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REGENCY CENTERS CORP - Quarter Report: 2015 September (Form 10-Q)


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             

Commission File Number 1-12298 (Regency Centers Corporation)
Commission File Number 0-24763 (Regency Centers, L.P.)

REGENCY CENTERS CORPORATION
REGENCY CENTERS, L.P.
(Exact name of registrant as specified in its charter)
FLORIDA (REGENCY CENTERS CORPORATION)
 
59-3191743
DELAWARE (REGENCY CENTERS, L.P)
 
59-3429602
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
One Independent Drive, Suite 114
Jacksonville, Florida 32202
 
(904) 598-7000
(Address of principal executive offices) (zip code)
 
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Regency Centers Corporation              YES  x    NO  o                     Regency Centers, L.P.              YES  x    NO  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Regency Centers Corporation              YES  x    NO  o                     Regency Centers, L.P.              YES  x    NO  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Regency Centers Corporation:
Large accelerated filer
x
 
Accelerated filer
o
Non-accelerated filer
o
 
Smaller reporting company
o
Regency Centers, L.P.:
Large accelerated filer
o
  
Accelerated filer
x
Non-accelerated filer
o
  
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Regency Centers Corporation              YES  o    NO   x                    Regency Centers, L.P.              YES  o    NO  x
The number of shares outstanding of the Regency Centers Corporation’s voting common stock was 94,162,229 as of October 30, 2015.
 





EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 2015 of Regency Centers Corporation and Regency Centers, L.P. Unless stated otherwise or the context otherwise requires, references to “Regency Centers Corporation” or the “Parent Company” mean Regency Centers Corporation and its controlled subsidiaries; and references to “Regency Centers, L.P.” or the “Operating Partnership” mean Regency Centers, L.P. and its controlled subsidiaries. The term “the Company” or “Regency” means the Parent Company and the Operating Partnership, collectively.
The Parent Company is a real estate investment trust (“REIT”) and the general partner of the Operating Partnership. The Operating Partnership's capital includes general and limited common Partnership Units (“Units”). As of September 30, 2015, the Parent Company owned approximately 99.8% of the Units in the Operating Partnership and the remaining limited Units are owned by investors. The Parent Company owns all of the Series 6 and 7 Preferred Units of the Operating Partnership. As the sole general partner of the Operating Partnership, the Parent Company has exclusive control of the Operating Partnership's day-to-day management.
The Company believes combining the quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into this single report provides the following benefits:
 
enhances investors' understanding of the Parent Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;  

eliminates duplicative disclosure and provides a more streamlined and readable presentation; and  

creates time and cost efficiencies through the preparation of one combined report instead of two separate reports. 
Management operates the Parent Company and the Operating Partnership as one business. The management of the Parent Company consists of the same individuals as the management of the Operating Partnership. These individuals are officers of the Parent Company and employees of the Operating Partnership.
The Company believes it is important to understand the few differences between the Parent Company and the Operating Partnership in the context of how the Parent Company and the Operating Partnership operate as a consolidated company. The Parent Company is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership. As a result, the Parent Company does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership. The Parent Company does not hold any indebtedness, but guarantees all of the unsecured public debt and approximately 21% of the secured debt of the Operating Partnership. The Operating Partnership holds all the assets of the Company and retains the ownership interests in the Company's joint ventures. Except for net proceeds from public equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates all remaining capital required by the Company's business. These sources include the Operating Partnership's operations, its direct or indirect incurrence of indebtedness, and the issuance of partnership units.
Stockholders' equity, partners' capital, and noncontrolling interests are the main areas of difference between the consolidated financial statements of the Parent Company and those of the Operating Partnership. The Operating Partnership's capital includes general and limited common Partnership Units, and Series 6 and 7 Preferred Units owned by the Parent Company. The limited partners' units in the Operating Partnership owned by third parties are accounted for in partners' capital in the Operating Partnership's financial statements and outside of stockholders' equity in noncontrolling interests in the Parent Company's financial statements. The Series 6 and 7 Preferred Units owned by the Parent Company are eliminated in consolidation in the accompanying consolidated financial statements of the Parent Company and are classified as preferred units of general partner in the accompanying consolidated financial statements of the Operating Partnership.
In order to highlight the differences between the Parent Company and the Operating Partnership, there are sections in this report that separately discuss the Parent Company and the Operating Partnership, including separate financial statements, controls and procedures sections, and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure for the Parent Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. 

As general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have assets other than its investment in the Operating Partnership. Therefore, while stockholders' equity and partners' capital differ as discussed above, the assets and liabilities of the Parent Company and the Operating Partnership are the same on their respective financial statements.




TABLE OF CONTENTS
 
 
 
Form 10-Q
Report Page
 
 
 
PART I - FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements
 
 
 
 
Regency Centers Corporation:
 
 
 
 
 
Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014
 
 
 
 
Consolidated Statements of Operations for the periods ended September 30, 2015 and 2014
 
 
 
 
Consolidated Statements of Comprehensive Income for the periods ended September 30, 2015 and 2014
 
 
 
 
Consolidated Statements of Equity for the periods ended September 30, 2015 and 2014
 
 
 
 
Consolidated Statements of Cash Flows for the periods ended September 30, 2015 and 2014
 
 
 
Regency Centers, L.P.:
 
 
 
 
 
Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014
 
 
 
 
Consolidated Statements of Operations for the periods ended September 30, 2015 and 2014
 
 
 
 
Consolidated Statements of Comprehensive Income for the periods ended September 30, 2015 and 2014
 
 
 
 
Consolidated Statements of Capital for the periods ended September 30, 2015 and 2014
 
 
 
 
Consolidated Statements of Cash Flows for the periods ended September 30, 2015 and 2014
 
 
 
 
Notes to Consolidated Financial Statements
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
 
 
Item 4.
Controls and Procedures
 
 
 
PART II - OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
 
 
 
Item 1A.
Risk Factors
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
Item 5.
Other Information
 
 
 
Item 6.
Exhibits
 
 
 
SIGNATURES
 
 
 
 
 
 





PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
REGENCY CENTERS CORPORATION
Consolidated Balance Sheets
September 30, 2015 and December 31, 2014
(in thousands, except share data)
 
 
2015
 
2014
Assets
 
(unaudited)
 
 
Real estate investments at cost:
 
 
 
 
Land
$
1,431,612

 
1,380,211

Buildings and improvements
 
2,880,141

 
2,790,137

Properties in development
 
187,240

 
239,538

 
 
4,498,993

 
4,409,886

Less: accumulated depreciation
 
1,014,788

 
933,708

 
 
3,484,205

 
3,476,178

Investments in real estate partnerships
 
321,164

 
333,167

Net real estate investments
 
3,805,369

 
3,809,345

Cash and cash equivalents
 
23,880

 
113,776

Restricted cash
 
5,142

 
8,013

Accounts receivable, net of allowance for doubtful accounts of $5,377 and $4,523 at September 30, 2015 and December 31, 2014, respectively
 
24,642

 
30,999

Straight-line rent receivable, net of reserve of $1,176 and $652 at September 30, 2015 and December 31, 2014, respectively
 
61,435

 
55,768

Notes receivable
 
11,314

 
12,132

Deferred costs, less accumulated amortization of $85,591 and $81,822 at September 30, 2015 and December 31, 2014, respectively
 
77,599

 
71,502

Acquired lease intangible assets, less accumulated amortization of $43,350 and $36,112 at September 30, 2015 and December 31, 2014, respectively
 
108,400

 
52,365

Trading securities held in trust, at fair value
 
28,291

 
28,134

Other assets
 
24,815

 
15,136

Total assets
$
4,170,887

 
4,197,170

Liabilities and Equity
 
 
 
 
Liabilities:
 
 
 
 
Notes payable
$
1,808,652

 
1,946,357

Unsecured credit facilities
 
215,000

 
75,000

Accounts payable and other liabilities
 
171,304

 
181,197

Acquired lease intangible liabilities, less accumulated accretion of $16,689 and $13,993 at September 30, 2015 and December 31, 2014, respectively
 
43,161

 
32,143

Tenants’ security, escrow deposits and prepaid rent
 
24,726

 
25,991

Total liabilities
 
2,262,843

 
2,260,688

Commitments and contingencies (note 12)
 

 

Equity:
 
 
 
 
Stockholders’ equity:
 
 
 
 
Preferred stock, $0.01 par value per share, 30,000,000 shares authorized; 13,000,000 Series 6 and 7 shares issued and outstanding at September 30, 2015 and December 31, 2014, with liquidation preferences of $25 per share
 
325,000

 
325,000

Common stock, $0.01 par value per share,150,000,000 shares authorized; 94,161,761 and 94,108,061 shares issued at September 30, 2015 and December 31, 2014, respectively
 
942

 
941

Treasury stock at cost, 414,541 and 425,246 shares held at September 30, 2015 and December 31, 2014, respectively
 
(19,438
)
 
(19,382
)
Additional paid in capital
 
2,542,791

 
2,540,153

Accumulated other comprehensive loss
 
(62,307
)
 
(57,748
)
Distributions in excess of net income
 
(907,962
)
 
(882,372
)
Total stockholders’ equity
 
1,879,026

 
1,906,592

Noncontrolling interests:
 
 
 
 
Exchangeable operating partnership units, aggregate redemption value of $9,582 and $9,833 at September 30, 2015 and December 31, 2014, respectively
 
(1,940
)
 
(1,914
)
Limited partners’ interests in consolidated partnerships
 
30,958

 
31,804

Total noncontrolling interests
 
29,018

 
29,890

Total equity
 
1,908,044

 
1,936,482

Total liabilities and equity
$
4,170,887

 
4,197,170

See accompanying notes to consolidated financial statements.

1



REGENCY CENTERS CORPORATION
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
 
Minimum rent
$
105,071

 
98,620

$
308,766

 
290,935

Percentage rent
 
486

 
371

 
2,593

 
2,301

Recoveries from tenants and other income
 
30,725

 
28,787

 
94,205

 
90,144

Management, transaction, and other fees
 
5,786

 
5,781

 
18,032

 
18,353

Total revenues
 
142,068

 
133,559

 
423,596

 
401,733

Operating expenses:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
37,032

 
36,417

 
109,249

 
110,345

Operating and maintenance
 
19,761

 
18,149

 
61,119

 
58,152

General and administrative
 
14,750

 
14,463

 
46,227

 
43,883

Real estate taxes
 
16,044

 
14,832

 
46,842

 
44,529

Other operating expenses
 
1,880

 
2,062

 
4,825

 
5,665

Total operating expenses
 
89,467

 
85,923

 
268,262

 
262,574

Other expense (income):
 
 
 
 
 
 
 
 
Interest expense, net
 
25,099

 
27,561

 
78,407

 
82,141

Provision for impairment
 

 

 

 
225

Early extinguishment of debt
 

 

 
(61
)
 

Net investment loss (income), including unrealized losses of $1,296 and $472, and $1,771 and $289 for the three and nine months ended September 30, 2015 and 2014, respectively
 
1,190

 
(94
)
 
190

 
(915
)
Total other expense
 
26,289

 
27,467

 
78,536

 
81,451

Income from operations before equity in income of investments in real estate partnerships
 
26,312

 
20,169

 
76,798

 
57,708

Equity in income of investments in real estate partnerships
 
5,667

 
5,713

 
17,991

 
22,353

Income from operations
 
31,979

 
25,882

 
94,789

 
80,061

Gain on sale of real estate
 
27,755

 
27,558

 
34,215

 
29,598

Net income
 
59,734

 
53,440

 
129,004

 
109,659

Noncontrolling interests:
 
 
 
 
 
 
 
 
Exchangeable operating partnership units
 
(94
)
 
(90
)
 
(204
)
 
(185
)
Limited partners’ interests in consolidated partnerships
 
(643
)
 
(142
)
 
(1,619
)
 
(863
)
Income attributable to noncontrolling interests
 
(737
)
 
(232
)
 
(1,823
)
 
(1,048
)
Net income attributable to the Company
 
58,997

 
53,208

 
127,181

 
108,611

Preferred stock dividends
 
(5,266
)
 
(5,266
)
 
(15,797
)
 
(15,797
)
Net income attributable to common stockholders
$
53,731

 
47,942

$
111,384

 
92,814


 
 
 
 
 
 
 
 
Income per common share - basic
$
0.57

 
0.52

$
1.18

 
1.00

Income per common share - diluted
$
0.57

 
0.52

$
1.18

 
1.00

See accompanying notes to consolidated financial statements.

2


REGENCY CENTERS CORPORATION
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Net income
$
59,734

 
53,440

$
129,004

 
109,659

Other comprehensive loss:
 
 
 
 
 
 
 
 
Loss on settlement of derivative instruments:
 
 
 
 
 
 
 
 
Amortization of loss on settled derivative instruments recognized in net income
 
2,011

 
2,107

 
6,225

 
6,639

Effective portion of change in fair value of derivative instruments:
 
 
 
 
 
 
 
 
Effective portion of change in fair value of derivative instruments
 
(15,768
)
 
(3,651
)
 
(11,274
)
 
(28,603
)
Less: reclassification adjustment for change in fair value of derivative instruments included in net income
 
144

 
153

 
429

 
459

Available for sale securities
 
 
 
 
 
 
 
 
Unrealized (loss) gain on available-for-sale securities (note 4)
 
(43
)
 
3,895

 
(73
)
 
4,809

Other comprehensive (loss) income
 
(13,656
)
 
2,504

 
(4,693
)
 
(16,696
)
Comprehensive income
 
46,078

 
55,944

 
124,311

 
92,963

Less: comprehensive income (loss) attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
 
737

 
232

 
1,823

 
1,048

Other comprehensive (loss) income attributable to noncontrolling interests
 
(149
)
 
56

 
(134
)
 
(137
)
Comprehensive income attributable to noncontrolling interests
 
588

 
288

 
1,689

 
911

Comprehensive income attributable to the Company
$
45,490

 
55,656

$
122,622

 
92,052

See accompanying notes to consolidated financial statements.


3




REGENCY CENTERS CORPORATION
Consolidated Statements of Equity
For the nine months ended September 30, 2015 and 2014
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interests
 
 
 
 
Preferred
Stock
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Distributions
in Excess of
Net Income
 
Total
Stockholders’
Equity
 
Exchangeable
Operating
Partnership
Units
 
Limited
Partners’
Interest  in
Consolidated
Partnerships
 
Total
Noncontrolling
Interests
 
Total
Equity
Balance at December 31, 2013
$
325,000

 
923

 
(16,726
)
 
2,426,477

 
(17,404
)
 
(874,916
)
 
1,843,354

 
(1,426
)
 
19,206

 
17,780

 
1,861,134

Net income
 

 

 

 

 

 
108,611

 
108,611

 
185

 
863

 
1,048

 
109,659

Other comprehensive loss
 

 

 

 

 
(16,559
)
 

 
(16,559
)
 
(29
)
 
(108
)
 
(137
)
 
(16,696
)
Deferred compensation plan, net
 

 

 
(2,441
)
 
2,441

 

 

 

 

 

 

 

Restricted stock issued, net of amortization
 

 

 

 
8,747

 

 

 
8,747

 

 

 

 
8,747

Common stock redeemed for taxes withheld for stock based compensation, net
 

 

 

 
(3,528
)
 

 

 
(3,528
)
 

 

 

 
(3,528
)
Common stock issued for dividend reinvestment plan
 

 

 

 
895

 

 

 
895

 

 

 

 
895

Common stock issued for partnership units exchanged
 

 

 

 
137

 

 

 
137

 
(137
)
 

 
(137
)
 

Common stock issued for stock offerings, net of issuance costs
 

 
9

 

 
49,291

 

 

 
49,300

 

 

 

 
49,300

Redemption of partnership units
 

 

 

 

 

 

 

 
(300
)
 

 
(300
)
 
(300
)
Contributions from partners
 

 

 

 

 

 

 

 

 
15,933

 
15,933

 
15,933

Distributions to partners
 

 

 

 

 

 

 

 

 
(5,051
)
 
(5,051
)
 
(5,051
)
Cash dividends declared:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock/unit
 

 

 

 

 

 
(15,797
)
 
(15,797
)
 

 

 

 
(15,797
)
Common stock/unit ($1.41 per share)
 

 

 

 

 

 
(129,939
)
 
(129,939
)
 
(228
)
 

 
(228
)
 
(130,167
)
Balance at September 30, 2014
$
325,000

 
932

 
(19,167
)
 
2,484,460

 
(33,963
)
 
(912,041
)
 
1,845,221

 
(1,935
)
 
30,843

 
28,908

 
1,874,129

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
$
325,000

 
941

 
(19,382
)
 
2,540,153

 
(57,748
)
 
(882,372
)
 
1,906,592

 
(1,914
)
 
31,804

 
29,890

 
1,936,482

Net income
 

 

 

 

 

 
127,181

 
127,181

 
204

 
1,619

 
1,823

 
129,004

Other comprehensive income
 

 

 

 

 
(4,559
)
 

 
(4,559
)
 
(7
)
 
(127
)
 
(134
)
 
(4,693
)
Deferred compensation plan, net
 

 

 
(56
)
 
56

 

 

 

 

 

 

 

Restricted stock issued, net of amortization
 

 

 

 
10,441

 

 

 
10,441

 

 

 

 
10,441

Common stock redeemed for taxes withheld for stock based compensation, net
 

 

 

 
(9,770
)
 

 

 
(9,770
)
 

 

 

 
(9,770
)
Common stock issued for dividend reinvestment plan
 

 

 

 
966

 

 

 
966

 

 

 

 
966


4



REGENCY CENTERS CORPORATION
Consolidated Statements of Equity
For the nine months ended September 30, 2015 and 2014
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interests
 
 
 
 
Preferred
Stock
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Distributions
in Excess of
Net Income
 
Total
Stockholders’
Equity
 
Exchangeable
Operating
Partnership
Units
 
Limited
Partners’
Interest  in
Consolidated
Partnerships
 
Total
Noncontrolling
Interests
 
Total
Equity
Common stock issued for stock offerings, net of issuance costs
 

 
1

 

 
945

 

 

 
946

 

 

 

 
946

Contributions from partners
 

 

 

 

 

 

 

 

 
454

 
454

 
454

Distributions to partners
 

 

 

 

 

 

 

 

 
(2,792
)
 
(2,792
)
 
(2,792
)
Cash dividends declared:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock/unit
 

 

 

 

 

 
(15,797
)
 
(15,797
)
 

 

 

 
(15,797
)
Common stock/unit ($1.455 per share)
 

 

 

 

 

 
(136,974
)
 
(136,974
)
 
(223
)
 

 
(223
)
 
(137,197
)
Balance at September 30, 2015
$
325,000

 
942

 
(19,438
)
 
2,542,791

 
(62,307
)
 
(907,962
)
 
1,879,026

 
(1,940
)
 
30,958

 
29,018

 
1,908,044

See accompanying notes to consolidated financial statements.


5



REGENCY CENTERS CORPORATION
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2015 and 2014
(in thousands)
(unaudited)
 
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
Net income
$
129,004

 
109,659

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
109,249

 
110,355

Amortization of deferred loan cost and debt premium
 
7,404

 
8,095

Amortization and (accretion) of above and below market lease intangibles, net
 
(1,250
)
 
(2,315
)
Stock-based compensation, net of capitalization
 
8,379

 
6,885

Equity in income of investments in real estate partnerships
 
(17,991
)
 
(22,353
)
Gain on sale of real estate
 
(34,215
)
 
(29,598
)
Provision for impairment
 

 
225

Early extinguishment of debt
 
(61
)
 

Distribution of earnings from operations of investments in real estate partnerships
 
34,527

 
30,008

Settlement of derivative instruments
 
(7,267
)
 
4,648

Gain on derivative instruments
 

 
(13
)
Deferred compensation expense
 
(610
)
 
610

Realized and unrealized loss (gain) on investments
 
189

 
(612
)
Changes in assets and liabilities:
 
 
 
 
Restricted cash
 
1,534

 
497

Accounts receivable
 
(4,408
)
 
(2,801
)
Straight-line rent receivables, net
 
(6,274
)
 
(4,724
)
Deferred leasing costs
 
(8,268
)
 
(6,416
)
Other assets
 
(2,257
)
 
131

Accounts payable and other liabilities
 
10,230

 
15,018

Tenants’ security, escrow deposits and prepaid rent
 
(1,152
)
 
511

Net cash provided by operating activities
 
216,763

 
217,810

Cash flows from investing activities:
 
 
 
 
Acquisition of operating real estate
 
(42,983
)
 
(98,018
)
Advance deposits on acquisition of operating real estate
 
(2,250
)
 

Real estate development and capital improvements
 
(150,967
)
 
(160,552
)
Proceeds from sale of real estate investments
 
93,727

 
62,788

Collection of notes receivable
 
1,000

 

Investments in real estate partnerships
 
(18,644
)
 
(6,012
)
Distributions received from investments in real estate partnerships
 
15,014

 
29,916

Dividends on investments
 
128

 
100

Acquisition of securities
 
(25,675
)
 
(19,866
)
Proceeds from sale of securities
 
22,296

 
5,344

Net cash used in investing activities
 
(108,354
)
 
(186,300
)
Cash flows from financing activities:
 
 
 
 
Net proceeds from common stock issuance
 
946

 
49,300

Proceeds from sale of treasury stock
 
51

 

Redemption of preferred stock and partnership units
 

 
(300
)
Distributions to limited partners in consolidated partnerships, net
 
(2,352
)
 
(4,619
)
Distributions to exchangeable operating partnership unit holders
 
(223
)
 
(228
)
Dividends paid to common stockholders
 
(136,008
)
 
(129,044
)
Dividends paid to preferred stockholders
 
(15,797
)
 
(15,797
)
Repayment of fixed rate unsecured notes
 
(350,000
)
 
(150,000
)
Proceeds from issuance of fixed rate unsecured notes, net
 
248,160

 
248,705

Proceeds from unsecured credit facilities
 
445,000

 
255,000

Repayment of unsecured credit facilities
 
(305,000
)
 
(255,000
)
Proceeds from notes payable
 
3,325

 
12,025

Repayment of notes payable
 
(76,027
)
 
(13,487
)
Scheduled principal payments
 
(4,384
)
 
(5,068
)
Payment of loan costs
 
(5,996
)
 
(2,973
)
Net cash used in financing activities
 
(198,305
)
 
(11,486
)
Net (decrease) increase in cash and cash equivalents
 
(89,896
)
 
20,024

Cash and cash equivalents at beginning of the period
 
113,776

 
80,684

Cash and cash equivalents at end of the period
$
23,880

 
100,708


6



REGENCY CENTERS CORPORATION
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2015, and 2014
(in thousands)
(unaudited)
 
 
2015
 
2014
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest (net of capitalized interest of $5,403 and $5,158 in 2015 and 2014, respectively)
$
71,734

 
72,573

Cash paid for income taxes
$
871

 
94

Supplemental disclosure of non-cash transactions:
 
 
 
 
Mortgage loans assumed for the acquisition of real estate
$
42,799

 
78,049

Initial fair value of non-controlling interest recorded at acquisition
$

 
15,385

Change in fair value of derivative instruments
$
(10,845
)
 
(28,144
)
Common stock issued for dividend reinvestment plan
$
966

 
895

Stock-based compensation capitalized
$
2,196

 
2,026

Contributions from limited partners in consolidated partnerships, net
$
13

 
116

Common stock issued for dividend reinvestment in trust
$
631

 
581

Contribution of stock awards into trust
$
1,633

 
1,865

Distribution of stock held in trust
$
1,898

 
4

Change in fair value of securities available-for-sale
$
(73
)
 
4,809

See accompanying notes to consolidated financial statements.



7



REGENCY CENTERS, L.P.
Consolidated Balance Sheets
September 30, 2015 and December 31, 2014
(in thousands, except unit data)
    
 
 
2015
 
2014
Assets
 
(unaudited)
 
 
Real estate investments at cost:
 
 
 
 
Land
$
1,431,612

 
1,380,211

Buildings and improvements
 
2,880,141

 
2,790,137

Properties in development
 
187,240

 
239,538

 
 
4,498,993

 
4,409,886

Less: accumulated depreciation
 
1,014,788

 
933,708

 
 
3,484,205

 
3,476,178

Investments in real estate partnerships
 
321,164

 
333,167

Net real estate investments
 
3,805,369

 
3,809,345

Cash and cash equivalents
 
23,880

 
113,776

Restricted cash
 
5,142

 
8,013

Accounts receivable, net of allowance for doubtful accounts of $5,377 and $4,523 at September 30, 2015 and December 31, 2014, respectively
 
24,642

 
30,999

Straight-line rent receivable, net of reserve of $1,176 and $652 at September 30, 2015 and December 31, 2014, respectively
 
61,435

 
55,768

Notes receivable
 
11,314

 
12,132

Deferred costs, less accumulated amortization of $85,591 and $81,822 at September 30, 2015 and December 31, 2014, respectively
 
77,599

 
71,502

Acquired lease intangible assets, less accumulated amortization of $43,350 and $36,112 at September 30, 2015 and December 31, 2014, respectively
 
108,400

 
52,365

Trading securities held in trust, at fair value
 
28,291

 
28,134

Other assets
 
24,815

 
15,136

Total assets
$
4,170,887

 
4,197,170

Liabilities and Capital
 
 
 
 
Liabilities:
 
 
 
 
Notes payable
$
1,808,652

 
1,946,357

Unsecured credit facilities
 
215,000

 
75,000

Accounts payable and other liabilities
 
171,304

 
181,197

Acquired lease intangible liabilities, less accumulated accretion of $16,689 and $13,993 at September 30, 2015 and December 31, 2014, respectively
 
43,161

 
32,143

Tenants’ security, escrow deposits and prepaid rent
 
24,726

 
25,991

Total liabilities
 
2,262,843

 
2,260,688

Commitments and contingencies (note 12)
 


 


Capital:
 
 
 
 
Partners’ capital:
 
 
 
 
Preferred units of general partner, $0.01 par value per unit, 13,000,000 units issued and outstanding at June 30, 2015 and December 31, 2014, liquidation preference of $25 per unit
 
325,000

 
325,000

General partner; 94,161,761 and 94,108,061 units outstanding at September 30, 2015 and December 31, 2014, respectively
 
1,616,333

 
1,639,340

Limited partners; 154,170 units outstanding at September 30, 2015 and December 31, 2014
 
(1,940
)
 
(1,914
)
Accumulated other comprehensive loss
 
(62,307
)
 
(57,748
)
Total partners’ capital
 
1,877,086

 
1,904,678

Noncontrolling interests:
 
 
 
 
Limited partners’ interests in consolidated partnerships
 
30,958

 
31,804

Total noncontrolling interests
 
30,958

 
31,804

Total capital
 
1,908,044

 
1,936,482

Total liabilities and capital
$
4,170,887

 
4,197,170

See accompanying notes to consolidated financial statements.

8



REGENCY CENTERS, L.P.
Consolidated Statements of Operations
(in thousands, except per unit data)
(unaudited)
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
 
Minimum rent
$
105,071

 
98,620

$
308,766

 
290,935

Percentage rent
 
486

 
371

 
2,593

 
2,301

Recoveries from tenants and other income
 
30,725

 
28,787

 
94,205

 
90,144

Management, transaction, and other fees
 
5,786

 
5,781

 
18,032

 
18,353

Total revenues
 
142,068

 
133,559

 
423,596

 
401,733

Operating expenses:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
37,032

 
36,417

 
109,249

 
110,345

Operating and maintenance
 
19,761

 
18,149

 
61,119

 
58,152

General and administrative
 
14,750

 
14,463

 
46,227

 
43,883

Real estate taxes
 
16,044

 
14,832

 
46,842

 
44,529

Other operating expenses
 
1,880

 
2,062

 
4,825

 
5,665

Total operating expenses
 
89,467

 
85,923

 
268,262

 
262,574

Other expense (income):
 
 
 
 
 
 
 
 
Interest expense, net
 
25,099

 
27,561

 
78,407

 
82,141

Provision for impairment
 

 

 

 
225

Early extinguishment of debt
 

 

 
(61
)
 

Net investment loss (income), including unrealized losses of $1,296 and $472, and $1,771 and $289 for the three and nine months ended September 30, 2015 and 2014, respectively
 
1,190

 
(94
)
 
190

 
(915
)
Total other expense
 
26,289

 
27,467

 
78,536

 
81,451

Income from operations before equity in income of investments in real estate partnerships
 
26,312

 
20,169

 
76,798

 
57,708

Equity in income of investments in real estate partnerships
 
5,667

 
5,713

 
17,991

 
22,353

Income from operations
 
31,979

 
25,882

 
94,789

 
80,061

Gain on sale of real estate
 
27,755

 
27,558

 
34,215

 
29,598

Net income
 
59,734

 
53,440

 
129,004

 
109,659

Limited partners’ interests in consolidated partnerships
 
(643
)
 
(142
)
 
(1,619
)
 
(863
)
Net income attributable to the Partnership
 
59,091

 
53,298

 
127,385

 
108,796

Preferred unit distributions
 
(5,266
)
 
(5,266
)
 
(15,797
)
 
(15,797
)
Net income attributable to common unit holders
$
53,825

 
48,032

$
111,588

 
92,999


 
 
 
 
 
 
 
 
Income per common unit - basic
$
0.57

 
0.52

$
1.18

 
1.00

Income per common unit - diluted
$
0.57

 
0.52

$
1.18

 
1.00

See accompanying notes to consolidated financial statements.

9


REGENCY CENTERS, L.P.
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Net income
$
59,734

 
53,440

$
129,004

 
109,659

Other comprehensive loss:
 
 
 
 
 
 
 
 
Loss on settlement of derivative instruments:
 
 
 
 
 
 
 
 
Amortization of loss on settled derivative instruments recognized in net income
 
2,011

 
2,107

 
6,225

 
6,639

Effective portion of change in fair value of derivative instruments:
 
 
 
 
 
 
 
 
Effective portion of change in fair value of derivative instruments
 
(15,768
)
 
(3,651
)
 
(11,274
)
 
(28,603
)
Less: reclassification adjustment for change in fair value of derivative instruments included in net income
 
144

 
153

 
429

 
459

Available for sale securities
 
 
 
 
 
 
 
 
Unrealized (loss) gain on available-for-sale securities (note 4)
 
(43
)
 
3,895

 
(73
)
 
4,809

Other comprehensive (loss) income
 
(13,656
)
 
2,504

 
(4,693
)
 
(16,696
)
Comprehensive income
 
46,078

 
55,944

 
124,311

 
92,963

Less: comprehensive income (loss) attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
 
643

 
142

 
1,619

 
863

Other comprehensive income (loss) attributable to noncontrolling interests
 
86

 
(92
)
 
(127
)
 
(108
)
Comprehensive income attributable to noncontrolling interests
 
729

 
50

 
1,492

 
755

Comprehensive income attributable to the Partnership
$
45,349

 
55,894

$
122,819

 
92,208

See accompanying notes to consolidated financial statements.


10



REGENCY CENTERS, L.P.
Consolidated Statements of Capital
For the nine months ended September 30, 2015 and 2014
 (in thousands)
(unaudited)
 
 
General Partner
Preferred and
Common Units
 
Limited
Partners
 
Accumulated
Other
Comprehensive Loss
 
Total
Partners’
Capital
 
Noncontrolling
Interests in
Limited Partners’
Interest in
Consolidated
Partnerships
 
Total
Capital
Balance at December 31, 2013
$
1,860,758

 
(1,426
)
 
(17,404
)
 
1,841,928

 
19,206

 
1,861,134

Net income
 
108,611

 
185

 

 
108,796

 
863

 
109,659

Other comprehensive income
 

 
(29
)
 
(16,559
)
 
(16,588
)
 
(108
)
 
(16,696
)
Contributions from partners
 

 

 

 

 
15,933

 
15,933

Distributions to partners
 
(129,939
)
 
(228
)
 

 
(130,167
)
 
(5,051
)
 
(135,218
)
Redemption of partnership units
 

 
(300
)
 

 
(300
)
 

 
(300
)
Preferred unit distributions
 
(15,797
)
 

 

 
(15,797
)
 

 
(15,797
)
Restricted units issued as a result of amortization of restricted stock issued by Parent Company
 
8,747

 

 

 
8,747

 

 
8,747

Common units issued as a result of common stock issued by Parent Company, net of repurchases
 
46,667

 

 

 
46,667

 

 
46,667

Common units exchanged for common stock of Parent Company
 
137

 
(137
)
 

 

 

 

Balance at September 30, 2014
 
1,879,184

 
(1,935
)
 
(33,963
)
 
1,843,286

 
30,843

 
1,874,129

 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
 
1,964,340

 
(1,914
)
 
(57,748
)
 
1,904,678

 
31,804

 
1,936,482

Net income
 
127,181

 
204

 

 
127,385

 
1,619

 
129,004

Other comprehensive loss
 

 
(7
)
 
(4,559
)
 
(4,566
)
 
(127
)
 
(4,693
)
Contributions from partners
 

 

 

 

 
454

 
454

Distributions to partners
 
(136,974
)
 
(223
)
 

 
(137,197
)
 
(2,792
)
 
(139,989
)
Preferred unit distributions
 
(15,797
)
 

 

 
(15,797
)
 

 
(15,797
)
Restricted units issued as a result of amortization of restricted stock issued by Parent Company
 
10,441

 

 

 
10,441

 

 
10,441

Common units redeemed as a result of common stock redeemed by Parent Company, net of issuances
 
(7,858
)
 

 

 
(7,858
)
 

 
(7,858
)
Balance at September 30, 2015
$
1,941,333

 
(1,940
)
 
(62,307
)
 
1,877,086

 
30,958

 
1,908,044

See accompanying notes to consolidated financial statements.


11



REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2015 and 2014
(in thousands)
(unaudited)
 
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
Net income
$
129,004

 
109,659

Adjustments to reconcile net income to net cash provided by operating activities:
 

 

Depreciation and amortization
 
109,249

 
110,355

Amortization of deferred loan cost and debt premium
 
7,404

 
8,095

Amortization and (accretion) of above and below market lease intangibles, net
 
(1,250
)
 
(2,315
)
Stock-based compensation, net of capitalization
 
8,379

 
6,885

Equity in income of investments in real estate partnerships
 
(17,991
)
 
(22,353
)
Gain on sale of real estate
 
(34,215
)
 
(29,598
)
Provision for impairment
 

 
225

Early extinguishment of debt
 
(61
)
 

Distribution of earnings from operations of investments in real estate partnerships
 
34,527

 
30,008

Settlement of derivative instruments
 
(7,267
)
 
4,648

Gain on derivative instruments
 

 
(13
)
Deferred compensation expense
 
(610
)
 
610

Realized and unrealized loss (gain) on investments
 
189

 
(612
)
Changes in assets and liabilities:
 

 

Restricted cash
 
1,534

 
497

Accounts receivable
 
(4,408
)
 
(2,801
)
Straight-line rent receivables, net
 
(6,274
)
 
(4,724
)
Deferred leasing costs
 
(8,268
)
 
(6,416
)
Other assets
 
(2,257
)
 
131

Accounts payable and other liabilities
 
10,230

 
15,018

Tenants’ security, escrow deposits and prepaid rent
 
(1,152
)
 
511

Net cash provided by operating activities
 
216,763

 
217,810

Cash flows from investing activities:
 
 
 
 
Acquisition of operating real estate
 
(42,983
)
 
(98,018
)
Advance deposits on acquisition of operating real estate
 
(2,250
)
 

Real estate development and capital improvements
 
(150,967
)
 
(160,552
)
Proceeds from sale of real estate investments
 
93,727

 
62,788

Collection of notes receivable
 
1,000

 

Investments in real estate partnerships
 
(18,644
)
 
(6,012
)
Distributions received from investments in real estate partnerships
 
15,014

 
29,916

Dividends on investments
 
128

 
100

Acquisition of securities
 
(25,675
)
 
(19,866
)
Proceeds from sale of securities
 
22,296

 
5,344

Net cash used in investing activities
 
(108,354
)
 
(186,300
)
Cash flows from financing activities:
 
 
 
 
Net proceeds from common units issued as a result of common stock issued by Parent Company
 
946

 
49,300

Proceeds from sale of treasury stock
 
51

 

Redemption of preferred partnership units
 

 
(300
)
Distributions (to) from limited partners in consolidated partnerships, net
 
(2,352
)
 
(4,619
)
Distributions to partners
 
(136,231
)
 
(129,272
)
Distributions to preferred unit holders
 
(15,797
)
 
(15,797
)
Repayment of fixed rate unsecured notes
 
(350,000
)
 
(150,000
)
Proceeds from issuance of fixed rate unsecured notes, net
 
248,160

 
248,705

Proceeds from unsecured credit facilities
 
445,000

 
255,000

Repayment of unsecured credit facilities
 
(305,000
)
 
(255,000
)
Proceeds from notes payable
 
3,325

 
12,025

Repayment of notes payable
 
(76,027
)
 
(13,487
)
Scheduled principal payments
 
(4,384
)
 
(5,068
)
Payment of loan costs
 
(5,996
)
 
(2,973
)
Net cash used in financing activities
 
(198,305
)
 
(11,486
)
Net (decrease) increase in cash and cash equivalents
 
(89,896
)
 
20,024

Cash and cash equivalents at beginning of the period
 
113,776

 
80,684

Cash and cash equivalents at end of the period
$
23,880

 
100,708




12



REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2015, and 2014
(in thousands)
(unaudited)
 
 
2015
 
2014
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest (net of capitalized interest of $5,403 and $5,158 in 2015 and 2014, respectively)
$
71,734

 
72,573

Cash paid for income taxes
$
871

 
94

Supplemental disclosure of non-cash transactions:
 
 
 
 
Mortgage loans assumed for the acquisition of real estate
$
42,799

 
78,049

Initial fair value of non-controlling interest recorded at acquisition
$

 
15,385

Change in fair value of derivative instruments
$
(10,845
)
 
(28,144
)
Common stock issued by Parent Company for dividend reinvestment plan
$
966

 
895

Stock-based compensation capitalized
$
2,196

 
2,026

Contributions from limited partners in consolidated partnerships, net
$
13

 
116

Common stock issued for dividend reinvestment in trust
$
631

 
581

Contribution of stock awards into trust
$
1,633

 
1,865

Distribution of stock held in trust
$
1,898

 
4

Change in fair value of securities available-for-sale
$
(73
)
 
4,809

See accompanying notes to consolidated financial statements.



13


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015

1.
Organization and Principles of Consolidation
General
Regency Centers Corporation (the “Parent Company”) began its operations as a Real Estate Investment Trust (“REIT”) in 1993 and is the general partner of Regency Centers, L.P. (the “Operating Partnership”). The Parent Company currently owns approximately 99.8% of the outstanding common Partnership Units of the Operating Partnership. The Parent Company engages in the ownership, management, leasing, acquisition, and development of retail shopping centers through the Operating Partnership, and has no other assets or liabilities other than through its investment in the Operating Partnership. As of September 30, 2015, the Parent Company, the Operating Partnership and their controlled subsidiaries on a consolidated basis (the "Company” or “Regency”) directly owned 199 retail shopping centers and held partial interests in an additional 119 retail shopping centers through investments in real estate partnerships (also referred to as "joint ventures" or "co-investment partnerships").

The financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. These adjustments are considered to be of a normal recurring nature.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue it expects to be entitled to for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP and will be effective for the Company on January 1, 2018, with adoption as early as January 1, 2017 permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures and has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

In February 2015, the FASB issued ASU No. 2015-02, Amendments to the Consolidation Analysis (Topic 810), which requires amendments to both the variable interest entity ("VIE") and voting models. The amendments (i) rescind the indefinite deferral of certain aspects of accounting standards relating to consolidations and provide a permanent scope exception for registered money market funds and similar unregistered money market funds, (ii) modify the identification of variable interests (fees paid to a decision maker or service provider), the VIE characteristics for a limited partnership or similar entity and primary beneficiary determination under the VIE model, and (iii) eliminate the presumption within the current voting model that a general partner controls a limited partnership or similar entity. The new guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2015 with early adoption permitted. The amendments may be applied using either a modified retrospective or full retrospective approach. The adoption of this standard during the first quarter of 2016 will not have a material impact on the Company's financial position or results of operations, but may result in additional disclosures.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30), which simplifies the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years with early adoption permitted. The Company will adopt this ASU in the first quarter of 2016, which will result in a decrease to total assets and liabilities of the net unamortized balance of debt issuance costs, which is $8.8 million at September 30, 2015, exclusive of the line of credit costs. Debt issue costs related to the line of credit will remain in deferred costs.



14

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015





2.
Real Estate Investments

The following tables detail the shopping centers acquired or land acquired for development. Additionally, the Company made $2.3 million in deposits toward the potential acquisition of operating properties.
(in thousands)
 
Nine months ended September 30, 2015
Date Purchased
 
Property Name
 
City/State
 
Property Type
 
Ownership
 
Purchase Price
 
Debt Assumed, Net of Premiums
 
Intangible Assets
 
Intangible Liabilities
9/1/15
 
University Commons
 
Boca Raton, FL
 
Operating
 
100%
 
$80,500
 
42,799
 
64,482
 
14,039


(in thousands)
 
Nine months ended September 30, 2014
Date Purchased
 
Property Name
 
City/State
 
Property Type
 
Ownership
 
Purchase Price
 
Debt Assumed, Net of Premiums
 
Intangible Assets
 
Intangible Liabilities
1/31/14
 
Persimmon Place
 
Dublin, CA
 
Development
 
100%
 
$14,200
 
 
 
2/14/14
 
Shops at Mira Vista
 
Austin, TX
 
Operating
 
100%
 
22,500
 
319
 
2,329
 
291
3/7/14
 
Fairfield Portfolio (1)
 
Fairfield, CT
 
Operating
 
80%
 
149,344
 
77,730
 
12,650
 
5,601
6/2/14
 
Willow Oaks Crossing
 
Concord, NC
 
Development
 
100%
 
3,342
 
 
 
7/15/14
 
Clybourn Commons
 
Chicago, IL
 
Operating
 
100%
 
19,000
 
 
1,686
 
3,298
9/10/14
 
Belmont Chase
 
Ashburn, VA
 
Development
 
100%
 
4,300
 
 
 
9/19/14
 
CityLine Market
 
Dallas, TX
 
Development
 
100%
 
4,913
 
 
 
Total property acquisitions
 
 
 
 
 
$217,599
 
$78,049
 
$16,665
 
$9,190

(1) On March 7, 2014, the Company acquired an 80% controlling interest in the Fairfield Portfolio, consisting of three operating properties. As a result of consolidation, the Company recorded the non-controlling interest of $15.4 million at fair value. The portfolio consists of three operating properties located in Fairfield, CT. 

The real estate operations acquired were not considered material to the Company, individually or in the aggregate, therefore pro-forma financial information is not required.


3.    Property Dispositions

Dispositions

The following table provides a summary of shopping centers and land parcels disposed of:
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in thousands)
 
2015
 
2014
 
2015
 
2014
Net proceeds from sale of real estate investments
 
$
67,345

 
$
55,569

 
$
93,727

 
$
62,788

Gain on sale of real estate
 
$
27,755

 
$
27,558

 
$
34,215

 
$
29,598

Number of operating properties sold
 
2

 
4

 
4

 
6

Number of land parcels sold
 

 
2

 

 
5

Percent interest sold
 
100
%
 
100
%
 
100
%
 
100
%




15

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015




4.    Available-for-Sale Securities

Available-for-sale securities are included in other assets in the accompanying Consolidated Balance Sheets, and consist of the following:
 
September 30, 2015
(in thousands)
Amortized Cost
 
Gains in Accumulated Other Comprehensive Loss
 
Losses in Accumulated Other Comprehensive Loss
 
Estimated Fair Value
Certificates of deposit
$
1,750

 
1

 

 
1,751

Corporate bonds
6,156

 

 
(74
)
 
6,082

Total
$
7,906

 
1

 
(74
)
 
7,833

 
September 30, 2014
(in thousands)
Amortized Cost
 
Gains in Accumulated Other Comprehensive Loss
 
Losses in Accumulated Other Comprehensive Loss
 
Estimated Fair Value
Common stock
$
14,350

 
4,809

 

 
19,159

Realized gains or losses on investments are recorded in our consolidated statements of operations within other income. Upon the sale of a security classified as available-for-sale, the security’s specific unrealized gain (loss) is reclassified out of accumulated other comprehensive loss into earnings based on the specific identification method. During the nine months ended September 30, 2015 and 2014, there were no reclassifications from accumulated other comprehensive loss into earnings.

The contractual maturities of available-for sale securities were as follows:
 
September 30, 2015
(in thousands)
Less than 12 months
 
1-3 Years
 
Over 3 Years
 
Total
Certificates of deposit
$
1,751

 

 

 
1,751

Corporate bonds
453

 
4,122

 
1,507

 
6,082

Total
$
2,204

 
4,122

 
1,507

 
7,833









16

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015



5.    Notes Payable and Unsecured Credit Facilities
The Company’s debt outstanding consists of the following: 
(in thousands)
September 30, 2015
 
December 31, 2014
Notes payable:
 
 
 
Fixed rate mortgage loans
$
479,413

 
518,993

Variable rate mortgage loans (1)
33,163

 
29,839

Fixed rate unsecured loans
1,296,076

 
1,397,525

Total notes payable
1,808,652

 
1,946,357

Unsecured credit facilities:
 
 
 
Line of Credit
50,000

 

Term Loan
165,000

 
75,000

Total unsecured credit facilities
215,000

 
75,000

Total debt outstanding
$
2,023,652

 
2,021,357


(1) An interest rate swap is in place to establish a fixed interest rate on $28.1 million of this variable rate mortgage for both periods. See note 6.
The weighted average contractual interest rates were 5.2% and 1.1% on the fixed rate and variable rate debt, respectively, at September 30, 2015. Significant financing activity since December 31, 2014 includes the following:

The Company repaid three mortgages totaling $76.0 million that were scheduled to mature during 2015;
The Company borrowed $50.0 million, net of repayments, on its $800.0 million Line of Credit (the "Line");
In May 2015, the Company amended its Line to extend the maturity to May 13, 2019 and reduced the applicable interest rate. Based on current credit ratings, the Line bears interest at an annual rate of LIBOR plus 92.5 basis points on any drawn balance plus an annual 15 basis point facility fee on the entire $800.0 million capacity. The interest rates are based on the higher of the Company's current corporate credit ratings issued by Moody's or S&P. Further, the Company has options to extend the maturity for two additional six-month periods.
In August 2015, the Company issued $250.0 million of 3.90% fixed rate ten-year unsecured public debt, which matures on November 1, 2025.
The proceeds from the public debt offering, along with borrowings of $90.0 million on the Term Loan, were used to repay $350.0 million of 5.25% fixed rate ten-year unsecured public debt that matured.
In September 2015, the Company assumed a mortgage with a fair value of $42.8 million upon acquisition of University Commons.


17

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015



As of September 30, 2015, scheduled principal payments and maturities on notes payable were as follows: 
(in thousands)
September 30, 2015
Scheduled Principal Payments and Maturities by Year:
Scheduled
Principal
Payments
 
Mortgage Loan
Maturities
 
Unsecured
Maturities (1)
 
Total
2015
$
2,127

 

 

 
2,127

2016
6,603

 
41,374

 

 
47,977

2017
5,937

 
116,383

 
400,000

(2) 
522,320

2018
5,021

 
57,253

 

 
62,274

2019
4,044

 
106,000

 
215,000

 
325,044

Beyond 5 Years
16,274

 
141,362

 
900,000

 
1,057,636

Unamortized debt premiums (discounts), net

 
10,198

 
(3,924
)
 
6,274

Total
$
40,006

 
472,570

 
1,511,076

 
2,023,652

(1) Includes unsecured public debt and unsecured credit facilities.
(2) During October 2015, the Company notified the trustee that it will redeem $100.0 million of the 2017 unsecured public debt on November 27, 2015.

The Company was in compliance as of September 30, 2015 with the financial and other covenants under its unsecured public debt and unsecured credit facilities.


6.    Derivative Financial Instruments
The following table summarizes the terms and fair values of the Company's derivative financial instruments, as well as their classification on the Consolidated Balance Sheets: 
 
 
 
 
 
 
 
 
 
 
 
Fair Value
(in thousands)
 
 
 
 
 
 
 
 
 
Liabilities (2)
Effective Date
 
Maturity Date
 
Early Termination Date (1)
 
Notional Amount
 
Bank Pays Variable Rate of
 
Regency Pays Fixed Rate of
 
September 30, 2015
 
December 31, 2014
10/16/13
 
10/16/20
 
N/A
 
$
28,100

 
1 Month LIBOR
 
2.196%
 
$
(1,272
)
 
(764
)
8/1/15
 
8/1/25
 
2/1/16
(3) 
75,000

 
3 Month LIBOR
 
2.479%
 

 
(289
)
8/1/15
 
8/1/25
 
2/1/16
(3) 
50,000

 
3 Month LIBOR
 
2.479%
 

 
(193
)
8/1/15
 
8/1/25
 
2/1/16
(3) 
50,000

 
3 Month LIBOR
 
2.479%
 

 
(193
)
8/1/15
 
8/1/25
 
2/1/16
(3) 
45,000

 
3 Month LIBOR
 
3.412%
 

 
(3,964
)
6/15/17
 
6/15/27
 
12/15/17
 
20,000

 
3 Month LIBOR
 
3.488%
 
(1,933
)
 
(1,227
)
6/15/17
 
6/15/27
 
12/15/17
 
100,000

 
3 Month LIBOR
 
3.480%
 
(9,584
)
 
(6,080
)
6/15/17
 
6/15/27
 
12/15/17
 
100,000

 
3 Month LIBOR
 
3.480%
 
(9,583
)
 
(6,084
)
Total derivative financial instruments
 
$
(22,372
)
 
(18,794
)
(1) Represents the date specified in the agreement for either optional or mandatory early termination which will result in cash settlement.
(2) Derivatives in an asset position are included within Other Assets in the accompanying Consolidated Balance Sheets, while those in a liability position are included within Accounts Payable and Other Liabilities.
(3) In connection with the issuance of the new bonds, the Company terminated and settled these swaps, resulting in cash payments of $7.3 million. The settlement value of these swaps will amortize through interest expense over the life of the bonds.
These derivative financial instruments are all interest rate swaps, which are designated and qualify as cash flow hedges. The Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges. The Company has master netting agreements; however, the Company

18

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015



does not have multiple derivatives subject to a single master netting agreement with the same counterparties. Therefore, none are offset in the accompanying Consolidated Balance Sheet.
The Company expects to issue new debt in 2017. In order to mitigate the risk of interest rate volatility, the Company previously entered into $220 million of forward starting interest rate swaps to partially hedge the new debt expected to be issued in 2017. These interest rate swaps lock in the 10-year treasury rate and swap spread at a weighted average fixed rate of 3.48%. A current market based credit spread applicable to Regency will be added to the locked in fixed rate at time of issuance that will determine the final bond yield.

The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive income (loss) ("AOCI") and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings within interest expense.

The following table represents the effect of the derivative financial instruments on the accompanying consolidated financial statements:
Derivatives in FASB
ASC Topic 815 Cash
Flow Hedging
Relationships:
Amount of Gain (Loss)
Recognized in OCI on
Derivative (Effective
Portion)
 
Location and Amount of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
 
Location and Amount of Gain or
(Loss) Recognized in
Income on  Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
 
Three months ended September 30,
 
 
 
Three months ended September 30,
 
 
 
Three months ended September 30,
(in thousands)
2015
 
2014
 
 
 
2015
 
2014
 
 
 
2015
 
2014
Interest rate swaps
$
(15,768
)
 
(3,651
)
 
Interest
expense
 
$
(2,155
)
 
(2,260
)
 
Other expenses
 
$

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives in FASB
ASC Topic 815 Cash
Flow Hedging
Relationships:
Amount of Gain (Loss)
Recognized in OCI on
Derivative (Effective
Portion)
 
Location and Amount of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
 
Location and Amount of Gain or
(Loss) Recognized in
Income on  Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
 
Nine months ended September 30,
 
 
 
Nine months ended September 30,
 
 
 
Nine months ended September 30,
(in thousands)
2015
 
2014
 
 
 
2015
 
2014
 
 
 
2015
 
2014
Interest rate swaps
$
(11,274
)
 
(28,603
)
 
Interest
expense
 
$
(6,654
)
 
(7,098
)
 
Other expenses
 
$

 


As of September 30, 2015, the Company expects $8.8 million of net deferred losses on derivative instruments accumulated in other comprehensive income to be reclassified into earnings during the next 12 months, of which $8.3 million is related to previously settled swaps.


7.    Fair Value Measurements

(a) Disclosure of Fair Value of Financial Instruments

All financial instruments of the Company are reflected in the accompanying Consolidated Balance Sheets at amounts which, in management's estimation, reasonably approximate their fair values, except for the following:
 
September 30, 2015
 
December 31, 2014
(in thousands)
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Financial assets:
 
 
 
 
 
 
 
Notes receivable
$
11,314

 
11,339

 
$
12,132

 
11,980

Financial liabilities:
 
 
 
 
 
 
 
Notes payable
$
1,808,652

 
1,925,400

 
$
1,946,357

 
2,116,000

Unsecured credit facilities
$
215,000

 
215,300

 
$
75,000

 
75,000


The table above reflects carrying amounts in the accompanying Consolidated Balance Sheets under the indicated captions. The above fair values approximate the amounts that would be received from selling those assets or that

19

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015



would be paid to transfer those liabilities in an orderly transaction between market participants as of September 30, 2015 and December 31, 2014. These fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company's own judgments about the assumptions that market participants would use in pricing the asset or liability.

The Company develops its judgments based on the best information available at the measurement date, including expected cash flows, appropriately risk-adjusted discount rates, and available observable and unobservable inputs. Service providers involved in fair value measurements are evaluated for competency and qualifications on an ongoing basis. As considerable judgment is often necessary to estimate the fair value of these financial instruments, the fair values presented above are not necessarily indicative of amounts that will be realized upon disposition of the financial instruments.

The following methods and assumptions were used to estimate the fair value of these financial instruments:

Notes Receivable

The fair value of the Company's notes receivable is estimated by calculating the present value of future contractual cash flows discounted at interest rates available for notes of the same terms and maturities, adjusted for counter-party specific credit risk. The fair value of notes receivable was determined primarily using Level 3 inputs of the fair value hierarchy, which considered counter-party credit risk and loan to value ratio on the underlying property securing the note receivable.

Notes Payable

The fair value of the Company's unsecured debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The fair value of the unsecured debt was determined using Level 2 inputs of the fair value hierarchy.

The fair value of the Company's mortgage notes payable is estimated by discounting future cash flows of each instrument at rates that reflect the current market rates available to the Company for debt of the same terms and maturities. Fixed rate loans assumed in connection with real estate acquisitions are recorded in the accompanying consolidated financial statements at fair value at the time the property is acquired. The fair value of the mortgage notes payable was determined using Level 2 inputs of the fair value hierarchy.

Unsecured Credit Facilities

The fair value of the Company's unsecured credit facilities is estimated based on the interest rates currently offered to the Company by financial institutions. The fair value of the credit facilities was determined using Level 2 inputs of the fair value hierarchy.

The following interest rate ranges were used by the Company to estimate the fair value of its financial instruments:
 
 
September 30, 2015
 
December 31, 2014
 
 
Low
 
High
 
Low
 
High
Notes receivable
 
6.9%
 
6.9%
 
7.4%
 
7.4%
Notes payable
 
2.4%
 
3.9%
 
0.9%
 
3.4%
Unsecured credit facilities
 
1.1%
 
1.2%
 
1.3%
 
1.3%

(b) Fair Value Measurements

The following financial instruments are measured at fair value on a recurring basis:

Trading Securities Held in Trust

The Company has investments in marketable securities, which are assets of the non-qualified deferred compensation plan ("NQDCP"), that are classified as trading securities held in trust on the accompanying

20

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015



Consolidated Balance Sheets. The fair value of the trading securities held in trust was determined using quoted prices in active markets, which are considered Level 1 inputs of the fair value hierarchy. Changes in the value of trading securities are recorded within net investment (income) loss from deferred compensation plan in the accompanying Consolidated Statements of Operations.

Available-for-Sale Securities

Available-for-sale securities consist of investments in certificates of deposit and corporate bonds, and are recorded at fair value using matrix pricing methods to estimate fair value, which are considered Level 2 inputs of the fair value hierarchy. Unrealized gains or losses on these securities are recognized through other comprehensive income.


Interest Rate Derivatives
The fair value of the Company's interest rate derivatives is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its interest rate swaps. As a result, the Company determined that its interest rate swaps valuation in its entirety is classified in Level 2 of the fair value hierarchy.
The following tables present the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis:
 
Fair Value Measurements as of September 30, 2015
(in thousands)
 
 
Quoted Prices in Active Markets for Identical Assets
 
Significant Other Observable Inputs
 
Significant Unobservable Inputs
Assets
Balance
 
(Level 1)
 
(Level 2)
 
(Level 3)
Trading securities held in trust
$
28,291

 
28,291

 

 

Available-for-sale securities
7,833

 

 
7,833

 

Total
$
36,124

 
28,291

 
7,833

 

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Interest rate derivatives
$
(22,372
)
 

 
(22,372
)
 

 
Fair Value Measurements as of December 31, 2014
(in thousands)
 
 
Quoted Prices in Active Markets for Identical Assets
 
Significant Other Observable Inputs
 
Significant Unobservable Inputs
Assets
Balance
 
(Level 1)
 
(Level 2)
 
(Level 3)
Trading securities held in trust
$
28,134

 
28,134

 

 

Liabilities
 
 
 
 
 
 
 
Interest rate derivatives
$
(18,794
)
 

 
(18,794
)
 


There were no assets measured at fair value on a nonrecurring basis as of September 30, 2015.

21

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015



8.    Equity and Capital

Common Stock of the Parent Company

Issuances:

The current ATM equity offering program authorizes the Parent Company to sell up to $200 million of common stock at prices determined by the market at the time of sale. As of September 30, 2015, $95.0 million of common stock remained available for issuance under this ATM equity program.

The following table presents the shares that were issued under the ATM equity program, with no shares issued during the three months ended September 30, 2015:
 
Three months ended September 30,
 
Nine months ended September 30,
(dollar amounts are in thousands, except price per share data)
2014
 
2015
 
2014
Shares issued
871,754

 
18,125

 
871,754

Weighted average price per share
$
57.35

 
$
64.72

 
57.35

Total proceeds
$
49,995

 
$
1,173

 
49,995

Commissions
$
695

 
$
15

 
695

Issuance costs
$

 
$

 



In January 2015, the Parent Company entered into a forward sale and an underwritten public offering of 2.875 million shares of its common stock at a price of $67.40 per share which will result in gross proceeds of approximately $193.8 million, before any underwriting discount and offering expenses. The forward sale will settle on one or more dates no later than January 14, 2016.


Common Units of the Operating Partnership

Issuances:
Common units were issued to the Parent Company in relation to the Parent Company's issuance of common stock, as discussed above.


22

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015



Accumulated Other Comprehensive Loss

The following tables present changes in the balances of each component of AOCI:
 
Controlling Interest
 
Noncontrolling Interest
 
Total
(in thousands)
Cash Flow Hedges
 
Unrealized gain (loss) on Available-For-Sale Securities
 
AOCI
 
Cash Flow Hedges
 
Unrealized gain (loss) on Available-For-Sale Securities
 
AOCI
 
AOCI
Balance as of December 31, 2013
$
(17,404
)
 

 
(17,404
)
 
(479
)
 

 
(479
)
 
(17,883
)
Other comprehensive income before reclassifications
(28,326
)
 
4,801

 
(23,525
)
 
(277
)
 
8

 
(269
)
 
(23,794
)
Amounts reclassified from accumulated other comprehensive income
6,966

 

 
6,966

 
132

 

 
132

 
7,098

Current period other comprehensive income, net
(21,360
)
 
4,801

 
(16,559
)
 
(145
)
 
8

 
(137
)
 
(16,696
)
Balance as of September 30, 2014
$
(38,764
)
 
4,801

 
(33,963
)
 
(624
)
 
8

 
(616
)
 
(34,579
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Controlling Interest
 
Noncontrolling Interest
 
Total
(in thousands)
Cash Flow Hedges
 
Unrealized gain (loss) on Available-For-Sale Securities
 
AOCI
 
Cash Flow Hedges
 
Unrealized gain (loss) on Available-For-Sale Securities
 
AOCI
 
AOCI
Balance as of December 31, 2014
$
(57,748
)
 

 
(57,748
)
 
(750
)
 

 
(750
)
 
(58,498
)
Other comprehensive income before reclassifications
(11,022
)
 
(73
)
 
(11,095
)
 
(252
)
 

 
(252
)
 
(11,347
)
Amounts reclassified from accumulated other comprehensive income
6,536

 

 
6,536

 
118

 

 
118

 
6,654

Current period other comprehensive income, net
(4,486
)
 
(73
)
 
(4,559
)
 
(134
)
 

 
(134
)
 
(4,693
)
Balance as of September 30, 2015
$
(62,234
)
 
(73
)
 
(62,307
)
 
(884
)
 

 
(884
)
 
(63,191
)

The following represents amounts reclassified out of AOCI into income:
AOCI Component
Amount Reclassified from AOCI into income
 
Affected Line Item Where Net Income is Presented
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
(in thousands)
2015
 
2014
 
2015
 
2014
 
 
Interest rate swaps
$
2,155

 
$
2,260

 
$
6,654

 
$
7,098

 
Interest expense


23

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015




9.    Stock-Based Compensation

The Company recorded stock-based compensation in general and administrative expenses in the accompanying Consolidated Statements of Operations. During 2015, the Company granted 209,069 shares of restricted stock with a weighted-average grant-date fair value of $69.80 per share.


10.    Non-Qualified Deferred Compensation Plan ("NQDCP")

The Company maintains a NQDCP which allows select employees and directors to defer part or all of their cash bonus, director fees, and restricted stock awards. All contributions into the participants' accounts are fully vested upon contribution to the NQDCP and are deposited into a Rabbi trust. The assets of the Rabbi trust, exclusive of the shares of the Company's common stock, are classified as trading securities in the accompanying Consolidated Balance Sheets, and totaled $28.3 million and $28.1 million at September 30, 2015 and December 31, 2014, respectively. The participants' deferred compensation liability, also exclusive of the shares of the Company's common stock, is included within accounts payable and other liabilities in the accompanying Consolidated Balance Sheets and totaled $27.8 million and $27.6 million at September 30, 2015 and December 31, 2014, respectively.

24

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015



11.    Earnings per Share and Unit
Parent Company Earnings per Share
The following summarizes the calculation of basic and diluted earnings per share: 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in thousands, except per share data)
 
2015
 
2014
 
2015
 
2014
Numerator:
 
 
 
 
 
 
 
 
Income from operations
 
$
31,979

 
25,882

 
$
94,789

 
80,061

Gain on sale of real estate
 
27,755

 
27,558

 
34,215

 
29,598

Less: income attributable to noncontrolling interests
 
737

 
232

 
1,823

 
1,048

Income from operations attributable to the Company
 
58,997

 
53,208

 
127,181

 
108,611

Less: preferred stock dividends and other
 
5,266

 
5,415

 
15,797

 
16,245

Income from operations attributable to common stockholders - basic
 
$
53,731

 
47,793

 
111,384

 
92,366

Income from operations attributable to common stockholders - diluted
 
$
53,731

 
47,817

 
111,384

 
92,416

Denominator:
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for basic EPS
 
94,158

 
92,345

 
94,080

 
92,071

Weighted average common shares outstanding for diluted EPS
 
94,595

 
92,396

 
94,483

 
92,107


 
 
 
 
 
 
 
 
Income per common share – basic
 
$
0.57

 
0.52

 
$
1.18

 
1.00

Income per common share – diluted
 
$
0.57

 
0.52

 
$
1.18

 
1.00

Income allocated to noncontrolling interests of the Operating Partnership has been excluded from the numerator and exchangeable Operating Partnership units have been omitted from the denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the numerator and denominator would have no impact. Weighted average exchangeable Operating Partnership units outstanding for the three and nine months ended September 30, 2015 were 154,170, and for the three and nine months ended September 30, 2014 were 158,920 and 159,229, respectively.
Operating Partnership Earnings per Unit
The following summarizes the calculation of basic and diluted earnings per unit: 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in thousands, except per share data)
 
2015
 
2014
 
2015
 
2014
Numerator:
 
 
 
 
 
 
 
 
Income from operations
 
$
31,979

 
25,882

 
$
94,789

 
80,061

Gain on sale of real estate
 
27,755

 
27,558

 
34,215

 
29,598

Less: income attributable to noncontrolling interests
 
643

 
142

 
1,619

 
863

Income from operations attributable to the Partnership
 
59,091

 
53,298

 
127,385

 
108,796

Less: preferred unit distributions and other
 
5,266

 
5,415

 
15,797

 
16,245

Income from operations attributable to common unit holders - basic
 
53,825

 
47,883

 
111,588

 
92,551

Income from operations attributable to common unit holders - diluted
 
53,825

 
47,907

 
111,588

 
92,601

Denominator:
 
 
 
 
 
 
 
 
Weighted average common units outstanding for basic EPU
 
94,312

 
92,505

 
94,234

 
92,231

Weighted average common units outstanding for diluted EPU
 
94,749

 
92,556

 
94,637

 
92,267


 
 
 
 
 
 
 
 
Income per common unit – basic
 
$
0.57

 
0.52

 
$
1.18

 
1.00

Income per common unit – diluted
 
$
0.57

 
0.52

 
$
1.18

 
1.00



25

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
September 30, 2015



12.    Commitments and Contingencies

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

The Company is also subject to numerous environmental laws and regulations as they apply to real estate pertaining to chemicals used by the dry cleaning industry, the existence of asbestos in older shopping centers, and underground petroleum storage tanks. The Company believes that the ultimate disposition of currently known environmental matters will not have a material effect on its financial position, liquidity, or operations; however, it can give no assurance that existing environmental studies with respect to the shopping centers have revealed all potential environmental liabilities; that any previous owner, occupant or tenant did not create any material environmental condition not known to it; that the current environmental condition of the shopping centers will not be affected by tenants and occupants, by the condition of nearby properties, or by unrelated third parties; or that changes in applicable environmental laws and regulations or their interpretation will not result in additional environmental liability to the Company.

The Company has the right to issue letters of credit under the Line up to an amount not to exceed $50.0 million, which reduces the credit availability under the Line. These letters of credit are primarily issued as collateral to facilitate the construction of development projects. As of September 30, 2015 and December 31, 2014, the Company had $5.9 million in letters of credit outstanding. 



26



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

Forward-Looking Statements    

In addition to historical information, the following information contains forward-looking statements as defined under federal securities laws. These forward-looking statements include statements about anticipated changes in our revenues, the size of our development and redevelopment program, earnings per share and unit, returns and portfolio value, and expectations about our liquidity. These statements are based on current expectations, estimates and projections about the real estate industry and markets in which the Company operates, and management's beliefs and assumptions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, changes in national and local economic conditions; financial difficulties of tenants; competitive market conditions, including timing and pricing of acquisitions and sales of properties and building pads ("out-parcels"); changes in leasing activity and market rents; timing of development starts; meeting development schedules; natural disasters in geographic areas in which we operate; cost of environmental remediation; our inability to exercise voting control over the co-investment partnerships through which we own many of our properties; and technology disruptions. For additional information, see “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2014. The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto of Regency Centers Corporation and Regency Centers, L.P. appearing elsewhere herein. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or uncertainties after the date hereof or to reflect the occurrence of uncertain events.


Overview of Our Strategy

Regency Centers began its operations as a publicly-traded REIT in 1993, and currently owns direct or partial interests in 318 shopping centers, the majority of which are grocery-anchored community and neighborhood centers. Our centers are located in the top markets of 27 states and the District of Columbia, and contain 37.9 million square feet of gross leasable area ("GLA"). All of our operating, investing, and financing activities are performed through the Operating Partnership, its wholly-owned subsidiaries, and through its co-investment partnerships. The Parent Company currently owns approximately 99.8% of the outstanding common partnership units of the Operating Partnership.
Our mission is to be the preeminent grocery-anchored shopping center owner and developer through:
First-rate performance of our exceptionally merchandised and located national portfolio;
Value-enhancing services of the best team of professionals in the business; and
Creation of superior growth in shareholder value.

Our strategic objectives are to:
Sustain average annual 3% same-property net operating income (“NOI”) growth from a high-quality portfolio of community and neighborhood shopping centers;
Develop new high quality shopping centers at attractive returns on investment from a disciplined development program;
Cost-effectively enhance our already strong balance sheet to reduce our cost of capital, provide financial flexibility and weather economic downturns; and
Engage a talented and dedicated team that operates efficiently and is recognized as a leader in the real estate industry and sustainability initiatives.

We earn revenues and generate cash flow by leasing space in our shopping centers to grocery stores, major retail anchors, restaurants, side-shop retailers, and service providers, as well as ground leasing or selling building pads to these same types of tenants. We experience growth in revenues by increasing occupancy and rental rates in our existing shopping centers and by acquiring and developing new shopping centers.

We grow our shopping center portfolio through acquisitions of operating centers and new shopping center development. We will continue to use our development capabilities, market presence, and anchor relationships to invest in value-added new developments and redevelopments of existing centers. We fund our acquisition and development activity from various capital sources including operating cash flow, property sales, equity offerings, new financing, and co-investment real estate partnerships. Co-investment real estate partnerships provide us with an additional capital source for shopping center acquisitions, developments, and redevelopments, as well as the opportunity to earn fees for asset management, property management, and other investing and financing services.

    

27



 

Shopping Center Portfolio

The following table summarizes general information related to the Consolidated Properties in our shopping center portfolio:
(GLA in thousands)
 
September 30, 2015
 
December 31, 2014
Number of Properties
 
199
 
202
Properties in Development
 
5
 
7
Gross Leasable Area
 
23,047
 
23,200
% Leased – Operating and Development
 
95.9%
 
95.3%
% Leased – Operating
 
96.0%
 
95.9%
Weighted average annual effective rent per square foot ("SF"), net of tenant concessions.
 
$18.92
 
$18.30
 
 
 
 
 

The following table summarizes general information related to the Unconsolidated Properties owned in co-investment partnerships in our shopping center portfolio:
(GLA in thousands)
 
September 30, 2015
 
December 31, 2014
Number of Properties
 
119
 
120
Gross Leasable Area
 
14,879
 
15,000
% Leased – Operating
 
96.3%
 
96.0%
Weighted average annual effective rent per SF, net of tenant concessions
 
$18.61
 
$17.85

For the purpose of the following disclosures of occupancy and leasing activity, anchor space is considered space greater than or equal to 10,000 SF and shop space is less than 10,000 SF. The following table summarizes pro-rata occupancy rates of our combined Consolidated and Unconsolidated shopping center portfolio:
 
 
September 30, 2015
 
December 31, 2014
% Leased – Operating
 
96.1%
 
95.9%
Anchor
 
98.9%
 
98.8%
Shop space
 
91.7%
 
91.2%

    

28




The following table summarizes leasing activity, including Regency's pro-rata share of activity within the portfolio of our co-investment partnerships:
 
 
Nine months ended September 30, 2015
 
 
Leasing Transactions (1)
 
SF (in thousands)
 
Base Rent PSF
 (2)
 
Tenant Improvements PSF
 (2)
 
Leasing Commissions PSF
 (2)
New leases
 

 

 

 

 

Anchor space
 
8
 
111
 
$
15.62

 
$
5.71

 
$
5.32

Shop space
 
334
 
542
 
$
30.59

 
$
10.30

 
$
13.65

Total New Leases (1)
 
342
 
653
 
$
28.04

 
$
9.52

 
$
12.23

Renewals
 

 

 


 


 


Anchor space
 
33
 
767
 
$
11.33

 
$
0.01

 
$
1.02

Shop space
 
697
 
1079
 
$
31.06

 
$
0.70

 
$
3.95

Total Renewal Leases (1)
 
730
 
1,846
 
$
22.86

 
$
0.41

 
$
2.73

Total Leases
 
1072
 
2,499
 
$
24.22

 
$
2.79

 
$
5.22

 
 
Nine months ended September 30, 2014
 
 
Leasing Transactions (1)
 
SF (in thousands)
 
Base Rent PSF
 (2)
 
Tenant Improvements PSF
 (2)
 
Leasing Commissions PSF
 (2)
New leases
 
 
 
 
 
 
 
 
 
 
Anchor space
 
25
 
744
 
$
14.42

 
$
5.17

 
$
4.71

Shop space
 
346
 
612
 
$
27.99

 
$
8.62

 
$
12.94

Total New Leases (1)
 
371
 
1,356
 
$
20.54

 
$
6.73

 
$
8.42

Renewals
 
 
 
 
 
 
 
 
 
 
Anchor space
 
40
 
889
 
$
11.19

 
$
0.26

 
$
1.20

Shop space
 
592
 
889
 
$
28.11

 
$
0.63

 
$
3.51

Total Renewal Leases (1)
 
632
 
1,778
 
$
19.65

 
$
0.45

 
$
2.35

Total Leases
 
1003
 
3,134
 
$
20.04

 
$
3.16

 
$
4.98

(1) Number of leasing transactions reported at 100%; all other statistics reported at pro-rata share.     
(2) Totals for base rent, tenant improvements, and leasing commissions reflect the weighted average per square foot ("PSF").







29



Significant Tenants and Concentrations of Risk

We seek to reduce our operating and leasing risks through geographic diversification and by avoiding dependence on any single property, market, or tenant. The following table summarizes our three most significant tenants, each of which is a grocery tenant, occupying our shopping centers: 

 
 
September 30, 2015
Grocery Anchor
 
Number of
Stores (1)
 
Percentage of
Company-
owned GLA (2)
 
Percentage  of
Annualized
Base Rent (2) 
Kroger
 
54
 
8.3%
 
4.3%
Publix
 
46
 
6.5%
 
3.7%
Safeway
 
50
 
5.0%
 
3.0%
 
 
 
 
 
 
 
(1) Includes stores owned by grocery anchors that are attached to our centers.
(2) Includes Regency's pro-rata share of Unconsolidated Properties and excludes those owned by anchors.

Bankruptcies

Although base rent is supported by long-term lease contracts, tenants who file bankruptcy may have the legal right to reject any or all of their leases and close related stores. In the event that a tenant with a significant number of leases in our shopping centers files bankruptcy and cancels its leases, we could experience a significant reduction in our revenues. We monitor the operating performance and rent collections of all tenants in our shopping centers, especially those tenants operating retail formats that are experiencing significant changes in competition, business practice, and store closings in other locations. We are not currently aware of the pending bankruptcy or announced store closings of any tenants in our shopping centers that would individually cause a material reduction in our revenues, and no tenant represents more than 5% of our annual base rent on a pro-rata basis.

Our management team devotes significant time to monitoring consumer preferences, shopping behaviors, and demographics to anticipate both challenges and opportunities in the changing retail industry that may affect our tenants. As a result of our findings, we may reduce new leasing, suspend leasing, or curtail the allowance for the construction of leasehold improvements within a certain retail category or to a specific retailer.




30



Liquidity and Capital Resources

Our Parent Company has no capital commitments other than its guarantees of the commitments of our Operating Partnership. The Parent Company will from time to time access the capital markets for the purpose of issuing new equity and will simultaneously contribute all of the offering proceeds to the Operating Partnership in exchange for additional partnership units. All debt is held by our Operating Partnership or by our co-investment partnerships. The following table represents the remaining available capacity under our at the market ("ATM") equity program and unsecured credit facilities:
(in thousands)
 
September 30, 2015
ATM equity program
 
 
Total capacity
 
$
200,000

Remaining capacity
 
$
95,000

 
 
 
Line of Credit (the "Line")
 
 
Total capacity
 
$
800,000

Remaining capacity (1)
 
$
744,100

Maturity (2)
 
May 13, 2019
 
 
 
(1) Net of letters of credit
 
 
(2) The Company has the option to extend the maturity for two additional six-month periods.

In January 2015, the Parent Company entered into an underwritten public offering for 2.875 million shares of its common stock at a price of $67.40 per share which will result in gross proceeds of approximately $193.8 million, before any underwriting discount and offering expenses. In connection with this offering, the Parent Company entered into a forward sale agreement (the "Forward Equity Offering") with an affiliate of Wells Fargo Securities, LLC for the underwritten shares. We expect to settle the offering by the maturity date of January 14, 2016.
    
The following table summarizes net cash flows related to operating, investing, and financing activities of the Company: 
 
 
Nine months ended September 30,
 
 
 (in thousands)
 
2015
 
2014
 
Change
Net cash provided by operating activities
 
$
216,763

 
217,810

 
(1,047
)
Net cash used in investing activities
 
(108,354
)
 
(186,300
)
 
77,946

Net cash used in financing activities
 
(198,305
)
 
(11,486
)
 
(186,819
)
Net (decrease) increase in cash and cash equivalents
 
$
(89,896
)
 
20,024

 
(109,920
)
Total cash and cash equivalents
 
$
23,880

 
100,708

 
(76,828
)
    
Net cash provided by operating activities:

Net cash provided by operating activities decreased $1.0 million due to:
$19.6 million increase in cash from operating income; and,
$4.5 million increase in operating cash flow distributions from our unconsolidated real estate partnerships as several redevelopment projects were completed and began distributing cash flows; reduced by
$7.3 million paid in August 2015 as compared to $4.6 million received in May 2014 upon the settlement of treasury hedges in connection with our bond issuances; and
$13.2 million net decrease in cash due to timing of cash receipts and payments related to operating activities.

We operate our business such that we expect net cash provided by operating activities will provide the necessary funds to pay our distributions to our common and preferred share and unit holders, which were $152.0 million and $145.1 million for the nine months ended September 30, 2015 and 2014, respectively. Our dividend distribution policy is set by our Board of Directors who monitors our financial position. Our Board of Directors recently declared our quarterly dividend on shares of our common stock of $0.485 per share, payable on December 2, 2015. Future dividends will be declared at the discretion of our Board of Directors and will be subject to capital requirements and availability. We plan to continue paying an aggregate

31



amount of distributions to our stock and unit holders that, at a minimum, meet the requirements to continue qualifying as a REIT for Federal income tax purposes.

Net cash used in investing activities:

Net cash used in investing activities decreased by $77.9 million, primarily due to a decrease in shopping center acquisitions during 2015:
 
 
Nine months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
Cash flows from investing activities:
 
 
 
 
 
 
Acquisition of operating real estate
 
$
(42,983
)
 
(98,018
)
 
55,035

Advance deposits on acquisition of operating real estate
 
(2,250
)
 

 
(2,250
)
Real estate development and capital improvements
 
(150,967
)
 
(160,552
)
 
9,585

Proceeds from sale of real estate investments
 
93,727

 
62,788

 
30,939

Collection of notes receivable
 
1,000

 

 
1,000

Investments in real estate partnerships
 
(18,644
)
 
(6,012
)
 
(12,632
)
Distributions received from investments in real estate partnerships
 
15,014

 
29,916

 
(14,902
)
Dividends on investments
 
128

 
100

 
28

Acquisition of securities
 
(25,675
)
 
(19,866
)
 
(5,809
)
Proceeds from sale of securities
 
22,296

 
5,344

 
16,952

Net cash used in investing activities
 
$
(108,354
)
 
(186,300
)
 
77,946


Significant changes in investing and divesting activities include:

We acquired one operating property during 2015, compared to the acquisition of five shopping centers in the same period of 2014.

We invested $9.6 million less on real estate development and capital improvements, as further detailed in a table below.

We received proceeds of $93.7 million from the sale of four shopping centers in 2015, compared to $62.8 million for two shopping centers and five out-parcels during 2014.

We invested $18.6 million in our real estate partnerships during 2015 to fund our share of maturing mortgage debt, compared to $6.0 million to fund redevelopment activities in the same period of 2014.

Distributions from our unconsolidated real estate partnerships include return of capital from sales or financing proceeds. The $15.0 million received in 2015 is primarily driven by $12.3 million of proceeds from the sale of one shopping center with a co-investment partner and $2.3 million of financing proceeds. During 2014, we received $24.8 million from real estate sales proceeds and $5.1 million from financing proceeds.

Acquisition of securities and proceeds from sale of securities include investments in equity and debt securities. In 2014, we paid $14.3 million for the acquisition of AmREIT, Inc. ("AmREIT") common stock. The remaining investing activity primarily relates to our deferred compensation plan and investments in corporate bonds and certificate of deposits.

32




We plan to continue developing and redeveloping shopping centers for long-term investment purposes. We deployed capital of $151.0 million for the development, redevelopment, and improvement of our real estate properties as comprised of the following:
 
 
Nine months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
Capital expenditures:
 
 
 
 
 
 
Land acquisitions
 
$

 
26,671

 
(26,671
)
Building and tenant improvements
 
22,211

 
25,690

 
(3,479
)
Redevelopments
 
34,523

 
27,762

 
6,761

Developments
 
78,921

 
64,574

 
14,347

Capitalized interest
 
5,403

 
5,158

 
245

Capitalized direct compensation
 
9,909

 
10,697

 
(788
)
Real estate development and capital improvements
 
$
150,967

 
160,552

 
(9,585
)

There were no land acquisitions during 2015, as compared to the acquisition of four land parcels for $26.7 million during 2014.

Redevelopment expenditures were higher during 2015 due to the timing, magnitude, and number of projects currently in process. We intend to continuously improve our portfolio of shopping centers through redevelopment which can include adjacent land acquisition, existing building expansion, new out-parcel building construction, and tenant improvement costs.  The size and magnitude of each redevelopment project varies with each redevelopment plan. 

Development expenditures were higher during 2015 due to the larger size of and progress towards completion of our development projects. At September 30, 2015 and December 31, 2014, we had five and seven development projects, respectively, that were either under construction or in lease up.

We have a staff of employees who directly support our development and redevelopment program. Internal compensation costs directly attributable to these activities are capitalized as part of each project as summarized in the table above. Changes in the level of future development and redevelopment activity could adversely impact results of operations by reducing the amount of internal costs for development and redevelopment projects that may be capitalized. A 10% reduction in development and redevelopment activity without a corresponding reduction in the compensation costs directly related to our development and redevelopment activities could result in an additional charge to net income of $1.0 million per year.


33




The following table details our development projects:
(in thousands, except cost PSF)
 
 
 
 
 
September 30, 2015
 
Property Name
 
Location
 
Start Date
 
Estimated /Actual Anchor Opening
 
Estimated Net Development Costs (1)
 
% of Costs Incurred (1)
 
GLA
 
Cost PSF of GLA (1)
 
Brooklyn Station on Riverside
 
Jacksonville, FL
 
Q4-13
 
Oct-14
 
$
15,180

 
83%
 
50
 
$
304

 
Willow Oaks Crossing
 
Concord, NC
 
Q2-14
 
Dec-15
 
13,711

 
77%
 
69
 
199

 
Belmont Shopping Center
 
Ashburn, VA
 
Q3-14
 
Aug-15
 
28,485

 
75%
 
91
 
313

 
CityLine Market
 
Richardson, TX
 
Q3-14
 
April-16
 
27,730

 
56%
 
80
 
347

 
Village at La Floresta
 
Brea, CA
 
Q4-14
 
Feb-16
 
33,116

 
71%
 
87
 
381

 
Total
 
 
 
 
 
 
 
$
118,222

 
71%
 
377
 
$
314

(2) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes leasing costs and is net of tenant reimbursements.
 
(2)  Amount represents a weighted average.
 

The following table summarizes our completed development projects:
(in thousands, except cost PSF)
 
Nine months ended September 30, 2015
Property Name
 
Location
 
Completion Date
 
Net Development
Costs (1)
 
GLA
 
Cost PSF
of GLA (1)
Fountain Square
 
Miami, FL
 
6/30/2015
 
$
55,937

 
177
 
$
316

Persimmon Place
 
Dublin, CA
 
9/30/2015
 
59,976

 
153
 
392

 
 
 
 
 
 
$
115,913

 
330
 
$
351

(1) Includes leasing costs and is net of tenant reimbursements.


Net cash used in financing activities:

Net cash flows used in financing activities increased by $186.8 million during 2015, primarily from debt repayments, net of proceeds from debt and equity issuances, as follows:
 
 
Nine months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
Cash flows from financing activities:
 
 
 
 
 
 
Equity issuances
 
$
946

 
49,300

 
(48,354
)
Stock redemption
 

 
(300
)
 
300

Distributions to limited partners in consolidated partnerships, net
 
(2,352
)
 
(4,619
)
 
2,267

Dividend payments
 
(152,028
)
 
(145,069
)
 
(6,959
)
Unsecured credit facilities, net
 
140,000

 

 
140,000

Proceeds from debt issuance
 
251,485

 
260,730

 
(9,245
)
Payment of debt issue costs
 
(5,996
)
 
(2,973
)
 
(3,023
)
Debt repayment
 
(430,411
)
 
(168,555
)
 
(261,856
)
Proceeds from sale of treasury stock, net
 
51

 

 
51

Net cash used in financing activities
 
$
(198,305
)
 
(11,486
)
 
(186,819
)

    

34



Significant financing activities during the nine months ended September 30, 2015 and 2014 include the following:

During 2015, we borrowed $140.0 million on our Line and Term Loan, net of repayments, with no such borrowings during 2014.

During both 2015 and 2014, we issued new $250.0 million fixed rate ten-year unsecured public debt, and received proceeds from non-recourse property mortgages.

During 2015, we used $430.4 million to repay debt, including $350.0 million to repay our 5.25% fixed rate ten-year unsecured public debt that matured in August 2015, $76.0 million to repay three mortgages that matured in 2015, and $4.4 million for scheduled principal payments.

During 2014 we used $168.6 million to repay debt, including $150.0 million to repay our 4.95% fixed-rate ten-year unsecured public debt that matured, $13.5 million to repay mortgages that matured in 2014, and $5.1 million for scheduled principal payments.

We endeavor to maintain a high percentage of unencumbered assets. At September 30, 2015, 79.4% of our wholly-owned real estate assets were unencumbered. Such assets allow us to access the secured and unsecured debt markets and to maintain availability on the Line. Our coverage ratio, including our pro-rata share of our partnerships, was 2.7 times and 2.5 times for the trailing four quarters ended September 30, 2015 and 2014, respectively. We define our coverage ratio as earnings before interest, taxes, investment transaction profits net of deal costs, depreciation and amortization (“Core EBITDA”) divided by the sum of the gross interest and scheduled mortgage principal paid to our lenders plus dividends paid to our preferred stockholders.

Through the end of 2016, we estimate that we will require approximately $390.1 million of cash, including $131.3 million to complete in-process developments and redevelopments, $149.7 million to repay maturing debt and fund the partial early redemption of the 2017 notes, and $109.1 million to fund our pro-rata share of estimated capital contributions to our co-investment partnerships for repayment of debt. If we start new developments or redevelop additional shopping centers, our cash requirements will increase. To meet our cash requirements, we may utilize cash generated from operations, proceeds from the sale of real estate, proceeds from settling our $193.8 million Forward Equity Offering, up to $744.1 million in available borrowings from our Line, and when the capital markets are favorable, proceeds from the sale of equity under our remaining $95.0 million ATM program and the issuance of new long-term debt.

We continuously monitor the capital markets and evaluate our ability to issue new debt, to repay maturing debt or fund our commitments. Based upon the current capital markets, our current credit ratings, and the number of high quality, unencumbered properties that we own which could collateralize borrowings, we currently expect that we will successfully issue new secured or unsecured debt to fund our obligations, as needed.
    
We have $400.0 million of fixed rate, unsecured debt maturing June 15, 2017. During October 2015, we notified the trustee that we will redeem $100.0 million of the 2017 maturing unsecured debt on November 27, 2015. We expect to issue new fixed rate debt in 2017 to repay the remaining $300.0 million maturity. In order to mitigate the risk of interest rate volatility, we have $220.0 million of forward starting interest rate swaps to partially hedge any new long-term debt issued in 2017. These interest rate swaps lock in the 10-year treasury rate and swap spread at a weighted average fixed rate of 3.48%, respectively. A current market based credit spread applicable to Regency will be added to the locked in fixed rate at time of issuance that will determine the final bond yield.

Our Line, Term Loan, and unsecured loans require that we remain in compliance with various covenants, which are described in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2014, with the Minimum Tangible Net Worth covenant removed from our Unsecured Credit Facilities. We are in compliance with these covenants at September 30, 2015 and expect to remain in compliance.

  


35



Investments in Real Estate Partnerships

At September 30, 2015 and December 31, 2014, we had investments in real estate partnerships of $321.2 million and $333.2 million, respectively. The following table is a summary of the unconsolidated combined assets and liabilities of these co-investment partnerships and our pro-rata share:
 
 
Regency's Share (1)
 
Combined
(dollars in thousands)
 
September 30, 2015
 
December 31, 2014
 
September 30, 2015
 
December 31, 2014
Number of Co-investment Partnerships
 
 
 
 
 
13

 
13

Regency’s Ownership
 
 
 
 
 
 20%-50%

 
 20%-50%

Number of Properties
 
 
 
 
 
119

 
120

Assets
 
$
951,975

 
981,359

 
$
2,734,714

 
2,807,502

Liabilities
 
522,051

 
539,310

 
1,511,334

 
1,558,874

Equity
 
429,924

 
442,049

 
1,223,380

 
1,248,628

less: Impairment of investment in real estate partnerships
 
(1,300
)
 
(1,300
)
 
 
 
 
less: Ownership percentage or Restricted Gain Method deferral
 
(29,257
)
 
(29,379
)
 
 
 
 
less: Net book equity in excess of purchase price
 
(78,203
)
 
(78,203
)
 
 
 
 
Investments in real estate partnerships
 
$
321,164

 
333,167

 
 
 
 
(1) Pro-rata financial information is not, and is not intended to be, a presentation in accordance with GAAP. However, management believes that providing such information is useful to investors in assessing the impact of its investments in real estate partnership activities on our operations, which includes such items on a single line presentation under the equity method in its consolidated financial statements.


Our equity method investments in real estate partnerships consist of the following: 
(in thousands)
Regency's Ownership
 
September 30, 2015
 
December 31, 2014
GRI - Regency, LLC (GRIR)
40.00%
 
$
233,150

 
247,175

Columbia Regency Retail Partners, LLC (Columbia I)
20.00%
 
17,471

 
15,916

Columbia Regency Partners II, LLC (Columbia II)
20.00%
 
7,550

 
9,343

Cameron Village, LLC (Cameron)
30.00%
 
11,641

 
12,114

RegCal, LLC (RegCal)
25.00%
 
18,066

 
13,354

US Regency Retail I, LLC (USAA)
20.01%
 
382

 
806

Other investments in real estate partnerships
50.00%
 
32,904

 
34,459

    Total
 
 
$
321,164

 
333,167




36




Notes Payable - Investments in Real Estate Partnerships

Scheduled principal repayments on notes payable held by our investments in real estate partnerships were as follows: 
(in thousands)
 
September 30, 2015
Scheduled Principal Payments and Maturities by Year:
 
Scheduled
Principal
Payments
 
Mortgage  Loan
Maturities
 
Unsecured
Maturities
 
Total
 
Regency’s
Pro-Rata
Share
2015
 
$
4,927

 
11,000

 

 
15,927

 
3,991

2016
 
17,135

 
305,076

 

 
322,211

 
113,155

2017
 
17,517

 
77,385

 
18,460

 
113,362

 
25,614

2018
 
18,696

 
67,022

 

 
85,718

 
27,655

2019
 
17,934

 
65,939

 

 
83,873

 
21,618

Beyond 5 Years
 
34,827

 
763,123

 

 
797,950

 
298,763

Unamortized debt premiums, net
 

 
(1,200
)
 

 
(1,200
)
 
(514
)
Total
 
$
111,036

 
1,288,345

 
18,460

 
1,417,841

 
490,282

 
 
 
 
 
 
 
 
 
 
 

At September 30, 2015, our investments in real estate partnerships had notes payable of $1.4 billion maturing through 2025, of which 98.7% had a weighted average fixed interest rate of 5.4%, and the remaining notes payable float over LIBOR and had a weighted average variable interest rate of 1.7%. These loans are all non-recourse, and our pro-rata share was $490.3 million as of September 30, 2015. As notes payable mature, they will be repaid from proceeds from refinancing and partner capital contributions. We are obligated to contribute our pro-rata share to fund maturities if they are not refinanced. We believe that our partners are financially sound and have sufficient capital or access thereto to fund future capital requirements.  In the event that a co-investment partner was unable to fund its share of the capital requirements of the co-investment partnership, we would have the right, but not the obligation, to loan the defaulting partner the amount of its capital call. 

Management fee income

In addition to earning our pro-rata share of net income or loss in each of these co-investment partnerships, we receive fees, as shown below:
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in thousands)
 
2015
 
2014
 
2015
 
2014
Asset management, property management, leasing, and investment and financing services
 
$
5,703

 
5,294

 
17,696

 
17,482




Recent Accounting Pronouncements

See note 1 to Consolidated Financial Statements.



37



Results from Operations

Comparison of the three months ended September 30, 2015 to 2014:

Our revenues increased as summarized in the following table: 
 
 
Three months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
Minimum rent
 
$
105,071

 
98,620

 
6,451

Percentage rent
 
486

 
371

 
115

Recoveries from tenants
 
28,294

 
26,313

 
1,981

Other income
 
2,431

 
2,474

 
(43
)
Management, transaction, and other fees
 
5,786

 
5,781

 
5

Total revenues
 
$
142,068

 
133,559

 
8,509


Minimum rent increased as follows:

$3.4 million increase from operations beginning at development properties;

$550,000 increase due to acquisitions of operating properties; and

$4.3 million increase from same properties, of which $2.3 million relates to redevelopment properties, and $2.0 million relates to higher rental rates and rent paying occupancy growth (same property includes operating properties owned for the entirety of both calendar year periods being presented, including redevelopments);

reduced by $1.8 million from the sale of operating properties.

Recoveries from tenants represent reimbursements to us for tenants' pro-rata share of the operating, maintenance, and real estate tax expenses that we incur to operate our shopping centers. Recoveries from tenants increased as follows:

$537,000 increase from operations beginning at development properties;

$102,000 increase due to acquisitions of operating properties; and

$1.7 million increase in recoveries at same properties, which was driven by an increase in recoverable costs and an increase in our recovery ratio, driven by occupancy improvements;

reduced by $416,000 from the sale of operating properties.

Changes in our operating expenses are summarized in the following table: 
 
 
Three months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
Depreciation and amortization
 
$
37,032

 
36,417

 
615

Operating and maintenance
 
19,761

 
18,149

 
1,612

General and administrative
 
14,750

 
14,463

 
287

Real estate taxes
 
16,044

 
14,832

 
1,212

Other operating expenses
 
1,880

 
2,062

 
(182
)
Total operating expenses
 
$
89,467

 
85,923

 
3,544

    
Depreciation and amortization costs increased $615,000 as follows:
$1.0 million increase from operations beginning at development properties; and
$443,000 increase at same properties, attributable to recent capital improvements and redevelopments being depreciated; reduced by
$153,000 from acquired properties; and

38



$684,000 from the sale of operating properties.

Operating and maintenance costs increased $1.6 million attributable to the following:
$516,000 increase related to operations beginning at development properties;
$768,000 increase related to acquired properties; and
$856,000 increase at same properties, primarily driven by increases in property management fees, landscaping, and parking lot maintenance costs;
reduced by $528,000 from the sale of operating properties.

Real estate taxes increased $1.2 million, due to
$224,000 increase related to operations beginning at development properties;
$38,000 increase related to acquired properties; and
$1.2 million increase at same properties from increased tax assessments;
reduced by $232,000 from sold properties.

The following table presents the components of other expense (income):
 
 
Three months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
Interest expense, net
 
 
 
 
 
 
Interest on notes payable
 
$
23,552

 
26,550

 
(2,998
)
Interest on unsecured credit facilities
 
1,064

 
858

 
206

Capitalized interest
 
(1,388
)
 
(1,886
)
 
498

Hedge expense
 
2,155

 
2,260

 
(105
)
Interest income
 
(284
)
 
(221
)
 
(63
)
Interest expense, net
 
25,099

 
27,561

 
(2,462
)
Net investment income
 
1,190

 
(94
)
 
1,284

     Total other expense (income)
 
$
26,289

 
27,467

 
(1,178
)

Our interest expense decreased mainly due to:
repayment of several non-recourse mortgages; and
repayment and new issuances during 2014 and 2015 of fixed rate, ten year, unsecured public debt at overall lower rates and lower balances;
increased by lower capitalized interest, which is based on lower cumulative costs incurred on development and redevelopment projects eligible for interest capitalization during the third quarter as two large development projects completed during 2015.
The $1.3 million decrease in net investment income is largely related to the change in the fair value of plan assets in the non-qualified deferred compensation plan, which is consistent with the change in plan liabilities included in general and administrative expenses above.
    
    

39



Our equity in income of investments in real estate partnerships decreased as follows: 
 
 
 
Three months ended September 30,
 
 
(in thousands)
Ownership
 
2015
 
2014
 
Change
GRI - Regency, LLC (GRIR)
40.00%
 
$
4,194

 
4,357

 
(163
)
Columbia Regency Retail Partners, LLC (Columbia I)
20.00%
 
377

 
339

 
38

Columbia Regency Partners II, LLC (Columbia II)
20.00%
 
158

 
181

 
(23
)
Cameron Village, LLC (Cameron)
30.00%
 
115

 
140

 
(25
)
RegCal, LLC (RegCal)
25.00%
 
115

 
82

 
33

US Regency Retail I, LLC (USAA)
20.01%
 
198

 
85

 
113

Other investments in real estate partnerships
50.00%
 
510

 
529

 
(19
)
    Total
 
 
$
5,667

 
5,713

 
(46
)
    
The following represents the remaining components that comprised net income attributable to the common stockholders and unit holders:
 
 
Three months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
Income from operations
 
$
31,979

 
25,882

 
6,097

Gain on sale of real estate
 
27,755

 
27,558

 
197

Income attributable to noncontrolling interests
 
(737
)
 
(232
)
 
(505
)
Preferred stock dividends
 
(5,266
)
 
(5,266
)
 

Net income attributable to common stockholders
 
$
53,731

 
47,942

 
5,789

Net income attributable to exchangeable operating partnership units
 
94

 
90

 
4

Net income attributable to common unit holders
 
$
53,825

 
48,032

 
5,793


During the three months ended September 30, 2015, we sold two operating properties for a gain of $27.8 million, net of taxes, as compared to a gain of $27.6 million from the four operating properties and two land parcels sold during the three months ended September 30, 2014.

Income attributable to noncontrolling interests increased during the three months ended September 30, 2015 primarily due to a redevelopment completion during 2015 that is owned through a consolidated partnership.

40





Comparison of the nine months ended September 30, 2015 to 2014:

Our revenues increased as summarized in the following table: 
 
 
Nine months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
Minimum rent
 
$
308,766

 
290,935

 
17,831

Percentage rent
 
2,593

 
2,301

 
292

Recoveries from tenants
 
87,651

 
82,000

 
5,651

Other income
 
6,554

 
8,144

 
(1,590
)
Management, transaction, and other fees
 
18,032

 
18,353

 
(321
)
Total revenues
 
$
423,596

 
401,733

 
21,863

        
Minimum rent increased as follows:

$6.3 million increase from operations beginning at development properties;

$3.4 million increase due to the acquisitions of operating properties; and

$12.4 million increase from same properties, of which $5.6 million relates to redevelopment properties, and $6.8 million relates to higher rental rates and rent paying occupancy growth;

reduced by $4.3 million from the sale of operating properties.

Recoveries from tenants represent reimbursements to us for tenants' pro-rata share of the operating, maintenance, and real estate tax expenses that we incur to operate our shopping centers. Recoveries from tenants increased as follows:

$1.2 million increase from operations beginning at development properties;

$1.0 million increase due to the acquisitions of operating properties; and

$4.2 million increase from same properties associated with rent paying occupancy improvements and higher recoverable costs;

reduced by $757,000 from the sale of operating properties.

Other income, which consists of incidental income earned at our centers, decreased primarily as a result of a large settlement fee earned in the first quarter of 2014.

We earned fees, at market-based rates, for asset management, property management, leasing, acquisition, and financing services that we provided to our co-investment partnerships and third parties as follows:    
 
 
Nine months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
Asset management fees
 
$
9,880

 
9,812

 
68

Property management fees
 
4,694

 
4,483

 
211

Leasing commissions and other fees
 
3,458

 
4,058

 
(600
)
Total management, transaction, and other fees
 
$
18,032

 
18,353

 
(321
)

Leasing commissions and other fees decreased during 2015 due to lower volume of transactions.




    



41





Changes in our operating expenses are summarized in the following table: 
 
 
Nine months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
Depreciation and amortization
 
$
109,249

 
110,345

 
(1,096
)
Operating and maintenance
 
61,119

 
58,152

 
2,967

General and administrative
 
46,227

 
43,883

 
2,344

Real estate taxes
 
46,842

 
44,529

 
2,313

Other operating expenses
 
4,825

 
5,665

 
(840
)
Total operating expenses
 
$
268,262

 
262,574

 
5,688


Depreciation and amortization decreased $1.1 million:
$2.1 million decrease from property sales and fully depreciated corporate assets; and
$1.0 million decrease at same properties attributable to a higher depreciation in 2014 on redevelopments;
increased by $2.0 million from new development operations and acquisitions.

Operating and maintenance increased $3.0 million:
$1.5 million increase from acquisitions;
$1.2 million increase from new development operations; and
$1.3 million increase at same properties primarily driven by increases in property management fees, landscaping, and parking lot maintenance costs;
reduced by $1.0 million from sold properties.

General and administrative expenses increased $2.3 million due to $1.6 million of higher compensation costs, $800,000 of higher non compensation costs, and $1.1 million of lower development and leasing overhead capitalization, reduced by $1.2 million in the value of participant obligations within the deferred compensation plan.
    
Real estate taxes increased $2.3 million:

$594,000 increase from acquisitions;
$367,000 increase from new development operations; and
$1.6 million increase at same properties;
reduced by $246,000 from sold properties.

Other operating expenses decreased $840,000 primarily due to higher transaction costs in 2014 due to greater property acquisitions and pursuit costs as compared to 2015.

    

42



The following table presents the components of other expense (income):
 
 
Nine months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
Interest expense, net
 
 
 
 
 
 
Interest on notes payable
 
$
75,299

 
78,307

 
(3,008
)
Interest on unsecured credit facilities
 
2,667

 
2,779

 
(112
)
Capitalized interest
 
(5,403
)
 
(5,158
)
 
(245
)
Hedge expense
 
6,656

 
7,114

 
(458
)
Interest income
 
(812
)
 
(901
)
 
89

Interest expense, net
 
78,407

 
82,141

 
(3,734
)
Provision for impairment
 

 
225

 
(225
)
Early extinguishment of debt
 
(61
)
 

 
(61
)
Net investment income
 
190

 
(915
)
 
1,105

     Total other expense (income)
 
$
78,536

 
81,451

 
(2,915
)

Our interest expense decreased mainly due to:
$3.0 million decrease in interest on notes payable from the repayment and new issuances during 2014 and 2015 of fixed rate, ten-year, unsecured public debt at overall lower rates and lower balances and repayment of several non-recourse mortgages; and
$458,000 decrease in hedge expense as our 2014 settled forward starting swaps are amortizing into interest expense to reduce our overall bond interest yield.
    
During the nine months ended September 30, 2014, we recognized a $225,000 impairment on three parcels of land. We did not have any impairments during the nine months ended September 30, 2015.

Investment income increased $1.1 million largely attributable to the change in the fair value of plan assets in the non-qualified deferred compensation plan, which is consistent with the change in plan liabilities included in general and administrative expenses above.
    

43




Our equity in income of investments in real estate partnerships decreased as follows: 
 
 
 
Nine months ended September 30,
 
 
(in thousands)
Ownership
 
2015
 
2014
 
Change
GRI - Regency, LLC (GRIR)
40.00%
 
$
13,524

 
9,483

 
4,041

Columbia Regency Retail Partners, LLC (Columbia I)
20.00%
 
1,127

 
1,074

 
53

Columbia Regency Partners II, LLC (Columbia II)
20.00%
 
452

 
134

 
318

Cameron Village, LLC (Cameron)
30.00%
 
477

 
448

 
29

RegCal, LLC (RegCal)
25.00%
 
349

 
857

 
(508
)
Regency Retail Partners, LP (the Fund) (1)
20.00%
 

 
16

 
(16
)
US Regency Retail I, LLC (USAA)
20.01%
 
606

 
420

 
186

Other investments in real estate partnerships
50.00%
 
1,456

 
9,921

 
(8,465
)
    Total
 
 
$
17,991

 
22,353

 
(4,362
)
 
 
 
 
 
 
 
 
(1) On August 13, 2013, the Fund sold 100% of its interest in its entire portfolio of shopping centers to a third party. The Fund was dissolved following the final distribution of proceeds in 2014.
    
The $4.4 million decrease in our equity in income in investments in real estate partnerships for 2015, as compared to 2014, is largely attributed to:
$4.0 million increase in pro-rata share of income from our GRIR partnership driven by our $1.1 million pro-rata gain on one operating property sold during 2015 coupled with $1.9 million higher pro-rata depreciation expense in 2014 due to redevelopment activity;
$424,000 pro-rata share of impairment losses recognized upon sale of two properties within Columbia II during 2014;
$654,000 of pro-rata gain on one operating property disposed of within RegCal during 2014; and
$8.5 million decrease within our other investment partnerships driven by the gain on sale of two land parcels and one operating property during 2014.
The following represents the remaining components that comprise net income attributable to the common stockholders and unit holders:
 
 
Nine months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
Income from operations
 
$
94,789

 
80,061

 
14,728

Gain on sale of real estate
 
34,215

 
29,598

 
4,617

Income attributable to noncontrolling interests
 
(1,823
)
 
(1,048
)
 
(775
)
Preferred stock dividends
 
(15,797
)
 
(15,797
)
 

Net income attributable to common stockholders
 
$
111,384

 
92,814

 
18,570

Net income attributable to exchangeable operating partnership units
 
204

 
185

 
19

Net income attributable to common unit holders
 
$
111,588

 
92,999

 
18,589


During the nine months ended September 30, 2015, we sold four operating properties resulting in a gain of $34.2 million, compared to a gain of $29.6 million from the sale of six operating properties and five land parcels during 2014.

Income attributable to noncontrolling interests increased $775,000 during 2015 from the 2014 acquisition of the Fairfield portfolio coupled with operations from a development beginning operations and a recent redevelopment completed within consolidated partnerships.





44



Supplemental Earnings Information

We use certain non-GAAP performance measures, in addition to the required GAAP presentations, as we believe these measures are beneficial to us in improving the understanding of the Company's operational results among the investing public. We believe such measures make comparisons of other REITs' operating results to the Company's more meaningful. We continually evaluate the usefulness, relevance, and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change.

The following are our definitions of Same Property Net Operating Income, Funds from Operations ("FFO"), and Core FFO, which we believe to be beneficial non-GAAP performance measures used in understanding our operational results:

Ÿ
NOI is calculated as total property revenues (minimum rent, percentage rents, and recoveries from tenants and other income) less direct property operating expenses (operating and maintenance and real estate taxes) from the properties owned by us, and excludes corporate-level income (including management, transaction, and other fees), for the entirety of the periods presented.

Pro-Rata information includes 100% of our consolidated properties plus our ownership interest in our unconsolidated real estate investment partnerships.

Same Property information is provided for operating properties that were owned and operated for the entirety of both calendar year periods being compared and excludes Non-Same Properties and Properties in Development. A Non-Same Property is a property acquired, sold, or development property completed during either calendar year period being compared.
 
Same Property NOI includes NOI for Same Properties, but excludes straight-line rental income, net of reserves, above and below market rent amortization, banking charges, and other fees. Same Property NOI is a key measure used by management in evaluating the performance of our properties.

Ÿ
FFO is a commonly used measure of REIT performance, which the National Association of Real Estate Investment Trusts ("NAREIT") defines as net income, computed in accordance with GAAP, excluding gains and losses from sales of depreciable property, net of tax, excluding operating real estate impairments, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. We compute FFO for all periods presented in accordance with NAREIT's definition. Many companies use different depreciable lives and methods, and real estate values historically fluctuate with market conditions. Since FFO excludes depreciation and amortization and gains and losses from depreciable property dispositions, and impairments, it can provide a performance measure that, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, acquisition and development activities, and financing costs. This provides a perspective of our financial performance not immediately apparent from net income determined in accordance with GAAP. Thus, FFO is a supplemental non-GAAP financial measure of our operating performance, which does not represent cash generated from operating activities in accordance with GAAP and therefore, should not be considered an alternative for cash flow as a measure of liquidity.

Core FFO is an additional performance measure used by Regency as the computation of FFO includes certain non-cash and non-comparable items that affect the Company's period-over-period performance.  Core FFO excludes from FFO, but is not limited to: (a) transaction related gains, income or expense; (b) impairments on land; (c) gains or losses from the early extinguishment of debt; and (d) other non-core amounts as they occur.  The Company provides a reconciliation of FFO to Core FFO.


45



Same Property NOI    
Our pro-rata same property NOI grew 4.3% from the following major components:
 
 
Three months ended September 30,
 
 
 
Nine months ended September 30,
 
 
(in thousands)
 
2015
 
2014
 
Change
 
2015
 
2014
 
Change
Base rent
 
$
117,717

 
113,334

 
4,383

 
$
350,304

 
337,184

 
13,120

Percentage rent
 
685

 
482

 
203

 
3,821

 
3,601

 
220

Recovery revenue
 
33,260

 
31,150

 
2,110

 
103,323

 
99,213

 
4,110

Other income
 
2,111

 
1,922

 
189

 
5,354

 
6,507

 
(1,153
)
Operating expenses
 
41,593

 
39,324

 
2,269

 
126,535

 
123,948

 
2,587

Pro-rata same property NOI
 
$
112,180

 
107,564

 
4,616

 
$
336,267

 
322,557

 
13,710

Growth
 
 
 
 
 
4.3
%
 
 
 
 
 
4.3
%

Pro-rata same property base rent increased $4.4 million and $13.1 million during the three and nine months ended September 30, 2015, respectively, because of improvements in rent paying occupancy, contractual rent steps, and rental rate growth.

Pro-rata same property recovery revenue increased $2.1 million and $4.1 million during the three and nine months ended September 30, 2015, respectively, from improvements in rent paying occupancy and increases in recoverable costs.

Pro-rata same property other income decreased $1.2 million during the nine months ended September 30, 2015 as a result of a large settlement fee earned in 2014.    

Pro-rata same property operating expenses increased $2.3 million during the three months ended September 30, 2015 primarily associated with increased real estate taxes, property management fees, cleaning, and landscaping costs.


































46






Our reconciliation of property revenues and property expenses to Same Property NOI, on a pro-rata basis, is as follows:
 
 
Three months ended September 30,
 
 
2015
 
2014
(in thousands)
 
Same Property
 
Other (1)
 
Total
 
Same Property
 
Other (1)
 
Total
Income from operations
 
$
58,467

 
(26,488
)
 
31,979

 
54,055

 
(28,173
)
 
25,882

Less:
 
 
 
 
 
 
 
 
 
 
 
 
Management, transaction, and other fees
 

 
5,786

 
5,786

 

 
5,781

 
5,781

Other (2)
 
1,743

 
1,300

 
3,043

 
1,905

 
(107
)
 
1,798

Plus:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
32,459

 
4,573

 
37,032

 
32,016

 
4,401

 
36,417

General and administrative
 

 
14,750

 
14,750

 

 
14,463

 
14,463

Other operating expense, excluding provision for doubtful accounts
 
12

 
1,182

 
1,194

 
32

 
1,351

 
1,383

Other expense (income)
 
6,563

 
19,726

 
26,289

 
7,320

 
20,147

 
27,467

Equity in income (loss) of investments in real estate excluded from NOI (3)
 
16,422

 
230

 
16,652

 
16,046

 
176

 
16,222

Pro-rata NOI
 
$
112,180

 
6,887

 
119,067

 
107,564

 
6,691

 
114,255

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30,
 
 
2015
 
2014
(in thousands)
 
Same Property
 
Other (1)
 
Total
 
Same Property
 
Other (1)
 
Total
Income from continuing operations, before tax
 
$
176,213

 
(81,424
)
 
94,789

 
160,872

 
(80,811
)
 
80,061

Less:
 
 
 
 
 
 
 
 
 
 
 
 
Management, transaction, and other fees
 

 
18,032

 
18,032

 

 
18,353

 
18,353

Other(2)
 
5,206

 
2,402

 
7,608

 
5,979

 
913

 
6,892

Plus:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
97,449

 
11,800

 
109,249

 
98,422

 
11,923

 
110,345

General and administrative
 

 
46,227

 
46,227

 

 
43,883

 
43,883

Other operating expense, excluding provision for doubtful accounts
 
(107
)
 
2,969

 
2,862

 
314

 
3,809

 
4,123

Other expense (income)
 
19,843

 
58,693

 
78,536

 
22,348

 
59,103

 
81,451

Equity in income (loss) of investments in real estate excluded from NOI (3)
 
48,075

 
1,237

 
49,312

 
46,580

 
(1,878
)
 
44,702

Pro-rata NOI
 
$
336,267

 
19,068

 
355,335

 
322,557

 
16,763

 
339,320

(1) Includes revenues and expenses attributable to non-same property, sold property, development property, and corporate activities. 
(2) Includes straight-line rental income, net of reserves, above and below market rent amortization, banking charges, and other fees.
(3) Includes non-NOI expenses incurred at our unconsolidated real estate partnerships, including those separated out above for our consolidated properties.


47



Our same property pool includes the following property count, pro-rata GLA, and changes therein:
 
Three months ended September 30,
 
2015
 
2014
(GLA in thousands)
Property Count
GLA
 
Property Count
GLA
Beginning same property count
303

26,682

 
309

26,033

Disposed properties
(1
)
(146
)
 
(5
)
(337
)
SF adjustments (1)

5

 

15

Ending same property count
302

26,541

 
304

25,711

 
 
 
 
 
 
 
Nine months ended September 30,
 
2015
 
2014
(GLA in thousands)
Property Count
GLA
 
Property Count
GLA
Beginning same property count
298

25,526

 
304

25,109

Acquired properties owned for entirety of comparable periods
4

427

 
6

560

Developments that reached completion by beginning of earliest comparable period presented
3

790

 
5

359

Disposed properties
(3
)
(220
)
 
(11
)
(422
)
SF adjustments (1)

18

 

106

Ending same property count
302

26,541

 
304

25,712

(1) SF adjustments arise from remeasurements or redevelopments.


48



FFO and Core FFO    
The Company's reconciliation of net income available to common shareholders to FFO and Core FFO is as follows:
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in thousands, except share information)
 
2015
 
2014
 
2015
 
2014
Reconciliation of Net income to FFO
 
 
 
 
 
 
 
 
Net income attributable to common stockholders
 
$
53,731

 
47,942

 
$
111,384

 
92,814

Adjustments to reconcile to FFO:
 
 
 
 
 
 
 
 
Depreciation and amortization (1)
 
45,606

 
45,244

 
135,990

 
138,627

Provision for impairment (2)
 

 
2

 

 
426

Gain on sale of operating properties (2)
 
(27,806
)
 
(28,488
)
 
(35,281
)
 
(35,907
)
Exchangeable operating partnership units
 
94

 
90

 
204

 
185

FFO
 
$
71,625

 
64,790

 
$
212,297

 
196,145

Reconciliation of FFO to Core FFO
 
 
 
 
 
 
 
 
FFO
 
$
71,625

 
64,790

 
$
212,297

 
196,145

Adjustments to reconcile to Core FFO:
 
 
 
 
 
 
 
 
Development and acquisition pursuit costs (2)
 
580

 
1,051

 
1,103

 
2,762

Gain on sale of land (2)
 
35

 
(19
)
 
(33
)
 
(3,347
)
Provision for impairment to land
 

 

 

 
225

Hedge ineffectiveness (2)
 
3

 

 
6

 

Early extinguishment of debt (2)
 
2

 
1

 
(58
)
 
42

Investment income
 

 
(334
)
 
(416
)
 
(334
)
Core FFO
 
$
72,245

 
65,489

 
$
212,899

 
195,493

(1) Includes Regency's pro-rata share of unconsolidated co-investment partnerships, net of pro-rata share attributable to noncontrolling interests.
(2) Includes Regency's pro-rata share of unconsolidated co-investment partnerships.



49



Environmental Matters

We are subject to numerous environmental laws and regulations as they apply to our shopping centers pertaining to chemicals used by the dry cleaning industry, the existence of asbestos in older shopping centers, and underground petroleum storage tanks. We believe that the tenants who currently operate dry cleaning plants or gas stations do so in accordance with current laws and regulations. Generally, we use all legal means to cause tenants to remove dry cleaning plants from our shopping centers or convert them to more environmentally friendly systems. Where available, we have applied and been accepted into state-sponsored environmental programs. We have a blanket environmental insurance policy for third-party liabilities and remediation costs on shopping centers that currently have no known environmental contamination. We have also placed environmental insurance, where possible, on specific properties with known contamination, in order to mitigate our environmental risk. We monitor the shopping centers containing environmental issues and in certain cases voluntarily remediate the sites. We also have legal obligations to remediate certain sites and we are in the process of doing so.

As of September 30, 2015 we had accrued liabilities of $9.1 million for our pro-rata share of environmental remediation. We believe that the ultimate disposition of currently known environmental matters will not have a material effect on our financial position, liquidity, or results of operations; however, we can give no assurance that existing environmental studies on our shopping centers have revealed all potential environmental liabilities; that any previous owner, occupant or tenant did not create any material environmental condition not known to us; that the current environmental condition of the shopping centers will not be affected by tenants and occupants, by the condition of nearby properties, or by unrelated third parties; or that changes in applicable environmental laws and regulations or their interpretation will not result in additional environmental liability to us.


Inflation/Deflation

Inflation has been historically low and has had a minimal impact on the operating performance of our shopping centers; however, inflation may become a greater concern in the future. Substantially all of our long-term leases contain provisions designed to mitigate the adverse impact of inflation. Most of our leases require tenants to pay their pro-rata share of operating expenses, including common-area maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation. In addition, many of our leases are for terms of less than ten years, which permits us to seek increased rents upon re-rental at market rates. However, during deflationary periods or periods of economic weakness, minimum rents and percentage rents will decline as the supply of available retail space exceeds demand and consumer spending declines. Occupancy declines resulting from a weak economic period will also likely result in lower recovery rates of our operating expenses.


50




Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes from the quantitative and qualitative disclosures about market risk disclosed in item 7A of Part II of our Form 10-K for the year ended December 31, 2014.

Item 4. Controls and Procedures

Controls and Procedures (Regency Centers Corporation)

Under the supervision and with the participation of the Parent Company's management, including its chief executive officer and chief financial officer, the Parent Company conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, the Parent Company's chief executive officer and chief financial officer concluded that its disclosure controls and procedures were effective as of the end of the period covered by this quarterly report on Form 10-Q to ensure information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Parent Company in the reports it files or submits is accumulated and communicated to management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal controls over financial reporting identified in connection with this evaluation that occurred during the third quarter of 2015 and that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Controls and Procedures (Regency Centers, L.P.)

Under the supervision and with the participation of the Operating Partnership's management, including the chief executive officer and chief financial officer of its general partner, the Operating Partnership conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act. Based on this evaluation, the chief executive officer and chief financial officer of its general partner concluded that its disclosure controls and procedures were effective as of the end of the period covered by this quarterly report on Form 10-Q to ensure information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Operating Partnership in the reports it files or submits is accumulated and communicated to management, including the chief executive officer and chief financial officer of its general partner, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal controls over financial reporting identified in connection with this evaluation that occurred during the third quarter of 2015 and that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.


51



PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in item 1A. of Part I of our Form 10-K for the year ended December 31, 2014.

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

There were no unregistered sales of equity securities or purchases by the Parent Company of its common stock during the quarter ended September 30, 2015.  


Item 3.    Defaults Upon Senior Securities
    
None.

Item 4.    Mine Safety Disclosures
    
None.

Item 5. Other Information
None.

52



Item 6. Exhibits

In reviewing any agreements included as exhibits to this report, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company, its subsidiaries or other parties to the agreements. Each agreement contains representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. We acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, we are responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this report not misleading. Additional information about the Company may be found elsewhere in this report and the Company's other public files, which are available without charge through the SEC's website at http://www.sec.gov. Unless otherwise indicated below, the Commission file number to the exhibit is No. 001-12298.
Ex #    Description
31.    Rule 13a-14(a)/15d-14(a) Certifications.
31.1    Rule 13a-14 Certification of Chief Executive Officer for Regency Centers Corporation.
31.2    Rule 13a-14 Certification of Chief Financial Officer for Regency Centers Corporation.
31.3    Rule 13a-14 Certification of Chief Executive Officer for Regency Centers, L.P.
31.4    Rule 13a-14 Certification of Chief Financial Officer for Regency Centers, L.P.
32.    Section 1350 Certifications.
32.1*    18 U.S.C. § 1350 Certification of Chief Executive Officer for Regency Centers Corporation.
32.2*    18 U.S.C. § 1350 Certification of Chief Financial Officer for Regency Centers Corporation.
32.3*    18 U.S.C. § 1350 Certification of Chief Executive Officer for Regency Centers, L.P.
32.4*    18 U.S.C. § 1350 Certification of Chief Financial Officer for Regency Centers, L.P.
101.    Interactive Data Files
101.INS        XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    XBRL Taxonomy Definition Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE        XBRL Taxonomy Extension Presentation Linkbase Document
__________________________
*
Furnished, not filed.

53




SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
November 5, 2015
REGENCY CENTERS CORPORATION
 
By:

/s/ Lisa Palmer
Lisa Palmer, Executive Vice President, Chief Financial Officer (Principal Financial Officer)
 
 
 
 
By:

/s/ J. Christian Leavitt
J. Christian Leavitt, Senior Vice President and Treasurer (Principal Accounting Officer)



November 5, 2015
REGENCY CENTERS, L.P.
 
By:
Regency Centers Corporation, General Partner
 
By:
/s/ Lisa Palmer       
Lisa Palmer, Executive Vice President, Chief Financial Officer (Principal Financial Officer)
 
 
 
 
By:

/s/ J. Christian Leavitt
J. Christian Leavitt, Senior Vice President and Treasurer (Principal Accounting Officer)

54