10-K 1 form10-k.htm EQUITY ONE, INC. FORM 10-K FOR THE PERIOD ENDED 12/31/2006 Equity One, Inc. Form 10-K For the Period Ended 12/31/2006
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
 
·  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2006
 
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 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 office)
 
(Zip code)
 
Registrant’s telephone number, including area code: (305) 947-1664
————————————
Securities registered pursuant to Section 12(b) of the Act:
 
Common Stock, $.01 Par Value
New York Stock Exchange
(Title of each class)
(Name of exchange on which registered)
None
————————————
 
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x   No o 
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes oNo x
 
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 o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  x  Accelerated filer o   Non-accelerated filer  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 x
 
As of June 30, 2006, the aggregate market value of the Common Stock held by non-affiliates of the Registrant was $759,339,672 based upon the last reported sale price of $20.90 per share on the New York Stock Exchange on such date.
 
As of February 26, 2007, the number of outstanding shares of Common Stock, par value $.01 per share, of the Registrant was 73,711,503.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Certain sections of the Registrant’s definitive Proxy Statement for the 2007 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K to the extent stated herein.
 




EQUITY ONE, INC.
 
TABLE OF CONTENTS
 
 
Page
 

   
Part I
 
  
Item 1.
  
Business
1
Item 1A.
  
Risk Factors
5
Item 1B.
  
Unresolved Staff Comments
14
Item 2.
  
Properties
15
Item 3.
  
Legal Proceedings
30
Item 4.
  
Submission of Matters to a Vote of Security Holders
30
       
   
Part II
 
  
Item 5.
  
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
31
Item 6.
  
Selected Financial Data
33
Item 7.
  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
35
Item 7A.
  
Quantitative and Qualitative Disclosures about Market Risk
53
Item 8.
  
Financial Statements and Supplementary Data
54
Item 9.
  
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
54
Item 9A.
  
Controls and Procedures
55
Item 9B.
  
Other information
55
       
   
Part III
 
  
Item 10.
  
Directors and Executive Officers of the Registrant
56
Item 11.
  
Executive Compensation
56
Item 12.
  
Security Ownership of Certain Beneficial Owners and Management
56
Item 13.
  
Certain Relationships and Related Transactions
56
Item 14.
  
Principal Accountant Fees and Services
56
       
   
Part IV
 
  
Item 15.
  
Exhibits and Financial Statement Schedules
57
   
Signatures
61
       


 

 


 
 

   PART I
  
ITEM 1. BUSINESS
 
The Company
 
We are a real estate investment trust, or REIT, that principally owns, manages, acquires and develops neighborhood and community shopping centers. As of December 31, 2006, our property portfolio consisted of 179 properties, including 166 shopping centers comprising approximately 17.9 million square feet of gross leasable area, or GLA, six development parcels and seven non-retail properties. As of December 31, 2006, the portfolio was 92.1% leased and included national and regional supermarkets tenants such as Publix, Supervalu, Kroger, BI-LO and Winn-Dixie and other national retailers such as Bed Bath & Beyond, Best Buy, CVS/pharmacy, Home Depot, Kmart, Marshall’s, TJ Maxx, Walgreens and Wal-Mart.
 
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. We maintain our principal executive and management office at 1600 N.E. Miami Gardens Drive, North Miami Beach, Florida 33179.
 
In this annual report, unless stated otherwise or unless the content requires otherwise, references to “we,” “us” or “our” mean Equity One, Inc. and our consolidated subsidiaries.
 
Strategy and Philosophy
 
Our principal business objective has been and will continue to be to maximize long-term stockholder value by generating sustainable cash flow growth and increasing the long-term value of our real estate assets. Our strategies for reaching this objective include:
 
·  
Operating Strategy: Maximizing the internal growth of revenue from our shopping centers by leasing and re-leasing those properties to a diverse group of creditworthy tenants at higher rental rates and redeveloping those properties to make them more attractive to tenants or to permit additional or better uses;
 
·  
Investment Strategy: Using capital wisely to renovate or redevelop our properties and to acquire and develop additional shopping centers where expected returns meet or exceed our standards; and
 
·  
Capital Strategy: Financing our capital requirements with internally generated funds, proceeds from selling properties that do not meet our investment criteria and access to debt and equity capital markets.
 
Operating Strategy. Our core operating strategy is to maximize rents and maintain high occupancy levels by attracting and retaining a strong and diverse base of tenants. Many of our properties are located in some of the most densely populated and highest growth areas of the country, including the metropolitan areas around Miami, Ft. Lauderdale, West Palm Beach, Tampa, Jacksonville and Orlando, Florida, Atlanta, Georgia, and Boston, Massachusetts. Strong trade-area demographics help our tenants generate high sales, which has enabled us to maintain high occupancy rates and increase rental rates.
 
In order to effectively achieve our operating strategy, we seek to:
 
·  
actively manage and maintain the high standards and physical appearance of our assets while maintaining competitive tenant occupancy costs;
 
·  
maintain a diverse tenant base in order to limit exposure to any one tenant’s financial condition;
 
·  
develop strong, mutually beneficial relationships with creditworthy tenants, particularly our anchor tenants, by consistently meeting or exceeding their expectations; and
 
·  
increase rental rates upon the renewal of expiring leases or as we lease space to new tenants while minimizing vacancy and down-time.
 
- 1 -
·  
As part of the active management of our properties, we evaluate renovation or redevelopment opportunities that will make them more attractive for leasing or re-leasing to tenants, take advantage of under-utilized land or existing square footage or re-configure properties for better uses.
 
Investment Strategy. Our investment strategy is to deploy capital in projects that are expected to generate returns that exceed our cost of capital. Our investments primarily fall into one of the following three categories:
 
·  
re-developing, renovating, expanding, reconfiguring and/or re-tenanting our existing properties;
 
·  
selectively acquiring shopping centers which will benefit from our active management and leasing strategies; and
 
·  
selectively developing new shopping centers to meet the needs of expanding retailers.
 
In the past, we have also made investments in the securities of other companies, whose assets or markets are consistent with our investment strategy. These investment decisions are made in the same manner as other investments by us and are subject to the gross income and asset tests necessary to maintain our REIT qualification.
 
In evaluating potential redevelopment, acquisition and development opportunities, we also consider such factors as:
 
·  
the expected returns in relation to our cost of capital, as well as the anticipated risk we will face in achieving the expected returns;
 
·  
the current and projected cash flow of the property and the potential to increase that cash flow;
 
·  
the tenant mix at the property, tenant sales performance and the creditworthiness of those tenants;
 
·  
economic, demographic, regulatory and zoning conditions in the property’s local and regional market;
 
·  
competitive conditions in the vicinity of the property, including competition for tenants and the potential that others may create competing properties through redevelopment, new construction or renovation;
 
·  
the level and success of our existing investments in the relevant market;
 
·  
the current market value of the land, buildings and other improvements and the potential for increasing those market values;
 
·  
the physical configuration of the property, its visibility, ease of entry and exit, and availability of parking; and
 
·  
the physical condition of the land, buildings and other improvements, including the structural and environmental conditions.
 
 
Capital Strategy. We intend to grow and expand our business by using cash flows from operations, by borrowing under our existing credit facilities or, if appropriate market conditions exist, by accessing the capital markets to issue equity, debt or a combination thereof. Our capital strategy is to maintain a strong balance sheet and sufficient flexibility to fund our operating and investment activities in a cost-efficient way. Our strategy includes:
 
·  
maintaining a prudent level of overall leverage and an appropriate pool of unencumbered properties that is sufficient to support our unsecured borrowings;
 
·  
managing our exposure to variable-rate debt;
 
·  
taking advantage of market opportunities to refinance existing debt, reduce interest costs and manage our debt maturity schedule; or
 
·  
using joint venture arrangements to access less expensive capital, mitigate capital risk, or to capitalize on the expertise of local real estate partners.
 
- 2 -
·  
While we generally hold our properties for investment and for the production of rental income, we also recycle our capital. Over time, when our assets no longer meet our investment criteria, asset type or geographic focus, we may sell or otherwise dispose of those assets. By identifying these opportunities, we are able to recycle our capital and reinvest the proceeds in more attractive properties or markets.
 
Change in Policies. Our board of directors establishes the policies that govern our operating, investment and capital strategies, including, among others, the development and acquisition of shopping centers, tenant and market focus, debt and equity financing policies, quarterly distributions to our stockholders and the REIT status. The board may amend these policies at any time, without a vote of our stockholders.
 
REIT Status
 
We elected to be taxed as a real estate investment trust for federal income tax purposes beginning with our taxable year ended December 31, 1995. As a REIT, we are generally not subject to federal income tax on REIT taxable income that we distribute to our stockholders. Under the Internal Revenue Code of 1986, as amended, which we refer to as the Code, REITs are subject to numerous organizational and operational requirements, including the requirement to distribute at least 90% of REIT taxable income (excluding net capital gains) each year. We will be subject to federal income tax on our taxable income (including any applicable alternative minimum tax) at regular corporate rates if we fail to qualify as a REIT for tax purposes in any taxable year, or to the extent we distribute less than 100% of REIT taxable income. We will also not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost. Even if we qualify as a REIT for federal income tax purposes, we may be subject to certain state and local income and franchise taxes and to federal income and excise taxes on our undistributed REIT taxable income.
 
We have elected to treat certain of our subsidiaries as taxable REIT subsidiaries, each of which we refer to as a TRS. In general, a TRS may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Code. A TRS is subject to federal and state income taxes. The sales of certain land parcels, our investment in DIM Vastgoed N.V. and certain other real estate and other activities are being conducted through our TRS entities. Our current TRS activities are limited and they have not incurred any significant income taxes to date.
 
Governmental Regulations Affecting Our Properties
 
We and our properties are subject to a variety of federal, state and local environmental, health, safety and similar laws, including:
 
·  
the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, which we refer to as CERCLA;
 
·  
the Resource Conservation & Recovery Act;
 
·  
the Federal Clean Water Act;
 
·  
the Federal Clean Air Act;
 
·  
the Toxic Substances Control Act;
 
·  
the Occupational Safety & Health Act; and
 
·  
the Americans with Disabilities Act.
 
Environmental Regulations. The application of these laws to a specific property that we own depends on a variety of property-specific circumstances, including the current and former uses of the property, the building materials used at the property and the physical layout of the property. Under certain environmental laws, principally CERCLA, we, as the owner or operator of properties currently or previously owned, may be required to investigate and clean up certain hazardous or toxic substances, asbestos-containing materials, or petroleum product releases at the property. We may also be held liable to a federal, state or local governmental entity or third parties for property damage, injuries resulting from the contamination and for investigation and clean up costs incurred in connection with the contamination, whether or not we knew of, or were responsible for, the contamination. Such costs or liabilities could exceed the value of the affected real estate. The presence of contamination or the failure to remediate contamination may adversely affect our ability to sell or lease real estate or to borrow using the real estate as collateral. We have several properties that will require or are currently undergoing varying levels of environmental remediation as a result of contamination from on-site uses by current or former owners or tenants, such as gas stations or dry cleaners.
 
- 3 -
Americans with Disabilities Act. Our properties are subject to the Americans with Disabilities Act of 1990. Under this act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services, including restaurants and retail stores, be made accessible and available to people with disabilities. The Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages.
 
Although we believe that we are in substantial compliance with existing regulations, including environmental and ADA regulations, we cannot predict the impact of new or changed laws or regulations on properties we currently own or may acquire in the future. Other than as part of our development or redevelopment projects, we have no current plans for substantial capital expenditures with respect to compliance with environmental, health, safety and similar laws, and we carry environmental insurance which covers a number of environmental risks for most of our properties.
 
Competition
 
There are numerous commercial developers, real estate companies, REITs and other owners of real estate in the areas in which our properties are located that compete with us with respect to the leasing of our properties and in seeking land for development or properties for acquisition. Some of these competitors have substantially greater resources than we have, although we do not believe that any single competitor or group of competitors in any of the primary markets where our properties are located are dominant in that market. This level of competition may reduce the number of properties available for development or acquisition, increase the cost of development or acquisition or interfere with our ability to attract and retain tenants.
 
All of our existing properties are located in developed areas that include other shopping centers and other retail properties. The number of retail properties in a particular area could materially adversely affect our ability to lease vacant space and maintain the rents charged at our existing properties. We believe that the principal competitive factors in attracting tenants in our market areas are location, price, anchor tenants and maintenance of properties. Our retail tenants also face competition from other retailers, outlet stores and discount shopping clubs. This competition could contribute to lease defaults and insolvency of our tenants.
 
Employees
 
At December 31, 2006, we had 217 full-time employees. Our employees are not represented by any collective bargaining group, and we consider our relations with our employees to be good.
 
Available Information
 
The internet address of our website is www.equityone.net. In the Investor Relations section of our website you can obtain, free of charge, a copy of our annual report on Form 10-K, our quarterly reports on Form 10-Q, our Supplemental Information Packages, our current reports on Form 8-K, and any amendments to those or other reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file or furnish such reports or amendments with the SEC. Also available in the corporate governance section of our website, free of charge, are copies of our Corporate Governance Guidelines, Code of Conduct and Ethics and the charters for our audit committee, compensation committee and nominating and corporate governance committee. Any amendments or waivers to our Code of Conduct and Ethics that apply to any of our executive officers or our senior financial officers will be disclosed on our website within four business days following the date of the amendment or waiver.
 

- 4 -

You may obtain printed copies of any of the foregoing materials from us, free of charge, by contacting our Investor Relations Department at:
 
Equity One, Inc.
1600 N.E. Miami Gardens Drive,
North Miami Beach, Florida 33179
Attn: Investor Relations Department
(305) 947-1664

You may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549, or you may obtain information by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet address at http://www.sec.gov that contains reports, proxy statements and information statements, and other information which you may obtain free of charge.
 
ITEM 1A. RISK FACTORS
 
This annual report on Form 10-K and the information incorporated by reference herein contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are forward-looking statements and can be identified by the use of forward-looking terminology such as “may,” “will,” “might,” “would,” “expect,” “anticipate,” “estimate,” “would,” “could,” “should,” “believe,” “intend,” “project,” “forecast,” “target,” “plan,” or “continue” or the negative of these words or other variations or comparable terminology. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Some specific risk factors that could impair forward looking statements are set forth below.
 
These risks factors are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for us to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may affect our business. Investors should also refer to our quarterly reports on Form 10-Q and current reports on Form 8-K for future periods for updates to these risk factors.
 
We are dependent upon certain key tenants and decisions made by these tenants or adverse developments in the business of these tenants could have a negative impact on our financial condition.
 
We own shopping centers which are supported by “anchor” tenants which, due to size, reputation or other factors, are particularly responsible for drawing other tenants and shoppers to our centers. For instance, Publix Supermarkets is our largest tenant and accounted for approximately 2.5 million square feet, or 14% of our gross leasable area, at December 31, 2006 and accounts for over $19.5 million of minimum rent, or 10% of our annualized minimum rent.
 
At any time, an anchor tenant or other tenant may experience a downturn in its business that may weaken its financial condition. As a result, tenants may delay lease commencement, fail to make rental payments when due or declare bankruptcy. We are subject to the risk that these tenants may be unable to make their lease payments or may decline to extend a lease upon its expiration. Any tenant bankruptcies, leasing delays or failures to make rental payments when due could result in the termination of the tenant’s lease and material losses to our business and harm to our operating results.
 
In addition, an anchor tenant may decide that a particular store is unprofitable and close its operations in our center, and, while the tenant may continue make rental payments, such a failure to occupy its premises could have an adverse effect on the property. A lease termination by an anchor tenant or a failure by that anchor tenant to occupy the premises could result in lease terminations or reductions in rent by other tenants in the same shopping center if their leases have “co-tenancy” clauses which permit cancellation or rent reduction if an anchor tenant’s lease is terminated or the anchor “goes dark.” Vacated anchor tenant space also tends to adversely affect the entire shopping center because of the loss of the departed anchor tenant’s power to draw customers to the center. We cannot provide any assurance that we would be able to quickly re-lease vacant space on favorable terms, if at all. Any of these developments could adversely affect our financial condition or results of operations.
 

- 5 -

We may experience difficulties and additional costs associated with renting unleased space and space to be vacated in future years.
 
Our goal is to improve the performance of our properties by re-leasing vacated space. However, we may not be able to maintain our overall occupancy. Our ability to continue to lease or re-lease vacant space in these or other properties will be affected by many factors, including our properties’ locations, current market conditions and covenants found in certain leases restricting the use of other space at our properties. For instance, in some cases, our tenant leases contain provisions giving the tenant the exclusive right to sell particular types of merchandise or provide specific types of services within the particular retail center, or limit the ability of other tenants to sell that merchandise or provide those services. When re-leasing space after a vacancy, these provisions may limit the number and types of prospective tenants for the vacant space. The failure to lease or to re-lease on satisfactory terms could harm our operating results.
 
If we are able to re-lease vacated space, there is no assurance that rental rates will be equal to or in excess of current rental rates. In addition, we may incur substantial costs in obtaining new tenants, including brokerage commission fees paid by us in connection with new leases or lease renewals, and the cost of making leasehold improvements.
 
We have substantial debt obligations which may reduce our operating performance and put us at a competitive disadvantage.
 
As of December 31, 2006, we had debt and other liabilities outstanding in the aggregate amount of approximately $1.1 billion. Many of our loan facilities require scheduled principal and balloon payments. In addition, our organizational documents do not limit the level or amount of debt that we may incur, nor do we have a policy limiting our debt to any particular level. The amount of our debt outstanding from time to time could have important consequences to our stockholders. For example, it could:
 
·  
require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, property acquisitions, redevelopments and other appropriate business opportunities that may arise in the future;
 
·  
limit our ability to make distributions on our outstanding shares of our common stock, including the payment of dividends required to maintain our status as a REIT;
 
·  
make it difficult to satisfy our debt service requirements;
 
·  
limit our flexibility in planning for, or reacting to, changes in our business and the factors that affect the profitability of our business, which may place us at a disadvantage compared to competitors with less debt or debt with less restrictive terms;
 
·  
limit our ability to obtain any additional debt or equity financing we may need in the future for working capital, debt refinancing, capital expenditures, acquisitions, redevelopment or other general corporate purposes or to obtain such financing on favorable terms; and
 
·  
require us to dedicate increased amounts of our cash flow from operations to payments on our variable rate, unhedged debt if interest rates rise.
 
If our internally generated cash is inadequate to repay our indebtedness upon maturity, then we will be required to repay debt through refinancing or equity offerings. If we are unable to refinance our indebtedness on acceptable terms, or at all, we might be forced to dispose of one or more of our properties potentially upon disadvantageous terms, which might result in losses and might adversely affect our cash available for distribution. If prevailing interest rates or other factors at the time of refinancing result in higher interest rates on refinancing, our interest expense would increase, without a corresponding increase in our rental rates, which would adversely affect our results of operations. Further, if one of our properties is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, or if we are in default under the related mortgage or deed of trust, such property could be transferred to the mortgagee, or the mortgagee could foreclose upon the property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent loss of income and asset value. Foreclosure could also create taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements under the Code.
 

- 6 -

Our financial covenants may restrict our operating or acquisition activities, which may harm our financial condition and operating results.
 
Our unsecured revolving credit facility, our outstanding senior unsecured notes and much of our existing mortgage indebtedness contain customary covenants and conditions, including, among others, compliance with various financial ratios and restrictions upon the incurrence of additional indebtedness and liens on our properties. Furthermore, the terms of some of this indebtedness will restrict our ability to consummate transactions that result in a change of control or to otherwise issue equity or debt securities. The existing mortgages also contain customary negative covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage. If we were to breach covenants in these debt agreements, the lender could declare a default and require us to repay the debt immediately. If we fail to make such repayment in a timely manner, the lender may be entitled to take possession of any property securing the loan.
 
Increases in interest rates cause our borrowing costs to rise and generally adversely affect the market price of our securities.
 
Of our approximately $1.1 billion of debt outstanding as of December 31, 2006, approximately $176.5 million bears interest at variable interest rates, including $100.0 million of fixed rate borrowings that we have converted to floating rate borrowings through the use of hedging agreements. We also may borrow additional funds at variable interest rates in the future. Increases in interest rates would increase our interest expense on our variable rate debt and reduce our future earnings and cash flows, which could adversely affect our ability to service our debt and meet our other obligations and also could reduce the amount we are able to distribute to our stockholders. Although we may in the future enter into hedging arrangements or other transactions as to a portion of our variable rate debt to limit our exposure to rising interest rates, the amounts we are required to pay under the variable rate debt to which the hedging or similar arrangements relate may increase in the event of non-performance by the counterparties to any of our hedging arrangements.
 
In addition, the market price of our common stock is affected by the annual distribution rate on the shares of our common stock. Increasing market interest rates may lead prospective purchasers of our common stock and other securities to seek alternative investments that offer a higher annual yield which would likely adversely affect the market price of our common stock and other securities. Finally, increases in interest rates may have the effect of depressing the market value of retail properties such as ours, including the value of those properties securing our indebtedness.
 
Geographic concentration of our properties makes our business vulnerable to economic downturns in certain regions or to other events, like hurricanes, that disproportionately affect those areas.
 
Approximately 55.0% of our retail property gross leasable area is located in Florida. As a result, economic, real estate and other, general conditions in Florida will significantly affect our revenues and the value of our properties. Business layoffs or downsizing, industry slowdowns, changing demographics and other similar factors may adversely affect the economic climate in Florida. Any resulting oversupply or reduced demand for retail properties in Florida would adversely affect our operating performance and limit our ability to make distributions to stockholders.
 
In addition, a significant portion of our retail property gross leasable area is located in coastal areas that are susceptible to the harmful effects of tropical storms, hurricanes and other similar natural disasters. Most importantly, as of December 31, 2006, over 62.0% of the total insured value of our portfolio is located in the State of Florida, with over 25% located in Miami-Dade, Broward and Palm Beach counties. In 2004 and 2005, our properties experienced damage from a total of seven named hurricanes or tropical storms, with an aggregate loss of approximately $14.7 million, not all of which was insured. While some of these uninsured expenses are recoverable from our tenants, not all of the leases have provisions permitting reimbursement, and, therefore, we must pay the remaining amounts. Moreover, with the increased hurricane activity in 2004 and 2005, the cost of property insurance has risen dramatically. While much of the cost of this insurance is passed on to our tenants as reimbursable property costs, some tenants, particularly national tenants, do not pay a pro rata share of these costs under their leases. Hurricanes and similar storms also disrupt our business and the business of our tenants, which could affect the ability of some tenants to pay rent. Therefore, as a result of the geographic concentration of our properties, we face demonstrable, increasing costs, such as uninsured property losses, increased insurance premiums and disruptions to our business and the businesses of our tenants.
 
Our insurance coverage on our properties may be inadequate therefore increasing the risks to our business.
 

- 7 -

       We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire, flood, rental loss and acts of terrorism. We also currently carry environmental insurance on most of our properties. All of these policies contain coverage limitations. We believe these coverages are of the types and amounts customarily obtained for or by an owner of similar types of real property assets located in the areas where our properties are located. We intend to obtain similar insurance coverage on subsequently acquired properties.
 
The availability of insurance coverage may decrease and the prices for insurance may increase as a consequence of significant losses incurred by the insurance industry. For instance, following the hurricane activity of 2004 and 2005, property insurance costs in the State of Florida have increased. In the event of future industry losses, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses from named wind storms or due to terrorist acts and toxic mold, or, if offered, the expense of obtaining these types of insurance may not be justified. We, therefore, may cease to have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available.
 
If an uninsured loss or a loss in excess of our insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property, but still remain obligated for any mortgage debt or other financial obligations related to the property. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could disrupt seriously our operations, delay revenue and result in large expenses to repair or rebuild the property. Also, due to inflation, changes in codes and ordinances, environmental considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed or the proceeds could be insufficient. Events such as these could adversely affect our results of operations and our ability to meet our obligations, including distributions to our stockholders.
 
We may be unable to sell properties when appropriate because real estate investments are illiquid.
 
·  Real estate investments generally cannot be sold quickly. In addition, there are limitations under federal income tax laws applicable to real estate and to REITs in particular that may limit our ability to sell our assets. We may not be able to alter our portfolio promptly in response to changes in economic or other conditions. Our inability to respond quickly to changes in the performance of our investments could adversely affect our ability to meet our obligations and make distributions to our stockholders
 
·  The federal income tax provisions applicable to REITs provide that any gain realized by a REIT on the sale of property held as inventory or other property held primarily for sale to customers in the ordinary course of business is treated as income from a “prohibited transaction” that is subject to a 100 percent penalty tax. Under current law, unless a sale of real property qualifies for a safe harbor, the question of whether the sale of a property constitutes the sale of property held primarily for sale to customers is generally a question of the facts and circumstances regarding a particular transaction. We intend to hold our properties for investment with a view to long-term appreciation, to engage in the business of acquiring and owning properties and to make occasional sales as are consistent with our investment objectives. We do not intend to engage in prohibited transactions. We cannot assure you, however, that we will only make sales that satisfy the requirements of the safe harbors or that the IRS will not successfully assert that one or more of our sales are prohibited transactions.
 
Our development and redevelopment activities are inherently risky and may not yield anticipated returns, which would harm our operating results and reduce funds available for distributions to stockholders.
 
An important component of our growth strategy is the redevelopment of properties within our portfolio and the development of new shopping centers. At December 31, 2006, we had invested an aggregate of approximately $113.3 million in these development or redevelopment projects at various stages of completion and anticipate that these projects will require an additional $58.8 million to complete, based on our current plans and estimates. These developments and redevelopments may not be as successful as currently expected. Expansion, renovation and development projects entail the following considerable risks:
 
·  
significant time lag between commencement and completion subjects us to greater risks due to fluctuation in the general economy;
 
- 8 -
 
·  
failure or inability to obtain construction or permanent financing on favorable terms;
 
·  
expenditure of money and time on projects that may never be completed;
 
·  
inability to achieve projected rental rates or anticipated pace of lease-up;
 
·  
higher-than-estimated construction costs, including labor and material costs; and
 
·  
possible delay in completion of the project because of a number of factors, including weather, labor disruptions, construction delays or delays in receipt of zoning or other regulatory approvals, or man-made or natural disasters (such as fires, hurricanes, earthquakes or floods).
 
While our policies with respect to expansion, renovation and development activities are intended to limit some of the risks otherwise associated with such activities, such as initiating construction only after securing commitments from anchor tenants, we will nevertheless be subject to risks that the construction costs of a property, due to factors such as cost overruns, design changes and timing delays arising from a lack of availability of materials and labor, weather conditions and other factors outside of our control, as well as financing costs, may exceed original estimates, possibly making the associated investment unprofitable. Any substantial unanticipated delays or expenses could adversely affect the investment returns from these redevelopment projects and harm our operating results.
 
Future acquisitions may not yield the returns expected, may result in disruptions to our business, may strain management resources and may result in stockholder dilution.
 
Our investing strategy and our market selection process may not ultimately be successful and may not provide positive returns on our investment. The acquisition of properties or portfolios of properties entails risks that include the following, any of which could adversely affect our results of operations and our ability to meet our obligations:
 
·  
we may not be able to identify suitable properties to acquire or may be unable to complete the acquisition of the properties we identify;
 
·  
we may not be able to integrate any acquisitions into our existing operations successfully;
 
·  
properties we acquire may fail to achieve within the time frames we project the occupancy or rental rates we project at the time we make the decision to acquire, which may result in the properties’ failure to achieve the returns we projected;
 
·  
our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs, which could significantly increase our total acquisition costs; and
 
·  
our investigation of a property or building prior to our acquisition, and any representations we may receive from the seller of such building or property, may fail to reveal various liabilities, which could reduce the cash flow from the property or increase our acquisition cost.
 
If we acquire a business, we will be required to integrate the operations, personnel and accounting and information systems of the acquired business and train, retain and motivate any key personnel from the acquired business. In addition, acquisitions of or investments in companies may cause disruptions in our operations and divert management’s attention away from day-to-day operations, which could impair our relationships with our current tenants and employees. The issuance of equity securities in connection with any acquisition or investment could be substantially dilutive to our stockholders.
 
Our ability to grow will be limited if we cannot obtain additional capital.
 
·  Our growth strategy is focused on the redevelopment of properties we already own and the acquisition and development of additional properties. We believe that it will be difficult to fund our expected growth with cash from operating activities because, in addition to other requirements, we are required to distribute to our stockholders at least 90% of our REIT taxable income (excluding net capital gains) each year to continue to qualify as a REIT for federal income tax purposes. As a result, we must rely primarily upon the availability of debt or equity capital, which may or may not be available on favorable terms or at all. The debt could include mortgage loans from third parties or the sale of debt securities. Equity capital could include shares of our common stock or preferred stock. We cannot guarantee that additional financing, refinancing or other capital will be available in the amounts we desire or on favorable terms. Our access to debt or equity capital depends on a number of factors, including the market’s perception of our growth potential, our ability to pay dividends, our financial condition, our credit rating and our current and potential future earnings. Depending on the outcome of these factors, we could experience delay or difficulty in implementing our growth strategy on satisfactory terms, or be unable to implement this strategy.
 
- 9 -
Competition for the acquisition of assets and the leasing of properties may impede our ability to make, or may increase the cost of, these acquisitions and may impair our future income.
 
Numerous commercial developers and real estate companies compete with us in seeking tenants for our existing properties and properties for acquisition. This competition may:
 
·  
reduce properties available for acquisition;
 
·  
increase the cost of properties available for acquisition;
 
·  
reduce the rate of return on these properties;
 
·  
reduce rents payable to us;
 
·  
interfere with our ability to attract and retain tenants;
 
·  
lead to increased vacancy rates at our properties; and
 
·  
adversely affect our ability to minimize expenses of operation.
 
In addition, tenants and potential acquisition targets may find competitors to be more attractive because they may have greater resources, broader geographic diversity, may be willing to pay more or offer greater lease incentives or may have a more compatible operating philosophy. In particular, larger REITs may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. These competitive factors may adversely affect our profitability, and our stockholders may experience a lower return on their investment.
 
We may be subjected to liability for environmental contamination which might have a material adverse impact on our financial condition and results of operations.
 
As an owner and operator of real estate and real estate-related facilities, we may be liable for the costs of removal or remediation of hazardous or toxic substances present at, on, under, in or released from our properties, as well as for governmental fines and damages for injuries to persons and property. We may be liable without regard to whether we knew of, or were responsible for, the environmental contamination and with respect to properties previously owned by companies we have acquired, whether the contamination occurred before or after the acquisition. We have several properties in our portfolio that will require or are currently undergoing varying levels of environmental remediation. The presence of contamination or the failure properly to remediate contamination at any of our properties may adversely affect our ability to sell or lease those properties or to borrow funds by using those properties as collateral. The costs or liabilities could exceed the value of the affected real estate. Although we have environmental insurance policies covering most of our properties, there is no assurance that these policies will cover any or all of the potential losses or damages from environmental contamination; therefore, any liability, fine or damage could directly impact our financial results.
 
The Americans with Disabilities Act of 1990 could require us to take remedial steps with respect to existing or newly acquired properties.
 
     Our existing properties, as well as properties we may acquire, as commercial facilities, are required to comply with Title III of the Americans with Disabilities Act of 1990. Investigation of a property may reveal non-compliance with this Act. The requirements of this Act, or of other federal, state or local laws, also may change in the future and restrict or require further renovations of our properties with respect to access for disabled persons. Future compliance with this Act may require expensive changes to the properties.
 
 
- 10 -
 
We may experience adverse consequences in the event we fail to qualify as a REIT.
 
Although we believe that we are organized and have operated so as to qualify as a REIT under the Internal Revenue Code since our REIT election in 1995, no assurance can be given that we have qualified or will remain so qualified. In addition, no assurance can be given that legislation, new regulations, administrative interpretations or court decisions will not significantly change the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification.
 
Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial and administrative interpretations. These provisions include requirements concerning, among other things, the ownership of our outstanding common stock, the nature of our assets, the sources of our income, and the amount of our distributions to our stockholders. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying sources. Satisfying this requirement could be difficult, for example, if defaults by tenants were to reduce the amount of income from qualifying rents. In addition, we must make distributions to stockholders aggregating annually at least 90% of our REIT taxable income, excluding net capital gains. To the extent that we satisfy the 90 percent distribution requirement, but distribute less than 100 percent of our taxable income, we will be subject to federal corporate income tax on our undistributed income. In addition, we will incur a four percent nondeductible excise tax on the amount, if any, by which our distributions (or deemed distributions) in any year are less than the sum of 85 percent of our ordinary income for that year, 95 percent of our capital gain net earnings for that year and 100 percent of our undistributed taxable income from prior years. We intend to make distributions to our stockholders to comply with the distribution provisions of the Internal Revenue Code. Although we anticipate that our cash flows from operating activities will be sufficient to enable us to pay our operating expenses and meet distribution requirements, no assurance can be given in this regard. We may be required to borrow money or sell assets to pay out enough of our taxable income to satisfy the distribution requirement and to avoid corporate income tax.

If we fail to qualify as a REIT:
 
·  
we would not be allowed a deduction for distributions to stockholders in computing taxable income;
 
·  
we would be subject to federal income tax at regular corporate rates;
 
·  
we could be subject to the federal alternative minimum tax;
 
·  
unless we are entitled to relief under specific statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified;
 
·  
we could be required to pay significant income taxes, which would substantially reduce the funds available for investment or for distribution to our stockholders for each year in which we failed or were not permitted to qualify; and
 
·  
we would no longer be required by law to make any distributions to our stockholders.
 
We are subject to other tax liabilities.
 
Even if we qualify as a REIT, we are subject to some federal, state and local taxes on our income and property that could reduce operating cash flow. For example, we will pay tax on certain types of income that are not distributed, and will be subject to a 100 percent excise tax on transactions with a taxable REIT subsidiary that are not conducted on an arms-length basis. In addition, our taxable REIT subsidiaries are subject to foreign, federal, state and local taxes.

- 11 -
Our Chairman of the Board and his affiliates own approximately 43% of our common stock and exercise significant control over our company and may delay, defer or prevent us from taking actions that would be beneficial to our other stockholders.

Chaim Katzman, the chairman of our board of directors and our largest stockholder, and his affiliates own approximately 43% of the outstanding shares of our common stock and, as a result of a stockholders’ agreement with other of our stockholders, have voting power of almost 50% of our outstanding shares with respect to the election of directors. Accordingly, Mr. Katzman is able to exercise significant control over the outcome of substantially all matters required to be submitted to our stockholders for approval, including decisions relating to the election of our board of directors and the determination of our day-to-day corporate and management policies. In addition, Mr. Katzman is able to exercise significant control over the outcome of any proposed merger or consolidation of our company which, under our charter, the affirmative vote of the holders of a majority of the outstanding shares of our common stock in such instances. Mr. Katzman’s ownership interest in our company may discourage third parties from seeking to acquire control of our company which may adversely affect the market price of our common stock.
 
Several of our controlling stockholders have pledged their shares of our stock as collateral under bank loans, foreclosure and disposition of which could have a negative impact on our stock price.
 
Several of our affiliated stockholders that beneficially own a significant interest in our company, including Gazit-Globe, Ltd. and related entities, have pledged a substantial portion of our stock that they own to secure loans made to them by commercial banks.
 
If a stockholder defaults on any of its obligations under these pledge agreements or the related loan documents, these banks may have the right to sell the pledged shares in one or more public or private sales that could cause our stock price to decline. Many of the occurrences that could result in a foreclosure of the pledged shares are out of our control and are unrelated to our operations. Some of the occurrences that may constitute such an event of default include:
 
·  
the stockholder’s failure to make a payment of principal or interest when due;
 
·  
the occurrence of another default that would entitle any of the stockholder’s other creditors to accelerate payment of any debts and obligations owed to them by the stockholder;
 
·  
if the bank, in its absolute discretion, deems that a change has occurred in the condition of the stockholder to which the bank has not given its prior written consent; and
 
·  
if, in the opinion of the bank, the value of the pledged shares shall be reduced or is likely to be reduced (for example, the price of our common stock declines).
 
In addition, because so many shares are pledged to secure loans, the occurrence of an event of default could result in a sale of pledged shares that would trigger a change of control of our company, even when such a change may not be in the best interests of our stockholders.
 
To maintain our status as a REIT, we limit the amount of shares any one stockholder can own.
 
The Internal Revenue Code imposes certain limitations on the ownership of the stock of a REIT. For example, not more than 50% in value of our outstanding shares of capital stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code). To protect our REIT status, our charter prohibits any one stockholder from owning (actually or constructively) more than 9.9% in value of the outstanding shares of common stock or of any class or series of outstanding preferred stock. The constructive ownership rules are complex. Shares of our capital stock owned, actually or constructively, by a group of related individuals and/or entities may be treated as constructively owned by one of those individuals or entities. As a result, the acquisition of less than 9.9% in value of the outstanding common stock and/or a class or series of preferred stock (or the acquisition of an interest in an entity that owns common stock or preferred stock) by an individual or entity could cause that individual or entity (or another) to own constructively more than 9.9% in value of the outstanding stock. If that happened, either the transfer or ownership would be void or the shares would be transferred to a charitable trust and then sold to someone who can own those shares without violating the 9.9% ownership limit.
 
- 12 -
Our board of directors may waive these restrictions on a case-by-case basis. The 9.9% ownership restrictions may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the stockholders’ best interest.
 
We cannot assure you we will continue to pay dividends at historical rates.
 
Our ability to continue to pay dividends on our common stock at historical rates or to increase our common stock dividend rate and service our debt securities, will depend on a number of factors, including, among others, the following:
 
·  
our financial condition and results of future operations;
 
·  
the performance of lease terms by tenants;
 
·  
the terms of our loan covenants; and
 
·  
our ability to acquire, finance, develop or redevelop and lease additional properties at attractive rates.
 
If we do not maintain or increase the dividend rate on our common stock, it could have an adverse effect on the market price of our common stock and other securities. Conversely, payment of dividends on our common stock may be subject to payment in full of the interest on any debt securities we may offer.
 
Our organizational documents contain provisions which may discourage the takeover of our company, may make removal of our management more difficult and may depress our stock price.
 
Our organizational documents contain provisions that may have an anti-takeover effect and inhibit a change in our management. As a result, these provisions could prevent our stockholders from receiving a premium for their shares of common stock above the prevailing market prices. These provisions include:
 
·  
the REIT ownership limit described above;
 
·  
the ability to issue preferred stock with the powers, preferences or rights determined by our board of directors;
 
·  
special meetings of our stockholders may be called only by the chairman of the board, the chief executive officer, the president or by the board of directors;
 
·  
advance notice requirements for stockholder proposals;
 
·  
the absence of cumulative voting rights; and
 
·  
provisions relating to the removal of incumbent directors.
 
Finally, Maryland law also contains several statutes that restrict mergers and other business combinations with an interested stockholder or that may otherwise have the effect of preventing or delaying a change of control.
 
We are undergoing a management transition, and this transition may disrupt our operations and our business.
 
During 2006, following the decision of our chairman of the board to relinquish the title of chief executive officer and the expiration of the employment agreements with our prior president and chief operating officer and our chief financial officer, we executed new employment agreements with Jeffrey S. Olson, as our new chief executive officer and president, Jeffrey S. Stauffer, as our new executive vice president and chief operating officer, and Gregory R. Andrews, as our new executive vice president and chief financial officer. This management transition occurred, for the most part, in the third and fourth quarters of 2006 and is on-going. While we hope that this transition will benefit our stockholders in the long run, the short term impact may include:
 
·  
increased general and administrative expenses following the hiring of additional personnel and the payment of severance and other termination payments to departed employees;
 
- 13 -
·  
disruption of our business; and
 
·  
management distraction from the day to day operations.
 
Changes in taxation of corporate dividends may adversely affect the value of our common stock.

The maximum marginal rate of tax payable by domestic non-corporate taxpayers on dividends received from a regular “C” corporation under current law is 15 percent through 2010, as opposed to higher ordinary income rates. The reduced tax rate, however, does not apply to distributions paid to domestic non-corporate taxpayers by a REIT on its stock, except for certain limited amounts. Although the earnings of a REIT that are distributed to its stockholders generally remain subject to less federal income taxation than earnings of a non-REIT “C” corporation that are distributed to its stockholders net of corporate-level income tax, legislation that extends the application of the 15 percent rate to dividends paid after 2010 by “C” corporations could cause domestic non-corporate investors to view the stock of regular “C” corporations as more attractive relative to the stock of a REIT, because the dividends from regular “C” corporations would continue to be taxed at a lower rate while distributions from REITs (other than distributions designated as capital gain dividends) are generally taxed at the same rate as the individual’s other ordinary income.

 
ITEM 1B. UNRESOLVED STAFF COMMENTS
 
None.
 

- 14 -

ITEM 2. PROPERTIES

Our portfolio consists primarily of shopping centers anchored by supermarket and other necessity-oriented retailers and at December 31, 2006 contained an aggregate of approximately 18.4 million square feet of gross leasable area or GLA. Other than our leasehold interests in McAlpin Square shopping center located in Savannah, Georgia, Plaza Acadienne shopping center located in Eunice, Louisiana, and El Novillo, located in Miami, Florida, all of our other properties are owned in fee simple. In addition, some of our properties are subject to mortgages as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Mortgage Indebtedness.” The following table provides a brief description of our properties as of December 31, 2006:

Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
 
Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
Anchor Stores and Certain Tenants (3)
 
               
ALABAMA (2 properties)
            
               
Madison Centre
Madison
2003
64,837
13
$ 607,824
$ 9.61
97.5%
Publix, Rite Aid
               
West Gate Plaza
Mobile
2003
64,378
9
447,202
7.22
96.2%
Winn-Dixie, Rite Aid
               
Subtotal Alabama Properties
(2 properties)
129,215
22
$ 1,055,026
$ 8.43
96.9%
  
               
               
FLORIDA (85 properties)
            
             
North Florida (12 properties)
            
               
Atlantic Village
Atlantic Beach
1995
100,559
25
1,122,322
11.16
100%
Publix, Jo-Ann Fabrics, Dollar Tree
               
Beauclerc Village
Jacksonville
1998
70,429
11
485,933
8.14
84.7%
Big Lots, Goodwill, Bealls Outlet
               
Commonwealth
Jacksonville
1994
81,467
16
671,899
8.38
98.4%
Winn-Dixie/Save Rite
               
Forest Village
Tallahassee
2000
71,526
17
694,475
10.52
92.3%
Publix
               
Fort Caroline
Jacksonville
1994
74,546
13
519,052
7.33
95%
Winn-Dixie, City Trends
               
Medical & Merchants
Jacksonville
2004
152,761
17
1,816,942
12.27
96.9%
Publix, Memorial Health Group, Blockbuster
               
Middle Beach
Panama City Beach
2003
69,277
9
670,061
9.67
100%
Publix, Movie Gallery
               
Monument Point
Jacksonville
1997
75,128
12
496,902
6.75
98%
Winn-Dixie, CVS/pharmacy
               
Oak Hill
Jacksonville
1995
78,492
19
577,638
7.36
100%
Publix, Bealls*
               
Parkmore Plaza
Milton
2003
159,093
13
769,784
4.87
99.4%
Bealls, Big Lots
 
- 15 -
 
 
  
Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
 
Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
 
 
Anchor Stores and Certain Tenants (3)
               
Pensacola Plaza
Pensacola
1986
56,098
3
258,604
4.61
100%
FoodWorld
               
South Beach Regional
Jacksonville Beach
2003
289,964
50
3,111,861
11.36
94.4%
Home Depot, Stein Mart, Bealls, Bed Bath & Beyond
               
Central Florida (11 properties)
          
               
Alafaya Commons
Orlando
2003
123,133
29
1,507,521
12.36
99.0%
Publix, Blockbuster
               
Alafaya Village
Orlando
1986
39,477
15
564,899
16.51
86.7%
Super Saver
               
Conway Crossing
Orlando
2003
76,321
18
903,969
12.07
98.2%
Publix
               
Shoppes of Eastwood
Orlando
2002
69,037
13
802,922
11.63
100%
Publix
               
Eustis Square
Eustis
2004
126,791
25
723,377
5.98
95.4%
Save-a-lot, Accent Marketing, Goodwill, Fred’s Store
               
Kirkman Shoppes
Orlando
2001
88,820
31
1,441,353
17.28
93.9%
Party Depot
               
Lake Mary
Orlando
1988
342,384
85
3,863,508
11.58
97.4%
Albertsons, Kmart, Lifestyle Fitness, Sun Star MovieTheatres
               
Park Promenade
Orlando
1999
125,818
26
1,053,040
8.70
96.2%
Publix, Orange County Library, Blockbuster, Goodwill
               
Town & Country
Kissimmee
2003
72,043
14
621,666
8.63
100%
Albertsons
               
Unigold
Winter Park
2003
117,527
25
1,340,964
11.41
100%
Winn-Dixie, Blockbuster, Lifestyle Family Fitness
               
Walden Woods
Park City
2003
75,874
14
486,939
7.15
89.7%
Dollar Tree, Aaron Rents, Dollar General
               
Florida West Coast (18 properties)
            
               
Bay Pointe Plaza
St. Petersburg
2003
103,986
24
1,003,211
10.09
95.6%
Publix, Bealls Outlet, West Marine
               
Carrollwood
Tampa
2003
94,203
35
1,044,759
12.47
88.9%
Publix, Floors Today
               
Charlotte Square
Port Charlotte
2003
96,188
24
777,394
8.31
97.3%
American Signature Furniture, Seafood Buffet
 
- 16 -
 
Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
 
Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
 
 
Anchor Stores and Certain Tenants (3)
               
Chelsea Place
New Port Richey
2003
81,144
18
936,749
11.54
100%
Publix, CVS/pharmacy
               
Lake St. Charles
Tampa
2001
57,015
8
570,342
10.00
100%
Sweet Bay
               
Lutz Lake
Lutz
2003
64,985
15
890,293
13.94
98.3%
Publix
               
Marco Town Center
Marco Island
2001
109,830
42
1,836,391
17.03
98.2%
Publix, West Marine
               
Mariners Crossing
Spring Hill
2001
91,608
15
842,787
9.20
100%
Kash N’ Karry
               
Midpoint Center
Cape Coral
2006
75,386
10
896,556
11.89
100%
Publix
               
Pavillion
Naples
2004
167,745
42
2,327,775
14.69
94.5%
Publix, Pavillion 6 Theatre, Anthony’s
               
Regency Crossing
Port Richey
2003
85,864
25
729,591
10.23
83.0%
Publix
               
Ross Plaza
Tampa
2001
85,359
19
805,483
10.34
91.3%
Ross Dress for Less, Laminate Kingdom
               
Seven Hills
Spring Hill
2003
72,590
17
740,185
10.67
95.6%
Publix
               
Shoppes of North Port
North Port
2000
84,705
21
827,441
9.91
98.6%
Publix, Bealls Outlet
               
Skipper Palms
Tampa
2001
89,482
18
826,745
9.72
95.0%
Winn-Dixie
               
Summerlin Square
Fort Myers
1998
109,156
29
993,543
10.62
85.7%
Winn-Dixie, West Marine
               
Venice Plaza
Venice
2003
148,779
15
755,190
5.75
88.3%
Sweet Bay, TJ Maxx/Home Goods, Blockbuster
               
Venice Shopping Center
Venice
2004
111,934
15
590,135
5.49
96.1%
Publix, Bealls Outlet, Dollar Tree, Wachovia Bank
               
Florida Treasure Coast (8 properties)
          
               
Cashmere Corners
Port St. Lucie
2001
92,734
18
878,314
9.47
100%
Albertsons
               
New Smyrna Beach Regional
New Smyrna Beach
2003
118,451
34
1,235,019
10.43
100%
Publix, Walgreens,* Bealls Outlet, Bealls Home Outlet, Blockbusters
               
Old King Commons
Palm Coast
2003
84,759
19
723,752
8.54
100%
Wal-Mart,* Bealls Outlet
               
Ryanwood
Vero Beach
2001
114,925
32
1,192,788
10.38
100%
Publix, Bealls Outlet, Books-A-Million
 
- 17 -
 
Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
 
Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
 
 
Anchor Stores and Certain Tenants (3)
               
Salerno Village
Stuart
2002
79,903
20
843,274
10.65
99.1%
Winn-Dixie, CVS/pharmacy
               
Shops at St. Lucie
Port St. Lucie
2006
19,361
12
425,227
21.96
100%
  
               
South Point Center
Vero Beach
2006
64,790
15
913,583
14.33
98.4%
Pulix
               
Treasure Coast
Vero Beach
2003
133,781
24
1,249,220
9.58
97.5%
Publix
               
South Florida/Atlantic Coast (36 properties)
        
               
Bird Ludlum
Miami
1994
192,282
43
3,004,742
15.63
100%
Winn-Dixie, CVS/pharmacy, Blockbuster, Goodwill, Bird Executive Suites
               
Boca Village
Boca Raton
2001
93,428
21
1,424,001
16.04
95%
Publix, CVS/pharmacy
               
Boynton Plaza
Boynton Beach
2001
99,324
29
1,164,089
11.72
100%
Publix, CVS/pharmacy, Hollywood Video
               
Bluff Square
Jupiter
2001
132,395
47
1,766,731
13.34
100%
Publix, Walgreens
               
Coral Reef Shopping Center
Palmetto Bay
2006
74,680
17
1,429,987
19.39
98.7%
Office Depot, My Pharmacy, ABC Fine Wine and Spirits
               
Countryside Shops
Cooper City
2003
179,561
46
2,348,269
13.25
98.7%
Publix, CVS/pharmacy, Stein Mart
               
Crossroads Square
Pembroke Pines
2001
92,257
27
1,317,403
14.52
98.4%
Lowe’s, CVS/pharmacy, 99 Cent Stuff
               
CVS Plaza
Miami
2004
29,204
8
487,942
16.71
100%
CVS/pharmacy
               
El Novillo
Miami Beach
2001
10,000
1
200,000
20.00
100%
Jumbo Buffet
               
Homestead Gas Station
Homestead
2005
2,136
1
45,588
21.34
100%
  
               
Greenwood
Palm Springs
2003
132,325
37
1,548,191
12.34
94.8%
Publix, Bealls, World Savings Bank
 
- 18 -
 
 
Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
 
Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
 
 
Anchor Stores and Certain Tenants (3)
               
Lago Mar
Miami
2003
82,613
20
1,029,879
13.28
93.9%
Publix
               
Jonathan’s Landing
Jupiter
2001
26,820
12
429,119
20.13
79.5%
Albertsons(4), Blockbuster
               
Lantana Village
Lantana
1998
181,780
26
1,327,219
7.33
99.6%
Winn-Dixie, Kmart, Rite Aid* (Dollar Store), Hollywood Video
               
Meadows
Miami
2002
75,524
20
994,228
13.16
100%
Publix
               
Oakbrook Square
Palm Beach Gardens
2004
212,074
30
2,865,949
14.57
92.7%
Publix, Stein Mart, TJ Maxs/Home Goods, CVS/pharmacy, Basset Furniture, Duffy’s Sports Bar
               
Oaktree Plaza
North Palm Beach
2003
24,145
19
288,287
13.01
91.8%
  
               
Pine Island
Davie
1999
254,907
45
2,782,623
10.99
99.3%
Publix, Home Depot Expo, Staples
               
Pine Ridge Square
Coral Springs
2003
117,399
35
1,663,049
14.29
99.1%
Fresh Market, Bed Bath & Beyond, Off Main Furniture, Blockbuster
               
Plaza Alegre
Miami
2003
91,611
21
1,385,368
15.12
100%
Publix, Goodwill, Blockbuster
               
Point Royale
Miami
1995
216,760
26
1,382,674
6.72
95%
Winn-Dixie, Best Buy, CVS/pharmacy* (Anna’s Linens)
               
Prosperity Center
Palm Beach Gardens
2001
122,106
9
1,690,666
15.59
88.8%
Office Depot, Barnes & Noble, Bed Bath & Beyond, Carmine’s, TJ Maxx
               
Ridge Plaza
Davie
1999
155,204
29
1,460,305
10.14
92.8%
AMC Theatre, Kabooms, Wachovia* (United Collection), Sofa Kings, Round Up
               
Riverside Square
Coral Springs
2003
107,941
35
1,489,995
13.94
99.0%
Publix, Tuesday Morning
               
Sawgrass Promenade
Deerfield Beach
2001
107,092
29
1,198,334
11.54
97.0%
Publix, Walgreens, Blockbuster
               
Sheridan Plaza
Hollywood
2003
455,843
66
6,375,917
14.25
98.2%
Publix, Ross Dress For Less, Bed Bath & Beyond, Office Depot, AMC Theater, CVS/pharmacy, Blockbuster, LA Fitness
 
- 19 -
 
Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
 
Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
 
 
Anchor Stores and Certain Tenants (3)
               
Shoppes at Quail Roost
Miami
2005
73,550
20
1,011,045
14.93
92.0%
Publix
               
Shoppes of Andros Isles
West Palm Beach
2006
79,420
17
977,923
12.53
98.2%
Publix
               
Shoppes of Ibis
West Palm Beach
2002
79,420
18
1,041,236
13.11
100%
Publix
               
Shoppes of Silverlakes
Pembroke Pines
2003
126,788
40
2,167,075
17.09
100%
Publix, Blockbuster
               
Shops at Skylake
North Miami Beach
1997
284,943
50
4,552,807
16.03
99.6%
Publix, TJ Maxx, Goodwill, LA Fitness, Blockbuster
               
Tamarac Town Square
Tamarac
2003
127,635
40
1,334,566
11.27
92.8%
Publix, Dollar Tree
               
Waterstone
Homestead
2005
82,531
13
1,246,670
15.11
100%
Publix, Walgreens
               
West Lakes Plaza
Miami
1996
100,747
27
1,171,515
11.63
100%
Winn-Dixie, Navarro Pharmacy
               
Westport Plaza
Davie
2004
49,980
8
760,375
16.21
93.9%
Publix, Blockbuster
               
Young Circle
Hollywood
2005
65,834
10
995,019
15.62
96.7%
Publix, Walgreens
             
Subtotal Florida Properties
(85 properties)
9,315,487
2,008
$ 105,720,164
$ 11.75
96.7%
  
               
GEORGIA (24 properties)
            
Atlanta Area (19 properties)
            
               
BridgeMill
Canton
2004
89,102
31
1,286,953
15.16
95.3%
Publix
               
Butler Creek
Acworth
2003
95,597
20
1,036,660
11.01
98.5%
Kroger
               
Chastain Square
Atlanta
2003
91,637
27
1,550,008
16.91
100.0%
Publix
               
Commerce Crossing
Commerce
2003
105,188
11
280,043
4.68
56.9%
Ingles, Fred’s Store
               
Douglas Commons
Douglasville
2003
97,027
16
968,695
10.23
97.6%
Kroger
               
Fairview Oaks
Ellenwood
2003
77,052
13
820,697
11.28
94.4%
Kroger, Blockbuster
 
- 20 -
 
Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
 
Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
 
 
Anchor Stores and Certain Tenants (3)
               
Grassland Crossing
Alpharetta
2003
90,906
14
1,047,552
11.69
98.6%
Kroger
               
Hairston Center
Decatur
2005
13,000
9
104,245
14.89
53.8%
  
               
Hamilton Ridge
Buford
2003
89,496
20
1,023,618
12.67
90.3%
Kroger
               
Mableton Crossing
Mableton
2003
86,819
17
907,887
10.60
98.6%
Kroger
               
Macland
Pointe
Marietta
2003
79,699
17
771,140
9.82
98.5%
Publix
               
Market Place
Norcross
2003
77,706
23
780,753
11.88
84.5%
Peachtree Cinema
               
Paulding Commons
Dallas
2003
192,391
30
1,397,803
7.70
94.4%
Kroger, Kmart
               
Piedmont Peachtree Csng
Buckland
1998
152,239
28
2,456,987
16.14
100%
Kroger, Cost Plus Store, Binders Art Supplies
               
Powers Ferry Plaza
Marietta
2003
86,473
24
918,525
10.66
99.7%
Micro Center
               
Presidential Markets
Snellville
2003
396,408
35
3,817,885
10.17
94.7%
Publix, Bed Bath & Beyond, TJ Maxx, Shoe Carnival, Borders, Ross Dress for Less, Marshalls, Carmike Cinema, Office Depot
               
Shops of Huntcrest
Lawrenceville
2003
97,040
26
1,315,038
13.76
98.5%
Publix
               
West Towne Square
Rome
2003
89,596
18
383,229
5.28
81.0%
Big Lots *
               
Williamsburg @ Dunwoody
Dunwoody
2003
44,928
27
832,986
18.54
100%
  
               
Central Georgia (3 Properties)
            
               
Daniel Village
Augusta
2003
171,932
39
1,339,251
$ 8.25
94.4%
BI-LO, Eckerd*, St. Joseph Home Health Care
               
Spalding Village
Griffin
2003
235,318
28
1,321,518
7.99
70.3%
Kroger, JC Penney, Blockbuster, Fred’s Store
               
Walton Plaza
Augusta
2003
43,460
8
407,099
9.63
97.2%
Harris Teeter* (Omni Fitness)
 
- 21 -
 
Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
 
Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
 
 
Anchor Stores and Certain Tenants (3)
               
South Georgia (2 properties)
            
               
Colony Square
Fitzgerald
2003
50,000
6
270,592
5.83
92.8%
Food Lion (Harvey’s)
               
McAlpin Square
Savannah
2003
176,807
27
1,187,670
7.33
91.6%
Kroger, US Post Office, Big Lots, In Fashion Menswear Outlet
               
Subtotal Georgia Properties
(24 properties)
2,729,821
514
$ 26,226,834
$ 10.52
91.2%
  
               
LOUISIANA (14 properties)
            
               
Ambassador Row
Lafayette
2003
193,978
26
1,496,385
9.17
84.1%
Conn’s Appliances, Big Lots, Chuck . Cheese, Goody’s
               
Ambassador Row Courtyard
Lafayette, LA
2003
146,697
23
1,308,432
9.71
91.8%
Bed Bath & Beyond, Marshalls, Hancock Fabrics, United Training Academy
               
Bluebonnet Village
Baton Rouge
2003
101,623
24
807,064
9.98
79.6%
Matherne’s, Ace Hardware
               
The Boulevard
Lafayette
2003
68,012
14
513,191
7.55
100%
Piccadilly, Harbor Freight Tools, Golfballs.com
               
Country Club Plaza
Slidell
2003
64,686
10
393,532
6.08
100%
Winn-Dixie, Dollar General
               
The Crossing
Slidell
2003
113,989
15
604,363
5.58
95.1%
Save A Center, A-1 Home Appliance, Piccadilly
               
Elmwood Oaks
Harahan
2003
133,995
11
1,237,616
9.57
96.5%
Academy Sports, Dollar Tree, Home Decor
               
Grand Marche (ground lease)
Lafayette
2003
200,585
1
27,500
0.14
100%
Grand Marche
               
Plaza Acadienne
Eunice
2003
105,419
8
232,496
4.20
52.6%
Super 1 Store, Fred’s*
               
Sherwood South
Baton Rouge
2003
77,107
9
532,819
6.91
100%
Burke’s Outlet, Harbor Freight Tools, Blockbuster, Fred’s Store
               
Siegen Village
Baton Rouge
2003
170,416
20
1,479,947
8.68
100%
Office Depot, Big Lots, Dollar Tree, Stage, Party City
               
Tarpon Heights
Galliano
2003
56,605
9
271,067
4.96
96.5%
CVS/pharmacy, Stage, Dollar General
 
- 22 -
 
Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
 
Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
 
 
Anchor Stores and Certain Tenants (3)
               
Village at Northshore
Slidell
2003
144,638
14
1,242,266
8.59
100%
Marshalls, Dollar Tree, Kirschman’s, Bed Bath & Beyond, Office Depot
               
Wal-Mart
Mathews
2003
54,223
1
157,500
2.90
100%
Wal-Mart
               
Subtotal Louisiana Properties
(14 properties)
1,631,973
185
$ 10,304,178
$ 6.84
92.3%
  
               
               
MASSACHUSETTS
(7 properties)
            
               
Cambridge Star Market
Cambridge
2004
66,108
1
1,777,835
$ 26.89
100%
Star Market
               
Medford Shaw’s Supermarket
Medford
2004
60,356
1
1,450,792
24.04
100%
Shaw’s
               
Plymouth Shaw’s Supermarket
Plymouth
2004
59,726
1
1,061,226
17.77
100%
Shaw’s
               
Quincy Star Market
Quincy
2004
100,741
1
1,748,916
17.36
100%
Star Market
               
Swampscott Whole Foods
Swampscott
2004
35,907
1
754,047
21.00
100%
Whole Foods
               
Webster Plaza
Webster
2006
200,681
15
1,540,715
7.91
97.0%
Shaw’s, K Mart
               
West Roxbury Shaw’s Plaza
West Roxbury
2004
76,316
12
1,777,738
23.65
98.5%
Shaw’s
               
               
Subtotal Massachusetts Properties 7 properties)
599,835
32
$ 10,111,269
$ 17.06
98.8%
  
               
MISSISSIPPI (1 property)
            
               
Shipyard Plaza
Pascagoula
2003
66,857
8
434,078
6.49
100%
Buffalo Wild Wings Grill and Bar, Big Lots
               
Subtotal Mississippi Properties
(1 property)
66,857
8
$ 434,078
$ 6.49
100%
  
               
NORTH CAROLINA
(9 properties)
            
               
Centre Pointe Plaza
Asheville
2003
163,642
24
945,887
6.04
95.7%
Belk’s Goody’s Dollar Tree, Aaron Rents
 
- 23 -
 
 
Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
 
Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
 
 
Anchor Stores and Certain Tenants (3)
               
Galleria
Wrightsville Beach
2003
92,114
36
848,291
9.81
93.8%
Harris Teeter, Eckerd
               
Parkwest Crossing
Durham
2003
85,602
17
835,303
10.29
94.9%
Food Lion
               
Plaza North
Hendersonville
2003
47,240
10
259,988
6.49
84.8%
CVS/pharmacy
               
Riverview Shopping Center
Durham
2003
128,498
16
839,881
7.27
89.9%
Kroger, Upchurch Drugs, Blockbuster, Riverview Galleries
               
Salisbury Marketplace
Salisbury
2003
79,732
20
776,791
9.93
98.1%
Food Lion
               
Shelby Plaza
Shelby
2003
103,200
9
388,869
3.84
98.1%
Big Lots, Aaron Rents, Burke’s Outlet, Tractor Supply Company
               
Thomasville Commons
Thomasville
2003
148,754
13
800,659
5.65
95.2%
Ingles, Kmart, CVS/pharmacy
               
Willowdale Shopping Center
Durham
2003
120,984
26
975,062
10.04
80.3%
Harris Teeter, Hall of Fitness
               
Subtotal North Carolina Properties
(9 properties)
969,766
171
$ 6,670,731
$ 7.43
92.6%
  
               
SOUTH CAROLINA
(9 properties)
            
               
Belfair Towne Village
Bluffton
2003
166,639
34
2,104,761
13.14
96.1%
Kroger, Blockbuster
               
Lancaster Plaza
Lancaster
2003
77,400
4
91,200
3.62
32.6%
BI-LO
               
Lancaster Shopping Center
Lancaster
2003
29,047
2
60,012
2.07
100%
Sweet Union Furniture
               
Milestone Plaza
Greenville
1995
93,655
11
1,494,668
15.96
100%
BI-LO
               
North Village Center
N. Myrtle Beach
2003
60,356
13
514,596
8.67
98.4%
BI-LO, Dollar General, Gold’s Gym
               
Sparkleberry Square
Columbia
2004
339,051
27
3,827,229
11.30
99.9%
Kroger, Kohl’s, Ross Dress for Less, Circuit City, Bed Bath & Beyond, Petsmart, Pier One
 
- 24 -
 
Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
 
Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
 
 
Anchor Stores and Certain Tenants (3)
               
Spring Valley Commons
Columbia
2003
75,415
18
672,265
9.21
96.8%
BI-LO
               
Windy Hill
North Myrtle Beach
2004
68,465
5
421,811
6.16
100%
Rose’s, Family Dollar
               
Woodruff
Greenville
2003
68,055
10
699,836
10.28
100%
Publix, Blockbuster
               
Subtotal South Carolina Properties
(9 properties)
978,083
124
$ 9,886,378
$ 10.80
93.5%
  
               
               
TENNESSEE (1 property)
            
               
Smyrna Village
Smyrna
2003
83,334
12
698,415
8.38
100%
Kroger
               
Subtotal Tennessee properties
(1 property)
83,334
12
$ 698,415
$ 8.38
100%
  
               
               
TEXAS (1 property)
            
               
Rosemeade
Carrolton
2001
51,231
17
240,428
6.32
74.3%
  
             
Subtotal Texas Properties
(1 property)
51,231
17
$ 240,428
$ 6.32
74.3%
  
               
VIRGINIA (1 property)
            
               
Smyth Valley Crossing
Marion
2003
126,841
14
724,090
5.84
97.8%
Ingles, Wal-Mart
               
Subtotal Virginia Properties
(1 property)
126,841
14
$ 724,090
$ 5.84
97.8%
  
               
Total/Weighted Average
Core Shopping Center Portfolio
(154 properties)
16,682,443
3,107
$172,071,591
$ 10.86
95.0%
  
 
             
DEVELOPMENTS AND REDEVELOPMENTS (18)
            
               
Brookside Plaza
Enfield, CT
1985
210,588
28
1,868,609
11.16
79.5%
Shaw’s Walgreens, Staples, Old Country Buffet, Blockbuster
Chapel Trail Plaza
Pembroke Pines, FL
1996
56,378
4
117,038
25.03
8.3%
  
               
Chestnut Square
Brevard, NC
1985
40,710
8
143,128
8.67
40.6%
Dollar General
 
 
- 25 -
 
Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
 
Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
 
 
Anchor Stores and Certain Tenants (3)
               
Union City Land
Fairburn, GA
2006
101.0 acres
-
-
-
-
  
               
Dolphin Village
St. Pete Beach, FL
2006
138,129
46
1,292,969
10.25
91.3%
Publix, Dollar Tree, CVS
               
Hampton Oaks
Atlanta, GA
2006
13.2 acres
-
-
-
-
  
               
Hunter Creek
Orlando, FL
2002
68,204
10
585,885
14.47
59.4%
  
               
Mandarin Landing
Jacksonville, FL
2000
141,565
37
709,928
9.00
55.7%
Office Depot
               
Providence Square
Charlotte, NC
2003
85,930
25
617,688
8.02
89.7%
Harris Teeter, Eckerd
               
River Green
Canton, GA
2005
9.2 acres
-
-
-
-
  
               
Stanley Market Place
Stanley, NC
2003
40,400
3
48,254
4.02
29.7%
Family Dollar
               
St. Lucie Land
Port St. Lucie, FL
2006
15.93 acres
-
-
-
-
  
               
Sunlake Development Parcel
Tampa, FL
2005
155.0 acres
-
-
-
-
  
               
Sunpoint Shopping Center
Ruskin, FL
2006
132,374
24
913,901
9.24
74.7%
  
               
The Shops at Westridge
McDonough, GA
2006
66,297
19
747,768
13.57
83.1%
  
               
Waterlick Plaza
Lynchburg, VA
2003
8.0 acres
-
-
-
-
  
               
Wesley Chapel Crossing
Decatur, GA
2003
170,792
26
492,681
7.73
37.3%
Ingles, CVS/pharmacy
               
Winchester Plaza
Huntsville, AL
2006
77,844
24
753,312
11.74
82.4%
Publix
               
               
Total Developments & Redevelopments (18)
1,229,211
254
$ 8,291,161
$10.23
65.4%
  
               
Total Retail Properties
(172 properties)
17,911,654
3,361
$180,362,752
$10.83
93.0%
  
             

 
- 26 -
 
 
 
Property
 
Year Acquired/
Built
 
GLA
 
(Sq. Ft.) at Dec. 31, 2006
 
Number of Tenants(1)
 
Annualized Minimum Rent as of Dec. 31, 2006(2)
Average Minimum Rent Per Leased Sq.
Ft. at Dec. 31, 2006
 
Percent Leased at Dec. 31, 2006
 
Anchor Stores and Certain Tenants (3)
 
             
Other Properties (7)
            
               
4101 South I-85
Industrial
Charlotte, NC
2003
188,513
9
133,117
1.86
38.0%
  
               
Banco Popular Office Building
Miami, FL
2005
32,737
 
21
758,520
23.17
100%
  
               
Commonwealth II
Jacksonville, FL
2006
53,598
1
-
-
0%
  
               
Laurel Walk Apartments
Charlotte, NC
2005
106,480
98
767,448
7.21
96.3%
  
               
Mandarin
Mini-storage(5)
Jacksonville, FL
1994
52,880
534
359,000
6.79
94%
  
               
Pinhook Office Building
Layayette, LA
2003
4,406
2
-
-
0%
  
               
Prosperity Office Building
Palm Beach Gardens, FL
2006
3,200
1
-
-
0%
  
               
Total Other Properties (7)
  
441,814
666
$ 2,018,085
$ 7.87
58.1%
  
               
Total Properties
(179 Properties)
  
18,353,468
4,027
$ 182,380,837
$ 10.78
92.1%
  
   
=========
=========
==========
=========
=========
  
——————————
(1)  
Number of tenants includes both occupied and vacant units.
 
(2)  
Calculated by annualizing the tenant’s monthly base rent payment at December 31, 2006, excluding expense reimbursements, percentage rent payments and other charges.
 
(3)  
Includes supermarket tenants and certain other tenants, as well as occupants that are on an adjacent or contiguous, separately owned parcel and do not pay any rent or expense recoveries.
 
(4)  
This tenant is on adjacent or contiguous, separately owned parcel.
 
(5)  
There are 534 storage units at this property.
 
*     Indicates a tenant that has closed its store and ceased to operate at the property, but continues to pay rent under the terms of its lease. The sub-tenant, if any, is shown in parentheses.
 
Most of our leases provide for the monthly payment in advance of fixed minimum rentals, the tenants’ pro rata share of ad valorem taxes, insurance (including fire and extended coverage, rent insurance and liability insurance) and common area maintenance for the property. They may also provide for the payment of additional rentals based on a percentage of the tenants’ sales. Utilities are generally paid directly by tenants except where common metering exists with respect to a property. In this case, we make the payments for the utilities and are reimbursed by the tenants on a monthly basis. Generally, our leases prohibit the tenant from assigning or subletting its space. They also require the tenant to use its space for the purpose designated in its lease agreement and to operate its business on a continuous basis. Some of the lease agreements with major tenants contain modifications of these basic provisions in view of the financial condition, stability or desirability of those tenants. Where a tenant is granted the right to assign its space, the lease agreement generally provides that the original lessee will remain liable for the payment of the lease obligations under that lease agreement.

- 27 -

 
Major Tenants
 
The following table sets forth as of December 31, 2006 the gross leasable area, or GLA of our existing properties leased to tenants in our core shopping center portfolio:
 
   
Supermarket Anchor Tenants
 
  
Other Anchor Tenants
 
  
Non-anchor Tenants
 
  
Total
 
  
Leased GLA (sq. ft.)
    
5,487,182
    
5,180,885
    
5,987,687
    
16,655,754
  
Percentage of Total Leased GLA
    
32.9
%
  
31.1
%
  
36.0
%
  
100.0
%
 
The following table sets forth as of December 31, 2006 the annual minimum rent at expiration attributable to tenants in our core shopping center portfolio:
 
   
Supermarket Anchor Tenants
 
  
Other Anchor Tenants
 
  
Non-anchor Tenants
 
  
Total
 
  
Annual Minimum Rent (“AMR”)
  
$
45,333,017
  
$
41,769,387
  
$
101,382,172
  
$
188,484,576
  
Percentage of Total AMR
    
24.1
%
  
22.2
%
  
53.7
%
  
100.0
%
 
The following table sets forth as of December 31, 2006 information regarding leases with the ten largest tenants in our core shopping center portfolio:
 
Tenant
  
Number of Leases
  
GLA (square feet)
  
Percent
of Total GLA
  
Annualized Minimum Rent at December 31, 2006
  
Percent of Aggregate Annualized Minimum Rent
  
Average Annual Minimum Rent per Square Foot
  
Publix
    
56
    
2,510,772
    
14.0
%
$
19,524,845
    
10.8
%
$
7.78
  
Shaw’s/Star Markets
    
7
    
457,407
    
2.6
%
  
8,300,236
    
4.6
%
  
18.15
  
Kroger
    
15
    
809,689
    
4.5
%
  
6,551,754
    
3.6
%
  
8.09
  
Winn-Dixie
    
13
    
594,537
    
3.3
%
  
4,106,169
    
2.3
%
  
6.91
  
Bed Bath & Beyond
    
8
    
256,689
    
1.4
%
  
2,615,820
    
1.5
%
  
10.19
  
Blockbuster
    
25
    
140,924
    
0.8
%
  
2,366,300
    
1.3
%
  
16.79
  
TJX Companies
    
9
    
275,658
    
1.5
%
  
2,340,942
    
1.3
%
  
8.49
  
Kmart Corporation
    
5
    
439,558
    
2.5
%
  
1,939,705
    
1.1
%
  
4.41
  
CVS/pharmacy
    
16
    
166,674
    
0.9
%
  
1,878,518
    
1.0
%
  
11.27
  
BI-LO
    
5
    
196,742
    
1.1
%
  
1,757,404
    
0.9
%
  
8.93
  
Total top ten tenants
    
159
    
5,848,650
    
32.7
%
$
51,381,693
    
28.5
%
$
8.79
  
 
 
 
- 28 -

Lease Expirations
 
The following tables set forth as of December 31, 2006 the anticipated expirations of tenant leases in our core shopping center portfolio for each year from 2007 through 2016 and thereafter:
 
All Tenants
 
 
 
Year
  
Number of Leases
  
GLA (square feet)
  
Percent of Total GLA
  
Annualized Minimum Rent at Expiration
  
Percent of Aggregate Annualized Minimum Rent at Expiration
  
Average Annual Minimum Rent per Square Foot at Expiration
  
M-T-M
    
82
    
145,283
    
0.8
%
$
1,854,375
    
1.0
%
$
12.76
  
2007
    
652
    
2,051,112
    
11.5
%
  
24,566,599
    
13.0
%
  
11.98
  
2008
    
593
    
1,718,992
    
9.6
%
  
22,841,487
    
12.1
%
  
13.29
  
2009
    
599
    
2,083,288
    
11.6
%
  
25,395,777
    
13.5
%
  
12.19
  
2010
    
408
    
1,893,093
    
10.6
%
  
21,102,398
    
11.2
%
  
11.15
  
2011
    
358
    
2,060,865
    
11.5
%
  
23,089,224
    
12.2
%
  
11.20
  
2012
    
69
    
965,071
    
5.4
%
  
8,348,749
    
4.4
%
  
8.65
  
2013
    
39
    
610,539
    
3.4
%
  
5,924,879
    
3.1
%
  
9.70
  
2014
    
34
    
726,513
    
4.1
%
  
5,740,948
    
3.0
%
  
7.90
  
2015
    
33
    
459,982
    
2.6
%
  
4,305,573
    
2.3
%
  
9.36
  
2016
    
36
    
996,637
    
5.6
%
  
14,846,290
    
7.9
%
  
14.90
  
Thereafter
    
117
    
2,944,379
    
16.3
%
  
30,468,277
    
16.3
%
  
10.35
  
Sub-total/Average
    
3,020
    
16,655,754
    
93.0
%
$
188,484,576
    
100.0
%
$
11.32
  
Vacant
    
341
    
1,255,900
    
7.0
%
  
N/A
    
N/A
    
N/A
  
Total/Average
    
3,361
    
17,911,654
    
100.0
%
$
188,484,576
    
100.0
%
$
10.52
  
 
 
Anchor Tenants (10,000 sq. ft. or greater)
 
 
 
 
Year
  
Number of Leases
  
GLA (square feet)
  
Percent of Total GLA
  
Annualized Minimum Rent at Expiration
  
Percent of Aggregate Annualized Minimum Rent at Expiration
  
Average Annual Minimum Rent per Square Foot at Expiration
  
M-T-M
    
-
    
-
    
0.0
%
$
-
    
0.0
%
$
-
  
2007
    
29
    
795,118
    
7.0
%
  
5,274,442
    
6.1
%
  
6.63
  
2008
    
22
    
541,663
    
4.8
%
  
3,681,582
    
4.2
%
  
6.80
  
2009
    
33
    
895,596
    
7.9
%
  
5,727,078
    
6.6
%
  
6.39
  
2010
    
42
    
1,039,531
    
9.2
%
  
6,485,178
    
7.4
%
  
6.24
  
2011
    
42
    
1,294,824
    
11.4
%
  
8,678,677
    
10.0
%
  
6.70
  
2012
    
22
    
809,866
    
7.1
%
  
5,346,895
    
6.1
%
  
6.60
  
2013
    
15
    
533,716
    
4.7
%
  
4,255,651
    
4.9
%
  
7.97
  
2014
    
15
    
661,561
    
5.8
%
  
4,415,767
    
5.1
%
  
6.67
  
2015
    
13
    
393,588
    
3.5
%
  
2,796,204
    
3.2
%
  
7.10
  
2016
    
19
    
936,602
    
8.2
%
  
13,377,706
    
15.4
%
  
14.28
  
Thereafter
    
66
    
2,766,002
    
24.5
%
  
27,063,224
    
31.0
%
  
9.78
  
Sub-total/Average
    
318
    
10,668,067
    
94.0
%
  
87,102,404
    
100.0
%
$
8.16
  
Vacant
    
22
    
686,121
    
6.0
%
  
N/A
    
N/A
    
N/A
  
Total/Average
    
340
    
11,354,188
    
100.0
%
$
87,102,404
    
100.0
%
$
7.67
  
 

Local Tenants (less than 10,000 sq. ft.)
 
 
 
 
Year
  
Number of Leases
  
GLA (square feet)
  
Percent of Total GLA
  
Annualized Minimum Rent at Expiration
  
Percent of Aggregate Annualized Minimum Rent at Expiration
  
Average Annual Minimum Rent per Square Foot at Expiration
  
M-T-M
    
82
    
145,283
    
2.2
%
$
1,854,375
    
1.8
%
$
12.76
  
2007
    
623
    
1,255,994
    
19.2
%
  
19,292,157
    
19.0
%
  
15.36
  
2008
    
571
    
1,177,329
    
18.0
%
  
19,159,905
    
18.9
%
  
16.27
  
2009
    
566
    
1,187,692
    
18.1
%
  
19,668,699
    
19.4
%
  
16.56
  
2010
    
366
    
853,562
    
13.0
%
  
14,617,220
    
14.4
%
  
17.12
  
2011
    
316
    
766,041
    
11.6
%
  
14,410,547
    
14.2
%
  
18.81
  
2012
    
47
    
155,205
    
2.4
%
  
3,001,854
    
3.0
%
  
19.34
  
2013
    
24
    
76,823
    
1.2
%
  
1,669,228
    
1.6
%
  
21.73
  
2014
    
19
    
64,952
    
1.0
%
  
1,325,181
    
1.3
%
  
20.40
  
2015
    
20
    
66,394
    
1.0
%
  
1,509,369
    
1.5
%
  
22.73
  
2016
    
17
    
60,035
    
0.8
%
  
1,468,584
    
1.4
%
  
24.46
  
Thereafter
    
51
    
178,377
    
2.7
%
  
3,405,053
    
3.5
%
  
19.09
  
Sub-total/Average
    
2,702
    
5,987,687
    
91.3
%
$
101,382,172
    
100.0
%
$
16.93
  
Vacant
    
319
    
569,779
    
8.7
%
  
N/A
    
N/A
    
N/A
  
Total/Average
    
3,021
    
6,557,466
    
100.0
%
$
101,382,172
    
100.0
%
$
15.46
  

 
- 29 -
 
We may incur substantial expenditures in connection with the re-leasing of our retail space, principally in the form of tenant improvements and leasing commissions. The amounts of these expenditures can vary significantly, depending on negotiations with tenants and the willingness of tenants to pay higher base rents over the terms of the leases. We also incur expenditures for certain recurring capital expenses.
 
Insurance
 
Our tenants are generally responsible under their leases for providing adequate insurance on the spaces they lease. We believe that our properties are covered by adequate fire, flood and property insurance, and where necessary hurricane and windstorm coverages all provided by reputable companies. However, certain of our properties are not covered by disaster insurance with respect to certain hazards (such as hurricanes) for which coverage is not available or available only at rates, which in our opinion, are not economically justifiable.
 
ITEM 3.   LEGAL PROCEEDINGS
 
Neither we nor our properties are subject to any litigation which we believe will have a material adverse affect on our business, financial condition, results of operations or cash flows. Furthermore, to the best of our knowledge, except as described above with respect to environmental matters, there is no litigation threatened against us or any of our properties, other than routine litigation and administrative proceedings arising in the ordinary course of business, which collectively are not expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.
 
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
No matters were submitted for stockholder vote during the fourth quarter of 2006.
 

 
- 30 -

 
PART II
 
 
ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF  EQUITY SECURITIES
 
Market Information and Dividends
 
Our common stock began trading on the New York Stock Exchange, or NYSE, on May 18, 1998, under the symbol “EQY.” On February 16, 2007, we had approximately 1,600 stockholders of record representing approximately 15,000 beneficial owners. The following table sets forth for the periods indicated the high and low sales closing prices as reported by the NYSE and the distributions declared by us:
 
   
High
  
Low
  
Distributions Declared
  
               
First Quarter, 2006
  
$
24.90
  
$
22.40
  
$
0.30
  
Second Quarter, 2006
  
$
24.00
  
$
20.48
  
$
1.30
  
Third Quarter, 2006
  
$
25.48
  
$
21.15
  
$
0.30
  
Fourth Quarter, 2006
  
$
28.14
  
$
23.89
  
$
0.30
  
 
   
High
  
Low
  
Distributions Declared
  
               
First Quarter, 2005
  
$
23.13
  
$
19.85
  
$
0.29
  
Second Quarter, 2005
  
$
23.15
  
$
19.92
  
$
0.29
  
Third Quarter, 2005
  
$
24.47
  
$
22.00
  
$
0.29
  
Fourth Quarter, 2005
  
$
23.89
  
$
22.05
  
$
0.30
  
                     
 
Dividends paid during 2006 and 2005 totaled $162.7 million and $87.3 million, respectively. Future declarations of dividends will be made by us at the discretion of our board of directors and will depend upon our earnings, financial condition and such other factors as our board of directors deems relevant. In order to qualify for the beneficial tax treatment accorded to real estate investment trusts under the Internal Revenue Code of 1986, or the Code, we are currently required to make distributions to holders of our shares in an amount equal to at least 90% of our “real estate investment trust taxable income,” as defined in Section 857 of the Code.
 
Performance Graph

The following graph compares the cumulative total return of our common stock with the Russell 2000 Index, the NAREIT All Equity Index and SNL Shopping Center REITs, an index of approximately 20 publicly-traded REITS that primarily own and operate shopping centers, each as provided by SNL Securities L.C., from December 31, 2001 until December 31, 2006. The SNL Shopping Center REIT index is compiled by SNL Securities L.C. and includes our common stock and securities of many of our competitors. The graph assumes that $100 was invested on December 31, 2001 in our common stock, the Russell 2000 Index, the NAREIT All Equity REIT Index and SNL Shopping Center REITs, and that all dividends were reinvested. The lines represent semi-annual index levels derived from compounded daily returns. The indices are re-weighted daily, using the market capitalization on the previous tracking day. If the semi-annual interval is not a trading day, the preceding trading day is used.
 
The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this annual report into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
 

- 31 -


   
Period Ending
  
Index
12/31/01
12/31/02
12/31/03
12/31/04
12/31/05
12/31/06
Equity One, Inc.
100.00
105.01
141.86
211.33
216.77
275.25
Russell 2000
100.00
79.52
117.09
138.55
144.86
171.47
NAREIT All Equity REIT Index
100.00
103.82
142.37
187.33
210.12
283.78
SNL Shopping Center REITS Index
100.00
115.58
163.87
222.64
242.95
327.02
 
Issuer Purchases Of Equity Securities
 
During 2006, our board of directors authorized a share repurchase program in an amount up to $100.0 million. During the period commencing May 2006 through December 2006 purchases of shares of common stock were made in the open market or in privately negotiated transactions, at the discretion of our management and as market conditions warranted.
 
During the quarter ended December 31, 2006, we made the following purchase of our common stock:
 
Period
October 1, 2006-
December 31, 2006
  
Total Number of Shares Purchased
  
Average Price Paid per Share
  
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
  
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
  
October 1-31
    
180,900
  
$
24.13
    
180,900
  
$
30,896,629
  
November 1-30
    
-
    
-
    
-
    
-
  
December 1-31
    
-
    
-
    
-
    
-
  
Total
    
180,900
  
$
24.13
    
180,900
  
$
30,896,629
  
 
 
- 32 -
During 2006, we purchased an aggregate of 3.0 million shares of our common stock under the share repurchase program for approximately $69.1 million with an average cost of $22.68 per common share.
 
Equity Compensation Plan Information
 
Information regarding equity compensation plans is presented in Item 12 of this annual report and incorporated herein by reference.
 
ITEM 6. SELECTED FINANCIAL DATA

   
Year Ended December 31,
  
   
2006
  
2005
  
2004
  
2003
  
2002
  
   
(in thousands other than per share, percentage and ratio data)
  
Statement of Operations Data: (1)
                      
Total rental income
  
$
233,421
  
$
210,259
  
$
187,257
  
$
145,696
  
$
61,229
  
Property operating expenses
    
65,102
    
55,701
    
50,005
    
43,227
    
18,214
  
Property management and leasing services
    
1,861
    
229
    
82
    
42
    
-
  
Lease termination
    
1,002
    
-
    
-
    
-
    
-
  
Rental property depreciation and amortization
    
42,012
    
34,996
    
29,976
    
21,806
    
8,249
  
Litigation settlement
    
-
    
-
    
-
    
-
    
2,067
  
General and administrative expenses
    
26,895
    
17,281
    
16,601
    
11,046
    
6,852
  
Total operating expenses
    
136,872
    
108,207
    
96,664
    
76,121
    
35,382
  
Interest expense
    
(54,458
)
  
(47,795
)
  
(41,486
)
  
(32,665
)
  
(16,266
)
Amortization of deferred financing fees
    
(1,490
)
  
(1,454
)
  
(1,335
)
  
(902
)
  
(627
)
Other income (expenses), net
    
16,628
    
7,941
    
2,704
    
1,095
    
4,054
  
Minority interest
    
(206
)
  
(188
)
  
(576
)
  
(756
)
  
(101
)
Income from continuing operations
  
$
57,023
  
$
60,556
  
$
49,900
  
$
36,347
  
$
12,907
  
Net income
  
$
176,955
  
$
92,741
  
$
97,804
  
$
63,647
  
$
39,934
  
Basic earnings per share:
                                
Income from continuing operations
  
$
0.77
  
$
0.82
  
$
0.71
  
$
0.61
  
$
0.40
  
Net income
  
$
2.40
  
$
1.26
  
$
1.39
  
$
1.06
  
$
1.22
  
Diluted earnings per share:
                               
Income from continuing operations
  
$
0.77
  
$
0.81
  
$
0.69
  
$
0.59
  
$
0.39
  
Net income
  
$
2.38
  
$
1.24
  
$
1.37
  
$
1.05
  
$
1.20
  
                                 
Balance Sheet Data: 
                                
Total rental properties, net of accumulated depreciation
  
$
1,885,711
  
$
1,896,505
  
$
1,873,687
  
$
1,617,299
  
$
678,431
  
Total assets
    
2,051,849
    
2,052,033
    
1,992,292
    
1,677,386
    
730,069
  
Mortgage notes payable
    
391,647
    
446,925
    
495,056
    
459,103
    
332,143
  
Total liabilities
    
1,125,182
    
1,077,879
    
1,059,507
    
834,162
    
375,969
  
Minority interest
    
989
    
1,425
    
1,397
    
12,672
    
3,869
  
Shareholders’ equity
    
925,678
    
972,729
    
931,388
    
830,552
    
350,231
  
Other Data:
                                
Funds from operations(2)
  
$
110,311
  
$
124,836
  
$
113,663
  
$
89,870
  
$
45,487
  
Cash flows from:
                                
Operating activities
    
94,643
  
$
117,192
  
$
113,110
  
$
78,262
  
$
45,613
  
Investing activities
    
114,813
    
(82,371
)
  
(244,851
)
  
(326,160
)
  
(51,439
)
Financing activities
    
(209,558
)
  
(39,841
)
  
135,897
    
245,920
    
7,864
  
GLA (square feet) at end of period
    
18,353
    
19,699
    
19,914
    
19,883
    
8,530
  
Occupancy of core shopping center portfolio at end of period
    
95
%
  
93
%
  
95
%
  
90
%
  
89
%
Dividends per share
  
$
2.20
  
$
1.17
  
$
1.13
  
$
1.10
  
$
1.08
  
                                 
(1)  
Reclassified to reflect the reporting of discontinued operations.
 
- 33 -
(2)  
We believe Funds From Operations (“FFO”) (combined with the primary GAAP presentations) is a useful supplemental measure of our operating performance that is a recognized metric used extensively by the real estate industry, in particular, REITs. Accounting for real estate assets using historical cost accounting under accounting principles generally accepted in the United States of America (“GAAP”) assumes that the value of real estate diminishes predictably over time. The National Association of Real Estate Investment Trusts (“NAREIT”) stated in its April 2002 White Paper on Funds from Operations “since real estate values…have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.”
 
FFO, as defined by NAREIT, is “net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.” We believe that financial analysts, investors and stockholders are better served by the presentation of comparable period operating results generated from our FFO measure. Our method of calculating FFO may be different from methods used by other REITs and accordingly, may not be comparable to such other REITs.
 
FFO is presented to assist investors in analyzing our performance. FFO (i) does not represent cash flow from operations as defined by GAAP, (ii) is not indicative of cash available to fund all cash flow needs and liquidity, including the ability to make distributions, and (iii) should not be considered as an alternative to net income (which is determined in accordance with GAAP) for purposes of evaluating our operating performance. We believe net income is the most directly comparable GAAP measure to FFO.
 
The following table illustrates the calculation of funds from operations for each of the five years in the period ended December 31, 2006 (in thousands):
 
   
Year Ended December 31,
  
   
2006
  
2005
  
2004
  
2003
  
2002
  
Net income
  
$
176,955
$
92,741
$
97,804
$
63,647
$
39,934
  
Adjustments:
                                
Rental property depreciation and amortization, including discontinued operations
    
44,791
    
43,445
    
37,215
    
28,007
    
13,810
  
Gain on disposal of income- producing properties
    
(112,995
)
  
(11,460
)
  
(22,176
)
  
(3,083
)
  
(9,264
)
Minority interest
    
206
    
110
    
623
    
803
    
101
  
Other Items:
                                
Interest on convertible partnership units
    
-
    
-
    
-
    
43
    
259
  
Pro-rata share of real estate depreciation from joint ventures 
    
1,354
    
-
    
197
    
453
    
647
  
Funds from operations
$
110,311
  
$
124,836
  
$
113,663
  
$
89,870
  
$
45,487
  
                                 
 
 
- 34 -
The following table reflects the reconciliation of FFO per diluted share to earnings per diluted share, the most directly comparable GAAP measure, for the periods presented:
 
 
  
Year Ended December 31,
  
   
2006
  
2005
  
2004
  
2003
  
2002
  
Earnings per diluted share*
  
$
2.38
  
$
1.24
  
$
1.37
  
$
1.05
$
1.20
  
Adjustments:
                                
Rental property depreciation and amortization, including discontinued operations
    
0.60
    
0.58
    
0.52
    
0.45
    
0.41
  
Gain on disposal of income-producing properties
    
(1.52
)
  
(0.15
)
  
(0.31
)
  
(0.05
)
  
(0.27
)
Other items:
                                
Pro-rata share of real estate depreciation from joint ventures
    
0.02
    
-
    
-
    
0.01
    
0.02
  
Funds from operations per diluted share
  
$
1.48
  
$
1.67
  
$
1.58
  
$
1.46
  
$
1.36
  
 
* Earnings per diluted share reflect the add-back of interest on convertible partnership units and the minority interest(s) in earnings of consolidated subsidiaries which are convertible to shares of our common stock.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing in “Item 8. Financial Statements and Supplementary Data” of this annual report.
 
Overview
 
We are a real estate investment trust, or REIT, that principally owns, manages, acquires and develops neighborhood and community shopping centers. As of December 31, 2006, our property portfolio consisted of 179 properties, including 166 shopping centers comprising approximately 17.9 million square feet of gross leasable area, or GLA, six development parcels and seven non-retail properties. As of December 31, 2006, the portfolio was 92.1% leased and included national, regional and local tenants.
 
Two important events occurred in 2006 that affect the results reported in this annual report and will affect our business in the future. First, in April 2006, we sold a portfolio of 29 properties located in the State of Texas to a joint venture in which we initially retained a 20% interest. In December, however, we sold our interest in the joint venture to an affiliate of our partner, completing the full disposition of our interest in the 29 Texas properties. The sale of the Texas properties resulted in a gain of $112.9 million. In addition, the $4.8 million of 2006 operating results of the Texas properties prior to their sale to the JV, four other properties sold in 2006 and one property held for sale at December 31, 2006 are reflected as operations of income-producing properties sold or held for sale. The 2005 and 2004 operations of income-producing properties sold or held for sale of $20.7 and $25.8 million reflect a reclassification of operations for properties sold during 2004, 2005 and 2006, including the Texas properties, and the one property held for sale.
 
Second, in August of 2006, our founder and chairman of the board, Chaim Katzman, decided to relinquish the title of chief executive officer, and we hired Jeffrey S. Olson, the former president of the east and west divisions of Kimco Realty Corporation, to replace him. In addition, the employment agreements with our prior president and chief operating officer and our prior chief financial officer expired at the end of 2006. Mr. Olson assumed the role of president, and we hired Jeffrey S. Stauffer, the former chief operating officer of Pan Pacific Retail Properties, to serve as our executive vice president and chief operating officer, and we hired Gregory R. Andrews, a former principal of Green Street Advisors, as our executive vice president and chief financial officer. This management transition occurred, for the most part, in the third and fourth quarters of 2006 and related changes to our organization are on-going. As a result, we incurred $5.7 million of compensation, severance and employment-related expenses in 2006 related to the management transition.
 
- 35 -
Our principal business objective has been and will continue under our new management team to be maximizing long-term stockholder value by generating sustainable cash flow growth and increasing the long-term value of our real estate assets.
 
Operating Strategies. We derive substantially all of our revenue from tenants under existing leases at our properties. Our core operating strategy is to maximize and strengthen this revenue by attracting and retaining a strong and diverse base of tenants. In 2006, this strategy resulted in:
 
a 3.0% increase in same property net operating income over 2005;
 
·  
an increase in the average rental rate of 6.5% to $12.53 per square foot on 434 lease renewals aggregating 1.4 million square feet;
 
·  
181 new leases totaling 528,514 square feet at an average rental rate of $12.69 per square foot, representing a 7.8% increase over prior rents on a same-space basis;
 
·  
also, 155 additional new leases totaling 591,532 square feet at an average rental rate of $12.44 per square foot, and
 
·  
an occupancy rate of 95.0% in our core shopping center portfolio at December 31, 2006 versus 93.4% at December 31, 2005.
 
In the long-term, our operating revenues are dependent on the continued occupancy of our properties, the rents that we are able to charge to our tenants and the ability of these tenants to make their rental payments. The main long-term threat to our business is our dependence on the viability of our anchor and other tenants. We believe, however, that our general operating risks are mitigated by concentrating on high-density neighborhoods in major metropolitan areas, leasing to strong tenants in the markets in which we own properties and maintaining a diverse tenant mix.
 
Investment Strategies. Our investment strategy is to deploy capital in projects that generate a return that exceeds our cost of capital and, at the same time, to sell assets that no longer meet our investment criteria. In 2006, this strategy resulted in:
 
·  
the sale of the 29 properties in Texas for aggregate consideration of $405.7 million and an aggregate gain of $112.9 million;
 
·  
the acquisition of 15 retail properties, 5 outparcels and 3 land parcels for aggregate consideration of $270.9 million; and
 
·  
the completion and leasing of $45.4 million of development and redevelopment projects.
 
Capital Strategy. Our business during 2006 was financed using our revolving lines of credit, proceeds from the sale of properties, issuance of public debt and assumed mortgages. Specifically, in 2006, our capital strategy resulted in:
 
·  
the issuance of $250.0 million principal amount of senior unsecured notes at interest rates ranging from 6.0% to 6.25% and maturing in 2016 and 2017;
 
·  
our re-purchase of 3.0 million shares of our common stock for total consideration of $69.1 million representing an average price of $22.68 per share and
 
·  
the prepayment of our $75.0 million 7.25% senior notes due August 2007 and mortgage notes aggregating $25.5 million.
 
At December 31, 2006, the outstanding balances on our lines of credit were in the aggregate $76.5 million, with $114.3 million of availability under those facilities. In order to fund our business in the future, we anticipate using similar financing sources. However, there can be no assurances that these sources will be available to us in the future at reasonable terms or at all. In addition, although we have enjoyed a low interest rate environment in recent years, the increase in interest rates over the last 18 months has had, and any future increases will have, an adverse effect on the cost of our future borrowings, including borrowings under our revolving credit facilities, which are based on variable interest rates. As interest rates rise, the interest expense we incur on these loans will increase.
 
- 36 -
 
2007 Outlook. One of our principal focuses in 2007 will be the disposition of assets that no longer meet our investment criteria. These sales may negatively affect our rental revenue and earnings in the short term. In the long run, we believe that our business and the earnings generated from the remaining properties will benefit from the quality, location and demographic characteristics of that portfolio, as well as new properties developed or acquired, in part, with capital from those sales.
 
We continue to see a positive impact on our income as a result of the redevelopment of our shopping centers and higher rental rates on existing spaces that are experiencing tenant turnover. We anticipate that approximately $100 million of developments and redevelopment projects will be completed in the next two years. As redevelopment properties stabilize, spaces that were out of service begin generating revenue; in addition, spaces that were not out of service and that have expiring leases may generate higher revenue because we generally receive higher rent on new leases. Further, leases signed in 2005 and 2006 on spaces for which there was a previous tenant have on average been renewed at higher base rent than the prior lease.
 
Our business is generally dependent on the performance of the economy in the areas in which we own properties and the cost of financing available to fund our growth. Changes in the economic environment tend to have a direct effect on our tenants’ businesses and, therefore, their ability to continue to pay us rent or remain in occupancy of our properties, as well as the willingness of businesses to lease locations. The markets in which we currently own properties have continued to show signs of economic and population growth during 2006, and we expect those trends to continue in 2007. However, general economic slowdowns or other macro-economic changes in these markets may adversely affect our business.
 
Critical Accounting Policies and Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, which we refer to as GAAP, requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past and current events and economic conditions. In addition, information relied upon by management in preparing such estimates includes internally generated financial and operating information, external market information, when available, and when necessary, information obtained from consultations with third party experts. Actual results could differ from these estimates. A discussion of possible risks which may affect these estimates is included in “Item 1A. Risk Factors” of this annual report. Management considers an accounting estimate to be critical if changes in the estimate or accrual could have a material impact on our consolidated results of operations or financial condition.
 
The most significant accounting policies, which involve the use of estimates and assumptions as to future uncertainties and, therefore, may result in actual amounts that differ from estimates, are as follows:
 
Revenue Recognition and Accounts Receivable. Leases with tenants are classified as operating leases. Generally, our leases contain fixed escalations which occur at specified times during the term of the lease. Base rents are recognized on a straight-line basis from when the tenant controls the space through the term of the related lease, net of valuation adjustments, based on management’s assessment of credit, collection and other business risk. We make estimates of the collectibility of our accounts receivable related to base rents, straight-line rents, expense reimbursements and other revenue or income taking into account our experience in the retail sector, available internal and external tenant credit information, payment history, industry trends, tenant credit-worthiness and remaining lease terms. In some cases, primarily relating to straight-line rents, the collection of these amounts extends beyond one year. The extended collection period for straight-line rents along with our evaluation of tenant credit risk may result in the non-recognition of a portion of straight-line rental income until the collection of such income is reasonably assured. These estimates have a direct impact on our earnings.
 
- 37 -
Real Estate Properties and Development Assets. The nature of our business as an owner, developer and operator of retail shopping centers means that we invest significant amounts of capital into our properties. Depreciation and maintenance costs relating to our properties constitute substantial costs for us as well as the industry as a whole. We capitalize real estate investments and depreciate them based on estimates of the assets’ physical and economic useful lives. The cost of our real estate investments is charged to depreciation expense over the estimated life of the asset using straight-line rates for financial statement purposes. We periodically review the estimated lives of our assets and implement changes, as necessary, to these estimates and, therefore, to our depreciation rates.
 
Properties and real estate under development are recorded at cost. We compute depreciation using the straight-line method over the estimated useful lives of the assets generally from 5 years to a maximum of 40 years on buildings and improvements. Maintenance and repair costs are charged to operations as incurred. Tenant work and other major improvements are capitalized and amortized over the term of the lease or the estimated useful life of the improvements, whichever is shorter. Minor improvements, furniture and equipment are capitalized and depreciated over estimated useful lives of the assets, generally from five to seven years.
 
Certain external and internal costs directly related to the development, redevelopment and leasing of real estate, including applicable salaries and the related direct costs, are capitalized. We capitalize acquisition and construction costs, property taxes, interest, insurance and other miscellaneous costs that are directly identifiable with a project, from pre-acquisition until the time that construction is complete and the development is ready for its intended use, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 67 and SFAS No. 34. We allocate the capitalized project costs to the various components of the project based on the components’ relative fair values. Our cost allocation method requires the use of management estimates regarding the fair market value of each project component. Management bases its estimates on current market appraisals, comparable sales, existing sale and purchase contracts, replacement cost, historical experience, and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the fair market values of real estate assets. Actual results may differ from these estimates and anticipated returns on a project, as well as the gain or loss on disposition of the individual project components, could vary significantly from estimated amounts. The capitalized costs associated with developments and redevelopments are depreciated over the life of the improvement. Capitalized costs associated with leases are amortized over the base term of the lease. Unamortized leasing costs are charged to operating expense if the applicable tenant vacates before the expiration of its lease. Undepreciated tenant work is charged to operations if the applicable tenant vacates and the tenant work is replaced.
 
- 38 -
We are required to make subjective assessments as to the useful lives of our real estate and related assets for purposes of determining the amount of depreciation to reflect on an annual basis. These assessments have a direct impact on net income. We periodically review the lives of assets and any decrease in asset lives could have the effect of increasing depreciation expense while any analysis indicating that lives are longer than we have assumed could have the effect of decreasing depreciation expense.
 
Interest costs on developments and major redevelopments are capitalized as part of developments and redevelopments not yet placed in service. Capitalization of interest commences when development activities and expenditures begin and end upon completion, which is when the asset is ready for its intended use. Generally, rental property is considered substantially complete and ready for its intended use upon completion of tenant improvements, but no later than one year from completion of major construction activity.
 
When assets are identified as held for sale, management estimates the sales prices, net of selling costs, of such assets. Assets that will be sold together in a single transaction are aggregated in determining if the net sales proceeds of the group are expected to be less than the net book value of the assets. If, in management’s opinion, the net sales prices of the assets, which have been identified for sale, are expected to be less than the net book value of the assets, an impairment charge is recorded. An impairment charge may also be recorded for any asset if it is probable, in management’s estimation, that aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property.
 
We are required to make subjective assessments as to whether there are impairments in the value of our real estate properties and other investments. The assessments have a direct impact on our net income because recording an impairment charge results in an immediate charge to expense.

Real Estate Acquisitions. Upon acquisition of operating real estate properties, we estimate the fair value of acquired tangible assets (consisting of land, building and improvements), identified intangible assets and liabilities (consisting of above- and below-market leases, in-place leases and lease origination costs), and assumed debt in accordance with SFAS No. 141, Business Combinations. Based on these estimates, we allocate the purchase price to the applicable assets and liabilities based on their estimated fair value. We evaluate the useful life of each amortizable intangible asset in each reporting period and account for any changes in such estimated useful life over the revised remaining useful life.
 
Securities. We have investments that consist primarily of equity securities. The equity investments are classified as available-for-sale and recorded at fair value based on current market prices. Changes in the fair value of the equity investments are included in accumulated other comprehensive income (loss).
 
Goodwill. We are required to perform annual impairment tests of our goodwill, and more frequently in certain circumstances. Goodwill can no longer be amortized. The goodwill impairment test is a two-step process, which requires management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of each reporting unit and comparing those estimated fair values with the carrying values, which include the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of a reporting unit’s “implied fair value” of goodwill requires us to allocate the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to its corresponding carrying value.
 
Management cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill that totaled $13.1 million at December 31, 2006. Such events include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our tenants, or a material negative change in our relationships with significant tenants.
 
Share-based and other Incentive Awards. With the adoption of SFAS 123(R)’s fair value method on January 1, 2006, we have had to recognize all share-based awards to employees, including grants of stock options, in our financial statements based on their fair values. Because there is no observable market for our options, management must make critical estimates in determining the fair value at the grant date. Variations in the assumptions will have a direct impact on our net income. Critical estimates in valuing the fair value at the grant date and the assumptions that marketplace participants would use in making estimates of fair value include: expected volatility, expected dividend yield, risk-free interest rate, involuntary conversion due to change in control and expected exercise history of similar grants.
 
In addition, in the employment agreements for three of our new executive officers, the employees have the right to an additional cash bonus at the end or early termination of those agreements based on the performance of our stock versus a group of our peers. In assessing the annual compensation costs related to these future payments, management is required to make critical assumptions and estimates in determining the future payment.
 
Management’s estimates of the compensation costs under 123(R) and these agreements are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. Assumptions may not always reflect unanticipated events and changes in circumstances may occur.
 
New Accounting Standards
 
In March 2004, the EITF reached a consensus on EITF Issue No. 03-1, The Meaning of Other-than-Temporary Impairment and Its Application to Certain Investments. The guidance prescribes a three-step model for determining whether an investment is other-than-temporarily impaired and requires disclosures about unrealized losses on investments. The accounting guidance became effective for reporting periods beginning after June 15, 2004, while the disclosure requirements became effective for annual reporting periods ending after June 15, 2004. In September 2004, the FASB issued FASB Staff Position (FSP) EITF 03-1-1, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1-1, The Meaning of Other-than-Temporary Impairment and Its Application to Certain Investments, (FSP EITF 03-11). FSP EITF 03-1-1 delayed the effective date for the measurement and recognition guidance contained in paragraphs 10-20 of EITF Issue 03-1. In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, The Meaning of Other-than-Temporary Impairment and Its Application to Certain Investments. This FSP addresses the determination as to when an investment is considered impaired, whether the impairment is other-than-temporary, and the measurement of an impairment loss. This statement specifically nullifies the requirements of paragraph 10-18 of EITF 03-1 and references existing other-than-temporary impairment guidance. The guidance under this FSP is effective for reporting periods beginning after December 15, 2005, and we continued to apply relevant “other-than-temporary” guidance, as provided for in FSP EITF 03-1-1 during fiscal 2005. The adoption in 2006 of the guidance of FSP FAS 115-1 and FAS 124-1 did not have a significant effect on our consolidated financial statements.
 
- 39 -
In December 2004, the FASB issued SFAS 123(R), Share-Based Payment. This standard requires compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant date fair value of the equity instruments issued. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. This standard replaces SFAS No. 123 and supersedes Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and applies to all awards granted, modified, repurchased or cancelled after July 1, 2005. In April 2005, the SEC amended the compliance date of SFAS No. 123(R) through an amendment of Regulation S-X. Public companies with calendar year-ends would be required to adopt the provisions of the standard effective for fiscal years beginning after September 15, 2005. The adoption on January 1, 2006 by us of SFAS 123(R)’s fair value method has had an impact on our results of operations, although it has had no impact on our overall financial position. We have elected to apply the modified prospective transition method to all past awards outstanding and unvested as of the date of adoption. However, had we adopted SFAS 123(R) in prior periods, the impact of the standard would have approximated the impact as presented in the disclosure of pro forma net income and earnings per share in Note 2, Stock-Based Compensation.
 
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Correction (SFAS 154”), which replaces APB Opinions No. 20 Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements - An Amendment of APB Opinion No. 28. SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, on the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005, and was adopted by us in the first quarter of 2006. The adoption of this standard did not materially impact our financial position, results of operations or cash flows.
 
In April 2006, the FASB issued FASB Staff Position FIN 46(R)-6, Determining the Variability to be Considered in Applying FASB Interpretation No. 46(R) that became effective for the third quarter of 2006. FSP FIN No. 46(R)-6 clarifies that the variability to be considered in applying Interpretation 46(R) shall be based on an analysis of the design of the variable interest entity. The adoption of this standard did not materially impact our consolidated financial statements.
 
In June 2006, the EITF reached a consensus on EITF Issue No. 06-02, Accounting for Sabbatical Leave and Other Similar Benefits (“EITF 06-02”). EITF 06-02 provides that an employee’s right to a compensated absence under a sabbatical leave or similar benefit arrangement in which the employee is not required to perform any duties during the absence is an accumulating benefit. Therefore, such arrangements should be accounted for as a liability with the cost recognized over the service period during which the employee earns the benefit. The provisions of EITF 06-02 will be effective as of January 1, 2007 and will impact the accounting for certain of our employment arrangements. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.
 
In June 2006, the FASB issued FASB Interpretation No. 48 - Accounting for Uncertainty in Income Taxes (“FIN 48”). In summary, FIN 48 requires that all tax positions subject to SFAS No. 109 - Accounting for Income Taxes, to be analyzed using a two-step approach. The first step requires an entity to determine if a tax position is more likely than not to be sustained upon examination. In the second step, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon ultimate settlement. FIN 48 is effective for fiscal years beginning after December 15, 2006, with any adjustment in a company’s tax provision being accounted for as a cumulative effect of accounting change in beginning equity. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.
 
- 40 -
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The adoption of this standard is not expected to materially impact how we measure fair value.
 
In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R), (“SFAS 158”).
 
SFAS 158 requires recognition of the over funded or under funded status of a benefit postretirement plan in the statement of financial position, as well as recognition of changes in that funded status through comprehensive income in the year in which they occur. SFAS 158 also requires a change in the measurement of a plan’s assets and benefit obligations as of the end date of the employer’s fiscal year. SFAS 158 is effective for fiscal years ending after December 15, 2006, except for the measurement date provisions, which are effective for fiscal years ending after December 15, 2008. The adoption of the applicable provisions of this standard did not have a material impact on our consolidated financial statements and the measurement date provisions are not expected to have a material impact on our consolidated financial statements.
 
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The adoption of this standard did not have a material impact on our consolidated financial statements.
 
Results of Operations
 
We derive substantially all of our revenues from rents received from tenants under existing leases on each of our properties. These revenues include 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’ revenues, 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, utilities and other expenses, general and administrative expenses, which include payroll, office expenses, professional fees and other administrative expenses, and interest expense, primarily on mortgage debt, unsecured senior debt 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 and interest, incurred in respect of property 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 change in our statement of operations line items is related to these changes in our property portfolio.
 
- 41 -
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005. The following summarizes items from our audited consolidated statements of operations that we think are important in understanding our results of operations and/or those items which have significantly changed in 2006 compared to 2005 (in thousands):
 
   
For the year ended December 31,
  
   
2006
  
2005
  
Change
  
   
(in thousands)
      
Total revenue$
 
$
233,421
  
$
210,259
    
11.0
%
Property operating expenses
  
$
65,102
  
$
55,701
    
16.9
%
Property management and leasing services expenses
  
$
1,861
  
$
229
    
712.7
%
Rental property depreciation and amortization
  
$
42,012
  
$
34,996
    
20.1
%
General and administrative expenses
  
$
26,895
  
$
17,281
    
55.6
%
Interest expense
  
$
54,458
  
$
47,795
    
14.0
%
Investment income
  
$
7,487
  
$
7,941
    
5.7
%
Gain on sale of real estate
  
$
6,937
  
$
-
    
100.0
%
Equity in income of unconsolidated joint ventures
  
$
1,650
  
$
-
    
100.0
%
Discontinued operations
  
$
119,932
  
$
32,185
    
272.6
%
 
Total revenue increased by $23.2 million, or 11.0%, to $233.4 million in 2006 from $210.3 million in 2005. The following factors accounted for this difference:
 
·  
Properties acquired during 2006 increased revenue by approximately $13.0 million;
 
·  
The full year 2006 benefited from properties acquired during 2005 which increased revenue by approximately $1.4 million;
 
·  
Same property revenue increased by approximately $7.0 million in 2006 due to higher termination fees, expense recovery revenue and increases in rental rates;
 
·  
The completion of development and redevelopment properties increased revenue by approximately $247,000, and
 
·  
Property management and leasing services revenue increased by $1.6 million as a result of providing property management and leasing services for the Texas properties.
 
Property operating expenses increased by $9.4 million, or 16.9%, to $65.1 million for 2006 from $55.7 million in 2005. The following factors accounted for this difference:
 
·  
Properties acquired during 2006 increased operating expenses by approximately $5.5 million;
 
·  
Properties acquired during 2005 increased the full year 2006 operating expenses by approximately $814,000;
 
·  
Same property operating expenses increased by approximately $2.5 million as a result of higher repairs and other maintenance expenses, and
 
·  
The completion of development and redevelopment properties increased operating expenses by $644,000.
 
Property management and leasing services expenses increased by $1.6 million as a result of providing property management and leasing services for the Texas properties.
 
        Rental property depreciation and amortization increased by $7.0 million, or 20.0%, to $42.0 million for 2006 from $35.0 million in 2005. The following factors accounted for this difference:
 
·  
Properties acquired during 2006 increased depreciation and amortization by $5.3 million;
 
·  
Properties acquired during 2005 increased the full year 2006 depreciation and amortization expense by approximately $326,000;
 
·  
Same property depreciation and amortization increased by $1.3 million related to leasing and tenant improvement amortization, and
 
·  
Completion of development and redevelopment properties increased depreciation and amortization by $25,000.
 
- 42 -
General and administrative expenses increased by $9.6 million, or 54.5%, to $26.7 million for 2006 from $17.3 million in 2005. Included in this increase were $5.7 million of compensation, employment-related expenses due to our executive management changes, $580,000 in higher fees paid to our non-employee members of the board of directors, $419,000 in additional travel and entertainment expenses, $442,000 of additional office expenses, $196,000 of computers and related services, $149,000 of depreciation related to additional furniture and fixture purchases, and write-offs of $1.0 million of abandoned pre-acquisition due diligence costs and $1.1 million related to abandoned corporate transactions that did not materialize.
 
Interest expense increased by $6.7 million, or 13.9%, to $54.5 million for 2006 from $47.8 million in 2005. This difference was primarily due to:
 
 
·
An increase of $13.6 million attributable to the issuance in September 2005 of $120.0 million principal amount of 5.375% unsecured senior notes, the issuance in March 2006 of $125.0 million principal amount of 6.0% unsecured senior notes and the issuance in August 2006 of $125.0 million principal amount of 6.25% unsecured senior notes, all of which was partially offset by the decrease of $1.9 million in interest on the repayment in March 2006 of the $50.0 million principal amount of 7.77% unsecured senior notes and the prepayment in August 2006 of the $75.0 million principal amount of 7.25% unsecured senior notes;
 
 
·
An increase of $843,000 in interest expense attributable to an increase in the variable interest rate on the $100.0 million notional principal swap of our unsecured notes;
 
 
·
A decrease of $1.3 million of interest expense attributable to a lower outstanding balance on our line of credit;
 
 
·
A decrease of $2.0 million of interest expense attributable to the repayment of certain mortgage notes, and
 
 
·
A decrease of $2.5 million of interest expense related to an increase in capitalized interest attributable to development and redevelopment activity.
 
Investment income for 2006 primarily relates to interest earned on the funds held in escrow pending the acquisition of replacement properties and $4.3 million of dividend income related to the $1.20 per ordinary share dividend declared by DIM Vastgoed N.V., a Dutch company in which we own 3.8 million ordinary shares as of March 2006. The 2005 investment income primarily relates to the gain of $5.2 million on the sale of common and preferred stock of Cedar Shopping Centers.
 
Gain on sale of real estate was $6.9 million for 2006 as a result of selling nine land parcels, of which six were related to the sale of the Texas properties, for a gross sales price of $18.5 million. There were no land sales during 2005. These gains are included in continuing operations rather than discontinued operations because they had no operating income.
 
Equity in income from unconsolidated joint venture was $1.7 million for 2006. This income is primarily due to Parcel F LLC, an entity in which we had a 50% interest, selling its land parcel and our pro-rata share of the gain.
 
We sold four income-producing properties in individual transactions, the 29 Texas properties and, at December 31, 2006, have one property held for sale that qualifies for discontinued operations. The $4.8 million of operating results of these properties are reflected as operations of income-producing properties sold or held for sale. The sales of the properties during 2006 produced an aggregate gain of $115.2 million. The 2005 operations of income-producing properties sold or held for sale of $20.7 million reflects a reclassification of operations for properties sold during 2005 and 2006 and the one property held for sale at December 31, 2006 that qualifies as discontinued operations. We recognized gains of $11.5 million in 2005 related to the sales of properties during that year.
 
- 43 -
    As a result of the foregoing, net income increased by $84.2 million, or 90.8 %, to $177.0 million for 2006 from $92.7 million in 2005.
 
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004. The following summarizes items from our audited consolidated statements of operations that we think are important in understanding our operations and/or those items which significantly changed in 2005 compared to 2004:
 
   
For the year ended December 31,
  
   
2005
  
2004
  
Change
  
   
(in thousands)
      
Total revenue
  
$
210,259
  
$
187,257
    
12.3
%
Property operating expenses
  
$
55,701
  
$
50,005
    
11.4
%
Rental property depreciation and amortization
  
$
34,996
  
$
29,976
    
16.8
%
General and administrative expenses
  
$
17,281
  
$
16,601
    
4.1
%
Interest expense
  
$
47,795
  
$
41,486
    
15.2
%
Investment income
  
$
7,941
  
$
2,346
    
238.5
%
Discontinued operations
  
$
32,185
  
$
47,904
    
32.8
%
 
Total revenue increased by $23.0 million, or 12.3%, to $210.3 million in 2005 from $187.3 million in 2004. The following factors accounted for this difference:
 
·  
Properties acquired during 2005 increased revenue by approximately $426,000;
 
·  
The full year 2005 benefited from properties acquired during 2004 which increased revenue by approximately $11.5 million;
 
·  
Same property revenue increased by approximately $9.3 million in 2005 due to higher termination fees, expense recovery revenue and increases in leasing rates;
 
·  
The completion of development and redevelopment properties increased revenue by approximately $1.4 million, and
 
·  
Property management and leasing services revenue increased by $320,000 as a result of providing additional leasing services to third parties.
 
Property operating expenses increased by $5.7 million, or 11.4%, to $55.7 million for 2005 from $50.0 million in 2004. The following factors accounted for this difference:
 
·  
Properties acquired during 2005 increased operating expenses by approximately $210,000;
 
·  
Properties acquired during 2004 increased the full year 2005 operating expenses by approximately $1.1 million;
 
·  
Same property operating expenses increased by $4.0 million as a result of higher hurricane-related clean up and repairs and other maintenance expenses, and
 
·  
The completion of development and redevelopment properties increased operating expenses by $466,000.
 
- 44 -
Property management and leasing services expense increased in 2005 by approximately $147,000 as a result of providing additional leasing services to third parties.
 
Rental property depreciation and amortization increased by $5.0 million, or 16.8%, to $35.0 million for 2005 from $30.0 million in 2004. The following factors accounted for this difference:
 
·  
Properties acquired during 2005 increased depreciation and amortization by $129,000;
 
·  
Properties acquired during 2004 increased the full year 2005 depreciation and amortization expense by approximately $2.8 million;
 
·  
Same property depreciation and amortization increased by $1.9 million related to leasing and tenant improvement amortization, and
 
·  
Completion of development and redevelopment properties increased depreciation and amortization by $198,000.
 
General and administrative expenses increased by $680,000, or 4.1%, to $17.3 million for 2005 from $16.6 million in 2004. Included in this increase were $1.0 million of compensation and employment related expenses due to additional staffing related to our growth, expansion into the northeast and additional staffing to meet compliance with the Sarbanes-Oxley Act of 2002; $97,000 related to computer upgrade, software and licenses expenses; $113,000 of additional office expenses and $228,000 of depreciation expense related to additional furniture and fixture purchases. These increases were offset by a reduction of $231,000 in professional fees related to compliance costs incurred in 2004 to implement requirements under the Sarbanes-Oxley Act of 2002 and $698,000 less in abandoned pre-acquisition due diligence costs.
 
Interest expense increased by $6.3 million, or 15.2%, to $47.8 million for 2005 from $41.5 million in 2004. This difference was primarily due to:
 
·  
An increase of $1.9 million attributable to the $200 million unsecured senior notes issued in March 2004 and $1.8 million attributable to the $120 million unsecured senior notes issued in September 2005;
 
·  
An increase of $1.6 million in interest expense attributable to an increase in the variable interest rate on the $100 million swap;
 
·  
An increase of $1.3 million of interest expense attributable to the assumption of mortgage debt related to the acquisition of properties during 2004;
 
·  
An increase of $2.3 million of interest expense attributable to outstanding principal balances on our line credit, resulting from the payoff of $26.7 million of mortgage notes, acquisitions of property and development activities and increase in the variable interest rate on the borrowings;
 
·  
A decrease of $2.5 million of interest expense attributable to the payoff of $26.7 million of mortgage notes and amortization of loan principal, and
 
·  
An increase in capitalized interest due to development and redevelopment activities which decreased interest expense by $150,000.
 
Investment income increased by $5.6 million or 238.5% to $7.9 million for 2005 from $2.3 million in 2004 due to a $5.0 million gain on the sale of Cedar Shopping Center common and preferred stock and an increase of $906,000 of dividends received on the shares prior to their sale in 2005, offset by a $554,000 reduction in interest income on the Winn Dixie bonds. We ceased recognizing interest income on the bonds until the payment of the interest is received from Winn Dixie.
 
During 2006, we sold four income-producing properties in individual transactions, the 29 Texas properties and at December 31, 2006, have one property held for sale that qualifies for discontinued operations. The 2005 operations of income-producing properties sold or held for sale of $20.7 million reflect a reclassification of operations for properties sold during 2005 and 2006. The sales of properties during 2005 produced an aggregate gain of $11.5 million. The 2004 operations of income-producing properties sold or held for sale of $25.8 million reflect a reclassification of operations for properties sold during 2004, 2005 and 2006 and the one property held for sale at December 31, 2006 that qualifies as discontinued operations. We recognized gains of $22.2 million in 2004 related to the sales of properties during 2004.
- 45 -
 
During 2004, the limited partners of IRT Partners LP elected to convert their partnership interest into shares of our common stock. This conversion resulted in a decrease in the minority interest.
 
As a result of the foregoing, net income decreased by $5.1 million, or 5.2 %, to $92.7 million for 2005 from $97.8 million in 2004.
 
Liquidity and Capital Resources
 
Due to the nature of our business and strategy, we typically generate significant amounts of cash from operations. The cash generated from operations is primarily paid to our shareholders in the form of dividends. Our status as a REIT requires that we distribute at least 90% of our REIT taxable income (including net capital gain) each year, as defined in the Code.
 
Our short-term liquidity requirements consist primarily of obligations under our capital and operating leases, 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 tenant improvements and redevelopments) and dividends to common stockholders. Historically, we have satisfied these requirements principally through cash generated from operations.
 
Our long-term capital requirements consist primarily of maturities under our long-term debt, development and redevelopment costs and potential acquisitions. We expect to fund these through a combination of sources which we believe will be available to us, including additional and replacement secured and unsecured borrowings, issuance of additional equity, joint venture relationships relating to existing properties or new acquisitions, and property dispositions. Overall capital requirements in 2007 will depend upon acquisition opportunities, the level of improvements and redevelopments on existing properties and the timing and cost of development of future phases of existing properties.
 
The cash needed to execute our operating and investing strategies, as well as to pay our debt at maturity, must come from one or more of the following sources:
 
·  
cash provided by operations that is not distributed to stockholders,
 
·  
unsecured debt financing and/or mortgage financings,
 
·  
proceeds from the issuance of new debt or equity securities,
 
·  
proceeds of property dispositions, or
 
·  
other debt and equity alternatives, including formation of joint ventures, in a manner consistent with our intention to operate with a conservative debt structure.
 
It is management’s intention that we have access to the capital resources necessary to operate, expand and develop our business. As a result, we intend to operate with and maintain a conservative capital structure that will allow us to maintain strong debt service coverage and fixed-charge coverage ratios as part of our commitment to investment-grade debt ratings.
 
While we believe that cash generated from operations, borrowings under our unsecured revolving credit facilities and our access to other longer term capital sources will be sufficient to meet our short-term and long-term liquidity requirements, there are risks inherent in our business, including those risks described in Item 1A - “Risk Factors,” that may have a material adverse effect on our cash flow, and, therefore, on our ability to meet these requirements.
 
- 46 -
As of December 31, 2006, we had approximately $1.5 million of cash held in escrow and no available cash and cash equivalents on hand. However, cash and cash equivalents are not a good indicator of our liquidity. We have revolving credit facilities with aggregate potential borrowing limits up to $280.0 million, which we can utilize to initially finance the acquisition of properties and meet other short-term working capital requirements. As of December 31, 2006, we had $114.3 million available that can be drawn under our revolving credit facilities. We drew an additional $35.0 million during the first two months of 2007 to fund acquisitions.
 
Summary of Cash Flows. The following summary discussion of our cash flows is based on the 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 (in thousands):
 
   
For the year ended December 31,
  
   
2006
  
2005
  
Increase (Decrease)
  
Cash provided by operating activities$
 
$
94,643
  
$
117,192
  
$
(22,549
)
Cash provided by (used in) investing activities
    
114,813
    
(82,371
)
  
197,184
  
Cash used in financing activities
    
(209,558
)
  
(39,841
)
  
(169,717
)
Cash and cash equivalents, end of year
    
-
    
102
        
 
Our principal source of operating cash flow is cash generated from our rental properties. Our properties provide a relatively consistent stream of cash flow that provides us with resources to fund operating expenses, debt service and quarterly dividends. In addition, over the past year, we have raised funds through the issuance of debt securities, the sale of the 29 Texas properties and the sale of selected individual properties.
 
Our principal demands for liquidity are payroll, maintenance expenditures, repairs, property taxes, insurance premiums and tenant improvements relating to rental properties, leasing costs, acquisition and development activities, debt service and repayment obligations and distributions to our stockholders. The principal sources of funding for our operations are operating cash flows, the sale of properties, the issuance of equity and debt securities, the placement of mortgage loans and periodic borrowings under our revolving credit facilities.
 
Cash provided by investing activities is usually from the sale of properties. For the year ended December 31, 2006, the source of funds was primarily from the proceeds of the disposition of our Texas properties and securities sales. Cash used in investing activities is to fund acquisitions, development and redevelopment costs, recurring and nonrecurring capital expenditures and leasing expenses. We invest in development projects that enable us to take advantage of our development, leasing and property management skills and invest in existing properties that meet our investment criteria.
 
Cash used in financing activities is primarily for the repayment of indebtedness and payment of our dividend. For the year ended December 31, 2006, we also repurchased $69.1 million of our common stock. Cash provided by financing activities is primarily from the issuance of debt and equity securities. For the year ended December 31, 2006, we issued $250.0 million of senior unsecured notes and repaid $125.0 million of senior unsecured notes.
 
Contractual Commitments. The following tables set forth certain information regarding future contractual obligations, excluding interest, as of December 31, 2006 (in thousands):
 
- 47 -
   
Payments due by period
  
Contractual Obligations
  
Total
  
Less than
1 year
  
1-3 years
  
3-5 years
  
More than
5 years
  
Mortgage notes payable:
                      
Scheduled amortization
  
$
105,121
  
$
10,205
  
$
20,871
  
$
17,643
  
$
56,402
  
Balloon payments
    
286,526
    
2,864
    
46,400
    
168,827
    
68,435
  
Total mortgage obligations
    
391,647
    
13,069
    
67,271
    
186,470
    
124,837
  
                                 
Unsecured revolving credit facilities
    
76,500
    
-
    
76,500
    
-
    
-
  
Unsecured senior notes(1)
    
595,000
    
-
    
200,000
    
-
    
395,000
  
Capital leases
    
-
    
-
    
-
    
-
    
-
  
Operating leases
    
686
    
425
    
161
    
100
    
-
  
Construction commitments
    
19,444
    
19,444
    
-
    
-
    
-
  
                                 
Total contractual obligations
  
$
1,083,277
  
$
32,938
  
$
343,932
  
$
186,570
  
$
519,837
  
 
(1)  
$100 million of the outstanding balance has been swapped to a floating interest rate based on the 6 month LIBOR in arrears, plus 0.4375%. The contractual obligations for the unsecured senior notes do not reflect this interest rate swap.
 
The following table sets forth certain information regarding future interest obligations on outstanding debt as of December 31, 2006 (in thousands):
 
   
Payments due by Period
  
   
Total
  
Less than
1 year
  
1-3 years
  
3-5 years
  
More than
5 years
  
                       
Mortgage notes
  
$
146,324
  
$
28,619
  
$
50,913
  
$
32,907
  
$
33,885
  
Unsecured senior notes(2)
    
248,678
    
32,848
    
61,133
    
47,446
    
107,251
  
    Unsecured revolving credit facilities(3)
    
8,788
    
4,304
    
4,484
    
-
    
-
  
                                 
    Total interest obligations
  
$
403,790
  
$
65,771
  
$
116,530
  
$
80,353
  
$
141,136
  
 
(2)  
$100 million of the outstanding principal balance has been swapped to a floating interest rate based on the 6 month LIBOR in arrears, plus 0.4375%. The interest obligations for the unsecured senior notes presented above assume that the rate that was in effect at December 31, 2006 remains the same for this interest rate swap.
 
(3)  
Interest on the unsecured revolving credit facility is variable; these amounts assume that the weighted average interest rate remains the same as the rate at December 31, 2006.
 
Indebtedness. The following table sets forth certain information regarding our indebtedness as of December 31, 2006 (dollars in thousands):
 
 
Property
    
Balance at December 31, 2006
    
 
Interest Rate(1)
    
 
 Maturity Date
    
Balance Due at Maturity
  
 
Fixed Rate Mortgage Debt
                          
Rosemeade 
  
$
2,947
    
8.295
%
  
12/01/07
  
$
2,864
  
Commonwealth
    
2,374
    
7.000
%
  
02/15/08
    
2,217
  
Mariners Crossing
    
3,224
    
7.080
%
  
03/01/08
    
3,154
  
Pine Island/Ridge Plaza
    
23,781
    
6.910
%
  
07/01/08
    
23,104
  
Shoppes of North Port
    
3,788
    
6.650
%
  
02/08/09
    
3,526
  
Prosperity Centre
    
5,193
    
7.875
%
  
03/01/09
    
4,137
  
Shoppes of Ibis
    
5,294
    
6.730
%
  
09/01/09
    
4,680
  
 
- 48 -
Tamarac Town Square
    
5,927
    
9.190
%
  
10/01/09
    
5,583
  
Park Promenade
    
6,100
    
8.100
%
  
02/01/10
    
5,833
  
Skipper Palms
    
3,456
    
8.625
%
  
03/01/10
    
3,318
  
Jonathan’s Landing
    
2,793
    
8.050
%
  
05/01/10
    
2,639
  
Bluff’s Square
    
9,815
    
8.740
%
  
06/01/10
    
9,401
  
Kirkman Shoppes
    
9,268
    
8.740
%
  
06/01/10
    
8,878
  
Ross Plaza
    
6,464
    
8.740
%
  
06/01/10
    
6,192
  
Shoppes of Andros Isle
    
6,419
    
7.900
%
  
06/10/10
    
5,800
  
Boynton Plaza
    
7,259
    
8.030
%
  
07/01/10
    
6,902
  
Pointe Royale
    
3,724
    
7.950
%
  
07/15/10
    
2,502
  
Shops at Skylake
    
13,453
    
7.650
%
  
08/01/10
    
11,644
  
Parkwest Crossing
    
4,584
    
8.100
%
  
09/01/10
    
4,352
  
Spalding Village
    
9,538
    
8.190
%
  
09/01/10
    
7,932
  
Charlotte Square
    
3,402
    
9.190
%
  
02/01/11
    
2,992
  
Forest Village
    
4,333
    
7.270
%
  
04/01/11
    
4,044
  
Boca Village
    
8,011
    
7.200
%
  
05/01/11
    
7,466
  
MacLand Pointe
    
5,659
    
7.250
%
  
05/01/11
    
5,267
  
Pine Ridge Square
    
7,090
    
7.020
%
  
05/01/11
    
6,579
  
Sawgrass Promenade
    
8,011
    
7.200
%
  
05/01/11
    
7,466
  
Presidential Markets
    
26,561
    
7.650
%
  
06/01/11
    
24,863
  
Lake Mary
    
23,720
    
7.250
%
  
11/01/11
    
21,973
  
Lake St. Charles
    
3,743
    
7.130
%
  
11/01/11
    
3,461
  
Belfair Towne Village
    
10,755
    
7.320
%
  
12/01/11
    
9,322
  
Marco Town Center
    
8,236
    
6.700
%
  
01/01/12
    
7,150
  
Riverside Square
    
7,347
    
9.190
%
  
03/01/12
    
6,458
  
Cashmere
    
4,916
    
5.880
%
  
11/01/12
    
4,084
  
Eastwood
    
5,857
    
5.880
%
  
11/01/12
    
4,866
  
Meadows
    
6,155
    
5.870
%
  
11/01/12
    
5,113
  
Sparkleberry Square
    
6,389
    
6.170
%
  
11/30/12
    
5,374
  
Lutz Lake
    
7,500
    
6.280
%
  
12/01/12
    
7,012
  
Midpoint Center
    
6,714
    
5.770
%
  
07/10/13
    
5,458
  
Alafaya Village
    
4,090
    
5.990
%
  
11/11/13
    
3,603
  
Summerlin Square
    
3,010
    
6.750
%
  
02/01/14
    
-
  
South Point
    
8,198
    
5.720
%
  
07/10/14
    
6,509
  
Bird Ludlum
    
8,328
    
7.680
%
  
04/01/15
    
-
  
Treasure Coast
    
3,920
    
8.000
%
  
04/01/15
    
-
  
Shoppes of Silverlakes
    
2,280
    
7.750
%
  
07/01/15
    
-
  
Grassland Crossing
    
5,473
    
7.870
%
  
12/01/16
    
2,601
  
Mableton Crossing
    
3,852
    
6.850
%
  
08/15/18
    
1,869
  
Sparkleberry Square
    
7,297
    
6.750
%
  
06/30/20
    
-
  
BridgeMill
    
9,033
    
7.940
%
  
05/05/21
    
3,761
  
Westport Plaza
    
4,681
    
7.490
%
  
08/24/23
    
1,340
  
Chastain Square
    
3,608
    
6.500
%
  
02/28/24
    
-
  
 
- 49 -
 
Daniel Village
    
3,943
    
6.500
%
  
02/28/24
    
-
  
Douglas Commons
    
4,699
    
6.500
%
  
02/28/24
    
-
  
Fairview Oaks
    
4,447
    
6.500
%
  
02/28/24
    
-
  
Madison Centre
    
3,608
    
6.500
%
  
02/28/24
    
-
  
Paulding Commons
    
6,126
    
6.500
%
  
02/28/24
    
-
  
Siegen Village
    
3,985
    
6.500
%
  
02/28/24
    
-
  
Wesley Chapel Crossing
    
3,147
    
6.500
%
  
02/28/24
    
-
  
Webster Plaza
    
8,122
    
8.070
%
  
08/15/24
    
2,793
  
 Total Fixed Rate Mortgage Debt
(58 loans outstanding) 
    
$
391,647 
    
7.260 
  
%
  
5.4 years 
    $
 286,082 
  
           
(wtd. avg.
interest rate) 
     (wtd.-avg. maturity)         

(1)  
The rate in effect on December 31, 2006, excludes effect of premium/discounts.
 
The weighted average interest rate at December 31, 2006 and 2005 was 7.26% and 7.19%, respectively, excluding the effects of the premium adjustment.
 
Each of the existing mortgage loans is secured by a mortgage on one or more of our properties. Certain of the mortgage loans involving an aggregate principal balance of approximately $76.4 million contain prohibitions on transfers of ownership which may have been violated by our previous issuances of common stock or in connection with past acquisitions and may be violated by transactions involving our capital stock in the future. If a violation were established, it could serve as a basis for a lender to accelerate amounts due under the affected mortgage. To date, no lender has notified us that it intends to accelerate its mortgage. In the event that the mortgage holders declare defaults under the mortgage documents, we will, if required, prepay the remaining mortgage from existing resources, refinancing of such mortgages, borrowings under our other lines of credit or other sources of financing. Based on discussions with various lenders, current credit market conditions and other factors, we believe that the mortgages will not be accelerated. Accordingly, we believe that the violations of these prohibitions will not have a material adverse impact on our results of operations or financial condition.
 
   
Balance at December 31, 2006
  
Interest Rate(1)
 
  
Maturity Date
  
Balance Due at Maturity
  
(in thousands)
                  
Fixed Rate Unsecured Senior
Notes Payable
                  
3.875% senior notes
   
200,000
    
3.875
%
  
04/15/09
  
$
200,000
  
Fair value of $100 million fixed-to-floating interest rate swap (1)
    
(3,813
)
  
6-month LIBOR
+ 0.4375
%
  
04/15/09
    
(3,813
)
7.84% senior notes
    
25,000
    
7.840
%
  
01/23/12
    
25,000
  
5.375% senior notes
    
120,000
    
5.375
%
  
10/15/15
    
120,000
  
6.00% senior notes
    
125,000
    
6.000
%
  
09/15/16
    
125,000
  
6.25% senior notes
    
125,000
    
6.250
%
  
01/15/17
    
125,000
  
Total Unsecured Senior Notes Payable
  
$
591,187
    
5.666
%
  
7.2 years
  
$
591,187
  
 
          
(wtd.-avg.
interest rate)
    
(wtd.-avg. maturity)
 
      

(1)  
$100 million of the outstanding balance has been swapped to a floating interest rate based on the 6 month LIBOR in arrears, plus 0.4375%. The indicated rate and weighted average rate for the unsecured senior notes do not reflect this interest rate swap.
 
The weighted average interest rate of our unsecured senior notes at December 31, 2006 and 2005 was 5.67% and 5.2%, respectively, excluding the effects of the premium/discount adjustment and fair value of the swap.
 
- 50 -
The indentures under which our unsecured senior notes were issued have several covenants which limit our ability to incur debt, require us to maintain an unencumbered assets ratio above a specified level and limit our ability to consolidate, sell, lease, or convey substantially all of our assets to, or merge with any other entity. These notes have also been guaranteed by most of our subsidiaries.
 
We swapped $100.0 million of the $200.0 million 3.875% senior notes to a floating interest rate based on 6-month LIBOR in arrears plus 0.4375%.
 
(in thousands)
  
Balance at December 31, 2006
  
Interest Rate(1)
  
Maturity Date
  
Balance Due at Maturity
Total Unsecured Variable Rate Revolving Credit Facilities
                                  
Wells Fargo 
        
$
76,500
          
5.627
%
        
01/17/09
        
$
76,500
    
City National Bank  
          
-
          
Libor + 1.00
%
        
05/11/07
          
-
    
Total Unsecured Variable Rate Revolving Credit Facilities
        
$
76,500
                                
$
76,500
    
 
(1) The rate in effect at December 31, 2006
 
In January 2006, we amended and restated our unsecured revolving credit facility with a syndicate of banks for which Wells Fargo Bank, National Association is the sole lead arranger and administrative agent. This facility has a maximum principal amount of $275 million and bears interest at our option at (i) LIBOR plus 0.45% to 1.15%, depending on the credit ratings of our senior unsecured long term notes, or (ii) the Federal Funds Rate plus 0.5%. The facility is guaranteed by most of our subsidiaries. Based on our current rating, the LIBOR spread is 0.80%. The facility also includes a competitive bid option which allows us to conduct auctions among the participating banks for borrowings in an amount not to exceed $137.5 million, a $35 million swing line facility for short-term borrowings and a $20 million letter of credit commitment and may, at our request, be increased up to a total commitment of $400 million. The facility expires January 17, 2009 with a one-year extension option. In addition, the facility contains customary covenants, including financial covenants regarding debt levels, total liabilities, interest coverage, EBITDA coverage ratios, unencumbered properties and permitted investments which may limit the amount available under the facility. The facility also prohibits stockholder distributions in excess of 95% of funds from operations calculated at the end of each fiscal quarter for the four fiscal quarters then ending. Notwithstanding this limitation, we can make stockholder distributions to avoid income taxes on asset sales. If a default under the facility exists, our ability to pay dividends would be limited to the amount necessary to maintain the Company’s status as a REIT unless the default is a payment default or bankruptcy event in which case we would be prohibited from paying any dividends
 
We also have a $5.0 million unsecured credit facility with City National Bank of Florida, of which there was no outstanding balance as of December 31, 2006 and $165,000 outstanding balance at December 31, 2005. This facility also provides collateral for $1.4 million in outstanding letters of credit.
 
As of December 31, 2006, the availability under the various credit facilities was approximately $114.3 million, net of outstanding balances and letters of credit.
 
We may not have sufficient funds on hand to repay balloon amounts on our indebtedness at maturity. Therefore, we expect to refinance this indebtedness either through additional mortgage financing secured by individual properties or groups of properties, by unsecured private or public debt offerings or by additional equity offerings. Our results of operations could be affected if the cost of new debt is greater or lesser than the cost of the maturing debt. If new financing is not available, we could be required to sell assets and our business would be adversely affected.
 
Shelf Registration. We have a universal shelf registration statement on file with the Securities and Exchange Commission, which will permit us, from time to time, to offer and sell various types of securities, including common stock, preferred stock, debt securities, depositary shares and warrants. The registration statement provides us additional flexibility in accessing capital markets to fund future growth and for general corporate purposes.
 
- 51 -
Equity. For the year ended December 31, 2006, we issued 383,230 shares of our common stock pursuant to the exercise of stock options at prices ranging from $9.73 to $21.07 per share. We also issued 211,070 shares of common stock at prices ranging from $22.92 to $24.01 per share pursuant to our Divided Reinvestment and Stock Purchase Plan. While reinvestments and purchases under this plan are currently suspended, as of December 31, 2006, there were approximately 5.4 million shares available for sale under the plan if reinstated.
 
Future Capital Requirements. We believe, based on currently proposed plans and assumptions relating to our operations, that our existing financial arrangements, together with cash generated from our operations, will be sufficient to satisfy our cash requirements for a period of at least twelve months. In the event that our plans change, our assumptions change or prove to be inaccurate or cash flows from operations or amounts available under existing financing arrangements prove to be insufficient to fund our expansion and development efforts or to the extent we discover suitable acquisition targets the purchase price of which exceeds our existing liquidity, we would be required to seek additional sources of financing. There can be no assurance that any additional financing will be available on acceptable terms or at all, and any future equity financing could be dilutive to existing stockholders. If adequate funds are not available, our business operations could be materially adversely affected.
 
Distributions. We believe that we currently qualify, and intend to continue to qualify in the future, as a REIT under the Internal Revenue Code. As a REIT, we are allowed to reduce taxable income by all or a portion of our distributions to stockholders. As distributions have exceeded taxable income, no provision for federal income taxes has been made. While we intend to continue to pay dividends to our stockholders, we also will reserve such amounts of cash flow as we consider necessary for the proper maintenance and improvement of our real estate and other corporate purposes while still maintaining our qualification as a REIT. Our cash distributions for the year ended December 31, 2006 were $162.7 million.
 
Off-Balance-Sheet Arrangements
 
From time to time, we may have off-balance-sheet joint ventures and other unconsolidated arrangements with varying structures. For example, from April through December, we had a 20% interest in a joint venture that owned 29 properties in Texas, and we accounted for this investment using the equity method of accounting. We sold our 20% interest in the joint venture in December and had no unconsolidated joint ventures reported using the equity method of accounting at December 31, 2006.
 
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 Financial Interpretation No. 46, Consolidation of Variable Interest Entities.
 
Letters of Credit. As of December 31, 2006, we have pledged letters of credit for $6.1 as additional security for certain property matters. The letters of credit are secured by our revolving credit facilities.
 
Construction Commitments. We have entered into construction commitments and have outstanding as of December 2006 to fund $19.7 million, based on current plans and estimates, in order to complete current development and redevelopment projects. These obligations, comprised principally of construction contracts, are generally due as the work is performed and are expected to be financed by our available credit facilities.
 
Operating Lease Obligations. Certain of our properties are subject to a ground lease, which are accounted for as operating leases and have annual obligations of approximately $100,000.
 
Non-Recourse Debt Guarantees. Under certain of our and joint venture non-recourse mortgage loans, we could, under certain 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 and material misrepresentations. In management’s judgment, it would be extremely unlikely for us to incur any material liability under these guarantees that will have a material adverse effect on the financial condition, results of operations, or cash flow of the Company.
 
- 52 -
Environmental Matters
 
We are subject to numerous environmental laws and regulations. The operation of dry cleaning facilities or gas stations at our shopping centers is the principal environmental concern. 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 their operations. Additionally, we use all legal means to cause tenants to remove dry cleaning plants from our shopping centers. Where available, we have applied and been accepted into state sponsored environmental programs. Several properties in our portfolio will require or are currently undergoing varying levels of environmental remediation. However, we have environmental insurance policies covering most of our properties.
 
We believe that the ultimate disposition of currently known environmental matters will not have a material effect on our financial position, liquidity or operations.
 
Inflation and Recession Considerations
 
Most of our leases contain provisions designed to partially mitigate the adverse impact of inflation. 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. 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.
 
Our financial results are affected by general economic conditions in the markets in which our properties are located. An economic recession, or other adverse changes in general or local economic conditions, could result in the inability of some of our existing tenants to meet their lease obligations and could otherwise adversely affect our ability to attract or retain tenants.
 
 
Interest Rate 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 costs and for other operating needs. With respect to our fixed rate mortgage notes and fixed rate senior unsecured notes, changes in interest rates generally do not affect our interest expense as these notes are predominantly at fixed-rates for extended terms. Because we have the intent to hold our existing fixed rate notes either to maturity or until the sale of the associated property, these fixed-rate notes do not pose an interest rate risk to our results of operations or our working capital position, only upon the refinancing of that mortgage. Our possible risk is from increases in long-term interest rates that may occur over a period of several years, as this may decrease the overall value of our real estate.
 
As of December 31, 2006, we had approximately $176.5 million of outstanding floating rate debt, including $100.0 million of fixed rate borrowings that we have converted to floating rate borrowings through the use of hedging agreements. We do not believe that the interest rate risk represented by our floating rate debt is material as of December 31, 2006, in relation to our $1.1 billion of outstanding debt, $2.1 billion of total assets and $2.0 billion total equity market capitalization as of that date.
 
If interest rates on our variable rate debt increase by 1%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by approximately $1.8 million. If interest rates on our variable rate debt decrease by 1%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by approximately $1.8 million. This assumes that the amount outstanding under our variable rate debt remains at approximately $176.5 million (including the $100 million of fixed rate debt converted to floating rate debt through the use of hedging agreements), the balance as of December 31, 2006.
 
- 53 -
The fair value of our fixed rate debt is $896.0 million, which includes the mortgage notes and fixed rate portion of senior unsecured notes payable (excluding the unamortized premium). If interest rates increase by 1%, the fair value of our total fixed rate debt would decrease by approximately $41.5 million. If interest rates decrease by 1%, the fair value of our total outstanding debt would increase by approximately $51.8 million. This assumes that our total outstanding fixed rate debt remains at $886.6 million, the balance as of December 31, 2006.
 
Hedging. 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. Additionally, any derivative instrument used for risk management that becomes ineffective is marked-to-market each period and would be charged to operations.
 
We are exposed to credit risk, in the event of non-performance by the counter-parties to the hedge agreements. We believe that we mitigate our credit risk by entering into these agreements with major financial institutions. Net interest differentials to be paid or received under a swap contract and/or collar agreement are included in interest expense as incurred or earned.
 
We have entered into treasury locks for an anticipated financing by August 2007 at a weighted average interest rate of 5.10% per annum on notional amounts aggregating $85.0 million which were executed to hedge the benchmark interest rate associated with forecasted interest payments relating to an anticipated issuance of fixed rate borrowings
 
During 2004, concurrent with the issuance of $200 million unsecured senior notes, we entered into a $100.0 million notional principal variable rate interest swap with an estimated fair value of $3.8 million as of December 31, 2006. This swap converted fixed rate debt to variable rate based on the 6 month LIBOR in arrears plus 0.4375%, and matures April 15, 2009.
 
The estimated fair value of our derivative financial instruments has been determined using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value.
 
Other Market Risks
 
As of December 31, 2006, we had no material exposure to any other market risks (including foreign currency exchange risk, commodity price risk or equity price risk).
 
In making thse determination and for purposes of the Securities and Exchange Commission's market risk disclosure requirements, we have estimated the fair value of our financial instruments at December 31, 2006 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 fair value amounts as of December 31, 2006, future estimates of fair value and the amounts which may be paid or realized in the future may differ significantly from amounts presented.
 
 
               The financial statements and supplementary data required by Regulation S-X are included in this Form 10-K commencing on page F-1.
 
 
None.
 
- 54 -
ITEM 9A.   CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of December 31, 2006, the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the December 31, 2006 that our disclosure controls and procedures were effective at the reasonable assurance level such that the information relating to us and our consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission (SEC) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management Report on Internal Control over Financial Reporting
 
The report of our management regarding internal control over financial reporting is set forth on page F-1 of Item 8 of this Annual Report on Form 10-K under the caption “Management Report on Internal Control over Financial Reporting” and incorporated herein by reference.
 
Attestation Report of Independent Registered Public Accounting Firm
 
The attestation report of our independent registered public accounting firm regarding internal control over financial reporting is set forth in page F-2 of Item 8 of this Annual Report on Form 10-K under the caption “Report of Independent Registered Public Accounting Firm” and incorporated herein by reference.
 
Changes in Internal Control over Financial Reporting
 
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2006, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
ITEM 9B. OTHER INFORMATION
 
None.
 

- 55 -

 
PART III
 
ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
Incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of our fiscal year covered by this Form 10-K.
 
ITEM 11.   EXECUTIVE COMPENSATION
 
Incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of our fiscal year covered by this Form 10-K.
 
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATD STOCKHOLDER MATTERS
 
Equity Compensation Plan Information
 
The following table sets forth information regarding securities authorized for issuance under equity compensation plans as of December 31, 2006.
 
 
Plan category
 
 
Number of securities to be issued upon exercise of outstanding options, warrants and rights
 
 
Weighted-average exercise price of outstanding options, warrants and rights
 
 
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
 
 
 
(a)
 
 
(b)
 
 
(c)
 
 
Equity compensation plans approved by security holders(1)
 
 
2,436,978
 
 
$ 22.82
 
 
710,233
 
 
Equity compensation plans not approved by security holders(1)
 
 
-
 
 
-
 
 
-
 
 
Total
 
 
2,436,978
 
 
$ 22.82
 
 
710,233
 
 
(1)  
Includes information related to our 1995 Stock Option Plan, 2000 Executive Incentive Compensation Plan, 1989 IRT Stock Option Plan and 1998 IRT Long-Term Incentive Plan.
 
The other information required by this item is incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of our fiscal year covered by this Form 10-K.
 
ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
        Incorporated by reference from our definitive proxy statement to be filed within 120 days after the end our fiscal year covered by this Form 10-K.
 
ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
Incorporated by reference from our definitive proxy statement to be filed within 120 days after the end our fiscal year covered by this Form 10-K.
 

- 56 -

 
PART IV
 
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
(a)    The following consolidated financial information is included as a separate section of this Form 10-K:
 
1.
Financial Statements:
  
   
Page
     
 
Management Report on Internal Control Over Financial Reporting
F-1
 
Report of Independent Registered Public Accounting Firm on Management Report on Internal Control over Financial Reporting
F-2
 
Report of Independent Registered Public Accounting Firm
F-4
 
Consolidated Balance Sheets as of December 31, 2006 and 2005
F-6
 
Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004
F-7 - F-8
 
Consolidated Statements of Comprehensive Income for the years ended December 31, 2006, 2005 and 2004
F-9
 
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2006, 2005 and 2004
F-10
 
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004
F-11 - F-12
 
Notes to the Consolidated Financial Statements
F-13 - F-44
2.
Financial statement schedules required to be filed
  
 
Schedule II - Valuation and Qualifying Accounts
S-1
 
Schedule III - Real Estate Investments and Accumulated Depreciation
S-2 - S-11
 
Schedule IV - Mortgage Loans on Real Estate
S-12
 
Schedules I and V are not required to be filed.
  

(b)   Exhibits: The following exhibits are filed as part of, or incorporated by reference into, this annual report.
 
EXHIBIT NO.
DESCRIPTION
   
3.1
Composite Charter of the Company (Exhibit 3.1) (1)
3.2
Amended and Restated Bylaws of the Company (Exhibit 3.2) (2)
4.1
Indenture dated November 9, 1995 between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4(c)) (3)
4.2
Supplemental Indenture No. 1, dated March 26, 1996, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4) (4)
4.3
Supplemental Indenture No. 2, dated August 15, 1997, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4) (5)
4.4
Supplemental Indenture No. 3, dated September 9, 1998, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4.1) (6)
4.5
Supplemental Indenture No. 4, dated November 1, 1999, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4.1) (7)
 
- 57 -
 
4.6
Supplemental Indenture No. 5, dated February 12, 2003, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (8)
4.7
Supplemental Indenture No. 6, dated April 23, 2004, between the Company and SunTrust Bank, as Trustee (Exhibit 4.2) (9)
4.8
Supplemental Indenture No. 7, dated May 20, 2005, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (10)
4.9
Indenture, dated September 9, 1998, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4.2) (6)
4.10
Supplemental Indenture No. 1, dated September 9, 1998, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4.3) (6)
4.11
Supplemental Indenture No. 2, dated November 1, 1999, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4.5) (7)
4.12
Supplemental Indenture No. 3, dated February 12, 2003, between the Company and SunTrust Bank, as Trustee (Exhibit 4.2) (8)
4.13
Supplemental Indenture No. 4, dated March 26, 2004, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (11)
4.14
Supplemental Indenture No. 5, dated April 23, 2004, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (9)
4.15
Supplemental Indenture No. 6 dated May 20, 2005, between the Company and SunTrust Bank, as Trustee (Exhibit 4.2)(10)
4.16
Supplemental Indenture No. 7 dated September 20, 2005, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1)(12)
4.17
Supplemental Indenture No. 8 dated December 30, 2005, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1)(13)
4.18
Supplemental Indenture No. 9 dated March 10, 2006 between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (14)
4.19
Supplemental Indenture No. 10 dated August 18, 2006 between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (15)
10.1
Form of Indemnification Agreement (Exhibit 10.1)(16)
10.2
1995 Stock Option Plan, as amended (17)*
10.3
Amended and Restated 2000 Executive Incentive Plan (Annex A) (18)*
10.4
Form of Stock Option Agreement for stock options awarded under the Amended and Restated 2000 Executive Incentive Plan (Exhibit 10.3) (19)*
10.5
Form of Restricted Stock Agreement for restricted stock awarded under the Amended and Restated 2000 Executive Incentive Plan (Exhibit 10.4) (19)*
10.6
IRT 1989 Stock Option Plan, assumed by the Company (20)*
10.7
IRT 1998 Long-Term Incentive Plan, assumed by the Company (21)*
10.8
2004 Employee Stock Purchase Plan (Annex B) (18)*
10.9
Registration Rights Agreement, dated as of January 1, 1996 by and among the Company, Chaim Katzman, Gazit Holdings, Inc., Dan Overseas Ltd., Globe Reit Investments, Ltd., Eli Makavy, Doron Valero and David Wulkan, as amended. (Exhibit 10.6, Amendment No. 3) (22)
10.10
Stock Exchange Agreement dated May 18, 2001 among the Company, First Capital Realty Inc. and First Capital America Holding Corp (23)
10.11
Use Agreement, regarding use of facilities, by and between Gazit (1995), Inc. and the Company, dated January 1, 1996. (Exhibit 10.15, Amendment No. 1) (22)
10.12
Subscription Agreement, dated October 4, 2000, made by Alony Hetz Properties & Investments, Ltd. (Exhibit 10.13) (24)
10.13
Stockholders Agreement, dated October 4, 2000, among the Company, Alony Hetz Properties & Investments, Ltd., Gazit-Globe (1982), Ltd., M.G.N. (USA), Inc. and Gazit (1995), Inc. (Exhibit 10.14) (24)
10.14
First Amendment to Stockholders Agreement, dated December 19, 2001, among the Company Alony Hetz Properties & Investments, Ltd., Gazit-Globe (1982), Ltd., M.G.N. (USA), Inc. and Gazit (1995), Inc. (Exhibit 10.15) (24)
10.15
Second Amendment to Stockholders Agreement, dated October 28, 2002, among the Company Alony Hetz Properties & Investments, Ltd., Gazit-Globe (1982), Ltd., M.G.N. (USA), Inc. and Gazit (1995), Inc. (25)
 
- 58 -
 
10.16
Third Amendment to Stockholders Agreement, dated May 23, 2003, among the Company Alony Hetz Properties & Investments, Ltd., Gazit-Globe (1982), Ltd., M.G.N. (USA), Inc. and Gazit (1995), Inc. (9)
10.17
Chairman Compensation Agreement effective as of January 1, 2007 between the Company and Chaim Katzman (Exhibit 10.1) (26)*
10.18
First Amended and Restated Employment Agreement effective as of September 15, 2006 between the Company and Jeffrey S. Olson (Exhibit 10.2) (26)*
10.19
Employment Agreement effective as of November 15, 2006 between the Company and Gregory R. Andrews (Exhibit 10.3) (26)*
10.20
Employment Agreement, effective as of November 6, 2006 between the Company and Jeffrey S. Stauffer (Exhibit 10.4) (26)*
10.21
Employment Letter effective as of May 31, 2005 between the Company and David Briggs (Exhibit 10.2) (27)*
10.22
Registration Rights Agreement, dated October 28, 2002, between the Company and certain Purchasers (Exhibit 99.3) (28)
10.23
Amended and Restated Credit Agreement, dated as of January 17, 2006, among the Company, each of the financial institutions initially a signatory thereto, Wachovia Bank National Association and SunTrust Bank, as Co-Syndication Agents, PNC Bank National Association and JP Morgan Chase Bank, N.A., as Co-Documentation Agents, Bank of America, N.A., Harris Nesbitt (Bank Of Montreal) and Branch Banking and Trust Company, as Managing Agents, and Wells Fargo Bank, National Association as Administrative Agent and as Sole Lead Arranger. (Exhibit 10.1)(29)
10.24
Clarification Agreement and Protocol, dated as of January 1, 2004, among the Company and Gazit-Globe (1982), Ltd. (Exhibit 10.2) (30)
10.25
Equity One, Inc. Non-Qualified Deferred Compensation Plan. (Exhibit 10.1) (31)*
10.26
Consulting Agreement effective as of January 1, 2007 between the Company and Doron Valero (Exhibit 10.6) (26)
12.1
Ratios of Earnings to Fixed Charges
21.1
List of Subsidiaries of the Registrant
23.1
Consent of Ernst & Young LLP
23.2
Consent of Deloitte & Touche LLP
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
 
*Identifies employee agreements, management contracts, compensatory plans or other arrangements.
 
(1)  
Previously filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended June 30, 2002, and incorporated by reference herein.
 
(2)  
Previously filed as an exhibit to our Annual Report on Form 10-K for the period ended December 31, 2003, and incorporated by reference herein.
 
(3)  
Previously filed by IRT Property Company as an exhibit to IRT’s Annual Report on Form 10-K for the period ending December 31, 1995, and incorporated by reference herein.
 
(4)  
Previously filed by IRT Property Company as an exhibit to IRT’s Current Report on Form 8-K filed on March 26, 1996, and incorporated by reference herein.
 
(5)  
Previously filed by IRT Property Company as an exhibit to IRT’s Current Report on Form 8-K filed on August 13, 1997, and incorporated by reference herein.
 
(6)  
Previously filed by IRT Property Company as an exhibit to IRT’s Current Report on Form 8-K filed on September 15, 1998, and incorporated by reference herein.
 
- 59 -
 
(7)  
Previously filed by IRT Property Company as an exhibit to IRT’s Current Report on Form 8-K filed on November 12, 1999, and incorporated by reference herein.
 
(8)  
Previously filed as an exhibit to our Current Report on Form 8-K filed on February 20, 2003, and incorporated by reference herein.
 
(9)  
Previously filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended March 31, 2004, and incorporated by reference herein.
 
(10)  
Previously filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended June 30, 2005, and incorporated by reference herein.
 
(11)  
Previously filed as an exhibit to our Current Report on Form 8-K filed on March 31, 2004, and incorporated by reference herein.
 
(12)  
Previously filed as an exhibit to our Current Report on Form 8-K filed on September 20, 2005, and incorporated by reference herein.
 
(13)  
Previously filed as an exhibit to our Annual Report on Form 10-K on March 3, 2006, and incorporated by reference herein.
 
(14)  
Previously filed as an exhibit to our Current Report on Form 8-K on March 13, 2006, and incorporated by reference herein.
 
(15)  
Previously filed as an exhibit to our Current Report on Form 8-K filed on August 22, 2006, and incorporated by reference herein.
 
(16)  
Previously filed as an exhibit to our Annual Report on Form 10-K on March 16, 2005, and incorporated by reference herein.
 
(17)  
Previously filed with our definitive Proxy Statement for the Annual Meeting of Stockholders held on June 30, 1999, and incorporated herein by reference.
 
(18)  
Previously filed with our definitive Proxy Statement for the Annual Meeting of Stockholders held on May 21, 2004, and incorporated herein by reference.
 
(19)  
Previously filed with our Current Report on Form 8-K filed on February 18, 2005, and incorporated by reference herein.
 
(20)  
Previously filed by IRT Property Company as an exhibit to IRT’s Current Report on Form 8-K filed on March 22, 1989, and incorporated herein by reference.
 
(21)  
Previously filed by IRT Property Company with IRT’s definitive Proxy Statement for the Annual Meeting of Stockholders held on May 22, 1998, and incorporated herein by reference.
 
(22)  
Previously filed with our Registration Statement on Form S-11, as amended (Registration No. 333-3397), and incorporated herein by reference.
 
(23)  
Previously filed as Appendix A to our definitive Proxy Statement for the Special Meeting of Stockholders held on September 6, 2001 and incorporated herein by reference.
 
(24)  
Previously filed with our Annual Report Form 10-K/A filed on March 18, 2002, and incorporated herein by reference.
 
(25)  
Previously filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended September 30, 2002, and incorporated by reference herein.
 
(26)  
Previously filed as an exhibit to our Quarterly Report on Form 10-Q on November 9, 2006, and incorporated by reference herein.
 
(27)  
Previously filed as an exhibit to our Current Report on Form 8-K on June 1 2005, and incorporated by reference herein.
 
(28)  
Previously filed as Exhibit 2.1 to our Current Report on Form 8-K filed on October 30, 2002, and incorporated by reference herein.
 
(29)  
Previously filed as an exhibit to our Current Report on Form 8-K on January 20, 2006, and incorporated by reference herein.
 
(30)  
Previously filed as an exhibit to our Current Report on Form 8-K filed on March 16, 2004, and incorporated by reference herein.
 
(31)  
Previously filed as an exhibit to our Current Report on Form 8-K on July 7, 2005, and incorporated by reference herein.
 

- 60 -


 
SIGNATURES
 

 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date: February 28, 2007
EQUITY ONE, INC.
   
 
By: /s/ Jeffrey S. Olson
Jeffrey S. Olson
 
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities, and on the dates indicated.

SIGNATURE 
 
TITLE
DATE
/s/   Jeffrey S. Olson
President and Chief Executive Officer
February 28, 2007
Jeffrey S. Olson
(Principal Executive Officer
and Director)
  
     
/s/   Gregory R. Andrews
Executive Vice President and
February 28, 2007
Gregory R. Andrews
Chief Financial Officer
(Principal Accounting and
Financial Officer)
  
     
/s/   Chaim Katzman
Chairman of the Board
February 28, 2007
Chaim Katzman
    
     
/s/   Noam Ben Ozer
Director
February 28, 2007
Noam Ben Ozer
    
     
 
Director
James S. Cassel
    
     
s/    Cynthia Cohen
Director
March 1, 2007
Cynthia Cohen
    
     
/s/   Neal Flanzraich
Director
February 28, 2007
Neal Flanzraich
    
     
/s/   Patrick L. Flinn
Director
February 28, 2007
Patrick L. Flinn
    
     
/s/   Natan Hetz
Director
March 1,  2007
Nathan Hetz
    
     
/s/   Peter Linneman
Director
February 27, 2007
Peter Linneman
    
     
 
Director
Dori Segal
    



- 61 -

 
 

EQUITY ONE, INC. AND SUBSIDIARIES 
  
   
TABLE OF CONTENTS
 		  
   
 
Page
   
Management Report on Internal Control Over Financial Reporting
F-1
   
Report of Independent Registered Public Accounting Firm on Management Report on Internal Control over Financial Reporting
F-2
   
Reports of Independent Registered Public Accounting Firms
F-4
   
Consolidated Balance Sheets as of December 31, 2006 and 2005
F-6
   
Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004
F-7 - F-8
   
Consolidated Statements of Comprehensive Income for the years ended December 31, 2006, 2005 and 2004
F-9
   
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2006, 2005 and 2004
F-10
   
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004
F-11 - F-12
   
Notes to the Consolidated Financial Statements
F-13 - F-44
   


 
Management Report on Internal Control over Financial Reporting
 
The management of Equity One, Inc. and subsidiaries (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting, which requires the use of certain estimates and judgments, and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
 
·  
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
 
·  
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
 
·  
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
 
Reasonable assurance is based on the premise that the cost of internal controls should not exceed the benefits derived. Reasonable assurance includes the understanding that there is a remote likelihood that material misstatements will not be prevented or detected in a timely manner. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
 
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. In making this assessment, the Company’s management used the criteria set forth by the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has concluded that, as of December 31, 2006, the Company’s internal control over financial reporting is effective.
 
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
The Company’s independent registered public accounting firm has issued an attestation report on our assessment of the Company’s internal control over financial reporting. This report appears on the following page of this Annual Report.
 

F - 1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




The Board of Directors and Stockholders
Equity One, Inc.


We have audited management’s assessment, included in the accompanying Management Report on Internal Control over Financial Reporting, that Equity One, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.


 
F - 2

 
 
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2006 and 2005, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the periods then ended of the Company and our report dated February 26, 2007 expressed an unqualified opinion thereon.


/s/ ERNST & YOUNG LLP
Certified Public Accountants
 
Miami, Florida
February 26, 2007
 

F - 3


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders
Equity One, Inc.
 

 
We have audited the accompanying consolidated balance sheets of Equity One, Inc. and subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for the years then ended.  Our audit also included the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Equity One, Inc. and subsidiaries at December 31, 2006 and 2005, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, the Company adopted SFAS No. 123(R), “Share-Based Payment,” applying the modified prospective method at the beginning of fiscal year 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2007 expressed an unqualified opinion thereon.


 


/s/ ERNST & YOUNG LLP
Certified Public Accountants
 
Miami, Florida
February 26, 2007
 


F - 4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of
Equity One, Inc.
North Miami Beach, Florida

We have audited the accompanying consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows of Equity One, Inc. and subsidiaries (the “Company”) for the year ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the Company’s results of operations and cash flows for the year ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 9 to the financial statements, the accompanying financial statements have been retrospectively adjusted for discontinued operations.

/s/ DELOITTE & TOUCHE LLP
Certified Public Accountants
 

Miami, Florida
March 11, 2005 (February 28, 2007, as to the effects
of the discontinued operations described in Note 9)



F - 5

EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2006 and 2005
(In thousands, except per share amounts)
 
   
2006
      
2005
  
ASSETS
              
PROPERTIES:
              
Income producing
  
$
1,896,843
        
$
1,661,243
  
Less: accumulated depreciation
    
(144,825
)
        
(111,031
)
Income-producing property, net
    
1,752,018
          
1,550,212
  
Construction in progress and land held for development
    
113,340
          
64,202
  
Property held for sale
    
20,353
          
282,091
  
Properties, net
    
1,885,711
          
1,896,505
  
CASH AND CASH EQUIVALENTS
    
-
          
102
  
CASH HELD IN ESCROW
    
1,547
          
-
  
ACCOUNTS AND OTHER RECEIVABLES, NET
    
18,967
          
17,600
  
SECURITIES
    
75,102
          
67,588
  
GOODWILL
   
13,092
          
12,013
  
OTHER ASSETS
    
57,430
          
58,225
  
TOTAL
  
$
2,051,849
        
$
2,052,033
  
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY
                    
LIABILITIES:
                    
NOTES PAYABLE
                    
Mortgage notes payable
  
$
391,647
        
$
392,480
  
Mortgage notes payable related to property held for sale
    
-
          
54,445
  
Unsecured revolving credit facilities
    
76,500
          
93,165
  
Unsecured senior notes payable
    
591,187
          
465,404
  
     
1,059,334
          
1,005,494
  
Unamortized premium/discount on notes payable
    
10,322
          
15,830
  
Total notes payable
    
1,069,656
          
1,021,324
  
OTHER LIABILITIES
                    
Accounts payable and accrued expenses
    
36,565
          
40,161
  
Tenant security deposits
    
9,622
          
9,561
  
Other liabilities
    
9,339
          
6,833
  
Total liabilities
    
1,125,182
          
1,077,879
  
MINORITY INTEREST
    
989
          
1,425
  
COMMITMENTS AND CONTINGENCIES
                    
STOCKHOLDERS’ EQUITY:
                    
Preferred stock, $0.01 par value - 10,000 shares authorized but unissued
    
-
          
-
  
Common stock, $0.01 par value - 100,000 shares authorized, 72,756 and 75,409 shares issued and outstanding for 2006 and 2005, respectively
    
728
          
754
  
Additional paid-in capital
    
895,247
          
955,378
  
Retained earnings
    
37,201
          
22,950
  
Accumulated other comprehensive (loss) income
   
(7,498
)
        
3,404
  
Unamortized restricted stock compensation
    
-
          
(9,692
)
Notes receivable from issuance of common stock
    
-
          
(65
)
Total stockholders’ equity
    
925,678
          
972,729
  
TOTAL
  
$
2,051,849
        
$
2,052,033
  
See accompanying notes to the consolidated financial statements.
                    

F - 6

EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
(In thousands, except per share amounts)
 
   
2006
  
2005
  
2004
  
REVENUE:
              
Minimum rents
  
$
176,474
  
$
159,017
  
$
143,663
  
Expense recoveries
    
51,076
    
44,251
    
38,146
  
Termination fees
    
1,741
    
4,776
    
3,435
  
Percentage rent
    
2,063
    
1,717
    
1,834
  
Management and leasing services
    
2,067
    
498
    
179
  
Total revenue
    
233,421
    
210,259
    
187,257
  
COSTS AND EXPENSES:
                    
Property operating
    
65,102
    
55,701
    
50,005
  
Services
    
1,861
    
229
    
82
  
Lease termination
    
1,002
    
-
    
-
  
Rental property depreciation and amortization
    
42,012
    
34,996
    
29,976
  
General and administrative
    
26,895
    
17,281
    
16,601
  
Total costs and expenses
    
136,872
    
108,207
    
96,664
  
INCOME BEFORE OTHER INCOME AND EXPENSES, MINORITY INTEREST AND DISCONTINUED OPERATIONS
    
96,549
    
102,052
    
90,593
  
OTHER INCOME AND (EXPENSES):
                    
Interest expense
    
(54,458
)
  
(47,795
)
  
(41,486
)
Amortization of deferred financing fees
    
(1,490
)
  
(1,454
)
  
(1,335
)
Investment income
    
7,487
    
7,941
    
2,346
  
Gain on the sale of real estate
    
6,937
    
-
    
-
  
Equity in income of unconsolidated joint ventures
    
1,650
    
-
    
-
  
Gain on extinguishment of debt
    
165
    
-
    
-
  
Other income
    
389
    
-
    
358
  
INCOME BEFORE MINORITY INTEREST AND DISCONTINUED OPERATIONS
    
57,229
    
60,744
    
50,476
  
MINORITY INTEREST
    
(206
)
  
(188
)
  
(576
)
INCOME FROM CONTINUING OPERATIONS
    
57,023
    
60,556
    
49,900
  
DISCONTINUED OPERATIONS:
                    
Operations of income-producing properties sold or held for sale
    
4,764
    
20,725
    
25,841
  
Gain on disposal of income-producing properties
    
115,168
    
11,460
    
22,176
  
Minority interest
    
-
    
-
    
(113
)
Income from discontinued operations
    
119,932
    
32,185
    
47,904
  
NET INCOME
  
$
176,955
  
$
92,741
  
$
97,804
  
 

F - 7

EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(In thousands, except per share amounts)
 
               
   
2006
  
2005
  
2004
  
EARNINGS PER SHARE:
              
BASIC EARNINGS PER SHARE
              
Income from continuing operations
  
$
0.77
  
$
0.82
  
$
0.71
  
Income from discontinued operations
    
1.63
    
0.44
    
0.68
  
Total basic earnings per share
  
$
2.40
  
$
1.26
  
$
1.39
  
NUMBER OF SHARES USED IN COMPUTING
BASIC EARNINGS PER SHARE
    
73,598
    
73,840
    
70,447
  
DILUTED EARNINGS PER SHARE
                    
Income from continuing operations
  
$
0.77
  
$
0.81
  
$
0.69
  
Income from discontinued operations
    
1.61
    
0.43
    
0.68
  
Total diluted earnings per share
  
$
2.38
  
$
1.24
  
$
1.37
  
NUMBER OF SHARES USED IN COMPUTING
DILUTED EARNINGS PER SHARE
    
74,324
    
74,790
    
72,036
  
                     
See accompanying notes to the consolidated financial statements.
                    


F - 8

EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(In thousands, except per share amounts)
 
               
   
2006
  
2005
  
2004
  
               
NET INCOME
  
$
176,955
  
$
92,741
  
$
97,804
  
OTHER COMPREHENSIVE INCOME (LOSS):
                    
Net unrealized holding (loss) gain on securities available for sale
    
(9,780
)
  
4,330
    
4,633
  
Changes in fair value of cash flow hedges
    
(2,574
)
  
--
    
122
  
Reclassification adjustment for gain (loss) on the sale of securities
included in net income
    
29
    
(5,559
)
  
--
  
Net realized gain on settlement of interest rate contracts
    
1,543
    
-
    
-
  
Amortization of interest rate contracts
    
(120
)
  
-
    
-
  
COMPREHENSIVE INCOME
  
$
166,053
  
$
91,512
  
$
102,559
  
See accompanying notes to the consolidated financial statements.
                    





F - 9

EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
(In thousands, except per share amounts)
 
   
Common
Stock
  
Additional
Paid-In
Capital
  
Retained Earnings
  
Accumulated Other Comprehensive
Income/ (Loss)
  
Unamortized Restricted Stock Compensation
  
Notes Receivable from the Issuance of Common Stock
  
Total Stockholders’
Equity
  
BALANCE,
JANUARY 1, 2004
  
$
694
  
$
843,678
  
$
-
  
$
(122
)
$
(10,091
)
$
(3,607
)
$
830,552
  
Issuance of common stock
    
42
    
77,853
    
-
    
-
    
(1,837
)
  
-
    
76,058
  
Stock issuance cost
    
-
    
(334
)
  
-
    
-
    
-
    
-
    
(334
)
Repayments of notes receivable from issuance of common stock
   
-
    
-
    
-
    
-
    
-
    
3,457
    
3,457
  
Net income
    
-
    
-
    
97,804
    
-
    
-
    
-
    
97,804
  
Dividends paid
    
-
    
(581
)
  
(80,323
)
  
-
    
-
    
-
    
(80,904
)
Changes in fair value of cash flow hedges
    
-
    
-
    
-
    
122
    
-
    
-
    
122
  
Net unrealized holding gain on securities available for sale
    
-
    
-
    
-
    
4,633
    
-
    
-
    
4,633
  
BALANCE,
DECEMBER 31, 2004
    
736
    
920,616
    
17,481
    
4,633
    
(11,928
)
  
(150
)
  
931,388
  
Issuance of common stock
    
18
    
34,943
    
-
    
-
    
2,236
    
-
    
37,197
  
Stock issuance cost
    
-
    
(181
)
  
-
    
-
    
-
    
-
    
(181
)
Repayments of notes receivable from issuance of common stock
   
-
    
-
    
-
    
-
    
-
    
85
    
85
  
Net income
    
-
    
-
    
92,741
    
-
    
-
    
-
    
92,741
  
Dividends paid
    
-
    
-
    
(87,272
)
  
-
    
-
    
-
    
(87,272
)
Net unrealized holding loss on securities available for sale
    
-
    
-
    
-
    
(1,229
)
  
-
    
-
    
(1,229
)
BALANCE,
DECEMBER 31, 2005
    
754
    
955,378
    
22,950
    
3,404
    
(9,692
)
  
(65
)
  
972,729
  
Cumulative effect of change in accounting principle
    
(5
)
  
(5,188
)
  
-
    
-
    
9,692
    
-
    
4,499
  
Issuance of common stock
    
9
    
8,074
    
-
    
-
    
-
    
-
    
8,083
  
Stock issuance cost
    
-
    
(69
)
  
-
    
-
    
-
    
-
    
(69
)
Repurchase of common stock
    
(30
)
  
(69,073
)
  
-
    
-
    
-
    
-
    
(69,103
)
Share-based compensation expense
          
6,125
    
-
    
-
    
-
    
-
    
6,125
  
Repayments of notes receivable from issuance of common stock
    
-
    
-
    
-
    
-
    
-
    
65
    
65
  
Net income
    
-
    
-
    
176,955
    
-
    
-
    
-
    
176,955
  
Dividends paid
    
-
    
-
    
(162,704
)
  
-
    
-
    
-
    
(162,704
)
Other comprehensive loss
    
-
    
-
          
(10,902
)
  
-
    
-
    
(10,902
)
BALANCE,
DECEMBER 31, 2006 
  
$
728
  
$
895,247
  
$
37,201
  
$
(7,498
)
$
-
  
$
-
  
$
925,678
  
 


See accompanying notes to the consolidated financial statements.

F - 10
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
(In thousands, except per share amounts)
 
   
2006
  
2005
  
2004
  
OPERATING ACTIVITIES:
              
Net income
  
$
176,955
  
$
92,741
  
$
97,804
  
Adjustments to reconcile net income to net cash provided by
operating activities:
                    
Straight line rent adjustment
    
(4,066
)
  
(4,450
)
  
(3,835
)
Amortization of above/(below) market lease intangibles
    
(2,612
)
  
(1,006
)
  
(192
)
Provision for losses on accounts receivable
    
742
    
893
    
199
  
Amortization of premium on notes payable
    
(5,864
)
  
(5,159
)
  
(4,958
)
Amortization of deferred financing fees
    
1,503
    
1,512
    
1,459
  
Rental property depreciation and amortization
    
44,791
    
43,445
    
37,215
  
Stock-based compensation
    
6,125
    
5,973
    
5,401
  
Amortization of derivatives
    
(120
)
  
-
    
-
  
Gain on disposal of real estate and income-producing properties
    
(122,105
)
  
(11,460
)
  
(22,334
)
Gain on sale of securities
    
(282
)
  
(5,223
)
  
(593
)
Equity in (income) loss of unconsolidated joint ventures
    
(1,853
)
  
-
    
46
  
Operating distributions from unconsolidated joint ventures
    
1,373
    
-
    
-
  
Minority interest
    
206
    
188
    
689
  
Changes in assets and liabilities:
                    
Accounts and other receivables
    
(1,988
)
  
(1,832
)
  
(2,406
)
Other assets
    
1,807
    
(2,768
)
  
(2,147
)
Accounts payable and accrued expenses
    
2,946
    
3,674
    
4,662
  
Tenant security deposits
    
60
    
1,002
    
853
  
Other liabilities
    
(2,975
)
  
(338
)
  
1,247
  
Net cash provided by operating activities
    
94,643
    
117,192
    
113,110
  
INVESTING ACTIVITIES:
                    
Additions to and purchases of rental property
    
(186,006
)
  
(36,081
)
  
(263,640
)
Purchases of land held for development
    
(45,784
)
  
(29,290
)
  
(4,214
)
Additions to construction in progress
    
(47,429
)
  
(23,058
)
  
(21,557
)
Proceeds from disposal of real estate and income-producing properties
    
411,090
    
44,024
    
72,568
  
Increase in cash held in escrow
    
(1,547
)
  
(51
)
  
-
  
Distributions from unconsolidated joint ventures from sale of property
    
1,935
    
(12
)
  
3,119
  
Increase in deferred leasing costs
    
(6,163
)
  
(5,877
)
  
(6,668
)
Additions to notes receivable
    
(33
)
  
(4,227
)
  
-
  
Proceeds from repayments of notes receivable
    
5,735
    
40
    
6,090
  
Proceeds from sale of securities
    
12,852
    
32,764
    
5,814
  
Cash used to purchase securities
    
(29,837
)
  
(60,603
)
  
(36,363
)
Net cash provided by (used in) investing activities
    
114,813
    
(82,371
)
  
(244,851
)
FINANCING ACTIVITIES:
                    
Repayments of mortgage notes payable
    
(88,880
)
  
(48,131
)
  
(25,721
)
Net (repayments) borrowings under revolving credit facilities
    
(16,665
)
  
(53,835
)
  
(15,000
)
Proceeds from senior debt offerings
    
246,868
    
118,606
    
198,550
  
Repayment of senior debt
    
(125,000
)
  
-
    
-
  
Increase in deferred financing costs
    
(1,947
)
  
(463
)
  
(1,926
)
Proceeds from issuance of common stock
    
8,083
    
31,510
    
58,304
  
Stock issuance costs
    
(69
)
  
(181
)
  
(334
)
Repurchases of common stock
    
(69,103
)
  
-
    
-
  
Repayment of notes receivable from issuance of common stock
    
65
    
85
    
3,457
  
Cash dividends paid to stockholders
    
(162,704
)
  
(87,272
)
  
(80,904
)
Distributions to minority interest
    
(206
)
  
(160
)
  
(529
)
Net cash (used in) provided by financing activities
  
$
(209,558
)
$
(39,841
)
$
135,897
  
 
F - 11
 
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(In thousands, except per share amounts)

   
2006
  
2005
  
2004
  
               
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
  
$
(102
)
$
(5,020
)
$
4,156
  
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    
102
    
5,122
    
966
  
CASH AND CASH EQUIVALENTS, END OF YEAR
  
$
-
  
$
102
  
$
5,122
  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                    
Cash paid for interest, net of amount capitalized
  
$
57,684
  
$
55,249
  
$
50,155
  
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
                    
Change in unrealized holding gain (loss) on securities
  
$
(9,753
)
$
(1,229
)
$
4,633
  
Change in fair value of hedges
  
$
(2,574
)
      
$
122
  
Conversion of operating partnership units
              
$
14,108
  
Note receivable from sale of property
              
$
9,355
  
The Company acquired and assumed mortgages on some of the rental property acquisitions:
                    
Fair value of rental property
  
$
58,551
        
$
148,416
  
Assumption of mortgage notes payable
    
(33,602
)
        
(61,674
)
Fair value adjustment of mortgage notes payable
    
(1,863
)
        
(2,697
)
Cash paid for rental property
  
$
23,086
        
$
84,045
  
The Company issued senior unsecured notes:
                    
Face value of notes
  
$
250,000
  
$
120,000
  
$
200,000
  
Underwriting costs
    
(1,624
)
  
(780
)
  
(1,200
)
Discount
    
(1,508
)
  
(614
)
  
(250
)
Cash received
  
$
246,868
  
$
118,606
  
$
198,550
  
                     
See accompanying notes to the consolidated financial statements.
                    



 


 

 
 

 

 

F - 12

EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

 
Organization
 
Equity One, Inc. operates as a self-managed real estate investment trust (“REIT”) that principally acquires, renovates, develops and manages neighborhood and community shopping centers anchored by leading supermarkets, drug stores or discount retail store chains.
 
Basis of Presentation
 
The consolidated financial statements include the accounts of Equity One, Inc. and its wholly-owned subsidiaries and those partnerships where the Company has financial and operating control. Equity One, Inc. and its subsidiaries are hereinafter referred to as “the consolidated companies” or the “Company.”
 
Investments in joint ventures not controlled by the Company are accounted for under the equity method of accounting where the Company has concluded that the venture is not a variable interest entity or the Company is not the primary beneficiary and subject to the consolidation rules of FIN 46(R), “Consolidation of Variable Interest Entities.”
 
All significant intercompany transactions and balances have been eliminated in consolidation.
 
Portfolio
 
As of December 31, 2006, the Company owns or has interests in 179 properties consisting of 166 shopping centers, six development parcels and seven non-retail properties.
 
2.   Summary of Significant Accounting Policies
 
Properties
 
Income-producing property is stated at cost and includes all costs related to acquisition, development and construction, including tenant improvements, interest incurred during development, costs of predevelopment and certain direct and indirect costs of development. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations and improvements, which improve or extend the useful life of assets, are capitalized.
 
The Company is actively pursuing acquisition opportunities and will not be successful in all cases; costs incurred related to these acquisition opportunities are expensed when it is probable that the Company will not be successful in the acquisition.
 
Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets, as follows:
 
Land improvements
 
40 years
Buildings
 
30-40 years
Building improvements
 
5-40 years
Tenant improvements
Over the shorter of the term of the related
lease or economic useful life
Equipment
 
5-7 years
 
Business Combinations
 
The results of operations of any acquired property are included in the Company’s financial statements as of the date of its acquisition.
 
F - 13

The Company allocates the purchase price of acquired companies and properties to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. Fair value is defined as the amount at which that asset could be bought or sold in a current transaction between willing parties (other than in a forced or liquidation sale). In order to allocate the purchase price of acquired companies and properties to the tangible and intangible assets acquired, the Company identifies and estimates the fair value of the land, buildings and improvements, reviews the leases to determine the existence of, and estimates the fair value of, any contractual or other legal rights and investigates the existence of, and estimates the fair value of, any other identifiable intangible assets. Such valuations require management to make significant estimates and assumptions, especially with respect to intangibles.
 
The cost approach is used as the primary method to estimate the fair value of the buildings, improvements and other assets. The cost approach is based upon the current costs to develop the particular asset in that geographic location, less an allowance for physical and functional depreciation. The assigned value for buildings and improvements is based on an as if vacant basis. The market value approach is used as the primary method to estimate the fair value of the land. The determination of the fair value of contractual intangibles is based on the costs incurred to originate a lease, including commissions and legal costs, excluding any new leases negotiated in connection with the purchase of a property. In-place lease values are based on management’s evaluation of the specific characteristics of each lease and the Company’s overall relationship with each tenant. Among the factors considered in the allocation of these values include the nature of the existing relationship with the tenant, the tenant’s credit quality, the expectation of lease renewals, the estimated carrying costs of the property during a hypothetical expected lease-up period, current market conditions and costs to execute similar leases. Estimated carrying costs include real estate taxes, insurance, other property operating costs and estimates of lost rentals at market rates during the hypothetical expected lease-up periods, given the specific market conditions. Above-market and below-market lease values are determined based on the present value (using a discount rate reflecting the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the leases negotiated and in-place at the time of acquisition and (ii) management’s estimate of fair market lease rates for the property or equivalent property, measured over a period equal to the remaining non-cancelable term of the lease. The value of contractual intangibles is amortized over the remaining term of each lease. The Company allocates no value to customer relationship intangibles if it has pre-existing business relationships with the retailers. Other than as discussed above, the Company has determined that its real estate properties do not have any other significant identifiable intangibles.
 
Critical estimates in valuing certain of the intangibles and the assumptions of what marketplace participants would use in making estimates of fair value include, but are not limited to: future expected cash flows, estimated carrying costs, estimated origination costs, lease up periods and tenant risk attributes, as well as assumptions about the period of time the acquired lease will continue to be used in the Company’s portfolio and discount rates used in these calculations. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. Assumptions may not always reflect unanticipated events and changes in circumstances may occur. In making such estimates, management uses a number of sources, including appraisals, third party cost segregation studies or other market data, as well as, information obtained in its pre-acquisition due diligence and marketing and leasing activities.
 
In the event that a tenant were to terminate its lease, the unamortized portion of each related intangible would be expensed.
 
Intangibles associated with property acquisitions are included in other assets in the accompanying consolidated balance sheets.
 
Construction in progress and land held for development
 
Land held for development is stated at cost. Costs incurred during the predevelopment stage are capitalized once management has identified a site, determined that the project is feasible and it is probable that the Company is able to proceed with the project. Properties undergoing significant renovations and improvements are considered under development. The Company estimates the cost of a property undergoing renovations as a basis for determining eligible costs. Interest, real estate taxes and other costs directly related to the properties and projects under development are capitalized until the property is ready for its intended use. Similar costs related to properties not under development are expensed as incurred. In addition, the Company writes off costs related to predevelopment projects when it determines that it will no longer pursue the project.
 

F - 14

Total interest expense capitalized to construction in progress and land held for development was $5.8 million, $3.4 million, and $3.2 million for the years ended December 31, 2006, 2005 and 2004, respectively.
 
Property Held for Sale
 
Under Statement of Financial Accounting Standards, or SFAS, No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the definition of a component of an entity, assuming no significant continuing involvement, requires that operating properties that are sold or classified as held for sale be accounted for as discontinued operations. Given the nature of real estate sales contracts, it is not unusual for such contracts to allow potential buyers a period of time to evaluate the property prior to formal acceptance of the contract. In addition, certain other matters critical to the final sale, such as financing arrangements often remain pending even upon contract acceptance. As a result, properties under contract may not close within the expected time period, or may not close at all. Due to these uncertainties, it is not likely that the Company can meet the criteria of Statement 144 prior to the sale formally closing. Therefore, any properties categorized as held for sale generally represent only those properties that management has determined meet the criteria and are likely to close within the requirements set forth in Statement 144. Accordingly, the results of operations of operating properties disposed of, or classified as held for sale for which the Company has no significant continuing involvement are reflected as discontinued operations.
 
Long-lived assets
 
On a periodic basis, or whenever events or change in circumstances indicate, the Company assesses whether the value of the real estate properties may be impaired. A property’s value is impaired only if it is probable that management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the historical net carrying value of the property. In management’s estimate of cash flows, it considers facts such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. In addition, the undiscounted cash flows may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or a range is estimated. The determination of undiscounted cash flows requires significant estimates by management and considers the expected course of action at the balance sheet date. Subsequent changes in estimated undiscounted cash flows arising from changes in anticipated actions could impact the determination of whether impairment exits and whether the effects could materially impact the Company’s net income. To the extent that impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the fair value of the property.
 
When assets are identified by the Company as held for sale, the Company estimates the sales prices, net of selling costs, of such assets. Assets that will be sold together in a single transaction are aggregated in determining if the net sales proceeds of the group are expected to be less than the net book value of the assets. If, in management’s opinion, the net sales prices of the assets, which have been identified for sale, are expected to be less than the net book value of the assets, an impairment charge is recorded. For the year ended December 31, 2006, $86,000 of impairment loss was recognized related to a property that was subsequently sold and is reflected in income from discontinued operations.
 
The Company is required to make subjective assessments as to whether there are impairments in the value of its real estate properties and other investments. The assessments have a direct impact on the Company’s net income because recording an impairment charge results in an immediate charge to expense.
 
Cash and cash equivalents
 
The Company considers highly liquid investments with an initial maturity of three months or less to be cash equivalents.
 
Cash Held in Escrow
 
Cash held in escrow represents the cash proceeds of property sales that are being held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the Internal Revenue Code.
 
Accounts Receivable
 
Accounts receivable include amounts billed to tenants and accrued expense recoveries due from tenants. Management evaluates the collectibility of these receivables and adjusts the allowance for doubtful accounts to
 

F - 15

reflect amounts estimated to be uncollectible. The allowance for doubtful accounts was approximately $1.6 million and $1.5 million at December 31, 2006 and 2005, respectively.
 
Securities
 
The Company’s investments consist primarily of equity and debt securities. The Company’s equity investments are classified as available-for-sale and recorded at fair value based on current market prices. Changes in the fair value of the equity investments are included in accumulated other comprehensive income (loss). The Company’s debt securities are recorded at cost and are classified as held-to-maturity, with the related discount/premium amortized over the life of the investment using the effective interest method.
 
For securities classified as held-to-maturity, the Company determines whether a decline in fair value below the amortized cost basis is other-than-temporary. If it is probable that the Company will be unable to collect all amounts due according to the contractual terms of a debt security, an other-than-temporary impairment is considered to have occurred. The determination of other-than-temporary declines in value requires significant estimates and assumptions by management and requires the consideration of expected outcomes that are out of management’s control. Subsequent changes in estimates, assumptions used or expected outcomes could impact the determination of whether a decline in value is other-than-temporary and whether the effects could materially impact the Company’s financial position or net income. If the decline in fair value is judged to be other-than-temporary, the cost basis of the individual security will be written down to fair value as a new cost basis and the amount of the write-down will be included in earnings (that is, accounted for as a realized loss).
 
As of December 31, 2006, the Company indirectly owned approximately 3.8 million ordinary shares of DIM Vastgoed N.V. (“DIM”), representing 48.7% of the total outstanding ordinary shares. In addition, the Company has committed to buy, in September 2007, certificates representing an additional 45,000 ordinary shares for total consideration of $941,000. DIM is a public company organized under the laws of the Netherlands, the shares of which are listed on Euronext Amsterdam and which operates as a closed-end investment company owning and operating a portfolio of 20 shopping center properties aggregating approximately 2.5 million square feet in the southeastern United States. DIM’s capital structure includes priority shares and ordinary shares. The priority shares are 100% owned by a foundation that is controlled by its supervisory board. The ordinary shares have voting rights; however, only the priority shares have the right to nominate members to the supervisory board and to approve certain other corporate matters. As of December 31, 2006, management believes that the investment in DIM should be accounted for as an available-for-sale security because, as of that date, the Company was unable to exert significant influence over DIM’s operating or financial policies and, based on DIM’s organizational and capital structure, the Company was unable to participate in the affairs of DIM’s supervisory board.
 
As of December 31, 2006, the fair value of DIM’s ordinary shares is less than the carrying amount of the Company’s investment. The Company’s aggregate cost is $77.9 million and, based on the closing market price on December 31, 2006, the ordinary shares of DIM had a fair value of $71.4 million. This results in an unrealized loss of $6.5 million. The Company has evaluated the near-term prospects of DIM in relation to the severity and the duration of the impairment, the thin trading market for DIM shares and the ability and intent to hold the investment for a reasonable period of time sufficient for a forecasted recovery of the carrying cost. As a result of these factors and the Company’s own evaluation of the net asset value of the underlying properties of DIM, the Company does not consider the investment to be other-than-temporarily impaired at December 31, 2006.
 
As of December 31, 2006, the Company owned 133,800 shares of preferred stock of a publicly traded REIT that had a fair value of $3.6 million, a carrying amount of $3.4 million and an unrealized gain of approximately $200,000.
 
During 2006, the Company held debt securities of Winn Dixie Stores, Inc. (“Winn Dixie”). Upon the emergence from bankruptcy protection in November 2006, the Company transferred its debt securities from held to maturity to available for sale and sold its holdings with a cost basis of $12.4 million for approximately $12.1 million, which resulted in a net gain of $247,000. Also, as a result of Winn Dixie’s reorganization, a portion of the debt securities were converted into common stock of Winn Dixie.
 
As of December 31, 2006, the Company owned 13,450 shares of common stock of Winn Dixie that had fair value of $182,000, a carrying amount of $170,000 and an unrealized gain of approximately $12,000.
 
The specific identification method is used to determine realized gain or loss on securities sold.
 
F - 16

The following table reflects the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed other-than-temporarily impaired (in thousands):
 
   
As of December 31,
  
   
2006
  
2005
  
Investment
  
Fair
Value
  
Unrealized Loss
  
Fair
Value
  
Unrealized Loss
  
Equity securities
  
$
71,358
  
$
6,578
    
-
    
-
  
Debt securities
    
-
    
-
  
$
11,130
  
$
788
  

 
Deferred Costs and Intangibles
 
Deferred costs and intangibles included in other assets consist of loan origination fees, leasing costs and the value of intangible assets when a property was acquired. Loan and other fees directly related to rental property financing with third parties are amortized over the term of the loan which approximates the effective interest method. Direct salaries, third party fees and other costs incurred by the Company to originate a lease are capitalized and are being amortized using the straight-line method over the term of the related leases. Intangible assets consist of in-place lease values, tenant origination costs and above/below market rents that were acquired in connection with the acquisition of the properties and are being amortized using the straight-line method over the term of the related leases.
 
Deposits
 
Deposits included in other assets are composed of funds held by various institutions for future payments of property taxes, insurance and improvements, utility and other service deposits.
 
Goodwill
 
Goodwill has been recorded to reflect the excess of cost over the fair value of net assets acquired in various business acquisitions. The Company adopted SFAS No. 142 on January 1, 2002 and no longer amortizes goodwill.
 
The Company is required to perform annual, or more frequently in certain circumstances, impairment tests of its goodwill. The Company has elected to test for goodwill impairment in November of each year. The goodwill impairment test is a two-step process which requires management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of each reporting unit and comparing those estimated fair values with the carrying values, which include the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of a reporting unit’s implied fair value of goodwill requires the Company to allocate the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the implied fair value of goodwill which is compared to its corresponding carrying amount. During the periods presented, no impairment of goodwill was incurred.
 
The key assumptions management employs to determine the fair value of the Company’s reporting units (each property is considered a reporting unit) include (a) net operating income; (b) cash flows; and (c) an estimation of the fair value of each reporting unit, which was based on the Company’s experience in evaluating properties for acquisition and relevant market conditions. A variance in the net operating income or discount rate could have a significant impact on the amount of any goodwill impairment charge recorded.
 
Management cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill that totaled $13.1 million at December 31, 2006. Such events include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on the Company’s tenant base, or a materially negative change in its relationships with significant tenants.
 
Goodwill was included in the determination of the gain on disposal of real estate due to the disposition of certain properties. For the years ended December 31, 2006, 2005 and 2004, $604,000, $325,000, and $539,000, respectively, was included in the gain on sale.
 
F - 17

 
Investments in and Advances to Unconsolidated Ventures
 
The Company had direct equity investments in joint venture projects. The Company accounts for these investments in unconsolidated ventures using the equity method of accounting, as the Company exercises significant influence over, but does not control and is not the primary beneficiary of, these entities. These investments are initially recorded at cost, as “Investments in and advances to unconsolidated ventures,” and subsequently adjusted for equity in earnings and cash contributions and distributions.
 
Minority interest
 
On January 1, 1999, Equity One (Walden Woods) Inc., a wholly-owned subsidiary of the Company, entered into a limited partnership as a general partner. An income-producing shopping center (“Walden Woods Village”) was contributed by its owners (the “Minority Partners”), and the Company contributed 93,656 shares of the Company’s common stock (the “Walden Woods Shares”) to the limited partnership at an agreed-upon price of $10.30 per share. Based on this per share price and the net value of property contributed by the Minority Partners, the limited partners received 93,656 partnership units. The Company has entered into a Redemption Agreement with the Minority Partners whereby the Minority Partners can request that the Company purchase either their limited partnership units or any shares of common stock which they received in exchange for their partnership units at a price of $10.30 per unit or per share no earlier than two years nor later than fifteen years after the exchange date of January 1, 1999. As a result of the Redemption Agreement, the Company has consolidated the accounts of the partnership with the Company’s financial data. In addition, under the terms of the limited partnership agreement, the Minority Partners do not have an interest in the Walden Woods Shares except to the extent of dividends. Accordingly, a preference in earnings has been allocated to the Minority Partners to the extent of the dividends declared. The Walden Woods Shares are not considered outstanding in the consolidated financial statements and are excluded from the share count in the calculation of primary earnings per share.
 
Until January 1, 2006, the Company had a controlling general partnership interest (75% interest) in Venice Plaza and recorded a minority interest for the limited partners’ share of equity. In January 2006, the Company acquired the minority partner’s interest (and eliminated the related minority interest).
 
The Company has controlling interests in two joint ventures that, together, own the Company’s Sunlake-development project. The Company has funded all of the acquisition costs, is required to fund any necessary development and operating costs, receives an 8% preferred return on its advances and is entitled to 60% of the profits thereafter. The minority partners are not required to make contributions and, to date, have not contributed any capital. The joint ventures are in the process of obtaining the required approvals and permits to continue their mixed-use business plan. No minority interest has been recorded as the venture has incurred operating losses after taking into account the Company’s preferred return.
 
The Company has a controlling membership interest in Dolphin Village Partners, LLC. The Company has funded all of the acquisition costs, is required to fund any necessary development and operating costs, receives an 8% preferred return on its advances and is entitled to 50% of the profits thereafter. The minority partner is not required to make contributions and, to date, has not contributed any capital. The joint venture encompasses the Dolphin Village Shopping Center and is in the process of obtaining the required approvals and permits to continue its mixed-use business plan. No minority interest has been recorded as the venture has incurred operating losses after taking into account the Company’s preferred return.
 
Use of Derivative Financial Instruments
 
The Company accounts for derivative and hedging activities in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted. These accounting standards require the Company to measure derivatives, including certain derivatives embedded in other contracts, at fair value and to recognize them in the consolidated balance sheets as assets or liabilities, depending on the Company’s rights or obligations under the applicable derivative contract. For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivative are reported in other comprehensive income and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedging instruments, and ineffective portions of hedges, are recognized in earnings in the current period.
 

F - 18

The Company does not enter into derivative instruments for speculative purposes. The Company requires 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. Additionally, any derivative instrument used for risk management that becomes ineffective is marked-to-market each period.
 
The Company believes that it mitigates its credit risk by entering into these agreements with major financial institutions. Net interest differentials to be paid or received under a swap contract and/or collar agreement are included in interest expense as incurred or earned.
 
The estimated fair value of the Company’s derivative financial instruments has been determined using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value.
 
The Company currently has in place an aggregate notional amount of $85.0 million of treasury locks, at a weighted average interest rate of 5.10% per annum, which were executed to hedge the benchmark interest rate associated with forecasted interest payments relating to an anticipated issuance of fixed-rate borrowings by August 2007.
 
The Company entered into an aggregate notional amount of $95.0 million of treasury locks which were terminated in connection with the issuance of the $125 million 6.0% senior unsecured notes in March 2006. The realized gain of $1.5 million on these hedging relationships has been deferred in other comprehensive income and will be reclassified into earnings over the term of the debt as an adjustment to interest expense.
 
During 2004, concurrent with the issuance of the $200 million 3.875% senior unsecured notes, the Company entered into a $100.0 million notional principal variable rate interest swap with an estimated fair value of $3.8 million as of December 31, 2006. This swap converted fixed rate debt to variable rate based on the 6 month LIBOR in arrears plus 0.4375%, and matures April 15, 2009.
 
Notes receivable from issuance of common stock
 
As a result of certain provisions of the Sarbanes-Oxley Act of 2002, the Company is generally prohibited from making loans to directors and executive officers. Prior to the adoption of the Sarbanes-Oxley Act of 2002, the Company had loaned $7.1 million to various executives in connection with their exercise of options to purchase shares of the Company’s common stock. All of the loans have been repaid as of December 31, 2006. In accordance with the provisions of the Sarbanes-Oxley Act of 2002, there were no material modifications to the terms of the outstanding loans granted to executives or any other loans granted.
 
Revenue Recognition
 
Rental income comprises minimum rents, expense reimbursements, termination fees and percentage rent payments. Minimum rents are recognized over the lease term on a straight-line basis. As part of the leasing process, the Company may provide the lessee with an allowance for the construction of leasehold improvements. Leasehold improvements are capitalized and recorded as tenant improvements and depreciated over the shorter of the useful life of the improvements or the lease term. If the allowance represents a payment for a purpose other than funding leasehold improvements, or in the event the Company is not considered the owner of the improvements, the allowance is considered to be a lease incentive and is recognized over the lease term as a reduction to revenue. Factors considered during this evaluation include, among others, the type of improvements made, who holds legal title to the improvements, and other controlling rights provided by the lease agreement. Determination of the accounting for a tenant allowance is made on a case-by-case basis, considering the facts and circumstances of the individual tenant lease. Lease revenue recognition commences when the lessee is given possession of the leased space upon completion of any landlord-owned tenant improvements.
 
Substantially all of the lease agreements contain provisions that require the payment of additional rents based on the respective tenant’s sales volume (contingent or percentage rent) and reimbursement of the tenant’s share of real estate taxes, insurance and common area maintenance (“CAM”) costs. Percentage rents are recognized
F - 19
 
when the tenant’s reported sales have achieved the specified levels as defined in their respective lease agreements. Expense recoveries of real estate taxes, insurance and CAM costs are recognized in the period that the applicable costs are incurred in accordance with the lease agreements. The Company accounts for these leases as operating leases as the Company has retained substantially all risks and benefits of property ownership.
 
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required rent payments. The computation of this allowance is based on the tenant’s payment history and current credit quality.
 
The Company has been engaged by joint ventures and other third parties to provide property management and leasing services. The fees are generally calculated as a percentage of either revenues received or reimbursement of costs and are recognized as services are provided.
 
The company accounts for profit recognition on sales of real estate in accordance with Statement of Financial Accounting Standards (“SFAS”) Statement No. 66, “Accounting for Sales of Real Estate. In summary, profits from sales will not be recognized by the Company unless a sale has been consummated; the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property; the Company has transferred to the buyer the usual risks and rewards of ownership; and the Company does not have substantial continuing involvement with the property. The sales of operating properties where we do not have continuing involvement are reflected in discontinued operations.
 
Concentration of Credit Risk
 
A concentration of credit risk arises in the Company’s business when a national or regionally based tenant occupies a substantial amount of space in multiple properties owned by the Company. In that event, if the tenant suffers a significant downturn in its business, it may become unable to make its contractual rent payments to the Company, exposing the Company to a potential loss in rental revenue, expense recoveries, and percentage rent that is magnified as a result of the tenant renting space in multiple locations. Generally, the Company does not obtain security from its national or regionally based tenants in support of their lease obligations to the Company. The Company regularly monitors its tenant base to assess potential concentrations of credit risk. However, Publix Super Markets accounts for over 10% of the Company’s annualized minimum rent, or approximately $19.5 million of annualized minimum rent. No other tenant accounts for over 5% of the Company’s annualized minimum rent.
 
Earnings Per Share
 
       Basic earnings per share (“EPS”) are computed by dividing net income by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted EPS reflects the potential dilution that could occur from shares issuable under stock-based compensation plans, which would include the exercise of stock options, and the conversion of the operating partnership units held by minority limited partners.
 
Income Taxes
 
The Company elected to be taxed as a REIT under the Internal Revenue Code (“Code”), commencing with its taxable year ended December 31, 1995.  To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its REIT taxable income to its stockholders.  Also, at least 95% of the Company’s gross income in any year must be derived from qualifying sources. The difference between net income available to common stockholders for financial reporting purposes and taxable income before dividend deductions relates primarily to temporary differences, principally real estate depreciation and amortization, deduction of deferred compensation and deferral of gains on sold properties utilizing like kind exchanges. It is management’s intention to adhere to these requirements and maintain the Company’s REIT status. As a REIT, the Company generally will not be subject to corporate level federal income tax on taxable income it distributes currently to its stockholders.  If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years.  Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income.  Accordingly, the only provision for federal income taxes in the accompanying consolidated financial statements relates to the Company’s consolidated taxable REIT subsidiaries (“TRSs”). The Company’s TRSs did not have significant tax provisions or deferred income tax items during the periods reported hereunder.
 
At December 31, 2006 and 2005, the accompanying financial statement basis of assets and liabilities exceeds the tax basis by approximately $225.5 million and $283.7 million, respectively.
 
The following summarizes the tax status of dividends paid:
 
   
Years Ended December 31,
  
 
2006
  
2005
  
2004
  
 Dividend paid per share
$
2.20
  
$
1.17
  
$
1.13
  
 Ordinary income  
23.62
%
  
68.17
%
  
68.67
%
 Return to capital  
29.86
%
  
26.92
%
  
31.33
%
 Capital gains  
46.52
%
  
4.91
%
  
-
  

F - 20
 
Stock-Based Compensation
 
Cumulative Effect of Change in Accounting Principle
 
Prior to January 1, 2006, the Company accounted for stock-based compensation under the recognition and measurement provisions of Accounting Principle Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, and related interpretations as permitted by SFAS No. 123, Accounting for Stock-Based Compensation. Under APB No. 25, no stock-based compensation costs were recognized in the statement of operations for stock options, as options granted had an exercise price equal to the market value of common shares on the date of grant. Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), Share-Based Payment, using the modified prospective transition method. Under this transition method, compensation cost recognized beginning January 1, 2006, includes (a) compensation costs for all share-based payments granted prior to, but not vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). The Company has used the binomial option-pricing model to estimate the fair value of each option grant.
 
On January 1, 2006, the Company recorded the cumulative effect of adopting SFAS 123(R). This cumulative effect resulted in decreasing accrued liabilities by $4.5 million and increasing shareholder equity by $4.5 million. These balance sheet changes related to deferred compensation on unvested shares. There was no effect on the consolidated statement of operations or cash flows. Under SFAS No. 123(R), deferred compensation is no longer recorded at the time unvested shares are issued. Share-based compensation is now recorded over the requisite service period with an offsetting credit to equity (generally additional paid-in capital).
 
Share-Based Compensation Subsequent to the Adoption of SFAS 123(R)
 
Share-based compensation expense charged against earnings for the year ended December 31, 2006, was $6.1 million, of which $748,000 related to stock options and $12,000 related to Employee Stock Purchase Plan from the adoption of SFAS 123(R) and $5.4 million related to restricted stock grants. Share-based compensation capitalized as part of properties and related assets for the year ended December 31, 2006 was $178,000. If the Company had not adopted SFAS No. 123(R), net income for the year ended December 31, 2006 would have excluded $760,000 of share-based compensation related to options and the employee stock purchase plan.
 
Pro Forma Information for Periods Prior to Adoption of SFAS No. 123(R)
 
The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123(R) to our stock-based compensation for the years ended December 31, 2005 and 2004 (in thousands, except per share amounts):
 
       
Years Ended December 31,
     
2005
  
2004
  
   
As reported
  
$
92,741
  
$
97,804
  
   
Stock-based employee compensation expense included in reported net income
    
5,660
    
5,163
  
   
Total fair value stock-based employee compensation expense for all awards
    
(6,486
)
  
(5,926
)
       
$
91,915
  
$
97,041
  
   
As reported
  
$
1.26
  
$
1.39
  
       
$
1.24
  
$
1.38
  
   
As reported
  
$
1.24
  
$
1.37
  
       
$
1.23
  
$
1.36
  
 
Segment information
 
The Company’s properties are community and neighborhood shopping centers located predominantly in high-growth and high-barrier markets in the southern and northeastern United States. Each of the Company’s centers is a separate operating segment which has been aggregated and reported as one reportable segment because they have characteristics so similar that they are expected to have essentially the same future prospects. The economic characteristics include similar returns, occupancy and tenants. In addition, each center is located near a metropolitan area with similar economic demographics and site characteristics. No individual property constitutes more than 10% of the Company’s combined revenue, net income or assets, and thus the individual properties have been aggregated into one reportable segment based upon their similarities with regard to both the nature and economics of the centers, tenants and operational processes, as well as long-term average financial performance. In addition, none of the shopping centers are located outside the United States.
 
Use of estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
New accounting pronouncements
 
In March 2004, the EITF reached a consensus on EITF Issue No. 03-1, The Meaning of Other-than-Temporary Impairment and Its Application to Certain Investments. The guidance prescribes a three-step model for determining whether an investment is other-than-temporarily impaired and requires disclosures about unrealized losses on investments. The accounting guidance became effective for reporting periods beginning after June 15, 2004, while the disclosure requirements became effective for annual reporting periods ending after June 15, 2004. In September 2004, the FASB issued FASB Staff Position (FSP) EITF 03-1-1, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1-1, The Meaning of Other-than-Temporary Impairment and Its Application to Certain Investments, (FSP EITF 03-1-1). FSP EITF 03-1-1 delayed the effective date for the measurement and recognition guidance contained in paragraphs 10-20 of EITF Issue 03-1. In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, The Meaning of Other-than-Temporary Impairment and Its Application to Certain Investments. This FSP addresses the determination as to when an investment is considered impaired, whether the impairment is other-than-temporary, and the measurement of an impairment loss. This statement specifically nullifies the requirements of paragraph 10-18 of EITF 03-1 and references existing other-than-temporary impairment guidance. The guidance under this FSP is effective for reporting periods beginning after December 15, 2005, and the Company continued to apply relevant “other-than-temporary” guidance, as provided for in FSP EITF 03-1-1 during fiscal 2005. The adoption in 2006 of the guidance of FSP FAS 115-1 and FAS 124-1 did not have a significant effect on the Company’s consolidated financial statements.
 
F - 21
 
In December 2004, the FASB issued SFAS 123(R), Share-Based Payment. This standard requires compensation costs related to share-based payment transactions to be recognized in the financial statements.  With limited exceptions, the amount of compensation cost will be measured based on the grant date fair value of the equity instruments issued. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. This standard replaces SFAS No. 123 and supersedes Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and applies to all awards granted, modified, repurchased or cancelled after July 1, 2005. In April 2005, the SEC amended the compliance date of SFAS No. 123(R) through an amendment of Regulation S-X. Public companies with calendar year-ends would be required to adopt the provision of the standard effective for fiscal years beginning after September 15, 2005. The adoption on January 1, 2006 by the Company of SFAS 123(R)’s fair value method had an impact on the Company’s results of operations, although it did not have any impact on the Company’s overall financial position. The Company has elected to apply the modified prospective transition method to all past awards outstanding and unvested as of the date of adoption. Had the Company adopted SFAS 123(R) in prior periods, the impact of the standard would have approximated the impact as presented in the disclosure of pro forma net income and earnings per share in Note 2, Stock-Based Compensation.
 
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Correction (SFAS 154”), which replaces APB Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements - An Amendment of APB Opinion No. 28. SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, on the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005, and was adopted by the Company in the first quarter of 2006. The adoption of this standard did not materially impact the Company’s financial position, results of operations or cash flows of the Company.
 
In April 2006, the FASB issued FASB Staff Position FIN 46(R)-6, Determining the Variability to be Considered in Applying FASB Interpretation No. 46(R) that became effective for the third quarter of 2006. FSP FIN No. 46(R)-6 clarifies that the variability to be considered in applying Interpretation 46(R) shall be based on an analysis of the design of the variable interest entity. The adoption of this standard did not materially impact the Company’s consolidated financial statements.
 
In June 2006, the EITF reached a consensus on EITF Issue No. 06-02, Accounting for Sabbatical Leave and Other Similar Benefits (“EITF 06-02”). EITF 06-02 provides that an employee’s right to a compensated absence under a sabbatical leave or similar benefit arrangement in which the employee is not required to perform any duties during the absence is an accumulating benefit. Therefore, such arrangements should be accounted for as a liability with the cost recognized over the service period during which the employee earns the benefit. The provisions of EITF 06-02 will be effective as of January 1, 2007 and will impact the accounting for certain of the Company’s employment arrangements. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
 
In June 2006, the FASB issued FASB Interpretation No. 48 - Accounting for Uncertainty in Income Taxes (“FIN 48”). In summary, FIN 48 requires that all tax positions subject to SFAS No. 109 - Accounting for Income Taxes, to be analyzed using a two-step approach. The first step requires an entity to determine if a tax position is more likely than not to be sustained upon examination. In the second step, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon ultimate settlement. FIN 48 is effective for fiscal years beginning after December 15, 2006, with any adjustment in a company’s tax provision being accounted for as a cumulative effect of accounting change in beginning equity. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
 
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The adoption of this standard is not expected to materially impact how the Company measures fair value.
 

F - 22
 
In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R), (“SFAS 158”). SFAS 158 requires recognition of the over funded or under funded status of a benefit postretirement plan in the statement of financial position, as well as recognition of changes in that funded status through comprehensive income in the year in which they occur. SFAS 158 also requires a change in the measurement of a plan’s assets and benefit obligations as of the end date of the employer’s fiscal year. SFAS 158 is effective for fiscal years ending after December 15, 2006, except for the measurement date provisions, which are effective for fiscal years ending after December 15, 2008. The adoption of the effective provisions of this standard did not have a material impact on the Company’s consolidated financial statements and the measurement provisions are not expected to have a material impact on the Company’s consolidated financial statements.
 
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The adoption of this standard did not materially impact the Company’s financial statements.
 
Fair value of financial instruments
 
The estimated fair values of financial instruments have been determined by the Company 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 the Company 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. The Company has used the following market assumptions and/or estimation methods:
 
Cash and Cash Equivalents and Accounts and Other Receivables.  The carrying amounts reported in the balance sheets for these financial instruments approximate fair value because of their short maturities.
 
Notes Receivable. The fair value is estimated by using the current interest rates at which similar loans would be made. The carrying amounts reported in the balance sheets approximate fair value.
 
Available for Sale Securities. The fair value estimated at December 31, 2006 and 2005 was $75.1 million and $55.6 million, respectively, based on the closing market prices of the securities. The unrealized holding loss was $6.3 million at December 31, 2006, and an unrealized holding gain of $3.4 million at December 31, 2005.
 
Mortgage Notes Payable. The fair value estimated at December 31, 2006 and 2005 was $413.4 million and $463.0 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.
 
Unsecured Revolving Credit Facilities. The fair value was estimated by using the current rates at which similar loans would be made and remaining terms. The carrying amounts reported in the balance sheets approximate fair value.
 
Unsecured Senior Notes Payable. The fair value estimated at December 31, 2006 and 2005 was $568.8 million and $453.0 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.
 

F - 23


3.  
 Properties
 
Composition in the consolidated balance sheets:
  
December 31,
  
   
2006
  
2005
  
   
(thousands)
 
  
Land and land improvements
  
$
802,925
  
$
700,680
  
Building and building improvements
    
1,054,467
    
932,769
  
Tenant improvements
    
39,451
    
27,794
  
     
1,896,843
    
1,661,243
  
Less: accumulated depreciation
    
(144,825
)
  
(111,031
)
Income-producing property, net
  
$
1,752,018
  
$
1,550,212
  
 
Acquisitions
 
The following table reflects a series of individual properties that were acquired during 2006:
 
Property
  
Location
  
Month Purchased
  
Square Feet/
Acres
  
Purchase Price
(000’s)
  
                   
Dolphin Village
  
St. Pete Beach, FL
  
January
  
138,129
  
$ 28,000
  
Brookside Plaza
  
Enfield, CT
  
January
  
210,787
  
28,500
  
Commonwealth II
  
Jacksonville, FL
  
January
  
53,598
  
600
  
Piedmont Peachtree Crossing
  
Buckhead, GA
  
March
  
152,239
  
47,950
  
Prosperity Office Building
  
Palm Beach Gardens, FL
  
March
  
3,200
  
1,400
  
Alafaya Village
  
Orlando, FL
  
April
  
39,477
  
6,638
  
Chestnut Square out parcel
  
Brevard, NC
  
April
  
1,070
  
475
  
Sunpoint Shopping Center
  
Ruskin, FL
  
May
  
132,374
  
7,500
  
Chapel Trail Plaza
  
Pembroke Pines, FL
  
May
  
56,378
  
8,900
  
Deep Creek land
  
Fairburn, GA
  
June
  
101 acres
  
8,000
  
Milestone Plaza
  
Greenville, SC
  
August
  
93,655
  
20,200
  
Shoppes at Quail Roost
  
Miami, FL
  
August
  
73,550
  
15,435
  
Coral Reef Shopping Center
  
Palmetto Bay, FL
  
September
  
74,680
  
21,200
  
Pointe Royale out parcel
  
Miami, FL
  
September
  
6,897
  
1,350
  
Westport out parcels (2)
  
Davie, FL
  
September
  
9,768
  
2,200
  
Webster Plaza
  
Webster, MA
  
October
  
200,681
  
17,825
  
Oaktree Plaza
  
North Palm Beach, FL
  
October
  
24,145
  
3,850
  
St. Lucie Land
  
Port St. Lucie, FL
  
November
  
15.93 acres
  
7,633
  
Hampton Oaks
  
Atlanta, GA
  
November
  
13.2 acres
  
2,400
  
Midpoint Center
  
Cape Coral, FL
  
December
  
75,386
  
12,450
  
Shoppes of Andros Isles
  
West Palm Beach, FL
  
December
  
79,420
  
13,835
  
South Point Center
  
Vero Beach, FL
  
December
  
64,790
  
14,590
  
Total
$270,931
  

No equity interests were issued or issuable in connection with the above purchases and no contingent payments, options or commitments are provided for in the agreements. No goodwill was recorded in conjunction with any of the individual property acquisitions.
 
The amounts assigned to intangibles consisting of in-place leases, lease origination costs and below-market leases (net of above-market leases) are $8.2 million, $2.3 million and $11.8 million, respectively. The weighted average amortization period is 10.4 years.
 

F - 24
 
4.  
Accounts and Other Receivables

Composition in the consolidated balance sheets:
  
December 31,
  
   
2006
  
2005
  
   
(thousands)
  
Tenants
  
$
18,312
  
$
16,456
  
Other
    
2,264
    
2,677
  
Allowance for doubtful accounts
    
(1,609
)
  
(1,533
)
Total accounts and other receivables
  
$
18,967
  
$
17,600
  
 
 
5.  
Investments in Joint Ventures
 
The Company accounts for investments in which it has significant influence over operating and financial policies of the investee, but does not have a controlling financial interest and is not the primary beneficiary, using the equity method of accounting. The Company has determined that these investments do not meet the consolidation criteria of variable interest entities. Major decisions, including property acquisitions and dispositions, financings, annual budgets and dissolution of the ventures are subject to the approval of all partners. Any difference between the carrying amount of these investments and the underlying equity in net assets is amortized to equity in income of unconsolidated joint ventures over the expected useful lives of the properties and other intangible assets
 
The following is a summary of the Company’s investments in unconsolidated joint ventures at December 31, 2006 and 2005 (in thousands):
 
Entity
  
Location
  
Ownership
  
December 31,
2006
  
December 31,
2005
  
Parcel F, LLC
    
Palm Beach Gardens, FL
    
50.0
%
$
-
  
$
285
  
EQYInvest Texas, LLC(1)
    
Texas
    
20.0
%
  
-
    
-
  
Total investments in and advances to joint ventures
$
-
  
$
285
  
 
    (1) Formed and disposed of during 2006.
 
The Company has included in other assets in its consolidated balance sheets its investment in unconsolidated joint ventures.
 
The following is a brief summary of the interest and obligations in unconsolidated joint ventures:
 
Parcel F, LLC. The Company had a 50% interest in this joint venture that owned a parcel of land that was sold in May 2006. The Company’s pro rata share of the gain was approximately $1.6 million. The joint venture has been subsequently liquidated.
 
EQYInvest Texas, LLC. The Company had a 20% interest in this joint venture, which interest was obtained in connection with the sale of the Texas Properties in April 2006. The Company sold its interest in the joint venture in December 2006 and is no longer a member of the joint venture (see Note 9).
 
A summary of financial information for the joint ventures being reported on the equity method of accounting is as follows (in thousands):
 
   
Year Ended December 31,
  
   
2006
  
 2005
  
2004
  
Rental revenue
  
$
25,368
    
-
  
$
2,026
  
Expenses:
                    
Operating expenses
    
7,297
    
-
    
620
  
Interest and amortization of deferred financing fees
    
11,555
    
-
    
970
  
Depreciation and amortization
    
9,546
    
-
    
459
  
Other expense
    
-
    
-
    
69
  
Gain on sale of real estate
    
(3,300
)
  
-
    
-
  
Total expenses 
    
25,098
    
-
    
2,118
  
Net income (loss)
  
$
270
    
-
  
$
(92
)
The Company’s equity in operations of unconsolidated joint
    ventures reported in:
                    
Continuing operations
  
$
1,650
    
-
    
-
  
Discontinued operations
  
$
(203
)
  
-
  
$
(46
)

Significant accounting policies used by the unconsolidated joint ventures are similar to those used by the Company.
 
F - 25
6. Other Assets
 
Composition in the consolidated balance sheets:
  
December 31,
  
   
2006
  
2005
  
   
(thousands)
  
Notes receivable, bearing interest at 7.25% through 10.0% per annum,
    maturing from September 2007 through November 2010
  
$
4,800
  
$
10,502
  
Deposits and escrow impounds
    
11,909
    
13,391
  
Deferred financing fees, net
   
6,307
    
4,237
  
Leasing commissions, net
    
11,134
    
10,226
  
Intangible assets, net
    
2,653
    
3,336
  
Furniture and equipment, net
    
2,700
    
2,641
  
Prepaid and other assets
    
17,927
    
13,892
  
Total other assets
  
$
57,430
  
$
58,225
  

All amounts included as intangible assets (other than goodwill) are subject to amortization. The gross carrying amount and accumulated amortization of the Company’s intangible assets as of December 31, 2006 and 2005 was $14.9 million and $6.8 million, and accumulated amortization of $3.8 million and $1.3 million, respectively for in-place leases; $5.0 million and $2.7 million, and accumulated amortization of $1.3 million and $625,000, respectively, for lease origination costs; a contra-asset of $17.2 million and $5.4 million, and accumulated amortization of $3.3 million and $1.1 million, respectively for net above/below market leases; and $1.8 million and none and accumulated amortization of $38,000 and none, respectively, for lease incentives. For the years ended December 31, 2006, 2005 and 2004, the amortization for the intangible assets was $1.8 million, $624,000 and $317,000, respectively. The net amortization for the next five years for the recorded intangible assets is approximately $723,000, $33,000, $336,000, $50,000, and $233,000, respectively.
 
·  7.    Borrowings
 
The following is a summary of the Company’s borrowings, consisting of mortgage notes payable, unsecured senior notes payable and unsecured revolving credit facilities:
 
   
December 31,
  
   
2006
  
2005
  
Mortgage Notes Payable
  
(thousands)
  
Fixed rate mortgage loans
  
$
391,647
  
$
446,925
  
Unamortized net premium on mortgage notes payable
    
10,463
    
11,006
  
Total 
  
$
402,110
  
$
457,931
  
 
The weighted average interest rate of the mortgage notes payable at December 31, 2006 and December 31, 2005 was 7.3% and 7.2%, respectively, excluding the effects of the net premium adjustment.
 
F - 26
Each of the existing mortgage loans is secured by a mortgage on one or more of the Company’s properties. Certain of the mortgage loans involving an aggregate principal balance of approximately $76.4 million contain prohibitions on transfers of ownership which may have been violated by the Company’s previous issuances ofcommon stock or in connection with past acquisitions and may be violated by transactions involving the Company’s capital stock in the future. If a violation were established, it could serve as a basis for a lender to accelerate amounts due under the affected mortgage. To date, no lender has notified the Company that it intends to accelerate its mortgage. In the event that the mortgage holders declare defaults under the mortgage documents, the Company will, if required, repay the remaining mortgage from existing resources, refinancing of such mortgages, borrowings under its revolving lines of credit or other sources of financing. Based on discussions with various lenders, current credit market conditions and other factors, the Company believes that the mortgages will not be accelerated. Accordingly, the Company believes that the violations of these prohibitions will not have a material adverse impact on the Company’s results of operations or financial condition.
 
   
December 31,
  
   
2006
  
2005
  
Unsecured Senior Notes Payable
  
(thousands)
  
7.77% Senior Notes, due 4/1/06
  
$
-
  
$
50,000
  
7.25% Senior Notes, due 8/15/07
    
-
    
75,000
  
3.875% Senior Notes, due 4/15/09
    
200,000
    
200,000
  
Fair value of interest rate swap
    
(3,813
)
  
(4,596
)
7.84% Senior Notes, due 1/23/12
    
25,000
    
25,000
  
5.375% Senior Notes, due 10/15/15
    
120,000
    
120,000
  
6.0% Senior Notes, due 9/15/16
    
125,000
    
-
  
6.25% Senior Notes, due 1/15/17
    
125,000
    
-
  
Unamortized net premium (discount) on unsecured senior notes payable
    
(141
)
  
4,824
  
Total 
  
$
591,046
  
$
470,228
  
 
The weighted average interest rate of the unsecured senior notes at December 31, 2006 and 2005 was 5.67% and 5.20%, respectively, excluding the effects of the interest rate swap and net premium adjustment.
 
The Company exercised its rights to redeem the $75 million 7.25% senior notes due August 2007 on August 25, 2006.
 
The indentures under which the Company’s unsecured senior notes were issued have several covenants which limit the ability to incur debt, require the Company to maintain an unencumbered assets ratio above a specified level and limit the ability to consolidate, sell, lease, or convey substantially all of the assets to, or merge with, any other entity. These notes have also been guaranteed by most of the Company’s subsidiaries.
 
The Company swapped $100 million notional principal of the $200 million 3.875% senior notes to a floating interest rate based on the 6-month LIBOR in arrears plus 0.4375%.

   
December 31,
  
   
2006
  
2005
  
Unsecured Revolving Credit Facilities
  
(thousands)
  
Wells Fargo
  
$
76,500
  
$
93,000
  
City National Bank
    
-
    
165
  
Total 
  
$
76,500
  
$
93,165
  
 
In January 2006, the Company entered into an amended and restated unsecured revolving credit facility, with a syndicate of banks for which Wells Fargo Bank, National Association is the sole lead arranger and administrative agent. This facility has a maximum principal amount of $275.0 million and bears interest at the Company’s option at (i) LIBOR plus 0.45% to 1.15%, depending on the credit ratings of the Company’s senior unsecured notes or (ii) Federal Funds Rate plus 0.5%. The facility is guaranteed by most of the Company’s subsidiaries. Based on the Company’s current rating, the LIBOR spread is 0.80%. The facility also includes a competitive bid option which allows the Company to conduct auctions among the participating banks for borrowings in an amount not to exceed $137.5 million, a $35.0 million swing line facility for short term borrowings, a $20.0 million letter of credit commitment and may, at the request of the Company, be increased up to a total commitment of $400.0 million. The facility expires January 17, 2009 with a one-year extension option. In addition, the facility contains customary covenants, including financial covenants regarding debt levels, total liabilities, interest coverage, EBITDA coverage ratios, unencumbered properties and permitted investments which may limit the amount available under the facility. The facility also prohibits stockholder distributions in excess of 95% of funds from operations calculated at the end of each fiscal quarter for the four fiscal quarters then ending, unless a waiver has been granted allowing such action. Notwithstanding this limitation, the Company can make stockholder distributions to avoid income taxes on asset sales. If a default under the facility exists, the Company’s ability to pay dividends would be limited to the amount necessary to maintain the Company’s status as a REIT unless the default is a payment default or bankruptcy event in which case the Company would be prohibited from paying any dividends. The weighted average interest rate at December 31, 2006 and December 31, 2005, was 5.63% and 4.68%, respectively. The facility also provides collateral for $3.6 million in outstanding letters of credit.
 
F - 27
The Company also has a $5.0 million unsecured credit facility with City National Bank of Florida, of which there was no outstanding balance at December 31, 2006 and a balance of $165,000 at December 31, 2005. This facility also provides collateral for $1.4 million in outstanding letters of credit.
 
As of December 31, 2006, the availability under the various credit facilities was approximately $ $114.3 million net of outstanding balances and letters of credit.
 
Principal maturities (including scheduled amortization payments) of the notes payable as of December 31, 2006 are as follows (in thousands):
 
Year ending December 31,
  
Amount
  
2007
  
$
13,069
  
2008
    
38,976
  
2009
    
28,295
  
2010
    
361,457
  
2011
    
101,513
  
              Thereafter
    
519,837
  
                      Total
  
$
1,063,147
  
 
Interest costs incurred, excluding amortization of discount/premium, were $64.8 million, $60.5 million and $55.3 million in the years ended December 31, 2006, 2005, 2004, respectively, of which $5.8 million, $3.4 million and $3.2 million were capitalized in the years ended December 31, 2006, 2005, 2004, respectively.
 
8. Consolidating Financial Information
 
As of December 31, 2006, most of the Company’s subsidiaries have guaranteed the Company’s unsecured senior debt. The guarantees are joint and several and full and unconditional.
 
Condensed Balance Sheet
  
Equity
One, Inc.
  
Guarantors
Combined Subsidiaries
  
Non
Guarantors
  
Eliminating Entries
  
Consolidated Equity One
  
As of December 31, 2006 (in thousands)
                      
ASSETS
                      
Properties, net
  
$
355,817
  
$
1,003,181
  
$
526,713
  
$
-
  
$
1,885,711
  
Investment in affiliates
    
700,622
    
140,134
    
(201,618
)
  
(639,138
)
  
-
  
Other assets
    
48,778
    
31,028
    
86,332
    
-
    
166,138
  
                                 
Total
 
$
1,105,217
  
$
1,174,343
  
$
411,427
  
$
( 639,138
)
$
2,051,849
  
LIABILITIES
                                
Mortgage notes payable
  
$
47,113
  
$
99,867
  
$
244,667
  
$
-
  
$
391,647
  
Unsecured revolving credit facilities
    
76,500
    
-
    
-
    
-
    
76,500
  
Unsecured senior notes
    
591,187
    
-
    
-
    
-
    
591,187
  
Unamortized premium on notes payable
    
11
    
2,346
    
7,965
    
-
    
10,322
  
Other liabilities
    
26,078
    
21,076
    
8,372
    
-
    
55,526
  
Total liabilities
    
740,889
    
123,289
    
261,004
    
-
    
1,125,182
  
                                 
MINORITY INTEREST
    
-
    
-
    
-
    
989
    
989
  
                                 
STOCKHOLDERS’ EQUITY
                                
Total stockholders’ equity
    
364,328
    
1,051,054
    
150,423
    
(640,127
)
  
925,678
  
Total
  
$
1,105,217
  
$
1,174,343
  
$
411,427
  
$
(639,138
)
$
2,051,849
  
 
 
F - 28

Condensed Balance Sheet
  
Equity
One, Inc.
  
Guarantors
Combined Subsidiaries
  
Non
Guarantors
  
Eliminating Entries
  
Consolidated Equity One
  
As of December 31, 2005 (in thousands)
                      
ASSETS
                      
Properties, net
  
$
356,624
  
$
1,085,261
  
$
454,620
  
$
-
  
$
1,896,505
  
Investment in affiliates
    
628,317
    
-
    
-
    
(628,317
)
  
-
  
Other assets
    
58,754
    
29,114
    
67,660
    
-
    
155,528
  
Total
 
$
1, 043,695
  
$
1,114,375
  
$
522,280
  
$
(628,317
)
$
2,052,033
  
LIABILITIES
                                
Mortgage notes payable
  
$
48,738
  
$
139,177
  
$
259,010
  
$
-
  
$
446,925
  
Unsecured revolving credit facilities
    
93,165
    
-
    
-
    
-
    
93,165
  
Unsecured senior notes
    
465,404
    
-
    
-
    
-
    
465,404
  
Unamortized premium on notes payable
    
5,024
    
2,832
    
7,974
    
-
    
15,830
  
Other liabilities
    
23,365
    
24,086
    
9,104
    
-
    
56,555
  
Total liabilities
    
635,696
    
166,095
    
276,088
    
-
    
1,077,879
  
MINORITY INTEREST
    
-
    
-
    
-
    
1,425
    
1,425
  
STOCKHOLDERS’ EQUITY
                                
Total stockholders’ equity
    
407,999
    
948,280
    
246,192
    
(629,742
)
  
972,729
  
Total
  
$
1,043,695
  
$
1,114,375
  
$
522,280
  
$
(628,317
)
$
2,052,033
  
 
 
F - 29
 
Condensed Statement of Operations
  
Equity One, Inc.
  
Guarantors Combined Subsidiaries
  
Non-
Guarantor
  
 
Eliminating
Entries
  
Consolidated
  
For the Year Ended December 31, 2006 (in thousands)
                                
RENTAL REVENUE:
                              
Minimum rents
  
$
37,219
  
$
93,243
  
$
46,012
    
-
  
$
176,474
  
Expense recoveries
    
10,237
    
27,332
    
13,507
    
-
    
51,076
  
Termination fees
    
295
    
1,178
    
268
    
-
    
1,741
  
Percentage rent
    
178
    
1,333
    
552
    
-
    
2,063
  
Management and leasing services
    
-
    
2,067
    
-
    
-
    
2,067
  
Total revenue
    
47,929
    
125,153
    
60,339
    
-
    
233,421
  
EQUITY IN SUBSIDIARIES EARNINGS
    
203,223
    
-
    
-
    
(203,223
)
  
-
  
COSTS AND EXPENSES:
                                
Property operating
    
11,562
    
38,767
    
14,773
    
-
    
65,102
  
Services
    
-
    
1,861
    
-
    
-
    
1,861
  
Lease termination
    
275
    
547
    
180
    
-
    
1,002
  
Rental property depreciation and amortization
    
7,433
    
22,966
    
11,613
    
-
    
42,012
  
General and administrative
    
25,314
    
1,581
    
-
    
-
    
26,895
  
Total costs and expenses
    
44,584
    
65,722
    
26,566
    
-
    
136,672
  
INCOME BEFORE OTHER INCOME AND EXPENSES, MINORITY INTEREST AND DISCONTINUED OPERATIONS
    
206,568
    
59,431
    
33,773
    
(203,223
)
  
96,549
  
OTHER INCOME AND EXPENSES:
                                
Interest expense
    
(33,041
)
  
(5,941
)
  
(15,476
)
  
-
    
(54,458
)
Amortization of deferred financing fees
    
(1,280
)
  
(81
)
  
(129
)
  
-
    
(1,490
)
Investment income
    
2,883
    
265
    
4,339
    
-
    
7,487
  
Gain on sale of real estate
    
-
    
5,651
    
1,286
    
-
    
6,937
  
Equity in income of unconsolidated joint ventures
    
-
    
1,650
    
-
    
-
    
1,650
  
Gain (loss) on extinguishment of debt
    
456
    
-
    
(291
)
  
-
    
165
  
Other Income
    
389
    
-
    
-
    
-
    
389
  
INCOME BEFORE MINORITY INTEREST AND DISCONTINUED OPERATIONS
    
175,975
    
60,975
    
23,502
    
(203,223
)
  
57,229
  
MINORITY INTEREST
    
-
    
(206
)
  
-
    
-
    
(206
)
INCOME FROM CONTINUING OPERATIONS
   
175,975
    
60,769
    
23,502
    
(203,223
)
  
57,023
  
DISCONTINUED OPERATIONS:
                                
Operations of income-producing properties sold or held for sale
    
(80
)
  
4,918
    
(74
)
  
-
    
4,764
  
Gain on disposal of income- producing properties
    
1,060
    
108,337
    
5,771
    
-
    
115,168
  
Income from discontinued operations
    
980
    
113,255
    
5,697
    
-
    
119,932
  
NET INCOME
  
$
176,955
  
$
174,024
  
$
29,199
  
$
(203,223
)
$
176,955
  

F - 30

 
 
Condensed Statement of Operations
  
Equity One, Inc.
  
Guarantors
Combined Subsidiaries
  
Non-
Guarantors
  
 
Eliminating
Entries
  
Consolidated
  
                       
For the Year Ended December 31, 2005
       (in thousands)
                      
REVENUE:
                      
Minimum rents
  
$
34,932
  
$
88,079
  
$
36,006
  
$
-
  
$
159,017
  
Expense recoveries
    
9,870
    
23,692
    
10,689
    
-
    
44,251
  
Termination fees
    
2,896
    
1,406
    
474
    
-
    
4,776
  
Percentage rent
    
173
    
977
    
567
    
-
    
1,717
  
Management and leasing services
    
50
    
448
    
-
    
-
    
498
  
Total revenue
    
47,921
    
114,602
    
47,736
    
-
    
210,259
  
EQUITY IN SUBSIDIARIES EARNINGS
    
91,369
    
-
    
-
    
(91,369
)
  
-
  
COSTS AND EXPENSES:
                                
Property operating
    
11,182
    
33,874
    
10,645
    
-
    
55,701
  
    Services
    
-
    
229
    
-
    
-
    
229
  
    Rental property depreciation and 
        amortization
    
6,877
    
20,091
    
8,028
    
-
    
34,996
  
General and administrative
    
16,496
    
491
    
294
    
-
    
17,281
  
Total costs and expenses
    
34,555
    
54,685
    
18,967
    
-
    
108,207
  
INCOME BEFORE OTHER INCOME AND EXPENSES, MINORITY INTEREST AND DISCONTINUED OPERATIONS
    
104,735
    
59,917
    
28,769
    
(91,369
)
  
102,052
  
OTHER INCOME AND EXPENSES:
                                
Interest expense
    
(22,891
)
  
(9,502
)
  
(15,402
)
  
-
    
(47,795
)
Amortization of deferred financing fees
    
(1,209
)
  
(102
)
  
(143
)
  
-
    
(1,454
)
Investment income
    
7,503
    
280
    
158
    
-
    
7,941
  
INCOME BEFORE MINORITY INTEREST AND DISCONTINUED OPERATIONS
    
88,138
    
50,593
    
13,382
    
(91,369
)
  
60,744
  
MINORITY INTEREST
    
-
    
(78
)
  
(110
)
  
-
    
(188
)
INCOME FROM CONTINUING OPERATIONS
    
88,138
    
50,515
    
13,272
    
(91,369
)
  
60,556
  
DISCONTINUED OPERATIONS:
                                
Operations of income-producing properties sold or held for sale
    
737
    
14,427
    
5,561
    
-
    
20,725
  
Gain on disposal of income-producing properties
    
3,866
    
3,837
    
3,757
    
-
    
11,460
  
Income from discontinued operations
    
4,603
    
18,264
    
9,318
    
-
    
32,185
  
NET INCOME
  
$
92,741
  
$
68,779
  
$
22,590
  
$
(91,369
)
$
92,741
  


F - 31


Condensed Statement of Operations
  
Equity One, Inc.
  
Guarantors
Combined Subsidiaries
  
Non-
Guarantors
  
 
Eliminating
Entries
  
Consolidated
  
                       
For the Year Ended December 31, 2004
       (in thousands)
                      
REVENUE:
                      
Minimum rents
  
$
35,018
  
$
76,731
  
$
31,914
  
$
-
  
$
143,663
  
Expense recoveries
    
8,474
    
20,712
    
8,960
    
-
    
38,146
  
Termination fees
    
176
    
3,097
    
162
    
-
    
3,435
  
Percentage rent
    
197
    
1,057
    
580
    
-
    
1,834
  
Management and leasing services
    
8
    
171
    
-
    
-
    
179
  
Total revenue
    
43,873
    
101,768
    
41,616
    
-
    
187,257
  
EQUITY IN SUBSIDIARIES EARNINGS
    
100,026
    
-
    
-
    
(100,026
)
  
-
  
COSTS AND EXPENSES:
                                
Property operating
    
10,287
    
30,335
    
9,383
  
$
-
    
50,005
  
Services
    
-
    
82
    
-
    
-
    
82
  
Rental property depreciation and amortization
    
6,485
    
16,758
    
6,733
    
-
    
29,976
  
General and administrative
    
15,927
    
626
    
48
    
-
    
16,601
  
Total costs and expenses
    
32,699
    
47,801
    
16,164
    
-
    
96,664
  
INCOME BEFORE OTHER INCOME AND EXPENSES, MINORITY INTEREST AND DISCONTINUED OPERATIONS
    
111,200
    
53,967
    
25,452
    
(100,026
)
  
90,593
  
OTHER INCOME AND EXPENSES:
                                
Interest expense
    
(16,377
)
  
(10,415
)
  
(14,694
)
  
-
    
(41,486
)
Amortization of deferred financing fees
    
(1,036
)
  
(126
)
  
(173
)
  
-
    
(1,335
)
Investment income
    
2,023
    
198
    
125
    
-
    
2,346
  
Other income
   
200
    
158
    
-
    
-
    
358
  
INCOME BEFORE MINORITY INTEREST AND DISCONTINUED OPERATIONS
    
96,010
    
43,782
    
10,710
    
(100,026
)
  
50,476
  
MINORITY INTEREST
    
-
    
(470
)
  
(106
)
  
-
    
(576
)
INCOME FROM CONTINUING OPERATIONS
    
96,010
    
43,312
    
10,604
    
(100,026
)
  
49,900
  
DISCONTINUED OPERATIONS:
                                
Operations of income-producing properties sold or held for sale
    
1,794
    
20,037
    
4,010
    
-
    
25,841
  
Gain on disposal of income-producing properties
    
-
    
21,598
    
578
    
-
    
22,176
  
Minority interest
    
-
    
(113
)
  
-
    
-
    
(113
)
Income from discontinued operations
    
1,794
    
41,522
    
4,588
    
-
    
47,904
  
NET INCOME
  
$
97,804
  
$
84,834
  
$
15,192
  
$
(100,026
)
$
97,804
  


F - 32


Condensed Statement of Cash Flows
  
Equity One, Inc.
  
Combined
Guarantor
Subsidiaries
  
Non-Guarantor
Subsidiaries
  
Consolidated
  
                   
For the year ended December 31, 2006
     (in thousands)
                  
Net cash (used in ) provided by operating activities
  
$
(39,286
)
$
106,419
  
$
27,510
  
$
94,643
  
INVESTING ACTIVITIES:
                          
Additions to and purchase of rental properties
    
(5,648
)
  
(72,671
)
  
(108,216
)
  
(186,535
)
Purchases of land held for development
    
-
    
(20,740
)
  
(25,044
)
  
(45,784
)
Additions to construction in progress
    
(2,462
)
  
(32,011
)
  
(12,956
)
  
(47,429
)
Proceeds from disposal of properties
    
2,569
    
381,348
    
27,702
    
411,619
  
Increase in cash held in escrow
    
(1,547
)
  
-
    
-
    
(1,547
)
Distributions from unconsolidated joint ventures from sale of property
    
-
    
-
    
1,935
    
1,935
  
Proceeds from sale of securities
    
12,852
    
-
    
-
    
12,852
  
Cash used to purchase securities
    
(434
)
  
-
    
(29,403
)
  
(29,837
)
Additions to notes receivable
    
-
    
(18
)
  
(15
)
  
(33
)
Proceeds from repayment of notes receivable
    
5,693
    
28
    
14
    
5,735
  
Increase in deferred leasing costs
    
(810
)
  
(4,505
)
  
(848
)
  
(6,163
)
Advances from (to) affiliates
    
151,090
    
(330,322
)
  
179,232
    
-
  
Net cash (used in) provided by investing activities
    
161,303
    
(78,891
)
  
32,401
   
114,813
  
FINANCING ACTIVITIES:
                          
Repayment of mortgage notes payable
    
(1,619
)
  
(27,350
)
  
(59,911
)
  
(88,880
)
Net borrowings (repayments) under revolving credit facilities
    
(16,665
)
  
-
    
-
    
(16,665
)
Proceeds from senior debt offering
    
246,868
    
-
    
-
    
246,868
  
Repayment of senior debt
    
(125,000
)
  
-
    
-
    
(125,000
)
Increase in deferred financing costs
    
(1,947
)
  
-
    
-
    
(1,947
)
Proceeds from issuance of common stock
    
8,083
    
-
    
-
    
8,083
  
Stock issuance costs
    
(69
)
  
-
    
-
    
(69
)
Repurchases of common stock
    
(69,103
)
  
-
    
-
    
(69,103
)
Repayment of notes receivable from issuance of common stock
    
65
    
-
    
-
    
65
  
Cash dividends paid to stockholders
    
(162,704
)
  
-
    
-
    
(162,704
)
Distributions to minority interest
    
(28
)
  
(178
)
  
-
    
(206
)
Net cash used in financing activities
    
(122,119
)
  
(27,528
)
  
(59,911
)
  
(209,558
)
NET DECREASE IN CASH AND CASH EQUIVALENTS
    
(102
)
  
-
    
-
    
(102
)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD
    
102
    
-
    
-
    
102
  
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD
  
$
-
  
$
-
  
$
-
  
$
-
  




F - 33


Condensed Statement of Cash Flows
  
Equity One, Inc.
  
Guarantors
Combined
Subsidiaries
  
Non-Guarantors
  
Consolidated
  
                   
For the year ended December 31, 2005
      (in thousands)
                  
Net cash (used in) provided by operating activities
  
$
(2,477
)
$
90,685
  
$
28,984
  
$
117,192
  
INVESTING ACTIVITIES:
                          
Additions to and purchase of rental property
    
(2,673
)
  
(31,991
)
  
(1,417
)
  
(36,081
)
Purchases of land held for development
    
(1,215
)
  
(28,075
)
  
-
    
(29,290
)
Additions to construction in progress
    
-
    
(15,551
)
  
(7,507
)
  
(23,058
)
Proceeds from disposal of properties
    
15,482
    
12,682
    
15,860
    
44,024
  
Decrease in cash held in escrow
    
(51
)
  
-
    
-
    
(51
)
Contributions paid to joint ventures
    
-
   
-
    
(12
)
  
(12
)
Increase in deferred leasing costs
    
(1,239
)
  
(3,962
)
  
(676
)
  
(5,877
)
Additions to notes receivable
    
(4,215
)
  
(12
)
  
-
    
(4,227
)
Proceeds from repayment of notes receivable
    
18
    
17
    
5
    
40
  
Proceeds from sale of securities
    
32,764
    
-
    
-
    
32,764
  
Cash used to purchase securities
    
(12,212
)
  
-
    
(48,391
)
  
(60,603
)
Advances from (to) affiliates
    
(36,139
)
  
(1,915
)
  
38,054
    
-
  
Net cash (used in) provided by investing activities
    
(9,480
)
  
(68,807
)
  
(4,084
)
  
(82,371
)
FINANCING ACTIVITIES:
                          
Repayment of mortgage notes payable
    
(1,513
)
  
(21,828
)
  
(24,790
)
  
(48,131
)
Net repayments under revolving credit facilities
    
(53,835
)
  
-
    
-
    
(53,835
)
Proceeds from senior debt offering
    
118,606
    
-
    
-
    
118,606
  
Increase in deferred financing costs
    
(463
)
  
-
    
-
    
(463
)
Proceeds from issuance of common stock
    
31,510
    
-
    
-
    
31,510
  
Stock issuance costs
    
(181
)
  
-
    
-
    
(181
)
Repayment of notes receivable from issuance of common stock
    
85
    
-
    
-
    
85
  
Cash dividends paid to stockholders
    
(87,272
)
  
-
    
-
    
(87,272
)
Distributions to minority interest
          
(50
)
  
(110
)
  
(160
)
Net cash provided by (used in) financing activities
    
6,937
    
(21,878
)
  
(24,900
)
  
(39,841
)
NET DECREASE IN CASH AND CASH EQUIVALENTS
    
(5,020
)
  
-
    
-
    
(5,020
)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD
    
5,122
    
-
    
-
    
5,122
  
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD
  
$
102
  
$
-
  
$
-
  
$
102
  
 

 

F - 34


       
Guarantors
          
Condensed Statement of Cash Flows
  
Equity One, Inc.
  
Combined
Subsidiaries
  
IRT
Partners LP
  
Non-Guarantors
  
Consolidated
  
                       
For the year ended December 31, 2004
       (in thousands)
                      
Net cash provided by operating activities
  
$
30,099
  
$
47,019
  
$
8,048
  
$
27,944
  
$
113,110
  
INVESTING ACTIVITIES:
                                
Additions to and purchase of rental properties
    
-
    
(183,168
)
  
-
    
(80,472
)
  
(263,640
)
Purchases of land held for development
    
-
    
(4,214
)
  
-
    
-
    
(4,214
)
Additions to construction in progress
    
-
    
(21,557
)
  
-
    
-
    
(21,557
)
Proceeds from disposal of properties
    
-
    
48,949
    
59
    
23,560
    
72,568
  
Distributions received from unconsolidated joint ventures from sale of property
    
3,119
    
-
    
-
    
-
    
3,119
  
Increase in deferred leasing costs
    
-
    
(4,235
)
  
-
    
(2,433
)
  
(6,668
)
Proceeds from repayment of notes receivable
    
6,090
    
-
    
-
    
-
    
6,090
  
Proceeds from sale of securities
    
5,814
    
-
    
-
    
-
    
5,814
  
Cash used to purchase securities
    
(36,363
)
  
-
    
-
    
-
    
(36,363
)
Advances from (to) affiliates
    
(166,221
)
  
131,123
    
(7,789
)
  
42,887
    
-
  
Net cash (used in) provided by investing activities
    
(187,561
)
  
(33,102
)
  
(7,730
)
  
(16,458
)
  
(244,851
)
FINANCING ACTIVITIES:
                                
Repayment of mortgage notes payable
    
-
    
(13,917
)
  
(318
)
  
(11,486
)
  
(25,721
)
Net repayments under revolving credit facilities
    
(15,000
)
  
-
    
-
    
-
    
(15,000
)
Proceeds from senior debt offering
    
198,550
    
-
    
-
    
-
    
198,550
  
Increase in deferred financing costs
    
(1,926
)
  
-
    
-
    
-
    
(1,926
)
Proceeds from issuance of common stock
    
58,304
    
-
    
-
    
-
    
58,304
  
Stock issuance costs
    
(334
)
  
-
    
-
    
-
    
(334
)
Repayment of notes receivable from issuance of common stock
    
3,457
    
-
    
-
    
-
    
3,457
  
Cash dividends paid to stockholders
    
(80,904
)
  
-
    
-
    
-
    
(80,904
)
Distributions to minority interest
    
(529
)
  
-
    
-
    
-
    
(529
)
Net cash provided by (used in) financing activities
    
161,618
    
(13,917
)
  
(318
)
  
(11,486
)
  
135,897
  
NET INCREASE IN CASH AND CASH EQUIVALENTS
    
4,156
    
-
    
-
    
-
    
4,156
  
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD
    
966
    
-
    
-
    
-
    
966
  
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD
  
$
5,122
  
$
-
  
$
-
  
$
-
  
$
5,122
  
 

 
9.    Property Held for Sale and Dispositions
 
Portfolio Dispositions
 
In April 2006, the Company disposed of 29 of its properties located in Texas (“the Texas Properties”) to EQYInvest Texas, LLC, a Delaware limited liability company (the “JV”), in exchange for cash consideration of $387.2 million and a 20% interest in the JV. The Texas Properties had a net book value of $222.0 million. In December, 2006, the Company disposed of its 20% interest in the JV for cash consideration of $18.5 million. As a result of these transactions, the Company recognized an aggregate gain of $112.9 million related to its disposition of the Texas properties and no longer has significant continuing involvement.
 
F - 35
The Company also entered into a management agreement pursuant to which the Company continues to manage and lease the properties on behalf of the JV. The Company will not receive any contingent consideration for the sale. The Company has guaranteed the joint venture an operating return based on certain predetermined targets for the first twelve months following the sale, which will require the Company to pay to the joint venture an amount of up to $2.0 million in the event that the joint venture does not achieve its targeted operating returns. The Company has also agreed to fund remaining construction costs to complete various projects in an amount up to $1.6 million. These contingent obligations are reflected in other liabilities in the accompanying consolidated balance sheets.
 
Individual Property Dispositions
 
As of December 31, 2006, one shopping center, one other property and a parcel of land were held for sale with a net book value of $20.4 million.
 
The following table reflects individual properties sold during 2006:
 
Date Sold
  
Property
  
Location
  
Square Feet/
Acres
  
Gross Sales Price
  
Gain On Sale
  
Income-producing properties
          
(thousands)
  
March 2006
  
Scottsville Square
  
Bowling Green, KY
  
38,450
  
$ 2,500
  
$ 478
  
April 2006
  
Sutherland Lumber
  
Marble Falls, TX
  
53,571
  
2,000
  
3
  
May 2006
  
Hedwig
  
Houston, TX
  
69,504
  
13,350
  
5,630
  
July 2006
  
Crossroads (Lowe’s)
  
Pembroke Pines, FL
  
177,929
  
7,678
  
2,173
  
   
Total
$25,528
  
$ 8,284
  
Sale of real estate
                  
February 2006
  
Westridge out parcel
  
McDonough, GA
  
1.0 acres
  
$ 875
  
$ 314
  
April 2006
  
Westridge out parcel
  
McDonough, GA
  
1.0 acres
  
583
  
202
  
Sept. 2006
  
River Green land parcel
  
Canton, GA
  
2.0 acres
  
1,500
  
439
  
   
Total
$ 2,958
  
$ 955
  

Pursuant to SFAS No. 144, the accompanying statements of operations have been retrospectively adjusted to reflect the classification of discontinued operations. The summary selected operating results for income-producing properties disposed of or designated as held for sale as of December 31, 2006, with no significant continuing involvement, are as follows (in thousands):

   
For the Year Ended December 31,
 
   
2006
  
2005
  
2004
  
 
Rental Revenue
  
$
14,593
  
$
44,980
  
$
52,201
  
Expenses
                    
Property operating expenses
    
4,112
    
11,558
    
13,308
  
Rental property depreciation and amortization.
    
2,779
    
8,451
    
7,239
  
Interest expense
    
1,064
    
4,188
    
5,643
  
Amortization of deferred financing fees
    
13
    
58
    
124
  
Other (income) expense
    
1,861
    
-
    
46
  
Operations of income-producing properties sold or held for sale
  
$
4,764
  
$
20,725
  
$
25,841
  

 

F - 36


10. Stockholders’ Equity and Earnings Per Share
 
Common Stock

The following table reflects the change in number of shares of common stock issued (retired) for the year ended December 31, 2006 (in thousands):

   
Common Stock*
  
Options Exercised
  
 
Total
  
Board of Directors
    
23
    
12
    
35
  
Officers**
    
270
    
356
    
626
  
Employees and other
    
24
    
15
    
39
  
Cumulative effect of a change in accounting principle ***
    
(518
)
  
-
    
(518
)
Shares acquired under the stock repurchase program
    
(3,046
)
  
-
    
(3,046
)
Dividend Reinvestment and Stock Purchase Plan
    
211
    
-
    
211
  
Total
    
(3,036
)
  
383
    
(2,653
)
 
* Effective January 1, 2006, the Company changed the method of accounting for restricted stock to comply with the provisions of FASB Statement No. 123(R). During 2006, the Company granted 309,416 shares of restricted stock which are subject to forfeiture and vest over periods from one to four years. Under FASB Statement No. 123(R), restricted stock with a requisite service period is not deemed to be issued until the shares vest and, accordingly, the above schedule includes 411,187 shares that vested during the current period.
 
**Is net of shares surrendered on the exercise of options.
 
***Represents the reversal of unvested restricted stock outstanding at December 31, 2005 to comply with the provisions of FASB Statement 123(R).
 
Common Stock Repurchases
 
In May 2006, the Company commenced a program to repurchase up to $100.0 million of the Company’s outstanding common stock. During the period May 2006 through December 2006, through periodic open-market transactions or through privately negotiated transactions, the Company repurchased and retired 3.0 million common shares, at an average purchase price of $22.68 per share, at an aggregate cost of $69.1 million.
 
Dividend Reinvestment Plan
 
The Company has a Dividend Reinvestment and Share Purchase Plan whereby shareholders may invest cash distributions and make optional cash payments to purchase common shares of the Company. Effective March 2006, issuances of stock under the plan were suspended.

Earnings per Share
 
The following is a reconciliation of the amounts of net income and shares of common stock used in calculating basic and diluted per-share income (“EPS”) for the years ended December 31, 2006, 2005 and 2004 (in thousands, except per share amounts):
 
   
For the Year Ended December 31, 2006
  
   
Income
(Numerator)
  
Shares
(Denominator)
  
Per Share
Amount
  
Net Income
  
$
176,955
              
Basic EPS
                    
Income attributable to common stockholders
  
$
176,955
    
73,598
  
$
2.40
  
Effect of Dilutive Securities
                    
Walden Woods Village, Ltd.
    
206
    
94
        
Unvested restricted stock
    
-
    
439
        
Stock options
    
-
    
193
        
     
206
    
726
        
Diluted EPS
                    
Income attributable to common stockholders
assuming conversions
  
$
177,161
    
74,324
  
$
2.38
  
 
 
F - 37
Options to purchase 1.8 million shares of common stock at prices ranging from $24.12 to $28.05 per share were outstanding at December 31, 2006, but were not included in the computation of diluted EPS because the option price was greater than the average market price of common shares.

   
For the Year Ended December 31, 2005
  
   
Income
(Numerator)
  
Shares
(Denominator)
  
Per Share
Amount
  
 
Net Income
  
$
92,741
              
Basic EPS
                    
Income attributable to common stockholders
  
$
92,741
    
73,840
  
$
1.26
  
Effect of Dilutive Securities
                    
Walden Woods Village, Ltd.
    
109
    
94
        
Unvested restricted stock
    
-
    
575
        
Stock options
    
-
    
281
        
     
109
    
950
        
Diluted EPS
                    
Income attributable to common stockholders
assuming conversions
  
$
92,850
    
74,790
  
$
1.24
  
 
Options to purchase 10,000 shares of common stock at $23.52 per share were outstanding at December 31, 2005, but were not included in the computation of diluted EPS because the option price was greater than the average market price of common shares.
 
   
For the Year Ended December 31, 2004
  
   
Income
(Numerator)
  
Shares
(Denominator)
  
Per Share
Amount
  
 
Net Income
  
$
97,804
              
Basic EPS
                    
Income attributable to common stockholders
  
$
97,804
    
70,447
  
$
1.39
  
Effect of Dilutive Securities
                    
Walden Woods Village, Ltd.
    
106
    
94
        
Unvested restricted stock
    
-
    
611
        
Convertible partnership units
    
517
    
520
        
Stock options
    
-
    
364
        
     
623
    
1,589
        
Diluted EPS
                    
Income attributable to common stockholders
assuming conversions
  
$
98,427
    
72,036
  
$
1.37
  

All options outstanding at December 31, 2004 were included in the computation of diluted EPS.

F - 38
 
11.
Share-Based Compensation and Other Benefit Plans
 
On October 23, 1996, the Company adopted the Equity One, Inc. 1995 Stock Option Plan (the “Plan”), which was amended December 10, 1998. The purpose of the Plan is to further the growth of the Company by offering incentives to directors, officers and other key employees of the Company, and to increase the interest of these directors, officers and employees in the Company through additional ownership of its common stock. The effective date of the Plan was January 1, 1996. The maximum number of shares of common stock as to which options may be granted under this Plan is 1.0 million shares, which is reduced each year by the required or discretionary grant of options. The term of each option is determined by the Compensation Committee of the Company (the “Committee”), but in no event can be longer than ten years from the date of the grant. The vesting of the options is determined by the Committee, in its sole and absolute discretion, at the date of grant of the option.

On June 23, 2000, the Company, with shareholder approval, adopted the Equity One 2000 Executive Incentive Compensation Plan (the “2000 Plan”). The terms of the 2000 Plan provide for grants of stock options, stock appreciation rights (“SARs”), restricted stock, deferred stock, other stock-related awards and performance or annual incentive awards that may be settled in cash, stock or other property. The persons eligible to receive an award under the 2000 Plan are the officers, directors, employees and independent contractors of the Company and its subsidiaries. Following an amendment to the 2000 Plan, approved by our stockholders on July 28, 2004, the total number of shares of common stock that may be issuable under the 2000 Plan is 5.5 million shares, plus (i) the number of shares with respect to which options previously granted under the 2000 Plan terminate without being exercised, and (ii) the number of shares that are surrendered in payment of the exercise price for any awards or any tax withholding requirements. In addition to increasing the available shares, the July 2004 amendment expanded the list of business criteria that our compensation committee may use in granting performance awards and annual incentive awards under the 2000 Plan intended to qualify for the exclusions from the limitations of Section 162(m) of the Internal Revenue Code and modified the definition of a “change of control” to include, in addition to other instances, following approval by stockholders of any reorganization, merger or consolidation or other transaction or series of transactions if persons who were stockholders immediately prior to such reorganization, merger or consolidation or other transaction do not, immediately thereafter, own more than 50% of the combined voting power of the reorganized, merger or consolidated company’s then outstanding voting securities (previously the threshold was 26%). The 2000 Plan will terminate on the earlier of the day before the tenth anniversary of the stockholders’ approval of the 2000 Plan or the date on which all shares reserved for issuance under the 2000 Plan have been issued.

Options

As of December 31, 2006, we have options outstanding under four share-based compensations plans. The Equity One, Inc. 2000 Stock Option Plan authorized the grant of options, common stock and other share-based awards for up to 5.5 million shares of common stock, of which 710,233 shares are available for issuance. The IRT Property Company 1998 Long Term Incentive Plan similarly authorized the grant of options, common stock and other share-based awards for up to 1,462,500 shares of common stock, of which 14,400 shares are available for issuance. The Equity One, Inc. 1995 Stock Option Plan authorized the grant of option awards for up to 1.0 million shares of common stock, all of which have been issued. The IRT Property Company 1989 Stock Option Plan authorized the grant of stock options and other share-based awards for up to 956,250 shares of common stock, of which no shares are available for issuance.

The term of each award is determined by the Compensation Committee of the Company (the “Committee”), but in no event can be longer than ten years from the date of the grant. The vesting of the awards is determined by the Committee, in its sole and absolute discretion, at the date of grant of the award. Dividends are paid on unvested shares of restricted stock. Certain options and share awards provide for accelerated vesting if there is a change in control.

The fair value of each option award during 2006 is estimated on the date of grant using the binomial option-pricing model. Expected volatilities, dividend yields, employee exercises and employee terminations are primarily based on historical data. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company measures compensation costs for restricted stock awards based on the fair value of the Company’s common stock at the date of the grant and charges to expense such amounts to earnings ratably over the vesting period.
 
F - 39
The following is a summary of the Company’s stock option activity for the years ended December 31, 2006, 2005 and 2004 (in thousands, except per share amounts):
 
   
2006
  
2005
  
2004
  
   
Stock Options
  
Weighted Average Exercise Price
  
Stock Options
  
Weighted Average Exercise Price
  
Stock Options
  
Weighted Average Exercise Price
  
 
Outstanding at the beginning of year
    
977
  
$
16.00
    
1,481
  
$
14.52
    
1,701
  
$
13.22
  
Granted
    
1,843
    
24.77
    
106
    
20.89
    
400
    
17.17
  
Forfeited
    
-
    
-
    
(14
)
  
12.93
    
-
    
-
  
Exercised
    
(383
)
  
14.85
    
(596
)
  
13.26
    
(620
)
  
12.64
  
Outstanding and expected to vest at the end of year
    
2,437
  
$
22.82
    
977
  
$
16.00
    
1,481
  
$
14.52
  
Vested, end of year
    
168
  
$
14.93
    
428
  
$
14.11
    
1,091
  
$
13.57
  
Weighted average fair value of options granted during the year
        
$
3.17
        
$
4.48
        
$
1.45
  
 
Cash received from stock options exercised during the years ended December 31, 2006, 2005 and 2004 was $3.0 million, $2.1 million and $6.1 million, respectively.
 
At December 31, 2006, the aggregate intrinsic value of outstanding and expected to vest options was $9.4 million and options exercisable was $2.0 million.
 
The total intrinsic value of options exercised during the years ended December 31, 2006, 2005 and 2004 was $3.6 million, $7.8 million and $4.3 million, respectively.
 
The fair value of each option grant was estimated on the grant date using a binomial option-pricing model with the following assumptions for the years ended December 31, 2006, 2005 and 2004:
 
     
2006
    
2005
    
2004 
  
Dividend Yield
  
4.7% - 5.0%
  
5.0%
  
6.5%
  
Risk-free interest rate
  
4.6% - 4.8%
  
4.0% - 4.2%
  
4.3%
  
Expected option life (years)
  
3.0 - 3.3
  
10
  
10
  
Expected volatility
  
20.0%
  
19.0% - 22.0%
  
16.0%
  
 
In determining the fair value of the option grants made during 2006, management included in the assumptions the probability of involuntary early exercise based on historical patterns, actuarial data, and potential change of control events.
 
The options were granted with an exercise price equivalent to the current stock price on the grant date or the ten-day average of the stock price prior to the grant date.
 
F - 40
The following table summarizes information about outstanding stock options as of December 31, 2006:
 
Options Outstanding
  
Options Exercisable
  
Exercise Price
      
Number Outstanding
(thousands)
  
Weighted Average Remaining Contractual Life
(in years)
  
Number Exercisable
(thousands)
  
   $10.00-10.99
        
47
    
1.8
    
47
  
   $11.00-11.99
        
11
    
3.8
    
11
  
   $13.00-13.99
        
10
    
4.9
    
10
  
   $16.00-16.99
        
88
    
6.0
    
-
  
   $17.00-17.99
        
368
    
7.0
    
90
  
   $20.00-20.99
        
60
    
8.2
    
-
  
   $23.00-23.99
        
10
    
8.0
    
10
  
   $24.00-24.99
        
1,243
    
9.7
    
-
  
   $25.00-25.99
        
500
    
9.9
    
-
  
    $26.00-26.99  
       
65
    
10.0
    
-
  
 $27.00-27.99    
        
10
    
9.9
        
   $28.00-28.99
        
25
    
9.9
    
-
  
         
2,437
          
168
  
 
 Restricted Stock Grants
 
The Company’s Compensation Committee of the Board of Directors grants restricted stock to its officers, directors, and other employees. Vesting periods for the restricted stock are determined by the Company’s Compensation Committee. The Company measures compensation costs for restricted stock awards based on the fair value of the Company’s common stock at the date of the grant and charges to expense such amounts to earnings ratably over the vesting period. As of December 31, 2006, the Company had 381,000 shares of non-vested restricted stock grants outstanding.
 
The following table provides a summary of restricted stock activity:
 
   
Unvested Shares
(000’s)
 
Weighted-Average Price
  
Unvested at December 31, 2005
    
518
  
$
18.72
  
Granted
    
309
    
24.43
  
Vested
    
(411
)
  
18.25
  
Forfeited
    
(35
)
  
21.85
  
Unvested at December 31, 2006
    
381
    
23.58
  

As of December 31, 2006, there was $14.3 million of total unrecognized compensation expense related to unvested share-based compensation arrangements (options and unvested restricted shares) granted under our plans. This cost is expected to be recognized over the next 4.0 years. The total vesting-date value of the shares that vested during the year ended December 31, 2006 was $10.1 million.
 
        401(k) Plan
 
The Company has a 401(k) defined contribution plan (the “401(k) Plan”) covering substantially all of the officers and employees of the Company which permits participants to defer compensation up to the maximum amount permitted by law. The Company matches 75% of each employee’s contribution up to a maximum of 4.5% of the employee’s annual compensation. Employee’s contributions vest immediately while the Company’s matching contributions vest over three years. The Company’s contributions to the 401(k) Plan for the years ended December 31, 2006, 2005 and 2004 were $295,000, $288,000, and $253,000, respectively. The 401(k) Plan invests the Company’s matching contributions by purchasing publicly traded shares of the Company’s common stock.
 
F - 41

Deferred Compensation Plan
 
During 2005, the Company established a non-qualified deferred compensation plan that permits eligible employees to defer a portion of their compensation. The deferred compensation liability (included in accounts payable in the accompanying balance sheet) was $491,000 at December 31, 2006. The Company has established a grantor trust (Rabbi Trust) to provide funding for benefits payable under its non-qualified deferred compensation plan. The assets held in the trust at December 31, 2006 amounted to $491,000. The Rabbi Trust’s assets consist of short-term cash investments and a managed portfolio of equity securities. These assets are included in other assets in the accompanying balance sheets.
 
2004 Employee Stock Purchase Plan
 
Under the 2004 Employee Stock Purchase Plan (the “Purchase Plan”) (implemented in October 2004), Equity One employees, including directors of Equity One who are employees, are eligible to participate in quarterly plan offerings in which payroll deductions may be used to purchase shares of Common Stock. The purchase price per share will be 90% of the average closing price per share of common stock on the NYSE on the five (5) trading days that immediately precede the date of purchase (the “Exercise date”), provided, however, that in no event shall the exercise price per share of common stock on the exercise date of an offering period be less than the lower 85% of (i) the market price on the first day of the offering period or (ii) the market price on the Exercise Date.
 
       Long-Term Incentive Compensation Plans
 
       Long-term incentive compensation is subject to a performance-based schedule, based on an approximately four-year performance period. In order to receive compensation, the Company’s Total Shareholder Return (“TSR”) over the performance period must exceed 6% and achieve a certain spread against the average TSR of the peer group.
 
Long-term incentive compensation participation is currently only granted to the top executives in the Company. The Company determines the grant date fair value of TSR grants based upon a Monte Carlo Simulation model. Compensation expense is measured at the grant date and recognized over the vesting period. The level of cash compensation available depends on the spread between the Company’s TSR and the average TSR of the peer group companies.
 
12. Future Minimum Rental
 
 Future minimum rental income under noncancelable operating leases approximates the following as of December 31, 2006 (in thousands):
 
  Year Ending December 31,
  
  Amount
 
2007
  
$
197,812
  
 
2008
    
173,011
  
 
2009
    
145,480
  
 
2010
    
119,546
  
 
2011
    
97,317
  
 
Thereafter
    
472,499
  
 
Total
  
$
1,205,665
  
 
 
13.    Commitments and Contingent Liabilities
 
Letters of Credit. As of December 31, 2006 and 2005, the Company has pledged letters of credit for $6.1 million and $1.4 million, respectively, as additional security for certain property matters. The letters of credit are generally secured by our revolving credit facilities.

F - 42
 
Construction Commitments. The Company has entered into construction commitments and, as of December 31, 2006, has outstanding commitments of $19.7 million, based on current plans and estimates, in order to complete current development and redevelopment projects. These obligations, comprised principally of construction contracts, are generally due as the work is performed and are expected to be financed by our available credit facilities.
 
     Operating Lease Obligations. Certain of the Company’s properties are subject to a ground lease, which are accounted for as operating leases and have annual obligations of approximately $100,000.
 
Non-Recourse Debt Guarantees. Under certain Company and joint venture non-recourse mortgage loans, the Company could, under certain 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 and material misrepresentations. In the Company’s judgment, it would be extremely unlikely for us to incur any material liability under these guarantees that will have a material adverse effect on the financial condition, results of operations, or cash flow of the Company.
 
Litigation. The Company is subject to litigation in the normal course of business, none of which as of December 31, 2006 in the opinion of management will have a material adverse effect on the financial condition, results of operations, or cash flows of the Company.
 
14.   Environmental Matters

The Company is subject to numerous environmental laws and regulations. The operation of dry cleaning facilities at the shopping centers is the principal environmental concern. 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 their operations. Additionally, we use all legal means to cause tenants to remove dry cleaning plants from our shopping centers. 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. However, the Company has environmental insurance policies covering all of our properties. Management believes that the ultimate disposition of currently known environmental matters will not have a material effect on our financial position, liquidity or operations.
 
15.    Subsequent Events
 
During 2007, the Company acquired a shopping center and an out parcel for total consideration of $48.9 million. The purchase price was funded from cash on hand and borrowings under our existing credit facility.
 
16.    Quarterly Financial Data (unaudited)
 
   
First Quarter(1)
 
  
Second Quarter(1)
 
  
Third Quarter(1)
 
  
Fourth Quarter(1)
 
  
Total(2)
 
  
2006:
                      
Total revenues
  
$ 55,637
  
$ 57,376
  
$ 57,536
  
$ 62,872
  
$ 233,421
  
Income from continuing operations
    
16,248
    
19,594
    
11,652
    
9,529
    
57,023
  
Net income
    
22,365
    
111,347
    
14,120
    
29,123
    
176,955
  
Basic per share data
                                
Income from continuing operations
  
$
0.22
  
$
0.26
  
$
0.16
  
$
0.13
  
$
0.77
  
Net Income
    
0.30
    
1.50
    
0.19
    
0.40
    
2.40
  
Diluted per share data
                                
Income from continuing operations
  
$
0.21
  
$
0.26
  
$
0.16
  
$
0.13
  
$
0.77
  
Net income
    
0.29
    
1.48
    
0.19
    
0.40
    
2.38
  


F - 43



   
First Quarter(1)
 
  
Second Quarter(1)
 
  
Third Quarter(1)
 
  
Fourth Quarter(1)
 
  
Total(2)
 
  
2005:
                      
Total revenues
  
$
50,975
  
$
53,285
  
$
51,431
  
$
54,568
  
$
210,259
  
Income from continuing operations
    
14,862
    
15,801
    
16,822
    
13,701
    
60,556
  
Net income
    
21,790
    
25,143
    
28,041
    
17,767
    
92,741
  
Basic per share data
                                
Income from continuing operations
  
$
0.20
  
$
0.21
  
$
0.23
  
$
0.18
  
$
0.82
  
Net Income
    
0.30
    
0.34
    
0.38
    
0.24
    
1.26
  
Diluted per share data
                                
Income from continuing operations
  
$
0.20
  
$
0.21
  
$
0.22
  
$
0.17
  
$
0.81
  
Net income
    
0.29
    
0.34
    
0.37
    
0.24
    
1.24
  
—————————
(1)  
Reclassified to reflect the reporting of discontinued operations.
 
(2)  
The sum of quarterly earnings per share amounts may differ from annual earnings per share.
 
** * *
 
F - 44

SCHEDULE II
Equity One, Inc.
VALUATION AND QUALIFYING ACCOUNTS
December 31, 2006
(in thousands)


 
Column A
  
 
Column B
  
 
Column C
  
 
Column E
  
       
 Additions
 
 Deductions
      
Description
  
Balance
at Beginning
of Period
  
 
Charged to
Bad Debt Expense
  
 
Accounts Receivable Written Off
  
Balance
at End
of  Period
  
Allowance for doubtful accounts:
                  
    Year ended December 31, 2006
  
$
1,533
  
$
755
  
$
679
  
$
1,609
  
    Year ended December 31, 2005
  
$
1,400
  
$
908
  
$
775
  
$
1,533
  

Note: Column D is not applicable

 
 
S - 1
 

SCHEDULE III
Equity One, Inc.

REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2006
(in thousands)

 
           
Initial Cost to Company
      
Gross Amounts at
Which Carried at
Close of Period
                  
Property
  
Location
  
Encum-brances
  
Land
  
Building
and Improve-ments
  
Capitalized Subsequent
to Acquisition
  
Land
  
Improve-ments
  
Total
  
Accumu-lated Deprecia-tion
 
Date of Cons-truction
  
Date Acquired
  
Depre-ciable Life
  
                                                   
Shopping Centers
                                                  
                                                   
ALABAMA
                                                  
Madison Centre
    
Madison
  
$
3,608
  
$
1,424
  
$
5,187
  
$
31
  
$ 1,424
$
5,218
  
$ 6,642
$
(761
)
  
6/19/05
    
2/12/03
  
40
West Gate Plaza
    
Mobile
    
-
    
1,288
   
3,162
   
13
 
1,288
 
3,175
 
4,463
 
(307
)
  
5/27/05
    
2/12/03
  
40
Winchester Plaza
    
Huntsville
    
-
    
8,301
   
3,210
   
-
  
8,301
 
3,210
 
11,510
 
-
    
6/28/05
    
2/28/05
  
-
                                                               
CONNECTICUT
                                                              
Brookside
    
Enfield
    
-
    
2,290
   
26,259
   
2,841
 
2,290
 
29,100
 
31,389
 
(767
)
  
6/7/05
    
1/12/06
  
40
                                                               
FLORIDA
                                                              
                                                               
North Florida
                                                              
Atlantic Village
    
Atlantic Beach
    
-
    
1,190
   
4,760
   
1,078
 
1,190
 
5,838
 
7,028
 
(2,109
)
  
1984
    
6/30/95
  
40
Beauclerc Village
    
Jacksonville
    
-
    
651
   
2,242
   
758
 
651
 
3,000
 
3,651
 
(964
)
  
1962
   
5/15/98
  
40
Commonwealth
    
Jacksonville
    
2,374
   
886
   
2,920
   
1,670
 
886
 
4,590
 
5,476
 
(1,581
)
  
6/6/05
    
2/28/94
  
40
Commonwealth Pic N Save
    
Jacksonville
    
-
    
606
   
-
    
-
  
606
 
-
  
606
 
-
    
1984
    
1/26/06
  
-
Forest Village
    
Tallahassee
    
4,333
   
4,997
   
3,206
   
700
 
4,997
 
3,906
 
8,903
 
(877
)
  
6/22/05
    
1/28/99
  
40
Ft. Caroline
    
Jacksonville
    
-
    
938
   
2,800
   
196
 
938
 
2,996
 
3,933
 
(1,015
)
  
6/7/05
    
1/24/94
  
40
Mandarin Landing
    
Jacksonville
    
-
    
4,443
   
4,747
   
1,622
 
4,443
 
6,369
 
10,812
 
(1,552
)
  
5/29/05
    
12/10/99
  
40
Medical & Merchants
    
Jacksonville
    
-
    
9,460
   
11,669
   
35
 
9,460
 
11,704
 
21,164
 
(886
)
  
6/15/05
    
5/27/04
  
40
Middle Beach Shopping Center
    
Panama City Bch
    
-
    
2,195
   
5,542
   
16
 
2,195
 
5,558
 
7,753
 
(443
)
  
6/16/05
    
12/23/03
  
40
Monument Point
    
Jacksonville
    
-
    
1,336
   
2,330
   
132
 
1,336
 
2,462
 
3,798
 
(646
)
  
6/7/05
    
1/31/97
  
40
Oak Hill
    
Jacksonville
    
-
    
690
   
2,760
   
150
 
690
 
2,910
 
3,600
 
(859
)
  
6/7/05
    
12/7/95
  
40
Parkmore Plaza
    
Milton
    
-
    
3,181
   
3,002
   
5
 
3,181
 
3,007
 
6,189
 
(434
)
  
6/8/05
    
2/12/03
  
40
Pensacola Plaza
    
Pensacola
    
-
    
1,122
   
990
   
76
 
1,122
 
1,066
 
2,188
 
(180
)
  
6/7/05
    
2/12/03
  
40
South Beach
   
Jacksonville Bch
    
-
    
9,545
   
19,228
   
1,494
 
9,545
 
20,722
 
30,267
 
(2,028
)
  
6/12/05
    
2/12/03
  
40
                                                               
Central Florida
                                                             
Alafaya Commons
    
Orlando
    
-
    
5,758
   
9,677
   
1,038
 
5,758
 
10,715
 
16,473
 
(1,053
)
  
1987
    
2/12/03
  
40
Alafaya Village
    
Orlando
    
4,090
   
1,444
   
4,967
   
0
 
1,444
 
4,967
 
6,411
 
(109
)
  
1986
    
4/20/06
  
40
Conway Crossing
    
Orlando
    
-
    
2,615
   
5,818
   
1,844
 
2,615
 
7,662
 
10,277
 
(726
)
  
6/24/05
    
2/12/03
  
40
Eustis Square
    
Eustis
    
-
    
1,463
   
4,515
   
2,208
 
1,463
 
6,723
 
8,186
 
(2,891
)
  
6/5/05
    
10/22/93
  
40
Hunters Creek
   
Orlando
    
-
    
1,562
   
5,445
   
948
 
1,562
 
6,393
 
7,955
 
(497
)
  
6/20/05
    
9/23/03
  
40
Kirkman Shoppes
    
Orlando
    
9,268
   
3,222
   
9,714
   
234
 
3,222
 
9,948
 
13,171
 
(1,927
)
  
5/26/05
    
8/15/00
  
33
Lake Mary
    
Orlando
    
23,720
   
7,092
   
13,878
   
4,953
 
7,092
 
18,831
 
25,923
 
(4,843
)
  
6/10/05
    
11/9/95
  
40
Park Promenade
    
Orlando
    
6,100
   
2,810
   
6,444
   
539
 
2,810
 
6,983
 
9,793
 
(1,603
)
  
6/9/05
    
1/31/99
  
40
Shoppes of Eastwood
    
Orlando
    
5,857
   
1,688
   
6,976
   
65
 
1,688
 
7,041
 
8,729
 
(821
)
  
6/21/05
    
6/28/02
  
40
Sunpoint
    
Ruskin
    
-
    
4,025
   
4,338
   
-
  
4,025
 
4,338
 
8,363
 
(93
)
  
6/6/05
    
5/5/06
  
40
Town & Country
    
Kissimmee
    
-
    
2,499
   
4,397
   
224
 
2,499
 
4,621
 
7,120
 
(446
)
  
6/15/05
    
2/12/03
  
40
Unigold
    
Winter Park
    
-
    
4,304
   
6,413
   
1,441
 
4,304
 
7,854
 
12,158
 
(859
)
  
6/9/05
    
2/12/03
  
40
Walden Woods
    
Plant City
    
-
    
950
   
3,780
   
996
 
950
 
4,776
 
5,726
 
(1,381
)
  
6/7/05
    
1/1/99
  
40
                                                               
Florida West Coast
                                                              
Bay Pointe Plaza
    
St. Petersburg
    
-
    
4,655
   
5,870
   
62
 
4,655
 
5,932
 
10,587
 
(637
)
  
1984
    
2/12/03
  
40
Carrollwood
    
Tampa
    
-
    
2,756
   
6,553
   
453
 
2,756
 
7,006
 
9,762
 
(738
)
  
5/23/05
    
2/12/03
  
40
Charlotte Square
    
Port Charlotte
    
3,402
   
4,155
   
4,414
   
88
 
4,155
 
4,502
 
8,656
 
(520
)
  
6/2/05
    
2/12/03
  
40
Chelsea Place
    
New Port Richey
    
-
    
2,591
   
6,491
   
1,151
 
2,591
 
7,642
 
10,233
 
(723
)
  
6/14/05
    
2/12/03
  
40
Dolphin Village Partners, LLC
    
St. Petersburg
    
-
    
17,404
   
10,098
   
926
 
17,404
 
11,024
 
28,428
 
(386
)
  
5/20/05
    
1/4/06
  
40
Lake St. Charles
    
Tampa
    
3,743
   
1,496
   
3,768
   
16
 
1,496
 
3,784
 
5,280
 
(506
)
  
6/21/05
    
9/21/01
  
40
Lutz Lake
    
Lutz
    
7,500
   
3,619
   
5,199
   
1,130
 
3,619
 
6,329
 
9,949
 
(620
)
  
6/24/05
    
2/12/03
  
40
Marco Town Center
    
Marco Island
    
8,236
   
3,872
   
11,966
   
602
 
3,872
 
12,568
 
16,440
 
(2,176
)
  
6/23/05
    
8/15/00
  
37
Mariners Crossing
    
Spring Hill
    
3,224
   
1,511
   
4,447
   
1,244
 
1,511
 
5,691
 
7,202
 
(757
)
  
6/11/05
    
9/12/00
  
40
Midpoint Center
    
Cape Coral
    
6,714
   
5,404
   
6,705
   
-
  
5,404
 
6,705
 
12,108
 
(16
)
  
6/24/05
    
12/8/06
  
40
Pavilion
    
Naples
    
-
    
10,827
   
11,299
   
2,180
 
10,827
 
13,479
 
24,306
 
(895
)
  
6/4/05
    
2/4/04
  
40
Regency Crossing
    
Port Richey
    
-
    
1,982
   
6,524
   
25
 
1,982
 
6,549
 
8,532
 
(643
)
  
6/8/05
    
2/12/03
  
40
Ross Plaza
    
Tampa
    
6,464
   
2,115
   
6,346
   
171
 
2,115
 
6,517
 
8,633
 
(1,271
)
  
6/6/05
    
8/15/00
  
33
Seven Hills
    
Spring Hill
    
-
    
2,167
   
5,167
   
480
 
2,167
 
5,647
 
7,814
 
(457
)
  
6/13/05
    
2/12/03
  
40
Shoppes of North Port
    
North Port
    
3,788
   
1,452
   
5,807
   
127
 
1,452
 
5,934
 
7,386
 
(918
)
  
1991
    
12/5/00
  
40
Skipper Palms
    
Tampa
    
3,456
   
1,315
   
3,940
   
274
 
1,315
 
4,214
 
5,528
 
(574
)
  
6/6/05
    
9/21/01
  
40
Summerlin Square
    
Fort Myers
    
3,010
   
2,187
   
7,989
   
216
 
2,187
 
8,205
 
10,392
 
(1,804
)
  
6/8/05
    
6/10/98
  
40
Venice Plaza
    
Venice
    
-
    
3,186
   
450
   
3,278
 
3,186
 
3,728
 
6,914
 
(616
)
  
5/24/05
    
2/12/03
  
40
Venice Shopping Center
    
Venice
    
-
    
3,857
   
2,562
   
138
 
3,857
 
2,700
 
6,557
 
(217
)
  
5/21/05
    
3/31/04
  
40
                                                               
Florida Treasure Coast
                                                              
Bluffs Square
    
Jupiter
    
9,815
   
3,232
   
9,917
   
303
 
3,232
 
10,220
 
13,451
 
(2,059
)
  
6/8/05
    
8/15/00
  
33
Cashmere Corners
    
Port St. Lucie
    
4,916
   
1,435
   
5,916
   
325
 
1,435
 
6,241
 
7,677
 
(867
)
  
6/23/05
    
8/15/00
  
40
Jonathan's Landing
    
Jupiter
    
2,793
   
1,146
   
3,442
   
35
 
1,146
 
3,477
 
4,622
 
(584
)
  
6/19/05
    
8/15/00
  
37
New Smyrna Beach
    
New Smyrna Beach
    
-
    
3,217
   
8,896
   
97
 
3,217
 
8,993
 
12,210
 
(916
)
  
6/9/05
    
2/12/03
  
40
Old Kings Commons
    
Palm Coast
    
-
    
1,420
   
5,005
   
386
 
1,420
 
5,391
 
6,811
 
(532
)
  
6/10/05
    
2/12/03
  
40
Ryanwood Square
Shopping Ctr
    
Vero Beach
    
-
    
2,281
   
6,880
   
655
 
2,281
 
7,535
 
9,817
 
(956
)
  
6/9/05
    
8/15/00
  
40
Salerno Village
    
Stuart
    
-
    
2,596
   
1,511
   
4,901
 
2,596
 
6,412
 
9,008
 
(485
)
  
6/9/05
    
5/6/02
  
40
South Point
    
Vero Beach
    
8,198
   
7,129
   
7,104
   
-
  
7,129
 
7,104
 
14,233
 
(17
)
  
2003
    
12/8/06
  
40
St. Lucie West Plaza
    
Port St. Lucie
    
-
    
709
   
3,082
   
932
 
709
 
4,014
 
4,723
 
(56
)
        
8/15/00
  
40
Treasure Coast Plaza
    
Vero Beach
    
3,920
   
1,359
   
9,728
   
280
 
1,359
 
10,008
 
11,367
 
(951
)
  
6/5/05
    
2/12/03
  
40
                                                               
South Florida / Atlantic Coast
                                                              
Bird Ludlum
    
Miami
    
8,328
   
4,088
   
16,318
   
677
 
4,088
 
16,995
 
21,083
 
(5,402
)
  
6/10/05
    
8/11/94
  
40
Boca Village
    
Boca Raton
    
8,011
   
3,385
   
10,174
   
288
 
3,385
 
10,462
 
13,847
 
(1,823
)
  
5/31/05
    
8/15/00
  
37
Boynton Plaza
    
Boynton Beach
    
7,259
   
2,943
   
9,100
   
254
 
2,943
 
9,354
 
12,297
 
(1,889
)
  
5/31/05
    
8/15/00
  
33
Chapel Trail Plaza
    
Pembroke Pines
    
-
    
3,617
   
5,777
   
-
  
3,617
 
5,777
 
9,394
 
(91
)
  
6/18/05
    
5/10/06
  
40
Coral Reef Shopping Center
    
South Miami
    
-
    
16,445
   
4,397
   
-
  
16,445
 
4,397
 
20,842
 
(43
)
  
5/21/05
    
9/1/06
  
40
Countryside Shops
    
Cooper City
    
-
    
11,343
   
13,853
   
3,037
 
11,343
 
16,890
 
28,233
 
(1,595
)
  
6/8/05
    
2/12/03
  
40
Crossroads Square
    
Ft. Lauderdale
    
-
    
3,592
   
4,401
   
5,711
 
3,592
 
10,112
 
13,704
 
(1,060
)
  
5/26/05
    
8/15/00
  
40
Cutler Ridge
    
South Miami
    
-
    
1,059
   
326
   
-
  
1,059
 
326
 
1,385
 
(5
)
  
1972
    
9/14/06
  
40
CVS Plaza
    
Miami
    
-
    
995
   
3,090
   
1,386
 
995
 
4,476
 
5,471
 
(280
)
  
6/26/05
    
7/23/99
  
40
El Novillo
    
Miami Beach
    
-
    
250
   
1,000
   
151
 
250
 
1,151
 
1,401
 
(368
)
  
5/23/05
    
4/30/98
  
40
Greenwood
    
Palm Springs
    
-
    
4,117
   
10,295
   
2,754
 
4,117
 
13,049
 
17,167
 
(1,211
)
  
6/4/05
    
2/12/03
  
40
Homestead Gas Station
    
Homestead
    
-
    
1,170
   
-
    
-
  
1,170
 
-
  
1,170
 
-
    
5/12/05
    
11/8/04
  
40
Lago Mar
    
Miami
    
-
    
4,216
   
6,609
   
1,025
 
4,216
 
7,634
 
11,851
 
(724
)
  
6/17/05
    
2/12/03
  
40
Lantana Village
    
Lantana
    
-
    
1,350
   
7,978
   
974
 
1,350
 
8,952
 
10,302
 
(1,858
)
  
5/29/05
    
1/6/98
  
40
Meadows
    
Miami
    
6,155
   
2,304
   
6,670
   
92
 
2,304
 
6,762
 
9,066
 
(839
)
  
6/19/05
    
5/23/02
  
40
Oakbrook
    
Palm Beach Gardens
    
-
    
7,706
   
16,079
   
3,502
 
7,706
 
19,581
 
27,288
 
(2,355
)
  
5/27/05
    
8/15/00
  
40
Oaktree Plaza
    
North Palm Bch
    
-
    
1,579
   
2,275
   
-
  
1,579
 
2,275
 
3,854
 
(21
)
  
1985
    
10/16/06
  
40
Pine Island
    
Davie
    
23,781
   
8,557
   
12,860
   
344
 
8,557
 
13,204
 
21,761
 
(2,579
)
  
6/5/05
    
8/26/99
  
40
Pine Ridge Square
    
Coral Springs
    
7,090
   
6,528
   
9,850
   
2,476
 
6,528
 
12,326
 
18,854
 
(1,209
)
  
6/8/05
    
2/12/03
  
40
Plaza Alegre
    
Miami
    
-
    
2,011
   
9,191
   
349
 
2,011
 
9,540
 
11,551
 
(1,426
)
  
6/25/05
    
2/26/02
  
40
Point Royale
    
Miami
    
3,724
   
3,720
   
5,005
   
1,300
 
3,720
 
6,305
 
10,025
 
(1,789
)
  
5/23/05
    
7/27/95
  
40
Prosperity Centre
    
Palm Bch Gardens
    
5,194
   
4,597
   
13,838
   
239
 
4,597
 
14,077
 
18,674
 
(2,452
)
  
6/15/05
    
8/15/00
  
40
Ridge Plaza
    
Davie
    
-
    
3,905
   
7,450
   
853
 
3,905
 
8,303
 
12,209
 
(1,746
)
  
6/6/05
    
8/15/00
  
40
Riverside Square
    
Coral Springs
    
7,347
   
6,423
   
8,260
   
1,006
 
6,423
 
9,266
 
15,689
 
(944
)
  
6/9/05
    
2/12/03
  
40
Sawgrass Promenade
    
Deerfield Beach
    
8,011
   
3,280
   
9,351
   
873
 
3,280
 
10,224
 
13,504
 
(2,053
)
  
6/4/05
    
8/15/00
  
40
Sheridan
    
Hollywood
    
-
    
38,888
   
36,241
   
2,884
 
38,888
 
39,125
 
78,012
 
(3,317
)
  
5/26/05
    
7/14/03
  
40
Shoppes at Andros Isle
    
West Palm Bch
    
6,419
   
5,996
   
7,832
   
-
  
5,996
 
7,832
 
13,828
 
(19
)
  
2000
    
12/8/06
  
40
Shoppes at Quail Roost
    
South Miami
    
-
    
7,905
   
7,008
   
-
  
7,905
 
7,008
 
14,913
 
(65
)
  
6/27/05
    
8/31/06
  
40
Shoppes at Silverlakes
   
Pembroke Pines
    
2,280
   
10,306
   
10,131
   
1,864
 
10,306
 
11,995
 
22,301
 
(1,151
)
  
6/17/05
    
2/12/03
  
40
Shoppes of Ibis
    
West Palm Bch
    
5,294
   
3,002
   
6,299
   
38
 
3,002
 
6,337
 
9,340
 
(737
)
  
6/21/05
    
7/10/02
  
40
Shops at Skylake
    
North Miami Beach
    
13,452
   
15,226
   
7,206
   
23,600
 
15,226
 
30,806
 
46,033
 
(3,512
)
  
6/21/05
    
8/19/97
  
40
Tamarac Town Square
    
Tamarac
    
5,927
   
4,742
   
5,610
   
283
 
4,742
 
5,893
 
10,635
 
(666
)
  
6/9/05
    
2/12/03
  
40
Waterstone
    
Homestead
    
-
    
1,820
   
8,030
   
457
 
1,820
 
8,487
 
10,307
 
(305
)
  
6/27/05
    
4/10/92
  
40
West Lakes Plaza
    
Miami
    
-
    
2,141
   
5,789
   
430
 
2,141
 
6,219
 
8,360
 
(1,689
)
  
6/6/05
    
11/6/96
  
40
Westport Outparcels
    
Davie
    
-
    
1,340
   
1,010
   
-
  
1,340
 
1,010
 
2,350
 
(9
)
  
6/12/05
    
9/14/06
  
40
Westport Plaza
    
Davie
    
4,681
   
3,609
   
3,446
   
621
 
3,609
 
4,067
 
7,676
 
(194
)
  
2002
    
12/17/04
  
40
Young Circle
    
Hollywood
    
-
    
13,409
   
8,894
   
1,203
 
13,409
 
10,097
 
23,506
 
(390
)
  
5/15/05
    
5/19/05
  
40
                                                               
GEORGIA
                                                              
Atlanta
                                                              
BridgeMill
    
Canton
    
9,032
   
8,593
   
6,310
   
607
 
8,593
 
6,916
 
15,509
 
(684
)
  
6/22/05
    
11/13/03
  
40
Butler Creek
    
Acworth
    
-
    
2,808
   
7,648
   
1,747
 
2,808
 
9,395
 
12,203
 
(1,128
)
  
6/12/05
    
7/15/03
  
40
Chastain Square
    
Atlanta
    
3,608
   
10,689
   
5,937
   
124
 
10,689
 
6,061
 
16,750
 
(657
)
  
6/3/05
    
2/12/03
  
40
Commerce Crossing
    
Commerce
    
-
    
2,013
   
1,301
   
390
 
2,013
 
1,691
 
3,704
 
(232
)
  
6/10/05
    
2/12/03
  
40
Douglas Commons
    
Douglasville
    
4,699
   
3,681
   
7,588
   
147
 
3,681
 
7,735
 
11,416
 
(824
)
  
6/10/05
    
2/12/03
  
40
Fairview Oaks
    
Ellenwood
    
4,447
   
1,929
   
6,187
   
1,616
 
1,929
 
7,803
 
9,732
 
(734
)
  
6/19/05
    
2/12/03
  
40
Grassland Crossing
    
Alpharetta
    
5,473
   
3,656
   
7,885
   
562
 
3,656
 
8,447
 
12,104
 
(828
)
  
6/18/05
    
2/12/03
  
40
Hairston Center
    
Decatur
    
-
    
1,644
   
642
   
3
 
1,644
 
645
 
2,289
 
(24
)
  
6/22/05
    
8/25/05
  
40
Hamilton Ridge
    
Buford
    
-
    
5,612
   
7,167
   
1,421
 
5,612
 
8,588
 
14,200
 
(807
)
  
6/24/05
    
12/18/03
  
40
Mableton Crossing
    
Mableton
    
3,852
   
3,331
   
6,403
   
77
 
3,331
 
6,480
 
9,811
 
(662
)
  
6/19/05
    
2/12/03
  
40
Macland Pointe
    
Marietta
    
5,659
   
3,462
   
4,814
   
57
 
3,462
 
4,871
 
8,333
 
(527
)
  
6/14/05
    
2/12/03
  
40
Market Place
    
Norcross
    
-
    
1,667
   
4,078
   
91
 
1,667
 
4,169
 
5,836
 
(446
)
  
5/29/05
    
2/12/03
  
40
Paulding Commons
    
Dallas
    
6,125
   
3,848
   
11,985
   
98
 
3,848
 
12,083
 
15,931
 
(1,210
)
  
6/13/05
    
2/12/03
  
40
Piedmont Peachtree Crossing
    
Atlanta
    
-
    
34,337
   
17,992
   
1,192
 
34,337
 
19,184
 
53,521
 
(481
)
  
5/31/05
    
3/6/06
  
40
Powers Ferry Plaza
    
Marietta
    
-
    
3,236
   
5,227
   
525
 
3,236
 
5,752
 
8,988
 
(770
)
  
6/1/05
    
2/12/03
  
40
Presidential Markets
    
Snellville
    
26,561
   
21,761
   
28,779
   
160
 
21,761
 
28,939
 
50,700
 
(3,210
)
  
6/15/05
    
2/12/03
  
40
Shops of Huntcrest
    
Lawrenceville
    
-
    
5,706
   
7,641
   
43
 
5,706
 
7,684
 
13,389
 
(872
)
  
6/25/05
    
2/12/03
  
40
Wesley Chapel Crossing
    
Decatur
    
3,147
   
6,389
   
4,311
   
583
 
6,389
 
4,894
 
11,283
 
(493
)
  
6/11/05
    
2/12/03
  
40
West Towne Square
    
Rome
    
-
    
1,792
   
1,853
   
133
 
1,792
 
1,986
 
3,778
 
(324
)
  
6/10/05
    
2/12/03
  
40
Westridge
    
McDonough
    
-
    
1,266
   
4,390
   
1,958
 
1,266
 
6,348
 
7,614
 
(77
)
        
2/12/03
  
40
Williamsburg @ Dunwoody
    
Dunwoody
    
-
    
4,347
   
3,615
   
725
 
4,347
 
4,340
 
8,687
 
(417
)
  
6/5/05
    
2/12/03
  
40
                                                               
Central Georgia
                                                             
Daniel Village
    
Augusta
    
3,944
   
3,439
   
8,352
   
109
 
3,439
 
8,461
 
11,899
 
(861
)
  
5/9/05
    
2/12/03
  
40
Spalding Village
    
Griffin
    
9,538
   
3,384
   
6,430
   
288
 
3,384
 
6,718
 
10,102
 
(572
)
  
6/11/05
    
2/12/03
  
40
Walton Plaza
    
Augusta
    
-
    
869
   
2,827
   
6
 
869
 
2,833
 
3,702
 
(278
)
  
6/12/05
    
2/12/03
  
40
                                                               
South Georgia
                                                              
Colony Square
    
Fitzgerald
    
-
    
1,000
   
1,085
   
64
 
1,000
 
1,149
 
2,149
 
(112
)
  
6/9/05
    
2/12/03
  
40
McAlphin Square
    
Savannah
    
-
    
3,536
   
6,963
   
166
 
3,536
 
7,129
 
10,665
 
(772
)
  
6/1/05
    
2/12/03
  
40
                                                               
LOUISIANA
                                                              
Ambassador Row
    
Lafayette
    
-
    
3,880
   
10,570
   
934
 
3,880
 
11,504
 
15,384
 
(1,222
)
  
1980
    
2/12/03
  
40
Ambassador Row Courtyard
    
Lafayette
    
-
    
3,110
   
9,208
   
1,761
 
3,110
 
10,969
 
14,079
 
(1,102
)
  
1986
    
2/12/03
  
40
Bluebonnet Village
    
Baton Rouge
    
-
    
2,790
   
4,231
   
1,118
 
2,790
 
5,349
 
8,138
 
(464
)
  
6/5/05
    
2/12/03
  
40
Country Club Plaza
    
Slidell
    
-
    
1,294
   
2,060
   
148
 
1,294
 
2,208
 
3,502
 
(253
)
  
6/4/05
    
2/12/03
  
40
Elmwood Oaks
    
Harahan
    
-
    
4,088
   
8,221
   
539
 
4,088
 
8,760
 
12,849
 
(924
)
  
6/11/05
    
2/12/03
  
40
Grand Marche
    
Lafayette
    
-
    
304
   
-
    
-
  
304
 
-
  
304
 
-
    
5/22/05
    
2/12/03
  
40
Plaza Acadienne
    
Eunice
    
-
    
2,108
   
168
   
25
 
2,108
 
193
 
2,301
 
(32
)
  
6/2/05
    
2/12/03
  
40
Sherwood South
    
Baton Rouge
    
-
    
833
   
2,412
   
1,079
 
833
 
3,491
 
4,324
 
(423
)
  
5/25/05
    
2/12/03
  
40
Siegen Village
    
Baton Rouge
    
3,986
   
4,329
   
9,691
   
883
 
4,329
 
10,574
 
14,902
 
(1,808
)
  
6/10/05
    
2/12/03
  
40
Tarpon Heights
    
Galliano
    
-
    
1,133
   
631
   
546
 
1,133
 
1,177
 
2,310
 
(402
)
  
6/4/05
    
2/12/03
  
40
The Boulevard
    
Lafayette
    
-
    
1,360
   
1,675
   
368
 
1,360
 
2,043
 
3,404
 
(325
)
  
1976
    
2/12/03
  
40
The Crossing
    
Slidell
    
-
    
1,591
   
3,650
   
733
 
1,591
 
4,383
 
5,973
 
(413
)
  
1988
    
2/12/03
  
40
Village at Northshore
    
Slidell
    
-
    
1,034
   
9,890
    
-
  
1,034
 
9,890
 
10,923
 
(915
)
  
6/10/05
    
2/12/03
  
40
Wal-Mart Stores, Inc.
    
Mathews
    
-
    
2,688
   
-
    
-
  
2,688
 
-
  
2,688
 
-
    
6/7/05
    
2/12/03
  
40
                                                               
Massachusetts
                                                              
Quincy Star Market
    
Boston
    
-
    
6,121
   
18,444
   
45
 
6,121
 
18,488
 
24,610
 
(1,116
)
  
5/18/05
    
10/7/04
  
40
Shaw's @ Medford
    
Boston
    
-
    
7,773
   
11,389
   
1
 
7,773
 
11,390
 
19,163
 
(686
)
  
1995
    
10/7/04
  
40
Shaw's @ Plymouth
   
Boston
    
-
    
4,917
   
12,198
   
1
 
4,917
 
12,199
 
17,115
 
(734
)
  
1993
    
10/7/04
  
40
Star's @ Cambridge
   
Boston
    
-
    
11,358
   
13,853
   
1
 
11,358
 
13,854
 
25,212
 
(836
)
  
1953
    
10/7/04
  
40
Webster Plaza
    
Webster
    
8,116
   
5,031
   
14,465
   
-
  
5,031
 
14,465
 
19,496
 
(101
)
  
1963
    
10/12/06
  
40
West Roxbury Shaw's Plaza
    
Boston
    
-
    
9,223
   
13,588
   
1,494
 
9,223
 
15,082
 
24,305
 
(848
)
  
5/26/05
    
10/7/04
  
40
Whole Foods @ Swampscott
   
Boston
    
-
    
5,139
   
6,538
   
8
 
5,139
 
6,546
 
11,684
 
(392
)
  
5/20/05
    
10/7/04
  
40
                                                               
MISSISSIPPI
                                                             
Shipyard Plaza
    
Pascagoula
    
-
    
1,337
   
1,653
   
421
 
1,337
 
2,074
 
3,411
 
(201
)
  
6/9/05
    
2/12/03
  
40
                                                               
NORTH CAROLINA
                                                             
Centre Pointe Plaza
    
Smithfield
    
-
    
2,081
   
4,411
    
886
  
2,081
 
5,297
 
7,378
 
(575
)
  
6/11/05
    
2/12/03
  
40
Chestnut Square
    
Brevard
    
-
    
1,189
   
1,326
   
552
 
1,189
 
1,878
 
3,067
 
(164
)
  
6/7/05
    
2/12/03
  
40
Galleria
    
Wrightsville Bch
   
-
    
1,493
   
3,875
   
783
 
1,493
 
4,658
 
6,150
 
(454
)
  
6/8/05
    
2/12/03
  
40
Parkwest Crossing
    
Durham
    
4,584
   
1,788
   
6,727
   
119
 
1,788
 
6,846
 
8,634
 
(687
)
  
6/12/05
    
2/12/03
  
40
Plaza North
    
Hendersonville
    
-
    
758
   
1,887
   
623
 
758
 
2,510
 
3,268
 
(237
)
  
6/8/05
    
2/12/03
  
40
Providence Square
    
Charlotte
    
-
    
1,112
   
2,575
   
735
 
1,112
 
3,310
 
4,422
 
(331
)
  
5/26/05
    
2/12/03
  
40
Riverview Shopping Center
    
Durham
    
-
    
2,277
   
4,745
   
1,347
 
2,277
 
6,092
 
8,370
 
(544
)
  
5/26/05
    
2/12/03
  
40
Salisbury Marketplace
    
Salisbury
    
-
    
3,118
   
5,099
   
352
 
3,118
 
5,451
 
8,569
 
(581
)
  
6/9/05
    
2/12/03
  
40
Shelby Plaza
    
Shelby
    
-
    
868
   
338
   
1,260
 
868
 
1,598
 
2,466
 
(132
)
  
5/25/05
    
2/12/03
  
40
Stanley Market Place
    
Stanley
    
-
    
396
   
669
   
2,959
 
396
 
3,628
 
4,025
 
(110
)
  
6/2/05
    
2/12/03
  
40
Thomasville Commons
    
Thomasville
    
-
    
1,212
   
4,567
   
1,804
 
1,212
 
6,371
 
7,583
 
(613
)
  
6/13/05
    
2/12/03
  
40
Willowdale Shopping Center
    
Durham
    
-
    
2,073
   
6,499
   
651
 
2,073
 
7,150
 
9,223
 
(845
)
  
6/8/05
    
2/12/03
  
40
                                                               
SOUTH CAROLINA
                                                             
Belfair Towne Village
    
Bluffton
    
10,755
   
11,071
   
10,037
   
3,760
 
11,071
 
13,797
 
24,869
 
(1,046
)
  
6/22/05
    
12/22/03
  
40
Lancaster Plaza
    
Lancaster
    
-
    
317
   
153
   
20
 
317
 
173
 
490
 
(27
)
  
5/24/05
    
2/12/03
  
40
Lancaster Shopping Center
    
Lancaster
    
-
    
280
   
120
   
45
 
280
 
165
 
445
 
(35
)
  
5/16/05
    
2/12/03
  
40
Milestone Plaza Shopping Ctr
    
Greenville
    
-
    
11,579
   
9,031
   
-
  
11,579
 
9,031
 
20,610
 
(79
)
  
6/17/05
    
8/25/06
  
40
North Village Center
    
North Myrtle Beach
    
-
    
2,860
   
2,774
   
99
 
2,860
 
2,873
 
5,733
 
(550
)
  
6/6/05
    
2/12/03
  
40
Sparkleberry Square
    
Columbia
    
13,685
   
10,956
   
32,491
   
1,635
 
10,956
 
34,126
 
45,082
 
(2,206
)
  
6/19/05
    
3/31/04
  
40
Spring Valley
    
Columbia
    
-
    
1,098
   
5,050
   
514
 
1,098
 
5,564
 
6,662
 
(574
)
  
5/31/05
    
2/12/03
  
40
Windy Hill
    
North Myrtle Beach
    
-
    
941
   
1,906
   
644
 
941
 
2,550
 
3,491
 
(140
)
  
5/21/05
    
4/8/04
  
40
Woodruff
    
Greenville
    
-
    
2,420
   
5,482
   
334
 
2,420
 
5,816
 
8,236
 
(563
)
  
6/17/05
    
12/23/03
  
40
                                                               
TENNESSEE
                                                              
Smyrna Village
    
Smyrna
    
-
    
1,503
   
4,694
   
439
 
1,503
 
5,133
 
6,636
 
(523
)
  
6/14/05
    
2/12/03
  
40
                                                               
                                                               
TEXAS
                                                             
Rosemeade
    
Carrollton
    
2,947
   
1,197
   
3,525
   
58
 
1,197
 
3,583
 
4,779
 
(478
)
  
6/8/05
    
9/21/01
  
40
                                                               
VIRGINIA
                                                             
Smyth Valley Crossing
    
Marion
    
-
    
2,537
   
3,890
   
1
 
2,537
 
3,891
 
6,428
 
(377
)
  
6/11/05
    
2/12/03
  
40
                                                             
40
Corporate
          
-
    
-
   
829
   
-
  
-
  
829
 
829
 
(538
)
  
various
    
various
  
40
-
                                                              
Total Shopping Centers
          
391,641
   
703,175
   
1,123,738
    
147,066
  
703,175
 
1,270,804
 
1,973,980
 
(143,981
)
              
                                                               
Land held for/under development
                                                              
                                                               
Central Florida
                                                             
Sunlake-Equity One LLC
    
Tampa
    
-
    
16,095
    
-
    
-
  
16,095
 
-
  
16,095
 
-
    
n/a
    
2/1/05
    
                                                               
Florida Treasure Coast
                                                              
St. Lucie Land
    
Port St. Lucie
    
-
    
7,719
   
-
    
189
 
7,719
 
189
 
7,908
 
-
    
n/a
    
11/27/06
    
                                                               
Atlanta
                                                              
River Green
    
Canton
    
-
    
2,587
   
-
    
271
 
2,587
 
271
 
2,858
 
-
    
n/a
    
9/27/05
    
Deep Creek
    
Fairburn
    
-
    
8,084
   
-
    
284
 
8,084
 
284
 
8,368
 
-
    
n/a
    
6/22/06
    
Hampton Oaks
    
Atlanta
    
-
    
2,535
   
-
    
42
 
2,535
 
42
 
2,577
 
-
    
n/a
    
11/30/06
    
                                                               
VIRGINIA
                                                             
Waterlick Plaza
    
Lynchburg
    
-
    
455
   
-
    
-
  
455
 
-
  
455
 
-
    
n/a
    
2/12/03
    
                                                               
Miscellaneous
          
-
    
-
   
-
    
516
     
516
 
516
 
-
    
n/a
          
                                                               
Total land held for/under development
          
-
    
37,476
    
-
    
1,302
  
37,476
  
1,302
  
38,778
 
-
                
Office Buildings
                                                              
                                                               
South Florida / Atlantic Coast
                                                              
Banco Popular Building
    
N Miami Beach
    
-
    
3,363
   
1,566
   
158
 
3,363
 
1,724
 
5,087
 
(84
)
  
1971
    
9/27/05
  
40
Prosperity Office Building
    
Palm Bch Gardens
    
-
    
-
   
-
    
93
 
-
  
93
 
93
 
-
    
5/25/05
    
8/15/00
  
40
2400 PGA
    
Palm Bch Gardens
    
-
    
1,418
   
-
    
-
  
1,418
 
-
  
1,418
 
-
          
3/20/06
  
40
                                                               
LOUISIANA
                                                              
Pinhook Office Building
    
Lafayette
    
-
    
34
   
22
   
-
  
34
 
22
 
56
 
(3
)
  
6/1/05
    
2/12/03
  
40
                                                               
Total Office Buildings
          
-
    
4,815
   
1,588
   
251
 
4,815
 
1,838
 
6,653
 
(86
)
              
                                                               
                                                               
Apartments
                                                              
                                                               
NORTH CAROLINA
                                                             
Laurel Walk Apartments
    
Charlotte
    
-
    
2,065
   
4,491
   
-
  
2,065
 
4,491
 
6,555
 
(122
)
  
6/7/05
    
10/31/05
  
40
                                                               
Total Apartments
          
-
    
2,065
   
4,491
   
-
  
2,065
 
4,491
 
6,555
 
(122
)
              
                                                               
Industrial Property
                                                              
                                                               
NORTH CAROLINA
                                                             
4101 South I-85 Industrial
    
Charlotte
    
-
    
1,619
   
950
   
584
 
1,619
 
1,534
 
3,153
 
(176
)
  
1956
    
2/12/03
  
40
                                                               
Total Industrial Property
          
-
    
1,619
   
950
   
584
 
1,619
 
1,534
 
3,153
 
(176
)
              
                                                               
Mini Storage Facility
                                                              
                                                               
North Florida
                                                              
Mandarin Mini
    
Jacksonville
    
-
    
362
   
1,148
   
318
 
362
 
1,466
 
1,828
 
(464
)
  
6/4/05
    
5/10/94
  
40
                                                               
Total Mini Storage Facilities
          
-
    
362
   
1,148
   
318
 
362
 
1,466
 
1,828
 
(464
)
              
 
Grand Total
        
$
391,641 
  
$
749,512 
    
$
1,131,915 
  
$
49,521 
 $ 749,512  
$
1,281,436 
$
 2,030,947   $ (144,829
)
              
 
 
     
Year ended
  
Year ended
  
Year ended
  
     
12/31/06
  
12/31/05
  
12/31/04
  
 (a)
Reconciliation of total real estate carrying value:
                    
 
Balance at beginning of year
  
$
2,020,475
  
$
1,970,069
  
$
1,684,006
  
 
Additions during period:
                    
 
Improvements
    
36,698
   
30,293
   
32,918
 
 
Acquisitions
   
270,931
   
54,051
   
316,952
 
 
Deductions during period:
                    
 
Cost of real estate sold
   
(297,157
)
  
(33,938
)
  
(63,807
)
 
Balance at end of year
  
$
2,030,947
  
$
2,020,475
  
$
1,970,069
  
                       
 (b)
Reconciliation of accumulated depreciation:
                    
 
Balance at beginning of year
    
(132,925
)
  
(96,382
)
  
(66,708
)
 
Depreciation expense
    
(37,684
)
  
(38,581
)
  
(34,924
)
 
Cost of real estate sold
    
25,780
   
2,038
   
5,250
 
 
Balance at end of year
  
$
(144,829
)
$
(132,925
)
$
(96,382
)
 (c)
Aggregate cost for federal income tax purposes
  
$
1,999,063
  
$
1,825,102
  
$
1,784,742
  
 
 
S - 2
 

SCHEDULE IV
Equity One, Inc.
MORTGAGE LOANS ON REAL ESTATE
December 31, 2006
(dollars in thousands)



Column A
  
Column B
  
Column C
  
Column D
  
Column F
  
Column G
  
Description
  
Interest
Rate
  
Final Maturity Date
  
Periodic
Payment
Term
  
Face Amount of Mortgage
  
Carrying Amount of Mortgage
  
Mortgage note, collaterized by first deed of trust on Plymouth Park, Texas
  
7.25%
  
9/24/07
  
Fixed rate, interest only monthly
  
$                  4,700
  
$               4,700
  
 
Note: Column C - The loan can be extended for three years at the option of the borrower
    Column E is not applicable
    Columg G - The tax basis is the same as presented above
    Colum H - None

 
   
Year Ended December 31,
  
   
2006
  
2005
  
2004
  
Balance, beginning of period
  
$
10,381
  
$
6,181
  
$
2,919
  
Additions during period:
                    
New loans
    
-
    
4,215
    
4,700
  
Reductions during period:
                    
Collection of principal
    
(5,681
)
  
(15
)
  
(1,438
)
Balance, end of period
  
$
4,700
  
$
10,381
  
$
6,181
  

 
S - 3
 
 
 
 

 
INDEX TO EXHIBITS
 


EXHIBIT NO.
DESCRIPTION
   
12.1
Ratio of Earnings to Fixed Charges
21.1
List of Subsidiaries of the Registrant
23.1
Consent of Ernst & Young LLP
23.2
Consent of Deloitte & Touche LLP
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002