10-K 1 eqy-12311310xk.htm 10-K EQY-12.31.13 10-K

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
T
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
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 offices)
 
(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)
Securities registered pursuant to Section 12(g) of the Act: None
________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  T    No  ¨
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  ¨    No  T
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  T    No  ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  T    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§232.405 of this chapter) 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.  T
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
T
  
Accelerated filer
£
 
Non-accelerated filer
£
(Do not check if a smaller reporting company)
Smaller reporting company
£
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  ¨    No  T
As of June 28, 2013, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of the Common Stock held by non-affiliates of the Registrant was approximately $1.4 billion based upon the last reported sale price of $22.63 per share on the New York Stock Exchange on such date.
As of February 21, 2014, the number of outstanding shares of Common Stock, par value $.01 per share, of the Registrant was 119,466,800.
_______________________

DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Registrant’s definitive Proxy Statement for the 2014 Annual Meeting of Stockholders to be filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K to the extent stated herein are incorporated by reference in Part III hereof.
 


EQUITY ONE, INC. AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2013
TABLE OF CONTENTS
 
  
 
Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
PART II
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
PART III
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
PART IV
 
 
 
Item 15.
 
 
 
 

 


PART I

ITEM 1.
BUSINESS
The Company
We are a real estate investment trust, or REIT, that owns, manages, acquires, develops and redevelops shopping centers and retail properties located primarily in supply constrained suburban and urban communities. We were organized as a Maryland corporation in 1992, completed our initial public offering in May 1998, and have elected to be taxed as a REIT since 1995.
As of December 31, 2013, our consolidated shopping center portfolio comprised 140 properties, including 118 retail properties and six non-retail properties totaling approximately 14.9 million square feet of gross leasable area, or GLA, 10 development or redevelopment properties with approximately 1.8 million square feet of GLA upon completion, and six land parcels. As of December 31, 2013, our consolidated shopping center occupancy was 92.4% and included national, regional and local tenants. Additionally, we had joint venture interests in 20 retail properties and two office buildings totaling approximately 3.7 million square feet of GLA. For a listing of the properties in our consolidated shopping center portfolio, refer to Item 2 - Properties.
In this annual report, references to “we,” “us” or “our” or similar terms refer to Equity One, Inc. and our consolidated subsidiaries, including DIM Vastgoed, N.V., which we refer to as DIM, a Dutch company in which we acquired a controlling interest in the first quarter of 2009, and C&C (US) No. 1, Inc., which we refer to as CapCo, a Delaware corporation in which we acquired a controlling interest through a joint venture with Liberty International Holdings Limited, or LIH, a private company limited by shares organized under the laws of England and Wales, in the first quarter of 2011.
Business Objectives and Strategies
Our principal business objective is to maximize long-term stockholder value by generating sustainable cash flow growth and increasing the long-term value of our real estate assets. Our key strategies for reaching this objective include:
•
Operating Strategy: Maximizing the internal growth of revenue from our shopping centers and retail properties by leasing and re-leasing those properties to a diverse group of creditworthy tenants, maintaining our properties to standards that our existing and prospective tenants find attractive, as well as containing costs through effective property management;
•
Investment Strategy: Using capital wisely to renovate or redevelop our properties and to acquire and develop additional shopping centers and retail properties in supply constrained suburban and urban communities where expected, risk-adjusted returns meet or exceed our standards as well as by investing in strategic partnerships that minimize operational or other risks; and
•
Capital Strategy: Financing our capital requirements with internally generated funds, borrowings under our existing credit facilities, proceeds from selling properties that do not meet our investment criteria and proceeds from institutional partners and the 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, as well as containing costs through effective property management. Many of our properties are located in some of the most densely populated areas of the country, including the metropolitan areas around Miami, Ft. Lauderdale, West Palm Beach, Tampa, Jacksonville and Orlando, Florida; Atlanta, Georgia; Boston, Massachusetts; the greater New York City metropolitan area; the Washington, D.C. metropolitan area; and Los Angeles and San Francisco, California.
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;
•
maximize rental rates upon the renewal of expiring leases or as we lease space to new tenants while limiting vacancy and down-time;
•
evaluate renovation or redevelopment opportunities that will make our properties more attractive for leasing or re-leasing to tenants and that will increase the overall value of our centers;
•
take advantage of under-utilized land or existing square footage, or re-configure properties for better uses; and

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•
adopt consistent standards and vendor review procedures.
Investment Strategy. Our investment strategy is to deploy capital in high quality investments and projects in our target markets that are expected to generate risk-adjusted returns that exceed our cost of capital. Our target markets consist of California, the northeastern United States, the Washington, D.C. metropolitan area, South Florida and Atlanta, Georgia. Our investments primarily fall into one of the following categories:
•
re-developing, renovating, expanding, reconfiguring and/or re-tenanting our existing properties;
•
selectively acquiring shopping centers that will benefit from our active management and leasing strategies with a focus on supply constrained markets;
•
selectively acquiring vacant and occupied land located in supply constrained markets for the purpose of developing new shopping centers to meet the needs of expanding retailers; and
•
investing in strategic partnerships in real estate related ventures where we act as a manager and utilize our expertise.
In evaluating potential redevelopment, acquisition and development opportunities for properties, we also consider such factors as:
•
the expected returns in relation to our cost of capital, as well as the anticipated risks 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 flow from operations, borrowing under our existing credit facilities, reinvesting proceeds from selling properties that no longer meet our investment criteria, accessing the capital markets to issue equity and debt or using joint venture arrangements. Our strategy is designed to help us 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 and manage our debt maturity schedule;
•
selling properties that no longer fit our investment strategy, that have limited growth potential or that are not a strategic fit within our overall portfolio and redeploying the proceeds elsewhere in our business or to pay down debt; and
•
using joint venture arrangements to access less expensive capital, mitigate capital risk, and leverage our existing personnel and internal resources.
Change in Policies
Our board of directors establishes the policies that govern our operating, investment and capital strategies, including, among others, the development, acquisition and disposition of shopping centers, tenant and market focus, debt and equity financing policies, and quarterly distributions to our stockholders. The board may amend these policies at any time without a vote of our stockholders.

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Segment Information
We review operating and financial data for each property on an individual basis; therefore each of our individual properties is a separate operating segment. We have aggregated our operating segments in six reportable segments based primarily upon our method of internal reporting which classifies our operations by geographical area. Our reportable segments by geographical area are as follows: (1) South Florida – including Miami-Dade, Broward and Palm Beach Counties; (2) North Florida – including all of Florida north of Palm Beach County; (3) Southeast – including Georgia, Louisiana, North Carolina and Virginia; (4) Northeast – including Connecticut, Maryland, Massachusetts and New York; (5) West Coast – California; and (6) Non-retail – which is comprised of our non-retail assets. See Note 20 in the consolidated financial statements of this annual report for more information about our business segments and the geographic diversification of our portfolio of properties.
Tax Status
We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 1995. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we currently distribute at least 90% of our REIT taxable income to our stockholders. The difference between net income available to common stockholders for financial reporting purposes and taxable income before dividend deductions relates primarily to temporary differences, such as real estate depreciation and amortization, deduction of deferred compensation and deferral of gains on sold properties utilizing like-kind exchanges. Also, at least 95% of our gross income in any year must be derived from qualifying sources. It is our intention to adhere to the organizational and operational requirements to maintain our REIT status. As a REIT, we generally will not be subject to corporate level federal income tax, provided that distributions to our stockholders equal at least the amount of our REIT taxable income as defined under the Code. If we fail to qualify as a REIT in any taxable year, we 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 we qualify for taxation as a REIT, we may be subject to state income or franchise taxes in certain states in which some of our properties are located and excise taxes on our undistributed 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. Our investment in certain land parcels, our investment in DIM 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, but may do so in the future if we dispose of properties.
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.
Environmental Regulations. The application of environmental laws to a specific property 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, 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 cleanup 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.

Americans with Disabilities Act. Our properties are subject to the Americans with Disabilities Act, or ADA. 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 ADA’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.

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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 is 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 increase or 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, including internet retailers, outlet stores, super centers and discount shopping clubs. This competition could contribute to lease defaults and insolvency of our tenants.
Significant Tenants
As of December 31, 2013, Publix Super Markets was our largest tenant and accounted for approximately 1.3 million square feet, or approximately 7.8% of our GLA, and approximately $9.4 million, or 3.8%, of our annual minimum rent.
Employees
Our headquarters are located at 1600 N.E. Miami Gardens Drive, North Miami Beach, Florida 33179. At December 31, 2013, we had 168 full-time employees and we believe that our relationships with our employees are good.
Available Information
The internet address of our website is www.equityone.net. In the "Investors" section of our website under "About Us," 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 Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file or furnish such reports or amendments with the Securities and Exchange Commission, or the SEC. Also available in the "Corporate Governance" section of our website (located within the "Investors" section) 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. We intend to provide any amendments or waivers to our Code of Conduct and Ethics that apply to any of our executive officers or our senior financial officers on our website within four business days following the date of the amendment or waiver. The reference to our website address does not constitute incorporation by reference of the information contained on our website and should not be considered a part of this report.
You may also 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 http://www.sec.gov.

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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,” “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.
Shorter term expirations of our tenants may lead to increased vacancies and reduced rental income which would have an adverse effect on our future results of operations.
From 2014 through 2016, approximately 41.8% of our leases, based on annualized minimum rents, with tenants are due to expire. The annualized minimum rents at expiration for these leases are $31.8 million, $25.2 million, and $37.0 million for 2014, 2015 and 2016, respectively. Additionally, approximately 1.9% of our leases are month-to-month, representing $4.2 million of annualized rents. Our ability to renew or replace these tenants at comparable rents could have a significant impact on our future results of operations.
We may not be able to re-lease vacated space and, 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 commissions paid by us in connection with new leases or lease renewals and the cost of making leasehold improvements. All of these events and factors could adversely affect our results of operations.
Revenue from our properties depends on the success of our tenants.
Revenue from our properties depends primarily on the ability of our tenants to pay the full amount of rent and other charges due under their leases on a timely basis. Some of our leases provide for the payment, in addition to base rent, of additional rent above the base amount according to a specified percentage of the gross sales generated by the tenants and generally provide for reimbursement of real estate taxes and expenses of operating the property. Any reduction in our tenants’ abilities to pay base rent, percentage rent or other charges on a timely basis, including the filing by any of our tenants for bankruptcy protection, will adversely affect our financial condition and results of operations. In the event of default by a tenant, we may experience delays and unexpected costs in enforcing our rights as landlord under the lease, which may also adversely affect our financial condition and results of operations.
We are particularly dependent on our “anchor” tenants, and decisions made by these tenants or adverse developments in the businesses of these tenants could have a negative impact on our financial condition.
We own shopping centers which are supported by “anchor” tenants. Anchor tenants generally occupy large amounts of square footage, pay a significant portion of the total rents at a property and contribute to the success of other tenants by drawing significant numbers of customers to a property. If an anchor tenant were to decide that a particular store is unprofitable and close its operations in one of our centers, such a closure could have an adverse effect on the property even though the tenant may continue to make rental payments. 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. As a result of retailer consolidation, store rationalization, competition from internet sales and general economic conditions, we have seen a decrease in the number of tenants available to fill anchor spaces, especially in some of our secondary markets. Therefore, in the event one or more of our anchor tenants were to leave our centers, we cannot provide any assurance that we would be able to quickly re-lease vacant space on favorable terms, or at all. Any of these developments could adversely affect our financial condition or results of operations.

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We may be unable to collect balances due from tenants that file for bankruptcy protection.
If a tenant or lease guarantor files for bankruptcy, we may not be able to collect all pre-bankruptcy amounts owed by that party. In addition, a tenant that files for bankruptcy protection may terminate its lease with us, in which event we would have a general unsecured claim against such tenant that would likely be worth less than the full amount owed to us for the remainder of the lease term, which could adversely affect our financial condition and results of operations.
The economic performance and value of our shopping centers depend on many factors, each of which could have an adverse impact on our cash flows and operating results.
The economic performance and value of our properties can be affected by many factors, including the following:

•
Economic uncertainty or downturns in general, or in the areas where our properties are located;
•
Local conditions, such as an oversupply of space, a reduction in demand for retail space or a change in local demographics;
•
The attractiveness of our properties to tenants and competition from other available space;
•
The adverse financial condition of some large retail companies and ongoing consolidation within the retail sector;
•
The growth of super-centers and warehouse club retailers, such as those operated by Wal-Mart and Costco, and their adverse effect on traditional grocery chains;
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Changes in the perception of retailers or shoppers regarding the safety, convenience and attractiveness of our shopping centers and changes in the overall climate of the retail industry;
•
Our ability to provide adequate management services and to maintain our properties;
•
Increased operating costs, if these costs cannot be passed through to tenants;
•
The expense of periodically renovating, repairing and re-letting spaces;
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The impact of increased energy costs on consumers and its consequential effect on the number of shopping visits to our properties; and
•
The consequences of any armed conflict involving, or terrorist attack against, the United States.

To the extent that any of these conditions occur or accelerate, they are likely to impact market rents for retail space, our portfolio occupancy, our ability to sell, acquire or develop properties, and our cash available for distribution to stockholders.
Internet sales can have an impact on our tenants and our business.
The use of the internet by consumers continues to gain in popularity and growth in internet sales is likely to continue in the future. The increase in internet sales could result in a downturn in the business of some of our current tenants and could affect the way other current and future tenants lease space. For example, the migration towards internet sales has led many omnichannel retailers to prune the number and size of their traditional “bricks and mortar” locations in order to increasingly rely on e-commerce and alternative distribution channels. Many tenants also permit merchandise purchased on their websites to be picked up at, or returned to, their physical store locations, which may have the effect of decreasing the reported amount of their in-store sales and the amount of rent we are able to collect from them (particularly with respect to those tenants who pay rent based on a percentage of their in-store sales). We cannot predict with certainty how growth in internet sales will impact the demand for space at our properties or how much revenue will be generated at traditional store locations in the future. If we are unable to anticipate and respond promptly to trends in retailer and consumer behavior, our occupancy levels and financial results could suffer.
Future terrorist acts and shooting incidents could harm the demand for, and the value of, our properties.
Over the past few years, a number of terrorist acts and shootings have occurred at domestic and international retail properties, including highly publicized incidents in Arizona, New Jersey, Maryland, Oregon and Kenya. In the event concerns regarding safety were to alter shopping habits or deter customers from visiting shopping centers, our tenants would be adversely affected as would the general demand for retail space. Additionally, if such incidents were to continue, insurance for such acts may become limited or subject to substantial cost increases. If such an incident were to occur at one of our properties, we may be subject to significant liability claims. While we attempt to mitigate this risk through insurance coverage and the employment of third party security services where we feel conditions warrant, we cannot guarantee that losses would not exceed applicable insurance coverages, thereby adversely affecting our results of operations and our ability to meet our obligations, including distributions to our stockholders.

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Many of our real estate costs are fixed, even if income from our properties decreases.
Our financial results depend primarily on leasing space in our properties to tenants on terms favorable to us. Costs associated with real estate investment, such as real estate taxes, insurance and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease, or other circumstances cause a reduction in income from the property. As a result, cash flow from the operations of our properties may be reduced if a tenant does not pay its rent or we are unable to fully lease our properties on favorable terms. Additionally, properties that we develop or redevelop may not produce any significant revenue immediately, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with such projects until they are fully occupied.
Loss of our key personnel could adversely affect the value of our common stock and operations.
We are dependent on the efforts of our key executive personnel. Although we believe qualified replacements could be found for these key executives, the loss of their services could adversely affect the value of our common stock and operations.
Volatility in the credit markets may affect our ability to obtain or re-finance our indebtedness at a reasonable cost.
As of December 31, 2013, we had approximately $510.7 million of unsecured senior notes and mortgage debt scheduled to mature in the next three years. Additionally, our $575.0 million unsecured revolving credit facility matures on September 30, 2015, with a one year extension at our option. At times during the last decade, the U.S. and global credit markets have experienced significant price volatility, dislocations and liquidity disruptions, which at times caused the spreads on prospective debt financings to widen considerably. If a downturn or dislocation in credit markets were to occur or if interest rates were to dramatically increase from their current low levels, we may experience difficulty refinancing these upcoming debt maturities at a reasonable cost or with desired financing alternatives. For example, it may be hard to raise new unsecured financing in the form of additional bank debt or corporate bonds at interest rates that are appropriate for our long term objectives. If we draw under our existing unsecured revolving line of credit to repay maturing debt, our ability to utilize the line for other uses such as investments will be reduced. If we increase our reliance on mortgage debt or draw heavily on our line of credit, the credit rating agencies that rate our unsecured corporate debt may reduce our investment-grade credit ratings. Any change in our credit ratings could further impact our access to capital and our cost of capital, including the cost of borrowings under our revolving lines of credit. To the extent we are unable to efficiently access the credit markets, we may need to repay maturing debt with proceeds from the issuance of equity or the sale of assets. In addition, lenders may impose more restrictive covenants, events of default and other conditions.
We have substantial debt obligations which may reduce our operating performance and put us at a competitive disadvantage.
As of December 31, 2013, we had debt outstanding in the aggregate amount of approximately $1.5 billion. Many of our loans require scheduled principal amortization. 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, developments and 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;
•
adversely affect financial ratios and operational coverage levels monitored by rating agencies and adversely affect the ratings assigned to our unsecured debt;
•
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, new developments 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.

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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 which may not be offset by 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.
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 unsecured term loan, our outstanding unsecured senior 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. If the lenders declared a default under our unsecured revolving credit facility, all amounts outstanding would become due and payable and our ability to borrow in future periods could be restricted. In addition, any such default would constitute a cross default under our unsecured senior note indebtedness and unsecured term loan giving rise to the acceleration of such indebtedness.
Increases in interest rates would cause our borrowing costs to rise and generally adversely affect the market price of our securities and the market value of our properties.
While we had approximately $1.2 billion of fixed interest rate debt outstanding as of December 31, 2013, we also borrow funds at variable interest rates under our lines of credit and could borrow under other variable facilities in the future. Increases in interest rates would increase our interest expense on any variable rate debt, as well as interest expense with respect to maturing fixed rate debt that must be refinanced at higher interest rates. This would 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.
In addition, the market price of our common stock is affected by the annual distribution rate on the shares of our common stock. An increase in market interest rates relative to our annual dividend rate 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 increasing market capitalization rates and/or depressing the market value of retail properties such as ours, including the value of those properties securing our indebtedness. Such declines in the market value of our properties would likely adversely affect the market price of our common stock and other securities.
The market value of our debt and equity securities is subject to various factors that may cause significant fluctuations or volatility.
As with other publicly traded securities, the market price of our publicly traded securities depends on various factors which may change from time-to time and are often out of our control. Among the conditions that may affect the market price of our publicly traded securities are the following:
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purchases or sales of our stock by our controlling stockholder;
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the extent of institutional investor interest in us;
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the market perception of our business compared to other REITS;
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the market perception of retail REITs, in general, compared to other investment alternatives;
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our financial condition and performance, including changes in our funds from operations (“FFO”) or earnings estimates;

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•
the market’s perception of our growth potential and potential future cash dividends;
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our credit or analyst ratings;
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any future issuances of equity or debt securities;
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additions or departures of key management personnel;
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strategic actions by us or our competitors, such as acquisitions or restructurings;
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an increase in market interest rates; and
•
general economic and financial market conditions.

These factors may cause the market price of our common stock to decline, in some cases regardless of our financial condition, results of operations, business or prospects. It is impossible to ensure that the market price of our common stock will not fall in the future. A decrease in the market price of our common stock could reduce our ability to raise additional equity in the public markets. Selling common stock at a decreased market price would have a dilutive impact on existing stockholders.
Geographic concentration of our properties makes our business vulnerable to economic downturns in certain regions or to other events, like hurricanes and earthquakes that disproportionately affect those areas.
As of December 31, 2013, approximately 49.6%, 13.5% and 15.8% of our consolidated retail property GLA was located in Florida, California and the northeastern United States, respectively. Our key development and redevelopment projects are also primarily located in these regions. As a result, economic, real estate and other general conditions in these regions will significantly affect our revenue and the value of our properties. Business layoffs or downsizing, industry slowdowns, declines in real estate values, changing demographics, increases in insurance costs and real estate taxes and other factors may adversely affect the economic climate in Florida, California and the northeastern United States. Any resulting reduction in demand for retail properties in these markets would adversely affect our operating performance and limit our ability to make distributions to stockholders.
In addition, a significant portion of our consolidated retail property GLA is located in coastal or other areas that are susceptible to the harmful effects of tropical storms, hurricanes, earthquakes and other similar natural or man-made disasters. As of December 31, 2013, over 43% of the total insured value of our portfolio is located in the State of Florida and approximately 14% of the total insured value of our portfolio is located in the northeastern United States. These areas are prone to strong tropical storms and hurricanes and in the case of the northeast, severe winter storms, including blizzards. Intense hurricanes and tropical storm activity during the last decade has caused our cost of property insurance to increase significantly. 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 and may reduce the willingness of residents to remain in or move to the affected area.
In addition, as of December 31, 2013, over 26% of the total insured value of our portfolio is located in the State of California, including a number of assets in the San Francisco Bay and Los Angeles areas. These properties may be subject to the risk that an earthquake or other, similar peril would affect the operations of these properties. Our insurance coverage with respect to these perils is significantly less than the full replacement costs of these assets. Therefore, if an earthquake did occur and our properties were affected, we would bear the losses resulting therefrom.
Therefore, as a result of the geographic concentration of our properties, we face demonstrable risks, including higher costs, such as uninsured property losses and higher 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.
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. We do not currently have insurance coverage covering the replacement cost of losses resulting from earthquakes.
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. In the event of future industry losses, we may be unable to renew or duplicate our current insurance coverage in amounts we deem adequate 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, earthquakes or terrorist acts and toxic mold, or,

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if offered, the cost of obtaining these types of insurance may not be commercially justified. We, therefore, may cease to have insurance coverage against certain types of losses and/or there may be decreases in the covered loss 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. Further, we may be unable to collect applicable insurance proceeds if our insurers are unable to pay or contest a claim. Therefore, we cannot guarantee that material losses will not occur in the future. If any of our properties were to experience a catastrophic loss, it could disrupt 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 our real estate investments when appropriate or on terms favorable to us.
Real estate property investments are illiquid and generally cannot be disposed of quickly. In addition, the federal tax code contains restrictions on a REIT’s ability to dispose of properties that are not applicable to other types of real estate companies. Therefore, we may not be able to alter our portfolio in response to economic conditions or trends in retailer or consumer behavior promptly or on terms favorable to us within a time frame that we would need. Our inability to respond quickly to such changes could adversely affect the value of our portfolio and our ability to meet our obligations and make distributions to our stockholders.

Our assets may be subject to impairment charges.
Our long-lived assets, including real estate held for investment, are carried at net book value unless circumstances indicate that the carrying value of the assets may not be recoverable. Our properties are reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the property may not be recoverable. When assets are identified as held for sale, we estimate the sales prices, net of selling costs, of such assets. If, in our 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 and we write down the asset to fair value. An impairment charge may also be recorded for any asset if it is probable, in our estimation, that the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property. In addition, we may be required to test for impairment when we perform periodic valuations of our properties in accordance with International Financial Reporting Standards under our agreement with our largest stockholder, Gazit-Globe, Ltd. ("Gazit"). We also perform an annual test of our goodwill for impairment and perform periodic evaluations for impairment of our investments in unconsolidated entities such as joint ventures. Recording an impairment charge results in an immediate reduction in our income and therefore could have a material adverse effect on our results of operations and financial condition in the period in which the charge is taken.

Our capital recycling strategy entails various risks.
During 2013, we sold thirty-two non-core assets and four outparcels for aggregate gross proceeds of $295.2 million. In general, we intend to continue to sell many of our remaining non-core properties over the next several years as part of our capital recycling efforts. In the event we are unable to sell these assets for amounts equal to or in excess of their current carrying values, we would be required to recognize an impairment charge. Further, in the event we are unable to reinvest the proceeds from these sales in an accretive manner, we may suffer earnings and FFO dilution. Any such impairment charges or earnings dilution could materially and adversely affect our business, financial condition, operating results and cash flows and the market price of our publicly traded securities.

Our board of directors may change our investment strategy without stockholder approval.
Our board of directors may determine to change our strategy with respect to capitalization, investment, distributions and/or operations. Our board of directors may establish investment criteria or limitations as it deems appropriate, but currently does not limit the number of properties in which we may seek to invest or the concentration of investments in any one geographic region. Although our board of directors has no present intention to revise or amend our strategies and policies, it may do so at any time without a vote by our stockholders. Accordingly, the results of decisions made by our board of directors and implemented by management may or may not serve the interests of all of our stockholders and could adversely affect our financial condition or results of operations, including our ability to distribute cash to shareholders or qualify as a REIT.


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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 and investment strategy is the redevelopment of properties within our portfolio and the development of new shopping centers, including Broadway Plaza in the Bronx, New York and Serramonte Shopping Center in Daly City, California. At December 31, 2013, we had invested an aggregate of approximately $62.2 million in active development or redevelopment projects at various stages of completion and based on our current plans and estimates we anticipate that these projects will require an additional $76.6 million to complete, including $42.0 million to complete Broadway Plaza and our previously announced expansion plans at Serramonte Shopping Center. In addition to these costs, we may expend substantial amounts in the future in connection with the further redevelopment of Serramonte Shopping Center and the redevelopment of the Westwood Complex in Bethesda, Maryland, and we are actively seeking additional significant development and redevelopment opportunities in our target markets. These developments and redevelopments may not be as successful as currently expected. Expansion, renovation and development projects entail the following considerable risks:
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significant time lag between commencement and completion subjects us to greater risks due to fluctuations in the general economy;
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failure or inability to obtain construction or permanent financing on favorable terms;
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expenditure of money and time on projects that may never be completed;
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inability to secure key anchor or other tenants;
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inability to achieve projected rental rates or anticipated pace of lease-up;
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higher-than-estimated construction costs, including labor and material costs;
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inability to realize the benefits of tax credits to the extent originally projected: and
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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).
In addition, in some instances we purchase underutilized land in urban areas from municipalities and development authorities pursuant to purchase agreements which give the municipality the right to reclaim the property for little or no consideration in the event we do not commence or complete construction in a timely or acceptable manner. Should they occur, these risks could adversely affect the investment returns from our development and 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 earnings per share and 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:
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we may not be able to identify suitable properties to acquire or may be unable to complete the acquisition of the properties we identify, even after making a non-refundable deposit or incurring significant acquisition related costs;
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we may not be able to integrate any acquisitions into our existing operations successfully;
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properties we acquire may fail to achieve 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;
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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 (such as to tenants or vendors or with respect to environmental contamination), which could reduce the cash flow from the property or increase our acquisition cost.
In addition, as part of our investing and capital strategy, we plan to sell assets that no longer meet our investment criteria and reinvest those proceeds in other parts of our business, including in the acquisition of higher quality properties in our target markets and the development and redevelopment of our properties, or use the proceeds to pay down debt. While we hope to minimize the dilutive effect of this strategy on our earnings, in the near term the returns on the assets we seek to dispose are likely to exceed the returns we are able to achieve through the reinvestment of those proceeds which could have the effect of reducing our income and materially and adversely affecting our results of operations and financial condition. Finally, if we acquire a business, we will

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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 or debt 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 or unsecured 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 general availability of credit in the capital markets, the market’s perception of our growth potential, our ability to pay dividends, our financial condition, our credit ratings 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 we may be unable to implement this strategy at all. See the Risk Factor entitled “Volatility in the credit markets may affect our ability to obtain or re-finance our indebtedness at a reasonable cost.”
Property ownership through joint ventures could limit our control of those investments and reduce our expected returns.
We have invested in some cases as a partner or co-venturer in properties. Real estate partnership or joint venture investments may involve risks not otherwise present for investments made solely by us, including the possibility that our partners or co-venturers might become bankrupt, that our partners or co-venturers might at any time have different interests or goals than we do, that our partners or co-venturers might fail to provide capital and fulfill their obligations, which may result in certain liabilities to us for guarantees and other commitments, and that our partners or co-venturers may take actions or fail to take actions contrary to our instructions, requests, policies or objectives and that our partners or co-venturers may engage in malfeasance or illegal activities which may jeopardize our investment or subject us to reputational risk. Other risks of joint venture investments could include an impasse on decisions, such as sales of the ventures or their properties, because neither our partners or co-venturers nor we would have full control over the involved partnerships or joint ventures. In other cases, our partners or co-venturers may have the power to cause the involved partnership or joint venture to take or refrain from taking actions contrary to our desires. In addition, our lenders may not be easily able to sell our joint venture assets and investments or view them less favorably as collateral, which could negatively affect our liquidity and capital resources. Any dispute that may arise with our joint venture partners may result in litigation or arbitration that could increase our expenses. Further, many of our joint ventures contain customary buy-sell provisions which could result in either the sale of our interest or the use of available cash or borrowings to acquire our partner’s interest at inopportune times. These factors could limit the return that we receive from those investments or cause our cash flows to be lower than our estimates.
Our activity level places significant demands on our operational, administrative and financial resources.
We continue to pursue extensive capital recycling and growth opportunities through a combination of acquisitions, dispositions and joint venture opportunities, some of which have complicated structures. This activity level and complexity places significant demands on our operational, administrative and financial resources. Our future performance will depend in part on our ability to successfully identify, attract and retain qualified personnel to support and manage the transformation, growth and complexity of our business, including successfully integrating new acquisitions into our operating platform. Obtaining sufficient personnel and other resources may increase our expenses, including general and administrative expense. In the event we have insufficient resources to support the growth and complexity in our business, we may fail to properly structure or account for the financial or tax aspects of our transactions or satisfy obligations owed to transaction counterparties, thereby impacting our qualification as a REIT or our financial results.
Competition for the acquisition of assets and the leasing of properties may adversely impact our future operating performance, our growth plans, and stockholder returns.
Numerous commercial developers and real estate companies compete with us in seeking tenants for our existing properties and properties for acquisition, particularly in our target markets. This competition may affect us in various ways, including:
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reducing properties available for acquisition;

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•
increasing the cost of properties we acquire;
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reducing the rate of return on these properties;
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reducing rents payable to us;
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interfering with our ability to attract and retain tenants;
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increasing vacancy rates at our properties; and
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adversely affecting 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 from time to time be subject to litigation that may negatively impact our cash flow, financial condition, results of operations and the trading price of our common stock.
We may from time to time be a defendant in lawsuits and regulatory proceedings relating to our business. Such litigation and proceedings may result in defense costs, settlements, fines or judgments against us, some of which may not be covered by insurance. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such litigation or proceedings. An unfavorable outcome could negatively impact our cash flow, financial condition, results of operations and trading price of our common stock. For a further discussion of litigation risks, see Note 22 to the consolidated financial statements.
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 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 to properly 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, environmental conditions known at the time of acquisition are typically excluded from coverage, and 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.
Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unplanned expenditures that adversely affect our cash flows.
All of our properties are required to comply with the Americans with Disabilities Act, or ADA. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities,” but generally requires that buildings be made accessible to people with disabilities. Compliance with the ADA requirements could require removal of access barriers, and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both. While the tenants to whom we lease properties are obligated by law to comply with the ADA provisions, and are typically obligated to cover costs of compliance, if required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of these tenants to cover costs could be adversely affected. As a result, we could be required to expend funds to comply with the provisions of the ADA, which could adversely affect our results of operations and financial condition and our ability to make distributions to stockholders. In addition, we are required to operate our properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to the properties. We may be required to make substantial capital expenditures to comply with those requirements, and these expenditures could have a material adverse effect on our ability to meet our financial obligations and make distributions to stockholders.

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Changes in accounting standards may adversely impact our financial condition and results of operations.
New accounting standards or pronouncements that may become applicable to us from time to time, or changes in the interpretation of existing standards and pronouncements, could have a significant adverse effect on our reported results for the affected periods.
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 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 new legislation, 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 Code for which there are often 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 nature and 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 or if the structure of one of our joint ventures or other investments fails to yield qualifying income.
In addition, in order to qualify as a REIT, we must make distributions to stockholders aggregating annually at least 90% of our REIT taxable income, excluding net capital gains. To the extent we satisfy the 90% distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed income. In addition, we will incur a 4% 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% of our ordinary income for that year, 95% of our capital gain net earnings for that year and 100% of our undistributed taxable income from prior years. We intend to make distributions to our stockholders to comply with the distribution provisions of the Code. Although we anticipate that our cash flows from operating activities and our ability to borrow under our existing credit facilities will enable us to pay our operating expenses and meet distribution requirements, no assurance can be given in this regard. Differences in timing between the receipt of income and the payment of expenses in determining our income as well as required debt amortization payments and the capitalization of certain expenses could require us to borrow funds on a short term basis or sell assets in order to satisfy the distribution requirements. The distribution requirements also severely limit our ability to retain earnings to acquire and improve properties or retire outstanding debt.
In addition, 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% 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 sales that are consistent with our investment objectives. Although we do not intend to engage in prohibited transactions, it is possible that our dispositions may not qualify for safe harbor treatment. Accordingly, we cannot assure you 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. In addition, the sale of our properties may generate gains for tax purposes which, if not adequately sheltered through “like kind exchanges” under Section 1031 of the Code, could require us to make additional distributions to our stockholders, thus reducing our capital available for investment in other properties, or if the proceeds of such sales are already invested in other properties, require us to obtain additional funds to make such distributions, in either such case to permit us to maintain our status as a REIT.
If we fail to qualify as a REIT:
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we would not be allowed a deduction for distributions to stockholders in computing taxable income, and therefore our taxable income or alternative minimum taxable income so computed would be fully subject to the regular federal income tax or the federal alternative minimum tax;
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unless we are entitled to relief under specific statutory provisions, we could not elect to be taxed as a REIT again for the four taxable years following the year during which we were disqualified;
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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
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the tax laws would no longer require us to pay any distributions to our stockholders.

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In addition, CapCo elected to be treated as a REIT under the Code in 2007 and we have operated CapCo so as to qualify as a REIT since we acquired a controlling interest in it through a joint venture with LIH in January 2011. In addition to the considerations and risks cited above with respect to qualification as a REIT generally, in the event that CapCo's qualification as a REIT since January 2011 has not been maintained or if we fail to maintain CapCo's qualification as a REIT in the future, our own REIT qualification could be in jeopardy and we could incur significant liability to LIH pursuant to the joint venture documents governing that transaction. We could also incur significant liability to LIH if we fail to comply with certain other covenants under those joint venture documents and, as a result, LIH incurs U.S. federal income tax liability under the Foreign Investment in Real Property Tax Act, or FIRPTA, provisions of the Code.
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% excise tax on transactions with a TRS that are not conducted on an arms-length basis. In addition, our TRSs are subject to foreign, federal, state and local taxes.
Our chairman of the board of directors and his affiliates are beneficial owners of approximately 45.3% 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.
As of December 31, 2013, Chaim Katzman, the chairman of our board of directors, beneficially owned approximately 45.3% of the outstanding shares of our common stock. Accordingly, Mr. Katzman is able to exercise significant influence 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 influence over the outcome of any proposed merger or consolidation of our company which, under our charter, requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock. 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. Additionally, in the event Mr. Katzman and his affiliates were to sell substantial amounts of our common stock, the trading price of our common stock could experience volatility or decline significantly and our ability to raise additional equity on attractive terms could be significantly impaired.
We provide our principal stockholder with reconciliations of our financial statements to International Financial Reporting Standards.
We are party to an agreement with Gazit pursuant to which we are obligated to provide it with quarterly and annual reconciliations of our financial statements, which are prepared in accordance with generally accepted accounting principles in the United States, to International Financial Reporting Standards, or IFRS, so that Gazit may consolidate our results in its financial reporting. Pursuant to this agreement, Gazit reimburses us for internal and third-party expenses incurred by us in connection with the preparation of these reconciliations, including the performance by our independent certified public accountants of certain procedures with respect to these reconciliations. Neither we nor the members of our board of directors or audit committee are experts with respect to IFRS and we are subject to the risk that we may incur liability to Gazit or its stockholders in the event of inaccuracies in our preparation of these reconciliations, which could adversely affect our financial condition and results of operations.
To maintain our status as a REIT, we limit the amount of shares any one stockholder can own.
The 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 provides that, subject to certain exceptions, no person may own, or be deemed to own, directly and by virtue of the constructive ownership provisions of the Code, more than 9.9% (or 5.0% in the case of an “individual”) in value of the aggregate outstanding shares of our capital stock or more than 9.9% (or 5.0% in the case of an “individual”), in value or number of shares, whichever is more restrictive, of the outstanding shares of our common 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 5.0% or 9.9%, as applicable, 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 5.0% or 9.9%, as applicable, 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 5.0% or 9.9% ownership limit, as applicable. Our board of directors may waive the REIT ownership restrictions on a case-by-case basis, and it has in the past done so, including for Chaim Katzman, our chairman of the board, and his affiliates, and for LIH and its affiliates. Our charter also provides that, subject to certain exceptions, a foreign

15


person may not acquire, beneficially or constructively, any shares of our capital stock, if immediately following the acquisition of such shares, the fair market value of the shares of our capital stock owned, directly and indirectly, by all foreign persons (other than LIH and its affiliates) would comprise 29% or more of the fair market value of the issued and outstanding shares of our capital stock. This 29% limit is intended to ensure that CapCo, one of our subsidiaries, will qualify as a "domestically controlled" REIT. The foregoing 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 current rates.
Our ability to continue to pay dividends on our common stock at current rates or to increase our common stock dividend rate will depend on a number of factors, including, among others, the following:
•
our financial condition and results of future operations;
•
the ability of our tenants to perform in accordance with the lease terms;
•
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, there could be an adverse effect on the market price of our common stock. Conversely, the payment of dividends on our common stock may be subject to payment in full of the interest on debt we may owe.
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 and foreign ownership limits 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 board of directors, the chairman of the board, the chief executive officer, the president or by the corporate secretary at the direction of stockholders entitled to cast not less than a majority of all votes entitled to be cast at such meeting;
•
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.
Dividends paid by REITs generally do not qualify for reduced tax rates.
In general, the maximum U.S. federal income tax rate for “Qualified dividends” paid by regular “C” corporations to U.S. shareholders that are individuals, trusts and estates beginning after December 31, 2012 is 20% and a new Medicare tax of 3.8% may also apply if income is greater than certain specified amounts. Subject to limited exceptions, dividends paid by REITs (other than distributions designated as capital gain dividends or returns of capital) are not eligible for these reduced rates and are taxable at ordinary income tax rates. The more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including the shares of our capital stock.
Foreign stockholders may be subject to U.S. federal income tax on gain recognized on a disposition of our common stock if we do not qualify as a "domestically controlled" REIT.
A foreign person disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests is generally subject to U.S. federal income tax on any gain recognized on the disposition. This tax does not apply, however, to the disposition of stock in a REIT if the REIT is "domestically controlled." In general, we will be a

16


domestically controlled REIT if at all times during the five-year period ending on the applicable stockholder’s disposition of our stock, less than 50% in value of our stock was held directly or indirectly by non-U.S. persons. If we were to fail to qualify as a domestically controlled REIT, gain recognized by a foreign stockholder on a disposition of our common stock would be subject to U.S. federal income tax unless our common stock was traded on an established securities market and the foreign stockholder did not at any time during a specified testing period directly or indirectly own more than 5% of our outstanding common stock.

Several of our controlling stockholders have pledged their shares of our stock as collateral under bank loans, which could result in foreclosure and disposition and could have a negative impact on our stock price.
As of December 31, 2013, Gazit and its subsidiaries beneficially owned approximately 44.8% of the outstanding shares of our common stock. Based on information we have received from Gazit, we believe that approximately 96.4% of the shares reported as beneficially owned by Gazit are pledged to secure loans made to it and its subsidiaries by commercial banks.
If one of these entities defaults on any of its obligations under the applicable 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 stockholder's failure to comply with specified financial ratios and other covenants set forth in the applicable pledge agreements and loan documents;
•
if the value of the pledged shares ceases to exceed the principal amount of indebtedness outstanding under the credit facilities by a specified margin as a result of the decline of our stock price or otherwise;
•
the occurrence of a default with respect to other material indebtedness owed by the stockholder that would entitle any of the stockholder’s other creditors to accelerate payment of such indebtedness; and
•
if the stockholder ceases to pay its debts or manage its affairs or reaches a compromise or arrangement with its creditors.
In addition, because so many shares are pledged to secure these 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 or may violate covenants of certain of our loan agreements.
We rely extensively on computer systems to process transactions and manage our business. Disruptions in both our primary and secondary (back-up) systems or breaches of our network security could harm our ability to run our business and expose us to liability.
In order to successfully operate our business, it is essential that we maintain uninterrupted operation of our business-critical computer systems. Our computer systems, including our back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, cyber-attacks, catastrophic events such as fires, hurricanes, earthquakes and tornadoes, and usage errors by our employees. In addition, we have recently undertaken significant investments and improvements in various IT solutions and software products that support our business. If our computer systems or these new IT solutions cease to function properly or are damaged, we may have to make a significant investment to repair or replace them, and we may suffer interruptions in our operations in the interim. Any material interruption in our computer systems or issues with the ongoing implementation of newly adopted IT solutions may have a material adverse effect on our business or results of operations.
Additionally, increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. In the event a security breach or failure results in the disclosure of sensitive third party data or the transmission of harmful/malicious code to third parties, we could be subject to liability claims. Depending on their nature and scope, such threats also could potentially lead to improper use of our systems and networks, manipulation and destruction of data, loss of trade secrets, system downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.

17



ITEM 2.
PROPERTIES
Our consolidated portfolio consists primarily of grocery-anchored shopping centers and, at December 31, 2013, contained an aggregate of approximately 14.9 million square feet of GLA. All of our properties are owned in fee simple other than McAlpin Square located in Savannah, Georgia, Plaza Acadienne located in Eunice, Louisiana, El Novillo located in Miami, Florida and Darinor Plaza located in Norwalk, Connecticut, each of which is subject to a ground lease in favor of a third party lessor. A small number of our other shopping centers include outparcels or portions of the center that are subject to ground leases. 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 – Indebtedness.”
The following table provides a brief description of our properties as of December 31, 2013: 
Property
 
City
 
Year Built /
Renovated
 
Total
Sq. Ft.
Owned
 
Percent
Leased
 
Average
base rent
per leased SF
 
Grocer
Anchor
 
Other anchor tenants
NORTH FLORIDA REGION (24)
 
 
 
 
 
 
 
 
 
 
Orlando / Central Florida (5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alafaya Commons
 
Orlando
 
1987
 
126,333

 
34.9
%
 
$
21.55

 
 
 
 
Alafaya Village
 
Orlando
 
1986
 
38,118

 
79.9
%
 
$
23.21

 
 
 
 
Park Promenade
 
Orlando
 
1987 / 2000
 
128,848

 
28.9
%
 
$
10.67

 
 
 
Dollar General
Town & Country
 
Kissimmee
 
1993
 
75,181

 
94.1
%
 
$
8.12

 
Albertsons* (Ross Dress For Less)
 
 
Unigold Shopping Center
 
Winter Park
 
1987
 
117,527

 
88.2
%
 
$
11.83

 
Winn-Dixie
 
You Fit
Jacksonville / North Florida (7)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beauclerc Village
 
Jacksonville
 
1962 / 1988
 
68,846

 
93.1
%
 
$
9.09

 
 
 
Big Lots / Goodwill / Beall’s Outlet
Forest Village
 
Tallahassee
 
2000
 
71,526

 
78.7
%
 
$
10.33

 
Publix
 
 
Ft. Caroline
 
Jacksonville
 
1985 / 1995
 
71,816

 
86.8
%
 
$
6.92

 
Winn-Dixie
 
Citi Trends
Mandarin Landing
 
Jacksonville
 
1976
 
139,580

 
88.6
%
 
$
16.58

 
Whole Foods
 
Office Depot / Aveda Institute
Oak Hill (2)
 
Jacksonville
 
1985 / 1997
 
78,492

 
100.0
%
 
$
8.36

 
Publix
 
Planet Fitness
Pablo Plaza
 
Jacksonville
 
1974 / 1998 / 2001 / 2008
 
146,473

 
86.0
%
 
$
11.57

 
Publix*
(Office Depot)
 
Marshalls / HomeGoods
South Beach
 
Jacksonville Beach
 
1990 / 1991
 
307,873

 
88.2
%
 
$
12.65

 
 
 
Ross / Bed Bath & Beyond / Home Depot / Stein Mart / Staples
Tampa / St. Petersburg / Venice / Cape Coral (7)
 
 
 
 
 
 
 
 
Charlotte Square
 
Port Charlotte
 
1980
 
96,626

 
69.9
%
 
$
7.75

 
 
 
Seafood Buffet / American Signature Furniture
Glengary Shoppes
 
Sarasota
 
1995
 
92,844

 
100.0
%
 
$
19.73

 
 
 
Best Buy / Barnes & Noble
Mariners Crossing
 
Spring Hill
 
1989 / 1999
 
97,812

 
85.9
%
 
$
10.13

 
Sweet Bay
 
 
Shoppes of North Port
 
North Port
 
1991
 
84,705

 
86.2
%
 
$
8.76

 
 
 
You Fit Health Club / Goodwill
Sunlake
 
Tampa
 
2008
 
94,397

 
91.3
%
 
$
18.75

 
Publix
 
 
Sunpoint Shopping Center
 
Ruskin
 
1984
 
132,374

 
83.0
%
 
$
7.90

 
 
 
Goodwill / Big Lots / Chapter 13 Trustee / The Crossing Church
Walden Woods
 
Plant City
 
1985 /1998 / 2003
 
72,950

 
87.3
%
 
$
7.92

 
 
 
Dollar Tree / Aaron Rents / Dollar General
North Palm Coast (5)
 
 
 
 
 
 
 
 
New Smyrna Beach
 
New Smyrna Beach
 
1987
 
118,451

 
87.8
%
 
$
12.32

 
Publix
 
 
Old King Commons
 
Palm Coast
 
1988
 
84,759

 
94.6
%
 
$
9.40

 
 
 
Staples / Beall's Outlet / Planet Fitness
Ryanwood
 
Vero Beach
 
1987
 
114,925

 
82.9
%
 
$
11.07

 
Publix
 
Beall’s Outlet / Books-A-Million
South Point Center
 
Vero Beach
 
2003
 
64,790

 
94.1
%
 
$
15.74

 
Publix
 
 

18


Property
 
City
 
Year Built /
Renovated
 
Total
Sq. Ft.
Owned
 
Percent
Leased
 
Average
base rent
per leased SF
 
Grocer
Anchor
 
Other anchor tenants
Treasure Coast
 
Vero Beach
 
1983
 
133,779

 
98.9
%
 
$
13.40

 
Publix
 
TJ Maxx
TOTAL SHOPPING CENTERS NORTH FLORIDA REGION (24)
 
2,559,025

 
82.8
%
 
$
12.13

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SOUTH FLORIDA REGION (36)
 
 
 
 
 
 
 
 
 
 
Miami-Dade / Broward / Palm Beach (32)
 
 
 
 
 
 
 
 
Aventura Square
 
Aventura
 
1991
 
143,250

 
100.0
%
 
$
24.36

 
 
 
Babies R Us / Jewelry Exchange / Old Navy / Bed Bath & Beyond / DSW
Bird Ludlum
 
Miami
 
1988 / 1998
 
192,274

 
94.2
%
 
$
19.88

 
Winn-Dixie
 
CVS Pharmacy / Goodwill
Bluffs Square
 
Jupiter
 
1986
 
123,917

 
81.0
%
 
$
12.89

 
Publix
 
Walgreens
Chapel Trail
 
Pembroke Pines
 
2007
 
56,378

 
100.0
%
 
$
23.72

 
 
 
LA Fitness
Coral Reef Shopping Center
 
Palmetto Bay
 
1968 / 1990
 
74,680

 
91.5
%
 
$
26.15

 
 
 
Office Depot / Walgreens
Countryside Shops
 
Cooper City
 
1986 /1988 / 1991
 
179,561

 
86.4
%
 
$
14.25

 
Publix
 
Stein Mart
Crossroads Square
 
Pembroke Pines
 
1973
 
81,587

 
86.0
%
 
$
18.26

 
 
 
CVS Pharmacy / Goodwill
El Novillo
 
Miami Beach
 
1970 / 2000
 
10,000

 
100.0
%
 
$
17.00

 
 
 
Sakura Japanese Buffet
Greenwood
 
Palm Springs
 
1982 / 1994
 
133,438

 
89.4
%
 
$
14.42

 
Publix
 
Beall’s Outlet
Hammocks Town Center
 
Miami
 
1987 / 1993
 
168,834

 
97.7
%
 
$
15.16

 
Publix
 
Metro Dade Library / CVS Pharmacy / Porky’s Gym
Jonathan’s Landing
 
Jupiter
 
1997
 
26,820

 
75.4
%
 
$
20.91

 
 
 
 
Lago Mar
 
Miami
 
1995
 
82,613

 
92.7
%
 
$
13.65

 
Publix
 
 
Lantana Village
 
Lantana
 
1976 / 1999
 
181,780

 
97.6
%
 
$
7.52

 
Winn-Dixie
 
Kmart / Rite Aid* (Family Dollar)
Magnolia Shoppes
 
Fort Lauderdale
 
1998
 
114,118

 
94.5
%
 
$
12.86

 
 
 
Regal Cinemas / Deal$
Shoppes of Oakbrook
 
Palm Beach Gardens
 
1974 / 2000 / 2003
 
199,633

 
92.6
%
 
$
14.87

 
Publix
 
Stein Mart / Homegoods / CVS Pharmacy / Bassett Furniture / Duffy’s
Oaktree Plaza
 
North Palm Beach
 
1985
 
23,745

 
81.9
%
 
$
16.70

 
 
 
 
Pine Island
 
Davie
 
1999
 
254,907

 
91.9
%
 
$
13.21

 
Publix
 
Burlington Coat Factory / Staples / You Fit Health Club
Point Royale
 
Miami
 
1970 / 2000
 
181,381

 
93.8
%
 
$
12.44

 
Winn-Dixie
 
Best Buy / Pasteur Medical
Prosperity Centre
 
Palm Beach Gardens
 
1993
 
122,014

 
96.6
%
 
$
18.19

 
 
 
Office Depot / CVS Pharmacy / Bed Bath & Beyond / TJ Maxx
Ridge Plaza
 
Davie
 
1984 / 1999
 
155,204

 
95.3
%
 
$
11.92

 
 
 
Ridge Cinema / Kabooms / United Collection / Round Up / Goodwill
Riverside Square
 
Coral Springs
 
1987
 
103,241

 
80.1
%
 
$
11.27

 
Publix
 
 
Sawgrass Promenade
 
Deerfield Beach
 
1982 / 1998
 
107,092

 
80.7
%
 
$
10.64

 
Publix
 
Walgreens / Dollar Tree
Sheridan Plaza
 
Hollywood
 
1973 / 1991
 
508,455

 
97.2
%
 
$
16.04

 
Publix
 
Kohl’s / Ross / Bed Bath & Beyond / Pet Supplies Plus / LA Fitness / Office Depot / Assoc. in Neurology
Shoppes of Andros Isles
 
West Palm Beach
 
2000
 
79,420

 
82.4
%
 
$
11.73

 
Publix
 
 
Shoppes of Silverlakes
 
Pembroke Pines
 
1995 / 1997
 
126,789

 
88.6
%
 
$
16.61

 
Publix
 
Goodwill
Shops at Skylake
 
North Miami Beach
 
1999 / 2005 / 2006
 
287,168

 
95.6
%
 
$
19.31

 
Publix
 
TJ Maxx / LA Fitness / Goodwill
Tamarac Town Square
 
Tamarac
 
1987
 
124,585

 
86.8
%
 
$
11.83

 
Publix
 
Dollar Tree / Pivot Education

19


Property
 
State
 
Year Built /
Renovated
 
Total
Sq. Ft.
Owned
 
Percent
Leased
 
Average
base rent
per leased SF
 
Grocer
Anchor
 
Other anchor tenants
Waterstone
 
Homestead
 
2005
 
61,000

 
100.0
%
 
$
14.99

 
Publix
 
 
West Bird
 
Miami
 
1977 / 2000
 
99,864

 
92.5
%
 
$
14.35

 
Publix
 
CVS Pharmacy
West Lakes Plaza
 
Miami
 
1984 / 2000
 
100,747

 
95.4
%
 
$
14.52

 
Winn-Dixie
 
Navarro Pharmacy
Westport Plaza
 
Davie
 
2002
 
49,533

 
97.6
%
 
$
17.75

 
Publix
 
 
Young Circle
 
Hollywood
 
1962 / 1997
 
65,834

 
98.1
%
 
$
15.64

 
Publix
 
Walgreens
Naples / Port St. Lucie / Stuart (4)
 
 
 
 
 
 
 
 
 
 
Cashmere Corners
 
Port St. Lucie
 
2001
 
89,234

 
92.1
%
 
$
7.64

 
Albertsons
 
 
Pavilion
 
Naples
 
1982 / 2001 / 2011
 
167,745

 
89.0
%
 
$
17.39

 
 
 
Paragon Theaters / L.A. Fitness / Anthony's
Salerno Village
 
Stuart
 
1987
 
82,477

 
86.3
%
 
$
10.79

 
Winn-Dixie
 
CVS Pharmacy
Shops at St. Lucie
 
Port St. Lucie
 
2006
 
19,361

 
65.2
%
 
$
21.77

 
 
 
 
TOTAL SHOPPING CENTERS SOUTH FLORIDA REGION (36)
 
4,578,679

 
92.3
%
 
$
15.27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SOUTHEAST REGION (27)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GEORGIA (11)
 
 
 
 
 
 
 
 
 
 
Atlanta (9)
 
 
 
 
 
 
 
 
 
 
BridgeMill
 
Canton
 
2000
 
89,102

 
90.6
%
 
$
16.22

 
Publix
 
 
Buckhead Station
 
Atlanta
 
1996
 
233,739

 
98.3
%
 
$
21.28

 
 
 
Bed Bath & Beyond / TJ Maxx / Old Navy / Toys R Us / DSW / Ulta / Nordstrom Rack
Chastain Square
 
Atlanta
 
1981 / 2001
 
91,637

 
100.0
%
 
$
18.61

 
Publix
 
 
Hairston Center
 
Decatur
 
2000
 
13,000

 
92.3
%
 
$
11.95

 
 
 
 
Hampton Oaks
 
Fairburn
 
2009
 
20,842

 
35.9
%
 
$
11.35

 
 
 
 
Market Place
 
Norcross
 
1976
 
73,686

 
93.4
%
 
$
11.84

 
 
 
Galaxy Cinema
Piedmont Peachtree Crossing
 
Buckhead
 
1978 / 1998
 
152,239

 
98.6
%
 
$
19.18

 
Kroger
 
Cost Plus Store / Binders Art Supplies
Wesley Chapel
 
Decatur
 
1989
 
164,153

 
83.1
%
 
$
8.39

 
Little Giant
 
Everest Institute* / Deal$ / Planet Fitness
Williamsburg at Dunwoody
 
Dunwoody
 
1983
 
44,928

 
83.8
%
 
$
20.29

 
 
 
 
Central / South Georgia (2)
 
 
 
 
 
 
 
 
 
 
Daniel Village
 
Augusta
 
1956 / 1997
 
172,438

 
66.5
%
 
$
9.63

 
Bi-Lo
 
 
McAlpin Square
 
Savannah
 
1979
 
173,952

 
96.6
%
 
$
8.38

 
Kroger
 
Big Lots / Habitat for Humanity / Savannah-Skidaway
TOTAL SHOPPING CENTERS GEORGIA (11)
 
1,229,716

 
89.2
%
 
$
14.72

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LOUISIANA (11)
 
 
 
 
 
 
 
 
 
 
Ambassador Row
 
Lafayette
 
1980 / 1991
 
194,678

 
83.5
%
 
$
10.83

 
 
 
Big Lots / Chuck E Cheese / Planet Fitness / JoAnn Fabrics
Ambassador Row Courtyard
 
Lafayette
 
1986 / 1991 / 2005
 
146,697

 
90.9
%
 
$
10.52

 
 
 
Bed Bath & Beyond / Marshalls / Hancock Fabrics / Unitech Training Academy / Tuesday Morning
Bluebonnet Village
 
Baton Rouge
 
1983
 
101,585

 
98.2
%
 
$
12.23

 
Matherne’s
 
Office Depot
Boulevard
 
Lafayette
 
1976 / 1994
 
68,012

 
93.1
%
 
$
9.20

 
 
 
Piccadilly / Harbor Freight Tools / Golfballs.com
Country Club Plaza
 
Slidell
 
1982 / 1994
 
64,686

 
86.8
%
 
$
6.79

 
Winn-Dixie
 
 
Crossing
 
Slidell
 
1988 / 1993
 
113,989

 
92.8
%
 
$
5.25

 
Save A Center
 
A-1 Home Appliance / Piccadilly



20


Property
 
City
 
Year Built /
Renovated
 
Total
Sq. Ft.
Owned
 
Percent
Leased
 
Average
base rent
per leased SF
 
Grocer 
Anchor
 
Other anchor tenants
Elmwood Oaks
 
Harahan
 
1989
 
130,284

 
100.0
%
 
$
9.16

 
 
 
Academy Sports / Dollar Tree / Tuesday Morning
Plaza Acadienne
 
Eunice
 
1980
 
59,419

 
100.0
%
 
$
4.38

 
Super 1 Store
 
Fred’s Store
Sherwood South
 
Baton Rouge
 
1972 / 1988 / 1992
 
77,230

 
100.0
%
 
$
6.20

 
 
 
Burke’s Outlet / Harbor Freight Tools / Ideal Market
Siegen Village
 
Baton Rouge
 
1988
 
170,416

 
98.9
%
 
$
10.19

 
 
 
Office Depot / Big Lots / Dollar Tree / Planet Fitness / Party City
Tarpon Heights
 
Galliano
 
1982
 
56,605

 
95.5
%
 
$
6.07

 
 
 
Stage / Dollar General
TOTAL SHOPPING CENTERS LOUISIANA (11)
 
1,183,601

 
93.8
%
 
$
8.90

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NORTH CAROLINA (4)
 
 
 
 
 
 
 
 
 
 
Centre Pointe Plaza
 
Smithfield
 
1989
 
159,383

 
99.2
%
 
$
6.35

 
 
 
Belk’s / Dollar Tree / Aaron Rents / Burke’s Outlet Stores
Riverview Shopping Center
 
Durham
 
1973 / 1995
 
128,498

 
93.1
%
 
$
8.58

 
Kroger
 
Upchurch Drugs / Riverview Galleries
Stanley Market Place (2)
 
Stanley
 
2007
 
53,228

 
94.1
%
 
$
9.84

 
Food Lion
 
Family Dollar
Thomasville Commons
 
Thomasville
 
1991
 
148,754

 
90.5
%
 
$
5.44

 
Ingles
 
Kmart
TOTAL SHOPPING CENTERS NORTH CAROLINA (4)
 
489,863

 
94.4
%
 
$
7.04

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VIRGINIA (1)
 
 
 
 
 
 
 
 
 
 
Smyth Valley Crossing
 
Marion
 
1989
 
126,841

 
97.2
%
 
$
6.01

 
Ingles
 
Walmart
TOTAL SHOPPING CENTERS VIRGINIA (1)
 
126,841

 
97.2
%
 
$
6.01

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL SHOPPING CENTERS SOUTHEAST REGION (27)
 
3,030,021

 
92.2
%
 
$
10.75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NORTHEAST REGION (22)
 
 
 
 
 
 
 
 
 
 
CONNECTICUT (8)
 
 
 
 
 
 
 
 
 
 
Brookside Plaza
 
Enfield
 
1985 / 2006
 
214,030

 
93.9
%
 
$
13.74

 
Wakefern Food
 
Bed Bath & Beyond / Walgreens / Staples /PetSmart
Compo Acres (1)
 
Westport
 
1960 / 2011
 
42,779

 
93.2
%
 
$
46.33

 
Trader Joe’s
 
 
Copps Hill
 
Ridgefield
 
1979 / 2002
 
184,528

 
100.0
%
 
$
13.61

 
Stop & Shop
 
Kohl’s / Rite Aid
Darinor Plaza (1)
 
Norwalk
 
1978
 
151,198

 
100.0
%
 
$
16.73

 
 
 
Kohl's / Old Navy / Party City
Danbury Green
 
Danbury
 
1985 / 2006
 
124,095

 
100.0
%
 
$
20.75

 
Trader Joe’s
 
Rite Aid / Annie Sez / Staples / DSW / Danbury Hilton Garden Inn
Post Road Plaza (1)
 
Darien
 
1978
 
20,005

 
100.0
%
 
$
43.92

 
Trader Joe's
 
 
Southbury Green
 
Southbury
 
1979 / 2002
 
156,215

 
97.6
%
 
$
21.99

 
ShopRite
 
Staples
The Village Center (1)
 
Westport
 
1969-1973 / 2009-2010
 
89,041

 
95.1
%
 
$
31.34

 
Fresh Market
 
 
TOTAL SHOPPING CENTERS CONNECTICUT (8)
 
981,891

 
97.6
%
 
$
19.95

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MARYLAND (1)
 
 
 
 
 
 
 
 
 
 
Westwood Complex (1)
 
Bethesda
 
1958-1960 /
2001
 
59,153

 
100.0
%
 
$
11.09

 
 
 
Bowlmor Lanes / CITGO
TOTAL SHOPPING CENTERS MARYLAND (1)
 
59,153

 
100.0
%
 
$
11.03

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MASSACHUSETTS (7)
 
 
 
 
 
 
 
 
 
 
Cambridge Star Market
 
Cambridge
 
1953 / 1997
 
66,108

 
100.0
%
 
$
30.25

 
Star Market
 
 
Medford Shaw’s Supermarket
 
Medford
 
1995
 
62,656

 
100.0
%
 
$
26.92

 
Shaw’s
 
 
Plymouth Shaw’s Supermarket
 
Plymouth
 
1993
 
59,726

 
100.0
%
 
$
19.99

 
Shaw’s
 
 
Quincy Star Market
 
Quincy
 
1965 / 1995
 
100,741

 
100.0
%
 
$
19.53

 
Star Market
 
 
Swampscott Whole Foods
 
Swampscott
 
1967 / 2005
 
35,907

 
100.0
%
 
$
24.95

 
Whole Foods
 
 
Webster Plaza
 
Webster
 
1963 / 1998
 
201,425

 
98.2
%
 
$
8.16

 
Shaw’s
 
K Mart

21


Property
 
City
 
Year Built /
Renovated
 
Total
Sq. Ft.
Owned
 
Percent
Leased
 
Average
base rent
per leased SF
 
Grocer
Anchor
 
Other anchor tenants
West Roxbury Shaw’s Plaza
 
West Roxbury
 
1973 / 1995 / 2006
 
76,316

 
93.3
%
 
$
26.14

 
Shaw’s
 
 
TOTAL SHOPPING CENTERS MASSACHUSETTS (7)
 
602,879

 
98.6
%
 
18,880

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NEW YORK (6)
 
 
 
 
 
 
 
 
 
 
 
 
1175 Third Avenue
 
Manhattan
 
1995
 
25,350

 
100.0
%
 
$
105.29

 
Food Emporium
 
 
90-30 Metropolitan
 
Queens
 
2007
 
59,815

 
100.0
%
 
$
30.03

 
Trader Joe's
 
Staples / Michael’s
101 7th Avenue
 
Manhattan
 
1930
 
56,870

 
100.0
%
 
$
24.62

 
 
 
Loehmann’s
1225-1239 Second Avenue (1)
 
Manhattan
 
1964 / 1987
 
18,474

 
96.8
%
 
$
105.30

 
 
 
CVS Pharmacy
Clocktower Plaza (1)
 
Queens
 
1985 / 1995
 
78,820

 
100.0
%
 
$
45.04

 
Pathmark
 
 
Westbury Plaza (1)
 
Westbury
 
1993 / 2004
 
394,451

 
100.0
%
 
$
22.15

 
 
 
Costco / Marshalls / Sports Authority / Walmart
TOTAL SHOPPING CENTERS NEW YORK (6)
 
633,780

 
99.9
%
 
$
31.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL SHOPPING CENTERS NORTHEAST REGION (22)
 
2,277,703

 
98.5
%
 
$
22.73

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
WEST COAST REGION (9)
 
 
 
 
 
 
 
 
 
 
CALIFORNIA (9)
 
 
 
 
 
 
 
 
 
 
Circle Center West
 
Long Beach
 
1989
 
64,403

 
94.1
%
 
$
20.15

 
 
 
Marshalls
Culver Center
 
Culver City
 
1950 / 2000
 
216,646

 
97.1
%
 
$
28.27

 
Ralph’s
 
LA Fitness / Sit N Sleep / Tuesday Morning / Best Buy
Marketplace Shopping Center
 
Davis
 
1990
 
111,156

 
100.0
%
 
$
22.94

 
Safeway
 
Petco / CVS Pharmacy
Plaza Escuela
 
Walnut Creek
 
2002
 
152,452

 
100.0
%
 
$
44.98

 
 
 
AAA / Yoga Works / The Container Store / Cheesecake Factory / Forever 21 / Sports Authority
Pleasanton Plaza (1)
 
Pleasanton
 
1981
 
163,469

 
96.1
%
 
$
12.63

 
 
 
JC Penney / Cost Plus / Design's School of Cosmetology / Office Max
Potrero (1)
 
San Francisco
 
1968 / 1997
 
226,642

 
99.9
%
 
$
29.95

 
Safeway
 
24 Hour Fitness / Party City / Petco / Office Depot / Ross
Ralph's Circle Center
 
Long Beach
 
1983
 
59,837

 
100.0
%
 
$
17.36

 
Ralph’s
 
 
Serramonte
 
Daly City
 
1968
 
799,808

 
97.7
%
 
$
18.51

 
 
 
Macy’s / JC Penney / Target / Daiso / H&M / Forever 21 / A’Gaci / Crunch Gym
Von’s Circle Center
 
Long Beach
 
1972
 
148,353

 
98.9
%
 
$
17.48

 
Von’s
 
Rite Aid / Ross
TOTAL SHOPPING CENTERS CALIFORNIA (9)
 
1,942,766

 
98.1
%
 
$
22.52

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL SHOPPING CENTERS WEST COAST REGION (9)
 
1,942,766

 
98.1
%
 
$
22.52

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL CONSOLIDATED SHOPPING CENTER PORTFOLIO (118)
 
14,388,194

 
92.4
%
 
$
16.16

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NON-RETAIL PROPERTIES (6) (1)
 
 
 
 
 
 
 
 
 
 
200 Potrero
 
San Francisco, CA
 
1928
 
30,500

 
55.1
%
 
 
 
 
 
Golden Bear Sportswear
4101 South I-85 Industrial
 
Charlotte, NC
 
1956 / 1963
 
188,513

 
100.0
%
 
 
 
 
 
Park ’N Go
Banco Popular Office Building
 
Miami, FL
 
1971
 
32,737

 
82.5
%
 
 
 
 
 
 
Prosperity Office Building
 
Palm Beach Gdns, FL
 
1972
 
3,200

 
50.0
%
 
 
 
 
 
 
Westwood - Manor Care
 
Bethesda, MD
 
1976
 
41,123

 
100.0
%
 
 
 
 
 
Manor Care
Westwood Towers
 
Bethesda, MD
 
1968 / 1997
 
211,020

 
100.0
%
 
 
 
 
 
Housing Opportunities
TOTAL NON-RETAIL PROPERTIES (6) (1)
 
507,093

 
95.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL EXCLUDING DEVELOPMENTS, REDEVELOPMENTS & LAND (124)
 
14,895,287

 
92.5
%
 
 
 
 
 
 

22


__________________________
Note: Total square footage does not include shadow anchor square footage that is not owned by Equity One but does include square footage for ground leases. Additionally, Brawley Commons in the Southeast Region with GLA totaling 119,189 square feet was excluded from the above and from the same property pool as the property was subject to a defaulted mortgage loan at December 31, 2013. In February 2014, we sold our interest in this property.
* Indicates a tenant which continues to pay rent, but has closed its store and ceased operations. The subtenant, if any, is shown in (  ).
(1) Not included in the same property pool for the year ended December 31, 2013.
(2) Property is classified as held for sale.
In addition to the 118 retail properties and 6 non-retail properties listed above, we had 10 development or redevelopment properties with approximately 1.8 million square feet of GLA upon completion and 6 land parcels for a total consolidated shopping center portfolio of 140 properties as of December 31, 2013.
Most of our leases provide for the monthly payment in advance of fixed minimum rent, the tenants’ pro rata share of property taxes, insurance (including fire and extended coverage, rent insurance and liability insurance) and common area maintenance for the property. Our leases may also provide for the payment of additional rent 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 those cases, we make the payments for the utilities and are reimbursed by the tenants on a monthly basis. Generally, our leases prohibit our tenants from assigning or subletting their spaces. The leases also require our tenants to use their spaces for the purposes designated in their lease agreements and to operate their businesses on a continuous basis. Some of the lease agreements with major, national, or regional 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 tenant will remain liable for the payment of the lease obligations under that lease agreement.
Major Tenants
The following table sets forth as of December 31, 2013 the GLA and the annual minimum rent at expiration of our existing properties leased to tenants in our consolidated shopping center portfolio. Our consolidated shopping center portfolio is defined as all of our shopping centers accounted for on a consolidated basis, excluding properties under development and redevelopment, non-retail properties, properties held in unconsolidated joint ventures and one property that was encumbered by a defaulted mortgage loan at December 31, 2013. We define anchor tenants as tenants occupying a space consisting of 10,000 square feet or more of GLA.
 
 
Supermarket
Anchor Tenants 
 
Other Anchor
Tenants
 
Non-anchor
Tenants
 
Total
Leased GLA (sq. ft.)
 
3,170,484

 
6,043,283

 
4,076,030

 
13,289,797

Percentage of Total Leased GLA
 
23.8
%
 
45.5
%
 
30.7
%
 
100.0
%
 
 
 
 
 
 
 
 
 
Annual Minimum Rent (“AMR”)
 
$
41,026,988

 
$
76,712,673

 
$
107,444,502

 
$
225,184,163

Percentage of Total AMR
 
18.2
%
 
34.1
%
 
47.7
%
 
100.0
%

23


The following table sets forth as of December 31, 2013 information regarding leases with the ten largest tenants (by annualized minimum rent) in our shopping center portfolio, including those properties under development or redevelopment:
Tenant
 
Number of
Leases
 
GLA
(square feet)
 
Percent of
Total GLA
 
Annualized
Minimum Rent
at 12/31/13
 
Percent of
Aggregate
Annualized
Minimum
Rent
 
Average
Annual
Minimum
Rent per
Square Foot
Publix
 
30

 
1,253,633

 
7.8
%
 
$
9,362,135

 
3.8
%
 
$
7.47

Supervalu
 
6

 
398,625

 
2.5
%
 
8,995,251

 
3.7
%
 
$
22.57

LA Fitness
 
7

 
320,897

 
2.0
%
 
5,874,153

 
2.4
%
 
$
18.31

The TJX Companies
 
13

 
371,068

 
2.3
%
 
5,639,466

 
2.3
%
 
$
15.20

Great Atlantic & Pacific Tea Co.
 
2

 
88,018

 
0.5
%
 
5,489,260

 
2.2
%
 
$
62.37

Bed Bath and Beyond
 
10

 
316,993

 
2.0
%
 
4,546,469

 
1.8
%
 
$
14.34

Sports Authority
 
4

 
108,391

 
0.7
%
 
3,753,410

 
1.5
%
 
$
34.63

CVS Pharmacy
 
13

 
153,211

 
1.0
%
 
3,708,094

 
1.5
%
 
$
24.20

The Gap, Inc.
 
7

 
119,729

 
0.7
%
 
3,414,675

 
1.4
%
 
$
28.52

Office Depot
 
8

 
209,845

 
1.3
%
 
3,383,261

 
1.4
%
 
$
16.12

Total top ten tenants
 
100

 
3,340,410

 
20.8
%
 
$
54,166,174

 
22.0
%
 
$
16.22

Lease Expirations
The following tables set forth as of December 31, 2013 the anticipated expirations of tenant leases in our consolidated shopping center portfolio for each year from 2014 through 2022 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
 
112

 
235,347

 
1.7
%
 
$
4,235,198

 
1.9
%
 
$
18.00

2014
 
392

 
2,216,877

 
15.4
%
 
31,806,983

 
14.1
%
 
$
14.35

2015
 
333

 
1,786,674

 
12.4
%
 
25,244,791

 
11.2
%
 
$
14.13

2016
 
337

 
2,233,427

 
15.5
%
 
37,008,787

 
16.4
%
 
$
16.57

2017
 
269

 
1,524,591

 
10.6
%
 
28,105,472

 
12.5
%
 
$
18.43

2018
 
197

 
1,327,895

 
9.2
%
 
22,268,294

 
9.9
%
 
$
16.77

2019
 
60

 
701,285

 
4.9
%
 
8,215,864

 
3.6
%
 
$
11.72

2020
 
53

 
611,151

 
4.3
%
 
10,135,041

 
4.5
%
 
$
16.58

2021
 
40

 
275,816

 
1.9
%
 
7,226,138

 
3.2
%
 
$
26.20

2022
 
53

 
594,792

 
4.1
%
 
11,364,842

 
5.1
%
 
$
19.11

Thereafter
 
123

 
1,781,942

 
12.4
%
 
39,572,753

 
17.6
%
 
$
22.21

Sub-total/Average
 
1,969

 
13,289,797

 
92.4
%
 
225,184,163

 
100.0
%
 
$
16.94

Vacant
 
451

 
1,098,397

 
7.6
%
 
NA

 
NA

 
NA

Total/Average
 
2,420

 
14,388,194

 
100.0
%
 
$
225,184,163

 
100.0
%
 
NA

 


24


ANCHOR TENANTS > 10,000 SF
 
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
 
1

 
10,163

 
0.1
%
 
$
66,060

 
0.1
%
 
$
6.50

2014
 
48

 
1,436,174

 
15.2
%
 
15,415,350

 
13.1
%
 
$
10.73

2015
 
40

 
1,097,804

 
11.6
%
 
8,911,004

 
7.6
%
 
$
8.12

2016
 
44

 
1,577,588

 
16.7
%
 
20,454,175

 
17.4
%
 
$
12.97

2017
 
33

 
1,004,612

 
10.7
%
 
13,427,913

 
11.4
%
 
$
13.37

2018
 
28

 
860,005

 
9.1
%
 
9,994,099

 
8.5
%
 
$
11.62

2019
 
9

 
553,811

 
5.9
%
 
4,326,938

 
3.7
%
 
$
7.81

2020
 
15

 
491,938

 
5.2
%
 
6,300,628

 
5.3
%
 
$
12.81

2021
 
10

 
182,749

 
2.0
%
 
3,473,403

 
2.9
%
 
$
19.01

2022
 
15

 
468,248

 
5.0
%
 
6,715,520

 
5.7
%
 
$
14.34

Thereafter
 
48

 
1,530,675

 
16.3
%
 
28,654,571

 
24.3
%
 
$
18.72

Sub-total/Average
 
291

 
9,213,767

 
97.8
%
 
117,739,661

 
100.0
%
 
$
12.78

Vacant
 
8

 
209,445

 
2.2
%
 
NA

 
NA

 
NA

Total/Average
 
299

 
9,423,212

 
100.0
%
 
$
117,739,661

 
100.0
%
 
NA

 
SHOP TENANTS < 10,000 SF
 
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
 
111

 
225,184

 
4.5
%
 
$
4,169,138

 
3.9
%
 
$
18.51

2014
 
344

 
780,703

 
15.7
%
 
16,391,633

 
15.2
%
 
$
21.00

2015
 
293

 
688,870

 
13.9
%
 
16,333,787

 
15.2
%
 
$
23.71

2016
 
293

 
655,839

 
13.2
%
 
16,554,612

 
15.4
%
 
$
25.24

2017
 
236

 
519,979

 
10.5
%
 
14,677,559

 
13.7
%
 
$
28.23

2018
 
169

 
467,890

 
9.4
%
 
12,274,195

 
11.4
%
 
$
26.23

2019
 
51

 
147,474

 
3.0
%
 
3,888,926

 
3.6
%
 
$
26.37

2020
 
38

 
119,213

 
2.4
%
 
3,834,413

 
3.6
%
 
$
32.16

2021
 
30

 
93,067

 
1.9
%
 
3,752,735

 
3.5
%
 
$
40.32

2022
 
38

 
126,544

 
2.5
%
 
4,649,322

 
4.3
%
 
$
36.74

Thereafter
 
75

 
251,267

 
5.1
%
 
10,918,182

 
10.2
%
 
$
43.45

Sub-total/Average
 
1,678

 
4,076,030

 
82.1
%
 
107,444,502

 
100.0
%
 
$
26.36

Vacant
 
443

 
888,952

 
17.9
%
 
NA

 
NA

 
NA

Total/Average
 
2,121

 
4,964,982

 
100.0
%
 
$
107,444,502

 
100.0
%
 
NA

We may incur substantial expenditures in connection with the re-leasing of our retail space, principally in the form of landlord work, 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 or periodic capital expenses required to keep our properties competitive.

25


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 liability, property, flood and environmental, and where necessary, hurricane and windstorm insurance coverages which are all provided by reputable companies. However, most of our insurance policies contain deductible or self-retention provisions requiring us to share some of any resulting losses. In addition, most of our policies contain limits beyond which we have no coverage. We currently do not have comprehensive insurance covering the replacement cost of losses resulting from earthquakes. Therefore, if an earthquake did occur and our properties were affected, we would bear the losses resulting therefrom.
ITEM 3.
LEGAL PROCEEDINGS
We are not presently involved in any litigation nor, to our knowledge, is any litigation threatened against us that, in management's opinion, would result in a material adverse effect on our business, financial condition, results of operations or our cash flows. For a further discussion of litigation, see Note 22 to our consolidated financial statements included herein.

ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.

 

26


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 21, 2014, there were 1,006 holders of record of our common stock (which number does not include individuals or entities who beneficially own shares but whose shares are held of record by a broker or clearing agency). The following table sets forth for the periods indicated the high and low sales prices as reported by the NYSE and the cash dividends declared by us:

 
 
Price Per Share
 
 
 
 
High
 
Low
 
Dividends Declared
per share
2013:
 
 
 
 
 
 
First Quarter
 
$
24.22

 
$
21.23

 
$
0.22

Second Quarter
 
$
26.72

 
$
20.86

 
$
0.22

Third Quarter
 
$
24.23

 
$
20.71

 
$
0.22

Fourth Quarter
 
$
24.99

 
$
21.44

 
$
0.22

2012:
 
 
 
 
 
 
First Quarter
 
$
20.31

 
$
16.82

 
$
0.22

Second Quarter
 
$
21.48

 
$
19.13

 
$
0.22

Third Quarter
 
$
22.16

 
$
20.63

 
$
0.22

Fourth Quarter
 
$
21.83

 
$
19.43

 
$
0.22

Dividends paid during 2013 and 2012 totaled $104.3 million and $102.1 million, respectively. Future declarations of dividends will be made 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 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.
Our total annual dividends paid per common share for each of 2013 and 2012 were $0.88 per share. The annual dividend amounts are different from dividends as calculated for federal income tax purposes. Distributions to the extent of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to a stockholder as ordinary dividend income. Distributions in excess of current and accumulated earnings and profits will be treated as a nontaxable reduction of the stockholder’s basis in such stockholder’s shares, to the extent thereof, and thereafter as taxable capital gain. Distributions that are treated as a reduction of the stockholder’s basis in its shares will have the effect of increasing the amount of gain, or reducing the amount of loss, recognized upon the sale of the stockholder’s shares. No assurances can be given regarding what portion, if any, of distributions in 2014 or subsequent years will constitute a return of capital for federal income tax purposes. During a year in which a REIT earns a net long-term capital gain, the REIT can elect under Section 857(b)(3) of the Code to designate a portion of dividends paid to stockholders as capital gain dividends. If this election is made, the capital gain dividends are generally taxable to the stockholder as long-term capital gains.
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, 2008 until December 31, 2013. 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, 2008 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 tracked day. If the semi-annual interval is not a trading day, the preceding trading day is used.


27


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, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.


 
 
Period Ending
Index
 
12/31/08
 
12/31/09
 
12/31/10
 
12/31/11
 
12/31/12
 
12/31/13
Equity One, Inc.
 
100.00

 
98.73

 
116.85

 
114.84

 
148.38

 
164.84

Russell 2000
 
100.00

 
127.17

 
161.32

 
154.59

 
179.86

 
249.69

NAREIT All Equity REIT Index
 
100.00

 
127.99

 
163.76

 
177.32

 
212.26

 
218.32

SNL REIT Retail Shopping Ctr
 
100.00

 
98.72

 
128.15

 
124.48

 
157.17

 
167.92

Issuer Purchases Of Equity Securities
Period
 
(a)
Total Number
of Shares of
Common
Stock
Purchased
 
(b)
Average
Price
Paid per
Share of Common Stock
 
(c)
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
 
(d)
Maximum Number (or
Approximate Dollar Value) of Shares that
May Yet be Purchased
Under the Plan or Program
October 1, 2013 - October 31, 2013
 
766

(1) 
$
23.03

 
N/A
 
N/A
November 1, 2013 - November 30, 2013
 
345

(1) 
$
24.23

 
N/A
 
N/A
December 1, 2013 - December 31, 2013
 
197

(1) 
$
22.38

 
N/A
 
N/A
 
 
1,308

 
$
23.25

 
N/A
 
N/A
____________________________________ 
(1) Represents shares of common stock surrendered by employees to us to satisfy such employees’ tax withholding obligations in connection with the vesting of restricted common stock.

28


Equity Compensation Plan Information
Information regarding equity compensation plans is presented in Item 12 of this annual report and incorporated herein by reference.

29


ITEM 6.
SELECTED FINANCIAL DATA
The following table includes selected consolidated financial data set forth as of and for each of the five years in the period ended December 31, 2013. The balance sheet data at December 31, 2013 and 2012, and the statement of operations data for the years ended December 31, 2013, 2012 and 2011, have been derived from the consolidated financial statements included in this Form 10-K. This selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the related notes included in Items 7 and 8, respectively, of this Form 10-K. 
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
2010
 
2009
 
 
(in thousands other than per share, percentage and ratio data)
Statement of Operations Data: (1)
 
 
 
 
 
 
 
 
 
 
Total revenue
 
$
332,511

 
$
301,033

 
$
256,243

 
$
197,036

 
$
178,843

Property operating expenses
 
89,647

 
79,971

 
71,199

 
54,610

 
52,604

Rental property depreciation and amortization (2)
 
87,266

 
79,415

 
75,029

 
43,838

 
36,989

General and administrative expenses (2)
 
39,514

 
42,473

 
50,910

 
41,360

 
37,633

Total operating expenses
 
216,427

 
201,859

 
197,138

 
139,808

 
127,226

Interest expense
 
(68,145
)
 
(70,665
)
 
(66,560
)
 
(60,786
)
 
(52,054
)
Amortization of deferred financing fees
 
(2,421
)
 
(2,474
)
 
(2,195
)
 
(1,879
)
 
(1,430
)
Gain on bargain purchase
 
—

 
—

 
30,561

 
—

 
—

Gain on acquisition of controlling interest in subsidiary
 
—

 
—

 
—

 
—

 
27,501

Other income, net
 
8,495

 
7,828

 
9,476

 
1,406

 
11,563

Gain on sale of real estate
 
—

 
—

 
5,542

 
254

 
—

Gain (loss) on extinguishment of debt
 
107

 
(29,146
)
 
(1,514
)
 
33

 
12,345

Impairment loss
 
(5,641
)
 
(8,909
)
 
(16,984
)
 
(184
)
 
(391
)
Benefit for income taxes
 
484

 
2,980

 
5,087

 
1,852

 
3,335

Income (loss) from continuing operations
 
$
48,963

 
$
(1,212
)
 
$
22,518

 
$
(2,076
)
 
$
52,486

Net income (loss) attributable to Equity One, Inc.
 
$
77,954

 
$
(3,477
)
 
$
33,621

 
$
25,112

 
$
83,817

Basic (loss) earnings per share:
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
0.32

 
$
(0.11
)
 
$
0.11

 
$
(0.02
)
 
$
0.64

Net income (loss)
 
$
0.66

 
$
(0.04
)
 
$
0.29

 
$
0.27

 
$
1.00

Diluted earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
0.32

 
$
(0.11
)
 
$
0.11

 
$
(0.02
)
 
$
0.63

Net income (loss)
 
$
0.65

 
$
(0.04
)
 
$
0.29

 
$
0.27

 
$
0.99

Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
Income producing properties, net of accumulated depreciation (1)
 
$
2,798,965

 
$
2,639,909

 
$
2,365,859

 
$
1,582,997

 
$
1,429,768

Total assets (1)
 
$
3,354,659

 
$
3,502,668

 
$
3,222,571

 
$
2,680,562

 
$
2,450,940

Notes payable (1)
 
$
1,502,291

 
$
1,578,891

 
$
1,263,488

 
$
996,697

 
$
990,163

Total liabilities (1)
 
$
1,750,744

 
$
1,875,638

 
$
1,574,565

 
$
1,386,857

 
$
1,362,240

Redeemable noncontrolling interest 
 
$
989

 
$
22,551

 
$
22,804

 
$
3,864

 
$
989

Stockholders’ equity
 
$
1,395,183

 
$
1,396,726

 
$
1,417,316

 
$
1,285,907

 
$
1,064,535

Other Data:
 
 
 
 
 
 
 
 
 
 
Funds from operations (3)
 
$
150,991

 
$
97,660

 
$
146,768

 
$
92,025

 
$
142,983

Cash flows from:
 
 
 
 
 
 
 
 
 
 
Operating activities 
 
$
132,742

 
$
153,219

 
$
102,626

 
$
71,562

 
$
96,294

Investing activities
 
$
123,047

 
$
(332,263
)
 
$
(44,615
)
 
$
(189,243
)
 
$
(8,287
)
Financing activities 
 
$
(257,622
)
 
$
195,497

 
$
(108,793
)
 
$
108,044

 
$
(47,249
)
GLA (square feet) at end of period
 
14,895

 
16,941

 
17,178

 
19,925

 
19,456

Consolidated shopping center occupancy at end of period
 
92.4
%
 
92.1
%
 
90.7
%
 
90.3
%
 
90.3
%
Dividends declared per share
 
$
0.88

 
$
0.88

 
$
0.88

 
$
0.88

 
$
1.12



30


(1) Reclassified to reflect the reporting of discontinued operations.
(2) Amounts have been reclassified to conform to the 2013 presentation.
(3) We believe Funds from Operations ("FFO") (when combined with the primary GAAP presentations) is a useful supplemental measure of our operating performance that is a recognized metric used extensively by the real estate industry and, in particular, REITs. The National Association of Real Estate Investment Trusts ("NAREIT") stated in its April 2002 White Paper on Funds from Operations, "Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminish predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves."
FFO, as defined by NAREIT, is "net income (computed in accordance with GAAP), excluding gains (or losses) from sales of, or impairment charges related to, depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures." NAREIT states further that "adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis." We believe that financial analysts, investors and stockholders are better served by the presentation of comparable period operating results generated from our FFO measure. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. In October 2011, NAREIT clarified that FFO should exclude the impact of impairment losses on depreciable operating properties, either wholly-owned or in joint ventures. We calculated FFO for all periods presented in accordance with this clarification.
FFO is presented to assist investors in analyzing our operating performance. FFO (i) does not represent cash flow from operations as defined by GAAP, (ii) is not indicative of cash available to fund all cash flow needs, including the ability to make distributions, (iii) is not an alternative to cash flow as a measure of liquidity, and (iv) should not be considered as an alternative to net income (which is determined in accordance with GAAP) for purposes of evaluating our operating performance.
The following table illustrates the calculation of FFO for each of the five years in the period ended December 31, 2013:
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
2010
 
2009
 
 
(In thousands)
Net income (loss) attributable to Equity One, Inc.
 
$
77,954

 
$
(3,477
)
 
$
33,621

 
$
25,112

 
$
83,817

Adjustments:
 
 
 
 
 
 
 
 
 
 
Rental property depreciation and amortization, net of
   noncontrolling interest (1)
 
90,097

 
87,456

 
95,254

 
65,735

 
56,057

Earnings allocated to noncontrolling interest (2)
 
9,996

 
—

 
9,520

 
—

 
—

Pro rata share of real estate depreciation from
   unconsolidated joint ventures
 
4,283

 
3,932

 
3,095

 
1,178

 
1,436

Impairments of depreciable real estate, net of tax (1)
 
6,538

 
25,156

 
9,360

 
—

 
—

(Gain) loss on disposal of depreciable assets, net of tax (1) (3)
 
(37,877
)
 
(15,407
)
 
(4,082
)
 
—

 
1,673

Funds from operations
 
$
150,991

 
$
97,660

 
$
146,768

 
$
92,025

 
$
142,983

 __________________________________________ 
(1) Includes amounts classified as discontinued operations.
(2) Represents earnings allocated to unissued shares held by LIH, which have been excluded for purposes of calculating earnings (loss) per diluted share. These amounts have been excluded from the computation of FFO for the year ended December 31, 2012 since their inclusion, and the corresponding inclusion of the unissued shares in the diluted shares, would be anti-dilutive. The computation of FFO for the years ended December 31, 2013 and 2011 includes earnings allocated to LIH and the respective weighted average share totals include the LIH shares outstanding as their inclusion is dilutive.
(3) Includes pro-rata share of unconsolidated joint ventures.





31



The following table reflects the reconciliation of FFO per diluted share to earnings (loss) per diluted share attributable to Equity One, Inc., the most directly comparable GAAP measure, for the periods presented:
 
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
2010
 
2009
 
 
(In thousands, except per share data)
Earnings (loss) per diluted share attributable to Equity One, Inc.
 
$
0.65

 
$
(0.04
)
 
$
0.29

 
$
0.27

 
$
0.98

Adjustments:
 
 
 
 
 
 
 
 
 
 
Rental property depreciation and amortization, net of
   noncontrolling interest
 
0.70

 
0.76

 
0.78

 
0.72

 
0.67

Earnings allocated to noncontrolling interest (1)
 
0.08

 
—

 
0.08

 
—

 
—

Net adjustment for rounding and earnings attributable to unvested shares (2)
 
(0.05
)
 
0.01

 
(0.02
)
 
—

 
0.02

Pro rata share of real estate depreciation from
   unconsolidated joint ventures
 
0.03

 
0.03

 
0.03

 
0.01

 
0.02

Impairments of depreciable real estate, net of tax
 
0.05

 
0.22

 
0.08

 
—

 
—

(Gain) loss on disposal of depreciable assets, net of tax
 
(0.29
)
 
(0.13
)
 
(0.03
)
 
—

 
0.02

Funds from operations per diluted share
 
$
1.17

 
$
0.85

 
$
1.21

 
$
1.00

 
$
1.71

Weighted average diluted shares (3)
 
129,122

 
125,907

 
121,474

 
91,710

 
83,857

__________________________________________ 
(1) Represents earnings allocated to unissued shares held by LIH, which have been excluded for purposes of calculating earnings (loss) per diluted share. These amounts have been excluded from the computation of FFO for the year ended December 31, 2012 since their inclusion, and the corresponding inclusion of the unissued shares in the diluted shares, would be anti-dilutive. The computation of FFO for the years ended December 31, 2013 and 2011 includes earnings allocated to LIH and the respective weighted average share totals include the LIH shares outstanding as their inclusion is dilutive.
(2) Represents an adjustment to compensate for the rounding of the individual calculations and to compensate for earnings allocated to unvested shares and shares issuable to LIH.
(3) Weighted average diluted shares used to calculate FFO per share for the years ended December 31, 2013 and 2011 are higher than the GAAP diluted weighted average shares as a result of the dilutive impact of the 11.4 million joint venture units held by LIH which are convertible into our common stock, and also as a result of employee stock options. These convertible units are not included in the diluted weighted average share count for GAAP purposes because their inclusion is anti-dilutive.

32


ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and 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 owns, manages, acquires, develops and redevelops shopping centers and retail properties located primarily in supply constrained suburban and urban communities. Our principal business objective is to maximize long-term stockholder value by generating sustainable cash flow growth and increasing the long-term value of our real estate assets. To achieve our objective, we lease and manage our shopping centers primarily with experienced, in-house personnel. We acquire shopping centers that either have leading anchor tenants or contain a mix of tenants that reflect the shopping needs of the communities they serve. We also develop and redevelop shopping centers, leveraging existing tenant relationships and geographic and demographic knowledge while seeking to minimize risks associated with land development.
As of December 31, 2013, our consolidated shopping center portfolio comprised 140 properties, including 118 retail properties and six non-retail properties totaling approximately 14.9 million square feet of GLA, 10 development or redevelopment properties with approximately 1.8 million square feet of GLA upon completion, and six land parcels. As of December 31, 2013, our consolidated shopping center occupancy was 92.4% and included national, regional and local tenants. Additionally, we had joint venture interests in 20 retail properties and two office buildings totaling approximately 3.7 million square feet of GLA. For additional information regarding the properties in our consolidated shopping center portfolio, refer to Item 2 - Properties.
Although the economic challenges of the past several years have affected our business, especially in leasing space to smaller shop tenants located in less densely populated areas, we have seen increasing interest from prospective small shop tenants during 2013 and are cautiously optimistic that this trend will continue in line with general economic conditions. The majority of our shopping centers are anchored by supermarkets, drug stores or other necessity-oriented retailers, which are less susceptible to economic cycles. As of December 31, 2013, approximately 60% of our shopping centers were supermarket-anchored, which we believe is a competitive advantage because supermarkets draw traffic to shopping centers even during challenging economic conditions. We also believe the continued diversification of our portfolio, including the reinvestment of proceeds from dispositions into higher quality assets in urban markets, has made us less susceptible to economic downturns and positions us to enjoy the benefits of an improving economy.
We intend to seek opportunities to invest in our primary target markets of California, the northeastern United States, the Washington, D.C. metropolitan area, South Florida and Atlanta, Georgia and to continue to dispose of non-strategic assets located primarily in the southeastern United States and north and central Florida. We also actively seek opportunities to develop or redevelop centers in urban markets with strong demographic characteristics and high barriers to entry. We expect to acquire additional assets in our target markets through the use of both joint venture arrangements and our own capital resources, and we expect to finance development and redevelopment activity primarily with our own capital resources or by issuing debt or equity.
Operating Strategies. Our core operating strategy is to maximize rents and maintain high occupancy levels by attracting and retaining a strong and diverse base of tenants, as well as containing costs through effective property management. In 2013, gradually improving economic conditions and our diversification into higher quality assets helped us to achieve the following leasing results:
•
the signing of 158 new leases totaling 734,641 square feet, including 96 new leases totaling 386,069 square feet at an average rental rate of $26.55 per square foot in 2013 (excluding $24.51 per square foot of tenant improvements and concessions) as compared to the prior in-place average rent of $16.84 per square foot, on a same space(1) basis, a 57.6% average rent spread. Excluding the new lease with Barneys New York at 101 7th Avenue, the overall cash rent spread was 12.7%;
•
the renewal and extension of 256 leases totaling 1.3 million square feet, including 242 leases totaling 1.2 million square feet at an average rental rate of $16.33 per square foot in 2013 (excluding $0.36 per square foot of tenant improvements and concessions) as compared to the prior in-place average rent of $14.76 per square foot, on a same space(1) basis, a 10.7% average rent spread;
•
an increase in consolidated shopping center occupancy(2) to 92.4% at December 31, 2013 from 92.1% at December 31, 2012; and
•
a decrease in occupancy on a same property basis(3) to 92.3% at December 31, 2013 from 93.6% at December 31, 2012 primarily as a result of the departure of three anchor tenants occupying 143,000 square feet which vacated during the fourth quarter of 2013.

33


____________________________________ 
(1) The "same space" designation is used to compare leasing terms (principally cash leasing spreads) from the prior tenant to the new/current tenant. In some cases, leases and/or premises are excluded from "same space" because the gross leasable area of the prior premises is combined or divided to form a larger or smaller, non-comparable space. Also excluded from the "same space" designation are those leases for which a comparable prior rent is not available due to the acquisition or development of a new center.
(2) Our consolidated shopping center occupancy excludes non-retail properties, properties held in unconsolidated joint ventures, development and redevelopment properties and a property that was encumbered by a defaulted mortgage loan. In February 2014, we sold our interest in this property.
(3) Information provided on a same-property basis includes the results of properties that we consolidated, owned and operated for the entirety of both periods being compared except for properties for which significant redevelopment or expansion occurred during either of the periods being compared and a property that was encumbered by a defaulted mortgage loan. In February 2014, we sold our interest in this property.
In the long-term, our operating revenue is dependent on the continued occupancy of our properties, the rents that we are able to charge to our tenants and the ability of our 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 our portfolio in high-density urban and suburban communities in major metropolitan areas, leasing to strong tenants in our markets and maintaining a diverse tenant mix.
Investment Strategies. Our investment strategy is to deploy capital in high quality investments and projects in our target markets that are expected to generate attractive, risk-adjusted returns and, at the same time, to sell assets that no longer meet our investment criteria. In 2013, this strategy resulted in:
•
the acquisition of five of the seven properties which comprise the Westwood Complex located in Bethesda, Maryland, for an aggregate purchase price of $60.0 million. In conjunction with the closing of these acquisitions, a portion of the outstanding balances related to the $95.0 million mortgage loan receivable and $12.0 million mezzanine loan receivable totaling $46.5 million was repaid by the borrower, reducing our total outstanding financing on the complex to $60.5 million as of December 31, 2013. Both the mortgage loan receivable and mezzanine loan receivable bore interest at 5.00% per annum. In January 2014, we acquired the two remaining parcels within the Westwood Complex for an aggregate gross purchase price of $80.0 million. Concurrent with the acquisitions, the outstanding principal balances of the mortgage loan and the mezzanine loan were fully repaid;
•
the acquisition of shopping centers located in Pleasanton, California and Westport, Connecticut, representing an aggregate of 252,510 square feet of GLA, for an aggregate purchase price of $85.2 million, which included the assumption of approximately $35.7 million of indebtedness;
•
the acquisition of an outparcel adjacent to Kirkman Shoppes in Orlando, Florida for $3.0 million;
•
the acquisition of the remaining 40% interest in Southbury Green and Danbury Green Shopping Centers for $18.9 million;
•
the sale of thirty-two non-core assets and four outparcels for aggregate gross proceeds of $295.2 million, resulting in a total net gain of $39.6 million;
•
the financing of two dispositions through loans receivable totaling $12.8 million that were secured by mortgage interests in the properties and full recourse guarantees from the principals of the buyers, bore interest at a weighted average interest rate of 7.7% per annum, and were repaid in December 2013;
•
the receipt of $45.0 million in connection with the prepayment of a junior mezzanine loan receivable;
•
the payment of $25.0 million to the retail tenant located at 1175 Third Avenue in New York City, New York in exchange for increased rents during a new ten-year base term and a reset of the rent payable during the option periods subsequent to the initial ten-year base term to the market rental rates prevailing at such times;
•
the investment of $4.1 million in one of our unconsolidated joint ventures in connection with the repayment of indebtedness by the joint venture; and
•
the investment of $17.2 million in one of our unconsolidated joint ventures in connection with shopping center acquisitions by the joint venture.
Capital Strategies. We intend to grow and expand our business by using cash flow from operations, borrowing under our existing credit facilities, reinvesting proceeds from selling properties that no longer meet our investment criteria, accessing the capital markets to issue equity and debt or using joint venture arrangements. During 2013, we financed our business using our revolving lines of credit, proceeds from the sale of properties mentioned above, the assumption of mortgage debt in place on acquired

34


properties and proceeds from the sale of shares of our common stock in connection with the exercise of outstanding stock options. We also prepaid $24.0 million in mortgage debt.
At December 31, 2013, the aggregate outstanding balance on our revolving credit facilities was $91.0 million as compared to $172.0 million at December 31, 2012. As of December 31, 2013, the maximum availability under these credit facilities was approximately $413.0 million, net of outstanding letters of credit and subject to the covenants in the loan agreements.
2014 Outlook. While we have experienced and expect to see continued gradual improvement in general economic conditions during 2014, the rate of economic recovery has varied across the regions in which we operate. Volatile consumer confidence, increasing competition from larger retailers, internet sales and limited access to capital have continued to pose challenges for small shop tenants, particularly in the Southeast and North and Central Florida markets. In addition, certain retail categories such as electronic goods, office supply stores and book stores continue to face increased threats from internet retailers. We believe the continued growth and diversification of our portfolio into top urban markets combined with the lack of new supply which limits competition, should continue to help to mitigate the impact of these challenges on our business, and we anticipate that our same-property portfolio occupancy in 2014 will increase approximately 1.0% over 2013 and our same-property net operating income (as defined in results of operations below) for 2014 will reflect an increase over 2013 of 2.5% to 3.5%.
We have 2.2 million square feet of GLA in our consolidated shopping center portfolio with leases expiring in 2014 and another approximately 235,000 square feet of GLA under month-to-month leases. We expect to achieve moderate increases in average rent spreads as we renew or re-lease these spaces.
Our financing activities during 2014 could include additional borrowings on our lines of credit, debt and/or equity offerings, creation of joint ventures with institutional partners, and the early repayment of mortgages. We believe we ended 2013 with sufficient cash and availability under our existing unsecured revolving lines of credit to address our near term debt maturities. However, our ability to raise new capital at attractive prices through the issuance of debt and equity securities, the placement of mortgage financings, or the sale of assets will determine our capacity to invest in a manner that provides growing returns for our stockholders. We also intend to continue our capital recycling program in 2014, including the disposition of properties in our secondary markets that no longer fit our investment strategy.
In 2014, we will continue to seek opportunities to invest in our primary target markets of California, the northeastern United States, the Washington, D.C. metropolitan area, South Florida and Atlanta, Georgia. We will also look for opportunities to develop or redevelop centers in urban markets with strong demographic characteristics and with high barriers to entry. We expect to acquire additional assets in our target markets through the use of both joint venture arrangements and our own capital resources, including proceeds from the sale of non-core assets, and we expect to finance development and redevelopment activity primarily with our own capital resources or by issuing debt or equity.
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 revenue and expenses. These estimates are prepared using our best judgment, after considering past and current events and economic conditions. In addition, certain information relied upon by us 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” in this annual report. We consider an accounting estimate to be critical if changes in the estimate or actual results could have a material impact on our consolidated results of operations or financial condition.

Our significant accounting policies are more fully described in Note 2 to the consolidated financial statements; however, 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. Revenue includes minimum rents, expense recoveries, percentage rental payments and management and leasing services. Generally, our leases contain fixed escalations which occur at specified times during the term of the lease. Lease revenue recognition commences when the lessee is given possession of the leased space, when the asset is substantially complete in the case of leasehold improvements, and there are no contingencies offsetting the lessee’s obligation to pay rent. Minimum rents are recognized on an accrual basis over the terms of the related leases on a straight-line basis. As part of the leasing process, we 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

35


purpose other than funding leasehold improvements, or in the event we are not considered the owner of the improvements, the allowance is considered a lease incentive and is recognized over the lease term as a reduction to revenue.
Many of our lease agreements contain provisions that require the payment of additional rents based on the respective tenants’ sales volumes (contingent or percentage rent) and substantially all contain provisions that require reimbursement of the tenants’ allocable real estate taxes, insurance and common area maintenance costs (“CAM”). Revenue based on a percentage of a tenant’s sales is recognized only after the tenant exceeds its sales breakpoint. Revenue from tenant reimbursements of taxes, CAM and insurance is recognized in the period that the applicable costs are incurred in accordance with the lease agreements.
We make estimates of the collectability of our accounts receivable using the specific identification method 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 deferral 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.
Recognition of Gains from the Sales of Real Estate. We account for profit recognition on sales of real estate in accordance with the Property, Plant and Equipment Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Profits are not recognized until (a) a sale has been consummated; (b) the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property; (c) our receivable, if any, is not subject to future subordination; (d) we have transferred to the buyer the usual risks and rewards of ownership; and (e) we do not have significant continuing involvement with the property. Recognition of gains from sales to co-investment partnerships is recorded on only that portion of the sales not attributable to our ownership interest.
Real Estate Acquisitions. We allocate the purchase price of acquired properties to land, building, improvements and intangible assets and liabilities in accordance with the Business Combinations Topic of the FASB ASC. We allocate the initial purchase price of assets acquired (net tangible and identifiable intangible assets) and liabilities assumed based on their relative fair values at the date of acquisition. Upon acquisition of real estate operating properties, we estimate the fair value of acquired tangible assets (consisting of land, building, building improvements and tenant improvements) and identified intangible assets and liabilities (consisting of above and below-market leases, in-place leases and tenant relationships), assumed debt and redeemable units issued at the date of acquisition, based on the evaluation of information and estimates available at that date. Based on these estimates, we allocate the estimated fair value to the applicable assets and liabilities. Fair value is determined based on an exit price approach, which contemplates the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. If, up to one year from the acquisition date, information regarding fair value of the assets acquired and liabilities assumed is received and estimates are refined, appropriate adjustments are made to the purchase price allocation on a retrospective basis. There are four categories of intangible assets and liabilities to be considered: (1) in-place leases; (2) above and below-market value of in-place leases; (3) lease origination costs and (4) tenant relationships. The aggregate value of other acquired intangible assets, consisting of in-place leases, is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases, including fixed rate renewal options, to market rental rates over (ii) the estimated fair value of the property as-if-vacant, determined as set forth above. The value of in-place leases exclusive of the value of above-market and below-market in-place leases is amortized to depreciation expense over the estimated remaining term of the respective leases. The value of above-market and below-market in-place leases is amortized to rental revenue over the estimated remaining term of the leases. If a lease terminates prior to its stated expiration, all unamortized amounts relating to that lease are written off.
In allocating the purchase price to identified intangible assets and liabilities of an acquired property, the value of above-market and below-market leases is estimated based on the present value of the difference between the contractual amounts, including fixed rate renewal options, to be paid pursuant to the leases and management’s estimate of the market lease rates and other lease provisions (i.e., expense recapture, base rental changes, etc.) measured over a period equal to the estimated remaining term of the lease. The capitalized above-market or below-market intangible is amortized to rental income over the estimated remaining term of the respective lease, which includes the expected renewal option period, if applicable.
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 the straight-line method for financial statement purposes. We periodically review the estimated lives of our assets and implement changes, as necessary, to these estimates.
Properties and real estate under development are recorded at cost. We compute depreciation using the straight-line method over the estimated useful lives of up to 55 years for buildings and improvements, the minimum lease term or economic useful life for

36


tenant improvements, and three to ten years for furniture and equipment. 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 useful lives of amortizable intangible assets are evaluated each reporting period with any changes in estimated useful lives being accounted for over the revised remaining useful life.
Properties also include construction in progress and land held for development. These properties are carried at cost and no depreciation is recorded. Properties undergoing significant renovations and improvements are considered under development. All direct and indirect costs related to development activities, except certain demolition costs which are expensed as incurred, are capitalized into properties in construction in progress and land held for development on our consolidated balance sheet. Costs incurred include predevelopment expenditures directly related to a specific project including development and construction costs, interest, insurance and real estate taxes. Indirect development costs include employee salaries and benefits and other related costs that are directly associated with the development of the property. Our method of calculating capitalized interest is based upon applying our weighted average borrowing rate to that portion of actual costs incurred. The capitalization of such expenses ceases when the property is ready for its intended use, but no later than one year from substantial completion of major construction activity. If we determine that a project is no longer probable, all predevelopment project costs are immediately expensed. Similar costs related to properties not under development are expensed as incurred.
Long-Lived Assets. We evaluate the carrying value of long-lived assets, including definite-lived intangible assets, when events or changes in circumstances indicate that the carrying value may not be recoverable in accordance with the Property, Plant and Equipment Topic of the FASB ASC. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. For long-lived assets to be held and used, the fair value of fixed (tangible) assets and definite-lived intangible assets is determined primarily using either internal projected cash flows discounted at a rate commensurate with the risk involved or an external appraisal. For long-lived assets to be disposed of by sale or other than by sale, fair value is determined in a similar manner or based on actual sales prices as determined by executed sales contracts, except that fair values are reduced for disposal costs.
At December 31, 2013, we reviewed the operating properties and construction in progress for impairment on a property-by-property and project-by-project basis in accordance with the Property, Plant and Equipment Topic of the FASB ASC, as we determined management's capital recycling initiatives and the fair values obtained from recent appraisals to be general indicators of impairment. Each property was assessed individually and as a result, the assumptions used to derive future cash flows varied by property or project. These key assumptions are dependent on property-specific conditions, are inherently uncertain and consider the perspective of a third-party marketplace participant. The factors that may influence the assumptions include:
•
historical project performance, including current occupancy, projected capitalization rates and net operating income;
•
competitors’ presence and their actions;
•
property specific attributes such as location desirability, anchor tenants and demographics;
•
current local market economic and demographic conditions; and
•
future expected capital expenditures and the period of time before net operating income is stabilized.
After considering these factors, we project future cash flows for each property based on management’s intention for that property (holding period) and, if appropriate, an assumed sale at the final year of the holding period (reversion value) using a projected capitalization rate. If the resulting carrying amount of the property exceeds the estimated undiscounted cash flows (including the projected reversion value) from the property, an impairment charge would be recognized to reduce the carrying value of the property to its fair value.
Investments in Joint Ventures. We strategically invest in entities that own, manage, acquire, develop and redevelop operating properties. Our partners generally are financial or other strategic institutions. We analyze our joint ventures under the FASB ASC Topics of Consolidation and Real Estate-General in order to determine whether the entity should be consolidated. If it is determined that these investments do not require consolidation because the entities are not variable interest entities ("VIEs") in accordance with the Consolidation Topic of the FASB ASC, we are not considered the primary beneficiary of the entities determined to be VIEs, we do not have voting control, and/or the limited partners (or non-managing members) have substantive participatory rights, then the selection of the accounting method used to account for our investments in unconsolidated joint ventures is generally determined by our voting interests and the degree of influence we have over the entity. Management uses its judgment when determining if we are the primary beneficiary of, or have a controlling interest in, an entity in which we have a variable interest. Factors considered in determining whether we have the power to direct the activities that most significantly impact the entity’s economic performance include risk and reward sharing, experience and financial condition of the other partners, voting rights, involvement in day-to-day capital and operating decisions and the extent of our involvement in the entity.

37


We use the equity method of accounting for investments in unconsolidated joint ventures when we own 20% or more of the voting interests and have significant influence but do not have a controlling financial interest, or if we own less than 20% of the voting interests but have determined that we have significant influence. Under the equity method, we record our investments in and advances to these entities in our consolidated balance sheets and our proportionate share of earnings or losses earned by the joint venture is recognized in equity in income (loss) of unconsolidated joint ventures in our consolidated statements of operations. We derive revenue through our involvement with unconsolidated joint ventures in the form of management and leasing services and interest earned on loans and advances. We account for this revenue gross of our ownership interest in each respective joint venture and record our proportionate share of related expenses in equity in income (loss) of unconsolidated joint ventures.
The cost method of accounting is used for unconsolidated entities in which we do not have the ability to exercise significant influence and we have virtually no influence over partnership operating and financial policies. Under the cost method, income distributions from the partnership are recognized in investment income. Distributions that exceed our share of earnings are applied to reduce the carrying value of our investment and any capital contributions will increase the carrying value of our investment. The fair value of a cost method investment is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment.
These joint ventures typically obtain non-recourse third-party financing on their property investments, thus contractually limiting our exposure to losses to the amount of our equity investment, and, due to the lender’s exposure to losses, a lender typically will require a minimum level of equity in order to mitigate its risk. Our exposure to losses associated with unconsolidated joint ventures is primarily limited to the carrying value of these investments.
On a periodic basis, we evaluate our investments in unconsolidated entities for impairment in accordance with the Investments-Equity Method and Joint Ventures Topic of the FASB ASC. We assess whether there are any indicators, including underlying property operating performance and general market conditions, that the value of our investments in unconsolidated joint ventures may be impaired. An investment in a joint venture is considered impaired only if we determine that its fair value is less than the net carrying value of the investment in that joint venture on an other-than-temporary basis. Cash flow projections for the investments consider property level factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. We consider various qualitative factors to determine if a decrease in the value of our investment is other-than-temporary. These factors include the age of the venture, our intent and ability to retain our investment in the entity, financial condition and long-term prospects of the entity and relationships with our partners and banks. If we believe that the decline in the fair value of the investment is temporary, no impairment charge is recorded. If our analysis indicates that there is an other-than-temporary impairment related to the investment in a particular joint venture, the carrying value of the venture will be adjusted to an amount that reflects the estimated fair value of the investment.
Loans Receivable. Loans receivable include both mortgage loans and mezzanine loans and are classified as held to maturity and recorded at the stated principal amount plus allowable deferred loan costs or fees, which are amortized as an adjustment of the loan’s yield over the term of the related loan. We evaluate the collectability of both interest and principal on the loan periodically to determine whether it is impaired. A loan is considered to be impaired when, based upon current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan’s effective interest rate or to the proportionate value of the underlying collateral asset if applicable. Interest income on performing loans is accrued as earned.
Goodwill. Goodwill reflects the excess of the fair value of the acquired business over the fair value of net identifiable assets acquired in various business acquisitions. We account for goodwill in accordance with the Intangibles-Goodwill and Other Topic of the FASB ASC. We perform annual, or more frequently in certain circumstances, impairment tests of our goodwill. We have elected to test for goodwill impairment in November of each year. The goodwill impairment test is a two-step process that requires us to make decisions in determining appropriate assumptions to use in the calculation. The first step 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, if any, by determining an “implied fair value” of goodwill. The determination of each reporting unit’s (each property is considered a reporting unit) implied fair value of goodwill requires us to allocate the estimated fair value of the reporting unit to its assets and liabilities. Any unallocated fair value represents the implied fair value of goodwill which is compared to its corresponding carrying amount.
Share Based Compensation and Incentive Awards. We recognize all share-based awards to employees, including grants of stock options, in our financial statements based on 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 determining the fair value of options at the grant date include: expected volatility, expected

38


dividend yield, risk-free interest rate, involuntary conversion due to change in control and expected exercise history of similar grants.
Income Tax. Although we may qualify for REIT status for federal income tax purposes, we may be subject to state income or franchise taxes in certain states in which some of our properties are located. In addition, taxable income from non-REIT activities managed through our taxable REIT subsidiaries, or TRSs, are subject to federal, state and local income taxes. Income taxes attributable to our TRSs are accounted for under the asset and liability method as required under the Income Taxes Topic of the FASB ASC. Under the asset and liability method, deferred income taxes are recognized for the temporary differences between the financial reporting basis and the tax basis of the taxable entities’ assets and liabilities and for operating loss and tax credit carry-forwards. The taxable entities estimate income taxes in each of the jurisdictions in which they operate. This process involves estimating our tax exposure together with assessing temporary differences resulting from differing treatment of items, such as depreciation, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. The recording of a net deferred tax asset assumes the realization of such asset in the future. Otherwise a valuation allowance must be recorded to reduce this asset to its net realizable value. We consider future pretax income and ongoing prudent and feasible tax planning strategies in assessing the need for such a valuation allowance. In the event that we determine that we may not be able to realize all or part of the net deferred tax asset in the future, a valuation allowance for the deferred tax asset is charged against income in the period such determination is made. In the case where we determine that the full amount of a tax asset will be realized, a reversal of a valuation is appropriate.
Discontinued Operations. The application of current accounting principles that govern the classification of any of our properties as held-for-sale on our consolidated balance sheets, or the presentation of results of operations and gains on the sale of these properties as discontinued, requires management to make certain significant judgments. In evaluating whether a property meets the criteria set forth by the Property, Plant and Equipment Topic of the FASB ASC, we make a determination as to the point in time that it is probable that a sale will be consummated. It is not unusual for real estate sales 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. Therefore, any properties categorized as held-for-sale represent only those properties that management has determined are probable to close within the requirements set forth in the Property, Plant and Equipment Topic of the FASB ASC. Prior to sale, we evaluate the extent of involvement with, and the significance to us of cash flows from a property subsequent to its sale, in order to determine if the results of operations and gain on sale should be reflected as discontinued. Consistent with the Property, Plant and Equipment Topic of the FASB ASC, any property sold in which we have continuing involvement or cash flows (most often sales to co-investment partnerships) is not considered to be discontinued. In addition, any property which we sell to an unrelated third party, but in which we retain a property or asset management function, is not considered discontinued. Therefore, based on our evaluation of the Property, Plant and Equipment Topic of the FASB ASC only properties sold, or to be sold, to unrelated third parties where we will have no continuing involvement or cash flows are classified as discontinued operations. Certain prior year amounts in our consolidated financial statements have been reclassified to conform to the current year presentation.
Segment Information. We review operating and financial data for each property on an individual basis; therefore each of our individual properties is a separate operating segment. We have aggregated our operating segments in six reportable segments based primarily upon our method of internal reporting which classifies our operations by geographical area. Our reportable segments by geographical area are as follows: (1) South Florida – including Miami-Dade, Broward and Palm Beach Counties; (2) North Florida – including all of Florida north of Palm Beach County; (3) Southeast - including Georgia, Louisiana, North Carolina and Virginia; (4) Northeast – including Connecticut, Maryland, Massachusetts and New York; (5) West Coast – California; and (6) Non-retail – which is comprised of our non-retail assets.
Recent Accounting Pronouncements
See Note 2 to the consolidated financial statements included in this annual report, which is incorporated by reference herein, for recent accounting pronouncements.
Results of Operations
We derive substantially all of our revenue from rents received from tenants under existing leases on each of our properties. This revenue includes fixed base rents, recoveries of expenses that we have incurred and that we pass through to the individual tenants and percentage rents that are based on specified percentages of tenants’ revenue, in each case as provided in the particular leases.
Our primary cash expenses consist of our property operating expenses, which include: real estate taxes; repairs and maintenance; management expenses; insurance; utilities; general and administrative expenses, which include payroll, office expenses, professional fees, acquisition costs and other administrative expenses; and interest expense, primarily on mortgage debt, unsecured

39


senior debt, term loans and revolving credit facilities. In addition, we incur substantial non-cash charges for depreciation and amortization on our properties. We also capitalize certain expenses, such as taxes, interest and salaries related to properties under development or redevelopment until the property is ready for its intended use.
Our consolidated results of operations often are not comparable from period to period due to the impact of property acquisitions, dispositions, developments and redevelopments. The results of operations of any acquired property are included in our financial statements as of the date of its acquisition. A large portion of the changes in our statement of operations line items is related to these changes in our shopping center portfolio. In addition, non-cash impairment charges may also affect comparability.
Throughout this section, we have provided certain information on a “same-property” basis. Information provided on a same-property basis includes the results of properties that we consolidated, owned and operated for the entirety of both periods being compared except for properties for which significant development, redevelopment or expansion occurred during either of the periods being compared and a property that was encumbered by a defaulted mortgage loan as of December 31, 2013. While there is judgment surrounding changes in designations, a property is removed from the same-property pool when a property is considered to be a redevelopment property because it is undergoing significant renovation pursuant to a formal plan or is being repositioned in the market and such renovation or repositioning is expected to have a significant impact on property operating income, or when a property is encumbered by a defaulted mortgage loan for which all property related income is being paid to the lender and discussions relating to the sale or surrender of our interest in the property have commenced. A development or redevelopment property is moved to the same-property pool once a substantial portion of the growth expected from the redevelopment is reflected in both the current and comparable prior year period. Acquisitions are moved into the same-property pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development, redevelopment or expansion. For the year ended December 31, 2013, we moved two properties (Willows Shopping Center and Kirkman Shoppes) totaling approximately 351,100 square feet out of the same-property pool as they are undergoing redevelopment and one property (Brawley Commons) totaling approximately 119,200 square feet out of the same-property pool as the property was subject to a defaulted mortgage loan as of December 31, 2013. Additionally, we moved two properties that had been under redevelopment (Westbury Plaza and Pavilion) totaling approximately 562,200 square feet into the same-property pool.
In this section, we present net operating income ("NOI"), which is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income from continuing operations before tax and discontinued operations, which, to calculate NOI, is adjusted to add back depreciation and amortization, general and administrative expense, interest expense, amortization of deferred financing fees and impairment losses, and to exclude straight line rent adjustments, accretion of below market lease intangibles (net), revenue earned from management and leasing services, investment income, gain on bargain purchase, gain on sale of real estate, equity in income of unconsolidated joint ventures, gain (loss) on extinguishment of debt and other income. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Our management also uses NOI to evaluate regional property level performance and to make decisions about resource allocations. Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis, providing perspective not immediately apparent from income from continuing operations before tax and discontinued operations. NOI excludes certain components from net income attributable to Equity One, Inc. in order to provide results that are more closely related to a property's results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with income from continuing operations before tax and discontinued operations as presented in our consolidated financial statements. NOI should not be considered as an alternative to income from continuing operations before tax and discontinued operations as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions.
We review operating and financial data, primarily NOI, for each property on an individual basis; therefore each of our individual properties is a separate operating segment. We have aggregated our operating segments into six reportable segments based primarily upon our method of internal reporting which classifies our operations by geographical area. Our reportable segments by geographical area are as follows: South Florida, North Florida, Southeast, Northeast, West Coast and Non-retail. See Part II and Note 20 to the consolidated financial statements included in this annual report, which is incorporated by reference herein, for more information about our business segments and the geographic diversification of our portfolio of properties, and for a reconciliation of NOI to income from continuing operations before tax and discontinued operations for the fiscal years 2013, 2012 and 2011.

40


Same-Property NOI and Occupancy Information
Same-property NOI increased by $5.0 million, or 3.1%, for the year ended December 31, 2013 as compared to the year ended December 31, 2012. The increase in same-property NOI was primarily driven by a net increase in minimum rent due to rent commencements (net of concessions and abatements) and contractual rent increases, including the rent increase related to the lease amendment completed during the second quarter of 2013 with the retail tenant located at 1175 Third Avenue in New York City, and higher expense recovery income due to higher recoverable operating expenses and an increase in the expense recovery ratios, partially offset by higher bad debt expense. Excluding the impact of the rent increase related to the 1175 Third Avenue lease amendment, same-property NOI increased 2.9% for the year ended December 31, 2013 as compared to the year ended December 31, 2012.
Same-property net operating income is reconciled to net operating income as follows:
 
For the year ended December 31,
 
2013
 
2012
 
 
(In thousands)
Same-property net operating income
$
166,587

 
$
161,541

 
Adjustments (1)
210

 
175

 
Same-property net operating income before adjustments
166,797

 
161,716

 
Non same-property net operating income
48,663

 
31,645

 
Less: Properties included in the same-property pool but shown as discontinued
operations in the consolidated statements of operations
(1,007
)
 
(859
)
 
Net operating income (2)
$
214,453

 
$
192,502

 
Number of properties
116

 
 
 
GLA (in square feet)
14,077

 
 
 
___________________________________________________ 
(1) Includes adjustments for items that affect the comparability of the same property results. Such adjustments include: common area maintenance costs related to a prior period, revenue and expenses associated with outparcels sold, settlement of tenant disputes, lease termination costs, or other similar matters that affect comparability.
(2) A reconciliation of net operating income to income from continuing operations before tax and discontinued operations is provided in Note 20 to the consolidated financial statements included in this annual report, which is incorporated herein by reference.
Same-property net operating income by geographical segment was as follows:
 
For the year ended December 31,
 
2013
 
2012
 
 
(In thousands)
South Florida
$
62,786

 
$
61,307

 
North Florida
16,803

 
17,069

 
Southeast
26,271

 
25,801

 
Northeast
25,887

 
24,084

 
West Coast
34,840

 
33,280

 
Same-property net operating income
$
166,587

 
$
161,541

 

41


The following table reflects our same-property occupancy and same-property GLA (in square feet) information by segment as of December 31:
 
Occupancy
 
GLA as of
 
2013
 
2012
 
% Change
 
December 31, 2013
 
 
 
 
 
 
 
(In thousands)
South Florida
92.3
%
 
92.4
%
 
(0.1
)%
 
4,579

North Florida
82.8
%
 
88.1
%
 
(5.3
)%
 
2,559

Southeast
92.2
%
 
93.5
%
 
(1.3
)%
 
3,030

Northeast
98.6
%
 
98.6
%
 
—
 %
 
2,130

West Coast
98.3
%
 
99.0
%
 
(0.7
)%
 
1,779

Same-property shopping center portfolio occupancy
92.3
%
 
93.6
%
 
(1.3
)%
 
14,077

Non-retail
91.7
%
 
91.1
%
 
0.6
 %
 
255

 
 
 
 
 
 
 
14,332

Comparison of the Year Ended December 31, 2013 to 2012
The following summarizes certain line items from our audited consolidated statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in 2013 as compared to the same period in 2012:
 
 
 
For the year ended December 31,
 
 
2013
 
2012
 
% Change
 
 
(In thousands)
Total revenue
 
$
332,511

 
$
301,033

 
10.5
 %
Property operating expenses
 
89,647

 
79,971

 
12.1
 %
Depreciation and amortization
 
87,266

 
79,415

 
9.9
 %
General and administrative expenses
 
39,514

 
42,473

 
(7.0
)%
Investment income
 
6,631

 
7,241

 
(8.4
)%
Equity in income of unconsolidated joint ventures
 
1,648

 
542

 
NM*

Interest expense
 
68,145

 
70,665

 
(3.6
)%
Gain (loss) on extinguishment of debt
 
107

 
(29,146
)
 
NM*

Impairment loss
 
5,641

 
8,909

 
(36.7
)%
Income tax benefit of taxable REIT subsidiaries
 
484

 
2,980

 
(83.8
)%
Income from discontinued operations
 
39,694

 
8,437

 
NM*

Net income
 
88,657

 
7,225

 
NM*

Net income (loss) attributable to Equity One, Inc.
 
77,954

 
(3,477
)
 
NM*

___________ 
* NM = not meaningful
Total revenue increased by $31.5 million, or 10.5%, to $332.5 million in 2013 from $301.0 million in 2012. The increase is primarily attributable to the following:
•
an increase of approximately $15.3 million associated with properties acquired in 2012 and 2013;
•
an increase of approximately $10.0 million primarily related to rent commencements associated with the opening of The Gallery at Westbury Plaza, as well as revenue related to redevelopment projects that were under construction in the 2012 period but were income producing in the 2013 period; and
•
an increase of approximately $6.4 million in same-property revenue due to an increase in expense recovery income primarily due to higher recoverable operating expenses and an increase in the expense recovery ratios, as well as higher rent from contractual rent increases and new rent commencements.


42


Property operating expenses increased by $9.7 million, or 12.1%, to $89.6 million in 2013 from $80.0 million in 2012. The increase primarily consisted of the following:
•
an increase of approximately $4.4 million associated with properties acquired in 2012 and 2013;
•
a net increase of approximately $3.2 million in same-property expenses, primarily attributable to higher recoverable operating expenses and bad debt expense; and
•
an increase of approximately $2.6 million in operating expenses at various development and redevelopment project sites that were under construction in 2012; partially offset by
•
a decrease of approximately $525,000 related to a legal settlement in the first quarter of 2012.
Depreciation and amortization increased by $7.9 million, or 9.9%, to $87.3 million in 2013 from $79.4 million in 2012. The increase was primarily related to the following:
•
an increase of approximately $5.7 million related to new depreciable assets added during 2013 and 2012 and accelerated depreciation of assets razed as part of redevelopment projects; and
•
an increase of approximately $4.9 million related to depreciation on properties acquired in 2013 and 2012; partially offset by
•
a decrease of approximately $3.0 million due to assets becoming fully depreciated during 2013 and 2012.
General and administrative expenses decreased by $3.0 million, or 7.0%, to $39.5 million in 2013 from $42.5 million in 2012. The decrease in 2013 was primarily related to the following:
•
a net decrease in professional services fees and office operational costs of approximately $2.0 million due primarily to an increase in capitalized information technology expenses and decreases in legal and professional expenses; and
•
a decrease of approximately $900,000 related to legal, consulting and other costs associated with acquisition and disposition activity.
Investment income decreased $610,000, or 8.4%, to $6.6 million in 2013 from $7.2 million in 2012. The decrease was due to a decrease in interest income from the repayment of two mezzanine loans, partially offset by an increase in interest income from loans made in 2012 and 2013.
We recorded equity in income of unconsolidated joint ventures of $1.6 million in 2013 compared to $542,000 in 2012. The increase was primarily related to a decrease in depreciation expense in the current year resulting from fully depreciated assets, an increase in rental income and a decrease in interest expense due to the repayment of two mortgages. These decreases were partially offset by acquisition costs incurred in the fourth quarter of 2013 by our joint venture with the New York Common Retirement Fund ("NYCRF").
Interest expense decreased by $2.5 million, or 3.6%, to $68.1 million in 2013 from $70.7 million in 2012. The decrease was primarily attributable to the following:
•
a decrease of approximately $5.4 million due to the redemption of our $250 million 6.25% unsecured senior notes in the fourth quarter of 2012 and the maturity of $10 million of unsecured senior notes in the first quarter of 2012, partially offset by the issuance of $300 million of our 3.75% unsecured senior notes in the fourth quarter of 2012; and
•
a decrease of approximately $1.8 million associated with lower mortgage interest due to the repayment of mortgages during 2012 and 2013; partially offset by
•
an increase of approximately $1.9 million due to lower capitalized interest as a result of the completion of a major development project, partially offset by the initiation of two new development/redevelopment projects;
•
an increase of approximately $1.3 million associated with our $250.0 million term loan entered into in 2012; and
•
an increase of approximately $1.2 million primarily associated with mortgage assumptions in 2013 and 2012 related to acquisitions.

43


We recorded a gain on extinguishment of debt of $107,000 in 2013 compared to a loss on extinguishment of debt of $29.1 million in 2012. The 2012 loss primarily consisted of a make-whole premium and deferred fees and costs of $29.6 million associated with the redemption of all of our $250 million 6.25% unsecured senior notes due 2014.
We recorded impairment losses in continuing operations in 2013 and 2012 of $5.6 million and $8.9 million, respectively. The 2013 impairment loss consisted of $5.5 million of impairment charges related to land held for development and income producing properties and $150,000 in goodwill impairment losses associated with properties in the Southeast and West Coast regions. The 2012 impairment loss included $8.5 million of impairment charges related to land held for development and income producing properties and $378,000 in goodwill impairment losses associated with properties primarily in the Southeast region.
We recorded income tax benefits from continuing operations in 2013 of $484,000 compared to $3.0 million in 2012. The tax benefits in 2013 and 2012 were primarily due to impairment losses recorded by our taxable REIT subsidiaries.
In 2013, we recorded net income from discontinued operations of $39.7 million compared to $8.4 million in 2012. The increase is primarily attributable to the following:
•
an increase of approximately $23.0 million related to net gains from the disposition of operating properties; and
•
a decrease in impairment losses of approximately $15.6 million on assets sold or held for sale; partially offset by
•
a decrease of approximately $7.1 million in operating income from sold or held for sale properties; and
•
an increase of approximately $209,000 in income tax provision of taxable REIT subsidiaries.
As a result of the foregoing, net income increased by $81.4 million to $88.7 million in 2013 from $7.2 million in 2012. Net income (loss) attributable to Equity One, Inc. increased by $81.4 million to income of $78.0 million in 2013 as compared to a loss of $3.5 million in 2012.
Comparison of the Year Ended December 31, 2012 to 2011
The following summarizes certain line items from our audited consolidated statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in 2012 as compared to the same period in 2011:
 
 
 
For the year ended December 31,
 
 
2012
 
2011
 
% Change
 
 
(In thousands)
Total revenue
 
$
301,033

 
$
256,243

 
17.5
 %
Property operating expenses
 
79,971

 
71,199

 
12.3
 %
Depreciation and amortization
 
79,415

 
75,029

 
5.8
 %
General and administrative expenses
 
42,473

 
50,910

 
(16.6
)%
Investment income
 
7,241

 
4,341

 
66.8
 %
Equity in income of unconsolidated joint ventures
 
542

 
4,829

 
(88.8
)%
Interest expense
 
70,665

 
66,560

 
6.2
 %
Gain on bargain purchase
 
—

 
30,561

 
NM*

Gain on sale of real estate
 
—

 
5,542

 
NM*

Loss on extinguishment of debt
 
29,146

 
1,514

 
NM*

Impairment loss
 
8,909

 
16,984

 
(47.5
)%
Income tax benefit of taxable REIT subsidiaries
 
2,980

 
5,087

 
(41.4
)%
Income from discontinued operations
 
8,437

 
20,700

 
(59.2
)%
Net income
 
7,225

 
43,218

 
(83.3
)%
Net (loss) income attributable to Equity One, Inc.
 
(3,477
)
 
33,621

 
NM*

___________
 * NM = not meaningful
Total revenue increased by $44.8 million, or 17.5%, to $301.0 million in 2012 from $256.2 million in 2011. The increase is primarily attributable to the following:
•
an increase of approximately $40.4 million associated with properties acquired in 2012 and 2011;

44


•
a net increase of $2.9 million in same-property revenue due to increased occupancy, higher percentage rent, and an increase in expense recovery income primarily due to higher recoverable expenses;
•
an increase of approximately $2.4 million in revenue related to development and redevelopment projects which were under construction in 2011 but were income producing in 2012; and
•
an increase of approximately $435,000 related to management and leasing fees earned from our joint venture with NYCRF relating to its property acquisition and financing activities in late 2011 and early 2012; partially offset by
•
a decrease of $1.3 million related to assets sold to our NYCRF joint venture in 2011.
Property operating expenses increased by $8.8 million, or 12.3%, to $80.0 million in 2012 from $71.2 million in 2011. The increase primarily consisted of the following:
•
an increase of approximately $9.5 million associated with properties acquired in 2012 and 2011;
•
an increase of approximately $525,000 related to a legal settlement in the first quarter of 2012; and
•
an increase of $135,000 in operating expenses at various development and redevelopment project sites that were under construction in 2012; partially offset by
•
a net decrease of approximately $900,000 in same-property expenses primarily attributable to lower bad debt expense and external management fees, partially offset by increased insurance expense and real estate taxes; and
•
a decrease of $390,000 in expenses related to assets sold to our NYCRF joint venture in 2011.
Depreciation and amortization increased by $4.4 million, or 5.8%, to $79.4 million in 2012 from $75.0 million in 2011. The increase was primarily related to the following:
•
an increase of approximately $12.5 million related to depreciation on properties acquired in 2012 and 2011; and
•
an increase of approximately $3.4 million related to new depreciable assets added during 2012 and 2011 and accelerated depreciation of assets razed as part of redevelopment projects; partially offset by
•
a net decrease of approximately $6.6 million primarily related to assets fully depreciated in 2011 as a result of tenant vacancies;
•
a decrease of approximately $4.4 million due to assets becoming fully depreciated during 2012 and 2011; and
•
a decrease of $525,000 due to the disposition of assets sold to our NYCRF joint venture in 2011.
General and administrative expenses decreased by $8.4 million, or 16.6%, to $42.5 million in 2012 from $50.9 million in 2011. The decrease was primarily related to the following:
•
a decrease of approximately $5.6 million related to legal, consulting, and other costs associated with acquisition and disposition activity;
•
a decrease of approximately $2.0 million due to a legal settlement in 2011;
•
a decrease of approximately $1.0 million in severance primarily due to amounts paid to former CapCo employees in 2011; and
•
a decrease of approximately $330,000 due to lower leasing costs and leasing commissions; partially offset by
•
a net increase in professional services fees and office operational costs of approximately $200,000 primarily due to information technology consulting services; and
•
an increase of $120,000 in fees paid to directors as a result of the grant and acceleration of restricted stock awards to a retiring director and higher stock compensation expense for 2012 grants to directors.
We recorded investment income of $7.2 million in 2012 compared to $4.3 million in 2011. The increase was due to interest income from mortgage loan investments made in 2011 and 2012; partially offset by a decrease in interest earned on bridge loans made to unconsolidated joint ventures that were repaid in 2011.

45


We recorded equity in income of unconsolidated joint ventures of $542,000 in 2012 compared to $4.8 million in 2011. The decrease was primarily a result of the sale of Pacific Financial Center by an unconsolidated joint venture in the third quarter of 2011 and lower income recognized in the joint ventures due to tenants vacating and associated accelerated depreciation of tenant specific assets.
Interest expense increased by $4.1 million, or 6.2% to $70.7 million in 2012 from $66.6 million in 2011. The increase is primarily attributable to the following:
•
an increase of approximately $6.8 million associated with the $250.0 million term loan that was entered into in 2012; and
•
an increase of approximately $2.4 million primarily associated with mortgage assumptions in 2012 and 2011 related to acquisitions; partially offset by
•
a decrease of approximately $2.7 million associated with lower mortgage interest due to mortgages paid off during 2012 and 2011 and mortgages associated with properties held for sale; and
•
a decrease of $2.4 million due to higher capitalized interest as a result of major development projects.
The gain on bargain purchase of $30.6 million recognized in 2011 was generated from our acquisition of a controlling interest in CapCo. No comparable amounts are included in 2012.
We recorded a gain on sale of real estate of $5.5 million in 2011 attributable to additional consideration earned related to the sale of an outparcel to our GRI-EQY I, LLC joint venture, resulting in a gain of approximately $3.6 million, the sale of two operating properties to our joint venture with NYCRF resulting in a gain of approximately $971,000, and the sale of two outparcels to unrelated third parties resulting in a gain of approximately $967,000.
In 2012, we recognized a loss on extinguishment of debt of $29.1 million, primarily consisting of a make-whole premium and deferred fees and costs of $29.6 million associated with the redemption of all of our $250 million, 6.25% unsecured senior notes due 2014. During 2011, we prepaid $146.8 million in mortgage debt (excluding the Serramonte mortgage that was repaid at the closing of the CapCo transaction) and recognized a net loss from the extinguishment of debt related to continuing operations of approximately $1.5 million.
We recorded impairment losses in continuing operations in 2012 and 2011 of $8.9 million and $17.0 million, respectively. The 2012 impairment loss consisted of $8.5 million of impairment charges related to land held for development and income producing properties and $378,000 of goodwill impairment losses associated with properties primarily in the Southeast region. The 2011 impairment loss included $16.4 million of impairment charges related to land held for development and income producing properties and $565,000 of goodwill impairment losses associated with properties primarily in the Southeast and South Florida regions.
We recorded income tax benefits from continuing operations in 2012 and 2011 of $3.0 million and $5.1 million, respectively. The tax benefits in 2012 and 2011 were primarily due to impairment losses recorded by our taxable REIT subsidiaries.
In 2012, we recorded net income from discontinued operations of $8.4 million compared to $20.7 million in 2011. The decrease is primarily attributable to the following:
•
an income tax benefit of $30.0 million relating to properties that were sold in 2011 with no comparable benefit in 2012; and
•
a decrease of $14.2 million in operating income from sold or held for sale properties; partially offset by
•
a decrease of $19.8 million in impairment losses on assets held for sale; and
•
an increase of $12.2 million related to net gains from the disposition of operating properties.
As a result of the foregoing, net income decreased by $36.0 million to $7.2 million in 2012 from $43.2 million in 2011. Net (loss) income attributable to Equity One, Inc. decreased by $37.1 million to a loss of $3.5 million in 2012 compared to income of $33.6 million in 2011.

46


Reportable Segments
The following table sets forth the financial information relating to our continuing operations presented by segments:
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
 
(In thousands)
Revenue:
 
 
 
 
 
 
South Florida
 
$
90,117

 
$
87,709

 
$
82,684

North Florida
 
37,809

 
37,982

 
40,264

Southeast
 
39,017

 
37,199

 
36,092

Northeast
 
75,635

 
53,197

 
35,997

West Coast
 
69,651

 
65,217

 
46,724

Non-retail
 
2,312

 
753

 
651

Total segment revenue
 
$
314,541

 
$
282,057

 
$
242,412

Add:
 
 
 
 
 
 
Straight line rent adjustment
 
2,022

 
3,239

 
2,095

Accretion of below market lease intangibles, net
 
13,350

 
13,248

 
9,449

Management and leasing services
 
2,598

 
2,489

 
2,287

Total revenue
 
$
332,511

 
$
301,033

 
$
256,243

 
 
 
 
 
 
 
Net operating income (NOI):
 
 
 
 
 
 
South Florida
 
$
60,850

 
$
59,074

 
$
54,633

North Florida
 
25,975

 
26,698

 
27,978

Southeast
 
26,612

 
26,257

 
25,014

Northeast
 
53,450

 
36,639

 
25,608

West Coast
 
45,820

 
43,533

 
31,142

Non-retail
 
1,746

 
301

 
34

Total NOI
 
$
214,453

 
$
192,502

 
$
164,409

For a reconciliation of NOI to income (loss) from continuing operations before tax and discontinued operations, see Note 20 to the consolidated financial statements included in this annual report, which is incorporated herein by reference.
Fiscal year 2013 compared to Fiscal year 2012 – Segments
South Florida: Revenue increased by 2.7%, or $2.4 million, to $90.1 million for 2013 from $87.7 million for 2012. NOI increased by 3.0%, or $1.8 million, to $60.9 million for 2013 from $59.1 million for 2012. Revenue increased due to higher rent from contractual rent increases, new rent commencements and higher expense recovery income due to an increase in expense recovery ratios. The increase in NOI was primarily a result of the increase in revenue, partially offset by higher bad debt expense.
North Florida: Revenue decreased by 0.5%, or $173,000, to $37.8 million for 2013 from $38.0 million for 2012. NOI decreased by 2.7%, or $723,000, to $26.0 million for 2013 from $26.7 million for 2012. Revenue decreased due to a decline in occupancy at our properties under redevelopment, partially offset by higher rent from contractual rent increases and rent commencements at our same site properties and higher expense recovery income due to an increase in recoverable operating expenses. The decrease in NOI was a result of the decrease in revenue, an increase in operating expenses at our same site properties and higher bad debt expense.
Southeast: Revenue increased by 4.9%, or $1.8 million, to $39.0 million for 2013 from $37.2 million for 2012. NOI increased by 1.4%, or $355,000, to $26.6 million for 2013 from $26.3 million for 2012. The increase in revenue was primarily a result of higher expense recovery income due to an increase in expense recovery ratios and higher rent from contractual rent increases and new rent commencements. The increase in NOI was a result of the increase in revenue, partially offset by an increase in bad debt expense.

47


Northeast: Revenue increased by 42.2%, or $22.4 million, to $75.6 million for 2013 from $53.2 million for 2012. NOI increased by 45.9%, or $16.8 million, to $53.5 million for 2013 from $36.6 million for 2012. The increase in revenue was primarily a result of our 2012 and 2013 acquisitions of Compo Acres, Post Road Plaza, Darinor Plaza, Clocktower Plaza, 1225-1239 Second Avenue, Westwood Center and Village Center; rent commencements associated with the opening of The Gallery at Westbury Plaza as well as those at our same site properties; and contractual rent increases at our same site properties, including the lease amendment with the tenant at our retail condominium at 1175 Third Avenue. The increase in NOI was the result of the increase in revenue and a settlement of a tenant dispute during 2012 that resulted in a $525,000 expense in the first quarter of 2012, partially offset by an increase in operating expenses due to our 2012 and 2013 acquisitions.
West Coast: Revenue increased by 6.8%, or $4.4 million, to $69.7 million for 2013 from $65.2 million for 2012. NOI increased by 5.3%, or $2.3 million, to $45.8 million for 2013 from $43.5 million for 2012. The increase in revenue was primarily the result of higher rent from contractual rent increases and new rent commencements, our 2012 and 2013 acquisition of Potrero Center and Pleasanton Plaza and an increase in expense recovery income due to higher recoverable operating expenses and an increase in expense recovery ratios. The increase in NOI was primarily attributable to the increase in revenue, partially offset by an increase in operating expenses and bad debt expense.
Non-retail: Revenue increased by $1.6 million to $2.3 million for 2013 from $753,000 for 2012. NOI increased by $1.4 million to $1.7 million for 2013 from $301,000 for 2012. The increase in revenue and NOI was due to higher minimum rent as a result of our 2012 acquisition of 200 Potrero in San Francisco and our 2013 acquisition of certain Westwood parcels, and increased occupancy.
Fiscal year 2012 compared to Fiscal year 2011 – Segments
South Florida: Revenue increased by 6.1%, or $5.0 million, to $87.7 million for 2012 from $82.7 million for 2011. NOI increased by 8.1%, or $4.4 million, to $59.1 million for 2012 from $54.6 million for 2011. Revenue increased due to our acquisition of Aventura Square, increased occupancy and higher rent from contractual rent increases and new rent commencements, as well as an increase in percentage rent primarily from anchor tenants. These increases in revenue were partially offset by decreases in revenue due to the sale of two properties to our NYCRF joint venture during 2011 and lower lease termination fees received in 2012. The increase in NOI was a result of our acquisition of Aventura Square and increased rental revenue, partially offset by the sale of two properties to our NYCRF joint venture.
North Florida: Revenue decreased by 5.7%, or $2.3 million, to $38.0 million for 2012 from $40.3 million for 2011. NOI decreased by 4.6%, or $1.3 million, to $26.7 million for 2012 from $28.0 million for 2011. Revenue decreased due to a decline in occupancy at our properties under redevelopment, higher lease termination fees received in 2011, lower percentage rent and a decrease in expense recovery income resulting from lower recoverable operating expenses. The decrease in NOI was a result of the decrease in revenue, partially offset by decreases in recoverable operating expenses, bad debt expense and real estate tax expense.
Southeast: Revenue increased by 3.1%, or $1.1 million, to $37.2 million for 2012 from $36.1 million for 2011. NOI increased by 5.0%, or $1.2 million, to $26.3 million for 2012 from $25.0 million for 2011. The increase in revenue was primarily a result of higher minimum rent from new rent commencements and contractual rent increases, and higher expense recovery income due to an increase in expense recovery ratios. The increase in NOI was a result of the increased revenue, lower property operating expenses, and lower bad debt expense.
Northeast: Revenue increased by 47.8%, or $17.2 million, to $53.2 million for 2012 from $36.0 million for 2011. NOI increased by 43.1%, or $11.0 million, to $36.6 million for 2012 from $25.6 million for 2011. The increase in both revenue and NOI was primarily a result of our 2011 and 2012 acquisitions of Compo Acres, Danbury Green, Southbury Green, Post Road Plaza, 90-30 Metropolitan, 161 W. 16th Street, Clocktower Plaza and 1225-1239 Second Avenue and rent commencements associated with the opening of The Gallery at Westbury Plaza as well as those at our same site properties. The increase in NOI from acquisitions was partially offset by an increase in non-recoverable property operating expenses due primarily to the settlement of a tenant dispute which resulted in a $525,000 expense in the first quarter of 2012.
West Coast: Revenue increased by 39.6%, or $18.5 million, to $65.2 million for 2012 from $46.7 million for 2011. NOI increased by 39.8%, or $12.4 million, to $43.5 million for 2012 from $31.1 million for 2011. The increase in revenue was primarily attributable to our acquisitions of Culver Center, Potrero, Ralph's Circle Center, Von's Circle Center and Circle Center West, new rent commencements and an increase in expense recovery income resulting from higher recoverable operating expenses and increased occupancy. The increase in NOI was primarily attributable to our acquisitions and increased revenue, partially offset by higher operating expenses and real estate taxes.
Non-retail: Revenue increased by $102,000 to $753,000 for 2012 from $651,000 for 2011. NOI increased by $267,000 to $301,000 for 2012 from $34,000 for 2011. The increase in revenue was primarily due to higher occupancy in our Southeast Region. The increase in NOI was due to a decrease in operating expenses and the increase in revenue.

48


Liquidity and Capital Resources
Due to the nature of our business, we typically generate significant amounts of cash from operations; however, the cash generated from operations is primarily paid to our stockholders in the form of dividends. Our status as a REIT requires that we distribute 90% of our REIT taxable income (excluding net capital gains) each year, as defined in the Code.
Short-term liquidity requirements
Our short-term liquidity requirements consist primarily of normal recurring operating expenses, regular debt service requirements (including debt service relating to additional or replacement debt, as well as scheduled debt maturities), recurring company expenditures, such as general and administrative expenses, non-recurring company expenditures (such as costs associated with development and redevelopment activities, tenant improvements and acquisitions) and dividends to common stockholders. We have satisfied these requirements through cash generated from operations and from financing and investing activities.
As of December 31, 2013, we had approximately $25.6 million of cash and cash equivalents available. In addition, we had two revolving credit facilities providing for borrowings of up to $580.0 million of which $413.0 million was the maximum available to be drawn thereunder, subject to financial covenants contained in those facilities. As of December 31, 2013, we had $91.0 million drawn under our $575.0 million credit facility, which bore interest at a weighted average rate of 1.30% per annum at such date, and had no borrowings outstanding under our $5.0 million credit facility.
During 2014, we have approximately $14.5 million in scheduled debt maturities and normal recurring principal amortization payments, excluding the Brawley Commons $6.5 million mortgage loan which matured on July 1, 2013 and remained unpaid as of December 31, 2013. In February 2014, we sold the property to a third party for $5.5 million, and the lender agreed to accept this amount as full repayment of the loan. Additionally, we are actively searching for acquisition and joint venture opportunities that may require additional capital and/or liquidity. Our available cash and cash equivalents, revolving credit facilities, and cash from property dispositions will be used to fund prospective acquisitions as well as our debt maturities and normal operating expenses.
In January 2014, we acquired the two remaining parcels within the Westwood Complex for an aggregate gross purchase price of $80.0 million. Concurrent with the acquisitions, the outstanding principal balance of the $95.0 million mortgage loan and the $12.0 million mezzanine loan were repaid in full by the respective borrowers. The acquisitions were funded by proceeds from the loan repayments as well as an additional $19.5 million cash investment, thereby bringing our total investment in the Westwood Complex to $140.0 million.
In January 2014, we acquired Rockwood Capital and Vestar Development Company's interests in Talega Village Center, a 102,000 square foot grocery-anchored shopping center located in San Clemente, California, for an additional equity investment of $6.2 million.
In addition, subsequent to year end, we closed on the sale of two properties located in the Southeast and North Florida regions for a purchase price of $10.7 million. The operations of these properties are included in discontinued operations in the accompanying consolidated financial statements for all the periods presented and the related assets and liabilities are presented as held for sale in our consolidated balance sheets at December 31, 2013 and 2012.
Long-term liquidity requirements
Our long-term capital requirements consist primarily of maturities of various long-term debts, development and redevelopment costs and the costs related to growing our business, including acquisitions.
An important component of our growth strategy is the redevelopment of properties within our portfolio and the development of new shopping centers. As of December 31, 2013, we have invested an aggregate of approximately $62.2 million in active development or redevelopment projects at various stages of completion and anticipate that these projects will require an additional $76.6 million to complete, based on our current plans and estimates, which we anticipate will be expended over the next two years.
Historically, we have funded these requirements through a combination of sources that were available to us, including additional and replacement secured and unsecured borrowings, proceeds from the issuance of additional debt or equity securities, capital from institutional partners that desire to form joint venture relationships with us, and proceeds from property dispositions.

49



2013 liquidity events
While we believe our availability under our lines of credit is sufficient to operate our business in 2014, if we identify acquisition or redevelopment opportunities that meet our investment objectives, we may need to raise additional capital.
While there is no assurance that we will be able to raise additional capital in the amounts or at the prices we desire, we believe we have positioned our balance sheet in a manner that facilitates our capital raising plans. The following is a summary of our financing and investing activities completed in 2013:
•
We funded a $12.0 million mezzanine loan in March 2013 to an entity that indirectly owned a portion of the Westwood Complex at the time the loan was made. The loan was secured by the entity's indirect ownership interests in the complex, bore interest at 5.0% per annum and matured on the earlier of January 15, 2014 or the acquisition of certain parcels comprising the complex. In conjunction with the closing of our acquisition of the various properties which are part of the Westwood Complex, a portion of the outstanding balances related to the $95.0 million mortgage loan receivable and $12.0 million mezzanine loan receivable totaling $46.5 million were repaid by the borrower, reducing our total outstanding financing on the complex to $60.5 million as of December 31, 2013. In January 2014, we acquired the two remaining parcels within the Westwood Complex for an aggregate gross purchase price of $80.0 million. Concurrent with the acquisitions, the outstanding principal balances of the mortgage loan and the mezzanine loan were fully repaid;
•
We acquired shopping centers located in Pleasanton, California and Westport, Connecticut, representing an aggregate of 252,510 square feet of GLA, for an aggregate purchase price of $85.2 million, which included the assumption of approximately $35.7 million of indebtedness;
•
We acquired an outparcel adjacent to Kirkman Shoppes in Orlando, Florida for $3.0 million;
•
We acquired the remaining 40% interest in Southbury Green and Danbury Green Shopping Centers for $18.9 million;
•
We sold thirty-two non-core assets and four outparcels for aggregate gross proceeds of $295.2 million, resulting in a total net gain of $39.6 million;
•
We financed two dispositions through loans receivable totaling $12.8 million that were secured by mortgage interests in the properties and full recourse guarantees from the principals of the buyers, bore interest at a weighted average interest rate of 7.7% per annum, and were repaid in December 2013;
•
We received $45.0 million in August 2013 in connection with the prepayment of a junior mezzanine loan receivable;
•
We paid $25.0 million to the retail tenant located at 1175 Third Avenue in New York City, New York in exchange for increased rents during a new ten-year base term and a reset of the rent payable during the option periods subsequent to the initial ten-year base term to market rental rates prevailing at such times;
•
We prepaid $24.0 million in mortgage debt;
•
We invested $4.1 million in one of our unconsolidated joint ventures in connection with the repayment of indebtedness by the joint venture;
•
We invested $17.2 million in one of our unconsolidated joint ventures in connection with shopping center acquisitions by the joint venture;
•
We received proceeds from the issuance of common stock of $8.5 million; and
•
We reduced the borrowings outstanding under our $575.0 million line of credit from $172.0 million as of December 31, 2012 to $91.0 million as of December 31, 2013.
We believe that we have access to 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.

50


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.
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.
 
 
 
For the year ended December 31,
 
 
2013
 
2012
 
Increase
(Decrease)
 
 
(In thousands)
Net cash provided by operating activities
 
$
132,742

 
$
153,219

 
$
(20,477
)
Net cash provided by (used in) investing activities
 
$
123,047

 
$
(332,263
)
 
$
455,310

Net cash (used in) provided by financing activities
 
$
(257,622
)
 
$
195,497

 
$
(453,119
)
Our principal source of operating cash flow is cash generated from our rental properties. Our properties provide a relatively consistent stream of rental income that provides us with resources to fund operating expenses, general and administrative expenses, debt service and quarterly dividends. Net cash provided by operating activities totaled $132.7 million for 2013 compared to $153.2 million for 2012. The decrease of $20.5 million is primarily attributable to an increase in other assets and a decrease in operating distributions from joint ventures, partially offset by the improved results from the operations of our properties.
Net cash provided by investing activities was $123.0 million for 2013 compared to net cash used in investing activities of $332.3 million for 2012. Investing activities during 2013 consisted primarily of proceeds related to the sale of real estate and rental properties of $286.5 million and proceeds from repayment of loans receivable of $91.5 million; partially offset by acquisitions of income producing properties of $109.4 million; additions to construction in progress of $54.0 million; $25.0 million paid for the purchase of a below market leasehold interest; investments in joint ventures of $30.4 million; additions to income producing properties of $13.7 million; $12.0 million related to an investment made in a mezzanine loan; and a $10.7 million increase in cash held in escrow. Investing activities for 2012 primarily consisted of: acquisitions of income producing properties for $243.5 million; investment in a mezzanine loan of $114.3 million; additions to construction in progress of $65.1 million; investments in joint ventures of $26.4 million; and additions to income producing properties of $20.2 million; partially offset by a decrease in cash held in escrow of $91.6 million; $42.0 million of proceeds related to the sale of real estate and rental properties; and repayment of a loan receivable of $19.3 million.
The following summarizes capital expenditures:
 
 
For the year ended December 31,
 
 
2013
 
2012
 
 
(In thousands)
Capital expenditures:
 
 
 
 
Tenant improvements and allowances
 
$
14,374

 
$
15,616

Leasing commissions and costs
 
9,370

 
6,920

Developments
 
22,635

 
67,354

Redevelopments and expansions
 
23,767

 
10,136

Maintenance capital expenditures
 
6,701

 
5,174

Total capital expenditures
 
76,847

 
105,200

Net change in accrued capital spending
 
85

 
(12,713
)
Capital expenditures per consolidated statements of cash flows
 
$
76,932

 
$
92,487

The decrease in development capital expenditures for 2013 compared to 2012 was primarily the result of development costs incurred for The Gallery at Westbury Plaza during 2012 which was completed earlier this year. We capitalized internal costs related to capital expenditures of $5.9 million and $5.0 million during 2013 and 2012, respectively, primarily consisting of capitalized internal costs related to successful leasing activities of $4.5 million and $3.8 million, respectively, capitalized internal costs related to development activities of $766,000 and $817,000, respectively, and capitalized internal costs related to redevelopment and expansion activities of $350,000 and $266,000, respectively. Capitalized interest totaled $2.9 million and $4.7 million during 2013 and 2012, respectively, primarily related to development and redevelopment and expansion activities.

51


Net cash used in financing activities totaled $257.6 million for 2013 compared to $195.5 million of net cash provided by financing activities for 2012. The largest financing cash outflows for 2013 related to the payment of $104.3 million in dividends; net repayments of revolving credit facilities of $81.0 million; prepayments and repayments of $48.3 million of mortgage debt; the purchase of noncontrolling interests for $19.0 million; and $10.0 million of distributions to noncontrolling interests; partially offset by proceeds from the issuance of common stock of $8.5 million in connection with the exercise of stock options. During 2012, $296.8 million in cash was provided by the issuance of unsecured senior notes with a principal amount of $300.0 million; borrowings under the new term loan of $250.0 million; the issuance of common stock of $85.8 million; and net borrowings under the revolving credit facilities of $34.0 million; partially offset by the repayment of senior debt of $287.8 million; payment of $102.1 million in dividends; prepayments and repayments of $66.2 million of mortgage debt; and distributions to noncontrolling interests totaling $10.0 million.
Contractual Commitments. The following tables provide a summary of our fixed, non-cancelable obligations as of December 31, 2013:
 
Payments due by period
Contractual Obligations
Total
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
(In thousands)
Mortgage notes payable:
 
 
 
 
 
 
 
 
 
 
 
 
 
Scheduled amortization
$
77,529

 
$
7,985

 
$
7,711

 
$
7,286

 
$
6,567

 
$
6,777

 
$
41,203

Balloon payments
352,626

 
12,994

 
73,949

 
120,824

 
64,000

 
54,754

 
26,105

   Total mortgage obligations
430,155

 
20,979

 
81,660

 
128,110

 
70,567

 
61,531

 
67,308

Unsecured revolving credit
facilities
91,000

 
—

 
91,000

 
—

 
—

 
—

 
—

Unsecured senior notes
731,136

 
—

 
107,505

 
105,230

 
218,401

 
—

 
300,000

Term loan
250,000

 
—

 
—

 
—

 
—

 
—

 
250,000

   Total unsecured obligations
1,072,136

 
—

 
198,505

 
105,230

 
218,401

 
—

 
550,000

Construction commitments
84,423

 
70,461

 
13,962

 
—

 
—

 
—

 
—

Operating leases (1)
46,091

 
1,772

 
1,722

 
1,590

 
1,374

 
1,391

 
38,242

Purchase contracts (2)
19,500

 
19,500

 
—

 
—

 
—

 
—

 
—

Total contractual obligations (3)
$
1,652,305

 
$
112,712

 
$
295,849

 
$
234,930

 
$
290,342

 
$
62,922

 
$
655,550


_______________________________________________ 
(1) During the third quarter of 2013, we executed a ground lease at 5530 Broadway that expires in 2061.
(2) In January 2014, we acquired the two remaining parcels within the Westwood Complex for an aggregate gross purchase price of $80.0 million. Concurrent with the acquisitions, the outstanding principal balance of the $95.0 million mortgage loan and the $12.0 million mezzanine loan were repaid in full by the respective borrowers. The acquisitions were funded by proceeds from the loan repayments as well as an additional $19.5 million cash investment, thereby bringing our total investment in the Westwood Complex to $140.0 million.
(3) Excludes our proportionate share of unconsolidated joint venture indebtedness. See further discussion in Off-Balance Sheet Arrangements section below.

Our debt level could subject us to various risks, including the risk that our cash flow will be insufficient to meet required payments of principal and interest, and the risk that the resulting reduction in financial flexibility could inhibit our ability to develop or improve our rental properties, withstand downturns in our rental income, or take advantage of business opportunities. In addition, because we currently anticipate that only a portion of the principal of our indebtedness will be repaid prior to maturity, it is expected that it will be necessary to refinance the majority of our debt. Accordingly, there is a risk that such indebtedness will not be able to be refinanced or that the terms of any refinancing will not be as favorable as the terms of our current indebtedness. For more information, see the risks described in Item 1A - “Risk Factors” in this annual report.

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The following table sets forth certain information regarding future interest obligations on outstanding debt as of December 31, 2013:
 
Payments due by period
Interest Obligations
Total
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
(In thousands)
Mortgage notes (1)
$
94,144

 
$
25,119

 
$
21,447

 
$
16,735

 
$
10,001

 
$
7,493

 
$
13,349

Unsecured senior notes
182,010

 
36,700

 
36,700

 
30,921

 
21,439

 
11,250

 
45,000

Term loan
41,800

 
8,030

 
8,030

 
8,052

 
8,030

 
8,030

 
1,628

Total interest obligations
$
317,954

 
$
69,849

 
$
66,177

 
$
55,708

 
$
39,470

 
$
26,773

 
$
59,977

______________________________ 
(1) Excludes interest related to Brawley Commons, which matured on July 1, 2013 and remained unpaid as of December 31, 2013. See footnote (1) below for additional information.
Indebtedness. The following table sets forth certain information regarding our indebtedness as of December 31, 2013:
 
Property
 
Balance at
December 31, 2013
 
Rate
 
Maturity
date
 
Balance Due
at Maturity
 
 
(In thousands)
 
 
 
 
 
(In thousands)
Mortgage Debt
 
 
 
 
 
 
 
 
Brawley Commons (1)
 
$
6,485

 
6.250
%
 
07/01/13

 
$
6,485

South Point
 
6,666

 
5.720
%
 
07/10/14

 
6,509

Southbury Green
 
21,000

 
5.200
%
 
01/05/15

 
21,000

Marketplace Shopping Center
 
15,934

 
6.250
%
 
02/19/15

 
15,650

Darinor Plaza
 
18,322

 
5.370
%
 
04/01/15

 
17,843

Pleasanton Plaza
 
19,968

 
5.316
%
 
06/01/15

 
19,458

Danbury Green
 
24,700

 
5.850
%
 
01/05/16

 
24,700

1225-1239 Second Avenue
 
16,457

 
6.325
%
 
06/01/16

 
15,903

Glengary Shoppes
 
15,808

 
5.750
%
 
06/11/16

 
15,059

Magnolia Shoppes
 
13,558

 
6.160
%
 
07/11/16

 
12,837

Willows Shopping Center
 
54,544

 
5.900
%
 
10/11/16

 
52,325

Culver Center
 
64,000

 
5.580
%
 
05/06/17

 
64,000

Sheridan Plaza
 
60,500

 
6.250
%
 
10/10/18

 
54,754

1175 Third Avenue
 
6,765

 
7.000
%
 
05/01/19

 
5,157

The Village Center
 
15,618

 
6.250
%
 
06/01/19

 
13,173

BridgeMill
 
7,200

 
7.940
%
 
05/05/21

 
3,761

Westport Plaza
 
3,720

 
7.490
%
 
08/01/23

 
1,221

Aventura Square / Oakbrook Square / Treasure Coast Plaza
 
24,326

 
6.500
%
 
02/28/24

 
—

Webster Plaza
 
6,819

 
8.070
%
 
08/15/24

 
2,793

Vons Circle Center
 
10,342

 
5.200
%
 
10/10/28

 
—

Copps Hill Plaza
 
17,423

 
6.060
%
 
01/01/29

 
—

Total Mortgage Debt (21 loans outstanding)
 
$
430,155

 
5.99
%
(2) 
4.31
 years
 
$
352,628

______________________________ 
(1) Mortgage debt matured on July 1, 2013 and remained unpaid as of December 31, 2013. As of December 31, 2013, the bank had not commenced formal foreclosure proceedings, but all excess cash flows derived from the property were remitted to the lender. In February 2014, we sold the property to a third party for $5.5 million, and the lender agreed to accept this amount as full repayment of the loan.
(2) Weighted average interest rates are calculated based on term to maturity and includes scheduled principal amortization.
The weighted average interest rate of the mortgage notes payable at December 31, 2013 and 2012 was 5.99% and 6.06%, respectively, excluding the effects of any discount or premium.

53


Our outstanding unsecured senior notes at December 31, 2013 consisted of the following:
Unsecured senior notes payable
 
Balance at
December 31, 2013
 
Rate
 
Maturity
date
 
Balance Due
at Maturity
 
 
(In thousands)
 
 
 
 
 
(In thousands)
5.375% senior notes
 
$
107,505

 
5.375
%
 
10/15/15

 
$
107,505

6.00% senior notes
 
105,230

 
6.000
%
 
09/15/16

 
105,230

6.25% senior notes
 
101,403

 
6.250
%
 
01/15/17

 
101,403

6.00% senior notes
 
116,998

 
6.000
%
 
09/15/17

 
116,998

3.75% senior notes
 
300,000

 
3.750
%
 
11/15/22

 
300,000

Total unsecured senior notes payable
 
$
731,136

 
5.02
%
(1) 
5.31
 years
 
$
731,136

____________________________ 
(1) Weighted average interest rates are calculated based on term to maturity and includes scheduled principal amortization.
The weighted average interest rate of the unsecured senior notes at December 31, 2013 and 2012 was 5.02% for both periods, excluding the effects of any discount or premium.
Our primary credit facility is with a syndicate of banks and provides $575.0 million of unsecured revolving credit. The facility bears interest at applicable LIBOR plus a margin of 1.00% to 1.85%, depending on the credit ratings of our unsecured senior notes. The facility also includes a facility fee applicable to the aggregate lending commitments thereunder which varies from 0.175% to 0.45% per annum depending on the credit ratings of our unsecured senior notes. At December 31, 2013, the interest rate margin applicable to amounts outstanding under the facility was 1.25% per annum and the facility fee was 0.25% per annum. The facility includes a competitive bid option which allows us to conduct auctions among the participating banks for borrowings at any one time outstanding up to 50% of the lender commitments, a $50.0 million swing line facility for short term borrowings, a $50.0 million letter of credit commitment and a $61.3 million multicurrency subfacility. The facility expires on September 30, 2015, with a one year extension at our option, subject to certain conditions. The facility contains a number of customary restrictions on our business, including restrictions on our ability to make certain investments, and also includes various financial covenants, including a minimum tangible net worth requirement, maximum unencumbered and total leverage ratios, a maximum secured indebtedness ratio, a minimum fixed charge coverage ratio and a minimum unencumbered interest coverage ratio. The facility also contains customary affirmative covenants and events of default, including a cross default to our other material indebtedness and the occurrence of a change of control. If a material default under the facility were to arise, our ability to pay dividends is limited to the amount necessary to maintain our status as a REIT unless the default is a payment default or bankruptcy event in which case we are prohibited from paying any dividends. As of December 31, 2013, we had drawn $91.0 million against the facility, which bore interest at a weighted average rate of 1.30% per annum. As of December 31, 2012, we had drawn $172.0 million against the facility, which bore interest at a rate of 1.77% per annum.
We also have an unsecured credit facility with City National Bank of Florida, for which there was no drawn balance as of December 31, 2013 and 2012. Prior to its renewal in October 2013, the credit facility provided $15.0 million of unsecured credit and bore interest at LIBOR plus 1.55%. In October 2013, the facility was renewed and decreased to provide $5.0 million of unsecured credit. The new facility bears interest at LIBOR plus 1.25% per annum and expires November 7, 2014.
As of December 31, 2013, giving effect to the financial covenants applicable to these credit facilities, the maximum available to us thereunder was approximately 413.0 million, net of outstanding letters of credit with an aggregate face amount of $2.7 million, of which $91.0 million was drawn.
We may not have sufficient funds on hand to repay balloon amounts on our indebtedness at maturity. Therefore, we plan to refinance such indebtedness either through additional mortgage financings secured by individual properties or groups of properties, by unsecured private or public debt offerings or by additional equity offerings, if available, or through the availability on our credit lines. Our results of operations could be affected if the cost of new debt is greater than the cost of the maturing debt. If new financing is not available, we could be required to sell assets and our business could be adversely affected.
Capital Recycling Initiatives
As part of our strategy to upgrade and diversify our portfolio and recycle our capital, we have sold or are in the process of selling certain non-core properties and are currently evaluating opportunities to sell certain additional non-core properties. Although we have not committed to a disposition plan with respect to certain of these assets, we may consider disposing of such properties if pricing is deemed to be favorable. If the market values of these assets are below their carrying values, it is possible that the disposition of these assets could result in impairments or other losses. Depending on the prevailing market conditions and historical carrying values, these impairments and losses could be material.

54


During the year ended December 31, 2013, we recognized $5.0 million of impairment losses on properties sold or held for sale and impairment losses from continuing operations totaling $5.6 million. See Notes 7 and 24 to the consolidated financial statements included in this annual report, which is incorporated by reference herein, for additional information regarding impairment losses.
Future Capital Requirements
We believe, based on currently proposed plans and assumptions relating to our operations, that our existing financial arrangements, together with cash generated from our operations, cash on hand and any short-term investments will be sufficient to satisfy our cash requirements for a period of at least twelve months. In the event that our plans change, our assumptions change or prove to be inaccurate or cash flows from operations or amounts available under existing financing arrangements prove to be insufficient to fund our debt maturities, pay our dividends, fund expansion, development and redevelopment efforts or to the extent we discover suitable acquisition targets the purchase price of which exceeds our existing liquidity, we would be required to seek additional sources of financing. Additional financing may not be available on acceptable terms or at all, and any future equity financing could be dilutive to existing stockholders. If adequate funds are not available, our business operations could be materially adversely affected.
Distributions
We believe that we currently qualify and intend to continue to qualify as a REIT under the Code. As a REIT, we are allowed to reduce taxable income by all or a portion of our distributions to stockholders. As distributions have exceeded taxable income, no provision for federal income taxes has been made. While we intend to continue to pay dividends to our stockholders, we also will reserve such amounts of cash flow as we consider necessary for the proper maintenance and improvement of our real estate and other corporate purposes while still maintaining our qualification as a REIT. Our cash distributions for the year ended December 31, 2013 were $104.3 million.
Off-Balance-Sheet Arrangements
Joint Ventures: We consolidate entities in which we own less than a 100% equity interest if we have a controlling interest or are the primary beneficiary in a variable-interest entity, as defined in the Consolidation Topic of the FASB ASC. From time to time, we may have off-balance-sheet joint ventures and other unconsolidated arrangements with varying structures.
As of December 31, 2013, we had investments in eight unconsolidated joint ventures in which our effective ownership interests ranged from 8.6% to 50.5%. We exercise significant influence over, but do not control, six of these entities and therefore they are presently accounted for using the equity method of accounting while two of these joint ventures are accounted for under the cost method. In January 2014, we acquired Rockwood Capital and Vestar Development Company's interests in Talega Village Center, a 102,000 square foot grocery-anchored shopping center located in San Clemente, California, for an additional equity investment of $6.2 million. In addition, in January 2014, the property held by Vernola Marketplace JV, LLC, in which we effectively own a 48% interest, was sold for $49.0 million, and the buyer assumed the existing mortgage of $22.9 million. The joint venture anticipates recognizing a gain of approximately $14.5 million on the sale. For a more complete description of our joint ventures see Note 9 to the consolidated financial statements included in this annual report, which is incorporated by reference herein.
At December 31, 2013, the aggregate carrying amount of debt, including our partners’ shares, incurred by those joint ventures accounted for under the equity method was approximately $286.0 million (of which our aggregate proportionate share was approximately $72.5 million). Although we have not guaranteed the debt of these joint ventures, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) on certain of the loans of the joint ventures.
Reconsideration events could cause us to consolidate these joint ventures and partnerships in the future. We evaluate reconsideration events as we become aware of them. Some triggers to be considered are additional contributions required by each partner and each partners’ ability to make those contributions. Under certain of these circumstances, we may purchase our partner’s interest. Our unconsolidated real estate joint ventures are with entities which appear sufficiently stable to meet their capital requirements; however, if market conditions worsen and our partners are unable to meet their commitments, there is a possibility we may have to consolidate these entities.
Purchase Obligations: In January 2014, we acquired the two remaining parcels within the Westwood Complex for an aggregate gross purchase price of $80.0 million. Concurrent with the acquisitions, the outstanding principal balance of the $95.0 million mortgage loan and the $12.0 million mezzanine loan were fully repaid by the respective borrowers. The acquisitions were funded by proceeds from the loan repayments as well as an additional $19.5 million cash investment, thereby bringing our total investment in the Westwood Complex to $140.0 million.

55


Contingencies
Letters of Credit: As of December 31, 2013, we had provided letters of credit having an aggregate face amount of $2.7 million as additional security for financial and other obligations. All of our letters of credit are issued under our revolving credit facilities.
Construction Commitments: As of December 31, 2013, we have entered into construction commitments and had outstanding obligations to fund approximately $84.4 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 funds available under our credit facilities, proceeds from property dispositions and available cash.
Operating Lease Obligations: We are obligated under non-cancelable operating leases for office space, equipment rentals and ground leases on certain of our properties totaling $46.1 million.
Non-Recourse Debt Guarantees: Under the terms of certain non-recourse mortgage loans, we could, under specific circumstances, be responsible for portions of the mortgage indebtedness in connection with certain customary non-recourse carve-out provisions, such as environmental conditions, misuse of funds, and material misrepresentations. In management’s judgment, it would be unlikely for us to incur any material liability under these guarantees that would have a material adverse effect on our financial condition, results of operations, or cash flows.
Other than our joint ventures and obligations described above and items disclosed in the Contractual Obligations Table, we have no off-balance sheet arrangements or contingencies as of December 31, 2013 that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, capital expenditures or capital resources.
Environmental Matters
We are subject to numerous environmental laws and regulations. The operation of dry cleaning and gas station facilities at our shopping centers are the principal environmental concerns. We require that the tenants who operate these facilities do so in material compliance with current laws and regulations and we have established procedures to monitor dry cleaning operations. Where available, we have applied and been accepted into state sponsored environmental programs. Several properties in the portfolio will require or are currently undergoing varying levels of environmental remediation. We have environmental insurance policies covering most of our properties which limits our exposure to some of these conditions, although these policies are subject to limitations and environmental conditions known at the time of acquisition are typically excluded from coverage. Management believes that the ultimate disposition of currently known environmental matters will not have a material effect on our financial position, liquidity or operations.
Inflation and Economic Condition Considerations
Most of our leases contain provisions designed to partially mitigate any adverse impact of inflation. Although inflation has been low in recent periods and has had a minimal impact on the performance of our shopping centers, there is more recent data suggesting that inflation may be a greater concern in the future given economic conditions and governmental fiscal policy. Most of our leases require the tenant to pay its share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation, though some larger tenants have capped the amount of these operating expenses they are responsible for under the lease. A small number of our leases also include clauses enabling us to receive percentage rents based on a tenant’s gross sales above predetermined levels, which sales generally increase as prices rise, or escalation clauses which are typically related to increases in the Consumer Price Index or similar inflation indices.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
The primary market risk to which we have exposure is interest rate risk. Changes in interest rates can affect our net income and cash flows. As changes in market conditions occur and interest rates increase or decrease, interest expense on the variable component of our debt will move in the same direction. We intend to utilize variable-rate indebtedness available under our unsecured revolving credit facilities in order to initially fund future acquisitions, development and redevelopment costs and other operating needs. With respect to our fixed rate mortgage notes and unsecured senior notes, changes in interest rates generally do not affect our interest expense as these notes are at fixed rates for extended terms. Because we have the intent to hold our existing fixed-rate debt either to maturity or until the sale of the associated property, these fixed-rate notes pose an interest rate risk to our results of operations and our working capital position only upon the refinancing of that indebtedness. Our possible risk is from increases in long-term interest rates that may occur as this may increase our cost of refinancing maturing fixed-rate debt. In addition, we may incur

56


prepayment penalties or defeasance costs when prepaying or defeasing debt. With respect to our floating rate term loan, the primary market risk exposure is increasing LIBOR-based interest rates, which we have effectively converted to a fixed rate of interest through the use of interest rate swaps.
As of December 31, 2013, we had $91.0 million of floating rate debt outstanding under our unsecured revolving line of credit. Our unsecured revolving line of credit bears interest at applicable LIBOR plus 1.00% to 1.85%, depending on the credit ratings of our unsecured senior notes. Considering the total outstanding balance of $91.0 million as of December 31, 2013, a 1% change in interest rates would result in an impact to income before taxes of approximately $900,000 per year.
The fair value of our fixed-rate debt is $1.2 billion as of December 31, 2013, which includes our mortgage notes and unsecured senior notes payable. If interest rates increase by 1%, the fair value of our total fixed-rate debt, based on the fair value as of December 31, 2013, would decrease by approximately $46.7 million. If interest rates decrease by 1%, the fair value of our total fixed-rate debt would increase by approximately $49.6 million. This assumes that our total outstanding fixed-rate debt remains at approximately $1.2 billion, the balance as of December 31, 2013.
As of December 31, 2013, we had $250.0 million of floating rate debt outstanding under our term loan, which we have effectively converted to a fixed rate of interest through the use of interest rate swaps – see “Hedging Activities” below. The fair value of our term loan was $248.7 million as of December 31, 2013. If interest rates increase by 1%, the fair value of our term loan (unhedged), based on the fair value as of December 31, 2013, would decrease by approximately $11.7 million. If interest rates decrease by 1%, the fair value of our term loan (unhedged), based on the fair value as of December 31, 2013, would increase by approximately $12.3 million.
Hedging Activities
To manage, or hedge, our exposure to interest rate risk, we follow established risk management policies and procedures, including the use of a variety of derivative financial instruments. We do not enter into derivative instruments for speculative purposes. We require that the hedges or derivative financial instruments be effective in managing the interest rate risk exposure that they are designated to hedge. This effectiveness is essential to qualify for hedge accounting. Hedges that meet these hedging criteria are formally designated as such at the inception of the contract. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, resulting in some ineffectiveness, the change in the fair value of the derivative instrument will be included in earnings.
In connection with our $250.0 million unsecured term loan, we entered into interest rate swaps in order to convert the variable LIBOR rate under the term loan to a fixed interest rate, providing us an effective weighted average fixed interest rate on the term loan of 3.17% per annum based on the current credit ratings of our unsecured senior notes. At December 31, 2013, the fair value of our interest rate swaps was an asset of $2.9 million, which is included in other assets in our consolidated balance sheet. At December 31, 2012, the fair value of our interest rate swaps was a liability of $7.0 million, which is included in accounts payable and accrued expenses in our consolidated balance sheet.
Other Market Risks
As of December 31, 2013, we had no material exposure to any other market risks (including foreign currency exchange risk or commodity price risk).
In making this determination and for purposes of the SEC's market risk disclosure requirements, we have estimated the fair value of our financial instruments at December 31, 2013 based on pertinent information available to management as of that date. Although management is not aware of any factors that would significantly affect the estimated amounts as of December 31, 2013, future estimates of fair value and the amounts which may be paid or realized in the future may differ significantly from amounts presented.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Regulation S-X are included in this Form 10-K in Item 15: Exhibits and Financial Statement Schedules.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

57


ITEM 9A.
CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our 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, 2013, the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of December 31, 2013 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 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 69 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 report of our independent registered public accounting firm regarding our internal control over financial reporting is set forth on page 70 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 have been no changes in our internal control over financial reporting during the quarter ended December 31, 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
None.

 

58


PART III

ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders 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 for the 2014 Annual Meeting of Stockholders 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 RELATED 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, 2013:
Plan category
 
(A)
Number of securities 
to be issued upon
exercise of outstanding options, warrants and rights
 
(B)
Weighted average
exercise price of
outstanding options,
warrants and rights
 
(C)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (A))
Equity compensation plans approved by security holders
 
2,620,054

 
$
21.09

 
4,986,924

Equity compensation plans not approved by security holders (1)
 
364,660

 
$
24.70

 
—

Total
 
2,984,714

 
$
21.53

 
4,986,924

 _________________________
(1) 
Represents options to purchase 364,660 shares of common stock issued to Jeffrey S. Olson our Chief Executive Officer, in connection with his initial employment.
The other information required by this item is incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders 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, AND DIRECTOR INDEPENDENCE
Incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders to be filed within 120 days after the end our fiscal year covered by this Form 10-K.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders to be filed within 120 days after the end our fiscal year covered by this Form 10-K.

59


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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.
Financial statement schedules required to be filed
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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. 3, dated September 9, 1998, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4.1) (4)
 
 
4.3
 
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 4.7) (5)
 
 
4.4
 
Supplemental Indenture No. 5, dated February 12, 2003, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (6)
 
 
4.5
 
Supplemental Indenture No. 6, dated April 23, 2004, between the Company and SunTrust Bank, as Trustee (Exhibit 4.2) (7)
 
 
 

60


EXHIBIT NO.
 
DESCRIPTION
4.6
 
Supplemental Indenture No. 7, dated May 20, 2005, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (8)
 
 
4.7
 
Indenture, dated September 9, 1998, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4.2) (4)
 
 
 
4.8
 
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) (4)
 
 
4.9
 
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) (5)
 
 
4.10
 
Supplemental Indenture No. 3, dated February 12, 2003, between the Company and SunTrust Bank, as Trustee (Exhibit 4.2) (6)
 
 
4.11
 
Supplemental Indenture No. 5, dated April 23, 2004, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (7)
 
 
 
4.12
 
Supplemental Indenture No. 6, dated May 20, 2005, between the Company and SunTrust Bank, as Trustee (Exhibit 4.2) (8)
 
 
4.13
 
Supplemental Indenture No. 7, dated September 20, 2005, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (10)
 
 
4.14
 
Supplemental Indenture No. 8, dated December 30, 2005, between the Company and SunTrust Bank, as Trustee (Exhibit 4.17) (11)
 
 
4.15
 
Supplemental Indenture No. 9, dated March 10, 2006, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (12)
 
 
 
4.16
 
Supplemental Indenture No. 10, dated August 18, 2006, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (13)
 
 
 
4.17
 
Supplemental Indenture No. 11, dated April 18, 2007, between the Company and U.S. Bank National Association, as Trustee (Exhibit 4.1) (23)
 
 
4.18
 
Supplemental Indenture No. 13, dated as of October 25, 2012, between the Company and U.S. Bank National Association, as Trustee (Exhibit 4.1) (42)
 
 
 
10.1
 
Form of Indemnification Agreement (Exhibit 10.1) (35)
 
 
10.2
 
1995 Stock Option Plan, as amended (Appendix A) (14)*
 
 
10.3
 
Amended and Restated 2000 Executive Incentive Plan (Exhibit 10.1) (28)*
 
 
 
10.4
 
Form of Stock Option Agreement for stock options awarded under the Amended and Restated 2000 Executive Incentive Plan (Exhibit 10.3) (16)*
 
 
10.5
 
Form of Restricted Stock Agreement for restricted stock awarded under the Amended and Restated 2000 Executive Incentive Plan (Exhibit 10.4) (16)*
 
 
10.6
 
IRT 1989 Stock Option Plan, assumed by the Company (17)*

61


EXHIBIT NO.
 
DESCRIPTION
10.7
 
IRT 1998 Long-Term Incentive Plan, assumed by the Company (Appendix A) (18)*
 
 
10.8
 
2004 Employee Stock Purchase Plan (Annex B) (15)*
 
 
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) (19)
 
 
10.10
 
Stock Exchange Agreement dated May 18, 2001 among the Company, First Capital Realty Inc. and First Capital America Holding Corp. (Appendix A) (20)
 
 
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) (19)
 
 
10.12
 
Registration Rights Agreement, dated October 28, 2002, between the Company and certain Purchasers (Exhibit 99.3) (24)
 
 
10.13
 
Third Amended and Restated Credit Agreement, dated as of September 30, 2011, by and among the Company, each of the financial institutions initially a signatory thereto, Wells Fargo Bank, National Association, as Administrative Agent, PNC Bank, National Association, as Syndication Agent, Wells Fargo Securities, LLC and PNC Capital Markets LLC, as Joint Lead Arrangers and Joint Book Runners, and SunTrust Bank, Bank of America, N.A. and U.S. Bank National Association as Co-Documentation Agents (Exhibit 10.1) (25)
 
 
 
10.14
 
Clarification Agreement and Protocol, dated as of January 1, 2004, among the Company and Gazit-Globe (1982), Ltd. (Exhibit 10.2) (26)
 
 
 
10.15
 
Equity One, Inc. Non-Qualified Deferred Compensation Plan. (Exhibit 10.1) (27)*
 
 
10.16
 
Registration Rights Agreement made as of September 23, 2008 by and among the Company and MGN America LLC (Exhibit 10.2) (31)
 
 
10.17
 
Common Stock Purchase Agreement made as of September 23, 2008 by and between the Company and MGN America, LLC (Exhibit 10.1) (31)
 
 
 
10.18
 
Common Stock Purchase Agreement, dated as of April 8, 2009, between the Company and MGN America, LLC (Exhibit 10.1) (33)
 
 
 
10.19
 
Registration Rights Agreement, dated as of April 8, 2009, between the Company and MGN America, LLC (Exhibit 10.2) (33)
 
 
10.20
 
Common Stock Purchase Agreement, dated as of March 9, 2010, between the Company and MGN America, LLC (Exhibit 10.1) (36)
 
 
10.21
 
Common Stock Purchase Agreement, dated as of March 9, 2010, between the Company and Silver Maple (2001), Inc. (Exhibit 10.2) (36)
 
 
 
10.22
 
Registration Rights Agreement, dated as of March 9, 2010, by and among the Company, MGN America, LLC and Silver Maple (2001), Inc. (Exhibit 10.3) (36)



62


EXHIBIT NO.
 
DESCRIPTION
10.23
 
Contribution Agreement, dated May 23, 2010, by and among the Company, Liberty International Holdings Limited and Capital Shopping Centres plc (Exhibit 10.1) (37)
 
 
10.24
 
Equityholders Agreement, dated May 23, 2010, by and among the Company, Capital Shopping Centres Group PLC, Liberty International Holdings Limited, Gazit-Globe Ltd., MGN (USA) Inc., Gazit (1995), Inc., MGN America, LLC, Silver Maple (2001), Inc. and Ficus, Inc. (Exhibit 10.2) (37)
 
 
10.25
 
Amendment to Contribution Agreement, dated November 8, 2010, by and among the Company, Liberty International Holdings Limited and Capital Shopping Centres plc (Exhibit 10.1) (38)
 
 
10.26
 
First Amendment to Amended and Restated Employment Agreement and Restricted Stock Agreement, dated as of August 9, 2010, by and between the Company and Jeffrey S. Olson (Exhibit 10.2) (39)*
 
 
10.27
 
Chairman Compensation Agreement, dated as of August 9, 2010 and, except as otherwise specifically provided therein, effective as of January 1, 2011, by and between the Company and Chaim Katzman (Exhibit 10.3) (39)*
 
 
10.28
 
First Amendment to Chairman Compensation Agreement and Restricted Stock Agreement, dated as of August 9, 2010, by and between the Company and Chaim Katzman (Exhibit 10.4) (39)*
 
 
10.29
 
Restricted Stock Agreement, effective as of August 9, 2010, by and between the Company and Chaim Katzman (Exhibit 10.5) (39)*
 
 
10.30
 
Common Stock Purchase Agreement, dated as of December 8, 2010, between the Company and MGN America, LLC (Exhibit 10.1) (30)
 
 
10.31
 
Registration Rights Agreement, dated as of December 8, 2010, by and among the Company and MGN America, LLC (Exhibit 10.2) (30)
 
 
10.32
 
Limited Liability Company Agreement of EQY-CSC LLC, dated as of January 4, 2011 (Exhibit 10.1) (32)
 
 
10.33
 
Registration and Liquidity Rights Agreement by and between the Company and Liberty International Holdings Limited, dated as of January 4, 2011 (Exhibit 10.2) (32)
 
 
10.34
 
Shared Appreciation Promissory Note, dated as of January 4, 2011 (Exhibit 10.3) (32)
 
 
10.35
 
Employment Agreement, dated as of January 28, 2011 and effective as of February 1, 2011, by and between the Company and Thomas A. Caputo (Exhibit 10.1) (22)*
 
 
10.36
 
Employment Agreement, dated as of January 28, 2011 and effective as of February 1, 2011, by and between the Company and Arthur L. Gallagher (Exhibit 10.2) (22)*
 
 
10.37
 
Employment Agreement, dated as of January 28, 2011 and effective as of February 1, 2011, by and between the Company and Mark Langer (Exhibit 10.3) (22)*
 
 
 
10.38
 
Amended and Restated Employment Agreement, dated as of August 9, 2010 and effective as of January 1, 2011, by and between the Company and Jeffrey S. Olson (Exhibit 10.4) (22)*
 
 
10.39
 
Common Stock Purchase Agreement, dated as of May 18, 2011, between the Company and MGN (USA), Inc. (Exhibit 10.1) (34)

63


EXHIBIT NO.
 
DESCRIPTION
10.40
 
Registration Rights Agreement, dated as of May 18, 2011, by and among the Company and MGN (USA), Inc. (Exhibit 10.2) (34)
 
 
 
10.41
 
Amendment No. 1, dated September 16, 2011, to Equityholders Agreement, dated May 23, 2010, by and among the Company, Capital Shopping Centers Group PLC, Liberty International Holdings Limited, Gazit-Globe Ltd., MGN (USA) Inc., Gazit (1995), Inc., MGN America, LLC, Silver Maple (2001), Inc., Ficus, Inc. and Gazit First Generation LLC (Exhibit 10.2) (29)
 
 
10.42
 
Loan Agreement, dated as of February 13, 2012, by and among the Company, each of the financial institutions party thereto as lenders, PNC Bank, National Association, as administrative agent, SunTrust Bank, as syndication agent, and PNC Capital Markets LLC and SunTrust Robinson Humphrey, Inc., as joint lead arrangers and joint book runners (Exhibit 10.1) (40)
 
 
 
10.43
 
Common Stock Purchase Agreement, dated as of August 8, 2012, between Equity One, Inc. and MGN
(USA), Inc. (Exhibit 10.1) (41)

 
 
 
10.44
 
Registration Rights Agreement, dated as of August 8, 2012, by and among Equity One, Inc. and MGN
 (USA), Inc. (Exhibit 10.2) (41)
 
 
12.1
 
Ratios of Earnings to Fixed Charges
 
 
21.1
 
List of Subsidiaries of the Registrant
 
 
23.1
 
Consent of Ernst & Young 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
 
 
101.INS
 
XBRL Instance Document
 
 
101.SCH
 
XBRL Taxonomy Extension Schema
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase
 
 
101.LAB
 
XBRL Extension Labels Linkbase
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase
 
*
Identifies employee agreements, management contracts, compensatory plans or other arrangements.

(1)
Previously filed as an exhibit to our Annual Report on Form 10-K filed on March 11, 2011, and incorporated by reference herein.
(2)
Previously filed as an exhibit to our Current Report on Form 8-K filed on March 20, 2013, and incorporated by reference herein.
(3)
Previously filed by IRT Property Company as an exhibit to IRT’s Annual Report on Form 10-K filed on February 16, 1996, and incorporated by reference herein.

64


(4)
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.
(5)
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.
(6)
Previously filed as an exhibit to our Current Report on Form 8-K filed on February 20, 2003, and incorporated by reference herein.
(7)
Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed on May 10, 2004, and incorporated by reference herein.
(8)
Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed on August 5, 2005, and incorporated by reference herein.
(9)
Reserved.
(10)
Previously filed as an exhibit to our Current Report on Form 8-K filed on September 20, 2005, and incorporated by reference herein.
(11)
Previously filed as an exhibit to our Annual Report on Form 10-K filed on March 3, 2006, and incorporated by reference herein.
(12)
Previously filed as an exhibit to our Current Report on Form 8-K filed on March 13, 2006, and incorporated by reference herein.
(13)
Previously filed as an exhibit to our Current Report on Form 8-K filed on August 22, 2006, and incorporated by reference herein.
(14)
Previously filed with our definitive Proxy Statement for the Annual Meeting of Stockholders held on June 30, 1999, and incorporated by reference herein.
(15)
Previously filed with our definitive Proxy Statement for the Annual Meeting of Stockholders held on May 21, 2004, and incorporated by reference herein.
(16)
Previously filed as an exhibit to our Current Report on Form 8-K filed on February 18, 2005, and incorporated by reference herein.
(17)
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 by reference herein.
(18)
Previously filed by IRT Property Company with IRT’s definitive Proxy Statement for the Annual Meeting of Stockholders held on June 18, 1998, and incorporated by reference herein.
(19)
Previously filed with our Registration Statement on Form S-11, as amended (Registration No. 333-3397), and incorporated by reference herein.
(20)
Previously filed with our definitive Proxy Statement for the Special Meeting of Stockholders held on September 6, 2001 and incorporated by reference herein.
(21)
Reserved.
(22)
Previously filed as an exhibit to our Current Report on Form 8-K filed on February 3, 2011, and incorporated by reference herein.
(23)
Previously filed as an exhibit to our Current Report on Form 8-K filed on April 20, 2007, and incorporated by reference herein.
(24)
Previously filed as an exhibit to our Current Report on Form 8-K filed on October 30, 2002, and incorporated by reference herein.
(25)
Previously filed as an exhibit to our Current Report on Form 8-K filed on October 5, 2011, and incorporated by reference herein.
(26)
Previously filed as an exhibit to our Current Report on Form 8-K filed on March 22, 2004, and incorporated by reference herein.
(27)
Previously filed as an exhibit to our Current Report on Form 8-K filed on July 7, 2005, and incorporated by reference herein.
(28)
Previously filed as an exhibit to our Current Report on Form 8-K filed on May 4, 2011, and incorporated by reference herein.
(29)
Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed on November 9, 2011, and incorporated by reference herein
(30)
Previously filed as an exhibit to our Current Report on Form 8-K filed on December 14, 2010, and incorporated by reference herein.
(31)
Previously filed as an exhibit to our Current Report on Form 8-K filed on September 29, 2008, and incorporated by reference herein.
(32)
Previously filed as an exhibit to our Current Report on Form 8-K filed on January 7, 2011, and incorporated by reference herein.
(33)
Previously filed as an exhibit to our Current Report on Form 8-K filed on April 14, 2009, and incorporated by reference herein.

65


(34)
Previously filed as an exhibit to our Current Report on Form 8-K filed on May 24, 2011, and incorporated by reference herein.
(35)
Previously filed as an exhibit to our Annual Report on Form 10-K filed on February 29, 2012, and incorporated by reference herein.
(36)
Previously filed as an exhibit to our Current Report on Form 8-K filed on March 15, 2010, and incorporated by reference herein.
(37)
Previously filed as an exhibit to our Current Report on Form 8-K filed on May 27, 2010, and incorporated by reference herein.
(38)
Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed on November 8, 2010, and incorporated by reference herein.
(39)
Previously filed as an exhibit to our Current Report on Form 8-K filed on August 12, 2010, and incorporated by reference herein.
(40)
Previously filed as an exhibit to our Current Report on Form 8-K filed on February 14, 2012, and incorporated by reference herein.
(41)
Previously filed as an exhibit to our Current Report on Form 8-K filed with the SEC on August 14, 2012 and incorporated by reference herein.
(42)
Previously filed as an exhibit to our Current Report on Form 8-K filed with the SEC on October 25, 2012 and incorporated by reference herein.

66


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:
March 3, 2014
 
 
 
EQUITY ONE, INC.
 
 
 
 
 
 
 
 
 
 
By:
 
/s/    JEFFREY S. OLSON        
 
 
 
 
 
 
 
Jeffrey S. Olson
 
 
 
 
 
 
 
Chief Executive Officer
(Principal 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 and in the capacities and on the dates indicated.
 
SIGNATURE
 
TITLE
 
DATE
 
 
 
/s/    JEFFREY S. OLSON        

  
Chief Executive Officer and Director
(Principal Executive Officer)

 
March 3, 2014
Jeffrey S. Olson
 
 
 
 
 
 
 
/s/    MARK LANGER        

  
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
 
March 3, 2014
Mark Langer
 
 
 
 
 
 
 
/s/    ANGELA F. VALDES         

  
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
 
March 3, 2014
Angela F. Valdes
 
 
 
 
 
 
 
/s/    CHAIM KATZMAN        

  
Chairman of the Board
 
March 3, 2014
Chaim Katzman
 
 
 
 
 
 
 
/s/    JAMES S. CASSEL        

  
Director
 
March 3, 2014
James S. Cassel
 
 
 
 
 
 
 
/s/    CYNTHIA COHEN        

  
Director
 
March 3, 2014
Cynthia Cohen
 
 
 
 
 
 
 
/s/    DAVID FISCHEL        

  
Director
 
March 3, 2014
David Fischel
 
 
 
 
 
 
 
/s/    NEIL FLANZRAICH        

  
Director
 
March 3, 2014
Neil Flanzraich
 
 
 
 
 
 
 
/s/    PETER LINNEMAN        

  
Director
 
March 3, 2014
Peter Linneman
 
 
 
 
 
 
 
/s/    GALIA MAOR        

  
Director
 
March 3, 2014
Galia Maor
 
 
 
 
 
 
 
/s/    DORI J. SEGAL        

  
Director
 
March 3, 2014
Dori J. Segal
 
 
 
 


67


EQUITY ONE, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
 



68


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, defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended, 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, 2013. 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 (1992 Framework) (the COSO criteria). Based on this assessment, management has concluded that, as of December 31, 2013, 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 a report on the Company’s internal control over financial reporting as of December 31, 2013. This report appears on the following page of this Form 10-K.

69


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Equity One, Inc.
We have audited Equity One, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 Framework) (the COSO criteria). Equity One, Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on 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, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, 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, Equity One, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Equity One, Inc. and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2013 of Equity One, Inc. and subsidiaries and our report dated March 3, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Certified Public Accountants
March 3, 2014
Boca Raton, Florida

70


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 as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedules listed in the Index at Item 15(a). These financial statements and 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, 2013 and 2012, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, 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.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Equity One, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 Framework) (the COSO criteria) and our report dated March 3, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Certified Public Accountants
March 3, 2014
Boca Raton, Florida

71


EQUITY ONE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2013 and 2012
(In thousands, except share par value amounts)
 
December 31,
2013
 
December 31,
2012
ASSETS
 
 
 
Properties:
 
 
 
Income producing
$
3,153,131

 
$
2,937,645

Less: accumulated depreciation
(354,166
)
 
(297,736
)
Income producing properties, net
2,798,965

 
2,639,909

Construction in progress and land held for development
104,464

 
108,711

Properties held for sale
13,404

 
268,184

Properties, net
2,916,833

 
3,016,804

Cash and cash equivalents
25,583

 
27,416

Cash held in escrow and restricted cash
10,912

 
442

Accounts and other receivables, net
12,872

 
13,426

Investments in and advances to unconsolidated joint ventures
91,772

 
72,171

Loans receivable, net
60,711

 
140,708

Goodwill
6,377

 
6,527

Other assets
229,599

 
225,174

TOTAL ASSETS
$
3,354,659

 
$
3,502,668

 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 
 
 
Liabilities:
 
 
 
Notes payable:
 
 
 
Mortgage notes payable
$
430,155

 
$
425,755

Unsecured senior notes payable
731,136

 
731,136

Term loan
250,000

 
250,000

Unsecured revolving credit facilities
91,000

 
172,000

 
1,502,291

 
1,578,891

Unamortized premium on notes payable, net
6,118

 
6,432

Total notes payable
1,508,409

 
1,585,323

Other liabilities:
 
 
 
Accounts payable and accrued expenses
44,227

 
55,248

Tenant security deposits
8,928

 
8,294

Deferred tax liability
11,764

 
12,016

Other liabilities
177,383

 
195,963

Liabilities associated with properties held for sale
33

 
18,794

Total liabilities
1,750,744

 
1,875,638

Redeemable noncontrolling interests
989

 
22,551

Commitments and contingencies

 

Stockholders' equity:
 
 
 
Preferred stock, $0.01 par value – 10,000 shares authorized but unissued
—

 
—

Common stock, $0.01 par value – 150,000 shares authorized, 117,647 and 116,938 shares issued
   and outstanding at December 31, 2013 and 2012, respectively
1,176

 
1,169

Additional paid-in capital
1,693,873

 
1,679,227

Distributions in excess of earnings
(302,410
)
 
(276,085
)
Accumulated other comprehensive income (loss)
2,544

 
(7,585
)
Total stockholders’ equity of Equity One, Inc.
1,395,183

 
1,396,726

Noncontrolling interests
207,743

 
207,753

Total equity
1,602,926

 
1,604,479

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
$
3,354,659

 
$
3,502,668


See accompanying notes to the consolidated financial statements.


72


EQUITY ONE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the years ended December 31, 2013, 2012 and 2011
(In thousands, except per share data) 
 
 
2013
 
2012
 
2011
 
REVENUE:
 
 
 
 
 
 
 
Minimum rent
 
$
248,086

 
$
227,013

 
$
194,162

 
Expense recoveries
 
77,499

 
67,329

 
56,630

 
Percentage rent
 
4,328

 
4,202

 
3,164

 
Management and leasing services
 
2,598

 
2,489

 
2,287

 
Total revenue
 
332,511

 
301,033

 
256,243

 
COSTS AND EXPENSES:
 
 
 
 
 
 
 
Property operating
 
89,647

 
79,971

 
71,199

 
Depreciation and amortization
 
87,266

 
79,415

 
75,029

 
General and administrative
 
39,514

 
42,473

 
50,910

 
Total costs and expenses
 
216,427

 
201,859

 
197,138

 
INCOME BEFORE OTHER INCOME AND EXPENSE, TAX AND
   DISCONTINUED OPERATIONS
 
116,084

 
99,174

 
59,105

 
OTHER INCOME AND EXPENSE:
 
 
 
 
 
 
 
Investment income
 
6,631

 
7,241

 
4,341

 
Equity in income of unconsolidated joint ventures
 
1,648

 
542

 
4,829

 
Other income
 
216

 
45

 
306

 
Interest expense
 
(68,145
)
 
(70,665
)
 
(66,560
)
 
Amortization of deferred financing fees
 
(2,421
)
 
(2,474
)
 
(2,195
)
 
Gain on bargain purchase
 
—

 
—

 
30,561

 
Gain on sale of real estate
 
—

 
—

 
5,542

 
Gain (loss) on extinguishment of debt
 
107

 
(29,146
)
 
(1,514
)
 
Impairment loss
 
(5,641
)
 
(8,909
)
 
(16,984
)
 
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAX AND
   DISCONTINUED OPERATIONS
 
48,479

 
(4,192
)
 
17,431

 
Income tax benefit of taxable REIT subsidiaries
 
484

 
2,980

 
5,087

 
INCOME (LOSS) FROM CONTINUING OPERATIONS
 
48,963

 
(1,212
)
 
22,518

 
DISCONTINUED OPERATIONS:
 
 
 
 
 
 
 
Operations of income producing properties
 
5,769

 
12,858

 
27,094

 
Gain on disposal of income producing properties
 
39,587

 
16,588

 
4,406

 
Impairment loss
 
(4,976
)
 
(20,532
)
 
(40,352
)
 
Income tax (provision) benefit of taxable REIT subsidiaries
 
(686
)
 
(477
)
 
29,552

 
INCOME FROM DISCONTINUED OPERATIONS
 
39,694

 
8,437

 
20,700

 
NET INCOME
 
88,657

 
7,225

 
43,218

 
Net income attributable to noncontrolling interests – continuing operations
 
(10,209
)
 
(10,676
)
 
(9,652
)
 
Net (income) loss attributable to noncontrolling interests – discontinued operations
 
(494
)
 
(26
)
 
55

 
NET INCOME (LOSS) ATTRIBUTABLE TO EQUITY ONE, INC.
 
$
77,954

 
$
(3,477
)
 
$
33,621

 
EARNINGS (LOSS) PER COMMON SHARE – BASIC:
 
 
 
 
 
 
 
Continuing operations
 
$
0.32

 
$
(0.11
)
 
$
0.11

 
Discontinued operations
 
0.33

 
0.07

 
0.19

 
 
 
$
0.66

*
$
(0.04
)
 
$
0.29

*
Number of Shares Used in Computing Basic Earnings (Loss) per Share
 
117,389

 
114,233

 
110,099

 
EARNINGS (LOSS) PER COMMON SHARE – DILUTED:
 
 
 
 
 
 
 
Continuing operations
 
$
0.32

 
$
(0.11
)
 
$
0.11

 
Discontinued operations
 
0.33

 
0.07

 
0.19

 
 
 
$
0.65

 
$
(0.04
)
 
$
0.29

*
Number of Shares Used in Computing Diluted Earnings (Loss) per Share
 
117,771

 
114,233

 
110,241

 
* Note: EPS does not foot due to the rounding of the individual calculations.

See accompanying notes to the consolidated financial statements.

73


EQUITY ONE, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
For the years ended December 31, 2013, 2012 and 2011
(In thousands)
 
 
 
2013
 
2012
 
2011
NET INCOME
 
$
88,657

 
$
7,225

 
$
43,218

OTHER COMPREHENSIVE INCOME (LOSS):
 
 
 
 
 
 
Net amortization of interest rate contracts included in net income
 
63

 
64

 
64

Net unrealized gain (loss) on interest rate swaps (1)
 
6,615

 
(9,437
)
 
(155
)
Net loss on interest rate swaps reclassified from accumulated other comprehensive
   income into interest expense
 
3,451

 
2,942

 
506

Other comprehensive income (loss)
 
10,129

 
(6,431
)
 
415

COMPREHENSIVE INCOME
 
98,786

 
794

 
43,633

Comprehensive income attributable to noncontrolling interests
 
(10,703
)
 
(10,702
)
 
(9,597
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO EQUITY ONE, INC.
 
$
88,083

 
$
(9,908
)
 
$
34,036


(1) This amount includes our share of our unconsolidated joint ventures' net unrealized losses of $42, $48 and $155 for the years ended December 31, 2013, 2012 and 2011, respectively.
See accompanying notes to the consolidated financial statements.

74


EQUITY ONE, INC. AND SUBSIDIARIES
Consolidated Statements of Equity
For the years ended December 31, 2013, 2012 and 2011
(In thousands)
 
 
Common Stock
 
Additional
Paid-In
Capital
 
Distributions
in Excess of
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders’
Equity of 
Equity
One, Inc.
 
Non-
controlling
Interests
 
Total
Equity
 
 
Shares
 
Amount
 
 
 
 
 
 
BALANCE AT JANUARY 1, 2011
 
102,327

 
$
1,023

 
$
1,391,762

 
$
(105,309
)
 
$
(1,569
)
 
$
1,285,907

 
$
3,934

 
$
1,289,841

Issuance of common stock, net of
   withholding taxes
 
6,211

 
62

 
116,480

 
—

 
—

 
116,542

 
—

 
116,542

Stock issuance costs
 
—

 
—

 
(1,185
)
 
—

 
—

 
(1,185
)
 
—

 
(1,185
)
Share-based compensation expense
 
—

 
—

 
7,160

 
—

 
—

 
7,160

 
—

 
7,160

Net income, excluding $143 of net income
   attributable to redeemable noncontrolling
   interests
 
—

 
—

 
—

 
33,621

 
—

 
33,621

 
9,454

 
43,075

Dividends paid on common stock
 
—

 
—

 
—

 
(98,842
)
 
—

 
(98,842
)
 
—

 
(98,842
)
Distributions to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
—

 
(11,405
)
 
(11,405
)
Acquisition of C&C (US) No. 1
 
4,051

 
41

 
73,657

 
—

 
—

 
73,698

 
206,145

 
279,843

Conversion of Class A share by LIH
 
10

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Purchase of subsidiary shares from
   noncontrolling interest
 
—

 
—

 
—

 
—

 
—

 
—

 
(242
)
 
(242
)
Other comprehensive income
 
—

 
—

 
—

 
—

 
415

 
415

 
—

 
415

BALANCE AT DECEMBER 31, 2011
 
112,599

 
1,126

 
1,587,874

 
(170,530
)
 
(1,154
)
 
1,417,316

 
207,886

 
1,625,202

Issuance of common stock, net of
withholding taxes
 
4,339

 
43

 
85,795

 
—

 
—

 
85,838

 
—

 
85,838

Stock issuance costs
 
—

 
—

 
(883
)
 
—

 
—

 
(883
)
 
—

 
(883
)
Share-based compensation expense
 
—

 
—

 
7,113

 
—

 
—

 
7,113

 
—

 
7,113

Restricted stock reclassified from
   liability to equity
 
—

 
—

 
101

 
—

 
—

 
101

 
—

 
101

Net (loss) income, excluding $840 of net
   income attributable to redeemable
   noncontrolling interests
 
—

 
—

 
—

 
(3,477
)
 
—

 
(3,477
)
 
9,862

 
6,385

Dividends paid on common stock
 
—

 
—

 
—

 
(102,078
)
 
—

 
(102,078
)
 
—

 
(102,078
)
Distributions to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
—

 
(9,995
)
 
(9,995
)
Revaluation of redeemable
   noncontrolling interest
 
—

 
—

 
185

 
—

 
—

 
185

 
—

 
185

Pro-rata share of investee's purchase of
   its subsidiary shares from
   noncontrolling interest
 
—

 
—

 
(958
)
 
—

 
—

 
(958
)
 
—

 
(958
)
Other comprehensive loss
 
—

 
—

 
—

 
—

 
(6,431
)
 
(6,431
)
 
—

 
(6,431
)
BALANCE AT DECEMBER 31, 2012
 
116,938

 
1,169

 
1,679,227

 
(276,085
)
 
(7,585
)
 
1,396,726

 
207,753

 
1,604,479

Issuance of common stock, net of
withholding taxes
 
709

 
7

 
8,503

 
—

 
—

 
8,510

 
—

 
8,510

Stock issuance costs
 
—

 
—

 
(96
)
 
—

 
—

 
(96
)
 
—

 
(96
)
Share-based compensation expense
 
—

 
—

 
6,414

 
—

 
—

 
6,414

 
—

 
6,414

Restricted stock reclassified from
   liability to equity
 
—

 
—

 
51

 
—

 
—

 
51

 
—

 
51

Net income, excluding $695 of net
   income attributable to redeemable
   noncontrolling interests
 
—

 
—

 
—

 
77,954

 
—

 
77,954

 
10,008

 
87,962

Dividends paid on common stock
 
—

 
—

 
—

 
(104,279
)
 
—

 
(104,279
)
 
—

 
(104,279
)
Distributions to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
—

 
(10,038
)
 
(10,038
)
Revaluation of redeemable
   noncontrolling interest
 
—

 
—

 
(226
)
 
—

 
—

 
(226
)
 
—

 
(226
)
Purchase of subsidiary shares from
   noncontrolling interest
 
—

 
—

 
—

 
—

 
—

 
—

 
(9
)
 
(9
)
Reclassification of redeemable NCI to
   permanent equity
 
—

 
—

 
—

 
—

 
—

 
—

 
29

 
29

Other comprehensive income
 
—

 
—

 
—

 
—

 
10,129

 
10,129

 
—

 
10,129

BALANCE AT DECEMBER 31, 2013
 
117,647

 
$
1,176

 
$
1,693,873

 
$
(302,410
)
 
$
2,544

 
$
1,395,183

 
$
207,743

 
$
1,602,926

See accompanying notes to the consolidated financial statements.

75


EQUITY ONE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended December 31, 2013, 2012 and 2011
(In thousands)
 
 
2013
 
2012
 
2011
OPERATING ACTIVITIES:
 
 
 
 
 
 
Net income
 
$
88,657

 
$
7,225

 
$
43,218

Adjustments to reconcile net income to net cash provided by operating
   activities:
 
 
 
 
 
 
Straight line rent adjustment
 
(2,344
)
 
(3,994
)
 
(3,185
)
Accretion of below market lease intangibles, net
 
(12,904
)
 
(12,660
)
 
(10,584
)
Amortization of below market ground lease intangibles
 
601

 
191

 
—

Equity in income of unconsolidated joint ventures
 
(1,648
)
 
(542
)
 
(5,533
)
Gain on bargain purchase
 
—

 
—

 
(30,561
)
Income tax provision (benefit) of taxable REIT subsidiaries
 
202

 
(2,503
)
 
(34,639
)
Provision for losses on accounts receivable
 
3,736

 
979

 
2,947

Amortization of (premium) discount on notes payable, net
 
(2,478
)
 
(2,627
)
 
1,183

Amortization of deferred financing fees
 
2,421

 
2,485

 
2,232

Depreciation and amortization
 
93,317

 
90,896

 
98,597

Share-based compensation expense
 
6,173

 
6,863

 
6,992

Amortization of derivatives
 
63

 
64

 
64

Gain on sale of real estate
 
(39,587
)
 
(16,588
)
 
(9,948
)
Loss on extinguishment of debt
 
31

 
30,602

 
2,396

Operating distributions from joint ventures
 
53

 
3,337

 
1,504

Impairment loss
 
10,617

 
29,441

 
57,336

Changes in assets and liabilities, net of effects of acquisitions and disposals:
 
 
 
 
 
 
Accounts and other receivables
 
(2,950
)
 
2,241

 
(2,394
)
Other assets
 
(4,653
)
 
26,824

 
(15,199
)
Accounts payable and accrued expenses
 
(4,645
)
 
(12,780
)
 
(142
)
Tenant security deposits
 
(289
)
 
787

 
(1,076
)
Other liabilities
 
(1,631
)
 
2,978

 
(582
)
Net cash provided by operating activities
 
132,742

 
153,219

 
102,626

INVESTING ACTIVITIES:
 
 
 
 
 
 
Acquisition of income producing properties
 
(109,449
)
 
(243,549
)
 
(279,080
)
Additions to income producing properties
 
(13,661
)
 
(20,175
)
 
(16,396
)
Acquisition of land held for development
 
(3,000
)
 
(9,505
)
 
—

Additions to construction in progress
 
(54,005
)
 
(65,143
)
 
(43,097
)
Deposits for the acquisition of income producing properties
 
(75
)
 
—

 
—

Proceeds from sale of real estate and rental properties
 
286,511

 
41,994

 
399,396

(Increase) decrease in cash held in escrow
 
(10,662
)
 
91,592

 
(91,591
)
Purchase of below market leasehold interest
 
(25,000
)
 
—

 
—

Increase in deferred leasing costs and lease intangibles
 
(9,266
)
 
(7,169
)
 
(7,154
)
Investment in joint ventures
 
(30,401
)
 
(26,392
)
 
(15,024
)
Investment in consolidated subsidiary
 
—

 
—

 
(242
)
Repayments of advances to joint ventures
 
5

 
517

 
34,887

Distributions from joint ventures
 
12,576

 
567

 
18,786

Investment in loans receivable
 
(12,000
)
 
(114,258
)
 
(45,100
)
Repayment of loans receivable
 
91,474

 
19,258

 
—

Net cash provided by (used in) investing activities
 
123,047

 
(332,263
)
 
(44,615
)
(Continued)
See accompanying notes to the consolidated financial statements.

76



EQUITY ONE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended December 31, 2013, 2012 and 2011
(In thousands)
 
 
 
2013
 
2012
 
2011
FINANCING ACTIVITIES:
 
 
 
 
 
 
Repayments of mortgage notes payable
 
(48,279
)
 
(66,173
)
 
(246,864
)
Net (repayments) borrowings under revolving credit facilities
 
(81,000
)
 
34,000

 
138,000

Proceeds from senior debt borrowings
 
—

 
296,823

 
—

Repayment of senior debt borrowings
 
—

 
(287,840
)
 
—

Proceeds from issuance of common stock
 
8,510

 
85,838

 
116,542

Borrowings under term loan
 
—

 
250,000

 
—

Payment of deferred financing costs
 
—

 
(3,251
)
 
(5,039
)
Stock issuance costs
 
(96
)
 
(883
)
 
(1,185
)
Dividends paid to stockholders
 
(104,279
)
 
(102,078
)
 
(98,842
)
Purchase of redeemable noncontrolling interests
 
(18,972
)
 
—

 
—

Distributions to redeemable noncontrolling interests
 
(3,468
)
 
(944
)
 
—

Distributions to noncontrolling interests
 
(10,038
)
 
(9,995
)
 
(11,405
)
Net cash (used in) provided by financing activities
 
(257,622
)
 
195,497

 
(108,793
)
Net (decrease) increase in cash and cash equivalents
 
(1,833
)
 
16,453

 
(50,782
)
Cash and cash equivalents obtained through acquisition
 
—

 
—

 
23,412

Cash and cash equivalents at beginning of the year
 
27,416

 
10,963

 
38,333

Cash and cash equivalents at end of the year
 
$
25,583

 
$
27,416

 
$
10,963

 
 
 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 
 
 
Cash paid for interest (net of capitalized interest of $2,863, $4,742
   and $2,273 in 2013, 2012 and 2011, respectively)
 
$
72,145

 
$
74,030

 
$
84,278

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
   FINANCING ACTIVITIES:
 
 
 
 
 
 
We acquired upon acquisition of certain income producing properties:
 
 
 
 
 
 
Income producing properties
 
$
161,719

 
$
261,139

 
$
471,984

Intangible and other assets
 
10,559

 
60,357

 
35,802

Intangible and other liabilities
 
(25,079
)
 
(39,809
)
 
(81,100
)
Assumption of mortgage notes payable
 
(37,750
)
 
(38,138
)
 
(128,722
)
Noncontrolling interest in Canyon Trails Towne Center
 
—

 
—

 
(18,884
)
Cash paid for income producing properties
 
$
109,449

 
$
243,549

 
$
279,080

Net cash paid for the acquisition of C&C (US) No. 1 is as follows:
 
 
 
 
 
 
Income producing properties
 
$
—

 
$
—

 
$
471,219

Intangible and other assets
 
—

 
—

 
113,484

Intangible and other liabilities
 
—

 
—

 
(35,898
)
Assumption of mortgage notes payable
 
—

 
—

 
(261,813
)
Issuance of Equity One common stock
 
—

 
—

 
(73,698
)
Noncontrolling interest in C&C (US) No. 1
 
—

 
—

 
(206,145
)
Gain on bargain purchase
 
—

 
—

 
(30,561
)
Cash acquired upon acquisition of C&C (US) No. 1
 
—

 
—

 
23,412

Net cash paid for acquisition of C&C (US) No. 1
 
—

 
—

 
—

Net cash paid for acquisition of income producing properties
 
$
109,449

 
$
243,549

 
$
279,080

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

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EQUITY ONE, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013, 2012 and 2011
1.    Organization and Basis of Presentation
Organization
We are a real estate investment trust, or REIT, that owns, manages, acquires, develops and redevelops shopping centers and retail properties located primarily in supply constrained suburban and urban communities. We were organized as a Maryland corporation in 1992, completed our initial public offering in May 1998, and have elected to be taxed as a REIT since 1995.
As of December 31, 2013, our consolidated shopping center portfolio comprised 140 properties, including 118 retail properties and six non-retail properties totaling approximately 14.9 million square feet of gross leasable area, or GLA, 10 development or redevelopment properties with approximately 1.8 million square feet of GLA upon completion, and six land parcels. As of December 31, 2013, our consolidated shopping center occupancy was 92.4% and included national, regional and local tenants. Additionally, we had joint venture interests in 20 retail properties and two office buildings totaling approximately 3.7 million square feet of GLA.
Basis of Presentation
The consolidated financial statements include the accounts of Equity One, Inc. and our wholly-owned subsidiaries and those other entities where we have a controlling financial interest, including where we have been determined to be a primary beneficiary of a variable interest entity (“VIE”) in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Equity One, Inc. and its subsidiaries are hereinafter referred to as “the consolidated companies”, the “Company”, “we”, “our”, “us” or similar terms. All significant intercompany transactions and balances have been eliminated in consolidation. Certain prior-period data have been reclassified to conform to the current period presentation. Certain operations have been classified as discontinued, and the associated results of operations and financial position are separately reported for all periods presented. Information in these notes to the consolidated financial statements, unless otherwise noted, does not include the accounts of discontinued operations.
2.    Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Properties
Income producing properties are stated at cost, less accumulated depreciation and amortization. Costs include those related to acquisition, development and construction, including tenant improvements, interest incurred during development, costs of predevelopment and certain direct and indirect costs of development. Costs related to business combinations are expensed as incurred and are included in general and administrative expenses in our consolidated statements of operations.
Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets as follows:
Buildings
  
30-55 years
Buildings and land improvements
  
2-40 years
Tenant improvements
  
Lesser of minimum lease term or economic useful life
Furniture and equipment
  
3-10 years
Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations and improvements that improve or extend the useful lives of assets are capitalized.

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Business Combinations
We allocate the purchase price of acquired properties to land, building, improvements and intangible assets and liabilities in accordance with the Business Combinations Topic of the FASB ASC. We allocate the initial purchase price of assets acquired (net tangible and identifiable intangible assets) and liabilities assumed based on their relative fair values at the date of acquisition. Upon acquisition of real estate operating properties, we estimate the fair value of acquired tangible assets (consisting of land, building, building improvements and tenant improvements) and identified intangible assets and liabilities (consisting of above and below-market leases, in-place leases and tenant relationships), assumed debt and redeemable units issued at the date of acquisition, based on the evaluation of information and estimates available at that date. Based on these estimates, we allocate the estimated fair value to the applicable assets and liabilities. Fair value is determined based on an exit price approach, which contemplates the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. If, up to one year from the acquisition date, information regarding fair value of the assets acquired and liabilities assumed is received and estimates are refined, appropriate adjustments are made to the purchase price allocation on a retrospective basis. There are four categories of intangible assets and liabilities to be considered: (1) in-place leases; (2) above and below-market value of in-place leases; (3) lease origination costs and (4) customer relationships. The aggregate value of other acquired intangible assets, consisting of in-place leases, is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases, including fixed rate renewal options, to market rental rates over (ii) the estimated fair value of the property as-if-vacant, determined as set forth above. The value of in-place leases exclusive of the value of above-market and below-market in-place leases is amortized to depreciation expense over the estimated remaining term of the respective leases. The value of above-market and below-market in-place leases is amortized to rental revenue over the estimated remaining term of the leases. If a lease terminates prior to its stated expiration, all unamortized amounts relating to that lease are written off.
In allocating the purchase price to identified intangible assets and liabilities of an acquired property, the value of above-market and below-market leases is estimated based on the present value of the difference between the contractual amounts, including fixed rate renewal options, to be paid pursuant to the leases and management’s estimate of the market lease rates and other lease provisions (i.e., expense recapture, base rental changes, etc.) measured over a period equal to the estimated remaining term of the lease. The capitalized above-market or below-market intangible is amortized to rental income over the estimated remaining term of the respective lease, which includes the expected renewal option period, if applicable.
The results of operations of acquired properties are included in our financial statements as of the dates they are acquired. The intangible assets and liabilities associated with property acquisitions are included in other assets and other liabilities in our consolidated balance sheets.
Construction in Progress and Land Held for Development
Properties also include construction in progress and land held for development. These properties are carried at cost and no depreciation is recorded. Properties undergoing significant renovations and improvements are considered under development. All direct and indirect costs related to development activities are capitalized into construction in progress and land held for development on our consolidated balance sheets, except for certain demolition costs, which are expensed as incurred. Costs incurred include predevelopment expenditures directly related to a specific project, development and construction costs, interest, insurance and real estate taxes. Indirect development costs include employee salaries and benefits, travel and other related costs that are directly associated with the development of the property. Our method of calculating capitalized interest is based upon applying our weighted average borrowing rate to the actual accumulated expenditures. The capitalization of such expenses ceases when the property is ready for its intended use, but no later than one-year from substantial completion of major construction activity. If we determine that a project is no longer viable, all predevelopment project costs are immediately expensed. Similar costs related to properties not under development are expensed as incurred.
Long-lived Assets
Properties Held and Used
We evaluate the carrying value of long-lived assets, including definite-lived intangible assets, when events or changes in circumstances indicate that the carrying value may not be recoverable in accordance with the Property, Plant and Equipment Topic of the FASB ASC. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. The fair value of fixed (tangible) assets and definite-lived intangible assets is determined primarily using either internal projected cash flows discounted at a rate commensurate with the risk involved or an external appraisal. At December 31, 2013, we reviewed the operating properties and construction in progress for impairment on a property-by-property and project-by-project basis in accordance with the Property, Plant and Equipment Topic of the FASB ASC, as we determined management's capital recycling initiatives and the fair values obtained from recent appraisals to be possible indicators of impairment.

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Each property was assessed individually and as a result, the assumptions used to derive future cash flows varied by property or project. These key assumptions are dependent on property-specific conditions, are inherently uncertain and consider the perspective of a third-party marketplace participant. The factors that may influence the assumptions include:
•
historical project performance, including current occupancy, projected capitalization rates and net operating income;
•
competitors’ presence and their actions;
•
property specific attributes such as location desirability, anchor tenants and demographics;
•
current local market economic and demographic conditions; and
•
future expected capital expenditures and the period of time before net operating income is stabilized.
After considering these factors, we project future cash flows for each property based on management’s intention for that property (holding period) and, if appropriate, an assumed sale at the final year of the holding period (reversion value) using a projected capitalization rate. If the resulting carrying amount of the property exceeds the estimated undiscounted cash flows (including the projected reversion value) from the property, an impairment charge would be recognized to reduce the carrying value of the property to its fair value.
Properties Held for Sale
Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell. The sale or disposal of a “component of an entity” is treated as discontinued operations. The operating properties sold by us typically meet the definition of a component of an entity and as such the revenue and expenses associated with sold properties are reclassified to discontinued operations for all periods presented.
The application of current accounting principles that govern the classification of any of our properties as held-for-sale on the consolidated balance sheet, or the presentation of results of operations and gains or losses on the sale of these properties as discontinued, requires management to make certain significant judgments. In evaluating whether a property meets the criteria set forth by the Property, Plant and Equipment Topic of the FASB ASC, we make a determination as to the point in time that it is probable that a sale will be consummated. Given the nature of all 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. Therefore, any properties categorized as held-for-sale represent only those properties that management has determined are probable to close within the requirements set forth in the Property, Plant and Equipment Topic of the FASB ASC. Prior to sale, we evaluate the extent of involvement with, and the significance to us of cash flows from a property subsequent to its sale, in order to determine if the results of operations and gain or loss on sale should be reflected as discontinued. Consistent with the Property, Plant and Equipment Topic of the FASB ASC, any property sold in which we have continuing involvement or cash flows (typically sales to co-investment partnerships that we do not control and for which we have recognized a partial sale of real estate) is not considered to be discontinued. In addition, any property which we sell to an unrelated third party, but in which we retain a property or asset management function, is not considered discontinued. Therefore, based on our evaluation of the Property, Plant and Equipment Topic of the FASB ASC only properties sold, or to be sold, to unrelated third parties where we will have no continuing involvement or cash flows are classified as discontinued operations.
Cash and Cash Equivalents
We consider liquid investments with a purchase date life to maturity of three months or less to be cash equivalents.
Cash Held in Escrow and Restricted Cash
Cash held in escrow and restricted cash 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 of 1986, as amended (the "Code") or cash that is not immediately available to us.
Accounts and Other Receivables
Accounts receivable includes amounts billed to tenants and accrued expense recoveries due from tenants. We make estimates of the uncollectability of our accounts receivable using the specific identification method. We analyze accounts receivable and historical bad debt levels, tenant credit-worthiness, payment history and industry trends when evaluating the adequacy of the allowance for doubtful accounts. Accounts receivable are written-off when they are deemed to be uncollectable and we are no

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longer actively pursuing collection. Our reported net income is directly affected by management’s estimate of the collectability of accounts receivable.
Investments in Joint Ventures
We analyze our joint ventures under the FASB ASC Topics of Consolidation and Real Estate-General in order to determine whether the entity should be consolidated. If it is determined that these investments do not require consolidation because the entities are not VIEs in accordance with the Consolidation Topic of the FASB ASC, we are not considered the primary beneficiary of the entities determined to be VIEs, we do not have voting control, and/or the limited partners (or non-managing members) have substantive participatory rights, then the selection of the accounting method used to account for our investments in unconsolidated joint ventures is generally determined by our voting interests and the degree of influence we have over the entity. Management uses its judgment when determining if we are the primary beneficiary of, or have a controlling financial interest in, an entity in which we have a variable interest. Factors considered in determining whether we have the power to direct the activities that most significantly impact the entity’s economic performance include risk and reward sharing, experience and financial condition of the other partners, voting rights, involvement in day-to-day capital and operating decisions and the extent of our involvement in the entity.
We use the equity method of accounting for investments in unconsolidated joint ventures when we own 20% or more of the voting interests and have significant influence but do not have a controlling financial interest, or if we own less than 20% of the voting interests but have determined that we have significant influence. Under the equity method, we record our investments in and advances to these entities in our consolidated balance sheets and our proportionate share of earnings or losses earned by the joint venture is recognized in equity in income (loss) of unconsolidated joint ventures in the accompanying consolidated statements of operations. We derive revenue through our involvement with unconsolidated joint ventures in the form of management and leasing services and interest earned on loans and advances. We account for this revenue gross of our ownership interest in each respective joint venture and record our proportionate share of related expenses in equity in income (loss) of unconsolidated joint ventures.
The cost method of accounting is used for unconsolidated entities in which we do not have the ability to exercise significant influence and we have virtually no influence over partnership operating and financial policies. Under the cost method, income distributions from the partnership are recognized in investment income. Distributions that exceed our share of earnings are applied to reduce the carrying value of our investment and any capital contributions will increase the carrying value of our investment. The fair value of a cost method investment is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment.
These joint ventures typically obtain non-recourse third-party financing on their property investments, thus contractually limiting our exposure to losses to the amount of our equity investment, and, due to the lender’s exposure to losses, a lender typically will require a minimum level of equity in order to mitigate its risk. Our exposure to losses associated with unconsolidated joint ventures is primarily limited to the carrying value of these investments.
On a periodic basis, we evaluate our investments in unconsolidated entities for impairment in accordance with the Investments-Equity Method and Joint Ventures Topic of the FASB ASC. We assess whether there are any indicators, including underlying property operating performance and general market conditions, that the value of our investments in unconsolidated joint ventures may be impaired. An investment in a joint venture is considered impaired only if we determine that its fair value is less than the net carrying value of the investment in that joint venture on an other-than-temporary basis. Cash flow projections for the investments consider property level factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. We consider various qualitative factors to determine if a decrease in the value of our investment is other-than-temporary. These factors include age of the venture, our intent and ability to retain our investment in the entity, financial condition and long-term prospects of the entity and relationships with our partners and banks. If we believe that the decline in the fair value of the investment is temporary, no impairment charge is recorded. If our analysis indicates that there is an other-than-temporary impairment related to the investment in a particular joint venture, the carrying value of the venture will be adjusted to an amount that reflects the estimated fair value of the investment.
Loans Receivable
Loans receivable include both mortgage loans and mezzanine loans and are classified as held to maturity and recorded at the stated principal amount plus allowable deferred loan costs or fees, which are amortized as an adjustment of the loan’s yield over the term of the related loan. We evaluate the collectability of both interest and principal on the loan periodically to determine whether it is impaired. A loan is considered to be impaired when, based upon current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan’s effective interest rate or to the proportionate value of the underlying collateral asset if applicable. Interest income on performing loans is accrued as earned.

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Goodwill
Goodwill reflects the excess of the fair value of the acquired business over the fair value of net identifiable assets acquired in various business acquisitions. We account for goodwill in accordance with the Intangibles – Goodwill and Other Topic of the FASB ASC.
We perform annual, or more frequently in certain circumstances, impairment tests of our goodwill. We have elected to test for goodwill impairment in November of each year. The goodwill impairment test is a two-step process that requires us to make decisions in determining appropriate assumptions to use in the calculation. The first step 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, if any, by determining an “implied fair value” of goodwill. The determination of each reporting unit’s (each property is considered a reporting unit) implied fair value of goodwill requires us to allocate the estimated fair value of the reporting unit to its assets and liabilities. Any unallocated fair value represents the implied fair value of goodwill which is compared to its corresponding carrying amount.
Deposits
Deposits included in other assets comprise funds held by various institutions for future payments of property taxes, insurance, improvements, utility and other service deposits.
Deferred Costs and Intangibles
Deferred costs, intangible assets included in other assets, and intangible liabilities included in other liabilities consist of loan origination fees, leasing costs and the value of intangible assets and liabilities 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 using the effective interest method. Direct salaries, third-party fees and other costs incurred by us to originate a lease are capitalized and are amortized against the respective leases 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-market rents that were recorded in connection with the acquisition of the properties. Intangible liabilities consist of below-market rents that are also recorded in connection with the acquisition of properties. Both intangible assets and liabilities are amortized and accreted using the straight-line method over the term of the related leases. When a lease is terminated early, any remaining unamortized or unaccreted balances under lease intangible assets or liabilities are charged to earnings. The useful lives of amortizable intangible assets are evaluated each reporting period with any changes in estimated useful lives being accounted for over the revised remaining useful life.
Noncontrolling Interests
Noncontrolling interests generally represent the portion of equity that we do not own in those entities that we consolidate. We account for and report our noncontrolling interests in accordance with the provisions required under the Consolidation Topic of the FASB ASC.
We identify our noncontrolling interests separately within the equity section on the consolidated balance sheets. Noncontrolling interests also include amounts related to joint venture units issued by consolidated subsidiaries or VIEs in connection with certain property acquisitions. Joint venture units which are redeemable for cash at the holder’s option or upon a contingent event outside of our control are classified as redeemable noncontrolling interests pursuant to the Distinguishing Liabilities from Equity Topic of the FASB ASC and are presented at redemption value in the mezzanine section between total liabilities and stockholders’ equity on the consolidated balance sheets. The amounts of consolidated net income (loss) attributable to Equity One, Inc. and to the noncontrolling interests are presented on the consolidated statements of operations.
Derivative Instruments and Hedging Activities
At times, we may use derivative instruments to manage exposure to variable interest rate risk. We generally enter into interest rate swaps to manage our exposure to variable interest rate risk and treasury locks to manage the risk of interest rates rising prior to the issuance of debt. We enter into derivative instruments that qualify as cash flow hedges and do not enter into derivative instruments for speculative purposes. The interest rate swaps associated with our cash flow hedges are recorded at fair value on a recurring basis. We assess the effectiveness of our cash flow hedges both at inception and on an ongoing basis. The effective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into interest expense as interest is incurred on the related variable rate debt. Within the next 12 months, we expect to reclassify $3.2 million as an increase to interest expense. Our cash flow hedges become ineffective if critical terms of the hedging instrument and the debt instrument do not perfectly match such as notional amounts, settlement dates, reset dates, calculation period and LIBOR rate. In addition, we evaluate the default risk of the counterparty by monitoring

82


the credit worthiness of the counterparty. When ineffectiveness exists, the ineffective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recognized in earnings in the period affected. Hedge ineffectiveness has not impacted earnings, and we do not anticipate it will have a significant effect in the future. Derivative instruments and hedging activities require management to make judgments on the nature of its derivatives and their effectiveness as hedges. These judgments determine if the changes in fair value of the derivative instruments are reported in the consolidated statements of operations as a component of net income (loss) or as a component of comprehensive income (loss) and as a component of stockholders’ equity on the consolidated balance sheets. While management believes its judgments are reasonable, a change in a derivative’s effectiveness as a hedge could materially affect expenses, net income and equity. See Note 14 for further detail on derivative activity.
Revenue Recognition
Revenue includes minimum rents, expense recoveries, percentage rental payments and management and leasing services. Minimum rents are recognized on an accrual basis over the terms of the related leases on a straight-line basis. As part of the leasing process, we 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 we are not considered the owner of the improvements, the allowance is considered 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. Lease revenue recognition commences when the lessee is given possession of the leased space, when the asset is substantially complete in the case of leasehold improvements, and there are no contingencies offsetting the lessee’s obligation to pay rent.
Many of the lease agreements contain provisions that require the payment of additional rents based on the respective tenants’ sales volume (contingent or percentage rent) and substantially all contain provisions that require reimbursement of the tenants’ allocable real estate taxes, insurance and common area maintenance costs (“CAM”). Revenue based on percentage of tenants’ sales is recognized only after the tenant exceeds its sales breakpoint. Revenue from tenant reimbursements of taxes, CAM and insurance is recognized in the period that the applicable costs are incurred in accordance with the lease agreements.
We recognize gains or losses on sales of real estate in accordance with the Property, Plant and Equipment Topic of the FASB ASC. Profits are not recognized until (a) a sale has been consummated; (b) the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property; (c) our receivable, if any, is not subject to future subordination; and (d) we have transferred to the buyer the usual risks and rewards of ownership, and we do not have a substantial continuing involvement with the property.
We are engaged by certain joint ventures to provide asset management, property management, leasing and investing services for such venture’s respective assets. We receive fees for our services, including a property management fee calculated as a percentage of gross revenue received, and recognize these fees as the services are rendered.
Earnings Per Share
Under the Earnings Per Share Topic of the FASB ASC, unvested share-based payment awards that entitle their holders to receive non-forfeitable dividends, such as our restricted stock awards, are classified as “participating securities.” As participating securities, our shares of restricted stock will be included in the calculation of basic and diluted earnings per share. Because the awards are considered participating securities under the provisions of the Earnings Per Share Topic of the FASB ASC, we are required to apply the two-class method of computing basic and diluted earnings per share. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common stockholders. Under the two-class method, earnings for the period are allocated between common stockholders and other security holders, based on their respective rights to receive dividends.
Segment Information
We invest in properties through direct ownership or through joint ventures. It is our intent that all properties will be owned or developed for investment purposes; however, we may decide to sell all or a portion of a development upon completion. Our revenue and net income are generated from the operation of our investment property. We also earn fees from third parties for services provided to manage and lease retail shopping centers owned through joint ventures or by third parties.
We review operating and financial data for each property on an individual basis; therefore each of our individual properties is a separate operating segment. We have aggregated our operating segments in six reportable segments based primarily upon our method of internal reporting which classifies our operations by geographical area. Our reportable segments by geographical area are as follows: (1) South Florida – including Miami-Dade, Broward and Palm Beach Counties; (2) North Florida – including all of Florida north of Palm Beach County; (3) Southeast - including Georgia, Louisiana, North Carolina and Virginia; (4) Northeast

83


– including Connecticut, Maryland, Massachusetts and New York; (5) West Coast – California; and (6) Non-retail – which is comprised of our non-retail assets.
Concentration of Credit Risk
A concentration of credit risk arises in our business when a national or regionally based tenant occupies a substantial amount of space in multiple properties owned by us. In that event, if the tenant suffers a significant downturn in its business, it may become unable to make its contractual rent payments to us, exposing us to potential losses in rental revenue, expense recoveries, and percentage rent. Further, the impact may be magnified if the tenant is renting space in multiple locations. Generally, we do not obtain security from our nationally-based or regionally-based tenants in support of their lease obligations to us. We regularly monitor our tenant base to assess potential concentrations of credit risk. As of December 31, 2013, Publix Super Markets was our largest tenant and accounted for approximately 1.3 million square feet, or approximately 7.8% of our GLA, and approximately $9.4 million, or 3.8%, of our annual minimum rent. As of December 31, 2013, we had outstanding receivables from Publix Super Markets of approximately $868,000.
Recent Accounting Pronouncements
In December 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-11, “Disclosures about Offsetting Assets and Liabilities.” Under ASU 2011-11, disclosures are required to provide information to help reconcile differences in the offsetting requirements under GAAP and International Financial Reporting Standards ("IFRS"). The new disclosure requirements mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, the ASU requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. In January 2013, the FASB issued ASU No. 2013-01, "Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities," which clarifies the instruments and transactions that are subject to the offsetting disclosure requirements established by ASU No. 2011-11. Derivative instruments accounted for in accordance with the derivatives and hedging topic of the FASB Accounting Standards Codification, repurchase agreements, reverse repurchase agreements, securities borrowing, and securities lending transactions are subject to the disclosure requirements of ASU No. 2011-11. ASU No. 2011-11 and ASU No. 2013-01 were effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. The adoption and implementation of these ASUs did not have an impact on our results of operations, financial condition or cash flows.
In July 2012, the FASB issued ASU No. 2012-02, "Testing Indefinite-Lived Intangible Assets for Impairment (the revised standard)." ASU No. 2012-02 is intended to reduce the cost and complexity of testing indefinite-lived intangible assets, other than goodwill, for impairment. It allows companies to perform a "qualitative" assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test. ASU No. 2012-02 was effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption and implementation of this ASU did not have an impact on our results of operations, financial condition or cash flows.
In February 2013, the FASB issued ASU No. 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." ASU No. 2013-02 requires entities to disclose information about the amounts reclassified out of accumulated other comprehensive income by component. Disclosure is also required regarding significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting periods. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. ASU No. 2013-02 was effective for reporting periods beginning after December 15, 2012. The adoption and implementation of this ASU did not have a material impact on our results of operations, financial condition or cash flows.
In February 2013, the FASB issued ASU No. 2013-04, "Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force)." ASU No. 2013-04 requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. ASU No. 2013-04 also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. ASU No. 2013-04 is effective for fiscal years, and interim periods within those years, after December 15, 2013. We are currently evaluating the impact, if any, that the adoption of this ASU will have on our consolidated financial statements.
In July 2013, the FASB issued ASU No. 2013-10, "Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (a consensus of the FASB Emerging Issues Task Force)."

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ASU No. 2013-10 permits the Fed Funds Effective Swap Rate to be used as a U.S. benchmark interest rate for hedge accounting purposes in addition to interest rates on direct Treasury obligations of the U.S. government and the London Interbank Offered Rate. The amendments also remove the restriction on using different benchmark rates for similar hedges. ASU No. 2013-10 was effective on July 17, 2013 and applies prospectively to qualifying new or redesignated hedging relationships entered into on or after the effective date. The adoption and implementation of this ASU did not have an impact on our results of operations, financial condition or cash flows.
In July 2013, the FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force)." ASU No. 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists and is intended to eliminate diversity in practice. ASU No. 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. We do not believe that the adoption of this ASU will have a material impact on our results of operations, financial condition or cash flows.

3.    Properties
The following table is a summary of the composition of income producing properties in the consolidated balance sheets:
 
 
December 31,
 
 
2013
 
2012
 
 
(In thousands)
Land and land improvements
 
$
1,364,729

 
$
1,266,245

Building and building improvements
 
1,669,401

 
1,575,784

Tenant improvements
 
119,001

 
95,616

 
 
3,153,131

 
2,937,645

Less: accumulated depreciation
 
(354,166
)
 
(297,736
)
Income producing properties, net
 
$
2,798,965

 
$
2,639,909

Capitalized Costs
We capitalized external and internal costs related to development and redevelopment activities of $45.3 million and $1.1 million, respectively, in 2013 and $76.4 million and $1.1 million, respectively, in 2012. We capitalized external and internal costs related to tenant and other property improvements of $20.8 million and $270,000, respectively, in 2013 and $20.7 million and $100,000, respectively, in 2012. We capitalized external and internal costs related to successful leasing activities of $4.8 million and $4.5 million, respectively, in 2013 and $3.1 million and $3.8 million, respectively, in 2012.

85


4.    Acquisitions
The following table provides a summary of acquisition activity during the year ended December 31, 2013:
 
Date Purchased
 
Property Name
 
City
 
State
 
Square
Feet /Acres
 
Purchase
Price
 
Mortgage
Assumed
 
 
 
 
 
 
 
 
 
 
(In thousands)
December 30, 2013
 
Kirkman Shoppes - land outparcel
 
Orlando
 
FL
 
0.80

(1) 
$
3,000

 
$
—

October 25, 2013
 
Pleasanton Plaza
 
Pleasanton
 
CA
 
163,469

 
30,900

 
20,021

October 23, 2013
 
The Village Center (2)
 
Westport
 
CT
 
89,041

 
54,250

 
15,680

September 5, 2013
 
Manor Care
 
Bethesda
 
MD
 
41,123

 
13,000

 
—

September 5, 2013
 
5335 CITGO
 
Bethesda
 
MD
 
18,128

 
6,000

 
—

September 5, 2013
 
5471 CITGO
 
Bethesda
 
MD
 
14,025

 
4,000

 
—

June 5, 2013
 
Westwood Towers
 
Bethesda
 
MD
 
211,020

 
25,000

 
—

May 7, 2013
 
Bowlmor Lanes
 
Bethesda
 
MD
 
27,000

 
12,000

 
—

Total
 
 
 
 
 
 
 
 
 
$
148,150

 
$
35,701

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

The aggregate purchase price of the above property acquisitions have been allocated as follows:
 
 
Amount
 
Weighted Average Amortization Period
 
 
(In thousands)
 
(In years)
Land
 
$
83,621

 
N/A
Land improvements
 
2,650

 
12.1
Buildings
 
75,941

 
34.4
Tenant improvements
 
2,507

 
12.2
Above-market leases
 
31

 
2.3
In-place lease interests
 
8,598

 
9.3
Lease origination costs
 
91

 
4.9
Leasing commissions
 
1,839

 
9.8
Below-market leases
 
(24,739
)
(1) 
10.3
Other acquired liabilities
 
(340
)
 
N/A
Above-market debt assumed
 
(2,049
)
 
3.9
 
 
$
148,150

 
 
 ______________________________________________ 
(1) Includes a below-market purchase option valued at $7.5 million held by the lessee of a certain non-retail property.
During the year ended December 31, 2013, we did not recognize any material measurement period adjustments related to prior year acquisitions.
In conjunction with the acquisitions of Manor Care, 5335 CITGO, and 5471 CITGO, we entered into reverse Section 1031 like-kind exchange agreements with third party intermediaries, which, for a maximum of 180 days, allow us to defer for tax purposes, gains on the sale of other properties identified and sold within this period. Until the earlier of the termination of the exchange agreements or 180 days after the respective acquisition dates, the third party intermediaries are the legal owner of the properties;

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however, we control the activities that most significantly impact each property and retain all of the economic benefits and risks associated with each property. Therefore, at the date of acquisition, we determined that we were the primary beneficiary of these VIEs and consolidated the properties and their operations as of the respective acquisition dates. Legal ownership of these assets was transferred to us by the qualified intermediary during the first quarter of 2014.
During the year ended December 31, 2012, we acquired five shopping centers, a retail condominium, a development site and a related outparcel, and a warehouse facility for an aggregate purchase price of $288.5 million, including mortgages assumed of approximately $35.5 million.
During the years ended December 31, 2013, 2012 and 2011, excluding costs related to C&C (US) No. 1, Inc. ("CapCo") in 2011, we expensed approximately $3.3 million, $3.4 million and $7.0 million, respectively, of transaction-related costs in connection with completed or pending property acquisitions which are included in general and administrative costs in the consolidated statements of operations. The purchase price related to the 2013 acquisitions listed in the above table was funded by the use of our line of credit, cash on hand, and proceeds from dispositions and loan repayments. In connection with the 2013 acquisitions, we assumed two mortgages with a total principal balance of $35.7 million, which mature on June 1, 2015 and June 1, 2019. See Note 14 for further information on the mortgages assumed.
5.    Acquisition of a Controlling Interest in CapCo
On January 4, 2011, we acquired a controlling ownership interest in CapCo, through a joint venture with Liberty International Holdings Limited, or LIH. At the time of the acquisition, CapCo, which was previously wholly-owned by LIH, owned a portfolio of 13 properties in California totaling approximately 2.6 million square feet of GLA. LIH is a subsidiary of Capital Shopping Centres Group PLC, a United Kingdom real estate investment trust. The results of CapCo’s operations have been included in our consolidated financial statements from the date of acquisition.
At the closing of the transaction, LIH contributed all of the outstanding shares of CapCo’s common stock to the joint venture in exchange for Class A Shares in the joint venture, representing an approximate 22% interest in the joint venture and we contributed a shared appreciation promissory note to the joint venture in the amount of $600.0 million and an additional $84.3 million in exchange for an approximate 78% interest in the joint venture, which consists of approximately 70% of the Class A joint venture shares and all of the Class B joint venture shares. The initial Class B joint venture shares are entitled to a preferred return of 1.5% per quarter. The actual payment of the Class B preferred return is limited to the extent that there is available cash remaining in any given period (subsequent to the payment of dividend equivalents to the holders of the Class A joint venture shares) and a decision to make such a distribution by the board of the joint venture. Any remaining available cash after the Class B preferred return is paid in a given period may be distributed, in an elective distribution, among the Class A and Class B joint venture shares, with 83.333% attributable to the Class B joint venture shares and 16.667% to the Class A joint venture shares on a pro-rata basis among the holders of such joint venture shares. Based on the respective ownership percentages held by Equity One and LIH, this allocation provides for, to the extent distributions in excess of available cash are distributed to the joint venture partners in the attribution of approximately 95% of such residual amounts to Equity One and the remaining 5% to LIH.
In addition, at the closing, LIH transferred and assigned to us an outstanding promissory note of CapCo in the amount of $67.0 million in exchange for approximately 4.1 million shares of our common stock and one share of our newly-established Class A common stock, that (i) was convertible into 10,000 shares of our common stock in certain circumstances and (ii) subject to certain limitations, entitled LIH to voting rights with respect to a number of shares of our common stock determined with reference to the number of joint venture shares held by LIH from time to time. Effective June 29, 2011, the one share of Class A common stock was converted in accordance with its terms into 10,000 shares of our common stock. In March 2012, LIH sold the shares of our common stock issued in exchange for the CapCo promissory note and upon conversion of the Class A common share in an underwritten public offering.
The joint venture shares received by LIH are redeemable for cash or, solely at our option, our common stock on a one-for-one basis, subject to certain adjustments. LIH’s ability to participate in earnings of CapCo is limited to their right to receive distributions payable on their joint venture shares. These non-elective distributions are designed to mirror dividends paid on our common stock. As such, earnings attributable to the noncontrolling interest as reflected in our consolidated statement of operations will be limited to distributions made to LIH on its joint venture shares. Distributions to LIH for the years ended December 31, 2013, 2012 and 2011 were $10.0 million, $10.0 million and $9.5 million, respectively, which were equivalent to the per share dividends declared on our common stock, adjusted for certain prorations as stipulated by the terms of the transaction.
In connection with the CapCo transaction, we also executed an Equityholders’ Agreement, among us, Capital Shopping Centers plc (“CSC”), LIH, Gazit-Globe Ltd. (“Gazit”), MGN (USA) Inc., Gazit (1995), Inc., MGN America, LLC, Silver Maple (2001), Inc. and Ficus, Inc. Pursuant to the Equityholders’ Agreement, we increased the size of our board of directors by one seat, effective January 4, 2011, and appointed David Fischel, a designee of CSC, to the board. Subject to its continuing to hold a minimum

87


number of shares of our common stock (on a fully diluted basis), CSC has the right to nominate one candidate for election to our board of directors at each annual meeting of our stockholders at which directors are elected.
Also in connection with the CapCo transaction, we amended our charter to, among other things, (i) add foreign ownership limits and (ii) modify the existing ownership limits for individuals (as defined for purposes of certain provisions of the Code). The foreign ownership limits provide that, subject to certain exceptions, a foreign person may not acquire, beneficially or constructively, any shares of our capital stock, if immediately following the acquisition of such shares, the fair market value of the shares of our capital stock owned, directly and indirectly, by all foreign persons (other than LIH and its affiliates) would comprise 29% or more of the fair market value of the issued and outstanding shares of our capital stock.
The ownership limits for individuals in our charter were amended to provide that, subject to exceptions, no person (as such term is defined in our charter), other than an individual (who will be subject to the more restrictive limits discussed below), may own, or be deemed to own, directly and by virtue of certain constructive ownership provisions of the Code, more than 9.9% in value of the outstanding shares of our capital stock in the aggregate or more than 9.9%, in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock, and no individual may own, or be deemed to own, directly and by virtue of certain constructive ownership provisions of the Code, more than 5.0% in value of the outstanding shares of our capital stock in the aggregate or more than 5.0%, in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock.
Under our charter, the board of directors may increase the ownership limits. In addition, our board of directors, in its sole discretion, may exempt a person from the ownership limits and may establish a new limit applicable to that person if that person submits to the board of directors certain representations and undertakings, including representations that demonstrate, to the reasonable satisfaction of the board, that such ownership would not jeopardize our status as a REIT under the Code.
The fair value of the approximately 4.1 million shares of common stock transferred of $73.7 million was based on the closing market price of our common stock on the closing date of $18.15 per share.
We expensed approximately $7.2 million of acquisition-related costs in connection with the CapCo transaction of which $1.9 million was recorded in general and administrative expenses in the accompanying consolidated statements of operations for the year ended December 31, 2011.
As of the acquisition date, we classified three properties with fair values less costs to sell totaling approximately $36.3 million as held for sale. Results of these held for sale properties are included in “discontinued operations” on the consolidated statement of operations for the year ended December 31, 2011.
Simultaneously with the closing of the transaction, we contributed an additional $84.3 million to the joint venture in exchange for additional Class B joint venture shares, which amount was used to repay the remaining principal amount due on the mortgage loan secured by the Serramonte Shopping Center. Although the mortgage loan was paid off at closing, the liability is reflected in the fair value of net assets acquired since the obligation became ours upon closing.
The fair value of the noncontrolling interest in CapCo was estimated by reference to the amount that LIH would be entitled to receive upon a redemption of its Class A joint venture shares, which is equal to the value of the same number of shares of Equity One common stock plus any accrued but unpaid quarterly distributions with respect to the Class A joint venture shares. As a result, the fair value of the joint venture shares held by LIH was estimated at $18.15 per share, or $206.1 million in aggregate, equal to the value of Equity One common stock that LIH would have received had it redeemed its Class A joint venture shares on January 4, 2011.
The fair value of the identifiable assets acquired and liabilities assumed exceeded the sum of the fair value of the consideration transferred and the fair value of the noncontrolling interest. The fair value of the assets acquired significantly increased from the date the original purchase terms were agreed upon until the closing of the transaction on January 4, 2011. As a result, we recognized a gain of approximately $30.6 million, which is included in the line item entitled “gain on bargain purchase” in the consolidated statement of operations for the year ended December 31, 2011. The following table provides a reconciliation of the gain on bargain purchase (in thousands):
Fair value of net assets acquired
$
310,404

Fair value of consideration transferred
(73,698
)
Fair value of noncontrolling interest
(206,145
)
Gain on bargain purchase
$
30,561


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6.    Dispositions
The following table provides a summary of disposition activity during the year ended December 31, 2013:
Date Sold
 
Property Name
 
City
 
State
 
Square
Feet/Acres
 
Gross Sales
Price
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
 
Income producing property sold
 
 
 
 
 
 
 
 
 
December 20, 2013
 
Spalding Village
 
Griffin
 
GA
 
235,318

 
$
5,600

 
December 19, 2013
 
Canyon Trails Towne Center
 
Goodyear
 
AZ
 
202,196

 
23,500

 
December 16, 2013
 
Danville-San Ramon Medical
   Center
 
Danville
 
CA
 
74,599

 
15,300

 
December 9, 2013
 
Walton Plaza
 
Augusta
 
GA
 
43,460

 
2,300

 
December 6, 2013
 
Shipyard Plaza
 
Pascagoula
 
MS
 
66,857

 
3,900

 
November 20, 2013
 
Powers Ferry Plaza
 
Marietta
 
GA
 
86,401

 
7,750

 
September 25, 2013
 
Regency Crossing
 
Port Richey
 
FL
 
85,864

 
6,550

(1) 
September 18, 2013
 
Paulding Commons
 
Hiram
 
GA
 
209,676

 
18,150

 
August 16, 2013
 
Willowdaile Shopping Center
 
Durham
 
NC
 
95,601

 
5,200

 
August 7, 2013
 
Village at Northshore
 
Slidell
 
LA
 
144,638

 
9,450

 
July 19, 2013
 
The Galleria
 
Wilmington
 
NC
 
92,114

 
3,760

 
July 1, 2013
 
CVS Plaza
 
Miami
 
FL
 
18,214

 
4,400

 
June 27, 2013
 
Providence Square
 
Charlotte
 
NC
 
85,930

 
2,000

 
June 18, 2013
 
Medical & Merchants
 
Jacksonville
 
FL
 
156,153

 
12,000

(2) 
June 18, 2013
 
Meadows
 
Miami
 
FL
 
75,524

 
15,242

 
June 18, 2013
 
Plaza Alegre
 
Miami
 
FL
 
88,411

 
20,633

 
June 7, 2013
 
Chestnut Square
 
Brevard
 
NC
 
34,260

 
6,000

 
May 1, 2013
 
Madison Centre
 
Madison
 
AL
 
64,837

 
7,350

 
April 4, 2013
 
Lutz Lake Crossing
 
Lutz
 
FL
 
64,985

 
10,550

 
April 4, 2013
 
Seven Hills
 
Spring Hill
 
FL
 
72,590

 
7,750

 
March 29, 2013
 
Middle Beach Shopping Center
 
Panama City Beach
 
FL
 
69,277

 
2,350

 
March 22, 2013
 
Douglas Commons
 
Douglasville
 
GA
 
97,027

 
12,000

 
March 22, 2013
 
North Village Center
 
North Myrtle Beach
 
SC
 
60,356

 
2,365

 
March 22, 2013
 
Windy Hill Shopping Center
 
North Myrtle Beach
 
SC
 
68,465

 
2,635

 
February 13, 2013
 
Macland Pointe
 
Marietta
 
GA
 
79,699

 
9,150

 
January 23, 2013
 
Shoppes of Eastwood
 
Orlando
 
FL
 
69,037

 
11,600

 
January 15, 2013
 
Butler Creek
 
Acworth
 
GA
 
95,597

 
10,650

 
January 15, 2013
 
Fairview Oaks
 
Ellenwood
 
GA
 
77,052

 
9,300

 
January 15, 2013
 
Grassland Crossing
 
Alpharetta
 
GA
 
90,906

 
9,700

 
January 15, 2013
 
Mableton Crossing
 
Mableton
 
GA
 
86,819

 
11,500

(3) 
January 15, 2013
 
Hamilton Ridge
 
Buford
 
GA
 
90,996

 
11,800

 
January 15, 2013
 
Shops at Westridge
 
McDonough
 
GA
 
66,297

 
7,550

 
 
 
 
 
 
 
 
 
 
 
287,985

 
(Continued)

89


Date Sold
 
Property Name
 
City
 
State
 
Square
Feet/Acres
 
Gross Sales
Price
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
 
Outparcels sold
 
 
 
 
 
 
 
 
 
 
 
October 31, 2013
 
Canyon Trails - land outparcel
 
Goodyear
 
AZ
 
0.90

(4) 
$
695

 
September 10, 2013
 
Willowdaile - Subway
 
Durham
 
NC
 
2,384

 
700

 
June 21, 2013
 
Canyon Trails - Jack in the Box
 
Goodyear
 
AZ
 
4,000

 
1,980

 
May 23, 2013
 
Canyon Trails - Chase Pad
 
Goodyear
 
AZ
 
4,200

 
3,850

 
 
 
 
 
 
 
 
 
 
 
7,225

 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
$
295,210

 
 ______________________________________________ 
(1) We provided financing to the buyer in the form of a $4.3 million loan receivable which was repaid in December 2013. See Note 11 for further discussion.
(2) We provided financing to the buyer in the form of an $8.5 million loan receivable which was repaid in December 2013. See Note 11 for further discussion.
(3) $2.8 million of mortgage debt secured by this property was repaid at closing.
(4) In acres.
As part of our strategy to upgrade and diversify our portfolio and recycle our capital, we have sold or are in the process of selling certain non-core properties and are currently evaluating opportunities to sell certain non-core properties. Although we have not committed to a disposition plan with respect to certain of these assets, we may consider disposing of such properties if pricing is deemed to be favorable. If the market values of these assets are below their carrying values, it is possible that the disposition of these assets could result in impairments or other losses. Depending on the prevailing market conditions and historical carrying values, these impairments and losses could be material. See Note 29 for additional discussion of the status of those dispositions under contract and the related financial statement impact.
Discontinued Operations
We report properties held-for-sale and operating properties sold in the current period as discontinued operations. Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell. The results of these discontinued operations are included in a separate component of income/loss on the consolidated statements of operations under the caption discontinued operations. This reporting has resulted in certain reclassifications of financial statement amounts.
As of December 31, 2013, we classified three properties located in our Southeast, North Florida and South Florida regions as held for sale. The operations of these properties are included in discontinued operations in the accompanying consolidated financial statements for all the periods presented and the related assets and liabilities are presented as held for sale in our consolidated balance sheets at December 31, 2013 and 2012. Subsequent to year end, we closed on the sale of the two properties located in the Southeast and North Florida regions for an aggregate purchase price of $10.7 million. Additionally, we have another property located in our Southeast region under contract for an estimated gross sales price of $10.1 million, which is subject to due diligence.
During 2012, we sold four properties and two outparcels in our Southeast and West Coast regions for a total sales price of $71.2 million, inclusive of $27.2 million of mortgage debt repaid by the buyer at closing.
On December 20, 2011, we sold 36 shopping centers predominantly located in the Atlanta, Tampa and Orlando markets to an affiliate of Blackstone Real Estate Partners VII (“Blackstone”) for a total sales price of $473.1 million, inclusive of the assumption of mortgage loans having an aggregate principal balance of approximately $155.7 million (as adjusted for subsequent payoffs of $9.9 million) as of the date of sale. The operations of these properties and the related assets and liabilities are included in discontinued operations in the accompanying consolidated financial statements for the year ended December 31, 2011. We recognized an aggregate impairment loss of $33.8 million related to this sale.

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The components of income and expense relating to discontinued operations for the years ended December 31, 2013, 2012 and 2011 are shown below. These include the results of operations through the date of sale for each property that was sold during 2013, 2012 and 2011 and the operations for the applicable period for those assets classified as held for sale as of December 31, 2013:
 
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(In thousands)
Rental revenue
$
16,232

 
$
36,472

 
$
95,621

Expenses:
 
 
 
 
 
    Property operating expenses
6,060

 
11,195

 
28,149

    Depreciation and amortization
3,787

 
8,896

 
21,298

    General and administrative expenses
24

 
14

 
123

Operations of income producing properties
6,361

 
16,367

 
46,051

Interest expense
(806
)
 
(2,514
)
 
(18,901
)
Equity in income of unconsolidated joint ventures
—

 
—

 
704

Gain on disposal of income producing properties
39,587

 
16,588

 
4,406

Impairment loss
(4,976
)
 
(20,532
)
 
(40,352
)
Loss on extinguishment of debt
(138
)
 
(1,456
)
 
(882
)
Income tax (provision) benefit
(686
)
 
(477
)
 
29,552

Other income
352

 
461

 
122

Income from discontinued operations
39,694

 
8,437

 
20,700

Net (income) loss attributable to noncontrolling interests
(494
)
 
(26
)
 
55

Income from discontinued operations attributable to Equity One, Inc.
$
39,200

 
$
8,411

 
$
20,755

Interest expense included in discontinued operations above includes interest on debt that is to be assumed by the buyer or interest on debt that is required to be repaid as a result of the disposal transaction.
During the years ended December 31, 2013, 2012 and 2011, we recognized impairment losses on discontinued operations of $5.0 million, $20.5 million and $40.4 million, respectively. See Note 7 for further discussion of these impairment losses.
During the year ended December 31, 2011, we recognized a tax benefit of $29.6 million primarily attributable to a reversal of a deferred tax liability associated with properties sold to an affiliate of Blackstone. The deferred tax liability was initially established upon our acquisition of DIM Vastgoed, N.V. ("DIM") in 2009. See Note 16 for further discussion of the DIM tax benefit.

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7.    Impairments
The following is a summary of the composition of impairment losses included in the consolidated statements of operations:
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
 
(In thousands)
Goodwill
 
$
150

 
$
378

 
$
565

Land held for development
 
3,085

 
740

 
11,766

Properties held for use
 
2,406

 
7,791

 
4,653

Impairment loss recognized in continuing operations
 
5,641

 
8,909

 
16,984

Goodwill
 
138

 
147

 
1,819

Properties held for sale
 
4,838

 
20,385

 
38,533

Impairment loss recognized in discontinued operations
 
4,976

 
20,532

 
40,352

Total impairment loss
 
$
10,617

 
$
29,441

 
$
57,336

Goodwill
We perform annual, or more frequent in certain circumstances, impairment tests of our goodwill. We estimate the fair value of the reporting unit using discounted projected future cash flows. If the carrying value of the reporting unit exceeds its fair value, an impairment is recorded. As a result of our analysis, we recognized $150,000, $378,000 and $565,000 of impairment losses in continuing operations for the years ended December 31, 2013, 2012 and 2011, respectively, and we recognized goodwill impairment losses in discontinued operations of $138,000, $147,000 and $1.8 million for the years ended December 31, 2013, 2012 and 2011, respectively.
Land Held for Development
We measure the recoverability of development projects by comparing the carrying amount to estimated future undiscounted cash flows. Impairment is recognized when the expected undiscounted cash flows for a development project are less than its carrying amount, at which time the property is written-down to fair value. During the years ended December 31, 2013, 2012 and 2011, we recognized $3.1 million, $740,000 and $11.8 million, respectively, of impairment losses on certain development projects for which management’s development intentions changed regarding the future status of the projects and considering the increased likelihood that management may sell the land parcels prior to development.
Properties Held for Use
We review properties held for use for impairment on a property by property basis when events or changes in circumstances indicate that the carrying value may not be recoverable in accordance with the Property, Plant, and Equipment Topic of the FASB ASC. Impairment is recognized on properties held for use when the expected undiscounted cash flows for a property are less than its carrying amount, at which time the property is written-down to fair value. During the years ended December 31, 2013, 2012 and 2011, we recognized $2.4 million, $7.8 million and $4.7 million, respectively, of impairment losses on certain properties located in secondary markets for which our anticipated holding periods have been reconsidered. The analysis included an assessment of the plans for each property. Based on this analysis, it was determined that there is an increased likelihood that holding periods for certain properties may be shorter than previously estimated due to management’s updated disposition plans. The expected cash flows considered the estimated holding period of the assets and the exit price in the event of disposition.
Properties Held for Sale
Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell. The sale or disposal of a “component of an entity” is treated as discontinued operations. The operating properties sold by us typically meet the definition of a component of an entity and as such the revenue and expenses associated with sold properties are reclassified to discontinued operations for all periods presented. During the years ended December 31, 2013, 2012 and 2011, we recognized impairment losses of $4.8 million, $20.4 million and $38.5 million, respectively, related to properties held for sale primarily based on sales contracts.

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8.    Accounts and Other Receivables
The following is a summary of the composition of accounts and other receivables included in the consolidated balance sheets:
 
 
December 31,
 
 
2013
 
2012
 
 
(In thousands)
Tenants
 
$
15,404

 
$
14,354

Other
 
2,287

 
2,254

Allowance for doubtful accounts
 
(4,819
)
 
(3,182
)
Total accounts and other receivables, net
 
$
12,872

 
$
13,426

For the years ended December 31, 2013, 2012 and 2011, we recognized bad debt expense of $3.7 million, $900,000 and $1.9 million, respectively, which is included in property operating expenses in the accompanying consolidated statements of operations.
9.    Investments in Joint Ventures
The following is a summary of the composition of investments in and advances to unconsolidated joint ventures included in the consolidated balance sheets:
 
 
 
 
 
 
 
 
Investment Balance
at December 31,
Joint Venture (1)
 
Number of Properties
 
Location
 
Ownership
 
2013
 
2012
 
 
 
 
 
 
 
 
(In thousands)
Investments in unconsolidated joint ventures:
 
 
 
 
 
 
 
 
 
 
GRI-EQY I, LLC (2)
 
10
 
GA, SC, FL
 
10.0%
 
$
12,912

 
$
8,587

G&I Investment South Florida Portfolio, LLC
 
3
 
 FL
 
20.0%
 
3,480

 
3,491

Madison 2260 Realty LLC
 
1
 
 NY
 
8.6%
 
634

 
634

Madison 1235 Realty LLC
 
1
 
 NY
 
20.1%
 
820

 
1,000

Talega Village Center JV, LLC (3)
 
1
 
CA
 
50.5%
 
2,828

 
2,909

Vernola Marketplace JV, LLC (3)
 
1
 
CA
 
50.5%
 
6,468

 
6,972

Parnassus Heights Medical Center
 
1
 
CA
 
50.0%
 
19,791

 
20,385

Equity One JV Portfolio, LLC (4) 
 
6
 
 FL, MA, NJ
 
30.0%
 
44,237

 
27,589

       Total
 
 
 
 
 
 
 
91,170

 
71,567

Advances to unconsolidated joint ventures
 
 
 
 
 
 
 
602

 
604

Investments in and advances to unconsolidated joint ventures
 
 
 
 
 
 
 
$
91,772

 
$
72,171

______________________________________________ 
(1) All unconsolidated joint ventures are accounted for under the equity method except for the Madison 2260 Realty LLC and Madison 1235 Realty LLC joint ventures, which are accounted for under the cost method.
(2) The investment balance as of December 31, 2013 and 2012 is presented net of a deferred gain of $3.3 million for both periods associated with the disposition of assets by us to the joint venture.
(3) Our effective interest is 48% when considering the 5% noncontrolling interest held by Vestar Development Company.
(4) The investment balance as of December 31, 2013 and 2012 is presented net of a deferred gain of approximately $376,000 and $404,000, respectively, associated with the disposition of assets by us to the joint venture.
Equity in income of unconsolidated joint ventures totaled $1.6 million, $542,000 and $4.8 million for the years ended December 31, 2013, 2012 and 2011, respectively. Management fees and leasing fees paid to us associated with these joint ventures, which are included in management and leasing services revenue in the accompanying consolidated statements of operations, totaled approximately $2.6 million, $2.4 million and $1.8 million for the years ended December 31, 2013, 2012 and 2011, respectively.

At December 31, 2013 and 2012, the aggregate carrying amount of the debt of our unconsolidated joint ventures accounted for under the equity method was $286.0 million and $289.9 million, respectively, of which our aggregate proportionate share was

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$72.5 million and $65.6 million, respectively. During the years ended December 31, 2013 and 2012, we made investments of $4.1 million in GRI-EQY I, LLC and $7.5 million in Parnassus Heights Medical Center, respectively, in connection with repayments of indebtedness by those joint ventures. Although we have not guaranteed the debt of these joint ventures, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) on certain of the loans of the joint ventures.
Equity One/Vestar Joint Ventures
In December 2010, we acquired ownership interests in two properties located in California through partnerships (the “Equity One/Vestar JVs”) with Vestar Development Company (“Vestar”). In both of these joint ventures, we hold a 95% interest, and they are consolidated. Each Equity One/Vestar JV holds a 50.5% ownership interest in each of the California properties through two separate joint ventures with Rockwood Capital (the “Rockwood JVs”). The Equity One/Vestar JVs’ ownership interests in the properties are accounted for under the equity method. Included in our original investment were two bridge loans with an aggregate balance of $35.0 million, secured by the properties, made by the Equity One/Vestar JVs to the Rockwood JVs as short-term financing until longer-term mortgage financing was obtained. During the third quarter of 2011, the bridge loans and related accrued interest were repaid to us in full with proceeds from new mortgages obtained by the joint ventures.
Upon formation, the Rockwood JVs were considered VIEs for which the Equity One/Vestar JVs, which we control, were not the primary beneficiaries due to shared control and lack of financial interest. Since the bridge loans were repaid to us during 2011 and the Rockwood JVs were able to secure long term mortgage financing from a third party lender, the Rockwood JVs are no longer considered VIEs.
In January 2014, we acquired Rockwood Capital and Vestar Development Company's interests in Talega Village Center, a 102,000 square foot grocery-anchored shopping center located in San Clemente, California, for an additional equity investment of $6.2 million. In addition, in January 2014, the property held by Vernola Marketplace JV, LLC was sold for $49.0 million, and the buyer assumed the existing mortgage of $22.9 million. The joint venture anticipates recognizing a gain of approximately $14.5 million on the sale.
CapCo Joint Ventures
In connection with the CapCo acquisition on January 4, 2011, we acquired ownership interests in three properties located in California through joint ventures, tenants-in-common or other shared ownership. The joint ventures included Pacific Financial Center, Parnassus Heights Medical Center and Trio Apartments. The aggregate fair value of these joint ventures as of January 4, 2011 was $47.4 million. Our ownership interests in these properties are/were accounted for under the equity method.
In September 2011, the property held by the Pacific Financial Center joint venture was sold. Our proportionate share of the gain, $4.3 million, is included in equity in income of unconsolidated joint ventures in the consolidated statement of operations for the year ended December 31, 2011.
In September 2011, the property held by the Trio Apartments joint venture was sold. Immediately preceding the sale of the property to a third party, we purchased our partner’s interest in the joint venture and consolidated the entity prior to the sale of the asset. As a result of the consolidation and corresponding remeasurement of our investment balance, a gain on sale of $3.2 million and our pro-rata share of the income of the joint venture of $704,000 for the year ended December 31, 2011 is included in discontinued operations in the consolidated statement of operations.
In addition, in connection with our acquisition of CapCo, we acquired a special purpose entity which held a 58% controlling interest in the Senator office building located in Sacramento, California. At the time of our acquisition, the special purpose entity and the other co-owners in the Senator building were in default of a $38.3 million non-recourse loan secured by the property. As a result of the continuing default, the lender and special servicer accelerated the loan and foreclosed on the property on September 20, 2011. It was our intention when we acquired our interest in the property to relinquish title. Accordingly, at the time of acquisition, we assigned no value to our interest in this special purpose entity.
New York Common Retirement Fund Joint Venture

In May 2011, we formed a joint venture with the New York Common Retirement Fund (“NYCRF”) for the purpose of acquiring and operating high-quality neighborhood and community shopping centers. NYCRF holds a 70% interest in the joint venture, and we own a 30% interest which is accounted for under the equity method. We perform the day to day accounting and property management functions for the joint venture and, as such, earn a management fee for the services provided. During the year of its formation, we sold two shopping centers located in Florida to the joint venture for an aggregate gross purchase price of $39.4

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million, and the joint venture also purchased a shopping center in Framingham, Massachusetts, for a gross purchase price of $23.2 million.

In January 2012, the joint venture made an $18.5 million mortgage loan (the “JV Loan”) secured by a newly developed shopping center in Northborough, Massachusetts. In addition to the JV Loan, we provided a mezzanine loan (the “Mezzanine Loan") indirectly secured by the shopping center in the amount of $19.3 million. The joint venture had an option to purchase the shopping center that was exercisable during certain periods prior to March 26, 2013, and the borrower had an option to sell the shopping center to the joint venture that was exercisable during certain different periods prior to October 26, 2013. During the fourth quarter of 2012, the joint venture exercised its purchase option and ultimately acquired the shopping center in December 2012 at a purchase price of $128.4 million. Concurrent with the closing of the transaction, the Mezzanine Loan of $19.3 million was repaid without penalty, and the joint venture converted the JV Loan into a direct ownership interest in the shopping center. During the period that the JV Loan and Mezzanine Loan were outstanding, we determined that the entities holding direct and indirect ownership interests in the shopping center were VIEs, and, in relation to the VIE in which we held a variable interest, we were not the primary beneficiary as we did not have the power to direct the activities that most significantly impacted the entity's economic performance. However, as the Mezzanine Loan was repaid during December 2012, we determined that we were no longer required to assess the applicable VIE for potential consolidation as we no longer held a variable interest in the entity. In September 2013, the joint venture also acquired three newly developed parcels adjacent to the shopping center. The joint venture funded the purchase price of $15.8 million through partner contributions, of which our proportionate share was $4.7 million.
In October 2013, the joint venture acquired a 129,000 square foot shopping center in Hackensack, New Jersey for a gross purchase price of $47.8 million. The purchase price was funded through partner contributions, of which our proportionate share was $7.8 million, and the origination of a $24.0 million mortgage loan, which bears interest at a fixed rate of 4.54% and matures in October 2023.
In December 2013, the joint venture acquired a 118,000 square foot shopping center in Windermere, Florida for a gross purchase price of $31.8 million. The purchase price was funded through partner contributions, of which our proportionate share was $4.7 million, and the origination of a $16.0 million mortgage loan, which bears interest at LIBOR plus a margin of 1.40% and matures in December 2023. In connection with the transaction, the joint venture entered into an interest rate swap which converts the mortgage loan to a fixed interest rate, providing an effective fixed interest rate under the loan of 4.38% per annum, and designated the swap as a qualifying cash flow hedge. In addition, the joint venture also acquired the right to purchase from the same developer an adjacent 34,000 square foot shopping center that is under construction. The joint venture currently expects to acquire this additional phase for a gross purchase price of $13.0 million during the second quarter of 2014.
10.    Variable Interest Entities
Included within our consolidated operating properties at December 31, 2013 are three Westwood Complex parcels which are owned by the subsidiary of a Section 1031 like-kind exchange intermediary. The agreement governing the operation of this entity provides us with the power to direct the activities that most significantly impact the entity's economic performance. The entity was deemed a VIE primarily because it does not have sufficient equity at risk for it to finance its activities without additional subordinated financial support from other parties. Additionally, we determined that the equity investors do not possess the characteristics of a controlling financial interest. Therefore, we concluded that we are the primary beneficiary of the VIE as a result of our having the power to direct the activities that most significantly impact its economic performance and the obligation to absorb losses, as well as the right to receive benefits, that could be potentially significant to the VIE.
Our consolidated operating properties at December 31, 2012 included two consolidated joint venture properties, Danbury Green and Southbury Green, that were held through VIEs for which we were the primary beneficiary. These entities were established to own and operate real estate property, and our involvement with these entities was through our majority ownership and controlling interest in the properties which provided us with the power to direct the activities that most significantly impacted the entities' economic performance. At inception, we determined that the interests held by the other equity investors in these entities were not equity investments at risk pursuant to the Consolidation Topic of the FASB ASC and, therefore, concluded that these entities were VIEs because they may not have had sufficient equity at risk for them to finance their activities without additional subordinated financial support. In May 2013, we acquired the interests held by the other equity investors for a purchase price of $18.9 million and now own the entirety of the equity investments in these entities. These entities are no longer considered VIEs, although we continue to consolidate the properties due to our ongoing controlling financial interests. See Note 17 for further discussion.
In addition to Danbury Green and Southbury Green, our consolidated operating properties at December 31, 2012 also included a consolidated property, Clocktower Plaza Shopping Center, which was owned at the time by the subsidiary of a Section 1031 like-kind exchange intermediary. Legal ownership of this entity was transferred to us by the qualified intermediary during the first quarter of 2013, and, as such, the entity is no longer considered a VIE.
 

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The majority of the operations of these VIEs are funded with cash flows generated from the properties. We have not provided financial support to any of these VIEs that we were not previously contractually required to provide; our contractual commitments consist primarily of funding any capital expenditures, including tenant improvements, which are deemed necessary to continue to operate the entity and any operating cash shortfalls that the entity may experience.
As of December 31, 2013, we also hold interests in other VIEs where we are not the primary beneficiary. See Note 11 for further discussion.
11.    Loans Receivable
Centro Mezzanine Loan
In July 2011, we invested in a $45.0 million junior mezzanine loan that bore interest at 8.46% per annum plus one month LIBOR (subject to a 0.75% per annum LIBOR floor) and had an initial stated maturity date of July 9, 2013. In July 2013, the borrower exercised its right to extend the maturity date of the loan to July 9, 2014, but ultimately prepaid the loan without penalty in August 2013.
Westwood Mortgage Loan and Mezzanine Loan
In October 2012, we purchased a $95.0 million mortgage loan secured by the Westwood Complex, a 22-acre site located in Bethesda, Maryland that consists of 214,767 square feet of retail space, a 211,020 square foot apartment building, and a 62-unit assisted living facility. The loan bore interest at 5.0% per annum and had a stated maturity date of January 15, 2014. Concurrent with the loan transaction, we also entered into a purchase contract to acquire the complex for an aggregate purchase price of $140.0 million. The purchase contract contemplated closing dates for the various parcels that comprise the complex that were the earlier of January 15, 2014 or upon the seller's identification of a property (or properties) which it could purchase with the proceeds from the sale of the parcels. To the extent that the closing dates under the purchase contract occurred prior to January 15, 2014, the parties also agreed that the applicable portions of the mortgage loan collateralized by such parcels would be repaid on the respective closing dates. Based on our initial assessment of the structure of the transaction, we determined that the entities that owned the parcels within the complex that we had yet to legally acquire were VIEs and that we were not the primary beneficiary of these entities as we did not have the power to direct the activities that most significantly impacted their economic performance. In connection with our acquisition of five of the Westwood parcels in 2013, the borrower repaid $40.7 million of the mortgage loan, and the entities holding these five parcels were no longer considered VIEs, as we consolidate the properties through our direct ownership interest. As of December 31, 2013, the remaining portion of the mortgage loan was performing, and the carrying amount of the loan was $54.4 million, which also reflected our maximum exposure to loss related to our investment in the loan.
In March 2013, we also funded a $12.0 million mezzanine loan to an entity that indirectly owned a portion of the Westwood Complex. The loan was secured by the entity's indirect ownership interests in the complex, bore interest at 5.0% per annum, and was scheduled to mature on the earlier of June 1, 2013 or our acquisition of certain parcels comprising the complex pursuant to the aforementioned purchase contract. During May 2013, the loan agreement was amended to extend the maturity date to the earlier of January 15, 2014 or our acquisition of the parcels indirectly securing the mezzanine loan. In connection with our acquisition of five of the Westwood parcels in 2013, the borrower repaid $5.8 million of the mezzanine loan. We determined that the borrower was a VIE and that we held a variable interest in the entity through our investment in the loan; however, we concluded that we were not the primary beneficiary of the entity because we did not have the power to direct the activities that most significantly impacted its economic performance. As of December 31, 2013, the loan was performing, and the carrying amount of the loan was $6.3 million, which also reflected our maximum exposure to loss related to our investment in the loan.
In January 2014, we acquired the two remaining parcels within the Westwood Complex for an aggregate gross purchase price of $80.0 million. Concurrent with the acquisitions, the outstanding principal balance of the $95.0 million mortgage loan and the $12.0 million mezzanine loan were repaid by the respective borrowers. The aggregate gross purchase price was funded by proceeds from the loan repayments as well as an additional $19.5 million cash investment, thereby bringing our total investment in the Westwood Complex to $140.0 million.
Loans Provided in Connection with Dispositions
In June 2013, we disposed of Medical & Merchants, one of our neighborhood shopping centers located in Jacksonville, Florida, for a gross sales price of $12.0 million and provided financing to the buyer in the form of an $8.5 million loan receivable. The loan was secured by a mortgage interest in the property and a full recourse guaranty from the principal of the buyer, bore interest at 9.0% per annum and had a stated maturity date of December 18, 2013. In December 2013, the borrower repaid the loan without penalty.

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In September 2013, we disposed of Regency Crossing, one of our neighborhood shopping centers located in Port Richey, Florida, for a gross sales price of $6.6 million and provided financing to the buyer in the form of a $4.3 million loan receivable. The loan was secured by a mortgage interest in the property and a full recourse guaranty from the principal of the buyer, bore interest at 5.0% per annum, and had a stated maturity date of December 15, 2013. In December 2013, the borrower repaid the loan without penalty.
12.    Goodwill
The following table presents goodwill activity during the years ended December 31, 2013 and 2012:
 
 
 December 31,
 
 
2013
 
2012
 
 
(In thousands)
Balance at beginning of period
 
$
6,527

 
$
6,910

Impairment
 
(150
)
 
(378
)
Allocated to property sale
 
—

 
(5
)
Balance at end of period
 
$
6,377

 
$
6,527

The following is a summary by segment of goodwill included in the consolidated balance sheets:
 
 
December 31,
 
 
2013
 
2012
 
 
(In thousands)
South Florida
 
$
2,028

 
$
2,028

North Florida
 
1,298

 
1,298

Southeast
 
3,051

 
3,201

Total
 
$
6,377

 
$
6,527

13.    Other Assets
The following is a summary of the composition of other assets included in the consolidated balance sheets:
 
December 31,
 
2013
 
2012
 
(In thousands)
Lease intangible assets, net
$
117,200

 
$
125,935

Leasing commissions, net
38,296

 
33,959

Prepaid expenses and other receivables
26,763

 
24,334

Straight-line rent receivable, net
21,490

 
19,464

Deferred financing costs, net
8,347

 
10,777

Deposits and mortgage escrow
7,763

 
5,218

Furniture, fixtures and equipment, net
4,406

 
2,519

Fair value of interest rate swaps
2,944

 
—

Deferred tax asset
2,390

 
2,968

Total other assets
$
229,599

 
$
225,174

In connection with our development of The Gallery at Westbury Plaza in Nassau County, New York, we remediated various environmental matters that existed when we acquired the property in November 2009. The site was eligible for participation in New York State's Brownfield Cleanup Program, which provides for refundable New York State franchise tax credits for costs incurred to remediate and develop a qualified site. We applied for participation in the program and subsequently received a certificate

97


of completion from the New York State Department of Environmental Conservation in August 2012. The certificate of completion confirmed our adherence to the cleanup requirements and ability to seek reimbursement for a portion of qualified costs incurred as part of the environmental remediation and development of the property. Accordingly, we have recognized receivables of $22.8 million and $21.0 million, which are included in prepaid expenses and other receivables in our consolidated balance sheets at December 31, 2013 and 2012, respectively, with a corresponding reduction to the cost of the project, for the reimbursable costs that will be paid to us subject to statutory deferrals over the next three years.
The following is a summary of the composition of intangible assets and accumulated amortization in the consolidated balance sheets:
 
 
December 31,
 
 
2013
 
2012
 
 
(In thousands)
Lease intangible assets:
 
 
 
 
Above-market leases
 
$
21,149

 
$
22,156

In-place lease interests (1)
 
126,219

 
120,378

Below-market ground leases
 
34,094

 
34,094

Lease origination costs
 
3,426

 
3,548

Lease incentives
 
5,853

 
4,158

Total intangibles
 
190,741

 
184,334

Accumulated amortization:
 
 
 
 
Above-market leases
 
10,508

 
8,111

In-place lease interests
 
57,752

 
46,332

Below-market ground leases
 
793

 
191

Lease origination costs
 
2,402

 
2,306

Lease incentives
 
2,086

 
1,459

Total accumulated amortization
 
73,541

 
58,399

Lease intangible assets, net
 
$
117,200

 
$
125,935

___________________________________________ 
(1) Increase is primarily related to the acquisition of Pleasanton Plaza in 2013.
The following is a summary of amortization expense included in the consolidated statement of operations related to lease intangible assets:
 
December 31,
 
2013
 
2012
 
2011
 
(In thousands)
Above-market lease amortization (1)
$
3,669

 
$
4,129

 
$
10,242

In-place lease amortization (2)
14,530

 
16,642

 
23,998

Below-market ground lease amortization (3)
602

 
191

 
—

Lease origination cost amortization (2)
337

 
454

 
606

Lease incentive amortization (1)
735

 
593

 
386

Lease intangible asset amortization
$
19,873

 
$
22,009

 
$
35,232

___________________________________________ 
(1) Amounts are recognized as a reduction of minimum rent.
(2) Amounts are included in depreciation and amortization expenses.
(3) Amounts are included in property operating expenses.

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As of December 31, 2013, the estimated amortization of lease intangible assets for the next five years are as follows:
Year Ending December 31,
Amount
 
(In thousands)
2014
$
15,940

2015
12,975

2016
9,793

2017
7,649

2018
6,300

14.    Borrowings
Mortgage Notes Payable
The following table is a summary of the mortgage notes payable balances included in the consolidated balance sheets:
 
 
December 31,
 
 
2013
 
2012
 
 
(In thousands)
Fixed rate mortgage loans
 
$
430,155

 
$
425,755

Unamortized premium, net
 
7,816

 
8,438

Total
 
$
437,971

 
$
434,193

Weighted average interest rate of fixed rate mortgage notes
 
5.99
%
 
6.06
%
Included in liabilities associated with properties held for sale are mortgage notes payable of $16.2 million at December 31, 2012 with weighted average interest rates of 6.89%.
During the years ended December 31, 2013 and 2012, we prepaid $24.0 million and $57.0 million in mortgage loans with a weighted average interest rate of 6.88% and 6.61%, respectively.
In connection with acquisitions completed during the year ended December 31, 2013, we assumed two mortgages with a total principal balance of $35.7 million. The $15.7 million mortgage assumed in connection with The Village Center acquisition matures on June 1, 2019 and bears interest at 6.25% per annum. The $20.0 million mortgage assumed in connection with the Pleasanton Plaza acquisition matures on June 1, 2015 and bears interest at 5.32% per annum.
As part of our ongoing strategy to dispose of properties in our secondary markets, we have engaged in marketing efforts related to the sale of Brawley Commons located in Charlotte, North Carolina. The property was encumbered by a $6.5 million mortgage loan which matured on July 1, 2013 and remained unpaid as of December 31, 2013. In February 2014, we sold the property to a third party for $5.5 million, and the lender agreed to accept this amount as full repayment of the loan. During the default period, we operated the property on behalf of the lender and remitted any profits generated by the property to the lender. During the year ended December 31, 2013, we recognized an impairment loss of $1.2 million to adjust the carrying value of the property to its estimated fair value.

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Unsecured Senior Notes
Our outstanding unsecured senior notes payable in the consolidated balance sheets consisted of the following:
 
 
December 31,
 
 
2013
 
2012
 
 
(In thousands)
5.375% Senior Notes, due 10/15/15
 
$
107,505

 
$
107,505

6.0% Senior Notes, due 9/15/16
 
105,230

 
105,230

6.25% Senior Notes, due 1/15/17
 
101,403

 
101,403

6.0% Senior Notes, due 9/15/17
 
116,998

 
116,998

3.75% Senior Notes, due 11/15/22
 
300,000

 
300,000

Total Unsecured Senior Notes
 
731,136

 
731,136

Unamortized discount, net
 
(1,698
)
 
(2,006
)
Total
 
$
729,438

 
$
729,130

Weighted average interest rate, net of discount adjustment
 
5.02
%
 
5.02
%
On October 25, 2012, we issued $300.0 million principal amount of unsecured senior notes at a fixed interest rate of 3.75%, maturing on November 15, 2022 (the "3.75% Notes"). The 3.75% Notes were offered to investors at a price of 99.591% with a yield to maturity of 3.799%. Interest is payable on the notes semi-annually in arrears on May 15 and November 15 of each year, which commenced on May 15, 2013. The 3.75% Notes rank equally with all of our other unsecured and unsubordinated indebtedness and contain customary debt covenants that are consistent with our other unsecured senior notes. The 3.75% Notes are also guaranteed by our subsidiaries that have guaranteed our other unsecured senior notes.
On October 25, 2012, we also called for redemption of all of our $250.0 million 6.25% unsecured senior notes, which were scheduled to mature on December 15, 2014 (the "6.25% Notes") pursuant to the terms of an optional redemption feature within the 6.25% Notes, and on November 26, 2012, we redeemed the 6.25% Notes at a redemption price equal to the principal amount of the notes and a required make-whole premium of $27.8 million utilizing proceeds from the 3.75% Notes. In connection with the redemption, we recognized a loss on early extinguishment of debt of $29.6 million, which was comprised of the aforementioned make-whole premium and deferred fees and costs associated with the 6.25% Notes.
The indentures under which our unsecured senior notes were issued have several covenants that limit our ability to incur debt, require us to maintain an unencumbered asset to unsecured debt 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 many of our subsidiaries.
Unsecured Revolving Credit Facilities
Our primary credit facility is with a syndicate of banks and provides $575.0 million of unsecured revolving credit. The facility bears interest at applicable LIBOR plus a margin of 1.00% to 1.85%, depending on the credit ratings of our unsecured senior notes. The facility also includes a facility fee applicable to the aggregate lending commitments thereunder which varies from 0.175% to 0.45% per annum depending on the credit ratings of our unsecured senior notes. At December 31, 2013, the interest rate margin applicable to amounts outstanding under the facility was 1.25% per annum and the facility fee was 0.25% per annum. The facility includes a competitive bid option which allows us to conduct auctions among the participating banks for borrowings at any one time outstanding up to 50% of the lender commitments, a $50.0 million swing line facility for short term borrowings, a $50.0 million letter of credit commitment and a $61.3 million multicurrency subfacility. The facility expires on September 30, 2015, with a one year extension at our option, subject to certain conditions. The facility contains a number of customary restrictions on our business, including restrictions on our ability to make certain investments, and also includes various financial covenants, including a minimum tangible net worth requirement, maximum unencumbered and total leverage ratios, a maximum secured indebtedness ratio, a minimum fixed charge coverage ratio and a minimum unencumbered interest coverage ratio. The facility also contains customary affirmative covenants and events of default, including a cross default to our other material indebtedness and the occurrence of a change of control. If a material default under the facility were to arise, our ability to pay dividends is limited to the amount necessary to maintain our status as a REIT unless the default is a payment default or bankruptcy event in which case we are prohibited from paying any dividends. As of December 31, 2013, we had drawn $91.0 million against the facility, which bore interest at a weighted average rate of 1.30% per annum. As of December 31, 2012, we had drawn $172.0 million against the facility, which bore interest at a rate of 1.77% per annum.
We also have an unsecured credit facility with City National Bank of Florida, for which there was no drawn balance as of December 31, 2013 and 2012. Prior to its renewal in October 2013, the credit facility provided $15.0 million of unsecured credit

100


and bore interest at LIBOR plus 1.55%. In October 2013, the facility was renewed and decreased to provide $5.0 million of unsecured credit. The new facility bears interest at LIBOR plus 1.25% per annum and expires November 7, 2014.
As of December 31, 2013, giving effect to the financial covenants applicable to these credit facilities, the maximum available to us thereunder was approximately $413.0 million, net of outstanding letters of credit with an aggregate face amount of $2.7 million, of which $91.0 million was drawn.
Term Loan and Interest Rate Swaps
On February 13, 2012, we entered into an unsecured term loan in the principal amount of $200.0 million with a maturity date of February 13, 2019. On July 12, 2012, we increased the principal amount of the term loan to $250.0 million through the exercise of an accordion feature. The term loan bears interest, at our option, at the base rate or one month, two month, three month or six month LIBOR, in each case plus a margin of 1.50% to 2.35% depending on the credit ratings of our unsecured senior notes. In connection with the interest rate swap discussed below, we have elected and, will continue to elect, the one month LIBOR option. The loan agreement also calls for other customary fees and charges. The loan agreement contains customary restrictions on our business, financial and affirmative covenants, events of default and remedies which are generally the same as those provided in our $575.0 million unsecured revolving credit facility. As of December 31, 2013, we had interest rate swaps which convert the LIBOR rate applicable to our $250.0 million term loan to a fixed interest rate, providing an effective weighted average fixed interest rate under the loan agreement of 3.17% per annum. The swaps are designated and qualified as cash flow hedges and have been recorded at fair value. The swap agreements mature on February 13, 2019. The fair value of our interest rate swaps at December 31, 2013 was an asset of $2.9 million, which is included in other assets in our consolidated balance sheet. At December 31, 2012, the fair value of our interest rate swaps was a liability of $7.0 million, which is included in accounts payable and accrued expenses in our consolidated balance sheet.
Principal maturities of borrowings, including mortgage notes payable, unsecured senior notes payable, term loan and unsecured revolving credit facilities are as follows:
Year Ending December 31,
Amount
 
(In thousands)
2014
$
20,979

2015
280,165

2016
233,340

2017
288,968

2018
61,531

Thereafter
617,308

Total
$
1,502,291

Interest costs incurred, excluding amortization and accretion of discount and premium, were $74.3 million, $80.5 million and $86.6 million in the years ended December 31, 2013, 2012 and 2011, respectively, of which $2.9 million, $4.7 million and $2.3 million, respectively, were capitalized.
15.    Other Liabilities
The following is a summary of the composition of other liabilities included in the consolidated balance sheets:
 
 
December 31,
 
 
2013
 
2012
 
 
(In thousands)
Lease intangible liabilities, net
 
$
167,777

 
$
185,061

Prepaid rent
 
9,450

 
10,687

Other
 
156

 
215

Total other liabilities
 
$
177,383

 
$
195,963

In May 2013, we executed a lease amendment with the tenant at our retail condominium at 1175 Third Avenue in New York City, New York, which included the purchase of a significant portion of the below market leasehold interest held by the tenant under the terms of the original lease agreement. Pursuant to the terms of the amendment, we paid the tenant $25.0 million in exchange

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for increased rents during a new ten-year base term and a reset of the rent payable during the option periods subsequent to the initial ten-year base term to the market rental rates prevailing at such times. The $25.0 million payment has been reflected as a reduction of the unamortized below market lease intangible liability we recognized when we acquired the retail condominium, and the remaining portion of the liability will be amortized over the new ten-year base term.
At December 31, 2013 and 2012, the gross carrying amount of our lease intangible liabilities, which are composed of below-market leases and above-market ground leases, was $228.7 million and $231.7 million, respectively, and the accumulated amortization was $60.9 million and $46.6 million, respectively.
Included in the consolidated statement of operations as an increase to minimum rent for the years ended December 31, 2013, 2012 and 2011 is $17.3 million, $17.4 million, and $21.2 million, respectively, of amortization expense related to lease intangible liabilities. As of December 31, 2013, the estimated amortization of lease intangible liabilities for the next five years are as follows:
Year Ending December 31,
Amount
 
(In thousands)
2014
$
17,194

2015
15,426

2016
12,155

2017
10,726

2018
10,113

16.    Income Taxes
We elected to be taxed as a REIT under the Code, commencing with our taxable year ended December 31, 1995. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we currently distribute at least 90% of our REIT taxable income to our stockholders. The difference between net income available to common stockholders for financial reporting purposes and taxable income before dividend deductions relates primarily to temporary differences, such as real estate depreciation and amortization, deduction of deferred compensation and deferral of gains on sold properties utilizing like kind exchanges. Also, at least 95% of our gross income in any year must be derived from qualifying sources. It is our intention to adhere to the organizational and operational requirements to maintain our REIT status. As a REIT, we generally will not be subject to corporate level federal income tax, provided that distributions to our stockholders equal at least the amount of our REIT taxable income as defined under the Code. We distributed sufficient taxable income for the year ended December 31, 2013; therefore, we anticipate that no federal income or excise taxes will be incurred. We distributed sufficient taxable income for the years ended December 31, 2012 and 2011; therefore, no federal income or excise taxes were incurred. If we fail to qualify as a REIT in any taxable year, we 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 we qualify for taxation as a REIT, we may be subject to state income or franchise taxes in certain states in which some of our properties are located and excise taxes on our undistributed taxable income. We are required to pay U.S. federal and state income taxes on our net taxable income, if any, from the activities conducted by our taxable REIT subsidiaries (“TRSs”). Accordingly, the only material provision for federal income taxes in our consolidated financial statements relates to our consolidated TRSs.
Further, we believe that we have appropriate support for the tax positions taken on our tax returns and that our accruals for tax liabilities are adequate for all years still subject to tax audit, which include all years after 2009.


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The following table reconciles GAAP net income to taxable income:
 
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
 
(In thousands)
GAAP net income (loss) attributable to Equity One
 
$
77,954

 
$
(3,477
)
 
$
33,621

Net (income) loss attributable to taxable REIT subsidiaries
 
(585
)
 
4,964

 
63,319

GAAP net income from REIT operations
 
77,369

 
1,487

 
96,940

Book/tax differences:
 
 
 
 
 
 
Joint ventures
 
9,255

 
4,530

 
(2,671
)
Depreciation
 
10,327

 
7,399

 
6,952

Sale of property
 
(30,288
)
 
(925
)
 
(44,819
)
Bargain purchase gain
 
—

 
—

 
(30,561
)
Exercise of stock options and restricted shares
 
(917
)
 
6,009

 
4,506

Interest expense
 
1,633

 
3,152

 
1,002

Deferred/prepaid/above and below-market rents, net
 
(4,381
)
 
(2,388
)
 
(1,711
)
Impairment loss
 
5,353

 
21,511

 
14,866

Amortization
 
210

 
227

 
(84
)
Acquisition costs
 
2,771

 
1,941

 
5,982

Other, net
 
200

 
(1,583
)
 
53

Inclusion from foreign taxable REIT subsidiary
 
—

 
—

 
10,502

Adjusted taxable income(1)
 
$
71,532

 
$
41,360

 
$
60,957

______________________________________________ 
(1) 
Adjusted taxable income subject to 90% dividend requirements.
The following summarizes the tax status of dividends paid:
 
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
Dividend paid per share
 
$
0.88

 
$
0.88

 
$
0.88

Ordinary income
 
66.37
%
 
43.72
%
 
51.80
%
Return of capital
 
31.21
%
 
54.10
%
 
39.13
%
Capital gains
 
2.42
%
 
2.18
%
 
9.07
%
Taxable REIT Subsidiaries
We are subject to federal, state and local income taxes on the income from our TRS activities, which include IRT Capital Corporation II (“IRT”), DIM, Southeast US Holdings, BV (“Southeast”), MCC Redondo Beach II, LLC and C&C Delaware, Inc. At December 31, 2013, Southeast owned an economic interest in DIM of 97.8%. Although DIM is organized under the laws of the Netherlands, it pays U.S. corporate income tax based on its operations in the United States. Pursuant to the tax treaty between the U.S. and the Netherlands, DIM is entitled to the avoidance of double taxation on its U.S. income. Thus, it pays virtually no income taxes in the Netherlands.
Income taxes have been provided for on the asset and liability method as required by the Income Taxes Topic of the FASB ASC. Under the asset and liability method, deferred income taxes are recognized for the temporary differences between the financial reporting bases and the tax bases of the TRS assets and liabilities. A deferred tax asset valuation allowance is recorded when it has been determined that it is more-likely-than-not that the deferred tax asset will not be realized. If a valuation allowance is needed, a subsequent change in circumstances in future periods that causes a change in judgment about the realization of the related deferred tax amount could result in the reversal of the deferred tax valuation allowance.

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Our total pre-tax income (losses) and income tax (provision) benefits relating to our TRS and taxable entities which have been consolidated for accounting reporting purposes are summarized as follows:
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
 
(In thousands)
U.S. income (loss) before income taxes
 
$
784

 
$
(7,452
)
 
$
(97,219
)
Foreign income (loss) before income taxes
 
3

 
(15
)
 
(739
)
Total income (loss) before income taxes
 
787

 
(7,467
)
 
(97,958
)
Less income tax (provision) benefit:
 
 
 
 
 
 
Current federal and state
 
(69
)
 
72

 
(405
)
Deferred federal and state
 
(133
)
 
2,431

 
35,044

Total income tax (provision) benefit
 
(202
)
 
2,503

 
34,639

Net income (loss) from taxable REIT subsidiaries
 
$
585

 
$
(4,964
)
 
$
(63,319
)
Our total pre-tax income (losses) for continuing operations and income tax (provision) benefits for continuing operations included above relating to our TRS and taxable entities which have been consolidated for accounting reporting purposes are summarized as follows:
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
 
(In thousands)
U.S. (loss) income before income taxes
 
$
(1,582
)
 
$
(9,161
)
 
$
11,747

Foreign income (loss) before income taxes
 
3

 
(15
)
 
(739
)
(Loss) income from continuing operations before income taxes
 
(1,579
)
 
(9,176
)
 
11,008

Less income tax (provision) benefit:
 
 
 
 
 
 
Current federal and state
 
(34
)
 
72

 
(97
)
Deferred federal and state
 
518

 
2,908

 
5,184

Total income tax benefit
 
484

 
2,980

 
5,087

(Loss) income from continuing operations from taxable REIT subsidiaries
 
$
(1,095
)
 
$
(6,196
)
 
$
16,095

We recorded tax provisions from discontinued operations of $686,000 and $477,000 and a tax benefit of $29.6 million during the years ended December 31, 2013, 2012 and 2011, respectively. The tax provisions relate to taxable income generated by the disposition of properties. The tax benefit is primarily attributable to the reversal of a deferred tax liability associated with properties sold by DIM and IRT and, to a lesser extent, by net operating losses.
The total income tax (provision) benefit differs from the amount computed by applying the statutory federal income tax rate to net income (loss) before income taxes as follows:
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
 
(In thousands)
Federal (provision) benefit at statutory tax rate (1)
 
$
(239
)
 
$
2,616

 
$
34,205

State taxes, net of federal (provision) benefit
 
(69
)
 
272

 
3,187

Adjustment to DIM gain
 
—

 
—

 
(3,315
)
Foreign tax rate differential
 
(5
)
 
(7
)
 
(2
)
Other
 
117

 
(370
)
 
574

Valuation allowance increase
 
(6
)
 
(8
)
 
(10
)
Total income tax (provision) benefit
 
$
(202
)
 
$
2,503

 
$
34,639

 ______________________________________________ 
(1) 
Rate of 34% or 35% used, dependent on the taxable income levels of our TRSs.

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The income tax benefit for continuing operations differs from the amount computed by applying the statutory federal income tax rate to net income (loss) before income taxes as follows:
 
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
 
(In thousands)
Federal benefit at statutory tax rate (1)
 
$
344

 
$
3,044

 
$
3,890

State taxes, net of federal (provision) benefit
 
34

 
321

 
444

Foreign tax rate differential
 
(5
)
 
(7
)
 
(2
)
Other
 
117

 
(370
)
 
765

Valuation allowance increase
 
(6
)
 
(8
)
 
(10
)
Total income tax benefit for continuing operations
 
$
484

 
$
2,980

 
$
5,087

 ______________________________________________ 
(1) Rate of 34% or 35% used, dependent on the taxable income levels of our TRSs.
Our deferred tax assets and liabilities were as follows:
 
 
December 31,
 
 
2013
 
2012
 
 
(In thousands)
Deferred tax assets:
 
 
 
 
Disallowed interest
 
$
2,842

 
$
2,903

Net operating loss
 
2,996

 
3,216

Other
 
110

 
138

Valuation allowance
 
(162
)
 
(213
)
Total deferred tax assets
 
5,786

 
6,044

Deferred tax liabilities:
 
 
 
 
Other real estate investments
 
(14,133
)
 
(13,828
)
Mortgage revaluation
 
(748
)
 
(1,005
)
Other
 
(277
)
 
(259
)
Total deferred tax liabilities
 
(15,158
)
 
(15,092
)
Net deferred tax liability
 
$
(9,372
)
 
$
(9,048
)

At December 31, 2013, the net deferred tax liability of $9.4 million consisted of a $2.4 million deferred tax asset associated with IRT included in other assets in the accompanying consolidated balance sheet and an $11.8 million deferred tax liability associated with DIM. At December 31, 2012 the net deferred tax liability of $9.0 million consisted of a $3.0 million deferred tax asset associated with IRT included in other assets in the accompanying consolidated balance sheet and a $12.0 million deferred tax liability associated with DIM.
The tax deduction for interest paid by the TRS to the REIT is subject to certain limitations pursuant to U.S. federal tax law. Such interest may only be deducted in any tax year in which the TRS’ income exceeds certain thresholds. Such disallowed interest may be carried forward and utilized in future years, subject to the same limitation. At December 31, 2013, IRT had approximately $7.5 million of disallowed interest carry forwards, with a tax value of $2.9 million. This carry forward does not expire. IRT expects to realize the benefits of its net deferred tax asset of approximately $2.4 million as of December 31, 2013, primarily from identified tax planning strategies, as well as projected taxable income. Southeast had a net operating loss carry forward of $650,000 at December 31, 2013, which begins to expire in 2016. A valuation allowance of $162,000 is provided for this asset. As of December 31, 2013, DIM had federal and state net operating loss carry forwards of approximately $4.8 million and $3.8 million, respectively, which begin to expire in 2027. As of December 31, 2013, IRT had federal and state net operating loss carry forwards of approximately $2.0 million and $1.6 million, respectively, which begin to expire in 2030.

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17.    Noncontrolling Interests
The following is a summary of the noncontrolling interests in consolidated entities included in the consolidated balance sheets:
 
December 31,
 
2013
 
2012
 
(In thousands)
Danbury 6 Associates LLC (1)
$
—

 
$
7,720

Southbury 84 Associates LLC (1)
—

 
11,242

Vestar/EQY Canyon Trails LLC (2)
—

 
2,600

Walden Woods Village, Ltd. (3)
989

 
989

Total redeemable noncontrolling interests
$
989

 
$
22,551

 
 
 
 
CapCo
$
206,145

 
$
206,145

DIM
1,081

 
1,100

Vestar/EQY Talega LLC (4)
147

 
147

Vestar/EQY Vernola LLC (5)
341

 
361

Vestar/EQY Canyon Trails LLC (2)
29

 
—

Total noncontrolling interests included in total equity
$
207,743

 
$
207,753

______________________________________________ 
(1) In May 2013, we acquired the remaining 40% preferred equity interests held by the noncontrolling interest holders.
(2) This entity held our interest in Canyon Trails Towne Center, which was sold in December 2013.
(3) This entity owns Walden Woods Shopping Center.
(4) This entity holds our interest in Talega Village Center JV, LLC.
(5) This entity holds our interest in Vernola Marketplace JV, LLC.
Noncontrolling interest represents the portion of equity that we do not own in those entities that we consolidate. We account for and report our noncontrolling interest in accordance with the provisions under the Consolidation Topic of the FASB ASC.
In January 1999, Equity One (Walden Woods) Inc., a wholly-owned subsidiary of ours, formed a limited partnership as a general partner. Walden Woods Village, an income producing shopping center, was contributed by its owners (the “Noncontrolling Partners”), and we contributed 93,656 shares of our common stock to the limited partnership at an agreed-upon price of $10.30 per share. Under the terms of the agreement, the Noncontrolling Partners do not share in any earnings of the partnership, except to the extent of dividends received by the partnership for the shares originally contributed by us. Based on the per-share price and the net value of property contributed by the Noncontrolling Partners, the limited partners received 93,656 partnership units. Upon the formation of the partnership, we entered into a redemption agreement with the Noncontrolling Partners pursuant to which the Noncontrolling Partners could request that we purchase their partnership units at a price of $10.30 per unit at any time before January 1, 2014. As a result of the redemption agreement, the value of the redeemable noncontrolling interest of $989,000 has been included in the mezzanine section of our consolidated balance sheet, separate from permanent equity, in accordance with the Distinguishing Liabilities subtopic from the Equity Topic of the FASB ASC. We also entered into a conversion agreement with the Noncontrolling Partners pursuant to which the Noncontrolling Partners can convert their partnership units into our common stock. The Noncontrolling Partners have not exercised their redemption or conversion rights, and their noncontrolling interest remains valued at $989,000 at December 31, 2013.
Our Sunlake development project was previously held in two joint ventures in which we held a controlling financial interest. Pursuant to the joint venture agreements, we agreed to fund all acquisition, development and operating costs and had reimbursement rights in relation to all capital outlays upon disposition of the project. In return, we received an 8% preferred return on our advances and were entitled to 60% of the profits thereafter. The minority partners did not contribute any capital to the joint ventures and a noncontrolling interest was not previously recognized in relation to their interests as our capital expenditures and cumulative preferred return surpassed the equity in the project. As of December 31, 2013, the partners agreed to terminate the joint ventures and the minority partners were not entitled to any distributions upon the termination.

In January 2009, we acquired a controlling financial interest in DIM and consolidated its results as of the acquisition date. As we owned 65.1% of DIM’s ordinary shares as of the acquisition date, we recorded $25.8 million of noncontrolling interest, which represented the fair value of the portion of DIM’s equity that we did not own, upon the consolidation of the entity. Subsequent to

106


the initial acquisition, we acquired additional DIM ordinary shares through various transactions during 2009 and 2010, including open market and private purchases, bringing our ownership interest to approximately 97.4% as of December 31, 2010. As of December 31, 2013 and 2012, our ownership interest in DIM was 97.8%.
In December 2010, we acquired controlling interests in three joint ventures with Vestar which required us to consolidate their results as of the acquisition date. Upon consolidation, we recorded $5.2 million of noncontrolling interests which represented the fair value of the portion of the joint venture equity that we did not own upon acquisition. For the Equity One/Vestar JVs, $517,000 and $508,000 of noncontrolling interests are recorded in permanent equity in our consolidated balance sheets as of December 31, 2013 and 2012, respectively. Our Canyon Trails joint venture with Vestar contained certain provisions which could have required us to redeem the noncontrolling interest at fair market value at Vestar’s option. Due to the redemption feature, we recorded $2.6 million of noncontrolling interest associated with this venture in the mezzanine section of our consolidated balance sheets as of December 31, 2012, which approximates the redemption value at such date. The joint venture sold this property in December 2013 and as a result we no longer include the noncontrolling interest in the mezzanine section of our consolidated balance sheet as of December 31, 2013.
We acquired a controlling interest in CapCo on January 4, 2011 which required us to consolidate CapCo’s results as of the acquisition date. We recorded $206.1 million of noncontrolling interest upon consolidation, which represented the fair value of the portion of CapCo’s equity that we did not own upon acquisition. The $206.1 million of noncontrolling interest is reflected in the equity section of our consolidated balance sheet as permanent equity as of December 31, 2013. Since LIH, the noncontrolling party, only participates in the earnings of CapCo to the extent of dividends declared on our common stock and considering that dividends are generally declared and paid in the same quarter, subsequent changes to the noncontrolling interest will only occur if dividends are declared but not paid, or if we acquire all or a portion of LIH’s interest or if its Class A joint venture shares are converted into our common stock. See Note 5 above for a discussion of the CapCo joint venture.
In October 2011, we acquired a 60% controlling financial interest in two VIEs, Danbury 6 Associates LLC and Southbury 84 Associates LLC. We determined that we were the primary beneficiary of these entities and, accordingly, consolidated their results as of the acquisition date. Upon consolidation, we recorded $19.0 million of noncontrolling interests which represented the estimated fair value of the preferred equity interests, which were entitled to a cumulative 5% annual preferred return, held by the noncontrolling interest holders. Because the operating agreements contained certain provisions that would potentially require us to redeem the noncontrolling interests at the balance of the holders' contributed capital as adjusted for unpaid preferred returns due to them pursuant to the operating agreements, we initially recorded the $19.0 million of noncontrolling interests associated with these ventures in the mezzanine section of our consolidated balance sheets and reflected such interests at their redemption value at each subsequent balance sheet date. In March 2013, we received formal notice from the noncontrolling interest holders electing to have their interests redeemed (at which time we reclassified the interests to other liabilities as mandatorily redeemable financial instruments pursuant to the Distinguishing Liabilities from Equity Topic of the FASB ASC) and subsequently acquired their interests for a purchase price of $18.9 million during May 2013. Both the income attributable to the noncontrolling interest holders and the amounts paid to them during the years ended December 31, 2013 and 2012 were $315,000 and $944,000, respectively. The income attributable to the noncontrolling interest holders and amounts paid to them during the year ended December 31, 2011 were $168,000 and $89,000, respectively.
During the years ended December 31, 2013, 2012 and 2011, there were no material effects on the equity attributable to us resulting from changes in our ownership interest in our subsidiaries other than those related to Danbury 6 Associates LLC and Southbury 84 Associates LLC as noted above.

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18.    Stockholders’ Equity and Earnings (Loss) Per Share
During each quarter of 2013, our Board of Directors declared cash dividends of $0.22 per share on our common stock. These dividends were paid in March, June, September and December 2013.
In August 2012, we completed an underwritten public offering and concurrent private placement totaling 4.1 million shares of our common stock at a price to the public and in the private placement of $21.20 per share. In the concurrent private placement, 500,000 shares were purchased by MGN (USA), Inc., an affiliate of our largest stockholder, Gazit-Globe, Ltd. ("Gazit"), which may be deemed to be controlled by Chaim Katzman, the Chairman of our Board of Directors. The offerings generated proceeds to us of approximately $85.6 million. The stock issuance costs and underwriting discounts were approximately $813,000. We used the net proceeds to reduce the outstanding balance under our unsecured revolving credit facility.
In May 2011, we completed an underwritten public offering and concurrent private placement of an aggregate of 6.0 million shares of our common stock at a price to the public and in the private placement of $19.42 per share. In the concurrent private placement, 1.0 million shares were purchased by MGN (USA), Inc. The offerings generated proceeds to us of approximately $115.7 million, net of stock issuance costs and underwriting discounts of $858,000.
In connection with the CapCo acquisition on January 4, 2011, LIH transferred and assigned to us an outstanding promissory note of CapCo in the amount of $67.0 million in exchange for approximately 4.1 million shares of our common stock and one share of a newly-established class of our capital stock, Class A common stock, that (i) was convertible into 10,000 shares of our common stock in certain circumstances, and (ii) subject to certain limitations, entitled LIH to voting rights with respect to a number of shares of our common stock determined with reference to the number of joint venture shares held by LIH from time to time. Effective June 29, 2011, the one share of Class A common stock was converted in accordance with its terms into 10,000 shares of our common stock.
Also in connection with the closing of the CapCo transaction in 2011, we executed a Registration and Liquidity Rights Agreement between us and LIH pursuant to which we agreed to register the approximately 4.1 million shares of our common stock received by LIH in the transaction and the approximately 11.4 million shares of our common stock issuable if we exercise our right to pay for the redemption of LIH’s joint venture units with shares of our common stock. On March 9, 2012, LIH sold the approximately 4.1 million shares of our common stock issued in exchange for the CapCo note and upon conversion of the Class A common stock pursuant to an underwritten public offering. Pursuant to the Registration and Liquidity Rights Agreement, we paid all of the expenses of the offering other than underwriting discounts and legal expenses of counsel to LIH, which amounted to $169,000 for the year ended December 31, 2012, and are included in general and administrative expenses in the accompanying consolidated statement of operations.

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Earnings (Loss) per Share
The following summarizes the calculation of basic earnings per share ("EPS") and provides a reconciliation of the amounts of net income (loss) available to common stockholders and shares of common stock used in calculating basic EPS:
 
 
Year Ended December 31,
 
 
 
2013
 
2012
 
2011
 
 
 
(In thousands)
 
Income (loss) from continuing operations
 
$
48,963

 
$
(1,212
)
 
$
22,518

 
Net income attributable to noncontrolling interests - continuing operations
 
(10,209
)
 
(10,676
)
 
(9,652
)
 
Income (loss) from continuing operations attributable to Equity One, Inc.
 
38,754

 
(11,888
)
 
12,866

 
Allocation of continuing income to participating securities
 
(1,045
)
 
(1,082
)
 
(1,169
)
 
Income (loss) from continuing operations available to common stockholders
 
37,709

 
(12,970
)
 
11,697

 
Income from discontinued operations
 
39,694

 
8,437

 
20,700

 
Net (income) loss attributable to noncontrolling interests - discontinued
   operations
 
(494
)
 
(26
)
 
55

 
Income from discontinued operations available to common stockholders
 
39,200

 
8,411

 
20,755

 
Net income (loss) available to common stockholders
 
$
76,909

 
$
(4,559
)
 
$
32,452

 
Weighted average shares outstanding – Basic
 
117,389

 
114,233

 
110,099

 
 
 
 
 
 
 
 
 
Basic earnings (loss) per share available to common stockholders:
 
 
 
 
 
 
 
Continuing operations
 
$
0.32

 
$
(0.11
)
 
$
0.11

 
Discontinued operations
 
0.33

 
0.07

 
0.19

 
Earnings (loss) per common share — Basic
 
$
0.66

*
$
(0.04
)
 
$
0.29

*
* Note: EPS does not foot due to the rounding of the individual calculations.



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The following summarizes the calculation of diluted EPS and provides a reconciliation of the amounts of net income (loss) available to common stockholders and shares of common stock used in calculating diluted EPS:
 
 
Year Ended December 31,
 
 
 
2013
 
2012
 
2011
 
 
 
(In thousands)
 
Income (loss) from continuing operations
 
$
48,963

 
$
(1,212
)
 
$
22,518

 
Net income attributable to noncontrolling interests - continuing operations
 
(10,209
)
 
(10,676
)
 
(9,652
)
 
Income (loss) from continuing operations attributable to Equity One, Inc.
 
38,754

 
(11,888
)
 
12,866

 
Allocation of continuing income to participating securities
 
(1,045
)
 
(1,082
)
 
(1,169
)
 
Income (loss) from continuing operations available to common stockholders
 
37,709

 
(12,970
)
 
11,697

 
Income from discontinued operations
 
39,694

 
8,437

 
20,700

 
Net (income) loss attributable to noncontrolling interests - discontinued
operations
 
(494
)
 
(26
)
 
55

 
Income from discontinued operations available to common stockholders
 
39,200

 
8,411

 
20,755

 
Net income (loss) available to common stockholders
 
$
76,909

 
$
(4,559
)
 
$
32,452

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding – Basic
 
117,389

 
114,233

 
110,099

 
Stock options using the treasury method
 
288

 
—

 
142

 
Executive Incentive Plan shares using the treasury method
 
94

 
—

 
—

 
Weighted average shares outstanding – Diluted
 
117,771

 
114,233

 
110,241

 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per share available to common stockholders:
 
 
 
 
 
 
 
Continuing operations
 
$
0.32

 
$
(0.11
)
 
$
0.11

 
Discontinued operations
 
0.33

 
0.07

 
0.19

 
Earnings (loss) per common share — Diluted
 
$
0.65

 
$
(0.04
)
 
$
0.29

*
* Note: EPS does not foot due to the rounding of the individual calculations.
The computation of diluted EPS for the years ended December 31, 2013 and 2011 did not include 1.4 million and 1.9 million shares of common stock, respectively, issuable upon the exercise of outstanding options, at prices ranging from $23.52 to $26.66 and $18.88 to $26.66, respectively, because the option prices were greater than the average market price of our common shares during the period. The computation of diluted EPS for the year ended December 31, 2012 did not include 3.5 million shares of common stock issuable upon the exercise of outstanding options, at prices ranging from $11.59 to $26.66, because their effect would be anti-dilutive.

The computation of diluted EPS for the years ended December 31, 2013, 2012 and 2011 did not include the 11.4 million joint venture units held by LIH which are convertible into our common stock. The LIH shares are redeemable for cash or, solely at our option, our common stock on a one-for-one basis, subject to certain adjustments. These convertible units are not included in the diluted weighted average share count because their inclusion is anti-dilutive.
19.    Share-Based Payment Plans
The Equity One Amended and Restated 2000 Executive Incentive Compensation Plan (the “2000 Plan”) provides for grants of stock options, stock appreciation rights, restricted stock, and 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 our officers, directors, employees and independent contractors. Following an amendment to the 2000 Plan, approved by our stockholders on May 2, 2011, the total number of shares of common stock that may be issuable under the 2000 Plan is 13.5 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. The 2000 Plan will terminate on the earlier of May 2, 2021 or the date on which all shares reserved for issuance under the 2000 Plan have been issued. As of December 31, 2013, 5.0 million shares were available for issuance under the 2000 Plan, as amended.

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Discounts offered to participants under our 2004 Employee Stock Purchase Plan represent the difference between market value of our stock on the purchase date and purchase price of shares as provided under the plan. 
Options and Restricted Stock
As of December 31, 2013, we had stock options and restricted stock outstanding under the 2000 Plan. In addition, in connection with the initial employment in 2006 of Jeffrey S. Olson, our Chief Executive Officer, we issued Mr. Olson options to purchase 364,660 shares of common stock.
The term of each award is determined by our compensation committee, but in no event can be longer than ten years from the date of 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 certain shares of non-vested restricted stock, which makes the restricted stock a participating security under the Earnings Per Share Topic of the FASB ASC. Certain options, restricted stock and other share awards provide for accelerated vesting if there is a change in control, as defined in the 2000 Plan.
The fair value of each stock option awarded was estimated on the date of grant using the Black-Scholes-Merton option-pricing model. Expected volatilities, dividend yields, employee exercises and employee forfeitures 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. We measure compensation expense for restricted stock awards based on the fair value of our common stock at the date of the grant and charge to expense such amounts ratably over the vesting period. For grants with a graded vesting schedule, we have elected to recognize compensation expense on a straight-line basis. We used the shortcut method described in the Share Compensation Topic of the FASB ASC for determining the expected life used in the valuation method.
The following table provides a summary of stock option activity for 2013:
 
 
Shares 
Under
Option
 
Weighted
Average  Exercise
Price
 
Weighted Average Remaining Contractual Term
 
Aggregate Intrinsic Value
 
 
(In thousands)
 
 
 
(In years)
 
(In thousands)
Outstanding at the beginning of year
 
3,521

 
$
20.73

 
 
 
 
Granted
 
—

 
—

 
 
 
 
Exercised
 
(536
)
 
16.30

 
 
 
 
Forfeited or expired
 
—

 
—

 
 
 
 
Outstanding at the end of year
 
2,985

 
$
21.53

 
4.3
 
$
5,890

Exercisable at the end of year
 
2,826

 
$
21.67

 
4.1
 
$
5,344

The total cash or other consideration received from options exercised during the years ended December 31, 2013, 2012 and 2011 was $8.7 million, $493,000 and $31,000, respectively. The total intrinsic value of options exercised during the years ended December 31, 2013, 2012 and 2011 was $4.6 million, $319,000 and $1,000, respectively.
The weighted average grant-date fair value of options granted during 2011 was $3.67. No options were granted during the years ended December 31, 2013 and 2012. During the year ended December 31, 2011, the fair value of each option grant was estimated on the grant date using the Black-Scholes-Merton pricing model with the following assumptions:
Dividend yield
4.6%
Risk-free interest rate
2.7%
Expected option life (years)
6.0 - 6.25
Expected volatility
30.2%
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.

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Restricted Stock Grants and Long-Term Incentive Compensation Plan
The following table presents information regarding restricted stock activity during the year ended December 31, 2013:
 
Shares
 
Weighted Average
Grant-Date Fair
Value
 
(In thousands)
 
 
Unvested at January 1, 2013
975

*
$
17.11

Granted
66

 
22.40

Vested
(181
)
 
17.74

Forfeited
(3
)
 
20.95

Unvested at December 31, 2013
857

*
$
17.37

 ______________________________________________ 
* Does not include 800,000 shares of restricted stock awarded to certain executives which are subject to performance vesting conditions and are not entitled to vote or receive dividends during the performance period as discussed below.
Our compensation committee grants restricted stock to our officers, directors, and other employees. Vesting periods for the restricted stock are determined by our compensation committee. We measure compensation costs for restricted stock awards based on the fair value of our common stock at the date of the grant and expense such amounts ratably over the vesting period. As of December 31, 2013, we had 856,661 shares of non-vested restricted stock grants outstanding.
During the year ended December 31, 2013, we granted 66,015 shares of restricted stock that are subject to forfeiture and vest over periods from 2 to 3 years. The total grant-date value of the 180,648 shares of restricted stock that vested during the year ended December 31, 2013 was $3.2 million.
On August 9, 2010, 698,894 restricted shares were awarded to Jeffrey S. Olson as part of his new employment agreement. Of this amount, 582,412 restricted shares (“Contingent Shares”) were issued under the 2000 Plan and will vest if our total shareholder return over a four-year measurement period commencing on January 1, 2011 exceeds the average total shareholder return of a peer group of publicly traded retail property REITs, as well as an absolute return threshold. All of the Contingent Shares will vest on December 31, 2014 (or such shorter time as provided in the employment agreement) if our total shareholder return for the measurement period both (1) exceeds the average total shareholder return of the peer group of companies by at least 300 basis points and (2) equals or exceeds 9%. If the full vesting requirements are not met, one-half of the Contingent Shares will vest on December 31, 2014 if our total shareholder return for the measurement period both (1) exceeds the average total shareholder return of the peer group of companies by at least 150 basis points and (2) equals or exceeds 6%. Mr. Olson must be employed by us on the vesting date. Mr. Olson will receive any dividends declared on the Contingent Shares over the measurement period and those dividends will not be forfeited by Mr. Olson if the Contingent Shares fail to vest.
On January 28, 2011, we entered into employment agreements with Thomas Caputo, our President, Arthur L. Gallagher, our Executive Vice President and President of Florida, and Mark Langer, our Executive Vice President and Chief Financial Officer, which were effective as of February 1, 2011. The initial term of each employment agreement ends December 31, 2014 and will automatically renew for successive one-year periods unless either party gives the other written notice at least six months before the expiration of the applicable term of that party’s intent to let the employment agreement expire. We granted an aggregate of 800,000 restricted shares (the “Executive Shares”) under the new employment agreements which will vest if our total shareholder return over the measurement period commencing on February 1, 2011 and ending on December 31, 2014 exceeds the average total shareholder return of a peer group of publicly traded retail property REITs, as well as an absolute return threshold. The total return thresholds for the Executive Shares are the same as the thresholds applicable to the Contingent Shares awarded to Mr. Olson. Messrs. Caputo, Gallagher, and Langer do not participate in dividends over the performance period and must be employed by us on the vesting date to receive the shares. As these shares are not entitled to vote or receive dividends during the performance period, they are not included in our restricted share count.
The Contingent Shares and the Executive Shares were each valued at approximately $4.5 million utilizing a Monte Carlo simulation to estimate the probability of the performance vesting conditions being satisfied. The Monte Carlo simulation used the statistical formula underlying the Black-Scholes-Merton binomial formula. For the Contingent Shares, we recognize compensation expense over the requisite service period from August 9, 2010 through December 31, 2014. For the Executive Shares, we recognize compensation expense over the requisite service period from January 28, 2011 through December 31, 2014. During the years ended December 31, 2013, 2012 and 2011, we recognized approximately $1.1 million, $1.1 million and $1.0 million, respectively, of

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compensation expense related to the Executive Shares, and approximately $1.0 million of compensation expense related to the Contingent Shares each period.
Included in the restricted stock grants are 380,000 shares awarded to our chairman as part of his chairman compensation agreement with us which was executed on August 9, 2010, (i) 31,250 of which vested on January 1, 2011; (ii) 7,266 of which will vest on the first day of each calendar month beginning February 2011 and ending December 2014; and (iii) 7,248 of which will vest on December 31, 2014.
Pursuant to their employment agreements, each of our executive officers is entitled to an annual bonus based upon the achievement of certain performance levels established by our compensation committee. We anticipate that the performance levels will be set for each calendar year so that each executive can reasonably be expected to earn a bonus for such calendar year in an amount equal to 50% of his base salary for each of Messrs. Olson and Caputo and 100% of his base salary for each of Messrs. Langer and Gallagher. Bonuses for Messrs. Olson and Caputo are payable in cash; bonuses for Messrs. Langer and Gallagher are payable one-half in cash and one-half in shares of restricted stock, which shares will vest in equal portions on the first, second and third year anniversaries of the grant date, subject to the executive then being employed by us, provided that the number of shares of restricted stock that would otherwise be granted to Mr. Langer for any bonus with respect to the 2011 or 2012 calendar years is reduced (but not below zero) by 12,500 shares. No bonus will be payable for Mr. Langer or Mr. Gallagher in respect of a calendar year in which such executive allows his employment agreement to expire. If we allow either Mr. Langer’s or Mr. Gallagher’s employment agreement to expire, all unvested shares of restricted stock granted to the executive in respect of the foregoing annual bonuses will continue to vest as if the executive had been employed through the last date such shares would have otherwise vested.
Share-Based Compensation Expense
Share-based compensation expense, which is included in general and administrative expenses in the accompanying consolidated statements of operations, is summarized as follows:
 
 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
 
(In thousands)
Restricted stock expense
 
$
5,931

 
$
6,060

 
$
5,692

Stock option expense
 
465

 
1,040

 
1,454

Employee stock purchase plan discount
 
18

 
13

 
14

Total equity-based expense
 
6,414

 
7,113

 
7,160

Restricted stock classified as a liability
 
117

 
51

 
103

Total expense
 
6,531

 
7,164

 
7,263

Less amount capitalized
 
(358
)
 
(301
)
 
(271
)
Net share-based compensation expense
 
$
6,173

 
$
6,863

 
$
6,992

As of December 31, 2013, we had $6.1 million of total unrecognized compensation expense related to unvested and restricted share-based payment arrangements (unvested options and restricted shares). This expense is expected to be recognized over a weighted average period of 1.2 years.
401(k) Plan
We have a 401(k) defined contribution plan (the “401(k) Plan”) covering substantially all of our officers and employees which permits participants to defer compensation up to the maximum amount permitted by law. We match 100% of each employee’s contribution up to 3.0% of the employee’s annual compensation and, thereafter, match 50% of the next 3.0% of the employee’s annual compensation. Employees’ contributions and our matching contributions vest immediately. Our contributions to the 401(k) Plan for the years ended December 31, 2013, 2012 and 2011 were $414,000, $432,000 and $418,000, respectively.
2004 Employee Stock Purchase Plan
Under the 2004 Employee Stock Purchase Plan, our employees, including our directors who are employees, are eligible to participate in quarterly plan offerings in which payroll deductions may be used to purchase shares of our common stock. The purchase price per share is 90% of the average closing price per share of our common stock on the NYSE on the five trading days that immediately precede the date of purchase, 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 of (i) 85% of the market price on the first day of the offering period or (ii) 85% of the market price on the exercise date.

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20.    Segment Reporting
We review operating and financial data for each property on an individual basis; therefore each of our individual properties is a separate operating segment. We have aggregated our operating segments in six reportable segments based primarily upon our method of internal reporting which classifies our operations by geographical area. Our reportable segments by geographical area are as follows: (1) South Florida – including Miami-Dade, Broward and Palm Beach Counties; (2) North Florida – including all of Florida north of Palm Beach County; (3) Southeast – including Georgia, Louisiana, North Carolina and Virginia; (4) Northeast – including Connecticut, Maryland, Massachusetts and New York; (5) West Coast – California; and (6) Non-retail – which is comprised of our non-retail assets.
We assess a segment’s performance based on net operating income (“NOI”). NOI excludes interest and other income, acquisition costs, general and administrative expenses, interest expense, amortization of deferred financing fees, depreciation and amortization expense, gains (losses) from extinguishments of debt, income of unconsolidated joint ventures, income tax benefit from taxable REIT subsidiaries, gain on bargain purchase, gains on sales of real estate, impairments, and income attributable to noncontrolling interests. NOI is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income from continuing operations before tax and discontinued operations, which, to calculate NOI, is adjusted to add back depreciation and amortization, general and administrative expense, interest expense, amortization of deferred financing fees, and impairment losses, and to exclude straight line rent adjustments, accretion of below market lease intangibles (net), revenue earned from management and leasing services, investment income, gain on bargain purchase, gain on sale of real estate, equity in income of unconsolidated joint ventures, gain (loss) on extinguishment of debt, and other income. NOI includes management fee expense recorded at each operating segment based on a percentage of revenue which is eliminated in consolidation. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Therefore, we believe NOI is a useful measure for evaluating the operating performance of our real estate assets. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with income from continuing operations before tax and discontinued operations as presented in our consolidated financial statements. NOI should not be considered as an alternative to net income attributable to Equity One as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions. We consider NOI to be an appropriate supplemental measure to net income because it helps both investors and management understand the core operations of our properties.
The following table sets forth the financial information relating to our continuing operations presented by segments and includes a reconciliation of NOI to income (loss) from continuing operations before tax and discontinued operations, the most directly comparable GAAP financial measure:

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Year Ended December 31,
 
2013
 
2012
 
2011
 
(In thousands)
Revenue:
 
 
 
 
 
South Florida
$
90,117

 
$
87,709

 
$
82,684

North Florida
37,809

 
37,982

 
40,264

Southeast
39,017

 
37,199

 
36,092

Northeast
75,635

 
53,197

 
35,997

West Coast
69,651

 
65,217

 
46,724

Non-retail
2,312

 
753

 
651

Total segment revenue
314,541

 
282,057

 
242,412

Add:
 
 
 
 
 
 Straight line rent adjustment
2,022

 
3,239

 
2,095

 Accretion of below market lease intangibles, net
13,350

 
13,248

 
9,449

 Management and leasing services
2,598

 
2,489

 
2,287

Total revenue
$
332,511

 
$
301,033

 
$
256,243

 
 
 
 
 
 
Net operating income (NOI):
 
 
 
 
 
South Florida
$
60,850

 
$
59,074

 
$
54,633

North Florida
25,975

 
26,698

 
27,978

Southeast
26,612

 
26,257

 
25,014

Northeast
53,450

 
36,639

 
25,608

West Coast
45,820

 
43,533

 
31,142

Non-retail
1,746

 
301

 
34

Total
214,453

 
192,502

 
164,409

Add:
 
 
 
 
 
Straight line rent adjustment
2,022

 
3,239

 
2,095

Accretion of below market lease intangibles, net
13,350

 
13,248

 
9,449

Management and leasing services
2,598

 
2,489

 
2,287

Elimination of intersegment expenses
10,441

 
9,584

 
6,804

Investment income
6,631

 
7,241

 
4,341

Equity in income of unconsolidated joint ventures
1,648

 
542

 
4,829

Other income
216

 
45

 
306

Gain on bargain purchase
—

 
—

 
30,561

Gain on sale of real estate
—

 
—

 
5,542

Gain (loss) on extinguishment of debt
107

 
(29,146
)
 
(1,514
)
Less:
 
 
 
 
 
Depreciation and amortization
87,266

 
79,415

 
75,029

General and administrative
39,514

 
42,473

 
50,910

Interest expense
68,145

 
70,665

 
66,560

Amortization of deferred financing fees
2,421

 
2,474

 
2,195

Impairment loss
5,641

 
8,909

 
16,984

Income (loss) from continuing operations before tax and discontinued
    operations
$
48,479

 
$
(4,192
)
 
$
17,431


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The following is a summary by segment of impairment losses included in the consolidated statements of operations:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(In thousands)
Impairments:
 
 
 
 
 
South Florida
$
—

 
$
601

 
$
3,786

North Florida
—

 
—

 
267

Southeast
2,731

 
8,168

 
12,931

West Coast
2,910

 
140

 
—

Total impairments on properties held for use
$
5,641

 
$
8,909

 
$
16,984

The following is a summary by segment of total assets included in the consolidated balance sheets:
 
 December 31,
 
2013
 
2012
 
(In thousands)
Assets:
 
 
 
South Florida
$
690,328

 
$
692,764

North Florida
318,375

 
316,364

Southeast
305,013

 
310,891

Northeast
974,444

 
894,658

West Coast
833,890

 
779,541

Non-retail
61,273

 
33,525

Corporate assets
157,932

 
206,741

Properties held for sale
13,404

 
268,184

Total assets
$
3,354,659

 
$
3,502,668

21.    Future Minimum Rental Income
Our properties are leased to tenants under operating leases with expiration dates extending to the year 2089. Future minimum rents under non-cancelable operating leases as of December 31, 2013, excluding tenant reimbursements of operating expenses and percentage rent based on tenants’ sales volume are as follows:
Year Ending December 31,
Amount
 
(In thousands)
2014
$
238,128

2015
222,030

2016
186,463

2017
158,835

2018
135,373

Thereafter
667,849

Total
$
1,608,678

22.    Commitments and Contingencies
As of December 31, 2013, we had provided letters of credit having an aggregate face amount of $2.7 million as additional security for financial and other obligations.

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As of December 31, 2013, we had invested an aggregate of approximately $62.2 million in active development or redevelopment projects at various stages of completion and anticipate that these projects will require an additional $76.6 million to complete, based on our current plans and estimates, which we anticipate will be expended over the next two years. These obligations, comprised principally of construction contracts, are generally due as the work is performed and are expected to be financed by funds available under our credit facilities, proceeds from property dispositions and available cash.
We are subject to litigation in the normal course of business. However, we do not believe that any of the litigation outstanding as of December 31, 2013 will have a material adverse effect on our financial condition, results of operations or cash flows.

We are involved in litigation with the fee owner of the majority of the parking lot that services one of our shopping centers. The owner is seeking a declaratory judgment that we and our anchor tenant failed to properly exercise a renewal option under the ground lease at the end of 2012, thereby causing the lease to expire in March 2013. In January 2014, the owner prevailed on its motion for summary judgment. We and our anchor tenant have filed a motion for reconsideration and intend to appeal the decision if necessary. In the event the litigation is finally determined in a manner adverse to us and/or we are otherwise unable to negotiate a new lease or purchase of the parking lot from the owner of the fee interest, we may lose access to the majority of the parking lot servicing the shopping center and our operations and those of our tenants at the shopping center could be adversely impacted. As of December 31, 2013, the shopping center had a carrying value of $21.3 million and generated NOI of approximately $1.8 million during the year then ended.
Certain of our shopping centers are subject to non-cancelable long-term ground leases that expire at various dates through the year 2076 and in most cases provide for renewal options. In addition, we have non-cancelable operating leases for office space and equipment that expire at various dates through the year 2021. At December 31, 2013, future minimum rental payments under non-cancelable operating leases are as follows:
Year Ending December 31,
Amount
 
(In thousands)
2014
$
1,772

2015
1,722

2016
1,590

2017
1,374

2018
1,391

Thereafter
38,242

Total
$
46,091

During the years ended December 31, 2013, 2012 and 2011, we recognized approximately $1.4 million, $1.2 million and $1.1 million, respectively, of rental expense related to our non-cancelable operating leases.
23.    Environmental Matters
We are subject to numerous environmental laws and regulations. The operation of dry cleaning and gas station facilities at our shopping centers are the principal environmental concerns. We require that the tenants who operate these facilities do so in material compliance with current laws and regulations and we have established procedures to monitor dry cleaning operations. Where available, we have applied and been accepted into state sponsored environmental programs. Several properties in the portfolio will require or are currently undergoing varying levels of environmental remediation. We have environmental insurance policies covering most of our properties which limits our exposure to some of these conditions, although these policies are subject to limitations and environmental conditions known at the time of acquisition are typically excluded from coverage. Management believes that the ultimate disposition of currently known environmental matters will not have a material effect on our financial position, liquidity or operations.
24.    Fair Value Measurements
Fair Value Hierarchy
The Fair Value Measurements and Disclosures Topic of FASB ASC establishes a framework for measuring fair value and requires the categorization of financial assets and liabilities, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and lowest priority to unobservable inputs. The various levels of the fair value hierarchy are described as follows:

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•
Level 1 – Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that we have the ability to access.
•
Level 2 – Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability.
•
Level 3 – Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
The Fair Value Measurements and Disclosures Topic of FASB ASC requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
Recurring Fair Value Measurements
As of December 31, 2013 and 2012, we had interest rate swap agreements with a notional amount of $250.0 million that are measured at fair value on a recurring basis. As of December 31, 2013, the fair value of our interest rate swaps was an asset of $2.9 million, which is included in other assets in our consolidated balance sheet. As of December 31, 2012, the fair value of our interest rate swaps was a liability of $7.0 million, which is included in accounts payable and accrued expenses in our consolidated balance sheet. The net unrealized gain (loss) on our interest rate swaps was $9.9 million and $(7.0) million for the years ended December 31, 2013 and 2012, respectively, and is included in accumulated other comprehensive income (loss). The fair value of the interest rate swaps is based on the estimated amount we would receive or pay to terminate the contract at the reporting date and is determined using interest rate pricing models and observable inputs. The interest rate swaps are classified within Level 2 of the valuation hierarchy.
The following are assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 and 2012 (in thousands):
 
Fair Value Measurements at December 31, 2013
Assets:
Total
 
Level 1
 
Level 2
 
Level 3
Interest rate derivatives
$
2,944

 
$
—

 
$
2,944

 
$
—

 
 
Fair Value Measurements at December 31, 2012
Liabilities:
Total
 
Level 1
 
Level 2
 
Level 3
Interest rate derivatives
$
6,954

 
$
—

 
$
6,954

 
$
—

Valuation Methods
The fair value of our interest rate swaps were determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of the derivative financial instrument. This analysis reflected the contractual terms of the derivative, including the period to maturity, and used observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While it was determined that the majority of the inputs used to value the derivatives fall within Level 2 of the fair value hierarchy under authoritative accounting guidance, the credit valuation adjustments associated with the derivatives also utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. However, as of December 31, 2013, the significance of the impact of the credit valuation adjustments on the overall valuation of the derivative financial instruments was assessed and it was determined that these adjustments were not significant to the overall valuation of the derivative financial instruments. As a result, it was determined that the derivative financial instruments in their entirety should be classified in Level 2 of the fair value hierarchy. The net unrealized gain (loss) included in other comprehensive income (“OCI”) was attributable to the net change in unrealized gains related to the interest rate swaps that remained outstanding at December 31, 2013, none of which were reported in the consolidated statements of operations because they were documented and qualified as hedging instruments.
We have a long-term incentive plan for four of our executives based on our total shareholder return versus returns for five of our peer companies. The fair value of this plan is determined using the average trial-specific value of the awards eligible for grant under the plan based upon a Monte Carlo simulation model. This model considers various assumptions, including time value, volatility factors, current market and contractual prices as well as projected future market prices for our common stock as well as the common stock of our peer companies over the performance period. Substantially all of these assumptions are observable in

118


the marketplace throughout the full term of the plan, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Non-Recurring Fair Value Measurements
The following table presents our hierarchy for those assets measured and recorded at fair value on a non-recurring basis as of December 31, 2013:
Assets:
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total Losses(1)
 
 
(In thousands)
Operating properties held and used
 
$
6,600

 
$
—

 
$
—

 
$
6,600

(2) 
$
2,406

Operating properties held for sale
 
3,875

 
—

 
3,875

 
—

 
1,313

Development properties held and used
 
6,400

 
—

 
—

 
6,400

 
3,085

Total
 
$
16,875

 
$
—

 
$
3,875

 
$
13,000

 
$
6,804

____________________________________________ 
(1) Total losses exclude impairments related to properties sold during the year ended December 31, 2013.
(2) $5.4 million of the total represents the fair value of an operating property as of the date it was impaired during the third quarter of 2013. As of December 31, 2013, the carrying amount of the property no longer equals its fair value.

The following table presents our hierarchy for those assets measured and recorded at fair value on a non-recurring basis as of December 31, 2012:
Assets:
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total Losses(1)
 
 
(In thousands)
Operating properties held and used
 
$
6,700

 
$
—

 
$
—

 
$
6,700

 
$
7,791

Operating properties held for sale
 
6,350

 
—

 
6,350

 
—

 
1,932

Development properties held and used
 
12,510

 
—

 
—

 
12,510

 
740

Total
 
$
25,560

 
$
—

 
$
6,350

 
$
19,210

 
$
10,463

____________________________________________ 
(1) Total losses exclude impairments related to properties sold during the years ended December 31, 2013 and 2012.
On a non-recurring basis, we evaluate the carrying value of investment property and investments in and advances to unconsolidated joint ventures, when events or changes in circumstances indicate that the carrying value may not be recoverable. Impairments, if any, typically result from values established by Level 3 valuations. The carrying value is considered impaired when the total projected undiscounted cash flows from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset as determined by purchase price offers or by discounted cash flows using the income or market approach. These cash flows are comprised of unobservable inputs which include contractual rental revenue and forecasted rental revenue and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based upon observable rates that we believe to be within a reasonable range of current market rates for the respective properties. Based on these inputs, we determined that the valuation of these investment properties and investments in unconsolidated joint ventures are classified within Level 3 of the fair value hierarchy.

119


The following are ranges of key inputs used in determining the fair value of income producing properties measured using Level 3 inputs as of December 31, 2013 and 2012:
 
2013
 
2012
 
Low
 
High
 
Low
 
High
Overall capitalization rates
12.5%
 
15.5%
 
12.5%
 
12.5%
Discount rates
10.0%
 
13.5%
 
13.5%
 
13.5%
Terminal capitalization rates
12.5%
 
12.5%
 
12.5%
 
12.5%
During the years ended December 31, 2013 and 2012, we recognized $2.4 million and $7.8 million, respectively, of impairment losses on operating properties located in the Southeast region. The estimated fair values related to the impairment assessments were primarily based on discounted cash flow analyses and, therefore, are classified within Level 3 of the fair value hierarchy.
During the years ended December 31, 2013 and 2012, we recognized $1.3 million and $1.9 million, respectively, of impairment losses on properties held for sale located in the Southeast and South Florida regions, respectively. The estimated fair values related to the impairment assessments were based upon the expected sales prices as determined by executed contracts and, therefore, are classified within Level 2 of the fair value hierarchy.
During the year ended December 31, 2013, we recognized impairment losses of $3.1 million on land parcels located in the Southeast and West Coast regions. During the year ended December 31, 2012, we recognized impairment losses of $740,000 on land parcels located in the South Florida and West Coast regions. The estimated fair values related to the impairment assessments were based on appraisals and, therefore, are classified within Level 3 of the fair value hierarchy.
We also performed annual, or more frequent in certain circumstances, impairment tests of our goodwill. Impairments, if any, resulted from values established by Level 3 valuations. We estimated the fair value of the reporting unit using discounted projected future cash flows, which approximated a current sales price. If the results of this analysis indicated that the carrying value of the reporting unit exceeded its fair value, an impairment was recognized to reduce the carrying value of the goodwill to fair value. During the years ended December 31, 2013 and 2012, we recognized goodwill impairment losses of $288,000 and $525,000, respectively.
25.    Fair Value of Financial Instruments
The estimated fair values of financial instruments have been determined by us using available market information and appropriate valuation methods. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange. The use of different market assumptions and/or estimation methods may have a material effect on the estimated fair value amounts. We have used the following market assumptions and/or estimation methods:
Cash and Cash Equivalents, Accounts and Other Receivables, Accounts Payable and Accrued Expenses and Unsecured Revolving Credit Facilities (classified within Levels 1, 2 and 3 of the valuation hierarchy) – The carrying amounts reported in the consolidated balance sheets for these financial instruments approximate fair value because of their short maturities.
Loans Receivable (classified within Level 2 of the valuation hierarchy) – The carrying value of the loans receivable of $60.7 million at December 31, 2013 approximates fair value due to their short maturities. At December 31, 2012, the estimated fair value was approximately $142.2 million and was estimated using a discounted cash flow analysis based on the then-current interest rates at which similar loans would be made. The carrying amount of these loans receivable, including accrued interest, was $140.7 million at December 31, 2012.
Mortgage Notes Payable (classified within Level 2 of the valuation hierarchy) – The fair value estimated at December 31, 2013 and 2012 was approximately $461.5 million and $494.4 million, respectively, calculated based on the net present value of payments over the term of the loans using estimated market rates for similar mortgage loans and remaining terms. The carrying amount (principal and unaccreted premium) of these notes, including notes associated with properties held for sale, was $438.0 million and $451.1 million at December 31, 2013 and 2012, respectively.
Unsecured Senior Notes Payable (classified within Level 2 of the valuation hierarchy) – The fair value estimated at December 31, 2013 and 2012 was approximately $762.6 million and $765.1 million, respectively, calculated based on the net present value of payments over the terms of the notes using estimated market rates for similar notes and remaining terms. The carrying amount

120


(principal net of unamortized discount) of these notes was $729.4 million and $729.1 million at December 31, 2013 and 2012, respectively.
Term Loan (classified within Level 2 of the valuation hierarchy) – The fair value estimated at December 31, 2013 and 2012 was approximately $248.7 million and $255.2 million, respectively, calculated based on the net present value of payments over the term of the loan using estimated market rates for similar loans and remaining terms. The carrying amount of this loan was $250.0 million at both December 31, 2013 and 2012.
The fair market value calculations of our debt as of December 31, 2013 and 2012 included assumptions as to the effects that prevailing market conditions would have on existing secured or unsecured debt. The calculations used a market rate spread over the risk free interest rate. This spread was determined by using the remaining life to maturity coupled with loan-to-value considerations of the respective debt. Once determined, this market rate was used to discount the remaining debt service payments in an attempt to reflect the present value of this stream of cash flows. While the determination of the appropriate market rate was subjective in nature, recent market data gathered suggested that the composite rates used for mortgages, senior notes and term loans were consistent with current market trends.
Interest Rate Swap Agreements (classified within Level 2 of the valuation hierarchy) – At December 31, 2013, the fair value of our interest rate swaps was an asset of $2.9 million, which is included in other assets in our consolidated balance sheet. At December 31, 2012, the fair value of our interest rate swaps was a liability of $7.0 million, which is included in accounts payable and accrued expenses in our consolidated balance sheet. See Note 24 above for a discussion of the method used to value the interest rate swaps.
Redeemable Noncontrolling Interests (classified within Level 3 of the valuation hierarchy) – The carrying amount of the redeemable noncontrolling interests of $1.0 million and $22.6 million at December 31, 2013 and 2012, respectively, approximates their fair value as determined by discounted cash flow analyses.

121


26.    Condensed Consolidating Financial Information
Many of our subsidiaries that are 100% owned, either directly or indirectly, have guaranteed our indebtedness under our unsecured senior notes and our term loan and revolving credit facilities. The guarantees are joint and several and full and unconditional. The following statements set forth consolidating financial information with respect to guarantors of our unsecured senior notes:
Condensed Consolidating Balance Sheet
As of December 31, 2013
Equity One,
Inc.
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminating Entries
 
Consolidated
 
(In thousands)
ASSETS
 
 
 
 
 
 
 
 
 
Properties, net
$
178,797

 
$
1,401,028

 
$
1,337,141

 
$
(133
)
 
$
2,916,833

Investment in affiliates
2,679,543

 
—

 
—

 
(2,679,543
)
 
—

Other assets
229,759

 
91,759

 
919,201

 
(802,893
)
 
437,826

Total Assets
$
3,088,099

 
$
1,492,787

 
$
2,256,342

 
$
(3,482,569
)
 
$
3,354,659

LIABILITIES
 
 
 
 
 
 
 
 
 
Total notes payable
$
1,670,438

 
$
131,217

 
$
467,354

 
$
(760,600
)
 
$
1,508,409

Other liabilities
22,478

 
89,111

 
173,156

 
(42,410
)
 
242,335

Total Liabilities
1,692,916

 
220,328

 
640,510

 
(803,010
)
 
1,750,744

REDEEMABLE NONCONTROLLING
   INTERESTS
—

 
—

 
989

 
—

 
989

EQUITY
1,395,183

 
1,272,459

 
1,614,843

 
(2,679,559
)
 
1,602,926

TOTAL LIABILITIES, REDEEMABLE
   NONCONTROLLING INTERESTS
   AND EQUITY
$
3,088,099

 
$
1,492,787

 
$
2,256,342

 
$
(3,482,569
)
 
$
3,354,659


Condensed Consolidating Balance Sheet
As of December 31, 2012
Equity One,
Inc.
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminating
Entries
 
Consolidated
 
(In thousands)
ASSETS
 
 
 
 
 
 
 
 
 
Properties, net
$
266,639

 
$
1,482,503

 
$
1,267,795

 
$
(133
)
 
$
3,016,804

Investment in affiliates
2,692,127

 
—

 
—

 
(2,692,127
)
 
—

Other assets
210,277

 
90,102

 
967,199

 
(781,714
)
 
485,864

Total Assets
$
3,169,043

 
$
1,572,605

 
$
2,234,994

 
$
(3,473,974
)
 
$
3,502,668

LIABILITIES
 
 
 
 
 
 
 
 
 
Total notes payable
$
1,751,130

 
$
157,730

 
$
437,063

 
$
(760,600
)
 
$
1,585,323

Other liabilities
21,189

 
114,567

 
175,807

 
(21,248
)
 
290,315

Total Liabilities
1,772,319

 
272,297

 
612,870

 
(781,848
)
 
1,875,638

REDEEMABLE NONCONTROLLING
   INTERESTS
—

 
—

 
22,551

 
—

 
22,551

EQUITY
1,396,724

 
1,300,308

 
1,599,573

 
(2,692,126
)
 
1,604,479

TOTAL LIABILITIES, REDEEMABLE
   NONCONTROLLING INTERESTS AND
   EQUITY
$
3,169,043

 
$
1,572,605

 
$
2,234,994

 
$
(3,473,974
)
 
$
3,502,668



122


Condensed Consolidating Statement of Comprehensive Income
for the year ended December 31, 2013
Equity One
Inc.
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminating Entries
 
Consolidated
 
(In thousands)
Total revenue
$
26,378

 
$
170,206

 
$
135,927

 
$
—

 
$
332,511

Equity in subsidiaries' earnings
178,116

 
—

 
—

 
(178,116
)
 
—

Total costs and expenses
44,282

 
91,888

 
80,775

 
(518
)
 
216,427

INCOME BEFORE OTHER INCOME AND
EXPENSE, TAX AND DISCONTINUED
OPERATIONS
160,212

 
78,318

 
55,152

 
(177,598
)
 
116,084

Other income and (expense)
(86,395
)
 
(8,857
)
 
29,171

 
(1,524
)
 
(67,605
)
INCOME FROM CONTINUING OPERATIONS
   BEFORE TAX AND DISCONTINUED
   OPERATIONS
73,817

 
69,461

 
84,323

 
(179,122
)
 
48,479

Income tax benefit of taxable REIT subsidiaries
193

 
74

 
217

 
—

 
484

INCOME FROM CONTINUING OPERATIONS
74,010

 
69,535

 
84,540

 
(179,122
)
 
48,963

Income from discontinued operations
4,112

 
30,498

 
4,668

 
416

 
39,694

NET INCOME
78,122

 
100,033

 
89,208

 
(178,706
)
 
88,657

Other comprehensive income
9,961

 
—

 
168

 
—

 
10,129

COMPREHENSIVE INCOME
88,083

 
100,033

 
89,376

 
(178,706
)
 
98,786

Comprehensive income attributable to
noncontrolling interests
—

 
—

 
(10,703
)
 
—

 
(10,703
)
COMPREHENSIVE INCOME
    ATTRIBUTABLE TO EQUITY ONE, INC.
$
88,083

 
$
100,033

 
$
78,673

 
$
(178,706
)
 
$
88,083



Condensed Consolidating Statement of Comprehensive (Loss) Income
for the year ended December 31, 2012
Equity One
Inc.
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminating Entries
 
Consolidated
 
(In thousands)
Total revenue
$
26,367

 
$
151,593

 
$
123,461

 
$
(388
)
 
$
301,033

Equity in subsidiaries' earnings
121,215

 
—

 
—

 
(121,215
)
 
—

Total costs and expenses
45,422

 
80,690

 
75,735

 
12

 
201,859

INCOME BEFORE OTHER INCOME AND
EXPENSE, TAX AND DISCONTINUED
OPERATIONS
102,160

 
70,903

 
47,726

 
(121,615
)
 
99,174

Other income and (expense)
(108,541
)
 
(5,594
)
 
11,635

 
(866
)
 
(103,366
)
(LOSS) INCOME FROM CONTINUING
   OPERATIONS BEFORE TAX AND
   DISCONTINUED OPERATIONS
(6,381
)
 
65,309

 
59,361

 
(122,481
)
 
(4,192
)
Income tax benefit of taxable REIT subsidiaries
—

 
97

 
2,883

 
—

 
2,980

(LOSS) INCOME FROM CONTINUING
   OPERATIONS
(6,381
)
 
65,406

 
62,244

 
(122,481
)
 
(1,212
)
Income (loss) from discontinued operations
3,363

 
(9,001
)
 
13,058

 
1,017

 
8,437

NET (LOSS) INCOME
(3,018
)
 
56,405

 
75,302

 
(121,464
)
 
7,225

Other comprehensive (loss) income
(6,890
)
 
—

 
459

 
—

 
(6,431
)
COMPREHENSIVE (LOSS) INCOME
(9,908
)
 
56,405

 
75,761

 
(121,464
)
 
794

Comprehensive income attributable to
noncontrolling interests
—

 
—

 
(10,702
)
 
—

 
(10,702
)
COMPREHENSIVE (LOSS) INCOME
    ATTRIBUTABLE TO EQUITY ONE, INC.
$
(9,908
)
 
$
56,405

 
$
65,059

 
$
(121,464
)
 
$
(9,908
)



123


Condensed Consolidating Statement of Comprehensive Income
for the year ended December 31, 2011
Equity One
Inc.
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminating Entries
 
Consolidated
 
(In thousands)
Total revenue
$
26,107

 
$
141,233

 
$
88,903

 
$
—

 
$
256,243

Equity in subsidiaries' earnings
136,057

 
—

 
—

 
(136,057
)
 
—

Total costs and expenses
48,461

 
80,573

 
65,271

 
2,833

 
197,138

INCOME BEFORE OTHER INCOME AND
EXPENSE, TAX AND DISCONTINUED
OPERATIONS
113,703

 
60,660

 
23,632

 
(138,890
)
 
59,105

Other income and (expense)
(91,174
)
 
(27,736
)
 
81,320

 
(4,084
)
 
(41,674
)
INCOME FROM CONTINUING
   OPERATIONS BEFORE TAX AND
   DISCONTINUED OPERATIONS
22,529

 
32,924

 
104,952

 
(142,974
)
 
17,431

Income tax benefit of taxable REIT subsidiaries
—

 
2,660

 
2,427

 
—

 
5,087

INCOME FROM CONTINUING OPERATIONS
22,529

 
35,584

 
107,379

 
(142,974
)
 
22,518

Income (loss) from discontinued operations
11,443

 
45,226

 
(94,781
)
 
58,812

 
20,700

NET INCOME
33,972

 
80,810

 
12,598

 
(84,162
)
 
43,218

Other comprehensive income
64

 
—

 
351

 
—

 
415

COMPREHENSIVE INCOME
34,036

 
80,810

 
12,949

 
(84,162
)
 
43,633

Comprehensive income attributable to
   noncontrolling interests
—

 
—

 
(9,597
)
 
—

 
(9,597
)
COMPREHENSIVE INCOME
    ATTRIBUTABLE TO EQUITY ONE, INC.
$
34,036

 
$
80,810

 
$
3,352

 
$
(84,162
)
 
$
34,036



124


Condensed Consolidating Statement of Cash Flows
for the year ended December 31, 2013
Equity One,
Inc.
 
 Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Consolidated
 
(In thousands)
Net cash (used in) provided by operating activities
$
(81,778
)
 
$
114,616

 
$
99,904

 
$
132,742

INVESTING ACTIVITIES:
 
 
 
 
 
 
 
Acquisition of income producing properties
—

 
(37,000
)
 
(72,449
)
 
(109,449
)
Additions to income producing properties
(1,636
)
 
(7,197
)
 
(4,828
)
 
(13,661
)
Acquisition of land held for development
—

 
(3,000
)
 
—

 
(3,000
)
Additions to construction in progress
(731
)
 
(39,043
)
 
(14,231
)
 
(54,005
)
Deposits for the acquisition of income producing properties
(75
)
 
—

 
—

 
(75
)
Proceeds from sale of real estate and rental properties
85,602

 
156,637

 
44,272

 
286,511

Increase in cash held in escrow
(10,662
)
 
—

 
—

 
(10,662
)
Purchase of below market leasehold interest
—

 
(25,000
)
 
—

 
(25,000
)
Investment in loans receivable
—

 
—

 
(12,000
)
 
(12,000
)
Repayment of loans receivable
—

 
—

 
91,474

 
91,474

Increase in deferred leasing costs and lease intangibles
(1,283
)
 
(4,766
)
 
(3,217
)
 
(9,266
)
Investment in joint ventures
—

 
—

 
(30,401
)
 
(30,401
)
Repayments of advances to joint ventures
—

 
—

 
5

 
5

Distributions from joint ventures
—

 
—

 
12,576

 
12,576

Advances to subsidiaries, net
189,173

 
(128,968
)
 
(60,205
)
 
—

Net cash provided by (used in) investing activities
260,388

 
(88,337
)
 
(49,004
)
 
123,047

FINANCING ACTIVITIES:
 
 
 
 
 
 
 
Repayments of mortgage notes payable
(3,578
)
 
(26,279
)
 
(18,422
)
 
(48,279
)
Net repayments under revolving credit facilities
(81,000
)
 
—

 
—

 
(81,000
)
Proceeds from issuance of common stock
8,510

 
—

 
—

 
8,510

Stock issuance costs
(96
)
 
—

 
—

 
(96
)
Dividends paid to stockholders
(104,279
)
 
—

 
—

 
(104,279
)
Purchase of redeemable noncontrolling interests
—

 
—

 
(18,972
)
 
(18,972
)
Distributions to noncontrolling interests
—

 
—

 
(10,038
)
 
(10,038
)
Distributions to redeemable noncontrolling interests
—

 
—

 
(3,468
)
 
(3,468
)
Net cash used in financing activities
(180,443
)
 
(26,279
)
 
(50,900
)
 
(257,622
)
Net decrease in cash and cash equivalents
(1,833
)
 
—

 
—

 
(1,833
)
Cash and cash equivalents at beginning of the year
27,416

 
—

 
—

 
27,416

Cash and cash equivalents at end of the year
$
25,583

 
$
—

 
$
—

 
$
25,583




125


Condensed Consolidating Statement of Cash Flows
for the year ended December 31, 2012
Equity One,
Inc.
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Consolidated
 
(In thousands)
Net cash (used in) provided by operating activities
$
(126,275
)
 
$
111,533

 
$
167,961

 
$
153,219

INVESTING ACTIVITIES:
 
 
 
 
 
 
 
Acquisition of income producing properties
—

 
(73,235
)
 
(170,314
)
 
(243,549
)
Additions to income producing properties
(4,853
)
 
(12,473
)
 
(2,849
)
 
(20,175
)
Acquisition of land held for development
—

 
(9,505
)
 
—

 
(9,505
)
Additions to construction in progress
(682
)
 
(63,697
)
 
(764
)
 
(65,143
)
Proceeds from sale of real estate and rental properties
1,417

 
15,342

 
25,235

 
41,994

Decrease in cash held in escrow
90,846

 
—

 
746

 
91,592

Investment in loans receivable
—

 
—

 
(114,258
)
 
(114,258
)
Repayment of loans receivable
—

 
—

 
19,258

 
19,258

Increase in deferred leasing costs and lease intangibles
(1,739
)
 
(3,296
)
 
(2,134
)
 
(7,169
)
Investment in joint ventures
—

 
—

 
(26,392
)
 
(26,392
)
Repayments of advances to joint ventures
—

 
—

 
517

 
517

Distributions from joint ventures
—

 
—

 
567

 
567

Advances to subsidiaries, net
(208,285
)
 
53,174

 
155,111

 
—

Net cash used in investing activities
(123,296
)
 
(93,690
)
 
(115,277
)
 
(332,263
)
FINANCING ACTIVITIES:
 
 
 
 
 
 
 
Repayments of mortgage notes payable
(6,585
)
 
(17,843
)
 
(41,745
)
 
(66,173
)
Net borrowings under revolving credit facilities
34,000

 
—

 
—

 
34,000

Proceeds from senior debt borrowings
296,823

 
—

 
—

 
296,823

Repayment of senior debt borrowings
(287,840
)
 
—

 
—

 
(287,840
)
Proceeds from issuance of common stock
85,838

 
—

 
—

 
85,838

Borrowings under term loan
250,000

 
—

 
—

 
250,000

Payment of deferred financing costs
(3,251
)
 
—

 
—

 
(3,251
)
Stock issuance costs
(883
)
 
—

 
—

 
(883
)
Dividends paid to stockholders
(102,078
)
 
—

 
—

 
(102,078
)
Distributions to noncontrolling interests
—

 
—

 
(9,995
)
 
(9,995
)
Distributions to redeemable noncontrolling interests
—

 
—

 
(944
)
 
(944
)
Net cash provided by (used in) financing activities
266,024

 
(17,843
)
 
(52,684
)
 
195,497

Net increase in cash and cash equivalents
16,453

 
—

 
—

 
16,453

Cash and cash equivalents at beginning of the year
10,963

 
—

 
—

 
10,963

Cash and cash equivalents at end of the year
$
27,416

 
$
—

 
$
—

 
$
27,416



126


Condensed Consolidating Statement of Cash Flows
for the year ended December 31, 2011
 
Equity One,
Inc.
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Consolidated
 
 
(In Thousands)
Net cash provided (used in) by operating activities
 
$
96,544

 
$
30,408

 
$
(24,326
)
 
$
102,626

INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
Acquisition of income producing properties
 
(55,000
)
 
(55,500
)
 
(168,580
)
 
(279,080
)
Additions to income producing properties
 
(2,296
)
 
(11,557
)
 
(2,543
)
 
(16,396
)
Additions to construction in progress
 
(2,339
)
 
(40,392
)
 
(366
)
 
(43,097
)
Proceeds from sale of real estate and rental properties
 
3,206

 
11,705

 
384,485

 
399,396

Increase in cash held in escrow
 
(91,591
)
 
—

 
—

 
(91,591
)
Investment in loans receivable
 
—

 
—

 
(45,100
)
 
(45,100
)
Increase in deferred leasing costs and lease intangibles
 
(1,416
)
 
(4,126
)
 
(1,612
)
 
(7,154
)
Investment in joint ventures
 
—

 
—

 
(15,024
)
 
(15,024
)
Repayments of advances to joint ventures
 
—

 
—

 
34,887

 
34,887

Distributions from joint ventures
 
—

 
—

 
18,786

 
18,786

Investment in consolidated subsidiary
 
—

 
—

 
(242
)
 
(242
)
Advances to subsidiaries, net
 
(122,297
)
 
163,051

 
(40,754
)
 
—

Net cash used in (provided by) investing activities
 
(271,733
)
 
63,181

 
163,937

 
(44,615
)
FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
Repayments of mortgage notes payable
 
(1,808
)
 
(93,589
)
 
(151,467
)
 
(246,864
)
Net borrowings under revolving credit facilities
 
138,000

 


 


 
138,000

Proceeds from issuance of common stock
 
116,542

 
—

 
—

 
116,542

Payment of deferred financing costs
 
(4,888
)
 
—

 
(151
)
 
(5,039
)
Stock issuance costs
 
(1,185
)
 
—

 
—

 
(1,185
)
Dividends paid to stockholders
 
(98,842
)
 
—

 
—

 
(98,842
)
Distributions to noncontrolling interests
 
—

 
—

 
(11,405
)
 
(11,405
)
Net cash provided by (used in) financing activities
 
147,819

 
(93,589
)
 
(163,023
)
 
(108,793
)
Net decrease in cash and cash equivalents
 
(27,370
)
 
—

 
(23,412
)
 
(50,782
)
Cash and cash equivalents obtained through acquisition
 
—

 
—

 
23,412

 
23,412

Cash and cash equivalents at beginning of the year
 
38,333

 
—

 
—

 
38,333

Cash and cash equivalents at end of the year
 
$
10,963

 
$
—

 
$
—

 
$
10,963

27.    Quarterly Financial Data (unaudited)
 
 
First
   Quarter (1)
 
Second
   Quarter (1)
 
Third
    Quarter (1)
 
Fourth
       Quarter (1)
2013
 
(In thousands, except per share data)
Total revenue
 
$
81,429

 
$
81,736

 
$
82,723

 
$
86,623

Income from continuing operations
 
$
13,929

 
$
10,145

 
$
14,611

 
$
10,278

Net income
 
$
27,291

 
$
36,177

 
$
13,051

 
$
12,138

Net income available to common shareholders
 
$
24,593

 
$
33,638

 
$
10,571

 
$
9,152

Basic per share data
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.09

 
$
0.06

 
$
0.10

 
$
0.06

Net income
 
$
0.21

 
$
0.28

 
$
0.09

 
$
0.08

Diluted per share data
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.09

 
$
0.06

 
$
0.10

 
$
0.06

Net income
 
$
0.21

 
$
0.28

 
$
0.09

 
$
0.08

_______________________________________________ 
(1) 
Reclassified to reflect the reporting of discontinued operations. Note that the sum of the individual quarters per share data may not foot to the year-to-date totals due to the rounding of the individual calculations.

127




 
 
First
Quarter (1)
 
Second
    Quarter (1)
 
Third
        Quarter (1)
 
Fourth
       Quarter (1)(2)
2012
 
(In thousands, except per share data)
Total revenue
 
$
72,976

 
$
73,948

 
$
75,156

 
$
78,953

Income (loss) from continuing operations
 
$
6,447

 
$
7,190

 
$
9,708

 
$
(24,557
)
Net income (loss)
 
$
21,695

 
$
5,021

 
$
10,801

 
$
(30,292
)
Net income (loss) available to common stockholders
 
$
18,982

 
$
2,268

 
$
8,065

 
$
(32,792
)
Basic per share data
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
0.03

 
$
0.04

 
$
0.06

 
$
(0.23
)
Net income (loss)
 
$
0.17

 
$
0.02

 
$
0.07

 
$
(0.28
)
Diluted per share data
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
0.03

 
$
0.04

 
$
0.06

 
$
(0.23
)
Net income (loss)
 
$
0.17

 
$
0.02

 
$
0.07

 
$
(0.28
)
_______________________________________________ 
(1) 
Reclassified to reflect the reporting of discontinued operations. Note that the sum of the individual quarters per share data may not foot to the year-to-date totals due to the rounding of the individual calculations.
(2) 
During the fourth quarter of 2012, we recognized a loss on early extinguishment of debt of $30.2 million (including $731,000 in discontinued operations), primarily comprised of a make-whole premium and deferred fees and costs of $29.6 million associated with the redemption of all of our $250 million 6.25% unsecured senior notes, which were scheduled to mature on December 15, 2014. Additionally, during the fourth quarter of 2012, we recognized impairment losses of $8.9 million in continuing operations and $10.7 million in discontinued operations. See Note 7 for further discussion of impairments.
28.    Related Parties
Refer to Note 18 for a discussion of the private placements during 2012 and 2011 to MGN (USA), Inc., an affiliate of our largest stockholder, Gazit.
We received rental income from affiliates of Gazit of approximately $246,000, $339,000 and $271,000 for the years ended December 31, 2013, 2012 and 2011, respectively.
General and administrative expenses incurred by us on behalf of Gazit, which are reimbursed, totaled approximately $1.2 million, $758,000 and $567,000 for the years ended December 31, 2013, 2012 and 2011, respectively. The balance due from Gazit, which is included in accounts and other receivables, was approximately $283,000 and $476,000 as of December 31, 2013 and 2012, respectively.
We reimbursed MGN Icarus, Inc., an affiliate of Gazit, for certain travel expenses incurred by the Chairman of our Board of Directors. The amounts reimbursed totaled approximately $111,000, $243,000 and $137,000 for the years ended December 31, 2013, 2012 and 2011, respectively.
29.    Subsequent Events
Pursuant to the Subsequent Events Topic of the FASB ASC, we have evaluated subsequent events and transactions that occurred after our December 31, 2013 consolidated balance sheet date for potential recognition or disclosure in our consolidated financial statements.
In January 2014, we acquired Rockwood Capital and Vestar Development Company's interests in Talega Village Center, a 102,000 square foot grocery-anchored shopping center located in San Clemente, California, for an additional equity investment of $6.2 million. In addition, in January 2014, the property held by Vernola Marketplace JV, LLC, in which we effectively own a 48% interest, was sold for $49.0 million, and the buyer assumed the existing mortgage of $22.9 million. The joint venture anticipates recognizing a gain of approximately $14.5 million on the sale. See Note 9 for additional information.
In January 2014, we acquired the two remaining parcels within the Westwood Complex for an aggregate gross purchase price of $80.0 million. See Note 11 for additional information.
Subsequent to year end, we closed on the sale of two properties located in the Southeast and North Florida regions for an aggregate purchase price of $10.7 million. The operations of these properties are included in discontinued operations in the accompanying

128


consolidated financial statements for all the periods presented and the related assets and liabilities are presented as held for sale in our consolidated balance sheets at December 31, 2013 and 2012.
Subsequent to year end, the due diligence period expired under a contract to sell Brawley Commons to a third party for $5.5 million, and the property met the criteria to be classified as held for sale. As of December 31, 2013, the property had a net book value of $5.4 million. In February 2014, we closed on the sale of the property pursuant to the contract. The property was encumbered by a $6.5 million mortgage loan which matured on July 1, 2013 and remained unpaid as of December 31, 2013, and the lender agreed to accept the proceeds from the sale as full repayment of the loan.




129


SCHEDULE II
Equity One, Inc.
VALUATION AND QUALIFYING ACCOUNTS
 
 
 
Balance at
beginning of
period
 
Charged to
expense
 
Adjustments
to valuation
accounts
 
Deductions
 
Balance at end
of period
 
 
(In thousands)
Year Ended December 31, 2013:
 
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
3,182

 
$
3,736

 
$
—

 
$
(2,099
)
 
$
4,819

Allowance for deferred tax asset
 
213

 
—

 
—

 
(51
)
 
162

Year Ended December 31, 2012:
 
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
5,265

 
979

 
—

 
(3,062
)
 
3,182

Allowance for deferred tax asset
 
205

 
8

 
—

 
—

 
213

Year Ended December 31, 2011:
 
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
3,672

 
2,947

 
—

 
(1,354
)
 
5,265

Allowance for deferred tax asset
 
195

 
10

 
—

 
—

 
205


Note: Amounts above include those amounts recorded in discontinued operations.

130


SCHEDULE III
Equity One, Inc.
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2013
(In thousands)
 
 
 
 
INITIAL COST TO 
COMPANY
Capitalized
Subsequent to
Acquisition or
Improvements (1)
GROSS AMOUNTS AT WHICH
CARRIED AT CLOSE OF PERIOD
 
 
 
Property
Location
Encumbrances
Land
Building &
Improvements
Land
Building &
Improvements
Total
Accumulated
Depreciation
Date of
Construction
Date
Acquired
90-30 Metropolitan
Avenue
NY
$
—

$
5,105

$
21,378

$
771

$
5,105

$
22,149

$
27,254

$
(1,290
)
2007
9/1/2011
161 W. 16th Street
NY
—

21,699

40,518

439

21,699

40,957

62,656

(2,091
)
1930
5/16/2011
200 Potrero
CA
—

4,778

1,469

347

4,778

1,816

6,594

(98
)
1928
12/27/2012
1175 Third Avenue
NY
6,765

28,282

22,115

(378
)
28,070

21,949

50,019

(1,497
)
1995
9/22/2010
1225-1239 Second
Avenue
NY
16,457

14,253

11,288

53

14,274

11,320

25,594

(307
)
1963
10/5/2012
2400 PGA
FL
—

1,418

—

7

1,418

7

1,425

(1
)
n/a
3/20/2006
4101 South I-85
Industrial
NC
—

1,619

950

274

1,619

1,224

2,843

(357
)
1956
2/12/2003
5335 CITGO
MD
—

6,203

103

—

6,203

103

6,306

(8
)
1958
9/5/2013
5471 CITGO
MD
—

4,107

78

—

4,107

78

4,185

(6
)
1959
9/5/2013
Alafaya Commons
FL
—

6,858

10,720

1,594

6,858

12,314

19,172

(3,252
)
1987
2/12/2003
Alafaya Village
FL
—

1,444

4,967

685

1,444

5,652

7,096

(1,493
)
1986
4/20/2006
Ambassador Row
LA
—

3,880

10,570

2,317

3,880

12,887

16,767

(3,394
)
1980
2/12/2003
Ambassador Row
Courtyard
LA
—

3,110

9,208

2,143

3,110

11,351

14,461

(3,349
)
1986
2/12/2003
Antioch Land
CA
—

7,060

—

(3,060
)
4,000

—

4,000

—

n/a
1/4/2011
Atlantic Village
FL
—

1,190

4,760

5,308

1,190

10,068

11,258

(2,952
)
1984
6/30/1995
Aventura Square (2)
FL
24,326

46,811

17,851

2,041

45,855

20,848

66,703

(1,551
)
1991
10/5/2011
Banco Popular
Building
FL
—

3,363

1,566

570

3,363

2,136

5,499

(582
)
1971
9/27/2005
Beauclerc Village
FL
—

651

2,242

1,590

651

3,832

4,483

(2,188
)
1962
5/15/1998
Bird Ludlum
FL
—

4,088

16,318

2,192

4,088

18,510

22,598

(8,710
)
1988
8/11/1994
Bluebonnet Village
LA
—

2,290

4,168

2,170

2,290

6,338

8,628

(1,769
)
1983
2/12/2003
Bluffs Square Shoppes
FL
—

3,232

9,917

613

3,232

10,530

13,762

(4,309
)
1986
8/15/2000
Boca Village
FL
—

3,385

10,174

3,398

3,385

13,572

16,957

(1,835
)
1978
8/15/2000
Bowlmor Lanes
MD
—

12,128

863

—

12,128

863

12,991

(58
)
1960
5/7/2013
Boynton Plaza
FL
—

2,943

9,100

1,066

2,943

10,166

13,109

(3,815
)
1978
8/15/2000
Brawley Commons
NC
6,485

4,206

11,556

(8,676
)
1,667

5,419

7,086

(1,424
)
1997
12/31/2008
BridgeMill
GA
7,200

8,593

6,310

698

8,593

7,008

15,601

(2,159
)
2000
11/13/2003
Broadway Plaza
NY
—

7,500

—

18,637

7,500

18,637

26,137

—

n/a
6/8/2012
Broadway Outparcels
NY
—

2,000

—

752

2,000

752

2,752

—

n/a
10/1/2012
Brookside Plaza
CT
—

2,291

26,260

7,687

2,291

33,947

36,238

(7,677
)
1985
1/12/2006
Buckhead Station
GA
—

27,138

45,277

1,905

27,138

47,182

74,320

(9,005
)
1996
3/9/2007
Cashmere Corners
FL
—

1,947

5,707

(78
)
1,947

5,629

7,576

(1,807
)
2001
8/15/2000
Centre Pointe Plaza
NC
—

2,081

4,411

1,282

2,081

5,693

7,774

(1,682
)
1989
2/12/2003
Chapel Trail Plaza
FL
—

3,641

5,777

3,010

3,641

8,787

12,428

(2,444
)
2007
5/10/2006
Charlotte Square
FL
—

4,155

4,414

105

4,155

4,519

8,674

(1,315
)
1980
2/12/2003
Chastain Square
GA
—

10,689

5,937

850

10,689

6,787

17,476

(1,877
)
1981
2/12/2003
Circle Center West
CA
—

10,800

10,340

836

10,800

11,176

21,976

(1,225
)
1989
3/15/2011
Clocktower Plaza
Shopping Center
NY
—

25,184

19,462

31

25,184

19,493

44,677

(894
)
1985
9/28/2012
Compo Acres
Shopping Center
CT
—

18,305

12,195

210

18,305

12,405

30,710

(774
)
1960
3/1/2012
Copps Hill Plaza
CT
17,423

14,146

24,626

52

14,146

24,678

38,824

(3,576
)
2002
3/31/2010
Coral Reef Shopping
Center
FL
—

16,464

4,376

1,642

17,515

4,967

22,482

(1,041
)
1968
9/1/2006
Country Club Plaza
LA
—

1,294

2,060

107

1,294

2,167

3,461

(567
)
1982
2/12/2003
Countryside Shops
FL
—

11,343

13,853

3,370

11,343

17,223

28,566

(4,597
)
1986
2/12/2003

131



 
 
 
INITIAL COST TO 
COMPANY
Capitalized
Subsequent to
Acquisition or
Improvements (1)
GROSS AMOUNTS AT WHICH
CARRIED AT CLOSE OF PERIOD
 
 
 
Property
Location
Encumbrances
Land
Building &
Improvements
Land
Building &
Improvements
Total
Accumulated
Depreciation
Date of
Construction
Date
Acquired
Crossroads Square
FL
$
—

$
3,592

$
4,401

$
6,809

$
3,520

$
11,282

$
14,802

$
(2,988
)
1973
8/15/2000
Culver Center
CA
64,000

74,868

59,958

4,449

75,214

64,061

139,275

(3,691
)
2000
11/16/2011
Danbury Green
CT
24,700

17,547

21,560

8,402

18,143

29,366

47,509

(3,031
)
2006
10/27/2011
Daniel Village
GA
—

3,439

8,352

183

3,439

8,535

11,974

(2,350
)
1956
2/12/2003
Darinor Plaza
CT
18,322

—

16,991

20

—

17,011

17,011

(1,267
)
1978
8/28/2012
El Novillo
FL
—

250

1,000

158

250

1,158

1,408

(453
)
1970
4/30/1998
Elmwood Oaks
LA
—

4,088

8,221

928

4,088

9,149

13,237

(2,736
)
1989
2/12/2003
Forest Village
FL
—

3,397

3,206

2,347

3,397

5,553

8,950

(1,851
)
2000
1/28/1999
Ft. Caroline
FL
—

701

2,800

730

700

3,531

4,231

(1,697
)
1985
1/24/1994
Gateway Plaza at
Aventura
FL
—

2,301

5,529

—

2,301

5,529

7,830

(833
)
1991
3/19/2010
Glengary Shoppes
FL
15,808

7,488

13,969

405

7,488

14,374

21,862

(2,119
)
1995
12/31/2008
Greenwood
FL
—

4,117

10,295

3,624

4,117

13,919

18,036

(3,657
)
1982
2/12/2003
Hairston Center
GA
—

1,644

642

109

1,644

751

2,395

(143
)
2000
8/25/2005
Hammocks Town
Center
FL
—

16,856

11,392

641

16,856

12,033

28,889

(1,701
)
1987
12/31/2008
Hampton Oaks
GA
—

835

—

1,633

1,172

1,296

2,468

(312
)
2009
11/30/2006
Homestead Gas
Station
FL
—

1,170

—

103

1,220

53

1,273

(8
)
N/A
11/8/2004
Kirkman Shoppes
FL
—

6,222

9,714

975

6,222

10,689

16,911

(4,071
)
1973
8/15/2000
Lago Mar
FL
—

4,216

6,609

1,320

4,216

7,929

12,145

(2,177
)
1995
2/12/2003
Lake Mary
FL
—

7,092

13,878

10,797

7,092

24,675

31,767

(9,552
)
1988
11/9/1995
Lantana Village
FL
—

1,350

7,978

944

1,350

8,922

10,272

(3,347
)
1976
1/6/1998
Laurel Walk House
NC
—

105

111

—

105

111

216

(23
)
1985
10/31/2005
Magnolia Shoppes
FL
13,558

7,176

10,886

532

7,176

11,418

18,594

(1,691
)
1998
12/31/2008
Mandarin Landing
FL
—

4,443

4,747

11,306

4,443

16,053

20,496

(4,845
)
1976
12/10/1999
Manor Care
MD
—

6,397

6,747

—

6,397

6,747

13,144

(78
)
1976
9/5/2013
Mariners Crossing
FL
—

1,262

4,447

2,852

1,511

7,050

8,561

(2,102
)
1989
9/12/2000
Market Place
GA
—

1,667

4,078

122

1,577

4,290

5,867

(1,216
)
1976
2/12/2003
Marketplace Shopping
Center
CA
15,934

8,727

22,188

2,493

8,737

24,671

33,408

(2,062
)
1990
1/4/2011
McAlpin Square
GA
—

3,536

6,963

294

3,536

7,257

10,793

(1,966
)
1979
2/12/2003
NSB Regional
FL
—

3,217

8,896

364

3,217

9,260

12,477

(2,539
)
1987
2/12/2003
Oak Hill (3)
FL
—

690

2,760

127

3,577

—

3,577

—

1985
12/7/1995
Oakbrook Square (2)
FL
—

7,706

16,079

4,171

7,706

20,250

27,956

(6,391
)
1974
8/15/2000
Oaktree Plaza
FL
—

1,589

2,275

259

1,589

2,534

4,123

(485
)
1985
10/16/2006
Old Kings Commons
FL
—

1,420

5,005

966

1,420

5,971

7,391

(1,528
)
1988
2/12/2003
Pablo Plaza
FL
—

5,327

12,676

385

5,424

12,964

18,388

(2,238
)
1973
8/31/2010
Park Promenade
FL
—

2,670

6,444

121

2,670

6,565

9,235

(2,453
)
1987
1/31/1999
Pavilion
FL
—

10,827

11,299

6,877

10,827

18,176

29,003

(4,554
)
1982
2/4/2004
Piedmont Peachtree
Crossing
GA
—

34,338

17,992

764

34,338

18,756

53,094

(4,081
)
1978
3/6/2006
Pine Island
FL
—

8,557

12,860

2,509

8,557

15,369

23,926

(5,341
)
1983
8/26/1999
Pine Ridge Square
FL
—

6,528

9,850

6,759

6,649

16,488

23,137

(3,556
)
1986
2/12/2003
Plaza Acadienne
LA
—

2,108

168

(1,005
)
2,108

(837
)
1,271

(96
)
1980
2/12/2003
Plaza Escuela
CA
—

10,041

63,038

1,663

10,041

64,701

74,742

(4,017
)
2002
1/4/2011
Pleasanton Plaza
CA
19,968

19,390

20,197

17

19,390

20,214

39,604

(147
)
1981
10/25/2013
Point Royale
FL
—

3,720

5,005

5,145

4,784

9,086

13,870

(3,184
)
1970
7/27/1995
Post Road Plaza
CT
—

9,807

2,707

12

9,807

2,719

12,526

(255
)
1978
3/1/2012
Potrero Center
CA
—

48,594

74,701

676

48,594

75,377

123,971

(3,984
)
1968
3/1/2012
Prosperity Centre
FL
—

4,597

13,838

966

4,597

14,804

19,401

(5,203
)
1993
8/15/2000
Quincy Star Market
MA
—

6,121

18,445

—

6,121

18,445

24,566

(4,587
)
1965
10/7/2004

132


 
 
 
INITIAL COST TO 
COMPANY
Capitalized
Subsequent to
Acquisition or
Improvements (1)
GROSS AMOUNTS AT WHICH
CARRIED AT CLOSE OF PERIOD
 
 
 
Property
Location
Encumbrances
Land
Building &
Improvements
Land
Building &
Improvements
Total
Accumulated
Depreciation
Date of
Construction
Date
Acquired
Ralph’s Circle Center
CA
$
—

$
9,833

$
5,856

$
940

$
9,833

$
6,796

$
16,629

$
(780
)
1983
7/14/2011
Ridge Plaza
FL
—

3,905

7,450

1,584

3,905

9,034

12,939

(3,414
)
1984
8/15/2000
River Green (land)
GA
—

2,587

—

(1,087
)
1,500

—

1,500

—

n/a
9/27/2005
Riverside Square
FL
—

6,423

8,260

1,049

5,623

10,109

15,732

(2,568
)
1987
2/12/2003
Riverview Shopping
Center
NC
—

2,202

4,745

2,170

2,202

6,915

9,117

(1,797
)
1973
2/12/2003
Ryanwood Square
FL
—

2,281

6,880

1,016

2,613

7,564

10,177

(2,291
)
1987
8/15/2000
Salerno Village Square
FL
—

2,291

1,511

5,214

2,291

6,725

9,016

(1,643
)
1987
5/6/2002
Sawgrass Promenade
FL
—

3,280

9,351

2,281

3,280

11,632

14,912

(4,661
)
1982
8/15/2000
Serramonte Shopping
Center
CA
—

81,049

119,765

27,802

80,999

147,617

228,616

(15,092
)
1968
1/4/2011
Shaw’s @ Medford
MA
—

7,750

11,390

—

7,750

11,390

19,140

(2,820
)
1995
10/7/2004
Shaw’s @ Plymouth
MA
—

4,917

12,198

—

4,917

12,198

17,115

(3,017
)
1993
10/7/2004
Sheridan Plaza
FL
60,500

38,888

36,241

6,523

38,888

42,764

81,652

(11,972
)
1973
7/14/2003
Sherwood South
LA
—

746

2,412

1,087

746

3,499

4,245

(1,206
)
1972
2/12/2003
Shoppes at Andros Isle
FL
—

6,009

7,832

73

6,009

7,905

13,914

(1,471
)
2000
12/8/2006
Shoppes at Silverlakes
FL
—

10,306

10,131

2,679

10,306

12,810

23,116

(3,393
)
1995
2/12/2003
Shoppes of Jonathan’s
Landing
FL
—

1,146

3,442

425

1,146

3,867

5,013

(1,325
)
1997
8/15/2000
Shoppes of North Port
FL
—

1,452

5,807

1,241

1,452

7,048

8,500

(2,081
)
1991
12/5/2000
Shops at Skylake
FL
—

15,226

7,206

25,138

15,226

32,344

47,570

(9,187
)
1999
8/19/1997
Siegen Village
LA
—

4,329

9,691

(617
)
4,329

9,074

13,403

(2,574
)
1988
2/12/2003
Smyth Valley Crossing
VA
—

2,537

3,890

690

2,537

4,580

7,117

(1,159
)
1989
2/12/2003
South Beach
FL
—

9,545

19,228

5,302

9,545

24,530

34,075

(7,163
)
1990
2/12/2003
South Point
FL
6,666

7,142

7,098

76

7,142

7,174

14,316

(1,332
)
2003
12/8/2006
Southbury Green
CT
21,000

18,483

31,857

5,335

18,744

36,931

55,675

(2,893
)
1997
10/27/2011
St. Lucie Land
FL
—

7,728

—

(2,128
)
5,600

—

5,600

—

n/a
11/27/2006
Stanley Market Place (3)
NC
—

396

669

2,654

3,719

—

3,719

—

2007
2/12/2003
Star’s at Cambridge
MA
—

11,358

13,854

—

11,358

13,854

25,212

(3,433
)
1953
10/7/2004
Summerlin Square (3)
FL
—

2,187

7,989

(2,993
)
1,670

5,513

7,183

(276
)
1986
6/10/1998
Sun Point
FL
—

4,025

4,228

2,057

4,025

6,285

10,310

(2,554
)
1984
5/5/2006
Sunlake-Equity One
LLC
FL
—

9,861

—

25,984

18,208

17,637

35,845

(2,585
)
2010
2/1/2005
Tamarac Town Square
FL
—

4,742

5,610

1,371

4,643

7,080

11,723

(1,868
)
1987
2/12/2003
Tarpon Heights
LA
—

1,133

631

223

1,133

854

1,987

(310
)
1982
2/12/2003
TD Bank Skylake
FL
—

2,041

—

453

2,064

430

2,494

(27
)
n/a
12/17/2009
The Boulevard
LA
—

1,360

1,675

648

1,360

2,323

3,683

(838
)
1976
2/12/2003
The Crossing
LA
—

1,591

3,650

769

1,591

4,419

6,010

(1,201
)
1988
2/12/2003
The Gallery at
Westbury Plaza
NY
—

27,481

3,537

82,541

39,716

73,843

113,559

(3,721
)
2012
11/16/2009
The Plaza at St. Lucie
West
FL
—

790

3,082

964

790

4,046

4,836

(833
)
2006
8/15/2000
The Village Center
CT
15,618

18,284

36,021

—

18,284

36,021

54,305

(267
)
1973
10/23/2013
Thomasville Commons
NC
—

1,212

4,567

1,844

1,212

6,411

7,623

(1,748
)
1991
2/12/2003
Town & Country
FL
—

2,503

4,397

457

2,354

5,003

7,357

(1,511
)
1993
2/12/2003
Treasure Coast Plaza (2)
FL
—

1,359

9,728

1,922

1,359

11,650

13,009

(2,820
)
1983
2/12/2003
Unigold
FL
—

4,304

6,413

2,044

4,304

8,457

12,761

(2,278
)
1987
2/12/2003
Union City Commons
(land)
GA
—

8,084

—

(5,684
)
2,400

—

2,400

—

n/a
6/22/2006
Von's Circle West
CA
10,342

18,219

18,909

2,777

18,274

21,631

39,905

(2,123
)
1972
3/16/2011
Walden Woods
FL
—

950

3,780

1,155

881

5,004

5,885

(2,781
)
1985
1/1/1999
Waterstone
FL
—

1,422

7,508

655

1,422

8,163

9,585

(1,653
)
2005
4/10/1992


133


 
 
 
INITIAL COST TO 
COMPANY
Capitalized
Subsequent to
Acquisition or
Improvements (1)
GROSS AMOUNTS
AT WHICH
CARRIED AT CLOSE
OF PERIOD
 
 
 
 
Property
Location
Encumbrances
Land
Building &
Improvements
Land
Building &
Improvements
Total
 
Accumulated
Depreciation
Date of
Construction
Date
Acquired
Webster Plaza
MA
$
6,819

$
5,033

$
14,465

$
1,654

$
5,033

$
16,119

$
21,152

 
$
(3,141
)
1963
10/12/2006
Webster Plaza
Solar Project
MA
—

—

—

732

—

732

732

 
(61
)
n/a
n/a
Wesley Chapel
Crossing
GA
—

6,389

4,311

4,926

6,389

9,237

15,626

 
(3,420
)
1989
2/12/2003
West Bird Plaza
FL
—

5,280

12,539

409

5,280

12,948

18,228

 
(1,693
)
1977
8/31/2010
West Lakes Plaza
FL
—

2,141

5,789

663

2,141

6,452

8,593

 
(2,802
)
1984
11/6/1996
West Roxbury
Shaw's Plaza
MA
—

9,207

13,588

1,945

9,207

15,533

24,740

 
(3,858
)
1973
10/7/2004
Westbury Plaza
NY
—

37,853

58,273

10,550

40,843

65,833

106,676

 
(8,109
)
1993
10/29/2009
Westport Outparcels
FL
—

1,347

1,010

(4
)
1,347

1,006

2,353

 
(185
)
1990
9/14/2006
Westport Plaza
FL
3,720

4,180

3,446

183

4,180

3,629

7,809

 
(950
)
2002
12/17/2004
Westwood Towers
MD
—

14,112

17,088

10

14,112

17,098

31,210

 
(519
)
1968
6/5/2013
Whole Foods at
Swampscott
MA
—

5,139

6,539

—

5,139

6,539

11,678

 
(1,613
)
1967
10/7/2004
Williamsburg at
Dunwoody
GA
—

4,347

3,615

1,388

4,347

5,003

9,350

 
(1,206
)
1983
2/12/2003
Willows Shopping
Center
CA
54,544

20,999

38,007

6,808

21,037

44,777

65,814

 
(4,513
)
1977
1/4/2011
Young Circle
FL
—

13,409

8,895

418

13,409

9,313

22,722

 
(2,086
)
1962
5/19/2005
Corporate
FL
—

—

242

(1,106
)
—

(864
)
(864
)
 
238

various
various
 
 
$
430,155

$
1,246,200

$
1,640,077

$
384,722

$
1,263,120

$
2,007,879

$
3,270,999

(4) 
$
(354,166
)
 
 

(1) Includes asset impairments recognized.
(2) Aventura Square encumbrance is cross collateralized with Oakbrook Square and Treasure Coast Plaza.
(3) Classified as held-for-sale.
(4) Represents aggregate cost for federal income tax purposes.

134


SCHEDULE III
Equity One, Inc.
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
 
Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets as follows:
 
Buildings
30-55 years
Buildings and land improvements
2-40 years
Tenant improvements
Lesser of minimum lease term or economic useful life
Furniture and equipment
3-10 years

 
 
2013
 
2012
 
2011
 
 
(In thousands)
Reconciliation of total real estate carrying value:
 
 
 
 
 
 
Balance at beginning of year
 
$
3,314,540

 
$
3,068,886

 
$
2,668,133

Additions during period:
 
 
 
 
 
 
Improvements
 
58,603

 
24,022

 
559,536

Acquisitions
 
164,719

 
273,185

 
944,598

Deductions during period:
 
 
 
 
 
 
Cost of real estate sold/written off
 
(266,863
)
 
(51,553
)
 
(1,103,381
)
Balance at end of year
 
$
3,270,999

 
$
3,314,540

 
$
3,068,886

Reconciliation of accumulated depreciation:
 
 
 
 
 
 
Balance at beginning of year
 
$
(297,736
)
 
$
(244,044
)
 
$
(200,688
)
Depreciation expense
 
(70,354
)
 
(66,758
)
 
(67,876
)
Cost of real estate sold/written off
 
13,924

 
13,066

 
24,520

Balance at end of year
 
$
(354,166
)
 
$
(297,736
)
 
$
(244,044
)


135


SCHEDULE IV
Equity One, Inc.
MORTGAGE LOANS ON REAL ESTATE
 
Type of Loan
 
Description
 
Location
 
Interest Rate
 
Final Maturity
Date
 
Periodic
Payment Terms
 
Prior Liens
 
Face Amount
of Mortgages
 
Carrying
Amount of
Mortgages
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Mezzanine Loan
 
Retail/Housing
 
Maryland
 
5.00
%
 
1/15/2014
 
Interest only
 
$
95,000

 
$
12,000

 
$
6,267

Mortgage Loan
 
Retail/Housing
 
Maryland
 
5.00
%
 
1/15/2014
 
Interest only
 
—

 
95,000

 
54,444

Totals
 
 
 
 
 
 
 
 
 
 
 
$
95,000

 
$
107,000

 
$
60,711


 
 
2013
 
2012
 
2011
 
 
(In thousands)
Reconciliation of loans on real estate:
 
 
 
 
 
 
Balance at beginning of year
 
$
140,708

 
$
45,279

 
$
—

Additions during year:
 
 
 
 
 
 
New loans, including capitalized costs
 
24,820

(1) 
114,518

 
45,114

Accrued interest
 
228

(1) 
2,277

 
196

 
 
25,048

 
116,795

 
45,310

Deductions during year:
 
 
 
 
 
 
Collection of principal
 
(104,264
)
(1) 
(19,258
)
 
—

Collection of interest
 
(516
)
(1) 
(2,000
)
 
(28
)
Amortization of capitalized costs
 
(265
)
 
(108
)
 
(3
)
 
 
(105,045
)
 
(21,366
)
 
(31
)
Balance at end of year
 
$
60,711

 
$
140,708

 
$
45,279

______________________________________________ 
(1) Includes amounts related to loans provided in connection with dispositions. See Note 11 for additional information.


136


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
 
 
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
 
 
 
101.INS

 
XBRL Instance Document
 
 
 
101.SCH

 
XBRL Taxonomy Extension Schema
 
 
 
101.CAL

 
XBRL Taxonomy Extension Calculation Linkbase
 
 
 
101.LAB

 
XBRL Extension Labels Linkbase
 
 
 
101.PRE

 
XBRL Taxonomy Extension Presentation Linkbase
 
 
 
101.DEF

 
XBRL Taxonomy Extension Definition Linkbase


137