-----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, MpEcHYmQ1JtnhId0R60Li6KrBxNzN4lAt8mr1JJpAMH5sPCDSlkhrzgmZ6LHCCMb OQUStRHdIeNKPn9JBLo+6Q== 0000910606-98-000011.txt : 19981021 0000910606-98-000011.hdr.sgml : 19981021 ACCESSION NUMBER: 0000910606-98-000011 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19981020 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REGENCY CENTERS LP CENTRAL INDEX KEY: 0001066247 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-24763 FILM NUMBER: 98727847 BUSINESS ADDRESS: STREET 1: 121 W FORSYTH STREET STREET 2: SUITE 200 CITY: JACKSONVILLE STATE: FL ZIP: 32202 MAIL ADDRESS: STREET 1: 121 W FORSYTH ST STREET 2: STE 200 CITY: JACKSONVILLE STATE: FL ZIP: 32202 10-Q/A 1 JUNE 30, 1998 FORM 10-Q/A United States SECURITIES AND EXCHANGE COMMISSION Washington DC 20549 FORM 10-Q/A (Mark One) [X] For the quarterly period ended June 30, 1998 -or- [ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to ________ Commission File Number 1-12298 REGENCY CENTERS, 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[ ] REGENCY CENTERS, L.P. Consolidated Balance Sheets June 30, 1998 and December 31, 1997
1998 1997 ---- ---- (unaudited) Assets Real estate investments, at cost: Land $ 183,543,075 134,457,274 Buildings and improvements 653,450,521 467,730,009 Construction in progress - development for investment 9,947,030 13,427,370 Construction in progress - development for sale 21,186,446 20,173,039 ------------ ----------- 868,127,072 635,787,692 Less: accumulated depreciation 24,857,246 22,041,114 ------------ ----------- 843,269,826 613,746,578 Investments in real estate partnerships 22,401,368 999,730 ------------ ----------- Net real estate investments 865,671,194 614,746,308 Cash and cash equivalents 7,997,662 14,642,429 Tenant receivables, net of allowance for uncollectible accounts of $2,203,559 and $1,162,570 at June 30, 1998 and December 31, 1997, respectively 8,523,897 7,245,788 Deferred costs, less accumulated amortization of $1,626,167 and $1,456,933 at June 30, 1998 and December 31, 1997, respectively 2,589,036 2,215,099 Other assets 2,764,023 2,299,521 ----------- ----------- $ 887,545,812 641,149,145 =========== =========== Liabilities and Stockholders' Equity Liabilities: Mortgage loans payable 224,440,767 145,455,989 Acquisition and development line of credit 89,731,185 48,131,185 Accounts payable and other liabilities 14,484,214 9,972,065 Tenants' security and escrow deposits 2,255,767 1,854,700 ----------- ----------- Total liabilities 330,911,933 205,413,939 ----------- ----------- Limited partners' interest in consolidated partnerships (note 2) 7,354,704 7,305,945 ----------- ----------- Partners' Capital Series A preferred units, par value $50, 1,600,000 units issued and outstanding at June 30, 1998 78,800,000 - General partner; 23,253,059 and 21,822,226 units outstanding at June 30, 1998 and December 31, 1997, respectively 448,879,503 415,112,127 Limited partners; 1,110,175 and 545,347 units outstanding at June 30, 1998 and December 31, 1997, respectively 21,599,672 13,317,134 ------------ ----------- Total partners' capital 549,279,175 428,429,261 ------------ ----------- Commitments and contingencies $ 887,545,812 641,149,145 =========== ===========
See accompanying notes to consolidated financial statements. REGENCY CENTERS, L.P. Consolidated Statements of Operations For the Three Months ended June 30, 1998 and 1997 (unaudited)
1998 1997 ---- ----- Revenues: Minimum rent $ 20,137,351 14,163,423 Percentage rent 203,785 404,913 Recoveries from tenants 4,534,061 2,863,135 Management, leasing and brokerage fees 2,902,262 2,046,334 Equity in income (loss) of investments in real estate partnerships 145,425 (9,654) ---------- ---------- Total revenues 27,922,884 19,468,151 ---------- ---------- Operating expenses: Depreciation and amortization 4,594,855 3,200,573 Operating and maintenance 3,326,494 2,755,616 General and administrative 3,829,341 2,995,008 Real estate taxes 2,304,500 1,344,411 ---------- ---------- Total operating expenses 14,055,190 10,295,608 ---------- ---------- Interest expense (income): Interest expense 5,840,063 5,173,451 Interest income (615,226) (264,326) ----------- --------- Net interest expense 5,224,837 4,909,125 ----------- --------- Income before minority interests and sale of real estate investments 8,642,857 4,263,418 --------- --------- Minority interest of limited partners (103,009) (214,406) Gain on sale of real estate investments 508,678 - -------- -------- Net income for unitholders $ 9,048,526 4,049,012 ========= ========= Net income per unit: Basic $ .32 .20 ========= ========== Diluted $ .31 .19 ========= ==========
See accompanying notes to consolidated financial statements. REGENCY CENTERS, L.P. Consolidated Statements of Operations For the Six Months ended June 30, 1998 and 1997 (unaudited)
1998 1997 ---- ----- Revenues: Minimum rent $ 37,201,835 23,099,828 Percentage rent 622,899 526,799 Recoveries from tenants 8,344,603 5,127,636 Management, leasing and brokerage fees 5,406,368 3,687,525 Equity in income of investments in real estate partnerships 146,411 17,137 --- ------- ----------- Total revenues 51,722,116 32,458,925 ---------- ----------- Operating expenses: Depreciation and amortization 8,740,321 5,151,973 Operating and maintenance 6,370,748 4,447,846 General and administrative 7,262,449 5,216,014 Real estate taxes 4,398,495 2,719,695 --------- ---------- Total operating expenses 26,772,013 17,535,528 ---------- ---------- Interest expense (income): Interest expense 9,249,580 7,631,828 Interest income (933,472) (423,016) ---------- ---------- Net interest expense 8,316,108 7,208,812 ----------- --------- Income before minority interests and sale of real estate investments 16,633,995 7,714,585 ---------- --------- Minority interest of limited partners (200,159) (345,142) Gain on sale of real estate investments 10,746,097 - ---------- --------- Net income for unitholders $ 27,179,933 7,369,443 ========== ========= Net income per unit: Basic $ 1.04 .35 ==== === Diluted $ 1.02 .32 ==== ===
See accompanying notes to consolidated financial statements. REGENCY CENTERS, L.P. Consolidated Statements of Cash Flows For the Six Months Ended June 30, 1998 and 1997 (unaudited)
1998 1997 ---- ---- Cash flows from operating activities: Net income $ 27,179,933 7,369,443 Adjustments to reconcile net income to net Cash provided by operating activities: Depreciation and amortization 8,740,321 5,151,973 Deferred financing cost and debt premium amortization (28,814) 441,004 Minority interest of limited partners 200,159 345,142 Equity in income of investments in real estate partnerships (146,411) (17,137) Gain on sale of real estate investments (10,746,097) - Changes in assets and liabilities: Tenant receivables (1,278,109) (1,175,630) Deferred leasing commissions (477,146) (173,658) Other assets (1,656,348) 712,327 Tenants' security deposits 401,067 689,406 Accounts payable and other liabilities 4,512,149 8,126,544 ----------- ----------- Net cash provided by operating activities 26,700,704 21,469,414 ------------ ----------- Cash flows from investing activities: Acquisition and development of real estate (119,980,748) (113,482,333) Investment in real estate partnerships (21,276,350) - Capital improvements (1,878,993) (1,013,456) Construction in progress for sale, net of reimbursement (1,013,407) (8,248,018) Proceeds from sale of real estate investments 30,662,197 - Distributions received from real estate partnership investments 21,123 - ------------- ------------ Net cash used in investing activities (113,466,178) (122,743,807) ------------- ------------ Cash flows from financing activities: Net proceeds from issuance of limited partnership units 7,667 2,255,140 Cash contributions from the issuance of Regency stock 9,685,435 68,275,213 Cash distributions for dividends (25,416,413) (13,719,745) Other contributions (distributions), net 1,478,481 609,420 Proceeds from issuance of Series A preferred units 78,800,000 - Proceeds from acquisition and development line of credit, net 41,600,000 37,630,000 Proceeds from mortgage loans payable 7,345,000 15,148,753 Repayments of mortgage loans payable (32,763,104) (2,148,114) Deferred financing costs (616,359) (510,471) ----------- ----------- Net cash provided by financing activities 80,120,707 107,540,196 ------------ ----------- Net (decrease) increase in cash and cash equivalents (6,644,767) 6,265,803 ------------- ------------ Cash and cash equivalents at beginning of period 14,642,429 6,466,899 ------------ ----------- Cash and cash equivalents at end of period $ 7,997,662 12,732,702 =========== ===========
REGENCY CENTERS, L.P. Consolidated Statements of Cash Flows For the Six Months Ended June 30, 1998 and 1997 (unaudited) -continued-
1998 1997 ---- ---- Supplemental disclosure of non cash transactions: Mortgage loans assumed from sellers of real estate at fair value $ 104,751,624 111,052,817 =========== =========== Limited and general partnership units issued to acquire real estate $ 28,963,411 94,769,706 =========== ===========
See accompanying notes to consolidated financial statements. REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements June 30, 1998 (Unaudited) 1. Summary of Significant Accounting Policies (a) Organization and Principles of Consolidation Regency Centers, L.P. (the Partnership) is the primary entity through which Regency Realty Corporation ("Regency"), a self-administered and self-managed real estate investment trust ("REIT"), conducts substantially all of its business and owns substantially all of its assets. In 1993, Regency was formed for the purpose of managing, leasing, brokering, acquiring, and developing shopping centers. The Partnership also provides management, leasing, brokerage and development services for real estate not owned by Regency (i.e., owned by third parties). The Partnership was formed in 1996 for the purpose of acquiring certain real estate properties. The historical financial statements of the Partnership reflect the accounts of the Partnership since its inception, together with the accounts of certain predecessor entities (including Regency Centers, Inc., a wholly-owned subsidiary of Regency through which Regency owned a substantial majority of its properties), which were merged with and into the Partnership as of February 26, 1998. The accompanying interim unaudited financial statements (the "Financial Statements") include the accounts of the Partnership, and its majority owned subsidiaries and partnerships. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. The Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and 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 generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, 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 as of December 31, 1997 included in the Partnership's Form 10 filed with the Securities and Exchange Commission. (b) Statement of Financial Accounting Standards No. 130 The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"), which is effective for fiscal years beginning after December 15, 1997. FAS 130 establishes standards for reporting total comprehensive income in financial statements, and requires that Companies explain the differences between total comprehensive income and net income. Management has adopted this statement in 1998. No differences between total comprehensive income and net income existed in the interim financial statements reported at June 30, 1998 and 1997. REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements June 30, 1998 (unaudited) 1. Summary of Significant Accounting Policies (continued) (c) Statement of Financial Accounting Standards No. 131 The FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("FAS 131"), which is effective for fiscal years beginning after December 15, 1997. FAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. Management does not believe that FAS 131 will effect its current disclosures. (d) Emerging Issues Task Force Issue 97-11 Effective March 19, 1998, the Emerging Issues Task Force (EITF) ruled in Issue 97-11, "Accounting for Internal Costs Relating to Real Estate Property Acquisitions", that only internal costs of identifying and acquiring non-operating properties that are directly identifiable with the acquired properties should be capitalized, and that all internal costs associated with identifying and acquiring operating properties should be expensed as incurred. The Partnership had previously capitalized direct costs associated with the acquisition of operating properties as a cost of the real estate. The Partnership has adopted EITF 97-11 effective March 19, 1998. During 1997, the Partnership capitalized approximately $1.5 million of internal costs related to acquiring operating properties. Through the effective date of EITF 97-11, the Partnership has capitalized $474,000 of internal acquisition costs. For the remainder of 1998, the Partnership expects to incur $1.1 million of internal costs related to acquiring operating properties which will be expensed. (e) Emerging Issues Task Force Issue 98-9 On May 22, 1998, the EITF reached a consensus on Issue 98-9 "Accounting for Contingent Rent in Interim Financial Periods". The EITF has stated that lessors should defer recognition of contingent rental income that is based on meeting specified targets until those specified targets are met and not ratably throughout the year. The Partnership has previously recognized contingent rental income (i.e. percentage rent) ratably over the year based on the historical trends of its tenants. The Partnership has adopted Issue 98-9 prospectively and has ceased the recognition of contingent rents until such time as its tenants have achieved its specified target. The Partnership believes this will effect the interim period in which percentage rent is recognized, however it will not have a material impact on the annual recognition of percentage rent. (f) Reclassifications Certain reclassifications have been made to the 1997 amounts to conform to classifications adopted in 1998. REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements June 30, 1998 (unaudited) 2. Acquisitions of Shopping Centers During the first six months of 1998, the Partnership acquired a total of 23 shopping centers for approximately $225.2 million (the "1998 Acquisitions"). In January, 1998, the Partnership entered into an agreement to acquire the shopping centers from various entities comprising the Midland Group ("Midland") consisting of 21 shopping centers plus a development pipeline of 11 shopping centers. Of the 32 centers to be acquired or developed, 31 are anchored by Kroger, or its affiliate. Eight of the shopping centers included in the development pipeline will be owned through a joint venture in which the Partnership will own less than a 50% interest upon completion of construction (the "JV Properties"). As of June 30, 1998, the Partnership has acquired all but one of the shopping centers and all of the JV Properties. The Partnership's investment in the properties acquired from Midland is $186.6 million at June 30, 1998. During 1998, 1999 and 2000, including all payments made to date, the Partnership will pay approximately $213 million for the 32 properties, including the assumption of debt, and in addition may pay contingent consideration of up to an estimated $23 million, through the issuance of Partnership units and the payment of cash. Whether contingent consideration will be issued, and if issued, the amount of such consideration, will depend on the satisfaction during 1998, 1999, and 2000 of performance criteria relating to the assets acquired from Midland. For example, if a property acquired as part of Midland's development pipeline satisfies specified performance criteria at closing and when development is completed, the transferors of the property will be entitled to additional Partnership units based on the development cost of the properties and their net operating income. Transferors who redeemed their Partnership units for cash at the initial Midland closing will receive contingent future consideration in cash rather than units. In March, 1997, the Partnership acquired 26 shopping centers from Branch Properties ("Branch") for $232.4 million. Additional Units and shares of common stock may be issued after the first, second and third anniversaries of the closing with Branch (each an "Earn-Out Closing"), based on the performance of the properties acquired. The formula for the earn-out provides for calculating any increases in value on a property-by-property basis, based on any increases in net income for the properties acquired, as of February 15 of the year of calculation. The earn-out is limited to 721,997 Units at the first Earn-Out Closing and 1,020,061 Units for all Earn-Out Closings (including the first Earn-Out Closing). During March, 1998, the Partnership issued 721,997 Units and shares valued at $18.2 million to the partners of Branch. 3. Mortgage Loans Payable and Unsecured Line of Credit The Partnership's outstanding debt at June 30, 1998 and December 31, 1997 consists of the following: 1998 1997 ---- ---- Mortgage Loans Payable: Fixed rate secured loans $189,995,742 114,615,011 Variable rate secured loans 12,679,515 30,840,978 Fixed rate unsecured loans 21,765,510 - Unsecured line of credit 89,731,185 48,131,185 ------------ ----------- Total $314,171,952 193,587,174 ============ =========== During March, 1998, the Partnership modified the terms of its unsecured line of credit (the "Line") by increasing the commitment to $300 million, reducing the interest rate, and incorporating a competitive bid facility of up to $150 million of the commitment amount. Maximum availability under the Line is subject to a pool of unencumbered assets which cannot have an aggregate value less than 175% of the amount of the Partnership's outstanding unsecured liabilities. The Line matures in May 2000, but may be extended annually for one year periods. Borrowings under the Line bear interest at a variable rate based on LIBOR plus a specified spread, (.875% currently), which is dependent on the Partnership's investment grade rating. The Partnership's ratings are currently Baa2 from Moody's Investor Service, BBB from Duff and Phelps, and BBB- from Standard and Poors. The Partnership is required to comply with certain financial covenants consistent with this REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements June 30, 1998 (unaudited) 3. Mortgage Loans Payable and Unsecured Line of Credit (continued) type of unsecured financing. The Line is used primarily to finance the acquisition and development of real estate, but is available for general working capital purposes. On June 29, 1998, the Partnership issued $80 million of 8.125% Series A Cumulative Redeemable Preferred Units ("Series A Preferred Units") to an institutional investor in a private placement. The issuance involved the sale of 1.6 million Series A Preferred Units for $50.00 per unit. The Series A Preferred Units, which may be called by the Partnership at par on or after June 25, 2003, have no stated maturity or mandatory redemption, and pay a cumulative, quarterly distribution at an annualized rate of 8.125%. At any time after June 25, 2008, the Series A Preferred Units may be exchanged for shares of 8.125% Series A Cumulative Redeemable Preferred Stock of Regency at an exchange rate of one share of Series A Preferred Stock for one Series A Preferred Unit. The Series A Preferred Units and Series A Preferred Stock are not convertible into common stock of Regency. The net proceeds of the offering were used to reduce the Partnership's bank line of credit. On July 17, 1998 the Partnership completed a $100 million private offering of term notes at an effective interest rate of 7.17%. The Notes were priced at 162.5 basis points over the current yield for seven year US Treasury Bonds. The net proceeds of the offering will be used to repay borrowings under the line of credit. Mortgage loans are secured by certain real estate properties, but generally may be prepaid subject to a prepayment of a yield-maintenance premium. Unconsolidated partnerships and joint ventures had mortgage loans payable of $62,727,120 at June 30, 1998, and the Partnership's share of these loans was $25,447,514. Mortgage loans are generally due in monthly installments of interest and principal and mature over various terms through 2018. Variable interest rates on mortgage loans are currently based on LIBOR plus a spread in a range of 125 basis points to 150 basis points. Fixed interest rates on mortgage loans range from 7.04% to 9.8%. During the first six months of 1998, the Partnership assumed mortgage loans with a face value of $99,602,679 related to the acquisition of shopping centers. The Partnership has recorded the loans at fair value which created debt premiums of $5,148,945 related to assumed debt based upon the above market interest rates of the debt instruments. Debt premiums are being amortized over the terms of the related debt instruments. As of June 30, 1998, scheduled principal repayments on mortgage loans payable and the unsecured line of credit were as follows: 1998 $ 8,325,724 1999 14,935,360 2000 99,525,400 2001 18,931,911 2002 38,654,417 Thereafter 128,998,937 ----------- Subtotal 309,371,749 Net unamortized debt premiums 4,800,203 ----------- Total $314,171,952 =========== REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements June 30, 1998 (unaudited) 4. Earnings Per Unit The following summarizes the calculation of basic and diluted earnings per unit for the three months ended, June 30, 1998 and 1997(in thousands except per unit data):
1998 1997 ---- ---- Basic Earnings Per Unit (EPU) Calculation: Weighted average units outstanding 23,855 13,440 Net income for unitholders $ 9,049 4,049 Less: dividends paid on Regency Class B common stock 1,344 1,285 ----- ----- Net income for Basic Earnings per Unit $ 7,705 2,764 ===== ===== Basic Earnings per Unit $ .32 .20 === === Diluted Earnings Per Unit (EPU) Calculation: Weighted average units outstanding for Basic EPU 23,855 13,440 Incremental units to be issued under common stock options using the Treasury method - 78 Contingent units for the acquisition of real estate 519 1,138 ------ ------ Total diluted units 24,374 14,656 ====== ====== Diluted Earnings per Unit $ .32 .19 === ===
The Regency Class B common stock dividends are deducted from income in computing earnings per unit since the proceeds of the sale by Regency of the Class B common stock was transferred to and reinvested by the Partnership. Accordingly, payment of such dividends is dependent upon the operations of the Partnership. REGENCY CENTERS, L.P. Notes to Consolidated Financial Statements June 30, 1998 (unaudited) 4. Earnings Per Unit (continued) The following summarizes the calculation of basic and diluted earnings per unit for the six months ended, June 30, 1998 and 1997(in thousands except per unit data):
1998 1997 ---- ---- Basic Earnings Per Unit (EPU) Calculation: Weighted average units outstanding 23,602 13,691 Net income for unitholders $ 27,180 7,369 Less: dividends paid on Regency Class B common stock 2,689 2,570 ----- ----- Net income for Basic Earnings per Unit $ 24,491 4,799 ====== ===== Basic Earnings per Unit $ 1.04 .35 ===== === Diluted Earnings Per Unit (EPU) Calculation: Weighted average units outstanding for Basic EPU 23,602 13,691 Incremental units to be issued under common stock options using the Treasury method 27 89 Contingent units for the acquisition of real estate 428 759 ------ ------ Total diluted units 24,057 14,539 ====== ====== Diluted Earnings per Unit $ 1.02 .33 ==== ===
The Regency Class B common stock dividends are deducted from income in computing earnings per unit since the proceeds of the sale by Regency of the Class B common stock was transferred to and reinvested by the Partnership. Accordingly, payment of such dividends is dependent upon the operations of the Partnership. PART II Item 1. Legal Proceedings None Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (dollar amounts in thousands). The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto of Regency Centers, L.P. ("RCLP" or the "Partnership") appearing elsewhere in this Form 10-Q, and with the Partnership's Form 10 filed August 7, 1998. Certain statements made in the following discussion may constitute forward-looking statements which involve unknown risks and uncertainties of business and economic conditions pertaining to the operation, acquisition, or development of shopping centers including the retail business sector, and may cause actual results of the Partnership in the future to significantly differ from any future results that may be implied by such forward-looking statements. Organization RCLP is the primary entity through which Regency Realty Corporation ("Regency"), a self-administered and self-managed real estate investment trust ("REIT") conducts substantially all of its business and owns substantially all of its assets. In 1993, Regency was formed for the purpose of managing, leasing, brokering, acquiring, and developing shopping centers. The Partnership also provides management, leasing, brokerage and development services for real estate not owned by Regency (i.e., owned by third parties). Of the 124 properties included in Regency's portfolio at June 30, 1998, 103 properties were owned either fee simple or through partnership interests by the Partnership. At June 30, 1998, Regency had an investment in real estate, at cost, of approximately $1.1 billion of which $891 million or 81% was owned by the Partnership. Shopping Center Business The Partnership's principal business is owning, operating and developing grocery anchored neighborhood infill shopping centers. Infill refers to shopping centers within a targeted investment market offering sustainable competitive advantages such as barriers to entry resulting from zoning restrictions, growth management laws, or limited new competition from development or expansions. The Partnership's properties summarized by state including their gross leasable areas (GLA) follows:
June 30, 1998 December 31, 1997 ------------- ----------------- Location # Properties GLA % Leased # Properties GLA % Leased -------- ------------ ----------- ---------- ------------- ---------- ---------- Florida 36 4,529,458 93.0% 35 4,168,458 93.5% Georgia 25 2,538,711 91.3% 23 2,368,890 92.4% North Carolina 12 1,241,784 97.2% 6 554,332 99.0% Ohio 10 1,045,630 97.3% - - - Texas 5 450,267 89.6% - - - Colorado 5 451,949 81.1% - - - Tennessee 4 295,257 93.7% 3 208,386 98.5% Kentucky 1 205,060 96.1% - - - South Carolina 1 79,723 95.0% 1 79,743 84.3% Virginia 2 197,324 98.1% - - - Michigan 1 85,478 99.0% - - - Missouri 1 82,498 98.4% - - - ------------ ----------- ----------- ------------- ---------- --------- Total 103 1,203,189 93.1% 68 7,379,778 93.6% ============ =========== =========== ============= ========== =========
The Partnership 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. The Partnership's current investment markets have continued to offer strong stable economies, and accordingly, the Partnership expects to realize growth in net income as a result of increasing occupancy in the portfolio, increasing rental rates, development and acquisition of shopping centers in targeted markets, and redevelopment of existing shopping centers. The following table summarizes the four largest tenants occupying the Partnership's shopping centers: Average Grocery Anchor Number of % of % of Annual Remaining Lease Stores Total GLA Base Rent Term Kroger * 36 15.5% 15.5% 20 yrs Publix 26 8.3% 6.3% 13 yrs Winn Dixie 11 3.6% 2.7% 13 yrs Blockbuster 29 1.3% 2.1% 4 yrs *includes properties under development scheduled for opening in 1998 and 1999. Excluding development properties, Kroger would represent 12.3% of GLA and 11.8% of annual base rent. Acquisition and Development of Shopping Centers During the first six months of 1998, the Partnership acquired a total of 23 shopping centers for approximately $225.2 million (the "1998 Acquisitions"). In January, 1998, the Partnership entered into an agreement to acquire the shopping centers from various entities comprising the Midland Group ("Midland") consisting of 21 shopping centers plus a development pipeline of 11 shopping centers. Of the 32 centers to be acquired or developed, 31 are anchored by Kroger, or its affiliate. Eight of the shopping centers included in the development pipeline will be owned through a joint venture in which the Partnership will own less than a 50% interest upon completion of construction (the "JV Properties"). As of June 30, 1998, the Partnership has acquired all but one of the shopping centers and all of the JV Properties. The Partnership's investment in the properties acquired from Midland is $186.6 million at June 30, 1998. During 1998, 1999 and 2000, including all payments made to date, the Partnership will pay approximately $213 million for the 32 properties, including the assumption of debt, and in addition may pay contingent consideration of up to an estimated $23 million, through the issuance of Partnership units and the payment of cash. Whether contingent consideration will be issued, and if issued, the amount of such consideration, will depend on the satisfaction during 1998, 1999, and 2000 of performance criteria relating to the assets acquired from Midland. For example, if a property acquired as part of Midland's development pipeline satisfies specified performance criteria at closing and when development is completed, the transferors of the property will be entitled to additional Partnership units based on the development cost of the properties and their net operating income. Transferors who redeemed their Partnership units for cash at the initial Midland closing will receive contingent future consideration in cash rather than units. The Partnership acquired 36 shopping centers during 1997 (the "1997 Acquisitions") for approximately $346.1 million. The 1997 Acquisitions include the acquisition of 26 shopping centers from Branch Properties ("Branch") for $232.4 million in March, 1997. The real estate acquired from Branch included 100% fee simple interests in 20 shopping centers, and also partnership interests (ranging from 50% to 93%) in four partnerships with outside investors that owned six shopping centers. The Partnership was also assigned the third party property management contracts of Branch on approximately 3 million SF of shopping center GLA that generate management fees and leasing commission revenues. Additional Units and shares of common stock may be issued after the first, second and third anniversaries of the closing with Branch (each an "Earn-Out Closing"), based on the performance of the properties acquired. The formula for the earn-out provides for calculating any increases in value on a property-by-property basis, based on any increases in net income for the properties acquired, as of February 15 of the year of calculation. The earn-out is limited to 721,997 Units at the first Earn-Out Closing and 1,020,061 Units for all Earn-Out Closings (including the first Earn-Out Closing). During March, 1998, the Partnership issued 721,997 Units and shares valued at $18.2 million to the partners of Branch. 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 unit holders. Net cash provided by operating activities was $26.7 million and $21.5 million for the six months ended June 30, 1998 and 1997. The Partnership paid distributions of $25.4 million and $13.7 million, during 1998 and 1997, respectively. In 1998, the Partnership increased its quarterly distribution per Unit to $.44 per unit vs. $.42 per unit in 1997, had more outstanding Units in 1998 vs. 1997; and accordingly, expects distributions paid during 1998 to increase substantially over 1997. Management expects to meet long-term liquidity requirements for debt maturities, 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 public markets. Net cash used in investing activities was $113.5 million and $122.7 million, during 1998 and 1997, respectively. Net cash provided by financing activities was $80.1 million and $107.5 million during 1998 and 1997, respectively. At June 30, 1998, the Company had 20 shopping centers under construction or undergoing major renovations. Total committed costs necessary to complete the properties under development is estimated to be $46.7 million and will be expended through June 1999. The Partnership's outstanding debt at June 30, 1998 and December 31, 1997 consists of the following: 1998 1997 ---- ---- Mortgage Loans Payable: Fixed rate secured loans $189,995,742 114,615,011 Variable rate secured loans 12,679,515 30,840,978 Fixed rate unsecured loans 21,765,510 - Unsecured line of credit 89,731,185 48,131,185 ----------- ----------- Total $314,171,952 193,587,174 ============ =========== The weighted average interest rate on total debt at June 30, 1998 and 1997 was 7.4% and 7.8% respectively. The Partnership's debt is typically cross-defaulted, but not cross-collateralized, and includes usual and customary affirmative and negative covenants. The Partnership is a party to a credit agreement dated as of March 27, 1998, providing for an unsecured line of credit (the "Line") from a group of lenders currently consisting of Wells Fargo Bank, National Association, First Union National Bank, Wachovia Bank, N.A., NationsBank, N.A., AmSouth Bank, Commerzbank AG, Atlanta Branch, PNC Bank, National Association, and Star Bank, N.A. This credit agreement modified the terms of the Partnership's existing line of credit by increasing the commitment to $300 million, reducing the interest rate, and incorporating a competitive bid facility of up to $150 million of the commitment amount. Maximum availability under the Line is based on the discounted value of a pool of eligible unencumbered assets (determined on the basis of capitalized net operating income) less the amount of the Partnership's outstanding unsecured liabilities. The Line matures in May 2000, but may be extended annually for one year periods. Borrowings under the Line bear interest at a variable rate based on LIBOR plus a specified spread, (.875% currently), which is dependent on the Partnership's investment grade rating. The Partnership's ratings are currently Baa2 from Moody's Investor Service, BBB from Duff and Phelps, and BBB- from Standard and Poors. The Partnership is required to comply with certain financial and other covenants customary with this type of unsecured financing. These financial covenants include (i) maintenance of minimum net worth, (ii) ratio of total liabilities to gross asset value, (iii) ratio of secured indebtedness to gross asset value, (iv) ratio of EBITDA to interest expense, (v) ratio of EBITDA to debt service and reserve for replacements, and (vi) ratio of unencumbered net operating income to interest expense on unsecured indebtedness. The Line is used primarily to finance the acquisition and development of real estate, but is available for general working capital purposes. On June 29, 1998, the Partnership issued $80 million of 8.125% Series A Cumulative Redeemable Preferred Units ("Series A Preferred Units") to an institutional investor in a private placement. The issuance involved the sale of 1.6 million Series A Preferred Units for $50.00 per unit. The Series A Preferred Units, which may be called by the Partnership at par on or after June 25, 2003, have no stated maturity or mandatory redemption, and pay a cumulative, quarterly dividend at an annualized rate of 8.125%. At any time after June 25, 2008, the Series A Preferred Units may be exchanged for shares of 8.125% Series A Cumulative Redeemable Preferred Stock of Regency at an exchange rate of one share of Series A Preferred Stock for one Series A Preferred Unit. The Series A Preferred Units and Series A Preferred Stock are not convertible into common stock of Regency. The net proceeds of the offering were used to reduce the Partnership's bank line of credit. On July 17, 1998 the Partnership completed a $100 million private offering of term notes at an effective interest rate of 7.17%. The Notes were priced at 162.5 basis points over the current yield for seven year US Treasury Bonds. The net proceeds of the offering will be used to repay borrowings under the line of credit. Mortgage loans are secured by certain real estate properties, but generally may be prepaid subject to a prepayment of a yield-maintenance premium. Unconsolidated partnerships and joint ventures had mortgage loans payable of $62,727,120 at June 30, 1998, and the Partnership's share of these loans was $25,447,514. Mortgage loans are generally due in monthly installments of interest and principal and mature over various terms through 2018. Variable interest rates on mortgage loans are currently based on LIBOR plus a spread in a range of 125 basis points to 150 basis points. Fixed interest rates on mortgage loans range from 7.04% to 9.8%. During the first six months of 1998, the Partnership assumed mortgage loans with a face value of $99,602,679 related to the acquisition of shopping centers. The Partnership has recorded the loans at fair value which created debt premiums of $5,148,945 related to assumed debt based upon the above market interest rates of the debt instruments. Debt premiums are being amortized over the terms of the related debt instruments. As of June 30, 1998, scheduled principal repayments on mortgage loans payable and the unsecured line of credit were as follows: 1998 $ 8,325,724 1999 14,935,360 2000 99,525,400 2001 18,931,911 2002 38,654,417 Thereafter 128,998,937 ----------- Subtotal 309,371,749 Net unamortized debt premiums 4,800,203 ----------- Total $ 314,171,952 =========== Regency qualifies and intends to continue 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. Since Regency's distributions have exceeded it's taxable income, Regency has made no provision for federal income taxes. While the Partnership intends to continue to pay distributions such that Regency can continue to pay dividends to its stockholders, the Partnership will reserve such amounts of cash flow as it considers necessary for the proper maintenance and improvement of its real estate, while still allowing Regency to maintain its qualification as a REIT. Results from Operations Comparison of the Six Months Ended June 30, 1998 to 1997 Revenues increased $19.3 million or 59% to $51.7 million in 1998. The increase was due primarily to the 1998 Acquisitions and 1997 Acquisitions. At June 30, 1998, the real estate portfolio contained approximately 11.2 million SF, was 93.1% leased and had average rents of $9.45 per SF. Minimum rent increased $14.1 million or 61%, and recoveries from tenants increased $3.2 million or 63%. Revenues from property management, leasing, brokerage, and development services provided on properties not owned by the Partnership were $5.4 million in 1998 compared to $3.7 million in 1997, the increase due primarily to fees earned from third party property management and leasing contracts acquired as part of the acquisition of Branch. During 1998, the Company sold four office buildings and a parcel of land for $30.6 million, and recognized a gain on the sale of $10.7 million. As a result of these transactions the Company's real estate portfolio is comprised entirely of neighborhood shopping centers. The proceeds from the sale were applied toward the purchase of the 1998 acquisitions. Operating expenses increased $9.2 million or 53% to $26.8 million in 1998. Combined operating and maintenance, and real estate taxes increased $3.6 million or 50% during 1998 to $10.8 million. The increases are due to the 1998 and 1997 Acquisitions. General and administrative expenses increased 39% during 1998 to $7.3 million due to the hiring of new employees and related office expenses necessary to manage the shopping centers acquired during 1998 and 1997, as well as, the shopping centers that the Partnership began managing for third parties during 1997. Depreciation and amortization increased $3.6 million during 1998 or 70% primarily due to the 1998 and 1997 Acquisitions. Interest expense increased to $9.2 million in 1998 from $7.6 million in 1997 or 21% due to increased average outstanding loan balances related to the financing of the 1998 and 1997 Acquisitions on the Line and the assumption of debt. Net income for common stockholders was $27.2 million in 1998 vs. $7.4 million in 1997, a $19.8 million or 269% increase for the reasons previously described. Diluted earnings per unit in 1998 was $1.02 vs. $0.32 in 1997 due to the increase in net income combined with the dilutive impact from the increase in weighted average common units and equivalents of 9.5 million primarily due to the acquisition of Branch and Midland, the issuance of units to SC-USREALTY during 1997, and the public offering completed in July, 1997. Comparison of the Three Months Ended June 30, 1998 to 1997 Revenues increased $8.5 million or 43% to $27.9 million in 1998. The increase was due primarily to the 1998 Acquisitions and 1997 Acquisitions. Minimum rent increased $6.0 million or 42%, and recoveries from tenants increased $1.7 million or 58%. Revenues from property management, leasing, brokerage, and development services provided on properties not owned by the Partnership were $2.9 million in 1998 compared to $2.0 million in 1997, the increase due primarily to fees earned from third party property management and leasing contracts acquired as part of the acquisition of Branch. Operating expenses increased $3.8 million or 37% to $14.1 million in 1998. Combined operating and maintenance, and real estate taxes increased $1.5 million or 37% during 1998 to $5.6 million. The increases are due to the 1998 and 1997 Acquisitions. General and administrative expenses increased 28% during 1998 to $3.8 million due to the hiring of new employees and related office expenses necessary to manage the shopping centers acquired during 1998 and 1997, as well as, the shopping centers that the Partnership began managing for third parties during 1997. Depreciation and amortization increased $1.4 million during 1998 or 44% primarily due to the 1998 and 1997 Acquisitions. Interest expense increased to $5.8 million in 1998 from $5.2 million in 1997 or 13% due to increased average outstanding loan balances related to the financing of the 1998 and 1997 Acquisitions on the Line and the assumption of debt. New Accounting Standards and Accounting Changes The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"), which is effective for fiscal years beginning after December 15, 1997. FAS 130 establishes standards for reporting total comprehensive income in financial statements, and requires that Companies explain the differences between total comprehensive income and net income. Management has adopted this statement in 1998. No differences between total comprehensive income and net income existed in the interim financial statements reported at June 30, 1998 and 1997. The FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("FAS 131"), which is effective for fiscal years beginning after December 15, 1997. FAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. Management does not believe that FAS 131 will effect its current disclosures. Effective March 19, 1998, the Emerging Issues Task Force (EITF) ruled in Issue 97-11, "Accounting for Internal Costs Relating to Real Estate Property Acquisitions", that only internal costs of identifying and acquiring non-operating properties that are directly identifiable with the acquired properties should be capitalized, and that all internal costs associated with identifying and acquiring operating properties should be expensed as incurred. The Partnership had previously capitalized direct costs associated with the acquisition of operating properties as a cost of the real estate. The Partnership has adopted EITF 97-11 effective March 19, 1998. During 1997, the Partnership capitalized approximately $1.5 million of internal costs related to acquiring operating properties. Through the effective date of EITF 97-11, the Partnership has capitalized $474,000 of internal acquisition costs. For the remainder of 1998, the Partnership expects to incur $1.1 million internal costs related to acquiring operating properties which will be expensed. On May 22, 1998, the EITF reached a consensus on Issue 98-9 "Accounting for Contingent Rent in Interim Financial Periods". The EITF has stated that lessors should defer recognition of contingent rental income that is based on meeting specified targets until those specified targets are met and not ratably throughout the year. The Partnership has previously recognized contingent rental income (i.e. percentage rent) ratably over the year based on the historical trends of its tenants. The Partnership has adopted Issue 98-9 prospectively and has ceased the recognition of contingent rents until such time as its tenants have achieved its specified target. The Partnership believes this will effect the interim period in which percentage rent is recognized, however it will not have a material impact on the annual recognition of percentage rent. Environmental Matters The Partnership like others in the commercial real estate industry, is subject to numerous environmental laws and regulations and the operation of dry cleaning plants at the Partnership's shopping centers is the principal environmental concern. The Partnership believes that the dry cleaners are operating in accordance with current laws and regulations and has established procedures to monitor their operations. Based on information presently available, no additional environmental accruals were made and management believes that the ultimate disposition of currently known matters will not have a material effect on the financial position, liquidity, or operations of the Partnership. Inflation Inflation has remained relatively low during 1998 and 1997 and has had a minimal impact on the operating performance of the shopping centers, however, substantially all of the Partnership's long-term leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Partnership 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 the Partnership's leases are for terms of less than ten years, which permits the Partnership to seek increased rents upon re-rental at market rates. Most of the Partnership's leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing the Partnership's exposure to increases in costs and operating expenses resulting from inflation. Year 2000 System Compliance Management recognizes the potential effect Year 2000 may have on the Partnership's operations and, as a result, has implemented a Year 2000 Compliance Project. The term "Year 2000 compliant" means that the software, hardware, equipment, goods or systems utilized by, or material to the physical operations, business operations, or financial reporting of an entity will properly perform date sensitive functions before, during and after the year 2000. The Partnership's Year 2000 Compliance Project includes an awareness phase, an assessment phase, a renovation phase, and a testing phase of our data processing network, accounting and property management systems, computer and operating systems, software packages, and building management systems. The project also includes surveying our major tenants and financial institutions. Total costs incurred to date associated with the Partnership's Year 2000 compliance project have been reflected in the Partnership's income statement throughout 1997 and 1998, and were approximately $250,000. The Partnership's computer hardware, operating systems, general accounting and property management systems and principal desktop software applications are Year 2000 compliant as certified by the various vendors. We are currently testing these systems, and expect to complete the testing phase by December 31, 1998. Based on initial testing, Management does not anticipate any Year 2000 issues that will materially impact operations or operating results. An assessment of the Partnership's building management systems has been completed. This assessment has resulted in the identification of certain lighting, telephone, and voice mail systems that may not be Year 2000 compliant. While we have not yet begun renovations, Management believes that the cost of upgrading these systems will not exceed $500,000. It is anticipated that the renovation and testing phases will be complete by June 30, 1999. The Partnership has surveyed its major tenants and financial institutions to determine the extent to which the Partnership is vulnerable to third parties' failure to resolve their Year 2000 issues. The Partnership will be able to more adequately assess its third party risk when responses are received from the majority of the entities contacted. Management believes its planning efforts are adequate to address the Year 2000 Issue and that its risk factors are primarily those that it cannot directly control, including the readiness of its major tenants and financial institutions. Failure on the part of these entities to become Year 2000 compliant could result in disruption in the Partnership's cash receipt and disbursement functions. There can be no guarantee, however, that the systems of unrelated entities upon which the Partnership's operations rely will be corrected on a timely basis and will not have a material adverse effect on the Partnership. The Partnership does not have a formal contingency plan or a timetable for implementing one. Contingency plans will be established, if they are deemed necessary, after the Partnership has adequately assessed the impact on operations should third parties fail to properly respond to their Year 2000 issues. Item 5. Other Information Regency Centers, L.P. Pro Forma Condensed Consolidated Financial Statements The following unaudited pro forma condensed consolidated balance sheet is based upon the historical consolidated balance sheet of Regency Centers, L.P. (the Partnership) as of June 30, 1998 as if the Partnership had completed the acquisition of two additional shopping centers and completed the issuance of $100 million senior term notes subsequent to period end. The following unaudited pro forma consolidated statements of operations of the Partnership are based upon the historical consolidated statements of operations for the six-month period ended June 30, 1998 and the year ended December 31, 1997. These statements are presented as if the Partnership had acquired all of its properties as of January 1, 1997. These unaudited pro forma condensed consolidated financial statements should be read in conjunction with the Partnership's registration statement on Form 10 and quarterly report on Form 10-Q/A filed for the period ended June 30, 1998 The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what the actual financial position or results of operations of the Partnership would have been at June 30, 1998 or December 31, 1997 assuming the transactions had been completed as set forth above, nor does it purport to represent the financial position or results of operations of the Partnership in future periods. Regency Center, L.P. Pro Forma Condensed Consolidated Balance Sheet June 30, 1998 (Unaudited) (In thousands)
Historical Adjustments Pro Forma Assets Real estate investments, at cost $ 836,994 36,243 (a) 873,237 Construction in progress 31,133 - 31,133 Less: accumulated depreciation 24,857 - 24,857 ------------ ---------- ----------- Real estate rental property, net 843,270 36,243 879,513 ------------ ---------- ----------- Investments in real estate partnerships 22,401 - 22,401 ------------ ---------- ----------- Net real estate investments 865,671 36,243 901,914 ------------ ---------- ----------- Cash and cash equivalents 7,998 - 7,998 Tenant receivables, net of allowance for uncollectible accounts 8,524 - 8,524 Deferred costs, less accumulated amortization 2,589 - 2,589 Other assets 2,764 1,250 (b) 4,014 ------------ ---------- ----------- Total Assets $ 887,546 37,493 925,039 ============ ========== =========== Liabilities and Partners' Capital Mortgage loans payable $ 224,441 - 224,441 Acquisition and development line of credit 89,731 (62,507) (a)(b) 27,224 Notes payable - 100,000 (b) 100,000 ------------ ---------- ----------- Total debt 314,172 37,493 351,665 Accounts payable and other liabilities 14,484 - 14,484 Tenant's security and escrow deposits 2,256 - 2,256 ------------ ---------- ----------- Total liabilities 330,912 37,493 368,405 ------------ ---------- ----------- Limited partners' interest in consolidated partnerships 7,355 - 7,355 ------------ ---------- ----------- Series A preferred units 78,800 - 78,800 General and limited operating partnership units 470,479 - 470,479 ------------ ---------- ----------- Total partners' capital 549,279 - 549,279 ------------ ---------- ----------- Total liabilities and partners' capital $ 887,546 37,493 925,039 ============ ========== ===========
See accompanying notes to pro forma condensed consolidated balance sheet. Regency Centers, L.P. Notes to Pro Forma Condensed Consolidated Balance Sheet June 30, 1998 (Unaudited) (In thousands) (a) Acquisitions of Shopping Centers: In January 1998, the Partnership entered into an agreement to acquire shopping centers from various entities comprising the Midland Group consisting of 21 shopping centers plus 11 shopping centers under development. The Partnership had acquired 20 of the 21 Midland shopping centers prior to June 30, 1998 containing 2.0 million square feet for approximately $167.1 million. Those shopping centers are included in the Partnership's June 30, 1998 balance sheet. The one remaining shopping center, Windmiller Farms, was acquired on July 15, 1998 using funds drawn on the Line. The center was acquired for an aggregate purchase price of $13.3 million which is reflected in the pro forma balance sheet. Subsequent to June 30, 1998, the Partnership expects to acquire an additional three properties under development for $41.3 million. In addition, during 1998, the Partnership expects to pay $4.6 million in additional costs related to joint venture investments and other transaction costs related to acquiring the various shopping centers from Midland, and during 1999 and 2000 expects to pay contingent consideration of $23.0 million. The following table represents the properties under development which the Partnership expects to acquire from Midland upon completion of construction during 1998. These properties are not included in these pro forma condensed consolidated financial statements. Expected Acquisition Purchase Date Price --------------- ------------- Garner Festival October-98 $ 20,571 Nashboro October-98 7,260 Crooked Creek October-98 13,471 ============= $ 41,302 ============= In addition, the Partnership acquired one other shopping center for an aggregate purchase price of $22.9 million which is reflected in the pro forma balance sheet. The shopping center, Pike Creek Shopping Center, was acquired on August 4, 1998 using funds drawn on the Line. (b) Represents the proceeds from a $100 million debt offering completed July 15, 1998, less offering costs of 1.25%. At closing, the Company used the net proceeds from the Offering ($98.8 million) for the repayment of the balance outstanding on the Line and the remainder was used to offset the $36.2 million borrowed on the Line for the acquisitions of Pike Creek and Windmiller Farms. The Company has recorded $1.2 million of financing costs as an "Other Asset" to be amortized over the term of the Notes. Regency Centers, L.P. Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year Ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data)
For the Six Month Period Ended June 30, 1998 Midland Acquisition Other Historical Properties Properties Adjustments Pro Forma (d) (e) Revenues: Minimum rent $ 37,202 3,913 3,026 (697) (i) 43,444 Percentage rent 623 - 154 (8) (i) 769 Recoveries from tenants 8,345 542 711 (67) (i) 9,531 Management, leasing and brokerage fees 5,406 - - - 5,406 Equity in income of investments in real estate partnership 146 - - - 146 ------------ ---------- --------- ---------- ------- 51,722 4,455 3,891 (772) 59,296 ------------ ---------- --------- ---------- ------- Operating expenses: Depreciation and amortization 8,740 817 (f) 891 (f) (453) (i) 9,995 Operating and maintenance 6,371 283 331 (122) (i) 6,863 General and administrative 7,262 231 203 (25) (i) 7,671 Real estate taxes 4,398 488 481 (81) (i) 5,286 ------------ ---------- --------- ---------- -------- 26,771 1,819 1,906 (681) 29,815 ------------ ---------- --------- ---------- -------- Interest expense (income): Interest expense 9,250 2,646 (g) 2,135 (h) (2,834) (j) 11,197 Interest income (933) - - - (933) ------------ ---------- --------- ---------- -------- 8,317 2,646 2,135 (2,834) 10,264 ------------ ---------- --------- ---------- -------- Income before minority interest and gain on sale of real estate investments 16,634 (10) (150) 2,743 19,217 Gain on sale of real estate investments 10,746 - - (9,336) (i) 1,410 Minority interest (200) - - - (200) ------------ ---------- --------- ---------- -------- Net income 27,180 (10) (150) (6,593) 20,427 Preferred distributions - - - (3,250) (k) (3,250) ------------ ---------- --------- ---------- -------- Net income for unit holders $ 27,180 (10) (150) (9,843) 17,177 ============ ========== ========= ========== ======== Net income per unit (note (l)): Basic $ 1.04 $ 0.61 ============ ======== Diluted $ 1.02 $ 0.60 ============ ========
See accompanying notes to pro forma consolidated statements of operations. Regency Centers, L.P. Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year Ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data)
For the Year Ended December 31, 1997 Branch Midland Acquisition Other Historical Properties Properties Properties Adjustments Pro Forma (c) (d) (e) Revenues: Minimum rent $ 53,330 3,596 16,482 12,739 (4,136) (i) 82,011 Percentage rent 898 167 - 367 - 1,432 Recoveries from tenants 12,993 751 2,240 3,115 (548) (i) 18,551 Management, leasing and brokerage fees 7,997 1,060 - - - 9,057 Equity in income of investments in real estate partnerships 33 - - - - 33 --------- ------------ ---------- --------- ---------- --------- 75,251 5,574 18,722 16,221 (4,684) 111,084 --------- ------------ ---------- --------- ---------- --------- Operating expenses: Depreciation & amortization 11,905 972 2,994 (f) 3,364 (f) (855) (i) 18,380 Operating and maintenance 10,688 595 1,194 1,780 (1,260) (i) 12,997 General and administrative 9,964 683 1,042 878 (49) (i) 12,518 Real estate taxes 6,451 404 1,635 1,876 (447) (i) 9,919 --------- ------------ ---------- --------- ---------- --------- 39,008 2,654 6,865 7,898 (2,611) 53,814 --------- ------------ ---------- --------- ---------- --------- Interest expense (income): Interest expense 13,614 1,517 10,353 (g) 8,610 (h) (7,179) (j) 26,915 Interest income (935) (33) - - - (968) --------- ------------ ---------- --------- ---------- --------- 12,679 1,484 10,353 8,610 (7,179) 25,947 --------- ------------ ---------- --------- ---------- --------- Income before minority interest and gain on sale of real estate investments 23,564 1,436 1,504 (287) 5,106 31,323 Gain on sale of real estate investments 451 - - - (451) (i) - Minority interest (505) (313) - - - (818) --------- ------------ ---------- --------- ---------- --------- Net income 23,510 1,123 1,504 (287) 4,655 30,505 Preferred distributions - - - - (6,500) (k) (6,500) --------- ------------ ---------- --------- ---------- --------- Net income for unit holders $ 23,510 1,123 1,504 (287) (1,845) 24,005 ========= ============ ========== ========= ========== ========= Net income per unit (note (l)): Basic $ 1.20 $ 1.23 ========= ========= Diluted $ 1.12 $ 1.15 ========== ==========
See accompanying notes to pro forma consolidated statements of operations. Regency Centers, L.P. Notes to Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) (c) Reflects pro forma results of operations for the Branch Properties for the period from January 1, 1997 to March 7, 1997 (acquisition date). (d) Reflects revenues and certain expenses for the Midland Properties for the period from January 1, 1998 to the earlier of the respective acquisition date of the property or June 30, 1998, and for the year ended December 31, 1997.
For the period ended June 30, 1998 Property Acquisition Minimum Recoveries Operating and Real General and Name Date Rent from Tenants Maintenance Estate Taxes Administrative --------- ----------- ------------ ------------- -------------- ------------- Windmiller Farms 7/15/98 $ 574 $ 90 $ 34 $ 71 $ 32 Franklin Square 4/29/98 414 56 52 31 32 St. Ann Square 4/17/98 217 44 18 35 12 East Point Crossing 4/29/98 268 52 16 35 17 North Gate Plaza 4/29/98 234 33 18 27 10 Worthington Park 4/29/98 281 68 22 40 19 Beckett Commons 3/1/98 113 7 6 14 4 Cherry Grove Plaza 3/1/98 239 11 13 22 21 Bent Tree Plaza 3/1/98 137 11 7 59 8 West Chester Plaza 3/1/98 130 12 13 42 7 Brookville Plaza 3/1/98 95 5 5 8 4 Lake Shores Plaza 3/1/98 123 10 5 16 6 Evans Crossing 3/1/98 116 4 5 8 6 Statler Square 3/1/98 164 15 13 1 8 Kernersville Plaza 3/1/98 120 4 8 8 8 Maynard Crossing 3/1/98 272 38 13 15 15 Shoppes at Mason 3/1/98 116 27 15 33 6 Lake Pine Plaza 3/1/98 152 13 10 8 9 Hamilton Meadows 3/1/98 148 42 10 15 7 ----------- ----------- ---------- ------------- -------------- $ 3,913 $ 542 $ 283 $ 488 $ 231 =========== =========== ========== ============= =============
For the year ended December 31, 1997 Property Acquisition Minimum Recoveries Operating and Real General and Name Date Rent from Tenants Maintenance Estate Taxes Administrative --------- ----------- -------------- ------------ -------------- ------------- Windmiller Farms 7/15/98 $ 1,157 $ 181 $ 69 $ 143 $ 64 Franklin Square 4/29/98 1,270 171 158 94 98 St. Ann Square 4/17/98 741 149 60 119 42 East Point Crossing 4/29/98 821 159 50 107 51 North Gate Plaza 4/29/98 718 100 56 84 32 Worthington Park 4/29/98 862 208 67 124 59 Beckett Commons 3/1/98 687 140 38 83 47 Cherry Grove Plaza 3/1/98 1,445 175 85 131 105 Bent Tree Plaza 3/1/98 786 130 64 59 48 West Chester Plaza 3/1/98 807 70 72 84 45 Brookville Plaza 3/1/98 571 42 34 50 30 Lake Shores Plaza 3/1/98 759 156 55 96 32 Evans Crossing 3/1/98 613 84 34 50 33 Statler Square 3/1/98 913 76 43 54 60 Kernersville Plaza 3/1/98 605 58 29 51 33 Maynard Crossing 3/1/98 1,367 133 78 95 104 Shoppes at Mason 3/1/98 644 56 61 65 38 Lake Pine Plaza 3/1/98 827 93 54 51 46 Hamilton Meadows 3/1/98 889 59 87 95 75 ----------- ----------- ---------- -------------- -------------- $ 16,482 $ 2,240 $ 1,194 $ 1,635 $ 1,042 =========== =========== ========== ============= =============
Regency Centers, L.P. Notes to Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) (e) Reflects revenues and certain expenses of the Acquisition Properties for the period from January 1, 1998 to the earlier of the respective acquisition date of the property or June 30, 1998, and for the year ended December 31, 1997.
For the period ended June 30, 1998 Property Acquisition Minimum Percentage Recoveries Operating and Real General and Name Date Rent Rent from Tenants Maintenance Estate Taxes Administrative --------- ----------- ----------- ------------- ------------- ------------- ------------ Bloomingdale Square 2/11/98 $ 214 $ 6 $ 53 $ 25 $ 24 $ 21 Silverlake 6/3/98 346 - 60 36 36 18 Highland Square 6/17/98 516 51 86 46 79 60 Shoppes @ 104 6/19/98 620 - 133 72 79 28 Fleming Island 6/30/98 348 - 289 39 194 36 Pike Creek 8/4/98 982 97 90 113 69 40 ----------- ----------- ---------- ------------- ------------- ------------ $ 3,026 $ 154 $ 711 $ 331 $ 481 $ 203 =========== =========== ========== ============= ============= ============
For the year ended December 31, 1997 Property Acquisition Minimum Percentage Recoveries Operating and Real General and Name Date Rent Rent from Tenants Maintenance Estate Taxes Administrative --------- ----------- ----------- ------------- --------------- ------------- ------------ Oakley Plaza 3/14/97 $ 142 $ - $ 14 $ 13 $ 13 $ 8 Mariner's Village 3/25/97 185 6 37 45 33 7 Carmel Commons 3/28/97 297 11 63 38 35 22 Mainstreet Square 4/15/97 193 - 34 42 30 15 East Port Plaza 4/25/97 543 - 107 96 65 33 Rivermont Station 6/30/97 642 - 124 65 56 34 Lovejoy Station 6/30/97 306 - 63 36 29 9 Tamiami Trails 7/10/97 508 - 163 124 66 30 Garden Square 9/19/97 671 - 232 144 99 50 Boynton Lakes Plaza 12/1/97 1,159 - 391 267 250 80 Pinetree Plaza 12/23/97 279 - 51 50 37 21 Bloomingdale Square 2/11/98 1,863 43 459 215 209 184 Silverlake 6/3/98 819 - 142 85 85 43 Highland Square 6/17/98 1,122 111 187 99 171 130 Shoppes @104 6/19/98 1,332 - 285 154 170 60 Fleming Island 6/30/98 698 - 581 79 388 72 Pike Creek 8/4/98 1,980 196 182 228 140 80 ----------- ----------- ---------- ------------- ------------- ------------ $ 12,739 $ 367 $ 3,115 $ 1,780 $ 1,876 $ 878 =========== =========== ========== ============= ============= ============
Regency Centers, L.P. Notes to Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) (f) Depreciation expense is based on the estimated useful life of the properties acquired. For properties under construction, depreciation expense is calculated from the date the property is placed in service through the end of the period. In addition, the six month period ended June 30, 1998 and year ended December 31, 1997 calculations reflect depreciation expense on the properties from January 1, 1997 to the earlier of the respective acquisition date of the property or June 30, 1998.
For the period ended June 30, 1998 Property Building and Year Building Depreciation Name Improvements Built/Renovated Useful Life Adjustment -------------- --------------- ----------- ------------- Bloomingdale Square $ 13,189 1987 30 $ 51 Silverlake Shopping Center 7,584 1988 31 103 Highland Square 9,049 1960 20 208 Shoppes @104 6,439 1990 33 91 Fleming Island 4,773 1994 37 64 Pike Creek 18,082 1981 24 374 ------------- Acquisition Properties pro forma depreciation adjustment $ 891 ============= Midland Properties $ 131,065 Ranging from Ranging from 1986 to 1996 29 to 40 $ 817 =============
For the year ended December 31, 1997 Property Building and Year Building Depreciation Name Improvements Built/Renovated Useful Life Adjustment ------------- ---------------- ----------- ------------- Oakley Plaza $ 6,428 1988 31 $ 41 Mariner's Village 5,979 1986 29 47 Carmel Commons 9,335 1979 22 101 Mainstreet Square 4,581 1988 31 43 East Port Plaza 8,179 1991 34 76 Rivermont Station 9,548 1996 39 121 Lovejoy Station 5,560 1995 38 73 Tamiami Trails 7,598 1987 30 133 Garden Square 7,151 1991 34 151 Boynton Lakes Plaza 9,618 1993 36 244 Pinetree Plaza 3,057 1982 25 120 Bloomingdale Square 13,189 1987 30 440 Silverlake Shopping Center 7,584 1988 31 245 Highlands Square 9,049 1960 20 452 Shoppes @104 6,439 1990 33 195 Fleming Island 4,773 1994 37 129 Pike Creek 18,082 1981 24 753 ------------- Acquisition Properties pro forma depreciation adjustment $ 3,364 ============= Midland Properties 131,065 Ranging from Ranging from 1986 to 1996 29 to 40 $ 2,994 =============
Regency Centers, L.P. Notes to Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) (g) To reflect interest expense on the Line required to complete the acquisition of the Midland Properties at the average interest rate afforded the Partnership (6.525%) and the assumption of $97.0 million of debt. For properties under construction, interest expense is calculated from the date the property is placed in service through the end of the period. Pro forma interest adjustment for the six month period ended June 30, 1998 $ 2,646 ============= Pro forma interest adjustment for the for the year ended December 31, 1997 $ 10,353 ============= (h) To reflect interest expense on the Line required to complete the acquisition of the Acquisition Properties at the average interest rate afforded the Partnership (6.525%). The six month period ended June 30, 1998 and year ended December 31, 1997 calculation reflects interest expense on the properties from January 1, 1997 to the respective acquisition date of the property. Pro forma interest adjustment for the six-month period ended June 30, 1998 $ 2,135 ============= Pro forma interest adjustment for the year ended December 31, 1997 $ 8,610 ============= (i) In December, 1997, the Partnership sold one office building for $2.6 million and recognized a gain on the sale of $451,000. During the first quarter of 1998, the Partnership sold three office buildings and a parcel of land for $26.7 million, and recognized a gain on the sale of $9.3 million. The adjustments to the pro forma statements of operations reflect the reversal of the revenues and expenses from the office buildings generated during 1997 and 1998, including the gains on the sale of the office buildings as if the sales had been completed on January 1, 1997. The Partnership believes that excluding the results of operations and gains related to the office buildings sold is necessary for an understanding of the continuing operations of the Partnership as the Partnership does not intend to own, operate or sell office buildings in the future. (j) To reflect (i) interest expense and loan cost amortization on the $100 million debt offering offset by (ii) the reduction of interest expense on the Line and mortgage loans from the proceeds of the debt offering, the issuance of the Series A preferred units and the proceeds from the sale of the office buildings referred to in note (i). Pro forma interest adjustment for the six-month period ended June 30, 1998 $ (2,834) ============= Pro forma interest adjustment for the year ended December 31, 1997 $ (7,179) ============= (k) To reflect the distribution on the offering of Series A preferred units at an assumed annual rate of 8.125% for the six-month period ended June 30, 1998 and year ended December 31, 1997. Regency Centers, L.P. Notes to Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) (l) The following summarizes the calculation of basic and diluted earnings per unit for the six-month period ended June 30, 1998 and the year ended December 31, 1997:
For the Six For the year Months Ended Ended June 30, 1998 December 31, 1997 ------------- ----------------- Basic Earnings Per Unit (EPU) Calculation: Weighted average common units outstanding 23,602 15,327 ============= ============= Net income for unit holders $ 17,177 $ 24,005 Less: dividends paid on Regency Class B common stock 2,689 5,140 ------------- ------------- Net income for Basic and Diluted EPU $ 14,488 $ 18,865 ============= ============= Basic EPU $ 0.61 $ 1.23 ============= ============= Diluted Earnings Per Unit (EPU) Calculation: Weighted average common units outstanding for Basic EPU 23,602 15,327 Incremental units to be issued under common stock options using the Treasury method 27 80 Contingent units for the acquisition of real estate 428 955 ------------- ------------- Total Diluted Units 24,057 16,362 ============= ============= Diluted EPU $ 0.60 $ 1.15 ============= =============
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: October 20, 1998 REGENCY CENTERS, L.P. By: /s/ J. Christian Leavitt Vice President, Treasurer and Secretary -----END PRIVACY-ENHANCED MESSAGE-----