification of the vesting conditions associated with his restricted stock and LTIP awards, all compensation expense previously recognized in relation to these awards (excluding the value of dividends previously paid on such awards) was reversed. The value of the modified restricted stock, as determined by the fair value of our common stock as of the modification date, and the fair value of the modified LTIP, as determined using a Monte Carlo simulation, will be recognized from the modification date through August 29, 2014. The modifications resulted in a net reversal of $1.7 million in compensation expense associated with these awards during the three and six months ended June 30, 2014. We expect to recognize $1.5 million in compensation expense in the third quarter of 2014 in connection with these awards.

David Lukes

On April 2, 2014, we entered into an employment agreement with David Lukes, our Chief Executive Officer, which became effective as of May 12, 2014 and has an initial term which ends on May 12, 2018. Mr. Lukes' employment agreement provides for an annual base salary of $850,000 and other benefits generally made available to our senior executive officers. In addition, Mr. Lukes is eligible for a target performance bonus of 100% of his base salary, except that with respect to the 2014 calendar year, Mr. Lukes will receive an annual bonus of no less than $850,000 reduced pro rata based on the portion of calendar year 2014 during which Mr. Lukes was not employed by the Company. Bonuses will be payable 50% in cash and 50% in shares of our restricted stock which will vest ratably over three years. Mr. Lukes also received a signing bonus of $500,000, which is included in general and administrative expenses in the accompanying statements of operations for the three and six months ended June 30, 2014. Mr. Lukes will repay the signing bonus in full in the event he resigns without good reason or is terminated for cause within 12 months of the commencement of his employment.

Upon the commencement of his employment, Mr. Lukes received 200,000 stock options with an exercise price of $22.87 per share that will vest ratably on the first, second, third and fourth anniversaries of the grant date. In addition, Mr. Lukes received 68,956 shares of restricted stock that will vest ratably on the second, third, and fourth anniversaries of the grant date and a LTIP, under which Mr. Lukes' target award is 156,300 shares of our common stock. The number of shares of stock that will ultimately be issued under the LTIP will be based on our performance during the four-year period beginning on the date of Mr. Lukes' employment. The performance metrics (and their weightings) are based on our absolute total shareholder return ("Absolute TSR") (25%), total shareholder return relative to specified peer companies ("Relative TSR") (25%) and growth in recurring funds from operations per share ("Recurring FFO Growth") (25%). The remaining 25% of Mr. Lukes' award will be discretionary. For each of these four components, Mr. Lukes can earn 50%, 100% or 200% of the 39,075 target shares allocated to such component based on the actual performance compared to specified targets. Shares earned pursuant to the LTIP will be issued following the completion of the four-year performance period, subject to Mr. Lukes' continued employment through the end of such period.

The Absolute TSR and Relative TSR components of Mr. Lukes’ LTIP are considered market-based awards. Accordingly, the probability of meeting the market criteria was considered when calculating the estimated fair value of the awards on the date of grant using Monte Carlo simulations. Furthermore, compensation expense associated with these awards will be recognized over the requisite service period as long as the requisite service is provided, regardless of whether the market criteria are achieved and the awards are ultimately earned. The significant assumptions used to value these awards include the volatility of our common stock (24.3%), the volatility of the common stock of various peer companies (which ranged from 13.7% to 28.6%), and the risk-free interest rate (1.3%). The aggregate estimated fair value of these components of Mr. Lukes’ LTIP was $1.5 million which will be recognized over the four-year performance period.

The Recurring FFO Growth component of Mr. Lukes’ LTIP is considered a performance-based award which is earned subject to future performance measurement. The award was valued at $19.51 per share based on the fair value of our common stock at the date of grant less the present value of the dividends expected to be paid on our common stock during the requisite service period. Compensation expense will be recognized over the requisite service period based on management’s periodic estimate of the likelihood that the performance criteria will be met.

Chaim Katzman

On June 2, 2014, we entered into a Chairman Compensation Agreement with Chaim Katzman, our Chairman of the Board, which will replace Mr. Katzman’s existing Chairman Compensation Agreement with the Company following the expiration of its term on December 31, 2014. The initial term of the new Chairman Compensation Agreement ends December 31, 2017. Pursuant to the agreement, Mr. Katzman will receive 255,000 shares of restricted stock that will vest as follows: (i) 7,095 shares on January 31, 2015; and (ii) 7,083 shares on the last day of each calendar month beginning February 2015 and ending December 2017. The award was valued at $22.24 per share based on the fair value of our common stock at the date of grant less the present value of the dividends expected to be paid on our common stock during the period from the date of grant to January 2, 2015, at which time Mr. Katzman’s restricted stock will be entitled to receive dividends. Compensation expense related to the award will be recognized over the period from June 2014 through December 2017.

Thomas Caputo

On June 25, 2014, we entered into a new employment agreement with Thomas Caputo, our President, which is effective as of January 1, 2015 immediately following the expiration of the current term of Mr. Caputo’s existing employment agreement with the Company and ends on December 31, 2016. Mr. Caputo's new employment agreement provides for an annual base salary of $750,000 and other benefits generally made available to our senior executive officers. In addition, Mr. Caputo will be eligible for a target performance bonus of 100% of his base salary that will be payable in cash. Pursuant to the agreement, on January 1, 2015, we will grant to Mr. Caputo $1.0 million in shares of our restricted common stock (valued by the Compensation Committee on the date of grant based on the average closing price of a share of our common stock during the 10 trading days immediately preceding the grant date), which shares will fully vest on December 31, 2016 subject to Mr. Caputo then being employed by the Company.

Michael Makinen

On June 25, 2014, we entered into an employment agreement with Michael Makinen to serve as our Chief Operating Officer. The agreement became effective as of July 15, 2014, and the initial term ends on July 15, 2018. Mr. Makinen's employment agreement provides for an annual base salary of $400,000 and other benefits generally made available to our senior executive officers. In addition, Mr. Makinen is eligible for a target performance bonus of $300,000, except that with respect to the 2014 calendar year, Mr. Makinen will receive an annual bonus of no less than $300,000 reduced pro rata based on the portion of calendar year 2014 during which Mr. Makinen was not employed by the Company. Bonuses will be payable 50% in cash and 50% in shares of our restricted stock which will vest ratably over three years.

Upon the commencement of his employment, Mr. Makinen received 5,000 shares of restricted stock that will vest in equal portions on the first and second anniversaries of the grant date and a LTIP, under which Mr. Makinen's target award will be 25,685 shares of our common stock. The number of shares of stock that will ultimately be awarded will be based on our performance during the four-year period beginning on the date of Mr. Makinen's employment. Mr. Makinen's LTIP award will share the same performance metrics and weightings as Mr. Lukes' LTIP award described above. Shares earned pursuant to the LTIP will be issued following the completion of the four-year performance period, subject to Mr. Makinen's continued employment through the end of such period.

Amended and Restated 2004 Employee Stock Purchase Plan

In 2004, we adopted an Employee Stock Purchase Plan (the “ESPP”) in order to provide a convenient means by which eligible employees could purchase shares of our common stock on a quarterly basis through payroll deductions and voluntary cash investments. The original ESPP terminated on March 31, 2014 pursuant to its own terms. Accordingly, our board of directors adopted an amended and restated ESPP which was approved by our stockholders at our May 2014 annual meeting. Under the amended and restated ESPP, the quarterly purchase price per share paid by employees is 85% of the average closing price per share of our common stock on the five trading days that immediately precede the last trading day of the quarter, provided, however, that in no event may the purchase price be less than the lower of (i) 85% of the closing price on the first trading day of the quarter or (ii) 85% of the closing price on the last trading day of the quarter. Shares purchased under the amended and restated ESPP are subject to a six-month holding requirement, subject to exceptions for hardship.

15. Segment Reporting

We review operating and financial data for each property on an individual basis; therefore each of our individual properties is a separate operating segment. We have aggregated our operating segments in six reportable segments based primarily upon our method of internal reporting which classifies our operations by geographical area. Our reportable segments by geographical area are as follows: (1) South Florida – including Miami-Dade, Broward and Palm Beach Counties; (2) North Florida – including all of Florida north of Palm Beach County; (3) Southeast – including Georgia, Louisiana, North Carolina and Virginia; (4) Northeast – including Connecticut, Maryland, Massachusetts and New York; (5) West Coast – California; and (6) Non-retail – which is comprised of our non-retail assets.

We assess a segment’s performance based on net operating income (“NOI”). NOI excludes interest and other income, acquisition costs, general and administrative expenses, interest expense, depreciation and amortization expense, gain (loss) on sale of real estate, gain (loss) on extinguishment of debt, equity in income of unconsolidated joint ventures, income tax provision from taxable REIT subsidiaries, amortization of deferred financing fees, impairments, and income attributable to noncontrolling interests. NOI is a non-GAAP financial measure. The most directly comparable GAAP financial measure is (loss) income from continuing operations before tax and discontinued operations, which, to calculate NOI, is adjusted to add back depreciation and amortization, general and administrative expense, interest expense, amortization of deferred financing fees and impairments, and to exclude straight line rent adjustments, accretion of below market lease intangibles (net), revenue earned from management and leasing services, investment income, equity in income of unconsolidated joint ventures, gain (loss) on extinguishment of debt and other income. NOI includes management fee expense recorded at each operating segment based on a percentage of revenue which is eliminated in consolidation. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Therefore, we believe NOI is a useful measure for evaluating the operating performance of our real estate assets. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with (loss) income from continuing operations before tax and discontinued operations as presented in our condensed consolidated financial statements. NOI should not be considered as an alternative to net income attributable to Equity One as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions. We consider NOI to be an appropriate supplemental measure to net income because it helps both investors and management understand the core operations of our properties.

The following table sets forth the financial information relating to our continuing operations presented by segments and includes a reconciliation of NOI to (loss) income from continuing operations before tax and discontinued operations, the most directly comparable GAAP financial measure:



	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014		2013
	(In thousands)
Revenue:
South Florida	$	22,765		$	23,296	$	46,270	$	46,337
North Florida	9,416			9,390		19,124		18,983
Southeast	8,857			9,491		18,385		18,882
Northeast	20,750			18,248		42,349		36,322
West Coast	19,414			17,011		37,697		33,950
Non-retail	906			394		1,832		660
Total segment revenue	82,108			77,830		165,657		155,134
Add:
Straight line rent adjustment	1,076			211		1,738		722
Accretion of below market lease intangibles, net	3,675			3,211		11,656		6,411
Management and leasing services	584			484		1,213		898
Total revenue	$	87,443		$	81,736	$	180,264	$	163,165

Net operating income (NOI):
South Florida	$	15,697		$	15,520	$	32,256	$	31,353
North Florida	6,588			6,482		13,463		12,646
Southeast ⁽¹⁾	6,000			6,588		13,787		13,273
Northeast	14,723			12,875		29,205		25,584
West Coast	12,982			11,288		25,523		22,794
Non-retail	751			241		1,510		399
Total NOI	56,741			52,994		115,744		106,049
Add:
Straight line rent adjustment	1,076			211		1,738		722
Accretion of below market lease intangibles, net	3,675			3,211		11,656		6,411
Management and leasing services	584			484		1,213		898
Elimination of intersegment expenses	2,754			2,595		5,514		5,188
Investment income	28			2,209		199		4,413
Equity in income of unconsolidated joint ventures	1,268			615		9,529		1,050
Gain on extinguishment of debt	—			107		1,074		107
Other income	5			162		2,846		162

Less:
Depreciation and amortization expense	27,666			22,797		53,933		44,530
General and administrative expense	8,872			9,673		19,786		18,567
Interest expense	16,086			16,701		32,986		33,937
Amortization of deferred financing fees	601			603		1,200		1,209
Impairment loss	13,892			2,662		13,892		2,662
(Loss) income from continuing operations before tax and discontinued operations	$	(986	)	$	10,152	$	27,716	$	24,095

⁽¹⁾ Included in NOI for the Southeast region for the six months ended June 30, 2014 is the reversal of $1.1 million in our allowance for doubtful accounts for certain historical real estate tax billings for which a settlement was reached with the tenants.

The following is a summary by segment of total assets included in the condensed consolidated balance sheets:



	June 30, 2014		December 31, 2013
	(In thousands)
Assets:
South Florida	$	650,820	$	690,328
North Florida	280,477		318,375
Southeast	274,356		305,013
Northeast	1,069,576		974,444
West Coast	854,829		833,890
Non-retail	60,150		61,273
Corporate assets	110,195		157,932
Properties held for sale	53,162		13,404
Total assets	$	3,353,565	$	3,354,659

16. Commitments and Contingencies

As of June 30, 2014, we had provided letters of credit having an aggregate face amount of $2.6 million as additional security for financial and other obligations.

As of June 30, 2014, we have invested an aggregate of approximately $70.0 million in active development or redevelopment projects at various stages of completion and anticipate that these projects will require an additional $69.4 million to complete, based on our current plans and estimates, which we anticipate will be expended over the next two years. These obligations, comprised principally of construction contracts, are generally due as the work is performed and are expected to be financed by funds available under our credit facilities, proceeds from property dispositions and available cash.

We are subject to litigation in the normal course of business; however, we do not believe that any of the litigation outstanding as of June 30, 2014 will have a material adverse effect on our financial condition, results of operations or cash flows.

We were involved in litigation with the fee owner of the majority of the parking lot that services one of our shopping centers. The owner was seeking a declaratory judgment that we and our anchor tenant failed to properly exercise a renewal option under the ground lease at the end of 2012, thereby causing the lease to expire in March 2013. In May 2014, we entered into an agreement to purchase the parking lot for $5.4 million, which approximates fair value, in order to settle our dispute with the fee owner and the transaction was consummated in July 2014.

17. Environmental Matters

We are subject to numerous environmental laws and regulations. The operation of dry cleaning and gas station facilities at our shopping centers are the principal environmental concerns. We require that the tenants who operate these facilities do so in material compliance with current laws and regulations and we have established procedures to monitor dry cleaning operations. Where available, we have applied and been accepted into state sponsored environmental programs. Several properties in the portfolio will require or are currently undergoing varying levels of environmental remediation. We have environmental insurance policies covering most of our properties which limits our exposure to some of these conditions, although these policies are subject to limitations and environmental conditions known at the time of acquisition are typically excluded from coverage. Management believes that the ultimate disposition of currently known environmental matters will not have a material effect on our financial position, liquidity or operations.

18. Fair Value Measurements

Recurring Fair Value Measurements

As of June 30, 2014 and December 31, 2013, we had three interest rate swap agreements with a notional amount of $250.0 million that are measured at fair value on a recurring basis. As of June 30, 2014, the fair value of one of our interest rate swaps consisted of an asset of $810,000, which is included in other assets, and the fair value of the remaining interest rate swaps consisted of a liability of $921,000, which is included in accounts payable and accrued expenses in our condensed consolidated balance sheet. As of December 31, 2013, the fair value of our swaps was an asset of $2.9 million, which is included in other assets in our condensed consolidated balance sheet. The net unrealized loss on our interest rate swaps was $3.1 million and $4.7 million for the three and six months ended June 30, 2014, respectively, and is included in accumulated other comprehensive income. The fair value of the interest rate swaps is based on the estimated amount we would receive or pay to terminate the contract at the reporting date and is determined using interest rate pricing models and observable inputs. The interest rate swaps are classified within Level 2 of the valuation hierarchy.

The following are assets (liabilities) measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013:



	Fair Value Measurements
Assets:	Total			Level 1		Level 2			Level 3
June 30, 2014	(In thousands)
Interest rate derivatives:
Classified as an asset in other assets	$	810		$	—	$	810		$	—
Classified as a liability in accounts payable and accrued expenses	$	(921	)	$	—	$	(921	)	$	—

December 31, 2013
Interest rate derivatives:
Classified as an asset in other assets	$	2,944		$	—	$	2,944		$	—

Valuation Methods

The fair values of our interest rate swaps were determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of the derivative financial instrument. This analysis reflected the contractual terms of the derivative, including the period to maturity, and used observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While it was determined that the majority of the inputs used to value the derivatives fall within Level 2 of the fair value hierarchy under authoritative accounting guidance, the credit valuation adjustments associated with the derivatives also utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. However, as of June 30, 2014, the significance of the impact of the credit valuation adjustments on the overall valuation of the derivative financial instruments was assessed and it was determined that these adjustments were not significant to the overall valuation of the derivative financial instruments. As a result, it was determined that the derivative financial instruments in their entirety should be classified in Level 2 of the fair value hierarchy. The net unrealized loss included in other comprehensive income was attributable to the net change in unrealized gains and losses related to the interest rate swaps that remained outstanding as of June 30, 2014, none of which were reported in the condensed consolidated statements of operations because they were documented and qualified as hedging instruments.

Non-Recurring Fair Value Measurements

The following table presents our hierarchy for those assets measured and recorded at fair value on a non-recurring basis as of June 30, 2014:



Assets:	Total		Level 1		Level 2		Level 3		Total Losses⁽¹⁾
	(In thousands)
Operating properties held and used	$	11,900	$	—	$	—	$	11,900	$	9,573
Operating properties held for sale	16,800		—		16,800		—		2,058
Total	$	28,700	$	—	$	16,800	$	11,900	$	11,631

^{____________________________________________}

⁽¹⁾Total losses exclude impairments of $2.2 million recognized related to properties sold during the six months ended June 30, 2014 primarily based on sales contracts.

The following table presents our hierarchy for those assets measured and recorded at fair value on a non-recurring basis as of December 31, 2013:



Assets:	Total		Level 1		Level 2		Level 3			Total Losses⁽¹⁾
	(In thousands)
Operating properties held and used	$	6,600	$	—	$	—	$	6,600	⁽²⁾	$	2,406
Operating properties held for sale	3,875		—		3,875		—			1,313
Development properties held for use	6,400		—		—		6,400			3,085
Total	$	16,875	$	—	$	3,875	$	13,000		$	6,804

^{____________________________________________}

⁽¹⁾Total losses are for the full year ended December 31, 2013 and exclude impairments related to properties sold during the year.

⁽²⁾$5.4 million of the total represents the fair value of an operating property as of the date it was impaired during the third quarter of 2013. As of December 31, 2013, the carrying amount of the property no longer equaled its fair value.

On a non-recurring basis, we evaluate the carrying value of investment property and investments in and advances to unconsolidated joint ventures when events or changes in circumstances indicate that the carrying value may not be recoverable. Impairments, if any, result primarily from values established by Level 3 valuations. The carrying value is considered impaired when the total projected undiscounted cash flows from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset as determined by purchase price offers or by discounted cash flows using the income or market approach. These cash flows are comprised of unobservable inputs which include contractual rental revenue and forecasted rental revenue and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based upon observable rates that we believe to be within a reasonable range of current market rates for the respective properties. Based on these inputs, we determined that the valuations of these investment properties and investments in unconsolidated joint ventures are classified within Level 3 of the fair value hierarchy.

The following are ranges of key inputs used in determining the fair value of income producing properties measured using Level 3 inputs:



	June 30, 2014		December 31, 2013
	Low	High	Low	High
Overall capitalization rates	10.0%	15.0%	12.5%	15.5%
Discount rates	12.0%	14.5%	10.0%	13.5%
Terminal capitalization rates	11.0%	13.5%	12.5%	12.5%

During the six months ended June 30, 2014, we recognized $9.6 million of impairment losses on two operating properties located in the Southeast region considered an asset group and one operating property located in the North Florida region. The operating properties located in the Southeast region were impaired due to the increased financial uncertainties surrounding a dark anchor tenant and the reconsideration of our anticipated holding period for the assets. The operating property in the North Florida region was impaired due to the loss of an anchor tenant and the re-leasing of such space at lower rents, as well as the reconsideration of our anticipated holding period for the asset. During the year ended December 31, 2013, we recognized $2.4 million of impairment losses on operating properties located in the Southeast region. The estimated fair values related to the impairment assessments were primarily based on discounted cash flow analyses and, therefore, are classified within Level 3 of the fair value hierarchy.

During the six months ended June 30, 2014, we recognized $2.1 million of impairment losses on two properties held for sale located in the Southeast and South Florida regions. During the year ended December 31, 2013, we recognized an impairment loss of $1.3 million on a property held for sale located in the Southeast region. The estimated fair values related to the impairment assessments were based upon the expected sales prices as determined by executed contracts and, therefore, are classified within Level 2 of the fair value hierarchy.

During the year ended December 31, 2013, we recognized impairment losses of $3.1 million on land parcels located in the Southeast and West Coast regions. The estimated fair values related to the impairment assessments were based on appraisals and, therefore, are classified within Level 3 of the fair value hierarchy. During the six months ended June 30, 2014, we did not recognize impairment losses on development properties held for use.

19. Fair Value of Financial Instruments

The estimated fair values of financial instruments have been determined by us using available market information and appropriate valuation methods. Considerable judgment is 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 and/or estimation methods may have a material effect on the estimated fair value amounts. We have used the following market assumptions and/or estimation methods:

Cash and Cash Equivalents, Accounts and Other Receivables, Accounts Payable and Accrued Expenses and Unsecured Revolving Credit Facilities (classified within Levels 1, 2 and 3 of the valuation hierarchy) – The carrying amounts reported in the condensed consolidated balance sheets for these financial instruments approximate fair value because of their short maturities.

Loans Receivable (classified within Level 2 of the valuation hierarchy) – The carrying value of the loans receivable of $60.7 million as of December 31, 2013 approximated fair value due to their short maturities.

Mortgage Notes Payable (classified within Level 2 of the valuation hierarchy) – The fair value estimated as of June 30, 2014 and December 31, 2013 was approximately $447.3 million and $461.5 million, respectively, calculated based on the net present value of payments over the term of the loans using estimated market rates for similar mortgage loans and remaining terms. The carrying amount (principal and unaccreted premium) of these notes, including notes associated with properties held for sale, was $414.7 million and $438.0 million as of June 30, 2014 and December 31, 2013, respectively.

Unsecured Senior Notes Payable (classified within Level 2 of the valuation hierarchy) – The fair value estimated as of June 30, 2014 and December 31, 2013 was approximately $791.2 million and $762.6 million, respectively, calculated based on the net present value of payments over the terms of the notes using estimated market rates for similar notes and remaining terms. The carrying amount (principal net of unamortized discount) of these notes was $729.6 million and $729.4 million as of June 30, 2014 and December 31, 2013, respectively.

Term Loan (classified within Level 2 of the valuation hierarchy) – The fair value estimated as of June 30, 2014 and December 31, 2013 was approximately $258.8 million and $248.7 million, respectively, calculated based on the net present value of payments over the term of the loan using estimated market rates for similar notes and remaining terms. The carrying amount of this loan was $250.0 million as of both June 30, 2014 and December 31, 2013.

The fair market value calculations of our debt as of June 30, 2014 and December 31, 2013 include assumptions as to the effects that prevailing market conditions would have on existing secured or unsecured debt. The calculations use a market rate spread over the risk free interest rate. This spread is determined by using the remaining life to maturity coupled with loan-to-value considerations of the respective debt. Once determined, this market rate is used to discount the remaining debt service payments in an attempt to reflect the present value of this stream of cash flows. While the determination of the appropriate market rate is subjective in nature, recent market data gathered suggest that the composite rates used for mortgages, senior notes and term loans are consistent with current market trends.

Interest Rate Swap Agreements (classified within Level 2 of the valuation hierarchy) – As of June 30, 2014, the fair value of one of our interest rate swaps consisted of an asset of $810,000, which is included in other assets, and the fair value of the remaining interest rate swaps consisted of a liability of $921,000, which is included in accounts payable and accrued expenses in our condensed consolidated balance sheet. As of December 31, 2013, the fair value of our interest rate swaps was an asset of $2.9 million, which is included in other assets in our condensed consolidated balance sheets. See Note 18 above for a discussion of the method used to value the interest rate swaps.

Redeemable Noncontrolling Interests (classified within Level 3 of the valuation hierarchy) – The carrying amount of the redeemable noncontrolling interests was $989,000 as of both June 30, 2014 and December 31, 2013, which approximates fair value as determined by discounted cash flow analyses.

20. Condensed Consolidating Financial Information

Many of our subsidiaries that are 100% owned, either directly or indirectly, have guaranteed our indebtedness under our unsecured senior notes and our term loan and revolving credit facilities. The guarantees are joint and several and full and unconditional. The following statements set forth consolidating financial information with respect to guarantors of our unsecured senior notes:



Condensed Consolidating Balance Sheet As of June 30, 2014	Equity One, Inc.		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminating Entries			Consolidated
	(In thousands)
ASSETS
Properties, net	$	161,172	$	1,401,374	$	1,398,654	$	(80	)	$	2,961,120
Investment in affiliates	2,678,334		—		—		(2,678,334		)	—
Other assets	256,021		95,994		834,548		(794,118		)	392,445
TOTAL ASSETS	$	3,095,527	$	1,497,368	$	2,233,202	$	(3,472,532	)	$	3,353,565
LIABILITIES
Total notes payable	$	1,712,598	$	123,580	$	451,719	$	(760,600	)	$	1,527,297
Other liabilities	12,420		87,612		181,082		(33,598		)	247,516
TOTAL LIABILITIES	1,725,018		211,192		632,801		(794,198		)	1,774,813
REDEEMABLE NONCONTROLLING INTERESTS	—		—		989		—			989
EQUITY	1,370,509		1,286,176		1,599,412		(2,678,334		)	1,577,763
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY	$	3,095,527	$	1,497,368	$	2,233,202	$	(3,472,532	)	$	3,353,565



Condensed Consolidating Balance Sheet As of December 31, 2013	Equity One, Inc.		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminating Entries			Consolidated
	(In thousands)
ASSETS
Properties, net	$	178,797	$	1,424,571	$	1,313,598	$	(133	)	$	2,916,833
Investment in affiliates	2,680,043		—		—		(2,680,043		)	—
Other assets	229,761		92,916		918,026		(802,877		)	437,826
TOTAL ASSETS	$	3,088,601	$	1,517,487	$	2,231,624	$	(3,483,053	)	$	3,354,659
LIABILITIES
Total notes payable	$	1,670,438	$	131,217	$	467,354	$	(760,600	)	$	1,508,409
Other liabilities	22,979		90,894		170,872		(42,410		)	242,335
TOTAL LIABILITIES	1,693,417		222,111		638,226		(803,010		)	1,750,744
REDEEMABLE NONCONTROLLING INTERESTS	—		—		989		—			989
EQUITY	1,395,184		1,295,376		1,592,409		(2,680,043		)	1,602,926
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY	$	3,088,601	$	1,517,487	$	2,231,624	$	(3,483,053	)	$	3,354,659



Condensed Consolidating Statement of Comprehensive (Loss) Income for the three months ended June 30, 2014	Equity One, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
	(In thousands)
Total revenue	$	6,133		$	43,391		$	37,919		$	—		$	87,443
Equity in subsidiaries' earnings	27,435			—			—			(27,435		)	—
Total costs and expenses	10,336			23,890			25,199			(274		)	59,151
INCOME BEFORE OTHER INCOME AND EXPENSE, TAX AND DISCONTINUED OPERATIONS	23,232			19,501			12,720			(27,161		)	28,292
Other income and (expense)	(25,725		)	(5,530		)	2,220			(243		)	(29,278		)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE TAX AND DISCONTINUED OPERATIONS	(2,493		)	13,971			14,940			(27,404		)	(986		)
Income tax benefit (provision) of taxable REIT subsidiaries	—			26			(105		)	—			(79		)
(LOSS) INCOME FROM CONTINUING OPERATIONS	(2,493		)	13,997			14,835			(27,404		)	(1,065		)
Income (loss) from discontinued operations	7			(53		)	68			1			23
Gain from sale of operating properties	8			1,125			8			—			1,141
NET (LOSS) INCOME	(2,478		)	15,069			14,911			(27,403		)	99
Other comprehensive loss	(2,278		)	—			(67		)	—			(2,345		)
COMPREHENSIVE (LOSS) INCOME	(4,756		)	15,069			14,844			(27,403		)	(2,246		)
Comprehensive income attributable to noncontrolling interests	—			—			(2,510		)	—			(2,510		)
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO EQUITY ONE, INC.	$	(4,756	)	$	15,069		$	12,334		$	(27,403	)	$	(4,756	)



Condensed Consolidating Statement of Comprehensive Income for the three months ended June 30, 2013	Equity One, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
	(In thousands)
Total revenue	$	6,626		$	41,687		$	33,423		$	—		$	81,736
Equity in subsidiaries' earnings	53,113			—			—			(53,113		)	—
Total costs and expenses	10,805			22,195			21,854			(143		)	54,711
INCOME BEFORE OTHER INCOME AND EXPENSE, TAX AND DISCONTINUED OPERATIONS	48,934			19,492			11,569			(52,970		)	27,025
Other income and (expense)	(16,532		)	(3,357		)	3,241			(225		)	(16,873		)
INCOME FROM CONTINUING OPERATIONS BEFORE TAX AND DISCONTINUED OPERATIONS	32,402			16,135			14,810			(53,195		)	10,152
Income tax benefit (provision) of taxable REIT subsidiaries	—			30			(37		)	—			(7		)
INCOME FROM CONTINUING OPERATIONS	32,402			16,165			14,773			(53,195		)	10,145
Income from discontinued operations	1,364			24,465			84			119			26,032
NET INCOME	33,766			40,630			14,857			(53,076		)	36,177
Other comprehensive income	7,585			—			128			—			7,713
COMPREHENSIVE INCOME	41,351			40,630			14,985			(53,076		)	43,890
Comprehensive income attributable to noncontrolling interests	—			—			(2,539		)	—			(2,539		)
COMPREHENSIVE INCOME ATTRIBUTABLE TO EQUITY ONE, INC.	$	41,351		$	40,630		$	12,446		$	(53,076	)	$	41,351



Condensed Consolidating Statement of Comprehensive Income for the six months ended June 30, 2014	Equity One, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
	(In thousands)
Total revenue	$	12,718		$	92,783		$	74,763		$	—		$	180,264
Equity in subsidiaries' earnings	78,277			—			—			(78,277		)	—
Total costs and expenses	23,445			48,201			46,959			(487		)	118,118
INCOME BEFORE OTHER INCOME AND EXPENSE, TAX AND DISCONTINUED OPERATIONS	67,550			44,582			27,804			(77,790		)	62,146
Other income and (expense)	(43,605		)	(7,283		)	16,943			(485		)	(34,430		)
INCOME FROM CONTINUING OPERATIONS BEFORE TAX AND DISCONTINUED OPERATIONS	23,945			37,299			44,747			(78,275		)	27,716
Income tax benefit (provision) of taxable REIT subsidiaries	—			7			(619		)	—			(612		)
INCOME FROM CONTINUING OPERATIONS	23,945			37,306			44,128			(78,275		)	27,104
Income from discontinued operations	7			3,057			17			6			3,087
(Loss) gain from sale of operating properties	(280		)	1,125			38			—			883
NET INCOME	23,672			41,488			44,183			(78,269		)	31,074
Other comprehensive loss	(3,023		)	—			(193		)	—			(3,216		)
COMPREHENSIVE INCOME	20,649			41,488			43,990			(78,269		)	27,858
Comprehensive income attributable to noncontrolling interests	—			—			(7,209		)	—			(7,209		)
COMPREHENSIVE INCOME ATTRIBUTABLE TO EQUITY ONE, INC.	$	20,649		$	41,488		$	36,781		$	(78,269	)	$	20,649



Condensed Consolidating Statement of Comprehensive Income for the six months ended June 30, 2013	Equity One, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
	(In thousands)
Total revenue	$	13,181		$	83,676		$	66,308		$	—		$	163,165
Equity in subsidiaries' earnings	96,236			—			—			(96,236		)	—
Total costs and expenses	21,436			45,366			40,406			(214		)	106,994
INCOME BEFORE OTHER INCOME AND EXPENSE, TAX AND DISCONTINUED OPERATIONS	87,981			38,310			25,902			(96,022		)	56,171
Other income and (expense)	(36,473		)	(3,623		)	8,470			(450		)	(32,076		)
INCOME FROM CONTINUING OPERATIONS BEFORE TAX AND DISCONTINUED OPERATIONS	51,508			34,687			34,372			(96,472		)	24,095
Income tax benefit (provision) of taxable REIT subsidiaries	—			70			(91		)	—			(21		)
INCOME FROM CONTINUING OPERATIONS	51,508			34,757			34,281			(96,472		)	24,074
Income from discontinued operations	6,933			32,131			24			306			39,394
NET INCOME	58,441			66,888			34,305			(96,166		)	63,468
Other comprehensive income	8,988			—			210			—			9,198
COMPREHENSIVE INCOME	67,429			66,888			34,515			(96,166		)	72,666
Comprehensive income attributable to noncontrolling interests	—			—			(5,237		)	—			(5,237		)
COMPREHENSIVE INCOME ATTRIBUTABLE TO EQUITY ONE, INC.	$	67,429		$	66,888		$	29,278		$	(96,166	)	$	67,429



Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2014	Equity One, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidated
	(In thousands)
Net cash (used in) provided by operating activities	$	(55,029	)	$	60,484		$	65,163		$	70,618
INVESTING ACTIVITIES:
Acquisition of income producing properties	—			(350		)	(85,551		)	(85,901		)
Additions to income producing properties	(1,027		)	(3,690		)	(4,456		)	(9,173		)
Additions to construction in progress	(1,199		)	(25,147		)	(7,077		)	(33,423		)
Deposits for the acquisition of income producing properties	(425		)	—			—			(425		)
Proceeds from sale of real estate and rental properties	9,374			29,598			17,326			56,298
Decrease in cash held in escrow	(22,704		)	—			—			(22,704		)
Repayment of loans receivable	—			—			60,526			60,526
Increase in deferred leasing costs and lease intangibles	(259		)	(1,773		)	(725		)	(2,757		)
Investment in joint ventures	—			—			(289		)	(289		)
Repayments of advances to joint ventures	—			—			27			27
Distributions from joint ventures	—			—			16,232			16,232
Repayments from subsidiaries, net	80,644			(51,482		)	(29,162		)	—
Net cash provided by (used in) investing activities	64,404			(52,844		)	(33,149		)	(21,589		)
FINANCING ACTIVITIES:
Repayments of mortgage notes payable	—			(7,640		)	(24,324		)	(31,964		)
Net borrowings under revolving credit facilities	42,000			—			—			42,000
Proceeds from issuance of common stock	4,852			—			—			4,852
Repurchase of common stock	(205		)	—			—			(205		)
Dividends paid to stockholders	(52,289		)	—			—			(52,289		)
Purchase of noncontrolling interest	—			—			(763		)	(763		)
Distributions to noncontrolling interests	—			—			(6,927		)	(6,927		)
Net cash used in financing activities	(5,642		)	(7,640		)	(32,014		)	(45,296		)
Net increase in cash and cash equivalents	3,733			—			—			3,733
Cash and cash equivalents at beginning of the period	25,583			—			—			25,583
Cash and cash equivalents at end of the period	$	29,316		$	—		$	—		$	29,316



Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2013	Equity One, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidated
	(In thousands)
Net cash (used in) provided by operating activities	$	(37,326	)	$	52,387		$	46,457		$	61,518
INVESTING ACTIVITIES:
Acquisition of income producing properties	—			(37,000		)	—			(37,000		)
Additions to income producing properties	(850		)	(4,603		)	(1,660		)	(7,113		)
Additions to construction in progress	(371		)	(13,986		)	(3,401		)	(17,758		)
Deposits for the acquisition of income producing properties	(1,150		)	—			—			(1,150		)
Proceeds from sale of real estate and rental properties	49,131			118,363			5,528			173,022
Increase in cash held in escrow	(10,258		)	—			—			(10,258		)
Purchase of below market leasehold interest	—			(25,000		)	—			(25,000		)
Investment in loans receivable	—			—			(12,000		)	(12,000		)
Repayment of loans receivable	—			—			28,659			28,659
Increase in deferred leasing costs and lease intangibles	(627		)	(2,204		)	(1,696		)	(4,527		)
Investment in joint ventures	—			—			(4,266		)	(4,266		)
Advances to joint ventures	—			—			(143		)	(143		)
Distributions from joint ventures	—			—			1,595			1,595
Repayments from subsidiaries, net	94,653			(86,580		)	(8,073		)	—
Net cash provided by (used in) investing activities	130,528			(51,010		)	4,543			84,061
FINANCING ACTIVITIES:
Repayments of mortgage notes payable	(3,584		)	(1,377		)	(26,362		)	(31,323		)
Net repayments under revolving credit facilities	(47,000		)	—			—			(47,000		)
Payment of deferred financing costs	(6		)	—			—			(6		)
Proceeds from issuance of common stock	8,176			—			—			8,176
Repurchase of common stock	(348		)	—			—			(348		)
Stock issuance costs	(94		)	—			—			(94		)
Dividends paid to stockholders	(52,105		)	—			—			(52,105		)
Purchase of noncontrolling interests	—			—			(18,917		)	(18,917		)
Distributions to noncontrolling interests	—			—			(5,041		)	(5,041		)
Distributions to redeemable noncontrolling interests	—			—			(680		)	(680		)
Net cash used in financing activities	(94,961		)	(1,377		)	(51,000		)	(147,338		)
Net decrease in cash and cash equivalents	(1,759		)	—			—			(1,759		)
Cash and cash equivalents at beginning of the period	27,416			—			—			27,416
Cash and cash equivalents at end of the period	$	25,657		$	—		$	—		$	25,657

21. Subsequent Events

Pursuant to the Subsequent Events Topic of the FASB ASC, we have evaluated subsequent events and transactions that occurred after our June 30, 2014 unaudited condensed consolidated balance sheet date for potential recognition or disclosure in our condensed consolidated financial statements and have included such events in the footnotes herein.


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

The following discussion should be read in conjunction with the condensed consolidated interim financial statements and notes thereto appearing in “Item 1. Financial Statements” of this report and the more detailed information contained in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 3, 2014.

Overview

We are a real estate investment trust, or REIT, that owns, manages, acquires, develops and redevelops shopping centers and retail properties primarily located in supply constrained suburban and urban communities. Our principal business objective is to maximize long-term stockholder value by generating sustainable cash flow growth and increasing the long-term value of our real estate assets. To achieve our objective, we lease and manage our shopping centers primarily with experienced, in-house personnel. We acquire shopping centers that either have leading anchor tenants or contain a mix of tenants that reflect the shopping needs of the communities they serve. We also develop and redevelop shopping centers, leveraging existing tenant relationships and geographic and demographic knowledge while seeking to minimize risks associated with land development.

Although the economic challenges of the past several years have affected our business, especially in leasing space to smaller shop tenants located in less densely populated areas, we continued to see increasing interest from prospective small shop tenants during the first half of 2014 and are cautiously optimistic that this trend will continue in line with general economic conditions. The majority of our shopping centers are anchored by supermarkets, drug stores or other necessity-oriented retailers, which are less susceptible to economic cycles. As of June 30, 2014, approximately 60% of our shopping centers were supermarket-anchored, which we believe is a competitive advantage because supermarkets draw traffic to shopping centers even during challenging economic conditions. We also believe the continued diversification of our portfolio, including the reinvestment of proceeds from dispositions into higher quality assets located in urban markets, has made us less susceptible to economic downturns and positions us to enjoy the benefits of an improving economy.

We intend to seek opportunities to invest in our primary target markets of California, the northeastern United States, the Washington D.C. metropolitan area, South Florida and Atlanta, Georgia and to continue to dispose of non-strategic assets located primarily in the southeastern United States and north and central Florida. We also actively seek opportunities to develop or redevelop centers in urban markets with strong demographic characteristics and high barriers to entry. As pricing and opportunity permits, we expect to acquire additional assets in our target markets through the use of both joint venture arrangements and our own capital resources, and we expect to finance development and redevelopment activity primarily with our own capital resources or by issuing debt or equity.

While we have experienced and expect to see continued gradual improvement in general economic conditions during the remainder of 2014, the rate of economic recovery has varied across the regions in which we operate. Volatile consumer confidence, increasing competition from larger retailers, internet sales and limited access to capital have continued to pose challenges for small shop tenants, particularly in certain Southeast and North and Central Florida markets. In addition, certain retail categories such as electronic goods, office supply stores and book stores continue to face increased threats from internet retailers. We believe the continued growth and diversification of our portfolio into top urban markets combined with the current lack of new supply which limits competition, should continue to help to mitigate the impact of these challenges on our business, and we anticipate that our same-property portfolio occupancy in 2014 will increase approximately 1.0% over 2013 and our same-property net operating income (as defined in results of operations below) for 2014 will reflect an increase over 2013 of 2.5% to 3.25%.

The execution of our business strategy during the second quarter of 2014 resulted in:


•	the sale of four non-core assets for aggregate gross proceeds of $32.3 million, resulting in a net gain of $1.2 million;


•	the prepayment of $6.6 million in mortgage debt;


•	the signing of 39 new leases totaling 168,630 square feet, including 23 new leases totaling 53,142 square feet at an average rental rate of $20.09 per square foot in 2014 (excluding $21.75 per square foot of tenant improvements and concessions) as compared to the prior in-place average rent of $18.14 per square foot, on a same space⁽¹⁾ basis, resulting in a 10.8% average rent spread;


•	the renewal and extension of 86 leases totaling 442,140 square feet, including 85 leases totaling 435,540 square feet at an average rental rate of $14.22 per square foot in 2014 (excluding $0.70 per square foot of tenant improvements and concessions) as compared to the prior in-place average rent of $13.67 per square foot, on a same space basis, a 4.1% average rent spread;


•	the increase in consolidated shopping center occupancy⁽²⁾ to 94.2% at June 30, 2014 from 93.9% at March 31, 2014, and from 91.5% at June 30, 2013; and


•	the increase in occupancy on a same-property basis⁽³⁾ to 94.2% at June 30, 2014 from 94.1% at March 31, 2014, and an increase of 40 basis points as compared to June 30, 2013.

Including the above, for the six months ended June 30, 2014, the execution of our business strategy resulted in:

•

the acquisition of the two remaining parcels within the Westwood Complex in Bethesda, Maryland for an aggregate purchase price of $80.0 million, thereby completing our acquisition of the entire seven-parcel Westwood Complex. Concurrent with the acquisitions, the outstanding principal balance of the related mortgage loan and mezzanine loan, totaling $60.5 million, were repaid in full by the respective borrowers;


•	the acquisition of an outparcel adjacent to the Williamsburg at Dunwoody shopping center in Dunwoody, Georgia for $350,000;


•	the acquisition of our joint venture partners' interests in Talega Village Center for an additional cash investment of $6.2 million, resulting in the recognition of a $2.8 million gain, including $561,000 attributable to a noncontrolling interest, due to the remeasurement of our existing equity investment to fair value;


•	the sale of eight non-core assets for aggregate gross proceeds of $58.6 million, resulting in a net gain of $4.0 million;


•	the sale of the property held by our joint venture, Vernola Marketplace JV, LLC, of which our proportionate share of the gain was $7.4 million, including $1.6 million attributable to a noncontrolling interest;


•	the prepayment of $22.5 million in mortgage debt;

•

the signing of 90 new leases totaling 411,526 square feet, including 56 new leases totaling 196,945 square feet at an average rental rate of $16.53 per square foot in 2014 (excluding $11.46 per square foot of tenant improvements and concessions) as compared to the prior in-place average rent of $17.19 per square foot, on a same space basis, resulting in a negative 3.9% average rent spread. Excluding the new anchor lease at Park Promenade, the average rental rate of the 55 new leases, on a same space basis, is $22.35 per square foot (excluding $14.76 per square foot of tenant improvements and concessions), as compared to the prior in-place average rent of $20.34 per square foot or an 9.9% average rent spread;


•	the renewal and extension of 158 leases totaling 876,083 square feet, including 157 leases totaling 869,483 square feet at an average rental rate of $16.42 per square foot in 2014 (excluding $0.44 per square foot of tenant improvements and concessions) as compared to the prior in-place average rent of $15.74 per square foot, on a same space basis, a 4.3% average rent spread;

_________________________

⁽¹⁾

The “same space” designation is used to compare leasing terms (principally cash leasing spreads) from the prior tenant to the new/current tenant. In some cases, leases and/or premises are excluded from “same space” because the gross leasable area of the prior premises is combined or divided to form a larger or smaller, non-comparable space. Also excluded from the “same space” designation are those leases for which a comparable prior rent is not available due to the acquisition or development of a new center.


⁽²⁾	Our consolidated shopping center occupancy excludes non-retail properties, properties held in unconsolidated joint ventures and development and redevelopment properties.


⁽³⁾	Information provided on a same-property basis includes the results of properties that we consolidated, owned and operated for the entirety of both periods being compared except for non-retail properties and properties for which significant development, redevelopment or expansion occurred during either of the periods being compared.

Results of Operations

We derive substantially all of our revenue from rents received from tenants under existing leases on each of our properties. This revenue includes fixed base rents, recoveries of expenses that we have incurred and that we pass through to the individual tenants and percentage rents that are based on specified percentages of tenants’ revenue, in each case as provided in the particular leases.

Our primary cash expenses consist of our property operating expenses, which include: real estate taxes, repairs and maintenance, management expenses, insurance, and utilities; general and administrative expenses, which include payroll, office expenses, professional fees, acquisition costs and other administrative expenses; and interest expense, primarily on mortgage debt, unsecured senior debt, term loans and revolving credit facilities. In addition, we incur substantial non-cash charges for depreciation and amortization on our properties. We also capitalize certain expenses, such as taxes, interest and salaries related to properties under development or redevelopment until the property is ready for its intended use.

Our consolidated results of operations often are not comparable from period to period due to the impact of property acquisitions, dispositions, developments and redevelopments. The results of operations of any acquired property are included in our financial statements as of the date of its acquisition. A large portion of the changes in our statement of operations line items is related to these changes in our shopping center portfolio. In addition, non-cash impairment charges may also affect comparability.

Throughout this section, we have provided certain information on a “same-property” basis. Information provided on a same-property basis includes the results of properties that we consolidated, owned and operated for the entirety of both periods being compared except for non-retail properties and properties for which significant development, redevelopment or expansion occurred during either of the periods being compared. While there is judgment surrounding changes in designations, a property is removed from the same-property pool when a property is considered to be a redevelopment property because it is undergoing significant renovation pursuant to a formal plan or is being repositioned in the market and such renovation or repositioning is expected to have a significant impact on property operating income. A development or redevelopment property is moved to the same-property pool once a substantial portion of the growth expected from the development or redevelopment is reflected in both the current and comparable prior year period. Acquisitions are moved into the same-property pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development, redevelopment or expansion. For the three months ended June 30, 2014, there were no changes to the same-property pool other than those resulting from properties that were disposed of during the quarter.

In this section, we present net operating income (“NOI”), which is a non-GAAP financial measure. The most directly comparable GAAP financial measure is (loss) income from continuing operations before tax and discontinued operations, which, to calculate NOI, is adjusted to add back depreciation and amortization, general and administrative expense, interest expense, amortization of deferred financing fees and impairments, and to exclude straight line rent adjustments, accretion of below market lease intangibles (net), revenue earned from management and leasing services, investment income, equity in income of unconsolidated joint ventures, gains from extinguishments of debt and other income. NOI includes management fee expense recorded at each operating segment based on a percentage of revenue which is eliminated in consolidation. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Our management also uses NOI to evaluate regional property level performance and to make decisions about resource allocations. Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis, providing perspective not immediately apparent from (loss) income from continuing operations before tax and discontinued operations. NOI excludes certain components from net income attributable to Equity One, Inc. in order to provide results that are more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with (loss) income from continuing operations before tax and discontinued operations as presented in our condensed consolidated financial statements. NOI should not be considered as an alternative to (loss) income from continuing operations before tax and discontinued operations as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions.

We review operating and financial data, primarily NOI, for each property on an individual basis; therefore, each of our individual properties is a separate operating segment. We have aggregated our operating segments into six reportable segments based primarily upon our method of internal reporting which classifies our operations by geographical area. Our reportable segments by geographical area are as follows: South Florida, North Florida, Southeast, Northeast, West Coast and Non-retail. See Note 15 to the condensed consolidated financial statements included in this report, which is incorporated in this Item 2 by reference, for more information about our business segments and the geographic diversification of our portfolio of properties, and for a reconciliation of NOI to (loss) income from continuing operations before tax and discontinued operations for the three and six months ended June 30, 2014 and 2013.

Same-Property NOI and Occupancy Information

Same-property NOI increased by $1.2 million, or 2.6%, and $2.3 million, or 2.5%, for the three and six months ended June 30, 2014, respectively, as compared to the three and six months ended June 30, 2013, respectively. The increase in same-property NOI was primarily driven by a net increase in minimum rent due to rent commencements (net of concessions and abatements) and contractual rent increases, including the rent increase related to the lease amendment completed during the second quarter of 2013 with the retail tenant located at 1175 Third Avenue in New York City. Excluding the impact of the rent increase related to the 1175 Third Avenue lease amendment, same-property NOI increased 2.3% and 1.9% for the three and six months ended June 30, 2014 as compared to the three and six months ended June 30, 2013, respectively.

Same-property net operating income is reconciled to net operating income as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In thousands, except number of properties)
Same-property net operating income	$	47,219	$	46,012	$	95,263	$	92,951
Adjustments ⁽¹⁾	202		423		1,659		(20		)
Same-property net operating income before adjustments	47,421		46,435		96,922		92,931
Non same-property net operating income	9,320		6,559		18,822		13,118
Net operating income ⁽²⁾	$	56,741	$	52,994	$	115,744	$	106,049
Number of properties	108				108
GLA (in square feet)	13,387				13,387

^{___________________________________________________}

⁽¹⁾Includes adjustments for items that affect the comparability of the same-property results. Such adjustments include: common area maintenance costs and real estate taxes related to a prior period, revenue and expenses associated with outparcels sold, settlement of tenant disputes, lease termination costs, or other similar matters that affect comparability.

⁽²⁾A reconciliation of net operating income to (loss) income from continuing operations before tax and discontinued operations is provided in Note 15 to the condensed consolidated financial statements included in this report.

Same-property net operating income by geographical segment was as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In thousands)
South Florida	$	14,943	$	14,168	$	30,304	$	29,095
North Florida	5,130		5,006		10,304		10,164
Southeast	6,197		6,126		12,443		12,373
Northeast	10,833		10,538		21,486		20,868
West Coast	10,116		10,174		20,726		20,451
Same-property net operating income	$	47,219	$	46,012	$	95,263	$	92,951

The following table reflects our same-property occupancy and same-property GLA (in square feet) information by segment:



	Occupancy						GLA as of
	2014		2013		% Change		June 30, 2014
							(In thousands)
South Florida	93.4	%	92.4	%	1.0	%	4,374,018
North Florida	89.3	%	87.5	%	1.8	%	2,348,088
Southeast	92.9	%	94.3	%	(1.4	)%	2,806,988
Northeast	99.1	%	98.5	%	0.6	%	2,074,654
West Coast	98.5	%	98.5	%	—	%	1,782,879
Same-property consolidated shopping center occupancy	94.1	%	93.7	%	0.4	%	13,386,627
Non-retail	94.9	%	95.5	%	(0.6	)%	466
							13,387,093

Comparison of the Three Months Ended June 30, 2014 to 2013

The following summarizes certain line items from our unaudited condensed consolidated statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the three months ended June 30, 2014 as compared to the same period in 2013:



	Three Months Ended June 30,
	2014			2013		% Change
	(In thousands)
Total revenue	$	87,443		$	81,736	7.0	%
Property operating expenses	22,613			22,241		1.7	%
Depreciation and amortization	27,666			22,797		21.4	%
General and administrative expenses	8,872			9,673		(8.3	)%
Investment income	28			2,209		(98.7	)%
Equity in income of unconsolidated joint ventures	1,268			615		NM*
Interest expense	16,086			16,701		(3.7	)%
Impairment loss	13,892			2,662		NM*
Income from discontinued operations	23			26,032		NM*
Gain on sale of operating properties	1,141			—		NM*
Net income	99			36,177		(99.7	)%
Net (loss) income attributable to Equity One, Inc.	(2,411		)	33,638		(107.2	)%

^{______________________________________________}

* NM = Not meaningful

Total revenue increased by $5.7 million, or 7.0%, to $87.4 million in 2014 from $81.7 million in 2013. The increase was primarily attributable to the following:


•	an increase of approximately $4.7 million associated with properties acquired in 2013 and 2014;


•	an increase of approximately $1.7 million in same-property revenue due to higher rent from new rent commencements and renewals; and


•	an increase of approximately $120,000 related to development and redevelopment projects; partially offset by


•	a decrease of approximately $855,000 associated with properties sold in 2014.

Property operating expenses increased by $372,000, or 1.7%, to $22.6 million in 2014 from $22.2 million in 2013. The increase primarily consists of the following:


•	an increase of approximately $1.1 million associated with properties acquired in 2013 and 2014; partially offset by


•	a decrease of approximately $447,000 associated with properties sold in 2014; and


•	a decrease of approximately $229,000 in operating expenses related to various development and redevelopment projects.

Depreciation and amortization increased by $4.9 million, or 21.4%, to $27.7 million for 2014 from $22.8 million in 2013. The increase was primarily related to the following:


•	a net increase of approximately $3.5 million related to accelerated depreciation of assets razed as part of redevelopment projects and new depreciable assets added during 2014 and 2013; and


•	an increase of approximately $2.3 million related to depreciation on properties acquired in 2014 and 2013; partially offset by


•	a decrease of approximately $720,000 due to assets becoming fully depreciated during 2014 and 2013; and


•	a decrease of approximately $210,000 associated with properties sold in 2014.

General and administrative expenses decreased by $801,000, or 8.3%, to $8.9 million for 2014 from $9.7 million in 2013. The decrease was primarily related to the following:


•	a decrease of approximately $1.5 million related to the net reversal of stock-based compensation expense recognized in prior periods associated with stock awards previously granted to our former CEO;


•	a decrease in transaction-related costs in connection with completed or pending property acquisitions of $475,000; and


•	a decrease of approximately $462,000 due to lower personnel related costs; partially offset by


•	an increase of approximately $1.2 million in severance costs, signing bonus payments and other costs associated with our reorganization;


•	an increase in professional services fees of $250,000, primarily related to legal fees; and


•	an increase of approximately $150,000 in Board of Director fees due to stock awards granted to our Chairman.

We recorded investment income of $28,000 in 2014 compared to $2.2 million in 2013. The decrease was primarily due to a decrease in interest income from the Westwood mortgage and mezzanine loans that were repaid in January 2014 and another mezzanine loan that was repaid in August 2013.

We recorded $1.3 million of equity in income of unconsolidated joint ventures in 2014 compared to $615,000 in 2013. The increase was primarily related to the acceleration of the accretion of a below market lease liability upon the tenant vacating the space at a property held by one of our joint ventures of which our proportionate share was $609,000.

Interest expense decreased by $615,000, or 3.7%, to $16.1 million for 2014 from $16.7 million in 2013. The decrease was primarily attributable to the following:


•	a decrease of approximately $655,000 due to higher capitalized interest as a result of the commencement of a major development project; and


•	a decrease of approximately $575,000 associated with lower mortgage interest primarily due to the repayment of mortgages during 2013 and 2014; partially offset by


•	an increase of approximately $445,000 primarily associated with mortgage assumptions in 2014 and 2013 related to acquisitions; and


•	an increase of approximately $115,000 associated with higher interest expense and unused facility fees associated with the unsecured revolving credit facilities.

We recorded impairment losses in continuing operations in 2014 and 2013 of $13.9 million and $2.7 million, respectively. The 2014 impairment loss consisted of $9.6 million of impairment charges related to income producing properties held and used, $2.2 million of impairment charges related to operating properties sold and $2.1 million of impairment charges related to operating properties held for sale. The 2013 impairment loss primarily related to a land parcel located in the West Coast region. See Note 18 to the condensed consolidated financial statements included in this report for additional discussion of impairment losses.

In 2014, we recorded income from discontinued operations of $23,000 compared to $26.0 million in 2013. The decrease is primarily attributable to a decrease of $25.8 million related to net gains from the disposition of operating properties and a decrease of $1.1 million in operating income from sold or held for sale properties. Upon the adoption of Accounting Standards Update ("ASU") No. 2014-08 on January 1, 2014, operations of properties held for sale and operating properties sold during the current period that were not previously classified as discontinued operations are reported in continuing operations as they do not represent a strategic shift that has or will have a major effect on our operations and financial results. Prior to the adoption of ASU No. 2014-08, we reported the operations and financial results of properties held for sale and operating properties sold as discontinued operations. During the three months ended June 30, 2014, the results of operations for one property in our South Florida region (Summerlin Square) classified as held for sale is presented as a discontinued operation in the accompanying condensed consolidated statements of operations for all periods presented as it was classified as held for sale prior to the adoption of ASU No. 2014-08. During the three months ended June 30, 2013, we sold eight properties in our South Florida, North Florida and Southeast regions and two outparcels in our West Coast region for a total sales price of $87.4 million. The results of operations for these properties are presented as discontinued operations in the accompanying condensed consolidated statements of operations for the three months ended June 30, 2013.

We recorded a gain on sale of operating properties of $1.1 million in 2014 due to the sale of four properties in our North Florida and South Florida regions. Prior to the adoption of ASU No. 2014-08, such gains would have been included in income from discontinued operations.

As a result of the foregoing, net income decreased by $36.1 million to $99,000 for 2014 compared to $36.2 million in 2013. Net (loss) income attributable to Equity One, Inc. decreased by $36.0 million to a loss of $2.4 million for 2014 compared to income of $33.6 million in 2013.

Comparison of the Six Months Ended June 30, 2014 to 2013

The following summarizes certain line items from our unaudited condensed consolidated statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the six months ended June 30, 2014 as compared to the same period in 2013:



	Six Months Ended June 30,
	2014		2013		% Change
	(In thousands)
Total revenue	$	180,264	$	163,165	10.5	%
Property operating expenses	44,399		43,897		1.1	%
Depreciation and amortization	53,933		44,530		21.1	%
General and administrative expenses	19,786		18,567		6.6	%
Investment income	199		4,413		(95.5	)%
Equity in income of unconsolidated joint ventures	9,529		1,050		NM*
Other income	2,846		162		NM*
Interest expense	32,986		33,937		(2.8	)%
Gain on extinguishment of debt	1,074		107		NM*
Impairment loss	13,892		2,662		NM*
Income from discontinued operations	3,087		39,394		NM*
Gain on sale of operating properties	883		—		NM*
Net income	31,074		63,468		(51.0	)%
Net income attributable to Equity One, Inc.	23,865		58,231		(59.0	)%

^{______________________________________________}

* NM = Not meaningful

Total revenue increased by $17.1 million, or 10.5%, to $180.3 million in 2014 from $163.2 million in 2013. The increase was primarily attributable to the following:


•	an increase of approximately $9.1 million associated with properties acquired in 2013 and 2014;


•	an increase of approximately $4.4 million related to the recognition of a net termination benefit at our property located at 101 7th Avenue in New York from the acceleration of the accretion of a below market lease liability upon the tenant vacating the space and rejecting the lease in connection with a bankruptcy filing;


•	an increase of approximately $3.6 million in same-property revenue due to higher rent from new rent commencements and renewals as well as an increase in expense recovery income primarily due to higher recoverable operating expenses, including higher snow removal costs and higher recovery ratios; and


•	an increase of approximately $700,000 related to development and redevelopment projects; partially offset by


•	a decrease of approximately $940,000 associated with properties sold in 2014.

Property operating expenses increased by $502,000, or 1.1%, to $44.4 million in 2014 from $43.9 million in 2013. The increase primarily consists of the following:


•	an increase of approximately $2.1 million associated with properties acquired in 2013 and 2014; partially offset by


•	a net decrease of approximately $1.0 million in same-property expenses primarily attributable to lower bad debt expense from the reversal of $1.1 million in our allowance for doubtful accounts for certain historical real estate tax billings for which a settlement was reached with the tenants, partially offset by higher snow removal costs in 2014; and


•	a decrease of approximately $650,000 associated with properties sold in 2014.

Depreciation and amortization increased by $9.4 million, or 21.1%, to $53.9 million for 2014 from $44.5 million in 2013. The increase was primarily related to the following:


•	an increase of approximately $6.8 million related to accelerated depreciation of assets razed as part of redevelopment projects and new depreciable assets added during 2014 and 2013; and


•	an increase of approximately $4.1 million related to depreciation on properties acquired in 2014 and 2013; partially offset by


•	a decrease of approximately $1.3 million due to assets becoming fully depreciated and amortized during 2014 and 2013; and


•	a decrease of approximately $210,000 associated with properties sold in 2014.

General and administrative expenses increased by $1.2 million, or 6.6%, to $19.8 million for 2014 from $18.6 million in 2013. The increase was primarily related to the following:


•	an increase of approximately $1.2 million in severance costs, signing bonus payments and other costs associated with our reorganization;


•	an increase in transaction-related costs in connection with completed or pending property acquisitions of $806,000;


•	an increase in professional service fees of approximately $552,000, primarily related to legal fees; and


•	an increase of approximately $150,000 in Board of Director fees due to stock awards granted to our Chairman; partially offset by


•	a decrease of approximately $1.5 million related to the net reversal of stock-based compensation expense recognized in prior periods associated with stock awards previously granted to our former CEO.

We recorded investment income of $199,000 in 2014 compared to $4.4 million in 2013. The decrease was primarily due to a decrease in interest income from the Westwood mortgage and mezzanine loans that were repaid in January 2014 and another mezzanine loan that was repaid in August 2013.

We recorded $9.5 million of equity in income of unconsolidated joint ventures in 2014 compared to $1.1 million in 2013. The increase was primarily related to the sale of Vernola Marketplace, a property held by one of our joint ventures, of which our proportionate share of the gain was $7.4 million (including $1.6 million attributable to a noncontrolling interest), an increase related to the acceleration of the accretion of a below market lease liability upon the tenant vacating the space at a property held by one of our joint ventures (our proportionate share was $609,000), an increase from the operations of two joint venture properties acquired in 2013 and a decrease in interest expense due to the repayment of a mortgage by a joint venture during the second quarter of 2013.

We recorded other income of $2.8 million in 2014 compared to $162,000 in 2013. The increase was primarily related to the acquisition of our joint venture partners' interests in Talega Village Center, resulting in the recognition of a $2.8 million gain, including $561,000 attributable to a noncontrolling interest, due to the remeasurement of our existing equity investment to fair value.

Interest expense decreased by $951,000, or 2.8%, to $33.0 million for 2014 from $33.9 million in 2013. The decrease was primarily attributable to the following:


•	a decrease of approximately $1.3 million associated with lower mortgage interest primarily due to the repayment of mortgages during 2013 and 2014; and


•	a decrease of approximately $525,000 due to higher capitalized interest as a result of the commencement of a major development project; and


•	a decrease of approximately $175,000 associated with lower interest expense and agency fees associated with the unsecured revolving credit facilities; partially offset by


•	an increase of approximately $885,000 primarily associated with mortgage assumptions in 2014 and 2013 related to acquisitions.

The gain on the extinguishment of debt of $1.1 million in 2014 primarily relates to the sale of Brawley Commons. The property was encumbered by a $6.5 million mortgage loan which matured on July 1, 2013 and remained unpaid. In February 2014, we sold the property to a third party for $5.5 million and the lender accepted this amount as full repayment of the loan, resulting in the recognition of a gain on extinguishment of debt of approximately $882,000.

We recorded impairment losses in continuing operations in 2014 and 2013 of $13.9 million and $2.7 million, respectively. The 2014 impairment loss consisted of $9.6 million of impairment charges related to income producing properties, $2.2 million of impairment charges related to operating properties sold and $2.1 million of impairment charges related to operating properties held for sale. The 2013 impairment loss primarily related to a land parcel located in the West Coast region. See Note 18 to the condensed consolidated financial statements included in this report for additional discussion of impairment losses.

In 2014, we recorded income from discontinued operations of $3.1 million compared to $39.4 million in 2013. The decrease is primarily attributable to a decrease of $33.7 million related to net gains from the disposition of operating properties and a decrease of $3.6 million in operating income from sold or held for sale properties. During the six months ended June 30, 2014, the results of operations for two of the properties sold (Stanley Marketplace and Oak Hill) and one property in our South Florida region (Summerlin Square) classified as held for sale are presented as discontinued operations in the accompanying condensed consolidated statements of operations for all periods presented as they were classified as held for sale prior to the adoption of ASU No. 2014-08. During the six months ended June 30, 2013, we sold twenty properties in our South Florida, North Florida and Southeast regions and two outparcels in our West Coast region for a total sales price of $188.0 million. The results of operations for these properties are presented as discontinued operations in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2013.

We recorded a gain on sale of operating properties of $883,000 in 2014 due to the sale of eight properties in our Southeast, North Florida and South Florida regions. Prior to the adoption of ASU No. 2014-08, such gains would have been included in income from discontinued operations.

As a result of the foregoing, net income decreased by $32.4 million to $31.1 million for 2014 from $63.5 million in 2013. Net income attributable to Equity One, Inc. decreased by $34.4 million to $23.9 million for 2014 compared to $58.2 million in 2013.

The following table sets forth the financial information relating to our continuing operations presented by segments:



	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In thousands)
Revenue:
South Florida	$	22,765	$	23,296	$	46,270	$	46,337
North Florida	9,416		9,390		19,124		18,983
Southeast	8,857		9,491		18,385		18,882
Northeast	20,750		18,248		42,349		36,322
West Coast	19,414		17,011		37,697		33,950
Non-retail	906		394		1,832		660
Total segment revenue	82,108		77,830		165,657		155,134
Add:
Straight line rent adjustment	1,076		211		1,738		722
Accretion of below market lease intangibles, net	3,675		3,211		11,656		6,411
Management and leasing services	584		484		1,213		898
Total revenue	$	87,443	$	81,736	$	180,264	$	163,165

Net operating income (NOI):
South Florida	$	15,697	$	15,520	$	32,256	$	31,353
North Florida	6,588		6,482		13,463		12,646
Southeast	6,000		6,588		13,787		13,273
Northeast	14,723		12,875		29,205		25,584
West Coast	12,982		11,288		25,523		22,794
Non-retail	751		241		1,510		399
Total NOI	$	56,741	$	52,994	$	115,744	$	106,049

For a reconciliation of NOI to (loss) income from continuing operations before tax and discontinued operations, see Note 15 to the condensed consolidated financial statements included in this report, which is incorporated herein by reference.

Comparison of the Three Months Ended June 30, 2014 to 2013 - Segments

South Florida: Revenue decreased by 2.3%, or $531,000, to $22.8 million for 2014 from $23.3 million for 2013. NOI increased by 1.1%, or $177,000, to $15.7 million for 2014 from $15.5 million for 2013. The decrease in revenue is primarily due to lower expense recovery income due to a decrease in expense recovery ratios, partially offset by an increase in rent from contractual rent increases and rent commencements. The increase in NOI is due to lower bad debt expense, partially offset by the decrease in revenue.

North Florida: Revenue remained relatively unchanged at $9.4 million for 2014 and 2013. NOI increased by 1.6%, or $106,000, to $6.6 million for 2014 from $6.5 million for 2013. The increase in NOI is due to a decrease in property operating expenses.

Southeast: Revenue decreased by 6.7%, or $634,000, to $8.9 million for 2014 from $9.5 million for 2013. NOI decreased by 8.9%, or $588,000, to $6.0 million for 2014 from $6.6 million for 2013. The decrease in revenue and NOI is primarily the result of the disposal of two properties during the first quarter of 2014. The results of operations for the two properties are included in continuing operations in the condensed consolidated statements of operations for all periods presented.

Northeast: Revenue increased by 13.7%, or $2.5 million, to $20.8 million for 2014 from $18.2 million for 2013. NOI increased by 14.4%, or $1.8 million, to $14.7 million for 2014 from $12.9 million for 2013. The increase in revenue is primarily the result of our 2013 and 2014 acquisitions of The Village Center and various Westwood Complex parcels; rent commencements associated with the opening of The Gallery at Westbury Plaza as well as those at our same site properties; and contractual rent increases at our same site properties, including the lease amendment with the tenant at our retail condominium at 1175 Third Avenue. The increase in NOI is the result of the increase in revenue, partially offset by an increase in operating expenses due to our 2013 and 2014 acquisitions.

West Coast: Revenue increased by 14.1%, or $2.4 million, to $19.4 million for 2014 from $17.0 million for 2013. NOI increased by 15.0%, or $1.7 million, to $13.0 million for 2014 from $11.3 million for 2013. The increase in revenue is primarily the result of our 2013 and 2014 acquisitions of Pleasanton Plaza and Talega Village Center, and contractual rent increases and rent commencements at our same site properties. The increase in NOI is primarily attributable to the increase in revenue partially offset by higher operating expenses from our 2013 and 2014 acquisitions and at our same site properties and higher bad debt expense.

Non-retail: Revenue increased by $512,000 to $906,000 for 2014 from $394,000 for 2013. NOI increased by $510,000 to $751,000 for 2014 from $241,000 for 2013. The increase in revenue and NOI is due to the 2013 and 2014 acquisition of various non-retail Westwood Complex parcels.

Comparison of the Six Months Ended June 30, 2014 to 2013 - Segments

South Florida: Revenue remained relatively unchanged at $46.3 million for 2014 and 2013. NOI increased by 2.9%, or $903,000, to $32.3 million for 2014 from $31.4 million for 2013. The increase in NOI is primarily due to lower bad debt expense.

North Florida: Revenue increased by 0.7%, or $141,000, to $19.1 million for 2014 from $19.0 million for 2013. NOI increased by 6.5%, or $817,000, to $13.5 million for 2014 from $12.6 million for 2013. The increase in revenue is primarily the result of contractual rent increases and rent commencements at our same site properties. The increase in NOI is due to a lease termination fee paid in 2013, lower bad debt expense and the increase in revenue.

Southeast: Revenue decreased by 2.6%, or $497,000, to $18.4 million for 2014 from $18.9 million for 2013. NOI increased by 3.9%, or $514,000, to $13.8 million for 2014 from $13.3 million for 2013. The decrease in revenue is primarily the result of asset dispositions in 2014 partially offset by contractual rent increases and rent commencements at our same site properties. The increase in NOI is a result of a decrease in bad debt expense due to the reversal of $1.1 million in our allowance for doubtful accounts for certain historical real estate tax billings for which a settlement was reached with the tenants partially offset by the decrease in revenue.

Northeast: Revenue increased by 16.6%, or $6.0 million, to $42.3 million for 2014 from $36.3 million for 2013. NOI increased by 14.2%, or $3.6 million, to $29.2 million for 2014 from $25.6 million for 2013. The increase in revenue is primarily the result of our 2013 and 2014 acquisitions of The Village Center and various Westwood Complex parcels; rent commencements associated with the opening of The Gallery at Westbury Plaza as well as those at our same site properties; and contractual rent increases at our same site properties, including the lease amendment with the tenant at our retail condominium at 1175 Third Avenue. The increase in NOI is the result of the increase in revenue, partially offset by an increase in operating expenses due to our 2013 and 2014 acquisitions and higher snow removal expense across the region.

West Coast: Revenue increased by 11.0%, or $3.7 million, to $37.7 million for 2014 from $34.0 million for 2013. NOI increased by 12.0%, or $2.7 million, to $25.5 million for 2014 from $22.8 million for 2013. The increase in revenue is primarily the result of our 2013 and 2014 acquisitions of Pleasanton Plaza and Talega Village Center, and contractual rent increases and rent commencements at our same site properties. The increase in NOI is primarily attributable to the increase in revenue partially offset by higher operating expenses from our 2013 and 2014 acquisitions and at our same site properties.

Non-retail: Revenue increased by $1.2 million to $1.8 million for 2014 from $660,000 for 2013. NOI increased by $1.1 million to $1.5 million for 2014 from $399,000 for 2013. The increase in revenue and NOI is due to the 2013 and 2014 acquisition of various non-retail Westwood Complex parcels.

Funds From Operations

We believe Funds from Operations (“FFO”) (when 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 and, in particular, REITs. The National Association of Real Estate Investment Trusts (“NAREIT”) stated in its April 2002 White Paper on Funds from Operations, “Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead 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 (loss) income (computed in accordance with GAAP), excluding gains (or losses) from sales of, or impairment charges related to, depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.” NAREIT states further that “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 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 operating performance. 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, including the ability to make distributions, (iii) is not an alternative to cash flow as a measure of liquidity, and (iv) should not be considered as an alternative to net income (which is determined in accordance with GAAP) for purposes of evaluating our operating performance.

The following table illustrates the calculation of FFO and FFO available to diluted common shareholders for the three and six months ended June 30, 2014 and 2013:



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(In thousands)
Net (loss) income attributable to Equity One, Inc.	$	(2,411	)	$	33,638		$	23,865		$	58,231
Adjustments:
Rental property depreciation and amortization, net of noncontrolling interest ⁽¹⁾	27,385			23,768			53,320			46,756
Pro-rata share of real estate depreciation and amortization from unconsolidated joint ventures	1,070			1,076			2,121			2,161
Gain on disposal of depreciable assets, net of tax ⁽¹⁾	(997		)	(24,430		)	(4,005		)	(35,626		)
Pro-rata share of gains on disposal of depreciable assets from unconsolidated joint ventures, net of noncontrolling interest ⁽²⁾	—			—			(8,007		)	—
Impairments of depreciable real estate, net of tax ⁽¹⁾	13,892			215			13,892			215
Funds from operations	38,939			34,267			81,186			71,737
Adjustment:
Earnings attributed to noncontrolling interests ⁽³⁾	2,499			2,499			4,998			4,998
Funds from operations available to diluted shareholders	$	41,438		$	36,766		$	86,184		$	76,735

^{__________________________________________}

⁽¹⁾ Includes amounts classified as discontinued operations.

⁽²⁾ Includes the remeasurement of the fair value of our equity interest in Talega Village Center JV, LLC, the owner of Talega Village Center, of $2.2 million, net of the related noncontrolling interest, for the six months ended June 30, 2014. See Note 5 to the condensed consolidated financial statements for further discussion.

⁽³⁾ Represents earnings attributed to convertible units held by Liberty International Holdings Limited ("LIH"). Although these convertible units are excluded from our calculation of (loss) earnings per diluted share, FFO available to diluted shareholders includes earnings allocated to LIH, as the inclusion of these units is dilutive to FFO per diluted share.

The following table reflects the reconciliation of FFO per diluted share to (loss) earnings per diluted share attributable to Equity One, Inc., the most directly comparable GAAP measure:



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013

(Loss) earnings per diluted share attributable to Equity One, Inc.	$	(0.02	)	$	0.28		$	0.20		$	0.49
Adjustments:
Rental property depreciation and amortization, net of noncontrolling interest	0.21			0.18			0.41			0.36
Earnings allocated to noncontrolling interest ⁽¹⁾	0.02			0.02			0.04			0.04
Net adjustment for rounding and earnings attributable to unvested shares ⁽²⁾	—			(0.02		)	(0.02		)	(0.03		)
Pro-rata share of real estate depreciation and amortization from unconsolidated joint ventures	0.01			0.01			0.02			0.02
Gain on disposal of depreciable assets, net of tax	(0.01		)	(0.19		)	(0.03		)	(0.28		)
Pro-rata share of gains on disposal of depreciable assets from unconsolidated joint ventures, net of noncontrolling interest	—			—			(0.06		)	—
Impairments of depreciable real estate, net of tax	0.11			—			0.11			—
Funds from operations per diluted share	$	0.32		$	0.28		$	0.67		$	0.60
Weighted average diluted shares (in thousands) ⁽³⁾	129,441			129,107			129,338			128,893

^{______________________________________________}

⁽¹⁾Represents earnings allocated to unissued shares held by LIH, which have been excluded for purposes of calculating (loss) earnings per diluted share. The computation of FFO includes earnings allocated to LIH and the respective weighted average share totals include the LIH shares outstanding as their inclusion is dilutive.

⁽²⁾ Represents an adjustment to compensate for earnings allocated to unvested shares and shares issuable to LIH and for the rounding of the individual calculations.

⁽³⁾ Weighted average diluted shares used to calculate FFO per share is higher than the GAAP diluted weighted average shares as a result of the dilutive impact of the 11.4 million joint venture units held by LIH which are convertible into our common stock, and also as a result of employee stock options. These convertible units are not included in the diluted weighted average share count for GAAP purposes because their inclusion is anti-dilutive.

Critical Accounting Policies

Our 2013 Annual Report on Form 10-K contains a description of our critical accounting policies, including initial adoption of accounting policies, revenue recognition and accounts receivable, recognition of gains from the sales of real estate, real estate acquisitions, real estate properties and development assets, long lived assets, investments in unconsolidated joint ventures, goodwill, share based compensation and incentive awards, income tax, and discontinued operations. For the three and six months ended June 30, 2014, there were no material changes to these policies except as noted in Note 2 to the condensed consolidated financial statements with respect to discontinued operations. See Note 2 to the condensed consolidated financial statements included as part of this Quarterly Report on Form 10-Q for a description of the potential impact of the adoption of any new accounting pronouncements.

Liquidity and Capital Resources

Due to the nature of our business, we typically generate significant amounts of cash from operations; however, the cash generated from operations is primarily paid to our stockholders in the form of dividends. Our status as a REIT requires that we distribute 90% of our REIT taxable income (excluding net capital gains) each year, as defined in the Internal Revenue Code (the “Code”).

Short-term liquidity requirements

Our short-term liquidity requirements consist primarily of normal recurring operating expenses, regular debt service requirements (including debt service relating to additional or replacement debt, as well as scheduled debt maturities), recurring company expenditures, such as general and administrative expenses, non-recurring company expenditures (such as costs associated with development and redevelopment activities, tenant improvements and acquisitions) and dividends to common stockholders. We have satisfied these requirements through cash generated from operations and from financing and investing activities.

As of June 30, 2014, we had approximately $29.3 million of cash and cash equivalents available. In addition, we had two revolving credit facilities providing for borrowings of up to $580.0 million of which $499.0 million was the maximum available to be drawn thereunder, based on the financial covenants contained in those facilities. As of June 30, 2014, we had $133.0 million drawn under our $575.0 million credit facility, which bore interest at a weighted-average rate of 1.32% per annum at such date, and had no borrowings outstanding under our $5.0 million credit facility.

During the remainder of 2014, we have approximately $4.0 million in scheduled debt maturities and normal recurring principal amortization payments. Additionally, we are actively searching for acquisition and joint venture opportunities that may require additional capital and/or liquidity. Our available cash and cash equivalents, revolving credit facilities, and cash from property dispositions will be used to fund prospective acquisitions as well as our debt maturities and normal operating expenses.

Long-term liquidity requirements

Our long-term capital requirements consist primarily of maturities of various long-term debts, development and redevelopment costs and the costs related to growing our business, including acquisitions.

An important component of our growth strategy is the redevelopment of properties within our portfolio and the development of new shopping centers. As of June 30, 2014, we have invested an aggregate of approximately $70.0 million in active development or redevelopment projects at various stages of completion and anticipate these projects will require an additional $69.4 million to complete, based on our current plans and estimates, which we anticipate will be expended over the next two years.

Historically, we have funded these requirements through a combination of sources that were available to us, including additional and replacement secured and unsecured borrowings, proceeds from the issuance of additional debt or equity securities, capital from institutional partners that desire to form joint venture relationships with us and proceeds from property dispositions.

2014 liquidity events

While we believe our availability under our lines of credit is sufficient to operate our business for the remainder of 2014, if we identify acquisition or redevelopment opportunities that meet our investment objectives, we may need to raise additional capital.

While there is no assurance that we will be able to raise additional capital in the amounts or at the prices we desire, we believe we have positioned our balance sheet in a manner that facilitates our capital raising plans. The following is a summary of our financing and investing activities completed during the six months ended June 30, 2014:

•

We acquired the two remaining parcels within the Westwood Complex in Bethesda, Maryland for an aggregate purchase price of $80.0 million, thereby completing our acquisition of the entire seven-parcel Westwood Complex. Concurrent with the acquisitions, the outstanding principal balance of the mortgage loan and mezzanine loan, totaling $60.5 million, were repaid in full by the respective borrowers. The aggregate gross purchase price was funded by proceeds from the loan repayments as well as an additional $19.5 million cash investment, thereby bringing our total investment in the Westwood Complex to $140.0 million;


•	We acquired an outparcel adjacent to the Williamsburg at Dunwoody shopping center in Dunwoody, Georgia for $350,000;


•	We acquired our joint venture partners' interests in Talega Village Center for an additional cash investment of $6.2 million;


•	We sold eight non-core assets for aggregate gross proceeds of $58.6 million, resulting in a total net gain of $4.0 million;


•	Our joint venture, Vernola Marketplace JV, LLC, sold a property, of which our proportionate share of the gain was $7.4 million, including $1.6 million attributable to a noncontrolling interest;


•	We prepaid $22.5 million in mortgage loans with a weighted average interest rate of 6.1%;


•	We increased the borrowings outstanding under our $575.0 million line of credit from $91.0 million as of December 31, 2013 to $133.0 million as of June 30, 2014; and


•	We invested approximately $45.4 million in capital expenditures to improve our properties.

Summary of Cash Flows. The following summary discussion of our cash flows is based on the condensed consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.



	Six Months Ended June 30,
	2014			2013			Increase (Decrease)
	(In thousands)
Net cash provided by operating activities	$	70,618		$	61,518		$	9,100
Net cash (used in) provided by investing activities	$	(21,589	)	$	84,061		$	(105,650	)
Net cash used in financing activities	$	(45,296	)	$	(147,338	)	$	102,042

Our principal source of operating cash flow is cash generated from our rental properties. Our properties provide a relatively consistent stream of rental income that provides us with resources to fund operating expenses, general and administrative expenses, debt service and quarterly dividends. Net cash provided by operating activities totaled $70.6 million for the six months ended June 30, 2014 compared to $61.5 million in the 2013 period. The increase is due primarily to an increase in operating income from our properties and the timing of expenses.

Net cash used in investing activities was $21.6 million for the six months ended June 30, 2014 compared to net cash provided by investing activities of $84.1 million for the same period in 2013. Investing activities during 2014 primarily consisted of: acquisitions of income producing properties of $85.9 million; additions to construction in progress of $33.4 million; an increase in cash held in escrow of $22.7 million and additions to income producing properties of $9.2 million; partially offset by proceeds from the repayment of loans receivable of $60.5 million; proceeds related to the sale of real estate and rental properties of $56.3 million and $16.2 million in distributions from joint ventures. Investing activities during 2013 primarily consisted of: proceeds related to the sale of real estate and rental properties of $173.0 million and proceeds from repayment of loans receivable of $28.7 million; partially offset by acquisitions of income producing properties of $37.0 million; purchase of a below market leasehold interest for $25.0 million; additions to construction in progress of $17.8 million; investment in a mezzanine loan of $12.0 million; increase in cash held in escrow of $10.3 million; and additions to income producing properties of $7.1 million.

The following summarizes capital expenditures:



	Six Months Ended June 30,
	2014			2013
Capital expenditures:	(In thousands)
Tenant improvements and allowances	$	8,200		$	6,411
Leasing commissions and costs	4,135			4,339
Developments	17,863			5,901
Redevelopments and expansions	12,025			6,570
Maintenance capital expenditures	4,156			1,328
Total capital expenditures	46,379			24,549
Net change in accrued capital spending	(1,026		)	4,849
Capital expenditures per condensed consolidated statements of cash flows	$	45,353		$	29,398

The increase in development and redevelopment capital expenditures during the six months ended June 30, 2014 compared to the same period in 2013 was primarily the result of costs incurred for Broadway Plaza and Serramonte Shopping Center. We capitalized internal costs related to capital expenditures of $2.8 million and $1.7 million during the six months ended June 30, 2014 and 2013, respectively, primarily consisting of capitalized internal costs related to successful leasing activities of $1.8 million and $1.3 million, respectively, capitalized internal costs related to development activities of $292,000 and $226,000, respectively, and capitalized internal costs related to redevelopment and expansion activities of $448,000 and $72,000, respectively. Capitalized interest totaled $2.2 million and $1.6 million during the six months ended June 30, 2014 and 2013, respectively, primarily related to development and redevelopment and expansion activities.

Net cash used in financing activities totaled $45.3 million for the six months ended June 30, 2014 compared to $147.3 million for the same period in 2013. The largest financing cash outflows for 2014 related to: dividends paid to stockholders of $52.3 million; prepayments and repayments of $32.0 million of mortgage debt; and $6.9 million of distributions to noncontrolling interests; partially offset by net borrowings under the revolving credit facilities of $42.0 million. During 2013, cash was used for: the payment of $52.1 million in dividends; net repayments under our revolving credit facilities of $47.0 million; prepayments and repayments of $31.3 million of mortgage debt; the purchase of noncontrolling interests for $18.9 million; and distributions to noncontrolling interests of $5.0 million; partially offset by proceeds from the issuance of common stock of $8.2 million.

Future Contractual Obligations. During the six months ended June 30, 2014, there were no material changes to the contractual obligation information presented in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2013.

Off-Balance Sheet Arrangements

Joint Ventures. We consolidate entities in which we own less than a 100% equity interest if we have a controlling interest or are the primary beneficiary in a variable interest entity, as defined in the Consolidation Topic of the FASB ASC. From time to time, we may have off-balance-sheet joint ventures and other unconsolidated arrangements with varying structures.

As of June 30, 2014, we have investments in seven unconsolidated joint ventures in which our effective ownership interests range from 8.6% to 50.5%. We exercise significant influence over, but do not control, five of these entities and therefore they are presently accounted for using the equity method of accounting while two of these joint ventures are accounted for under the cost method. For a more complete description of our joint ventures see Note 5 to the condensed consolidated financial statements included in this report. As of June 30, 2014, the aggregate carrying amount of the debt, including our partners’ shares, incurred by those joint ventures accounted for under the equity method was approximately $250.0 million (of which our aggregate proportionate share was approximately $54.7 million). Although we have not guaranteed the debt of these joint ventures, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) on certain of the loans of the joint ventures.

Reconsideration events could cause us to consolidate these joint ventures and partnerships in the future. We evaluate reconsideration events as we become aware of them. Some triggers to be considered are additional contributions required by each partner and each partners’ ability to make those contributions. Under certain of these circumstances, we may purchase our partner’s interest. Our unconsolidated real estate joint ventures are with entities which appear sufficiently stable to meet their capital requirements; however, if market conditions worsen and our partners are unable to meet their commitments, there is a possibility we may have to consolidate these entities.

Purchase Obligations. In May 2014, we entered into an agreement to acquire the parking lot at one of our shopping centers for a purchase price of $5.4 million. The transaction was consummated in July 2014.

Contingencies

Letters of Credit. As of June 30, 2014, we had provided letters of credit having an aggregate face amount of $2.6 million as additional security for financial and other obligations. All of our letters of credit are issued under our revolving credit facilities.

Construction Commitments. As of June 30, 2014, we have entered into construction commitments and had outstanding obligations to fund approximately $69.4 million, based on current plans and estimates, in order to complete current development and redevelopment projects. These obligations, comprising principally construction contracts, are generally due as the work is performed and are expected to be financed by funds available under our credit facilities, proceeds from property dispositions and available cash.

Operating Lease Obligations. We are obligated under non-cancelable operating leases for office space, equipment rentals and ground leases on certain of our properties totaling $45.3 million.

Non-Recourse Debt Guarantees. Under the terms of certain non-recourse mortgage loans, we could, under specific circumstances, be responsible for portions of the mortgage indebtedness in connection with certain customary non-recourse carve-out provisions, such as environmental conditions, misuse of funds, impermissible transfers and material misrepresentations. In management’s judgment, it would be unlikely for us to incur any material liability under these guarantees that would have a material adverse effect on our financial condition, results of operations, or cash flows.

Capital Recycling Initiatives

During the three and six months ended June 30, 2014, we recognized impairment losses on properties held for sale or sold and properties held for use totaling $4.3 million and $9.6 million, respectively. See Note 18 to the condensed consolidated financial statements included in this report for additional information regarding impairment losses.

Environmental Matters

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, cash on hand and any short-term investments 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 debt maturities, pay our dividends, fund expansion, development and redevelopment 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. Additional financing may not 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. See Part I – Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2013 for additional information regarding such risks.

Distributions

We believe that we currently qualify and intend to continue to qualify as a REIT under the 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 and Economic Condition Considerations

Most of our leases contain provisions designed to partially mitigate any adverse impact of inflation. Although inflation has been low in recent periods and has had a minimal impact on the performance of our shopping centers, there is more recent data suggesting that inflation may be a greater concern in the future given economic conditions and governmental fiscal policy. 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, though some larger tenants have capped the amount of these operating expenses they are responsible for under their lease. A small number of our leases also include clauses enabling us to receive percentage rents based on a tenant’s gross sales above predetermined levels, which sales generally increase as prices rise, or escalation clauses which are typically related to increases in the Consumer Price Index or similar inflation indices.

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,” “could,” “should,” “believe,” “intend,” “project,” “forecast,” “target,” “plan,” or “continue” or the negative of these words or other variations or comparable terminology. Forward-looking statements 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 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:


•	general economic conditions, including current macro-economic challenges, competition from alternative sales channels including the internet, and changes in the supply of and demand for shopping center properties in our markets;


•	risks that tenants will not remain in occupancy or pay rent, or pay reduced rent due to declines in their businesses;


•	interest rate levels, the availability of financing and our credit ratings;


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


•	greater than anticipated construction or operating costs or delays in completing development or redevelopment projects or obtaining necessary approvals therefor;


•	inflationary, deflationary and other general economic trends;


•	the effects of hurricanes, earthquakes, terrorist attacks and other natural or man-made disasters;


•	changes in key personnel;


•	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;


•	the impact of acquisitions and dispositions of properties and joint venture interests and expenses incurred by us in connection with our acquisition and disposition activity;


•	impairment charges related to changes in market values of our properties as well as those related to our disposition activity;


•	our ability to maintain our status as a real estate investment trust, or REIT, for U.S. federal income tax purposes and the effect of future changes in REIT requirements as a result of new legislation;


•	our ability to dispose of properties that no longer meet our investment criteria at favorable prices; and


•	other risks detailed from time to time in the reports filed by us with the Securities and Exchange Commission, including, but not limited to, those risk factors identified in our most recently filed Annual Report on Form 10-K.

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 RISK

Interest Rate Risk

The primary market risk to which we have exposure is interest rate risk. Changes in interest rates can affect our net income and cash flows. As changes in market conditions occur and interest rates increase or decrease, interest expense on the variable component of our debt will move in the same direction. We intend to utilize variable-rate indebtedness available under our unsecured revolving credit facilities in order to initially fund future acquisitions, development and redevelopment costs and other operating needs. With respect to our fixed rate mortgage notes and unsecured senior notes, changes in interest rates generally do not affect our interest expense as these notes are at fixed rates for extended terms. Because we have the intent to hold our existing fixed-rate debt either to maturity or until the sale of the associated property, these fixed-rate notes pose an interest rate risk to our results of operations and our working capital position only upon the refinancing of that indebtedness. Our possible risk is from increases in long-term interest rates that may occur as this may increase our cost of refinancing maturing fixed-rate debt. In addition, we may incur prepayment penalties or defeasance costs when prepaying or defeasing debt. With respect to our floating rate term loan, the primary market risk exposure is increasing LIBOR-based interest rates, which we have effectively converted to a fixed rate of interest through the use of interest rate swaps.

As of June 30, 2014, we had $133.0 million of floating rate debt outstanding under our unsecured revolving line of credit. Our unsecured revolving line of credit bears interest at applicable LIBOR plus 1.00% to 1.85%, depending on the credit ratings of our unsecured senior notes. Considering the total outstanding balance of $133.0 million as of June 30, 2014, a 1% change in interest rates would result in an impact to income before taxes of approximately $1.3 million per year.

The fair value of our fixed-rate debt was $1.2 billion as of June 30, 2014, which includes our mortgage notes and unsecured senior notes payable. If interest rates increase by 1%, the fair value of our total fixed-rate debt, based on the fair value as of June 30, 2014, would decrease by approximately $47.3 million. If interest rates decrease by 1%, the fair value of our total fixed-rate debt would increase by approximately $50.2 million. This assumes that our total outstanding fixed-rate debt remains at approximately $1.1 billion, the balance as of June 30, 2014.

As of June 30, 2014, we had $250.0 million of floating rate debt outstanding under our term loan, which we have effectively converted to a fixed rate of interest through the use of interest rate swaps – see “Hedging Activities” below. The fair value of our term loan was $258.8 million as of June 30, 2014. If interest rates increase by 1%, the fair value of our total term loan (unhedged), based on the fair value as of June 30, 2014, would decrease by approximately $11.5 million. If interest rates decrease by 1%, the fair value of our total term loan (unhedged), based on the fair value as of June 30, 2014, would increase by approximately $12.1 million.

Hedging Activities

To manage, or hedge, our exposure to interest rate risk, we follow established risk management policies and procedures, including the use of a variety of derivative financial instruments. We do not enter into derivative instruments for speculative purposes. We require that the hedges or derivative financial instruments be effective in managing the interest rate risk exposure that they are designated to hedge. This effectiveness is essential to qualify for hedge accounting. Hedges that meet these hedging criteria are formally designated as such at the inception of the contract. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, resulting in some ineffectiveness, the change in the fair value of the derivative instrument will be included in earnings.

In connection with our $250.0 million unsecured term loan, we entered into three interest rate swaps in order to convert the variable LIBOR rate under the term loan to a fixed interest rate, providing us an effective weighted average fixed interest rate on the term loan of 3.17% per annum based on the current credit ratings of our unsecured senior notes. As of June 30, 2014, the fair value of one of our interest rate swaps consisted of an asset of $810,000, which is included in other assets, and the fair value of the remaining interest rate swaps consisted of a liability of $921,000, which is included in accounts payable and accrued expenses in our condensed consolidated balance sheet. As of December 31, 2013, the fair value of our interest rate swaps was an asset of $2.9 million, which is included in other assets in our condensed consolidated balance sheets.

Other Market Risks

As of June 30, 2014, we had no material exposure to any other market risks (including foreign currency exchange risk or commodity price risk). In making this determination and for purposes of the SEC's market risk disclosure requirements, we have estimated the fair value of our financial instruments as of June 30, 2014 based on pertinent information available to management as of that date. Although management is not aware of any factors that would significantly affect the estimated amounts as of June 30, 2014, future estimates of fair value and the amounts which may be paid or realized in the future may differ significantly from amounts presented.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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 SEC’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.

As required by Rule 13a-15(b) under the Exchange Act, 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 this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2014, our disclosure controls and procedures were effective at the reasonable assurance level such that the 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.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not presently involved in any litigation nor, to our knowledge, is any litigation threatened against us that, in management's opinion, would result in a material adverse effect on our business, financial condition, results of operations or our cash flows. For a further discussion of litigation, see Note 16 to our condensed consolidated financial statements included herein.

ITEM 1A. RISK FACTORS

Our Annual Report on Form 10-K for the year ended December 31, 2013, Part I – Item 1A, Risk Factors, describes important risk factors that could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this Form 10-Q or presented elsewhere by management from time to time. Except to the extent updated below or previously updated or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations"), there were no material changes in such risk factors.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Not applicable.

(b) Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


(a)	Exhibits



10.1	Amended and Restated 2004 Employee Stock Purchase Plan effective as of April 1, 2014 (incorporated by reference to Annex A of the Company's Definitive Proxy Statement on Schedule 14A for the 2014 Annual Meeting, filed on March 28, 2014)

10.2	Employment Agreement between Equity One and David Lukes dated April 2, 2014 (incorporated by reference to the copy thereof filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 7, 2014)

10.3	Amendment to Employment Agreement between Equity One and Mark Langer dated April 4, 2014 (incorporated by reference to the copy thereof filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on April 7, 2014)

10.4	Separation Agreement between Equity One and Jeffrey Olson dated June 2, 2014 (incorporated by reference to the copy thereof filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 5, 2014)

10.5	Chairman Compensation Agreement between Equity One and Chaim Katzman dated June 2, 2014 (incorporated by reference to the copy thereof filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on June 5, 2014)

10.6	Employment Agreement between Equity One and Michael Makinen dated June 25, 2014 (incorporated by reference to the copy thereof filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 30, 2014)

10.7	Employment Agreement between Equity One and Thomas Caputo dated June 25, 2014 (incorporated by reference to the copy thereof filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on June 30, 2014)

12.1	Ratio of Earnings to Fixed Charges

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.

32.1	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.

99.1	First Amendment to 2000 Executive Incentive Compensation Plan as adopted on May 9, 2014 (incorporated by reference to the copy thereof filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on May 12, 2014)

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema

101.CAL	XBRL Extension Calculation Linkbase

101.LAB	XBRL Extension Labels Linkbase

101.PRE	XBRL Taxonomy Extension Presentation Linkbase

101.DEF	XBRL Taxonomy Extension Definition Linkbase

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.



		EQUITY ONE, INC.

Date:	August 8, 2014		/s/ Mark Langer
			Mark Langer
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)




Date:	August 8, 2014	/s/ Angela F. Valdes
		Angela F. Valdes
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

INDEX TO EXHIBITS



Exhibits	Description
10.1	Amended and Restated 2004 Employee Stock Purchase Plan effective as of April 1, 2014 (incorporated by reference to Annex A of the Company's Definitive Proxy Statement on Schedule 14A for the 2014 Annual Meeting, filed on March 28, 2014)

10.2	Employment Agreement between Equity One and David Lukes dated April 2, 2014 (incorporated by reference to the copy thereof filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 7, 2014)

10.3	Amendment to Employment Agreement between Equity One and Mark Langer dated April 4, 2014 (incorporated by reference to the copy thereof filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on April 7, 2014)

10.4	Separation Agreement between Equity One and Jeffrey Olson dated June 2, 2014 (incorporated by reference to the copy thereof filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 5, 2014)

10.5	Chairman Compensation Agreement between Equity One and Chaim Katzman dated June 2, 2014 (incorporated by reference to the copy thereof filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on June 5, 2014)

10.6	Employment Agreement between Equity One and Michael Makinen dated June 25, 2014 (incorporated by reference to the copy thereof filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 30, 2014)

10.7	Employment Agreement between Equity One and Thomas Caputo dated June 25, 2014 (incorporated by reference to the copy thereof filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on June 30, 2014)

12.1	Ratio of Earnings to Fixed Charges

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.

32.1	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.

99.1	First Amendment to 2000 Executive Incentive Compensation Plan as adopted on May 9, 2014 (incorporated by reference to the copy thereof filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on May 12, 2014)

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema

101.CAL	XBRL Extension Calculation Linkbase

101.LAB	XBRL Extension Labels Linkbase

101.PRE	XBRL Taxonomy Extension Presentation Linkbase

101.DEF	XBRL Taxonomy Extension Definition Linkbase

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