United States SECURITIES AND EXCHANGE COMMISSION Washington DC 20549 FORM 10-Q (Mark One) [X] For the quarterly period ended March 31, 2001 -or- [ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to ________ Commission File Number 1-12298 REGENCY CENTERS CORPORATION --------------------------- (Exact name of registrant as specified in its charter) Florida 59-3191743 ------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 121 West Forsyth Street, Suite 200 Jacksonville, Florida 32202 --------------------------- (Address of principal executive offices) (Zip Code) (904) 356-7000 -------------- (Registrant's telephone number, including area code) Unchanged --------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ] (Applicable only to Corporate Registrants) ------------------------------------------ As of May 10, 2001, there were 57,488,885 shares outstanding of the Registrant's common stock.
Independent Accountants' Review Report The Shareholders and Board of Directors Regency Centers Corporation: We have reviewed the consolidated balance sheet of Regency Centers Corporation as of March 31, 2001, and the related consolidated statements of operations and cash flows for the three-month periods ended March 31, 2001 and 2000 and the consolidated statement of stockholders' equity for the three-month period ended March 31, 2001. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Regency Centers Corporation as of December 31, 2000, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated January 30, 2001, we expressed an unqualified opinion on those consolidated financial statements. /s/ KPMG LLP KPMG LLP Jacksonville, Florida May 11, 2001
REGENCY CENTERS CORPORATION Consolidated Balance Sheets March 31, 2001 and December 31, 2000 (unaudited) <TABLE> <CAPTION> 2001 2000 ---- ---- <S> <C> <C> Assets Real estate investments: Land $ 573,264,744 564,089,984 Buildings and improvements 1,839,382,266 1,813,554,881 ---------------- -------------- 2,412,647,010 2,377,644,865 Less: accumulated depreciation 162,622,517 147,053,900 ---------------- -------------- 2,250,024,493 2,230,590,965 Properties in development 317,614,274 296,632,730 Operating properties held for sale 169,266,551 184,150,762 Investments in real estate partnerships 77,984,292 85,198,279 ---------------- -------------- Net real estate investments 2,814,889,610 2,796,572,736 Cash and cash equivalents 52,676,997 100,987,895 Notes receivable 53,640,640 66,423,893 Tenant receivables, net of allowance for uncollectible accounts of $5,165,285 and $4,414,085 at March 31, 2001 and December 31, 2000, respectively 27,336,927 39,407,777 Deferred costs, less accumulated amortization of $14,502,673 and $13,910,018 at March 31, 2001 and December 31, 2000, respectively 25,835,134 21,317,141 Other assets 7,158,564 10,434,298 ---------------- -------------- $ 2,981,537,872 3,035,143,740 ================ ============== Liabilities and Stockholders' Equity Liabilities: Notes payable $ 1,051,605,731 841,072,156 Unsecured line of credit 221,000,000 466,000,000 Accounts payable and other liabilities 65,600,818 75,460,304 Tenants' security and escrow deposits 8,349,916 8,262,885 ---------------- -------------- Total liabilities 1,346,556,465 1,390,795,345 ---------------- -------------- Preferred units 375,403,652 375,407,777 Exchangeable operating partnership units 33,443,772 34,899,813 Limited partners' interest in consolidated partnerships 3,710,614 8,625,839 ---------------- -------------- Total minority interest 412,558,038 418,933,429 ---------------- -------------- Stockholders' equity: Series 2 cumulative convertible preferred stock and paid in capital, $01 par value per share: 1,502,532 shares authorized; 1,487,507 shares issued and outstanding at March 31, 2001 and December 31, 2000; liquidation preference $20.83 per share 34,696,112 34,696,112 Common stock $.01 par value per share: 150,000,000 shares authorized; 60,832,086 and 60,234,925 shares issued at March 31, 2001 and December 31, 2000; respectively 608,321 602,349 Treasury stock; 3,373,315 and 3,336,754 shares held at March 31, 2001 and December 31, 2000, respectively, at cost (67,600,416) (66,957,282) Additonal paid in capital 1,321,223,634 1,317,668,173 Distributions in excess of net income (57,201,963) (51,064,870) Stock loans (9,302,319) (9,529,516) ---------------- -------------- Total stockholders' equity 1,222,423,369 1,225,414,966 ---------------- -------------- Commitments and contingencies $ 2,981,537,872 3,035,143,740 ================ ============== </TABLE> See accompanying notes to consolidated financial statements
REGENCY CENTERS CORPORATION Consolidated Statements of Operations For the Three Months ended March 31, 2001 and 2000 (unaudited) <TABLE> <CAPTION> 2001 2000 ---- ---- <S> <C> <C> Revenues: Minimum rent $ 66,059,373 61,313,756 Percentage rent 1,113,425 659,517 Recoveries from tenants 19,204,399 16,610,464 Service operations revenue 5,449,347 2,254,404 Equity in income of investments in real estate partnerships 1,165,199 363,514 ------------------ --------------- Total revenues 92,991,743 81,201,655 ------------------ --------------- Operating expenses: Depreciation and amortization 15,895,916 13,761,765 Operating and maintenance 12,311,475 10,500,109 General and administrative 4,315,174 4,496,079 Real estate taxes 9,633,633 8,031,672 Other expenses 1,379,332 - ------------------ --------------- Total operating expenses 43,535,530 36,789,625 ------------------ --------------- Interest expense (income): Interest expense 19,337,143 15,691,149 Interest income (1,977,301) (843,000) ------------------ --------------- Net interest expense 17,359,842 14,848,149 ------------------ --------------- Income before minority interests and gain on sale of operating properties 32,096,371 29,563,881 Gain on sale of operating properties 68,658 - ------------------ --------------- Income before minority interests 32,165,029 29,563,881 Minority interest preferred unit distributions (8,368,751) (6,312,499) Minority interest of exchangeable partnership units (560,668) (688,007) Minority interest of limited partners (89,786) (243,433) ------------------ --------------- Net income 23,145,824 22,319,942 Preferred stock dividends (733,837) (699,459) ------------------ --------------- Net income for common stockholders $ 22,411,987 21,620,483 ================== =============== Net income per share: Basic $ 0.39 0.38 ================== =============== Diluted $ 0.39 0.38 ================== =============== </TABLE> See accompanying notes to consolidated financial statements
REGENCY CENTERS CORPORATION Consolidated Statement of Stockholders' Equity For the Three Months Ended March 31, 2001 (unaudited) <TABLE> <CAPTION> Additional Distributions Total Series 2 Common Treasury Paid In in exess of Stock Stockholders' Preferred Stock Stock Stock Capital Net Income Loans Equity --------------- ----------- ----------- -------------- ------------ ----------- ------------- <S> <C> <C> <C> <C> <C> <C> <C> Balance at December 31, 2000 $ 34,696,112 602,349 (66,957,282) 1,317,668,173 (51,064,870) (9,529,516) 1,225,414,966 Common stock issued net, as compensation for directors or officers, or issued under stock options - 5,513 (643,134) 2,564,391 - - 1,926,770 Common stock cancelled under stock loans - 5 - (227,202) - 227,197 - Common stock issued for partnership units exchanged - 454 - 1,218,272 - - 1,218,726 Cash dividends declared: Common stock ($.50 per share) and preferred stock - - - - (29,282,917) - (29,282,917) Net income - - - - 23,145,824 - 23,145,824 -------------- ----------- ------------ --------------- ------------- ------------ ------------- Balance at March 31, 2001 $ 34,696,112 608,321 (67,600,416) 1,321,223,634 (57,201,963) (9,302,319) 1,222,423,369 ============== =========== ============ =============== ============= ============ ============= </TABLE> See accompanying notes to consolidated financial statements.
REGENCY CENTERS CORPORATION Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2001 and 2000 (unaudited) <TABLE> <CAPTION> 2001 2000 ---- ---- <S> <C> <C> Cash flows from operating activities: Net income $ 23,145,824 22,319,942 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,895,916 13,761,765 Deferred loan cost and debt premium amortization 134,890 208,857 Stock based compensation 1,209,536 1,042,205 Minority interest preferred unit distribution 8,368,751 6,312,499 Minority interest of exchangeable partnership units 560,668 688,007 Minority interest of limited partners 89,786 243,433 Equity in income of investments in real estate partnerships (1,165,199) (363,514) Gain on sale of operating properties (68,658) - Changes in assets and liabilities: Tenant receivables 11,955,230 4,886,922 Deferred leasing costs (1,762,012) (1,578,385) Other assets 2,928,231 (760,440) Tenants' security and escrow deposits 26,407 363,267 Accounts payable and other liabilities (9,130,158) (7,974,985) ------------------ ------------------ Net cash provided by operating activities 52,189,212 39,149,573 ------------------ ------------------ Cash flows from investing activities: Acquisition and development of real estate, net (28,960,418) (40,158,954) Acquistion of partners' interest in investments in real estate partnerships, net of cash acquired 1,547,043 - Investment in real estate partnerships (7,151,192) (2,589,459) Capital improvements (2,771,477) (3,070,462) Repayment of notes receivable 14,394,060 - Distributions received from investments in real estate partnerships 4,220,959 - ------------------ ------------------ Net cash used in investing activities (18,721,025) (45,818,875) ------------------ ------------------ Cash flows from financing activities: Net (costs) or proceeds from common stock issuance (33,236) 12,222 Repurchase of common stock - (10,634,695) Net distributions to limited partners in consolidated partnerships (5,005,010) (1,118,720) Distributions to exchangeable partnership unit holders (797,983) (965,807) Distributions to preferred unit holders (8,368,751) (6,312,499) Dividends paid to common stockholders (28,549,080) (27,153,292) Dividends paid to preferred stockholders (733,837) (699,459) Net proceeds from fixed rate unsecured notes 215,450,373 - Additional costs from issuance of preferred units (4,125) - (Repayment) proceeds of unsecured line of credit, net (245,000,000) 28,000,000 Proceeds from notes payable 32,039 6,562,987 Repayment of notes payable (7,257,743) (5,678,996) Scheduled principal payments (1,485,620) (1,650,494) Deferred loan costs (26,112) - ------------------ ------------------ Net cash used in financing activities (81,779,085) (19,638,753) ------------------ ------------------ Net decrease in cash and cash equivalents (48,310,898) (26,308,055) Cash and cash equivalents at beginning of period 100,987,895 54,117,443 ------------------ ------------------ Cash and cash equivalents at end of period $ 52,676,997 27,809,388 ================== ================== </TABLE>
REGENCY CENTERS CORPORATION Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2001 and 2000 (unaudited) continued <TABLE> <CAPTION> 2001 2000 ---- ---- <S> <C> <C> Supplemental disclosure of cash flow information - cash paid for interest (net of capitalized interest of approximately $5,210,000 and $2,820,000 in 2001 and 2000, respectively) $ 16,461,634 13,196,588 ================== ================== Notes receivable taken in connection with sales of development properties $ 1,610,807 - ================== ================== </TABLE> See accompanying notes to consolidated financial statements.
REGENCY CENTERS CORPORATION Notes to Consolidated Financial Statements March 31, 2001 1. Summary of Significant Accounting Policies (a) Organization and Principles of Consolidation The accompanying consolidated financial statements include the accounts of Regency Centers Corporation, its wholly owned qualified REIT subsidiaries, and its majority owned or controlled subsidiaries and partnership (the "Company" or "Regency"). All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. The Company owns approximately 98% of the outstanding common units ("Units") of Regency Centers, L.P., ("RCLP" or the "Partnership") and a 50.01% partnership interest in a majority owned real estate partnership (the "Majority Partnership"). Regency invests in retail shopping centers through its partnership interest in RCLP. All of the acquisition, development, operations and financing activity of Regency including the issuance of Units or preferred units are executed by RCLP. The equity interests of third parties held by RCLP and the Majority Partnership are included in the consolidated financial statements as preferred or exchangeable operating partnership units ("Units") and limited partners' interest in consolidated partnerships. The Company is a qualified real estate investment trust ("REIT") which began operations in 1993 as Regency Realty Corporation. In February 2001, the Company changed its name to Regency Centers Corporation. The financial statements reflect all adjustments which are of a normal recurring nature, and in the opinion of management, are necessary to properly state the results of operations and financial position. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted although management believes that the disclosures are adequate to make the information presented not misleading. The financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2000 Form 10-K filed with the Securities and Exchange Commission. (b) Real Estate Investments Land, buildings and improvements are recorded at cost. All direct and indirect costs clearly associated with the acquisition, development and construction of real estate projects are capitalized as buildings and improvements. Maintenance and repairs which do not improve or extend the useful lives of the respective assets are reflected in operating and maintenance expense. The property cost includes the capitalization of interest expense incurred during construction based on average outstanding expenditures. Depreciation is computed using the straight line method over estimated useful lives of up to forty years for buildings and improvements, term of lease for tenant improvements, and three to seven years for furniture and equipment.
REGENCY CENTERS CORPORATION Notes to Consolidated Financial Statements March 31, 2001 (b) Real Estate Investments (continued) Operating properties held for sale include properties that no longer meet the Company's long-term investment standards such as expected growth in revenue or market dominance. Once identified and marketed for sale, these properties are segregated on the balance sheet as operating properties held for sale. The Company also develops shopping centers and stand-alone retail stores for resale. Once completed, these developments are also included in operating properties held for sale. Operating properties held for sale are carried at the lower of cost or fair value less estimated selling costs. Depreciation and amortization are suspended during the period held for sale. The Company reviews its real estate investments for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. (c) Reclassifications Certain reclassifications have been made to the 2000 amounts to conform to classifications adopted in 2001. 2. Segments The Company was formed, and currently operates, for the purpose of 1) operating and developing Company owned retail shopping centers (Retail segment), and 2) providing services including property management and commissions earned from third parties, and development related profits and fees earned from the sales of shopping centers and build to suit properties to third parties (Service operations segment). The Company's reportable segments offer different products or services and are managed separately because each requires different strategies and management expertise. There are no material inter-segment sales or transfers. The Company assesses and measures operating results starting with net operating income for the Retail segment and income for the Service operations segment and converts such amounts into a performance measure referred to as Funds From Operations ("FFO"). The operating results for the individual retail shopping centers have been aggregated since all of the Company's shopping centers exhibit highly similar economic characteristics as neighborhood shopping centers, and offer similar degrees of risk and opportunities for growth. FFO as defined by the National Association of Real Estate Investment Trusts consists of net income (computed in accordance with generally accepted accounting principles) excluding gains (or losses) from debt restructuring and sales of income producing property held for investment, plus depreciation and amortization of real estate, and adjustments for unconsolidated investments in real estate partnerships and joint ventures. The Company further adjusts FFO by distributions made to holders of Units and preferred stock that results in a diluted FFO amount. The Company considers diluted FFO to be the industry standard for reporting the operations of real estate investment trusts ("REITs"). Adjustments for investments in real estate partnerships are calculated to reflect diluted FFO on the same basis. While management believes that diluted FFO is the most relevant and widely used measure of the Company's performance, such amount does not represent cash flow from operations as defined by accounting principles generally accepted
REGENCY CENTERS CORPORATION Notes to Consolidated Financial Statements March 31, 2001 2. Segments (continued) in the United States of America, should not be considered an alternative to net income as an indicator of the Company's operating performance, and is not indicative of cash available to fund all cash flow needs. Additionally, the Company's calculation of diluted FFO, as provided below, may not be comparable to similarly titled measures of other REITs. The accounting policies of the segments are the same as those described in note 1. The revenues, diluted FFO, and assets for each of the reportable segments are summarized as follows for the three month periods ended March 31, 2001 and 2000. Assets not attributable to a particular segment consist primarily of cash and deferred costs.
REGENCY CENTERS CORPORATION Notes to Consolidated Financial Statements March 31, 2001 2. Segments (continued) <TABLE> <CAPTION> 2001 2000 ---- ---- <S> <C> <C> Revenues: --------- Retail segment $ 87,542,396 78,947,251 Service operations segment 5,449,347 2,254,404 ------------------ -------------------- Total revenues $ 92,991,743 81,201,655 ================== ==================== Funds from Operations: ---------------------- Retail segment net operating income $ 65,665,946 60,415,470 Service operations segment income 5,449,347 2,254,404 Adjustments to calculate diluted FFO: Interest expense (19,337,143) (15,691,149) Interest income 1,977,301 843,000 General and administrative and other (5,694,506) (4,496,079) Non-real estate depreciation (389,032) (268,316) Minority interest of limited partners (89,786) (243,433) Gain on sale of operating properties (68,658) - Minority interest in depreciation and amortization - (149,881) Share of joint venture depreciation and amortization 134,435 387,583 Distributions on preferred units (8,368,751) (6,312,499) ------------------ -------------------- Funds from Operations - diluted 39,279,153 36,739,100 ------------------ -------------------- Reconciliation to net income for common stockholders: Real estate related depreciation and amortization (15,506,884) (13,493,449) Minority interest in depreciation and amortization - 149,881 Share of joint venture depreciation and amortization (134,435) (387,583) Gain on sale of operating properties 68,658 - Minority interest of exchangeable operating partnership units (560,668) (688,007) ------------------ -------------------- Net income $ 23,145,824 22,319,942 ================== ==================== March 31, December 31, Assets (in thousands): 2001 2000 ---------------------- ---- ---- Retail segment $ 2,475,125 2,454,476 Service operations segment 420,742 447,929 Cash and other assets 85,671 132,739 ------------------ -------------------- Total assets $ 2,981,538 3,035,144 ================== ==================== </TABLE>
REGENCY CENTERS CORPORATION Notes to Consolidated Financial Statements March 31, 2001 3. Investments in Real Estate Partnerships The Company uses the equity method to account for all investments in which it owns less than 50% and does not have a controlling financial interest. The Company's combined investment in these partnerships was $78.0 million and $85.2 million at March 31, 2001 and December 31, 2000, respectively. Net income is allocated to the Company in accordance with the respective partnership agreements. On December 31, 2000, the Company contributed $4.5 million to Columbia Regency Retail Partners, LLC ("Columbia") representing a 10% equity interest. Subsequent to March 31 2001, the Company contributed $24.3 million and increased its ownership to a 20% equity interest. 4. Notes Payable and Unsecured Line of Credit The Company's outstanding debt at March 31, 2001 and December 31, 2000 consists of the following (in thousands): <TABLE> <CAPTION> 2001 2000 ---- ---- <S> <C> <C> Notes Payable: Fixed rate mortgage loans $ 268,722 270,491 Variable rate mortgage loans 33,354 40,640 Fixed rate unsecured loans 749,530 529,941 -------------- --------------- Total notes payable 1,051,606 841,072 Unsecured line of credit 221,000 466,000 -------------- --------------- Total $ 1,272,606 1,307,072 ============== =============== </TABLE> Subsequent to March 31, 2001, the Company modified the terms of its line of credit (the "Line") by reducing the commitment to $600 million, reducing the interest rate spread from 1.0% to .85% and extending the maturity date to April 2004. Interest rates paid on the Line during the three months ended March 31, 2001 and 2000 were based on LIBOR plus 1.0% or 6.1875% and 7.125%, respectively. The spread that the Company pays on the Line is dependent upon maintaining specific investment grade ratings. The Company is required to comply and is in compliance with certain financial and other covenants customary with this type of unsecured financing. The Line is used primarily to finance the acquisition and development of real estate, but is also available for general working capital purposes. On January 22, 2001 the Company, through RCLP, completed a $220 million unsecured debt offering with an interest rate of 7.95%. The notes were priced at 99.867%, are due on January 15, 2011 and are guaranteed by the Company. The net proceeds of the offering were used to reduce the balance of the Line.
REGENCY CENTERS CORPORATION Notes to Consolidated Financial Statements March 31, 2001 4. Notes Payable and Unsecured Line of Credit (continued) Mortgage loans are secured by certain real estate properties, and may be prepaid, but could be subject to a yield-maintenance premium. Mortgage loans are generally due in monthly installments of interest and principal and mature over various terms through 2019. Variable interest rates on mortgage loans are currently based on LIBOR plus a spread in a range of 125 basis points to 135 basis points. Fixed interest rates on mortgage loans range from 7.04% to 9.5%. As of March 31, 2001, scheduled principal repayments on notes payable and the Line were as follows (in thousands): <TABLE> <CAPTION> Scheduled Principal Term Loan Total Scheduled Payments by Year Payments Maturities Payments -------------------------- -------------- --------------- --------------- <S> <C> <C> <C> 2001 $ 4,241 60,322 64,563 2002 4,946 44,092 49,038 2003 4,691 22,866 27,557 2004 (includes the Line) 5,066 420,905 425,971 2005 3,883 148,040 151,923 Beyond 5 Years 182,483 361,752 544,235 Unamortized debt premiums - 9,319 9,319 -------------- --------------- --------------- Total $ 205,310 1,067,296 1,272,606 ============== =============== =============== </TABLE> Unconsolidated partnerships and joint ventures had mortgage loans payable of $14.2 million at March 31, 2001, and the Company's proportionate share of these loans was $5.8 million. The fair value of the Company's notes payable and Line are estimated based on the current rates available to the Company for debt of the same remaining maturities. Variable rate notes payable, and the Line, are considered to be at fair value since the interest rates on such instruments reprice based on current market conditions. Fixed rate loans assumed in connection with real estate acquisitions are recorded in the accompanying financial statements at fair value. The Company considers the carrying value of all other fixed rate notes payable to be a reasonable estimation of their fair value based on the fact that the rates of such notes are similar to rates available to the Company for debt of the same terms.
REGENCY CENTERS CORPORATION Notes to Consolidated Financial Statements March 31, 2001 5. Stockholders' Equity and Minority Interest At March 31, 2001, the face value of total preferred units issued was $384 million with an average fixed distribution rate of 8.72% vs. $290 million with an average fixed distribution rate of 8.71% at March 31, 2000. Terms and conditions of the Preferred Units are summarized as follows: <TABLE> <CAPTION> Units Issue Issuance Distribution Callable Series Issued Price Amount Rate By Company - -------------- ------------- --------------- ----------------- ---------------- ----------------- <S> <C> <C> <C> <C> <C> Series A 1,600,000 $ 50.00 $ 80,000,000 8.125% 06/25/03 Series B 850,000 100.00 85,000,000 8.750% 09/03/04 Series C 750,000 100.00 75,000,000 9.000% 09/03/04 Series D 500,000 100.00 50,000,000 9.125% 09/29/04 Series E 700,000 100.00 70,000,000 8.750% 05/25/05 Series F 240,000 100.00 24,000,000 8.750% 09/08/05 ------------- ----------------- 4,640,000 $ 384,000,000 ============= ================= </TABLE>
REGENCY CENTERS CORPORATION Notes to Consolidated Financial Statements March 31, 2001 6. Earnings Per Share The following summarizes the calculation of basic and diluted earnings per share for the three month periods ended March 31, 2001 and 2000 (in thousands except per share data): <TABLE> <CAPTION> 2001 2000 ------------- -------------- <S> <C> <C> Basic Earnings Per Share (EPS) Calculation: ------------------------------------------- Weighted average common shares outstanding 57,205 56,510 ============= ============== Net income for Basic EPS $ 22,412 21,620 ============= ============== Basic EPS $ 0.39 0.38 ============= ============== Diluted Earnings Per Share (EPS) Calculation -------------------------------------------- Weighted average shares outstanding for Basic EPS 57,205 56,510 Exchangeable operating partnership units 1,642 2,076 Incremental shares to be issued under common stock options using the Treasury method 165 - ------------- -------------- Total diluted shares 59,012 58,586 ============= ============== Net income for Basic EPS $ 22,412 21,620 Add: minority interest of exchangeable operating partnership units 561 688 ------------- -------------- Net income for Diluted EPS $ 22,973 22,308 ============= ============== Diluted EPS $ 0.39 0.38 ============= ============== </TABLE> The Series 2 preferred stock is not included in the above calculation because the effect is anti-dilutive.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto of Regency Centers Corporation ("Regency" or "Company") appearing elsewhere within. Organization - ------------ Regency is a qualified real estate investment trust ("REIT") which began operations in 1993. Regency had previously operated under the name Regency Realty Corporation, but changed its name to Regency Centers Corporation in February 2001 to more appropriately acknowledge its brand and position in the shopping center industry. Regency invests in retail shopping centers through its partnership interest in Regency Centers, L.P., ("RCLP") an operating partnership in which Regency currently owns approximately 98% of the outstanding common partnership units ("Units"). The acquisition, development, operations and financing activity of Regency including the issuance of Units or preferred units is executed by RCLP. Shopping Center Business - ------------------------ Regency is a national owner, operator and developer of primarily grocery-anchored neighborhood retail shopping centers. Regency's retail properties summarized by state and in order by largest holdings including their gross leasable areas (GLA) are as follows: <TABLE> <CAPTION> March 31, 2001 December 31, 2000 Location # Properties GLA % Leased * # Properties GLA % Leased * ------------ --------- ---------- ------------ ----------- ---------- <S> <C> <C> <C> <C> <C> <C> Florida 54 6,552,276 93.0% 55 6,558,734 92.7% California 38 4,710,142 98.6% 39 4,922,329 98.4% Texas 33 4,118,666 93.8% 33 4,125,058 94.2% Georgia 26 2,561,411 94.0% 26 2,553,041 95.2% Ohio 14 1,869,825 96.8% 13 1,760,955 96.7% North Carolina 13 1,302,751 97.9% 13 1,302,751 97.4% Washington 9 1,095,640 95.5% 10 1,180,020 95.8% Colorado 10 897,610 97.7% 10 897,788 97.9% Oregon 9 779,203 93.3% 9 776,853 91.7% Arizona 8 519,945 97.9% 8 522,014 97.9% Alabama 5 516,062 96.7% 5 516,062 97.9% Tennessee 10 493,860 99.7% 10 493,860 99.7% Virginia 6 419,440 96.3% 6 419,440 95.3% Missouri 2 370,095 95.8% 2 369,045 95.8% Kentucky 5 336,547 100.0% 5 325,347 100.0% Illinois 2 300,162 91.6% 1 178,601 86.4% Michigan 3 274,987 94.3% 3 274,987 94.1% Delaware 2 239,077 98.6% 2 239,077 98.6% Mississippi 2 185,061 98.2% 2 185,061 97.7% South Carolina 4 183,872 98.5% 4 183,872 97.4% New Jersey 3 112,514 100.0% 3 112,514 100.0% Wyoming 1 87,771 - 1 87,777 - Pennsylvania 1 6,000 100.0% 1 6,000 100.0% -------------- --------------- ---------------- -------------- --------------- ------------- Total 260 27,932,917 95.4% 261 27,991,186 95.4% ============== =============== ================ ============== =============== ============= </TABLE> * Excludes pre-stabilized properties under development
The table on the previous page includes properties owned by joint ventures in which Regency has an ownership position. Historically, Regency excluded single tenant properties from the table, but beginning with March 31, 2001 began including these properties. Amounts reported for December 31, 2000 have been restated to include these properties for comparative purposes. Regency is focused on building a platform of grocery anchored neighborhood shopping centers because grocery stores provide convenience shopping of daily necessities, foot traffic for adjacent local tenants, and should withstand adverse economic conditions. Regency's current investment markets have continued to offer stable economies, and accordingly, Regency expects to realize growth in net income as a result of increasing occupancy in the portfolio, increasing rental rates, development and acquisition of shopping centers in targeted markets, and redevelopment of existing shopping centers. The following table summarizes the four largest grocery tenants occupying Regency's shopping centers at March 31, 2001: <TABLE> <CAPTION> Grocery Number of % of % of Annualized Average Remaining Anchor Stores Total GLA Base Rent Lease Term ------ ------ --------- --------- ---------- <S> <C> <C> <C> <C> Kroger 58 11.9% 10.3% 16 yrs Publix 44 7.2% 5.1% 12 yrs Safeway 42 5.5% 4.6% 12 yrs Albertsons 21 2.5% 2.2% 13 yrs </TABLE> Number of stores includes tenant owned stores. All reported amounts above include properties owned through joint ventures. Acquisition and Development of Shopping Centers - ----------------------------------------------- Regency has implemented a growth strategy dedicated to developing high-quality shopping centers. This development process can require 12 to 36 months from initial land or redevelopment acquisition through construction and lease-up and finally stabilized income, depending upon the size and type of project. Generally, anchor tenants begin operating their stores prior to construction completion of the entire center, resulting in rental income during the development phase. At March 31, 2001, Regency had 51 projects under construction or undergoing major renovations, which when complete will represent an investment of $724 million. Total cost necessary to complete these developments is estimated to be $322 million and will be expended through 2002. These developments are approximately 45% complete and over 62% pre-leased. Liquidity and Capital Resources - ------------------------------- Management anticipates that cash generated from operating activities will provide the necessary funds on a short-term basis for its operating expenses, interest expense and scheduled principal payments on outstanding indebtedness, recurring capital expenditures necessary to properly maintain the shopping centers, and distributions to share and unit holders. Net cash provided by operating activities was $52.2 million and $39.1 million for the three months ended March 31, 2001 and 2000, respectively. During the first three months of 2001 and 2000, respectively, Regency incurred capital expenditures of $2.8 million and $3.1 million, paid scheduled principal payments of $1.5 million and $1.7 million, and paid dividends and distributions of $38.3 million and $35.1 million to its share and unit holders. Management expects to meet long-term liquidity requirements for maturing debt, non-recurring capital expenditures, and acquisition, renovation and development of shopping centers from: (i) excess cash generated from operating activities, (ii) working capital reserves, (iii) additional debt borrowings, and (iv) additional equity raised in the private and public markets. Net cash used in investing activities was $18.7 million and $45.8 million during the first three months
of 2001 and 2000, respectively, primarily for the purposes discussed under Acquisition and Development of Shopping Centers. Net cash used in financing activities was $81.8 million and $19.6 million for the three months ended March 31, 2001 and 2000, respectively, primarily related to proceeds from the debt offering completed during 2001 further discussed below. Regency's outstanding debt at March 31, 2001 and December 31, 2000 consists of the following (in thousands): <TABLE> <CAPTION> 2001 2000 ---- ---- <S> <C> <C> Notes Payable: Fixed rate mortgage loans $ 268,722 270,491 Variable rate mortgage loans 33,354 40,640 Fixed rate unsecured loans 749,530 529,941 ----------------------------- Total notes payable 1,051,606 841,072 Unsecured line of credit 221,000 466,000 ----------------------------- Total $ 1,272,606 1,307,072 ============================= </TABLE> Mortgage loans are secured by certain real estate properties, and may be prepaid, but could be subject to a yield-maintenance premium. Mortgage loans are generally due in monthly installments of interest and principal and mature over various terms through 2019. Variable interest rates on mortgage loans are currently based on LIBOR plus a spread in a range of 125 basis points to 135 basis points. Fixed interest rates on mortgage loans range from 7.04% to 9.5%. Subsequent to March 31, 2001, the Company modified the terms of its line of credit (the "Line") by reducing the commitment to $600 million, reducing the interest rate spread from 1.0% to .85% and extending the maturity date to April 2004. Interest rates paid on the Line during the three months ended March 31, 2001 and 2000 were based on LIBOR plus 1.0% or 6.1875% and 7.125%, respectively. The spread that the Company pays on the Line is dependent upon maintaining specific investment grade ratings. The Company is required to comply and is in compliance with certain financial and other covenants customary with this type of unsecured financing. The Line is used primarily to finance the acquisition and development of real estate, but is also available for general working capital purposes. On January 22, 2001 the Company, through RCLP, completed a $220 million unsecured debt offering with an interest rate of 7.95%. The notes were priced at 99.867%, are due on January 15, 2011 and are guaranteed by the Company. The net proceeds of the offering were used to reduce the balance of the Line. At March 31, 2001, the face value of total preferred units issued was $384 million with an average fixed distribution rate of 8.72% vs. $290 million with an average fixed distribution rate of 8.71% at March 31, 2000.
As of March 31, 2001, scheduled principal repayments on notes payable and the Line were as follows (in thousands): <TABLE> <CAPTION> Scheduled Principal Term Loan Total Scheduled Payments by Year Payments Maturities Payments -------------------------- -------------- --------------- --------------- <S> <C> <C> <C> 2001 $ 4,241 60,322 64,563 2002 4,946 44,092 49,038 2003 4,691 22,866 27,557 2004 (includes the Line) 5,066 420,905 425,971 2005 3,883 148,040 151,923 Beyond 5 Years 182,483 361,752 544,235 Unamortized debt premiums - 9,319 9,319 -------------- --------------- --------------- Total $ 205,310 1,067,296 1,272,606 ============== =============== =============== </TABLE> Unconsolidated partnerships and joint ventures had mortgage loans payable of $14.2 million at March 31, 2001, and Regency's proportionate share of these loans was $5.8 million. Regency believes it qualifies and intends to qualify as a REIT under the Internal Revenue Code. As a REIT, Regency is allowed to reduce taxable income by all or a portion of its distributions to stockholders. As distributions have exceeded taxable income, no provision for federal income taxes has been made. While Regency intends to continue to pay dividends to its stockholders, it also will reserve such amounts of cash flow as it considers necessary for the proper maintenance and improvement of its real estate, while still maintaining its qualification as a REIT. Regency's real estate portfolio has grown substantially as a result of the development activity discussed above. Regency intends to continue to acquire and develop shopping centers in the near future, and expects to meet the related capital requirements from borrowings on the Line. Regency expects to repay the Line from time to time from additional public and private equity or debt offerings and from proceeds from the sale of real estate. Because acquisition and development activities are discretionary in nature, they are not expected to burden Regency's capital resources currently available for liquidity requirements. Regency expects that cash provided by operating activities, unused amounts available under the Line, and cash reserves are adequate to meet liquidity requirements. Results from Operations Comparison of the three months ended March 31, 2001 to 2000 Revenues increased $11.8 million or 15% to $93.0 million in 2001. The increase was due primarily to revenues from newly completed developments that only partially operated during 2000, and from growth in rental rates at the operating properties. Minimum rent increased $4.7 million or 8%, and recoveries from tenants increased $2.6 million or 16%. At March 31, 2001, Regency was operating or developing 260 retail properties. Regency identifies its properties as either development properties or stabilized properties. Development properties are defined as properties that are in the construction and initial lease-up process that are not yet 93% leased and occupied. Stabilized properties are all properties not identified as development. At March 31, 2001, Regency had 209 stabilized properties that were 95.4% leased. At December 31, 2000, stabilized properties were 95.4% leased. In 2001, rental rates grew by 10.4% from renewal leases and new leases replacing previously occupied spaces in the stabilized properties. Service operations revenue includes fees earned in Regency's service operations segment which includes property management and leasing commissions earned from third parties, and development profits earned from the sale of shopping centers, build to suit
properties, and land to third parties. Service operations revenue increased by $3.2 million to $5.4 million in 2001, or 142%. The increase was primarily due to a $3.0 million increase in development profits. Operating expenses increased $6.7 million or 18% to $43.5 million in 2001. Combined operating and maintenance, and real estate taxes increased $3.4 million or 18% during 2001 to $21.9 million. The increase was primarily due to expenses incurred by newly completed developments that only partially operated during 2000, and general increases in operating expenses on the stabilized properties. General and administrative expenses were $4.3 million during 2001 vs. $4.5 million in 2000 or 4% lower. Depreciation and amortization increased $2.1 million during 2001 or 16% primarily due to developments that only partially operated during 2000. Interest expense increased to $19.3 million in 2001 from $15.7 million in 2000 or 23%. The increase was primarily due to higher debt balances and a higher percentage of outstanding debt with fixed interest rates, which are generally higher than variable interest rates. Regency had $1.3 billion and $1.0 billion of outstanding debt at March 31, 2001 and 2000, respectively. On March 31, 2001, 80% of outstanding debt had fixed interest rates vs. 72% on March 31, 2000. Preferred unit distributions increased $2.1 million to $8.4 million during 2001 as a result of the preferred units issued in 2001 and the second and third quarters of 2000. Average fixed distribution rates of the preferred units were 8.72% at March 31, 2001 vs. 8.71% at March 31, 2000. Net income for common stockholders was $22.4 million in 2001 vs. $21.6 million in 2000, or a 4% increase. Diluted earnings per share was $.39 in 2001 vs. $.38 in 2000, or 2.6% higher as a result of the increase in net income. New Accounting Standards and Accounting Changes The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment to FASB Statement No. 133" ("FAS 138"), which was effective for the Company on January 1, 2001. FAS 138 and FAS 133 establish accounting and reporting standards for derivative instruments and hedging activities. FAS 138 and FAS 133 require entities to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. FAS 138 and FAS 133 had no impact to the financial statements as Regency has no derivative instruments. Environmental Matters - --------------------- Regency, like others in the commercial real estate industry, is subject to numerous environmental laws and regulations. The operation of dry cleaning plants at Regency's shopping centers is the principal environmental concern. Regency believes that the tenants who operate these plants do so in accordance with current laws and regulations and has established procedures to monitor their operations. Additionally, Regency uses all legal means to cause tenants to remove dry cleaning plants from its shopping centers. Where available, Regency has applied and been accepted into state sponsored environmental programs. Regency has a blanket environmental insurance policy that covers it against third party liabilities and remediation costs on shopping centers that currently have no known environmental contamination. Regency has also placed environmental insurance on specific properties with known contamination in order to mitigate its environmental risk. Management believes that the ultimate disposition of currently known environmental matters will not have a material effect on the financial position, liquidity, or operations of Regency.
Inflation - --------- Inflation has remained relatively low during 2001 and 2000 and has had a minimal impact on the operating performance of the shopping centers; however, substantially all of Regency's long-term leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling Regency to receive percentage rentals based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses are often related to increases in the consumer price index or similar inflation indices. In addition, many of Regency's leases are for terms of less than ten years, which permits Regency to seek increased rents upon re-rental at market rates. Most of Regency's leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing Regency's exposure to increases in costs and operating expenses resulting from inflation.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk Market Risk - ----------- Regency is exposed to interest rate changes primarily as a result of its line of credit and long-term debt used to maintain liquidity and fund capital expenditures and expansion of Regency's real estate investment portfolio and operations. Regency's interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objectives Regency borrows primarily at fixed rates and may enter into derivative financial instruments such as interest rate swaps, caps and treasury locks in order to mitigate its interest rate risk on a related financial instrument. Regency has no plans to enter into derivative or interest rate transactions for speculative purposes, and at March 31, 2001, Regency did not have any borrowings hedged with derivative financial instruments. Regency's interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts maturing (in thousands), weighted average interest rates of remaining debt, and the fair value of total debt (in thousands), by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes. <TABLE> <CAPTION> Fair 2001 2002 2003 2004 2005 Thereafter Total Value ---- ---- ---- ---- ---- ---------- ----- ----- <S> <C> <C> <C> <C> <C> <C> <C> <C> Fixed rate debt 36,759 43,864 13,303 199,905 148,041 567,061 1,008,933 1,018,252 Average interest rate for all debt 7.93% 7.89% 7.87% 8.00% 8.09% 8.12% - - Variable rate LIBOR debt 23,563 228 9,563 221,000 - - 254,354 254,354 Average interest rate for all debt 6.52% 6.52% 6.46% - - - - - </TABLE> As the table incorporates only those exposures that exist as of March 31, 2001, it does not consider those exposures or positions, which could arise after that date. Regency's ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, Regency's hedging strategies at that time, and interest rates. Forward Looking Statements - -------------------------- This report on Form 10-Q contains certain forward-looking statements under the federal securities law. These statements are based on current expectations, estimates, and projections about the industry and markets in which Regency Centers Corporation operates, management's beliefs, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Actual operating results may be affected by changes in national and local economic conditions, competitive market conditions, obtaining governmental approvals and meeting development schedules, and other factors cited in our reports filed with the SEC and therefore, may differ materially from what is expressed or forecasted in this report.
Part II Item 2 Changes in Securities and Use of Proceeds None Item 6 Exhibits and Reports on Form 8-K: (a) Exhibits 10. Material Contracts None 15. Letter Regarding Unaudited Interim Financial Information (b) Reports on Form 8-K Form 8-K filed on February 12, 2001 for Regency Realty Corporation and Form 8-KA filed on February 12, 2001 for Regency Centers Corporation on Item 5. Other Events reflecting the name change to Regency Centers Corporation which was effective on February 12, 2001.
SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 14, 2001 REGENCY CENTERS CORPORATION By: /s/ J. Christian Leavitt ------------------------- Senior Vice President, and Chief Accounting Officer