United States
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-Q
(Mark One)
[X] For the quarterly period ended March 31, 2000
-or-
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission File Number 0-24763
REGENCY CENTERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 59-3429602
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
(Address of principal executive offices) (Zip Code)
(904) 356-7000
(Registrant's telephone number, including area code)
Unchanged
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No[ ]
REGENCY CENTERS, L.P.
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
(unaudited)
2000 1999
------ ------
Assets
Real estate investments, at cost:
Land $ 555,699,275 538,881,578
Buildings and improvements 1,743,862,740 1,722,813,591
Construction in progress - development for investment 77,773,975 81,995,169
Construction in progress - development for sale 90,448,773 85,305,724
--------------- ----------------
2,467,784,763 2,428,996,062
Less: accumulated depreciation 93,356,791 81,294,400
--------------- ----------------
2,374,427,972 2,347,701,662
Investments in real estate partnerships 69,891,757 66,938,784
--------------- ----------------
Net real estate investments 2,444,319,729 2,414,640,446
Cash and cash equivalents 24,171,177 50,964,920
Notes receivable 19,511,432 15,673,125
Tenant receivables, net of allowance for uncollectible accounts of
$1,974,003 and $1,883,547 at March 31, 2000 and
and December 31, 1999 27,063,696 30,884,172
Deferred costs, less accumulated amortization of
$6,355,686 and $5,498,619 at March 31, 2000
and December 31, 1999 11,675,811 11,272,866
Other assets 7,516,236 7,273,925
--------------- ----------------
$ 2,534,258,081 2,530,709,454
=============== ================
Liabilities and Partners' Capital
Liabilities:
Notes payable 712,523,192 713,787,207
Acquisition and development line of credit 275,179,310 247,179,310
Accounts payable and other liabilities 39,137,770 47,981,987
Tenants' security and escrow deposits 7,935,332 7,566,967
--------------- ----------------
Total liabilities 1,034,775,604 1,016,515,471
--------------- ----------------
Limited partners' interest in consolidated partnerships 10,233,707 11,108,994
--------------- ----------------
Partners' Capital:
Series A preferred units, par value $50: 1,600,000 units
issued and outstanding at March 31, 2000 and December 31, 1999 78,800,000 78,800,000
Series B preferred units, par value $100: 850,000 units
issued and outstanding at March 31, 2000 and December 31, 1999 82,799,720 82,799,720
Series C preferred units, par value $100: 750,000 units
issued and outstanding at March 31, 2000 and December 31, 1999 73,058,577 73,058,577
Series D preferred units, par value $100: 500,000 units
issued and outstanding at March 31, 2000 and December 31, 1999 49,157,977 49,157,977
General partner; 55,123,067 and 55,535,928 units outstanding
at March 31, 2000 and December 31, 1999 1,165,803,420 1,179,400,122
Limited partners; 1,861,053 and 1,863,604 units outstanding
at March 31, 2000 and December 31, 1999 39,629,076 39,868,593
--------------- ----------------
Total partners' capital 1,489,248,770 1,503,084,989
--------------- ----------------
Commitments and contingencies
$ 2,534,258,081 2,530,709,454
=============== ================
See accompanying notes to consolidated financial statements.
REGENCY CENTERS, L.P.
Consolidated Statements of Operations
For the Three Months ended March 31, 2000 and 1999
(unaudited)
2000 1999
------- -------
Revenues:
Minimum rent $ 57,809,032 35,566,793
Percentage rent 607,715 327,971
Recoveries from tenants 15,773,024 8,488,372
Other non-rental revenues 2,254,404 1,895,047
Equity in income of investments in
real estate partnerships 363,514 741,103
--------------- ----------------
Total revenues 76,807,689 47,019,286
--------------- ----------------
Operating expenses:
Depreciation and amortization 12,782,676 8,506,319
Operating and maintenance 9,795,178 6,292,506
General and administrative 4,496,079 3,637,359
Real estate taxes 7,644,494 4,371,510
Other expenses - 150,000
--------------- ----------------
Total operating expenses 34,718,427 22,957,694
--------------- ----------------
Interest expense (income):
Interest expense 14,727,257 9,678,802
Interest income (829,367) (452,889)
--------------- ----------------
Net interest expense 13,897,890 9,225,913
--------------- ----------------
Income before minority interests 28,191,372 14,835,679
Minority interest of limited partners (243,433) (260,939)
--------------- ----------------
Net income 27,947,939 14,574,740
Preferred unit distributions (6,312,499) (1,625,001)
--------------- ----------------
Net income for common unitholders $ 21,635,440 12,949,739
=============== ================
Net income per common unit:
Basic $ 0.38 0.33
=============== ================
Diluted $ 0.38 0.33
=============== ================
See accompanying notes to consolidated financial statements
REGENCY CENTERS, L.P.
Consolidated Statement of Changes in Capital
For the Three Months Ended March 31, 2000
Preferred General Limited Total
Units Partner Partners Capital
----------- --------- ---------- ----------
Balance December 31, 1999 $ 283,816,274 1,179,400,122 39,868,593 1,503,084,989
Net income 6,312,499 20,947,433 688,007 27,947,939
Cash distributions for dividends (27,955,447) (863,111) (28,818,558)
Preferred unit distribution (6,312,499) - - (6,312,499)
Repurchase of Regency stock and
corresponding units - (10,634,695) - (10,634,695)
Other contributions, net - 2,201,754 - 2,201,754
Units issued as a result of common
stock issued by Regency - 1,779,840 - 1,779,840
Units exchanged for common
stock of Regency - 64,413 (64,413) -
--------------- ---------------- ----------------- -----------------
Balance March 31, 2000 $ 283,816,274 1,165,803,420 39,629,076 1,489,248,770
=============== ================ ================= =================
See accompanying notes to consolidated financial statements
REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2000 and 1999
(unaudited)
2000 1999
------ ------
Cash flows from operating activities:
Net income $ 27,947,939 14,574,740
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 12,782,676 8,506,319
Deferred financing cost and debt premium amortization 100,685 (133,434)
Services provided by Regency in exchange for units 1,767,618 2,743,155
Minority interest of limited partners 243,433 260,939
Equity in income of investments in real estate partnerships (363,514) (741,103)
Changes in assets and liabilities:
Tenant receivables 3,820,476 (2,956,898)
Deferred leasing commissions (1,401,924) (526,645)
Other assets (561,813) 867,968
Tenants' security deposits 368,365 60,079
Accounts payable and other liabilities (8,844,217) 8,163,816
---------------- ----------------
Net cash provided by operating activities 35,859,724 30,818,936
---------------- ----------------
Cash flows from investing activities:
Acquisition and development of real estate (31,177,598) (2,991,864)
Acquisition of Pacific, net of cash acquired - (9,046,230)
Investment in real estate partnerships (2,589,459) (3,291,401)
Capital improvements (2,468,055) (2,551,035)
Construction in progress for sale, net of sales proceeds (8,981,356) (12,316,835)
Distributions received from real estate partnership investments - 704,474
---------------- ---------------
Net cash used in investing activities (45,216,468) (29,492,891)
---------------- ----------------
Cash flows from financing activities:
Cash contributions from the issuance of Regency stock
and exchangeable partnership units 12,222 28,601
Repurchase of Regency stock and corresponding units (10,634,695) -
Net (distributions) to limited partners
in consolidated partnerships (1,118,720) -
Distributions to preferred unit holders (6,312,499) (1,625,001)
Cash distributions for dividends (28,818,558) (13,756,854)
Other contributions (distributions), net 2,201,754 (16,625,679)
Proceeds from acquisition and development
line of credit, net 28,000,000 52,148,125
Proceeds from mortgage loans 6,562,987 -
Repayment of mortgage loans (7,329,490) (8,870,784)
Deferred financing costs - (1,976,816)
---------------- ----------------
Net cash (used in) provided by financing activities (17,436,999) 9,321,592
---------------- ----------------
Net (decrease) increase in cash and cash equivalents (26,793,743) 10,647,637
Cash and cash equivalents at beginning of period 50,964,920 15,536,926
---------------- ----------------
Cash and cash equivalents at end of period $ 24,171,177 26,184,563
================ ================
REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2000 and 1999
(unaudited)
-continued-
2000 1999
------- ------
Supplemental disclosure of cash flow information - cash paid
for interest (net of capitalized interest of approximately $2,820,000
and $2,158,000 in 2000 and 1999, respectively) $ 12,340,868 8,714,895
================ ================
Supplemental disclosure of non-cash transactions:
Mortgage loans assumed for the acquisition of Pacific and real estate $ - 405,284,768
================ ================
Exchangeable operating partnership units, preferred and common
stock issued for the acquisition of Pacific and real estate $ - 806,543,467
================ ================
Other liabilities assumed to acquire Pacific $ - 13,897,643
================ ================
See accompanying notes to consolidated financial statements.
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
March 31, 2000
(unaudited)
1. Summary of Significant Accounting Policies
(a) Organization and Principles of Consolidation
Regency Centers, L.P. ("RCLP" or "Partnership") is the primary
entity through which Regency Realty Corporation ("Regency" or
"Company"), a self-administered and self-managed real estate
investment trust ("REIT"), conducts substantially all of its
business and owns substantially all of its assets.
The Partnership was formed in 1996 for the purpose of acquiring
certain real estate properties. The historical financial
statements of the Partnership reflect the accounts of the
Partnership since its inception, together with the accounts of
certain predecessor entities (including Regency Centers, Inc., a
wholly-owned subsidiary of Regency through which Regency owned a
substantial majority of its properties), which were merged with
and into the Partnership as of February 26, 1998. At March 31,
2000, Regency owns approximately 97% of the outstanding common
units ("Units") of the Partnership.
The Partnership's ownership interests are represented by Units, of
which there are (i) Series A Preferred Units, (ii) Series B
Preferred Units (iii) Series C Preferred Units (iv) Series D
Preferred Units (v) Original Limited Partnership Units, all of
which were issued in connection with the Branch acquisition, (vi)
Additional Units, all of which were issued in connection with the
Midland and other property acquisitions, and (vii) Class B Units,
all of which are owned by Regency. Each outstanding Unit other
than Class B Units and Series A, B, C, and D Preferred Units is
exchangeable, on a one share per one Unit basis, for the common
stock of Regency or for cash at Regency's election.
The accompanying consolidated financial statements include the
accounts of the Partnership, its wholly owned subsidiaries, and
its majority owned or controlled subsidiaries and partnerships.
All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
The financial statements reflect all adjustments which are of a
normal recurring nature, and in the opinion of management, are
necessary to properly state the results of operations and
financial position. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted although management believes that the disclosures are
adequate to make the information presented not misleading. The
financial statements should be read in conjunction with the
financial statements and notes thereto included in the
Partnership's December 31, 1999 Form 10-K filed with the
Securities and Exchange Commission.
(b Reclassifications
Certain reclassifications have been made to the 1999 amounts to
conform to classifications adopted in 2000.
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
March 31, 2000
(unaudited)
2. Acquisitions
On September 23, 1998, the Company entered into an Agreement of Merger
("Agreement") with Pacific Retail Trust ("Pacific"), a privately held
real estate investment trust. The Agreement, among other matters,
provided for the merger of Pacific into Regency, and the exchange of each
Pacific common or preferred share into 0.48 shares of Regency common or
preferred stock. The stockholders approved the merger at a Special
Meeting of Stockholders of Regency held February 26, 1999. On February
28, 1999, the effective date of the merger, the Company issued equity
instruments valued at $770.6 million to the Pacific stockholders in
exchange for their outstanding common and preferred shares and units. The
total cost to acquire Pacific was approximately $1.157 billion based on
the value of Regency shares issued, including the assumption of $379
million of outstanding debt and other liabilities of Pacific, and closing
costs. The price per share used to determine the purchase price was
$23.325 based on the five day average of the closing stock price of
Regency's common stock on the New York Stock Exchange immediately before,
during and after the date the terms of the merger were agreed to and
announced to the public. The merger was accounted for as a purchase with
the Company as the acquiring entity. Concurrent with this acquisition,
the Company contributed all the assets and liabilities of Pacific to the
Partnership in exchange for Class B Units.
During 1998, the Partnership, through Regency, acquired 42 shopping
centers and joint ventures for a total investment of $370.3 ("1998
Acquisitions"). With respect to these acquisitions, during 1999, the
Partnership and Regency paid contingent consideration valued at $9.0
million consisting of 69,555 Additional Units, 3,768 shares of common
stock, and $7.0 million. In April 2000, the Partnership paid $5.0 million
in cash as partial contingent consideration related to the 1998
Acquisitions. In addition, common stock and Units valued at $2.5 million
may be issued during the remainder of the year.
The operating results of Pacific are included in the Partnership's
consolidated financial statements from the date each property was
acquired. The following unaudited pro forma information presents the
consolidated results of operations as if Pacific had occurred on January
1, 1999. Such pro forma information reflects adjustments to 1) increase
depreciation, interest expense, and general and administrative costs, 2)
adjust the weighted average common units issued to acquire the
properties. Pro forma revenues would have been $69.8 million as of March
31, 1999. Pro forma net income for common unitholders would have been
$19.9 million as of March 31, 1999. Pro forma basic net income per unit
would have been $.32 as of March 31, 1999. Pro forma diluted net income
per unit would have been $.32 as of March 31, 1999. This data does not
purport to be indicative of what would have occurred had the Pacific
acquisition been made on January 1, 1999, or of results which may occur
in the future.
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
March 31, 2000
(unaudited)
3. Segments
The Partnership was formed, and currently operates, for the purpose of 1)
operating and developing Partnership owned retail shopping centers
(Retail segment), and 2) providing services including property
management, leasing, brokerage, and construction and development
management for third-parties (Service operations segment). The
Partnership had previously operated four office buildings that were sold
during 1998 and 1997 (Office buildings segment). The Partnership's
reportable segments offer different products or services and are managed
separately because each requires different strategies and management
expertise. There are no material inter-segment sales or transfers.
The Partnership assesses and measures operating results starting with Net
Operating Income for the Retail segment and Income for the Service
operations segment and converts such amounts into a performance measure
referred to as Funds From Operations ("FFO"). The operating results for
the individual retail shopping centers have been aggregated since all of
the Partnership's shopping centers exhibit highly similar economic
characteristics as neighborhood shopping centers, and offer similar
degrees of risk and opportunities for growth. FFO as defined by the
National Association of Real Estate Investment Trusts consists of net
income (computed in accordance with generally accepted accounting
principles) excluding gains (or losses) from debt restructuring and sales
of income producing property held for investment, plus depreciation and
amortization of real estate, and adjustments for unconsolidated
investments in real estate partnerships and joint ventures. The
Partnership further adjusts FFO by distributions made to holders of Units
that results in a diluted FFO amount. The Partnership considers diluted
FFO to be the industry standard for reporting the operations of real
estate investment trusts ("REITs"). Adjustments for investments in real
estate partnerships are calculated to reflect diluted FFO on the same
basis. While management believes that diluted FFO is the most relevant
and widely used measure of the Partnership's performance, such amount
does not represent cash flow from operations as defined by generally
accepted accounting principles, should not be considered an alternative
to net income as an indicator of the Partnership's operating performance,
and is not indicative of cash available to fund all cash flow needs.
Additionally, the Partnership's calculation of diluted FFO, as provided
below, may not be comparable to similarly titled measures of other REITs.
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
March 31, 2000
(unaudited)
3. Segments (continued)
The accounting policies of the segments are the same as those described
in note 1. The revenues, diluted FFO, and assets for each of the
reportable segments are summarized as follows for the three month periods
ended March 31, 2000 and 1999. Non-segment assets to reconcile to total
assets include cash and deferred costs.
2000 1999
---- ----
Revenues:
Retail segment $ 74,553,285 45,124,239
Service operations segment 2,254,404 1,895,047
-------------- --------------
Total revenues $ 76,807,689 47,019,286
============== ==============
Funds from Operations:
Retail segment net operating income $ 57,113,613 34,460,223
Service operations segment income 2,254,404 1,895,047
Adjustments to calculate diluted FFO:
Interest expense (14,727,257) (9,678,802)
Interest income 829,367 452,889
General and administrative (4,496,079) (3,787,359)
Non-real estate depreciation (268,316) (175,790)
Minority interests of limited partne rs (243,433) (260,939)
Minority interests in depreciation
and amortization (149,881) (181,594)
Share of joint venture depreciation
and amortization 387,583 99,193
Distributions on preferred units (6,312,499) (1,625,001)
-------------- --------------
Funds from Operations - diluted 34,387,502 21,197,867
-------------- --------------
Reconciliation to net income for common unitholders:
Real estate related depreciation
and amortization (12,514,360) (8,330,529)
Minority interests in depreciation
and amortization 149,881 181,594
Share of joint venture depreciation
and amortization (387,583) (99,193)
-------------- --------------
Net income available for common unitholders $ 21,635,440 12,949,739
============== ==============
March 31, December 31,
Assets (in thousands): 2000 1999
---------------------- ---- ----
Retail segment $ 2,366,498 2,344,092
Service operations segment 136,419 123,233
Cash and other assets 31,341 63,384
-------------- --------------
Total assets $ 2,534,258 2,530,709
============== ==============
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
March 31, 2000
(unaudited)
4. Notes Payable and Acquisition and Development Line of Credit
The Partnership's outstanding debt at March 31, 2000 and December 31,
1999 consists of the following (in thousands):
2000 1999
---- ----
Notes Payable:
Fixed rate mortgage loans $ 324,037 331,716
Variable rate mortgage loans 17,909 11,376
Fixed rate unsecured loans 370,577 370,696
-------------- --------------
Total notes payable 712,523 713,788
Acquisition and development line of credit 275,179 247,179
-------------- --------------
Total $ 987,702 960,967
============== ==============
During February, 1999, the Partnership modified the terms of its
unsecured acquisition and development line of credit (the "Line") by
increasing the commitment to $635 million. This credit agreement also
provides for a competitive bid facility of up to $250 million of the
commitment amount. Maximum availability under the Line is based on the
discounted value of a pool of eligible unencumbered assets (determined on
the basis of capitalized net operating income) less the amount of the
Partnership's outstanding unsecured liabilities. The Line matures in
February 2001, but may be extended annually for one year periods.
Borrowings under the Line bear interest at a variable rate based on LIBOR
plus a specified spread, (1.00% currently), which is dependent on the
Company's investment grade rating. The Partnership is required to comply,
and is in compliance, with certain financial and other covenants
customary with this type of unsecured financing. These financial
covenants include among others (i) maintenance of minimum net worth, (ii)
ratio of total liabilities to gross asset value, (iii) ratio of secured
indebtedness to gross asset value, (iv) ratio of EBITDA to interest
expense, (v) ratio of EBITDA to debt service and reserve for
replacements, and (vi) ratio of unencumbered net operating income to
interest expense on unsecured indebtedness. The Line is used primarily to
finance the acquisition and development of real estate, but is also
available for general working capital purposes.
Mortgage loans are secured by certain real estate properties, and may be
prepaid subject to a prepayment of a yield-maintenance premium. Mortgage
loans are generally due in monthly installments of interest and principal
and mature over various terms through 2019. Variable interest rates on
mortgage loans are currently based on LIBOR plus a spread in a range of
125 basis points to 150 basis points. Fixed interest rates on mortgage
loans range from 7.04% to 9.5%.
During 1999, the Partnership assumed debt with a fair value of $411.2
million related to the acquisition of real estate, which included debt
premiums of $4.1 million based upon the above market interest rates of
the debt instruments. Debt premiums are being amortized over the terms of
the related debt instruments, as an adjustment to interest expense.
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
March 31, 2000
(unaudited)
4. Notes Payable and Acquisition and Development Line of Credit (continued)
On April 15, 1999 the Partnership completed a $250 million unsecured debt
offering in two tranches. The Partnership issued $200 million 7.4% notes
due April 1, 2004, priced at 99.922% to yield 7.42%, and $50 million
7.75% notes due April 1, 2009, priced at 100%. The net proceeds of the
offering were used to reduce the balance of the Line.
As of March 31, 2000, scheduled principal repayments on notes payable and
the Line were as follows (in thousands):
Scheduled
Principal Term Loan Total
Scheduled Payments by Year Payments Maturities Payments
------------ ------------ -----------
2000 $ 4,294 35,995 40,289
2001 5,621 330,029 335,650
2002 4,943 44,097 49,040
2003 4,933 13,301 18,234
2004 5,327 199,874 205,201
Beyond 5 Years 36,886 290,389 327,275
Net unamortized debt premiums - 12,013 12,013
------------ ------------ -----------
Total $ 62,004 925,698 987,702
============ ============ ===========
Unconsolidated partnerships and joint ventures had mortgage loans payable
of $50.0 million at March 31, 2000, and the Partnership's proportionate
share of these loans was $21.1 million.
The fair value of the Partnership's notes payable and Line are estimated
based on the current rates available to the Partnership for debt of the
same remaining maturities. Variable rate notes payable, and the Line, are
considered to be at fair value since the interest rates on such
instruments reprice based on current market conditions. Notes payable
with fixed rates, that have been assumed in connection with acquisitions,
are recorded in the accompanying financial statements at fair value. The
Partnership considers the carrying value of all other fixed rate notes
payable to be a reasonable estimation of their fair value based on the
fact that the rates of such notes are similar to rates available to the
Partnership for debt of the same terms.
REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
March 31, 2000
(unaudited)
5. Regency's Stockholders' Equity and Partners' Capital
Allocation of profits and losses and distributions to unitholders are
made in accordance with the partnership agreement. Distributions to
Limited Partners are made in the same amount as the dividends declared
and paid on Regency common stock.
Distributions to the General Partner are made at the General Partner's
discretion.
The following represent equity transactions initiated by Regency and the
Partnership. The proceeds from such transactions are the primary source
of capital from which the Partnership acquires and develops new real
estate.
During 1999, the Board of Directors authorized the repurchase of up to
$65 million of the Company's outstanding shares through periodic open
market transactions or privately negotiated transactions. At March 31,
2000, the Company had repurchased 3.25 million shares for $65 million of
which the majority of the funds came from the Partnership.
6. Earnings Per Unit
The following summarizes the calculation of basic and diluted earnings
per unit for the three month period ended March 31, 2000 and 1999,
respectively (in thousands except per share data):
2000 1999
---- ----
Basic Earnings Per Unit (EPU) Calculation:
Weighted average units outstanding 55,497 34,952
============ ==============
Net income for common unitholders $ 21,635 12,950
Less: dividends paid on Class B common
stock, Series 1 and Series 2 preferred stock 699 1,379
------------ --------------
Net income for Basic and Diluted EPU $ 20,936 11,571
============ ==============
Basic EPU $ .38 .33
============ ==============
Diluted Earnings Per Unit (EPU) Calculation:
Weighted average units outstanding for EPU 55,497 34,952
Contingent units for the acquisition of real estate - 159
------------ --------------
Total diluted units 55,497 35,111
============ ==============
Diluted EPU $ .38 .33
============ ==============
The Class B common stock dividends are deducted from income in
computing earnings per unit since the proceeds of this offering were
transferred to and reinvested by the Partnership. In addition, the
Series 1 and Series 2 Preferred stock dividends are also deducted from
net income in computing earnings per unit since the properties acquired
with these preferred shares were contributed to the Partnership.
Accordingly, the payment of Class B common, Series 1 and Series 2
Preferred stock dividends are deemed to be preferential to the
distributions made to common unitholders.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto of Regency Centers, L.P.
appearing elsewhere within.
Organization
Regency Realty Corporation ("Regency" or "Company") is a qualified real estate
investment trust ("REIT") which began operations in 1993. The Company invests in
real estate primarily through its general partnership interest in Regency
Centers, L.P., ("RCLP" or "Partnership") an operating partnership in which the
Company currently owns approximately 97% of the outstanding common partnership
units ("Units"). Of the 216 properties included in the Company's portfolio at
March 31, 2000, 198 properties were owned either fee simple or through
partnership interests by the Partnership. At March 31, 2000, the Company had an
investment in real estate, at cost, of approximately $2.639 billion of which
$2.538 billion or 96% was owned by the Partnership.
Shopping Center Business
The Partnership's principal business is owning, operating and developing grocery
anchored neighborhood shopping centers which are located in infill locations or
high growth corridors. The Partnership's properties summarized by state and in
order by largest holdings including their gross leasable areas (GLA) follows:
March 31, 2000 December 31, 1999
-------------- -----------------
Location # Properties GLA %Leased * # Properties GLA % Leased *
-------- ------------ --- --------- ------------ ---- -----------
Florida 40 4,938,928 93.2% 39 4,859,031 93.7%
California 35 3,894,539 97.9% 36 3,858,628 98.2%
Texas 29 3,876,334 93.7% 29 3,849,549 94.2%
Georgia 25 2,539,556 93.5% 25 2,539,556 91.8%
Ohio 13 1,832,774 92.8% 13 1,822,854 98.1%
North Carolina 12 1,241,639 97.8% 12 1,241,639 97.9%
Washington 9 1,080,792 98.8% 9 1,066,962 98.1%
Colorado 10 908,229 97.7% 10 903,502 98.0%
Oregon 7 671,220 94.0% 7 616,070 94.2%
Arizona 2 326,984 98.6% 2 326,984 99.7%
Kentucky 2 305,307 89.8% 2 305,307 91.8%
Tennessee 3 271,697 99.5% 3 271,697 98.9%
Michigan 3 250,655 98.7% 3 250,655 98.7%
Delaware 1 232,754 96.3% 1 232,754 96.3%
Virginia 2 197,324 95.1% 2 197,324 96.1%
Illinois 1 178,600 86.4% 1 178,600 85.9%
South Carolina 2 162,056 98.8% 2 162,056 98.8%
Missouri 1 82,498 95.8% 1 82,498 95.8%
Wyoming 1 87,800 - 1 75,000 -
-------- ------------ ------- -------- ------------ --------
Total 198 23,079,686 94.9% 198 22,840,666 95.5%
======== ============ ======= ======== ============ ========
* Excludes properties under construction
The Partnership, is focused on building a platform of grocery anchored
neighborhood shopping centers because grocery stores provide convenience
shopping of daily necessities, foot traffic for adjacent local tenants, and
should withstand adverse economic conditions. The Partnership's current
investment markets have continued to offer strong stable economies, and
accordingly, the Partnership expects to realize growth in net income as a result
of increasing occupancy in the portfolio, increasing rental rates, development
and acquisition of shopping centers in targeted markets, and redevelopment of
existing shopping centers.
The following table summarizes the four largest grocery tenants occupying the
Partnership's shopping centers at March 31, 2000:
Grocery Number of % of % of Annualized Avg Remaining
Anchor Stores Total GLA Base Rent Lease Term
-------- ----------- ---------- --------------- -------------
Kroger 55 13.6% 11.6% 16 yrs
Publix 34 6.6% 4.4% 12 yrs
Safeway 33 5.4% 4.5% 11 yrs
Albertsons 18 2.9% 2.7% 14 yrs
Acquisition and Development of Shopping Centers
On September 23, 1998, the Company entered into an Agreement of Merger
("Agreement") with Pacific Retail Trust ("Pacific"), a privately held real
estate investment trust. The Agreement, among other matters, provided for the
merger of Pacific into Regency, and the exchange of each Pacific common or
preferred share into 0.48 shares of Regency common or preferred stock. The
stockholders approved the merger at a Special Meeting of Stockholders of Regency
held February 26, 1999. On February 28, 1999, the effective date of the merger,
the Company issued equity instruments valued at $770.6 million to the Pacific
stockholders in exchange for their outstanding common and preferred shares and
units. The total cost to acquire Pacific was approximately $1.157 billion based
on the value of Regency shares issued, including the assumption of $379 million
of outstanding debt and other liabilities of Pacific, and closing costs. The
price per share used to determine the purchase price was $23.325 based on the
five day average of the closing stock price of Regency's common stock on the New
York Stock Exchange immediately before, during and after the date the terms of
the merger were agreed to and announced to the public. The merger was accounted
for as a purchase with the Company as the acquiring entity. Concurrent with this
acquisition, the Company contributed all the assets and liabilities of Pacific
to the Partnership in exchange for Class B Units.
During 1998, the Partnership, through Regency, acquired 42 shopping centers and
joint ventures for a total investment of $370.3 ("1998 Acquisitions"). With
respect to these acquisitions, during 1999, the Partnership and Regency paid
contingent consideration valued at $9.0 million consisting of 69,555 Additional
Units, 3,768 shares of common stock, and $7.0 million. In April 2000, the
Partnership paid $5.0 million in cash as partial contingent consideration
related to the 1998 Acquisitions. In addition, common stock and Units valued at
$2.5 million may be issued during the remainder of the year.
Results from Operations
Comparison of 2000 to 1999
Revenues increased $29.8 million or 63% to $76.8 million in 2000. The increase
was due primarily to the Pacific acquisition in 1999. At March 31, 2000, the
total real estate portfolio contained approximately 23.1 million SF, and was
92.8% leased. Minimum rent increased $22.2 million or 63%, and recoveries from
tenants increased $7.3 million or 86%. Other non-rental revenues from property
management, leasing, brokerage, and development services (service operation
segment) provided on properties not owned by the Partnership were $2.3 million
and $1.9 million at March 31, 2000 and 1999, respectively.
Operating expenses increased $11.8 million or 51% to $34.7 million in 2000.
Combined operating and maintenance, and real estate taxes increased $6.8 million
or 64% during 2000 to $17.4 million and these increases are primarily due to
Pacific. General and administrative expenses increased 24% to $4.5 million due
to the hiring of new employees and related office expenses necessary to manage
the shopping centers acquired due to Pacific. Depreciation and amortization
increased $4.3 million during 2000 or 50% primarily due to Pacific.
Interest expense increased to $14.7 million in 2000 from $9.7 million in 1999 or
52% due to increased average outstanding loan balances related to the financing
of Pacific on the Line and the assumption of debt.
Net income for common unit holders was $21.6 million in 2000 vs. $12.9 million
in 1999, an $8.7 million or 67% increase for the reasons previously described.
Diluted earnings per unit in 2000 was $.38 vs. $.33 in 1999.
Liquidity and Capital Resources
Management anticipates that cash generated from operating activities will
provide the necessary funds on a short-term basis for its operating expenses,
interest expense and scheduled principal payments on outstanding indebtedness,
recurring capital expenditures necessary to properly maintain the shopping
centers, and distributions to share and unit holders. Net cash provided by
operating activities was $35.9 million and $30.8 million for the three months
ended March 31, 2000 and 1999, respectively. The Partnership incurred recurring
and non-recurring capital expenditures (non-recurring expenditures pertain to
immediate building improvements on new acquisitions and anchor tenant
improvements on new leases) of $2.5 million and $2.6 million, during the three
months ended March 31, 2000 and 1999, respectively. The Partnership paid
scheduled principal payments of $1.7 million and $1.0 million during the three
months ended March 31, 2000 and 1999, respectively. The Partnership paid
distributions of $7.2 million and $2.1 million, during the three months ended
March 31, 2000 and 1999, respectively, to its Common and Series A , B, C and D
Preferred unitholders.
Management expects to meet long-term liquidity requirements for term debt
payoffs at maturity, non-recurring capital expenditures, and acquisition,
renovation and development of shopping centers from: (i) excess cash generated
from operating activities, (ii) working capital reserves, (iii) additional debt
borrowings, and (iv) additional equity raised in the public markets. Net cash
used in investing activities was $45.2 million and $29.5 million, during the
three months ended March 31, 2000 and 1999, respectively, primarily for purposes
discussed above under Acquisitions and Development of Shopping Centers. Net cash
used in financing activities was $17.4 million for the three months ended March
31, 2000 compared to cash provided by financing activities of $9.3 million for
the three months ended March 31, 1999. At March 31, 2000, the Partnership had 43
shopping centers under construction or undergoing major renovations, with costs
to date of $259.5 million. Total committed costs necessary to complete the
properties under development is estimated to be $141.0 million and will be
expended through 2000.
During 1999, the Board of Directors authorized the repurchase of up to $65
million of the Company's outstanding shares through periodic open market
transactions or privately negotiated transactions. At March 31, 2000, the
Company had repurchased 3.25 million shares for $65 million of which the
majority of the funds came from the Partnership.
The Partnership's outstanding debt at March 31, 2000 and December 31, 1999
consists of the following (in thousands):
2000 1999
---- ----
Notes Payable:
Fixed rate mortgage loans $ 324,037 331,716
Variable rate mortgage loans 17,909 11,376
Fixed rate unsecured loans 370,577 370,696
-------------- --------------
Total notes payable 712,523 713,788
Acquisition and development line of credit 275,179 247,179
-------------- --------------
Total $ 987,702 960,967
============== ==============
During February, 1999, the Partnership modified the terms of its unsecured
acquisition and development line of credit (the "Line") by increasing the
commitment to $635 million. This credit agreement also provides for a
competitive bid facility of up to $250 million of the commitment amount. Maximum
availability under the Line is based on the discounted value of a pool of
eligible unencumbered assets (determined on the basis of capitalized net
operating income) less the amount of the Partnership's outstanding unsecured
liabilities. The Line matures in February 2001, but may be extended annually for
one year periods. Borrowings under the Line bear interest at a variable rate
based on LIBOR plus a specified spread, (1.00% currently), which is dependent on
the Company's investment grade rating. The Partnership is required to comply,
and is in compliance, with certain financial and other covenants customary with
this type of unsecured financing. These financial covenants include among others
(i) maintenance of minimum net worth, (ii) ratio of total liabilities to gross
asset value, (iii) ratio of secured indebtedness to gross asset value, (iv)
ratio of EBITDA to interest expense, (v) ratio of EBITDA to debt service and
reserve for replacements, and (vi) ratio of unencumbered net operating income to
interest expense on unsecured indebtedness. The Line is used primarily to
finance the acquisition and development of real estate, but is also available
for general working capital purposes.
Mortgage loans are secured by certain real estate properties, and may be prepaid
subject to a prepayment of a yield-maintenance premium. Mortgage loans are
generally due in monthly installments of interest and principal and mature over
various terms through 2019. Variable interest rates on mortgage loans are
currently based on LIBOR plus a spread in a range of 125 basis points to 150
basis points. Fixed interest rates on mortgage loans range from 7.04% to 9.5%.
During 1999, the Partnership assumed debt with a fair value of $411.2 million
related to the acquisition of real estate, which included debt premiums of $4.1
million based upon the above market interest rates of the debt instruments. Debt
premiums are being amortized over the terms of the related debt instruments as
an adjustment to interest expense.
On April 15, 1999 the Partnership completed a $250 million unsecured debt
offering in two tranches. The Partnership issued $200 million 7.4% notes due
April 1, 2004, priced at 99.922% to yield 7.42%, and $50 million 7.75% notes due
April 1, 2009, priced at 100%. The net proceeds of the offering were used to
reduce the balance of the Line.
As of March 31, 2000, scheduled principal repayments on notes payable and the
Line for the next five years were as follows (in thousands):
Scheduled
Principal Term Loan Total
Scheduled Payments by Year Payments Maturities Payments
----------- ----------- -----------
2000 4,294 35,995 40,289
2001 $ 5,621 330,029 335,650
2002 4,943 44,097 49,040
2003 4,933 13,301 18,234
2004 5,327 199,874 205,201
Beyond 5 Years 36,886 290,389 327,275
Net unamortized debt premiums - 12,013 12,013
----------- ----------- --------
$ 62,044 925,698 987,702
=========== =========== ========
Unconsolidated partnerships and joint ventures had mortgage loans payable of
$50.0 million at March 31, 2000, and the Partnership's proportionate share of
these loans was $21.1 million.
The Company qualifies and intends to continue to qualify as a REIT under the
Internal Revenue Code. As a REIT, the Company is allowed to reduce taxable
income by all or a portion of its distributions to stockholders. As
distributions have exceeded taxable income, no provision for federal income
taxes has been made. While the Company intends to continue to pay dividends to
its stockholders, the Company and the Partnership will reserve such amounts of
cash flow as it considers necessary for the proper maintenance and improvement
of the real estate portfolio, while still maintaining the Company's
qualification as a REIT.
The Partnership's real estate portfolio grew substantially during 1999 as a
result of the Pacific acquisition. The Partnership intends to continue to
acquire and develop shopping centers in the near future, and expects to meet the
related capital requirements from borrowings on the Line. The Partnership
expects to repay the Line from time to time from additional public and private
equity or debt offerings, such as those completed in previous years. Because
such acquisition and development activities are discretionary in nature, they
are not expected to burden the Partnership's capital resources currently
available for liquidity requirements. The Partnership expects that cash provided
by operating activities, unused amounts available under the Line, and cash
reserves are adequate to meet liquidity requirements.
New Accounting Standards and Accounting Changes
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities " (FAS 133), which is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. FAS 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. FAS 133
requires entities to recognize all derivatives as either assets or liabilities
in the balance sheet and measure those instruments at fair value. The
Partnership does not believe FAS 133 will materially effect its financial
statements.
Environmental Matters
The Partnership like others in the commercial real estate industry, is subject
to numerous environmental laws and regulations and the operation of dry cleaning
plants at the Partnership's shopping centers is the principal environmental
concern. The Partnership believes that the dry cleaners are operating in
accordance with current laws and regulations and has established procedures to
monitor their operations. The Partnership has approximately 38 properties that
will require or are currently undergoing varying levels of environmental
remediation. These remediations are not expected to have a material financial
effect on the Company or the Partnership due to financial statement reserves and
various state-regulated programs that shift the responsibility and cost for
remediation to the state. Based on information presently available, no
additional environmental accruals were made and management believes that the
ultimate disposition of currently known matters will not have a material effect
on the financial position, liquidity, or operations of the Company or
Partnership.
Inflation
Inflation has remained relatively low during 2000 and 1999 and has had a minimal
impact on the operating performance of the shopping centers, however,
substantially all of the Partnership's long-term leases contain provisions
designed to mitigate the adverse impact of inflation. Such provisions include
clauses enabling the Partnership to receive percentage rentals based on tenants'
gross sales, which generally increase as prices rise, and/or escalation clauses,
which generally increase rental rates during the terms of the leases. Such
escalation clauses are often related to increases in the consumer price index or
similar inflation indices. In addition, many of the Partnership's leases are for
terms of less than ten years, which permits the Partnership to seek increased
rents upon re-rental at market rates. Most of the Partnership's leases require
the tenants to pay their share of operating expenses, including common area
maintenance, real estate taxes, insurance and utilities, thereby reducing the
Partnership's exposure to increases in costs and operating expenses resulting
from inflation.
Year 2000 System Compliance
Management recognized the potential effect Year 2000 could have on the
Partnership's operations and, as a result, implemented a Year 2000 Compliance
Project. The project included an awareness phase, an assessment phase, a
renovation phase, and a testing phase of the data processing network, accounting
and property management systems, computer and operating systems, software
packages, and building management systems. The project also included surveying
major tenants and financial institutions. The Partnership's computer hardware,
operating systems, business systems, general accounting and property management
systems and principal desktop software applications are Year 2000 compliant.
Additionally, the Partnership did not incur and does not expect any business
interruption as a result of any of its customers or financial institutions not
being Year 2000 compliant.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
The Partnership is exposed to interest rate changes primarily as a result of its
Line and long-term debt used to maintain liquidity and fund capital expenditures
and expansion of the Partnership's real estate investment portfolio and
operations. The Partnership's interest rate risk management objective is to
limit the impact of interest rate changes on earnings and cash flows and to
lower its overall borrowing costs. To achieve its objectives the Partnership
borrows primarily at fixed rates and may enter into derivative financial
instruments such as interest rate swaps, caps and treasury locks in order to
mitigate its interest rate risk on a related financial instrument. The
Partnership has not been party to any market risk sensitive instruments during
the reporting period ending March 31, 2000 and does not plan to enter into
derivative or interest rate transactions for speculative purposes.
Part II
Item 6 Exhibits and Reports on Form 8-K:
Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None
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: May 9, 2000 REGENCY CENTERS, L..P.
-----------------------------
By: /s/ J. Christian Leavitt
Senior Vice President
and Chief Accounting Officer