-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J0qmPYLtDXzuB3E5chp8U6KpGYnt5ZRa0txcOobakLskiq+wRuKi/lqyTL6Z6zJi lYP9w4hVBj1ha0BJNE5knA== 0000897069-01-500579.txt : 20020410 0000897069-01-500579.hdr.sgml : 20020410 ACCESSION NUMBER: 0000897069-01-500579 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REGENCY CENTERS LP CENTRAL INDEX KEY: 0001066247 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 593429602 STATE OF INCORPORATION: FL FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24763 FILM NUMBER: 1790238 BUSINESS ADDRESS: STREET 1: 121 W FORSYTH STREET STREET 2: SUITE 200 CITY: JACKSONVILLE STATE: FL ZIP: 32202 BUSINESS PHONE: 9043567000 MAIL ADDRESS: STREET 1: 121 W FORSYTH ST STREET 2: STE 200 CITY: JACKSONVILLE STATE: FL ZIP: 32202 10-Q 1 dkm82.txt FORM 10-Q F/Q/E 09/30/01 United States SECURITIES AND EXCHANGE COMMISSION Washington DC 20549 FORM 10-Q (Mark One) [X] For the quarterly period ended September 30, 2001 -or- [ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to ________ Commission File Number 0-24763 REGENCY CENTERS, L.P. (Exact name of registrant as specified in its charter) Delaware 59-3429602 -------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 121 West Forsyth Street, Suite 200 Jacksonville, Florida 32202 (Address of principal executive offices) (Zip Code) (904) 356-7000 (Registrant's telephone number, including area code) Unchanged (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ] Independent Accountants' Review Report The Unitholders of Regency Centers, L.P. and the Board of Directors of Regency Centers Corporation: We have reviewed the consolidated balance sheet of Regency Centers, L.P. as of September 30, 2001, and the related consolidated statements of operations for the three-month and nine-month periods ended September 30, 2001 and 2000 and the consolidated statements of changes in partners' capital and cash flows for the nine-month period ended September 30, 2001. These consolidated financial statements are the responsibility of the Partnership's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Regency Centers, L.P. as of December 31, 2000, and the related consolidated statements of operations, changes in partners' capital, and cash flows for the year then ended (not presented herein); and in our report dated January 30, 2001, we expressed an unqualified opinion on those consolidated financial statements. /s/ KPMG LLP Jacksonville, Florida October 30, 2001 2 REGENCY CENTERS, L.P. Consolidated Balance Sheets September 30, 2001 and December 31, 2000 (unaudited)
2001 2000 ---- ---- Assets Real estate investments: Land $ 584,568,078 564,089,984 Buildings and improvements 1,843,618,244 1,813,554,881 ------------------- ----------------- 2,428,186,322 2,377,644,865 Less: accumulated depreciation 187,099,195 147,053,900 ------------------- ----------------- 2,241,087,127 2,230,590,965 Properties in development 387,683,122 296,632,730 Operating properties held for sale 151,433,751 184,150,762 Investments in real estate partnerships 66,118,903 85,198,279 ------------------- ----------------- Net real estate investments 2,846,322,903 2,796,572,736 Cash and cash equivalents 36,278,495 100,987,895 Notes receivable 30,995,921 66,423,893 Tenant receivables, net of allowance for uncollectible accounts of $5,278,796 and $4,414,085 at September 30, 2001 and December 31, 2000, respectively 36,991,993 39,407,777 Deferred costs, less accumulated amortization of $18,221,155 and $13,910,018 at September 30, 2001 and December 31, 2000, respectively 31,158,643 21,317,141 Other assets 8,895,871 10,434,298 ------------------- ----------------- $ 2,990,643,826 3,035,143,740 =================== ================= Liabilities and Partners' Capital Liabilities: Notes payable 1,027,488,627 841,072,156 Unsecured line of credit 263,000,000 466,000,000 Accounts payable and other liabilities 60,875,670 75,460,304 Tenants' security and escrow deposits 8,522,444 8,262,885 ------------------- ----------------- Total liabilities 1,359,886,741 1,390,795,345 ------------------- ----------------- Limited partners' interest in consolidated partnerships 3,832,925 13,116,282 ------------------- ----------------- Partners' Capital: Series A preferred units, par value $50: 1,600,000 units issued and outstanding at September 30, 2001 and December 31, 2000 78,800,000 78,800,000 Series B preferred units, par value $100: 850,000 units issued and outstanding at September 30, 2001 and December 31, 2000 82,799,720 82,799,720 Series C preferred units, par value $100: 750,000 units issued and outstanding at September 30, 2001 and December 31, 2000 73,058,577 73,058,577 Series D preferred units, par value $100: 500,000 units issued and outstanding at September 30, 2001 and December 31, 2000 49,157,977 49,157,977 Series E preferred units, par value $100: 700,000 units issued and outstanding at September 30, 2001 and December 31, 2000 68,221,579 68,221,579 Series F preferred units, par value $100: 240,000 units issued and outstanding at September 30, 2001 and December 31, 2000 23,365,799 23,369,924 General partner; 59,077,709 and 58,414,526 units outstanding at September 30, 2001 and December 31, 2000 1,219,410,943 1,225,414,966 Limited partners; 1,555,636 and 1,448,874 units outstanding at September 30, 2001 and December 31, 2000 32,109,565 30,409,370 ------------------- ----------------- Total partners' capital 1,626,924,160 1,631,232,113 ------------------- ----------------- Commitments and contingencies $ 2,990,643,826 3,035,143,740 =================== =================
See accompanying notes to consolidated financial statements. 3 REGENCY CENTERS, L.P. Consolidated Statements of Operations For the Three Months ended September 30, 2000 and 2001 (unaudited)
2001 2000 ---- ---- Revenues: Minimum rent $ 68,917,918 65,487,039 Percentage rent 194,726 325,785 Recoveries from tenants 19,295,760 17,999,790 Service operations revenue 9,075,710 6,021,017 Equity in income of investments in real estate partnerships 233,262 2,804,787 ------------------- ----------------- Total revenues 97,717,376 92,638,418 ------------------- ----------------- Operating expenses: Depreciation and amortization 16,972,770 14,776,780 Operating and maintenance 12,567,112 11,992,681 General and administrative 4,469,616 4,996,685 Real estate taxes 9,582,330 9,004,241 Other expenses 1,315,127 830,000 ------------------- ----------------- Total operating expenses 44,906,955 41,600,387 ------------------- ----------------- Interest expense (income): Interest expense 18,389,731 18,791,545 Interest income (1,737,839) (1,160,925) ------------------- ----------------- Net interest expense 16,651,892 17,630,620 ------------------- ----------------- Income before loss on sale of operating properties and minority interests 36,158,529 33,407,411 Loss on sale of operating properties (136,932) - Minority interest of limited partners (324,206) (186,203) ------------------- ----------------- Net income 35,697,391 33,221,208 Preferred unit distributions (8,368,752) (7,977,919) ------------------- ----------------- Net income for common unitholders $ 27,328,639 25,243,289 =================== ================= Net income per common unit: Basic $ 0.45 0.42 =================== ================= Diluted $ 0.45 0.42 =================== =================
See accompanying notes to consolidated financial statements 4 REGENCY CENTERS, L.P. Consolidated Statements of Operations For the Nine Months ended September 30, 2001 and 2000 (unaudited)
2001 2000 ---- ---- Revenues: Minimum rent $ 201,724,876 189,389,963 Percentage rent 1,855,287 1,378,246 Recoveries from tenants 57,027,191 51,081,827 Service operations revenue 23,246,649 15,387,761 Equity in income of investments in real estate partnerships 2,125,524 2,865,450 ------------------- ----------------- Total revenues 285,979,527 260,103,247 ------------------- ----------------- Operating expenses: Depreciation and amortization 49,741,350 43,163,768 Operating and maintenance 36,876,254 33,095,724 General and administrative 13,387,373 13,253,951 Real estate taxes 28,862,726 25,326,122 Other expenses 4,666,749 1,749,715 ------------------- ----------------- Total operating expenses 133,534,452 116,589,280 ------------------- ----------------- Interest expense (income): Interest expense 56,845,009 52,681,417 Interest income (5,003,490) (2,823,483) ------------------- ----------------- Net interest expense 51,841,519 49,857,934 ------------------- ----------------- Income before gain, provision on real estate investments and minority interest 100,603,556 93,656,033 Gain on sale of operating properties 961,373 18,310 Provison for loss on operating properties held for sale - (6,909,625) Minority interest of limited partners (456,707) (666,517) ------------------- ----------------- Net income 101,108,222 86,098,201 Preferred unit distributions (25,106,255) (21,232,432) ------------------- ----------------- Net income for common unitholders $ 76,001,967 64,865,769 =================== ================= Net income per common unit: Basic $ 1.25 1.07 =================== ================= Diluted $ 1.25 1.07 =================== =================
See accompanying notes to consolidated financial statements 5 REGENCY CENTERS, L.P. Consolidated Statement of Changes in Partners' Capital For the Nine Months Ended September 30, 2001 (unaudited)
Preferred General Limited Total Units Partner Partners Capital ----- ------- -------- ------- Balance December 31, 2000 $ 375,407,777 1,225,414,966 30,409,370 1,631,232,113 Net income 25,106,255 74,144,499 1,857,468 101,108,222 Costs from the issuance of preferred units (4,125) - - (4,125) Cash distributions for dividends (88,286,383) (2,435,151) (90,721,534) Preferred unit distribution (25,106,255) - - (25,106,255) Units issued to acquire limited partners' interest in consolidated partnerships - - 4,383,468 4,383,468 Units converted for cash - - (110,487) (110,487) Units issued as a result of common stock issued by Regency, net of repurchases - 5,600,874 - 5,600,874 Units exchanged for common stock of Regency - 3,220,453 (3,220,453) - Units issued for acquisition of real estate or investments in real estate partnerships - 43,196 498,688 541,884 Reallocation of limited partners interest - (726,662) 726,662 - -------------- --------------- --------------- ---------------- Balance September 30, 2001 $ 375,403,652 1,219,410,943 32,109,565 1,626,924,160 ============== =============== =============== ================
See accompanying notes to consolidated financial statements 6 REGENCY CENTERS, L.P. Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2001 and 2000 (unaudited)
2001 2000 ---- ---- Cash flows from operating activities: Net income $ 101,108,222 86,098,201 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 49,741,350 43,163,768 Deferred loan cost and debt premium amortization 790,671 554,273 Services provided by Regency in exchange for units 5,181,067 3,592,406 Minority interest of limited partners 456,707 666,517 Equity in income of investments in real estate partnerships (2,125,524) (2,865,450) Gain on sale of operating properties (961,373) (18,310) Provision for loss on operating properties held for sale - 6,909,625 Changes in assets and liabilities: Tenant receivables 991,906 5,549,265 Deferred leasing costs (6,550,023) (5,385,197) Other assets 12,141 (1,448,389) Tenants' security and escrow deposits 169,728 313,158 Accounts payable and other liabilities (14,438,585) (9,448,374) ------------------ ------------------ Net cash provided by operating activities 134,376,287 127,681,493 ------------------ ------------------ Cash flows from investing activities: Acquisition and development of real estate, net (102,596,176) (238,488,759) Acquistion of partners' interest in investments in real estate partnerships, net of cash acquired 2,416,621 (1,402,371) Investment in real estate partnerships (48,469,245) (49,515,795) Capital improvements (11,210,416) (12,920,698) Proceeds from sale of operating properties 37,550,387 7,491,870 Proceeds from sale of real estate partnership 2,967,481 - Repayment of notes receivable 65,350,068 15,673,125 Distributions received from investments in real estate partnerships 15,096,764 - ------------------ ------------------ Net cash used in investing activities (38,894,516) (279,162,628) ------------------ ------------------ Cash flows from financing activities: Net proceeds from the issuance of Regency stock and exchangeable partnership units 53,164 22,476 Repurchase of Regency stock and corresponding units (38,102) (11,088,419) Purchase of limited partner's interest in consolidated partnership - (2,527,264) Redemption of partnership units (110,487) (1,396,946) Net distributions to limited partners in consolidated partnerships (5,275,985) (2,099,886) Distributions to preferred unit holders (25,106,255) (21,232,432) Cash distributions for dividends (90,721,534) (86,384,738) Net proceeds from fixed rate unsecured notes 215,382,284 149,728,500 (Additional costs) net proceeds from issuance of preferred units (4,125) 91,621,978 (Repayment) proceeds of unsecured line of credit, net (203,000,000) 57,820,690 Proceeds from notes payable 50,670 8,118,953 Repayment of notes payable (42,074,671) (40,881,096) Scheduled principal payments (4,562,245) (4,785,445) Deferred loan costs (4,783,885) (2,681,766) ------------------ ------------------ Net (cash used) provided by in financing activities (160,191,171) 134,234,605 ------------------ ------------------ Net decrease in cash and cash equivalents (64,709,400) (17,246,530) Cash and cash equivalents at beginning of period 100,987,895 54,117,443 ------------------ ------------------ Cash and cash equivalents at end of period $ 36,278,495 36,870,913 ================== ==================
7 REGENCY CENTERS, L.P. Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2001 and 2000 (unaudited) continued
2001 2000 ---- ---- Supplemental disclosure of cash flow information - cash paid for interest (net of capitalized interest of approximately $15,745,000 and $8,873,000 in 2001 and 2000, respectively) $ 61,239,008 59,643,181 ================== ================== Supplemental disclosure of non-cash transactions: Mortgage loans assumed for the acquisition of real estate $ 5,470,479 19,947,565 ================== ================== Exchangeable operating partnership units and common stock issued for investments in real estate partnerships $ - 329,948 ================== ================== Exchangeable operating partnership units and common stock issued for the acquisition of partners' interest in investments in real estate partnerships $ 541,884 1,287,111 ================== ================== Exchangeable operating partnership units, preferred and common stock issued for the acquisition of Pacific and real estate $ - 103,885 ================== ================== Notes receivable taken in connection with sales of development properties $ 29,922,096 37,962,720 ================== ==================
See accompanying notes to consolidated financial statements. 8 REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements September 30, 2001 (unaudited) 1. Summary of Significant Accounting Policies (a) Organization and Principles of Consolidation Regency Centers, L.P. ("RCLP" or "Partnership") is the primary entity through which Regency Centers Corporation ("Regency" or "Company"), a self-administered and self-managed real estate investment trust ("REIT"), conducts all of its business and owns all of its assets. The Partnership was formed in 1996 for the purpose of acquiring certain real estate properties. At September 30, 2001, Regency owns approximately 97% of the outstanding common units of the Partnership. During 2000, Regency transferred all of the assets and liabilities of eighteen shopping centers to the Partnership in exchange for common units. Seventeen of the properties were acquired in 1993, and one was acquired in 1998. Since the Partnership and the eighteen properties are under the common control of Regency, the transfer of the properties has been accounted for at historical cost in a manner similar to a pooling of interests, as if the Partnership had directly acquired the properties at their original acquisition dates. Accordingly, the Partnership's financial statements have been restated to include the assets, liabilities, units issued, and results of operations of the eighteen properties from the date they were acquired. The Partnership's ownership interests are represented by Units, of which there are six series of preferred Units, common Units owned by the limited partners and common Units owned by Regency which serves as the general partner. Each outstanding common Unit owned by a limited partner is exchangeable, on a one share per one Unit basis, for the common stock of Regency or for cash at Regency's election. The accompanying consolidated financial statements include the accounts of the Partnership, its wholly owned subsidiaries, and its majority owned or controlled subsidiaries and partnerships. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. The financial statements reflect all adjustments which are of a normal recurring nature, and in the opinion of management, are necessary to properly state the results of operations and financial position. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted although management believes that the disclosures are adequate to make the information presented not misleading. The financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's December 31, 2000 Form 10-K filed with the Securities and Exchange Commission. 9 REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements September 30, 2001 (unaudited) (b) Real Estate Investments Land, buildings and improvements are recorded at cost. All direct and indirect costs clearly associated with the acquisition, development and construction of real estate projects are capitalized as buildings and improvements. Maintenance and repairs which do not improve or extend the useful lives of the respective assets are reflected in operating and maintenance expense. The property cost includes the capitalization of interest expense incurred during construction based on average outstanding expenditures. Depreciation is computed using the straight line method over estimated useful lives of up to forty years for buildings and improvements, term of lease for tenant improvements, and three to seven years for furniture and equipment. Operating properties held for sale include properties that no longer meet the Partnership's long-term investment standards such as expected growth in revenue or market dominance. Once identified and marketed for sale, these properties are segregated on the balance sheet as operating properties held for sale. The Partnership also develops shopping centers and stand-alone retail stores for resale. Once completed, these developments are also included in operating properties held for sale. Operating properties held for sale are carried at the lower of cost or fair value less estimated selling costs. Depreciation and amortization are suspended during the period held for sale. Net income from the operating properties held for sale was $1.2 and $7.1 for the three months and nine months ended September 30, 2001. The Partnership reviews its real estate investments for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. (c) Reclassifications Certain reclassifications have been made to the 2000 amounts to conform to classifications adopted in 2001. 10 REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements September 30, 2001 (unaudited) 2. Segments The Partnership was formed, and currently operates, for the purpose of 1) operating and developing Partnership owned retail shopping centers (Retail segment), and 2) providing services including management fees and commissions earned from third parties, and development related profits and fees earned from the sales of shopping centers, outparcels and build to suit properties to third parties (Service operations segment). The Partnership's reportable segments offer different products or services and are managed separately because each requires different strategies and management expertise. There are no material inter-segment sales or transfers. The Partnership assesses and measures operating results starting with net operating income for the Retail segment and income for the Service operations segment and converts such amounts into a performance measure referred to as Funds From Operations ("FFO"). The operating results for the individual retail shopping centers have been aggregated since all of the Partnership's shopping centers exhibit highly similar economic characteristics as neighborhood shopping centers, and offer similar degrees of risk and opportunities for growth. FFO as defined by the National Association of Real Estate Investment Trusts consists of net income (computed in accordance with generally accepted accounting principles) excluding gains (or losses) from debt restructuring and sales of income producing property held for investment, plus depreciation and amortization of real estate, and adjustments for unconsolidated investments in real estate partnerships and joint ventures. The Partnership further adjusts FFO by distributions made to holders of Units and preferred stock that results in a diluted FFO amount. The Partnership considers diluted FFO to be the industry standard for reporting the operations of REITs. Adjustments for investments in real estate partnerships are calculated to reflect diluted FFO on the same basis. While management believes that diluted FFO is the most relevant and widely used measure of the Partnership's performance, such amount does not represent cash flow from operations as defined by accounting principles generally accepted in the United States of America, should not be considered an alternative to net income as an indicator of the Partnership's operating performance, and is not indicative of cash available to fund all cash flow needs. Additionally, the Partnership's calculation of diluted FFO, as provided below, may not be comparable to similarly titled measures of other REITs. The accounting policies of the segments are the same as those described in note 1. The revenues, diluted FFO, and assets for each of the reportable segments are summarized as follows for the three month and nine month periods ended September 30, 2001 and 2000. Assets not attributable to a particular segment consist primarily of cash and deferred costs. 11 REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements September 30, 2001 (unaudited) 2. Segments (continued)
For the three months ended September 30, September 30, 2001 2000 ---- ---- Revenues: Retail segment $ 88,641,666 86,617,401 Service operations segment 9,075,710 6,021,017 --------------------------------------- Total revenues $ 97,717,376 92,638,418 ======================================= Funds from Operations: Retail segment net operating income $ 66,355,292 65,602,170 Service operations segment income 9,075,710 6,021,017 Adjustments to calculate diluted FFO: Interest expense (18,389,731) (18,791,545) Interest income 1,737,839 1,160,925 General and administrative and other (5,784,743) (5,826,685) Non-real estate depreciation (601,589) (351,817) Minority interest of limited partners (324,206) (186,203) Loss on sale of operating properties 136,932 - Minority interest in depreciation and amortization (57,377) (111,946) Share of joint venture depreciation and amortization 124,861 168,578 Distributions on preferred units (8,368,752) (7,977,919) --------------------------------------- Funds from Operations - diluted 43,904,236 39,706,575 --------------------------------------- Reconciliation to net income for common stockholders: Real estate related depreciation and amortization (16,371,181) (14,406,654) Minority interest in depreciation and amortization 57,377 111,946 Share of joint venture depreciation and amortization (124,861) (168,578) Loss on sale of operating properties (136,932) - ------------------ -------------------- Net income available for common unitholders $ 27,328,639 25,243,289 ================== ====================
12 REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements September 30, 2001 (unaudited) 2. Segments (continued)
For the nine months ended September 30, September 30, 2001 2000 ---- ----- Revenues: Retail segment $ 262,732,878 244,715,486 Service operations segment 23,246,649 15,387,761 ------------------ -------------------- Total revenues $ 285,979,527 260,103,247 ================== ==================== Funds from Operations: Retail segment net operating income $ 197,955,271 186,311,950 Service operations segment income 23,246,649 15,387,761 Adjustments to calculate diluted FFO: Interest expense (56,845,009) (52,681,417) Interest income 5,003,490 2,823,483 General and administrative and other (18,054,122) (15,003,666) Non-real estate depreciation (1,451,437) (952,598) Minority interest of limited partners (456,707) (666,517) Gain on sale of operating properties including depreciation on developments sold (1,954,840) (18,310) Minority interest in depreciation and amortization (155,801) (411,774) Share of joint venture depreciation and amortization 496,553 1,102,167 Distributions on preferred units (25,106,255) (21,232,432) ------------------ -------------------- Funds from Operations - diluted 122,677,792 114,658,647 ------------------ -------------------- Reconciliation to net income for common unitholders: Real estate related depreciation and amortization (48,289,913) (42,211,170) Minority interest in depreciation and amortization 155,801 411,774 Share of joint venture depreciation and amortization (496,553) (1,102,167) Provision for loss on operating properties held for sale - (6,909,625) Gain on sale of operating properties including depreciation on developments sold 1,954,840 18,310 ------------------ -------------------- Net income available for common unitholders $ 76,001,967 64,865,769 ================== ==================== September 30, December 31, Assets (in thousands): 2001 2000 ---------------------- ---- ---- Retail segment $ 2,468,110 2,454,476 Service operations segment 446,201 447,929 Cash and other assets 76,333 132,739 ------------------ -------------------- Total assets $ 2,990,644 3,035,144 ================== ====================
13 REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements September 30, 2001 (unaudited) 3. Investments in Real Estate Partnerships The Partnership uses the equity method to account for all investments in which it owns 50% or less and does not have a controlling financial interest. The Partnership's combined investment in these partnerships was $66.1 million and $85.2 million at September 30, 2001 and December 31, 2000, respectively. Net income is allocated to the Partnership in accordance with the respective partnership agreements. During the second quarter, Regency formed a joint venture with an affiliate of Macquarie CountryWide Trust of Australia ("CountryWide"). CountryWide is a Sydney, Australia based property trust with a similar investment philosophy to Regency, focusing on grocery-anchored shopping centers. The venture purchased five Regency centers, consisting of three operating properties and two recently completed developments. Regency has a 25% ownership in the venture. On December 31, 2000, the Partnership contributed $4.5 million to Columbia Regency Retail Partners, LLC ("Columbia") representing a 10% equity interest. During the second quarter, the Company contributed $24.3 million and increased its ownership to a 20% equity interest. 4. Notes Payable and Unsecured Line of Credit The Partnership's outstanding debt at September 30, 2001 and December 31, 2000 consists of the following (in thousands):
2001 2000 ---- ---- Notes Payable: Fixed rate mortgage loans $ 266,753 270,491 Variable rate mortgage loans 19,616 40,640 Fixed rate unsecured loans 741,120 529,941 -------------- --------------- Total notes payable 1,027,489 841,072 Unsecured line of credit 263,000 466,000 -------------- --------------- Total $ 1,290,489 1,307,072 ============== ===============
On April 30, 2001, the Partnership modified the terms of its line of credit (the "Line") by reducing the commitment to $600 million, reducing the interest rate spread from 1.0% to .85% and extending the maturity date to April 2004. Interest rates paid on the Line at September 30, 2001 and 2000 were based on LIBOR plus .85% and 1.0% or 3.538% and 7.625%, respectively. The spread that the Partnership pays on the Line is dependent upon maintaining specific investment grade ratings. The Partnership is required to comply and is in compliance with certain financial and other covenants customary with this type of unsecured financing. The Line is used primarily to finance the acquisition and development of real estate, but is also available for general working capital purposes. 14 REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements September 30, 2001 (unaudited) 4. Notes Payable and Unsecured Line of Credit (continued) On January 22, 2001 the Partnership completed a $220 million unsecured debt offering with an interest rate of 7.95%. The notes were priced at 99.867%, are due on January 15, 2011 and are guaranteed by the Company. The net proceeds of the offering were used to reduce the balance of the Line. Mortgage loans are secured by certain real estate properties, and may be prepaid, but could be subject to a yield-maintenance premium. Mortgage loans are generally due in monthly installments of interest and principal and mature over various terms through 2019. Variable interest rates on mortgage loans are currently based on LIBOR plus a spread in a range of 125 basis points to 135 basis points. Fixed interest rates on mortgage loans range from 6.82% to 9.5%. As of September 30, 2001, scheduled principal repayments on notes payable and the Line were as follows (in thousands):
Scheduled Principal Term Loan Total Scheduled Payments by Year Payments Maturities Payments -------------------------- -------------- --------------- --------------- 2001 $ 1,466 24,750 26,216 2002 5,051 44,093 49,144 2003 4,803 22,866 27,669 2004 (includes the Line) 5,185 472,689 477,874 2005 4,011 148,040 152,051 Beyond 5 Years 33,024 516,168 549,192 Unamortized debt premiums - 8,343 8,343 -------------- --------------- --------------- Total $ 53,540 1,236,949 1,290,489 ============== =============== ===============
Unconsolidated partnerships and joint ventures had mortgage loans payable of $65.1 million at September 30, 2001 and the Partnership's proportionate share of these loans was $14.2 million. The fair value of the Partnership's notes payable and Line are estimated based on the current rates available to the Partnership for debt of the same remaining maturities. Variable rate notes payable, and the Line, are considered to be at fair value since the interest rates on such instruments reprice based on current market conditions. Fixed rate loans assumed in connection with real estate acquisitions are recorded in the accompanying financial statements at fair value. Based on the borrowing rates currently available to the Partnership for loans with similar terms and average maturities, the fair value of long-term debt is $1.32 billion. 15 REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements September 30, 2001 (unaudited) 5. Regency's Stockholders' Equity and Partners' Capital At September 30, 2001 and 2000, the face value of total preferred units issued was $384 million with an average fixed distribution rates of 8.72%. Terms and conditions of the Preferred Units are summarized as follows:
Units Issue Issuance Distribution Callable Series Issued Price Amount Rate By Partnership - ------------------------------------------------------------------------------------------------------- Series A 1,600,000 $ 50.00 $ 80,000,000 8.125% 06/25/03 Series B 850,000 100.00 85,000,000 8.750% 09/03/04 Series C 750,000 100.00 75,000,000 9.000% 09/03/04 Series D 500,000 100.00 50,000,000 9.125% 09/29/04 Series E 700,000 100.00 70,000,000 8.750% 05/25/05 Series F 240,000 100.00 24,000,000 8.750% 09/08/05 ------------- ----------------- 4,640,000 $ 384,000,000 ============= =================
16 REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements September 30, 2001 (unaudited) 6. Earnings Per Unit The following summarizes the calculation of basic and diluted earnings per unit for the three month periods ended September 30, 2001 and 2000 (in thousands except per unit data):
2001 2000 ------------- -------------- Basic Earnings Per Unit (EPU) Calculation: Weighted average units outstanding 59,112 58,580 ============= ============== Net income for common unitholders $ 27,329 25,243 Less: dividends paid on Series 2 preferred stock 744 699 ------------- -------------- Net income for Basic and Diluted EPU $ 26,585 24,544 ============= ============== Basic EPU $ .45 .42 ============= ============== Diluted Earnings Per Unit (EPU) Calculation ------------------------------------------- Weighted average units outstanding for Basic EPU 59,112 58,580 Incremental units to be issued under common stock options using the Treasury Method 272 103 ------------- -------------- Total diluted units 59,384 58,683 ============= ============== Diluted EPU $ .45 .42 ============= ==============
The Series 2 Preferred stock dividends are deducted from net income in computing earnings per unit since the properties acquired with these preferred shares were contributed to the Partnership. Accordingly, the payment of Series 2 Preferred stock dividends are deemed to be preferential to the distributions made to common unitholders. 17 REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements September 30, 2001 (unaudited) 6. Earnings Per Unit (continued) The following summarizes the calculation of basic and diluted earnings per unit for the nine month periods ended September 30, 2001 and 2000 (in thousands except per unit data):
2001 2000 ------------- -------------- Basic Earnings Per Unit (EPU) Calculation: Weighted average units outstanding 59,016 58,606 ============= ============== Net income for common unitholders $ 76,002 64,866 Less: dividends paid on Series 2 preferred stock 2,221 2,098 ------------- -------------- Net income for Basic and Diluted EPU $ 73,781 62,768 ============= ============== Basic EPU $ 1.25 1.07 ============= ============== Diluted Earnings Per Unit (EPU) Calculation ------------------------------------------- Weighted average units outstanding for Basic EPU 59,016 58,606 Incremental units to be issued under common stock options using the Treasury Method 213 45 ------------- -------------- Total diluted units 59,229 58,651 ============= ============== Diluted EPU $ 1.25 1.07 ============= ==============
The Series 2 Preferred stock dividends are deducted from net income in computing earnings per unit since the properties acquired with these preferred shares were contributed to the Partnership. Accordingly, the payment of Series 2 Preferred stock dividends are deemed to be preferential to the distributions made to common unitholders. 18 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto of Regency Centers, L.P. appearing elsewhere within. Organization - ------------ Regency Centers Corporation ("Regency" or "Company") is a qualified real estate investment trust ("REIT") which began operations in 1993. Regency had previously operated under the name Regency Realty Corporation, but changed its name to Regency Centers Corporation in February 2001 to more appropriately acknowledge its brand and position in the shopping center industry. Regency invests in retail shopping centers through its partnership interest in Regency Centers, L.P., ("RCLP" or "Partnership") an operating partnership in which Regency currently owns approximately 97% of the outstanding common partnership units ("Units"). The acquisition, development, operations and financing activity of Regency including the issuance of Units or preferred units is executed by RCLP. During 2000, Regency transferred all of the assets and liabilities of eighteen shopping centers to the Partnership in exchange for common units. Seventeen of the properties were acquired in 1993, and one was acquired in 1998. Since the Partnership and the eighteen properties are under the common control of Regency, the transfer of the properties has been accounted for at historical cost in a manner similar to a pooling of interests, as if the Partnership had directly acquired the properties at their original acquisition dates. Accordingly, the Partnership's financial statements for the three and nine months ended September 30, 2000 have been restated to include the assets, liabilities, units issued, and results of operations of the eighteen properties from the date they were acquired. 19 Shopping Center Business - ------------------------ Regency is a national owner, operator and developer of primarily grocery-anchored neighborhood retail shopping centers. Regency's retail properties summarized by state and in order by largest holdings including their gross leasable areas (GLA) are as follows:
September 30, 2001 December 31, 2000 Location # Properties GLA % Leased * # Properties GLA % Leased * ------------ --------- ---------- ------------ ----------- ---------- Florida 54 6,578,447 92.0% 55 6,558,734 92.7% Texas 37 4,507,987 94.5% 33 4,125,058 94.2% California 36 4,442,298 98.8% 39 4,922,329 98.4% Georgia 26 2,556,472 93.9% 26 2,553,041 95.2% Ohio 14 1,870,044 94.9% 13 1,760,955 96.7% North Carolina 13 1,302,751 98.1% 13 1,302,751 97.4% Colorado 12 1,192,452 98.8% 10 897,788 97.9% Washington 9 1,095,456 97.5% 10 1,180,020 95.8% Oregon 9 786,911 91.8% 9 776,853 91.7% Alabama 7 665,440 95.6% 5 516,062 97.9% Arizona 9 627,158 98.4% 8 522,014 97.9% Tennessee 10 493,860 99.4% 10 493,860 99.7% Virginia 6 408,368 97.6% 6 419,440 95.3% Missouri 2 370,157 95.8% 2 369,045 95.8% Kentucky 5 337,845 98.9% 5 325,347 100.0% Illinois 2 300,162 91.6% 1 178,601 86.4% Michigan 3 274,987 90.2% 3 274,987 94.1% Delaware 2 239,077 99.5% 2 239,077 98.6% Mississippi 2 185,061 100.0% 2 185,061 97.7% South Carolina 4 183,872 100.0% 4 183,872 97.4% New Jersey 3 112,640 100.0% 3 112,514 100.0% Wyoming 1 87,777 - 1 87,777 - Maryland 1 6,763 - - - - Pennsylvania 1 6,000 100.0% 1 6,000 100.0% -------------- --------------- ---------------- -------------- --------------- ------------- Total 268 28,631,985 95.3% 261 27,991,186 95.4% ============== =============== ================ ============== =============== =============
* Excludes pre-stabilized properties under development This table includes properties owned by joint ventures in which Regency has an ownership position. Historically, Regency excluded single tenant properties from the table, but beginning with March 31, 2001 began including these properties. Amounts reported for December 31, 2000 have been restated to include these properties for comparative purposes. Regency is focused on building a platform of grocery anchored neighborhood shopping centers because grocery stores provide convenience shopping of daily necessities, foot traffic for adjacent local tenants, and should withstand adverse economic conditions. Regency's current investment markets have continued to offer stable economies, and accordingly, Regency expects to realize growth in net income as a result of increasing occupancy in the portfolio, increasing rental rates, development and acquisition of shopping centers in targeted markets, and redevelopment of existing shopping centers. 20 The following table summarizes the four largest grocery tenants occupying Regency's shopping centers at September 30, 2001:
Grocery Number of % of % of Annualized Average Remaining Anchor Stores Total GLA Base Rent Lease Term ------ ------ --------- --------- ---------- Kroger 58 11.4% 9.4% 16 yrs Publix 46 7.4% 5.2% 13 yrs Safeway 47 5.9% 4.9% 12 yrs Albertsons 23 2.9% 2.2% 14 yrs
Number of stores includes tenant owned stores. All reported amounts above include properties owned through joint ventures. Acquisition and Development of Shopping Centers - ----------------------------------------------- Regency has implemented a growth strategy dedicated to developing high-quality shopping centers. This development process can require 12 to 36 months from initial land or redevelopment acquisition through construction and lease-up and finally stabilized income, depending upon the size and type of project. Generally, anchor tenants begin operating their stores prior to construction completion of the entire center, resulting in rental income during the development phase. At September 30, 2001, Regency had 52 projects under construction or undergoing major renovations, which when complete will represent an investment of $720 million. Total cost necessary to complete these developments is estimated to be $240 million and will be expended through 2002. These developments are approximately 67% complete and over 73% pre-leased. Liquidity and Capital Resources - ------------------------------- Management anticipates that cash generated from operating activities will provide the necessary funds on a short-term basis for its operating expenses, interest expense and scheduled principal payments on outstanding indebtedness, recurring capital expenditures necessary to properly maintain the shopping centers, and distributions to share and unit holders. Net cash provided by operating activities was $134.4 million and $127.7 million for the nine months ended September 30, 2001 and 2000, respectively. During the first nine months of 2001 and 2000, respectively, Regency incurred capital expenditures of $11.2 million and $12.9 million and paid scheduled principal payments of $4.6 million and $4.8 million. The Partnership paid distributions of $115.8 million and $107.6 million to its unitholders. Management expects to meet long-term liquidity requirements for maturing debt, non-recurring capital expenditures, and acquisition, renovation and development of shopping centers from: (i) excess cash generated from operating activities, (ii) working capital reserves, (iii) additional debt borrowings, and (iv) additional equity raised in the private and public markets. Net cash used in investing activities was $38.9 million and $279.2 million during the first nine months of 2001 and 2000, respectively, primarily for the purposes discussed under Acquisition and Development of Shopping Centers. Net cash used in financing activities was $160.2 million for the nine months ended September 30, 2001 and net cash provided from financing activities was $134.2 million for the nine months ended September 30, 2000. 21 Regency's outstanding debt at September 30, 2001 and December 31, 2000 consists of the following (in thousands):
2001 2000 ---- ---- Notes Payable: Fixed rate mortgage loans $ 266,753 270,491 Variable rate mortgage loans 19,616 40,640 Fixed rate unsecured loans 741,120 529,941 -------------- --------------- Total notes payable 1,027,489 841,072 Unsecured line of credit 263,000 466,000 -------------- --------------- Total $ 1,290,489 1,307,072 ============== ===============
Mortgage loans are secured by certain real estate properties, and may be prepaid, but could be subject to a yield-maintenance premium. Mortgage loans are generally due in monthly installments of interest and principal and mature over various terms through 2019. Variable interest rates on mortgage loans are currently based on LIBOR plus a spread in a range of 125 basis points to 135 basis points. Fixed interest rates on mortgage loans range from 6.82% to 9.5%. On April 30, 2001, the Partnership modified the terms of its line of credit (the "Line") by reducing the commitment to $600 million, reducing the interest rate spread from 1.0% to .85% and extending the maturity date to April 2004. Interest rates paid on the Line at September 30, 2001 and 2000 were based on LIBOR plus .85% and 1.0% or 3.538% and 7.625%, respectively. The spread that the Partnership pays on the Line is dependent upon maintaining specific investment grade ratings. The Partnership is required to comply and is in compliance with certain financial and other covenants customary with this type of unsecured financing. The Line is used primarily to finance the acquisition and development of real estate, but is also available for general working capital purposes. On January 22, 2001 the Partnership completed a $220 million unsecured debt offering with an interest rate of 7.95%. The notes were priced at 99.867%, are due on January 15, 2011 and are guaranteed by the Company. The net proceeds of the offering were used to reduce the balance of the Line. At September 30, 2001 and 2000, the face value of total preferred units issued was $384 million with an average fixed distribution rates of 8.72%. Terms and conditions of the Preferred Units are summarized as follows:
Units Issue Issuance Distribution Callable Series Issued Price Amount Rate By Company - ----------------------------------------------------------------------------------------------------- Series A 1,600,000 $ 50.00 $ 80,000,000 8.125% 06/25/03 Series B 850,000 100.00 85,000,000 8.750% 09/03/04 Series C 750,000 100.00 75,000,000 9.000% 09/03/04 Series D 500,000 100.00 50,000,000 9.125% 09/29/04 Series E 700,000 100.00 70,000,000 8.750% 05/25/05 Series F 240,000 100.00 24,000,000 8.750% 09/08/05 ------------- -------------------- 4,640,000 $ 384,000,000 ============= ====================
22 As of September 30, 2001, scheduled principal repayments on notes payable and the Line were as follows (in thousands):
Scheduled Principal Term Loan Total Scheduled Payments by Year Payments Maturities Payments -------------------------- ---------------------------------------------- 2001 $ 1,466 24,750 26,216 2002 5,051 44,093 49,144 2003 4,803 22,866 27,669 2004 (includes the Line) 5,185 472,689 477,874 2005 4,011 148,040 152,051 Beyond 5 Years 33,024 516,168 549,192 Unamortized debt premiums - 8,343 8,343 ---------------------------------------------- Total $ 53,540 1,236,949 1,290,489 ==============================================
Unconsolidated partnerships and joint ventures had mortgage loans payable of $65.1 million at September 30, 2001, and Regency's proportionate share of these loans was $14.2 million. Regency believes it qualifies and intends to qualify as a REIT under the Internal Revenue Code. As a REIT, Regency is allowed to reduce taxable income by all or a portion of its distributions to stockholders. As distributions have exceeded taxable income, no provision for federal income taxes has been made. While Regency intends to continue to pay dividends to its stockholders, it also will reserve such amounts of cash flow as it considers necessary for the proper maintenance and improvement of its real estate, while still maintaining its qualification as a REIT. Regency's real estate portfolio has grown substantially as a result of the development activity discussed above. Regency intends to continue to acquire and develop shopping centers in the near future, and expects to meet the related capital requirements from borrowings on the Line. Regency expects to repay the Line from time to time from additional public and private equity or debt offerings and from proceeds from the sale of real estate. Because acquisition and development activities are discretionary in nature, they are not expected to burden Regency's capital resources currently available for liquidity requirements. Regency expects that cash provided by operating activities, unused amounts available under the Line, and cash reserves are adequate to meet liquidity requirements. Results from Operations Comparison of the three months ended September 30, 2001 to 2000 Revenues increased $5.1 million or 5% to $97.7 million in 2001. The increase was due primarily to revenues from newly completed developments that only partially operated during 2000, and from growth in rental rates at the operating properties. Minimum rent increased $3.4 million or 5%, and recoveries from tenants increased $1.3 million or 7%. Service operations revenue includes fees earned in Regency's service operations segment which includes property management and leasing commissions earned from third parties, and development profits earned from the sale of shopping centers, build to suit properties, and land to third parties. Service operations revenue increased by $3.1 million to $9.1 million in 2001, or 51%. The increase was primarily due to a $2.6 million increase in development profits. 23 Operating expenses increased $3.3 million or 8% to $44.9 million in 2001. Combined operating and maintenance, and real estate taxes increased $1.2 million or 5% during 2001 to $22.1 million. The increase was primarily due to expenses incurred by newly completed developments that only partially operated during 2000, and general increases in operating expenses on the stabilized properties. General and administrative expenses were $4.5 million during 2001 vs. $5.0 million in 2000 or a decrease of 11%. Depreciation and amortization increased $2.2 million during 2001 or 15% primarily due to developments that only partially operated during 2000. Interest expense decreased to $18.4 million in 2001 from $18.8 million in 2000 or 2%. The decrease was primarily due to lower interest rates on the Line. Preferred unit distributions increased $391,000 to $8.4 million during 2001 as a result of the preferred units issued in September 2000. Net income for common unitholders was $27.3 million in 2001 vs. $25.2 million in 2000, or a 8% increase. Diluted earnings per share was $.45 in 2001 vs. $.42 in 2000, or 7% higher as a result of the increase in net income. Comparison of the nine months ended September 30, 2001 to 2000 Revenues increased $25.9 million or 10% to $286.0 million in 2001. The increase was due primarily to revenues from newly completed developments that only partially operated during 2000, and from growth in rental rates at the operating properties. Minimum rent increased $12.3 million or 7%, and recoveries from tenants increased $5.9 million or 12%. At September 30, 2001, Regency was operating or developing 268 retail properties. Regency identifies its properties as either development properties or stabilized properties. Development properties are defined as properties that are in the construction and initial lease-up process that are not yet 93% leased and occupied. Stabilized properties are all properties not identified as development. At September 30, 2001, Regency had 216 stabilized properties that were 95.3% leased. At December 31, 2000, stabilized properties were 95.4% leased. In 2001, rental rates grew by 11% from renewal leases and new leases replacing previously occupied spaces in the stabilized properties. Service operations revenue includes fees earned in Regency's service operations segment which includes property management and leasing commissions earned from third parties, and development profits earned from the sale of shopping centers, build to suit properties, and land to third parties. Service operations revenue increased by $7.9 million to $23.2 million in 2001, or 51%. The increase was primarily due to a $7.0 million increase in development profits. Operating expenses increased $16.9 million or 15% to $133.5 million in 2001. Combined operating and maintenance, and real estate taxes increased $7.3 million or 13% during 2001 to $65.7 million. The increase was primarily due to expenses incurred by newly completed developments that only partially operated during 2000, and general increases in operating expenses on the stabilized properties. General and administrative expenses were $13.4 million during 2001 vs. $13.3 million in 2000 or an increase of 1%. Depreciation and amortization increased $6.6 million during 2001 or 15% primarily due to developments that only partially operated during 2000. In June 2000, the Company identified six operating properties that did not meet its long-term investment standards, and accordingly classified these properties as operating properties held for sale on its balance sheet and ceased the depreciation and amortization of these assets. The Company reduced the carrying value of these properties to the lower of cost or fair value, net of selling costs and this reduction resulted in a $6.9 million provision for loss on operating properties held for sale that was charged against net income at June 30, 2000. 24 Interest expense increased to $56.8 million in 2001 from $52.7 million in 2000 or 8%. The increase was primarily due to higher debt balances and a higher percentage of outstanding debt with fixed interest rates, which are generally higher than variable interest rates. Regency had $1.3 billion and $1.2 billion of outstanding debt at September 30, 2001 and 2000, respectively. On September 30, 2001, 78% of outstanding debt had fixed interest rates vs. 72% on September 30, 2000. Preferred unit distributions increased $3.9 million to $25.1 million during 2001 as a result of the preferred units issued in 2001 and the second and third quarters of 2000. Net income for common unitholders was $76.0 million in 2001 vs. $64.9 million in 2000, or a 17% increase. Diluted earnings per unit was $1.25 in 2001 vs. $1.07 in 2000, or 17% higher as a result of the increase in net income. New Accounting Standards and Accounting Changes - ----------------------------------------------- In August 2001, the Financial Accounting Standards Board issued FASB Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (Statement 144), which supercedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (Statement 121). Statement 144 retains the fundamental provisions in Statement 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with Statement 121. The Company is required to adopt Statement 144 no later than the year beginning after December 15, 2001, and plans to adopt its provisions for the quarter ending March 31, 2002. Management does not expect the adoption of Statement 144 to have a material impact on the Company's financial statements because the impairment assessment under Statement 144 is largely unchanged from Statement 121. The provisions of the Statement for assets held for sale or other disposal generally are required to be applied prospectively after the adoption date to newly initiated disposal activities. Therefore, management cannot determine the potential effects that adoption of Statement 144 will have on the Company's financial statements. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment to FASB Statement No. 133" ("FAS 138"), which was effective for the Company on January 1, 2001. FAS 138 and FAS 133 establish accounting and reporting standards for derivative instruments and hedging activities. FAS 138 and FAS 133 require entities to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. FAS 138 and FAS 133 had no impact to the financial statements as Regency has no derivative instruments. Environmental Matters - --------------------- Regency, like others in the commercial real estate industry, is subject to numerous environmental laws and regulations. The operation of dry cleaning plants at Regency's shopping centers is the principal environmental concern. Regency believes that the tenants who operate these plants do so in accordance with current laws and regulations and has established procedures to monitor their operations. Additionally, Regency uses all legal means to cause tenants to remove dry cleaning plants from its shopping centers. Where available, Regency has applied and been accepted into state sponsored environmental programs. Regency has a blanket environmental insurance policy that covers it against third party liabilities and remediation costs on shopping centers that currently have no known environmental contamination. Regency has also placed environmental insurance on specific properties with known contamination in order to mitigate its environmental risk. Management believes that the ultimate disposition of currently known environmental matters will not have a material effect on the financial position, liquidity, or operations of Regency. 25 Inflation - --------- Inflation has remained relatively low during 2001 and 2000 and has had a minimal impact on the operating performance of the shopping centers; however, substantially all of Regency's long-term leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling Regency to receive percentage rentals based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses are often related to increases in the consumer price index or similar inflation indices. In addition, many of Regency's leases are for terms of less than ten years, which permits Regency to seek increased rents upon re-rental at market rates. Most of Regency's leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing Regency's exposure to increases in costs and operating expenses resulting from inflation. 26 Item 3. Quantitative and Qualitative Disclosures about Market Risk Market Risk - ----------- Regency is exposed to interest rate changes primarily as a result of its line of credit and long-term debt used to maintain liquidity and fund capital expenditures and expansion of Regency's real estate investment portfolio and operations. Regency's interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objectives Regency borrows primarily at fixed rates and may enter into derivative financial instruments such as interest rate swaps, caps and treasury locks in order to mitigate its interest rate risk on a related financial instrument. Regency has no plans to enter into derivative or interest rate transactions for speculative purposes, and at September 30, 2001, Regency did not have any borrowings hedged with derivative financial instruments. Regency's interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts maturing (in thousands), weighted average interest rates of remaining debt, and the fair value of total debt (in thousands), by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes.
Fair 2001 2002 2003 2004 2005 Thereafter Total Value ---- ---- ---- ---- ---- ---------- ----- ----- Fixed rate debt 24,750 44,093 13,303 199,921 148,040 569,423 999,530 1,034,164 Weighted average interest rate for all debt 7.92% 7.88% 7.86% 7.99% 8.08% 8.11% Variable rate LIBOR debt - - 9,848 272,768 - - 282,616 282,616 Weighted average interest rate for all debt - - 5.35% - - - - -
As the table incorporates only those exposures that exist as of September 30, 2001, it does not consider those exposures or positions, which could arise after that date. Regency's ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, Regency's hedging strategies at that time, and interest rates. 27 Part II Item 2. Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits 10. Material Contracts None 15. Letter Regarding Unaudited Interim Financial Information (b) Reports on Form 8-K None 28 SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 14, 2001 REGENCY CENTERS, L.P. By: /s/ J. Christian Leavitt ------------------------- Senior Vice President, and Chief Accounting Officer 29 EX-15 3 dkm82a.txt LETTER FROM KPMG LLP EXHIBIT 15 The Unitholders of Regency Centers, L.P. and the Board of Directors Regency Centers Corporation Re: Registration Statement No. 333-58966 With respect to the subject registration statement, we acknowledge our awareness of the use therein of our report dated October 30, 2001 related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. /s/ KPMG LLP Jacksonville, Florida November 14, 2001 -----END PRIVACY-ENHANCED MESSAGE-----