Regency Centers (REG) 10-Q 2004 Q3 Quarterly report

United States

SECURITIES AND EXCHANGE COMMISSION

Washington DC 20549

FORM 10-Q

(Mark One)

x For the quarterly period ended September 30, 2004

-or-

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from            to            

Commission File Number 1-12298

REGENCY CENTERS CORPORATION

(Exact name of registrant as specified in its charter)

Florida	59-3191743
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

121 West Forsyth Street, Suite 200

Jacksonville, Florida 32202

(Address of principal executive offices) (Zip Code)

(904) 598-7000

(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  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

(Applicable only to Corporate Registrants)

As of November 3, 2004, there were 62,666,102 shares outstanding of the Registrant’s common stock.

REGENCY CENTERS CORPORATION

Consolidated Balance Sheets

September 30, 2004 and December 31, 2003

(in thousands, except share data)

	2004			2003
	(unaudited)
Assets
Real estate investments at cost:
Land	$	778,419		738,101
Buildings and improvements		1,936,833		1,914,075
		2,715,252		2,652,176
Less: accumulated depreciation		325,130		285,665
		2,390,122		2,366,511
Properties in development		437,280		369,474
Operating properties held for sale		44,931		4,200
Investments in real estate partnerships		115,871		140,496
Net real estate investments		2,988,204		2,880,681
Cash and cash equivalents		50,181		29,869
Notes receivable		33,452		70,782
Tenant receivables, net of allowance for uncollectible accounts of $3,601 and $3,353 at September 30, 2004 and December 31, 2003, respectively		50,337		54,573
Deferred costs, less accumulated amortization of $24,120 and $29,493 at September 30, 2004 and December 31, 2003, respectively		41,769		35,804
Acquired lease intangible assets, net		11,316		10,205
Other assets		13,661		16,315
	$	3,188,920		3,098,229
Liabilities and Stockholders’ Equity
Liabilities:
Notes payable	$	1,249,021		1,257,777
Unsecured line of credit		230,000		195,000
Accounts payable and other liabilities		109,145		94,280
Acquired lease intangible liabilities, net		5,400		6,115
Tenants’ security and escrow deposits		9,621		9,358
Total liabilities		1,603,187		1,562,530
Preferred units		101,762		223,526
Exchangeable operating partnership units		19,704		26,544
Limited partners’ interest in consolidated partnerships		1,742		4,651
Total minority interest		123,208		254,721
Stockholders’ equity:
Preferred stock, $.01 par value per share, 30,000,000 shares authorized; 800,000 and 300,000 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively, liquidation preference $250 per share		200,000		75,000
Common stock $.01 par value per share, 150,000,000 shares authorized; 67,698,118 and 64,956,077 shares issued at September 30, 2004 and December 31, 2003, respectively		677		650
Treasury stock at cost, 5,159,852 and 5,048,120 shares held at September 30, 2004 and December 31, 2003, respectively, at cost		(112,262	)	(111,414	)
Additional paid in capital		1,471,536		1,394,361
Accumulated other comprehensive (loss) income		(5,434	)	175
Distributions in excess of net income		(91,992	)	(77,794	)
Total stockholders’ equity		1,462,525		1,280,978
Commitments and contingencies	$	3,188,920		3,098,229

See accompanying notes to consolidated financial statements.

1

REGENCY CENTERS CORPORATION

Consolidated Statements of Operations

For the three months ended September 30, 2004 and 2003

(in thousands, except per share data)

(unaudited)

	2004			2003
Revenues:
Minimum rent	$	72,606		66,436
Percentage rent		733		737
Recoveries from tenants		21,536		19,996
Management fees and commissions		1,917		1,561
Equity in income of investments in real estate partnerships		2,199		1,590
Total revenues		98,991		90,320
Operating expenses:
Depreciation and amortization		20,375		18,105
Operating and maintenance		14,110		12,527
General and administrative		7,232		6,138
Real estate taxes		10,410		9,549
Other expenses		1,479		468
Total operating expenses		53,606		46,787
Other expense (income)
Interest expense, net of interest income of $886 and $335 in 2004 and 2003, respectively		20,099		21,195
Gain on sale of operating properties and properties in development		(7,946	)	(11,796	)
Total other expense (income)		12,153		9,399
Income before minority interests		33,232		34,134
Minority interest of preferred units		(7,458	)	(7,256	)
Minority interest of exchangeable operating partnership units		(397	)	(630	)
Minority interest of limited partners		(85	)	(113	)
Income from continuing operations		25,292		26,135
Income from discontinued operations		12,454		5,031
Net income		37,746		31,166
Preferred stock dividends		(2,177	)	(1,397	)
Net income for common stockholders	$	35,569		29,769
Income per common share - basic:
Continuing operations	$	0.38		0.43
Discontinued operations		0.20		0.09
Net income for common stockholders per share	$	0.58		0.52
Income per common share - diluted:
Continuing operations	$	0.38		0.43
Discontinued operations		0.20		0.08
Net income for common stockholders per share	$	0.58		0.51

See accompanying notes to consolidated financial statements.

2

REGENCY CENTERS CORPORATION

Consolidated Statements of Operations

For the nine months ended September 30, 2004 and 2003

(in thousands, except per share data)

(unaudited)

	2004			2003
Revenues:
Minimum rent	$	211,531		198,117
Percentage rent		1,523		1,496
Recoveries from tenants		60,610		57,804
Management fees and commissions		5,294		5,006
Equity in income of investments in real estate partnerships		6,888		5,910
Total revenues		285,846		268,333
Operating expenses:
Depreciation and amortization		60,011		53,322
Operating and maintenance		39,785		37,484
General and administrative		20,337		16,438
Real estate taxes		30,255		28,247
Other expenses		2,629		1,572
Total operating expenses		153,017		137,063
Other expense (income)
Interest expense, net of interest income of $2,604 and $1,613 in 2004 and 2003, respectively		59,919		62,593
Gain on sale of operating properties and properties in development		(16,579	)	(21,600	)
Total other expense (income)		43,340		40,993
Income before minority interests		89,489		90,277
Minority interest of preferred units		(17,621	)	(24,745	)
Minority interest of exchangeable operating partnership units		(1,155	)	(1,543	)
Minority interest of limited partners		(255	)	(317	)
Income from continuing operations		70,458		63,672
Income from discontinued operations		16,562		12,410
Net income		87,020		76,082
Preferred stock dividends		(4,971	)	(2,757	)
Net income for common stockholders	$	82,049		73,325
Income per common share - basic:
Continuing operations	$	1.08		1.03
Discontinued operations		0.27		0.21
Net income for common stockholders per share	$	1.35		1.24
Income per common share - diluted:
Continuing operations	$	1.08		1.02
Discontinued operations		0.27		0.21
Net income for common stockholders per share	$	1.35		1.23

See accompanying notes to consolidated financial statements.

3

REGENCY CENTERS CORPORATION

Consolidated Statement of Stockholders’ Equity

(in thousands, except per share data)

For the nine months ended September 30, 2004

	Preferred Stock		Common Stock	Treasury Stock		Additional Paid In Capital		Accumulated Other Comprehensive Income (Loss)		Distributions in Excess of Net Income		Total Stockholders’ Equity
Balance at December 31, 2003	$	75,000	650	(111,413	)	1,394,361		175		(77,794	)	1,280,979
Comprehensive Income:
Net income		—	—	—		—				87,020		87,020
Loss on settlement of derivative instruments		—	—	—		—		(5,895	)	—		(5,895	)
Amortization of loss on derivative instruments		—	—	—		—		286		—		286
Total comprehensive income		—	—	—		—		—		—		81,411
Common stock issued as compensation to directors or officers		—	7	—		10,947		—		—		10,954
Common stock issued for exercise of stock options		—	3	—		11,604		—		—		11,607
Common stock surrendered for payment of taxes and forfeitures				(849	)	(8,134	)					(8,983	)
Common stock issued for partnership units exchanged		—	2	—		5,408		—		—		5,410
Common stock issued in stock offering		—	15	—		67,380		—		—		67,395
Series 4 preferred stock issued		125,000				(4,169	)					120,831
Reallocation of minority interest		—	—	—		(5,861	)	—		—		(5,861	)
Cash dividends declared:
Common stock ($1.59 per share)		—	—	—		—		—		(96,247	)	(96,247	)
Preferred stock ($1.55 per share)		—	—	—		—		—		(4,971	)	(4,971	)
Balance at September 30, 2004	$	200,000	677	(112,262	)	1,471,536		(5,434	)	(91,992	)	1,462,525

See accompanying notes to consolidated financial statements.

4

REGENCY CENTERS CORPORATION

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2004 and 2003

(unaudited)

	2004			2003
Cash flows from operating activities:
Net income	$	87,020		76,082
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		60,772		56,279
Deferred loan cost and debt premium amortization		1,813		1,571
Stock based compensation		10,133		8,688
Minority interest of preferred units		17,621		24,745
Minority interest of exchangeable operating partnership units		1,417		1,842
Minority interest of limited partners		255		317
Equity in income of investments in real estate partnerships		(6,888	)	(5,910	)
Net gain on sale of properties		(30,207	)	(28,256	)
Provision for loss on operating properties		—		1,969
Distributions from operations of investments in real estate partnerships		10,822		8,303
Hedge settlement		(5,720	)	—
Changes in assets and liabilities:
Tenant receivables		4,773		5,592
Deferred leasing costs		(4,683	)	(7,309	)
Other assets		647		(615	)
Accounts payable and other liabilities		1,708		(7,664	)
Tenants’ security and escrow deposits		230		566
Net cash provided by operating activities		149,713		136,200
Cash flows from investing activities:
Acquisition of real estate		(26,560	)	(22,476	)
Development of real estate		(246,185	)	(225,270	)
Proceeds from sale of real estate investments		129,475		138,830
Repayment of notes receivable, net		45,530		48,332
Investments in real estate partnerships		(18,621	)	(10,260	)
Distributions received from investments in real estate partnerships		21,464		18,361
Net cash used in investing activities		(94,897	)	(52,483	)
Cash flows from financing activities:
Net proceeds from common stock issuance		79,002		125,073
Repurchase of common stock		—		(150,502	)
Redemption of preferred units		(125,000	)	(155,750	)
Redemption of exchangeable operating partnership units		(20,402	)	(974	)
Contributions from limited partners in consolidated partnerships		352		247
Distributions to exchangeable operating partnership unit holders		(1,706	)	(2,182	)
Distributions to preferred unit holders		(14,385	)	(20,873	)
Dividends paid to common stockholders		(96,247	)	(93,808	)
Dividends paid to preferred stockholders		(4,971	)	(2,757	)
Net proceeds from issuance of preferred stock		120,831		72,295
Repayment of fixed rate unsecured notes		(200,000	)	—
Proceeds from issuance of fixed rate unsecured notes, net		148,646		—
Proceeds from unsecured line of credit, net		35,000		116,000
Proceeds from notes payable		54,852		30,822
Repayment of notes payable, net		(2,350	)	(7,256	)
Scheduled principal payments		(4,282	)	(4,358	)
Deferred loan costs		(3,844	)	(253	)
Net cash used in financing activities		(34,504	)	(94,276	)
Net increase (decrease) in cash and cash equivalents		20,312		(10,559	)
Cash and cash equivalents at beginning of the period		29,869		56,447
Cash and cash equivalents at end of the period	$	50,181		45,888

5

REGENCY CENTERS CORPORATION

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2004 and 2003

(unaudited)

	2004		2003
Supplemental disclosure of cash flow information - cash paid for interest (net of capitalized interest of $8,903 and $9,778 in 2004 and 2003, respectively)	$	73,363	71,371
Supplemental disclosure of non-cash transactions:
Mortgage debt assumed by purchaser on sale of real estate	$	9,899	5,254
Common stock issued for partnership units exchanged	$	5,410	1,164
Mortgage loans assumed for the acquisition of real estate	$	4,148	15,342
Real estate contributed as investments in real estate partnerships	$	4,544	18,329
Exchangeable operating partnership units issued for the acquisition of real estate	$	13,400	—
Notes receivable taken in connection with sales of operating properties and properties in development	$	8,200	69,287
Change in fair value of derivative instrument	$	—	1,677

See accompanying notes to consolidated financial statements.

6

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

1. Summary of Significant Accounting Policies

(a) Organization and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Regency Centers Corporation and partnerships in which it has majority ownership or controlling interest (the “Company” or “Regency”). All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. The Company owns approximately 98% of the outstanding common units (“Units”) of Regency Centers, L.P. (“RCLP”). Regency invests in real estate through its partnership interest in RCLP. Generally all of the acquisition, development, operations and financing activities of Regency, including the issuance of Units and preferred units, are executed by RCLP. The equity interests of third parties held in RCLP and the majority owned or controlled partnerships are included in the consolidated financial statements as preferred or exchangeable operating partnership units and limited partners’ interest in consolidated partnerships. The Company is a qualified real estate investment trust (“REIT”), which began operations in 1993.

The financial statements reflect all adjustments that are of a normal recurring nature, and in the opinion of management, are necessary to properly state the results of operations and financial position. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted although management believes that the disclosures are adequate to make the information presented not misleading. The financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2003 Form 10-K filed with the Securities and Exchange Commission.

(b) Revenues

The Company leases space to tenants under agreements with varying terms. Leases are accounted for as operating leases with minimum rent recognized on a straight-line basis over the term of the lease regardless of when payments are due. Accrued rents are included in tenant receivables.

Substantially all of the lease agreements contain provisions that grant additional rents based on tenants’ sales volume (contingent or percentage rent) and reimbursement of the tenants’ share of real estate taxes and certain common area maintenance (“CAM”) costs. Percentage rents are recognized when the tenants achieve the specified targets as defined in their lease agreements. Recovery of real estate taxes and CAM costs are recognized as the respective costs are incurred in accordance with the lease agreements.

The Company accounts for profit recognition on sales of real estate in accordance with Statement of Financial Accounting Standards (“SFAS”) Statement No. 66, “Accounting for Sales of Real Estate.” In summary, profits from sales will not be recognized by the Company unless a sale has been consummated; the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property; the Company has transferred to the buyer the usual risks and rewards of ownership; and the Company does not have substantial continuing financial involvement with the property.

7

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

(b) Revenues (continued)

The Company has been engaged by joint ventures to provide asset and property management services for their shopping centers. The fees are market based and generally calculated as a percentage of revenues earned and the estimated values of the properties and recognized as services are provided.

(c) Real Estate Investments

Land, buildings and improvements are recorded at cost. All specifically identifiable costs related to development activities are capitalized into properties in development on the consolidated balance sheet. The capitalized costs include pre-development costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. The Company incurs costs prior to land acquisition including acquisition contract deposits, legal, engineering and other external professional fees related to evaluating the feasibility of developing a shopping center. These pre-acquisition development costs are included in properties in development. If the Company determines that the development of a shopping center is no longer probable, any pre-development costs previously incurred are immediately expensed. At September 30, 2004 and December 31, 2003, the Company had capitalized pre-development costs of $15.7 million and $8.8 million, respectively. The Company’s method of capitalizing interest is based upon applying its weighted average borrowing rate to that portion of the actual development costs expended. The Company ceases cost capitalization when the property is available for occupancy upon substantial completion of tenant improvements. Maintenance and repairs that do not improve or extend the useful lives of the respective assets are reflected in operating and maintenance expense. Depreciation is computed using the straight-line method over estimated useful lives of up to 40 years for buildings and improvements, term of lease for tenant improvements, and three to seven years for furniture and equipment.

The Company allocates the purchase price of assets acquired (net tangible and identifiable intangible assets) and liabilities assumed based on their relative fair values at the date of acquisition pursuant to the provisions SFAS No. 141, “Business Combinations” (“Statement 141”). Statement 141 provides guidance on allocating a portion of the purchase price of a property to intangible assets. The Company’s methodology for this allocation includes estimating an “as-if vacant” fair value of the physical property, which is allocated to land, building and improvements. The difference between the purchase price and the “as-if vacant” fair value is allocated to intangible assets. There are three categories of intangible assets to be considered, (i) value of in-place leases, (ii) above and below-market value of in-place leases and (iii) customer relationship value.

The value of in-place leases is estimated based on the value associated with the costs avoided in originating leases comparable to the acquired in-place leases as well as the value associated with lost rental and recovery revenue during the assumed lease-up period. The value of in-place leases is amortized to expense over the estimated weighted-average remaining lease lives.

Above-market and below-market in-place lease values for acquired properties are recorded based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimates of fair market lease rates

8

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

(c) Real Estate Investments (continued)

for the comparable in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The value of above-market lease values is accreted as a reduction of base rental revenue over the remaining terms of the respective leases. The value of below-market lease values is acreted as an increase to base rental revenue over the remaining terms of the respective leases including renewal options.

The Company allocates no value to customer relationship intangibles if the Company has pre-existing business relationships with the major retailers in the acquired property because the customer relationships associated with the acquired property provide no incremental value over the Company’s existing relationships.

The Company follows the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“Statement 144”). In accordance with Statement 144, operating properties held for sale includes only those properties available for immediate sale in their present condition and for which management believes it is probable that a sale of the property will be completed within one year. Operating properties held for sale are carried at the lower of cost or fair value less costs to sell. Depreciation and amortization are suspended during the held for sale period.

The Company reviews its real estate portfolio for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable based upon expected undiscounted cash flows from the property. The Company determines impairment by comparing the property’s carrying value to an estimate of fair value based upon varying methods such as i) estimating future cash flows, ii) determining resale values by market, or iii) applying a capitalization rate to net operating income using prevailing rates in a given market. These methods of determining fair value can fluctuate significantly as a result of a number of factors, including changes in the general economy of those markets in which we operate, tenant credit quality and demand for new retail stores. In the event a property is impaired, we write down the asset to fair value for “held-and-used” assets and to fair value less costs to sell for “held-for-sale” assets. During June 2003, we recorded a provision for loss of approximately $2.0 million on three shopping centers located in geographic areas no longer considered primary investment markets that also lacked the long-term investment growth that the Company believes is critical to its investment strategy. At the time the provision was recorded, the three properties were under contract for sale, and the provision was established based upon the criteria described above. These assets were subsequently sold to third parties and included as part of discontinued operations.

The Company’s properties generally have operations and cash flows that can be clearly distinguished from the rest of the Company. In accordance with Statement 144, the operations and gains on sales reported in discontinued operations include those operating properties and properties in development that have been sold and for which operations and cash flows can be clearly distinguished. The operations from these properties have been eliminated from ongoing operations and the Company will not have continuing involvement after disposition. Prior periods have been restated to reflect the operations of these properties as discontinued operations. The operations and gains on sales of operating properties sold to real estate partnerships in which the Company has continuing involvement are included in income from continuing operations.

9

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

(d) Deferred Costs

Deferred costs include deferred leasing costs and deferred loan costs, net of accumulated amortization. Such costs are amortized over the periods through lease expiration or loan maturity. Deferred leasing costs consist of internal and external commissions associated with leasing the Company’s shopping centers. Net deferred leasing costs were $31.5 million and $28.0 million at September 30, 2004 and December 31, 2003, respectively. Deferred loan costs consist of initial direct and incremental costs associated with financing activities. Net deferred loan costs were $10.3 million and $7.8 million at September 30, 2004 and December 31, 2003, respectively.

(e) Earnings per Share and Treasury Stock

Basic net income per share of common stock is computed based upon the weighted average number of common shares outstanding during the period. Diluted net income per share also includes common share equivalents for stock options and exchangeable operating partnership units. See note 8 for the calculation of earnings per share.

Repurchases of the Company’s common stock (net of shares retired) are recorded at cost and are reflected as Treasury stock in the consolidated statement of stockholders’ equity. Outstanding shares do not include treasury shares.

(f) Stock-Based Compensation

The Company follows the provisions of SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure” (“Statement 148”). Statement 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, Statement 148 amends the disclosure requirements of SFAS Statement No. 123, “Accounting for Stock-Based Compensation” (“Statement 123”), to require more prominent and frequent disclosures in financial statements about the effects of stock-based compensation. As permitted under Statement 123 and Statement 148, the Company will continue to follow the accounting guidelines pursuant to Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“Opinion 25”), for stock-based compensation and to furnish the pro forma disclosures as required under Statement 148.

10

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

(f) Stock-Based Compensation (continued)

The Company applies Opinion 25 in accounting for its plan, and accordingly, no compensation cost has been recognized for its stock options in the consolidated financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under Statement 123, the Company’s net income for common stockholders for the three months and nine months ended September 30, 2004 and 2003 would have been reduced to the pro forma amounts indicated below (in thousands except per share data):

	For the three months ended September 30,
	2004		2003
Net income for common stockholders as reported:	$	35,569	29,769
Add: stock-based employee compensation expense included in reported net income		3,051	2,918
Deduct: total stock-based employee compensation expense determined under fair value based methods for all awards		5,114	4,149
Pro forma net income	$	33,506	28,538
Earnings per share:
Basic – as reported	$	0.58	0.52
Basic – pro forma	$	0.55	0.50
Diluted – as reported	$	0.58	0.51
Diluted – pro forma	$	0.54	0.49
	For the nine months ended September 30,
	2004		2003
Net income for common stockholders as reported:	$	82,049	73,325
Add: stock-based employee compensation expense included in reported net income		10,126	8,688
Deduct: total stock-based employee compensation expense determined under fair value based methods for all awards		14,190	11,763
Pro forma net income	$	77,985	70,250
Earnings per share:
Basic – as reported	$	1.35	1.24
Basic – pro forma	$	1.28	1.18
Diluted – as reported	$	1.35	1.23
Diluted – pro forma	$	1.28	1.18

11

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

(g) Consolidation of Variable Interest Entities

In December 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46 (“FIN 46”) (revised December 2003 (“FIN 46R”)), “Consolidation of Variable Interest Entities”, which addresses how a business enterprise should evaluate whether it has controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FIN 46, which was issued in January 2003. FIN 46R is applicable immediately to a variable interest entity created after January 31, 2003 and as of the first interim period ending after March 15, 2004 to those variable interest entities created before February 1, 2003 and not already consolidated under FIN 46 in previously issued financial statements. The Company did not create any variable interest entities after January 31, 2003. The Company has adopted FIN 46R, analyzed the applicability of this interpretation to its structures and determined that they are not party to any variable interest entities that should be consolidated.

(h) Segment Reporting

The Company’s business is investing in retail shopping centers through direct ownership or through joint ventures. The Company actively manages its portfolio of retail shopping centers and may from time to time make decisions to sell lower performing properties, or developments not meeting its long-term investment objectives. The proceeds of sales are reinvested into higher quality retail shopping centers through acquisitions or new developments, which management believes will meet its planned rate of return. It is management’s intent that all retail shopping centers will be owned or developed for investment purposes. The Company’s revenue and net income are generated from the operation of its investment portfolio. The Company will also earn incidental fees from third parties for services provided to manage and lease retail shopping centers owned through joint ventures.

The Company’s portfolio is located throughout the United States; however, management does not distinguish or group its operations on a geographical basis for purposes of allocating resources or measuring performance. The Company reviews operating and financial data for each property on an individual basis, therefore, the Company defines an operating segment as its individual properties. No individual property constitutes more than 10% of the Company’s combined revenue, net income or assets, and thus the individual properties have been aggregated into one reportable segment based upon their similarities with regard to both the nature of the centers, tenants and operational processes, as well as long-term average financial performance. In addition, no single tenant accounts for 10% or more of revenue and none of the shopping centers are located outside the United States.

(i) Derivative Financial Instruments

The Company adopted SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” as amended (“Statement 133”), on January 1, 2001. Statement 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Gains or losses resulting from changes in the values of those derivatives are accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The Company’s use of derivative financial instruments is normally to mitigate its interest rate risk on a related financial instrument or forecasted transaction through the use of interest rate swaps or rate locks.

12

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

(i) Derivative Financial Instruments (continued)

Statement 133 requires that changes in fair value of derivatives that qualify as cash flow hedges be recognized in other comprehensive income (loss) while the ineffective portion of the derivative’s change in fair value be recognized immediately in earnings. Upon the settlement of a hedge, gains and losses associated with the transaction will be recorded in other comprehensive income (loss) and amortized over the underlying term of the hedge transaction. Historically all of the Company’s derivative instruments qualify for hedge accounting.

To determine the fair value of derivative instruments, the Company uses standard market conventions and techniques such as discounted cash flow analysis, option pricing models and termination costs at each balance sheet date. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

j) Financial Instruments with Characteristics of Both Liabilities and Equity

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“Statement 150”). Statement 150 affects the accounting for certain financial instruments, including requiring companies having consolidated entities with specified termination dates to treat minority owners’ interests in such entities as liabilities in an amount based on the fair value of the entities. Although Statement 150 was originally effective July 1, 2003, the FASB has indefinitely deferred certain provisions related to classification and measurement requirements for mandatorily redeemable financial instruments that become subject to Statement 150 solely as a result of consolidation including minority interests of entities with specified termination dates. As a result, Statement 150 has no impact on the Company’s consolidated statements of operations for the nine months ended September 30, 2004.

At September 30, 2004, the Company held a majority interest in three consolidated entities with specified termination dates ranging from 2017 to 2049. The minority owners’ interests in these entities are to be settled upon termination by distribution or transfer of either cash or specific assets of the underlying entities. The estimated fair value of minority interests in entities with specified termination dates was approximately $5.3 million at September 30, 2004 as compared to the carrying value of $1.4 million. The Company has no other financial instruments that are affected by Statement 150.

(k) Reclassifications

Certain reclassifications have been made to the 2003 amounts to conform to classifications adopted in 2004.

13

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

2. Discontinued Operations

During the three months ended September 30, 2004, the Company sold 100% of its interest in three properties for net proceeds of $33.6 million and the combined operating income and gain of $12.5 million on these sales are included in discontinued operations. The revenues from properties included in discontinued operations, including properties sold in 2004 and 2003, as well as operating properties held for sale, were $1.9 million and $5.3 million for the three months ended September 30, 2004 and 2003, respectively. The operating income from these properties was $1.8 million and $2.6 million for the three months ended September 30, 2004 and 2003, respectively. Operating income and gains on sales included in discontinued operations are shown net of minority interest of exchangeable operating partnership units totaling $193,662 and $119,524 for the three months ended September 30, 2004 and 2003, respectively.

During the nine months ended September 30, 2004, the Company sold 100% of its interest in 11 properties for net proceeds of $71.2 million and the combined operating income and gain of $16.6 million on these sales are included in discontinued operations. The revenues from properties included in discontinued operations, including properties sold in 2004 and 2003, as well as operating properties held for sale, were $8.0 million and $17.2 million for the nine months ended September 30, 2004 and 2003, respectively. The operating income from these properties was $3.5 million and $5.9 million for the nine months ended September 30, 2004 and 2003, respectively. Operating income and gains on sales included in discontinued operations are shown net of minority interest of exchangeable operating partnership units totaling $262,144 and $298,661 for the nine months ended September 30, 2004 and 2003, respectively.

3. Real Estate Investments

As of September 30, 2004, the Company acquired two operating properties from third parties. One of the properties was acquired for a purchase price $25.1 million, and the second by the assumption of $4.1 million in debt and the issuance of 339,167 exchangeable operating partnership units valued at $13.4 million. Acquired lease intangible assets of $2.6 million for in-place leases were recorded for the acquisitions. The acquisitions were accounted for as purchases and the results of their operations are included in the consolidated financial statements from the respective dates of acquisition, and neither was considered significant to the Company’s operations in the current or preceding periods. On October 12, 2004, the Company purchased one operating property by the assumption of approximately $22.7 million of debt, the issuance of 581,395 exchangeable operating partnership units valued at approximately $25 million and $9.8 million in cash.

The Company accounts for all investments in which it owns 50% or less and does not have a controlling financial interest using the equity method. The Company’s combined investment in these partnerships was $115.9 million and $140.5 million at September 30, 2004 and December 31, 2003, respectively. Any difference between the carrying amount of these investments and the underlying equity in net assets is amortized to equity in income of investments in real estate partnerships over the depreciable life of the property, which is generally 40 years. Net income, which includes all operating results, as well as gains and losses on sales of properties within the joint ventures, is allocated to the Company in accordance with the respective partnership agreements. Such allocations of net income are recorded in equity in income of investments in real estate partnerships in the accompanying consolidated statements of operations.

14

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

3. Real Estate Investments (continued)

The Company has a 25% equity interest in Macquarie CountryWide-Regency, LLC (“MCWR”), a joint venture with an affiliate of Macquarie CountryWide Trust of Australia (“MCW”), a Sydney, Australia-based property trust focused on investing in grocery-anchored shopping centers. As of September 30, 2004, MCWR had acquired two properties from the Company for $43.4 million, for which the Company received net proceeds of $20.1 million.

The Company also has a 20% equity interest in Columbia Regency Retail Partners, LLC (“Columbia”), a joint venture with the Oregon Public Employees Retirement Fund (“OPERF”) that was formed for the purpose of investing in retail shopping centers. In August 2004, Columbia acquired six shopping centers for a purchase price of $119.2 million totaling approximately 900,000 square feet located in the Chicago area. Regency contributed $5.2 million for its proportionate share of the purchase price.

On August 16, 2004, the Company entered into two separate definitive agreements with its joint venture partners, MCW and OPERF to acquire 24 retail properties totaling 2.6 million square feet located in the Southeastern United States. The acquisitions were completed in the fourth quarter and Regency contributed $56.1 million for its proportionate share of the purchase price.

Recognition of gains from sales to joint ventures is recorded on only that portion of the sales not attributable to the Company’s ownership interest. The gains and operations are not recorded as discontinued operations because of Regency’s continuing involvement in these shopping centers. Columbia and MCWR intend to continue to acquire retail shopping centers, some of which they may acquire directly from the Company. For those properties acquired from third parties, the Company is required to contribute its pro-rata share of the purchase price to the partnerships.

With the exception of Columbia and MCWR, both of which intend to continue expanding their investment in shopping centers, the investments in real estate partnerships represent single asset entities formed for the purpose of developing or owning retail based commercial real estate.

In August 2004, Regency sold its membership interest in the Hermosa Venture 2002, LLC to the partner. In March 2004, the two properties in the OTR/Regency Texas Realty Holdings, L.P., an unconsolidated joint venture in which Regency has a 30% equity interest, were sold to an outside party for $28.3 million resulting in a gain of $8.2 million. The Company received $17.2 million which represents a $4.3 million distribution for the Company’s 30% equity interest and $12.9 million for the repayment of a loan. The Company recognized a $1.2 million gain in the equity in income of investments in real estate partnerships in the accompanying consolidated statements of operations.

15

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

3. Real Estate Investments (continued)

The Company’s investments in real estate partnerships as of September 30, 2004 and December 31, 2003 consist of the following (in thousands):

	Ownership	2004		2003
Columbia Regency Retail Partners, LLC	20%	$	50,316	40,267
Macquarie CountryWide-Regency, LLC	25%		42,355	39,071
Other investments in real estate partnerships	30% - 50%		23,200	61,158
		$	115,871	140,496

Summarized financial information for the unconsolidated investments on a combined basis, is as follows (in thousands):

	September 30, 2004		December 31, 2003
Balance Sheet:
Investment in real estate, net	$	844,786	727,530
Acquired lease intangibles, net		48,984	45,252
Other assets		50,801	39,408
Total assets	$	944,571	812,190
Notes payable	$	417,286	322,238
Other liabilities		17,101	14,102
Partners’ equity		510,184	475,850
Total liabilities and equity	$	944,571	812,190

Unconsolidated partnerships and joint ventures had notes payable of $417.3 million at September 30, 2004 and the Company’s proportionate share of these loans was $102.9 million. The Company does not guarantee any debt of these partnerships beyond its ownership percentage.

The revenues and expenses on a combined basis are summarized as follows for the three months ended September 30, 2004 and 2003 (in thousands):

	2004		2003
Statement of Operations:
Total revenues	$	26,352	18,835
Total expenses		19,411	13,375
Gain (loss) on sale of real estate		421	(9	)
Net income	$	7,362	5,451

The revenues and expenses on a combined basis are summarized as follows for the nine months ended September 30, 2004 and 2003 (in thousands):

	2004		2003
Statement of Operations:
Total revenues	$	72,474	52,257
Total expenses		52,225	34,616
Gain on sale of real estate		8,667	652
Net income	$	28,916	18,293

16

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

4. Acquired Lease Intangibles

The Company follows Statement 141 to account for the acquisition of shopping centers that are considered businesses. In accordance with Statement 141, identifiable intangible assets are valued and recorded at the acquisition date. Such intangibles include the value of in-place leases and above or below-market leases.

Acquired lease intangible assets are net of accumulated amortization of $1.9 million and $405,327 at September 30, 2004 and December 31, 2003, respectively. These assets have a weighted average amortization period of eight years. The aggregate amortization expense from acquired leases was $1.5 million and $82,285 for the nine months ended September 30, 2004 and 2003, respectively. Acquired lease intangible liabilities are net of previously accreted minimum rent of $1.7 million and $953,964 at September 30, 2004 and December 31, 2003, respectively and have a weighted average amortization period of seven years.

5. Notes Payable and Unsecured Line of Credit

The Company’s outstanding debt at September 30, 2004 and December 31, 2003 consists of the following (in thousands):

	2004		2003
Notes Payable:
Fixed rate mortgage loans	$	259,162	217,001
Variable rate mortgage loans		40,958	41,629
Fixed rate unsecured loans		948,901	999,147
Total notes payable		1,249,021	1,257,777
Unsecured line of credit		230,000	195,000
Total	$	1,479,021	1,452,777

On April 1, 2004, RCLP completed the sale of $150 million of ten-year senior unsecured notes. The 4.95% notes are due April 15, 2014 and were priced at 99.747% to yield 4.982%. The proceeds of the offering were used to partially repay the $200 million of 7.4% notes maturing on April 1, 2004 and the remaining balance due was funded from the unsecured line of credit. As a result of two forward-starting interest rate swaps totaling $144.2 million initiated in 2003 in anticipation of this transaction, the effective interest rate is 5.47%. On March 31, 2004, the interest rate swaps were settled for $5.7 million, which is recorded in other comprehensive loss and will be amortized over the life of the notes to interest expense. The swaps qualified for hedge accounting under Statement 133; therefore, the change in fair value was recorded through other comprehensive (loss) income.

On March 26, 2004, the Company closed on the amended and restated unsecured revolving line of credit (the “Line”). Under the new agreement, the Company reduced the line commitment from $600 million to $500 million. The Line has a three-year term with a one-year extension option at an interest rate of LIBOR plus .75% which is a reduction of 10 basis points from the prior agreement. At September 30, 2004, the balance on the Line is $230 million. Interest rates paid on the Line, which are based on LIBOR plus .75%, were 2.5% at September 30, 2004 and LIBOR plus .85% or 1.975% at December 31, 2003. The spread paid on the Line is dependent upon the Company maintaining specific investment-grade ratings. The Company is also required to comply, and is in compliance, with certain financial covenants such as Minimum Net Worth, Total Liabilities to Gross Asset Value (“GAV”) and Secured Indebtedness to GAV and other covenants customary with this type of unsecured financing. The Line is used primarily to finance the development of real estate, but is also available for general working capital purposes.

17

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

5. Notes Payable and Unsecured Line of Credit (continued)

Mortgage loans are secured by certain real estate properties and may be prepaid, but could be subject to a yield-maintenance premium. Mortgage loans are generally due in monthly installments of interest and principal and mature over various terms through 2019. Variable interest rates on mortgage loans are currently based on LIBOR plus a spread in a range of 125 to 150 basis points. Fixed interest rates on mortgage loans range from 5.01% to 9.50%.

The fair value of the Company’s notes payable and Line are estimated based on the current rates available to the Company for debt of the same remaining maturities. Notes payable with variable interest rates 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 Company for loans with similar terms and average maturities, the fair value of long-term debt is $1.7 billion.

As of September 30, 2004, scheduled principal repayments on notes payable and the Line were as follows (in thousands):

Scheduled Payments by Year	Scheduled Principal Payments		Term Loan Maturities	Total Payments
Current year	$	1,230	21,803	23,033
2005		3,642	168,516	172,158
2006		3,348	21,126	24,474
2007 (includes the Line)		3,008	256,165	259,173
2008		2,823	19,621	22,444
2009		2,861	53,090	55,951
Beyond 5 Years		18,492	898,886	917,378
Unamortized debt premiums		—	4,410	4,410
Total	$	35,404	1,443,617	1,479,021

6. Derivative Financial Instruments

The Company is exposed to capital market risk, such as changes in interest rates. In order to manage the volatility relating to interest rate risk, the Company may enter into interest rate hedging arrangements from time to time. The Company does not utilize derivative financial instruments for trading or speculative purposes.

During 2003, the Company entered into two forward-starting interest rate swaps of $96.5 million and $47.7 million. The Company designated the $144.2 million swaps as cash flow hedges to fix the rate on a refinancing in April 2004. On March 31, 2004, the Company settled the swaps with a payment to the counter-party for $5.7 million. The swaps qualify for hedge accounting under Statement 133, therefore the losses associated with the swaps have been included in accumulated other comprehensive loss. These amounts are included as an adjustment to interest expense as interest is incurred on the $150 million of ten-year unsecured notes sold April 1, 2004.

18

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

7. Stockholders’ Equity and Minority Interest

(a) On August 31, 2004, the Company received proceeds from a $125 million offering of 5,000,000 depositary shares representing 500,000 shares of Series 4 Cumulative Redeemable Preferred Stock. The depositary shares are perpetual preferred stock, not convertible into common stock of the Company, are redeemable at par upon Regency’s election on or after August 31, 2009, pay a 7.25% annual dividend, and have a liquidation value of $25 per depositary share. The proceeds from this offering were used to redeem $85 million of Series B 8.75% Preferred Units and $40 million of Series C 9.0% Preferred Units. On April 3, 2003, the Company received proceeds from a $75 million offering of 3,000,000 depositary shares representing 300,000 shares of Series 3 Cumulative Redeemable Preferred Stock. The depositary shares are perpetual preferred stock, not convertible into common stock of the Company, are redeemable at par upon Regency’s election on or after April 3, 2008, pay a 7.45% annual dividend, and have a liquidation value of $25 per depositary share. The terms of the Series 3 and Series 4 Preferred Stock do not contain any unconditional obligations which would require the Company to redeem the securities at any time or for any purpose.

(b) On August 24, 2004, the Company sold 1,500,000 shares of common stock to Citigroup Global Markets Inc. and the net proceeds of approximately $67 million were used to reduce the balance of the Line.

(c) The Company, through RCLP, has issued Cumulative Redeemable Preferred Units (“Preferred Units”) in various amounts since 1998. The issues were sold primarily to institutional investors in private placements for $100 per unit. The Preferred Units, which may be called by RCLP at par after certain dates, have no stated maturity or mandatory redemption, and pay a cumulative, quarterly dividend at fixed rates. At any time after ten years from the date of issuance, the Preferred Units may be exchanged by the holder for Cumulative Redeemable Preferred Stock (“Preferred Stock”) at an exchange rate of one share for one unit. The Preferred Units and the related Preferred Stock are not convertible into common stock of the Company. At September 30, 2004 and December 31, 2003, the face value of total Preferred Units issued was $104 million and $229 million with an average fixed distribution rate of 8.93% and 8.88%, respectively.

On September 3, 2004, the Company redeemed $85 million of Series B 8.75% Preferred Units and $40 million of Series C 9.0% Preferred Units from proceeds of the Series 4 Preferred stock offering described above. At the time of the redemptions, $3.2 million of previously deferred costs related to the original preferred units’ issuance were recognized in the consolidated statements of operations as a component of minority interest of preferred units.

19

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

7. Stockholders’ Equity and Minority Interest (continued)

(c) Terms and conditions of the Preferred Units outstanding as of September 30, 2004 are summarized as follows:

Series	Units Outstanding	Issue Price	Amount Outstanding		Distribution Rate		Callable by Company	Exchangeable by Unit holder
Series D	500,000	100.00		50,000,000	9.125	%	09/29/04	09/29/09
Series E	300,000	100.00		30,000,000	8.750	%	05/25/05	05/25/10
Series F	240,000	100.00		24,000,000	8.750	%	09/08/05	09/08/10
	1,040,000		$	104,000,000

20

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

8. Earnings per Share

The following summarizes the calculation of basic and diluted earnings per share for the three months ended September 30, 2004 and 2003, respectively (in thousands except per share data):

	2004		2003
Numerator:
Income from continuing operations	$	25,292	26,135
Discontinued operations		12,454	5,031
Net income		37,746	31,166
Less: Preferred stock dividends		2,177	1,397
Net income for common stockholders – basic		35,569	29,769
Add: Minority interest of exchangeable operating partnership units – continuing operations		397	630
Add: Minority interest of exchangeable operating partnership units – discontinued operations		193	120
Net income for common stockholders – diluted	$	36,159	30,519
Denominator:
Weighted average common shares outstanding for basic EPS		61,436	57,647
Exchangeable operating partnership units		1,056	1,432
Incremental shares to be issued under common stock options using the Treasury method		167	363
Weighted average common shares outstanding for diluted EPS		62,659	59,442
Income per common share – basic
Income from continuing operations	$	0.38	0.43
Discontinued operations		0.20	0.09
Net income for common stockholders per share	$	0.58	0.52
Income per common share – diluted
Income from continuing operations	$	0.38	0.43
Discontinued operations		0.20	0.08
Net income for common stockholders per share	$	0.58	0.51

21

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

8. Earnings per Share (continued)

The following summarizes the calculation of basic and diluted earnings per share for the nine months ended September 30, 2004 and 2003, respectively (in thousands except per share data):

	2004		2003
Numerator:
Income from continuing operations	$	70,458	63,672
Discontinued operations		16,562	12,410
Net income		87,020	76,082
Less: Preferred stock dividends		4,971	2,757
Net income for common stockholders – basic		82,049	73,325
Add: Minority interest of exchangeable operating partnership units – continuing operations		1,155	1,543
Add: Minority interest of exchangeable operating partnership units – discontinued operations		262	299
Net income for common stockholders – diluted	$	83,466	75,167
Denominator:
Weighted average common shares outstanding for basic EPS		60,779	59,302
Exchangeable operating partnership units		1,055	1,464
Incremental shares to be issued under common stock options using the Treasury method		222	395
Weighted average common shares outstanding for diluted EPS		62,056	61,161
Income per common share – basic
Income from continuing operations	$	1.08	1.03
Discontinued operations		0.27	0.21
Net income for common stockholders per share	$	1.35	1.24
Income per common share – diluted
Income from continuing operations	$	1.08	1.02
Discontinued operations		0.27	0.21
Net income for common stockholders per share	$	1.35	1.23

22

Regency Centers Corporation

Notes to Consolidated Financial Statements

September 30, 2004

9. Contingencies

The Company is involved in litigation on a number of matters and is subject to certain claims which arise in the normal course of business, none of which, in the opinion of management, is expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

23

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In addition to historical information, the following information contains forward-looking statements as defined under federal securities laws. These statements are based on current expectations, estimates and projections about the industry and markets in which Regency operates, and managements’ beliefs and assumptions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, changes in national and local economic conditions; financial difficulties of tenants; competitive market conditions, including pricing of acquisitions and sales of properties and out-parcels; changes in expected leasing activity and market rents; timing of acquisitions, development starts and sales of properties and out-parcels; weather; the ability to obtain governmental approvals; and meeting development schedules. The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto of Regency Centers Corporation (“Regency” or “Company”) appearing elsewhere within.

Introduction and Strategic Overview

Regency is a qualified real estate investment trust (“REIT”), which began operations in 1993. Our primary operating and investment goal is long-term growth in earnings per share and total shareholder return by focusing on a strategy of owning and operating grocery anchored shopping centers that are anchored by market-leading supermarkets, and that are located in areas with attractive demographics. We own and operate our shopping centers through our operating partnership, Regency Centers, L.P. (“RCLP”), in which we currently own approximately 98% of the operating partnership units. Regency’s operating, investing and financing activities are generally performed by RCLP, its wholly-owned subsidiaries and its joint ventures with third parties.

Currently, our real estate investment portfolio before depreciation totals $4.1 billion with 263 shopping centers in 21 states including approximately $878.9 million in real estate assets comprised of 51 shopping centers owned by unconsolidated joint ventures in 16 states. Portfolio information is presented on a combined basis including unconsolidated joint ventures (“Combined Basis”), on a basis that excludes the unconsolidated joint ventures (“Regency Consolidated Properties”) and on basis including only the unconsolidated joint ventures (“Unconsolidated Properties”). We believe that providing our shopping center portfolio information under these methods provides a more complete understanding of the properties that we own, including those that we partially own but for which we provide property and asset management services. At September 30, 2004, our gross leasable area (“GLA”) on a Combined Basis totaled 30.6 million square feet and was 93.5% leased. The GLA for the Regency Consolidated Properties totaled 24.1 million square feet and was 92.6% leased. The GLA for the Unconsolidated Properties totaled 6.5 million square feet and was 96.7% leased.

We earn revenues and generate operating cash flow by leasing space to grocers and retail side-shop tenants in our shopping centers. We experience growth in revenues by increasing occupancy and rental rates at currently owned shopping centers, and by developing new shopping centers. A neighborhood center is a convenient, cost-effective distribution platform for food retailers. Grocery anchored centers generate substantial daily traffic and offer sustainable competitive advantages to their tenants. This high traffic generates increased sales, thereby driving higher occupancy, rental rates and rental-rate growth for Regency, which we expect to sustain our growth in earnings per share and increase the value of our portfolio over the long term.

We seek a range of strong national, regional and local specialty tenants, for the same reason that we choose to anchor our centers with leading grocers. We have created a formal partnering process — the Premier Customer Initiative (“PCI”) — to promote mutually beneficial relationships with our non-grocer specialty retailers. The objective of PCI is for Regency to build a base of specialty tenants who represent the “best-in-class” operators in their respective merchandising categories. Such tenants reinforce the consumer appeal and other strengths of a center’s grocery anchor, help to stabilize a center’s occupancy, reduce re-leasing downtime, reduce tenant turnover and yield higher sustainable rents.

24

We grow our shopping center portfolio through new shopping center development, where we acquire the land and construct the building. Development is customer-driven, meaning we generally have an executed lease from the anchor before we start construction. Developments serve the growth needs of our grocery and specialty retail customers, result in modern shopping centers with long-term leases from the grocery anchors and produce attractive returns on our invested capital. This development process can require up to 36 months from initial land or redevelopment acquisition through construction, lease-up and stabilization of rental income, depending upon the size of the project. Generally, anchor tenants begin operating their stores prior to construction completion of the entire center, resulting in rental income during the development phase.

We intend to maintain a conservative capital structure to fund our growth programs without compromising our investment-grade ratings. Our approach is founded on our self-funding business model. This model utilizes center “recycling” as a key component. Our recycling strategy calls for us to re-deploy the proceeds from the sales of properties into new higher quality developments that we expect to generate sustainable revenue growth and more attractive returns on invested capital. Our commitment to maintaining a high-quality shopping center portfolio dictates that we continually assess the value of all of our properties and sell those that no longer meet our long-term investment standards.

Joint venturing of shopping centers also provides us with a capital source for new development, as well as the opportunity to earn fees for asset and property management services. As asset manager, we are engaged by our partners to apply similar operating, investment, and capital strategies to the portfolios owned by the joint ventures. Joint ventures grow their shopping center investments through acquisitions from third parties or direct purchases of shopping centers from Regency. Although selling properties to joint ventures reduces our ownership interest, we continue to share in the risks and rewards of centers that meet our long-term investment strategy. Regency is not subject to liability and has no obligations or guarantees of the joint ventures beyond its ownership percentage.

We have identified certain significant risks and challenges affecting our industry, and we are addressing them accordingly. A further economic downturn could result in declines in occupancy levels at our shopping centers, which would reduce our rental revenues; however, we believe that our investment focus on grocery anchored shopping centers that provide daily necessities will minimize the impact of a downturn in the economy. Increased competition from super-centers such as Wal-Mart could result in grocery anchor closings or consolidations in the grocery store industry. We closely monitor the operating performance and tenants’ sales of our shopping centers that operate near super-centers. A slow down in our shopping center development program would reduce operating revenues and gains from sales. We believe that developing shopping centers in markets with strong demographics with leading grocery stores will enable us to continue to maintain our development program at historical averages.

25

Shopping Center Portfolio

The following tables summarize general operating statistics related to our shopping center portfolio that we use to evaluate and monitor our performance. The portfolio information below is presented on a (a) Combined Basis, (b) for Regency Consolidated Properties and (c) for Unconsolidated Properties:

	9/30/04		12/31/03
Number of Properties (a)	263		265
Number of Properties (b)	212		219
Number of Properties (c)	51		46
Properties in Development (a)	31		36
Properties in Development (b)	30		34
Properties in Development (c)	1		2
Gross Leaseable Area (a)	30,591,437		30,347,744
Gross Leaseable Area (b)	24,121,444		24,565,776
Gross Leaseable Area (c)	6,469,993		5,781,968
% Leased – All Properties (a)	93.5	%	92.2	%
% Leased – All Properties (b)	92.6	%	91.8	%
% Leased – All Properties (c)	96.7	%	95.7	%
% Leased – Non development (a)	95.5	%	95.4	%
% Leased – Non development (b)	95.0	%	95.1	%
% Leased – Non development (c)	97.1	%	97.1	%

26

The following table is a list of the shopping centers summarized by state and in order of largest holdings follows presented on a Combined Basis:

	September 30, 2004						December 31, 2003
Location	# Properties	GLA	% of Total GLA		% Leased		# Properties	GLA	% of Total GLA		% Leased
California	47	5,957,619	19.5	%	94.2	%	49	5,917,372	19.5	%	90.8	%
Florida	49	5,835,727	19.1	%	94.7	%	50	5,943,345	19.6	%	94.3	%
Texas	37	4,696,522	15.4	%	88.8	%	41	5,086,086	16.7	%	88.1	%
Georgia	20	2,008,069	6.6	%	94.7	%	20	2,008,066	6.6	%	95.8	%
Ohio	14	1,876,012	6.1	%	87.3	%	14	1,901,538	6.3	%	90.6	%
Colorado	15	1,639,055	5.3	%	96.4	%	14	1,623,674	5.3	%	94.2	%
Virginia	12	1,486,539	4.9	%	90.4	%	10	1,272,369	4.2	%	89.1	%
North Carolina	9	1,191,424	3.9	%	98.3	%	3	408,211	1.3	%	97.0	%
Washington	10	1,050,011	3.4	%	97.5	%	10	1,050,061	3.5	%	98.7	%
Oregon	10	1,046,772	3.4	%	97.6	%	9	1,020,470	3.4	%	96.4	%
Arizona	8	837,956	2.7	%	95.5	%	8	838,715	2.8	%	92.2	%
Tennessee	5	588,486	1.9	%	93.1	%	7	652,906	2.1	%	91.5	%
Illinois	6	444,234	1.5	%	96.8	%	6	444,234	1.5	%	96.5	%
Alabama	5	380,607	1.2	%	88.0	%	6	543,330	1.8	%	85.5	%
Michigan	4	368,348	1.2	%	93.8	%	4	368,260	1.2	%	87.2	%
South Carolina	5	339,926	1.1	%	96.7	%	5	339,926	1.1	%	95.7	%
Kentucky	2	302,669	1.0	%	97.5	%	3	323,029	1.1	%	97.8	%
Delaware	2	240,418	0.8	%	99.9	%	2	240,418	0.8	%	99.5	%
Maryland	1	206,050	0.7	%	91.7	%	1	188,243	0.6	%	90.2	%
New Jersey	1	88,993	0.3	%	98.6	%	1	88,993	0.3	%	89.4	%
Pennsylvania	1	6,000	—		100.0	%	1	6,000	—		100.0	%
Missouri	—	—	—		—		1	82,498	0.3	%	91.5	%
Total	263	30,591,437	100.0	%	93.5	%	265	30,347,744	100.0	%	92.2	%

The following table is a list of the shopping centers summarized by state and in order of largest holdings follows presented for Regency Consolidated Properties:

	September 30, 2004						December 31, 2003
Location	# Properties	GLA	% of Total GLA		% Leased		# Properties	GLA	% of Total GLA		% Leased
California	41	5,076,471	21.0	%	93.6	%	41	4,859,526	19.8	%	90.1	%
Florida	38	4,631,284	19.2	%	94.0	%	39	4,738,901	19.3	%	94.1	%
Texas	32	3,997,494	16.6	%	88.2	%	34	4,167,951	17.0	%	87.9	%
Ohio	13	1,767,109	7.3	%	86.8	%	13	1,792,635	7.3	%	92.7	%
Georgia	17	1,656,297	6.9	%	95.6	%	17	1,656,294	6.7	%	96.8	%
Colorado	12	1,241,978	5.2	%	96.5	%	11	1,223,072	5.0	%	92.6	%
Virginia	9	1,020,145	4.2	%	86.4	%	8	910,103	3.7	%	85.2	%
North Carolina	9	970,508	4.0	%	97.5	%	9	970,558	3.9	%	98.6	%
Washington	8	695,460	2.9	%	97.2	%	7	662,573	2.7	%	95.6	%
Oregon	6	574,358	2.4	%	95.4	%	7	688,359	2.8	%	92.2	%
Arizona	4	480,839	2.0	%	91.6	%	6	545,277	2.2	%	90.5	%
Tennessee	6	444,234	1.8	%	96.8	%	6	444,234	1.8	%	96.5	%
Illinois	3	415,011	1.7	%	97.4	%	3	408,211	1.7	%	97.0	%
Michigan	4	368,348	1.5	%	93.8	%	4	368,260	1.5	%	87.2	%
Alabama	4	305,515	1.3	%	85.0	%	5	468,238	1.9	%	83.1	%
Delaware	2	240,418	1.0	%	99.9	%	2	240,418	1.0	%	99.5	%
South Carolina	2	140,982	0.6	%	92.0	%	3	223,315	0.9	%	94.3	%
New Jersey	1	88,993	0.4	%	98.6	%	1	88,993	0.4	%	89.4	%
Pennsylvania	1	6,000	—		100.0	%	1	6,000	—		100.0	%
Missouri	—	—	—		—		1	82,498	0.3	%	91.5	%
Kentucky	—	—	—		—		1	20,360	0.1	%	93.1	%
Total	212	24,121,444	100.0	%	92.6	%	219	24,565,776	100.0	%	91.8	%

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The following table is a list of the shopping centers summarized by state and in order of largest holdings follows presented for Unconsolidated Properties:

	September 30, 2004						December 31, 2003
Location	# Properties	GLA	% of Total GLA		% Leased		# Properties	GLA	% of Total GLA		% Leased
Florida	11	1,204,443	18.6	%	97.5	%	11	1,204,444	20.8	%	98.0	%
California	6	881,148	13.6	%	97.8	%	8	1,057,846	18.3	%	97.5	%
Illinois	6	776,413	12.0	%	98.7	%	—	—	—		—
Texas	5	699,028	10.8	%	92.6	%	7	918,135	15.9	%	89.2	%
Virginia	3	466,394	7.2	%	99.3	%	2	362,266	6.3	%	99.0	%
Colorado	3	397,077	6.1	%	96.1	%	3	400,602	6.9	%	99.1	%
Georgia	3	351,772	5.4	%	90.3	%	3	351,772	6.1	%	91.1	%
Washington	2	351,312	5.4	%	98.2	%	2	357,897	6.2	%	97.8	%
Kentucky	2	302,669	4.7	%	97.5	%	2	302,669	5.2	%	98.1	%
Oregon	2	263,598	4.1	%	95.7	%	1	150,356	2.5	%	92.5	%
Maryland	1	206,050	3.2	%	91.7	%	1	188,243	3.3	%	90.2	%
South Carolina	3	198,944	3.1	%	100.0	%	2	116,611	2.0	%	98.5	%
Ohio	1	108,903	1.7	%	96.1	%	1	108,903	1.9	%	88.4	%
Arizona	1	107,647	1.7	%	100.0	%	1	107,629	1.9	%	96.3	%
North Carolina	1	79,503	1.2	%	98.5	%	1	79,503	1.4	%	100.0	%
Alabama	1	75,092	1.2	%	100.0	%	1	75,092	1.3	%	100.0	%
Total	51	6,469,993	100.0	%	96.7	%	46	5,781,968	100.0	%	95.7	%

The following summarizes the four largest grocery tenants occupying our shopping centers at September 30, 2004:

Grocery Anchor	Number of Stores (a)	Percentage of Company- owned GLA (b)		Percentage of Annualized Base Rent (c)
Kroger	59	11.0	%	7.9	%
Publix	54	8.0	%	5.0	%
Safeway	53	6.4	%	4.9	%
Albertsons	22	2.8	%	2.1	%

(a) Includes stores owned by the grocery anchor that are attached to our centers.

(b) GLA includes 100% of the GLA in unconsolidated joint ventures.

(c) Annualized base rent includes only Regency’s pro-rata share of rent from unconsolidated joint ventures.

Liquidity and Capital Resources

General

We expect that cash generated from revenues will provide the necessary funds on a short-term basis to pay our operating expenses, interest expense, scheduled principal payments on outstanding indebtedness, recurring capital expenditures necessary to maintain our shopping centers properly, and distributions to stock and unit holders. Net cash provided by operating activities was $149.7 million and $136.2 million for the nine months ended September 30, 2004 and 2003, respectively. During the nine months ended September 30, 2004 and 2003, we incurred capital expenditures of $7.7 million and $10.5 million to maintain our shopping centers, paid scheduled principal payments of $4.3 million and $4.4 million to our lenders, and paid dividends and distributions of $117.3 million and $119.6 million to our share and unit holders, respectively.

Although base rent is supported by long-term lease contracts, tenants who file bankruptcy are able to cancel their leases and close the related stores. In the event that a tenant with a significant number of leases in our shopping centers files bankruptcy and cancels its leases, we could experience a

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significant reduction in our revenues. We are not currently aware of any current or pending bankruptcy of any of our tenants that would cause a significant reduction in our revenues, and no tenant represents more than 10% of our annual base rental revenues.

We expect to meet long-term capital requirements for maturing preferred units and debt, the acquisition of real estate, and the renovation or development of shopping centers from: (i) residual cash generated from operating activities after the payments described above, (ii) proceeds from the sale of real estate, (iii) joint venturing of real estate, (iv) refinancing of debt, and (v) equity raised in the private or public markets.

We currently have $400 million available for equity securities under our shelf registration and RCLP has $180 million available for debt under their shelf registration. Additionally, we have the right to call and repay, at par, outstanding preferred units beginning five years after their issuance date, at our discretion.

We intend to continue to grow our portfolio through new development and acquisitions, either directly or through our joint venture relationships. Because development and acquisition activities are discretionary in nature, they are not expected to burden the capital resources we have currently available for liquidity requirements. Capital necessary to complete developments-in-process are funded from our line of credit. Regency expects that cash provided by operating activities, unused amounts available under our line of credit and cash reserves are adequate to meet short-term and committed long-term liquidity requirements.

Shopping Center Development, Acquisitions and Sales

At September 30, 2004, we had 31 projects under construction or undergoing major renovations, which, when completed, will represent an expected investment of $547.7 million before the estimated reimbursement of certain tenant-related costs and projected sales proceeds from adjacent land and out-parcels of $117.1 million. Costs necessary to complete these developments are estimated to be $192.7 million, which are generally already committed as part of existing construction contracts, and will be expended through 2006. These developments are approximately 65% complete and 80% pre-leased. The costs necessary to complete these developments will be funded from our line of credit which has a commitment amount of $500 million and a balance of $230 million at September 30, 2004. In 2004, we started three new developments for $34.2 million based on total costs that we expect to expend through completion.

During 2004 we sold 11 retail centers to third parties for $84.7 million, compared with eight retail centers sold for $57.6 million during the nine months ended September 30, 2003 as part of our asset recycling program. All of the centers sold in 2004 and 2003 were operating and are included in discontinued operations in our accompanying consolidated statements of operations.

We have land out-parcels adjacent to our shopping centers that we routinely develop, lease, or sell. During the nine months ended September 30, 2004 and 2003, gains related to the sale of out-parcels were $10.9 million and $4.4 million, respectively.

Investments in new developments and acquisitions, and proceeds from the sale of properties to third parties or partial sales to joint ventures are included in investing activities in the accompanying consolidated statements of cash flows. Net cash used in investing activities was $94.9 million and $52.5 million for the nine months ended September 30, 2004 and 2003, respectively.

Investments in Real Estate Partnerships

At September 30, 2004, we had investments in real estate partnerships of $115.9 million, primarily comprised of two partnerships, a 20% investment interest in Columbia Regency Retail Partners, LLC (“Columbia”), a joint venture with the Oregon Public Employees Retirement Fund

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(“OPERF”) and a 25% investment interest in Macquarie CountryWide-Regency, LLC (“MCWR”), a joint venture with an affiliate of Macquarie CountryWide Trust of Australia (“MCW”), a Sydney, Australia-based property trust. The purpose of these partnerships is to invest in retail shopping centers, and we have been engaged by our partners to provide asset and property management services.

The following is a summary of unconsolidated combined assets and liabilities of these partnerships, and our pro-rata share at September 30, 2004 and December 31, 2003 ($ amounts in thousands):

	2004		2003
Number of Joint Ventures		7		8
Regency’s Ownership		20%-50%		20%-50%
Number of Properties		51		46
Combined Assets	$	944,571	$	812,190
Combined Liabilities		434,387		336,340
Combined Equity		510,184		475,850
Regency’s Share of:
Assets	$	234,610	$	256,050
Liabilities		107,892		106,034

As of September 30, 2004 and 2003 total unconsolidated combined net income for all joint ventures was $28.9 million and $18.3 million, and our pro-rata share was $6.9 million and $5.9 million, respectively. Any difference between the carrying amount of our investments in real estate partnerships and the underlying equity in net assets is amortized to equity in income of investments in real estate partnerships over the depreciable life of the property, which is generally 40 years.

At September 30, 2004, Columbia owned 19 shopping centers and had total assets of $417.5 million. In August 2004, Columbia acquired six shopping centers for a purchase price of $119.2 million totaling approximately 900,000 square feet located in the Chicago area. We contributed $5.2 million for our proportionate share of the purchase price. At September 30, 2004, MCWR owned 28 shopping centers and had total assets of $450.9 million. During the nine months ended September 30, 2004, MCWR had acquired two properties from us for $43.4 million, for which we received net proceeds of $20.1 million.

On August 16, 2004, we entered into definitive agreements with two of our joint venture partners, MCW and OPERF to acquire 24 retail properties totaling 2.6 million square feet located in the Southeastern United States. The acquisitions were completed in the fourth quarter and we contributed $56.1 million for our proportionate share of the purchase price.

The gain we recognize on the sales of our properties to Columbia and MCWR is recorded on only the portion attributable to our joint venture partners’ ownership percentage. The gains and operations are not recorded as discontinued operations because of our continuing involvement in these shopping centers. Columbia and MCWR intend to continue to acquire retail shopping centers, some of which they may acquire directly from us. For those properties acquired from third parties, we are required to contribute our pro-rata share of the purchase price to the partnership.

In August 2004, we sold our membership interest in the Hermosa Venture 2002, LLC, an unconsolidated joint venture, to our partner and have no further financial commitments related to the venture. In March 2004, the only two properties owned by OTR/Regency Texas Realty Holdings, L.P., an unconsolidated joint venture in which Regency has a 30% interest, were sold to a third party for $28.3 million resulting in a gain of $8.2 million. We received $17.2 million representing $12.9 million for loan repayments and a $4.3 distribution for our interest. We recognized our share of the gain of $1.2 million in equity in income of investments in real estate partnerships.

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Debt and Equity

Outstanding debt at September 30, 2004 and December 31, 2003 consists of the following (in thousands):

	2004		2003
Notes Payable:
Fixed-rate mortgage loans	$	259,162	217,001
Variable-rate mortgage loans		40,958	41,629
Fixed-rate unsecured loans		948,901	999,147
Total notes payable		1,249,021	1,257,777
Unsecured line of credit		230,000	195,000
Total	$	1,479,021	1,452,777

Mortgage loans are secured and may be prepaid, but could be subject to yield maintenance premiums. 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 to 150 basis points. Fixed interest rates on mortgage loans range from 5.01% to 9.50%.

On March 26, 2004, we entered into a new unsecured revolving line of credit (the “Line”). Under the new agreement, we reduced the line commitment from $600 million to $500 million, but have the right to expand the Line by an additional $150 million subject to additional lender syndication. The new facility has a three-year term, a one-year extension option at maturity, and an interest rate of LIBOR plus .75% which is a reduction of 10 basis points from the previous agreement. Interest rates paid on the Line, which are based on LIBOR plus .75%, were 2.50% at September 30, 2004 and LIBOR plus .85% or 1.975% at December 31, 2003. The spread that we pay on the Line is dependent upon maintaining specific investment-grade ratings. We are also required to comply, and are in compliance, with certain financial covenants such as Minimum Net Worth, Total Liabilities to Gross Asset Value (“GAV”), Secured Indebtedness to GAV and other covenants customary with this type of unsecured financing. The Line is used primarily to finance the development and acquisition of real estate, but is also available for general working capital purposes.

As of September 30, 2004, scheduled principal repayments on notes payable and the Line were as follows (in thousands):

Scheduled Payments by Year	Scheduled Principal Payments		Term Loan Maturities	Total Payments
Current year	$	1,230	21,803	23,033
2005		3,642	168,516	172,158
2006		3,348	21,126	24,474
2007 (includes the Line)		3,008	256,165	259,173
2008		2,823	19,621	22,444
2009		2,861	53,090	55,951
Beyond 5 Years		18,492	898,886	917,378
Unamortized debt premiums		—	4,410	4,410
Total	$	35,404	1,443,617	1,479,021

Our investments in real estate partnerships had unconsolidated notes and mortgage loans payable of $417.3 million at September 30, 2004, and our proportionate share of these loans was $102.9 million. We do not guarantee any debt of these partnerships beyond our ownership percentage.

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We are exposed to capital market risk such as changes in interest rates. In order to manage the volatility related to interest-rate risk, we originate new debt with fixed interest rates, or we consider entering into interest-rate hedging arrangements. At September 30, 2004, 82% of our total debt had fixed interest rates, compared with 84% at December 31, 2003. We intend to limit the percentage of variable interest- rate debt to be no more than 30% of total debt, which we believe to be an acceptable risk. Based upon the variable interest-rate debt outstanding at September 30, 2004, if variable interest rates were to increase by 1%, our annual interest expense would increase by $2.7 million. We do not utilize derivative financial instruments for trading or speculative purposes. We account for derivative instruments under Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended (“Statement 133”).

On April 1, 2004, we completed the sale of $150 million ten-year senior unsecured notes (the “Notes”). The 4.95% Notes are due April 15, 2014 and were priced at 99.747% to yield 4.982%. The proceeds of the offering combined with borrowings from the Line were used to repay $200 million of 7.4% notes that matured on April 1, 2004. Related to the offering, we settled two forward-starting interest rate swaps that were initiated in 2003 totaling $144.2 million. On March 31, 2004, the interest rate swaps were settled for $5.7 million, which is recorded in other comprehensive (loss) income and is being amortized over the ten year term of the Notes to interest expense. The swaps qualified for hedge accounting under Statement 133; and therefore, the change in fair value was recorded in other comprehensive (loss) income. After taking into effect the hedge settlement, the effective interest rate on the Notes is 5.47%.

We have issued Preferred Units in various amounts since 1998, the net proceeds of which we used to reduce the balance of the Line. We issued Preferred Units primarily to institutional investors in private placements. The Preferred Units, which may be called by us in 2004 and 2005, have no stated maturity or mandatory redemption, and they pay a cumulative, quarterly dividend at fixed rates ranging from 8.75% to 9.125%. At any time after ten years from the date of issuance, the Preferred Units may be exchanged by the holders for Cumulative Redeemable Preferred Stock at an exchange rate of one share for one unit. The Preferred Units and the related Preferred Stock are not convertible into Regency common stock. At September 30, 2004 and December 31, 2003, the face value of total Preferred Units issued was $104 million and $229 million with an average fixed distribution rate of 8.93% and 8.88%, respectively. Included in Preferred Units are original issuance costs of $2.2 million that will be expensed as the underlying Preferred Units are redeemed in the future.

On August 24, 2004 we sold 1,500,000 shares of common stock to Citigroup Global Markets Inc. The net proceeds of approximately $67 million were used to reduce the balance of the Line.

On August 31, 2004, we sold 5,000,000 depositary shares representing 500,000 shares of Series 4 Cumulative Redeemable Preferred Stock for $125 million. The depositary shares are perpetual preferred stock, not convertible into common stock of the Company, are redeemable at par upon our election on or after August 31, 2009, pay a 7.25% annual dividend, and have a liquidation value of $25 per depositary share. The proceeds from this offering were used to redeem $85 million of Series B 8.75% Preferred Units and $40 million of Series C 9.0% Preferred Units. The terms of the Series 4 Preferred Stock do not contain any unconditional obligations which would require us to redeem the securities at any time or for any purpose.

On September 3, 2004, we redeemed $85 million of Series B 8.75% Preferred Units and $40 million of Series C 9.0% Preferred Units from proceeds of the Series 4 Preferred stock offering described above. At the time of the redemptions, $3.2 million of previously deferred costs related to the original preferred units’ issuance were recognized in the consolidated statements of operations as a component of minority interest of preferred units.

In summary, net cash used in financing activities related to the debt and equity activity discussed above was $34.5 million and $94.3 million for the nine months ended September 30, 2004 and 2003, respectively.

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Critical Accounting Policies and Estimates

Knowledge about our accounting policies is necessary for a complete understanding of our financial results, and discussions and analysis of these results. The preparation of our financial statements requires that we make certain estimates that impact the balance of assets and liabilities at a financial statement date and the reported amount of income and expenses during a financial reporting period. These accounting estimates are based upon our judgments and are considered to be critical because of their significance to the financial statements and the possibility that future events may differ from those judgments, or that the use of different assumptions could result in materially different estimates. We review these estimates on a periodic basis to ensure reasonableness. However, the amounts we may ultimately realize could differ from such estimates.

Capitalization of Costs - We have an investment services group with an established infrastructure that supports the due diligence, land acquisition, construction, leasing and accounting of our development properties. All direct costs related to these activities are capitalized. Included in these costs are interest and real estate taxes incurred during construction, as well as estimates for the portion of internal costs that are incremental and deemed directly or indirectly related to our development activity. If future accounting standards limit the amount of internal costs that may be capitalized, or if our development activity were to decline significantly without a proportionate decrease in internal costs, we could incur a significant increase in our operating expenses.

Valuation of Real Estate Investments - Our long-lived assets, primarily real estate held for investment, are carried at cost unless circumstances indicate that the carrying value of the assets may not be recoverable. We review long-lived assets for impairment whenever events or changes in circumstances indicate such an evaluation is warranted. The review involves a number of assumptions and estimates used to determine whether impairment exists. Depending on the asset, we use varying methods such as i) estimating future cash flows, ii) determining resale values by market, or iii) applying a capitalization rate to net operating income using prevailing rates in a given market. These methods of determining fair value can fluctuate significantly as a result of a number of factors, including changes in the general economy of those markets in which we operate, tenant credit quality and demand for new retail stores. If we determine that impairment exists due to our inability to recover an asset’s carrying value, a provision for loss is recorded to the extent that the carrying value exceeds estimated fair value.

Discontinued Operations - The application of current accounting principles that govern the classification of any of our properties as held for sale on the balance sheet, or the presentation of results of operations and gains on the sale of these properties as discontinued, requires management to make certain significant judgments. In evaluating whether a property meets the criteria set forth by SFAS Statement No. 144 “Accounting for the Impairment and Disposal of Long-Lived Assets” (“Statement 144”), the Company makes a determination as to the point in time that it can be reasonably certain that a sale will be consummated. Given the nature of all real estate sales contracts, it is not unusual for such contracts to allow potential buyers a period of time to evaluate the property prior to formal acceptance of the contract. In addition, certain other matters critical to the final sale, such as financing arrangements often remain pending even upon contract acceptance. As a result, properties under contract may not close within the expected time period, if at all. Due to these uncertainties, it is not likely that the Company can meet the criteria of Statement 144 prior to the sale formally closing. Therefore, any properties categorized as held for sale represent only those properties that management has determined are probable to close within the requirements set forth in Statement 144. The Company also makes judgments regarding the extent of involvement it will have with a property subsequent to its sale, in order to determine if the results of operations and gain on sale should be reflected as discontinued. Consistent with Statement 144, any property sold to an entity in which the Company has significant continuing involvement (most often joint ventures) are not considered to be discontinued. In addition, any property which the Company sells to an unrelated third party, but retains a property or asset management function, is also not considered discontinued. Thus, only properties sold, or to be sold, to unrelated third parties for which the Company, in its judgment, has no continuing involvement are classified as discontinued.

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Income Tax Status - The prevailing assumption underlying the operation of our business is that we will continue to operate so as to qualify as a REIT, defined under the Internal Revenue Code. We are required to meet certain income and asset tests on a periodic basis to ensure that we continue to qualify as a REIT. As a REIT, we are allowed to reduce taxable income by all or a portion of our distributions to stockholders. We evaluate the transactions that we enter into and determine their impact on our REIT status. Determining our taxable income, calculating distributions, and evaluating transactions requires us to make certain judgments and estimates as to the positions we take in our interpretation of the Internal Revenue Code. Because many types of transactions are susceptible to varying interpretations under federal and state income tax laws and regulations, our positions are subject to change at a later date upon final determination by the taxing authorities.

Results from Operations

Comparison of the nine months ended September 30, 2004 to 2003

At September 30, 2004, we were operating or developing 263 shopping centers. We identify our shopping centers as either development properties or stabilized properties. Development properties are defined as properties that are in the construction or initial lease-up process and have not reached their initial full occupancy (reaching full occupancy generally means achieving at least 93% leased and rent paying on newly constructed or renovated square feet). All properties not categorized as development properties are considered stabilized properties. At September 30, 2004, we had 182 stabilized shopping centers that were 95.1% leased, which excludes properties owned through unconsolidated joint ventures.

Our revenues increased by $17.5 million, or 7%, to $285.8 million in 2004. This increase was related to changes in occupancy for the combined portfolio of stabilized and development properties, growth in re-leasing rental rates, and revenues from new developments commencing operations in 2004, net of a reduction in revenues from properties sold. In addition to collecting minimum rent from our tenants for the GLA that they lease from us, we also collect contingent rent based upon tenant sales, which we refer to as percentage rent. Tenants are also responsible for reimbursing us for their pro-rata share of the expenses associated with operating our shopping centers. In 2004, our minimum rent increased by $13.4 million, or 7%, and our recoveries from tenants increased $2.8 million, or 5%.

Our operating expenses increased by $16.0 million, or 12%, to $153.0 million in 2004. Our combined operating, maintenance, and real estate taxes increased by $4.3 million, or 7%, during 2004 to $70.0 million. This increase was primarily due to new developments that incurred operating expenses for only a portion of the previous year, general increases in operating expenses on the stabilized properties. Although the three hurricanes affected 42 shopping centers in Florida, all of the centers are operating and fully functional. Total clean-up and repair costs including those costs that will be reimbursed by our insurance coverage are estimated to be $1 million, mostly for debris removal and roof repairs.

Our general and administrative expenses were $20.3 million during 2004, compared with $16.4 million in 2003, or 24% higher, primarily related to accruing higher incentive compensation based upon growth in net income, and costs associated with implementing new regulations for public companies imposed by the Sarbanes Oxley Act. Our depreciation and amortization expense increased $6.7 million during the current year primarily related to new development properties placed in service during 2004.

Our net interest expense decreased to $59.9 million in 2004 from $62.6 million in 2003. Average interest rates on our outstanding debt declined to 5.92% at September 30, 2004 compared with 6.60% at September 30, 2003, due to reductions in the LIBOR rate and the lower interest rate on the Notes discussed in Debt and Equity. Our average fixed interest rates were 7.50% at September 30, 2004, compared with 6.79% at September 30, 2003.

We account for profit recognition on sales of real estate in accordance with SFAS Statement No. 66, “Accounting for Sales of Real Estate.” Profits from sales of real estate will not be recognized by us

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unless a sale has been consummated; the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property; we have transferred to the buyer the usual risks and rewards of ownership; and we do not have substantial continuing involvement with the property. Gains from the sale of operating and development properties includes $10.9 million in gains from the sale of 25 out-parcels for proceeds of $26.9 million and $5.7 million for properties sold to joint ventures. During 2003, the gains from the sale of operating and development properties included $4.4 million from the sale of 23 out-parcels for proceeds of $30.3 million and $17.2 million for properties sold to joint ventures. These gains are included in continuing operations rather than discontinued operations because they were either properties that had no operating income, or they were properties sold to joint ventures where we have continuing involvement through our minority investment.

We review our real estate portfolio for impairment whenever events or changes in circumstances indicate that we may not be able to recover the carrying amount of an asset. We determine whether impairment has occurred by comparing the property’s carrying value to an estimate of fair value based upon methods described in our Critical Accounting Policies. In the event a property is impaired, we write down the asset to fair value for “held-and-used” assets and to fair value less costs to sell for “held-for-sale” assets.

Our income from discontinued operations was $16.6 million in 2004 related to 11 centers sold to third parties for $84.7 million. In compliance with the adoption of Statement 144 in January 2002, if we sell an asset in the current year, we are required to reclassify its operating income into discontinued operations for all prior periods. This practice results in a reclassification of amounts previously reported as continuing operations into discontinued operations. Reclassified operating income from discontinued operations was $5.1 million in 2003, a result of reclassifying the historical operations of the properties sold in 2004 as well as properties sold subsequent to September 30, 2003. Our income from discontinued operations was $12.4 million in 2003 related to eight centers sold to third parties for $57.6 million. Our income from discontinued operations is shown net of minority interest of exchangeable partnership units totaling $262,144 and $298,661 for the nine months ended September 30, 2004 and 2003, respectively.

In March of 2003, we redeemed $35 million of Series C 9% Preferred Units and $40 million of Series E 8.75% Preferred Units. At the time of redemption, the premium and $1.9 million of previously deferred costs related to the original preferred units’ issuance were recognized in the consolidated statements of operations as a component of minority interest of preferred units. During August of 2003, we redeemed the $80 million Series A 8.125% Preferred Units. At the time of redemption, $1.2 million of previously deferred costs related to the original preferred units’ issuance were recognized in the consolidated statements of operations as a component of minority interest preferred unit distributions. On September 3, 2004, we redeemed $85 million of Series B 8.75% Preferred Units and $40 million of Series C 9.0% Preferred Units. At the time of redemptions, $3.2 million of previously deferred cost related to the original preferred units’ issuance were recognized in the consolidated statements of operations as a component of minority interest of preferred units. As an result of these redemptions, the minority interest of preferred units was $7.1 million lower for the nine months ended September 30, 2004.

Net income for common stockholders was $82.0 million in 2004, compared with $73.3 million in 2003 or a 12% increase for the reasons previously discussed. Diluted earnings per share were $1.35 in 2004, compared with $1.23 in 2003, or 10% higher, related to the increase in net income and an increase in weighted average common shares of 894,106 shares.

Comparison of the three months ended September 30, 2004 to 2003

Our revenues increased by $8.7 million, or 10%, to $99.0 million in 2004. This increase was related to changes in occupancy for the combined portfolio of stabilized and development properties, growth in re-leasing rental rates, and revenues from new developments commencing operations in 2004, net of a reduction in revenues from properties sold. During the three months ended September 30, 2004, our minimum rent increased by $6.2 million, or 9%, and our recoveries from tenants increased $1.5 million, or 8%.

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Our operating expenses increased by $6.8 million, or 15%, to $53.6 million in 2004. Our combined operating, maintenance, and real estate taxes increased by $2.4 million, or 11%, during 2004 to $24.5 million. This increase was primarily due to new developments that incurred operating expenses for only a portion of the previous year, general increases in operating expenses on the stabilized properties.

Our general and administrative expenses were $7.2 million during the three months ended September 30, 2004, compared with $6.1 million in 2003, or 18% higher, primarily related to accruing higher incentive compensation based upon growth in net income, and costs associated with implementing new regulations for public companies imposed by the Sarbanes Oxley Act. Our depreciation and amortization expense increased $2.3 million in 2004 compared to 2003 related to new development properties placed in service during 2004.

Our net interest expense decreased to $20.1 million for the three months ended September 30, 2004 from $21.2 million for the comparable period in 2003 due to interest savings related to the $150 million debt offering completed on April 1, 2004 discussed previously.

Our income from discontinued operations was $12.5 million related to the sale of three centers to third parties for $34.4 million for the three months ended September 30, 2004 compared to $5.0 million related to the sale of three properties for $18.5 million for the comparable period in 2003. Reclassified operating income from discontinued operations was $2.1 million in 2003, a result of reclassifying the historical operations of the properties sold in 2004 as well as properties sold subsequent to September 30, 2003. Our income from discontinued operations is shown net of minority interest of exchangeable partnership units totaling $193,662 and $119,524 for the three months ended September 30, 2004 and 2003, respectively.

Net income for common stockholders was $35.6 million in 2004, compared with $29.8 million in 2003 or a 19% increase. Diluted earnings per share were $0.58 in 2004, compared with $0.51 in 2003.

Environmental Matters

We are subject to numerous environmental laws and regulations and we are primarily concerned with dry cleaning plants that currently operate or have operated at our shopping centers in the past. We believe that the tenants who currently operate plants do so in accordance with current laws and regulations. Generally, we use all legal means to cause tenants to remove dry cleaning plants from our shopping centers or convert them to environmentally approved systems. Where available, we have applied and been accepted into state-sponsored environmental programs. We have a blanket environmental insurance policy that covers us against third-party liabilities and remediation costs on shopping centers that currently have no known environmental contamination. We have also placed environmental insurance, where possible, on specific properties with known contamination, in order to mitigate our environmental risk. We believe that the ultimate disposition of currently known environmental matters will not have a material effect on Regency’s financial position, liquidity, or operations; however, we can give no assurance that existing environmental studies with respect to our shopping centers have revealed all potential environmental liabilities; that any previous owner, occupant or tenant did not create any material environmental condition not known to us; that the current environmental condition of the shopping centers will not be affected by tenants and occupants, by the condition of nearby properties, or by unrelated third parties; or that changes in applicable environmental laws and regulations or their interpretation will not result in additional environmental liability to us.

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Inflation

Inflation has remained relatively low and has had a minimal impact on the operating performance of our shopping centers; however, substantially all of our long-term leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling us 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 our leases are for terms of less than ten years, which permits us to seek increased rents upon re-rental at market rates. Most of our leases require tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, and insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risk

We are exposed to interest-rate changes primarily related to the variable interest rate on the Line and the refinancing of long-term debt which currently contain fixed interest rates. Our interest-rate risk management objective is to limit the impact of interest-rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we borrow primarily at fixed interest rates and may enter into derivative financial instruments such as interest-rate swaps, caps and treasury locks in order to mitigate our interest-rate risk on a related financial instrument. We have no plans to enter into derivative or interest-rate transactions for speculative purposes.

Our interest-rate risk is monitored using a variety of techniques. The table below presents the principal cash flows (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.

	2004			2005		2006		2007		2008		2009		Thereafter		Total	Fair Value
Fixed rate debt	$	7,075		147,158		24,474		29,173		22,444		55,951		917,378		1,203,653	1,415,280
Average interest rate for all debt		7.01	%	6.92	%	6.91	%	6.88	%	6.88	%	6.83	%	6.45	%	—	—
Variable rate LIBOR debt	$	15,958		25,000		—		230,000		—		—		—		270,958	270,958
Average interest rate for all debt		2.00	%	1.89	%	—		1.89	%	—		—		—		—	—

As the table incorporates only those exposures that exist as of September 30, 2004, it does not consider those exposures or positions, which could arise after that date. Moreover, because firm commitments are not presented in the table above, the information presented above has limited predictive value. As a result, our ultimate realized gain or loss with respect to interest-rate fluctuations will depend on the exposures that arise during the period, our hedging strategies at that time, and actual interest rates.

Item 4. Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report, and, based on their evaluation, the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. There have been no changes in the Company’s internal controls over financial reporting identified in connection with this evaluation that occurred during the period covered by this report and that have affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II

Item 1. Legal Proceedings

We are a party to various legal proceedings, which arise, in the ordinary course of our business. We are not currently involved in any litigation nor to our knowledge, is any litigation threatened against us, the outcome of which would, in our judgment based on information currently available to us, have a material adverse effect on our financial position or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) We sold the following equity securities during the quarter ended September 30, 2004 that we did not report on Form 8-K because they represent in the aggregate less than 1% of our outstanding common stock. All shares were issued to a total of four accredited investors in transactions exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, in exchange for an equal number of common units of our operating partnership, Regency Centers, L.P.

Date	Number of Shares
8/17/04	9,724
8/17/04	14,627
8/26/04	3,500
9/13/04	12,554

(b) None

(c) Issuer Purchases of Equity Securities

Period	Total number of shares purchased (1)	(a) Average price paid per share		(b) Total number of shares purchased as part of publicly announced plans or programs	(d) Maximum number or approximate dollar value of shares that may yet be purchased under the plans or programs
July 1 through July 31, 2004	19,073	$	44.35	—	—
August 1 through August 31, 2004	19,366	$	43.59	—	—
September 1 through September 30, 2004	30,717	$	46.28	—	—
Total	69,156	$	44.97	—	—

¹ Represents shares delivered in payment of the exercise price or withholding taxes in connection with option exercises by participants under Regency’s Long-Term Omnibus Plan.

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Item 3. None

Item 4. Submission of Matters to a Vote of Security Holders

On September 10, 2004, the holders of depositary shares representing our 7.45% Series 3 cumulative redeemable preferred stock held a special meeting at which they approved an amendment to our articles of incorporation increasing our authorized preferred stock from 10 million to 30 million shares. The amendment was approved by the affirmative vote of 2,122,354 shares, with 355,688 shares voted against and 276,599 shares abstaining.

Item 5. None

Item 6. Exhibits

(a) Exhibits:

3.2	Amended and Restated Bylaws.
31.1	Rule 13a-14 Certification of Chief Executive Officer.
31.2	Rule 13a-14 Certification of Chief Financial Officer.
31.3	Rule 13a-14 Certification of Chief Operating Officer.
32.1	Section 1350 Certification of Chief Executive Officer.
32.2	Section 1350 Certification of Chief Financial Officer.
32.3	Section 1350 Certification of Chief Operating Officer.

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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 5, 2004	REGENCY CENTERS CORPORATION
	By:	/s/J. Christian Leavitt
		Senior Vice President and Principal Accounting Officer

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