UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from ________ to __________
Commission File Number 1-12298
REGENCY REALTY CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 59-3191743
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
121 West Forsyth Street, Suite 200 (904) 356-7000
Jacksonville, Florida 32202 (Registrant's
telephone No.)
(Address of principal executive
offices) (zip code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 par value
(Title of Class)
New York Stock Exchange
(Name of exchange on which registered)
Securities registered pursuant to Section(g) of the Act: None
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 and (2) has been subject to such filing requirements for
the past 90 days. YES (X) NO ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $165,638,487 based on the closing price on the New
York Stock Exchange for such stock on March 20, 1997. The approximate number of
shares of Registrant's Common Stock outstanding was 12,323,183 as of March 21,
1997.
Documents Incorporated by References
Portions of the Registrant's Proxy Statement in connection with its 1997 Annual
Meeting of Shareholders are incorporated by reference in Part III.
TABLE OF CONTENTS
Form 10-K
Item No. Report Page
PART I
1. Business..........................................................1
2. Properties........................................................4
3. Legal Proceedings.................................................10
4. Submission of Matters to a Vote of Security Holders ..............10
PART II
5. Market for the Registrant's Common Equity and
Related Shareholder Matters ............................ 10
6. Selected Consolidated Financial Data ............................12
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations .........................14
8. Consolidated Financial Statements and Supplementary Data ..... ..19
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ........................19
PART III
10. Directors and Executive Officers of the Registrant ..............19
11. Executive Compensation ..........................................20
12. Security Ownership of Certain Beneficial Owners and Management ..20
13. Certain Relationships and Related Transactions ..................20
PART IV
14. Exhibits, Financial Statements, Schedules and Reports on
Form 8-K 20
PART I
Item 1. Business
General: The principal business of Regency Realty Corporation (the
"Company") is owning, operating and developing grocery anchored neighborhood
shopping centers in targeted infill markets in the Southeast. The Company, a
Florida corporation organized in 1993, commenced operations as a real estate
investment trust in 1993 with the completion of its Initial Public Offering
("IPO"), and was the successor to the real estate business of The Regency Group,
Inc. which had operated since 1963. Unless the context requires otherwise, all
references to the "Company" include (1) its wholly owned real estate properties,
an operating partnership and two joint ventures and (2) Regency Realty Group,
Inc. (the "Management Company").
The Company owns and operates 50 commercial real estate properties, 40 of
which are anchored by grocery stores. At December 31, 1996, the properties
contained 5.5 million square feet ("GLA") and were 95.4% leased. The properties
are all located in the Southeast, primarily in Florida (71% of GLA) and Georgia
(11% of GLA). At December 31, 1996, approximately 10.2%, 4.6%, 3.3%, and 3% of
annualized total rent pertains to leases with Publix, Winn-Dixie, Wal-Mart, and
Kroger, respectively. For more specific data and information about the
properties owned by the Company see Item 2. Properties, included elsewhere in
this Form 10-K. In addition, through the Management Company, the Company
performs property management, leasing and client services on a selective basis
that generate fees and have the potential for creating synergistic relationships
that lead to additional acquisition, development, management and leasing
opportunities.
Operating and Investment Philosophy: The Company's key operating and
investment objectives are (1) to generate superior shareholder returns by
sustaining above average annual increases in funds from operations and long term
growth in free and clear cash flow, (2) to create the largest real estate
portfolio of quality grocery anchored neighborhood shopping centers in targeted
infill markets in the Southeast, (3) to build the strongest possible capital
structure through conservative financial management that will cost effectively
provide the capital to fund the Company's growth strategy, and (4) to put in
place the people and processes necessary to enable the Company to implement its
Retail Operating System, a system which incorporates research based investment
strategies and value added leasing and management systems.
Management believes that the key to successful implementation of its
strategies is to continue to exploit the Company's competitive strengths which
include, its cohesive and experienced management team, its research
capabilities, its strong capital structure, its access to competitively priced
capital, its client relationships, its market expertise in targeted markets, its
growing critical mass of quality neighborhood shopping centers focused on
convenience and daily necessities, and the vibrant targeted submarkets that
enjoy a favorable environment for retail sales.
Since its IPO in 1993, the Company has acquired 27 properties at a cost of
$224.7 million. These acquisitions were financed with $114.4 of new equity, and
$110.3 million of new debt. The Company's total market capitalization at
December 31, 1996 was $529.1 million vs. $172.9 million at the completion of its
IPO, an increase of 206%. At December 31, 1996, the Company's debt to total
market capitalization was 32.4%. The Company intends to continue its emphasis on
acquiring and developing grocery anchored neighborhood shopping centers that are
the most significant shopping centers serving a targeted submarket that offer
daily necessities and convenience.
1
Current Developments: During 1996, the Company acquired 13 grocery
anchored shopping centers for approximately $107.1 million, representing 1.4
million square feet (the "1996 Acquisitions"). Total real estate investments, at
cost, increased 40.1% from December 31, 1995. The 1996 Acquisitions were located
in Florida, Georgia, and North Carolina and included six Publix locations, two
Winn-Dixie locations, and two Kroger locations. The Company also acquired a
parcel of land for a new Winn-Dixie development and an existing shopping center
for redevelopment.
On June 11, 1996, the Company entered into a Stock Purchase Agreement (the
"Agreement") with Security Capital U.S. Realty and Security Capital Holdings
S.A. (collectively, "US Realty"). As part of the Agreement, the Company agreed
to sell 7,499,400 shares of common stock to U.S. Realty for $132,176,925. During
1996, the Company sold 3,651,800 shares to US Realty for $64,362,975 and the
proceeds were used to reduce the outstanding balance of its acquisition and
development line of credit with Wells Fargo Realty Advisors Funding,
Incorporated (the "Wells Fargo Line"). Not later than June, 1997, the Company
intends to sell the remaining shares committed to US Realty, the proceeds of
which will be used to further reduce the balance of its Wells Fargo Line,
increasing the capacity for future acquisitions.
During 1996, the Company entered into discussions with Branch Properties,
L.P. ("Branch"), an Atlanta based real estate partnership that operates and
develops shopping centers in the Southeast, for purposes of evaluating the
potential acquisition of the assets of Branch. On March 7, 1997, the Company
acquired the assets of Branch for approximately $190 million. At closing, the
Company issued 3,529,598 redeemable partnership units ("Redeemable Units") from
Regency Retail Partnership L.P. ("Partnership") in exchange for 100% of the
existing partnership units of Branch, and assumed approximately $112 million of
debt, net of minority interests. During the next three years, Branch will have
the right to earn an additional $23.3 million of Redeemable Units based upon the
achievement of increased income levels. At closing the Company acquired from
Branch 18 shopping centers comprising 1.9 million square feet; 8 shopping
centers containing 700,000 square feet that are currently under development or
redevelopment, and management contracts on over 4 million square feet owned by
third parties. Including the completion of the development and redevelopment
properties, the three largest anchor tenants in these properties are Publix,
Kroger, and Harris Teeter. Also at closing, the Company reduced Branch's debt by
approximately $25.7 million from a $26 million sale of common stock to US Realty
which funded concurrent with the acquisition.
In December,1996 the Company negotiated an increase in the commitment
amount of the Wells Fargo Line to $90 million. The Company increased the Wells
Fargo Line commitment amount to $150 million during the first quarter of 1997.
The unused balance of the Wells Fargo Line will be used to continue to acquire
and develop neighborhood shopping centers in the Southeast. In addition to
acquiring single neighborhood shopping centers from individual sellers, the
Company also expects to continue to engage in discussions with public and
private real estate entities regarding possible portfolio acquisitions or
business combinations.
Matters Relating to the Real Estate Business: The Company is subject to
certain business risks arising in connection with owning real estate which
include, among others, (1) the bankruptcy or insolvency of, or a downturn in the
business of, any of its anchor tenants, (2) the possibility that such tenants
will not renew their leases as they expire, (3) vacated anchor space affecting
the entire shopping center because of the loss of the departed anchor tenant's
customer drawing power, (4) risks relating to leverage, including uncertainty
that the Company will be able to refinance its indebtedness, and the risk of
higher interest rates, (5) the Company's inability to satisfy its cash
requirements for operations and the possibility that the Company may be required
to borrow funds to meet distribution requirements in order to maintain its
qualification as a REIT, (6) potential liability for unknown or future
environmental matters and costs of compliance with the Americans with
Disabilities Act, and (7) the risk of uninsured losses. Unfavorable economic
conditions could also result in the inability of tenants in certain retail
sectors to meet their lease obligations and otherwise could adversely affect the
Company's ability to attract and retain desirable tenants. The Company believes
that the shopping centers are relatively well positioned to withstand adverse
economic conditions since they typically are anchored by grocery stores, drug
stores and discount department stores that offer day-to-day necessities rather
than luxury goods.
2
Compliance with Governmental Regulations: The Company like others in the
commercial real estate industry, is subject to numerous environmental laws and
regulations particularly as they pertain to dry cleaning plants. Although
potential liability could exist for unknown or future environmental matters, the
Company believes that dry cleaning tenants are operating in accordance with
current laws and regulations and has established procedures to monitor these
operations. For additional information, see Management's Discussion and Analysis
included elsewhere in this Form 10-K.
Competition: There are numerous shopping center developers, real estate
companies and other owners of real estate that operate in the Southeast that
compete with the Company in seeking retail tenants to occupy vacant space, for
the acquisition of shopping centers, and for the development of new shopping
centers.
Changes in Policies: The Company's Board of Directors determines the
Company's policies with respect to certain activities, including its debt
capitalization, growth, distributions, REIT status, and investment and operating
policies. The Board of Directors has no present intention to amend or revise
these policies. However, the Board of Directors may do so at any time without a
vote of the Company's stockholders.
Employees: The Company presently has four management and leasing offices
in Florida and one office in Atlanta, Georgia. As of March 20, 1997, the Company
had approximately 160 employees and believes that relations with its employees
are good.
3
Item 2. Properties
The Company owns and operates 46 neighborhood shopping centers and 4
suburban office complexes in the Southeast. The properties consist of
approximately 5.5 million square feet of Company owned gross leasable area
(GLA). At December 31, 1996, the locations of properties by GLA were as follows:
Company Percent Anchor Percent Number
Owned of Owned Total of of
GLA Total GLA GLA Total Properties
Florida 3,958,423 71.8% 297,481 4,255,904 72.0% 34
Georgia 592,351 10.7% - 592,351 10.0% 6
Alabama 516,080 9.4% 42,848 558,928 9.5% 5
North
Carolina 260,094 4.7% - 260,094 4.4% 3
Mississippi 185,061 3.4% 54,962 240,023 4.1% 2
--------- ------ -------- --------- ------ --
Total 5,512,009 100.0% 395,291 5,907,300 100.0% 50
========= ====== ======== ========= ====== ==
The Company's neighborhood shopping centers generally have one or more
anchor tenants, the majority of which are anchored by Publix (17), Winn-Dixie
(9), Wal-Mart (7) or Kroger (3), with 37 of the center's having two or more
anchor tenants. The average size of the properties is 118,146 sf. Six of the
shopping centers are anchored by four grocery stores and two Wal-Mart stores,
where the store operator owns its own building. To the extent that the shopping
centers are anchored by store space which the Company does not own, the Company
can capitalize on the customer drawing power and other advantages provided by
these anchor tenants while not bearing the leasing and operating risks
associated with leasing space to such a tenant. In most instances, these stores
reimburse the Company for their share of common area maintenance expenses.
The following table sets forth, as of December 31, 1996, information
as to retail tenants which individually account for 1.0% or more of total rent:
Percent of
Company Total Percent of
Leased GLA Company Total Total
Tenant Stores (Sq. Ft.) GLA Rent (1) Rent (2)
- ------ ------ --------- --- -------- --------
Publix 17 723,636 13.1% $ 5,372,770 10.2%
Winn Dixie 9 364,393 6.6% 2,432,073 4.6%
Wal-Mart 5 393,487 7.1% 1,765,280 3.3%
Kroger 3 165,435 3.0% 1,566,150 3.0%
Walgreens 9 116,640 2.1% 1,469,878 2.8%
AMC Theater 1 72,616 1.3% 1,003,651 1.9%
K-Mart 2 168,306 3.1% 987,130 1.9%
Eckerd 10 101,095 1.8% 887,746 1.7%
Luria's 3 69,855 1.3% 592,686 1.1%
Waccamaw 1 87,752 1.6% 538,633 1.0%
Jo-Ann
Fabrics 4 52,230 .9% 527,396 1.0%
-- ------- ---- --------- -----
Total 64 2,315,445 41.9% $17,143,393 32.5%
== ========= ===== =========== =====
-----------------------
1) Total rent includes annualized base rent, percentage rent, and
reimbursements for common area maintenance, real estate taxes, and insurance.
2) Based on annualized total rent on all properties owned at
December 31,1996.
4
The Company's leases have lease terms generally ranging from three to five
years for tenant space under 5,000 square feet. Leases greater than 10,000
square feet generally have lease terms in excess of ten years, mostly comprised
of anchor tenants. Many of the anchor leases contain provisions allowing the
tenant the option of extending the term of the lease at expiration. The
Company's leases provide for the monthly payment in advance of fixed minimum
rentals, additional rents calculated as a percentage of the tenant's sales, the
tenant's pro rata share of real estate taxes, insurance, and common area
maintenance expenses, and reimbursement for utility costs if not directly
metered. At December 31, 1996, 42% of the Company's leases have terms of five
years or less, which allows the Company the opportunity to increase rents upon
lease expiration. Approximately 42% of the Company's leases expire beyond ten
years.
The following table sets forth a schedule of lease expirations for the next
ten years, assuming that no tenants exercise renewal options:
Percent of Future
Total Minimum Percent
Lease Company Rent Under of
Expiration Expiring Square Expiring Total
Year GLA Footage Leases Rent (1)
---------- -------- ---------- ---------- --------
1997 437,545 7.9% 4,966,284 10.7%
1998 616,350 11.2% 6,435,218 13.8%
1999 442,226 8.0% 5,379,912 11.6%
2000 261,023 4.7% 3,334,962 7.2%
2001 334,874 6.1% 3,877,709 8.3%
2002 314,026 5.7% 2,303,083 5.0%
2003 216,386 3.9% 1,565,877 3.4%
2004 133,002 2.4% 1,242,960 2.7%
2005 174,354 3.2% 1,705,906 3.7%
2006 208,155 3.8% 1,562,226 3.4%
2007 40,298 0.7% 512,591 1.1%
------------------
(1)Total rent includes current minimum rent and future contractual
rent steps for all properties, but excludes additional rent such
as percentage rent, common area maintenance, real estate taxes
and insurance reimbursements.
Corporate Headquarters: The Company leases 24,263 square feet in a 10 story
office building located at 121 West Forsyth Street in Jacksonville, Florida,
which serves as the Company's headquarters. The lease, which expires on October
31, 1999, provides that the Company will pay annual base rent of approximately
$286,000. The Company provides property management services to the building's
owner, who is unaffi iated with the Company.
5
Item 2.
The following table describes the Company's properties owned at
December 31, 1996:
Company
Owned
Gross
Year Year Land Leasable Percent
Property Acquired Constructed (r) Area Area Leased
======== ======== =========== ==== ======== =======
Florida:
Jacksonville / North Florida:
Bolton Plaza 1994 1995 15.1 172,938 98.4%
Courtyard 1987 1987 17.0 67,794 95.5%
Old St. Augustine Plaza 1996 1990 23.9 170,220 97.5%
The Quadrant (o) 1984 1985 17.8 188,502 96.5%
Westland One (o) 1988 1988 3.6 36,304 89.9%
Palm Harbor 1996 1991 24.0 168,448 99.6%
Anastasia Plaza 1993 1988 11.4 102,342 95.5%
Millhopper 1993 1974 11.0 84,444 99.4%
Newberry Square 1994 1986 16.0 181,006 98.0%
Carriage Gate 1994 1978 8.7 76,833 93.2%
Village Commons (j) 1988 1988 23.8 105,827 91.3%
Miami / Ft. Lauderdale:
Aventura 1994 1974 8.6 102,876 81.1%
North Miami 1993 1988 4.0 42,500 100.0%
Fairway Executive Center (o) 1985 1985 2.0 33,135 83.8%
University Market Place 1990 1990 13.0 124,101 93.1%
Welleby 1996 1982 12.0 109,949 92.3%
Berkshire Commons 1994 1992 12.5 106,434 98.8%
Palm Beach / Treasure Coast:
Wellington Market Place 1995 1990 18.7 178,555 94.4%
Wellington Town Square 1996 1982 11.3 105,150 94.4%
Tequesta Shoppes 1996 1986 12.5 109,766 97.0%
Chasewood Plaza 1992 1986 17.3 183,844 95.0%
Martin Downs Shoppes 1992 1988 6.4 48,932 67.4%
Martin Downs Town Center 1996 1996 7.6 64,546 100.0%
Martin Downs Village Center 1992 1985 20.1 121,998 93.4%
Ocean Breeze 1992 1985 11.7 111,551 94.6%
Ocean East (d)(j) 1996 1996 11.3 104,772 93.3%
Tampa Bay Area:
Peachland Promenade 1995 1991 14.5 82,082 96.9%
Market Place 1995 1983 9.3 90,296 98.1%
Paragon Cable Building (o) 1993 1993 3.2 40,298 100.0%
Regency Square at Brandon 1986 1986 52.6 341,751 93.8%
Seven Springs 1994 1986 19.5 162,580 97.0%
Terrace Walk 1990 1990 4.4 50,926 88.0%
University Collections 1996 1984 11.3 106,627 97.6%
Village Center 1995 1993 17.0 181,096 97.4%
----- --------- -----
473.1 3,958,423 95.0%
===== ========= =====
<FN>
(a) Tenant owns its own pad and building
(d) Development or redevelopment property
(r) or last renovation or major addition
(o) suburban office building
(j) ownership is less than 100%
</FN>
6
Property Major Tenants and Lease Expiration (Mo/Yr)
======== ==========================================
Florida:
Jacksonville / North Florida:
Bolton Plaza Wal-Mart (6/08), Blockbuster (6/98)
Courtyard Albertsons (a)
Old St. Augustine Plaza Publix (10/10), Eckerd Drugs(10/10), Waccamaw (3/02)
The Quadrant (o) RS&H (10/98), Total System Service (10/00), GTE (8/99), Xerox (10/97)
Westland One (o) Logistics Services (1/99)
Palm Harbor Publix (3/11), Eckerd Drugs (12/98), Bealls (4/07), Blockbuster (12/01)
Anastasia Plaza Publix (2/08)
Millhopper Publix (4/03), Eckerd Drugs (3/98), Clothworld (3/98)
Newberry Square Publix (11/06), Kmart (10/11), Jo-Ann Fabrics (1/02)
Carriage Gate TJ Maxx (11/98)
Village Commons (j) Wal-Mart (a) , Stein Mart (8/98), Ben Franklin (5/06), Shoe Station (5/02)
Miami / Ft. Lauderdale:
Aventura Publix (11/98), Eckerd Drugs (9/97)
North Miami Publix (10/03), Eckerd Drugs (8/99)
Fairway Executive Center (o) Tarmac of Florida (5/01)
University Market Place Albertsons (a), PetsMart (1/4), Linen Supermarket (2/04)
Welleby Publix (4/15), Walgreens (8/02)
Berkshire Commons Publix (10/11), Walgreens (8/11)
Palm Beach / Treasure Coast:
Wellington Market Place Winn-Dixie (9/09), Walgreens (8/09), United Artists (3/10)
Wellington Town Square Publix (9/02), Eckerd Drug (10/02)
Tequesta Shoppes Publix (9/06), Walgreens (10/01)
Chasewood Plaza Publix (2/06), Walgreen's (3/01), Ben Franklin (2/01)
Martin Downs Shoppes 1st Bank of Indiantown (1/97)
Martin Downs Town Center Publix (11/16)
Martin Downs Village Center Coastal Care (9/12), Walgreens (7/00)
Ocean Breeze Publix (11/03), Walgreens (11/03), Coastal Care (6/06)
Ocean East (d)(j) Stuart Fine Foods (12/10), Coastal Care (11/16)
Tampa Bay Area:
Peachland Promenade Publix (1/12), Ace Hardware (2/99)
Market Place Publix (7/03), Eckerd Drugs (4/03)
Paragon Cable Building (o) Paragon Cable (8/07)
Regency Square at Brandon Marshalls (1/02), Jo-Ann Fabrics (11/02), AMC Theaters (11/15)
Staples (1/00), Michaels (11/03), TJ Maxx (9/99), S&K Menswear (1/01)
Seven Springs Winn-Dixie (5/07), Kmart (11/10)
Terrace Walk -
University Collections Kash N Karry (a), Eckerd Drug (9/04), Jo-Ann Fabrics (8/05)
Village Center Publix (6/07), Walgreens (6/07), Stein Mart (7/08)
<FN>
(a) Tenant owns its own pad and building
(d) Development or redevelopment property
(r) or last renovation or major addition
(o) suburban office building
(j) ownership is less than 100%
</FN>
7
Company
Owned
Gross
Year Year Land Leasable Percent
Property Acquired Constructed (r) Area Area Leased
======== ======== =============== ==== ======== =======
Georgia:
Atlanta:
Orchard Square 1995 1987 14.8 85,940 91.2%
Cambridge Square 1996 1979 9.5 68,725 91.4%
Russell Ridge 1994 1994 16.5 98,556 100.0%
Sandy Plains Village 1996 1992 19.0 168,513 80.6%
Other Markets:
LaGrange Marketplace 1993 1989 8.2 76,327 93.7%
Parkway Station 1996 1983 10.5 94,290 94.3%
---- ------- -----
78.5 592,351 90.5%
==== ======= =====
Alabama:
Birmingham:
Village In Trussville 1993 1987 8.0 69,300 97.8%
West County Marketplace 1993 1987 14.0 129,155 100.0%
Other Markets:
Bonner's Point 1993 1985 11.9 87,280 100.0%
Country Club 1993 1991 5.5 67,622 100.0%
The Marketplace 1993 1995 13.0 162,723 100.0%
---- ------- ------
52.4 516,080 99.7%
==== ======= ======
North Carolina:
Charlotte:
City View 1996 1993 14.5 77,550 98.5%
Union Square 1996 1989 18.8 97,191 98.8%
Raleigh / Durham:
Woodcroft 1996 1984 11.8 85,353 98.6%
---- ------- -----
45.1 260,094 98.6%
==== ======= =====
Mississippi:
Columbia Marketplace 1993 1988 21.7 136,002 100.0%
Lucedale Marketplace 1993 1989 6.1 49,059 100.0%
---- ------- ------
27.8 185,061 100.0%
==== ======= ======
Total Properties: 676.9 5,512,009 95.4%
===== ========= =====
<FN>
(a) Tenant owns its own pad and building
(d) Development or redevelopment property
(r) or last renovation or major addition
(o) suburban office building
(j) ownership is less than 100%
</FN>
8
Property Major Tenants and Lease Expiration (Mo/Yr)
======== ==========================================
Georgia:
Atlanta:
Orchard Square A&P (1/08), Big B Drugs (1/08)
Cambridge Square Winn-Dixie (5/01), Big B Drugs (9/01)
Russell Ridge Kroger (9/14), Blockbuster (7/00)
Sandy Plains Village Kroger (8/10), Revco (10/97), Blockbuster (2/01), Ace Hardware (1/98)
Other Markets:
LaGrange Marketplace Winn-Dixie (6/09), Eckerd Drugs (1/10)
Parkway Station Kroger (2/07)
Alabama:
Birmingham:
Village In Trussville Bruno's (10/12), Big B Drugs (2/03), Movie Gallery (12/97)
West County Marketplace Food World (a), Wal-Mart (2/08), Eckerd Drugs (2/11)
Other Markets:
Bonner's Point Winn-Dixie (1/06), Wal-Mart (10/05)
Country Club Winn-Dixie (5/11), Harco Drugs (4/06)
The Marketplace Winn-Dixie (2/15), Beall's (1/04)
North Carolina:
Charlotte:
City View Winn-Dixie (6/13), Revco (5/08)
Union Square Harris Teeter (10/15), Revco (6/04)
Consolidated Theatres (5/06), Blockbuster (9/99)
Raleigh / Durham:
Woodcroft Food Lion (11/04), Kerr Drugs (11/04)
Mississippi:
Columbia Marketplace Winn-Dixie (9/12), Wal-Mart (2/08)
Lucedale Marketplace Delchamps (8/09), Wal-Mart (a)
Total Properties:
<FN>
(a) Tenant owns its own pad and building
(d) Development or redevelopment property
(r) or last renovation or major addition
(o) suburban office building
(j) ownership is less than 100%
</FN>
9
Item 3. Legal Proceedings
The Company is not presently involved in any litigation nor, to its
knowledge, is any litigation threatened against the Company, except for routine
litigation arising in the ordinary course of business such as "slip and fall"
litigation which is expected to be covered by insurance. In the opinion of
management of the Company, such litigation is not expected to have a material
adverse effect on the business, financial condition or results of operations of
the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART Il
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters
Prior to the Company's IPO there was no public market for the Company's
common stock. In connection with its IPO, 5,620,779 shares were sold for cash at
the initial offering price of $19.25 per share. The common stock commenced
trading on the New York Stock Exchange ("NYSE") under the symbol "REG" on
October 29, 1993. There have been no additional public stock offerings since the
IPO; however, there have been several private equity transactions since 1994.
The high and low sales prices for the common stock on the NYSE during each
quarter for the period January 1, 1995 to December 31, 1996 were as follows:
1996 1995
------------------------ -------------------------
Cash Cash
High Low Dividends High Low Dividends
Price Price Declared Price Price Declared
March 31 $ 17.500 15.875 .405 17.125 15.250 .395
June 30 21.125 16.500 .405 18.375 15.750 .395
September 30 22.375 19.250 .405 18.125 16.375 .395
December 31 26.250 21.125 .405 17.500 16.375 .395
The approximate number of holders of record of the common stock was 3,000
as of March 20, 1997.
On March 7, 1997, the Company acquired Branch Properties, L.P.
("Branch"), an Atlanta based real estate partnership that owns, operates, and
develops shopping centers in the Southeast, for approximately $190 million. At
closing, the Company issued 3,373,801 redeemable partnership units ("Redeemable
Units") from Regency Retail Partnership, L.P. ("Partnership") and 155,797 shares
of common stock in exchange for 100% of the existing partnership units of
Branch, and assumed approximately $112 million of debt excluding the minority
interest amount. During the next three years, Branch will have the right to earn
an additional $23.3 million of Redeemable Units based upon the achievement of
increased income levels. Subject to shareholder approval to be held at the
Company's 1997 Annual Meeting, the Redeemable Units will be redeemable for
Regency common stock.
10
On June 11, 1996, the Company entered into a Stock Purchase Agreement (the
"Agreement") with US Realty. Under the Agreement, the Company has agreed to sell
7,499,400 shares of common stock to US Realty at a price of $17.625 per share
representing total maximum proceeds of $132,176,925. During 1996, the Company
sold 3,651,800 shares to US Realty for $64,362,975 and the proceeds were used to
pay down the Wells Fargo Line. The Company sold 1,475,178 shares to US Realty on
March 3, 1997 and the proceeds of $26 million were primarily used to reduce debt
assumed as part of the Branch transaction. Not later than June, 1997, the
Company intends to sell the remaining shares committed to US Realty, the
proceeds of which will be used to further reduce its outstanding debt. As part
of the Agreement, US Realty also has participation rights entitling them to
purchase additional equity in the Company at the same price as that offered to
other purchasers in order to preserve their pro rata ownership in the Company
including common stock and Redeemable Units issued as part of the Branch
transaction.
In connection with the acquisition of five shopping centers during 1995,
the Company completed a $50 million private placement (the "Private Placement")
with LaSalle Advisors Limited Partnership (the "Investor") on December 20, 1995
by issuing 2,500,000 shares of non-voting Class B common stock at $20 per share.
The Company initially issued $18,250,000 of Series B preferred stock to the
Investor on October 26, 1995 to fund an October purchase of one of the shopping
centers; however, these shares were subsequently converted into Class B common.
The Class B common shares are convertible into 2,975,468 shares of common stock
beginning on the third anniversary of the issuance date subject to limitations
that the holder may not beneficially own more than 4.9% of the Company's
outstanding common stock except in certain circumstances.
In connection with the purchase of a shopping center on June 29, 1994, the
Company issued 7,665 shares of Series A nonvoting preferred stock at a
liquidation value of $1,000 per share. In 1996, the holder converted all of the
remaining preferred stock outstanding into 94,282 shares of common stock. In
1995 and 1994, the preferred stock was converted into 222,465 and 111,411 shares
of common stock, respectively.
Future dividends paid by the Company on common and Class B common stock
will be at the discretion of the Board of Directors of the Company and will
depend on the actual cash flow of the Company, its financial condition, capital
requirements, the annual distribution requirements under the REIT provisions of
the Code, limitations imposed by the financial covenants of the Company's
outstanding debt, and such other factors as the Board of Directors deem
relevant.
11
Item 6. Selected Consolidated Financial Data (in thousands, except
per share data)
The following table sets forth Selected Financial Data on a historical
basis for the five years ended December 31, 1996, for the Company and the
commercial real estate business of The Regency Group, Inc. ("TRG" or "Regency
Properties"), the predecessor of the Company. This information should be read in
conjunction with the financial statements of the Company (including the related
notes thereto) and Management's Discussion and Analysis of the Financial
Condition and Results of Operations, each included elsewhere in this Form 10-K.
The historical Selected Financial Data for Regency Realty Corporation for the
three year period ended December 31, 1996 and for the period from July 9, 1993
to December 31, 1993, have been derived from the audited financial statements.
The historical Selected Financial Data for the Regency Properties as of November
5, 1993 and the year ended December 31, 1992 have been derived from audited
financial statements.
Regency Realty Corporation Regency Properties (1)
------------------------------------------ ----------------------------
Period Ended Period Ended Year Ended
Year Ended December 31, December 31, November 5, December 31,
----------------------------------------
1996 1995 1994 1993 1993 1992
--- ---- ---- ---- ---- ----
Operating Data:
Revenues:
Rental revenues $43,433 $31,555 $25,673 $3,094 $7,375 $8,436
Management, leasing and
brokerage fees 3,444 2,426 2,332 572 2,247 2,589
Equity in income of real estate
partnership investments 70 4 17 3 18 11
--------- -------- -------- -------- --------- ---------
Total revenues 46,948 33,985 28,022 3,669 9,640 11,036
--------- -------- -------- -------- --------- ---------
Operating expenses:
Operating, maintenance and real
estate taxes 12,065 8,684 7,140 862 3,365 3,659
General and administrative 6,048 4,894 4,531 736 2,835 3,633
Depreciation and amortization 8,758 6,436 5,266 679 1,564 1,643
--------- -------- -------- -------- --------- ---------
Total operating expenses 26,872 20,014 16,937 2,277 7,764 8,935
--------- -------- -------- -------- --------- ---------
Equity in loss of unconsolidated
partnership - - - - (111) -
Minority interest in operating
(income) loss - - - - 126 (77)
Other non-recurring income, net - - - - 3,291 -
Interest expense, net of income 10,111 8,386 5,701 496 3,937 4,701
--------- -------- -------- -------- --------- ---------
Net income (loss) $9,965 $5,585 $5,384 $895 $1,245 ($2,677)
Preferred stock dividends 58 591 283 - - -
--------- -------- -------- -------- --------- ---------
Net income (loss) for common
stockholders $9,907 $4,994 $5,101 $895 $1,245 ($2,677)
========= ======== ======== ======== ========= =========
Net income per common share $0.96 $0.75 $0.80 $0.14 n/a n/a
========= ======== ======== ======== ========= =========
Other Data:
Weighted average common shares
outstanding (2) 10,341 6,630 6,339 6,333 n/a n/a
Common shares outstanding (2) 13,619 9,704 6,455 6,333 n/a n/a
Company owned gross leasable area
(at end of period) 5,512 3,981 3,182 2,337 1,145 1,145
Number of properties (at end of period) 50 36 30 23 8 8
Balance Sheet Data:
Real estate, net of accumulated
depreciation $367,190 $260,415 $204,421 $145,123 $55,921
Total assets 386,524 271,005 214,082 153,653 60,636
Total debt 171,607 115,617 107,998 53,521 61,049
Stockholders' equity 206,726 147,007 101,760 97,416 (11,143)
12
Item 6. Selected Consolidated Financial Data (in thousands, except
per share data) -continued-
- -----------------
(1) Such Combined Financial Statements have been prepared to reflect the
historical combined operations of the Regency Properties associated with
the ownership of the properties and the management, leasing, acquisition,
development and brokerage business acquired by the Company from TRG on
November 5, 1993 in connection with the Company's Initial Public Offering
("IPO") completed November 5, 1993.
(2) 1996 includes 28,848 Partnership Operating Units issued on February 28,
1996, convertible on a one for one basis into shares of common stock after
the first anniversary date of the issuance date. 1996 and 1995 include
2,975,468 common shares, or the weighted average impact thereof, that the
Class B common stock, issued December 20, 1995, will be convertible into
after three years from the issuance date, subject to certain limitations.
13
Item 7.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 Realty
Corporation (the "Company") appearing elsewhere in this Form 10-K.
Business
The Company's principal business is operating and developing grocery
anchored neighborhood shopping centers in targeted infill markets in the
Southeast. At December 31, 1996 the Company owned 50 properties or approximately
5.5 million square feet(GLA); 71% of the GLA of the properties are located in
Florida, and 40 are grocery anchored. The Company's four largest tenants in
order by number of leased store locations are Publix Supermarkets (17),
Winn-Dixie Stores (9), Wal-Mart (5), and The Kroger Co. (3).
Acquisition and Development
During 1996, the Company acquired 13 shopping centers (the "1996
Acquisitions") for $107 million (including certain budgeted capital improvements
designed to improve the performance of the acquired property) for a total of
1,417,259 square feet. The Company also acquired a parcel of land to begin
development of a Winn-Dixie shopping center, and entered into a joint venture to
redevelop an existing shopping center. Total estimated cost at completion of
these development projects is $15.2 million and both are expected to be
completed during the first quarter of 1998.
During 1995, the Company acquired five shopping centers and completed the
development or expansion of four shopping centers for a total cost of $62
million (the "1995 Acquisitions").
On March 7, 1997, the Company acquired Branch Properties, L.P.
("Branch"), an Atlanta based real estate partnership that owns, operates, and
develops shopping centers in the Southeast, for approximately $190 million. At
closing, the Company issued 3,373,801 redeemable partnership units ("Redeemable
Units") from Regency Retail Partnership, L.P. ("Partnership") and 155,797 shares
of common stock in exchange for 100% of the existing partnership units of
Branch, and assumed approximately $112 million of debt excluding the minority
interest amount. During the next three years, Branch will have the right to earn
an additional $23.3 million of Redeemable Units based upon the achievement of
increased income levels. At closing the Company acquired from Branch 18 shopping
centers comprising 1.9 million square feet; 8 shopping centers containing
700,000 square feet that are currently under development or redevelopment, and
management contracts on over 4 million square feet owned by third parties.
Including the completion of the development and redevelopment properties, the
three largest tenants in these properties are Publix, Kroger, and Harris Teeter.
After the closing, the Company's five largest tenants in order by number of
leased store locations are Publix (24), Winn-Dixie (9), Kroger (5) Wal-Mart (5),
and Harris Teeter (3). Also at closing, the Company reduced the assumed debt by
approximately $25.7 million funded from a $26 million sale of common stock to
Security Capital U.S. Realty ("US Realty") further discussed below.
14
Liquidity and Capital Resources
The Company's total indebtedness at December 31, 1996 and 1995 was $172
million and $116 million, respectively, of which $94 million and $91 million had
fixed interest rates averaging 7.6% and 7.5%, respectively. The weighted average
interest rate on total debt at December 31, 1996 and 1995 was 7.5% and 7.7%,
respectively. Based upon the Company's total market capitalization (total debt
and the market value of equity) at December 31, 1996 of $529 million (closing
common stock price of $26.25 per share and total common stock and equivalents
outstanding of 13,619,221), the Company's debt to total market capitalization
ratio was 32.4% vs. 40.6% at December 31, 1996 and 1995, respectively.
During 1996, the Company negotiated an unsecured $90 million revolving
line of credit with Wells Fargo Realty Advisors Funding, Incorporated ("Wells
Fargo Line") with an interest rate equal to the London Interbank Offered Rate
("LIBOR") plus 1.625%. The proceeds were used to pay off the balance of the
secured line of credit and fund the 1996 Acquisitions. The balance of the Wells
Fargo Line at December 31, 1996, was $74 million. The unused available
commitment on the Wells Fargo Line will be used to finance future acquisition
and development activity. The Company increased the Wells Fargo Line commitment
amount to $150 million during the first quarter of 1997, and reduced the
variable interest rate to LIBOR plus 1.50%.
On June 11, 1996, the Company entered into a Stock Purchase Agreement (the
"Agreement") with US Realty. Under the Agreement, the Company has agreed to sell
7,499,400 shares of common stock to US Realty at a price of $17.625 per share
representing total maximum proceeds of $132,176,925. During 1996, the Company
sold 3,651,800 shares to US Realty for $64,362,975 and the proceeds were used to
pay down the Wells Fargo Line. The Company sold 1,475,178 shares to US Realty on
March 3, 1997 and the proceeds of $26 million were primarily used to reduce debt
assumed as part of the Branch transaction. Not later than June, 1997, the
Company intends to sell the remaining shares committed to US Realty, the
proceeds of which will be used to further reduce its outstanding debt. As part
of the Agreement, US Realty also has participation rights entitling them to
purchase additional equity in the Company at the same price as that offered to
other purchasers in order to preserve their pro rata ownership in the Company
including common stock and Redeemable Units issued as part of the Branch
transaction.
The Company funded the 1995 Acquisitions from borrowings on the Line and
the proceeds from a $50 million private placement (the "Private Placement"). The
Private Placement was completed on December 20, 1995 by issuing 2,500,000 shares
of non-voting Class B common stock to a single investor. The Class B common
shares are convertible into 2,975,468 shares of common stock beginning on the
third anniversary of the issuance date subject to limitations that the holder
may not beneficially own more than 4.9% of the Company's outstanding common
stock except in certain circumstances.
The Company's principal demands for liquidity are dividends to
stockholders, the operation, maintenance and improvement of real estate, and
scheduled interest and principal payments. The Company paid common and preferred
dividends of $16.2 million and $10.8 million to its stockholders during 1996 and
1995, respectively. The percentage of funds from operations paid out in common
dividends, or "dividend payout ratio", was 80.7% and 85.2% at December 31, 1996
and 1995, respectively. In January 1997, the Company increased its quarterly
common dividend to $.42 per share or $1.68 annually. Total dividends expected to
be paid by the Company during 1997 will increase substantially over 1996 due to
the common stock dividend increase, and the Agreement with US Realty; however,
the Company expects the dividend payout ratio to remain below 85%.
15
During 1996 and 1995, the Company's net cash used in investing activities
was $109.8 million and $61.5 million, respectively, related primarily to real
estate acquisitions, construction and building improvements. The Company
invested approximately $2.9 million and $2.0 million for improvements to its
properties at December 31, 1996 and 1995, respectively. The Company anticipates
that cash provided by operating activities, unused amounts under the Wells Fargo
Line, and cash reserves are adequate to meet liquidity requirements. At December
31, 1996, the Company had cash balances of $8.3 million of which $1.8 million
was restricted.
The Company has made an election to be taxed, and is operating so as to
qualify, as a Real Estate Investment Trust ("REIT") for Federal income tax
purposes, and accordingly has paid no Federal income tax subsequent to its
Initial Public Offering in 1993. While the Company intends to continue to pay
dividends to its stockholders, the Company will reserve such amounts of cash
flow as it considers necessary for the proper maintenance and improvement of its
real estate, while still maintaining its qualification as a REIT.
The Company's real estate portfolio has grown substantially during 1996
and 1995 as a result of the acquisitions and developments discussed above. In
addition to the Branch acquisition, during 1997, the Company expects to exceed
the 1996 level of growth and intends to meet the related capital requirements,
principally for the acquisition or development of new properties, from
borrowings on the Wells Fargo Line, and from additional public equity and debt
offerings. Because such acquisition and development activities are discretionary
in nature, they are not expected to burden the Company's capital resources
currently available for liquidity requirements.
Results of Operations
Comparison of 1996 to 1995
Revenues increased $13.0 million or 38% to $46.9 million in 1996 due to
the 1996 Acquisitions providing $3.7 million in revenues in 1996 (partial year
ownership), and the 1995 Acquisitions providing $9.5 million in 1996 vs. $2.3
million in 1995 (partial year ownership). At December 31, 1996, the real estate
portfolio contained approximately 5.5 million sf, was 95.4% leased and had
average rents of $8.73 per sf. Minimum rent increased $9.7 million or 39%, and
recoveries from tenants increased $1.9 million or 32%. On a same property basis
(excluding the 1996 and 1995 Acquisitions) revenues increased $2.0 million or
6.3%, primarily due to higher occupancy levels, and an increase in average
rents. At December 31, 1996, the real estate portfolio on a same property basis
was 96.2% leased vs. 95.7% leased at December 31, 1995. Same property average
rents grew to $8.13 at December 31, 1996 from $8.08 at December 31, 1995.
Revenues from property management, leasing, brokerage, and development services
provided on properties not owned by the Company were $3.4 million in 1996
compared to $2.4 million in 1995, the increase due primarily to higher build to
suit development activity.
Operating expenses increased $6.9 million or 34% to $26.9 million in 1996.
Combined operating and maintenance expense and real estate taxes increased $3.4
million or 39% during 1996 to $12.1 million due to the 1996 Acquisitions
generating $1.0 million in operating expenses in 1996 (partial year ownership)
and the 1995 Acquisitions producing $2.6 million in operating expenses in 1996
vs. $.5 million in 1995 (partial year ownership). General and administrative
expense increased 24% during 1996 to $6.0 million due to hiring new employees
during 1996 as part of the development of a "retail operating system" that will
ensure that the Company has the resources necessary to acquire and manage
properties in the future. Depreciation and amortization was 36% higher than 1995
due to the 1996 and 1995 Acquisitions.
Net interest expense increased to $10.1 million in 1996 from $8.4 million
in 1995 or 21% due primarily to increased average outstanding loan balances.
Outstanding debt at December 31, 1996 was $172 million vs. $116 million in 1995.
Weighted average interest rates were 7.5% in 1996 vs. 7.7% in 1995. Preferred
stock dividends declined as a result of the full conversion of the remaining
Series A preferred stock into common stock during 1996. Net income for common
stockholders was $9.9 million or $.96 per share in 1996 vs. $5.0 million or $.75
per share in 1995.
16
Comparison of 1995 to 1994
Revenues increased $6.0 million or 21% to $34.0 million in 1995 due to the
1995 Acquisitions providing $2.3 million in revenues in 1995 (partial year
ownership), and the 1994 Acquisitions providing $7.6 million in 1995 vs. $5.0
million in 1994 (partial year ownership). At December 31, 1995, the real estate
portfolio contained approximately 4 million sf, was 96.2% leased and had average
rents of $8.54 per sf. Minimum rent increased $4.3 million or 21%, and
recoveries from tenants increased $1.4 million or 33%. On a same property basis
(excluding the 1995 and 1994 Acquisitions) revenues increased $1.1 million or
4.8%, primarily due to higher occupancy levels, and an increase in average
rents. At December 31, 1995, the real estate portfolio on a same property basis
was 95.3% leased vs. 93.7% leased at December 31, 1994. Same property average
rents grew to $8.49 at December 31, 1995 from $8.34 at December 31, 1994.
Revenues from property management, leasing, brokerage, and development services
provided on properties not owned by the Company were $2.4 million in 1995
compared to $2.3 million in 1994.
Operating expenses increased $3.1 million or 18% to $20.0 million in 1995.
Combined operating and maintenance expense and real estate taxes increased $1.5
million or 22% during 1995 to $8.7 million due to the 1995 Acquisitions
generating $.45 million in operating expenses in 1995 (partial year ownership)
and the 1994 Acquisitions producing $1.7 million in operating expenses in 1995
vs. $1.0 million in 1994 (partial year ownership). General and administrative
expense increased 8% during 1995 to $4.9 million due to increased staffing
requirements related to the acquisitions, and nominal increases in employee
compensation. Depreciation and amortization was 22% higher than 1994 due to the
1995 and 1994 Acquisitions.
Net interest expense increased to $8.4 million in 1995 from $5.7 million
in 1994 or 47% due primarily to increased average outstanding loan balances and
higher interest rates. Outstanding debt at December 31,1995 was $116 million vs.
$108 million in 1994. Weighted average interest rates were 7.7% in 1995 vs. 7.2%
in 1994. Preferred stock dividends increased from $.28 million in 1994 to $.59
million in 1995 as a result of the Series B preferred stock issued on October
26, 1995 and outstanding through December 20, 1995, partially offset by the
conversion of Series A preferred stock into common stock.
Net income for common stockholders was $5.0 million or $.75 per share in
1995 vs. $5.1 million or $.80 per share in 1994. The reduction is primarily due
to the increase in net interest expense and depreciation expense discussed
above, and additionally, as it pertains to per share amounts, the dilution from
the conversion of the Series A and B preferred stock into common and Class B
common stock, respectively.
Funds from Operations
The Company considers funds from operations ("FFO") to be one measure of
REIT performance and defines it as net income (computed in accordance with
generally accepted accounting principles) excluding gains (or losses) from debt
restructuring and sales of property, adjusted for certain noncash amounts,
primarily depreciation and amortization, and after adjustments for investments
in real estate partnerships. Adjustments for investments in real estate
partnerships are calculated to reflect FFO on the same basis. FFO as defined
above has become a measure used by many industry analysts; however, FFO should
not be considered an alternative to net income as an indication of the Company's
performance or to cash flow as a measure of liquidity determined in accordance
with generally accepted accounting principles.
FFO for the years ended December 31, 1996, 1995 and 1994 are summarized
in the following table:
1996 1995 1994
Net income for common stockholders $ 9,907 4,994 5,101
Add: non-cash amounts:
Real estate depreciation and
amortization 8,049 5,833 4,656
Common stock compensation:
Board of directors' fees and
401 (k) contributions 613 451 417
Long-term compensation plans 2,173 815 621
Straight-lining of rents charge 28 208 206
------ ------ ------
Funds from operations $ 20,770 12,301 11,001
====== ====== ======
Weighted average shares outstanding 10,341 6,630 6,339
====== ===== =====
Funds from operations per share $ 2.01 1.86 1.74
===== ==== ====
17
In May 1995 the National Association of Real Estate Investment Trusts
(NAREIT) amended the definition of FFO and recommended the following changes to
become effective for fiscal years ending in 1996: (1) amortization of loan costs
and depreciation of office furniture and equipment should not be added back to
net income, (2) non-recurring gains (losses) should be excluded from FFO, and
(3) gains (losses) from the sale of undepreciated real estate considered to be
part of a company's recurring business may be included in FFO. The Company
modified its definition of FFO for these changes effective January 1, 1996 and
has also restated amounts reported for 1995 and 1994 for comparison purposes.
Environmental Matters
The Company 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 Company's shopping centers is the principal environmental concern.
The Company believes that the dry cleaners are operating in accordance with
current laws and regulations and has established procedures to monitor their
operations. Based on information presently available, no additional
environmental accruals were made and management believes that the ultimate
disposition of currently known matters will not have a material effect on the
financial position, liquidity, or operations of the Company. Environmental
matters are discussed further in note 10, Contingencies, of the notes to
Consolidated Financial Statements.
Economic Conditions
A substantial number of the Company's long-term leases contain provisions
designed to mitigate the adverse impact of inflation on the Company's net
income. Such provisions include percentage rentals, rental escalation clauses
and reimbursements for common area maintenance, insurance, and real estate
taxes. In addition, 42% of the Company's leases have terms of five years or
less, which allows the Company the opportunity to increase rents upon lease
expiration. Approximately 42% of the Company's leases expire beyond 10 years and
are generally anchor tenants. Unfavorable economic conditions could result in
the inability of certain tenants to meet their lease obligations and otherwise
could adversely affect the Company's ability to attract and retain desirable
tenants. During 1996, Discovery Zone ("DZ") filed for protection under the
bankruptcy laws. DZ had two leases with the Company, both of which have been
terminated and no longer pay rent. DZ's annualized minimum rent represented
approximately .50% of 1996 minimum rent reported by the Company. Luria's
currently has three leases with the Company, one store of which was closed
during 1995, but continued to pay rent. During 1996, Luria's defaulted on the
lease of the closed store and informed the Company that it intends to close its
remaining two stores during 1997. Minimum rent from the three Luria's leases
represents approximately 1.2% of 1996 total minimum rent reported by the
Company. The three leases with Luria's expire beyond 2007, and the Company
considers Luria's to be bound by the lease terms.
At December 31, 1996 approximately 11%, 5%, 3% and 3% of the Company's
annualized rent is received from Publix, Winn-Dixie, Wal-Mart and Kroger,
respectively (the "Four Major Tenants"). During 1996 no tenant had rents in
excess of 10% of the Company's minimum rent. In February, 1996, Wal-Mart closed
its store located at The Marketplace in Alexander City, Alabama in order to
relocate to a new larger store nearby. Wal-Mart will continue to pay rent due
under its lease at The Marketplace which expires in October, 2007. The
Marketplace is anchored by a Winn-Dixie which opened during 1995. Although the
Company considers the financial condition and its relationship with the Four
Major Tenants to be very solid, a significant downturn in business or the
non-renewal of expiring leases of the Four Major Tenants could adversely affect
the Company. Management also believes that the shopping centers are relatively
well positioned to withstand adverse economic conditions since they are
typically anchored by supermarkets, drug stores and discount department stores
that offer day-to-day necessities rather than luxury goods.
18
Item 8. Consolidated Financial Statements and Supplementary Data
The Consolidated Financial Statements and supplementary data included in
this Report are listed in Part IV, Item 14(a).
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning the directors of the Company is incorporated herein
by reference to the Company's definitive proxy statement to be filed with the
Securities and Exchange Commission within 120 days after the end of the fiscal
year covered by this Form 10-K with respect to its 1997 Annual Meeting of
Shareholders.
The following table provides information concerning the executive officers
of the Company, all of whom were officers of TRG for five years or more prior to
the Company's acquisition of TRG's real estate business in November, 1993.
- -------------------------------------------------------------------------------
Positions with the Company;
Name Principal Occupations During
(Age) Past Five Years
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Martin E. Stein, Jr. (44) President, Chief Executive Officer and Director
of the Company and TRG.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Bruce M. Johnson (49) Executive Vice President and Chief Financial
Officer of the Company and previously
Vice President of Investment Management and
Acquisitions for TRG.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Robert C. Gillander, Jr. (43) Executive Vice President of Investments
for the Company and previously Vice President
of Development for TRG.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
James D. Thompson (41) Executive Vice President of Operations for the
Company and previously Vice President of Asset
Management in North and Central Florida regions
for TRG.
- -------------------------------------------------------------------------------
19
Item 11. Executive Compensation
Incorporated herein by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days after the end of the fiscal year covered by this Form 10-K with respect to
its 1997 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owner and Management
Incorporated herein by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days after the end of the fiscal year covered by this Form 10-K with respect to
its 1997 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days after the end of the fiscal year covered by this Form 10-K with respect to
its 1997 Annual Meeting of Shareholders.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statements and Financial Statement Schedules:
The Company's 1996 financial statements and financial statement schedule,
together with the report of KPMG Peat Marwick LLP dated January 27, 1997, except
for Note 11 as to which the date is March 7, 1997 are listed on the index
immediately preceding the financial statements at the end of this report.
(b) Reports on Form 8-K:
None
20
(c) Exhibits:
3. Articles of Incorporation
*** (i) Restated Articles of Incorporation of Regency
Realty Corporation as amended to date.
*(ii) Bylaws of Regency Realty Corporation.
4. See exhibits 3(i) and 3(ii) for provisions of the Articles of
Incorporation and Bylaws of Regency Realty Corporation defining rights
of security holders.
10. Material Contracts
~*(a) Regency Realty Corporation 1993 Long Term Omnibus Plan
~*(b) Form of Stock Purchase Award Agreement
~*(c) Form of Management Stock Pledge Agreement, relating
to the Stock Purchase Award Agreement filed as Exhibit 10(b)
~*(d) Form of Promissory Note, relating to the Stock
Purchase Award Agreement filed as Exhibit 10(b)
~*(e) Form of Option Award Agreement for Key Employees
~*(f) Form of Option Award Agreement for Non-Employee Directors
~*(g) Annual Incentive for Management Plan
~*(h) Form of Director/Officer Indemnification Agreement
~*(i) Form of Non-Competition Agreement between Regency Realty Corporation
and Joan W. Stein, Robert L. Stein, Richard W. Stein, the Martin E. Stein
Testamentary Trust A and the Martin E. Stein Testamentary Trust B. ~***
(j) Form of Employment Agreements entered into with the
following:
(i) Bruce M. Johnson
(ii) Robert C. Gillander, Jr.
(iii) James D. Thompson
(iv) Richard E. Cook
(v) A. Chester Skinner, III
(vi) J. Christian Leavitt
(vii) Robert L. Miller
~ Management contract or compensatory plan or arrangement
filed pursuant to S-K 601(10)(iii)(A).
* Included as an exhibit to the Pre-effective Amendment No. 2 to the
Company's S-11 filed October 5,1993, and is incorporated herein by reference
** Included as an exhibit to the Company's Form 10-Q filed
December 13, 1993, and is incorporated herein by reference
*** Included as an exhibit to the Company's Form 10-Q filed
November 14, 1996, and is incorporated herein by reference
**** Included as an exhibit to the Company's Form 10-Q filed May 12, 1994,
and is incorporated herein by reference
***** Filed as appendices to the Registrant's definitive proxy statement
dated August 2, 1996 and is incorporated herein by reference.
****** Filed as an exhibit to the Registrant's Form 8-K report
filed March 14, 1997 and is incorporated herein by reference.
21
*(k) Form of Agreement for Right of First Refusal as to stock in Regency
Realty Group, Inc. between The Regency Group, Inc. and Regency Realty
Corporation.
(l) The following documents, all dated November 5, 1993, relating to a $51
million loan from Salomon Brothers Inc. to corporations and subsidiaries wholly
owned by the Company.
** (i) Loan Agreement between RSP IV Criterion, Ltd.,
Regency Rosewood Temple Terrace, Ltd., Treasure Coast
Investors, Ltd., Landcom Regency Mandarin, Ltd., RRC FL
SPC, Inc., RRC AL SPC, Inc., RRC MS SPC, Inc., and RRC
GA SPC, Inc. (as borrowers) and RRC Lender, Inc. (as
lender)
** (ii) Promissory Note in the original principal amount
of $51 million
** (iii) Undertaking executed by the Registrant and RRC FL
SPC, Inc., RRC AL SPC, Inc., RRC MS SPC, Inc., and RRC
GA SPC, Inc.
** (iv) Certificate Purchase Agreement between RRC Lender,
Inc. (as seller) and Salomon Brothers, Inc.( as lender)
(m) The following documents relating to the purchase by Security Capital
U.S. Realty and Security Capital Holdings, S.A. of up to 45% of the Registrant's
outstanding common stock:
***** (i) Stock Purchase Agreement dated June 11, 1996.
***** (ii) Stockholders' Agreement dated July 10, 1996.
****** (A) First Amendment of Stockholders' Agreement
dated February 10, 1997.
***** (iii) Registration Rights Agreement dated July 10, 1996.
****(n) Stock Grant Plan adopted on January 31, 1994 to grant
stock to employees.
(o) Criteria for Restricted Stock Awards under 1993
Long Term Omnibus Plan.
(p) Form of 1996 Stock Purchase Award Agreement.
(q) Form of 1996 Management Stock Pledge Agreement
relating to the Stock Purchase Award Agreement filed as
Exhibit 10(p)..
(r) Form of Promissory Note relating to 1996 Stock Purchase Award
Agreement filed as Exhibit 10 (p).
- ----------------------------
~ Management contract or compensatory plan or arrangement filed pursuant to
S-K 601(10)(iii)(A).
* Included as an exhibit to the Pre-effective Amendment No. 2 to the
Company's S-11 filed October 5, 1993, and is incorporated herein by reference
** Included as an exhibit to the Company's Form 10-Q filed December 13,
1993, and is incorporated herein by reference
*** Included as an exhibit to the Company's Form 10-Q filed November 14, 1996,
and is incorporated herein by reference
**** Included as an exhibit to the Company's Form 10-Q filed May 12, 1994,
and is incorporated herein by reference
***** Filed as appendices to the Registrant's definitive proxy statement
dated August 2, 1996 and is incorporated herein by reference.
****** Filed as an exhibit to the Registrant's Form 8-K report
filed March 14, 1997 and is incorporated herein by reference.
22
(s) Purchase and Sale Agreement dated July 11, 1996 between RREFF
MA-II Cambridge Square, Inc., a Delaware Corporation as
("Seller") and RRC Acquisitions, Inc., a Florida Corporation
and wholly-owned subsidiary of the Company as ("Buyer"),
relating to the acquisition of Cambridge Square Shopping
Center.
(t) Purchase and Sale Agreement dated September 23, 1996 between
Real Estate Collateral Management Company, Inc., a Delaware
Corporation as ("Seller") and RRC Acquisitions, Inc., a
Florida Corporation and wholly-owned subsidiary of the Company
as ('Buyer"), relating to the acquisition of Old St. Augustine
Plaza.
(u) Purchase and Sale Agreement dated November 7, 1996 between
Durham Woodcroft Associates. L.P., a North Carolina limited
partnership as ('Seller") and RRC Acquisitions, Inc., a
Florida Corporation and wholly-owned subsidiary of the Company
as ("Buyer"), relating to the acquisition of Woodcroft
Shopping Center.
(v) Purchase and Sale Agreement dated December 10, 1996 between C.
M. Wellington Town Square, L.P., an Illinois limited
partnership as ('Seller") and RRC Acquisitions, Inc., a
Florida Corporation and wholly-owned subsidiary of the Company
as ("Buyer"), relating to the acquisition of Wellington Town
Square.
(w) Agreement to Purchase Real Estate dated December 27, 1996
between Publix Super Markets, Inc., a Florida Corporation as
('Seller") and RRC Acquisitions, Inc., a Florida Corporation
and wholly-owned subsidiary of the Company as ('Buyer"),
relating to the acquisition of Town Center at Martin Downs.
~*(x) Form of Employment Agreement with Martin E. Stein, Jr.
21. Subsidiaries of the Registrant
23. Consent of KPMG Peat Marwick LLP
27. Financial Data Table
- --------------------------
~ Management contract or compensatory plan or arrangement filed pursuant to
S-K 601(10)(iii)(A).
* Included as an exhibit to the Pre-effective Amendment No.2 to the Company's
S-11 filed October 5, 1993, and is incorporated herein by reference
** Included as an exhibit to the Company's Form 10-Q filed December 13,
1993, and is incorporated herein by reference
*** Included as an exhibit to the Company's Form 10-Q filed November 14,
1996, and is incorporated herein by reference
**** Included as an exhibit to the Company's Form 10-Q filed May 12, 1994,
and is incorporated herein by reference
***** Filed as appendices to the Registrant's definitive proxy statement
dated August 2, 1996 and is incorporated herein by reference.
****** Filed as an exhibit to the Registrant's Form 8-K report filed March
14, 1997 and is incorporated herein by reference.
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REGENCY REALTY CORPORATION
Date: March 21, 1997 By: /s/ Martin E. Stein, Jr.
---------------------------
Martin E. Stein, Jr.
President and Chief
Executive Officer
Date: March 21,1997 By: /s/ Bruce M. Johnson
-------------------------
Bruce M. Johnson
Executive Vice President and
Chief Financial Officer
Date: March 21, 1997 By: /s/ J. Christian Leavitt
---------------------------
J. Christian Leavitt
Secretary and Treasurer
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Date: March 21, 1997 /s/ Joan W. Stein
-----------------------------
Joan W. Stein, Chairman
Date: March 21, 1997 /s/ Martin E. Stein, Jr.
------------------------------
Martin E. Stein, Jr., Director
Date: March 21, 1997 /s/ Robert L. Stein
-----------------------------
Robert L. Stein, Director
Date: March 21, 1997 /s/ Edward L. Baker
-----------------------------
Edward L. Baker, Director
Date: March 21, 1997 /s/ A. R.Carpenter
------------------------------
A. R. Carpenter, Director
Date: March 21, 1997 /s/ J. Dix Druce
-------------------------------
J. Dix Druce, Jr., Director
Date: March 21, 1997 /s/ Albert D. Ernest, Jr.
--------------------------
Albert D. Ernest, Jr., Director
Date: March 21, 1997 /s/ Douglas S. Luke
--------------------------
Douglas S. Luke, Director
Date: March 21, 1997 /s/ J. Marhsall Peck
-----------------------------
J. Marshall Peck, Director
Date: March 21, 1997 /s/ Paul E. Szurek
-----------------------------
Paul E. Szurek, Director
24
REGENCY REALTY CORPORATION
INDEX TO FINANCIAL STATEMENTS
Regency Realty Corporation
Independent Auditors' Report F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995, and 1994 F-4
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994 F-7
Notes to Consolidated Financial Statements F-9
Financial Statement Schedule
Independent Auditors' Report on Financial Statement Schedule S-1
Schedule III - Regency Realty Corporation Combined
Real Estate and Accumulated Depreciation -
December 31, 1996 S-2
All other schedules are omitted because they are
not applicable or because information required
therein is shown in the financial statements
or notes thereto.
F-1
Independent Auditors' Report
The Shareholders and Board of Directors
Regency Realty Corporation:
We have audited the accompanying consolidated balance sheets of Regency Realty
Corporation as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three year period ended December 31, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Regency Realty
Corporation as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
-----------------------------
KPMG Peat Marwick LLP
Certified Public Accountants
Jacksonville, Florida January 27, 1997, except for Note 11, as to which the date
is March 7, 1997
F-2
REGENCY REALTY CORPORATION
Consolidated Balance Sheets
December 31, 1996 and 1995
1996 1995
---- ----
Assets
Real estate rental property, at cost
(notes 2, 4, 5 and 8):
Land $ 84,186,483 61,126,706
Buildings and improvements 304,820,998 217,604,461
Construction in progress 3,360,206 -
----------- -----------
392,367,687 278,731,167
Less: accumulated depreciation 26,213,225 18,631,310
----------- -----------
366,154,462 260,099,857
Investments in real estate
partnerships (note 3) 1,035,107 315,389
----------- -----------
Real estate, net 367,189,569 260,415,246
Cash and cash equivalents (note 4) 8,293,229 3,401,701
Tenant receivables, net of allowance for
uncollectible accounts of $832,091
and $474,019 at December 31, 1996 and
1995, respectively 5,281,419 2,620,763
Deferred costs, less accumulated amortization
of $2,519,019 and $2,547,765 at
December 31, 1996 and 1995, respectively 3,961,439 3,598,011
Other assets 1,798,393 969,676
----------- ---------
$ 386,524,049 271,005,397
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Mortgage loans payable (note 4) 97,906,288 93,277,273
Acquisition and development line of
credit (note 5) 73,701,185 22,339,803
Accounts payable and other liabilities 6,300,640 7,405,232
Tenants' security and escrow deposits 1,381,673 976,515
----------- -----------
Total Liabilities 179,289,786 123,998,823
----------- -----------
Limited partner's interest in operating
partnership (note 6) 508,486 -
Stockholders' Equity (notes 6 and 7)
Preferred stock - 1,000,000 shares
authorized:Series A 8% cumulative
convertible, 1,916 shares issued
and outstanding at December 31, 1995 - 1,916,268
Common stock $.01 par value per share:
25,000,000 shares authorized;
10,614,905 and 6,728,723 shares
issued and outstanding at
December 31, 1996 and 1995,
respectively 106,149 67,287
Special common stock - 10,000,000 shares
authorized: Class B $.01 par
value per share, 2,500,000
shares issued and outstanding 25,000 25,000
Additional paid in capital 223,080,831 155,221,241
Distributions in excess of net income (13,981,770) (8,073,188)
Stock loans (2,504,433) (2,150,034)
------------ ------------
Total stockholders' equity 206,725,777 147,006,574
=========== ===========
Commitments and contingencies
(notes 8 and 10)
$ 386,524,049 271,005,397
See accompanying notes to consolidated =========== ===========
financial statements.
F-3
REGENCY REALTY CORPORATION
Consolidated Statements of Operations
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ----- ----
Revenues:
Minimum rent (note 8) $ 34,705,905 25,044,201 20,716,870
Percentage rent 997,981 672,986 565,711
Recoveries from tenants (note 9) 7,729,404 5,837,773 4,390,894
Management, leasing and
brokerage fees 3,444,287 2,425,733 2,331,990
Equity in income of real estate
partnership investments (note 3) 69,990 4,226 16,943
---------- ---------- ----------
Total revenues 46,947,567 33,984,919 28,022,408
---------- ---------- ----------
Operating expenses:
Depreciation and amortization 8,758,067 6,436,092 5,265,947
Operating and maintenance 7,655,934 5,682,967 4,793,231
General and administrative (note 9) 6,048,140 4,894,432 4,530,682
Real estate taxes 4,409,460 3,000,557 2,347,016
---------- ---------- ----------
Total operating expenses 26,871,601 20,014,048 16,936,876
---------- ---------- ----------
Interest expense (income):
Interest expense 10,777,131 8,840,376 6,065,239
Interest income (666,031) (454,207) (364,105)
----------- ---------- ----------
Net interest expense 10,111,100 8,386,169 5,701,134
----------- ---------- ----------
Net income 9,964,866 5,584,702 5,384,398
Preferred stock dividends 57,721 590,904 283,071
--------- --------- ---------
Net income for common
stockholders $ 9,907,145 4,993,798 5,101,327
========= ========= =========
Net income per common share
outstanding $ .96 .75 .80
=== === ===
Weighted average common
shares outstanding 10,341,239 6,630,385 6,338,648
========== ========= =========
See accompanying notes to consolidated financial statements.
F-4
REGENCY REALTY CORPORATION
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, 1995 and 1994
Additional Distributions
Preferred Common Class B Paid In in excess of Stock
Stock Stock Common Stock Capital Net Income Loans
----- ----- ------------ ------- ---------- -----
Balance at December 31, 1993 - 63,331 - 98,986,129 895,522 (2,529,450)
Common stock issued as compensation - 101 - 173,771 - -
Series A Preferred stock issued (note 6) 7,665,132 - - - - -
Series A Preferred stock converted
to common stock (1,916,283) 1,114 - 1,915,169 - -
Series A Preferred stock converted -
partial share payment (14) - - - - -
Partial forgiveness of stock loans (note 7) - - - - - 126,472
Cash dividends declared:
Preferred stock - - - - (283,071) -
Common stock, $1.37 per share - - - - (8,716,587) -
Stock issuance costs - - - (5,775) - -
Net income - - - - 5,384,398 -
----------- --------- ------------- ----------- ----------- ----------
Balance at December 31, 1994 $ 5,748,835 64,546 - 101,069,294 (2,719,738) (2,402,978)
Common stock issued as compensation - 516 - 831,083 - -
Series B Preferred stock issued (note 6) 18,250,000 - - - - -
Series B Preferred stock converted
to Class B common stock (18,250,000) - 9,125 18,240,875 - -
Class B common stock issued (note 6) - - 15,875 31,734,125 - -
Series A Preferred stock converted
to common stock (3,832,567) 2,225 - 3,830,342 - -
Partial forgiveness of stock loans (note 7) - - - - - 252,944
Cash dividends declared:
Preferred stock - - - - (590,904) -
Common stock, $1.58 per share - - - - (10,347,248) -
Stock issuance costs - - - (484,478) - -
Net income - - - - 5,584,702 -
----------- --------- ------------- ----------- --------- ----------
Balance at December 31, 1995 $ 1,916,268 67,287 25,000 155,221,241 (8,073,188) (2,150,034)
Common stock issued (note 6) - 36,518 - 64,326,457 - -
Common stock purchased by executive
officers (note 7) - 800 - 1,339,200 - (1,273,000)
Common stock issued as compensation - 532 - 1,091,375 - -
Common stock purchased by directors - 69 - 139,931 - -
Series A Preferred stock converted
to common stock (1,916,282) 943 - 1,915,339 - -
Series A Preferred stock converted -
partial share payment 14 - - - - -
Partial forgiveness of stock loans (note 7) - - - - - 918,601
Cash dividends declared:
Preferred stock - - - - (57,721) -
Common stock, $1.62 per share - - - - (15,815,727) -
Stock issuance costs - - - (952,712) - -
Net income - - - - 9,964,866 -
----------- --------- ------------- ----------- ------------ ----------
Balance at December 31, 1996 $ - 106,149 25,000 223,080,831 (13,981,770) (2,504,433)
=========== ========= ============= =========== ============ ===========
See accompanying notes to consolidated financial statements.
F-5
REGENCY REALTY CORPORATION
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, 1995 and 1994
-continued-
Total
Stockholders'
Equity
-------------
Balance at December 31, 1993 97,415,532
Common stock issued as compensation 173,872
Series A Preferred stock issued (note 6) 7,665,132
Series A Preferred stock converted
to common stock -
Series A Preferred stock converted -
partial share payment (14)
Partial forgiveness of stock loans (note 7) 126,472
Cash dividends declared:
Preferred stock (283,071)
Common stock, $1.37 per share (8,716,587)
Stock issuance costs (5,775)
Net income 5,384,398
-----------
Balance at December 31, 1994 101,759,959
Common stock issued as compensation 831,599
Series B Preferred stock issued (note 6) 18,250,000
Series B Preferred stock converted
to Class B common stock -
Class B common stock issued (note 6) 31,750,000
Series A Preferred stock converted
to common stock -
Partial forgiveness of stock loans (note 7) 252,944
Cash dividends declared:
Preferred stock (590,904)
Common stock, $1.58 per share (10,347,248)
Stock issuance costs (484,478)
Net income 5,584,702
------------
Balance at December 31, 1995 147,006,574
Common stock issued (note 6) 64,362,975
Common stock purchased by executive
officers (note 7) 67,000
Common stock issued as compensation 1,091,907
Common stock purchased by directors 140,000
Series A Preferred stock converted
to common stock -
Series A Preferred stock converted -
partial share payment 14
Partial forgiveness of stock loans (note 7) 918,601
Cash dividends declared:
Preferred stock (57,721)
Common stock, $1.62 per share (15,815,727)
Stock issuance costs (952,712)
Net income 9,964,866
------------
Balance at December 31, 1996 206,725,777
===========
See accompanying notes to consolidated financial statements.
F-6
REGENCY REALTY CORPORATION
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income $ 9,964,866 5,584,702 5,384,398
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 8,758,067 6,436,092 5,265,947
Equity in income of real estate
partnership investments (69,990) (4,226) (16,943)
Changes in assets and liabilities:
(Increase) decrease in tenant receivables (2,660,656) 9,879 (397,699)
(Increase) in deferred leasing commissions (585,889) (479,454) (378,563)
(increase) in other assets (1,019,637) (619,800) (130,012)
Increase in tenants' security
and escrow deposits 405,158 304,378 282,568
Increase in accounts payable
and other liabilities 1,212,000 4,660,370 1,496,384
----------- ----------- -----------
Net cash provided by operating activities 16,003,919 15,891,941 11,506,080
----------- ----------- -----------
Cash flows from investing activities:
Investment in real estate (102,933,980) (59,537,217) (43,518,218)
Investment in real estate partnership (881,309) - -
Capital expenditures (2,898,250) (1,978,643) (1,875,963)
Construction in progress (3,360,206) - -
Distributions received from real
estate partnership investments 231,581 12,146 29,083
------------ ----------- -----------
Net cash used in investing activities (109,842,164) (61,503,714) (45,365,098)
------------ ----------- -----------
Cash flows from financing activities:
Proceeds from common stock issuance 64,569,975 - -
Limited partner distribution (16,846) - -
Series B preferred stock issued - 18,250,000 -
Class B common stock issued - 31,750,000 -
Dividends paid in cash (16,179,518) (10,760,237) (8,871,517)
Stock issuance costs (952,712) (484,478) (5,775)
Proceeds (repayments) from acquisition
and development line of credit, net 51,361,382 (18,736,629) 38,555,343
Proceeds from construction and mortgage
loans payable 1,518,331 26,773,540 5,326,460
Principal payments on mortgage loans payable (808,068) (417,851) (112,581)
Payment of loan closing costs (762,771) (221,708) (422,253)
------------ ----------- -----------
Net cash provided by financing activities 98,729,773 46,152,637 34,469,677
------------ ----------- -----------
Net increase in cash and cash equivalents 4,891,528 540,864 610,659
------------ ----------- -----------
Cash and cash equivalents at beginning of period 3,401,701 2,860,837 2,250,178
------------ ----------- -----------
Cash and cash equivalents at end of period $ 8,293,229 3,401,701 2,860,837
=========== ========== ==========
See accompanying notes to consolidated financial statements.
F-7
REGENCY REALTY CORPORATION
Consolidated Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994
-continued-
1996 1995 1994
---- ---- ----
Supplemental disclosure of
cash flow information
cash paid for interest
(including capitalized interest
of approximately $381,000,
$285,000 and
$216,000 in 1996, 1995
and 1994, respectively) $ 10,979,841 9,147,175 5,898,287
=========== ========== =========
Supplemental disclosure of non
cash transactions:
Mortgage loans assumed
from sellers of real estate $ 3,918,752 - 10,707,705
=========== ========== ==========
Limited partner interest
in operating partnership
issued to seller of
eal estate as partial payment $ 525,332 - -
=========== ========== ==========
Preferred stock issued to
seller of real estate $ - - 7,665,132
========= ========== ==========
See accompanying notes to consolidated financial statements.
F-8
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
1. Summary of Significant Accounting Policies
(a) General
Regency Realty Corporation (the Company) was formed for the purpose of
managing, leasing, brokering, acquiring, and developing shopping
centers. The Company also provides management, leasing, brokerage and
development services for real estate not owned by the Company (third
parties). The Company commenced operations effective with the
completion of its initial public offering on November 5, 1993.
The accompanying consolidated financial statements include the accounts
of Regency Realty Group, Inc. (the "Management Company"), its wholly
owned real estate properties, an operating partnership, and the
Company's two joint ventures. All significant intercompany balances and
transactions have been eliminated.
(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. Minimum rent has been adjusted to reflect the
effects of recognizing rent on a straight line basis. Substantially all
of the lease agreements contain provisions which provide additional
rents based on tenants' sales volume or reimbursement of the tenants'
share of real estate taxes and certain common area maintenance (CAM)
costs. These additional rents are reflected on the accrual basis.
Management, leasing, brokerage and development fees are recognized as
revenue when earned.
(c) Real Estate Rental Property
Land, buildings and improvements are recorded at cost. All direct and
indirect costs clearly associated with the acquisition, development and
construction of real estate projects owned by the Company are
capitalized as buildings and improvements, while maintenance and
repairs which do not improve or extend the useful lives of the
respective assets are reflected in operating and maintenance expense.
The property cost includes the capitalization of interest expense
incurred during construction in accordance with generally accepted
accounting principles. Included in land is 30 and 8.4 acres of
undeveloped land with a cost basis of approximately $2,600,000 and
$1,700,000 at December 31, 1996 and 1995, respectively.
Depreciation is computed using the straight line method over estimated
useful lives up to forty years for buildings and improvements, term of
lease for tenant improvements, and five to seven years for furniture
and equipment.
(d) Income Taxes
The Company has made an election to be taxed, and is operating so as to
qualify, as a Real Estate Investment Trust (REIT) for Federal income
tax purposes. Accordingly, the Company will not pay Federal income tax
provided distributions to stockholders equal at least the amount of its
REIT taxable income as defined under the Internal Revenue Code.
F-9
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies, continued
(d) Income Taxes, continued
Regency Realty Group, Inc. files a separate tax return and is subject
to Federal and State income taxes. This Management Company had taxable
income of $150,674 for the year ended December 31, 1996 and incurred a
taxable loss for the years ended December 31, 1995 and 1994. The
Management Company had a net operating loss carryforward of $484,000 at
December 31, 1995, and accordingly paid no income tax in 1996. No
income tax benefit has been recorded for the net operating loss
carryforwards.
The tax basis of real estate assets exceeds the net book basis by
approximately $1.9 and $7.0 million at December 31, 1996 and 1995,
respectively, primarily due to higher depreciation expense for book
purposes and differences in accounting for real estate held in the
operating partnership.
(e) Deferred Costs
Deferred costs consist of internal and external commissions associated
with leasing the rental property and loan costs incurred in obtaining
financing which are limited to initial direct and incremental costs.
The net leasing commission balance was $1,108,374 and $808,291 at
December 31, 1996 and 1995, respectively. The net loan cost balance was
$2,853,065 and $2,789,720 at December 31, 1996 and 1995, respectively.
Such costs are deferred and amortized using the straight-line method
over the terms of the respective leases and loans. Fully amortized
deferred leasing costs of $958,398 were removed from the financial
statements during 1996.
(f) Fair Value of Financial Instruments
The fair value of the Company's mortgage loans payable and acquisition
and development line of credit are estimated based on the current rates
available to the Company for debt of the same remaining maturities.
Therefore, the Company considers their carrying value to be a
reasonable estimation of their fair value.
(g) Per Share Data
Net income per common share outstanding is computed based upon the
weighted average shares outstanding during the period. The Company's
Class B common stock as well as the redeemable units of the limited
partner are convertible into shares of common stock and are included in
the weighted average shares calculation as common stock equivalents.
The dilutive impact of common stock options is included in the
calculation of net income per share when the exercise price falls below
the market price. Net income per share on a fully diluted basis is not
different from net income per common share outstanding and thus is not
disclosed separately.
(h) Cash and Cash Equivalents
Any instruments which have an original maturity of ninety days or less
when purchased are considered cash equivalents.
(i) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and
liabilities, at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
F-10
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies, continued
(j) Impairment of Long-Lived Assets
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", on January 1, 1996. This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.
Adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(k) Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option
plan in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and
related interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. On January 1, 1996, the
Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma net
income and pro forma earnings per share disclosures for employee stock
option grants made in 1995 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has
elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123.
(l) Reclassifications
Certain reclassifications have been made to the 1994 and 1995 amounts
to conform to classifications adopted in 1996.
2. Acquisitions of Real Estate Rental Property
During 1996 and 1995, the Company acquired 18 shopping centers (the
"Acquisitions") accounted for as purchases with consideration totaling
approximately $160.4 million in cash and the assumption of a mortgage loan.
The operating results are included in the Company'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 the Acquisitions had occurred on January 1, 1995, after
giving effect to certain adjustments including depreciation expense,
additional general and administration costs, interest expense on new debt
incurred, and an increase in the weighted average common shares outstanding
for Common and Class B common stock issued to acquire shopping centers as
if it had been issued on January 1, 1995. Pro forma revenues would have
been $57.6 million and $53.5 million in 1996 and 1995, respectively. Pro
forma net income for common stockholders would have been $10.6 million and
$8.0 million in 1996 and 1995, respectively. Pro forma net income per
common share would have been $.98 per share and $.76 per share in 1996 and
1995, respectively. This data does not purport to be indicative of what
would have occurred had the acquisitions been made on January 1, 1995, or
of results which may occur in the future.
F-11
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
3. Investments In Real Estate Partnerships
The Company has a 10% investment in Village Commons Shopping Center and
during 1996 acquired a 25% investment in Ocean East Mall by contributing
$881,307 in cash. These investments are recorded on the equity method of
accounting with income being recognized in the year reported by the
partnership. The Company's combined investment in these two partnerships
was $1,035,107 and $315,389 at December 31, 1996 and 1995, respectively.
Net income is allocated in accordance with each of the partnership
agreements. The Company's combined proportionate share of net income was
$69,990, $4,226 and $16,943 for the years ended December 31, 1996, 1995 and
1994, respectively.
At December 31, 1996 and 1995, the combined total assets of the
partnerships were $13,147,083 and $8,345,732, respectively, and total
liabilities were $7,109,378 and $5,192,241, respectively. Combined net
income was $323,174, $42,260 and $169,432 for the years ended December 31,
1996, 1995 and 1994, respectively.
4. Mortgage Loans Payable
Mortgage loans payable secured by real estate rental property are as
follows:
1996 1995
6.72% mortgage loan, held by a trust
created for the benefit of investors
who purchased mortgage pass-through
certificates, non recourse to the
Company, interest only paid monthly,
due in full November 5, 2000 $ 51,000,000 51,000,000
7.60% mortgage notes payable in monthly
principal installments of $26,236
maturing from June 28, 2001
to June 1, 2002 15,932,745 16,238,314
9.80% mortgage note, payable in monthly
installments of $73,899, including
principal and interest, maturing
on February 1, 1999 8,000,421 8,097,910
9.50% mortgage note, payable in monthly
installments of $78,633 including principal
and interest, maturing on March 1, 2002 8,823,403 8,931,412
8.01% mortgage note, payable in monthly
principal installments of $10,411,
maturing on August 17, 2002 6,532,665 6,651,967
8.28% mortgage note, payable in monthly
installments of $37,598 including
principal and interest, maturing
on August 1, 1997 3,801,821 -
8.72% mortgage note, rate adjusts
annually, payable in monthly
installments of $23,105 including
principal and interest, maturing
on March 1, 1997 2,296,902 2,357,670
Construction note payable, interest only
payable monthly at Prime + 1/4%
1,518,331 -
---------- -----------
Total mortgage loans payable $ 97,906,288 93,277,273
========== ===========
F-12
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
4. Mortgage Loans Payable (continued)
Principal maturities on the mortgage loans are as follows:
Year Amount
1997 6,774,592
1998 2,253,663
1999 8,443,866
2000 51,726,556
2001 8,869,856
Thereafter 19,837,755
----------
$ 97,906,288
============
As part of their borrowing arrangements, the Company is expected to
maintain escrow balances for the payment of real estate taxes on the
mortgaged properties, and in the case of the $51,000,000 mortgage loan,
also maintain interest, insurance and specified capital improvement
escrows. Escrow balances recorded as cash and cash equivalents were
$1,069,337 and $1,255,421 at December 31, 1996 and 1995, respectively.
5. Acquisition and Development Line of Credit
The Company negotiated a $90 million unsecured acquisition and development
revolving line of credit, the Wells Fargo Line, during 1996 which replaced
the existing secured line of credit, the Line. The Wells Fargo Line will be
used to finance future real estate acquisitions and developments. The
interest rate is based on the LIBOR plus1.625% with interest only for two
years, and if then terminated, becomes a two year term loan maturing in
May, 2000 with principal due in seven equal quarterly installments.
However, the borrower may request a one year extension of the interest only
revolving period annually in May of each year beginning in 1997.
6. Stockholders' Equity
On June 11, 1996, the Company entered into a Stock Purchase Agreement (the
"Agreement") with Security Capital U.S. Realty and Security Capital
Holdings S.A. ( collectively, "US Realty"). Under the Agreement, the
Company has agreed to sell 7,499,400 shares of Common Stock to US Realty at
$17.625 per share representing total maximum proceeds of $132,176,925.
During 1996, the Company sold 3,651,800 shares to US Realty for
$64,362,975. Not later than June 1, 1997 ("Subsequent Closing"), the
Company may sell up to 3,847,600 shares for a total of $67,813,950. US
Realty will have the right, exercisable on a one-time basis in June 1997,
to acquire additional shares of common stock to the extent that the shares
to be acquired at the Subsequent Closing have not yet been purchased.
In connection with the purchase of a shopping center on February 28, 1996,
the Company issued 28,848 Partnership Operating Units to a limited partner
convertible on a one for one basis into shares of common stock after the
first anniversary of the issuance date.
The Company completed a $50,000,000 private placement by issuing 2,500,000
shares of non-voting Class B common stock to a single investor on December
20, 1995 (the "Private Placement"). The proceeds from the Private Placement
were used to acquire five shopping centers. The Company initially issued
$18,250,000 of Series B preferred stock on October 26, 1995 to fund the
acquisition of a shopping center. These shares were subsequently converted
into Class B common stock. The Class B common stock is convertible into
2,975,468 shares of common stock beginning on the third anniversary of the
issuance date, subject to certain limitations defined in the agreement. The
dividend on each share of Class B common is payable when and if declared by
the Board of Directors pari passu with any dividend on the common stock of
the Company.
In connection with the purchase of a shopping center on June 29, 1994, the
Company issued 7,665 shares of Series A nonvoting preferred stock at a
liquidation value of $1,000 per share. In 1996, the holder converted all of
the remaining preferred stock outstanding into 94,282 shares of common
stock. In 1995 and 1994, the preferred stock was converted into 222,465 and
111,411 shares of common stock, respectively.
F-13
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
7. Long-term Stock Incentive Plans
In 1993, the Company adopted a Long Term Omnibus Plan (the "Plan") pursuant
to which the Board of Directors may grant stock and stock options to
officers, directors and other key employees. The Plan provides for the
issuance of up to 12% of the Company's common shares outstanding not to
exceed 3 million shares of authorized but unissued common stock. Stock
options are granted with an exercise price equal to the stock's fair market
value at the date of grant. All stock options granted have ten year terms,
and with respect to officers and other key employees, become fully
exercisable after five years from the date of grant, and with respect to
directors, become fully exercisable after one year.
At December 31, 1996, there were approximately 1.1 million shares available
for grant under the Plan. The per share weighted-average fair value of
stock options granted during 1996 and 1995 was $3.04 and $1.08 on the date
of grant using the Black Scholes option-pricing model with the following
weighted-average assumptions: 1996 - expected dividend yield 6.6%,
risk-free interest rate of 5.9%, expected volatility 21%, and an expected
life of five years; 1995 - expected dividend yield 9.2%, risk-free interest
rate of 5.4%, expected volatility 19%, and an expected life of five years.
The Company applies APB Opinion No. 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 SFAS No. 123, the Company's net income for common
stockholders would have been reduced to the pro forma amounts indicated
below:
Net income for
common stockholders 1996 1995
------------------- ---- ----
As reported $ 9,907,145 $ 4,993,798
Net income per
common share 0.96 0.75
Pro forma 9,896,934 4,993,798 (*)
Net income per
common share 0.96 0.75
-------------------
* The options granted during 1995 were issued
on December 31, 1995 and accordingly had no
effect to income.
Pro forma net income for common stockholders reflects only options granted
in 1996 and 1995. Therefore, the full impact of calculating compensation
cost for stock options under SFAS No. 123 is not reflected in the pro forma
net income for common stockholders amounts presented above because
compensation cost is reflected over the options' vesting period and
compensation cost for options granted prior to January 1, 1995 is not
considered.
Stock option activity during the periods indicated is as follows:
Number of Weighted-Average
Shares Exercise Price
---------- ----------------
Outstanding, December 31, 1993 187,000 $19.22
Granted 6,500 $17.33
Forfeited (2,500) $19.25
----------
Outstanding, December 31, 1994 191,000 $19.16
Granted 6,000 $17.25
Forfeited (11,000) $19.25
----------
Outstanding, December 31, 1995 186,000 $19.09
Granted 12,000 $24.67
---------
Outstanding, December 31, 1996 198,000 $19.43
=========
F-14
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
7. Long-term Stock Incentive Plans (continued)
At December 31, 1996, the range of exercise prices and weighted-average
remaining contractual life of the outstanding options was $16.75 - $26.25
and 7.5 years, respectively.
At December 31, 1996 and 1995, the number of options exercisable was
186,000 and 31,500, respectively, and the weighted-average exercise price
of those options was $19.09 and $19.16, respectively.
Also as part of the Plan, in 1993 and 1996, certain officers purchased
common stock at fair market value directly from the Company, of which 90%
and 95%, respectively, was financed by a stock purchase loan provided by
the Plan. These recourse loans are fully secured by stock, bear interest at
fixed rates of 7.34% to 7.79% and mature after ten years. The Board of
Directors may authorize the forgiveness of all or a portion of the
principal balance based on the Company's achievement of specified financial
objectives, and total stockholder return performance targets. During 1996,
1995 and 1994, $646,598 $379,418 and $252,944 was forgiven, respectively,
and is included as a charge to income on the consolidated statements of
operations. The Company also has a performance based restricted stock plan
for officers whereby a portion of the shares authorized under the Plan may
be granted upon the achievement of certain total stockholder return
performance targets. Shares granted under the plan become fully vested by
December 31, 2000. During 1996, the initial measurement and grant date, the
Company charged $809,400 to income on the consolidated statement of
operations.
8. Operating Leases
The Company's properties are leased to tenants under operating leases with
expiration dates extending to the year 2041. Future minimum rent under
noncancelable operating leases as of December 31,1996, excluding tenant
reimbursements of operating expenses and excluding additional contingent
rentals based on tenants' sales volume are as follows:
Year ending December 31, Amount
1997 41,544,074
1998 36,779,305
1999 31,659,814
2000 27,375,272
2001 22,728,344
Thereafter 146,240,248
-----------
Total $ 306,327,057
===========
At December 31, 1996, the real estate portfolio as a whole was
approximately 95.4% leased.
The shopping centers' tenant base includes primarily national and regional
supermarkets, drug stores, discount department stores and other retailers
and, consequently, the credit risk is concentrated in the retail industry.
There were no tenants which individually represented 10% or more of the
Company's combined minimum rent. The combined annualized rent from the
Company's four largest retail tenants represented approximately 22% of
annualized minimum rent at December 31, 1996.
9. Related Party Transactions
The Company provides management, leasing, and brokerage services for
certain commercial real estate properties of The Regency Group, Inc. and
its affiliates ("TRG"), a corporation wholly-owned by certain officers and
stockholders of the Company. Fees for such services are charged to TRG
based on current market rates.
F-15
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
9. Related Party Transactions (continued)
From time to time, certain personnel of the Company may provide
administrative services to TRG, pursuant to an agreement. The cost of such
services are reimbursed by TRG based on percentage allocations of management
time and general overhead made in compliance with applicable regulations of the
Internal Revenue Service. The Company received $95,000, $194,000 and $204,000
during the years ended December 31, 1996, 1995 and 1994, respectively, which has
been recorded as a reimbursement to general and administrative expenses.
In connection with and as a condition to the Company's acquisition of
University Marketplace, TRG entered into a cash flow support agreement with
the Company. The agreement provided that TRG guarantee the monthly gross
rental revenue, for a period of three years following the Company's initial
public offering for a portion of the anchor space vacated by Phar-Mor in
July 1993. The Company received $58,034 and $88,882 during the years ended
December 31, 1995 and 1994, respectively, which has been recorded as
recoveries from tenants.
10. Contingencies
The Company 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 Company's shopping centers is the principal
environmental concern. The Company believes that the dry cleaners are
operating in accordance with current laws and regulations and has
established procedures to monitor their operations. While the Company has
registered the plants located in Florida under a state funded program
designed to substantially fund the clean up, if necessary, of any
environmental issues, the owner or operator is not relieved from the
ultimate responsibility for clean up. The Company also has established due
diligence procedures to identify and evaluate potential environmental
issues on properties under consideration for acquisition. In connection
with acquisitions during 1996 and 1995, the Company established
environmental reserves of $600,000 and $500,000, respectively. While it is
not possible to predict with certainty, management believes that the
reserves are adequate to cover future clean-up costs related to these
sites. The Company's policy is to accrue environmental clean-up costs when
it is probable that a liability has been incurred and that amount is
reasonably estimable. 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.
11. Subsequent Event
On March 7, 1997, the Company acquired Branch Properties, L.P. ("Branch"),
an Atlanta based real estate partnership that owns, manages, leases, and
develops shopping centers in the Southeastern United States, for
approximately $190 million. At the closing, the Company issued 3,373,801
redeemable partnership units ("Redeemable Units") from Regency Retail
Partnership, L.P. ("Partnership") and 155,797 shares of common stock in
exchange for 100% of the existing partnership units of Branch, and assumed
approximately $112 million of debt excluding the minority interest amount.
During the next three years, Branch will have the right to earn an
additional $23.3 million of Redeemable Units based upon the achievement of
increased income levels. At closing the Company acquired from Branch 18
shopping centers comprising 1.9 million square feet; 8 shopping centers
containing 700,000 square feet that are currently under development or
redevelopment, and management contracts on over 4 million square feet owned
by third parties.
F-16
REGENCY REALTY CORPORATION
Notes to Consolidated Financial Statements
12. Market and Dividend Information (Unaudited)
The Company trades on the New York Stock Exchange under the symbol "REG".
The Company currently has approximately 3,000 shareholders. The following
table sets forth the high and low prices and the cash dividends declared on
the Company's common stock by quarter for 1996 and 1995.
1996 1995
------------------------ -------------------------
Cash Cash
High Low Dividends High Low Dividends
Price Price Declared Price Price Declared
March 31 $ 17.500 15.875 .405 17.125 15.250 .395
June 30 21.125 16.500 .405 18.375 15.750 .395
September 30 22.375 19.250 .405 18.125 16.375 .395
December 31 26.250 21.125 .405 17.500 16.375 .395
13. Summary of Quarterly Financial Data (Unaudited)
Presented below is a summary of the consolidated quarterly financial data
for the years ended December 31, 1996 and 1995.
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(amounts in thousands, except per share data)
1996:
Revenues $ 10,501 10,952 12,030 13,464
Net income for common
stockholders 2,576 2,597 3,025 1,709
Net income per share .26 .26 .28 .16
1995:
Revenues $ 7,863 8,102 8,569 9,451
Net income for common
stockholders 1,341 1,313 1,213 1,127
Net income per share 0.20 0.20 0.18 0.17
F-17
Independent Auditors' Report
On Financial Statement Schedule
The Shareholders and Board of Directors
Regency Realty Corporation
Under date of January 27, 1997, except for Note 11 as to which the date is March
7, 1997, we reported on the consolidated balance sheets of Regency Realty
Corporation as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three year period ended December 31, 1996, as contained in the
annual report on Form 10-K for the year 1996. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related financial statement schedule as listed in the accompanying index on page
F-1 of the annual report on Form 10-K for the year 1996. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Certified Public Accountants
Jacksonville, Florida
January 27, 1997
S-1
REGENCY REALTY CORPORATION
Combined Real Estate and Accumulated Depreciation
December 31, 1996
Schedule III
Initial Cost Total Cost
------------------------- Capitalized --------------------------------
Building & Subsequent to Building & Accumulated
Land Improvements Acquistion Land Improvements Total Depreciation
---- ------------ ---------- ---- ------------ ----- ------------
University Marketplace 3,250,562 7,044,579 2,161,839 3,532,046 8,924,934 12,456,980 1,288,558
Millhopper 1,073,390 3,593,523 77,826 1,073,390 3,671,349 4,744,739 558,028
Newberry Square 2,341,460 8,466,651 606,591 2,341,460 9,073,242 11,414,702 783,531
Bolton Plaza 2,660,227 6,209,110 1,110,507 2,634,664 7,345,180 9,979,844 489,924
Courtyard 1,761,567 4,187,039 149,000 1,761,567 4,336,039 6,097,606 977,582
Chasewood Plaza 1,675,000 11,390,727 4,294,660 2,476,486 14,883,901 17,360,387 1,710,514
Aventura 2,751,094 9,317,790 110,043 2,751,094 9,427,833 12,178,927 1,165,150
North Miami Shopping Center 603,750 2,021,250 85,432 603,750 2,106,682 2,710,432 372,351
Berkshire Commons 2,294,960 8,151,236 32,531 2,294,960 8,183,767 10,478,727 609,755
Peachland Promenade 1,284,562 5,143,564 40,263 1,284,562 5,183,827 6,468,389 270,430
Anastasia Shopping Plaza 1,072,451 3,617,493 87,595 1,072,451 3,705,088 4,777,539 341,374
Market Place 1,287,000 4,662,740 50,558 1,287,000 4,713,298 6,000,298 126,661
Martin Downs Shoppes 700,000 1,207,861 738,862 817,135 1,829,588 2,646,723 190,898
Martin Downs Village Center 2,000,000 5,133,495 2,303,522 2,437,664 6,999,353 9,437,017 816,085
Ocean Breeze 1,250,000 3,341,199 2,294,970 1,527,400 5,358,769 6,886,169 562,251
Carriage Gate 740,960 2,494,750 503,911 740,960 2,998,661 3,739,621 382,906
Regency Square at Brandon 577,975 18,156,719 7,228,382 4,491,461 21,471,615 25,963,076 4,798,799
Seven Springs 1,737,994 6,290,048 1,417,041 1,757,441 7,687,642 9,445,083 622,809
Terrace Walk 1,196,286 2,935,683 83,406 1,196,286 3,019,089 4,215,375 468,695
Village Center 3,885,444 10,799,316 (38,745) 3,885,443 10,760,572 14,646,015 291,457
Wellington Market Place 5,070,384 13,308,972 197,109 5,070,384 13,506,081 18,576,465 406,180
The Marketplace 1,211,605 4,056,242 2,815,258 1,758,433 6,324,672 8,083,105 497,399
West County Marketplace 1,491,462 4,993,155 120,670 1,491,462 5,113,825 6,605,287 521,915
Villages in Trussville 973,954 3,260,627 50,689 973,954 3,311,316 4,285,270 324,518
Bonner's Point 859,854 2,878,641 87,477 859,854 2,966,118 3,825,972 327,501
Country Club 1,105,201 3,709,452 57,619 1,105,201 3,767,071 4,872,272 340,451
Columbia Marketplace 1,280,158 4,285,745 76,840 1,280,158 4,362,585 5,642,743 408,610
Lucedale Marketplace 641,565 2,147,848 50,334 641,565 2,198,182 2,839,747 200,816
Orchard Square 1,155,000 4,135,353 222,881 1,155,000 4,358,234 5,513,234 107,386
Russell Ridge 2,153,214 - 6,287,829 2,215,341 6,225,702 8,441,043 264,111
LaGrange Marketplace 983,923 3,294,003 58,996 983,923 3,352,999 4,336,922 311,344
Fairway Executive Center 512,169 2,282,314 8,827 512,169 2,291,141 2,803,310 651,916
Quadrant 2,342,823 15,541,967 859,758 2,343,698 16,400,850 18,744,548 3,853,078
Westland One 198,344 1,747,391 51,517 198,344 1,798,908 1,997,252 342,858
Paragon Cable Building 570,000 2,472,537 - 570,000 2,472,537 3,042,537 180,307
Parkway Station 1,123,200 4,283,917 57,681 1,123,200 4,341,598 5,464,798 90,881
Welleby Plaza 1,496,000 5,371,636 175,213 1,496,000 5,546,849 7,042,849 121,615
Union Square 1,578,654 5,933,889 2,010 1,578,654 5,935,899 7,514,553 60,958
City View 1,207,204 4,341,304 3,610 1,207,204 4,344,914 5,552,118 48,763
Palm Harbour 2,899,928 10,998,230 5,968 2,899,928 11,004,198 13,904,126 110,179
Sandy Plains Village 2,906,640 10,412,440 - 2,906,640 10,412,440 13,319,080 108,210
Tequesta Shoppes 1,782,000 6,426,042 9,290 1,782,000 6,435,332 8,217,332 28,363
University Collection 2,530,000 8,971,597 31,000 2,530,000 9,002,597 11,532,597 37,403
Old St. Augustine Plaza 2,047,151 7,355,162 - 2,047,151 7,355,162 9,402,313 15,323
Wellington Town Square 1,914,000 7,197,934 - 1,914,000 7,197,934 9,111,934 14,996
Woodcroft Shopping Center 1,419,000 5,211,981 - 1,419,000 5,211,981 6,630,981 -
Cambridge Square 792,000 2,916,034 - 792,000 2,916,034 3,708,034 -
Town Center at Martin Downs 1,364,000 4,985,410 - 1,364,000 4,985,410 6,349,410 10,386
---------- ----------- ---------- ---------- ----------- ----------- -----------
77,754,115 276,684,596 34,568,770 84,186,483 304,820,998 389,007,481 26,213,225
========== =========== ========== ========== =========== =========== ===========
S-2
REGENCY REALTY CORPORATION
Combined Real Estate and Accumulated Depreciation
December 31, 1996
-continued-
Schedule III
Total Cost,
Net of Date of
Accumulated Construction (c)
Depreciation Mortgages Acquisition (a)
------------ ---------- ---------------
University Marketplace 11,168,422 - 1990 (a)
Millhopper 4,186,711 2,401,000 1993 (a)
Newberry Square 10,631,171 6,801,694 1994 (a)
Bolton Plaza 9,489,920 - 1994 (a)
Courtyard 5,120,024 1,378,000 1987 (c)
Chasewood Plaza 15,649,873 8,000,000 1992 (a)
Aventura 11,013,777 8,823,403 1994 (a)
North Miami Shopping Center 2,338,081 1,160,000 1993 (a)
Berkshire Commons 9,868,972 8,000,421 1994 (a)
Peachland Promenade 6,197,959 4,370,784 1995 (a)
Anastasia Shopping Plaza 4,436,165 - 1993 (a)
Market Place 5,873,637 - 1995 (a)
Martin Downs Shoppes 2,455,825 1,313,000 1992 (a)
Martin Downs Village Center 8,620,932 4,150,000 1992 (a)
Ocean Breeze 6,323,918 2,805,000 1992 (a)
Carriage Gate 3,356,715 2,429,176 1994 (a)
Regency Square at Brandon 21,164,277 12,000,000 1986 (c)
Seven Springs 8,822,274 - 1994 (a)
Terrace Walk 3,746,680 683,000 1990 (c)
Village Center 14,354,558 - 1995 (a)
Wellington Market Place 18,170,285 - 1995 (a)
The Marketplace 7,585,706 4,978,091 1993 (a),
1995 (c)
West County Marketplace 6,083,372 3,190,000 1993 (a)
Villages in Trussville 3,960,752 1,775,000 1993 (a)
Bonner's Point 3,498,471 1,613,000 1993 (a)
Country Club 4,531,821 2,264,000 1993 (a)
Columbia Marketplace 5,234,133 2,586,000 1993 (a)
Lucedale Marketplace 2,638,931 1,390,000 1993 (a)
Orchard Square 5,405,848 - 1995 (a)
Russell Ridge 8,176,932 6,532,665 1993 (c)
LaGrange Marketplace 4,025,578 1,645,000 1993 (a)
Fairway Executive Center 2,151,394 - 1985 (a)
Quadrant 14,891,470 - 1985 (c)
Westland One 1,654,394 - 1988 (c)
Paragon Cable Building 2,862,230 2,296,902 1994 (a)
Parkway Station 5,373,917 3,801,821 1996 (a)
Welleby Plaza 6,921,234 - 1996 (a)
Union Square 7,453,595 - 1996 (a)
City View 5,503,355 - 1996 (a)
Palm Harbour 13,793,947 - 1996 (a)
Sandy Plains Village 13,210,870 - 1996 (a)
Tequesta Shoppes 8,188,969 - 1996 (a)
University Collection 11,495,194 - 1996 (a)
Old St. Augustine Plaza 9,386,990 - 1996 (a)
Wellington Town Square 9,096,938 - 1996 (a)
Woodcroft Shopping Center 6,630,981 - 1996 (a)
Cambridge Square 3,708,034 - 1996 (a)
Town Center at Martin Downs 6,339,024 - 1996 (a)
----------- ------------
362,794,256 96,387,957
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S-3
REGENCY REALTY CORPORATION
Combined Real Estate and Accumulated Depreciation
December 31, 1996
-continued-
Schedule III
Depreciation and amortization of the Company's investment in buildings and
improvements reflected in the statement of operations is calculated over the
estimated useful lives of the assets as follows:
Buildings 40 years
Improvements 40 years
The aggregate cost for Federal income tax purposes was
approximately $383,644,529 at December 31, 1996.
The changes in total real estate assets for the period ended
December 31, 1996 and 1995:
1996 1995
---- ----
Balance, beginning of period 278,731,167 217,215,307
Developed or acquired properties 107,378,064 59,537,217
Improvements 2,898,250 1,978,643
------------- ------------
Balance, end of period $ 389,007,481 278,731,167
============= ============
The changes in accumulated depreciation for the period ended
December 31, 1996 and 1995:
1996 1995
---- ----
Balance, beginning of period 18,631,310 13,117,581
Depreciation for period 7,581,915 5,513,729
------------ -----------
Balance, end of period $ 26,213,225 18,631,310
============ ===========
S-4