Filed Pursuant to Rule 424(b)(4)
Registration No. 333-105408
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 28, 2003)
23,203,712 SHARES
REGENCY CENTERS CORPORATION
COMMON STOCK
$32.56 PER SHARE
An affiliate of Security Capital Group Incorporated, a subsidiary of
General Electric Capital Corporation, is selling 23,203,712 shares of our common
stock under this prospectus supplement. Of the 23,203,712 shares being offered
under this prospectus supplement, 6,876,832 shares will be sold by Security
Capital through the underwriters named herein, 11,720,000 shares will be sold by
the underwriters named herein and are the subject of forward sale agreements
between Security Capital and affiliates of certain of the underwriters, and
4,606,880 shares will be purchased by us directly from Security Capital at the
public offering price per share, subject to adjustment as set forth in a
purchase and sale agreement between us and Security Capital, as more fully
described in this prospectus supplement.
Security Capital will receive the net proceeds from the sale of all of the
shares offered hereby, including the shares being sold in connection with the
forward sale agreements. We will not receive any of the proceeds from the sale
of the shares being offered by this prospectus supplement.
Concurrently with this offering, Security Capital has separately entered
into forward sale agreements with affiliates of certain of the underwriters of
this offering pursuant to which Security Capital will sell up to an additional
8,280,000 shares of our common stock not offered under this prospectus
supplement in connection with an offering by Citigroup Global Markets Holdings
Inc., or CGMHI, of debt securities exchangeable for shares of our common stock.
We understand that CGMHI and its affiliates expect to enter into hedging
arrangements related to the concurrent offering. See "The Offering -- Concurrent
Offering" on page S-11 of this prospectus supplement.
Our common stock is listed on the New York Stock Exchange under the symbol
"REG". The last reported sale price of our common stock on June 18, 2003 was
$32.56 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities
regulators has approved or disapproved of these securities, or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
----------
PER SHARE TOTAL
-------- --------------
Public offering price ............................. $32.5600 $605,512,850(1)
Underwriting discount(2) .......................... $ 1.4245 $ 26,491,187
Proceeds to selling shareholder,
before expenses(2) .............................. $31.1355 $579,021,663(1)
----------
(1) Does not include $150,000,000 to be paid by us to Security Capital in
connection with the 4,606,880 shares of our common stock we expect to
purchase directly from Security Capital.
(2) Security Capital will receive proceeds from the sale of 11,720,000 of the
shares of common stock offered hereby upon settlement of the forward sale
agreements within 12 months of the date of this prospectus supplement equal
to the initial forward price of $31.1355 per share, subject to adjustment
as described in this prospectus supplement. No underwriting discount is
being paid on the 4,606,880 shares of our common stock expected to be
purchased by us directly from Security Capital. See "Underwriting".
Security Capital has granted to the underwriters the right to purchase up
to 2,789,524 additional shares to cover over-allotments, if any.
All of the shares offered hereby will be ready for delivery on or about
June 24, 2003.
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JOINT BOOK-RUNNING MANAGERS
MERRILL LYNCH & CO. CITIGROUP
----------
JPMORGAN UBS INVESTMENT BANK WACHOVIA SECURITIES
The date of this prospectus supplement is June 18, 2003
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT, AND SECURITY CAPITAL AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANYONE TO
PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND SECURITY
CAPITAL AND THE UNDERWRITERS ARE NOT, MAKING AN OFFER OF THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THIS PROSPECTUS SUPPLEMENT OR THE DATE OF INCORPORATION
BY REFERENCE.
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary ............................................. S-3
Capitalization ............................................................ S-10
The Offering .............................................................. S-11
Selling Shareholder ....................................................... S-11
The Company ............................................................... S-13
Properties ................................................................ S-15
Regency Centers Debt ...................................................... S-25
Selected Consolidated Financial Data ...................................... S-27
Historical Stock Prices and Dividends ..................................... S-29
Executive Officers and Directors .......................................... S-30
Underwriting .............................................................. S-33
Experts ................................................................... S-35
Validity of Common Stock .................................................. S-35
PROSPECTUS
Summary ................................................................... 1
Forward-Looking Information ............................................... 1
Risk Factors .............................................................. 2
Use of Proceeds ........................................................... 8
Regency Centers Corporation ............................................... 8
The Selling Shareholder ................................................... 8
Plan of Distribution ...................................................... 10
Description of Capital Stock .............................................. 11
Federal Income Tax Considerations ......................................... 17
Legal Matters ............................................................. 29
Experts ................................................................... 29
S-2
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING IS ONLY A SUMMARY. BECAUSE IT IS A SUMMARY, IT DOES NOT
CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU. FOR MORE COMPLETE
INFORMATION, YOU SHOULD READ THIS TOGETHER WITH THE MORE DETAILED INFORMATION
ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE
INFORMATION INCORPORATED BY REFERENCE HEREIN AND THEREIN.
REGENCY CENTERS CORPORATION
GENERAL
Regency Centers Corporation ("Regency Centers" or "Regency") completed its
initial public offering in 1993 (NYSE: REG) and is a qualified
self-administered, self-managed real estate investment trust ("REIT"). Through a
series of strategic acquisitions in 1997, 1998 and 1999, we expanded the scope
of our operations and became a nationally-based owner, operator, and developer
of grocery-anchored retail shopping centers.
At March 31, 2003, our assets totaled approximately $3.1 billion with 261
shopping centers in 21 states. At March 31, 2003, including properties owned
through our joint ventures, our gross leasable area ("GLA") totaled 29.6 million
square feet and was 94.9% leased. Geographically, including properties owned
through our joint ventures, 20.6% of our GLA is located in Florida, 18.1% in
California, 17.3% in Texas, 8.2% in Georgia, 6.4% in Ohio, and 29.4% spread
throughout 16 other states.
We invest in retail shopping centers through Regency Centers, L.P., the
operating partnership in which we are the sole general partner and currently own
approximately 98% of the outstanding common partnership units. Our acquisition,
development, operations and financing activity, including the issuance of common
or preferred partnership units, is generally executed by our operating
partnership, its wholly-owned subsidiaries and joint ventures with third
parties.
Our executive offices are located at 121 West Forsyth Street, Suite 200,
Jacksonville, Florida 32202 and our telephone number is (904) 598-7000.
OPERATING AND INVESTMENT PHILOSOPHY
Our primary operating and investment goal is to compound long-term growth
in per share earnings and total shareholder return through:
o focusing on a strategy of owning, operating, and developing
grocery-anchored neighborhood shopping centers that are anchored by
market-leading supermarkets in areas with attractive demographics,
o sustaining growth in the profits and intrinsic value of the operating
portfolio by increasing net operating income from our high-quality
centers through intense leasing and management and industry-leading
operating systems like our premier customer initiative,
o recycling the proceeds from the disposition of our lower-quality
properties and non-core developments into higher yielding,
higher-quality new developments and acquisitions,
o using joint ventures to cost efficiently expand the portfolio and
increase fee-based income,
o realizing value from our customer-driven development program,
o using financial management to maintain a strong balance sheet with
access to substantial capital, and
o attracting and motivating a talented management team that is committed
to achieving our strategic goals.
GROCERY-ANCHORED STRATEGY
We focus our investment strategy on grocery-anchored retail shopping
centers that are located in attractive trade areas and are anchored by a
dominant grocer in the local market. Over 90% of our grocery-anchored centers
are anchored by one of the top three grocers in the local market. A neighborhood
center is a convenient, cost-effective distribution platform for food retailers.
We believe that grocery-anchored centers generate substantial daily traffic and
offer sustainable competitive advantages to their tenants. This high traffic
generates increased sales, driving higher occupancy, higher rental rates, and
higher rental rate growth for us -- meaning that we expect to sustain our cash
flow growth and increase the value of our portfolio over the long term. Our
principal grocer anchors report that sales in their stores in our shopping
centers have outperformed sales in their other stores.
S-3
ATTRACTIVE DEMOGRAPHICS
Grocery-anchored centers are best located in neighborhood trade areas with
attractive demographics. The average population within three miles of our
centers is approximately 72,000 people with average household incomes of
approximately $87,000 and a projected five-year population growth rate of 8.7%.
The three-mile trade areas of our centers are growing nearly twice as fast and
household incomes are more than 35% greater than the national averages,
translating into more retail buying power. Once we select specific markets, we
seek the best location within the best neighborhoods, preferably occupying the
dominant corner, close to residential communities, with excellent visibility for
our tenants and easy access for neighborhood shoppers.
PREMIER CUSTOMER INITIATIVE
For the same reason we choose to anchor our centers with leading grocers,
we also seek a range of strong national, regional and local specialty tenants.
We have created a partnering process -- the premier customer initiative -- to
promote mutually beneficial relationships with our non-grocer specialty
retailers. Our objective is to build a base of specialty tenants who represent
the "best-in-class" operators in their respective merchandising categories. We
believe that these tenants reinforce the consumer appeal and other strengths of
a center's grocery-anchor, help to stabilize a center's occupancy, reduce
releasing downtime, lower tenant turnover and yield higher sustainable rents.
VALUE-ADDED DEVELOPMENT
Development is customer-driven, meaning we generally have a signed lease
from the anchor before we purchase the land and begin construction. Developments
serve the growth needs of our grocery and specialty retail customers, result in
modern shopping centers with long-term leases from the grocery-anchors and
produce attractive returns on invested capital. Our returns on invested capital
for developments, targeted in excess of 10%, generally exceed the returns
produced by acquisitions.
CAPITAL STRATEGY
We intend to maintain a capital structure designed to fund our growth
programs without compromising our investment-grade ratings. This approach is
founded on our self-funding capital strategy. This strategy utilizes two key
components: joint ventures and center "recycling." Joint venturing of assets
provides us with a capital source for new investments and market-based fees that
we may earn as the asset manager. Property returns plus profits from fees
generate attractive returns on our equity. Our asset recycling strategy calls
for us to re-deploy the proceeds from the sales of outparcels, developments and
low growth, lower-quality operating properties into new higher-quality
developments and acquisitions that we expect will generate sustainable revenue
growth and more attractive returns on invested capital. Our commitment to
maintaining a high-quality portfolio dictates that we continually assess the
value and prospects of all of our properties and actively manage the portfolio
with the timely disposition of those properties that no longer meet our
long-term investment standards.
JOINT VENTURES
We have unconsolidated investments in seven joint ventures with total
assets of $571.3 million at March 31, 2003. Of these seven, the assets of
Macquarie CountryWide-Regency, LLC and Columbia Regency Retail Partners, LLC
represent $475.8 million, or 83%, of our total unconsolidated joint venture
assets. We have a 25% equity interest in Macquarie CountryWide-Regency, LLC, a
joint venture with an affiliate of Macquarie CountryWide Trust, a Sydney,
Australia-based property trust focused on investing in grocery-anchored shopping
centers. Our joint venture with Macquarie owned 15 properties, had assets of
$185.2 million and had total debt of $84.9 million as of March 31, 2003. We also
have a 20% equity interest in Columbia Regency Retail Partners, LLC, a joint
venture with the Oregon State Treasury that was formed for the purpose of
investing in retail shopping centers. Our joint venture with the Oregon State
Treasury owned 12 properties, had assets of $290.6 million and total debt of
$78.2 million as of March 31, 2003.
S-4
THE OFFERING
Common stock offered
by Security Capital .............. 23,203,712 shares, consisting of:
o 6,876,832 shares to be sold by Security
Capital through the underwriters named in
this prospectus supplement;
o 11,720,000 shares to be sold by the
underwriters named in this prospectus
supplement and subject to forward sale
agreements between Security Capital and
affiliates of certain of the underwriters
named in this prospectus supplement; and
o 4,606,880 shares to be purchased by us
directly from Security Capital at the
public offering price per share, subject
to adjustments.
Over-allotment option
from Security Capital ............ Up to an additional 2,789,524 shares of our
common stock.
Use of proceeds .................. We will not receive any of the proceeds from
the offering of our common stock by Security
Capital.
New York Stock Exchange symbol ... "REG".
Risk factors ..................... An investment in our common stock involves
risks. You should carefully read "Risk
Factors" beginning on page 2 of the
accompanying prospectus before deciding to
invest in shares of our common stock.
CONCURRENT OFFERING
We understand that Citigroup Global Markets Holdings Inc., or CGMHI, will
concurrently sell an aggregate of 7,200,000 SynDECS (Debt Exchangeable for
Common Stock) (plus up to an additional 1,080,000 SynDECS that are subject to an
over-allotment option). The SynDECS are a series of debt securities of CGMHI
that will each be mandatorily exchanged upon maturity, which is scheduled to be
on July 1, 2006, into between 5/6th of a share and one share of our common stock
or its value in cash based on a formula linked to the market price of our common
stock. We also understand that CGMHI and its affiliates expect to enter into
hedging arrangements related to the SynDECS, including short sales relating to
approximately 1,500,000 shares of our common stock, and that CGMHI and its
affiliates may borrow shares of common stock from stock lenders, including
Security Capital, in connection with these hedging arrangements.
In connection with the concurrent offering, Security Capital has advised us
that its subsidiary that owns the shares offered under this prospectus
supplement has entered into forward purchase contracts with Citibank, N.A., an
affiliate of Citigroup Global Markets Inc., and UBS AG, London Branch, an
affiliate of UBS Securities LLC. Under the forward purchase contracts, the
Security Capital subsidiary has agreed to deliver 4,200,000 shares of our common
stock to UBS AG, London Branch in mid-2004 and 3,000,000 shares of our common
stock (plus up to 1,080,000 shares in connection with the over-allotment option
relating to the concurrent offering) to Citibank during the first half of 2004.
The initial forward price under the forward purchase contracts is $30.92 per
share, and the contracts provide that the initial forward price is subject to
increase based on a floating interest factor and subject to decrease for
dividends having a record date after the date of the consummation of the
concurrent offering and prior to the date of settlement. In addition, the
Security Capital subsidiary will enter into a stock lending arrangement under
which Citigroup Global Markets or an affiliate thereof may borrow shares of our
common stock in connection with the Citibank forward purchase contract. The
forward purchase contracts may also be settled in cash at the Security Capital
subsidiary's option. If a forward purchase contract is settled in cash and the
market price of our common stock at the time of settlement of the forward
purchase contracts is above the forward price, Security Capital would pay
Citibank and UBS AG, London Branch an amount of cash equal to the difference. If
the market value of the common stock at the time of settlement of the forward
contracts is below the forward price, Security Capital would be paid the
difference by Citibank and UBSAG, London Branch. Delivery and payment may be
accelerated under these forward contracts under certain circumstances. Until
delivery under the forward contracts, Security Capital will continue to
beneficially own and vote those shares, subject to the conditions of an
agreement between us and Security Capital terminating the stockholders
agreement. The subsidiary will also have the right to settle the forward
contracts in cash instead of delivering shares of our common stock. If it does
so, it will continue to own the shares.
Any market that develops for the SynDECS is likely to influence the market
for our common stock. For example, the price of our common stock could become
more volatile and could be depressed by investors' anticipation of the potential
distribution into the market of substantial additional amounts of our common
stock at the maturity of the SynDECS, by possible sales of our common stock by
investors who view the SynDECS as a more attractive means of equity
participation in Regency and by hedging or arbitrage trading activity that may
develop involving the SynDECS and our common stock.
S-5
OWNERSHIP LIMITS
Regency's articles of incorporation provide that, subject to certain
limited exceptions, no holder may own, or be deemed to own by virtue of certain
attribution provisions under the Internal Revenue Code, more than 7% by value of
Regency's outstanding capital stock. As a result, it is possible that ownership
of a SynDECS would be treated as beneficial ownership of Regency capital stock
and that ownership would be aggregated with your ownership, directly or by
attribution, of Regency capital stock in determining your beneficial ownership
of Regency capital stock for purposes of the ownership limitations. See
"Description of Capital Stock -- Statutory Provisions and Provisions of Our
Articles of Incorporation and Bylaws" in the accompanying prospectus. You should
consult your own tax and legal advisors to determine how these ownership
limitations apply to you.
RECENT DEVELOPMENTS
PURCHASE AND SALE AGREEMENT WITH SECURITY CAPITAL
On June 11, 2003, we entered into a purchase and sale agreement with
Security Capital and its subsidiary that owns our shares to purchase up to
$150,000,000 of the shares of our common stock beneficially owned by Security
Capital at the per share offering price to the public of the shares offered
under this prospectus supplement, which is equal to 4,606,880 shares. The amount
of shares that we purchase will decrease if Security Capital's ownership of our
common stock would not be 9.8% or less of our total outstanding common stock
after consummation of this offering and entering into the forward sale
agreements. For the purpose of this calculation, Security Capital is not treated
as owning the shares covered by the forward sale agreements entered into by the
subsidiary in connection with this offering and the concurrent offering of
SynDECS or any shares subject to the underwriters' over-allotment options that
are not sold in the offerings, and our total outstanding common stock is reduced
by the assumed purchase by us of $150,000,000 of shares of our common stock. If
Security Capital's ownership percentage would be over 15% based on this
calculation, we will have no obligation to purchase shares beneficially owned by
Security Capital under the purchase and sale agreement. Assuming the
consummation of the concurrent offering, we will repurchase all 4,606,880 shares
contemplated by this prospectus supplement. The closing of the purchase under
the purchase and sale agreement will occur upon, and be subject to, the
consummation of this offering.
We plan to fund the share repurchase in the near term by drawing on our
line of credit and over time by reducing the amount so drawn through
accelerating the sale of non-core assets and additional property dispositions
through expanded joint venture activities. We expect that the long-term impact
of the transaction will generally be balance-sheet and earnings neutral.
AGREEMENT RELATING TO DISPOSITION OF SHARES
In connection with the purchase and sale agreement, we entered into an
agreement with Security Capital pursuant to which we and Security Capital have
agreed that the Stockholders Agreement between Security Capital and us will
terminate upon the consummation of this offering, the entering into of the
forward sale agreements and our purchase of shares of our common stock from the
subsidiary pursuant to the purchase and sale agreement, provided that Security
Capital's ownership in Regency (excluding the shares subject to the forward sale
agreements) has been reduced to 15% or less of our total outstanding common
stock. Assuming this offering is consummated, the forward sale agreements are
entered into as described and we consummate the repurchase of our shares as
described, Security Capital would own less than 10% of our common stock under
this calculation prior to any exercise of the over-allotment options. Security
Capital also has agreed to vote all shares of our common stock covered by the
forward sale agreements over which it has voting power following the closing of
this offering in the same proportion as shares are voted by our other
shareholders. In addition, the agreement provides that, upon the closing under
the purchase and sale agreement, Joseph E. Parsons, an employee of General
Electric Capital Corporation, will resign from our board of directors. In the
event that Security Capital's ownership (excluding the shares subject to the
forward sale agreements) is in excess of 15% after the consummation of this
offering and our purchase of shares of our common stock from the subsidiary, the
Stockholders Agreement will not terminate, but will be amended so that it will
thereafter terminate immediately when Security Capital ceases to own 15% or more
of our total outstanding common stock.
SECURITY CAPITAL OWNERSHIP LIMIT
In order to facilitate the subsidiary's disposition of its shares of our
common stock, our board of directors adopted resolutions relating to the
ownership limits under our articles of incorporation to provide, among other
things, that Security Capital will have an ownership limit equal to 60% of our
common stock less the number of shares sold in this offering or to us pursuant
to the purchase and sale agreement, but not subtracting the shares subject to
the forward sale agreements.
S-6
SALE OF DEPOSITARY SHARES REPRESENTING PREFERRED STOCK
On April 3, 2003, we completed an underwritten public offering of $75
million of depositary shares representing our Series 3 preferred stock. The
depositary shares are redeemable at our election after five years, pay a 7.45%
cumulative annual dividend and have an aggregate liquidation preference of $75
million. We used the proceeds of the offering of the depositary shares to repay
outstanding indebtedness on our line of credit, which was drawn to redeem $35
million of 9% preferred units and $40 million of 8.75% preferred units of our
operating partnership in a negotiated transaction in March 2003 at a 1% premium.
RECENT TAX LEGISLATION
REITs currently enjoy tax advantages relative to regular C corporations
because they are not subject to corporate-level income tax on income they
distribute to shareholders, but shareholders do include REIT dividends in
taxable income. The recently enacted Jobs and Growth Tax Relief Reconciliation
Act of 2003 (the "Act") generally reduces to 15% the maximum marginal rate of
tax that individuals will pay on corporate dividends for taxable years ending
after December 31, 2002 and before January 1, 2009. This reduced tax rate,
however, will not apply to dividends paid to individuals by a REIT on its stock
except for certain limited amounts. While the earnings of a REIT that are
distributed to its shareholders will still generally be subject to less federal
income taxation in the aggregate than the distributed earnings of a non-REIT C
corporation, which are distributed net of a corporate income tax, this
legislation could make an investment in a REIT comparatively less attractive
than an investment in other corporations because dividends paid by REITs will
generally not be eligible for the new reduced tax rates that apply for corporate
dividends. In addition, under the legislation, the maximum tax rate for REIT
capital gain distributions (except to the extent of real estate depreciation
recapture) was reduced from 20% to 15%. We cannot predict what effect, if any,
the enactment of this legislation may have on the value of our common stock,
either in terms of price or relative to other investments.
On several occasions, Congress has proposed legislation adding an
additional requirement for REIT qualification. This proposed legislation would
require that an entity seeking to qualify as a REIT not be a "controlled
entity." This legislation was proposed recently in the version of the Act passed
by the Senate on May 15, 2003. Under this legislation, an entity is a controlled
entity if, at any time during the taxable year, one person (excluding other
REITs), in the case of a corporation, owns stock possessing at least 50% of the
total voting power of the stock of such corporation, or having a value equal to
at least 50% of the total value of the stock of such corporation, or in the case
of a trust, owns beneficial interests in the trust which would meet the 50% vote
or value tests applicable for corporations if such interests were stock. This
legislation was proposed to be effective for taxable years ending after May 8,
2003; however, under a grandfathering provision, the additional requirement
would not have applied to any entity which was a controlled entity as of May 8,
2003, which was a REIT for the taxable year which included such date, and which
had significant assets or activities as of such date. As of May 15, 2003,
Security Capital owned approximately 56.7% of the voting power of Regency
Centers and hence, we are a controlled entity within the meaning of this
proposed legislation. However, we believe that we would satisfy the provisions
of the grandfathering exception as proposed, and would not have been
disqualified from maintaining our REIT status by virtue of Security Capital's
ownership. The final version of the Act did not include this proposed
legislation, but it has been proposed in another tax bill. No assurances can be
given, however, about whether this proposal will be enacted, what form that
legislation might take and whether a similar grandfathering provision would be
included.
S-7
SUMMARY FINANCIAL DATA
The following table summarizes our selected consolidated financial data on
a historical basis as of and for the five years ended December 31, 2002, and as
of and for the three months ended March 31, 2003 and March 31, 2002. This
information should be read in conjunction with our consolidated financial
statements (including the related notes thereto) and management's discussion and
analysis of financial condition and results of operations incorporated by
reference in this prospectus supplement and the accompanying prospectus. This
selected consolidated financial data has been derived from our audited
consolidated financial statements, except as indicated. The selected
consolidated financial data as of and for the three months ended March 31, 2003
and 2002, in our opinion, reflect all adjustments necessary to present fairly
the data for such periods. Interim results for the three months ended March 31,
2003 are not necessarily indicative of results that can be expected for future
periods.
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
OPERATING DATA:
Revenues .................................. $ 97,496 $ 87,578 $380,203 $357,954 $336,395 $281,202 $132,866
Operating expenses ........................ 46,971 41,342 184,325 168,391 153,218 126,953 66,527
Other expense (income):
Interest expense, net of interest
income ................................ 20,633 19,622 81,286 63,680 63,867 56,576 26,051
(Gain) loss on sale of operating
properties ............................ -- (1,494) (5,267) (699) (4,507) 233 (10,726)
Provision for loss on operating and
development properties ................ 4,369 1,595 12,995 -- --
Other income ............................ -- -- (2,383) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total other expense ..................... 20,633 18,128 78,005 64,576 72,355 56,809 15,325
Income before minority interests ........ 29,892 28,108 117,873 124,987 110,822 97,440 51,014
-------- -------- -------- -------- -------- -------- --------
Minority interests ........................ (11,299) (8,970) (36,037) (36,440) (34,410) (17,775) (5,444)
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations ....... 18,593 19,138 81,836 88,547 76,412 79,665 45,570
-------- -------- -------- -------- -------- -------- --------
Income (loss) from discontinued
operations(1) ........................... (669) 6,139 28,689 12,117 11,199 10,181 5,020
-------- -------- -------- -------- -------- -------- --------
Net income .............................. 17,924 25,277 110,525 100,664 87,611 89,846 50,590
Preferred stock dividends ................. -- (759) (2,858) (2,965) (2,817) (2,245) --
-------- -------- -------- -------- -------- -------- --------
Net income for common
stockholders .......................... $ 17,924 $ 24,518 $107,667 $ 97,699 $ 84,794 $ 87,601 $ 50,590
======== ======== ======== ======== ======== ======== ========
Income per common share -- basic:
Income from continuing operations ....... $ 0.31 $ 0.31 $ 1.36 $ 1.49 $ 1.30 $ 1.42 $ 1.60
Discontinued operations(1) .............. $ (0.01) $ 0.11 $ 0.49 $ 0.21 $ 0.19 $ 0.19 $ 0.20
-------- -------- -------- -------- -------- -------- --------
Net income for common
stockholders per share .............. $ 0.30 $ 0.42 $ 1.85 $ 1.70 $ 1.49 $ 1.61 $ 1.80
======== ======== ======== ======== ======== ======== ========
Income per common share -- diluted:
Income from continuing operations ....... $ 0.31 $ 0.31 $ 1.35 $ 1.49 $ 1.30 $ 1.43 $ 1.56
Discontinued operations(1) .............. $ (0.01) $ 0.11 $ 0.49 $ 0.20 $ 0.19 $ 0.18 $ 0.19
-------- -------- -------- -------- -------- -------- --------
Net income for common
stockholders per share .............. $ 0.30 $ 0.42 $ 1.84 $ 1.69 $ 1.49 $ 1.61 $ 1.75
======== ======== ======== ======== ======== ======== ========
(footnotes appear on following page)
S-8
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
OTHER DATA:
Common stock outstanding ............... 60,404 58,110 59,557 57,601 56,898 56,924 25,489
Common units, convertible preferred
stock(2) and Class B common
stock outstanding .................... 1,496 3,023 1,955 3,043 3,150 3,565 4,337
Total GLA (unaudited)(3) ............... 29,572 29,232 29,483 29,089 27,991 24,769 14,652
Number of properties (at period end)
(unaudited)(3) ....................... 261 271 262 272 261 216 129
Ratio of earnings to fixed charges
(unaudited)(4) ....................... 1.5 1.6 1.8 1.7 1.7 1.9 2.1
Common dividends per share ............. $ 0.52 $ 0.51 $ 2.04 $ 2.00 $ 1.92 $ 1.84 $ 1.76
Funds from Operations(5) ............... $ 40,328 $ 39,967 $ 178,954 $ 168,957 $ 158,794 $ 140,989 $ 67,121
BALANCE SHEET DATA:
Real estate investments at cost ........ $3,168,098 $3,180,761 $3,088,914 $3,156,831 $2,943,627 $2,636,193 $1,250,332
Total assets ........................... 3,053,738 3,112,593 3,061,859 3,109,314 3,035,144 2,654,936 1,240,107
Total debt ............................. 1,429,910 1,427,114 1,333,524 1,396,721 1,307,072 1,011,967 548,126
Stockholders' equity ................... 1,207,840 1,213,479 1,221,720 1,219,051 1,225,415 1,247,249 550,741
----------
(1) Discontinued operations represent properties held for sale or sold with
which we will not have continuing involvement after disposition.
(2) As a result of conversions to common stock, we ceased to have any
convertible preferred stock outstanding in February 2003.
(3) Includes properties owned by our joint ventures.
(4) The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For purposes of computing these ratios, earnings have
been calculated by adding fixed charges (excluding capitalized interest and
preferred distributions) to income before minority interests and gains and
losses from the sale of operating properties and subtracting equity in
income of investments in real estate. Fixed charges consist of interest
costs (whether expensed or capitalized), amortization of deferred debt
costs and preferred distributions.
(5) We report Funds From Operations (FFO) as a supplemental earnings measure.
We consider FFO to be an accurate benchmark to our peer group and a
meaningful performance measurement because it excludes various items in net
income that do not relate to or are not indicative of the operating
performance of the ownership, management and development of real estate,
such as depreciation and amortization. FFO is defined by the National
Association of Real Estate Investment Trusts generally as net earnings
(computed in accordance with GAAP), excluding real estate depreciation and
amortization, gains, and losses from sales of properties, after adjustment
from unconsolidated partnerships and joint ventures and excluding items
classified by GAAP as extraordinary or unusual, along with significant
non-recurring events. We also adjust for the payment of preferred stock
dividends.
The following table reconciles FFO to net income.
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
------- ------- -------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Net income for common stockholders ........ $17,924 $24,518 $107,667 $ 97,699 $ 84,794 $ 87,601 $50,590
Add (Less):
Depreciation expense --
real property ......................... 17,550 15,989 65,908 60,089 55,891 46,751 23,577
Amortization of leasing
commissions ........................... 1,692 1,209 6,029 4,750 2,887 1,261 951
Provision for loss on operating
properties ............................ -- -- 2,524 1,595 12,995 -- --
Loss (gain) on sale of operating
properties ............................ 803 (3,158) (8,829) (699) (3,082) 233 (9,823)
Preferred stock dividends ............... -- 758 2,858 2,965 2,817 2,245 --
Preferred unit issuance costs ........... 1,922 -- -- -- -- -- --
Minority interest of exchangeable
partnership units ..................... 437 651 2,797 2,558 2,492 2,898 1,826
------- ------- -------- -------- -------- -------- --------
Funds from Operations ................. $40,328 $39,967 $178,954 $168,957 $158,794 $140,989 $67,121
======= ======= ======== ======== ======== ======== ========
S-9
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2003, as
adjusted to give effect to (i) the sale of $75,000,000 of depositary shares
representing our Series 3 preferred stock in April 2003 and application of the
net proceeds of that sale to repay outstanding indebtedness under our line of
credit and (ii) the repurchase of 4,606,880 shares from Security Capital for
$150,000,000 with borrowings under our line of credit. There can be no assurance
that such repurchase will be consummated in the amount of $150,000,000. Although
we plan to fund the $150,000,000 share repurchase in the near term by drawing on
our line of credit, over time we plan to reduce the amount so drawn through
accelerating the sale of non-core assets and additional property dispositions
through expanded joint venture activities.
The capitalization table should be read in conjunction with our
consolidated financial statements and the related notes incorporated by
reference in this prospectus supplement and the accompanying prospectus.
MARCH 31, 2003
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
Debt:
Notes payable ......................................................................... $1,251,160 $1,251,160
Unsecured line of credit .............................................................. 178,750 256,295
---------- ----------
Total debt .......................................................................... 1,429,910 1,507,455
---------- ----------
Preferred units ......................................................................... 302,326 302,326
Exchangeable operating partnership units ................................................ 29,914 29,914
Limited partners' interest in consolidated partnerships ................................. 16,358 16,358
---------- ----------
Total minority interest ............................................................. 348,598 348,598
---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value per share: 10,000,000 shares authorized;
0 shares issued at March 31, 2003 and 300,000 issued and outstanding at
March 31, 2003 (as adjusted) ........................................................ -- 75,000(1)
Common stock, $.01 par value per share: 150,000,000 shares authorized;
64,383,288 issued and 60,404,451 outstanding at March 31, 2003 and
55,797,571 outstanding at March 31, 2003 (as adjusted)(2) ........................... 644 644
Additional paid in capital(2) ......................................................... 1,300,181 1,147,636
Distributions in excess of net income ................................................. (92,985) (92,985)
---------- ----------
Total stockholders' equity .......................................................... 1,207,840 1,130,295
---------- ----------
Total capitalization ................................................................ $2,986,348 $2,986,348
========== ==========
----------
(1) Reflects the sale of $75,000 of depositary shares representing our Series 3
preferred stock in April 2003.
(2) The $150,000 of shares we expect to purchase from Security Capital would be
held as treasury stock, which is a deduction from "Additional paid in
capital." Therefore, as a result "Common Stock" is not reduced and
"Additional paid in capital" is reduced by $152,545, which includes
expenses related to the sale of depositary shares.
S-10
THE OFFERING
All of the shares of common stock offered by this prospectus supplement are
being offered by a subsidiary of Security Capital Group Incorporated as follows:
o 6,876,832 shares to be sold by Security Capital through the underwriters
named in this prospectus supplement;
o 11,720,000 shares to be sold by the underwriters named in this
prospectus supplement and subject to forward sale agreements between
Security Capital and affiliates of certain of the underwriters named in
this prospectus supplement; and
o 4,606,880 shares to be purchased by us directly from Security Capital at
the public offering price per share, subject to adjustments.
We will not receive any proceeds from the sale of our common stock.
CONCURRENT OFFERING
We understand that CGMHI will concurrently sell an aggregate of 7,200,000
SynDECS (Debt Exchangeable for Common Stock) (plus up to an additional 1,080,000
SynDECS that are subject to an over-allotment option). The SynDECS are a series
of debt securities of CGMHI that will each be mandatorily exchanged upon
maturity on July 1, 2006 into between 5/6th of a share and one share of our
common stock or its value in cash based on a formula linked to the market price
of our common stock. We also understand that CGMHI and its affiliates expect to
enter into hedging arrangements related to the SynDECS, including short sales
relating to approximately 1,500,000 shares of our common stock and that CGMHI
and its affiliates may borrow shares of common stock from stock lenders,
including Security Capital, in connection with these hedging arrangements.
In connection with the concurrent offering, Security Capital has advised us
that its subsidiary that owns the shares offered under this prospectus
supplement has entered into forward purchase contracts with Citibank, N.A., an
affiliate of Citigroup Global Markets Inc., and UBS AG, London Branch, an
affiliate of UBS Securities LLC. Under the forward purchase contracts, the
Security Capital subsidiary has agreed to deliver 4,200,000 shares of our common
stock to UBS AG, London Branch in mid-2004 and 3,000,000 shares of our common
stock (plus up to 1,080,000 shares in connection with the over-allotment option
relating to the concurrent offering) to Citibank during the first half of 2004.
The initial forward price under the forward purchase contracts is $30.92 per
share, and the contracts provide that the initial forward price is subject to
increase based on a floating interest factor and subject to decrease for
dividends having a record date after the date of the consummation of the
concurrent offering and prior to the date of settlement. In addition, the
Security Capital subsidiary may enter into a stock lending arrangement under
which Citigroup Global Markets or an affiliate thereof may borrow shares of our
common stock in connection with the Citibank forward purchase contract. The
forward purchase contracts may also be settled in cash at the Security Capital
subsidiary's option. If a forward purchase contract is settled in cash and the
market price of our common stock at the time of settlement of the forward
purchase contracts is above the forward price, Security Capital would pay
Citibank and UBS AG, London Branch an amount of cash equal to the difference. If
the market value of the common stock at the time of settlement of the forward
contracts is below the forward price, Security Capital would be paid the
difference by Citibank and UBSAG, London Branch. Delivery and payment may be
accelerated under these forward contracts under certain circumstances. Until
delivery under the forward contracts, the subsidiary will continue to own and
vote those shares, subject to the conditions of an agreement between us and
Security Capital terminating the stockholders agreement. The subsidiary will
also have the right to settle the forward contracts in cash instead of
delivering shares of our common stock. If it does so, it will continue to own
the shares.
SELLING SHAREHOLDER
The following table sets forth information with respect to the beneficial
ownership of our common stock by Security Capital Group Incorporated and its
subsidiary.
As of June 11, 2003 there were 60,511,537 shares of our common stock
outstanding. The amounts and percentages of common stock beneficially owned are
reported on the basis of regulations of the SEC governing the determination of
beneficial ownership of securities. Under the rules of the SEC, a person is
deemed to be a "beneficial owner" of a security if that person has or shares
"voting power," which includes the power to vote or to direct the voting of the
security, or "investment power," which includes the power to dispose of or to
direct the disposition of the security. A person is also deemed to be a
beneficial owner of any securities of which that person may be deemed a
beneficial owner within 60 days. Under these rules, more than one person may be
deemed a beneficial owner of the same securities and a person may be deemed to
be a beneficial owner of securities as to which the person has no economic
interest.
The selling shareholder is a subsidiary of Security Capital Group
Incorporated.
S-11
Security Capital will remain the beneficial owner of the shares of our
common stock covered by the forward sale agreements and the stock lending
agreements unless and until its subsidiary delivers the shares in accordance
with the terms of the forward sale agreements. The subsidiary will also have the
right to settle the forward purchase contracts in cash instead of delivering
shares of our common stock. If it does so, it will continue to own the shares.
--------------------------------------------------------------------------------------------------------------------------
Shares of our Percentage of Shares of our
Common Stock Common Stock Beneficially Owned
Beneficially ----------------------------------
Shares of our Owned After After
Common Stock Shares of our Offering and Offering and
Beneficially Common Stock Share Settlement Share Settlement
Name of Owned Before to be Sold in of Forward Sale Before of Forward Sale
Beneficial Owner Offering Offering Agreements(1) Offering Agreements(1)
--------------------------------------------------------------------------------------------------------------------------
Security Capital
and its subsidiary 34,273,236 23,203,712 3,869,524(1) 56.6% 6.9%(2)
--------------------------------------------------------------------------------------------------------------------------
----------
(1) Shares of our Common Stock Beneficially Owned After Offering and Share
Settlement of Forward Sale Agreements assumes:
o the sale by Security Capital of 6,876,832 shares of our common stock
through the underwriters named herein;
o the sale by Security Capital of 11,720,000 shares of our common stock
upon settlement of the forward sale agreements between Security Capital
and certain of the underwriters named herein;
o the sale by Security Capital of 7,200,000 shares of our common stock
(which does not include 1,080,000 shares subject to an over-allotment
option) upon settlement of the forward contracts between a subsidiary of
Security Capital and Citibank, N.A. and UBS AG, London Branch in
connection with the concurrent offering of SynDECS, described below;
o the repurchase by us of 4,606,880 shares directly from Security Capital;
and
o the 2,789,524 shares of our common stock subject to the over-allotment
option granted to the underwriters in this offering, and the 1,080,000
shares subject to the over-allotment option granted to the underwriters
in the concurrent SynDECS offering are not sold.
(2) Based on the number of shares outstanding as of June 11, 2003, after giving
effect to our stock repurchase, described below.
Security Capital will beneficially own 22,789,524, or 40.8%, of the
outstanding shares of our common stock after this offering but prior to share
settlement of the forward sale agreements and exercise of the over-allotment
options. If the underwriters exercise the over-allotment option for this
offering in full, Security Capital and its subsidiary will beneficially own
35.8% of our common stock after this offering, after giving effect to our stock
repurchase, described below, but before giving effect to the concurrent
offering, described above.
On June 11, 2003, we entered into a purchase and sale agreement with
Security Capital and the subsidiary to purchase up to $150,000,000 of the shares
of our common stock beneficially owned by Security Capital at the per share
offering price to the public of the shares offered under this prospectus
supplement, which is equal to 4,606,880 shares. The amount of shares that we
purchase will decrease if Security Capital's ownership of our common stock would
not be 9.8% or less of our total outstanding common stock after consummation of
this offering and entering into the forward sale agreements. For the purpose of
this calculation, Security Capital is not treated as owning the shares covered
by the forward sale agreements entered into by the subsidiary in connection with
this offering and the concurrent offering of SynDECS or any shares subject to
the underwriters' over-allotment options that are not sold in the offerings, and
our total outstanding common stock is reduced by the assumed purchase by us of
$150,000,000 of shares of our common stock. If Security Capital's ownership
percentage would be over 15% based on this calculation, we will have no
obligation to purchase shares beneficially owned by Security Capital under the
purchase and sale agreement. Assuming the consummation of the concurrent
offering, we will repurchase all 4,606,880 shares contemplated by this
prospectus supplement. The closing of the purchase under the purchase and sale
agreement will occur upon, and be subject to, the consummation of this offering.
In connection with the purchase and sale agreement, we entered into an
agreement with Security Capital pursuant to which we and Security Capital have
agreed that the Stockholders Agreement between Security Capital and us will
terminate upon the consummation of this offering, the entering into of the
forward sale agreements and our purchase of shares of our common stock from the
subsidiary pursuant to the purchase and sale agreement, provided that Security
Capital's ownership in Regency (excluding the shares subject to the forward sale
agreements) has been reduced to 15% or less of our total outstanding common
stock. Assuming this offering is consummated, the forward sale agreements are
entered into as described and we consummate the repurchase of our shares as
described, Security Capital would own less than 10% of our common stock under
this calculation prior to any exercise of the over-allotment options. Security
Capital also has agreed to vote all shares of our common stock covered by the
forward sale agreements over which it has voting power following the closing of
this offering in the same proportion as shares are voted by our other
shareholders. In addition, the agreement provides that, upon the closing
S-12
under the purchase and sale agreement, Joseph E. Parsons, an employee of General
Electric Capital Corporation, will resign from our board of directors. In the
event that Security Capital's ownership (excluding the shares subject to the
forward sale agreements) is in excess of 15% after the consummation of this
offering and our purchase of shares of our common stock from the subsidiary, the
Stockholders Agreement will not terminate, but will be amended so that it will
thereafter terminate immediately when Security Capital ceases to own 15% or more
of our total outstanding common stock.
In order to facilitate the subsidiary's disposition of its shares of our
common stock, our board of directors adopted resolutions relating to the
ownership limits under our articles of incorporation to provide, among other
things, that Security Capital will have an ownership limit equal to 60% of our
common stock less the number of shares sold in this offering or to us pursuant
to the purchase and sale agreement, but not subtracting the shares subject to
the forward sale agreements.
In connection with the concurrent offering, Security Capital has advised us
that its subsidiary that owns the shares offered under this prospectus
supplement has entered into forward purchase contracts with Citibank, N.A., an
affiliate of Citigroup Global Markets Inc., and UBS AG, London Branch, an
affiliate of UBS Securities LLC. Under the forward purchase contracts, the
Security Capital subsidiary has agreed to deliver 4,200,000 shares of our common
stock to UBS AG, London Branch in mid-2004 and 3,000,000 shares of our common
stock (plus up to 1,080,000 shares in connection with the over-allotment option
relating to the concurrent offering) to Citibank during the first half of 2004.
The initial forward price under the forward purchase contracts is $30.92 per
share, and the contracts provide that the initial forward price is subject to
increase based on a floating interest factor and subject to decrease for
dividends having a record date after the date of the consummation of the
concurrent offering and prior to the date of settlement. In addition, the
Security Capital subsidiary may enter into a stock lending arrangement under
which Citigroup Global Markets or an affiliate thereof may borrow shares of our
common stock in connection with the Citibank forward purchase contract. The
forward purchase contracts may also be settled in cash at the Security Capital
subsidiary's option. If a forward purchase contract is settled in cash and the
market price of our common stock at the time of settlement of the forward
purchase contracts is above the forward price, Security Capital would pay
Citibank and UBS AG, London Branch an amount of cash equal to the difference. If
the market value of the common stock at the time of settlement of the forward
contracts is below the forward price, Security Capital would be paid the
difference by Citibank and UBSAG, London Branch. Delivery and payment may be
accelerated under these forward contracts under certain circumstances. Until
delivery under the forward contracts, Security Capital will continue to
beneficially own these shares subject to the conditions of the agreement between
us and Security Capital terminating the stockholders agreement. If the
underwriters for this offering and the concurrent offering of SynDECS each
exercise their over-allotment option in full, and the subsidiary of Security
Capital delivers shares of our common stock upon termination of the forward
purchase contracts, the subsidiary will own no shares of our common stock.
In May 2002, Security Capital became an indirect wholly-owned subsidiary of
General Electric Capital Corporation, which in turn is an indirect subsidiary of
the General Electric Company. Both General Electric Capital Services, Inc., the
parent of General Electric Capital Corporation, and its parent, the General
Electric Company, disclaim any beneficial ownership over the shares of Regency
common stock beneficially owned by Security Capital.
Our material relationships with Security Capital and its affiliates are
described on page 8 of the accompanying prospectus under "The Selling
Shareholder -- Material Relationships with Security Capital".
THE COMPANY
Regency Centers completed its initial public offering in 1993 (NYSE: REG)
and is a qualified self-administered, self-managed REIT. Through a series of
strategic acquisitions in 1997, 1998 and 1999, we expanded the scope of our
operations and became a nationally-based owner, operator, and developer of
grocery-anchored retail shopping centers.
At March 31, 2003, our assets totaled approximately $3.1 billion with 261
shopping centers in 21 states. At March 31, 2003, including properties owned by
our joint ventures, our GLA totaled 29.6 million square feet and was 94.9%
leased. Geographically, including properties owned by our joint ventures, 20.6%
of our GLA is located in Florida, 18.1% in California, 17.3% in Texas, 8.2% in
Georgia, 6.4% in Ohio, and 29.4% spread throughout 16 other states.
We invest in retail shopping centers through Regency Centers, L.P., the
operating partnership in which we are the sole general partner and currently own
approximately 98% of the outstanding common partnership units. Our acquisition,
development, operations and financing activity, including the issuance of common
or preferred partnership units, is generally executed by our operating
partnership, its wholly-owned subsidiaries and joint ventures with third
parties.
S-13
Our executive offices are located at 121 West Forsyth Street, Suite 200,
Jacksonville, Florida 32202 and our telephone number is (904) 598-7000.
OPERATING AND INVESTMENT PHILOSOPHY
Our primary operating and investment goal is to compound long-term growth
in per share earnings and total shareholder return through:
o focusing on a strategy of owning, operating, and developing
grocery-anchored neighborhood shopping centers that are anchored by
market-leading supermarkets in areas with attractive demographics,
o sustaining growth in the profits and intrinsic value of the operating
portfolio by increasing net operating income from our high-quality
centers through intense leasing and management and industry-leading
operating systems like our premier customer initiative,
o recycling the proceeds from the disposition of our lower-quality
properties and non-core developments into higher yielding,
higher-quality new developments and acquisitions,
o using joint ventures to cost efficiently expand the portfolio and
increase fee-based income,
o realizing value from our value-added development program,
o using financial management to maintain a strong balance sheet with
access to substantial capital, and
o attracting and motivating a talented management team that is committed
to achieving our strategic goals.
GROCERY-ANCHORED STRATEGY
We focus our investment strategy on grocery-anchored retail shopping
centers that are located in attractive trade areas and are anchored by a
dominant grocer in the local market. Over 90% of our grocery-anchored centers
are anchored by one of the top three groceries in the local market. A
neighborhood center is a convenient, cost-effective distribution platform for
food retailers. We believe that grocery-anchored centers generate substantial
daily traffic and offer sustainable competitive advantages to their tenants.
This high traffic generates increased sales, driving higher occupancy, higher
rental rates, and higher rental rate growth for us -- meaning that we expect to
sustain our cash flow growth and increase the value of our portfolio over the
long term. Our principal grocer anchors report that sales in their stores in our
shopping centers have outperformed sales for their other stores.
ATTRACTIVE DEMOGRAPHICS
Grocery-anchored centers are best located in neighborhood trade areas with
attractive demographics. The average population within three miles of our
centers is approximately 72,000 people with average household incomes in excess
of approximately $87,000 and a projected five-year population growth rate of
8.7%. The three-mile trade areas of our centers are growing nearly twice as fast
and household incomes are more than 35% greater than the national averages,
translating into more retail buying power. Once we select specific markets, we
seek the best location within the best neighborhoods, preferably occupying the
dominant corner, close to residential communities, with excellent visibility for
our tenants and easy access for neighborhood shoppers.
PREMIER CUSTOMER INITIATIVE
For the same reason we choose to anchor our centers with leading grocers,
we also seek a range of strong national, regional and local specialty tenants.
We have created a partnering process -- the premier customer initiative -- to
promote mutually beneficial relationships with our non-grocer specialty
retailers. Our objective is to build a base of specialty tenants who represent
the "best-in-class" operators in their respective merchandising categories. We
believe that these tenants reinforce the consumer appeal and other strengths of
a center's grocery-anchor, help to stabilize a center's occupancy, reduce
releasing downtime, lower tenant turnover and yield higher sustainable rents.
VALUE-ADDED DEVELOPMENT
Development is customer-driven, meaning we generally have a signed lease
from the anchor before we purchase the land and begin construction. Developments
serve the growth needs of our grocery and specialty retail customers, result in
modern shopping centers with long-term leases from the grocery-anchors and
produce attractive returns on invested capital. Our returns on invested capital
for developments, targeted in excess of 10%, generally exceed the returns
produced by acquisitions.
S-14
CAPITAL STRATEGY
We intend to maintain a capital structure designed to fund our growth
programs without compromising our investment-grade ratings. This approach is
founded on our self-funding capital strategy. This strategy utilizes two key
components: joint ventures and center "recycling." Joint venturing of assets
provides us with a capital source for new investments and market-based fees that
we may earn as the asset manager. Property returns plus profits from fees
generate attractive returns on our equity. Our joint venture investments are
described in more detail below. Our asset recycling strategy calls for us to
re-deploy the proceeds from the sales of outparcels, developments and low
growth, lower-quality operating properties into new higher-quality developments
and acquisitions that we expect will generate sustainable revenue growth and
more attractive returns on invested capital. Our commitment to maintaining a
high-quality portfolio dictates that we continually assess the value and
prospects of all of our properties and actively manage the portfolio with the
timely disposition of those properties that no longer meet our long-term
investment standards.
JOINT VENTURES
We have unconsolidated investments in seven joint ventures with total
assets of $571.3 million at March 31, 2003. Of these seven, the assets of
Macquarie CountryWide-Regency, LLC and Columbia Regency Retail Partners, LLC
represent $475.8 million, or 83% of our total unconsolidated joint venture
assets. We have a 25% equity interest in Macquarie CountryWide-Regency, LLC, a
joint venture with an affiliate of Macquarie CountryWide Trust, a Sydney,
Australia-based property trust focused on investing in grocery-anchored shopping
centers. Our joint venture with Macquarie owned 15 properties, had assets of
$185.2 million and had total debt of $84.9 million as of March 31, 2003. We also
have a 20% equity interest in Columbia Regency Retail Partners, LLC, a joint
venture with the Oregon State Treasury that was formed for the purpose of
investing in retail shopping centers. Our joint venture with the Oregon State
Treasury owned 12 properties, had assets of $290.6 million and total debt of
$78.2 million as of March 31, 2003.
PROPERTIES
GEOGRAPHIC PROPERTY INFORMATION
The following table sets forth information concerning our shopping centers,
including those partially owned through joint ventures, summarized by state and
in order of largest holdings, including their GLA as of March 31, 2003:
NUMBER OF PERCENTAGE
LOCATION PROPERTIES GLA LEASED*
------------------ --- ---------- -----
Florida .......... 52 6,100,565 92.9%
California ....... 44 5,342,704 98.6%
Texas ............ 40 5,123,143 92.6%
Georgia .......... 24 2,431,517 93.9%
Ohio ............. 14 1,901,604 90.8%
Colorado ......... 14 1,523,911 98.2%
North Carolina ... 10 1,050,043 98.4%
Washington ....... 9 986,374 98.4%
Oregon ........... 10 896,739 93.9%
Virginia ......... 7 854,302 99.2%
Alabama .......... 7 644,896 93.1%
Arizona .......... 6 525,701 95.9%
Tennessee ........ 6 444,234 97.7%
Illinois ......... 3 408,211 94.9%
South Carolina ... 5 339,926 99.1%
Kentucky ......... 2 301,025 96.5%
Michigan ......... 3 279,265 93.2%
Delaware ......... 2 240,418 99.5%
New Jersey ....... 1 88,993 --
Missouri ......... 1 82,498 92.9%
Pennsylvania ..... 1 6,000 100.0%
--- ---------- -----
Total .......... 261 29,572,069 94.9%
=== ========== =====
----------
* Excludes pre-stabilized properties under development
S-15
DETAILED PROPERTY INFORMATION
The following table sets forth more detailed information about our
properties including those owned through our joint ventures.
YEAR GROSS
YEAR CONSTRUCT- LEASABLE PERCENT GROCERY DRUG STORE &
PROPERTY NAME ACQUIRED ED (1) AREA (GLA) LEASED (2) ANCHOR OTHER ANCHORS
------------- -------- --------- --------- --------- ----------------- ----------------------------------
FLORIDA
JACKSONVILLE / NORTH FLORIDA
Anastasia (5) 1993 1988 102,342 97.1% Publix --
Bolton Plaza 1994 1988 172,938 96.5% -- Wal-Mart, Blockbuster
Carriage Gate 1994 1978 76,833 87.6% -- TJ Maxx
Courtyard 1993 1987 137,256 100.0% Albertsons (4) Target
Fleming Island 1998 2000 136,662 96.6% Publix Stein Mart
Highlands Square 1998 1999 262,054 92.3% Publix/Winn-Dixie Eckerd, Big Lots, Bealls Outlet
Julington Village (5) 1999 1999 81,821 100.0% Publix --
Lynnhaven 2001 2001 63,871 97.8% Publix --
Millhopper 1993 1974 84,065 100.0% Publix Eckerd, Jo-Ann Fabrics
Newberry Square 1994 1986 180,524 97.0% Publix Kmart, Jo-Ann Fabrics
Ocala Corners (5) 2000 2000 86,772 100.0% Publix --
Old St. Augustine Plaza 1996 1990 175,459 100.0% Publix Eckerd, Burlington Coat Factory
Palm Harbour 1996 1991 172,758 98.8% Publix Eckerd, Bealls, Blockbuster
Pine Tree Plaza 1997 1999 60,787 100.0% Publix --
Regency Court 1997 1992 218,648 79.4% -- CompUSA, Office Depot
Sports Authority
US 301 & SR 100 - Starke 2000 2000 12,738 100.0% -- Eckerd
Vineyard (3) 2001 2001 62,821 81.6% Publix --
TAMPA / ORLANDO
Beneva Village Shops 1998 1987 141,532 96.3% Publix Walgreen's, Ross Dress for Less
Bloomingdale Square 1998 1987 267,935 99.3% Publix Wal-Mart, Beall's, Blockbuster Video
Center of Seven Springs 1994 1986 162,580 38.8% Winn-Dixie --
East Towne Shopping Center (3) 2002 2002 69,841 70.2% Publix --
Kings Crossing Sun City (5) 1999 1999 75,020 98.4% Publix --
Mainstreet Square 1997 1988 107,134 93.6% Winn-Dixie Walgreen's
Mariner's Village 1997 1986 138,940 97.3% Winn-Dixie Walgreen's, Blockbuster
Market Place - St. Petersburg 1995 1983 90,296 98.8% Publix Dollar World
Peachland Promenade 1995 1991 82,082 98.7% Publix --
Regency Square at Brandon 1993 1986 349,848 97.1% -- TJ Maxx, AMC Theatre
Staples, Michaels, Marshalls
Regency Village (3), (5) 2000 2000 83,170 89.4% Publix --
Terrace Walk 1993 1990 50,936 90.2% -- Northside Mental Health Center
Town Square 1997 1999 44,679 99.3% -- Pier 1 Imports, Petco
University Collections 1996 1984 106,899 98.7% Kash N Karry (4) Eckerd, Jo-Anns Fabrics
Village Center-Tampa 1995 1993 181,110 97.1% Publix Walgreen's, Stein Mart, Blockbuster
Willa Springs 2000 2000 89,930 98.6% Publix --
WEST PALM BEACH /
TREASURE COAST
Boynton Lakes Plaza 1997 1993 130,924 98.4% Winn-Dixie World Gym, Blockbuster
Chasewood Plaza 1993 1986 141,178 93.8% Publix Beall's, Books-A-Million
Chasewood Storage 1993 1986 42,810 100.0% -- --
East Port Plaza 1997 1991 235,842 55.3% Publix Walgreen's, Sears Homelife
Martin Downs Village Center 1993 1985 121,946 98.7% -- Beall's, Coastal Care
Martin Downs Village Shoppes 1993 1998 49,773 92.3% -- Walgreen's
Ocean Breeze 1993 1985 108,209 83.6% Publix Coastal Care, Beall's
Shops of San Marco (3), (5) 2002 2002 91,538 95.3% Publix --
Town Center at Martin Downs 1996 1996 64,546 100.0% Publix --
Wellington Town Square 1996 1982 105,150 100.0% Publix Eckerd
(footnotes appear on page S-23)
S-16
YEAR GROSS
YEAR CONSTRUCT- LEASABLE PERCENT GROCERY DRUG STORE &
PROPERTY NAME ACQUIRED ED (1) AREA (GLA) LEASED (2) ANCHOR OTHER ANCHORS
------------- -------- --------- --------- --------- ----------------- ----------------------------------
MIAMI / FT. LAUDERDALE
Aventura 1994 1974 102,876 94.9% Publix Eckerd, Humana
Berkshire Commons 1994 1992 106,354 98.7% Publix Walgreen's
Garden Square 1997 1991 90,258 98.6% Publix Eckerd, Blockbuster
Palm Trails Plaza 1997 1998 76,067 97.6% Winn-Dixie --
Shoppes @ 104 (5) 1998 1990 108,192 98.7% Winn Dixie Navarro Pharmacies
Shoppes of Pebblebrooke (5) 2000 2000 76,767 100.0% Publix --
University Market Place 1993 1990 129,121 87.8% Albertsons (4) Beverly's Pet Center, Cafe Iguana
Welleby 1996 1982 109,949 97.1% Publix Beall's
FT. MYERS / CAPE CORAL
Grande Oaks 2000 2000 78,784 96.4% Publix --
---------- -----
Subtotal/Weighted
Average (Florida) 6,100,565 92.5%
---------- -----
CALIFORNIA
LOS ANGELES / SCA
230th & Hawthorne (3) 2002 2002 13,860 100.0% -- Stouds Linen Warehouse
Amerige Heights 2000 2000 96,679 98.5% Albertsons Target(4)
Campus Marketplace (5) 2000 2000 144,288 94.4% Ralph's Long's Drugs, Blockbuster
Costa Verde 1999 1988 178,622 100.0% Albertsons Bookstar, Blockbuster
El Camino Shopping Center 1999 1995 135,883 100.0% Von's Food & Drug Sav-On Drugs
El Norte Parkway Plaza 1999 1984 87,990 96.4% Von's Food & Drug --
Friars Mission 1999 1989 146,898 100.0% Ralph's Long's Drugs, Blockbuster
Garden Village (5) 2000 2000 112,957 95.1% Albertsons Rite Aid, Blockbuster
Gelson's Westlake (3) 2002 2002 82,315 90.1% Gelsons --
Heritage Plaza 1999 1981 231,222 98.9% Ralph's Sav-On Drugs, Ace Hardware
Hermosa Beach (3), (5) 2003 2003 13,129 100.0% -- --
McBean & Valencia (3) 2002 2002 180,528 93.5% -- Kohl's
Morningside Plaza 1999 1996 91,600 100.0% Stater Brothers --
Newland Center 1999 1985 166,492 99.1% Albertsons --
Oakbrook Plaza 1999 1982 83,279 100.0% Albertsons Long's Drugs
Park Plaza (5) 2001 1991 193,529 93.1% Von's Food & Drug Sav-On Drugs, Petco, Ross
Plaza Hermosa 1999 1984 94,940 100.0% Von's Food & Drug Sav-On Drugs, Blockbuster
Rona Plaza 1999 1989 51,754 100.0% Food 4 Less NAMS Pharmacy
Rosecrans & Inglewood (3) 2002 2002 12,000 100.0% -- CVS Drug
Santa Ana Downtown Plaza 1999 1987 100,305 100.0% Food 4 Less Famsa, Inc., Blockbuster
Seal Beach (5) 2002 1966 85,910 100.0% Pavilions (4) Sav-On Drugs
Twin Peaks 1999 1988 198,139 100.0% Albertsons Target
Ventura Village 1999 1984 76,070 97.9% Von's Food & Drug Blockbuster
Vista Village (3) 2002 2002 129,665 68.9% -- Krikorian Theatres
Westlake Village Plaza 1999 1975 190,525 97.5% Von's Food & Drug Long's Drugs, Blockbuster
Westridge Center (3) 2001 2001 87,284 91.0% Albertsons --
Woodman - Van Nuys 1999 1992 107,614 95.8% Gigante --
SAN FRANCISCO / NCA
Blossom Valley 1999 1990 93,314 100.0% Safeway Long's Drugs
Corral Hollow (5) 2000 2000 167,118 100.0% Safeway Long's Drugs, Orchards Hardware
Country Club 1999 1994 111,251 100.0% Ralph's Long's Drugs, Blockbuster
Diablo Plaza 1999 1982 63,214 100.0% Safeway (4) Long's Drugs, Jo-Ann Fabrics
El Cerrito Plaza 2000 2000 256,177 94.1% Albertsons/ Long's Drugs, Barnes & Noble
Trader Joe's Bed, Bath & Beyond, Ross, Petco
Encina Grande 1999 1965 102,499 100.0% Safeway Walgreens, Blockbuster
Gilroy (3) 2002 2002 339,808 50.4% -- --
Loehmann's Plaza 1999 1983 113,310 100.0% Safeway (4) Long's Drugs, Loehmann's, Blockbuster
Powell Street Plaza 2001 1987 165,920 100.0% Trader Joe's Ross, Jo-Ann Fabrics, Circuit City
Prairie City Crossing 1999 1999 82,503 100.0% Safeway --
San Leandro 1999 1982 50,432 100.0% Safeway (4) Blockbuster
Sequoia Station 1999 1996 103,148 100.0% Safeway (4) Long's Drugs, Wherehouse Music
Barnes and Noble, Old Navy
(footnotes appear on page S-23)
S-17
YEAR GROSS
YEAR CONSTRUCT- LEASABLE PERCENT GROCERY DRUG STORE &
PROPERTY NAME ACQUIRED ED (1) AREA (GLA) LEASED (2) ANCHOR OTHER ANCHORS
------------- -------- --------- --------- --------- ----------------- ----------------------------------
SAN FRANCISCO / NCA
(CONTINUED)
Slatten Ranch (3), (5) 2002 2002 206,824 73.2% -- Target(4), Mervyn's
Strawflower Village 1999 1985 78,827 100.0% Safeway Long's Drugs
Tassajara Crossing 1999 1990 146,188 100.0% Safeway Long's Drugs, Ace Hardware
West Park Plaza 1999 1996 88,103 100.0% Safeway Rite Aid, Blockbuster
Woodside Central 1999 1993 80,591 100.0% -- Marshalls, Discovery Zone
--------- -----
Subtotal/Weighted
Average (California) 5,342,704 93.4%
--------- -----
TEXAS
AUSTIN
Hancock Center 1999 1998 410,438 91.2% H.E.B. Sears, Old Navy, Petco
Market @ Round Rock 1999 1987 123,347 99.1% Albertsons Color Tile and Carpet
North Hills 1999 1995 144,019 98.9% H.E.B. Hollywood Video
DALLAS / FT. WORTH
Arapaho Village 1999 1997 103,033 98.0% Tom Thumb Arapaho Village Pharmacy
Bethany Park Place 1998 1998 74,066 100.0% Kroger Blockbuster
Casa Linda Plaza 1999 1997 324,639 84.5% Albertsons Petco, Blockbuster
24 Hour Fitness, Colberts
Cooper Street 1999 1992 133,196 100.0% -- Circuit City, Office Max,
Home Depot, Jo-Ann Fabrics
Creekside (5) 1998 1998 96,816 98.6% Kroger --
Hebron Park (5) 1999 1999 46,800 94.9% Albertsons (4) Blockbuster
Hillcrest Village 1999 1991 14,530 100.0% -- Blockbuster
Keller Town Center 1999 1999 114,937 95.1% Tom Thumb --
Lebanon/Legacy Center (3) 2000 2000 56,802 36.9% Albertsons (4) --
MacArthur Park Phase II (5) 1999 1999 198,443 100.0% Kroger Linens `N Things, Barnes & Noble
Main Street Center (3) 2002 2002 32,680 22.5% Albertsons (4) --
Market @ Preston Forest 1999 1990 90,171 100.0% Tom Thumb Petco
Matlock 2000 2000 40,139 34.5% -- Wal-Mart (4)
Mills Pointe 1999 1986 126,186 93.5% Tom Thumb Blockbuster
Mockingbird Commons 1999 1987 121,564 86.3% Tom Thumb --
Northview Plaza 1999 1991 116,016 91.1% Kroger Blockbuster
Overton Park Plaza (5) 2001 1991 350,856 96.8% Albertsons Home Depot, Circuit City, TJ Maxx
Oshman's, Office Depot, Petsmart
Preston Brook - Frisco 1998 1998 91,274 98.5% Kroger --
Preston Park 1999 1985 273,396 76.3% Tom Thumb Gap, Blockbuster, Williams Sonoma
Prestonwood 1999 1999 101,024 85.9% Albertsons (4) Blockbuster
Rockwall (3) 2002 2002 65,644 0.0% Tom Thumb (4) --
Shiloh Springs 1998 1998 110,040 96.2% Kroger Blockbuster
Southlake - Village Center (5) 1998 1998 118,092 95.7% Kroger Blockbuster
Southpark 1999 1997 146,758 94.4% Albertsons Bealls
Trophy Club 1999 1999 106,607 83.8% Tom Thumb Family Medicine, Blockbuster
Valley Ranch Centre 1999 1997 117,187 89.9% Tom Thumb --
HOUSTON
Alden Bridge 2002 1998 138,952 100.0% Kroger Walgreens, Blockbuster
Atascocita Center (3) 2002 2002 94,180 69.7% Kroger --
Champions Forest 1999 1983 115,247 92.6% Randall's Food Eckerd
Cochran's Crossing 2002 1994 138,192 100.0% Kroger Eckerd , Blockbuster
Coles Center 2001 2001 42,063 93.4% Randall's Food (4) --
Fort Bend Market 2000 2000 30,158 63.7% Kroger (4) --
Indian Springs Center (3), (5) 2002 2002 135,977 57.5% H.E.B. --
Kleinwood Center (3) 2000 2000 152,906 64.8% H.E.B. Walgreens, Blockbuster
Panther Creek 2002 1994 164,080 95.1% Randall's Food Eckerd, Sears Paint & Hardware
Sterling Ridge 2002 2000 128,643 100.0% Kroger Eckerd, Blockbuster
Sweetwater Plaza (5) 2001 2000 134,045 93.2% Kroger Walgreen's
--------- -----
Subtotal/Weighted
Average (Texas) 5,123,143 88.2%
--------- -----
(footnotes appear on page S-23)
S-18
YEAR GROSS
YEAR CONSTRUCT- LEASABLE PERCENT GROCERY DRUG STORE &
PROPERTY NAME ACQUIRED ED (1) AREA (GLA) LEASED (2) ANCHOR OTHER ANCHORS
------------- -------- --------- --------- --------- -------------- -------------------------------------
GEORGIA
ATLANTA
Ashford Place 1997 1993 53,450 98.6% -- Pier 1 Imports
Briarcliff LaVista 1997 1962 39,203 89.6% -- Michael's
Briarcliff Village 1997 1990 187,156 99.8% Publix TJ Maxx, Office Depot, Petco, La-Z-Boy
Buckhead Court 1997 1984 55,229 92.5% -- --
Cambridge Square 1996 1979 71,699 100.0% Kroger --
Cromwell Square 1997 1990 70,282 95.1% -- CVS Drug, Haverty's, Hancock Fabrics
Cumming 400 1997 1994 126,900 97.0% Publix Big Lots
Delk Spectrum 1998 1991 100,880 100.0% Publix Blockbuster
Dunwoody Hall 1997 1986 89,471 99.9% Publix Eckerd
Dunwoody Village 1997 1975 120,597 90.9% Fresh Market Walgreen's
Killian Hill Market (3) 2000 2000 113,001 85.8% Publix --
Loehmann's Plaza 1997 1986 137,601 90.7% -- Eckerd, Loehmann's, LA Fitness
Lovejoy Station (5) 1997 1995 77,336 95.6% Publix Blockbuster
Memorial Bend 1997 1995 177,283 92.0% Publix TJ Maxx
Orchard Square (5) 1995 1987 93,222 96.1% Publix --
Paces Ferry Plaza 1997 1987 61,696 100.0% -- Blockbuster
Powers Ferry Square 1997 1987 97,704 89.5% -- CVS Drug, Pearl Arts & Crafts
Powers Ferry Village 1997 1994 78,996 99.9% Publix CVS Drug
Rivermont Station 1997 1996 90,267 100.0% Kroger CVS Drug, Blockbuster
Roswell Village (5) 1997 1997 145,334 81.1% Publix Eckerd, Blockbuster
Russell Ridge 1994 1995 98,558 100.0% Kroger Blockbuster
Sandy Plains Village 1996 1992 175,035 91.9% Kroger Stein Mart, Blockbuster
OTHER MARKETS
LaGrange Marketplace 1993 1989 76,327 90.3% Winn-Dixie Eckerd
Parkway Station 1996 1983 94,290 78.8% Kroger --
--------- -----
Subtotal/Weighted
Average (Georgia) 2,431,517 93.5%
--------- -----
OHIO
CINCINNATI
Beckett Commons 1998 1995 121,497 100.0% Kroger Stein Mart
Cherry Grove 1998 1997 195,497 90.2% Kroger TJ Maxx, Hancock Fabric
Hyde Park Plaza 1997 1995 397,893 95.2% Kroger/Thriftway Walgreen's, Michaels, Blockbuster
Barnes & Noble, Jo-Ann Fabrics
Regency Milford Center 2001 2001 108,903 88.0% Kroger --
Shoppes at Mason 1998 1997 80,800 97.5% Kroger Blockbuster
Westchester Plaza 1998 1988 88,181 100.0% Kroger --
COLUMBUS
East Pointe 1998 1993 86,524 100.0% Kroger Goodyear, Blockbuster
Kingsdale 1997 1999 270,470 60.1% Big Bear Stein Mart, Goodyear
Kroger New Albany Center (5) 1999 1999 91,722 98.5% Kroger Blockbuster
North Gate/(Maxtown) 1998 1996 85,100 100.0% Kroger --
Park Place 1998 1988 106,833 98.8% Big Bear Blockbuster
Windmiller Plaza 1998 1997 120,429 97.9% Kroger Sears Hardware
Worthington 1998 1991 93,095 91.2% Kroger Blockbuster
TOLEDO
Cherry Street Center 2000 2000 54,660 100.0% Farmer Jack --
--------- -----
Subtotal/Weighted
Average (Ohio) 1,901,604 90.8%
--------- -----
(footnotes appear on page S-23)
S-19
YEAR GROSS
YEAR CONSTRUCT- LEASABLE PERCENT GROCERY DRUG STORE &
PROPERTY NAME ACQUIRED ED (1) AREA (GLA) LEASED (2) ANCHOR OTHER ANCHORS
------------- -------- --------- --------- --------- -------------- -------------------------------------
COLORADO
COLORADO SPRINGS
Cheyenne Meadows (5) 1998 1998 89,893 98.4% King Soopers --
Jackson Creek 1998 1999 85,263 100.0% King Soopers --
Woodmen Plaza 1998 1998 104,558 100.0% King Soopers --
DENVER
Boulevard Center 1999 1986 88,511 90.4% Safeway (4) One Hour Optical
Buckley Square 1999 1978 111,146 95.8% King Soopers True Value Hardware
Centerplace of Greeley (3) 2002 2002 148,110 39.2% Safeway Target (4), Ross, Shoe Carnival
Crossroads Commons (5) 2001 1986 144,288 100.0% Whole Foods Barnes & Noble, Mann Theaters
Hilltop Village (3) 2002 2002 99,836 66.1% King Soopers --
Leetsdale Marketplace 1999 1993 119,916 100.0% Safeway Blockbuster
Littleton Square 1999 1997 94,257 97.7% King Soopers Walgreens, Blockbuster
Lloyd King Center 1998 1998 83,326 100.0% King Soopers --
New Windsor Marketplace (3) 2002 2002 94,950 69.0% King Soopers --
Stroh Ranch 1998 1998 93,436 100.0% King Soopers --
Willow Creek Center (5) 2001 1985 166,421 97.4% Safeway Family Fitness, Gateway
--------- -----
Subtotal/Weighted
Average (Colorado) 1,523,911 88.6%
--------- -----
NORTH CAROLINA
CHARLOTTE
Carmel Commons 1997 1979 132,651 94.4% Fresh Market Eckerd, Blockbuster, Piece Goods
Union Square 1996 1989 97,191 100.0% Harris Teeter CVS Drug, Blockbuster
Consolidated Theatres
GREENSBORO
Kernersville Marketplace 1998 1997 72,590 97.9% Harris Teeter --
RALEIGH / DURHAM
Bent Tree Plaza 1998 1994 79,503 100.0% Kroger --
Garner Town Square 1998 1998 221,776 100.0% Kroger Target (4), Office Max, Blockbuster
Petsmart, Home Depot (4) United Artist
Glenwood Village 1997 1983 42,864 91.8% Harris Teeter --
Lake Pine Plaza 1998 1997 87,691 100.0% Kroger Blockbuster
Maynard Crossing 1998 1997 122,814 97.8% Kroger Blockbuster
Southpoint Crossing 1998 1998 103,128 100.0% Kroger Blockbuster
Woodcroft 1996 1984 89,835 98.4% Food Lion True Value
--------- -----
Subtotal/Weighted
Average (North Carolina) 1,050,043 98.4%
--------- -----
WASHINGTON
SEATTLE
Cascade Plaza (5) 1999 1999 217,657 98.7% Safeway Long's Drugs, Ross, Bally Fitness
Jo-Ann Fabrics
Inglewood Plaza 1999 1985 17,253 100.0% -- --
James Center (5) 1999 1999 140,240 95.5% Fred Myer Rite Aid
Padden Parkway (3) 2002 2002 54,473 96.3% Albertsons --
Pine Lake Village 1999 1989 102,953 100.0% Quality Foods Rite Aid, Blockbuster
Sammamish Highlands 1999 1992 101,289 100.0% Safeway (4) Bartell Drugs, Ace Hardware
South Point Plaza 1999 1997 190,355 100.0% Cost Cutters Rite Aid, Office Depot,
Pep Boys, Pacific Fabrics
Southcenter 1999 1990 58,282 89.7% -- Target (4)
Thomas Lake 1999 1998 103,872 100.0% Albertsons Rite Aid, Blockbuster
--------- -----
Subtotal/Weighted
Average (Washington) 986,374 98.3%
--------- -----
(footnotes appear on page S-23)
S-20
YEAR GROSS
YEAR CONSTRUCT- LEASABLE PERCENT GROCERY DRUG STORE &
PROPERTY NAME ACQUIRED ED (1) AREA (GLA) LEASED (2) ANCHOR OTHER ANCHORS
------------- -------- --------- --------- --------- -------------- -------------------------------------
OREGON
PORTLAND
Cherry Park Market (Grmr) 1999 1997 113,518 88.6% Safeway --
Hillsboro Market Center 2000 2000 67,240 100.0% Albertsons --
Hillsboro Market Center
Phase II 2002 2002 83,126 91.0% -- Marshalls, Petsmart
McMinnville Market Center (3) 2003 2003 73,913 72.6% Albertsons --
Murrayhill Marketplace 1999 1988 149,214 90.2% Safeway Segal's Baby News
Sherwood Crossroads 1999 1999 89,189 89.0% Safeway --
Sherwood Market Center 1999 1995 124,257 98.0% Albertsons --
Sunnyside 205 1999 1988 53,094 96.3% -- --
Walker Center 1999 1987 89,609 100.0% -- Sportmart, Blockbuster
West Hills 1999 1998 53,579 98.1% QFC Blockbuster
--------- -----
Subtotal/Weighted
Average (Oregon) 896,739 92.1%
--------- -----
VIRGINIA
WASHINGTON D.C.
Ashburn Farm Market 2000 2000 92,019 100.0% Giant --
Chesire Station 2000 2000 97,156 97.8% Safeway Petco, Blockbuster
Somerset (3) 2002 2002 108,870 64.2% Shoppers Food Whse --
Tall Oaks Village Center 2002 1998 69,331 100.0% Giant --
Village Center at Dulles (5) 2002 1991 289,602 99.2% Shoppers Food Whse CVS Drug, Gold's Gym, Petco
OTHER VIRGINA
Brookville Plaza (5) 1998 1991 63,664 98.1% Kroger --
Statler Square 1998 1996 133,660 100.0% Kroger CVS Drug, Staples
--------- -----
Subtotal/Weighted
Average (Virginia) 854,302 94.8%
--------- -----
ALABAMA
BIRMINGHAM
Southgate Village
Shopping Center 2001 1988 75,392 96.9% Publix Rite Aid
Trace Crossing
Shopping Center (3) 2001 2001 74,130 87.2% Publix --
Valleydale Village (3) 2002 2002 118,466 77.4% Publix Pets America
Villages of Trussville 1993 1987 59,281 73.6% Bruno's CVS Drug
MONTGOMERY
Country Club 1993 1991 67,622 92.9% Winn-Dixie Rite Aid
OTHER MARKETS
Bonner's Point 1993 1985 87,282 98.6% Winn-Dixie Wal-Mart
Marketplace - Alexander City 1993 1987 162,723 95.7% Winn-Dixie Wal-Mart, Goody's Family Clothing
--------- -----
Subtotal/Weighted
Average (Alabama) 644,896 89.6%
--------- -----
ARIZONA
PHOENIX
Carefree Marketplace 2000 2000 24,697 89.3% Fry's (4) --
Palm Valley Marketplace (5) 2001 1999 107,630 98.1% Safeway Blockbuster
Paseo Village 1999 1998 92,399 97.5% ABCO Walgreens, Blockbuster
Pima Crossing 1999 1996 236,539 99.5% -- Stein Mart, Blockbuster
Pier 1 Imports, Bally Total Fitness
Stonebridge Center 2000 2000 30,235 78.4% Safeway (4) --
The Provinces 2000 2000 34,201 80.8% Safeway (4) --
--------- -----
Subtotal/Weighted
Average (Arizona) 525,701 95.9%
--------- -----
(footnotes appear on page S-23)
S-21
YEAR GROSS
YEAR CONSTRUCT- LEASABLE PERCENT GROCERY DRUG STORE &
PROPERTY NAME ACQUIRED ED (1) AREA (GLA) LEASED (2) ANCHOR OTHER ANCHORS
------------- -------- --------- --------- --------- -------------- -------------------------------------
TENNESSEE
NASHVILLE
Harpeth Village 1997 1998 70,091 100.0% Publix Blockbuster
Hwy 46 & Hwy 70 (Dickson) 1998 1998 10,908 100.0% -- Eckerd
Nashboro Village 1998 1998 86,811 96.8% Kroger --
Northlake Village 2000 1988 151,629 95.2% Kroger CVS Drug, Petco
Peartree Village 1997 1997 114,795 100.0% Harris Teeter Eckerd, Office Max
West End Avenue 1998 1998 10,000 100.0% -- Walgreen's
------- -----
Subtotal/Weighted
Average (Tennessee) 444,234 97.7%
------- -----
ILLINOIS
Frankfort Crossing 2003 107,734 95.0% Jewel --
Hinsdale Lake Commons 1998 1986 178,975 97.3% Dominick's Ace Hardware, Blockbuster
Murray's Party Time Supplies
Westbrook Commons 2001 1984 121,502 91.4% Dominick's --
------- -----
Subtotal/Weighted
Average (Illinois) 408,211 94.9%
------- -----
SOUTH CAROLINA
Merchants Village (5) 1997 1997 79,724 100.0% Publix --
Murray Landing (3) 2002 2002 64,441 78.3% Publix --
Pelham Commons (3) 2002 2002 76,541 57.8% Publix --
Queensborough (5) 1998 1993 82,333 100.0% Publix --
Rosewood Shopping Center 2001 2001 36,887 95.1% Publix --
------- -----
Subtotal/Weighted
Average (South Carolina) 339,926 85.9%
------- -----
KENTUCKY
Franklin Square 1998 1988 201,673 95.5% Kroger Rite Aid, JC Penney, Office Depot
Chakers Theatre, Pier 1 Imports
Silverlake (5) 1998 1988 99,352 98.5% Kroger Blockbuster
------- -----
Subtotal/Weighted
Average (Kentucky) 301,025 96.5%
------- -----
MICHIGAN
Fenton Marketplace 1999 1999 97,224 98.6% Farmer Jack Blockbuster, Micheals
Lakeshore 1998 1996 85,940 89.2% Kroger Rite Aid
Waterford 1998 1998 96,101 91.3% Kroger --
------- -----
Subtotal/Weighted
Average (Michigan) 279,265 93.2%
------- -----
DELAWARE
Pike Creek 1998 1981 229,510 99.5% Acme Eckerd, Kmart, Blockbuster
White Oak - Dove DE 2000 2000 10,908 100.0% -- Eckerd
------- -----
Subtotal/Weighted
Average (Deleware) 240,418 99.5%
------- -----
NEW JERSEY
Echelon Village Plaza (3) 2000 2000 88,993 81.7% Genuardi's --
------- -----
(footnotes appear on page S-23)
S-22
YEAR GROSS
YEAR CONSTRUCT- LEASABLE PERCENT GROCERY DRUG STORE &
PROPERTY NAME ACQUIRED ED (1) AREA (GLA) LEASED (2) ANCHOR OTHER ANCHORS
------------- -------- --------- --------- --------- -------------- -------------------------------------
MISSOURI
St. Ann Square 1998 1986 82,498 92.9% National Bally Total Fitness
---------- -----
PENNSYLVANIA
Hershey - Goodyear 2000 2000 6,000 100.0% -- --
---------- -----
TOTAL/WEIGHTED AVERAGE 29,572,069 92.2%
---------- -----
----------
(1) Or latest renovation.
(2) Includes development properties. If development properties are excluded,
the total percentage leased would be 94.9% for our shopping centers.
(3) Property under development or redevelopment. (4) Tenant owns its own
building.
(5) Owned by a joint venture with outside investors in which our operating
partnership or an affiliate is a partner.
S-23
DEVELOPMENTS
Our projects under construction or undergoing major renovation at March 31,
2003 are summarized as follows:
Number of projects:(1) ...................... 31
Estimated gross costs:(2) ................... $545.5 million
Estimated gross costs to completion: ........ $260 million
Percentage completed: ....................... 52%
Percentage pre-leased: ...................... 69%
----------
(1) Of these properties, nine are located in California and six are located in
Texas.
(2) Before the estimated reimbursement of certain tenant-related costs and
projected sales proceeds from adjacent land and outparcels of $112.7
million.
TENANTS
The following table summarizes the largest tenants occupying our shopping
centers based upon percentage of total annualized base rent exceeding .5% at
March 31, 2003. The table includes 100% of the base rent from leases and 100% of
GLA of properties owned by joint ventures.
PERCENTAGE OF PERCENTAGE OF
TOTAL ANNUALIZED NUMBER
TENANT GLA GLA RENT BASE RENT OF STORES
----------------------------- --------- ------------- ----------- ------------- ---------
Kroger ............................... 3,508,194 11.9% $29,851,405 9.11% 59
Publix ............................... 2,403,191 8.1% 19,768,421 6.03% 52
Safeway .............................. 1,727,568 5.8% 15,260,409 4.66% 35
Albertsons ........................... 966,645 3.3% 9,242,175 2.82% 17
Blockbuster .......................... 395,004 1.3% 7,430,500 2.27% 71
Winn-Dixie ........................... 579,493 2.0% 4,118,618 1.26% 12
H.E.B. Grocery ....................... 308,030 1.0% 3,865,550 1.18% 4
Hallmark ............................. 224,100 0.8% 3,438,727 1.05% 53
Long's Drugs ......................... 233,845 0.8% 2,771,270 0.85% 10
Walgreens ............................ 238,286 0.8% 2,736,177 0.84% 17
Kohl's Department Store .............. 178,213 0.6% 2,372,488 0.72% 2
Barnes & Noble ....................... 144,497 0.5% 2,340,442 0.71% 7
Starbucks ............................ 82,532 0.3% 2,203,352 0.67% 54
Petco ................................ 131,791 0.4% 2,143,075 0.65% 10
Eckerd (JC Penney) ................... 177,192 0.6% 2,036,536 0.62% 19
Mail Boxes, Etc. ..................... 106,675 0.4% 1,992,232 0.61% 76
Harris Teeter ........................ 183,892 0.6% 1,941,870 0.59% 4
T.J. Maxx / Marshalls ................ 242,976 0.8% 1,841,634 0.56% 9
Subway ............................... 81,456 0.3% 1,764,851 0.54% 66
Shoppers Food Warehouse/ Supervalu ... 115,894 0.4% 1,671,710 0.51% 2
H & R Block .......................... 96,567 0.3% 1,635,414 0.50% 59
In May 2003, Kmart Corporation, previously a tenant in four of our shopping
centers, emerged from its reorganization under Chapter 11 of the U.S. Bankruptcy
Code. While under Chapter 11 bankruptcy protection, Kmart rejected two leases
representing $942,000 of annual base rent and closed both stores. We have two
other leases with Kmart representing $883,000 of our annual base rent which
Kmart did not reject. Both of these stores are open and operating. However, we
have no assurance that Kmart will be able to continue rental payments on these
two stores in the future.
As a result of the Kmart store closing at one of our shopping centers,
combined with an earlier closing of an adjacent Winn-Dixie grocery store, we
determined that the value of this shopping center had been permanently impaired.
As a result, we recorded a provision for loss on operating properties of $2.4
million during 2002.
S-24
LEASE EXPIRATIONS
The following table sets forth, for all leases in place as of March 31,
2003, a schedule of lease expirations for the next ten years, assuming no
tenants renew their leases. The table includes 100% of minimum rent and 100% of
GLA of properties owned by joint ventures.
FUTURE PERCENTAGE OF
LEASE PERCENT OF MINIMUM TOTAL
EXPIRATION TOTAL RENT UNDER MINIMUM
YEAR EXPIRING GLA GLA EXPIRING LEASES RENT (2)
---------- ------------ ---- ------------ ----
(1) ................. 288,021 1.1% $ 4,073,908 1.3%
2003 ................ 1,225,143 4.8% 19,514,475 6.0%
2004 ................ 2,229,056 8.7% 34,487,601 10.6%
2005 ................ 2,413,756 9.4% 36,763,838 11.3%
2006 ................ 2,659,259 10.4% 38,223,388 11.7%
2007 ................ 3,013,700 11.8% 43,601,032 13.4%
2008 ................ 1,668,059 6.5% 18,023,782 5.5%
2009 ................ 792,274 3.1% 9,343,109 2.9%
2010 ................ 925,660 3.6% 10,990,510 3.4%
2011 ................ 1,102,670 4.3% 13,772,123 4.2%
2012 ................ 1,317,847 5.2% 17,502,146 5.4%
---------- ---- ------------ ----
10 Year Total .... 17,635,445 68.9% $246,295,912 75.7%
========== ==== ============ ====
----------
(1) Leased currently under month to month lease or in process of renewal.
(2) Total minimum rent includes current minimum rent and future contractual
rent for all properties, but excludes additional rent such as percentage
rent, common area maintenance, real estate taxes, and insurance
reimbursements.
REGENCY CENTERS DEBT
Our outstanding debt at March 31, 2003 and December 31, 2002 consisted of
the following (in thousands):
MARCH 31, DECEMBER 31,
2003 2002
---------- -----------
Notes Payable:
Fixed rate mortgage loans ...... $ 227,702 $ 229,551
Variable rate mortgage loans ... 24,440 24,998
Fixed rate unsecured loans ..... 999,018 998,975
Unsecured line of credit ......... 178,750 80,000
---------- ----------
Total .......................... $1,429,910 $1,333,524
========== ==========
Interest rates paid on our unsecured line of credit, which are based on
LIBOR plus .85%, were 2.225% and 2.288% at March 31, 2003 and December 31, 2002,
respectively. The spread that we pay on the line is dependent upon maintaining
specific investment grade ratings. We are required to comply, and are in
compliance with, certain financial and other covenants customary with this type
of unsecured financing. Our line of credit is used primarily to finance the
acquisition and development of real estate, but is also available for general
working capital purposes. Borrowings under our line of credit will increase if
we purchase shares of our common stock from Security Capital, although we plan
to reduce the amount so drawn over time through accelerating the sale of
non-core assets and additional property dispositions through expanded joint
venture activities. See "Recent Developments."
Mortgage loans are secured by certain real estate properties, and may be
prepaid, but could be subject to a yield-maintenance premium. Our mortgage loans
are generally due in monthly installments of interest and principal and mature
over various terms through 2019. Variable interest rates on mortgage loans are
currently based on LIBOR plus a spread in a range of 130 basis points to 150
basis points. Fixed interest rates on mortgage loans range from 6.64% to 9.5%.
We have outstanding the following tranches of fixed rate unsecured debt:
o $250 million at an interest rate of 6.75%, which was sold at 99.85% of
face value and is due on January 15, 2012;
o $240 million with fixed interest rates ranging from 7.25% to 7.95%,
which is due in 2011;
o $160 million with fixed interest rates ranging from 8.0% to 8.45%, which
is due in 2010;
o $50 million with a fixed interest rate of 7.75%, which is due in 2009;
S-25
o $100 million with a fixed interest rate of 7.125%, which is due in 2005;
and
o $200 million with a fixed interest rate of 7.40%, which is due in 2004.
As of March 31, 2003, scheduled principal repayments on notes payable and
our line of credit were as follows (in thousands):
SCHEDULED SCHEDULED UNSECURED TERM
PAYMENTS BY YEAR AMORTIZATION LINE OF CREDIT MATURITIES TOTAL
---------------- ------------ -------------- ---------- ----------
2003 ................ $ 3,672 -- $ 22,704 $ 26,376
2004 ................ 5,241 $ 178,750 220,532 404,523
2005 ................ 4,045 -- 147,746 151,791
2006 ................ 3,359 -- 24,093 27,452
2007 ................ 2,768 -- 25,699 28,467
2008 ................ 2,324 -- 28,961 31,285
2009 ................ 2,255 -- 53,090 55,345
2010 ................ 2,023 -- 177,114 179,137
2011 ................ 2,173 -- 239,657 241,830
2012 ................ 2,229 -- 255,386 257,615
>10 years ........... 8,177 -- 12,102 20,279
Net unamortized
debt premiums ..... -- -- 5,810 5,810
-------- ---------- ---------- ----------
$ 38,266 $ 178,750 $1,212,894 $1,429,910
======== ========== ========== ==========
S-26
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated financial data on
a historical basis as of and for the five years ended December 31, 2002, and as
of and for the three months ended March 31, 2003 and March 31, 2002. This
information should be read in conjunction with our consolidated financial
statements (including the related notes thereto) and management's discussion and
analysis of financial condition and results of operations incorporated by
reference in this prospectus supplement and the accompanying prospectus. This
selected consolidated financial data has been derived from our audited
consolidated financial statements, except as indicated. The selected
consolidated financial data as of and for the three months ended March 31, 2003
and 2002, in our opinion, reflect all adjustments necessary to present fairly
the data for such periods. Interim results for the three months ended March 31,
2003 are not necessarily indicative of results that can be expected in future
periods.
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
OPERATING DATA:
Revenues:
Rental revenues ......................... $ 91,223 $ 84,490 $354,183 $323,020 $306,030 $258,275 $120,057
Service operations revenue .............. 3,937 2,023 20,255 31,495 27,226 18,239 11,863
Equity in income of investments
in real estate partnerships ........... 2,336 1,065 5,765 3,439 3,139 4,688 946
-------- -------- -------- -------- -------- -------- --------
Total revenues ...................... 97,496 87,578 380,203 357,954 336,395 281,202 132,866
-------- -------- -------- -------- -------- -------- --------
Operating expenses:
Operating, maintenance and real
estate taxes .......................... 23,590 20,927 89,749 81,039 75,811 61,928 28,068
General and administrative and other
expenses .............................. 4,562 4,349 24,133 24,917 21,870 19,747 15,064
Depreciation and amortization ........... 18,819 16,066 70,443 62,435 55,537 45,278 23,395
-------- -------- -------- -------- -------- -------- --------
Total operating expenses ............ 46,971 41,342 184,325 168,391 153,218 126,953 66,527
-------- -------- -------- -------- -------- -------- --------
Other expense (income):
Interest expense, net of interest
income ................................ 20,633 19,622 81,286 63,680 63,867 56,576 26,051
-------- -------- -------- -------- -------- -------- --------
(Gain) loss on sale of operating
properties ............................ -- (1,494) (5,267) (699) (4,507) 233 (10,726)
Provision for loss on operating and
development properties ................ 4,369 1,595 12,995 -- --
Other income .............................. -- -- (2,383) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total other expense ................. 20,633 18,128 78,005 64,576 72,355 56,809 15,325
Income before minority interests .... 29,892 28,108 117,873 124,987 110,822 97,440 51,014
-------- -------- -------- -------- -------- -------- --------
Minority interest preferred unit
distributions .......................... (10,782) (8,368) (33,475) (33,475) (29,601) (12,368) (3,358)
Minority interest of exchangeable
partnership units ...................... (453) (493) (2,070) (2,244) (2,177) (2,552) (1,622)
Minority interest of limited partners ..... (64) (109) (492) (721) (2,632) (2,855) (464)
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations ....... 18,593 19,138 81,836 88,547 76,412 79,665 45,570
Discontinued operations, net(1):
Operating income from discontinued
operations ............................ (42) 4,433 9,985 12,117 11,199 10,181 5,020
Gain on sale of operating properties
and properties in development ......... (627) 1,706 18,704 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Income from discontinued
operations(1) ......................... (669) 6,139 28,689 12,117 11,199 10,181 5,020
-------- -------- -------- -------- -------- -------- --------
Net income .............................. 17,924 25,277 110,525 100,664 87,611 89,846 50,590
Preferred stock dividends ................. -- (759) (2,858) (2,965) (2,817) (2,245) --
-------- -------- -------- -------- -------- -------- --------
Net income for common stockholders ...... $ 17,924 $ 24,518 $107,667 $ 97,699 $ 84,794 $ 87,601 $ 50,590
======== ======== ======== ======== ======== ======== ========
(FOOTNOTES APPEAR ON FOLLOWING PAGE)
S-27
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
Income per common share - basic:
Income from continuing operations ........... $ 0.31 $ 0.31 $ 1.36 $ 1.49 $ 1.30 $ 1.42 $ 1.60
Discontinued operations(1) .................. $ (0.01) $ 0.11 $ 0.49 $ 0.21 $ 0.19 $ 0.19 $ 0.20
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income for common stockholders
per share ............................... $ 0.30 $ 0.42 $ 1.85 $ 1.70 $ 1.49 $ 1.61 $ 1.80
========== ========== ========== ========== ========== ========== ==========
Income per common share - diluted:
Income from continuing operations ........... $ 0.31 $ 0.31 $ 1.35 $ 1.49 $ 1.30 $ 1.43 $ 1.56
Discontinued operations(1) .................. $ (0.01) $ 0.11 $ 0.49 $ 0.20 $ 0.19 $ 0.18 $ 0.19
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income for common stockholders
per share ............................... $ 0.30 $ 0.42 $ 1.84 $ 1.69 $ 1.49 $ 1.61 $ 1.75
========== ========== ========== ========== ========== ========== ==========
OTHER DATA:
Common stock outstanding .................... 60,404 58,110 59,557 57,601 56,898 56,924 25,489
Common units, convertible preferred
stock(2) and Class B common stock
outstanding ............................... 1,496 3,023 1,955 3,043 3,150 3,565 4,337
Total GLA (unaudited)(3) .................... 29,572 29,232 29,483 29,089 27,991 24,769 14,652
Number of properties
(at period end) (unaudited)(3) ............ 261 271 262 272 261 216 129
Ratio of earnings to fixed
charges (unaudited)(4) .................... 1.5 1.6 1.8 1.7 1.7 1.9 2.1
Common dividends per share .................. $ 0.52 $ 0.51 $ 2.04 $ 2.00 $ 1.92 $ 1.84 $ 1.76
Funds from Operations(5) .................... $ 40,328 $ 39,967 $ 178,954 $ 168,957 $ 158,794 $ 140,989 $ 67,121
BALANCE SHEET DATA:
Real estate investments at cost ............. $3,168,098 $3,180,761 $3,088,914 $3,156,831 $2,943,627 $2,636,193 $1,250,332
Total assets ................................ 3,053,738 3,112,593 3,061,859 3,109,314 3,035,144 2,654,936 1,240,107
Total debt .................................. 1,429,910 1,427,114 1,333,524 1,396,721 1,307,072 1,011,967 548,126
Stockholders' equity ........................ 1,207,840 1,213,479 1,221,720 1,219,051 1,225,415 1,247,249 550,741
----------
(1) Discontinued operations represent properties held for sale or sold with
which we will not have continuing involvement after disposition.
(2) As a result of conversions to common stock, we ceased to have any
convertible preferred stock outstanding in February 2003.
(3) Includes properties owned by our joint ventures.
(4) The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For purposes of computing these ratios, earnings have
been calculated by adding fixed charges (excluding capitalized interest and
preferred distributions) to income before minority interests and gains and
losses from the sale of operating properties and subtracting equity in
income of investments in real estate. Fixed charges consist of interest
costs (whether expensed or capitalized), amortization of deferred debt
costs and preferred distributions.
(5) We report Funds From Operations (FFO) as a supplemental earnings measure.
We consider FFO to be an accurate benchmark to our peer group and a
meaningful performance measurement because it excludes various items in net
income that do not relate to or are not indicative of the operating
performance of the ownership, management and development of real estate,
such as depreciation and amortization. FFO is defined by the National
Association of Real Estate Investment Trusts generally as net earnings
(computed in accordance with GAAP), excluding real estate depreciation and
amortization, gains, and losses from sales of properties, after adjustment
from unconsolidated partnerships and joint ventures and excluding items
classified by GAAP as extraordinary or unusual, along with significant
non-recurring events. We also adjust for the payment of preferred stock
dividends.
The following table reconciles FFO to net income.
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
------- ------- -------- -------- -------- -------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Net income for common stockholders ................ $17,924 $24,518 $107,667 $ 97,699 $ 84,791 $ 87,601 $50,590
Add (Less):
Depreciation expense-- real property ............ 17,550 15,989 65,908 60,089 55,891 46,751 23,577
Amortization of leasing commissions ............. 1,692 1,209 6,029 4,750 2,887 1,261 951
Provision for loss on operating properties ...... -- -- 2,524 1,595 12,995 -- --
Loss (gain) on sale of operating properties ..... 803 (3,158) (8,829) (699) (3,082) 233 (9,823)
Preferred stock dividends ....................... -- 758 2,858 2,965 2,817 2,245 --
Preferred unit issuance costs ................... 1,922 -- -- -- -- -- --
Minority interest of exchangeable
partnership units ............................. 437 651 2,797 2,558 2,492 2,898 1,826
------- ------- -------- -------- -------- -------- -------
Funds from Operations ......................... $40,328 $39,967 $178,954 $168,957 $158,794 $140,989 $67,121
======= ======= ======== ======== ======== ======== =======
S-28
HISTORICAL STOCK PRICES AND DIVIDENDS
Our common stock is traded on the New York Stock Exchange under the symbol
"REG". We currently have approximately 4,000 common shareholders. The following
table sets forth the high and low prices and the cash dividends declared on our
common stock by quarter for the first two quarters of 2003 and for 2002 and
2001.
2003 2002 2001
------------------------------ ---------------------------- ----------------------------
CASH CASH CASH
QUARTER HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
ENDED PRICE PRICE DECLARED PRICE PRICE DECLARED PRICE PRICE DECLARED
------- ------ ------ --------- ------ ------ ----- ------ ------ -----
March 31 $33.53 $30.40 $0.52 $29.50 $26.88 $0.51 $25.00 $22.63 $0.50
June 30* 35.72 32.41 0.52 31.03 27.82 0.51 25.56 23.00 0.50
September 30 31.85 25.22 0.51 26.35 22.72 0.50
December 31 32.40 28.92 0.51 27.75 24.51 0.50
----------
*Through June 18, 2003.
We currently intend to pay regular quarterly distributions to our common
stockholders. However, future distributions will be declared and paid at the
discretion of our board of directors, and will depend upon cash generated by
operating activities, our financial condition, capital requirements, annual
distribution requirements under the REIT provisions of the Internal Revenue
Code, and such other factors as the board of directors deems relevant. We
anticipate that for the foreseeable future, cash available for distribution will
be greater than earnings and profits due to non-cash expenses, primarily
depreciation and amortization, to be incurred by us.
Under our line of credit, distributions may not exceed 95% of funds from
operations ("FFO") based on the immediately preceding four quarters. FFO is
defined in accordance with the NAREIT definition as described in our
consolidated financial statements. Also, in the event of any monetary default,
we may not make distributions to shareholders.
Our distributions to the extent of our current and accumulated earnings and
profits for federal income tax purposes will be taxable to shareholders at
ordinary income rates and not at the reduced rates for dividends that the Jobs
and Growth Tax Relief Reconciliation Act of 2003 enacted for 2003 through 2008,
unless designated by us as capital gains dividends or qualified dividend income.
Distributions that are treated as dividends may be taxed at capital gains rates,
rather than ordinary income rates, if they are distributed to a non-corporate
taxpayer, are designated by us as qualified dividend income and certain other
requirements are satisfied. Dividends are eligible to be designated by us as
qualified dividend income up to an amount equal to the sum of the qualified
dividend income received by us during the year of the distribution from other C
corporations (including our taxable REIT subsidiary), our "undistributed" REIT
taxable income from the immediately preceding year and our income attributable
to the sale of a built-in-gain asset from the immediately preceding year
(reduced by any federal income taxes that we paid with respect to such REIT
taxable income and built-in gain.)
Distributions in excess of earnings and profits generally will be treated
as a non-taxable return of capital. Such distributions have the effect of
deferring taxation until the sale of a shareholder's common stock.
In order to maintain our qualification as a REIT, we must make annual
distributions to shareholders of at least 90% of our taxable income. Under
certain circumstances, which management does not expect to occur, we could be
required to make distributions in excess of cash available for distributions in
order to meet such requirements.
We currently maintain a dividend reinvestment and stock purchase plan which
enables our shareholders to automatically reinvest distributions, as well as
make voluntary cash payments towards the purchase of additional shares.
S-29
EXECUTIVE OFFICERS AND DIRECTORS
Information concerning our executive officers and directors is set forth
below.
NAME OF DIRECTORS AGE POSITIONS
--------------------- ----- --------------
Martin E. Stein, Jr. 50 Chairman of the Board and Chief Executive Officer
Mary Lou Fiala 51 President and Chief Operating Officer
Bruce M. Johnson 55 Managing Director and Chief Financial Officer
Raymond L. Bank 49 Director
C. Ronald Blankenship 53 Director
A.R. Carpenter 61 Director
J. Dix Druce Jr. 55 Director
Douglas S. Luke 61 Director
Joseph E. Parsons 46 Director
John C. Schweitzer 58 Director
Thomas G. Wattles 51 Director
Terry N. Worrell 58 Director
MARTIN E. STEIN, JR.
Mr. Stein is Chairman of the Board and Chief Executive Officer of Regency
Centers. He served as President of Regency Centers from its initial public
offering in October 1993 until December 31, 1998. Mr. Stein also served as
President of Regency Centers' predecessor real estate division since 1981, and
Vice President from 1976 to 1981. He is a director of Florida Rock Industries,
Inc., a publicly held producer of construction aggregates, Patriot
Transportation Holding, Inc., a publicly held transportation and real estate
company, and Stein Mart, Inc., a publicly held upscale discount retailer.
MARY LOU FIALA
Ms. Fiala has served as a director of Regency Centers since 1997. Ms. Fiala
became President and Chief Operating Officer in January 1999. Before joining
Regency Centers she was Managing Director -- Security Capital U.S. Realty
Strategic Group from March 1997 to January 1999. Ms. Fiala was Senior Vice
President and Director of Stores, New England -- Macy's East/Federated
Department Stores from 1994 to March 1997. From 1976 to 1994, Ms. Fiala held
various merchandising and store operations positions with Macy's/Federated
Department Stores. Ms. Fiala is a member of the board of trustees of the
International Council of Shopping Centers and the University of North Florida
Foundation.
BRUCE M. JOHNSON
Mr. Johnson has been Managing Director and Chief Financial Officer of
Regency Centers since its initial public offering in October 1993. Mr. Johnson
also served as Executive Vice President of Regency Centers' predecessor real
estate division since 1979. He is chairman of the board of Brooks Rehabilitation
Hospital, a private not for profit rehabilitation hospital, and a director of
its private parent company, Brooks Health Systems.
RAYMOND L. BANK
Mr. Bank has served as a director of Regency Centers since 1997. Mr. Bank
has been President and Chief Operating Officer of Merchant Development
Corporation, a venture capital and buy-out firm focusing on consumer retail,
direct marketing, and service companies, since 1994. He has also served as
President of Raymond L. Bank Associates, Inc., a consulting firm serving a
diverse clientele in corporate development, retail, and direct marketing
strategies, since 1991. He is a director of OfficeMax, Inc.
C. RONALD BLANKENSHIP
Mr. Blankenship has served as a director of Regency Centers since 2001. Mr.
Blankenship has been Vice Chairman of Security Capital since May 1998; we
anticipate that, simultaneously with the closing of this offering, he will
terminate his employment with Security Capital. He was Chief Operating Officer
of Security Capital from 1998 to May 2002 and Managing Director from 1991 until
May 1998. Prior to June 1997, he was the Chairman of Archstone Communities
Trust. Mr. Blankenship was formerly a trustee of ProLogis Trust, and was
formerly a director of BelmontCorp, InterPark Holdings Incorporated, Storage
USA, Inc. and Macquarie Capital Partners, LLC. He also served as Interim
Chairman, Chief Executive Officer and director of Homestead Village Incorporated
from May 1999 until November 2001.
S-30
A. R. CARPENTER
Mr. Carpenter has served as a director of Regency Centers since 1993. Mr.
Carpenter was formerly Vice Chairman of CSX Corporation, a position he held from
July 1999 to February 2001. From 1962 until February 2001, he held a variety of
positions with CSX, including President and Chief Executive Officer (from 1992
to July 1999) and Executive Vice President-Sales and Marketing (from 1989 to
1992) of CSX Transportation, Inc. Mr. Carpenter is a director of Florida Rock
Industries, Inc. and Stein Mart, Inc.
J. DIX DRUCE, JR.
Mr. Druce has served as a director of Regency Centers since 1993. Mr. Druce
has been President and Chairman of the Board of National P.E.T. Scan, LLC since
June 2000. From 1988 until 2000, he served as President and Chairman of the
Board of Life Service Corp., Inc., a life insurance management company, and
President and director of American Merchants Life Insurance Company and its
parent, AML Acquisition Company, from October 1992 until the companies' sale in
2000. He was President and director (Chairman from May 1989 to July 1991) of
National Farmers Union Life Insurance Company from 1987 to 1991, and President
and director of Loyalty Life Insurance Company and NFU Acquisition Company from
1987 to 1991. Mr. Druce is a director of Florida Rock Industries, Inc.
DOUGLAS S. LUKE
Mr. Luke has served as a director of Regency Centers since 1993. Mr. Luke
is President and Chief Executive Officer of HL Capital, Inc., a personal
management and investment company. Mr. Luke was President and Chief Executive
Officer of WLD Enterprises, Inc., a Ft. Lauderdale, Florida-based diversified
private investment and management company with interests in securities, real
estate and operating businesses, from 1991 to 1998. From 1987 to 1990 he was
Managing Director of Rothschild Inc./Rothschild Ventures. He is director of
MeadWestvaco Corporation, a diversified paper and chemicals manufacturing
company.
JOSEPH E. PARSONS(1)
Mr. Parsons has been a director of Regency Centers since 2002. Mr. Parsons
is President -- North America Equity Holdings of GE Real Estate, the commercial
real estate lending and investing business of General Electric's GE Commercial
Finance division. Prior to joining GE Real Estate, from July 2000 to February
2002, Mr. Parsons was President and Chief Executive Officer of GE Equity, the
global private equity investment business of General Electric. Mr. Parsons was
President and Chief Executive Officer, e-Business, GE Capital from November 1999
to July 2000, and Vice President and Manager, Business Development, Office of
the CEO of GE Capital from January 1999 to November 1999. Mr. Parsons was Vice
President, Business Development, EVP Office of GE Capital from November 1997 to
January 1999.
JOHN C. SCHWEITZER
Mr. Schweitzer has been a director of Regency Centers since 1999 and
currently serves as its lead director. Mr. Schweitzer was a member of Pacific
Retail Trust's board of trustees before its merger into Regency Centers in
February 1999. He is President of Westgate Corporation and Managing Partner of
Campbell Capital, Ltd., which holds investments in real estate and venture
capital operations. Mr. Schweitzer is a trustee of Archstone Smith Communities
Trust, and a director of J.P. Morgan Chase Bank of Texas-Austin and KLRU Austin
Public Television. He previously served as a director or officer of a number of
public companies and financial institutions, including Franklin Federal Bancorp,
Elgin Clock Company, El Paso Electric Company, MBank El Paso, the Circle K
Corporation, Homestead Village Incorporated and Enerserv Products.
THOMAS G. WATTLES
Mr. Wattles has been a director of Regency Centers since 2001. Mr. Wattles
has been Chairman and Chief Investment Officer of Dividend Capital Trust, an
industrial property private REIT, since March 2003 and Principal of Black Creek
Group, a real estate investment management firm, since February 2003. He served
as Managing Director of Security Capital from 1991 to 2002 and as a trustee of
ProLogis Trust from 1993 to May 2002. He was a director of ProLogis' predecessor
from its formation in 1991, and was Non-Executive Chairman of ProLogis from
March 1997 to May 1998. Mr. Wattles was Co-Chairman and Chief Investment Officer
of ProLogis and its former REIT Manager from November 1993 to March 1997, and
director of the former REIT Manager from June 1991 to March 1997.
----------
(1) Mr. Parsons was nominated to the board as a designee of Security Capital
and will resign from our board upon completion of this offering and the
purchase by us of our shares from Security Capital.
S-31
TERRY N. WORRELL
Mr. Worrell has been a director of Regency Centers since 1999. Mr. Worrell
was a member of Pacific Retail Trust's board of trustees before its merger into
Regency Centers in February 1999. He is a private investor in commercial
properties and other business ventures. Mr. Worrell is a director of Titanium
Metals Corporation, a producer of titanium products. From 1974 to 1989 he was
President and CEO of Sound Warehouse of Dallas, Inc. prior to its purchase by
Blockbuster Music.
S-32
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global
Markets Inc., as joint book-runners, are acting as representatives of each of
the underwriters named below. Subject to the terms and conditions stated in the
underwriting agreement dated as of the date of this prospectus supplement, the
underwriters have severally agreed to purchase, and Security Capital has agreed
to sell to the underwriters, the respective number of shares of our common stock
set forth opposite each underwriter's name below.
NUMBER
UNDERWRITER OF SHARES
-------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .................................................. 5,236,449
Citigroup Global Markets Inc. ....................................... 5,236,449
UBS Securities LLC .................................................. 3,490,966
J.P. Morgan Securities Inc. ......................................... 1,745,484
Wachovia Securities, LLC ............................................ 1,745,484
Lazard Freres & Co. LLC ............................................. 285,500
Legg Mason Wood Walker, Incorporated ................................ 285,500
Raymond James & Associates, Inc. .................................... 285,500
U.S. Bancorp Piper Jaffray Inc. ..................................... 285,500
----------
Total .................................................. 18,596,832
==========
The underwriting agreement provides that the obligation of the underwriters
to purchase the shares in this offering is subject to approval of legal matters
by counsel and other conditions. The underwriters are obligated to purchase all
the shares if any of the shares are purchased. If an underwriter defaults, the
underwriting agreement provides that the purchase commitments of the
nondefaulting underwriters may be increased or the underwriting agreement may be
terminated.
Security Capital has granted an option to the underwriters to purchase up
to 2,789,524 additional shares of our common stock if the underwriters sell more
shares than the total number set forth in the table above. The underwriters may
exercise this option for 30 days from the date of this prospectus supplement
solely to cover any such over-allotments. If the underwriters exercise this
option, each will be obligated, subject to conditions contained in the
underwriting agreement, to purchase a number of additional shares of our common
stock proportionate to that underwriter's initial amount reflected in the table
above.
The underwriters propose to offer the shares to the public directly at the
public offering price set forth on the cover page of this prospectus supplement
and to dealers at that price less a concession not in excess of $0.85 per share.
The underwriters may allow, and the dealers may reallow, a discount not in
excess of $0.10 per share to other dealers. If all of the shares are not sold to
the public at the initial public offering price, the underwriters may change the
public offering price and the other selling terms.
A subsidiary of Security Capital has entered into forward sale agreements
dated the date of this prospectus supplement with affiliates of Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), J.P. Morgan Securities
Inc. ("J.P. Morgan") and Wachovia Securities, LLC ("Wachovia"), as purchasers,
relating to 3,906,667, 3,906,667 and 3,906,666 shares of our common stock,
respectively. Security Capital has entered into stock lending agreements with
Merrill Lynch and affiliates of J.P. Morgan and Wachovia through UBS Securities
LLC, as agent in connection with these arrangements. The forward sale agreements
provide for settlement on a settlement date or dates, to be specified in the
discretion of the subsidiary of Security Capital or otherwise within 12 months
of the date of this prospectus supplement, at an initial forward price of
$31.1355 per share. Until the delivery under the forward sale agreements,
Security Capital will continue to beneficially own and vote these shares,
subject to an agreement between us and Security Capital terminating the
stockholders agreement. Security Capital will also have the right to settle the
forward sale agreements in cash instead of delivering shares of our common
stock. If it does so, it will continue to own the shares. The forward sale
agreements provide that the initial forward price will be subject to increase
based on a floating interest factor based on the Federal Funds rate, less a
spread, and subject to decrease for dividends having an ex-dividend date after
the date of this prospectus supplement and prior to the date of settlement. In
connection with the forward sale agreements, the underwriters will sell
11,720,000 shares of the common stock offered by this prospectus supplement.
Merrill Lynch, J.P. Morgan and Wachovia will receive the aggregate proceeds of
the sale of the 11,720,000 shares of the common stock sold under this prospectus
supplement. Benefits received by the affiliates of Merrill Lynch, J.P. Morgan
and Wachovia from the forward sale agreements may constitute underwriting
compensation.
S-33
The 11,720,000 shares of common stock offered by this prospectus supplement
in connection with the forward sale agreements will be borrowed by Merrill Lynch
and affiliates of J.P. Morgan and Wachovia from stock lenders, including
Security Capital. Merrill Lynch and affiliates of J.P. Morgan and Wachovia will
use any shares of common stock received from Security Capital under the forward
sale agreements to settle or close out such borrowings.
If Security Capital elects to cash settle the forward sale agreements and
if the market price of the common stock at the time of the settlement of the
forward sale agreements is above the forward price, Security Capital would pay
the affiliates of Merrill Lynch, J.P. Morgan and Wachovia under the forward sale
agreements an amount in cash equal to the difference. If the market value of the
common stock at the time of the repurchase is below the forward price, Security
Capital would be paid the difference by the affiliates of Merrill Lynch, J.P.
Morgan and Wachovia under the forward sale agreements.
The following table shows the underwriting discounts and commissions that
Security Capital is to pay to the underwriters in connection with this offering.
Such amounts are shown assuming either no exercise or full exercise by the
underwriters of their over-allotment option.
PAID BY THE SELLING SHAREHOLDER NO EXERCISE FULL EXERCISE
------------------------------- ----------- -------------
Per share ......................................... $ 1.4245 $ 1.4245
Total ............................................. $26,491,187 $30,464,864
We, each of our executive officers and directors and Security Capital and
its subsidiaries have agreed that, for a period of 90 days from the date of this
prospectus supplement, we and they will not, without the prior written consent
of the representatives, dispose of or hedge any shares of our common stock or
any securities convertible into or exchangeable for our common stock, other than
in connection with the forward sale agreements described in this prospectus
supplement, subject to certain exceptions. Notwithstanding the foregoing,
Security Capital may participate in the concurrent SynDECS offering and may
enter into the forward sale agreements and the related hedging activity. The
representatives in their joint discretion may release any of the securities
subject to these lock-up agreements at any time without notice.
In connection with the offering, the underwriters may purchase and sell
shares of our common stock in the open market. These transactions may include
short sales, covering transactions and stabilizing transactions. Short sales
involve sales of common stock in excess of the number of shares to be purchased
by the underwriters in the offering, which creates a short position. "Covered"
short sales are sales made in an amount not greater than the underwriters'
option to purchase additional shares from us in the offering. The underwriters
may close out any covered short position by either exercising their option to
purchase additional shares or purchasing shares in the open market. In
determining the source of shares to close out the covered short position, the
underwriters will consider, among other things, the price of shares available
for purchase in the open market as compared to the shares price at which they
may purchase through the overallotment option. "Naked" short sales are any sales
in excess of such option. The underwriters must close out any naked short
position by purchasing shares in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there may be
downward pressure on the price of our common stock in the open market after
pricing that could adversely affect investors who purchase in the offering.
Stabilizing transactions consist of various bids for or purchases of our common
stock made by the underwriters in the open market prior to the completion of the
offering. See also "The Offering--Concurrent Offering" for a description of
certain hedging arrangements to be entered into by affiliates of Citigroup
Global Markets.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the other underwriters a portion of the
underwriting discount received by it because the representatives have
repurchased shares sold by or for the account of such underwriter in stabilizing
or short covering transactions.
Any of these activities may have the effect of preventing or retarding a
decline in the market price of the common stock. They may also cause the price
of the common stock to be higher than the price that would otherwise exist in
the open market in the absence of these transactions. The underwriters may
conduct these transactions on the New York Stock Exchange or in the
over-the-counter market, or otherwise. If the underwriters commence any of these
transactions, they may discontinue them at any time without notice.
We and Security Capital estimate that our respective portions of the total
expenses of this offering will be $260,000 (including expenses incurred in
connection with the share repurchase) and $725,000. The underwriters have agreed
to reimburse Security Capital for certain of its expenses incurred in connection
with this offering.
Our common stock is listed on the New York Stock Exchange under the symbol
"REG".
S-34
We and Security Capital have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the underwriters may be required to make
because of any of those liabilities.
Certain of the underwriters have from time to time provided investment and
commercial banking services to us and our affiliates, for which they have
received customary fees and expenses. The underwriters may, from time to time
engage in transactions with and perform services for us in the ordinary course
of their business. In addition, certain of the underwriters have acted as
underwriters in our offerings of preferred stock and debt. Citigroup Global
Markets Inc. and Merrill Lynch are the underwriters of the SynDECS being offered
in a concurrent offering. UBS Securities LLC will act as agent for Security
Capital in connection with its stock lending. See "Selling Shareholder".
EXPERTS
The consolidated financial statements and schedule of Regency Centers
Corporation as of December 31, 2002 and 2001, and for each of the years in the
three-year period ended December 31, 2002, have been incorporated by reference
in this prospectus supplement and in the registration statement of which this
prospectus supplement forms a part in reliance upon the reports of KPMG LLP,
independent accountants, also incorporated by reference in this prospectus
supplement, and upon the authority of said firm as experts in accounting and
auditing. The audit report covering the December 31, 2002 financial statements
refers to the Company's adoption of Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long Lived Assets."
VALIDITY OF COMMON STOCK
The validity of the shares offered hereby will be passed upon for us by
Foley & Lardner, Jacksonville, Florida. Attorneys with Foley & Lardner
representing Regency Centers with respect to this offering beneficially owned
approximately 7,800 shares of common stock of Regency Centers as of the date of
this prospectus supplement. The validity of the shares offered hereby will be
passed upon for the underwriters by Sullivan & Cromwell LLP, New York, New York,
who may rely on the advice of Foley & Lardner as to matters related to Florida
law. Sullivan &Cromwell LLP has from time to time represented our independent
directors.
S-35
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PROSPECTUS
34,273,236 SHARES
REGENCY CENTERS CORPORATION
121 W. FORSYTH STREET, SUITE 200
JACKSONVILLE, FLORIDA 32202
(904) 598-7000
-----------------------------------
This prospectus relates to the public offering from time to time of up to
34,273,236 shares of common stock by Security Capital Group Incorporated and its
affiliates or their permitted transferees. We are registering these shares for
offer and sale as required under the terms of a registration rights agreement
between Security Capital and us. Our registration of the offered shares does not
mean that Security Capital will offer or sell any of the shares. We will not
receive any proceeds from the sale of the shares.
Security Capital may sell shares to or through underwriters, and also to
other purchasers or through agents. The names of the underwriters will be set
forth in a prospectus supplement.
Our common stock is listed on the New York Stock Exchange under the symbol
"REG." The last reported sales price for our common stock on the New York Stock
Exchange on May 19, 2003 was $33.65 per share.
-----------------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the common stock or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
May 28, 2003
SUMMARY
THE ISSUER
We are a real estate investment trust which acquires, owns, develops and
manages grocery-anchored shopping centers in target markets in the United
States. Our common stock is traded on the New York Stock Exchange.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's web site at http//www.sec.gov. We also maintain a web site at
www.regencycenters.com.
This prospectus is part of a registration statement we filed with the SEC,
covering the securities offered hereby. The SEC allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. We refer you
to the registration statement, the exhibits, financial statements and schedules
thereto for further information. This prospectus is qualified in its entirety by
such other information. The information incorporated by reference is considered
to be part of this prospectus, and later information that we file with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any documents we file in the future
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the selling shareholder sells all of the shares
covered by this prospectus (but we do not incorporate by reference any documents
that we furnish to but that are not deemed filed with the SEC):
o Our annual report on Form 10-K for the fiscal year ended December 31,
2002;
o Our quarterly report on Form 10-Q for the quarter ended March 31, 2003;
and
o Our current report on Form 8-K dated April 10, 2003.
The Securities and Exchange Commission has assigned file number 1-12298 to
reports and other information that we file with the Securities and Exchange
Commission.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Ms. Diane Ortolano
Shareholder Communications
Regency Centers Corporation
121 W. Forsyth Street
Suite 200
Jacksonville, FL 32202
(904) 598-7675
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
When we say "we," "our," "us" or "Regency," we mean Regency Centers
Corporation and its consolidated subsidiaries, except where we make it clear
that we mean only the parent company. When we say "you," without any further
specification, we mean any party to whom this prospectus is delivered, including
a holder in street name.
FORWARD-LOOKING INFORMATION
Some of the matters discussed in this prospectus include forward-looking
statements based on current expectations, estimates, forecasts and projections,
beliefs and assumptions made by our management. You can identify these
forward-looking statements by the use of words like "strategy," "expects,"
"plans," "believes,"
1
"will," "estimates," "intends," "projects," "goals," "targets,"
"anticipating," "hope" and other words of similar meaning. You can also identify
them by the fact that they do not relate strictly to historical or current
facts.
Even though we believe our expectations regarding future events are based
on reasonable assumptions, forward-looking statements are not guarantees of
future performance. In evaluating these statements, you should specifically
consider various risks, uncertainties and other factors that may cause our
actual results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by the
forward-looking statements. Certain of such risks and uncertainties include
those listed under the caption "Risk Factors" and those indicated from time to
time in our filings with the Securities and Exchange Commission, many of which
are beyond our ability to control or predict. You are cautioned not to unduly
rely on these forward-looking statements when evaluating the information
included or incorporated by reference into this prospectus.
These forward-looking statements speak only as of the date of this
prospectus. We undertake no obligation to review or revise any particular
forward-looking statements included or incorporated by reference in this
prospectus to reflect events, conditions or circumstances occurring after the
date of this prospectus or to reflect the occurrence of unanticipated events.
RISK FACTORS
The following contains a description of the material risks involved in an
investment in our common stock.
OUR DEBT FINANCING MAY REDUCE DISTRIBUTIONS TO SHAREHOLDERS.
We do not expect to generate sufficient funds from operations to make
balloon principal payments when due on our debt. If we are unable to refinance
our debt on acceptable terms, we might be forced to dispose of properties, which
might result in losses, or to obtain financing at unfavorable terms. Either
could reduce the cash flow available for distributions to shareholders. In
addition, if we cannot make required mortgage payments, the mortgagee could
foreclose on the property securing the mortgage, causing the loss of cash flow
from that property to meet obligations. Substantially all of our debt is
cross-defaulted, but not cross-collateralized.
Our organizational documents do not limit the amount of debt that may be
incurred. We have established a policy limiting total debt to 50% of total
assets at cost and maintaining a minimum debt service coverage ratio of 2:1 on
an annual basis. Our board of directors may amend this policy at any time
without the approval of our shareholders.
Our line of credit imposes certain covenants which limit our flexibility in
obtaining other financing, such as a prohibition on negative pledge agreements.
The degree to which we are leveraged could have important consequences to
you, including the following:
o leverage could affect our ability to obtain additional financing in the
future to repay indebtedness or for working capital, capital
expenditures, acquisitions, development or other general corporate
purposes;
o leverage could make us more vulnerable to a downturn in our business or
the economy generally; and
o as a result, our leverage could lead to reduced distributions to
shareholders.
LOSS OF REVENUES FROM MAJOR TENANTS COULD REDUCE DISTRIBUTIONS TO SHAREHOLDERS.
We derive significant revenues from anchor tenants such as Kroger, Publix,
Safeway, and Albertsons that occupy more than one center. Distributions to
shareholders could be adversely affected by the loss of revenues in the event a
major tenant:
o files for bankruptcy or insolvency;
o experiences a downturn in its business;
o materially defaults on its lease;
o does not renew its leases as they expire; or
o renews at lower rental rates.
Vacated anchor space, including space owned by the anchor, can reduce
rental revenues generated by the shopping center because of the loss of the
departed anchor tenant's customer drawing power. Most anchors have
2
the right to vacate and prevent retenanting by paying rent for the balance of
the lease term. If major tenants vacate a property, then other tenants may be
entitled to terminate their leases at the property.
WE DO NOT HAVE VOTING CONTROL OVER OUR JOINT VENTURE INVESTMENTS, SO WE ARE
UNABLE TO ENSURE THAT OUR OBJECTIVES WILL BE PURSUED.
We have invested in some cases as a co-venturer or partner in the
acquisition or development of properties. These investments involve risks not
present in a wholly owned project. We do not have voting control over the
ventures or partnerships. The co-venturer or partner might (1) have interests or
goals that are inconsistent with our interests or goals or (2) otherwise impede
our objectives. The co-venturer or partner also might become insolvent or
bankrupt.
DOWNTURNS IN THE RETAILING INDUSTRY LIKELY WILL HAVE A DIRECT IMPACT ON OUR
PERFORMANCE.
Our properties consist of grocery-anchored shopping centers. Our
performance therefore is linked to economic conditions in the market for retail
space generally. The market for retail space has been or could be adversely
affected by any of the following:
o weakness in the national, regional and local economies;
o consequences of any armed conflict involving, or terrorist attack
against, the United States;
o the adverse financial condition of some large retailing companies;
o the ongoing consolidation in the retail sector;
o the excess amount of retail space in a number of markets;
o increasing consumer purchases through catalogues or the Internet;
o the timing and costs associated with property improvements and rentals;
o changes in taxation and zoning laws; and
o adverse government regulation.
To the extent that any of these conditions occur, they are likely to impact
market rents for retail space.
WE ARE DEPENDENT ON EXTERNAL SOURCES OF CAPITAL, WHICH MAY NOT BE AVAILABLE.
To qualify as a REIT, we must, among other things, distribute to our
stockholders each year at least 90% of our REIT taxable income (excluding any
net capital gains). Because of these distribution requirements, we likely will
not be able to fund all future capital needs, including capital for
acquisitions, with income from operations. We therefore will have to rely on
third-party sources of capital, which may or may not be available on favorable
terms or at all. Our access to third-party sources of capital depends on a
number of things, including the market's perception of our growth potential and
our current and potential future earnings. Moreover, additional equity offerings
may result in substantial dilution of stockholders' interests, and additional
debt financing may substantially increase leverage.
WE COULD BE ADVERSELY AFFECTED BY POOR MARKET CONDITIONS WHERE PROPERTIES ARE
GEOGRAPHICALLY CONCENTRATED.
Our performance depends on the economic conditions in markets in which our
properties are concentrated, including Florida, California, Texas, Georgia and
Ohio. Our operating results could be adversely affected if market conditions,
such as an oversupply of space or a reduction in demand for real estate, in
these areas become more competitive relative to other geographic areas.
SECURITY CAPITAL CONTROLS SHAREHOLDER VOTE. SALE OF SHARES MAY ADVERSELY AFFECT
STOCK PRICE.
Security Capital and its affiliates, which are offering shares pursuant to
this prospectus, own 34,273,236 shares of our common stock as of the date of
this prospectus, constituting 56.7% of our outstanding common stock. As a result
of its stock ownership, Security Capital currently can control the outcome of
any corporate transaction or other matter submitted to the shareholders for
approval.
3
Sales of a substantial number of shares of our common stock, or the
perception that such sales could occur, also could adversely affect prevailing
market prices for our common stock. The shares offered pursuant to this
prospectus constitute 56.7% of our outstanding common stock, and are available
for sale in the public markets from time to time.
UNSUCCESSFUL DEVELOPMENT ACTIVITIES COULD REDUCE DISTRIBUTIONS TO SHAREHOLDERS.
We actively pursue development activities as opportunities arise.
Development activities require various government and other approvals. We may
not recover our investment in development projects for which approvals are not
received. We incur risks associated with development activities, including:
o the risk that we may abandon development opportunities and lose our
investment in these developments;
o the risk that construction costs of a project may exceed original
estimates, possibly making the project unprofitable;
o lack of cash flow during the construction period; and
o the risk that occupancy rates and rents at a completed project will
not be sufficient to make the project profitable.
If we sustain material losses due to an unsuccessful development project,
our cash flow will be reduced.
INCREASED INTEREST RATES MAY REDUCE DISTRIBUTIONS TO SHAREHOLDERS.
We are obligated on floating rate debt. If we do not eliminate our exposure
to increases in interest rates through interest rate protection or cap
agreements, these increases may reduce cash flow and our ability to make
distributions to shareholders.
Although swap agreements enable us to convert floating rate debt to fixed
rate debt and cap agreements enable us to cap our maximum interest rate, they
expose us to the risk that the counterparties to these hedge agreements may not
perform, which could increase our exposure to rising interest rates. Generally,
however, the counterparties to our hedge agreements are major financial
institutions. If we enter into swap agreements, decreases in interest rates will
increase our interest expense as compared to the underlying floating rate debt.
This could result in our making payments to unwind these agreements, such as in
connection with a prepayment of the floating rate debt. Cap agreements do not
protect us from increases up to the capped rate.
INCREASED MARKET INTEREST RATES COULD REDUCE OUR STOCK PRICES.
The annual dividend rate on our common stock as a percentage of its market
price may influence the trading price of our stock. An increase in market
interest rates may lead purchasers to demand a higher annual dividend rate,
which could adversely affect the market price of our stock. A decrease in the
market price of our common stock could reduce our ability to raise additional
equity in the public markets.
PARTNERSHIP STRUCTURE MAY LIMIT FLEXIBILITY TO MANAGE ASSETS.
We invest in retail shopping centers through Regency Centers, L.P., the
operating partnership in which we currently own 98% of the outstanding common
partnership units. From time to time, we acquire properties through our
operating partnership in exchange for limited partnership interests. This
acquisition structure may permit limited partners who contribute properties to
us to defer some, if not all, of the income tax liability that they would incur
if they sold the property.
Properties contributed to our operating partnership may have unrealized
gain attributable to the difference between the fair market value and adjusted
tax basis in the properties prior to contribution. As a result, the sale of
these properties could cause adverse tax consequences to the limited partners
who contributed them.
Generally, our operating partnership has no obligation to consider the tax
consequences of its actions to any limited partner. However, our operating
partnership may acquire properties in the future subject to material
restrictions on refinancing or resale designed to minimize the adverse tax
consequences to the limited partners who contribute those properties. These
restrictions could significantly reduce our flexibility to manage our assets by
preventing us from reducing mortgage debt or selling a property when such a
transaction might be in our best interest in order to reduce interest costs or
dispose of an under-performing property.
4
UNINSURED LOSS MAY ADVERSELY AFFECT DISTRIBUTIONS TO SHAREHOLDERS.
We carry comprehensive liability, fire, flood, extended coverage and rental
loss insurance for our properties with policy specifications and insured limits
customarily carried for similar properties. We believe that the insurance
carried on our properties is adequate in accordance with industry standards.
There are, however, some types of losses, such as from hurricanes, terrorism,
wars or earthquakes, which may be uninsurable, or the cost of insuring against
such losses may not be economically justifiable. If an uninsured loss occurs, we
could lose both the invested capital in and anticipated revenues from the
property, and would still be obligated to repay any recourse mortgage debt on
the property. In that event, our distributions to shareholders could be reduced.
WE FACE COMPETITION FROM NUMEROUS SOURCES.
The ownership of shopping centers is highly fragmented, with less than 10%
owned by real estate investment trusts. We face competition from other real
estate investment trusts as well as from numerous small owners in the
acquisition, ownership and leasing of shopping centers. We compete to develop
shopping centers with other real estate investment trusts engaged in development
activities as well as with local, regional and national real estate developers.
We compete in the acquisition of properties through proprietary research
that identifies opportunities in markets with high barriers to entry and
higher-than-average population growth and household income. We seek to maximize
rents per square foot by establishing relationships with supermarket chains that
are first or second in their markets and leasing non-anchor space in multiple
centers to national or regional tenants. We compete to develop properties by
applying our proprietary research methods to identify development and leasing
opportunities and by pre-leasing a significant portion of a center before
beginning construction.
There can be no assurance, however, that other real estate owners or
developers will not utilize similar research methods and target the same markets
and anchor tenants that we target. These entities may successfully control these
markets and tenants to our exclusion. If we cannot successfully compete in our
targeted markets, our cash flow, and therefore distributions to shareholders,
may be adversely affected.
COSTS OF ENVIRONMENTAL REMEDIATION COULD REDUCE OUR CASH FLOW.
Under various federal, state and local laws, an owner or manager of real
property may be liable for the costs of removal or remediation of hazardous or
toxic substances on the property. These laws often impose liability without
regard to whether the owner knew of, or was responsible for, the presence of
hazardous or toxic substances. The cost of any required remediation could exceed
the value of the property and/or the aggregate assets of the owner.
We have properties that will require or are currently undergoing varying
levels of environmental remediation for contamination caused by dry cleaner
tenants. These remediations are not expected to have a material financial effect
on us due to financial statement reserves and state-regulated programs that
shift the responsibility and cost for remediation to the state.
The presence of, or the failure to properly remediate, hazardous or toxic
substances may adversely affect our ability to sell or rent a contaminated
property or to borrow using the property as collateral. Any of these
developments could reduce cash flow and distributions to shareholders.
IF WE FAIL TO QUALIFY AS A REIT FOR FEDERAL INCOME TAX PURPOSES, WE WOULD BE
SUBJECT TO FEDERAL INCOME TAX AT REGULAR CORPORATE RATES.
We believe that we qualify for taxation as a REIT for federal income tax
purposes, and we plan to operate so that we can continue to meet the
requirements for taxation as a REIT. If we qualify as a REIT, we generally will
not be subject to federal income tax on our income that we distribute currently
to our stockholders. Many of the REIT requirements, however, are highly
technical and complex. The determination that we are a REIT requires an analysis
of various factual matters and circumstances, some of which may not be totally
within our control and some of which involve questions of interpretation. For
example, to qualify as a REIT, at least 95% of our gross income must come from
specific passive sources, like rent, that are itemized in the REIT tax laws.
There can be no assurance that the IRS or a court would agree with the positions
we have taken in interpreting the REIT requirements. We also are required to
distribute to our stockholders at least 90% of our REIT taxable income
5
(excluding capital gains). The fact that we hold some of our assets through
partnerships and their subsidiaries further complicates the application of the
REIT requirements. Even a technical or inadvertent mistake could jeopardize our
REIT status. Furthermore, Congress and the IRS might make changes to the tax
laws and regulations, and the courts might issue new rulings, that make it more
difficult, or impossible, for us to remain qualified as a REIT.
Also, unless the IRS granted us relief under certain statutory provisions,
we would remain disqualified as a REIT for four years following the year we
first failed to qualify. If we failed to qualify as a REIT, we would have to pay
significant income taxes. This likely would have a significant adverse affect on
the value of our securities. In addition, we would no longer be required to pay
any dividends to stockholders.
Even if we qualify as a REIT for federal income tax purposes, we are
required to pay certain federal, state and local taxes on our income and
property. For example, if we have net income from "prohibited transactions,"
that income will be subject to a 100% tax. In general, prohibited transactions
are sales or other dispositions of property held primarily for sale to customers
in the ordinary course of business. The determination as to whether a particular
sale is a prohibited transaction depends on the facts and circumstances related
to that sale. While we have undertaken a significant number of asset sales in
recent years, we do not believe that those sales should be considered prohibited
transactions, but there can be no assurance that the IRS would not contend
otherwise. In addition, any net taxable income earned directly by our taxable
affiliates, including Regency Realty Group, Inc., is subject to federal and
state corporate income tax. In this regard, several provisions of the laws
applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary
will be subject to an appropriate level of federal income taxation. For example,
a taxable REIT subsidiary is limited in its ability to deduct interest payments
made to an affiliated REIT. In addition, a REIT has to pay a 100% penalty tax on
some payments that it receives if the economic arrangements between the REIT,
the REIT's tenants, and the taxable REIT subsidiary are not comparable to
similar arrangements between unrelated parties. Finally, some state and local
jurisdictions may tax some of our income even though as a REIT we are not
subject to federal income tax on that income. To the extent that we and our
affiliates are required to pay federal, state and local taxes, we will have less
cash available for distributions to our stockholders.
Prior to December 31, 2000, a REIT could not own securities in any one
issuer if the value of those securities exceeded 5% of the value of the REIT's
total assets or the securities owned by the REIT represented more than 10% of
the issuer's outstanding voting securities. As a result of the REIT
Modernization Act, after December 31, 2000, the 5% value test and the 10% voting
security test were modified in two respects. First, the 10% voting securities
test was expanded so that REITs also are prohibited from owning more than 10% of
the value of the outstanding securities of any one issuer. Second, an exception
to these tests allows a REIT to own securities of a subsidiary that exceed the
5% value test and the new 10% vote or value test if the subsidiary elects to be
a "taxable REIT subsidiary." Under a new asset test, for taxable years beginning
after December 31, 2000, we are not able to own securities of taxable REIT
subsidiaries that represent in the aggregate more than 20% of the value of our
total assets. We currently own more than 10% of the total value of the
outstanding securities of Regency Realty Group, Inc. Regency Realty Group, Inc.
has elected to be a taxable REIT subsidiary.
OUR FORMER FOREIGN CONTROLLED STATUS COULD CAUSE FOREIGN SHAREHOLDERS TO BE
SUBJECT TO TAX UPON A SALE OF SHARES.
Gain recognized by a non-U.S. shareholder upon the sale or exchange of our
shares generally would not be subject to United States taxation unless, among
other exceptions, our shares constitute a U.S. real property interest within the
meaning of the Foreign Investment in Real Property Tax Act, which is referred to
as "FIRPTA," as described below.
Our shares will not constitute a U.S. real property interest if we are a
domestically controlled REIT, which requires that, at all times during the
five-year period preceding a sale or exchange of our stock, less than 50% in
value of our stock is held directly or indirectly by non-U.S. shareholders.
Because a foreign company beneficially owned in excess of 50% in value of our
shares until January 16, 2001, when a domestic corporation acquired those
shares, we believe that we currently are not a domestically controlled REIT, but
that we may become domestically-controlled in the future. Because our shares are
publicly traded, however, we cannot guarantee that we will become a domestically
controlled REIT. Even if we do not qualify as a domestically controlled REIT at
the time a non-U.S. shareholder sells our shares, gain arising from the sale
still would not be
6
subject to FIRPTA tax if: (1) the class or series of shares sold is considered
regularly traded under applicable treasury regulations on an established
securities market, such as the NYSE; and (2) the selling non-U.S. shareholder
owned, actually or constructively, 5% or less in value of the outstanding class
or series of shares being sold throughout the five-year period ending on the
date of the sale or exchange. See "Federal Income Tax Considerations - U.S.
Taxation of Non-U.S. Shareholders" below for a more detailed discussion of the
U.S. tax consequences applicable to foreign investors in our stock.
PENDING TAX LEGISLATION COULD ADVERSELY AFFECT THE PRICE OF OUR STOCK.
Both the United States Senate and the United States House of
Representatives have passed tax bills that would, among other things,
substantially reduce or eliminate at the shareholder level the taxation of
dividends paid by corporations other than REITs. REITs currently enjoy tax
advantages relative to regular C corporations because they are not subject to
corporate-level income tax on income they distribute to shareholders, but
shareholders do include REIT dividends in taxable income. If the double taxation
of corporate dividends were to be eliminated or reduced, individual investors
could view stocks of regular C corporations as more attractive relative to
stocks of REITs than is currently the case, because part or all of the dividends
paid on the stocks of the regular C corporations will be exempt from tax for the
individual. This may have an adverse effect on the price of our stock. This
adverse effect may take place prior to the adoption of any tax cut based upon
the market's perception of the likelihood of implementation of such a provision.
However, under the proposed legislation, if a REIT receives excludible dividend
income from an investment in another corporation (such as a taxable REIT
subsidiary), the REIT may retain or distribute that dividend income to the
REIT's shareholders, with the REIT and the shareholders able to benefit from the
dividend exclusion from, or reduction in, taxation. We cannot predict the form
in which this pending legislation ultimately will be enacted, whether it will in
fact be enacted, or what effect, if any, its enactment may have on the value of
our common stock.
7
USE OF PROCEEDS
We will not receive any proceeds from the resale of the shares covered by
this prospectus, all of which are being offered by the selling shareholder. For
additional information see "The Selling Shareholder" and "Plan of Distribution"
elsewhere in this prospectus.
REGENCY CENTERS CORPORATION
Regency Centers Corporation ("Regency Centers") completed its initial
public offering in 1993 (NYSE: REG) and became a qualified self-administered,
self-managed real estate investment trust ("REIT"). Through a series of
strategic acquisitions in 1997, 1998 and 1999, we expanded the scope of our
operations and became a nationally based owner, operator, and developer of
grocery-anchored retail shopping centers.
At March 31, 2003, our assets totaled approximately $3.1 billion with 261
shopping centers in 21 states. At March 31, 2003, our gross leasable area
("GLA") totaled 29.6 million square feet and was 94.9% leased. Geographically,
20.6% of our GLA is located in Florida, 18.1% in California, 17.3% in Texas,
8.2% in Georgia, 6.4% in Ohio, and 29.3% spread throughout 16 other states.
We invest in retail shopping centers through Regency Centers, L.P., the
operating partnership in which we currently own approximately 98% of the
outstanding common partnership units. Our acquisition, development, operations
and financing activity, including the issuance of common or preferred
partnership units, is executed by our operating partnership, its wholly-owned
subsidiaries and its joint ventures with third parties.
Our executive offices are located at 121 West Forsyth Street, Suite 200,
Jacksonville, Florida 32202 and our telephone number is (904) 598-7000.
THE SELLING SHAREHOLDER
GENERAL
Security Capital, including its affiliates, permitted pledgees, transferees
or other successors in interest, may from time to time offer and sell any or all
of the shares of common stock offered by this prospectus. Security Capital
currently intends, subject to market conditions, the market price of our common
stock and other considerations it deems relevant, to sell approximately
4,700,000 shares in the 30 to 60 days following the date of this prospectus.
However, the registration of the shares offered hereby does not necessarily mean
that Security Capital will sell any or all of the shares.
As of May 13, 2003, there were 60,482,796 shares of our common stock
outstanding and Security Capital beneficially owned 34,273,236 shares,
representing approximately 56.7% of our common stock. All of these shares are
available for resale under this prospectus. Because Security Capital and its
affiliates may sell all, some or none of the shares, we cannot estimate the
number of offered shares that Security Capital will sell or the number of shares
that Security Capital will beneficially own after the offering.
In May 2002, Security Capital became an indirect wholly-owned subsidiary of
General Electric Capital Corporation, which in turn is an indirect subsidiary of
the General Electric Company. Both General Electric Capital Services, Inc., the
parent of General Electric Capital Corporation, and its parent, the General
Electric Company, disclaim any beneficial ownership over the shares of Regency
common stock owned by Security Capital.
MATERIAL RELATIONSHIPS WITH SECURITY CAPITAL
During the past three years, we have had material relationships with
Security Capital as described below.
STOCKHOLDERS AGREEMENT
Security Capital is a party to a Stockholders Agreement with us. The
Stockholders Agreement contained a standstill provision that expired on April
10, 2003. The following are material provisions of the Stockholders Agreement
that remain in effect following the end of the standstill and until Security
Capital ceases to own 10% or 15% of our common stock on a fully diluted basis
for 180 consecutive days:
8
BOARD OF DIRECTORS REPRESENTATION. So long as Security Capital continues to
own at least 15% of our common stock on a fully diluted basis, Security Capital
has the right to name the lesser of three directors, or its pro rata share based
on stock ownership, and to have one of its designees serve on most committees of
our board. Currently, C. Ronald Blankenship, Vice Chairman of Security Capital,
and Joseph E. Parsons, President-North America Equity Holdings of GE Real Estate
and Chairman and Chief Executive Officer of Security Capital, serve on our board
of directors as Security Capital's designees, and Mr. Blankenship serves on our
board's investment committee. A third director, Thomas G. Wattles, also was
designated by Security Capital and also serves on the investment committee, but,
as of November 30, 2002, he was no longer employed by or otherwise affiliated
with Security Capital.
PARTICIPATION RIGHTS. So long as Security Capital owns at least 15% of our
common stock on a fully diluted basis, it has the right to acquire its pro rata
share, based on its then stock ownership, or 49%, if less, of most capital stock
we issue or sell.
APPROVAL OF PARTNERSHIPS AND JOINT VENTURES. So long as Security Capital
continues to own 15% of our common stock on a fully diluted basis, we may not
enter into any partnerships or joint ventures without Security Capital's prior
written consent, in its sole discretion.
INFORMATION RIGHTS. So long as Security Capital continues to own 15% of our
common stock on a fully diluted basis, we are required to give Security Capital
monthly reports, financial statements and other information and consult with
Security Capital before seeking the approval of our board of directors for
actions such as:
o acquisitions of more than $10 million;
o dispositions of more than $20 million;
o debt or other financing arrangements of more than $20 million;
o our annual operating budget;
o material changes in our executive management;
o new material agreements with any members of our executive management; and
o most issuances of equity by us or any of our subsidiaries.
We are not obligated to accept or comply with any advice offered by
Security Capital on these matters.
TAX-DEFERRED EXCHANGES. So long as Security Capital continues to own 10% of
our common stock on a fully diluted basis, when we dispose of properties, we
must use reasonable efforts, consistent with prudent management of our assets in
the interest of our shareholders, to dispose of them in transactions than
qualify as tax deferred exchanges for federal income tax purposes.
NEGOTIATED SALES OF OUR STOCK BY SECURITY CAPITAL. So long as Security
Capital continues to own 15% of our common stock on a fully diluted basis, it
may not transfer shares of our common stock in a negotiated transaction that
would result in any transferee beneficially owning more than 9.8% of our capital
stock unless we approve the transfer, in our sole discretion.
NON-COMPETE. So long as Security Capital continues to own 15% of our common
stock on a fully diluted basis, Security Capital is prohibited from directly or
indirectly owning, developing or acquiring shopping centers in the U.S. that (1)
have less than 250,000 square feet and (2) are anchored by a grocery store,
drugstore or general merchandise discount store such as Wal-Mart.
REGISTRATION RIGHTS AGREEMENT
We are parties to a registration rights agreement with Security Capital
granting Security Capital the right to require us, upon notice, to register its
shares of our common stock for resale under the Securities Act of 1933. Security
Capital has requested this registration under that agreement by notice to us
dated May 14, 2003. The agreement contains terms customary for registration
rights agreements of its type, including indemnification provisions.
RELATED PARTY TRANSACTIONS
Until May 13, 2002, Macquarie Capital Partners LLC was 40% owned by
Security Capital. Under an agreement with us, Macquarie Capital Partners LLC
acts as our financial advisor in connection with identifying
9
alternative sources of capital, including arranging and structuring joint
ventures or funds that own grocery-anchored shopping centers. Fees paid to
Macquarie Capital Partners LLC are based upon a percentage (a range of 2% - 3%)
of capital raised. During 2002, 2001 and 2000, respectively, we paid
approximately $1.7 million, $1.2 million and $1.5 million for these services.
During 2002, 2001 and 2000, respectively, we paid Security Capital
approximately $376,000, $35,000 and $460,000 for insurance administrative,
property tax, and income tax consulting services under an administrative
services agreement. Security Capital continues to provide insurance
administrative services under that agreement.
MATERIAL RELATIONSHIPS WITH GENERAL ELECTRIC
On November 21, 1996 we entered into a $11.5 million mortgage loan with
General Electric Capital Corporation. The loan is secured by one of our centers,
Pike Creek, bears interest at the rate of 9.04% per year and matures on November
21, 2003. The mortgage loan was subsequently assigned to Fair Oak LLC for which
General Electric Capital Corporation acts as manager and servicer.
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling shareholder. All
costs, expenses and fees in connection with the registration of the shares
offered hereby, other than our legal and accounting fees in excess of $25,000,
and all brokerage commissions and similar selling expenses, if any, attributable
to the sale of shares will be borne by the selling shareholder.
Common stock may be sold from time to time by Security Capital or by its
permitted pledgees, transferees or other successors in interest to Security
Capital. The distribution of the common stock may be effected in one or more
transactions that may take place through the New York Stock Exchange, including
block trades or ordinary broker's transactions, or through broker-dealers acting
either as principal or agent, or through privately negotiated transactions, or
through an underwritten public offering, or through a combination of any such
methods of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices for cash or
other consideration. Usual and customary or specifically negotiated brokerage
fees or commissions may be paid by Security Capital in connection with such
sales. Additionally, Security Capital may sell common stock upon conversion or
exchange of convertible or exchangeable securities issued by Security Capital or
in satisfaction of options or short sales of shares.
The aggregate proceeds to Security Capital from the sale of common stock
will be the purchase price of the common stock sold less the aggregate agents'
commissions and underwriters' discounts, if any, and other expenses of issuance
and distribution not borne by us. Security Capital and any dealers or agents
that participate in the distribution of the common stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of the common stock by them and any commissions received by any such
dealers or agents might be deemed to be underwriting discounts and commissions
under the Securities Act.
To the extent required, the specific number of shares of common stock to be
sold, the names of the selling shareholders, if other than Security Capital,
purchase price, public offering price, the terms upon which such securities may
be issued, the names of any agent, dealer or underwriter, and any applicable
commission or discount with respect to a particular offering will be set forth
in any accompanying prospectus supplement.
We have also agreed to indemnify Security Capital against specified
liabilities, including certain potential liabilities arising under the
Securities Act, or to contribute to the payments Security Capital may be
required to make in respect thereof.
Because the selling shareholder may be deemed to be an "underwriter" within
the meaning of Section 2(11) of the Securities Act, the selling shareholder will
be subject to the prospectus delivery requirements of the Securities Act, which
may include delivery through the facilities of the NYSE pursuant to Rule 153
under the Securities Act. We have informed the selling shareholder that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to its sales in the market.
The selling shareholder also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such rule.
10
DESCRIPTION OF CAPITAL STOCK
GENERAL
We are authorized to issue up to 150,000,000 shares of common stock, $.01
par value per share, 10,000,000 shares of special common stock, $.01 par value,
and 10,000,000 shares of preferred stock, $.01 par value per share. As of May
13, 2003, we had 60,482,796 shares of common stock issued and outstanding. We
also had depositary shares representing an aggregate of 300,000 shares of 7.45%
Series 3 cumulative redeemable preferred stock issued and outstanding on that
date. In addition, we have reserved for issuance, upon exchange of six
corresponding series of preferred limited partnership interests of our operating
partnership, an aggregate of 3,890,000 million shares of cumulative redeemable
preferred stock.
All of the outstanding capital stock is fully paid and non-assessable.
COMMON STOCK
Holders of common stock are entitled to one vote per share. All actions
submitted to a vote of shareholders are voted on by holders of common stock
voting together as a single class. Holders of common stock are not entitled to
cumulative voting in the election of directors.
Holders of common stock are entitled to receive dividends in cash or in
property on an equal basis, if and when dividends are declared on the common
stock by our board of directors, subject to any preference in favor of
outstanding shares of preferred stock.
In the event of liquidation of our company, all holders of common stock
will participate on an equal basis with each other in our net assets available
for distribution after payment of our liabilities and payment of any liquidation
preferences in favor of outstanding shares of preferred stock.
Holders of common stock are not entitled to preemptive rights, and the
common stock is not subject to redemption.
The rights of holders of common stock are subject to the rights of holders
of any preferred stock that we designate or have designated. The rights of
preferred shareholders may adversely affect the rights of the common
shareholders.
SPECIAL COMMON STOCK
Under our articles of incorporation, our board of directors is authorized,
without further shareholder action, to provide for the issuance of up to
10,000,000 shares of special common stock from time to time in one or more
classes or series. The special common stock will bear dividends in such amounts
as the board may determine with respect to each class or series. Dividends on
any class or series of special common stock must be PARI PASSU with dividends on
our common stock. Upon the liquidation, dissolution or winding up of the
company, the special common stock will participate PARI PASSU with the common
stock in liquidating distributions. Shares of special common stock will have one
vote per share and vote together with the holders of common stock (and not
separately as a class except where otherwise required by law), unless the board
of directors creates classes or series with more limited voting rights or
without voting rights. The board will have the right to determine whether shares
of special common stock may be converted into shares of any other class or
series or be redeemed, and, if so, the redemption price and the other terms and
conditions of redemption, and to determine such other rights as may be allowed
by law. Holders of special common stock will not be entitled, as a matter of
right, to preemptive rights. As all special common stock is expected to be
closely held, it is anticipated that most classes or series would be convertible
into common stock for liquidity purposes.
PREFERRED STOCK
Our board of directors has the ability to issue up to 10,000,000 shares of
preferred stock in one or more series, without shareholder approval. The board
of directors may designate for the series:
o the number of shares and name of the series,
o the voting powers of the series, including the right to elect directors,
if any,
o the dividend rights and preferences, if any,
11
o redemption terms, if any,
o liquidation preferences and the amounts payable on liquidation or
dissolution,
o the terms upon which the series may be converted into any other series
or class of our stock, including the common stock and
o any other terms that are not prohibited by law.
7.45% SERIES 3 CUMULATIVE REDEEMABLE PREFERRED STOCK
The Series 3 preferred shares are represented by depositary shares. Each
depositary share represents 1/10th of a share of Series 3 preferred stock. The
Series 3 preferred shares have a liquidation preference of $250 per share ($25
per depositary share) and are entitled to a cumulative dividend at the rate of
7.45% of the liquidation preference per year ($1.8625 per year per depositary
share). As to the limited matters on which the Series 3 preferred stock is
entitled to vote, generally voting as a class with other preferred shares upon
which like voting rights have been granted, each share of Series 3 preferred
stock is entitled to one vote per $25 of liquidation preference. At any time
after April 3, 2008, we have the right, but not the obligation, to redeem the
Series 3 preferred stock for cash at a redemption price of $250 per share
(equivalent to $25 per depositary share), plus all accrued but unpaid dividends.
CUMULATIVE REDEEMABLE PREFERRED STOCK RESERVED FOR ISSUANCE
We have reserved six series of cumulative redeemable preferred stock for
issuance upon exchange, on a one-share-for-one-unit basis, of six corresponding
series of preferred limited partnership interests in Regency Centers, L.P., our
operating partnership. The limited partnership interests were issued in private
placements to institutional investors. Each corresponding series of cumulative
redeemable preferred stock:
o will be entitled to a liquidation preference;
o will bear cumulative preferential quarterly dividends based on a
specified percentage of the liquidation preference;
o will not be convertible into our common stock;
o will have no stated maturity or mandatory redemption; and
o will be redeemable from time to time at our election. The preferred
stock generally will be issuable beginning 10 years after the date of
issuance of the corresponding series of preferred units. The following
table sets forth additional information about each series of the
cumulative redeemable preferred stock.
AGGREGATE
UNITS ISSUED/ LIQUIDATION DISTRIBUTION CALLABLE EXCHANGEABLE
SERIES SHARES ISSUABLE PREFERENCE RATE BY REGENCY BY UNITHOLDER
-------- --------------- ------------ ------------- ---------- -------------
Series A 1,600,000 $ 80,000,000 8.125% 06/25/03 06/25/08
Series B 850,000 85,000,000 8.750% 09/03/04 09/03/09
Series C 400,000 40,000,000 9.000% 09/03/04 09/03/09
Series D 500,000 50,000,000 9.125% 09/29/04 09/29/09
Series E 300,000 30,000,000 8.750% 05/25/05 05/25/10
Series F 240,000 24,000,000 8.750% 09/08/05 09/08/10
--------- ------------
3,890,000 $309,000,000
========= ============
It is impossible for us to state the actual effect it will have on common
stock holders if the board of directors designates any new series of preferred
stock. The effects of such a designation will not be determinable until the
rights accompanying the series have been designated. The issuance of preferred
stock could adversely affect the voting power, liquidation rights or other
rights held by owners of common stock or other series of preferred stock. The
board of directors' authority to issue preferred stock without shareholder
approval could make it more difficult for a third party to acquire control of
our company, and could discourage any such attempt.
12
STATUTORY PROVISIONS AND PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS
The following provisions of the Florida Business Corporation Act and our
articles of incorporation and bylaws could have the effect of preventing or
delaying a person from acquiring or seeking to acquire a substantial equity
interest in, or control of, our company.
RESTRICTIONS ON OWNERSHIP
RESTRICTIONS RELATING TO REIT QUALIFICATION. For Regency Centers to qualify
as a REIT, not more than 50% in value of our outstanding capital stock may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Internal Revenue Code of 1986, as amended (the "Code"), to include certain
entities such as qualified pension plans) during the last half of a taxable
year. Also, our stock must be beneficially owned (without reference to
attribution rules) by 100 or more persons during at least 335 days in a taxable
year of 12 months or during a proportionate part of a shorter taxable year, and
certain other requirements must be satisfied (see "Federal Income Tax
Considerations-Requirements for Qualification").
To assure that five or fewer individuals do not Beneficially Own (as
defined in our articles to include ownership through the application of certain
stock attribution provisions of the Code) more than 50% in value of our
outstanding capital stock, our articles provide that, subject to certain
exceptions, no holder may own, or be deemed to own (by virtue of certain of the
attribution provisions of the Code), more than 7% by value (the "Ownership
Limit") of our outstanding capital stock.
Certain existing holders specified in our articles and those to whom
Beneficial Ownership of their capital stock is attributed, whose Beneficial
Ownership of capital stock exceeds the Ownership Limit ("Existing Holders"), may
continue to own such percentage of outstanding capital stock (the "Existing
Holder Limit") and may increase their respective Existing Holder Limits through
our benefit plans, dividend reinvestment plans, additional asset sales or
capital contributions to Regency Centers or acquisitions from other Existing
Holders, but may not acquire additional shares from such sources such that the
five largest Beneficial Owners of capital stock hold more than 49.5% by value of
the outstanding capital stock, and in any event may not increase their
respective Existing Holder Limits through acquisition of capital stock from any
other sources.
In addition, Security Capital and its affiliates may not own more than 60%
of our outstanding common stock on a fully diluted basis ("Special Shareholder
Limit"). The Special Shareholder Limit will be reduced to 49% of our common
stock on a fully diluted basis if the ownership by Security Capital and its
affiliates drops below 45% for 180 consecutive days. The Special Shareholder
Limit also will be increased or reduced in certain other events specified in our
articles.
Because rent from a related tenant (any tenant 10% of which is owned,
directly or constructively, by the REIT) is not qualifying rent for purposes of
the gross income tests under the Code (see "Federal Income Tax
Considerations-Requirements for Qualification-Income Tests"), our articles also
provide that no constructive owner of our stock who owns, directly or
indirectly, a 10% interest in any of our tenants (a "Related Tenant Owner") may
own, or constructively own by virtue of certain of the attribution provisions of
the Code (which differ from the attribution provisions applied to determine
Beneficial Ownership), more than 9.8% by value of our outstanding capital stock
(the "Related Tenant Limit").
Our board of directors may waive the Ownership Limit, the Existing Holder
Limit, the Special Shareholder Limit and the Related Tenant Limit if evidence
satisfactory to the board is presented that such ownership will not then or in
the future jeopardize our status as a REIT. As a condition of such waiver, the
board may require opinions of counsel satisfactory to it and/or an undertaking
from the applicant with respect to preserving our REIT status.
Any shares issued or transferred in violation of the foregoing restriction
will be void, or if such remedy is invalid, will be subject to the provisions
for "excess shares" described below.
Our articles previously restricted the ownership of our capital stock by
non-U.S. persons, but these restrictions have been repealed.
13
REMEDIES. If:
(1) shares of capital stock in excess of the applicable Ownership Limit,
Existing Holder Limit, Special Shareholder Limit, or Related Tenant
Limit, or
(2) shares which (a) would cause Regency Centers to be beneficially owned
by fewer than 100 persons (without application of the attribution
rules) or (b) would result in Regency Centers being "closely held"
within the meaning of Section 856(h) of the Code,
are issued or transferred to any person or retained by any person after becoming
a Related Tenant Owner, such issuance, transfer, or retention shall be null and
void to the intended holder, and the intended holder will have no rights to the
stock. Capital stock transferred, proposed to be transferred, or retained in
excess of the Ownership Limit, the Existing Holder Limit, the Special
Shareholder Limit or the Related Tenant Limit or which would otherwise
jeopardize our REIT status ("excess shares") will be deemed held in trust on
behalf of and for our benefit. Our board of directors will, within six months
after receiving notice of such actual or proposed transfer, either (i) direct
the holder of such shares to sell all shares held in trust for us for cash in
such manner as the board directs, or (ii) redeem such shares for a price equal
to the lesser of (a) the price paid by the holder from whom shares are being
redeemed and (b) the average of the last reported sales prices on the NYSE of
the relevant class of capital stock on the 10 trading days immediately preceding
the date fixed for redemption by the board, or if such class of capital stock is
not then traded on the NYSE, the average of the last reported sales prices of
such class of capital stock (or, if sales prices are not reported, the average
of the closing bid and asked prices) on the 10 trading days immediately
preceding the relevant date as reported on any exchange or quotation system over
which such class of capital stock may be traded, or if such class of capital
stock is not then traded over any exchange or quotation system, then the price
determined in good faith by the board as the fair market value of such class of
capital stock on the relevant date. If the board directs the intended holder to
sell the shares, the holder shall receive such proceeds as our trustee and pay
us out of the proceeds of such sale all expenses incurred by us in connection
with such sale, plus any remaining amount of such proceeds that exceeds the
amount originally paid by the intended holder for such shares. The intended
holder shall not be entitled to distributions, voting rights or any other
benefits with respect to such excess shares except the amounts described above.
Any dividend or distribution paid to an intended holder on excess shares
pursuant to our articles must be repaid to us upon demand.
MISCELLANEOUS. All certificates representing capital stock will bear a
legend referring to the restrictions described above. The transfer restrictions
described above shall not preclude the settlement of any transaction entered
through the facilities of the New York Stock Exchange.
Our articles provide that every shareholder of record of more than 5% of
the outstanding capital stock and every actual owner (as defined in our
articles) of more than 5% of the outstanding capital stock held by a nominee
must give us written notice of information specified in our articles within 30
days after December 31 of each year. In addition, each beneficial owner of
capital stock and each person who holds capital stock for a beneficial owner
must provide us such information as we may request, in good faith, in order to
determine our status as a REIT and to comply with the requirements of any taxing
authority or governmental authority or to determine such compliance.
The ownership limitations described above may have the effect of precluding
a third party from acquiring control of Regency Centers even if our board of
directors determines that maintenance of REIT status is no longer in our best
interests. The board of directors has the right under our articles (subject to
contractual restrictions) to revoke our REIT status if the board of directors
determines that it is no longer in our best interest to attempt to qualify, or
to continue to qualify, as a REIT. In the event of such revocation, the
ownership limitations in our articles will remain in effect. Any change in the
ownership limitations would require an amendment to our articles.
STAGGERED BOARD OF DIRECTORS
Our articles and bylaws divide the board into three classes of directors,
with each class constituting approximately one-third of the total number of
directors and with classes serving staggered three-year terms. The
classification of directors will have the effect of making it more difficult for
shareholders to change the composition of our board. We believe, however, that
the longer time required to elect a majority of a classified board of directors
helps to insure continuity and stability of our management and policies.
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The classification provisions could also have the effect of discouraging a
third party from accumulating large blocks of our stock or attempting to obtain
control of Regency Centers, even though such an attempt might be beneficial to
Regency Centers and its shareholders. Accordingly, shareholders could be
deprived of opportunities to sell their shares of capital stock at a higher
market price than might otherwise be the case.
ADVANCE NOTICE PROVISIONS FOR SHAREHOLDER NOMINATIONS AND SHAREHOLDER
PROPOSALS
Our bylaws establish an advance notice procedure for shareholders to make
nominations of candidates for election as directors or to bring other business
before any meeting of our shareholders. Any shareholder nomination or proposal
for action at an upcoming shareholder meeting must be delivered to Regency
Centers no later than the deadline for submitting shareholder proposals pursuant
to Rule 14a-8 under the Exchange Act. The presiding officer at any shareholder
meeting is not required to recognize any proposal or nomination which did not
comply with this deadline.
The purpose of requiring shareholders to give advance notice of nominations
and other business is to afford our board a meaningful opportunity to consider
the qualifications of the proposed nominees or the advisability of the other
proposed business and, to the extent deemed necessary or desirable by our board,
to inform shareholders and make recommendations about such qualifications or
business, as well as to provide a more orderly procedure for conducting meetings
of shareholders. Although our bylaws do not give the board any power to
disapprove timely shareholder nominations for the election of directors or
proposals for action, they may have the effect of precluding a contest for the
election of directors or the consideration of shareholder proposals if the
proper procedures are not followed, and of discouraging or deterring the third
party from conducting a solicitation of proxies to elect its own slate of
directors or to approve its own proposal.
CERTAIN PROVISIONS OF FLORIDA LAW
We are subject to anti-takeover provisions that apply to public
corporations organized under Florida law unless the corporation has elected to
opt out of those provisions in its articles of incorporation or its bylaws. We
have not elected to opt out of these provisions.
Subject to certain exceptions, the Florida Business Corporation Act
prohibits the voting of shares in a publicly held Florida corporation that are
acquired in a "control share acquisition" unless:
o the board of directors approves the control share acquisition or
o the holders of a majority of the corporation's voting shares approve the
granting of voting rights to the acquiring party.
A "control share acquisition" is defined as an acquisition that immediately
thereafter entitles the acquiring party, directly or indirectly, to vote in the
election of directors within any of the following ranges of voting power:
o 1/5 or more but less than 1/3;
o 1/3 or more but less than a majority; and
o a majority or more.
The Florida Business Corporation Act also contains an "affiliated
transaction" provision that prohibits a publicly held Florida corporation from
engaging in a broad range of business combinations or other extraordinary
corporate transactions with an "interested shareholder" unless:
o the transaction is approved by a majority of disinterested directors
before the person becomes an interested shareholder;
o the corporation has not had more than 300 shareholders of record during
the three years preceding the "affiliated transaction";
o the interested shareholder has owned at least 80% of the corporation's
outstanding voting shares for at least five years;
o the interested shareholder is the beneficial owner of at least 90% of
the voting shares (excluding shares acquired directly from the
corporation in a transaction not approved by a majority of the
disinterested directors);
15
o consideration is paid to the holders of the corporation's shares equal
to the highest amount per share paid by the interested shareholder for
the acquisition of the corporation's shares in the last two years or
fair market value, and other specified conditions are met; or
o the transaction is approved by the holders of two-thirds of the
corporation's voting shares other than those owned by the interested
shareholder.
An "interested shareholder" is defined as a person who, together with
affiliates and associates, beneficially owns more than 10% of a company's
outstanding voting shares.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Florida Business Corporation Act authorizes Florida corporations to
indemnify any person who was or is a party to any proceeding other than an
action by, or in the right of, the corporation, by reason of the fact that he or
she is or was a director, officer, employee, or agent of the corporation. The
indemnity also applies to any person who is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation or
other entity. The indemnification applies against liability incurred in
connection with such a proceeding, including any appeal thereof, if the person
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation. To be eligible for indemnity
with respect to any criminal action or proceeding, the person must have had no
reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or on behalf of a corporation, indemnification
may not be made if the person seeking indemnification is found liable, unless
the court in which the action was brought determines such person is fairly and
reasonably entitled to indemnification.
The indemnification provisions of the Florida Business Corporation Act
require indemnification if a director, officer, employee or agent has been
successful in defending any action, suit or proceeding to which he or she was a
party by reason of the fact that he is or was a director, officer, employee or
agent of the corporation. The indemnity covers expenses actually and reasonably
incurred in defending the action.
The indemnification authorized under Florida law is not exclusive and is in
addition to any other rights granted to officers and directors under the
articles of incorporation or bylaws of the corporation or any agreement between
officers and directors and the corporation. Each of our directors and executive
officers has signed an indemnification agreement. The indemnification agreements
provide for full indemnification of our directors and executive officers under
Florida law. The indemnification agreements also provide that we will indemnify
the officer or director against liabilities and expenses incurred in a
proceeding to which the officer or director is a party or is threatened to be
made a party, or in which the officer or director is called upon to testify as a
witness or deponent, in each case arising out of actions of the officer or
director in his or her official capacity. The officer or director must repay
such expenses if it is subsequently found the officer or director is not
entitled to indemnification. Exceptions to this additional indemnification
include criminal violations by the officer or director, transactions involving
an improper personal benefit to the officer or director, unlawful distributions
of our assets under Florida law and willful misconduct or conscious disregard
for our best interests.
Our bylaws provide for the indemnification of directors, former directors
and officers to the maximum extent permitted by Florida law and for the
advancement of expenses incurred in connection with the defense of any action,
suit or proceeding that the director or officer was a party to by reason of the
fact that he or she is or was a director or officer of our corporation, or at
our request, a director, officer, employee or agent of another corporation. Our
bylaws also provide that we may purchase and maintain insurance on behalf of any
director against liability asserted against the director in such capacity.
Under the Florida Business Corporation Act, a director is not personally
liable for monetary damages to us or to any other person for acts or omissions
in his or her capacity as a director except in certain limited circumstances.
Those circumstances include violations of criminal law (unless the director had
reasonable cause to believe that such conduct was lawful or had no reasonable
cause to believe such conduct was unlawful), transactions in which the director
derived an improper personal benefit, transactions involving unlawful
distributions, and conscious disregard for the best interest of the corporation
or willful misconduct (only if the proceeding is by or in the right of the
corporation). As a result, shareholders may be unable to recover monetary
damages against directors for actions taken by them which constitute negligence
or gross negligence or which are in violation of their fiduciary duties,
although injunctive or other equitable relief may be available.
TRANSFER AGENT AND REGISTRAR
The transfer agent for our common stock is Wachovia Bank, National
Association, Charlotte, North Carolina.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain of the material federal income tax
considerations regarding Regency Centers and is based on current law, is for
general information only and is not tax advice. This discussion does not purport
to deal with all aspects of taxation that may be relevant to particular
investors in light of their personal investment or tax circumstances, or to
certain types of holders (including insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, foreign corporations,
persons who are not citizens or residents of the United States, persons who own
shares as part of a conversion transaction, as part of a hedging transaction or
as a position in a straddle for tax purposes, persons whose functional currency
is not the U.S. dollar and traders in securities that elect mark-to-market
accounting) subject to special treatment under the federal income tax laws. This
summary deals only with shareholders of Regency Centers that hold shares as
"capital assets," within the meaning of Section 1221 of the Code. This summary
does not discuss any state, local, or foreign tax considerations. This summary
is based in its entirety on the applicable Code provisions, rules and
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as of the date hereof and all of which are subject
to change (which change may apply retroactively).
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP
AND SALE OF SECURITIES IN AN ENTITY ELECTING TO BE TAXED AS A REAL ESTATE
INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
As used in this section, the term "Company" refers to Regency Centers
Corporation and all qualified REIT subsidiaries (a wholly-owned subsidiary which
is not treated as a separate entity for federal income tax purposes) but
excludes Regency Realty Group, Inc. and its subsidiaries (collectively, the
"Management Company") (which is treated as a separate entity for federal income
tax purposes, although its results are consolidated with those of the Company
for financial reporting purposes).
GENERAL
The Company made an election to be taxed as a REIT under Sections 856
through 860 of the Code commencing with its taxable year ending December 31,
1993. The Company believes that it has been organized and operated in such a
manner as to qualify for taxation as a REIT under the Code for such taxable year
and all subsequent taxable years to date, and the Company intends to continue to
operate in such a manner in the future. However, no assurance can be given that
the Company will operate in a manner so as to qualify or remain qualified as a
REIT.
The following sets forth only a summary of the material aspects of the Code
sections that govern the federal income tax treatment of a REIT and its
shareholders.
It is the opinion of Foley & Lardner that the Company has been organized
and operated in conformity with the requirements for qualification and taxation
as a REIT commencing with the Company's taxable year that ended December 31,
1993 and for all subsequent taxable years to date, and its method of operation
will enable it to continue to be taxed as a REIT. It must be emphasized that
this opinion is based and conditioned upon certain representations made by the
Company as to factual matters including, but not limited to, those set forth
below in this discussion of "Federal Income Tax Considerations," those
concerning its business and properties, and certain matters relating to the
Company's manner of operation. Foley & Lardner is not aware of any facts or
circumstances that are inconsistent with these representations. The
qualification and taxation as a REIT depends upon the Company's ability to meet,
through actual annual operating results, the various income, asset,
distribution, stock ownership and other tests discussed below, the results of
which will not be reviewed by nor be under the control of Foley & Lardner.
Accordingly, no assurance can be given that the actual results of the Company's
operation for any particular taxable year will satisfy such requirements. For a
discussion of the tax consequences of failure to qualify as a real estate
investment trust, see "-- Failure to Qualify."
TAXATION OF THE COMPANY
As a REIT, the Company generally is not subject to federal corporate income
tax on its net income that is currently distributed to shareholders. This
treatment substantially eliminates the "double taxation" (at the
17
corporate and shareholder levels) that generally results from an investment in a
corporation. However, the Company will be subject to federal income tax in the
following circumstances. First, the Company will be taxed at regular corporate
rates on any undistributed REIT taxable income, including undistributed net
capital gains. Second, under certain circumstances, the Company may be subject
to the "corporate alternative minimum tax" on its items of tax preference.
Third, if the Company has (i) net income from the sale or other disposition of
"foreclosure property" (which is, in general, property acquired by the Company
by foreclosure or otherwise on default of a loan secured by the property) which
is held primarily for sale to customers in the ordinary course of business or
(ii) other non-qualifying net income from foreclosure property, it will be
subject to tax on such income at the highest corporate rate. Fourth, if the
Company has net income from "prohibited transactions" (which are, in general,
certain sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business other than foreclosure property),
such income will be subject to a 100% tax. Fifth, if the Company fails to
satisfy either the 75% gross income test or the 95% gross income test discussed
below, but still maintains its qualification as a REIT because other
requirements are met, the Company will be subject to a tax equal to the gross
income attributable to the greater of either (1) the amount by which 75% of the
Company's gross income exceeds the amount of the Company's income qualifying
under the 75% test for the taxable year or (2) the amount by which 90% of the
Company's gross income exceeds the amount of the Company's income qualifying for
the 95% income test for the taxable year, multiplied by a fraction intended to
reflect the Company's profitability. Sixth, if the Company should fail to
distribute during each calendar year at least the sum of (i) 85% of its REIT
ordinary income for such year, (ii) 95% of its REIT capital gain net income for
such year, and (iii) any undistributed taxable income from prior years, it will
be subject to a 4% excise tax on the excess of such required distribution over
the amounts actually distributed. Seventh, the Company will be subject to a 100%
penalty tax on some payments it receives (or on certain expenses deducted by a
taxable REIT subsidiary) if arrangements among the Company, its tenants, and the
Company's taxable REIT subsidiaries are not comparable to similar arrangements
among unrelated parties. Eighth, when assets are acquired from a "C" corporation
in a carryover basis transaction, the "C" corporation is generally required to
recognize gain with respect to the assets' "built-in gain." Built-in gain is the
amount by which an asset's fair market value exceeds its adjusted basis. If the
Company was the successor to these acquired entities, the Company would be
liable for any tax owed by them as a result of the recognition of built-in gain.
Applicable treasury regulations, however, allow an acquiring REIT, such as the
Company, to avoid the recognition of gain and the imposition of corporate level
tax on a built-in gain asset acquired in a carryover basis transaction from a
"C" corporation on or after January 2, 2002 unless and until the acquiring REIT
disposes of that built-in gain asset in a taxable transaction during the 10-year
period following the asset's acquisition (the "Recognition Period"), at which
time the acquiring REIT would recognize, and would be subject to the highest
regular corporate rate of tax on, the built-in gain.
In addition, the Management Company is taxed on its income at regular
corporate rates.
REQUIREMENTS FOR QUALIFICATION
A REIT is defined in the Code as a corporation, trust or association: (1)
which is managed by one or more trustees or directors; (2) the beneficial
ownership of which is evidenced by transferable shares or by transferable
certificates of beneficial interest; (3) which would be taxable as a domestic
corporation, but for Sections 856 through 859 of the Code; (4) which is neither
a financial institution nor an insurance company subject to certain provisions
of the Code; (5) the beneficial ownership of which is held by 100 or more
persons (determined without reference to any rules of attribution); (6) not more
than 50% in value of the outstanding stock of which is owned during the last
half of each taxable year, directly or indirectly, by or for "five or fewer"
individuals (as defined in the Code to include certain entities); (7) which
meets certain income and asset tests described below and (8) which makes an
election to be a REIT for the current taxable year or has made such an election
for a previous taxable year which has not been terminated or revoked. Conditions
(1) to (4), inclusive, must be met during the entire taxable year and condition
(5) must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months. The
Company has previously issued sufficient shares to allow it to satisfy
conditions (5) and (6). The Company's articles of incorporation provide
restrictions regarding the transfer of its shares which are intended to assist
the Company in continuing to satisfy the stock ownership requirements described
in (5) and (6) above. Moreover, for the Company's taxable years commencing on or
after January 1, 1998, if the Company complies with regulatory rules pursuant to
which it is required to send annual letters to certain of its shareholders
requesting information regarding the actual ownership of its stock, but does not
know, or exercising reasonable diligence would not have known, whether it failed
to
18
meet the requirement that it not be closely held, the Company will be treated as
having met the "five or fewer" requirement. If the Company were to fail to
comply with these regulatory rules for any year, it would be subject to a
$25,000 penalty. If the Company's failure to comply was due to intentional
disregard of the requirements, the penalty would be increased to $50,000.
However, if the Company's failure to comply was due to reasonable cause and not
willful neglect, no penalty would be imposed.
In addition, the Company must satisfy all relevant filing and other
administrative requirements established by the IRS that must be met to elect and
maintain REIT status, use a calendar year for federal income tax purposes, and
comply with the recordkeeping requirements of the Code and regulations
promulgated thereunder.
On several occasions, Congress has proposed legislation adding an
additional requirement for REIT qualification. This proposed legislation would
require that an entity seeking to qualify as a REIT not be a "controlled
entity." This legislation was proposed most recently in the Jobs and Growth Tax
Relief Reconciliation Act of 2003, which the Senate passed on May 15, 2003.
Under this legislation, an entity is a controlled entity if, at any time during
the taxable year, one person (excluding other REITs), in the case of a
corporation, owns stock possessing at least 50% of the total voting power of the
stock of such corporation, or having a value equal to at least 50% of the total
value of the stock of such corporation, or in the case of a trust, owns
beneficial interests in the trust which would meet the 50% vote or value tests
applicable for corporations if such interests were stock. This legislation is
proposed to be effective for taxable years ending after May 8, 2003; however,
under a grandfathering provision, the additional requirement would not apply to
any entity which was a controlled entity as of May 8, 2003, which is a REIT for
the taxable year which includes such date, and which has significant assets or
activities as of such date. As of May 15, 2003, Security Capital owned
approximately 56.7% of the voting power of the Company and hence, the Company is
a controlled entity within the meaning of this proposed legislation. However,
the Company believes that it would satisfy the provisions of the grandfathering
exception as presently proposed, and would not be disqualified from maintaining
its REIT status by virtue of Security Capital's ownership. No assurances can be
given, however, about what form any final legislation might take and whether a
similar grandfathering provision would be included.
The Company owns its properties through its operating partnership, Regency
Centers, L.P. (the "Partnership"), of which the Company is the general partner
and a Company subsidiary is the principal limited partner. The former owners of
certain Partnership properties and certain investment funds also are limited
partners. The Company presently owns certain of its properties indirectly
through other partnerships and limited liability companies (collectively with
the Partnership, the "Property Partnerships"), of which the partners are the
Partnership and certain third parties. In the case of a REIT which is a partner
in a partnership either directly or indirectly through a qualified REIT
subsidiary, Treasury Regulations provide that the REIT will be deemed to own its
proportionate share of the assets of the partnership and will be deemed to be
entitled to the income of the partnership attributable to such share. In
addition, the character of the assets and gross income of the partnership will
retain the same character in the hands of the REIT for purposes of Section 856
of the Code, including satisfying the gross income tests and asset tests. Thus,
the Company's proportionate share of the assets, liabilities and items of income
of the Property Partnerships (other than certain properties held by the
Management Company), is treated as assets, liabilities and items of income of
the Company for purposes of applying the requirements described below.
The Company believes that each of the Property Partnerships in which it
owns an interest, directly or through another partnership or limited liability
company, will be treated as partnerships or disregarded for federal income tax
purposes and will not be taxable as corporations. If any of these entities were
treated as a corporation, it would be subject to an entity level tax on its
income and the Company could fail to meet the REIT income and asset tests. For a
discussion of the tax consequences of failure to qualify as a real estate
investment trust, see "-- Failure to Qualify."
If a REIT owns a corporate subsidiary that is a "qualified REIT
subsidiary," the separate existence of that subsidiary will be disregarded for
federal income tax purposes. Generally, a qualified REIT subsidiary is a
corporation, other than a taxable REIT subsidiary (discussed below), all of the
capital stock of which is owned by the REIT. All assets, liabilities and items
of income, deduction and credit of the qualified REIT subsidiary will be treated
as assets, liabilities and items of income, deduction and credit of the REIT
itself. A qualified REIT subsidiary of Company will not be subject to federal
corporate income taxation, although it may be subject to state and local
taxation in some states. Although in the past the Company owned some of its
properties indirectly
19
through qualified REIT subsidiaries, at the present time, the Company does not
utilize any qualified REIT subsidiaries.
A "taxable REIT subsidiary" of the Company is a corporation in which the
Company directly or indirectly owns stock and that elects, together with the
Company, to be treated as a taxable REIT subsidiary under Section 856(l) of the
Code. In addition, if a taxable REIT subsidiary of the Company owns, directly or
indirectly, securities representing 35% or more of the vote or value of a
subsidiary corporation, that subsidiary will also be treated as a taxable REIT
subsidiary of the Company. A taxable REIT subsidiary is a corporation subject to
federal income tax, and state and local income tax where applicable, as a
regular "C" corporation.
Generally, a taxable REIT subsidiary can perform some impermissible tenant
services without causing the Company to receive impermissible tenant services
income under the REIT income tests. However, several provisions regarding the
arrangements between a REIT and its taxable REIT subsidiaries are intended to
ensure that a taxable REIT subsidiary will be subject to an appropriate level of
federal income taxation. For example, a taxable REIT subsidiary is limited in
its ability to deduct interest payments made to the Company. In addition, a REIT
will be obligated to pay a 100% penalty tax on some payments that it receives or
on certain expenses deducted by the taxable REIT subsidiary if the economic
arrangements between the REIT, the REIT's tenants and the taxable REIT
subsidiary are not comparable to similar arrangements among unrelated parties.
The Management Company has made an election to be treated as a taxable REIT
subsidiary of the Company.
INCOME TESTS
In order for the Company to maintain its qualification as a REIT, it must
satisfy two gross income requirements annually. First, at least 75% of the
Company's gross income (excluding gross income from prohibited transactions) for
each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property, including "rents from
real property", gains on the disposition of real estate, dividends paid by
another REIT and interest on obligations secured by mortgages on real property
or on interests in real property or from certain types of temporary investments.
Second, at least 95% of the Company's gross income (excluding gross income
from prohibited transactions) for each taxable year must be derived from any
combination of income qualifying under the 75% test and from dividends,
interest, some payments under hedging instruments, gain from the sale or
disposition of stock or securities and some hedging instruments.
Rents received by the Company qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if the
following conditions are met. First, the amount of rent must not be based in
whole or in part on the income or profits derived by any person from such
property, although an amount received or accrued generally will not be excluded
from the term "rents from real property" solely by reason of being based on a
fixed percentage or percentages of receipts or sales. The Company does not
anticipate charging rent for any portion of any property that is based in whole
or in part on the income or profits of any person (except by reason of being
based on a percentage of receipts for sales, which is permitted by the Code).
Second, rents received from a "related party tenant" will not qualify as rents
from real property in satisfying the gross income tests unless the tenant is a
taxable REIT subsidiary and at least 90% of the property is leased to unrelated
tenants and the rent paid by the taxable REIT subsidiary is substantially
comparable to the rent paid by the unrelated tenants for comparable space. A
tenant is a related party tenant if the REIT, or an actual or constructive owner
of 10% or more of the REIT, actually or constructively owns 10% or more of the
tenant. The Company does not anticipate receiving rents from such a tenant.
Additionally, pursuant to the articles of incorporation, Related Tenant Owners
are prohibited from acquiring constructive ownership of more than 9.8% by value
of the Company. Third, rent attributable to personal property leased in
connection with a lease of real property will not qualify if it is greater than
15% of the total rent received under the lease. Fourth, for rents to qualify as
rents from real property for the purpose of satisfying the gross income tests,
the Company is generally only allowed directly to provide services that are
"usually or customarily rendered" in connection with the rental of real property
and not otherwise considered "rendered to the occupant." Accordingly, the
Company may not provide "impermissible services" to tenants (except through a
taxable REIT subsidiary, or through an independent contractor that bears the
expenses of providing the services and from whom the Company derives no revenue)
without giving rise to "impermissible tenant service income," which is
nonqualifying income for purposes of the income tests. For this purpose, the
amount that the Company would be deemed to have received for performing
20
any "impermissible services" will be the greater of the actual amount so
received or 150% of the direct cost to the Company of providing those services.
If impermissible tenant service income exceeds 1% of the Company's total income
from a property, all of the income from that property will fail to qualify as
rents from real property. If the total amount of impermissible tenant service
income from a property does not exceed 1% of the Company's total income from the
property, the services will not "taint" the other income from the property (that
is, they will not cause the rent paid by tenants of that property to fail to
qualify itself as rents from real property), but the impermissible tenant
service income will not qualify as rents from real property. The Company
provides certain services with respect to the properties that the Company
believes complies with the "usually or customarily rendered" requirement. The
Company will hire independent contractors from whom the Company derives no
income to perform such services or utilize the Management Company to perform
such services, to the extent that the performance of such services by the
Company would cause amounts received from its tenants to be excluded from rents
from real property.
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of receipts
or sales. The Company does not expect to derive significant amounts of interest
that would fail to qualify under the 75% and 95% gross income tests.
The Company's share of any dividends received from corporate subsidiaries
(and from other corporations in which the Company owns an interest) will qualify
for purposes of the 95% gross income test but not for purposes of the 75% gross
income test. The Company does not anticipate that it will receive sufficient
dividends to cause the Company to exceed the limit on nonqualifying income under
the 75% gross income test.
It is possible that, from time to time, the Company or the Partnership will
enter into hedging transactions with respect to one or more of its assets or
liabilities. Any such hedging transactions could take a variety of forms. If the
Company or the Partnership enters into an interest rate swap or cap contract to
hedge any variable rate indebtedness incurred to acquire or carry real estate
assets, any periodic income or gain from the disposition of such contract should
be qualifying income for purposes of the 95% gross income test but not for the
75% gross income test. For the Company's taxable year which begins on January 1,
1998, and for all taxable years thereafter, income from hedging transactions
which is qualifying income for the 95% gross income test also includes payments
to the Company under an option, futures contract, forward rate agreement, or any
similar financial instrument. To the extent that the Company or the Partnership
hedges with other types of financial instruments or in other situations, it may
not be entirely clear how the income from those transactions will be treated for
purposes of the various income tests that apply to REITs under the Code. The
Company intends to structure any hedging transactions in a manner that does not
jeopardize its status as a REIT.
The Management Company receives fees in consideration of the performance of
management and administrative services with respect to properties that are not
owned by the Company and earns income from the acquisition, development and
resale of real estate. Distributions received by the Company from the Management
Company of its earnings do not qualify under the 75% gross income test. The
Company believes that the aggregate amount of the distributions from the
Management Company together with all other non-qualifying income in any taxable
year will not cause the Company to exceed the limits on non-qualifying income
under the 75% and 95% gross income tests.
The Company believes that it has satisfied the 75% and 95% gross income
tests for taxable years ended prior to the date of this prospectus and intends
to operate in such a manner so as to satisfy such tests in the future. If the
Company fails to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, it may nevertheless qualify as a REIT for such year if it is
entitled to relief under certain provisions of the Code. These relief provisions
generally will be available if the Company's failure to meet such tests was due
to reasonable cause and not due to willful neglect, the Company attaches a
schedule of the sources of its income to its federal income tax return, and any
incorrect information on the schedule was not due to fraud with intent to evade
tax. It is not possible to state whether in all circumstances the Company would
be entitled to the benefit of those relief provisions. As discussed above, even
if those relief provisions apply, a tax would be imposed with respect to the
excess net income.
If the Company has net income from "prohibited transactions," that income
will be subject to a 100% tax. In general, prohibited transactions are sales or
other dispositions of property held primarily for sale to customers in
21
the ordinary course of business. The determination as to whether a particular
sale is a prohibited transaction depends on the facts and circumstances related
to that sale. While the Company has undertaken a significant number of asset
sales in recent years, the Company does not believe that those sales should be
considered prohibited transactions, but there can be no assurance that the IRS
would not contend otherwise.
ASSET TESTS
The Company, at the close of each quarter of its taxable year, must also
satisfy four tests relating to the nature of its assets. First, at least 75% of
the value of the Company's total assets must be represented by real estate
assets (including (i) its allocable share of real estate assets which are held
by the Partnership or other Property Partnerships or which are held by
"qualified REIT subsidiaries" of the Company and (ii) stock or debt instruments
held for not more than one year purchased with the proceeds of a stock offering
or long-term (at least five years) debt offering of the Company), cash, cash
items and government securities. Second, not more than 25% of the value of the
Company's total assets may be represented by securities other than those in the
75% asset class. Third, except for equity investments in REITs, qualified REIT
subsidiaries, or taxable REIT subsidiaries or other securities that qualify as
"real estate assets" for purposes of the 75% test described above, (a) the value
of any one issuer's securities that the Company owns may not exceed 5% of the
value of the Company's total assets; (b) the Company may not own more than 10%
of any one issuer's outstanding voting securities; and (c) the Company may not
own more than 10% of the value of the outstanding securities of any one issuer.
For purposes of the 10% value test, securities which qualify as "straight debt"
are not taken into account if (a) the issuer is an individual, (b) the only
securities of such issuer which are held by the REIT or a taxable REIT
subsidiary are straight debt or (c) the issuer is a partnership and the REIT
owns at least a 20% profits interest in the partnership. Straight debt means any
written unconditional promise to pay on demand or on a specified date a sum
certain in money if (a) the interest rate (and the interest payment dates) are
not contingent on profits, the borrower's discretion or similar factors and (b)
the instrument is not convertible. Fourth, no more than 20% of the value of the
Company's total assets may be comprised of securities of one or more taxable
REIT subsidiaries.
The Partnership owns 100% of the outstanding capital stock of the
Management Company. The Company believes that the aggregate value of the
Management Company does not exceed 20% of the aggregate value of the Company's
gross assets. As of each relevant testing date prior to the election to treat
the Management Company as a taxable REIT subsidiary, which election first became
available as of January 1, 2001, the Company believes it did not own more than
10% of the voting securities of the Management Company. In addition, the Company
believes that as of each relevant testing date prior to the election to treat
the Management Company as a taxable REIT subsidiary of the Company, the
Company's pro rata share of the value of the securities, including debt, of the
Management Company did not exceed 5% of the total value of the Company's assets.
No independent appraisals have been obtained to support the Company's estimate
of value, however, and Foley & Lardner, in issuing its opinion on the Company's
qualification as a REIT, is relying on the Company's representation as to the
limited value of the interests in the Management Company.
After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT if it fails to satisfy the 25%, 20%,
and 5% asset tests and the 10% value limitation at the end of a later quarter
solely by reason of changes in the relative values of the Company's assets. If
the failure to satisfy the 25%, 20%, or 5% asset tests or the 10% value
limitation results from an acquisition of securities or other property during a
quarter, the failure can be cured by disposition of sufficient nonqualifying
assets within 30 days after the close of that quarter. The Company intends to
maintain adequate records of the value of its assets to maintain compliance with
the asset tests and would attempt to take any available actions within 30 days
after the close of any quarter in an effort to cure any noncompliance with the
25%, 20%, or 5% asset tests or 10% value limitation of which it becomes aware
within that period. If the Company failed to cure noncompliance with the asset
tests within this time period, it would cease to qualify as a REIT. See "--
Failure to Qualify."
ANNUAL DISTRIBUTION REQUIREMENTS
The Company, in order to qualify as a REIT, is required to distribute
dividends (other than capital gains dividends) to its shareholders in an amount
at least equal to: (a) the sum of (i) 90% of the Company's "REIT taxable income"
(computed without regard to the dividends paid deduction and the Company's net
capital gain) and (ii) 90% of the net income (after tax), if any, from
foreclosure property; minus (b) the sum of certain items of
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non-cash income. In addition, if during the applicable Recognition Period, the
Company disposes of any asset with built-in-gain, the Company will be required
to distribute at least 90% of the built-in-gain (after tax), if any, recognized
on the disposition of such asset. Such distribution must be paid in the taxable
year to which it relates, or in the following taxable year if declared before
the Company timely files its tax return for such prior year and if paid on or
before the first regular dividend payment date after such declaration. To the
extent that the Company does not distribute all of its net capital gain or
distributes at least 90%, but less than 100%, of its "REIT taxable income," as
adjusted, it will be subject to tax thereon at regular ordinary and capital
gains corporate tax rates. The Company may elect to retain, rather than
distribute as a capital gain dividend, its net long-term capital gains. If the
Company makes this election, a "Capital Gains Designation," the Company would
pay tax on its retained net long-term capital gains. In addition, to the extent
the Company makes a Capital Gains Designation, a U.S. Shareholder generally
would: (i) include its proportionate share of the Company's undistributed
long-term capital gains in computing its long-term capital gains in its return
for its taxable year in which the last day of the Company's taxable year falls
(subject to certain limitations as to the amount that is includable); (ii) be
deemed to have paid the capital gains tax imposed on the Company on the
designated amounts included in the U.S. Shareholder's long-term capital gains;
(iii) receive a credit or refund for the amount of tax deemed paid by it; (iv)
increase the adjusted basis of its shares by the difference between the amount
of includable gains and the tax deemed to have been paid by it; and (v) in the
case of a U.S. Shareholder that is a corporation, appropriately adjust its
earnings and profits for the retained capital gains in accordance with Treasury
Regulations to be prescribed by the IRS. If the Company should fail to
distribute during each calendar year at least the sum of (i) 85% of its REIT
ordinary income for such year, (ii) 95% of its REIT capital gain income for such
year and (iii) any undistributed taxable income from prior periods, the Company
will be subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed.
The Company intends to make timely distributions sufficient to satisfy this
annual distribution requirement in the future. It is possible that the Company,
from time to time, may not have sufficient cash or other liquid assets to meet
the 90% distribution requirement due to timing differences between the actual
receipt of income and the actual payment of deductible expenses and the
inclusion of such income and deduction of such expenses in arriving at the
taxable income of the Company, or if the amount of nondeductible expenses such
as principal amortization or capital expenditures exceeds the amount of noncash
deductions. In the event that such timing differences occur, in order to meet
the 90% distribution requirement, the Company may find it necessary to arrange
for short-term, or possibly long-term, borrowings to permit the payment of
required dividends or to pay dividends in the form of taxable stock dividends.
Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a certain year by paying "deficiency
dividends" to shareholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year. Thus, the Company
may be able to avoid being taxed on amounts distributed as deficiency dividends;
however, the Company will be required to pay to the IRS interest based upon the
amount of any deduction taken for deficiency dividends.
FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable corporate alternative minimum tax) on its taxable
income at regular corporate rates. Such a failure could have an adverse effect
on the market value and marketability of the common stock. Distributions to
shareholders in any year in which the Company fails to qualify will not be
deductible by the Company nor will they be required to be made. In such event,
to the extent of current and accumulated earnings and profits, all distributions
to shareholders will be taxable as ordinary income, and, subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, the Company will also be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether the Company would be entitled to such
statutory relief.
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
As used in this section, the term U.S. shareholder means a holder of shares
who is (i) a citizen or resident of the United States, (ii) a domestic
corporation, partnership, limited liability company or other entity treated as a
23
corporation or partnership for federal income tax purposes, (iii) an estate
whose income is subject to U.S. federal income tax regardless of its source; or
(iv) a trust if a U.S. court can exercise primary supervision over the trust's
administration and one or more U.S. persons have authority to control all
substantial decisions of the trust.
So long as the Company qualifies as a REIT, distributions to U.S.
shareholders out of the Company's current or accumulated earnings and profits
that are not designated as capital gain dividends will be taxable as ordinary
income and will not be eligible for the dividends received deduction generally
available for corporations. Distributions in excess of the Company's current and
accumulated earnings and profits will not be taxable to a U.S. shareholder to
the extent that the distributions do not exceed the adjusted tax basis of the
shareholder's shares. Rather, the distributions will reduce the adjusted tax
basis of the shares. Distributions that exceed the U.S. shareholder's adjusted
tax basis in the Company's shares will be taxable as capital gains. For purposes
of determining the portion of distributions on separate classes of shares that
will be treated as dividends for U.S. federal income tax purposes, current or
accumulated earnings and profits will be allocated to distributions resulting
from priority rights of preferred shares before being allocated to other
distributions. If the Company declares a dividend in October, November, or
December of any year with a record date in one of these months and pays the
dividend on or before January 31 of the following year, the Company will be
treated as having paid the dividend, and the shareholder will be treated as
having received the dividend, on December 31 of the year in which the dividend
was declared.
The Company may elect to designate distributions of the Company's net
capital gain as "capital gain dividends." Capital gain dividends are taxed to
shareholders as gain from the sale or exchange of a capital asset held for more
than one year, without regard to how long the U.S. shareholder has held the
Company's shares. Designations that the Company makes only will be effective to
the extent that they comply with Revenue Ruling 89-81, which requires that
distributions made to different classes of shares be composed proportionately of
dividends of a particular type. If the Company designates any portion of a
dividend as a capital gain dividend, a U.S. shareholder will receive an Internal
Revenue Service Form 1099-DIV indicating the amount that will be taxable to the
shareholder as capital gain. Corporate shareholders, however, may be required to
treat up to 20% of capital gain dividends as ordinary income.
Instead of paying capital gain dividends, the Company may designate all or
part of its net capital gain as "undistributed capital gain." The Company will
be subject to tax at regular corporate rates on any undistributed capital gain.
A U.S. shareholder (1) will include in its income as long-term capital gains its
proportionate share of such undistributed capital gains and (2) will be deemed
to have paid its proportionate share of the tax paid by the Company on such
undistributed capital gains and receive a credit or refund to the extent that
the tax the Company paid exceeds the U.S. shareholder's tax liability on the
undistributed capital gain and (3) in the case of a U.S. shareholder that is a
corporation, appropriately adjust its earnings and profits for the retained
capital gains in accordance with Treasury Regulations to be prescribed by the
IRS. A U.S. shareholder will increase the basis in its common shares by the
difference between the amount of capital gain included in its income and the
amount of tax it is deemed to have paid. The Company's earnings and profits will
be adjusted appropriately.
The Company will classify portions of any designated capital gain dividend
or undistributed capital gain as either: (1) a 20% rate gain distribution, which
would be taxable to non-corporate U.S. shareholders at a maximum rate of 20%; or
(2) an "unrecaptured Section 1250 gain" distribution, which would be taxable to
non-corporate U.S. shareholders at a maximum rate of 25%. The Company must
determine the maximum amounts that it may designate as 20% and 25% rate capital
gain dividends by performing the computation required by the Code as if the
Company were an individual whose ordinary income were subject to a marginal tax
rate of at least 28%.
Distributions that the Company makes and gain arising from the sale or
exchange by a U.S. shareholder of the Company's shares will not be treated as
passive activity income, and as a result, U.S. shareholders generally will not
be able to apply any "passive losses" against this income or gain. In addition,
taxable distributions from the Company generally will be treated as investment
income for purposes of the investment interest limitations. A U.S. shareholder
may elect to treat capital gain dividends and capital gains from the disposition
of shares as investment income for purposes of the investment interest
limitation, in which case the applicable capital gains will be taxed at ordinary
income rates. The Company will notify shareholders regarding the portions of
distributions for each year that constitute ordinary income, return of capital,
capital gain or represent tax preference items to be taken into account for
purposes of computing the alternative minimum tax liability of the shareholders.
U.S. shareholders may not include in their individual income tax returns any of
the Company's net
24
operating losses or capital losses. The Company's operating or capital losses
would be carried over by the Company for potential offset against future income,
subject to applicable limitations.
Upon any taxable sale or other disposition of shares, a U.S. shareholder
will recognize gain or loss for federal income tax purposes in an amount equal
to the difference between: (1) the amount of cash and the fair market value of
any property received on the sale or other disposition and (2) the holder's
adjusted tax basis in the shares for tax purposes.
This gain or loss will be a capital gain or loss. The applicable tax rate
will depend on the shareholder's holding period for the asset (generally, if an
asset has been held for more than one year it will produce long-term capital
gain) and the shareholder's tax bracket. The Internal Revenue Service has the
authority to prescribe, but has not yet prescribed, regulations that would apply
a capital gain tax rate of 25% (which is generally higher than the long-term
capital gain tax rates for noncorporate shareholders) to a portion of capital
gain realized by a noncorporate shareholder on the sale of REIT shares that
would correspond to the REIT's "unrecaptured Section 1250 gain." Shareholders
are urged to consult with their tax advisors with respect to their capital gain
tax liability. A corporate U.S. shareholder will be subject to tax at a maximum
rate of 35% on capital gain from the sale of the Company's shares. In general,
any loss recognized by a U.S. shareholder upon the sale or other disposition of
shares that have been held for six months or less, after applying the holding
period rules, will be treated as a long-term capital loss, to the extent of
distributions received by the U.S. shareholder from the Company that were
required to be treated as long-term capital gains.
TAXATION OF TAX-EXEMPT SHAREHOLDERS
Provided that a tax-exempt shareholder has not held its common shares as
"debt financed property" within the meaning of the Code and the shares are not
otherwise used in a trade or business, distributions from the Company will not
be unrelated business taxable income, referred to as UBTI, to a tax-exempt
shareholder. Similarly, income from the sale of shares will not constitute UBTI
unless the tax-exempt shareholder has held its shares as debt financed property
within the meaning of the Code or has used the shares in a trade or business.
However, for tax-exempt shareholders that are social clubs, voluntary
employee benefit associations, supplemental unemployment benefit trusts or
qualified group legal services plans exempt from federal income taxation under
Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code, respectively, or a
single parent title-holding corporation exempt under Section 501(c)(2) the
income of which is payable to any of the aforementioned tax-exempt
organizations, income from an investment in the Company will constitute UBTI
unless the organization properly sets aside or reserves such amounts for
purposes specified in the Code. These tax-exempt shareholders should consult
their tax advisors concerning these "set aside" and reserve requirements.
Notwithstanding the above, however, a portion of the dividends paid by a
"pension held REIT" are treated as UBTI if received by any trust which is
described in Section 401(a) of the Code, is tax-exempt under Section 501(a) of
the Internal Revenue Code, and holds more than 10%, by value, of the equity
interests in the REIT. Tax-exempt pension funds that are described in Section
401(a) of the Internal Revenue Code are referred to below as "pension trusts."
A REIT is a pension held REIT if it meets the following two tests: (1) it
qualified as a REIT only by reason of Section 856(h)(3) of the Code, which
provides that stock owned by pension trusts will be treated, for purposes of
determining if the REIT is closely held, as owned by the beneficiaries of the
trust rather than by the trust itself; and (2) either (a) at least one pension
trust holds more than 25% of the value of the REIT's stock, or (b) a group of
pension trusts each individually holding more than 10% of the value of the
REIT's shares, collectively owns more than 50% of the value of the REIT's
shares.
The percentage of any REIT dividend from a "pension held REIT" treated as
UBTI is equal to the ratio of the gross income of the REIT from unrelated trades
or businesses less direct expenses related to this gross income, treating the
REIT as if it were a pension trust and therefore subject to tax on UBTI, to the
total gross income of the REIT less direct expenses related to the total gross
income. An exception applies where the percentage is less than 5% for any year.
The provisions requiring pension trusts to treat a portion of REIT distributions
as UBTI will not apply if the REIT is able to satisfy the "not closely held
requirement" without relying upon the "look-through" exception for pension
trusts. Based on both the Company's current share ownership and the limitations
on transfer and ownership of shares contained in the Company's organizational
documents, we do not expect to be classified as a pension held REIT.
25
U.S. TAXATION OF NON-U.S. SHAREHOLDERS
As used in this section, the terms "non-U.S. shareholder" means a holder of
shares that is not a U.S. person for U.S. federal income tax purposes. The
Company's distributions to a non-U.S. shareholder that are neither attributable
to gain from sales or exchanges by the Company of "U.S. real property interests"
nor designated by the Company as capital gains dividends will be treated as
dividends of ordinary income to the extent that they are made out of the
Company's current or accumulated earnings and profits. These distributions
ordinarily will be subject to withholding of U.S. federal income tax on a gross
basis at a rate of 30%, or a lower rate as permitted under an applicable income
tax treaty, unless the dividends are treated as effectively connected with the
conduct by the non-U.S. shareholder of a U.S. trade or business. Under some
treaties, however, lower withholding rates generally applicable to dividends do
not apply to dividends from REITs. Applicable certification and disclosure
requirements must be satisfied to be exempt from withholding under the
effectively connected income exemption. Dividends that are effectively connected
with a trade or business will be subject to tax on a net basis, that is, after
allowance for deductions, at graduated rates, in the same manner as U.S.
shareholders are taxed with respect to these dividends, and are generally not
subject to withholding. Any dividends received by a corporate non-U.S.
shareholder that is engaged in a U.S. trade or business also may be subject to
an additional branch profits tax at a 30% rate, or lower applicable treaty rate.
Distributions in excess of current and accumulated earnings and profits
that exceed the non-U.S. shareholder's basis in the Company's shares will be
taxable to a non-U.S. shareholder as gain from the sale of shares, which is
discussed below. Distributions in excess of current or accumulated earnings and
profits of the Company that do not exceed the adjusted tax basis of the non-U.S.
shareholder in the Company's shares will reduce the non-U.S. shareholder's
adjusted tax basis in the shares and will not be subject to U.S. federal income
tax, but will be subject to U.S. withholding tax as described below.
The Company expects to withhold U.S. income tax at the rate of 30% on any
dividend distributions (including distributions that later may be determined to
have been in excess of current and accumulated earnings and profits) made to a
non-U.S. shareholder unless: (1) a lower treaty rate applies and the non-U.S.
shareholder files an Internal Revenue Service Form W-8BEN evidencing eligibility
for that reduced treaty rate with the Company; or (2) the non-U.S. shareholder
files an Internal Revenue Service Form W-8ECI with the Company claiming that the
distribution is effectively connected income.
The Company may be required to withhold at least 10% of any distribution in
excess of the Company's current and accumulated earnings and profits, even if a
lower treaty rate applies and the non-U.S. shareholder is not liable for tax on
the receipt of that distribution. However, a non-U.S. shareholder may seek a
refund of these amounts from the Internal Revenue Service if the non-U.S.
shareholder's U.S. tax liability with respect to the distribution is less than
the amount withheld.
Distributions to a non-U.S. shareholder that the Company designates at the
time of the distribution as capital gain dividends, other than those arising
from the disposition of a U.S. real property interest, generally should not be
subject to U.S. federal income taxation unless: (1) the investment in the shares
is effectively connected with the conduct of the non-U.S. shareholder's U.S.
trade or business, in which case the non-U.S. shareholder will be subject to the
same treatment as U.S. shareholders on any gain, except that a shareholder that
is a foreign corporation also may be subject to the 30% branch profits tax, as
discussed above, or (2) the non-U.S. shareholder is a nonresident alien
individual who is present in the U.S. for 183 days or more during the taxable
year and has a "tax home" in the U.S., in which case the nonresident alien
individual will be subject to a 30% tax on the individual's capital gains.
Under the Foreign Investment in Real Property Tax Act, which is referred to
as "FIRPTA," distributions to a non-U.S. shareholder that are attributable to
gain from sales or exchanges by the Company of U.S. real property interests,
whether or not designated as a capital gain dividend, will cause the non-U.S.
shareholder to be treated as recognizing gain that is income effectively
connected with a U.S. trade or business. Non-U.S. shareholders will be taxed on
this gain at the same rates applicable to U.S. shareholders, subject to a
special alternative minimum tax in the case of nonresident alien individuals.
Also, this gain may be subject to a 30% branch profits tax in the hands of a
non-U.S. shareholder that is a corporation.
The Company will be required to withhold and remit to the Internal Revenue
Service 35% of any distributions to foreign shareholders that are designated as
capital gain dividends, or, if greater, 35% of a
26
distribution that could have been designated as a capital gain dividend.
Distributions can be designated as capital gains to the extent of the Company's
net capital gain for the taxable year of the distribution. The amount withheld
is creditable against the non-U.S. shareholder's United States federal income
tax liability.
Although the law is not clear on the matter, it appears that amounts the
Company designates as undistributed capital gains in respect of the common
shares held by U.S. shareholders generally should be treated for non-U.S.
shareholders in the same manner as actual distributions by the Company of
capital gain dividends. Under that approach, the non-U.S. shareholders would be
able to offset as a credit against their United States federal income tax
liability resulting from reporting the capital gain their proportionate share of
the tax paid by the Company on the undistributed capital gains, and to receive
from the Internal Revenue Service a refund to the extent their proportionate
share of this tax paid by the Company were to exceed their actual United States
federal income tax liability.
Gain recognized by a non-U.S. shareholder upon the sale or exchange of the
Company's shares generally would not be subject to United States taxation
unless: (1) the investment in the Company's shares is effectively connected with
the conduct of the non-U.S. shareholder's U.S. trade or business, in which case
the non-U.S. shareholder will be subject to the same treatment as domestic
shareholders as to any gain; (2) the non-U.S. shareholder is a nonresident alien
individual who is present in the United States for 183 days or more during the
taxable year and has a tax home in the United States, in which case the
nonresident alien individual will be subject to a 30% tax on the individual's
net capital gains for the taxable year; or (3) the Company's shares constitute a
U.S. real property interest within the meaning of FIRPTA, as described below.
The Company's shares will not constitute a U.S. real property interest if
the Company is a domestically controlled REIT. The Company will be a
domestically-controlled REIT if, at all times during the 5 year period,
preceding a sale or exchange of stock, less than 50% in value of the Company's
stock is held directly or indirectly by non-U.S. shareholders. The Company
believes that it currently is not a domestically controlled REIT because
Security Capital U.S. Realty, a foreign company, beneficially owned in excess of
50% in value of the Company's shares until January 16, 2001, when beneficial
ownership of those shares was acquired by Security Capital, a Maryland
corporation. Therefore, the sale of the Company's shares may currently be
subject to taxation under FIRPTA. The Company believes, however, that at the
present time less than 50% in value of the Company's stock is held directly or
indirectly by non-U.S. shareholders and hence, the Company may become
domestically-controlled in the future. Because the Company's shares are publicly
traded, however, the Company cannot guarantee that the Company will become a
domestically controlled REIT. Even if the Company does not qualify as a
domestically controlled REIT at the time a non-U.S. shareholder sells the
Company's shares, gain arising from the sale still would not be subject to
FIRPTA tax if: (1) the class or series of shares sold is considered regularly
traded under applicable treasury regulations on an established securities
market, such as the NYSE; and (2) the selling non-U.S. shareholder owned,
actually or constructively, 5% or less in value of the outstanding class or
series of shares being sold throughout the five-year period ending on the date
of the sale or exchange.
If gain on the sale or exchange of the Company's shares were subject to
taxation under FIRPTA, the non-U.S. shareholder would be subject to regular U.S.
income tax as to any gain in the same manner as a taxable U.S. shareholder,
subject to any applicable alternative minimum tax and special alternative
minimum tax in the case of nonresident alien individuals.
OTHER TAX CONSEQUENCES
The Company and its security holders may be subject to state or local
taxation in various state or local jurisdictions, including those in which it or
they transact business or reside. The state and local tax treatment of the
Company and its security holders may not conform to the federal income tax
consequences discussed above. Consequently, prospective security holders should
consult their own tax advisors regarding the effect of state and local tax laws
on an investment in the Company.
BACKUP WITHHOLDING
U.S. SHAREHOLDERS
The Company will report to its domestic shareholders and to the IRS the
amount of dividends paid during
27
each calendar year, and the amount of tax withheld, if any. Under the backup
withholding rules, a shareholder may be subject to backup withholding at the
rate of 30% (29% for 2004-2005) with respect to dividends paid unless such
shareholder (a) is a corporation or another form of entity exempt from backup
withholding and, when required, demonstrates this fact, or (b) provides a
taxpayer identification number, certifies to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A shareholder that does not provide the Company with a
correct taxpayer identification number may also be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be creditable against the
shareholder's income tax liability. In addition, the Company may be required to
withhold a portion of capital gain distributions to any shareholders who fail to
certify their non-foreign status to the Company.
NON-U.S. SHAREHOLDERS
Generally, information reporting will apply to payments of distributions on
the Company's shares, and backup withholding at a rate of 30% (29% for
2004-2005) may apply, unless the payee certifies that it is not a U.S. person or
otherwise establishes an exemption.
The payment of the proceeds from the disposition of Company shares to or
through the U.S. office of a U.S. or foreign broker will be subject to
information reporting and, possibly, backup withholding unless the non-U.S.
shareholder certifies as to its non-U.S. status or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
shareholder is a U.S. person or that the conditions of any other exemption are
not, in fact, satisfied. The proceeds of the disposition by a non-U.S.
shareholder of Company shares to or through a foreign office of a broker
generally will not be subject to information reporting or backup withholding.
However, if the broker is a U.S. person, a controlled foreign corporation for
U.S. tax purposes, or a foreign person 50% or more of whose gross income from
all sources for specified periods is from activities that are effectively
connected with a U.S. trade or business, information reporting generally will
apply unless the broker has documentary evidence as to the non-U.S.
shareholder's foreign status and has no actual knowledge to the contrary.
Applicable treasury regulations provide presumptions regarding the status
of shareholders when payments to the shareholders cannot be reliably associated
with appropriate documentation provided to the payer. Because the application of
these treasury regulations varies depending on the shareholder's particular
circumstances, you are urged to consult your tax advisor regarding the
information reporting requirements applicable to you.
28
LEGAL MATTERS
The validity of the common stock and certain tax matters described under
"Federal Income Tax Considerations" will be passed upon for Regency by Foley &
Lardner, Jacksonville, Florida. Attorneys with Foley & Lardner representing
Regency with respect to this offering beneficially owned approximately 7,800
shares of our common stock as of the date of this prospectus.
EXPERTS
The consolidated financial statements and schedule of Regency Centers
Corporation as of December 31, 2002 and 2001, and for each of the years in the
three-year period ended December 31, 2002, have been incorporated by reference
herein and in the registration statement in reliance upon the reports of KPMG
LLP, independent accountants, also incorporated by reference herein and upon the
authority of said firm as experts in accounting and auditing. The audit report
covering the December 31, 2002 financial statements refers to the Company's
adoption of Statement of Financial Accounting Standards No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." To the extent that KPMG LLP
audits and reports on consolidated financial statements of Regency Centers
Corporation issued at future dates, and consents to the use of its report
thereon, such consolidated financial statements also will be incorporated by
reference in the registration statement in reliance upon its reports and said
authority.
29
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23,203,712 SHARES
REGENCY CENTERS CORPORATION
COMMON STOCK
[REGENCY LOGO]
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PROSPECTUS SUPPLEMENT
JUNE 18, 2003
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MERRILL LYNCH &CO.
CITIGROUP
JPMORGAN
UBS INVESTMENT BANK
WACHOVIA SECURITIES
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