EXHIBIT 99.4 SECURITIES AND EXCHANGE COMMISSION UNITED STATES Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) January 12, 1998 REGENCY REALTY CORPORATION (Exact name of registrant as specified in its charter) Florida 1-12298 59-3191743 (State or other jurisdiction Commission (IRS Employer of incorporation) File Number) Identification No.) 121 West Forsyth Street, Suite 200 Jacksonville, Florida 32202 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (904)-356-7000 Not Applicable (Former name or former address, if changed since last report) 1 ITEM 5. PENDING ACQUISITION OF ASSETS Regency Realty Corporation (the "Company") announced on January 12, 1998 that it had entered into an agreement to acquire the real estate assets of entities comprising the Midland Group ("Midland") consisting of 21 shopping centers (the "Midland Properties") plus a development pipeline of 12 shopping centers. Of the 21 centers to be acquired, 20 are anchored by Kroger and King Soopers, a Kroger subsidiary. Eight of the shopping centers included in the development pipeline will be owned through a joint venture in which the Company will own less than a 50% interest upon completion of construction. At closing and during 1998, the Company will pay approximately $230.4 million to acquire 21 properties and pay transaction costs through the issuance of units of limited partnership interest valued at $26.58 per unit or cash of $47 million, the assumption of $92.5 million of debt, and $90.9 million to pay off existing secured real estate loans. The Company will incur additional costs to establish reserves, pay severance, and prepay existing assumed loans. Subsequent to 1998, the Company expects to pay approximately $12.7 million to acquire equity interests in the development pipeline as the properties reach stabilization. The Company may also be required to make payments aggregating $10.5 million through the year 2000 contingent upon increases in net income from existing properties, the development pipeline, and new properties developed or acquired in accordance with the contribution agreement. The factors considered by the Company in determining the price to be paid for the shopping centers included historical and expected cash flow, nature of the tenancies and terms of the leases in place, occupancy rates, opportunities for alternative and new tenancies, current operating costs, physical condition and location, and the anticipated impact on the Company's financial results. The Company took into consideration capitalization rates at which it believes other shopping centers have recently sold, but determined the purchase price on the factors discussed above. No separate independent appraisals were obtained for the properties acquired. Consummation of the acquisition is subject, among other things, to Midland partner and other third party consents. Amounts shown above for units issued and cash payments to Midland partners are estimated amounts that are subject to Midland partner approval. OTHER EVENTS The Company, through its wholly-owned subsidiaries (together the "Company") acquired seven shopping centers (the "Acquisition Properties") during the months of June through December, 1997. The individual purchase price of these acquisitions, as provided below, did not individually exceed 10% of the Company's total assets. The acquisitions were made pursuant to separate purchase agreements, the sellers of which are unrelated to the Company. All of the properties currently operate as neighborhood retail shopping centers, and will continue as such. The purchase price of each shopping center was funded from the Company's revolving line of credit with Wells Fargo Realty Advisors Funding, Inc. 2 OTHER EVENTS (CONTINUED) The factors considered by the Company in determining the price to be paid for the shopping centers included historical and expected cash flow, nature of the tenancies and terms of the leases in place, occupancy rates, opportunities for alternative and new tenancies, current operating costs, physical condition and location, and the anticipated impact on the Company's financial results. The Company took into consideration capitalization rates at which it believes other shopping centers have recently sold, but determined the purchase price on the factors discussed above. No separate independent appraisals were obtained for the Acquisition Properties. The following summarizes the Acquisition Properties: Property Purchase Acquisition Occupancy at Name Price Date GLA City/State Acquisition Rivermont Station $ 13,448,000 6-30-97 90,323 Atlanta, GA 98.0% Lovejoy Station $ 7,099,500 6-30-97 77,336 Atlanta, GA 95.0% Tamiami Trails $ 9,560,300 7-10-97 110,867 Miami, FL 93.0% Gardens Square $ 9,723,700 9-19-97 90,258 Miami, FL 95.0% Kingsdale $ 17,575,000 10-10-97 267,177 Columbus, OH 95.6% Boynton Lks Plaza $ 12,893,500 12-01-97 130,724 Boynton Bch, FL 90.0% Pinetree Plaza $ 2,534,927 12-23-97 53,866 Jacksonville, FL 95.0% ============ ======== Total $ 72,834,927 820,551 ============ ======== 3 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS A. Financial Statements (a) MIDLAND PROPERTIES Audited Statement of Revenues and Certain Expenses for the year ended December 31, 1996. (b) GARDENS SQUARE Audited Statement of Revenues and Certain Expenses for the year ended December 31, 1996. (c) PINETREE PLAZA Audited Statement of Revenues and Certain Expenses for the year ended December 31, 1996. B. Pro Forma Financial Information (a) REGENCY REALTY CORPORATION Pro Forma Consolidated Balance Sheet, September 30, 1997 (unaudited) Pro Forma Consolidated Statements of Operations for the Nine Month Period ended September 30, 1997 and the Year ended December 31, 1996 (unaudited) C. Exhibits: 10. Material Contracts * (a) Purchase and Sale Agreement dated May 22, 1997, between RRC Acquisitions, Inc., a wholly-owned subsidiary of the Company as purchaser and Cousins Real Estate Corporation as seller relating to the acquisition of Rivermont Station Shopping Center. * (b) Purchase and Sale Agreement dated May 22, 1997, between RRC Acquisitions, Inc., a wholly-owned subsidiary of the Company as purchaser and Cousins Real Estate Corporation as seller relating to the acquisition of Lovejoy Station Shopping Center. ** (c) Purchase and Sale Agreement dated May 12, 1997, between RRC Acquisitions, Inc., a wholly-owned subsidiary of the Company as purchaser and Quantum Realty Partners, L.P. as seller relating to the acquisition of Tamiami Trails Shopping Center. 4 ** (d) Purchase and Sale Agreement dated July 9, 1997, between RRC Acquisitions, Inc., a wholly-owned subsidiary of the Company as purchaser and Miami Gardens Associates as seller relating to the acquisition of Gardens Square Shopping Center. ** (e) Purchase and Sale Agreement dated September 19, 1997, between RRC Acquisitions, Inc., a wholly-owned subsidiary of the Company as purchaser and TBC Kingsdale, Inc. as seller relating to the acquisition of Kingsdale Shopping Center. (f) Purchase and Sale Agreement dated October 1, 1997, between RRC Acquisitions, Inc., a wholly-owned subsidiary of the Company as purchaser and Boynton Lakes Plaza Partnership as seller relating to the acquisition of Boynton Lakes Plaza Shopping Center. (g) Purchase and Sale Agreement dated October 7, 1997, between RRC Acquisitions, Inc., a wholly-owned subsidiary of the Company as purchaser and Meteor Industriebeteiligungsgesellschaft mbH as seller relating to the acquisition of Pinetree Plaza Shopping Center. 23. Consent of KPMG Peat Marwick LLP - -------------------------- * Incorporated by reference to Form 10-Q filed August 11, 1997. ** Incorporated by reference to Form 10-Q filed November 13, 1997. 5 SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. REGENCY REALTY CORPORATION (registrant) February 4, 1998 By:/s/ J. Christian Leavitt ---------------------------------- J. Christian Leavitt Vice President and Treasurer 6 Independent Auditors' Report The Board of Directors Regency Realty Corporation: We have audited the accompanying statement of revenues and certain expenses of the Midland Properties for the year ended December 31, 1996. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses of the Midland Properties was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in a Form 8-K of Regency Realty Corporation and excludes material amounts, described in note 1, that would not be comparable to those resulting from the proposed future operation of the properties. The presentation is not intended to be a complete presentation of the Midland Properties revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses, described in note 1, of the Midland Properties for the year ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Jacksonville, Florida November 21, 1997 7 MIDLAND PROPERTIES Statement of Revenues and Certain Expenses For the year ended December 31, 1996 Revenues: Minimum rent $ 11,997,123 Percentage rent 36,037 Recoveries from tenants 1,884,462 ------------- Total revenues 13,917,622 Operating expenses: Operating and maintenance 1,174,141 Management fees 408,614 Real estate taxes 1,144,284 General and administrative 92,343 ------------- Total expenses 2,819,382 Revenues in excess of certain expenses $ 11,098,240 ============= See accompanying notes to statement of revenues and certain expenses. 8 MIDLAND PROPERTIES Notes to Statement of Revenues and Certain Expenses For the year ended December 31, 1996 1. Basis of Presentation The statement of revenues and certain expenses combines the operations of the following 20 shopping centers (Midland Properties), in which Midland Development Group, Inc., or one of its affiliated entities, is the general partner: Square Property Name Location Feet Beckett Commons West Chester, OH 80,434 Bent Tree Plaza Raleigh, NC 79,503 Brookville Plaza Lynchburg, VA 63,664 Cherry Grove Plaza Cincinnati, OH 186,020 Creekside Arlington, TX 85,652 East Point Crossing Columbus, OH 81,320 Evans Crossing Evans, GA 76,580 Franklin Shopping Centers Franklin, KY 205,060 Hamilton Meadows Hamilton, OH 126,251 Lake Pine Plaza Raleigh, NC 76,490 Lake Shores Plaza Detroit, MI 85,478 North Gate Plaza Columbus, OH 85,100 Maynard Crossing Raleigh, NC 121,063 Shoppes at Mason Cincinnati, OH 80,880 St. Ann Square St. Ann, MO 82,498 Statler Square Staunton, VA 132,994 Village Center Southlake, TX 118,172 West Chester Plaza Westchester, OH 88,181 Windmiller Farms Columbus, OH 119,192 Worthington Park Centre Worthington, OH 91,192 This financial statement is prepared on the accrual basis of accounting in conformity with generally accepted accounting principles. Subsequent to December 31, 1996, the Midland Properties were acquired by Regency Realty Corporation (RRC) in a transaction accounted for as a purchase. All operations of the Midland Properties will be included in the consolidated financial statements of RRC beginning at the acquisition date. 9 MIDLAND PROPERTIES Notes to Statement of Revenues and Certain Expenses 1. Basis of Presentation, continued The accompanying financial statement is not representative of the actual operations for the period presented as certain expenses, which may not be comparable to the expenses expected to be incurred by RRC in the proposed future operation of the Midland Properties, have been excluded. RRC is not aware of any material factors relating to the Midland Properties that would cause the reported financial information not to be necessarily indicative of future operating results. Costs not directly related to the operation of the Midland Properties have been excluded, and consist of interest, depreciation, professional fees, certain other non operating expenses. 2. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Operating Leases For the year ended December 31, 1996, Kroger Supermarkets, an anchor tenant in 18 of the 20 shopping centers, paid minimum rent of $6,315,460, which exceeded 10% of the total minimum rent earned by all the Midland Properties. The Midland Properties are leased to tenants under operating leases with expiration dates extending to the year 2022. 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 $ 17,564,921 1998 18,422,107 1999 17,620,074 2000 16,369,355 2001 15,652,802 ============= 10 MIDLAND PROPERTIES Notes to Statement of Revenues and Certain Expenses 4. Related Party Transactions Midland Development Group, Inc., serves as managing agent for the Midland Properties and receives a management fee of approximately 4% of minimum and percentage rent, as adjusted and defined, which amounted to $408,614 for the year ended December 31, 1996. 11 Independent Auditors' Report The Board of Directors Regency Realty Corporation: We have audited the accompanying statement of revenues and certain expenses of Gardens Square Shopping Center for the year ended December 31, 1996. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses of Gardens Square Shopping Center was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in a Form 8-K of Regency Realty Corporation and excludes material amounts, described in note 1, that would not be comparable to those resulting from the proposed future operation of the property. The presentation is not intended to be a complete presentation of Gardens Square Shopping Center revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses, described in note 1, of Gardens Square Shopping Center for the year ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Jacksonville, Florida January 27, 1998 12 GARDENS SQUARE SHOPPING CENTER Statement of Revenues and Certain Expenses For the year ended December 31, 1996 Revenues: Minimum rent $ 934,590 Recoveries from tenants 323,245 ------------- Total revenues 1,257,835 Operating expenses: Operating and maintenance 201,078 Management fees 50,340 Real estate taxes 137,533 General and administrative 18,589 ------------- Total expenses 407,540 Revenues in excess of certain expenses $ 850,295 ============= See accompanying notes to statement of revenues and certain expenses. 13 GARDENS SQUARE SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses For the year ended December 31, 1996 1. Basis of Presentation The statement of revenues and certain expenses relates to the operation of a 90,258 square foot shopping center (the "Property") located in Miami, Florida. The Property's financial statement is prepared on the accrual basis of accounting in conformity with generally accepted accounting principles. Subsequent to December 31, 1996, the Property was acquired by Regency Realty Corporation (RRC) in a transaction accounted for as a purchase. All operations of the Property will be included in the consolidated financial statements of RRC beginning at the acquisition date. The accompanying financial statement is not representative of the actual operations for the period presented as certain expenses, which may not be comparable to the expenses expected to be incurred by RRC in the proposed future operation of the Property, have been excluded. RRC is not aware of any material factors relating to the Property that would cause the reported financial information not to be necessarily indicative of future operating results. Costs not directly related to the operation of the Property have been excluded, and consist of interest, depreciation, professional fees, and various other non operating expenses. 2. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 14 GARDENS SQUARE SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses 3. Operating Leases For the year ended December 31, 1996, the following tenants paid minimum rent which exceeded 10% of the total minimum rent earned by the Property: Minimum Tenant Rent Paid Publix Supermarkets $ 263,200 Eckerd Drugs 104,544 The Property is leased to tenants under operating leases with expiration dates extending to the year 2011. 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 $ 984,141 1998 926,382 1999 825,996 2000 794,885 2001 594,413 ========= 15 Independent Auditors' Report The Board of Directors Regency Realty Corporation: We have audited the accompanying statement of revenues and certain expenses of Pinetree Plaza for the year ended December 31, 1996. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses of Pinetree Plaza was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in a Form 8-K of Regency Realty Corporation and excludes material amounts, described in note 1, that would not be comparable to those resulting from the proposed future operation of the property. The presentation is not intended to be a complete presentation of Pinetree Plaza revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses, described in note 1, of Pinetree Plaza for the year ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Jacksonville, Florida January 27, 1998 16 PINETREE PLAZA Statement of Revenues and Certain Expenses For the year ended December 31, 1996 Revenues: Minimum rent $ 284,892 Recoveries from tenants 51,775 ------------- Total revenues 336,667 Operating expenses: Operating and maintenance 51,834 Management fees 16,532 Real estate taxes 37,625 General and administrative 4,817 ------------- Total expenses 110,808 Revenues in excess of certain expenses $ 225,859 ============= See accompanying notes to statement of revenues and certain expenses. 17 PINETREE PLAZA Notes to Statement of Revenues and Certain Expenses For the year ended December 31, 1996 1. Basis of Presentation The statement of revenues and certain expenses relates to the operation of a 56,566 square foot shopping center (the "Property") located in Orange Park, Florida. The financial statement is prepared on the accrual basis of accounting in conformity with generally accepted accounting principles. Subsequent to December 31, 1996, the Property was acquired by Regency Realty Corporation (RRC) in a transaction accounted for as a purchase. All operations of the Property will be included in the consolidated financial statements of RRC beginning at the acquisition date. The accompanying financial statement is not representative of the actual operations for the period presented as certain expenses, which may not be comparable to the expenses expected to be incurred by RRC in the proposed future operation of the Property, have been excluded. RRC is not aware of any material factors relating to the Property that would cause the reported financial information not to be necessarily indicative of future operating results. Costs not directly related to the operation of the Property have been excluded, and consist of interest, depreciation, professional fees, and certain other non operating expenses. 2. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 18 PINETREE PLAZA Notes to Statement of Revenues and Certain Expenses 3. Operating Leases For the year ended December 31, 1996, the following tenants paid minimum rent which exceeded 10% of the total minimum rent earned by the Property: Minimum Tenant Rent Paid Winn Dixie Stores, Inc. $ 120,405 Revco/Piece Goods Shops, Co. 42,330 Windsurfing Orange Park, Inc. 47,253 The Property is leased to tenants under operating leases with expiration dates extending to the year 2006 and including a new anchor tenant lease signed during 1997 with Publix Supermarkets which begins in 1999. 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 $ 295,760 1998 157,812 1999 420,936 2000 393,064 2001 396,954 ========= 19 Regency Realty Corporation Pro Forma Condensed Consolidated Balance Sheet September 30, 1997 (Unaudited) (In thousands) The following unaudited pro forma condensed consolidated balance sheet is based upon the historical consolidated balance sheet of the Company as of September 30, 1997 as if the Company had acquired Midland and the Acquisition Properties as of that date. The following pro forma condensed consolidated balance sheet should be read in conjunction with the Company's annual report filed on Form 10- K for the year ended December 31, 1996, Form 10-Q for the period ended September 30, 1997, and the pro forma consolidated statement of operations of the Company and notes thereto included elsewhere herein. The unaudited pro forma condensed consolidated balance sheet is not necessarily indicative of what the actual financial position of the Company would have been at September 30, 1997, nor does it purport to represent the future financial position of the Company. Regency Regency Realty Realty Corporation Midland Acquisition Corporation Historical Properties Properties Pro Forma Assets (a) Real estate rental property, at cost $ 772,496 $ 230,400 33,004 (b) 1,035,900 Less: accumulated depreciation 37,130 - - 37,130 ---------- ---------- ---------- ------------ Real estate rental property, net 735,366 230,400 33,004 998,770 ---------- ---------- ---------- ------------ Construction in progress 16,211 - - 16,211 Investments in unconsolidated real estate partnerships 1,005 - - 1,005 ---------- ---------- ---------- ------------ Total investments in real estate, net 752,582 230,400 33,004 1,015,986 ---------- ---------- ---------- ------------ Cash and cash equivalents 14,031 - - 14,031 Accounts receivable and other assets 12,036 - - 12,036 ---------- ---------- ---------- ------------ $ 778,649 $ 230,400 33,004 1,042,053 ========== ========== ========== ============ Liabilities and Stockholders' Equity Mortgage and other loans $ 236,277 $ 92,500 - 328,777 Acquisition and development line of credit 3,831 137,900 33,004 (b) 174,735 ---------- ---------- ---------- ------------ Total Notes Payable 240,108 230,400 33,004 503,512 Tenant security and escrow deposits 2,226 - - 2,226 Accounts payable & other liabilities 16,002 - - 16,002 ---------- ---------- ---------- ------------ Total Liabilities 258,336 230,400 33,004 521,740 ---------- ---------- ---------- ------------ Minority interests in consolidated partnerships 8,504 - - 8,504 Redeemable partnership units 13,753 - - 13,753 ---------- ---------- ---------- ------------ 22,257 - - 22,257 ---------- ---------- ---------- ------------ Stockholders' Equity Common stock and additional paid in capital 519,540 - - 519,540 Distributions in excess of net income (21,484) - - (21,484) ---------- ---------- ---------- ------------ Total Stockholders' Equity 498,056 - - 498,056 ---------- ---------- ---------- ------------ $ 778,649 $ 230,400 33,004 1,042,053 ========== ========== ========== ============ See accompanying notes to pro forma condensed consolidated balance sheet. 20 Regency Realty Corporation Notes to Pro Forma Condensed Consolidated Balance Sheet September 30, 1997 (Unaudited) (In thousands) (a) At closing and during 1998, the Company will pay approximately $230.4 million to acquire 21 properties and pay transaction costs through the issuance of units of limited partnership interest valued at $26.58 per unit or cash of $47 million, the assumption of $92.5 million of debt, and $90.9 million to pay off existing secured real estate loans. Subsequent to 1998, the Company expects to pay approximately $12.7 million to acquire equity interests in the development pipeline as the properties reach stabilization. The Company may also be required to make payments aggregating $10.5 million through the year 2000 contingent upon increases in net income from existing properties, the development pipeline, and new properties developed or acquired in accordance with the contribution agreement. (b) Represents the aggregate purchase price for Kingsdale Shopping Center, Boynton Lakes Plaza and Pinetree Plaza. The other Acquisition Properties (Rivermont Station, Lovejoy Station, Tamiami Trails, and Gardens Square) were acquired prior to September 30, 1997 and are therefore included in the Company's September 30, 1997 balance sheet. Purchase Price -------------- Kingsdale Shopping Ctr 17,575 Boynton Lakes Plaza 12,894 Pinetree Plaza 2,535 -------------- $ 33,004 ============== 21 Regency Realty Corporation Pro Forma Consolidated Statements of Operations For the Nine Month Period ended September 30, 1997 and the Year ended December 31, 1996 (Unaudited) (In thousands, except share and per share data) The following unaudited pro forma consolidated statements of operations are based upon the historical consolidated statements of operations for the nine month period ended September 30, 1997 and the year ended December 31, 1996 and are presented as if the Company had acquired Midland and the Acquisition Properties as of January 1, 1996. Previously Reported Acquisitions represent operating properties which the Company has acquired and reported on in two Form 8-K/A's dated June 6, 1997 and March 7, 1997. These pro forma consolidated statements of operations should be read in conjunction with the Company's 1996 Form 10-K, and the Statement of Revenues and Certain Expenses of Midland Properties, Garden Square and Pinetree Plaza and notes thereto included elsewhere herein. The unaudited pro forma consolidated statements of operations are not necessarily indicative of what the actual results of the Company would have been assuming the transactions had been completed as set forth above, nor does it purport to represent the Company's results of operations in future periods. For the Nine Month Period Ended September 30, 1997: Regency Regency Realty Previously Realty Corporation Reported Midland Acquisition Pro Forma Corporation Historical Acquisitions Properties Properties Adjustments Pro Forma Real estate operating revenues: (a) (b) (c) Minimum rent $ 49,925 6,659 13,093 4,898 - 74,575 Percentage rent 1,612 302 27 - - 1,941 Recoveries from tenants 11,303 1,344 1,875 1,324 - 15,846 Other recoveries and income - - 100 - - 100 Equity income of unconsolidated partnerships 20 - - - - 20 ----------- ----------- ---------- ---------- ---------- ------------ 62,860 8,305 15,095 6,222 - 92,482 ----------- ----------- ---------- ---------- ---------- ------------ Real estate operating expenses: Operating and maintenance 9,967 1,142 969 1,310 - 13,388 Real estate taxes 6,049 844 1,517 758 - 9,168 ----------- ----------- ---------- ---------- ---------- ------------ 16,016 1,986 2,486 2,068 - 22,556 ----------- ----------- ---------- ---------- ---------- ------------ Net Property Revenues 46,844 6,319 12,609 4,154 - 69,926 Third party revenues: Leasing, brokerage and development fees 4,804 735 - - - 5,539 Property management fees 1,484 325 - - - 1,809 ----------- ----------- ---------- ---------- ---------- ------------ 6,288 1,060 - - - 7,348 ----------- ----------- ---------- ---------- ---------- ------------ Other expense (income): General and administrative 7,761 683 622 - - 9,066 Depreciation & amortization 11,502 2,029 - - 3,300 (d) 16,831 Interest expense 14,749 5,035 - - 14,371 (e) 34,155 Interest income (729) (33) - - - (762) ----------- ----------- ---------- ---------- ---------- ------------ 33,283 7,714 622 - 17,670 59,290 ----------- ----------- ---------- ---------- ---------- ------------ Net income 19,849 (335) 11,987 4,154 (17,670) 17,984 Minority interest in consolidated property partnerships (2,342) 1,010 - - - (1,332) ----------- ----------- ---------- ---------- ---------- ------------ Net income for common stockholders $ 17,507 675 11,987 4,154 (17,670) 16,652 =========== =========== ========== ========== ========== ============ Earnings per share (note (f)): Primary $ 0.97 $ 0.90 =========== ============ Fully Diluted $ 0.97 $ 0.84 =========== ============ 22 Regency Realty Corporation Pro Forma Consolidated Statements of Operations For the Nine Month Period ended September 30, 1997 and the Year ended December 31, 1996 (Unaudited) (In thousands, except share and per share data) For the Year Ended December 31, 1996: Regency Regency Realty Previously Realty Corporation Reported Midland Acquisition Pro Forma Corporation Historical Acquisitions Properties Properties Adjustments Pro Forma Real estate operating revenues: (a) (b) (c) Minimum rent $ 34,706 25,564 11,997 7,088 - 79,355 Percentage rent 998 496 36 - - 1,530 Recoveries from tenants 7,729 4,994 1,884 1,879 - 16,486 Other recoveries and income - 321 - - - 321 Equity income of unconsolidated partnerships 70 - - - - 70 ----------- ----------- ---------- ----------- ----------- ------------ 43,503 31,375 13,917 8,967 - 97,762 ----------- ----------- ---------- ----------- ----------- ------------ Real estate operating expenses: Operating and maintenance 7,656 9,329 1,174 1,822 - 19,981 Real estate taxes 4,409 2,875 1,144 1,032 - 9,460 ----------- ----------- ---------- ----------- ----------- ------------ 12,065 12,204 2,318 2,854 - 29,441 ----------- ----------- ---------- ----------- ----------- ------------ Net Property Revenues 31,438 19,171 11,599 6,113 - 68,321 Third party revenues: Leasing, brokerage and development fees 2,852 3,576 - - - 6,428 Property management fees 592 879 - - - 1,471 ----------- ----------- ---------- ----------- ----------- ------------ 3,444 4,455 - - - 7,899 ----------- ----------- ---------- ----------- ----------- ------------ Other expense (income): General and administrative 6,048 2,547 501 - - 9,096 Depreciation & amortization 8,758 7,255 - - 3,891 (d) 19,904 Branch formation expenses - 108 - - - 108 Interest expense 10,777 12,259 - - 13,176 (e) 36,212 Interest income (666) - - - - (666) ----------- ----------- ---------- ----------- ----------- ------------ 24,917 22,169 501 - 17,067 64,654 ----------- ----------- ---------- ----------- ----------- ------------ Net income 9,965 1,457 11,098 6,113 (17,067) 11,566 Minority interest in consolidated property partnerships - (696) - - - (696) Preferred stock dividends (58) - - - - (58) ----------- ----------- ---------- ----------- ----------- ------------ Net income for common stockholders $ 9,907 761 11,098 6,113 (17,067) $ 10,812 =========== =========== ========== =========== =========== ============ Earnings per share (note (f)): Primary $ 0.96 $ 0.75 =========== ============ Fully Diluted $ 0.96 $ 0.73 =========== ============ See accompanying notes to pro forma consolidated statements of operations. 23 Regency Realty Corporation Notes to Pro Forma Consolidated Statements of Operations For the Nine Month Period ended September 30, 1997 and the Year ended December 31, 1996 (Unaudited) (In thousands, except share and per share data) (a) Reflects revenues and certain expenses for the Previously Reported Acquisitions for the period from January 1, 1997 to the respective acquisition date of the property, and for the year ended December 31,1996, as reported in Form 8-K/A dated June 6, 1997. (b) Reflects revenues and certain expenses for the Midland Properties for the nine month period ended September 30, 1997 and the year ended December 31, 1996. (c) Reflects revenues and certain expenses of the Acquisition Properties for the period from January 1, 1997 to the respective acquisition date of the property and for the year ended December 31, 1996. For the period from January 1, 1997 to the Acquisition Date Property Acquisition Minimum Percentage Recoveries Operating & Real Name Date Rent Rent from Tenants Maintenance Estate Taxes ---- ----------- ------------- ------------- ------------- -------------- ------------- Rivermont Station 6/30/97 $ 642 - 124 98 56 Lovejoy Station 6/30/97 306 - 64 45 29 Tamiami Trails 7/10/97 508 - 163 154 66 Gardens Square 9/19/97 671 - 232 194 99 Kingsdale Shopping Ctr 10/10/97 1,334 - 300 400 221 Boynton Lakes Plaza 12/1/97 1,159 - 391 347 250 Pinetree Plaza 12/23/97 279 - 51 72 37 ------------- ------------- ------------- -------------- ------------- $ 4,898 - 1,324 1,310 758 ============= ============= ============= ============== ============= For the year ended December 31, 1996 Property Minimum Percentage Recoveries Operating & Real Name Rent Rent from Tenants Maintenance Estate Taxes ---- ------------- ------------- ------------- -------------- ------------- Rivermont Station $ 1,294 - 251 199 112 Lovejoy Station 617 - 128 91 59 Tamiami Trails 970 - 311 294 127 Gardens Square 935 - 323 270 138 Kingsdale Shopping Ctr 1,720 - 387 516 285 Boynton Lakes Plaza 1,267 - 427 379 273 Pinetree Plaza 285 - 52 73 38 ------------- ------------- ------------- -------------- ------------- $ 7,088 - 1,879 1,822 1,032 ============= ============= ============= ============== ============= 24 (d) Depreciation expense is based upon the costs allocated to the buildings acquired estimating the useful life. For properties under construction, depreciation expense is calculated from the date the property is placed in service through the end of the period. In addition, the nine month period ended September 30, 1997 calculation reflects depreciation expense on the Acquisition Properties from January 1, 1997 to the respective acquisition date of the property. For the year ended December 31, 1996 Property Building and Year Building Annual Name Improvements Built/Renovated Useful Life Depreciation ---- ------------- --------------- ----------- ------------- Rivermont Station 9,548 1996 39 $ 245 Lovejoy Station 5,560 1995 38 146 Tamiami Trails 7,598 1987 30 253 Garden Square 7,151 1991 34 210 Kingsdale Shopping Center 10,023 1959 27 371 Boynton Lakes Plaza 9,618 1993 36 267 Pinetree Plaza 3,057 1982 25 122 Midland Properties 180,435 Ranging from Ranging from 2,275 1986 to 1996 29 to 40 --------- Pro forma depreciation expense for the year ended December 31, 1996 $ 3,891 ========= Pro forma depreciation expense for the nine month period ended September 30, 1997 $ 3,300 ========= (e) To reflect interest expense on the acquisition and development line of credit required to make the property acquisitions at the average interest rate afforded the Company (7.4%) and the assumption of $92,500 of debt at existing rates averaging 8.2%. For properties under construction, interest expense is calculated from the date the property is placed in service through the end of the period. Pro forma interest expense for the year ended December 31, 1996 $ 13,176 ========= Pro forma interest expense for the nine month period ended September 30, 1997 $ 14,371 ========= 25 (f) Earnings per share December 31, September 30, 1996 1997 ------------- ------------- Primary Common Shares and Per Share Calculation: Total Primary Shares 15,380 19,956 Income from continuing operations for common stockholders 10,812 16,652 Minority Interest in RRLP 696 1,332 ------------- ------------- Income for Primary Shareholders 11,508 17,984 ------------- ------------- Primary earnings per share 0.75 0.90 ============= ============= Fully Diluted Common Shares and Per Share Calculation: Contingent Units as reported on in Form 8-K/A dated June 6, 1997. 1,020 1,020 ------------- ------------- Total Fully Diluted Shares 16,400 20,976 ------------- ------------- Required increase in income from real estate operations necessary to earn contingent shares, less applicable depreciation on increased purchase price. 439 (262) Income from continuing operations before extraordinary item for common stockholders for computation of fully diluted ------------- ------------- earnings per share 11,947 17,722 ------------- ------------- Fully diluted earnings per share 0.73 0.84 ============= ============= PURCHASE AND SALE AGREEMENT THIS AGREEMENT is made as of the 1st day of October, 1997, between BOYNTON LAKES PLAZA PARTNERSHIP, a Florida general partnership ("Seller"), and RRC ACQUISITIONS, INC., a Florida corporation, its designees, successors and assigns ("Buyer"). Background Buyer wishes to purchase a shopping center in the City of Boynton Beach, County of Palm Beach, State of Florida, owned by Seller, known as Boynton Lakes Plaza (the "Shopping Center"); Seller wishes to sell the Shopping Center to Buyer; In consideration of the mutual agreements herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, Seller agrees to sell and Buyer agrees to purchase the Property (as hereinafter defined) on the following terms and conditions: 1. DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: 1.1 Agreement means this instrument as it may be amended from time to time. 1.2 Allocation Date means the close of business on the day immediately prior to the Closing Date. 26 ========================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): March 11, 1998 REGENCY REALTY CORPORATION (Exact name of registrant as specified in its charter) Florida 1-12298 59-3191743 (State or other (Commission (IRS Employer jurisdiction File No.) Identification No.) of incorporation) 121 West Forsyth Street, Suite 200 Jacksonville, Florida 32202 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (904)356-7000 N/A (Former name or former address, if changed since last report) ========================================================================== Item 2. Acquisition or Disposition of Assets. General On March 11, 1998, Regency Realty Corporation (the "Company") acquired, through a limited partnership (the "Partnership") of which the Company is the sole general partner, substantially all of the completed properties and third party management assets of Midland Development Group, Inc. and certain of its affiliates ("Midland") pursuant to a Contribution Agreement dated January 12, 1998. For additional information, see the Company's current report on Form 8-K filed with the Commission on February 4, 1998. Item 7. Financial Statements and Exhibits. (a) and (b) Financial Statements and Pro Forma Financial Information Audited statement of revenues and certain expenses for Midland for the year ended December 31, 1996 and unaudited pro forma consolidated balance sheet as of September 30, 1997 and unaudited pro forma consolidated statements of operations for the nine months ended September 30, 1997 and the year ended December 31, 1996 were included in the Company's current report on Form 8-K filed with the Commission on February 4, 1998. (c) Exhibits (2) Contribution Agreement dated as of January 12, 1998, by and among Regency Realty Corporation, Midland Development Group, Inc., the Midland Principals and certain Midland Affiliates. (10) Material Contracts: (a) Second Amended and Restated Agreement of Limited Partnership of Regency Centers, L.P., dated as of March 5, 1998, by and among Regency Realty Corporation, as General Partner, and the Limited Partners named therein. (b) Registration Rights Agreement dated as of March 5, 1998, by and among Regency Realty Corporation and the Investors named therein. (c) Amended and Restated Redemption Agreement dated as of March 5, 1998, by and among Regency Realty Corporation and the Investors named therein. (d) Non-Competition Agreement dated as of March 11, 1998, by and among Regency Centers, L.P., Regency Realty Group, Inc., Regency Realty Corporation and Lee S. Wielansky. (e) Lock-up letter agreement of Lee S. Wielansky dated as of March 1, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. REGENCY REALTY CORPORATION (Registrant) March 19, 1998 By: /s/ J. Christian Leavitt ------------------------------------ J. Christian Leavitt Vice President and Treasurer SECURITIES AND EXCHANGE COMMISSION UNITED STATES Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) January 14, 1998 REGENCY REALTY CORPORATION (Exact name of registrant as specified in its charter) Florida 1-12298 59-3191743 (State or other jurisdiction Commission (IRS Employer of incorporation) File Number) Identification No.) 121 West Forsyth Street, Suite 200 Jacksonville, Florida 32202 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (904)-356-7000 Not Applicable (Former name or former address, if changed since last report) 30 ITEM 5. OTHER EVENTS Regency Realty Corporation, through its wholly owned subsidiaries (together the "Company") acquired five shopping centers (the "1998 Acquisition Properties"), in addition to the Midland Properties described below, during the months of January through June 1998. The individual or the aggregate purchase price of these acquisitions, as provided below, did not individually exceed 10% of the Company's total assets. The acquisitions were made pursuant to separate purchase agreements, the sellers of which are unrelated to the Company. All of the properties currently operate as neighborhood retail shopping centers, and will continue as such. The purchase price of each shopping center was funded from the Company's revolving line of credit with Wells Fargo Realty Advisors Funding, Inc. The factors considered by the Company in determining the price to be paid for the shopping centers included historical and expected cash flow, nature of the tenancies and terms of the leases in place, occupancy rates, opportunities for alternative and new tenancies, current operating costs, physical condition and location, and the anticipated impact on the Company's financial results. The Company took into consideration capitalization rates at which it believes other shopping centers have recently sold, but determined the purchase price on the factors discussed above. No separate independent appraisals were obtained for the properties acquired. The following summarizes the 1998 Acquisition Properties: 31 Property Purchase Acquisition Occupancy at Name Price Date GLA City/State Acquisition Delk Spectrum $13,987,236 1-14-98 100,880 Marietta, GA 100.0% Bloomingdale $18,096,719 2-11-98 267,935 Brandon, FL 98.0% Silverlake $ 9,283,350 6-3-98 100,500 Erlanger, KY 91.2% Highland Square $12,501,000 6-17-98 226,682 Jacksonville, FL 90.0% Shoppes @ 104 $12,189,650 6-19-98 108,435 Miami, FL 94.0% =========== ======== Total $66,057,955 804,432 =========== ======== In January 1998, the Company entered into an agreement to acquire shopping centers from various entities comprising the Midland Group consisting of 21 shopping centers plus 11 shopping centers under development. The Company acquired 13 of the Midland shopping centers during March 1998 containing 1.3 million square feet for approximately $111.0 million. Those shopping centers are included in the Company's March 31, 1998 balance sheet. Subsequent to March 31, 1998, the Company has acquired or will acquire six additional shopping centers for $56.1 million and during July and August 1998, expects to acquire an additional three properties under development for $41.3 million. In addition, during 1998, the Company expects to pay $4.6 million in additional costs related to joint venture investments and other transaction costs related to acquiring the various shopping centers from Midland, and during 1999 and 2000 expects to pay contingent consideration of $23.0 million. The Company previously filed Form 8-K dated January 12, 1998 that summarized the transaction and provided 1996 audited financial statements of the Midland Properties. The enclosed pro forma financial statements for the year ended December 31, 1997 include the Midland shopping centers and their related audited financial statements for the year then ended. In June 1998, the Company, through an operating partnership in which it is the general partner, sold $80 million of 8.125% Series A Cumulative Redeemable Preferred Units to an institutional investor in a private placement. The enclosed pro forma financial statements include the net proceeds from the offering. In December 1997, the Company sold one office building for $2.6 million and recognized a gain on the sale of $451,000. During the first quarter of 1998, the Company sold three office buildings and a parcel of land for $26.7 million, and recognized a gain on the sale of $9.3 million. The enclosed pro forma financial statements include adjustments to reflect the reversal of the revenues and expenses from the office buildings generated during 1997 and 1998, including the gains on the sale of the office buildings as if the sales had been completed on January 1, 1997. 32 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS A. Financial Statements (a) DELK SPECTRUM SHOPPING CENTER Audited Statement of Revenues and Certain Expenses for the year ended December 31, 1997. (b) BLOOMINGDALE SQUARE Audited Statement of Revenues and Certain Expenses for the year ended December 31, 1997. (c) MIDLAND PROPERTIES Audited Statement of Revenues and Certain Expenses for the year ended December 31, 1997. (d) HIGHLAND SQUARE SHOPPING CENTER Audited Statement of Revenues and Certain Expenses for the year ended December 31, 1997. (e) SILVERLAKE SHOPPING CENTER Audited Statement of Revenues and Certain Expenses for the year ended December 31, 1997. B. Pro Forma Financial Information (a) REGENCY REALTY CORPORATION Pro Forma Consolidated Balance Sheet, March 31, 1998 (unaudited). Pro Forma Consolidated Statements of Operations for the Three-Month Period ended March 31, 1998 and the Year ended December 31, 1997 (unaudited). C. Exhibits: 10. Material Contracts * (a) Contribution Agreement dated November 3, 1997, between RRC Acquisitions, Inc., a wholly-owned subsidiary of the Company as purchaser and Cobb-Powers Ferry/Southside Associates, L.P. as seller relating to the acquisition of Delk Spectrum Shopping Center. * (b) Purchase and Sale Agreement dated October 7, 1997, between RRC Acquisitions,Inc., a wholly-owned subsidiary of the Company as purchaser and Bloomingdale Associates, Ltd. as seller relating to the acquisition of Bloomingdale Square. (c) Purchase and Sale Agreement dated April 4, 1998, between RRC Acquisitions Two, Inc., a wholly-owned subsidiary of the Company as purchaser and Silverlake Development Co., Ltd. as seller relating to the acquisition of Silverlake Shopping Center. (d) Purchase and Sale Agreement dated February 24, 1998, between RRC Acquisitions, Inc., a wholly owned subsidiary of the Company as purchaser and Ricardo Pines, Pines Highland Square Associates, Ltd., and Pines Group, Inc. as seller relating to the acquisition of Highland Square Shopping Center. (e) Purchase and Sale Agreement dated March 20, 1998, between RRC Acquisitions Two, Inc., a wholly owned subsidiary of the Company as purchaser and Nationwide Life Insurance Company as seller relating to the acquisition of Shoppes @ 104. 23. Consent of KPMG Peat Marwick LLP * Incorporated by reference to Form 10-Q filed May 15, 1998. 33 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. REGENCY REALTY CORPORATION (registrant) July 20, 1998 By: /s/ J. Christian Leavitt ---------------------------- J. Christian Leavitt Vice President and Treasurer 34 Independent Auditors' Report The Board of Directors Regency Realty Corporation: We have audited the accompanying statement of revenues and certain expenses of Delk Spectrum Shopping Center for the year ended December 31, 1997. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses of Delk Spectrum Shopping Center was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in a Form 8-K of Regency Realty Corporation and excludes material amounts, described in note 1, that would not be comparable to those resulting from the proposed future operation of the property. The presentation is not intended to be a complete presentation of Delk Spectrum Shopping Center revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses, described in note 1, of Delk Spectrum Shopping Center for the year ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Jacksonville, Florida May 15, 1998 35 DELK SPECTRUM SHOPPING CENTER Statement of Revenues and Certain Expenses For the year ended December 31, 1997 Revenues: Minimum rent $ 1,355,213 Recoveries from tenants 144,801 Percentage rent 10,296 ------------- Total revenues 1,510,310 Operating expenses: Real estate taxes 87,763 Operating and maintenance 57,295 Management fees 33,966 General and administrative 12,231 ------------- Total expenses 191,255 Revenues in excess of certain expenses $ 1,319,055 ============= See accompanying notes to statement of revenues and certain expenses. 36 DELK SPECTRUM SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses For the year ended December 31, 1997 1. Basis of Presentation The statement of revenues and certain expenses relates to the operation of a 100,880 square foot shopping center (the "Property") located in Marietta, Georgia. The Property's financial statement is prepared on the accrual basis of accounting in conformity with generally accepted accounting principles. Subsequent to December 31, 1997, the Property was acquired by Regency Realty Corporation (RRC) in a transaction accounted for as a purchase. All operations of the Property will be included in the consolidated financial statements of RRC beginning at the acquisition date. The accompanying financial statement is not representative of the actual operations for the period presented as certain expenses, which may not be comparable to the expenses expected to be incurred by RRC in the proposed future operation of the Property, have been excluded. RRC is not aware of any material factors relating to the Property that would cause the reported financial information not to be necessarily indicative of future operating results. Costs not directly related to the operation of the Property have been excluded, and consist of interest, depreciation, professional fees, and certain other non operating expenses. 2. Related Party Transaction During the year, management fees of $33,966 were paid to a property manager which is a related entity of the Property. The Property pays management fees of 2.5% of total income reported on the cash basis. 3. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 37 DELK SPECTRUM SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses 4. Operating Leases For the year ended December 31, 1997, the following tenants paid minimum rent which exceeded 10% of the total minimum rent earned by the Property: Minimum Tenant Rent Paid A&P Food Stores $ 431,952 Blockbuster Video 149,316 Outback Steakhouse, of Georgia - I, L.P. 136,032 The Property is leased to tenants under operating leases with expiration dates extending to the year 2016. Future minimum rent under noncancelable operating leases as of December 31, 1997, excluding tenant reimbursements of operating expenses and excluding additional contingent rentals based on tenants' sales volume, are as follows: Year ending December 31, Amount 1998 $ 1,322,718 1999 1,280,486 2000 1,250,745 2001 1,112,330 2002 724,383 38 Independent Auditors' Report The Board of Directors Regency Realty Corporation: We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses of Bloomingdale Square was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in a Form 8-K of Regency Realty Corporation and excludes material amounts, described in note 1, that would not be comparable to those resulting from the proposed future operation of the property. The presentation is not intended to be a complete presentation of Bloomingdale Square revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses, described in note 1, of Bloomingdale Square for the year ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Jacksonville, Florida May 13, 1998 39 BLOOMINGDALE SQUARE Statement of Revenues and Certain Expenses For the year ended December 31, 1997 Revenues: Minimum rent $ 1,862,950 Recoveries from tenants 458,560 Percentage rent 42,746 ------------- Total revenues 2,364,256 Operating expenses: Operating and maintenance 214,721 Real estate taxes 209,525 Management fees 93,803 General and administrative 90,227 ------------- Total expenses 608,276 Revenues in excess of certain expenses $ 1,755,980 ============= See accompanying notes to statement of revenues and certain expenses. 40 BLOOMINGDALE SQUARE Notes to Statement of Revenues and Certain Expenses For the year ended December 31, 1997 1. Basis of Presentation The statement of revenues and certain expenses relates to the operation of a 267,935 square foot shopping center (the "Property") located in Brandon, Florida. The Property's financial statement is prepared on the accrual basis of accounting in conformity with generally accepted accounting principles. Subsequent to December 31, 1997, the Property was acquired by Regency Realty Corporation (RRC) in a transaction accounted for as a purchase. All operations of the Property will be included in the consolidated financial statements of RRC beginning at the acquisition date. The accompanying financial statement is not representative of the actual operations for the period presented as certain expenses, which may not be comparable to the expenses expected to be incurred by RRC in the proposed future operation of the Property, have been excluded. RRC is not aware of any material factors relating to the Property that would cause the reported financial information not to be necessarily indicative of future operating results. Costs not directly related to the operation of the Property have been excluded, and consist of interest, depreciation, professional fees, and certain other non operating expenses. 2. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 41 BLOOMINGDALE SQUARE Notes to Statement of Revenues and Certain Expenses 3. Operating Leases For the year ended December 31, 1997, the following tenants paid minimum rent which exceeded 10% of the total minimum rent earned by the Property: Minimum Tenant Rent Paid Wal-Mart $ 405,550 Publix 208,924 Beall's Department Stores 185,250 The Property is leased to tenants under operating leases with expiration dates extending to the year 2006. Future minimum rent under noncancelable operating leases as of December 31, 1997, excluding tenant reimbursements of operating expenses and excluding additional contingent rentals based on tenants' sales volume, are as follows: Year ending December 31, Amount 1998 $ 1,885,581 1999 1,805,590 2000 1,580,180 2001 1,397,825 2002 1,149,187 42 Independent Auditors' Report The Board of Directors Regency Realty Corporation: We have audited the accompanying statement of revenues and certain expenses of the Midland Properties for the year ended December 31, 1997. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses of the Midland Properties was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in a Form 8-K of Regency Realty Corporation and excludes material amounts, described in note 1, that would not be comparable to those resulting from the proposed future operation of the properties. The presentation is not intended to be a complete presentation of the Midland Properties revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses, described in note 1, of the Midland Properties for the year ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Jacksonville, Florida July 8, 1998 43 MIDLAND PROPERTIES Statement of Revenues and Certain Expenses For the year ended December 31, 1997 Revenues: Minimum rent $ 16,468,353 Recoveries from tenants 2,239,717 Percentage rent 14,118 ---------------- Total revenues 18,722,188 Operating expenses: Operating and maintenance 1,193,921 Management fees 554,670 Real estate taxes 1,635,129 General and administrative 486,452 ---------------- Total expenses 3,870,172 Revenues in excess of certain expenses $ 14,852,016 ================ See accompanying notes to statement of revenues and certain expenses. 44 MIDLAND PROPERTIES Notes to Statement of Revenues and Certain Expenses For the year ended December 31, 1997 1. Basis of Presentation The statement of revenues and certain expenses combines the operations of the following 19 shopping centers (Midland Properties), in which Midland Development Group, Inc., or one of its affiliated entities, is the general partner: Square Property Name Location Feet Beckett Commons West Chester, OH 80,434 Bent Tree Plaza Raleigh, NC 79,503 Brookville Plaza Lynchburg, VA 63,664 Cherry Grove Plaza Cincinnati, OH 186,040 East Point Crossing Columbus, OH 86,520 Evans Crossing Evans, GA 76,580 Franklin Shopping Centers Franklin, KY 205,060 Hamilton Meadows Hamilton, OH 126,251 Lake Pine Plaza Raleigh, NC 87,690 Lake Shores Plaza Detroit, MI 85,478 Kernersville Plaza Kernersville, NC 72,590 North Gate Plaza Columbus, OH 85,100 Maynard Crossing Raleigh, NC 122,813 Shoppes at Mason Cincinnati, OH 80,880 St. Ann Square St. Ann, MO 82,498 Statler Square Staunton, VA 133,660 West Chester Plaza Westchester, OH 88,181 Windmiller Farms Columbus, OH 119,192 Worthington Park Centre Worthington, OH 93,092 This financial statement is prepared on the accrual basis of accounting in conformity with generally accepted accounting principles. Subsequent to December 31, 1997, the Midland Properties were acquired by Regency Realty Corporation (RRC) in a transaction accounted for as a purchase. All operations of the Midland Properties will be included in the consolidated financial statements of RRC beginning at the acquisition date. 45 MIDLAND PROPERTIES Notes to Statement of Revenues and Certain Expenses 1. Basis of Presentation, continued The accompanying financial statement is not representative of the actual operations for the period presented as certain expenses, which may not be comparable to the expenses expected to be incurred by RRC in the proposed future operation of the Midland Properties, have been excluded. RRC is not aware of any material factors relating to the Midland Properties that would cause the reported financial information not to be necessarily indicative of future operating results. Costs not directly related to the operation of the Midland Properties have been excluded, and consist of interest, depreciation, professional fees, and certain other non operating expenses. 2. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Operating Leases For the year ended December 31, 1997, Kroger Supermarkets, an anchor tenant in all 19 of the shopping centers, paid minimum rent of $8,363,436, which exceeded 10% of the total minimum rent earned by all the Midland Properties. The Midland Properties are leased to tenants under operating leases with expiration dates extending to the year 2022. Future minimum rent under noncancelable operating leases as of December 31, 1997, excluding tenant reimbursements of operating expenses and excluding additional contingent rentals based on tenants' sales volume, are as follows: Year ending December 31, Amount 1998 $ 17,280,288 1999 16,587,478 2000 15,311,669 2001 14,285,341 2002 12,150,739 46 MIDLAND PROPERTIES Notes to Statement of Revenues and Certain Expenses 4. Related Party Transactions Midland Development Group, Inc., serves as managing agent for the Midland Properties and receives a management fee of approximately 4% of minimum and percentage rent, as adjusted and defined, which amounted to $554,670 for the year ended December 31, 1997. 47 Independent Auditors' Report The Board of Directors Regency Realty Corporation: We have audited the accompanying statement of revenues and certain expenses of Highland Square Shopping Center for the year ended December 31, 1997. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses of Highland Square Shopping Center was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in a Form 8-K of Regency Realty Corporation and excludes material amounts, described in note 1, that would not be comparable to those resulting from the proposed future operation of the property. The presentation is not intended to be a complete presentation of Highland Square Shopping Center revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses, described in note 1, of Highland Square Shopping Center for the year ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Jacksonville, Florida July 1, 1998 48 HIGHLAND SQUARE SHOPPING CENTER Statement of Revenues and Certain Expenses For the year ended December 31, 1997 Revenues: Minimum rent $ 1,122,221 Recoveries from tenants 187,529 Percentage rent 111,154 ------------- Total revenues 1,420,904 Operating expenses: Real estate taxes 171,358 Operating and maintenance 98,963 General and administrative 76,051 Management fees 54,111 ------------- Total expenses 400,483 Revenues in excess of certain expenses $ 1,020,421 ============= See accompanying notes to statement of revenues and certain expenses. 49 HIGHLAND SQUARE SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses For the year ended December 31, 1997 1. Basis of Presentation The statement of revenues and certain expenses relates to the operation of a 226,682 square foot shopping center (the "Property") located in Jacksonville, Florida. The Property's financial statement is prepared on the accrual basis of accounting in conformity with generally accepted accounting principles. Subsequent to December 31, 1997, the Property was acquired by Regency Realty Corporation (RRC) in a transaction accounted for as a purchase. All operations of the Property will be included in the consolidated financial statements of RRC beginning at the acquisition date. The accompanying financial statement is not representative of the actual operations for the period presented as certain expenses, which may not be comparable to the expenses expected to be incurred by RRC in the proposed future operation of the Property, have been excluded. RRC is not aware of any material factors relating to the Property that would cause the reported financial information not to be necessarily indicative of future operating results. Costs not directly related to the operation of the Property have been excluded, and consist of interest, depreciation, professional fees, and certain other non operating expenses. 2. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 50 HIGHLAND SQUARE SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses 3. Operating Leases For the year ended December 31, 1997, one tenant, Winn Dixie Stores, Inc. paid minimum rent of $223,000 which exceeded 10% of the total minimum rent earned by the Property. The Property is leased to tenants under operating leases with expiration dates extending to the year 2014. Future minimum rent under noncancelable operating leases as of December 31, 1997, excluding tenant reimbursements of operating expenses and excluding additional contingent rentals based on tenants' sales volume, are as follows: Year ending December 31, Amount 1998 $ 1,052,126 1999 878,359 2000 659,175 2001 427,187 2002 334,822 4. Related Party Transactions Pines Group, Inc., a related party through common general partners, serves as managing agent for Highland Square Shopping Center and receives a management fee of approximately 4% of total revenues which amounted to $54,111 for the year ended December 31, 1997. 51 Independent Auditors' Report The Board of Directors Regency Realty Corporation: We have audited the accompanying statement of revenues and certain expenses of Silverlake Shopping Center for the year ended December 31, 1997. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses of Silverlake Shopping Center was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in a Form 8-K of Regency Realty Corporation and excludes material amounts, described in note 1, that would not be comparable to those resulting from the proposed future operation of the property. The presentation is not intended to be a complete presentation of Silverlake Shopping Center revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses, described in note 1, of Silverlake Shopping Center for the year ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Jacksonville, Florida June 30, 1998 52 SILVERLAKE SHOPPING CENTER Statement of Revenues and Certain Expenses For the year ended December 31, 1997 Revenues: Minimum rent $ 819,303 Recoveries from tenants 142,294 ----------- Total revenues 961,597 Operating expenses: Operating and maintenance 84,650 Real estate taxes 85,302 Management fees 11,043 General and administrative 31,995 ----------- Total expenses 212,990 Revenues in excess of certain expenses $ 748,607 =========== See accompanying notes to statement of revenues and certain expenses. 53 SILVERLAKE SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses For the year ended December 31, 1997 1. Basis of Presentation The statement of revenues and certain expenses relates to the operation of a 100,500 square foot shopping center (the "Property") located in Erlanger, KY. The Property's financial statement is prepared on the accrual basis of accounting in conformity with generally accepted accounting principles. Subsequent to December 31, 1997, the Property was acquired by Regency Realty Corporation (RRC) in a transaction accounted for as a purchase. All operations of the Property will be included in the consolidated financial statements of RRC beginning at the acquisition date. The accompanying financial statement is not representative of the actual operations for the period presented as certain expenses, which may not be comparable to the expenses expected to be incurred by RRC in the proposed future operation of the Property, have been excluded. RRC is not aware of any material factors relating to the Property that would cause the reported financial information not to be necessarily indicative of future operating results. Costs not directly related to the operation of the Property have been excluded, and consist of interest, depreciation, professional fees, and certain other non operating expenses. 2. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 54 SILVERLAKE SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses 3. Operating Leases For the year ended December 31, 1997, one tenant, Kroger Supermarkets, paid minimum rent of $466,104 which exceeded 10% of the total minimum rent earned by the Property. The Property is leased to tenants under operating leases with expiration dates extending to the year 2014. Future minimum rent under noncancelable operating leases as of December 31, 1997, excluding tenant reimbursements of operating expenses and excluding additional contingent rentals based on tenants' sales volume, are as follows: Year ending December 31, Amount 1998 $ 826,061 1999 711,620 2000 671,534 2001 568,221 2002 526,588 =========== 4. Related Party Transactions Oakley Properties, Inc., an affiliated entity through common general partners, serves as the managing agent for the Property and received management fees of $11,043 for the year ended December 31, 1997. 55 Regency Realty Corporation Pro Forma Condensed Consolidated Financial Statements The following unaudited pro forma condensed consolidated balance sheet is based upon the historical consolidated balance sheet of the Company as of March 31, 1998 as if the Company had completed the acquisition of all the Midland Properties and the 1998 Acquisition Properties as of that date. The following unaudited pro forma consolidated statements of operations of the Company are based upon the historical consolidated statements of operations for the three-month period ended March 31, 1998 and the year ended December 31, 1997. These statements are presented as if the Company had acquired the 1998 Acquisition Properties and 13 other properties acquired during 1997 (together the "Acquisition Properties"), as well as the Branch Properties and the Midland Properties as of January 1, 1997. These unaudited pro forma condensed consolidated financial statements should be read in conjunction with the Company's annual report filed on Form 10-K for the year ended December 31, 1997, and Form 10-Q for the period ended March 31, 1998. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what the actual financial position or results of operations of the Company would have been at March 31, 1998 or December 31, 1997 assuming the transactions had been completed as set forth above, nor does it purport to represent the financial position or results of operations of the Company in future periods. Midland Other Historical Properties Adjustments Pro Forma (a) Assets Real estate investments, at cost $ 950,050 $ 56,100 $ 33,974 (b) $ 1,040,124 Construction in progress 40,765 - - 40,765 Less: accumulated depreciation 40,833 - - 40,833 ------------ ------------ ------------ ------------ Real estate rental property, net 949,982 56,100 33,974 1,040,056 ------------ ------------ ------------ ------------ Investments in real estate partnerships 992 - - 992 ------------ ------------ ------------ ------------ Net real estate investments 950,974 56,100 33,974 1,041,048 ------------ ------------ ------------ ------------ Cash and cash equivalents 16,707 - - 16,707 Tenant receivables, net of allowance for uncollectible accounts 9,788 - - 9,788 Deferred costs, less accumulated amortization 4,532 - - 4,532 Other assets 3,981 - - 3,981 ============ ============ ============ ============ Total Assets $ 985,982 $ 56,100 $ 33,974 $ 1,076,056 ============ ============ ============ ============ Liabilities and Stockholders' Equity Mortgage loans payable $ 305,531 $ 31,732 $ (25,774)(c) $ 311,489 Acquisition and development line of credit 90,231 24,368 (18,652)(b)(c) 95,947 ------------ ------------ ------------ ----------- Total debt 395,762 56,100 (44,426) 407,436 Tenant's security and escrow deposits 2,562 - - 2,562 Accounts payable & other liabilities 11,911 - - 11,911 ------------ ------------ ------------ ------------ Total liabilities 410,235 56,100 (44,426) 421,909 ------------ ------------ ------------ ------------ Redeemable partnership units 28,106 - - 28,106 Preferred partnership units - - 78,400 (c) 78,400 Limited partners' interest in consolidated partnerships 7,414 - - 7,414 ------------ ------------ ------------ ------------ 35,520 - 78,400 113,920 ------------ ------------ ------------ ------------ Common stock and additional paid in capital 553,187 - - 553,187 Distributions in excess of net income (12,960) - - (12,960) ------------ ------------ ------------ ------------ Total stockholders' equity 540,227 - - 540,227 ------------ ------------ ------------ ------------ Total liabilities and stockholders' equity $ 985,982 $ 56,100 $ 33,974 $ 1,076,056 ============ ============ ============ ============ See accompanying notes to pro forma condensed consolidated balance sheet. 56 Regency Realty Corporation Notes to Pro Forma Condensed Consolidated Balance Sheet March 31, 1998 (Unaudited) (In thousands) (a) Acquisitions of Shopping Centers: In January 1998, the Company entered into an agreement to acquire shopping centers from various entities comprising the Midland Group consisting of 21 shopping centers plus 11 shopping centers under development. The Company acquired 13 of the Midland shopping centers during March 1998 containing 1.3 million square feet for approximately $111.0 million. Those shopping centers are included in the Company's March 31, 1998 balance sheet. Subsequent to March 31, 1998, the Company has acquired or will acquire six additional shopping centers for $56.1 million and during July and August 1998, expects to acquire an additional three properties under development for $41.3 million. In addition, during 1998, the Company expects to pay $4.6 million in additional costs related to joint venture investments and other transaction costs related to acquiring the various shopping centers from Midland, and during 1999 and 2000 expects to pay contingent consideration of $23.0 million. The following table sets forth the aggregate purchase price for East Point, Maxtown, Worthington, Franklin Square, St. Ann Square and Windmiller, which have been or will be acquired subsequent to March 31, 1998. Purchase Price ------------- East Point $ 8,215 Maxtown 7,712 Worthington 10,691 Franklin Square 11,375 St. Ann Square 6,653 Windmiller 11,454 ============= $ 56,100 ============= The following table represents the properties under development which the Company expects to acquire from Midland upon completion of construction during 1998. These properties are not included in these pro forma condensed consolidated financial statements. Expected Acquisition Purchase Date Price ------------- ------------- Garner Festival July-98 $ 20,571 Nashboro July-98 7,260 Crooked Creek August-98 13,471 ========== $ 41,302 ========== (b) Represents the aggregate purchase price for Silverlake Shopping Center, Highlands Square Shopping Center and Shoppes @ 104. The other Acquisition Properties were acquired prior to March 31, 1998 and are therefore included in the Company's March 31, 1998 balance sheet. Acquisition Purchase Date Price -------------- ------------- Silverlake Shopping Center June 3, 1998 $ 9,283 Highland Square Shopping Center June 17, 1998 12,501 Shoppes @ 104 June 19, 1998 12,190 =========== $ 33,974 =========== (c) Represents the proceeds from the offering of cumulative redeemable preferred units completed in June 1998, less estimated offering costs of 2%. At closing, the Company used the net proceeds from the offering, approximately $78.4 million, for the repayment of existing mortgage loans ($25.8 million) and the repayment of balances on the Line ($52.6 million). 57 Regency Realty Corporation Pro Forma Consolidated Statements of Operations For the Three Month Period Ended March 31, 1998 and the Year Ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) For the Three Month Period Ended March 31, 1998 Midland Acquisition Other Historical Properties Properties Adjustments Pro Forma (e) (f) Revenues: Minimum rent $ 22,255 $ 3,332 $ 1,064 $ (697) (j) $ 25,954 Percentage rent 1,103 - 32 (8) (j) 1,127 Recoveries from tenants 4,821 410 208 (67) (j) 5,372 Management, leasing and brokerage fees 2,504 - - - 2,504 Equity in income of investments in real estate partnerships 1 - - - 1 -------- ------- ------- --------- --------- 30,684 3,742 1,304 (772) 34,958 -------- ------- ------- --------- --------- Operating expenses: Depreciation & amortization 5,456 676 (g) 280 (g) (453) (j) 5,959 Operating and maintenance 4,116 228 109 (122) (j) 4,331 General and administrative 3,433 180 81 (25) (j) 3,669 Real estate taxes 2,789 385 131 (81) (j) 3,224 -------- ------- ------- --------- --------- 15,794 1,469 601 (681) 17,183 -------- ------- ------- --------- --------- Interest expense (income): Interest expense 5,215 2,058 (h) 712 (i) (1,799) (k) 6,186 Interest income (335) - - - (335) -------- ------- ------- --------- --------- 4,880 2,058 712 (1,799) 5,851 -------- ------- ------- --------- --------- Income before minority interest and gain on sale of real estate investments 10,010 215 (9) 1,708 11,924 Gain on sale of real estate investments 10,237 - - (9,336) (j) 901 Minority interest (691) (9) - 4 (696) -------- ------- ------- --------- --------- Net income 19,556 206 (9) (7,624) 12,129 -------- ------- ------- --------- --------- Preferred distributions - - - (1,625) (l) (1,625) -------- ------- ------- --------- --------- Net income for common stockholders $ 19,556 $ 206 $ (9) $ (9,249) $ 10,504 ======== ======= ======== ========= ========= Net income per share (note (m)): Basic $ 0.74 $ 0.37 ======== ========= Diluted $ 0.69 $ 0.37 ======== ========= See accompanying notes to pro forma consolidated statements of operations. 58 Regency Realty Corporation Pro Forma Consolidated Statements of Operations For the Three Month Period Ended March 31, 1998 and the Year Ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) For the Year Ended December 31, 1997 Branch Midland Acquisition Other Historical Properties Properties Properties Adjustments Pro Forma (d) (e) (f) Revenues: Minimum rent $ 70,103 $ 3,596 16,482 14,452 (4,136) (j) $ 100,497 Percentage rent 2,151 167 0 299 - 2,617 Recoveries from tenants 16,601 751 2,240 3,136 (548) (j) 22,180 Management, leasing and brokerage fees 8,448 1,060 0 0 - 9,508 Equity in income of investments in real estate partnerships 33 - 0 0 - 33 ----------- ----------- ----------- ---------- --------- --------- 97,336 5,574 18,722 17,887 (4,684) 134,835 ----------- ----------- ----------- ---------- --------- --------- Operating expenses: Depreciation & amortization 16,303 972 2,994 (g) 3,458 (g) (855) (j) 22,872 Operating and maintenance 14,213 595 1,194 1,999 (1,260) (j) 16,741 General and administrative 9,964 683 1,042 931 (49) (j) 12,571 Real estate taxes 8,692 404 1,635 1,922 (447) (j) 12,206 ----------- ----------- ----------- ---------- --------- --------- 49,172 2,654 6,865 8,310 (2,611) 64,390 ----------- ----------- ----------- ---------- --------- --------- Interest expense (income): Interest expense 19,667 1,517 10,353 (h) 9,765 (i) (7,196) (k) 34,106 Interest income (1,000) (33) 0 0 - (1,033) ----------- ----------- ----------- ---------- --------- --------- 18,667 1,484 10,353 9,765 (7,196) 33,073 ----------- ----------- ----------- ---------- --------- --------- Income before minority interest and gain on sale of real estate investments 29,497 1,436 1,504 (188) 5,123 37,372 Gain on sale of real estate investments 451 - 0 0 (451) (j) - Minority interest (2,547) 1,010 (38) 5 52 (1,518) ----------- ----------- ----------- ---------- --------- --------- Net income 27,401 2,446 1,466 (183) 4,724 35,854 Preferred distributions - - 0 0 (6,500) (l) (6,500) =========== =========== =========== ========== ========= ========= Net income for common stockholders $ 27,401 $ 2,446 1,466 (183) $ (1,776) $ 29,354 =========== =========== =========== ========== ========= ========= Net income per share (note (m)): Basic $ 1.28 1.39 =========== ========= Diluted $ 1.23 1.28 =========== ========= See accompanying notes to pro forma consolidated statements of operations. 59 Regency Realty Corporation Notes to Pro Forma Consolidated Statements of Operations For the Three Month Period Ended March 31, 1998 and the Year ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) (d) Reflects pro forma results of operations for the Branch Properties for the period from January 1, 1997 to March 7, 1997 (acquisition date). (e) Reflects revenues and certain expenses for the Midland Properties for the period from January 1, 1998 to the earlier of the respective acquisition date of the property or March 31, 1998 and for the year ended December 31, 1997. For the period from January 1, 1998 to the Acquisition Date Property Acquisition Minimum Recoveries Operating and Real General and Name Date Rent from Tenants Maintenance Estate Taxes Administrative ------------------- --------- --------- -------------- ------------- ------------- --------------- Windmiller Farms Jul-98 $ 289 $ 45 $ 17 $ 36 $ 16 Franklin Square 4/29/98 303 19 27 25 13 St. Ann Square 4/17/98 184 3 17 - 5 East Point Crossing 4/29/98 223 19 15 46 8 North Gate Plaza 4/29/98 181 51 12 46 22 Worthington Park 4/29/98 227 74 17 61 7 Beckett Commons 3/1/98 113 7 6 14 4 Cherry Grove Plaza 3/1/98 239 11 13 22 21 Bent Tree Plaza 3/1/98 137 11 7 59 8 West Chester Plaza 3/1/98 130 12 13 42 7 Brookville Plaza 3/1/98 95 5 5 - 4 Lake Shores Plaza 3/1/98 123 10 5 - 6 Evans Crossing 3/1/98 116 4 5 - 6 Statler Square 3/1/98 164 15 13 1 8 Kernersville Plaza 3/1/98 120 4 8 - 8 Maynard Crossing 3/1/98 272 38 13 - 15 Shoppes at Mason 3/1/98 116 27 15 33 6 Lake Pine Plaza 3/1/98 152 13 10 - 9 Hamilton Meadows 3/1/98 148 42 10 - 7 ========= =========== ========== ============ =============== $ 3,332 $ 410 $ 228 $ 385 $ 180 ========= =========== ========== ============ =============== For the year ended December 31, 1997 Property Acquisition Minimum Recoveries Operating and Real General and Name Date Rent from Tenants Maintenance Estate Taxes Administrative ------------------- --------- --------- -------------- ------------- ------------- --------------- Windmiller Farms Jul-98 $ 1,157 $ 181 $ 69 $ 143 $ 64 Franklin Square 4/29/98 1,270 171 158 94 98 St. Ann Square 4/17/98 741 149 60 119 42 East Point Crossing 4/29/98 821 159 50 107 51 North Gate Plaza 4/29/98 718 100 56 84 32 Worthington Park 4/29/98 862 208 67 124 59 Beckett Commons 3/1/98 687 140 38 83 47 Cherry Grove Plaza 3/1/98 1,445 175 85 131 105 Bent Tree Plaza 3/1/98 786 130 64 59 48 West Chester Plaza 3/1/98 807 70 72 84 45 Brookville Plaza 3/1/98 571 42 34 50 30 Lake Shores Plaza 3/1/98 759 156 55 96 32 Evans Crossing 3/1/98 613 84 34 50 33 Statler Square 3/1/98 913 76 43 54 60 Kernersville Plaza 3/1/98 605 58 29 51 33 Maynard Crossing 3/1/98 1,367 133 78 95 104 Shoppes at Mason 3/1/98 644 56 61 65 38 Lake Pine Plaza 3/1/98 827 93 54 51 46 Hamilton Meadows 3/1/98 889 59 87 95 75 ========= =========== ========== ============ =============== $ 16,482 $ 2,240 $ 1,194 $ 1,635 $ 1,042 ========= =========== ========== ============ =============== 60 (f) Reflects revenue and certain expenses of the Acquisition Properties for the periods from January 1, 1998 and 1997 to the respective acquisition date of the property. For the period from January 1, 1998 to the Acquisition Date Property Acquisition Minimum Percentage Recoveries Operating and Real General and Name Date Rent Rent from Tenants Maintenance Estate Taxes Administrative ---- ----------- --------- ---------- ------------ ------------- ------------ -------------- Delk Spectrum 1/14/98 $ 48 $ - $ 5 $ 2 $ 3 2 Bloomingdale Square 2/11/98 209 5 52 24 23 21 Silverlake 6/3/98 202 - 35 21 21 11 Highland Square 6/17/98 277 27 46 24 42 32 Shoppes @104 6/19/98 328 - 70 38 42 15 ========= =========== ========== ============ =============== =========== $ 1,064 $ 32 $ 208 $ 109 $ 131 81 ========= =========== ========== ============ =============== =========== For the period from January 1, 1997 to the Acquisition Date Property Acquisition Minimum Percentage Recoveries Operating and Real General and Name Date Rent Rent from Tenants Maintenance Estate Taxes Administrative ---- --------- --------- ----------- -------------- ------------ --------------- ----------- Oakley Plaza 3/14/97 $ 142 $ - $ 14 $ 13 $ 13 $ 8 Mariner's Village 3/25/97 185 6 37 45 33 7 Carmel Commons 3/28/97 297 11 63 38 35 22 Mainstreet Square 4/15/97 193 - 34 42 30 15 East Port Plaza 4/25/97 543 - 107 96 65 33 Hyde Park Plaza 6/6/97 1,702 118 339 144 265 84 Rivermont Station 6/30/97 642 - 124 65 56 34 Lovejoy Station 6/30/97 306 - 63 36 29 9 Tamiami Trails 7/10/97 508 - 163 124 66 30 Garden Square 9/19/97 671 - 232 144 99 50 Kingsdale S.C. 10/10/97 1,334 - 300 325 221 75 Boynton Lakes Plaza 12/1/97 1,159 - 391 267 250 80 Pinetree Plaza 12/23/97 279 - 51 50 37 21 Delk Spectrum 1/14/98 1,355 10 145 57 88 46 Bloomingdale Square 2/11/98 1,863 43 459 215 209 184 Silverlake 6/3/98 819 - 142 85 85 43 Highland Square 6/17/98 1,122 111 187 99 171 130 Shoppes @104 6/19/98 1,332 - 285 154 170 60 ========= =========== ========== ========== ============== ========== $ 14,452 $ 299 $ 3,136 $ 1,999 $ 1,922 $ 931 ========= =========== ========== ========== ============== ========== (g) Depreciation expense is based on the estimated useful life of the properties acquired. For properties under construction, depreciation expense is calculated from the date the property is placed in service through the end of the period. In addition, the three month period ended March 31, 1998 and year ended December 31, 1997 calculations reflect depreciation expense on the properties from January 1, 1997 to the earlier of the respective acquisition date of the property or March 31, 1998. 61 For the period from January 1, 1998 to the Acquisition Date Property Building and Year Building Depreciation Name Improvements Built/Renovated Useful Life Adjustment ------------- -------------- ------------ --------------- Delk Spectrum $ 10,417 1991 34 $ 11 Bloomingdale Square 13,189 1987 30 49 Silverlake Shopping Center 7,584 1988 31 60 Highland Square 9,049 1960 20 112 Shoppes @104 6,439 1990 33 48 =============== Acquisition Properties pro forma depreciation adjustment $ 280 =============== Midland Properties $ 131,065 Ranging from Ranging from 1986 to 1996 29 to 40 $ 676 =============== For the period from January 1, 1997 to the Acquisition Date Property Building and Year Building Depreciation Name Improvements Built/Renovated Useful Life Adjustment ------------- ---------------- ---------- --------------- Oakley Plaza $ 6,428 1988 31 $ 41 Mariner's Village 5,979 1986 29 47 Carmel Commons 9,335 1979 22 101 Mainstreet Square 4,581 1988 31 43 East Port Plaza 8,179 1991 34 76 Hyde Park Plaza 33,734 1995 38 382 Rivermont Station 9,548 1996 39 121 Lovejoy Station 5,560 1995 38 73 Tamiami Trails 7,598 1987 30 133 Garden Square 7,151 1991 34 151 Kingsdale Shopping Center 10,023 1959 27 288 Boynton Lakes Plaza 9,618 1993 36 244 Pinetree Plaza 3,057 1982 25 120 Delk Spectrum 10,417 1991 34 306 Bloomingdale Square 13,189 1987 30 440 Silverlake Shopping Center 7,584 1988 31 245 Highlands Square 9,049 1960 20 452 Shoppes @104 6,439 1990 33 195 =============== Acquisition Properties pro forma depreciation adjustment $ 3,458 =============== Midland Properties $131,065 Ranging from Ranging from 1986 to 1996 29 to 40 $ 2,994 =============== 62 (h) To reflect interest expense on the Line required to complete the acquisition of the Midland Properties at the average interest rate afforded the Company (6.525%) and the assumption of $97.0 million of debt. For properties under construction, interest expense is calculated from the date the property is placed in service through the end of the period. Pro forma interest adjustment for the three month period ended March 31, 1998 $ 2,058 =============== Pro forma interest adjustment for the year ended December 31, 1997 $ 10,353 =============== (i) To reflect interest expense on the Line required to complete the acquisition of the Acquisition Properties at the average interest rate afforded the Company (6.525%). The three month period ended March 31, 1998 and year ended December 31, 1997 calculation reflects interest expense on the properties from January 1, 1997 to the respective acquisition date of the property. Pro forma interest adjustment for the three month period ended March 31, 1998 $ 712 ============== Pro forma interest adjustment for the year ended December 31, 1997 $ 9,765 ============== (j) In December, 1997, the Company sold one office building for $2.6 million and recognized a gain on the sale of $451,000. During the first quarter of 1998, the Company sold three office buildings and a parcel of land for $26.7 million, and recognized a gain on the sale of $9.3 million. The adjustments to the pro forma statements of operations reflects the reversal of the revenues and expenses from the office buildings generated during 1997 and 1998, including the gains on the sale of the office buildings as if the sales had been completed on January 1, 1997. (k) To reflect the reduction of interest expense on the Line and mortgage loans from the proceeds of the issuance of the preferred units and the proceeds from the sale of the office buildings. Pro forma interest adjustment for the three-month period ended March 31, 1998 $ (1,799) =============== Pro forma interest adjustment for the year ended December 31, 1997 $ (7,196) =============== (l) To reflect the distribution on the offering of preferred units at an assumed annual rate of 8.125% for the three-month period ended March 31, 1998 and year ended December 31, 1997. (m) The following summarizes the calculation of basic and diluted earnings per share for the three-month period ended March 31, 1998 and the year ended December 31, 1997: 63 For the Three For the year Months Ended Ended March 31, 1998 December 31, 1997 --------------- ---------------- Basic Earnings Per Share (EPS) Calculation: Weighted average common shares outstanding 24,727 17,424 ============ =============== Net income for common stockholders $ 10,503 $ 29,354 Less: dividends paid on Class B common stock 1,344 5,140 ============ =============== Net income for Basic EPS $ 9,159 24,214 ============ =============== Basic earnings per share $ 0.37 1.39 ============ =============== Diluted Earnings Per Share (EPS) Calculation: Weighted average common shares outstanding for Basic EPS 24,727 17,424 Redeemable operating partnership units - 1,243 Incremental shares to be issued under common stock options using the Treasury method 54 80 Contingent units or shares for the acquisition of real estate - 955 ------------ --------------- Total Diluted Shares 24,781 19,702 ------------ --------------- Net income for Basic EPS 9,159 24,214 Add: minority interest of redeemable partnership units - 1,013 ============ =============== Net income for Diluted EPS 9,159 25,227 ============ =============== Diluted EPS $ 0.37 $ 1.28 ============ =============== 64 The Board of Directors Regency Realty Corporation: We consent to the use of reports incorporated by reference in the registration statements, (No. 3-86886, No. 333-930, No. 333-2546, and No. 333- 31077) on Form S-3 and (No. 333-24971) on Form S-8, of Regency Realty Corporation of our reports, with respect to the Statements of Revenues and Certain Expenses for the year ended December 31, 1997, of the following properties: Name of Property Date of audit report Delk Spectrum Shopping Center May 15, 1998 Bloomingdale Square May 13, 1998 Sliverlake Shopping Center June 30, 1998 Highland Square Shopping Center July 1, 1998 Midland Properties July 8, 1998 The above reports appear in the Form 8-K of Regency Realty Corporation dated July 20, 1998. KPMG PEAT MARWICK LLP July 20, 1998 Jacksonville, Florida 65 PURCHASE AND SALE AGREEMENT THIS AGREEMENT is made as of the 24th day of February, 1998, between RICARDO PINES, individually ("Pine"), PINES HIGHLAND SQUARE ASSOCIATES, LTD., a Florida limited partnership ("Partnership"), and PINES GROUP, INC., a Florida corporation ("PGI"), and RRC ACQUISITIONS TWO, INC., a Florida corporation, its designees, successors and assigns ("Buyer"). Background Buyer wishes to purchase a shopping center in the City of Jacksonville, County of Duval, State of Florida, commonly known as Highland Square Shopping Center (the "Shopping Center"). The Shopping Center is comprised of three parcels, one of which ("Parcel One") is owned by Pine, another of which ("Parcel Two") is owned by Highland Square, and the third is owned by Pine and PGI as Tenants in Common. Pine, Highland Square and PGI desire to sell the Shopping Center to Buyer. In consideration of the mutual agreements herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, Pine, Highland Square and PGI agree to sell and Buyer agrees to purchase the Shopping Center on the following terms and conditions: 1. DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: 1.1 Agreement means this instrument as it may be amended from time to time. 1.2 Allocation Date means the close of business on the day immediately prior to the Closing Date. 1.3 Audit Representation Letter means the form of Audit Representation Letter attached hereto as Exhibit . 1.4 Buyer means the party identified as Buyer on the initial page hereof. 1.5 Closing means generally the execution and delivery of those documents and funds necessary to effect the sale of the Property by Seller to Buyer. 1.6 Closing Date means the date on which the Closing occurs. 1.7 Contracts means all service contracts, agreements or other instruments to be assigned by Seller to Buyer at Closing. 1.8 Day means a calendar day, whether or not the term is capitalized. 1.9 Earnest Money Deposit means the deposit delivered by Buyer to Escrow Agent prior to the Closing under Sections and of this Agreement, together with the earnings thereon, if any. 66 1.10 Environmental Claim means any investigation, notice, violation, demand, allegation, action, suit, injunction, judgment, order, consent decree, penalty, fine, lien, proceeding, or claim (whether administrative, judicial, or private in nature) arising (a) pursuant to, or in connection with, an actual or alleged violation of, any Environmental Law, (b) in connection with any Hazardous Material or actual or alleged Hazardous Material Activity, (c) from any abatement, removal, remedial, corrective, or other response action in connection with a Hazardous Material, Environmental Law or other order of a governmental authority or (d) from any actual or alleged damage, injury, threat, or harm to health, safety, natural resources, or the environment. 1.11 Environmental Law means any current legal requirement in effect at the Closing Date pertaining to (a) the protection of health, safety, and the indoor or outdoor environment, (b) the conservation, management, protection or use of natural resources and wildlife, (c) the protection or use of source water and groundwater, (d) the management, manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, Release, threatened Release, abatement, removal, remediation or handling of, or exposure to, any Hazardous Material or (e) pollution (including any Release to air, land, surface water, and groundwater); and includes, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USC ss.ss.9601 et seq., Solid Waste Disposal Act, as amended by the Resource Conservation Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 USC ss.ss.6901 et seq., Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 USC ss.ss.1251 et seq., Clean Air Act of 1966, as amended, 42 USC ss.ss.7401 et seq., Toxic Substances Control Act of 1976, 15 USC ss.ss.2601 et seq., Hazardous Materials Transportation Act, 49 USC App. ss.ss.1801, Occupational Safety and Health Act of 1970, as amended, 29 USC ss.ss.651 et seq., Oil Pollution Act of 1990, 33 USC ss.ss.2701 et seq., Emergency Planning and Community Right-to-Know Act of 1986, 42 USC App. ss.ss.11001 et seq., National Environmental Policy Act of 1969, 42 USC ss.ss.4321 et seq., Safe Drinking Water Act of 1974, as amended by 42 USC ss.ss.300(f) et seq., and any similar, implementing or successor law, any amendment, rule, regulation, order or directive, issued thereunder. 67 1.12 Escrow Agent means Chicago Deferred Exchange Corporation, 171 North Clark Street, Chicago, Illinois 60601 (Fax 312/223-3301). 1.13 Governmental Approval means any permit, license, variance, certificate, consent, letter, clearance, closure, exemption, decision, action or approval of a governmental authority. 1.14 Hazardous Material means any asbestos, petroleum, petroleum product, dry cleaning solvent or chemical, biological or medical waste, "sharps" or any other hazardous or toxic substance as defined in or regulated by any Environmental Law in effect at the pertinent date or dates. 1.15 Hazardous Material Activity means any activity, event, or occurrence at or prior to the Closing Date involving a Hazardous Material, including, without limitation, the manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, Release, threatened Release, abatement, removal, remediation, handling or corrective or response action to any Hazardous Material. 1.16 Improvements means all buildings, structures or other improvements situated on the Real Property. 1.17 Inspection Period means the period of time which expires at the end of business on Wednesday, March 25, 1998. Buyer may extend the Inspection Period for an additional fifteen days by depositing an additional $50,000 with Escrow Agent which additional deposit shall become a part of the Earnest Money Deposit provided for in Section hereof. 1.18 Lady's Island Publix means the free-standing Publix grocery store and related facilities on lands located at the intersection of Sea Island Parkway and Sam's Point Road at Lady's Island Drive, in Beaufort County, South Carolina, owned by Buyer and leased to Publix Super Markets, Inc. ("Publix"), commonly known as "Lady's Island Publix". 1.19 Leases means all leases and other occupancy agreements permitting persons to lease or occupy all or a portion of the Property. 1.20 Materials means all plans, drawings, specifications, soil test reports, environmental reports, market studies, surveys, and similar documentation, if any, owned by or in the possession of Seller with respect to the Property, Improvements and any proposed improvements to the Property, which Seller may lawfully transfer to Buyer except that, as to financial and other records, Materials shall include only photostatic copies. 68 1.21 Other Centers means the Lady's Island Publix and the Weems Road Winn-Dixie. 1.22 Permitted Exceptions means only the following interests, liens and encumbrances: (a) Liens for ad valorem taxes not payable on or before Closing; (b) Rights of tenants under Leases; and (c) Other matters determined by Buyer to be acceptable. 1.23 Personal Property means all (a) sprinkler, plumbing, heating, air-conditioning, electric power or lighting, incinerating, ventilating and cooling systems, with each of their respective appurtenant furnaces, boilers, engines, motors, dynamos, radiators, pipes, wiring and other apparatus, equipment and fixtures, elevators, partitions, fire prevention and extinguishing systems located in or on the Improvements, (b) all Materials, and (c) all other personal property used in connection with the Improvements, provided the same are now owned or are acquired by Seller prior to the Closing. 1.24 Property means collectively the Real Property, the Improvements and the Personal Property. 1.25 Prorated means the allocation of items of expense and income between Buyer and Seller based upon that percentage of the time period as to which such item of expense or income relates which has expired as of the date at which the proration is to be made. 1.26 Purchase Price means the consideration agreed to be paid by Buyer to Seller for the purchase of the Property as set forth in Section (subject to adjustments as provided herein). 1.27 Real Property means the lands more particularly described on Exhibit , together with all easements, licenses, privileges, rights of way and other appurtenances pertaining to or accruing to the benefit of such lands. 1.28 Release means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the indoor or outdoor environment, including, without limitation, the abandonment or discarding of barrels, drums, containers, tanks, and other receptacles containing or previously containing any Hazardous Material at or prior to the Closing Date. 69 1.29 Rent Roll means the list of Leases attached hereto as Exhibit , identifying with particularity the space leased by each tenant, the term (including extension options), square footage and applicable rent, common area maintenance, tax and other reimbursements, security deposits and similar data. 1.30 Seller means Pine, Highland Square and PGI, collectively, except that as to particular representations and warranties, and covenants, as they are made with respect to any particular parcel included in the Real Property (and the improvements thereon), or to the selling entities, as the case may be, the particular representation, warranty or covenant shall be deemed to have been made only by the entity which owns the particular parcel, or to the particular entity or person, as applicable. 1.31 Seller Financial Statements means the unaudited balance sheets and statements of income, cash flows and changes in financial positions prepared by Seller for the Property, as of and for the two (2) calendar years next preceding the date of this Agreement and all monthly reports of income, expense and cash flow prepared by Seller for the Property, which shall be consistent with past practice, for any period beginning after the latest of such calendar years, and ending prior to Closing. 1.32 Shopping Center means the Shopping Center identified on the initial page hereof, including the 11.56 acre unimproved parcel included in the Real Property. 1.33 Survey means a map of a stake survey of the Real Property which shall comply with Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys, jointly established and adopted by ALTA and ACSM in 1992, and includes items 1, 2, 3, 4, 6, 7, 8, 9, 10 and 11 of Table "A" thereof, which meets the accuracy standards (as adopted by ALTA and ACSM and in effect on the date of the Survey) of an urban survey, which is dated not earlier than thirty (30) days prior to the Closing, and which is certified to Buyer, Seller, the Title Insurance company providing Title Insurance to Buyer, and Buyer's lender, and dated as of the date the Survey was made. 1.34 Surviving Mortgage means a Mortgage dated January 31, 1996, from Seller to Allstate Life Insurance Company, with a principal balance of $4,024,418.58 as of February 1, 1998, bearing interest at eight and forty-five one-hundredths percent (8.45%) per annum and amortizing over a twenty (20) year period which commenced February 1, 1996, and which matures on February 1, 2006 (subject to extension for an additional ten (10) years as provided in the loan documents. 1.35 Tenant Estoppel Letter means a letter or other certificate from a tenant certifying as to certain matters regarding such tenant's Lease, in substantially the same form as attached hereto as Exhibit , or in the case of national or regional "credit" 70 tenants identified as such on the Rent Roll, the form customarily used by such tenant provided the information disclosed is acceptable to Buyer. 1.36 Title Defect means any exception in the Title Insurance Commitment or any matter disclosed by the Survey, other than a Permitted Exception. 1.37 Title Insurance means an ALTA Form B Owners Policy of Title Insurance for the full Purchase Price insuring marketable title in Buyer in fee simple, subject only to the Permitted Exceptions, issued by Chicago Title Insurance Company. 1.38 Title Insurance Commitment means a binder whereby the title insurer agrees to issue the Title Insurance to Buyer. 1.39 Transaction Documents means this Agreement, the deed conveying the Property, the assignment of leases, the bill of sale conveying the Personal Property and all other documents required or appropriate in connection with the transactions contemplated hereby. 1.40 Weems Road Winn-Dixie means the free-standing Winn-Dixie grocery store and related facilities located at the intersection of Weems Road and U.S. Highway 90, in Tallahassee, Leon County, Florida, owned by Buyer and leased to Winn-Dixie Stores, Inc. ("Winn-Dixie"), commonly known as "Weems Road Winn- 2. PURCHASE PRICE AND PAYMENT 2.1 Purchase Price; Payment. (a) Purchase Price and Terms. The total Purchase Price for the Property (subject to adjustment as provided herein) shall be $12,000,000. The Purchase Price shall be payable by Buyer's assumption of the Surviving Mortgage, the outstanding principal balance to reduce the Purchase Price and the balance of the Purchase Price shall be paid in cash at Closing. (b) Adjustments to the Purchase Price. The Purchase Price shall be adjusted as of the Closing Date by: (1) prorating the Closing year's real and tangible personal property taxes as of the Allocation Date (if the amount of the current year's property taxes are not available, such taxes will be prorated based upon the prior year's assessment); 71 (2) prorating as of the Allocation Date cash receipts and expenditures for the Shopping Center and other items customarily prorated in transactions of this sort; and (3) subtracting the amount of security deposits, prepaid rents from tenants under the Leases, and credit balances, if any, of any tenants, and adding any expenses prepaid by Seller. Any rents, percentage rents or tenant reimbursements payable by tenants after the Allocation Date but applicable to periods on or prior to the Allocation Date shall be remitted to Seller by Buyer within thirty (30) days after receipt, less any expenses of the Property incurred on or prior to the Allocation Date by Seller but not paid by Seller prior to Closing and discovered by Buyer after Closing. Buyer shall have no obligation to collect delinquencies, but should Buyer collect any delinquent rents or other sums which cover periods prior to the Allocation Date and for which Seller have received no proration or credit, Buyer shall remit same to Seller within thirty (30) days after receipt, less any costs of collection. Buyer will not interfere in Seller's efforts to collect sums due it prior to the Closing. Seller will remit to Buyer promptly after receipt any rents, percentage rents or tenant reimbursements received by Seller after Closing which are attributable to periods occurring after the Allocation Date. Undesignated receipts after Closing of either Buyer or Seller from tenants in the Shopping Center shall be applied first to then current rents and reimbursements for such tenant(s), then to delinquent rents and reimbursements attributable to post-Allocation Date periods, and then to pre-Allocation Date periods. 2.2 Earnest Money Deposit. An Earnest Money Deposit in the amount of $50,000 shall be delivered to Escrow Agent within three (3) days after the date of execution by the last of Buyer or Seller to execute and transmit a copy of this Agreement to the other. This Agreement may be terminated by Seller if the Earnest Money Deposit is not received by Escrow Agent by such deadline. The Earnest Money Deposit paid by Buyer shall be deposited by Escrow Agent in an interest bearing account, and shall be held and disbursed by Escrow Agent as specifically provided in this Agreement. The Earnest Money Deposit shall be applied to the Purchase Price at the Closing. 2.3 Closing Costs. (a) Seller shall pay: (1) Documentary stamp and other transfer taxes imposed upon the transactions contemplated hereby; (2) Cost of satisfying any liens on the Property; 72 (3) Cost of title insurance and the costs, if any, of curing title defects and recording any curative title documents; (4) All broker's commissions, finders' fees and similar expenses incurred by either party in connection with the sale of the Property, subject however to Buyer's indemnity given in Section of this Agreement; (5) Seller's attorneys' fees relating to the sale of the Property, if any; and (6) One-half of the costs incurred in connection with the assumption of the Surviving Mortgage, including assumption fees and the fees of the lender's counsel. (b) Buyer shall pay: (1) Cost of Buyer's due diligence inspection; (2) Costs of the Phase 1 environmental site assessment to be obtained by Buyer; (3) Cost of the Survey; (4) One-half of the costs incurred in connection with the assumption of the Surviving Mortgage, including assumption fees and the fees of the lender's counsel. (5) Cost of recording the deed; and (6) Buyer's attorneys' fees. 3. INSPECTION PERIOD AND CLOSING 3.1 Inspection Period. (a) Buyer agrees that it will have the Inspection Period to physically inspect the Property, review the economic data, underwrite the tenants and review their Leases, and to otherwise conduct its due diligence review of the Property and all books, records and accounts of Seller related thereto. Buyer hereby agrees to indemnify and hold Seller harmless from any damages, liabilities or claims for property damage or personal injury arising out of such inspection and investigation by Buyer or 73 its agents or independent contractors. Within the Inspection Period, Buyer may, in its sole discretion and for any reason or no reason, elect to go forward with this Agreement to closing, which election shall be made by notice to Seller given within the Inspection Period. If such notice is not timely given, this Agreement and all rights, duties and obligations of Buyer and Seller hereunder, except any which expressly survive termination, shall terminate and Escrow Agent shall forthwith return to Buyer the Earnest Money Deposit. If Buyer so elects to go forward, the Earnest Money Deposit shall be increased by an additional deposit of $100,000 (to be deposited with Escrow Agent no later than three (3) business days following the end of the Inspection Period), and shall not be refundable except upon the terms otherwise set forth herein. (b) Seller will promptly furnish or make available to Buyer the documents enumerated on Exhibit attached hereto. Buyer, through its officers, employees and other authorized representatives, shall have the right to reasonable access to the Property and all records of Seller related thereto which are in the custody of Seller or Seller's agents, including without limitation all Leases and Seller Financial Statements, at reasonable times during the Inspection Period for the purpose of inspecting the Property, taking soil and ground water samples, conducting Hazardous Materials inspections, reviewing the books and records of Seller concerning the Property and otherwise conducting its due diligence review of the Property. Seller shall cooperate with and assist Buyer in making such inspections and reviews. Seller shall give Buyer any authorizations which may be required by Buyer in order to gain access to records or other information pertaining to the Property or the use thereof maintained by any governmental or quasi-governmental authority or organization. Buyer, for itself and its agents, agrees not to enter into any contract with existing tenants without the written consent of Seller if such contract would be binding upon Seller should this transaction fail to close. Buyer shall have the right to have due diligence interviews and other discussions or negotiations with tenants. (c) Buyer, through its officers or other authorized representatives, shall have the right to reasonable access to all Materials (other than privileged or confidential litigation materials) for the purpose of reviewing and copying the same. 3.2 Hazardous Material. Prior to the end of the Inspection Period Buyer may order environmental assessments of the Property. A copy of any assessment report, if made, shall be furnished by Buyer to Seller promptly upon its completion. If an assessment report discloses the existence of any Hazardous Material or any other matters concerning the environmental condition of the Property or its environs, Buyer may notify Seller in writing, within the Inspection Period that Buyer elects to terminate this Agreement, whereupon this Agreement shall terminate and Escrow Agent shall return to Buyer its Earnest Money Deposit. 74 3.3 Time and Place of Closing. Unless otherwise agreed by the parties, the Closing shall take place at Suite 1500, 1301 Riverplace Boulevard, Jacksonville, Florida 32207, at 10:00 A.M. on the date which is the fifteenth (15th) day following the expiration of the Inspection Period, provided that Buyer may designate an earlier date for Closing. 4. WARRANTIES, REPRESENTATIONS AND COVENANTS OF SELLER Seller warrants and represents as follows as of the date of this Agreement and as of the Closing and where indicated covenants and agrees as follows: 4.1 Organization; Authority. Pine, Highland Square and PGI are duly organized, validly existing and in good standing under the laws of the State of Florida, and each has full power and authority to enter into and perform this Agreement in accordance with its terms. The persons executing this Agreement and other Transaction Documents have been duly authorized to do so on behalf of Seller. Neither Pine, nor Highland Square, nor PGI is a "foreign person" under Sections 1445 or 897 of the Internal Revenue Code, nor is this transaction subject to any withholding under any state or federal law. 4.2 Authorization; Validity. The execution and delivery of this Agreement by Highland Square and PGI and Seller's consummation of the transactions contemplated by this Agreement have been duly and validly authorized. This Agreement constitutes a legal, valid and binding agreement of Pine, Highland Square and PGI enforceable against each in accordance with its terms. 4.3 Title. Seller is the owner in fee simple of all of the Property, subject only to the Permitted Exceptions. 4.4 Commissions. Seller has neither dealt with nor does it have any knowledge of any broker or other party who has or may have any claim against Seller, Buyer or the Property for a brokerage commission or finder's fee or like payment arising out of or in connection with the transaction provided herein except for Cohen and Company, Inc., and Seller agrees to indemnify Buyer from any such claim arising by, through or under Seller. 4.5 Sale Agreements. The Property is not subject to any outstanding agreement(s) of sale, option(s), or other right(s) of third parties to acquire any interest therein, except for Permitted Exceptions and this Agreement. 4.6 Litigation. There is no litigation or proceeding pending, or to the best of Seller's knowledge, threatened against Seller relating to the Property, except a dispute 75 with Eckerd Corporation which Seller shall resolve before Closing or Seller shall indemnify and hold Buyer harmless from any loss or damage therefrom. 4.7 Leases. There are no Leases affecting the Property, oral or written, except as listed on the Rent Roll, and any Leases or modifications entered into between the date of this Agreement and the Closing Date with the consent of Buyer. Copies of the Leases, which have been delivered to Buyer or shall be delivered to Buyer within five (5) days from the date hereof, are, to the best knowledge of Seller, true, correct and complete copies thereof, subject to the matters set forth on the Rent Roll. Between the date hereof and the Closing Date, Seller will not terminate or modify existing Leases or enter into any new Leases without the consent of Buyer. All of the Property's tenant leases are in good standing and to the best of Seller's knowledge no defaults exist thereunder except as noted on the Rent Roll. No rent or reimbursement has been paid more than one (1) month in advance and no security deposit has been paid, except as stated on the Rent Roll. No tenants under the Leases are entitled to interest on any security deposits. No tenant under any Lease has or will be promised any inducement, concession or consideration by Seller other than as expressly stated in such Lease, and except as stated therein there are and will be no side agreements between Seller and any tenant. 4.8 Financial Statements. Each of the Seller Financial Statements delivered or to be delivered to Buyer hereunder has or will have been prepared in accordance with the books and records of Seller and presents fairly in all material respects the financial condition, results of operations and cash flows for the Property as of and for the periods to which they relate. All are in conformity with generally accepted accounting principles applied on a consistent basis. There has been no material adverse change in the operations of the Property or its prospects since the date of the most recent Seller Financial Statements. Seller covenants to furnish promptly to Buyer copies of the Seller Financial Statements together with unaudited updated monthly reports of cash flow for interim periods beginning after December 31, 1996. Buyer and its independent certified accountants shall be given access to Seller's books and records at any time prior to and for one (1) month following Closing upon reasonable advance notice in order that they may verify the financial statements prior to Closing. Seller agrees to execute and deliver to Buyer or its accountants the Audit Representation Letter should Buyer's accountants audit the records of the Shopping Center. 4.9 Contracts. Except for Leases and Permitted Exceptions, there are no management, service, maintenance, utility or other contracts or agreements affecting the Property, oral or written, which extend beyond the Closing Date and which would bind Buyer or encumber the Property, at Buyer's option, more than thirty (30) days after Closing. All such Contracts are in full force and effect in accordance with their respective terms, and all obligations of Seller under the Contracts required to be 76 performed to date have been performed in all material respects; no party to any Contract has asserted any claim of default or offset against Seller with respect thereto and no event has occurred or failed to occur, which would in any way affect the validity or enforceability of any such Contract; and the copies of the Contracts delivered to Buyer prior to the date hereof are true, correct and complete copies thereof. Between the date hereof and the Closing, Seller covenants to fulfill all of its obligations under all Contracts, and covenants not to terminate or modify any such Contracts or enter into any new contractual obligations relating to the Property without the consent of Buyer (not to be unreasonably withheld) except such obligations as are freely terminable without penalty by Seller upon not more than thirty (30) days' written notice. 4.10 Maintenance and Operation of Property. From and after the date hereof and until the Closing, Seller covenants to keep and maintain and operate the Property substantially in the manner in which it is currently being maintained and operated and covenants not to cause or permit any waste of the Property nor undertake any action with respect to the operation thereof outside the ordinary course of business without Buyer's prior written consent. In connection therewith, Seller covenants to make all necessary repairs and replacements until the Closing so that the Property shall be of substantially the same quality and condition at the time of Closing as on the date hereof. Seller covenants not to remove from the Improvements or the Real Property any article included in the Personal Property. Seller covenants to maintain such casualty and liability insurance on the Property as it is presently being maintained. 4.11 Permits and Zoning. To the best knowledge of Seller, there are no material permits and licenses (collectively referred to as "Permits") required to be issued to Seller by any governmental body, agency or department having jurisdiction over the Property which materially affect the ownership or the use thereof which have not been issued. The Property is properly zoned for its present use and is not subject to any local, regional or state development order. The use of the Property is consistent with the land use designation for the Property under the comprehensive plan or plans applicable thereto, and all concurrency requirements have been satisfied. There are no outstanding assessments, impact fees or other charges related to the Property. 4.12 Rent Roll; Tenant Estoppel Letters. The Rent Roll is true and correct in all respects. Seller agrees to use its best reasonable efforts to obtain current Tenant Estoppel Letters acceptable to Buyer from all Tenants under Leases, which Tenant Estoppel Letters shall confirm the matters reflected by the Rent Roll as to the particular tenant and shall be otherwise acceptable to Buyer in all respects. 4.13 Condemnation. Neither the whole nor any portion of the Property, including access thereto or any easement benefitting the Property, is subject to temporary requisition of use by any governmental authority or has been condemned, or taken in any proceeding similar to a condemnation proceeding, nor is there now 77 pending any condemnation, expropriation, requisition or similar proceeding against the Property or any portion thereof. Seller has received no notice nor has any knowledge that any such proceeding is contemplated. 4.14 Governmental Matters. Seller has not entered into any commitments or agreements with any governmental authorities or agencies affecting the Property that have not been disclosed in writing to Buyer and Seller has received no notices from any such governmental authorities or agencies of uncured violations at the Property of building, fire, air pollution or zoning codes, rules, ordinances or regulations, environmental and hazardous substances laws, or other rules, ordinances or regulations relating to the Property. Seller shall be responsible for the remittance of all sales tax for periods occurring prior to the Allocation Date directly to the appropriate state department of revenue. 4.15 Repairs. Seller has received no notice of any requirements or recommendations by any lender, insurance companies, or governmental body or agencies requiring or recommending any repairs or work to be done on the Property which have not already been completed. 4.16 Consents and Approvals; No Violation. Neither the execution and delivery of this Agreement by Seller nor the consummation by Seller of the transactions contemplated hereby will (a) require Seller to file or register with, notify, or obtain any permit, authorization, consent, or approval of, any governmental or regulatory authority; (b) conflict with or breach any provision of the organizational documents of Seller; (c) violate or breach any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, lease, contract, agreement or other instrument, commitment or obligation to which Seller is a party, or by which Seller, the Property or any of Seller's material assets may be bound; or (d) violate any order, writ, injunction, decree, judgment, statute, law or ruling of any court or governmental authority applicable to Seller, the Property or any of Seller's material assets. 4.17 To Seller's knowledge, the Surviving Mortgage is presently held by Allstate Life Insurance Company and is in good standing with no defaults existing thereunder. The principal balance outstanding as of February 1, 1998, is $4,024,418.58, and the monthly payment of principal and interest is $36,315.77. The interest rate is eight and forty-five one-hundredths percent (8.45%) per annum. Seller is not required to make deposits with the holder of the Surviving Mortgage for taxes and insurance. The transfer of the Property to Buyer will require the consent of the holder of the Surviving Mortgage. Prior to Closing, Seller shall use reasonable efforts to cause the holder of the Surviving Mortgage to execute and deliver to Buyer an estoppel letter and consent consenting to this transaction, certifying as to the foregoing 78 matters and releasing Seller from the Mortgage, in form and substance satisfactory to Buyer and Seller. Seller will maintain the Surviving Mortgage in good standing, without default, until Closing. 4.18 Environmental Matters. (a) Seller represents and warrants as of the date hereof and as of the Closing that: (1) Seller has not, and has no knowledge of any other person who has, caused any Release, threatened Release, or disposal of any Hazardous Material at the Property in any material quantity; (2) The Property does not now contain and to the best of Seller's knowledge has not contained any: (a) underground storage tank, (b) material amounts of asbestos-containing building material, (c) landfills or dumps, (d) more than one dry cleaning drop off facility and one coin laundry and cleaner tenant;; or (e) hazardous waste management facility as defined pursuant to the Resource Conservation and Recovery Act ("RCRA") or any comparable state law. The Property is not a site on or nominated for the National Priority List promulgated pursuant to Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or any state remedial priority list promulgated or published pursuant to any comparable state law; and (3) There are to the best of Seller's knowledge no conditions or circumstances at the Property which pose a risk to the environment or the health or safety of persons. (b) Seller shall indemnify, hold harmless, and hereby waives any claim for contribution against Buyer for any damages to the extent they arise from the inaccuracy or breach of any representation or warranty by Seller in this section of this Agreement. This indemnity shall survive Closing indefinitely. 4.19 No Untrue Statement. Neither this Agreement nor any exhibit nor any written statement or Transaction Document furnished or to be furnished by Seller to Buyer in connection with the transactions contemplated by this Agreement contains or will contain any untrue statement of material fact or omits or will omit any material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. 4.20 AS-IS ACQUISITION. BUYER ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY REPRESENTED AND WARRANTED BY SELLER IN THIS AGREEMENT, THERE HAVE BEEN NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR 79 IMPLIED, UPON WHICH BUYER IS RELYING WHICH HAVE BEEN MADE BY SELLER OR UPON SELLER'S BEHALF RELATING IN ANY WAY TO THE PROPERTY; AND THAT SUBJECT TO ANY AND ALL CONDITIONS TO BUYER'S OBLIGATIONS DESCRIBED IN THIS AGREEMENT AND TO SELLER'S REPRESENTATIONS AND WARRANTIES EXPRESSED IN THIS AGREEMENT, BUYER IS ACQUIRING THE PROPERTY "AS IS". THE PROVISIONS OF THIS SECTION 4.20 SHALL SURVIVE THE CLOSING OF THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT. 5. WARRANTIES, REPRESENTATIONS AND COVENANTS OF BUYER Buyer hereby warrants and represents as of the date of this Agreement and as of the Closing and where indicated covenants and agrees as follows: 5.1 Organization; Authority. Buyer is a corporation duly organized, validly existing and in good standing under laws of Florida and has full power and authority to enter into and perform this Agreement in accordance with its terms, and the persons executing this Agreement and other Transaction Documents on behalf of Buyer have been duly authorized to do so. 5.2 Authorization; Validity. The execution, delivery and performance of this Agreement and the other Transaction Documents have been duly and validly authorized by the Board of Directors of Buyer. This Agreement has been duly and validly executed and delivered by Buyer and (assuming the valid execution and delivery of this Agreement by Seller) constitutes a legal, valid and binding agreement of Buyer enforceable against it in accordance with its terms. 5.3 Commissions. Buyer has neither dealt with nor does it have any knowledge of any broker or other party who has or may have any claim against Buyer or Seller for a brokerage commission or finder's fee or like payment arising out of or in connection with the transaction provided herein except Cohen and Company, Inc., whose commission shall be paid by Seller; and Buyer agrees to indemnify Seller from any other such claim arising by, through or under Buyer. 6. POSSESSION; RISK OF LOSS 6.1 Possession. Possession of the Property will be transferred to Buyer at the conclusion of the Closing. 6.2 Risk of Loss. All risk of loss to the Property shall remain upon Seller until the conclusion of the Closing. If, before the possession of the Property has been transferred to Buyer, any material portion of the Property is damaged by fire or other casualty and will not be restored by the Closing Date or if any material portion of the Property is taken by eminent domain or there is a material obstruction of access to the 80 Improvements by virtue of a taking by eminent domain, Seller shall, within ten (10) days of such damage or taking, notify Buyer thereof and Buyer shall have the option to: (a) terminate this Agreement upon notice to Seller given within ten (10) business days after such notice from Seller, in which case Buyer shall receive a return of its Earnest Money Deposit; or (b) proceed with the purchase of the Property, in which event Seller shall assign to Buyer all Seller's right, title and interest in all amounts due or collected by Seller under the insurance policies or as condemnation awards. In such event, the Purchase Price shall be reduced by the amount of any insurance deductible to the extent it reduced the insurance proceeds payable. 7. TITLE MATTERS 7.1 Title. (a) Title Insurance and Survey. Prior to the end of the Inspection Period Buyer's counsel shall order the Title Insurance Commitment and a Survey (Seller having furnished Buyer copies of existing surveys and other title information in its possession). Buyer will have ten (10) days from receipt of the Title Commitment (including legible copies of all recorded exceptions noted therein) and Survey to notify Seller in writing of any Title Defects, encroachments or other matters not acceptable to Buyer which are not permitted by this Agreement. Any Title Defect or other objection disclosed by the Title Insurance Commitment (other than liens removable by the payment of money) or the Survey which is not timely specified in Buyer's written notice to Seller of Title Defects shall be deemed a Permitted Exception. Seller shall notify Buyer in writing within five (5) days of Buyer's notice if Seller intends to cure any Title Defect or other objection. If Seller elects to cure, Seller shall use diligent efforts to cure the Title Defects and/or objections by the Closing Date (as it may be extended). If Seller elects not to cure or if such Title Defects and/or objections are not cured, Buyer shall have the right, in lieu of any other remedies, to: (i) refuse to purchase the Property, terminate this Agreement and receive a return of the Earnest Money Deposit; or (ii) waive such Title Defects and/or objections and close the purchase of the Property subject to such Title Defects. (b) Miscellaneous Title Matters. If a search of the title discloses judgments, bankruptcies or other returns against other persons having names the same as or similar to that of Seller, Seller shall on request deliver to Buyer an affidavit stating, if true, that such judgments, bankruptcies or the returns are not against Seller. Seller further agrees to execute and deliver to the Title Insurance agent at Closing such documentation, if any, as the Title Insurance underwriter shall reasonably require to 81 evidence that the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized and that there are no mechanics' liens on the Property or parties in possession of the Property other than tenants under Leases and Seller. 8. CONDITIONS PRECEDENT 8.1 Conditions Precedent to Buyer's Obligations. The obligations of Buyer under this Agreement are subject to satisfaction or waiver by Buyer of each of the following conditions or requirements on or before the Closing Date: (a) Seller's warranties and representations under this Agreement shall be true and correct as of the Closing Date, and Seller shall not be in default hereunder. (b) All obligations of Seller contained in this Agreement, shall have been fully performed in all material respects and Seller shall not be in default under any covenant, restriction, right-of-way or easement affecting the Property. (c) There shall have been no material adverse change in the Property, its operations or future prospects, the Leases or the financial condition of tenants leasing space in the Shopping Center. (d) A Title Insurance Commitment in the full amount of the Purchase Price shall have been issued and "marked down" through Closing, subject only to Permitted Exceptions. (e) The physical and environmental condition of the Property shall be unchanged from the date of this Agreement, ordinary wear and tear excepted. (f) Seller shall have delivered to Buyer the following in form reasonably satisfactory to Buyer: (1) A warranty deed in proper form for recording, duly executed and acknowledged so as to convey to Buyer the fee simple title to the Property, subject only to the Permitted Exceptions: (2) Originals, if available, or if not, true copies of the Leases and of the contracts, agreements, permits and licenses, and such Materials as may be in the possession or control of Seller; (3) A blanket assignment to Buyer of all Leases and the contracts, agreements, permits and licenses (to the extent assignable) as they affect 82 the Property, including an indemnity against breach of such instruments by Seller prior to the Closing Date; (4) A bill of sale with respect to the Personal Property and Materials; (5) A title certificate, properly endorsed by Seller, as to any items of Property for which title certificates exist; (6) The Survey; (7) A current rent roll for all Leases in effect showing no changes from the rent roll attached to this Agreement other than those set forth in the Leases or approved in writing by Buyer; (8) All Tenant Estoppel Letters obtained by Seller, which must include Publix, Winn-Dixie Stores, Consolidated Stores, Family Dollar Stores and Eckerd Drug, and eighty percent (80%) of the other tenants who have signed leases for any portion of the Property, without any material exceptions, covenants, or changes to the form approved by Buyer and distributed to the tenants by Seller, the substance of which Tenant Estoppel Letters must be acceptable to Buyer in all respects (including specifically the Eckerd Drug Tenant Estoppel Letter, which must reflect that the dispute between Seller and Eckerd Drug has been resolved, or Seller shall otherwise indemnify Buyer from any loss or damage attributable thereto); (9) A general assignment of all assignable existing warranties relating to the Property; (10) An owner's affidavit, non-foreign affidavits, non-tax withholding certificates and such other documents as may reasonably be required by Buyer or its counsel in order to effectuate the provisions of this Agreement and the transactions contemplated herein; (11) The originals or copies of any real and tangible personal property tax bills for the Property for the tax year of Closing and the previous year, and, if requested, the originals or copies of any current water, sewer and utility bills which are in Seller's custody or control; (12) Resolutions of Seller authorizing the transactions described herein; (13) All keys and other means of access to the Improvements in the possession of Seller or its agents; 83 (14) Materials; and (15) Such other documents as Buyer may reasonably request to effect the transactions contemplated by this Agreement; and (g) Receipt of the consent of the holder of the Surviving Mortgage to this transaction, and the release of Seller, imposing such conditions, if any, as are acceptable to each of Seller and Buyer. In the event that all of the foregoing provisions of this Section are not satisfied and Buyer elects in writing to terminate this Agreement, then the Earnest Money Deposit shall be promptly delivered to Buyer by Escrow Agent and, upon the making of such delivery, neither party shall have any further claim against the other by reasons of this Agreement, except as provided in Article . 8.2 Conditions Precedent to Seller's Obligations. The obligations of Seller under this Agreement are subject to satisfaction or waiver by Seller of each of the following conditions or requirements on or before the Closing date: (a) Buyer's warranties and representations under this Agreement shall be true and correct as of the Closing Date, and Buyer shall not be in default hereunder. (b) All of the obligations of Buyer contained in this Agreement shall have been fully performed by or on the date of Closing in compliance with the terms and provisions of this Agreement. (c) Buyer shall have delivered to Seller at or prior to the Closing the following, which shall be reasonably satisfactory to Seller: (1) Delivery and/or payment of the balance of the Purchase Price in accordance with Section at Closing; (2) Such other documents as Seller may reasonably request to effect the transactions contemplated by this Agreement; and (d) Receipt of the consent of the holder of the Surviving Mortgage to this transaction, and the release of Seller, imposing such conditions, if any, as are acceptable to each of Seller and Buyer. 8.3 Section 1031 Exchange. Buyer acknowledges that Seller may endeavor to effect a like-kind exchange under Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code"), such that Seller can acquire the Other Centers, or 84 other properties, with the proceeds of the sale of the Shopping Center to Buyer. Seller expressly reserves the right to assign its rights, but not it obligations, hereunder, to a qualified intermediary including without limitation Escrow Agent, as provided in the Internal Revenue Code and the regulations promulgated thereunder, including without limitation Reg. 1.1031(k)-(l)(g)(4), on or before the Closing Date. Accordingly, Buyer agrees that (i) Buyer will cooperate with Seller to effect a tax-free exchange or exchanges in accordance with the provisions of Section 1031 of the Code and the regulations promulgated with respect thereto; and (ii) it is a condition of this agreement that Buyer and Seller enter into a mutually agreeable contract pursuant to which Buyer will agree to sell to Seller, and Seller will agree to purchase from Buyer the Other Centers. It is not a condition that the transactions contemplated by such other contract actually close (eg. Seller, as Buyer under said contract, may determine during the inspection period under such other contract that Seller does not wish to purchase the Other Centers), but only that a mutually agreeable contract for the sale and purchase of the Other Centers by entered into by Seller and Buyer. Seller and Buyer agree to negotiate in good faith such that a contract for the sale and Seller shall be solely responsible for any additional fees, costs or expenses incurred in connection with the like-kind exchange contemplated by this paragraph. In no event shall Seller's ability or inability to effect a like-kind exchange, as contemplated hereby, in any way relieve Seller from its obligations and liabilities under this Agreement. Seller hereby agrees to indemnify and hold harmless Buyer from any liability, losses or damages incurred by Buyer in connection with or arising out of the Section 1031 like-kind exchange, including but not limited to any tax liability. It is not Buyer's intention to effect a Section 1031 exchange with respect to the proceeds of Buyer's sale of the Other Centers to Seller. In the event that all conditions precedent to Buyer's obligation to purchase shall have been satisfied but the foregoing provisions of this Section have not, and Seller elects in writing to terminate this Agreement, then the Earnest Money Deposit shall be promptly delivered to Seller by Escrow Agent and, upon the making of such delivery, neither party shall have any further claim against the other by reasons of this Agreement, except as provided in Article . 8.4 Best Efforts. Each of the parties hereto agrees to use reasonable best efforts to take or cause to be taken all actions necessary, proper or advisable to consummate the transactions contemplated by this Agreement. 9. PRE-CLOSING BREACH; REMEDIES 9.1 Breach by Seller. In the event of a breach of Seller's covenants or warranties herein and failure by Seller to cure such breach within the time provided for 85 Closing, Buyer may, at Buyer's election (i) terminate this Agreement and receive a return of the Earnest Money Deposit, and the parties shall have no further rights or obligations under this Agreement (except as survive termination); (ii) enforce this Agreement by suit for specific performance; or (iii) waive such breach and close the purchase contemplated hereby, notwithstanding such breach. 9.2 Breach by Buyer. In the event of a breach of Buyer's covenants or warranties herein and failure of Buyer to cure such breach within the time provided for Closing, Seller's sole remedy shall be to terminate this Agreement and retain Buyer's Earnest Money Deposit as agreed liquidated damages for such breach, and upon payment in full to Seller of such amounts, the parties shall have no further rights, claims, liabilities or obligations under this Agreement (except as survive termination). 10. MISCELLANEOUS 10.1 Disclosure. Neither party shall disclose the transactions contemplated by this Agreement without the prior approval of the other, except to its attorneys, accountants and other consultants, their lenders and prospective lenders, or where disclosure is required by law. 10.2 Radon Gas. Radon is a naturally occurring radioactive gas which, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon which exceed federal and state guidelines have been found in buildings in the state in which the Property is located. Additional information regarding radon and radon testing may be obtained from the county public health unit. 10.3 Entire Agreement. This Agreement, together with the exhibits attached hereto, constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may not be modified, amended or otherwise changed in any manner except by a writing executed by Buyer and Seller. 10.4 Notices. All written notices and demands of any kind which either party may be required or may desire to serve upon the other party in connection with this Agreement shall be served by personal delivery, certified or overnight mail, reputable overnight courier service or facsimile (followed promptly by hard copy) at the addresses set forth below: 86 As to Seller Ricardo Pines 3301 Ponce de Leon Boulevard, Penthouse Suite Coral Gables, Florida 33134 Facsimile: (305) 529-0002 As to Buyer: RRC Acquisitions Two, Inc. Attention: Robert L. Miller Suite 200, 121 West Forsyth Street Jacksonville, Florida 32202 Facsimile: (904) 634-3428 With a copy to: Rogers, Towers, Bailey, Jones & Gay, P.A. Attention: William E. Scheu, Esquire 1301 Riverplace Boulevard, Suite 1500 Jacksonville, Florida 32207 Facsimile: (904) 396-0663 Any notice or demand so served shall constitute proper notice hereunder upon delivery to the United States Postal Service or to such overnight courier. A party may change its notice address by notice given in the aforesaid manner. 10.5 Headings. The titles and headings of the various sections hereof are intended solely for means of reference and are not intended for any purpose whatsoever to modify, explain or place any construction on any of the provisions of this Agreement. 10.6 Validity. If any of the provisions of this Agreement or the application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Agreement by the application of such provision or provisions to persons or circumstances other than those as to whom or which it is held invalid or unenforceable shall not be affected thereby, and every provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 10.7 Attorneys' Fees. In the event of any litigation between the parties hereto to enforce any of the provisions of this Agreement or any right of either party hereto, the unsuccessful party to such litigation agrees to pay to the successful party all costs and expenses, including reasonable attorneys' fees, whether or not incurred in trial or on appeal, incurred therein by the successful party, all of which may be included in and as a part of the judgment rendered in such litigation. Any indemnity provisions herein shall include indemnification for reasonable attorneys' fees and costs, whether or not suit be brought and including fees and costs on appeal. 10.8 Time of Essence. Time is of the essence of this Agreement. 87 10.9 Governing Law. This Agreement shall be governed by the laws of the state in which the Property is located, and the parties hereto agree that any litigation between the parties hereto relating to this Agreement shall take place (unless otherwise required by law) in a court located in the county in which the Property is located. Each party waives its right to jurisdiction or venue in any other location. 10.10 Successors and Assigns. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. No third parties, including any brokers or creditors, shall be beneficiaries hereof. 10.11 Exhibits. All exhibits attached hereto are incorporated herein by reference to the same extent as though such exhibits were included in the body of this Agreement verbatim. 10.12 Gender; Plural; Singular; Terms. A reference in this Agreement to any gender, masculine, feminine or neuter, shall be deemed a reference to the other, and the singular shall be deemed to include the plural and vice versa, unless the context otherwise requires. The terms "herein," "hereof," "hereunder," and other words of a similar nature mean and refer to this Agreement as a whole and not merely to the specified section or clause in which the respective word appears unless expressly so stated. 10.13 Further Instruments, Etc. This Agreement may be executed in counterparts and when so executed shall be deemed executed as one agreement. Seller and Buyer shall execute any and all documents and perform any and all acts reasonably necessary to fully implement this Agreement. 10.14 Survival. The obligations of Seller and Buyer intended to be performed after the Closing shall survive the closing. 10.15 No Recording. Neither this Agreement nor any notice, memorandum or other notice or document relating hereto shall be recorded. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Witnesses: RRC ACQUISITIONS TWO, INC., a Florida corporation ______________________________ By:___________________________________ 88 Name:____________________________ Name:__________________________________ Title:_________________________________ ___________________________________ Date: ___________________________, 1998 Name:_____________________________ Tax Identification No: 59-3478325 "BUYER" PINES GROUP, INC., a Florida corporation __________________________________ By:____________________________________ Name:_____________________________ Name:_______________________________ Title:______________________________ __________________________________ Date: ___________________________, 1998 Name:_____________________________ Tax Identification No:_________________ "PGI" __________________________________ ____________________________________ Name:_____________________________ RICARDO PINES __________________________________ Date: ___________________________, 1998 Name:_____________________________ Tax Identification No:_________________ "PINE" 89 HIGHLAND SQUARE ASSOCIATES, LTD., a Florida limited partnership ___________________________________ By: Its General Partner Name:_____________________________ PINES JACKSONVILLE MANAGEMENT, INC., a Florida corporation By: __________________________________ Its: President ___________________________________ Date: __________________________, 1998 Name:_____________________________ Tax Identification No:_________________ "HIGHLAND SQUARE" 90 EXHIBIT Audit Representation Letter __________________________ (Acquisition Completion Date) 91 KPMG Peat Marwick LLP Suite 2700 One Independent Drive Jacksonville, Florida 32202 Dear Sirs: We are writing at your request to confirm our understanding that your audit of the Statement of Revenue and Certain Expenses for Highland Square Shopping Center for the twelve months ended ________________, was made for the purpose of expressing an opinion as to whether the statement presents fairly, in all material respects, the results of its operations in conformity with generally accepted accounting principles. In connection with your audit we confirm, to the best of our knowledge and belief, the following representations made to you during your audit: 1. We have made available to you all financial records and related data for the period under audit. 2. There have been no undisclosed: a. Irregularities involving any member of management or employees who have significant roles in the internal control structure. b. Irregularities involving other persons that could have a material effect on the Statement of Revenue and Certain Expenses. c. Violations or possible violations of laws or regulations, the effects of which should be considered for disclosure in the Statement of Revenue and Certain Expenses. 3. There are no undisclosed: a. Unasserted claims or assessments that our lawyers have advised us are probable of assertion and must be disclosed in accordance with Statement of Financial Accounting Standards No. 5 (SFAS No. 5). 92 b. Material gain or loss contingencies (including oral and written guarantees) that are required to be accrued or disclosed by SFAS No. 5. c. Material transactions that have not been properly recorded in the accounting records underlying the Statement of Revenue and Certain Expenses. d. Material undisclosed related party transactions and related amounts receivable or payable, including sales, purchases, loans, transfers, leasing arrangements, and guarantees. e. Events that have occurred subsequent to the balance sheet date that would require adjustment to or disclosure in the Statement of Revenue and Certain Expenses. 4. All aspects of contractual agreements that would have a material effect on the Statement of Revenue and Certain Expenses have been complied with. Further, we acknowledge that we are responsible for the fair presentation of the Statements of Revenue and Certain Expenses prepared in conformity with generally accepted accounting principles. Very truly yours, "Seller/Manager" __________________________________________ Name:_____________________________________ Title:____________________________________ 93 EXHIBIT Legal Description of Real Property 94 EXHIBIT Rent Roll 95 EXHIBIT Form of Estoppel Letter _____________________, 199_ RRC Acquisitions Two, Inc. Regency Centers, Inc. 121 West Forsyth Street, Suite 200 Jacksonville, Florida 32202 RE: ___________________________ (Name of Shopping Center) Ladies and Gentlemen: The undersigned (Tenant) has been advised you may purchase the above Shopping Center, and we hereby confirm to you that: 1. The undersigned is the Tenant of ___________________________, Landlord, in the above Shopping Center, and is currently in possession and paying rent on premises known as Store No. ______________ [or Address: ___________________________________________________________], and containing approximately _____________ square feet, under the terms of the lease dated ______________________, which has (not) been amended by amendment dated ________________________ (the "Lease"). There are no other written or oral agreements between Tenant and Landlord. Tenant neither expects nor has been promised any inducement, concession or consideration for entering into the Lease, except as stated therein, and there are no side agreements or understandings between Landlord and Tenant. 2. The term of the Lease commenced on ____________________, expiring on ___________________, with options to extend of ________________ (____) years each. 3. As of ____________________, monthly minimum rental is $_______________ a month. 4. Tenant is required to pay its pro rata share of Common Area Expenses and its pro rata share of the Center's real property taxes and insurance cost. Current additional monthly payments for expense reimbursement total $____________ per month for common area maintenance, property insurance and real estate taxes. 5. Tenant has given [no security deposit] [a security deposit of $______________]. 96 6. No payments by Tenant under the Lease have been made for more than one (1) month in advance, and minimum rents and other charges under the Lease are current. 7. All matters of an inducement nature and all obligations of the Landlord under the Lease concerning the construction of the Tenant's premises and development of the Shopping Center, including without limitation, parking requirements, have been performed by Landlord. 8. The Lease contains no first right of refusal, option to expand, option to terminate, or exclusive business rights, except as follows: 9. Tenant knows of no default by either Landlord or Tenant under the Lease, and knows of no situations which, with notice or the passage of time, or both, would constitute a default. Tenant has no rights to off-set or defense against Landlord as of the date hereof. 10. The undersigned has not entered into any sublease, assignment or any other agreement transferring any of its interest in the Lease or the Premises except as follows: 11. Tenant has not generated, used, stored, spilled, disposed of, or released any hazardous substances at, on or in the Premises. "Hazardous Substances" means any flammable, explosive, toxic, carcinogenic, mutagenic, or corrosive substance or waste, including volatile petroleum products and derivatives and dry cleaning solvents. To the best of Tenant's knowledge, no asbestos or polychlorinated biphenyl ("PCB") is located at, on or in the Premises. The term "Hazardous Substances" does not include those materials which are technically within the definition set forth above but which are contained in pre-packaged office supplies, cleaning materials or personal grooming items or other items which are sold for consumer or commercial use and typically used in other similar buildings or space. The undersigned makes this statement for your benefit and protection with the understanding that you intend to rely upon this statement in connection with your intended purchase of the above described Premises from Landlord. The undersigned agrees that it will, upon receipt of written notice from Landlord, commence to pay all rents to you or to any Agent acting on your behalf. Very truly yours, ___________________________________________ ____________________________________(Tenant) Mailing Address: ____________________________ By:________________________________________ Its:____________________________________ ____________________________ 97 Exhibit Document Request List Items Required from the Seller: 1) Property Specifications (Zoning) 2) As Built Plans & Specs (arch. and engineering) 3) Site Plan (including suite numbers) 4) Location maps 5) Aerial photographs 6) Demographics (including traffic counts) 7) Legal Description 8) Parking Information - Space count 9) Copy of All Leases (and amendments) & Lease Briefs 10) Certificates of Occupancy - All current tenants 11) Schedule of Security Deposits 12) Most recent Rent Roll (with suite #'s, rent escalations, and option period info) 13) Sales Reports (most recent 3 Years) for tenants reporting 14) Current Rent Billings (by category, base, CAM, etc.) 15) Current Delinquency Report (with explanations for balances > $1,000) 16) Tenant Activity Register for all Current Tenants (billings & payments) 17) Tenant Estoppels 18) Property Operating Results - Most recent 3 Years 19) Property Capital Expenditures - Most recent 3 Years 20) Audited Financial Statements - 3 Years 21) Real Estate and other tax bills - 3 Years 22) Year to Date Financials & YTD detail general Ledger 23) Existing Service Agreements and Warranties 24) Three years loss history - reported claims 25) Most Recent Year Expense Recovery Reconciliation 26) Breakdown of CAM Pools 27) Proof Sales Tax Payments are Current 28) Appraisal (last available) 29) Seller's Budget for up-coming/current year 30) Utility Bills for last 12 months/deposits 31) Personal Property Inventory 32) Existing Title Insurance Policy 33) Available Inspection Reports (environmental, roof, structural, etc.) 34) Summary of Tenant Contacts (with address and telephone numbers) With local (include store#) & national addresses 35) Survey 36) Tax plat map 98 SECURITIES AND EXCHANGE COMMISSION UNITED STATES Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) October 7, 1998 REGENCY REALTY CORPORATION (Exact name of registrant as specified in its charter) Florida 1-12298 59-3191743 (State or other jurisdiction Commission (IRS Employer of incorporation) File Number) Identification No.) 121 West Forsyth Street, Suite 200 Jacksonville, Florida 32202 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (904)-356-7000 Not Applicable (Former name or former address, if changed since last report) 99 ITEM 5. OTHER INFORMATION The factors considered by the Company in determining the price to be paid for the shopping center included its historical and expected cash flow, nature of the tenancies and terms of the leases in place, occupancy rates, opportunities for alternative and new tenancies, current operating costs, physical condition and location, and the anticipated impact on the Company's financial results. The Company took into consideration capitalization rates at which it believes other shopping centers have recently sold, but determined the purchase price on the factors discussed above. No separate independent appraisals were obtained for the property acquired. The following summarizes the property acquired: Property Acquisition Acquisition Occupancy at Name Costs Date GLA City/State Acquisition Pike Creek $22,897,676 8-04-98 234,580 Wilmington, DE 97% ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS A. Financial Statements and Pro Forma Financial Information A) Financial Statements: Pike Creek Independent Auditors' Report Statement of Revenues and Certain Expenses for the year ended December 31, 1997 B) Pro Forma Financial Information: Regency Realty Corporation Pro Forma Condensed Consolidated Balance Sheet, June 30, 1998 (unaudited) ProForma Condensed Statement of Operations for the six month period ended June 30, 1998 and the year ended December 31, 1997 (unaudited) C. Exhibits: 10. Material Contracts (a) Purchase and Sale Agreement dated May 1, 1998, by and between BIG VALLEY ASSOCIATES, LIMITED PARTNERSHIP, a Delaware limited partnership ("Seller") and RRC ACQUISITIONS TWO, INC., A Florida corporation ("Purchaser"). 23. Consent of KPMG Peat Marwick LLP 100 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. REGENCY REALTY CORPORATION (registrant) October 7, 1998 By: /s/ J. Christian Leavitt -------------------------------- J. Christian Leavitt Vice President and Treasurer 101 Independent Auditors' Report The Board of Directors Regency Realty Corporation: We have audited the accompanying statement of revenues and certain expenses of Pike Creek Shopping Center for the year ended December 31, 1997. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses of Pike Creek Shopping Center was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in a Form 8-K of Regency Realty Corporation and excludes material amounts, described in note 1, that would not be comparable to those resulting from the proposed future operation of the property. The presentation is not intended to be a complete presentation of Pike Creek Shopping Center revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses, described in note 1, of Pike Creek Shopping Center for the year ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Jacksonville, Florida September 9, 1998 102 PIKE CREEK SHOPPING CENTER Statement of Revenues and Certain Expenses For the year ended December 31, 1997 Revenues: Minimum rent $ 1,979,571 Recoveries from tenants 182,438 Percentage rent 195,536 ------------- Total revenues 2,357,545 ------------- Certain operating expenses: Operating and maintenance 134,303 Real estate taxes 140,003 Management fees 93,408 General and administrative 79,978 ------------- Total expenses 447,692 ------------- Revenues in excess of certain expenses $ 1,909,853 ============= See accompanying notes to statement of revenues and certain expenses. 103 PIKE CREEK SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses For the year ended December 31, 1997 1. Basis of Presentation The statement of revenues and certain expenses relates to the operation of a 234,580 square foot shopping center (the "Property") located in Wilmington, Delaware. The Property's financial statement is prepared on the accrual basis of accounting in conformity with generally accepted accounting principles. Subsequent to December 31, 1997, the Property was acquired by Regency Realty Corporation (RRC) in a transaction accounted for as a purchase. All operations of the Property will be included in the consolidated financial statements of RRC beginning at the acquisition date. The accompanying financial statement is not representative of the actual operations for the period presented as certain expenses, which may not be comparable to the expenses expected to be incurred by RRC in the proposed future operation of the Property, have been excluded. RRC is not aware of any material factors relating to the Property that would cause the reported financial information not to be necessarily indicative of future operating results. Costs not directly related to the operation of the Property have been excluded, and consist of interest, depreciation, professional fees, and certain other non operating expenses. 2. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 104 PIKE CREEK SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses 3. Operating Leases For the year ended December 31, 1997, the following tenants paid minimum rent which exceeded 10% of the total minimum rent earned by the Property: Minimum Tenant Rent Paid ACME Markets $ 440,000 Kmart Corporation 370,745 The Property is leased to tenants under operating leases with expiration dates extending to the year 2011. Future minimum rent under noncancelable operating leases as of December 31, 1997, excluding tenant reimbursements of operating expenses and excluding additional contingent rentals based on tenants' sales volume, are as follows: Year ending December 31, Amount 1998 $ 1,904,402 1999 1,746,945 2000 1,566,526 2001 722,183 2002 483,116 Thereafter 3,619,066 105 Regency Realty Corporation Pro Forma Condensed Consolidated Financial Statements The following unaudited pro forma condensed consolidated balance sheet is based upon the historical consolidated balance sheet of Regency Realty Corporation (the Company) as of June 30, 1998 as if the Company had completed the acquisition of two additional shopping centers and completed the issuance of $100 million senior term notes subsequent to period end. The following unaudited pro forma consolidated statements of operations of the Company are based upon the historical consolidated statements of operations for the six-month period ended June 30, 1998 and the year ended December 31, 1997. These statements are presented as if the Company had acquired all of its properties as of January 1, 1997. These unaudited pro forma condensed consolidated financial statements should be read in conjunction with the Company's Form 10-K as of and for the three years ended December 31, 1997 and Form 10-Q filed for the period ended June 30, 1998. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what the actual financial position or results of operations of the Company would have been at June 30, 1998 or December 31, 1997 assuming the transactions had been completed as set forth above, nor does it purport to represent the financial position or results of operations of the Company in future periods. 106 Regency Realty Corporation Pro Forma Condensed Consolidated Balance Sheet June 30, 1998 (Unaudited) (in thousands) Historical Adjustments Pro Forma Assets Real estate investments, at cost $ 1,050,352 36,243 (a) 1,086,595 Construction in progress 31,133 - 31,133 Less: accumulated depreciation 46,160 - 46,160 -------------- -------------- -------------- Real estate rental property, net 1,035,325 36,243 1,071,568 -------------- -------------- -------------- Investments in real estate partnerships 22,401 - 22,401 -------------- -------------- -------------- Net real estate investments 1,057,726 36,243 1,093,969 -------------- -------------- -------------- Cash and cash equivalents 12,733 - 12,733 Tenant receivables, net of allowance for uncollectible accounts 10,684 - 10,684 Deferred costs, less accumulated amortization 4,497 - 4,497 Other assets 7,458 1,250 (b) 8,708 -------------- -------------- -------------- Total Assets $ 1,093,098 37,493 1,130,591 ============== ============== ============== Liabilities and Stockholders' Equity Mortgage loans payable $ 317,796 - 317,796 Acquisition and development line of credit 89,731 (62,507) (a)(b) 27,224 Notes payable - 100,000 (b) 100,000 -------------- -------------- -------------- Total debt 407,527 37,493 445,020 Accounts payable and other liabilities 17,064 - 17,064 Tenant's security and escrow deposits 2,763 - 2,763 -------------- -------------- -------------- Total liabilities 427,354 37,493 464,847 -------------- -------------- -------------- Exchangeable preferred units 78,800 - 78,800 Exchangeable operating partnership units 26,912 - 26,912 Limited partners' interest in consolidated partnerships 7,520 - 7,520 -------------- -------------- -------------- 113,232 - 113,232 Common stock and additional paid in capital 567,014 - 567,014 Distributions in excess of net income (14,502) - (14,502) -------------- -------------- -------------- Total stockholders' equity 552,512 - 552,512 -------------- -------------- -------------- Total liabilities and stockholders' equity $ 1,093,098 37,493 1,130,591 ============== ============== ============== See accompanying notes to pro forma condensed consolidated balance sheet. 107 Regency Realty Corporation Notes to Pro Forma Condensed Consolidated Balance Sheet June 30, 1998 (Unaudited) (in thousands) (a) Acquisitions of Shopping Centers: In January 1998, the Company entered into an agreement to acquire shopping centers from various entities comprising the Midland Group consisting of 21 shopping centers plus 11 shopping centers under development. The Company had acquired 20 of the 21 Midland shopping centers prior to June 30, 1998 containing 2.0 million square feet for approximately $167.1 million. Those shopping centers are included in the Company's June 30, 1998 balance sheet. The one remaining shopping center, Windmiller Farms, was acquired on July 15, 1998 using funds drawn on the Line. The center was acquired for an aggregate purchase price of $13.3 million which is reflected in the pro forma balance sheet. Subsequent to June 30, 1998, the Company expects to acquire an additional three properties under development for $41.3 million. In addition, during 1998, the Company expects to pay $4.6 million in additional costs related to joint venture investments and other transaction costs related to acquiring the various shopping centers from Midland, and during 1999 and 2000 expects to pay contingent consideration of $23.0 million. The following table represents the properties under development which the Company expects to acquire from Midland upon completion of construction during 1998. These properties are not included in these pro forma condensed consolidated financial statements. Expected Acquisition Purchase Date Price --------------- --------------- Garner Festival October-98 $ 20,571 Nashboro October-98 7,260 Crooked Creek October-98 13,471 --------------- $ 41,302 =============== In addition, the Company acquired one other shopping center for an aggregate purchase price of $22.9 million which is reflected in the pro forma balance sheet. The shopping center, Pike Creek Shopping Center, was acquired on August 4, 1998 using funds drawn on the Line. (b) Represents the proceeds from a $100 million debt offering completed July 15, 1998, less offering costs of 1.25%. At closing, the Company used the net proceeds from the Offering ($98.8 million) for the repayment of the balance outstanding on the Line and the remainder was used to offset the $36.2 million borrowed on the Line for the acquisitions of Pike Creek and Windmiller Farms. The Company has recorded $1.2 million of financing costs as an "Other Asset" to be amortized over the term of the Notes. 108 Regency Realty Corporation Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year Ended December 31, 1997 (Unaudited) (In thousands, except share and per share data) For the Six Month Period Ended June 30, 1998 Midland Acquisition Other Historical Properties Properties Adjustments Pro Forma Revenues: Minimum rent $ 47,661 (d) 3,913 (e) 3,074 (697) (i) 53,951 Percentage rent 1,662 - 154 (8) (i) 1,808 Recoveries from tenants 10,639 542 716 (67) (i) 11,830 Management, leasing and brokerage fees 5,406 - - - 5,406 Equity in income of investments in real estate partnerships 146 - - - 146 -------------- -------------- -------------- ----------- -------------- 65,514 4,455 3,944 (772) 73,141 -------------- -------------- -------------- ----------- -------------- Operating expenses: Depreciation and amortization 11,385 817 (f) 902 (f) (453) (i) 12,651 Operating and maintenance 8,472 283 333 (122) (i) 8,966 General and administrative 7,262 231 205 (25) (i) 7,673 Real estate taxes 5,788 488 484 (81) (i) 6,679 -------------- -------------- -------------- ----------- -------------- 32,907 1,819 1,924 (681) 35,969 -------------- -------------- -------------- ----------- -------------- Interest expense (income): Interest expense 12,873 2,646 (g) 2,168 (h) (3,220) (j) 14,467 Interest income (966) - - - (966) -------------- -------------- -------------- ----------- -------------- 11,907 2,646 2,168 (3,220) 13,501 -------------- -------------- -------------- ----------- -------------- Income before minority interest and gain on sale of real estate investments 20,700 (10) (148) 3,129 23,671 Gain on sale of real estate investments 10,746 - - (9,336) (i) 1,410 Minority interest (1,092) - (3) 202 (893) -------------- -------------- -------------- ----------- -------------- Net income 30,354 (10) (151) (6,005) 24,188 Preferred distributions - - - (3,250) (k) (3,250) -------------- -------------- -------------- ----------- -------------- Net income for shareholders $ 30,354 (10) (151) (9,255) 20,938 ============== ============== ============== =========== ============== Net income per share (note (l)): Basic $ 1.11 $ 0.73 ============== ============== Diluted $ 1.06 $ 0.72 ============== ============== See accompanying notes to pro forma consolidated statements of operations. 109 Regency Realty Corporation Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year Ended December 31, 1997 (Unaudited) (In thousands, except share and per share data) For the Year Ended December 31, 1997 Branch Midland Acquisition Other Historical Properties Properties Properties Adjustments Pro Forma (c) (d) (e) Revenues: Minimum rent $ 70,103 3,596 16,482 17,130 (4,136) (i) 103,175 Percentage rent 2,151 167 - 495 - 2,813 Recoveries from tenants 17,052 751 2,240 3,899 (548) (i) 23,394 Management, leasing and brokerage fees 7,997 1,060 - - - 9,057 Equity in income of investments in real estate partnerships 33 - - - - 33 ------------- --------- ----------- ---------- ------------ ----------- 97,336 5,574 18,722 21,524 (4,684) 138,472 ------------- --------- ----------- ---------- ------------ ----------- Operating expenses: Depreciation & amortization 16,303 972 2,994 (f) 4,340 (f) (855) (i) 23,754 Operating and maintenance 14,212 595 1,194 2,306 (1,260) (i) 17,047 General and administrative 9,964 683 1,042 1,083 (49) (i) 12,723 Real estate taxes 8,692 404 1,635 2,450 (447) (i) 12,734 ------------- --------- ----------- ---------- ------------ ----------- 49,171 2,654 6,865 10,179 (2,611) 66,258 ------------- --------- ----------- ---------- ------------ ----------- Interest expense (income): Interest expense 19,667 1,517 10,353 (g) 11,778 (h) (6,439) (j) 36,876 Interest income (1,000) (33) - - - (1,033) ------------- --------- ----------- ---------- ------------ ----------- 18,667 1,484 10,353 11,778 (6,439) 35,843 ------------- --------- ----------- ---------- ------------ ----------- Income before minority interest and gain on sale of real estate investments 29,498 1,436 1,504 (433) 4,366 36,371 Gain on sale of real estate investments 451 - - - (451) (i) - Minority interest (2,547) 1,010 (38) (2) (142) (1,719) ------------- --------- ----------- ---------- ------------ ----------- Net income 27,402 2,446 1,466 (435) 3,773 34,652 Preferred distributions - - - - (6,500) (k) (6,500) ------------- --------- ----------- ---------- ------------ ----------- Net income for shareholders $ 27,402 2,446 1,466 (435) (2,727) 28,152 ============= ========= =========== ========== ============ =========== Net income per share (note (l)): Basic $ 1.28 $ 1.32 ============= =========== Diluted $ 1.23 $ 1.23 ============= =========== See accompanying notes to pro forma consolidated statements of operations. 110 Regency Realty Corporation Notes to Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) (c) Reflects pro forma results of operations for the Branch Properties for the period from January 1, 1997 to March 7, 1997 (acquisition date). (d) Reflects revenues and certain expenses for the Midland Properties for the period from January 1, 1998 to the earlier of the respective acquisition date of the property or June 30, 1998, and for the year ended December 31, 1997. For the period ended June 30, 1998 Property Acquisition Minimum Recoveries Operating and Real General and Name Date Rent from Tenants Maintenance Estate Taxes Administrative ------------ ------------- -------------- -------------- -------------- -------------- Windmiller Farms 7/15/98 $ 574 $ 90 $ 34 $ 71 $ 32 Franklin Square 4/29/98 414 56 52 31 32 St. Ann Square 4/17/98 217 44 18 35 12 East Point Crossing 4/29/98 268 52 16 35 17 North Gate Plaza 4/29/98 234 33 18 27 10 Worthington Park 4/29/98 281 68 22 40 19 Beckett Commons 3/1/98 113 7 6 14 4 Cherry Grove Plaza 3/1/98 239 11 13 22 21 Bent Tree Plaza 3/1/98 137 11 7 59 8 West Chester Plaza 3/1/98 130 12 13 42 7 Brookville Plaza 3/1/98 95 5 5 8 4 Lake Shores Plaza 3/1/98 123 10 5 16 6 Evans Crossing 3/1/98 116 4 5 8 6 Statler Square 3/1/98 164 15 13 1 8 Kernersville Plaza 3/1/98 120 4 8 8 8 Maynard Crossing 3/1/98 272 38 13 15 15 Shoppes at Mason 3/1/98 116 27 15 33 6 Lake Pine Plaza 3/1/98 152 13 10 8 9 Hamilton Meadows 3/1/98 148 42 10 15 7 ------------- -------------- -------------- --------------- ----------- $ 3,913 $ 542 $ 283 $ 488 $ 231 ============= ============== ============== ================ =========== For the year ended December 31, 1997 Property Acquisition Minimum Recoveries Operating and Real General and Name Date Rent from Tenants Maintenance Estate Taxes Administrative ------------ ---------- ------------ -------------- ---------------- ------------- Windmiller Farms 7/15/98 $ 1,157 $ 181 $ 69 $ 143 $ 64 Franklin Square 4/29/98 1,270 171 158 94 98 St. Ann Square 4/17/98 741 149 60 119 42 East Point Crossing 4/29/98 821 159 50 107 51 North Gate Plaza 4/29/98 718 100 56 84 32 Worthington Park 4/29/98 862 208 67 124 59 Beckett Commons 3/1/98 687 140 38 83 47 Cherry Grove Plaza 3/1/98 1,445 175 85 131 105 Bent Tree Plaza 3/1/98 786 130 64 59 48 West Chester Plaza 3/1/98 807 70 72 84 45 Brookville Plaza 3/1/98 571 42 34 50 30 Lake Shores Plaza 3/1/98 759 156 55 96 32 Evans Crossing 3/1/98 613 84 34 50 33 Statler Square 3/1/98 913 76 43 54 60 Kernersville Plaza 3/1/98 605 58 29 51 33 Maynard Crossing 3/1/98 1,367 133 78 95 104 Shoppes at Mason 3/1/98 644 56 61 65 38 Lake Pine Plaza 3/1/98 827 93 54 51 46 Hamilton Meadows 3/1/98 889 59 87 95 75 ---------- ------------ -------------- ---------------- ------------- $ 16,482 $ 2,240 $ 1,194 $ 1,635 $ 1,042 ========== ============ ============== ================ ============= 111 Regency Realty Corporation Notes to Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) (e) Reflects revenues and certain expenses for the Acquisition Properties for the period from January 1, 1998 to the earlier of the respective acquisition date of the property or June 30, 1998, and for the year ended December 31, 1997. For the period ended June 30, 1998 Property Acquisition Minimum Percentage Recoveries Operating and Real General and Name Date Rent Rent from Tenants Maintenance Estate Taxes Administrative ------------ ---------- ----------- -------------- ------------ ------------ -------------- Delk Spectrum 1/14/98 $ 48 $ - $ 5 $ 2 $ 3 $ 2 Bloomingdale Square 2/11/98 214 6 53 25 24 21 Silverlake 6/3/98 346 - 60 36 36 18 Highland Square 6/17/98 516 51 86 46 79 60 Shoppes @104 6/19/98 620 - 133 72 79 28 Fleming Island 6/30/98 348 - 289 39 194 36 Pike Creek 8/4/98 982 97 90 113 69 40 ------------ ----------- -------------- ------------ ------------ --------- $ 3,074 $ 154 $ 716 $ 333 $ 484 $ 205 ============ ============ ============== ============ ============ ========= For the year ended December 31, 1997 Property Acquisition Minimum Percentage Recoveries Operating and Real General and Name Date Rent Rent from Tenants Maintenance Estate Taxes Administrative ------------ ------------ ----------- ------------ ------------- ------------- ------------- Oakley Plaza 3/14/97 $ 142 - $ 14 $ 13 $ 13 $ 8 Mariner's Village 3/25/97 185 6 37 45 33 7 Carmel Commons 3/28/97 297 11 63 38 35 22 Mainstreet Square 4/15/97 193 - 34 42 30 15 East Port Plaza 4/25/97 543 - 107 96 65 33 Hyde Park Plaza 6/6/97 1,702 118 339 144 265 84 Rivermont Station 6/30/97 642 - 124 65 56 34 Lovejoy Station 6/30/97 306 - 63 36 29 9 Tamiami Trails 7/10/97 508 - 163 124 66 30 Garden Square 9/19/97 671 - 232 144 99 50 Kingsdale 10/10/97 1,334 - 300 325 221 75 Boynton Lakes Plaza 12/1/97 1,159 - 391 267 250 80 Pinetree Plaza 12/23/97 279 - 51 50 37 21 Delk Spectrum 1/14/98 1,355 10 145 57 88 46 Bloomingdale Square 2/11/98 1,863 43 459 215 209 184 Silverlake 6/3/98 819 - 142 85 85 43 Highland Square 6/17/98 1,122 111 187 99 171 130 Shoppes @104 6/19/98 1,332 - 285 154 170 60 Fleming Island 6/30/98 698 - 581 79 388 72 Pike Creek 8/4/98 1,980 196 182 228 140 80 ------------ ----------- ------------ --------- ------------- --------------- $ 17,130 $ 495 $ 3,899 $ 2,306 $ 2,450 $ 1,083 ============ =========== ============ ========= ============= =============== 112 Regency Realty Corporation Notes to Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) (f) Depreciation expense is based on the estimated useful life of the properties acquired. For properties under construction, depreciation expense is calculated from the date the property is placed in service through the end of the period. In addition, the six month period ended June 30, 1998 and year ended December 31, 1997 calculations reflect depreciation expense on the properties from January 1, 1997 to the earlier of the respective acquisition date of the property or June 30, 1998. For the period ended June 30, 1998 Property Building and Year Building Depreciation Name Improvements Built/Renovated Useful Life Adjustment -------------- ----------------- ----------- --------------- Delk Spectrum $ 10,417 1991 34 $ 11 Bloomingdale Square 13,189 1987 30 51 Silverlake Shopping Center 7,584 1988 31 103 Highland Square 9,049 1960 20 208 Shoppes @104 6,439 1990 33 91 Fleming Island 4,773 1994 37 64 Pike Creek 18,082 1981 24 374 ---------------- Acquisition Properties pro forma depreciation adjustment $ 902 ================ Midland Properties $ 131,065 Ranging from Ranging from 1986 to 1996 29 to 40 $ 817 ================ For the year ended December 31, 1997 Property Building and Year Building Depreciation Name Improvements Built/Renovated Useful Life Adjustment -------------- ------------------ --------------- ---------------- Oakley Plaza $ 6,428 1988 31 $ 41 Mariner's Village 5,979 1986 29 47 Carmel Commons 9,335 1979 22 101 Mainstreet Square 4,581 1988 31 43 Hyde Park Plaza 33,734 1995 38 382 East Port Plaza 8,179 1991 34 76 Rivermont Station 9,548 1996 39 121 Lovejoy Station 5,560 1995 38 73 Tamiami Trails 7,598 1987 30 133 Garden Square 7,151 1991 34 151 Kingsdale 10,023 1997 27 288 Boynton Lakes Plaza 9,618 1993 36 244 Pinetree Plaza 3,057 1982 25 120 Delk Spectrum 10,417 1991 34 306 Bloomingdale Square 13,189 1987 30 440 Silverlake Shopping Center 7,584 1988 31 245 Highlands Square 9,049 1960 20 452 Shoppes @104 6,439 1990 33 195 Fleming Island 4,773 1994 37 129 Pike Creek 18,082 1981 24 753 Acquisition Properties pro ---------------- forma depreciation adjustment $ 4,340 ================ Midland Properties 131,065 Ranging from Ranging from 1986 to 1996 29 to 40 $ 2,994 ================ 113 Regency Realty Corporation Notes to Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) (g) To reflect interest expense on the Line required to complete the acquisition of the Midland Properties at the average interest rate afforded the Company (6.525%) and the assumption of $97.0 million of debt. For properties under construction, interest expense is calculated from the date the property is placed in service through the end of the period. Pro forma interest adjustment for the six month period ended June 30, 1998 $ 2,646 =============== Pro forma interest adjustment for the year ended December 31, 1997 $ 10,353 =============== (h) To reflect interest expense on the Line required to complete the acquisition of the Acquisition Properties at the average interest rate afforded the Company (6.525%). The six month period ended June 30, 1998 and year ended December 31, 1997 calculation reflects interest expense on the properties from January 1, 1997 to the respective acquisition date of the property. Pro forma interest adjustment for the six-month period ended June 30, 1998 $ 2,168 ================ Pro forma interest adjustment for the year ended December 31, 1997 $ 11,778 ================ (i) In December, 1997, the Company sold one office building for $2.6 million and recognized a gain on the sale of $451,000. During the first quarter of 1998, the Company sold three office buildings and a parcel of land for $26.7 million, and recognized a gain on the sale of $9.3 million. The adjustments to the pro forma statements of operations reflect the reversal of the revenues and expenses from the office buildings generated during 1997 and 1998, including the gains on the sale of the office buildings as if the sales had been completed on January 1, 1997. The Company believes that excluding the results of operations and gains related to the office buildings sold is necessary for an understanding of the continuing operations of the Company. (j) To reflect (i) interest expense and loan cost amortization on the $100 million debt offering offset by (ii) the reduction of interest expense on the Line and mortgage loans from the proceeds of the debt offering, the issuance of the preferred units and the proceeds from the sale of the office buildings referred to in note (i). Pro forma interest adjustment for the six-month period ended June 30, 1998 $ (3,220) ================== Pro forma interest adjustment for the year ended December 31, 1997 $ (6,439) ================== (k) To reflect the distribution on the offering of preferred units at an assumed annual rate of 8.125% for the six-month period ended June 30, 1998 and year ended December 31, 1997. 114 Regency Realty Corporation Notes to Pro Forma Consolidated Statements of Operations For the Six Month Period Ended June 30, 1998 and the Year ended December 31, 1997 (Unaudited) (In thousands, except unit and per unit data) (l) The following summarizes the calculation of basic and diluted earnings per unit for the six-month period ended June 30, 1998 and the year ended December 31, 1997: For the Six For the year Months Ended Ended June 30, 1998 December 31, 1997 ---------------- ------------------- Basic Earnings Per Share (EPS) Calculation: Weighted average common shares outstanding 24,837 17,424 ================ =================== Net income for common stockholders $ 20,938 $ 28,152 Less: dividends paid on Class B common stock 2,689 5,140 ---------------- ------------------- Net income for Basic EPS $ 18,249 23,012 ================ =================== Basic EPS $ 0.73 1.32 ================ =================== Net income for Basic EPS $ 18,249 23,012 Add: minority interest of exchangeable partnership units 693 1,214 ---------------- ------------------ Net income for Diluted EPS $ 18,942 24,226 ================ ================== Diluted Earnings Per Share (EPS) Calculation: Weighted average common shares outstanding for Basic EPS 24,837 17,424 Exchangeable operating partnership units 1,135 1,243 Incremental units to be issued under common stock options using the Treasury method 27 80 Contingent units or shares for the acquisition of real estate 428 955 ---------------- ------------------- Total Diluted Shares 26,427 19,702 ================ =================== Diluted EPS $ 0.72 $ 1.23 ================ =================== 115