Form 10-K
Table of Contents
Index to Financial Statements

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-K

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 1-12298

 

 

REGENCY CENTERS CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

FLORIDA   59-3191743

(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 No.)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Name of each exchange on which registered

Common Stock, $.01 par value   New York Stock Exchange
7.45% Series 3 Cumulative Redeemable Preferred Stock, $0.1 par value   New York Stock Exchange
7.25% Series 4 Cumulative Redeemable Preferred Stock, $0.1 par value   New York Stock Exchange
6.70% Series 5 Cumulative Redeemable Preferred Stock, $.01 par value   New York Stock Exchange

 

 

Securities registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  x     NO  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES  ¨     NO  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES  x     NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

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):

 

Large accelerated filer  x   Accelerated filer  ¨   Non-accelerated filer  ¨   Smaller reporting company  ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company. YES  ¨    NO  x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $4,763,478,999

The number of shares outstanding of the registrant's voting common stock was 69,589,326 as of February 26, 2008.

Documents Incorporated by Reference

Portions of the registrant's proxy statement in connection with its 2008 Annual Meeting of Stockholders are incorporated by reference in Part III.

 

 

 


Table of Contents
Index to Financial Statements

TABLE OF CONTENTS

 

Item No.

        Form 10-K
Report Page
   PART I   

1.

   Business    1

1A.

   Risk Factors    4

1B.

   Unresolved Staff Comments    10

2.

   Properties    10

3.

   Legal Proceedings    36

4.

   Submission of Matters to a Vote of Security Holders    36
   PART II   

5.

  

Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

   37

6.

   Selected Financial Data    39

7.

   Management's Discussion and Analysis of Financial Condition and Results of Operations    39

7A.

   Quantitative and Qualitative Disclosures about Market Risk    59

8.

   Financial Statements and Supplementary Data    60

9.

   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure    101

9A.

   Controls and Procedures    101

9B.

   Other Information    101
   PART III   

10.

   Directors, Executive Officers and Corporate Governance    102

11.

   Executive Compensation    102

12.

  

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

   102

13.

   Certain Relationships and Related Transactions, and Director Independence    103

14.

   Principal Accountant Fees and Services    103
   PART IV   

15.

   Exhibits and Financial Statement Schedules    104


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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 growth in revenues, the size of our development program, earnings per share, returns and portfolio value and expectations about our liquidity. These statements are based on current expectations, estimates and projections about the industry and markets in which Regency Centers Corporation (“Regency” or “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 including the impact of a slowing economy; financial difficulties of tenants; competitive market conditions, including pricing of acquisitions and sales of properties and out-parcels; changes in expected leasing activity and market rents; timing of acquisitions, development starts and sales of properties and out-parcels; meeting development schedules; our inability to exercise voting control over the co-investment partnerships through which we own or develop many of our properties; weather; consequences of any armed conflict or terrorist attack against the United States; and the ability to obtain governmental approvals. For additional information, see “Risk Factors” elsewhere herein. The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto of Regency Centers Corporation appearing elsewhere within.

PART I

Item 1. Business

Regency is a qualified real estate investment trust (“REIT”), which began operations in 1993. Our primary operating and investment goal is long-term growth in earnings per share and total shareholder return, which we work to achieve by focusing on a strategy of owning, operating and developing high-quality community and neighborhood shopping centers that are tenanted by market-dominant grocers, category-leading anchors, specialty retailers, and restaurants located in areas with above average household incomes and population densities. All of our operating, investing and financing activities are performed through our operating partnership, Regency Centers, L.P. (“RCLP”), RCLP’s wholly owned subsidiaries, and through its investments in co-investment partnerships with third party investors. Regency currently owns 99% of the outstanding operating partnership units of RCLP.

At December 31, 2007, we directly owned 232 shopping centers (the “Consolidated Properties”) located in 23 states representing 25.7 million square feet of gross leasable area (“GLA”). Our cost of these shopping centers is $4.0 billion before depreciation. Through co-investment partnerships, we own partial interests in 219 shopping centers (the “Unconsolidated Properties”) located in 27 states and the District of Columbia representing 25.4 million square feet of GLA. Our investment in the partnerships that own the Unconsolidated Properties is $432.9 million. Certain portfolio information described below is presented (a) on a Combined Basis, which is a total of the Consolidated Properties and the Unconsolidated Properties, (b) for our Consolidated Properties only and (c) for the Unconsolidated Properties that we own through co-investment partnerships. We believe that presenting the information under these methods provides a more complete understanding of the properties that we wholly-own versus those that we partially-own, but for which we provide asset management, property management, leasing, investing and financing services. The shopping center portfolio that we manage, on a Combined Basis, represents 451 shopping centers located in 29 states and the District of Columbia and contains 51.1 million square feet of GLA.

We earn revenues and generate cash flow by leasing space in our shopping centers to market-leading grocers, major retail anchors, specialty side-shop retailers, and restaurants, including ground leasing or selling building pads (out-parcels) to these tenants. We experience growth in revenues by increasing occupancy and rental rates at currently owned shopping centers, and by acquiring and developing new shopping centers. Community and neighborhood shopping centers generate substantial daily traffic by conveniently offering necessities and services. This high traffic generates increased sales, thereby driving higher occupancy and rental-rate growth, which we expect will sustain our growth in earnings per share and increase the value of our portfolio over the long term.

 

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We seek a range of strong national, regional and local specialty retailers, for the same reason that we choose to anchor our centers with leading grocers and major retailers who provide a mix of goods and services that meet consumer needs. We have created a formal partnering process—the Premier Customer Initiative (“PCI”)—to promote mutually beneficial relationships with our specialty retailers. The objective of PCI is for Regency to build a base of specialty tenants who represent the “best-in-class” operators in their respective merchandising categories. Such retailers reinforce the consumer appeal and other strengths of a center’s anchor, help to stabilize a center’s occupancy, reduce re-leasing downtime, reduce tenant turnover and yield higher sustainable rents.

We grow our shopping center portfolio through acquisitions of operating centers and new shopping center development, where we acquire the land and construct the building. Development is customer driven, meaning we generally have an executed lease from the anchor before we start construction. Developments serve the growth needs of our anchors and specialty retailers, resulting in modern shopping centers with long-term anchor leases that produce attractive returns on our invested capital. This development process generally requires three to four years from initial land or redevelopment acquisition through construction, lease-up and stabilization of rental income, but can take longer depending upon the size of the project. Generally, anchor tenants begin operating their stores prior to the completion of construction of the entire center, resulting in rental income during the development phase.

We intend to maintain a conservative capital structure to fund our growth programs, which should preserve our investment-grade ratings. Our approach is founded on our self-funding business model. This model utilizes center “recycling” as a key component, which requires ongoing monitoring of each center to ensure that it continues to meet our investment standards. We sell the operating properties that no longer measure up to our standards. We also develop certain retail centers because of their attractive profit margins with the intent of selling them to co-investment partnerships or other third parties upon completion. These sale proceeds are re-deployed into new, higher-quality developments and acquisitions that are expected to generate sustainable revenue growth and more attractive returns.

Joint venturing of shopping centers also provides us with a capital source for new developments and acquisitions, as well as the opportunity to earn fees for asset and property management services. As asset manager, we are engaged by our partners to apply similar operating, investment, and capital strategies to the portfolios owned by the co-investment partnerships. Co-investment partnerships grow their shopping center investments through acquisitions from third parties or direct purchases from Regency. Although selling properties to co-investment partnerships reduces our ownership interest, we continue to share in the risks and rewards of centers that meet our high quality standards and long-term investment strategy.

Competition

We are among the largest publicly-held owners of shopping centers in the nation based on revenues, number of properties, gross leasable area and market capitalization. There are numerous companies and private individuals engaged in the ownership, development, acquisition and operation of shopping centers which compete with us in our targeted markets. This results in competition for attracting anchor tenants, as well as the acquisition of existing shopping centers and new development sites. We believe that the principal competitive factors in attracting tenants in our market areas are location, demographics, rental costs, tenant mix, property age and maintenance. We believe that our competitive advantages include our locations within our market areas, the design quality of our shopping centers, the strong demographics surrounding our shopping centers, our relationships with our anchor tenants and our side-shop and out-parcel retailers, our PCI program which allows us to provide retailers with multiple locations, our practice of maintaining and renovating our shopping centers, and our ability to source and develop new shopping centers.

Changes in Policies

Our Board of Directors establishes the policies that govern our investment and operating strategies including, among others, development and acquisition of shopping centers, tenant and market focus, debt and equity financing policies, quarterly distributions to stockholders, and REIT tax status. The Board of Directors may amend these policies at any time without a vote of our stockholders.

 

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Employees

Our headquarters are located at One Independent Drive, Suite 114, Jacksonville, Florida. We presently maintain 21 market offices nationwide where we conduct management, leasing, construction, and investment activities. At December 31, 2007, we had 568 employees and we believe that our relations with our employees are good.

Compliance with Governmental Regulations

Under various federal, state and local laws, ordinances and regulations, we may be liable for the cost to remove or remediate certain hazardous or toxic substances at our shopping centers. These laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of the hazardous or toxic substances. The cost of required remediation and the owner's liability for remediation could exceed the value of the property and/or the aggregate assets of the owner. The presence of such substances, or the failure to properly remediate such substances, may adversely affect our ability to sell or rent the property or borrow using the property as collateral. We have a number of properties that could require or are currently undergoing varying levels of environmental remediation. Environmental remediation is not currently expected to have a material financial effect on us due to reserves for remediation, insurance programs designed to mitigate the cost of remediation and various state-regulated programs that shift the responsibility and cost to the state.

Executive Officers

The executive officers of the Company are appointed each year by the Board of Directors. Each of the executive officers has been employed by the Company in the position or positions indicated in the list and pertinent notes below. Each of the executive officers has been employed by the Company for more than five years.

 

Name

   Age   

Title

   Executive Officer in
Position Shown Since
 

Martin E. Stein, Jr.

   55   

Chairman and Chief Executive Officer

   1993  

Mary Lou Fiala

   56   

President and Chief Operating Officer

   1999  

Bruce M. Johnson

   60   

Managing Director and Chief Financial Officer

   1993  

Brian M. Smith

   53   

Managing Director and Chief Investment Officer

   2005 (1)

 

(1) Mr. Smith was appointed Chief Investment Officer for the Company in September 2005. Mr. Smith was previously Managing Director—Investments—Pacific, Mid-Atlantic and Northeast since 1999.

Company Website Access and SEC Filings

The Company’s website may be accessed at www.regencycenters.com. All of our filings with the Securities and Exchange Commission (“SEC”) can be accessed through our website promptly after filing; however, in the event that the website is inaccessible, then we will provide paper copies of our most recent annual report on Form 10-K, the most recent quarterly report on Form 10-Q, current reports filed or furnished on Form 8-K, and all related amendments, excluding exhibits, free of charge upon request. These filings are also accessible on the SEC’s website at www.sec.gov.

General Information

The Company’s registrar and stock transfer agent is American Stock Transfer & Trust Company (“AST”), New York, New York. The Company offers a dividend reinvestment plan (“DRIP”) that enables its shareholders to reinvest dividends automatically, as well as to make voluntary cash payments toward the purchase of additional shares. For more information, contact AST’s Shareholder Services Group toll free at (866) 668-6550 or the Company’s Shareholder Relations Department.

The Company’s independent auditors are KPMG LLP, Independent Registered Public Accountants, Jacksonville, Florida. The Company’s General Counsel is Foley & Lardner LLP, Jacksonville, Florida.

 

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Annual Meeting

The Company’s annual meeting will be held at The River Club, One Independent Drive, 35th Floor, Jacksonville, Florida, at 11:00 a.m. on Tuesday, May 6, 2008.

Item 1A. Risk Factors

Risk Factors Related to Our Industry and Real Estate Investments

Our revenues and cash flow could be adversely affected by poor market conditions where properties are geographically concentrated.

Regency’s performance depends on the economic conditions in markets in which our properties are concentrated. During the year ended December 31, 2007, our properties in California, Florida and Texas accounted for 58.4% of our consolidated net operating income. Our revenues and cash available for distribution to stockholders could be adversely affected by this geographic concentration if market conditions in these areas, such as an oversupply of retail space or a reduction in the demand for shopping centers, become more competitive relative to other geographic areas.

Loss of revenues from major tenants could reduce distributions to stockholders.

We derive significant revenues from anchor tenants such as Kroger, Publix and Safeway that occupy more than one center. Distributions to stockholders could be adversely affected by the loss of revenues in the event a major tenant:

 

   

becomes bankrupt or insolvent;

 

   

experiences a downturn in its business;

 

   

materially defaults on its leases;

 

   

does not renew its leases as they expire; or

 

   

renews at lower rental rates.

Vacated anchor space, including space owned by the anchor, can reduce rental revenues generated by the shopping center because of the loss of the departed anchor tenant’s customer drawing power. Most anchors have the right to vacate and prevent re-tenanting by paying rent for the balance of the lease term. If major tenants vacate a property, then other tenants may be entitled to terminate their leases at the property.

Downturns in the retailing industry likely will have a direct adverse impact on our revenues and cash flow.

Our properties consist primarily of grocery-anchored shopping centers. Our performance therefore is generally linked to economic conditions in the market for retail space. The market for retail space has been or could be adversely affected by any of the following:

 

   

weakness in the national, regional and local economies, which could adversely impact consumer spending and retail sales and in turn tenant demand for space;

 

   

the growth of super-centers, such as those operated by Wal-Mart, and their adverse effect on major grocery chains;

 

   

the impact of increased energy costs on consumers and its consequential effect on the number of shopping visits to our centers;

 

   

consequences of any armed conflict involving, or terrorist attack against, the United States;

 

   

the adverse financial condition of some large retailing companies;

 

   

the ongoing consolidation in the retail sector;

 

   

the excess amount of retail space in a number of markets;

 

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increasing consumer purchases through catalogs or the Internet;

 

   

reduction in the demand by tenants to occupy our shopping centers as a result of reduced consumer demand for certain retail formats such as video rental stores;

 

   

the timing and costs associated with property improvements and rentals;

 

   

changes in taxation and zoning laws; and

 

   

adverse government regulation.

To the extent that any of these conditions occur, they are likely to impact market rents for retail space, occupancy in the operating portfolios, our ability to recycle capital, and our cash available for distribution to stockholders.

Unsuccessful development activities or a slowdown in development activities could reduce distributions to stockholders.

We actively pursue development activities as opportunities arise. Development activities require various government and other approvals for entitlements which can significantly delay the development process. We may not recover our investment in development projects for which approvals are not received. We incur other risks associated with development activities, including:

 

   

the ability to lease up developments to full occupancy on a timely basis;

 

   

the risk that occupancy rates and rents of a completed project will not be sufficient to make the project profitable and available for contribution to our co-investment partnerships or sale to third parties.

 

   

the risk that the current size and continued growth in our development pipeline will strain the organization's capacity to complete the developments within the targeted timelines and at the expected returns on invested capital;

 

   

the risk that we may abandon development opportunities and lose our investment in these developments;

 

   

the risk that development costs of a project may exceed original estimates, possibly making the project unprofitable;

 

   

delays in the development and construction process;

 

   

lack of cash flow during the construction period; and

If developments are unsuccessful, funding provided from contributions to co-investment partnerships and sales to third parties may be materially reduced and our cash flow available for distribution to stockholders will be reduced. Our earnings and cash flow available for distribution to stockholders also may be reduced if we experience a significant slowdown in our development activities.

Uninsured loss may adversely affect distributions to stockholders.

We carry comprehensive liability, fire, flood, extended coverage, rental loss and environmental insurance for our properties with policy specifications and insured limits customarily carried for similar properties. We believe that the insurance carried on our properties is adequate in accordance with industry standards. There are, however, some types of losses, such as from hurricanes, terrorism, wars or earthquakes, which may be uninsurable, or the cost of insuring against such losses may not be economically justifiable. If an uninsured loss occurs, we could lose both the invested capital in and anticipated revenues from the property, but we would still be obligated to repay any recourse mortgage debt on the property. In that event, our distributions to stockholders could be reduced.

We face competition from numerous sources.

The ownership of shopping centers is highly fragmented, with less than 10% owned by real estate investment trusts. We face competition from other real estate investment trusts as well as from numerous small owners in the acquisition, ownership and leasing of shopping centers. We compete to develop shopping centers with other real estate investment trusts engaged in development activities as well as with local, regional and national real estate developers.

 

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We compete in the acquisition of properties through proprietary research that identifies opportunities in markets with high barriers to entry and higher-than-average population growth and household income. We seek to maximize rents per square foot by (1) establishing relationships with supermarket chains that are first or second in their markets or other category-leading anchors and (2) leasing non-anchor space in multiple centers to national or regional tenants. We compete to develop properties by applying our proprietary research methods to identify development and leasing opportunities and by pre-leasing a significant portion of a center before beginning construction.

There can be no assurance, however, that other real estate owners or developers will not utilize similar research methods and target the same markets and anchor tenants that we target. These entities may successfully control these markets and tenants to our exclusion. If we cannot successfully compete in our targeted markets, our cash flow, and therefore distributions to stockholders, may be adversely affected.

Costs of environmental remediation could reduce our cash flow available for distribution to stockholders.

Under various federal, state and local laws, an owner or manager of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on the property. These laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of hazardous or toxic substances. The cost of any required remediation could exceed the value of the property and/or the aggregate assets of the owner.

We 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 (UST’s). The presence of, or the failure to properly remediate, hazardous or toxic substances may adversely affect our ability to sell or rent a contaminated property or to borrow using the property as collateral. Any of these developments could reduce cash flow and distributions to stockholders.

Risk Factors Related to Our Co-investment Partnerships and Acquisition Structure

We do not have voting control over our joint venture investments, so we are unable to ensure that our objectives will be pursued.

We have invested as a co-venturer in the acquisition or development of properties. As of December 31, 2007, our investments in real estate partnerships represented 10.4% of our total assets. These investments involve risks not present in a wholly-owned project. We do not have voting control over the ventures. The co-venturer might (1) have interests or goals that are inconsistent with our interests or goals or (2) otherwise impede our objectives. The co-venturer also might become insolvent or bankrupt.

Our co-investment partnerships account for a significant portion of our revenues and net income in the form of management fees and are an important part of our growth strategy. The termination of our co-investment partnerships could adversely affect distributions to stockholders.

Our management fee income has increased significantly as our participation in co-investment partnerships has increased. If co-investment partnerships owning a significant number of properties were dissolved for any reason, we would lose the asset management and property management fees from these co-investment partnerships, which could adversely affect our ability to recycle capital and fund developments and acquisitions and the amount of cash available for distribution to stockholders.

In addition, termination of the co-investment partnerships without replacing them with new co-investment partnerships could adversely affect our growth strategy. Property sales to the co-investment partnerships provide us with an important source of funding for additional developments and acquisitions. Without this source of capital, our ability to recycle capital, fund developments and acquisitions and to increase distributions to stockholders could be adversely affected.

 

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Our partnership structure may limit our flexibility to manage our assets.

We invest in retail shopping centers through Regency Centers, L.P., the operating partnership in which we currently own 99% of the outstanding common partnership units. From time to time, we acquire properties through our operating partnership in exchange for limited partnership interests. This acquisition structure may permit limited partners who contribute properties to us to defer some, if not all, of the income tax liability that they would incur if they sold the property for cash.

Properties contributed to our operating partnership may have unrealized gain attributable to the difference between the fair market value and adjusted tax basis in the properties prior to contribution. As a result, our sale of these properties could cause adverse tax consequences to the limited partners who contributed them.

Generally, our operating partnership has no obligation to consider the tax consequences of its actions to any limited partner. However, our operating partnership may acquire properties in the future subject to material restrictions on refinancing or resale designed to minimize the adverse tax consequences to the limited partners who contribute those properties. These restrictions could significantly reduce our flexibility to manage our assets by preventing us from reducing mortgage debt or selling a property when such a transaction might be in our best interest in order to reduce interest costs or dispose of an under-performing property.

Risk Factors Related to Our Capital Recycling and Capital Structure

A reduction in the availability of capital, an increase in the cost of capital, and higher market capitalization rates could adversely impact Regency’s ability to recycle capital and fund developments and acquisitions, and could dilute earnings.

As part of our capital recycling program, we sell operating properties that no longer meet our investment standards. We also develop certain retail centers because of their attractive margins with the intent of selling them to co-investment partnerships or other third parties for a profit. These sale proceeds are used to fund the construction of new developments. An increase in market capitalization rates could cause a reduction in the value of centers identified for sale, which would have an adverse impact on our capital recycling program by reducing the amount of cash generated and profits realized. In order to meet the cash requirements of our development program, we may be required to sell more properties than initially planned, which would have a dilutive impact on our earnings.

Our debt financing may reduce distributions to stockholders.

We do not expect to generate sufficient funds from operations to make balloon principal payments when due on our debt. If we are unable to refinance our debt on acceptable terms, we might be forced (1) to dispose of properties, which might result in losses, or (2) to obtain financing at unfavorable terms. Either could reduce the cash flow available for distributions to stockholders.

In addition, if we cannot make required mortgage payments, the mortgagee could foreclose on the property securing the mortgage, causing the loss of cash flow from that property. Furthermore, substantially all of our debt is cross-defaulted, which means that a default under one loan could trigger defaults under other loans.

Our organizational documents do not limit the amount of debt that may be incurred. The degree to which we are leveraged could have important consequences, including the following:

 

   

leverage could affect our ability to obtain additional financing in the future to repay indebtedness or for working capital, capital expenditures, acquisitions, development or other general corporate purposes;

 

   

leverage could make us more vulnerable to a downturn in our business or the economy generally; and

 

   

as a result, our leverage could lead to reduced distributions to stockholders.

Covenants in our debt agreements may restrict our operating activities and adversely affect our financial condition.

Our revolving line of credit and our unsecured notes contain customary covenants, including compliance with financial ratios, such as ratios of total debt to gross asset value and fixed charge coverage ratios. Our line of credit also

 

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restricts our ability to enter into a transaction that would result in a change of control. These covenants may limit our operational flexibility and our acquisition activities. Moreover, if we breach any of these covenants, the resulting default could cause the acceleration of our indebtedness, even in the absence of a payment default. If we are not able to refinance our indebtedness after a default, or unable to refinance our indebtedness on favorable terms, distributions to stockholders and our financial condition would be adversely affected.

We depend on external sources of capital, which may not be available in the future.

To qualify as a REIT, we must, among other things, distribute to our stockholders each year at least 90% of our REIT taxable income (excluding any net capital gains). Because of these distribution requirements, we likely will not be able to fund all future capital needs, including capital for acquisitions or developments, with income from operations. We therefore will have to rely on third-party sources of capital, which may or may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of things, including the market’s perception of our growth potential and our current and potential future earnings. In addition, our line of credit imposes covenants that limit our flexibility in obtaining other financing, such as a prohibition on negative pledge agreements.

Additional equity offerings may result in substantial dilution of stockholders’ interests, and additional debt financing may substantially increase our degree of leverage.

Risk Factors Related to Interest Rates and the Market for Our Stock

Increased interest rates may reduce distributions to stockholders.

We are obligated on floating rate debt, and if we do not eliminate our exposure to increases in interest rates through interest rate protection or cap agreements, these increases may reduce cash flow and our ability to make distributions to stockholders.

Although swap agreements enable us to convert floating rate debt to fixed rate debt and cap agreements enable us to cap our maximum interest rate, they expose us to the risk that the counterparties to these hedge agreements may not perform, which could increase our exposure to rising interest rates. If we enter into swap agreements, decreases in interest rates will increase our interest expense as compared to the underlying floating rate debt. This could result in our making payments to unwind these agreements, such as in connection with a prepayment of the floating rate debt. Cap agreements do not protect us from increases up to the capped rate.

Increased market interest rates could reduce our stock prices.

The annual dividend rate on our common stock as a percentage of its market price may influence the trading price of our stock. An increase in market interest rates may lead purchasers to demand a higher annual dividend rate, which could adversely affect the market price of our stock. A decrease in the market price of our common stock could reduce our ability to raise additional equity in the public markets. Selling common stock at a decreased market price would have a dilutive impact on existing shareholders.

Risk Factors Related to Federal Income Tax Laws

If we fail to qualify as a REIT for federal income tax purposes, we would be subject to federal income tax at regular corporate rates.

We believe that we qualify for taxation as a REIT for federal income tax purposes, and we plan to operate so that we can continue to meet the requirements for taxation as a REIT. If we qualify as a REIT, we generally will not be subject to federal income tax on our income that we distribute currently to our stockholders. Many of the REIT requirements, however, are highly technical and complex. The determination that we are a REIT requires an analysis of various factual matters and circumstances, some of which may not be totally within our control and some of which involve questions of interpretation. For example, to qualify as a REIT, at least 95% of our gross income must come from specific passive

 

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sources, like rent, that are itemized in the REIT tax laws. There can be no assurance that the IRS or a court would agree with the positions we have taken in interpreting the REIT requirements. We also are required to distribute to our stockholders at least 90% of our REIT taxable income (excluding capital gains). The fact that we hold many of our assets through co-investment partnerships and their subsidiaries further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize our REIT status. Furthermore, Congress and the Internal Revenue Service might make changes to the tax laws and regulations, and the courts might issue new rulings, that make it more difficult, or impossible, for us to remain qualified as a REIT.

Also, unless the IRS granted us relief under certain statutory provisions, we would remain disqualified as a REIT for four years following the year we first failed to qualify. If we failed to qualify as a REIT, we would have to pay significant income taxes. This would likely have a significant adverse affect on the value of our securities. In addition, we would no longer be required to pay any dividends to stockholders.

Even if we qualify as a REIT for federal income tax purposes, we are required to pay certain federal, state and local taxes on our income and property. For example, if we have net income from “prohibited transactions,” that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale. While we have undertaken a significant number of asset sales in recent years, we do not believe that those sales should be considered prohibited transactions, but there can be no assurance that the IRS would not contend otherwise.

In addition, any net taxable income earned directly by our taxable affiliates, including Regency Realty Group, Inc., is subject to federal and state corporate income tax. Several provisions of the laws applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct interest payments made to an affiliated REIT. In addition, a REIT has to pay a 100% penalty tax on some payments that it receives if the economic arrangements between the REIT, the REIT’s tenants and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income. To the extent that we and our affiliates are required to pay federal, state and local taxes, we will have less cash available for distributions to our stockholders.

A REIT may not own securities in any one issuer if the value of those securities exceeds 5% of the value of the REIT’s total assets or the securities owned by the REIT represent more than 10% of the issuer’s outstanding voting securities or 10% of the value of the issuer’s outstanding securities. An exception to these tests allows a REIT to own securities of a subsidiary that exceed the 5% value test and the 10% value tests if the subsidiary elects to be a “taxable REIT subsidiary.” We are not able to own securities of taxable REIT subsidiaries that represent in the aggregate more than 20% of the value of our total assets. We currently own more than 10% of the total value of the outstanding securities of Regency Realty Group, Inc., which has elected to be a taxable REIT subsidiary.

Risk Factors Related to Our Ownership Limitations, the Florida Business Corporation Act and Certain Other Matters

Restrictions on the ownership of our capital stock to preserve our REIT status could delay or prevent a change in control.

Ownership of more than 7% by value of our outstanding capital stock by certain persons is restricted for the purpose of maintaining our qualification as a REIT, with certain exceptions. This 7% limitation may discourage a change in control and may also (i) deter tender offers for our capital stock, which offers may be attractive to our stockholders, or (ii) limit the opportunity for our stockholders to receive a premium for their capital stock that might otherwise exist if an investor attempted to assemble a block in excess of 7% of our outstanding capital stock or to effect a change in control.

The issuance of our capital stock could delay or prevent a change in control.

Our articles of incorporation authorize our board of directors to issue up to 30,000,000 shares of preferred stock and 10,000,000 shares of special common stock and to establish the preferences and rights of any shares issued. The

 

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Index to Financial Statements

issuance of preferred stock or special common stock could have the effect of delaying or preventing a change in control even if a change in control were in our stockholders’ interest. The provisions of the Florida Business Corporation Act regarding control share acquisitions and affiliated transactions could also deter potential acquisitions by preventing the acquiring party from voting the common stock it acquires or consummating a merger or other extraordinary corporate transaction without the approval of our disinterested stockholders.

Item 1B. Unresolved Staff Comments

The Company has received no written comments regarding its periodic or current reports from the staff of the Securities and Exchange Commission that were issued 180 days or more preceding December 31, 2007 that remain unresolved.

Item 2. Properties

The following table is a list of the shopping centers summarized by state and in order of largest holdings presented on a Combined Basis (includes properties owned by unconsolidated co-investment partnerships):

 

    December 31, 2007     December 31, 2006  

Location

  # Properties   GLA   % of Total
GLA
    %
Leased
    # Properties   GLA   % of Total
GLA
    %
Leased
 

California

  73   9,615,484   18.8 %   89.9 %   71   9,521,497   20.2 %   88.6 %

Florida

  60   6,137,127   12.0 %   94.2 %   55   6,175,929   13.1 %   93.1 %

Texas

  38   4,524,621   8.9 %   90.7 %   39   4,779,440   10.1 %   86.1 %

Virginia

  34   4,153,392   8.1 %   93.8 %   33   3,884,864   8.2 %   94.1 %

Illinois

  24   2,901,849   5.7 %   94.5 %   16   2,256,682   4.8 %   95.8 %

Georgia

  30   2,628,658   5.1 %   94.0 %   32   2,735,441   5.8 %   92.6 %

Colorado

  22   2,424,813   4.8 %   91.4 %   21   2,345,224   5.0 %   91.8 %

Ohio

  16   2,270,932   4.4 %   86.7 %   16   2,292,515   4.9 %   85.3 %

Missouri

  23   2,265,472   4.4 %   97.9 %   —     —     —       —    

North Carolina

  16   2,180,033   4.3 %   92.7 %   16   2,193,420   4.6 %   92.4 %

Maryland

  18   2,058,337   4.0 %   95.0 %   18   2,058,329   4.4 %   94.6 %

Pennsylvania

  14   1,596,969   3.1 %   87.4 %   13   1,649,570   3.5 %   90.1 %

Washington

  14   1,332,518   2.6 %   98.5 %   11   1,172,684   2.5 %   94.5 %

Oregon

  11   1,088,697   2.1 %   96.9 %   10   1,011,678   2.1 %   91.5 %

Nevada

  3   774,736   1.5 %   43.7 %   1   119,313   0.3 %   87.4 %

Delaware

  5   654,779   1.3 %   89.7 %   5   654,687   1.4 %   91.3 %

Tennessee

  8   576,614   1.1 %   95.7 %   7   488,050   1.0 %   94.4 %

Massachusetts

  3   561,176   1.1 %   86.2 %   3   568,099   1.2 %   83.7 %

South Carolina

  9   547,735   1.1 %   92.5 %   9   536,847   1.1 %   97.5 %

Arizona

  4   496,073   1.0 %   98.8 %   4   496,087   1.1 %   99.3 %

Minnesota

  3   483,938   1.0 %   96.2 %   3   483,938   1.0 %   96.5 %

Kentucky

  3   325,792   0.6 %   88.1 %   2   302,670   0.6 %   95.0 %

Michigan

  4   303,457   0.6 %   89.6 %   4   303,412   0.6 %   87.6 %

Indiana

  6   273,256   0.5 %   81.9 %   5   193,370   0.4 %   70.9 %

Wisconsin

  2   269,128   0.5 %   97.7 %   2   269,128   0.6 %   97.3 %

Alabama

  2   193,558   0.4 %   83.5 %   2   193,558   0.4 %   82.2 %

Connecticut

  1   179,860   0.4 %   100.0 %   1   179,730   0.4 %   100.0 %

New Jersey

  2   156,482   0.3 %   95.2 %   2   156,482   0.3 %   97.8 %

New Hampshire

  1   91,692   0.2 %   74.8 %   2   125,173   0.3 %   74.8 %

Dist. of Columbia

  2   39,646   0.1 %   79.4 %   2   39,645   0.1 %   89.4 %
                                       

Total

  451   51,106,824   100.0 %   91.7 %   405   47,187,462   100.0 %   91.0 %
                                       

 

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Index to Financial Statements

Item 2. Properties (Continued)

 

The following table is a list of the shopping centers summarized by state and in order of largest holdings presented for Consolidated Properties (excludes properties owned by unconsolidated co-investment partnerships):

 

    December 31, 2007     December 31, 2006  

Location

  # Properties   GLA   % of Total
GLA
    %
Leased
    # Properties   GLA   % of Total
GLA
    %
Leased
 

California

  44   5,656,656   22.0 %   86.8 %   46   5,861,515   23.8 %   84.9 %

Florida

  42   4,376,530   17.0 %   94.4 %   34   4,054,604   16.4 %   93.6 %

Texas

  29   3,404,741   13.2 %   88.7 %   30   3,629,118   14.7 %   82.5 %

Ohio

  14   2,015,751   7.8 %   85.5 %   14   2,037,134   8.3 %   83.6 %

Georgia

  16   1,409,725   5.5 %   92.9 %   16   1,408,407   5.7 %   89.7 %

Virginia

  10   1,315,651   5.1 %   89.0 %   9   1,018,531   4.1 %   89.1 %

Colorado

  14   1,277,505   5.0 %   88.3 %   13   1,158,670   4.7 %   89.0 %

North Carolina

  10   1,023,768   4.0 %   93.5 %   9   947,413   3.8 %   95.3 %

Oregon

  8   734,027   2.8 %   97.4 %   7   657,008   2.7 %   88.8 %

Nevada

  2   675,672   2.6 %   35.6 %   1   119,313   0.5 %   87.4 %

Washington

  8   614,837   2.4 %   98.6 %   6   555,666   2.3 %   90.3 %

Pennsylvania

  5   534,741   2.1 %   72.9 %   4   587,592   2.4 %   78.1 %

Tennessee

  7   490,549   1.9 %   95.1 %   7   488,050   2.0 %   94.4 %

Illinois

  3   414,996   1.6 %   92.2 %   3   415,011   1.7 %   93.6 %

Arizona

  3   388,440   1.5 %   99.0 %   3   388,440   1.6 %   99.1 %

Massachusetts

  2   375,897   1.5 %   79.4 %   2   382,820   1.5 %   76.1 %

Michigan

  4   303,457   1.2 %   89.6 %   4   303,412   1.2 %   87.6 %

Delaware

  2   240,418   0.9 %   99.6 %   2   240,418   1.0 %   98.7 %

South Carolina

  3   170,663   0.7 %   79.1 %   2   91,361   0.4 %   94.7 %

Maryland

  1   129,340   0.5 %   77.3 %   1   129,940   0.5 %   67.0 %

New Hampshire

  1   91,692   0.4 %   74.8 %   2   125,173   0.5 %   74.8 %

Indiana

  3   54,487   0.2 %   44.5 %   3   54,486   0.2 %   23.5 %

Kentucky

  1   23,122   0.1 %   —       —     —     —       —    
                                       

Total

  232   25,722,665   100.0 %   88.1 %   218   24,654,082   100.0 %   87.3 %
                                       

The Consolidated Properties are encumbered by notes payable of $202.7 million.

 

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Item 2. Properties (Continued)

 

The following table is a list of the shopping centers summarized by state and in order of largest holdings presented for Unconsolidated Properties (only properties owned by unconsolidated co-investment partnerships):

 

     December 31, 2007     December 31, 2006  

Location

   # Properties    GLA    % of Total
GLA
    %
Leased
    # Properties    GLA    % of Total
GLA
    %
Leased
 

California

   29    3,958,828    15.6 %   94.4 %   25    3,659,982    16.2 %   94.5 %

Virginia

   24    2,837,741    11.2 %   96.0 %   24    2,866,333    12.7 %   95.8 %

Illinois

   21    2,486,853    9.8 %   94.9 %   13    1,841,671    8.2 %   96.3 %

Missouri

   23    2,265,472    8.9 %   97.9 %   —      —      —       —    

Maryland

   17    1,928,997    7.6 %   96.2 %   17    1,928,389    8.6 %   96.4 %

Florida

   18    1,760,597    6.9 %   93.6 %   21    2,121,325    9.4 %   92.1 %

Georgia

   14    1,218,933    4.8 %   95.3 %   16    1,327,034    5.9 %   95.7 %

North Carolina

   6    1,156,265    4.6 %   92.0 %   7    1,246,007    5.5 %   90.1 %

Colorado

   8    1,147,308    4.5 %   94.8 %   8    1,186,554    5.3 %   94.5 %

Texas

   9    1,119,880    4.4 %   96.6 %   9    1,150,322    5.1 %   97.4 %

Pennsylvania

   9    1,062,228    4.2 %   94.7 %   9    1,061,978    4.7 %   96.8 %

Washington

   6    717,681    2.8 %   98.4 %   5    617,018    2.7 %   98.3 %

Minnesota

   3    483,938    1.9 %   96.2 %   3    483,938    2.2 %   96.5 %

Delaware

   3    414,361    1.6 %   83.9 %   3    414,269    1.8 %   87.0 %

South Carolina

   6    377,072    1.5 %   98.5 %   7    445,486    2.0 %   98.0 %

Oregon

   3    354,670    1.4 %   96.0 %   3    354,670    1.6 %   96.5 %

Kentucky

   2    302,670    1.2 %   94.8 %   2    302,670    1.3 %   95.0 %

Wisconsin

   2    269,128    1.1 %   97.7 %   2    269,128    1.2 %   97.3 %

Ohio

   2    255,181    1.0 %   96.5 %   2    255,381    1.1 %   99.0 %

Indiana

   3    218,769    0.9 %   91.2 %   2    138,884    0.6 %   89.5 %

Alabama

   2    193,558    0.8 %   83.5 %   2    193,558    0.9 %   82.2 %

Massachusetts

   1    185,279    0.7 %   100.0 %   1    185,279    0.8 %   99.4 %

Connecticut

   1    179,860    0.7 %   100.0 %   1    179,730    0.8 %   100.0 %

New Jersey

   2    156,482    0.6 %   95.2 %   2    156,482    0.7 %   97.8 %

Arizona

   1    107,633    0.4 %   98.1 %   1    107,647    0.5 %   100.0 %

Nevada

   1    99,064    0.4 %   98.9 %   —      —      —       —    

Tennessee

   1    86,065    0.3 %   98.8 %   —      —      —       —    

Dist. of Columbia

   2    39,646    0.2 %   79.4 %   2    39,645    0.2 %   89.4 %
                                            

Total

   219    25,384,159    100.0 %   95.2 %   187    22,533,380    100.0 %   95.0 %
                                            

The Unconsolidated Properties are encumbered by mortgage loans of $2.6 billion.

 

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Index to Financial Statements

Item 2. Properties (Continued)

 

The following table summarizes the largest tenants occupying our shopping centers for Consolidated Properties plus Regency’s pro-rata share of Unconsolidated Properties as of December 31, 2007 based upon a percentage of total annualized base rent exceeding .5%.

 

Tenant

   GLA    Percent to
Company
Owned GLA
    Rent    Percentage of
Annualized
Base Rent
    Number of
Leased
Stores
   Anchor
Owned
Stores (a)

Kroger

   2,815,024    8.9 %   $ 26,580,497    5.89 %   60    8

Publix

   2,115,188    6.7 %     19,353,278    4.29 %   65    1

Safeway

   1,672,156    5.3 %     15,918,223    3.53 %   59    6

Supervalu

   1,004,004    3.2 %     11,430,702    2.53 %   33    2

Blockbuster Video

   315,644    1.0 %     6,727,361    1.49 %   84    —  

CVS

   270,823    0.9 %     4,703,665    1.04 %   41    —  

Whole Foods

   144,754    0.5 %     4,487,427    0.99 %   5    —  

TJX Companies

   434,184    1.4 %     4,444,445    0.98 %   27    —  

Harris Teeter

   346,382    1.1 %     4,004,525    0.89 %   9    —  

Walgreens

   239,870    0.8 %     3,981,447    0.88 %   23    —  

Ahold

   248,795    0.8 %     3,666,951    0.81 %   11    —  

Starbucks

   103,140    0.3 %     3,258,350    0.72 %   95    —  

Sears Holdings

   433,809    1.4 %     3,237,083    0.72 %   16    1

Rite Aid

   227,691    0.7 %     3,191,160    0.71 %   35    —  

Washington Mutual Bank

   92,010    0.3 %     2,997,406    0.66 %   39    —  

Hallmark

   165,085    0.5 %     2,844,081    0.63 %   61    —  

Best Buy

   137,564    0.4 %     2,812,624    0.62 %   7    —  

PETCO

   156,164    0.5 %     2,710,930    0.60 %   20    —  

Schnucks

   309,522    1.0 %     2,695,784    0.60 %   31    —  

Ross Dress For Less

   198,594    0.6 %     2,637,377    0.58 %   16    —  

Bank of America

   69,566    0.2 %     2,630,181    0.58 %   31    —  

Kohl’s

   315,680    1.0 %     2,547,527    0.56 %   4    —  

Longs Drug

   211,818    0.7 %     2,516,809    0.56 %   15    —  

H.E.B.

   210,413    0.7 %     2,499,163    0.55 %   4    —  

Subway

   90,621    0.3 %     2,488,934    0.55 %   116    —  

L.A. Fitness Sports Club

   138,188    0.4 %     2,483,484    0.55 %   4    —  

The UPS Store

   98,293    0.3 %     2,358,410    0.52 %   112    —  

Staples

   167,316    0.5 %     2,339,828    0.52 %   12    —  

Stater Bros.

   151,151    0.5 %     2,300,289    0.51 %   5    —  

 

(a) Stores owned by anchor tenant that are attached to our centers.

Regency’s leases have terms generally ranging from three to five years for tenant space under 5,000 square feet. Leases greater than 10,000 square feet generally have lease terms in excess of five years, mostly comprised of anchor tenants. Many of the anchor leases contain provisions allowing the tenant the option of extending the term of the lease at expiration. The leases provide for the monthly payment in advance of fixed minimum rentals, additional rents calculated as a percentage of the tenant’s sales, the tenant’s pro-rata share of real estate taxes, insurance, and common area maintenance expenses, and reimbursement for utility costs if not directly metered.

 

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Index to Financial Statements

Item 2. Properties (Continued)

 

The following table sets forth a schedule of lease expirations for the next ten years, assuming no tenants renew their leases:

 

Lease Expiration Year

   Expiring GLA (2)    Percent of
Total
Company
GLA (2)
    Minimum
Rent
Expiring
Leases (3)
   Percent of
Total
Minimum
Rent (3)
 

(1)

   482,215    2.6 %   $ 8,056,099    2.5 %

2008

   1,800,898    9.8 %     34,557,885    10.5 %

2009

   2,581,489    14.0 %     48,346,537    14.7 %

2010

   2,543,345    13.8 %     47,601,932    14.5 %

2011

   2,845,531    15.4 %     49,952,956    15.2 %

2012

   3,254,578    17.7 %     58,570,659    17.8 %

2013

   1,269,126    6.9 %     21,102,490    6.4 %

2014

   783,656    4.3 %     11,394,840    3.5 %

2015

   741,434    4.0 %     11,841,862    3.6 %

2016

   836,198    4.5 %     14,072,697    4.3 %

2017

   1,280,552    7.0 %     23,103,472    7.0 %
                        

10 Year Total

   18,419,022    100.0 %     328,601,429    100.0 %
                        

 

(1) leased currently under month to month rent or in process of renewal
(2) represents GLA for Consolidated Properties plus Regency’s pro-rata share of Unconsolidated Properties
(3) total minimum rent includes current minimum rent and future contractual rent steps for the Consolidated properties plus Regency’s pro-rata share from Unconsolidated Properties, but excludes additional rent such as percentage rent, common area maintenance, real estate taxes and insurance reimbursements

See the following Combined Basis property table and also see Item 7, Management’s Discussion and Analysis for further information about Regency’s properties.

 

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

CALIFORNIA

           

Los Angeles/ Southern CA

           

4S Commons Town Center

  2004   2004   240,118   98.8 %   Ralphs   Metropolis Funiture, Griffin Ace Hardware, Sav-On Drugs, Cost Plus, Bed Bath & Beyond, LA Fitness

Amerige Heights Town Center (4)

  2000   2000   96,679   98.5 %   Albertsons   (Target)

Bear Creek Village Center (4)

  2003   2004   75,220   97.6 %   Stater Bros.  

Brea Marketplace (4)

  2005   1987   298,311   77.6 %     24 Hour Fitness, Circuit City, Big 5 Sporting Goods, Toys “R” Us, Beverages & More, Childtime Childcare, Crown Books Liquidation Center

 

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Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

CALIFORNIA (Continued)

           

Campus Marketplace (4)

  2000   2000   144,289   98.9 %   Ralphs   Longs Drug, Discovery Isle Child Development Center

Costa Verde

  1999   1988   178,623   94.2 %   Bristol Farms   Bookstar, The Boxing Club

El Camino

  1999   1995   135,728   100.0 %   Von’s Food & Drug   Sav-On Drugs

El Norte Pkwy Plaza

  1999   1984   90,679   98.0 %   Von’s Food & Drug   Longs Drug

Falcon Ridge Town Center Phase I (4)

  2003   2004   232,754   100.0 %   Stater Bros.   (Target), Sports Authority, Ross Dress for Less, Linen’s-N-Things, Michaels, Pier 1 Imports

Falcon Ridge Town Center Phase II (4)

  2005   2005   66,864   100.0 %     24 Hour Fitness, Sav On

Five Points Shopping Center (4)

  2005   1960   144,553   100.0 %   Albertsons   Longs Drug, Ross Dress for Less, Big 5 Sporting Goods

French Valley

  2004   2004   99,019   93.6 %   Stater Bros.  

Friars Mission

  1999   1989   146,898   99.2 %   Ralphs   Longs Drug

Garden Village Shopping Center (4)

  2000   2000   112,767   100.0 %   Albertsons   Rite Aid

Gelson’s Westlake Market Plaza

  2002   2002   84,975   100.0 %   Gelson’s Markets   John of Italy Salon & Spa

Golden Hills Promenade (3)

  2006   2006   290,888   60.0 %    

Granada Village (4)

  2005   1965   224,649   76.3 %     Rite Aid, TJ Maxx, Stein Mart

Hasley Canyon Village

  2003   2003   65,801   100.0 %   Ralphs  

Heritage Plaza

  1999   1981   231,582   99.8 %   Ralphs   Sav-On Drugs, Hands On Bicycles, Inc., Total Woman, Irvine Ace Hardware

Highland Greenspot (3)

  2007   2007   92,450   48.7 %    

Indio-Jackson (3)

  2006   2006   355,469   30.3 %   (WinCo)   24 Hour Fitness, PETCO

Jefferson Square (3)

  2007   2007   102,832   13.6 %   Fresh & Easy  

Laguna Niguel Plaza (4)

  2005   1985   41,943   93.9 %   (Albertsons)   Sav-On Drugs

Morningside Plaza

  1999   1996   91,222   95.5 %   Stater Bros.  

Navajo Shopping Center (4)

  2005   1964   102,138   100.0 %   Albertsons   Rite Aid, Kragen Auto Parts

Newland Center

  1999   1985   149,140   100.0 %   Albertsons  

Oakbrook Plaza

  1999   1982   83,279   98.3 %   Albertsons   (Longs Drug)

Park Plaza Shopping Center (4)

  2001   1991   194,396   97.7 %   Henry’s Marketplace   Sav-On Drugs, PETCO, Ross Dress For Less, Office Depot

 

15


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

CALIFORNIA (Continued)

           

Plaza Hermosa

  1999   1984   94,940   100.0 %   Von’s Food & Drug   Sav-On Drugs

Point Loma Plaza (4)

  2005   1987   212,774   95.6 %   Von’s Food & Drug   Sport Chalet 5, 24 Hour Fitness, Jo-Ann Fabrics

Rancho San Diego Village (4)

  2005   1981   152,896   98.2 %   Von’s Food & Drug   (Longs Drug), 24 Hour Fitness

Rio Vista Town Center (3)

  2005   2005   72,619   68.7 %   Stater Bros.   (CVS)

Rona Plaza

  1999   1989   51,760   100.0 %   Food 4 Less  

Santa Ana Downtown

  1999   1987   100,306   97.6 %   Food 4 Less   Famsa, Inc.

Santa Maria Commons

  2005   2005   113,514   100.0 %     Kohl’s, Rite Aid

Seal Beach (4)

  2002   1966   90,172   72.4 %   Von’s Food & Drug   CVS

Shops of Santa Barbara

  2003   2004   51,568   86.0 %     Circuit City

Shops of Santa Barbara Phase II (3)

  2004   2004   63,657   95.2 %   Whole Foods  

Twin Oaks Shopping Center (4)

  2005   1978   98,399   100.0 %   Ralphs   Rite Aid

Twin Peaks

  1999   1988   198,140   99.2 %   Albertsons   Target

Valencia Crossroads

  2002   2003   172,856   100.0 %   Whole Foods   Kohl’s

Ventura Village

  1999   1984   76,070   100.0 %   Von’s Food & Drug  

Vine at Castaic (3)

  2005   2005   30,236   82.6 %    

Vista Village Phase I (4)

  2002   2003   129,009   100.0 %     Krikorian Theaters, Linen’s-N-Things, (Lowe’s)

Vista Village Phase II (4)

  2002   2003   55,000   100.0 %   Sprout’s Markets   (Staples)

Vista Village IV

  2006   2006   11,000   88.2 %    

Westlake Village Plaza and Center

  1999   1975   190,519   99.0 %   Von’s Food & Drug   (Sav-On Drugs), Longs Drug, Total Woman

Westridge

  2001   2003   92,287   98.9 %   Albertsons   Beverages & More!

Woodman Van Nuys

  1999   1992   107,614   100.0 %   Gigante  

San Francisco/Northern CA

           

Applegate Ranch Shopping Center (3)

  2006   2006   179,131   28.4 %   (Super Target)  

Auburn Village (4)

  2005   1990   133,944   100.0 %   Bel Air Market   Goodwill Industries, (Longs Drug)

Bayhill Shopping Center (4)

  2005   1990   121,846   100.0 %   Mollie Stone’s Market   Longs Drug

Blossom Valley

  1999   1990   93,316   98.9 %   Safeway   Longs Drug

Clayton Valley

  2003   2004   260,853   93.0 %     Yardbirds Home Center, Longs Drugs, Dollar Tree

 

16


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

CALIFORNIA (Continued)

           

Clovis Commons

  2004   2004   175,039   95.8 %   (Super Target)   (Super Target), Petsmart, TJ Maxx, Office Depot, Best Buy

Corral Hollow (4)

  2000   2000   167,184   98.6 %   Safeway   Longs Drug, Sears Orchard Supply & Hardware

Diablo Plaza

  1999   1982   63,265   100.0 %   (Safeway)   (Longs Drug), Jo-Ann Fabrics

El Cerrito Plaza (4)

  2000   2000   256,035   86.5 %   (Lucky’s), Trader Joe’s   (Longs Drug), Bed, Bath & Beyond, Barnes & Noble, Copelands Sports, PETCO, Ross Dress For Less

Encina Grande

  1999   1965   102,499   92.9 %   Safeway   Walgreens

Folsom Prairie City Crossing

  1999   1999   90,237   98.2 %   Safeway  

Loehmanns Plaza California

  1999   1983   113,310   98.0 %   (Safeway)   Longs Drug, Loehmann’s

Mariposa Shopping Center (4)

  2005   1957   126,658   98.2 %   Safeway   Longs Drug, Ross Dress for Less

Pleasant Hill Shopping Center (4)

  2005   1970   233,679   99.2 %     Marshalls, Barnes & Noble, Toys “R” Us, Target

Powell Street Plaza

  2001   1987   165,928   100.0 %   Trader Joe’s   Circuit City, Copeland Sports, Ethan Allen, Jo-Ann Fabrics, Ross Dress For Less

Raley’s Supermarket (4)

  2007   1964   62,827   100.0 %   Raley’s  

San Leandro

  1999   1982   50,432   100.0 %   (Safeway)   (Longs Drug)

Sequoia Station

  1999   1996   103,148   100.0 %   (Safeway)   Longs Drug, Barnes & Noble, Old Navy, Warehouse Music

Silverado Plaza (4)

  2005   1974   84,916   100.0 %   Nob Hill   Longs Drug

Snell & Branham Plaza (4)

  2005   1988   99,350   100.0 %   Safeway  

Stanford Ranch Village (4)

  2005   1991   89,875   87.1 %   Bel Air Market   Plum Pharmacy

Strawflower Village

  1999   1985   78,827   94.9 %   Safeway   (Longs Drug)

Tassajara Crossing

  1999   1990   146,188   99.0 %   Safeway   Longs Drug, Ace Hardware

West Park Plaza

  1999   1996   88,103   98.3 %   Safeway   Rite Aid

Woodside Central

  1999   1993   80,591   100.0 %     CEC Entertainment, Marshalls. (Target)

Ygnacio Plaza (4)

  2005   1968   109,701   100.0 %     Rite Aid
                 

Subtotal/Weighted Average (CA)

      9,615,484   89.9 %    
                 

 

17


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

FLORIDA

           

Ft. Myers / Cape Coral

           

Corkscrew Village

  2007   1997   82,011   100.0 %   Publix  

First Street Village (3)

  2006   2006   54,926   83.2 %   Publix  

Grande Oak

  2000   2000   78,784   100.0 %   Publix  

Jacksonville / North Florida

           

Anastasia Plaza (4)

  1993   1988   102,342   97.3 %   Publix  

Canopy Oak Center (3)(4)

  2006   2006   90,043   61.9 %   Publix  

Carriage Gate

  1994   1978   76,784   100.0 %     Leon County Tax Collector, TJ Maxx

Courtyard Shopping Center

  1993   1987   137,256   100.0 %   (Publix)   Target

Fleming Island

  1998   2000   136,662   95.7 %   Publix   Stein Mart, (Target)

Hibernia Pavilion (3)

  2006   2006   51,298   76.4 %   Publix  

Hibernia Plaza (3)

  2006   2006   8,400   33.3 %     (Walgreens)

Horton’s Corner (3)

  2007   2007   14,820   100.0 %     Walgreens

John’s Creek Shopping Center

  2003   2004   89,921   100.0 %   Publix   Walgreens

Julington Village (4)

  1999   1999   81,820   100.0 %   Publix   (CVS)

Millhopper

  1993   1974   84,065   100.0 %   Publix   CVS, Jo-Ann Fabrics

Newberry Square

  1994   1986   180,524   97.8 %   Publix   Jo-Ann Fabrics, K-Mart

Nocatee Town Center (3)

  2007   2007   81,082   67.0 %   Publix  

Oakleaf Commons (3)

  2006   2006   73,719   79.1 %   Publix  

Ocala Corners (4)

  2000   2000   86,772   100.0 %   Publix  

Old St Augustine Plaza

  1996   1990   232,459   99.5 %   Publix   CVS, Burlington Coat Factory, Hobby Lobby

Palm Harbor Shopping Village (4)

  1996   1991   166,041   92.5 %   Publix   CVS, Bealls

Pine Tree Plaza

  1997   1999   63,387   92.9 %   Publix  

Plantation Plaza (4)

  2004   2004   77,747   100.0 %   Publix  

Shoppes at Bartram Park (4)

  2005   2004   118,014   88.1 %   Publix  

Shops at John’s Creek

  2003   2004   15,490   100.0 %    

Starke

  2000   2000   12,739   100.0 %     CVS

Vineyard Shopping Center (4)

  2001   2002   62,821   87.5 %   Publix  

Miami / Fort Lauderdale

           

Aventura Shopping Center

  1994   1974   102,876   100.0 %   Publix   CVS

Berkshire Commons

  1994   1992   106,354   100.0 %   Publix   Walgreens

Caligo Crossing (3)

  2007   2007   10,800   0.0 %    

 

18


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

FLORIDA (Continued)

           

Five Corners Plaza (4)

  2005   2001   44,647   94.8 %   Publix  

Garden Square

  1997   1991   90,258   100.0 %   Publix   CVS

Naples Walk Shopping Center

  2007   1999   125,390   99.2 %   Publix  

Pebblebrook Plaza (4)

  2000   2000   76,767   100.0 %   Publix   (Walgreens)

Shoppes @ 104 (4)

  1998   1990   108,192   100.0 %   Winn-Dixie   Navarro Discount Pharmacies

Welleby

  1996   1982   109,949   96.2 %   Publix   Bealls

Tampa / Orlando

           

Beneva Village Shops

  1998   1987   141,532   94.5 %   Publix   Walgreens, Bealls, Harbor Freight Tools

Bloomingdale

  1998   1987   267,736   100.0 %   Publix   Ace Hardware, Bealls, Wal-Mart

East Towne Shopping Center

  2002   2003   69,841   100.0 %   Publix  

Kings Crossing Sun City (4)

  1999   1999   75,020   100.0 %   Publix  

Lynnhaven (4)

  2001   2001   63,871   95.6 %   Publix  

Marketplace St Pete

  1995   1983   90,296   95.5 %   Publix   Dollar Duck

Merchants Crossing (4)

  2006   1990   213,739   93.6 %   Publix   Beall’s, Office Depot, Walgreens

Peachland Promenade (4)

  1995   1991   82,082   98.7 %   Publix  

Regency Square Brandon

  1993   1986   349,848   99.4 %     AMC Theater, Dollar Tree, Marshalls, Michaels, S & K Famous Brands, Shoe Carnival, Staples, TJ Maxx, PETCO, (Best Buy), (MacDill)

Regency Village (4)

  2000   2002   83,170   89.9 %   Publix   (Walgreens)

Spring Hill Phase I (3)

  2007   2007   108,317   90.6 %    

Town Square

  1997   1999   44,380   100.0 %     PETCO, Pier 1 Imports

Village Center 6

  1995   1993   181,110   98.7 %   Publix   Walgreens, Stein Mart

Northgate Square

  2007   1995   75,495   100.0 %   Publix  

Westchase

  2007   1998   78,998   96.5 %   Publix  

Willa Springs Shopping Center

  2000   2000   89,930   100.0 %   Publix  

West Palm Beach /Treasure Cove

     

Boynton Lakes Plaza

  1997   1993   124,924   99.4 %   Winn-Dixie   World Gym

Chasewood Plaza

  1993   1986   155,603   100.0 %   Publix   Bealls, Books-A-Million

East Port Plaza

  1997   1991   235,842   60.8 %   Publix   Walgreens

 

19


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

FLORIDA (Continued)

           

Island Crossing (4)

  2007   1996   58,456   100.0 %   Publix  

Martin Downs Village Center

  1993   1985   121,946   85.9 %     Bealls, Coastal Care

Martin Downs Village Shoppes

  1993   1998   48,907   96.2 %     Walgreens

Town Center at Martin Downs

  1996   1996   64,546   100.0 %   Publix  

Village Commons Shopping Center (4)

  2005   1986   169,053   92.6 %   Publix   CVS

Wellington Town Square

  1996   1982   107,325   98.0 %   Publix   CVS
                 

Subtotal/Weighted Average (FL)

      6,137,127   94.2 %    
                 

TEXAS

           

Austin

           

Hancock

  1999   1998   410,438   95.5 %   H.E.B.   Sears, Old Navy, PETCO, 24 Hour Fitness

Market at Round Rock

  1999   1987   123,046   92.5 %   Albertsons  

North Hills

  1999   1995   144,020   90.2 %   H.E.B.  

Dallas / Ft. Worth

           

Bethany Park Place

  1998   1998   74,066   95.5 %   Kroger  

Cooper Street

  1999   1992   133,196   87.5 %     (Home Depot), Office Max

Hickory Creek Plaza (3)

  2006   2006   28,134   15.8 %   (Kroger)   (Kroger)

Highland Village (3)

  2005   2005   351,906   77.0 %     AMC Theater, Barnes & Noble

Hillcrest Village

  1999   1991   14,530   100.0 %    

Keller Town Center

  1999   1999   114,937   96.3 %   Tom Thumb  

Lebanon/Legacy Center

  2000   2002   56,674   97.9 %   (Albertsons)  

Main Street Center (4)

  2002   2002   42,754   81.4 %   (Albertsons)  

Market at Preston Forest

  1999   1990   91,624   100.0 %   Tom Thumb   PETCO

Mockingbird Common

  1999   1987   120,321   98.4 %   Tom Thumb  

Preston Park

  1999   1985   273,826   80.7 %   Tom Thumb   Gap, Williams Sonoma

Prestonbrook

  1998   1998   91,537   98.8 %   Kroger  

Prestonwood Park

  1999   1999   101,167   67.6 %   (Albertsons)  

Rockwall Town Center (3)

  2002   2004   45,969   79.7 %   (Kroger)   (Walgreens)

Shiloh Springs

  1998   1998   110,040   97.5 %   Kroger  

Signature Plaza

  2003   2004   32,415   80.0 %   (Kroger)  

Trophy Club

  1999   1999   106,507   88.5 %   Tom Thumb   (Walgreens)

 

20


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

TEXAS (Continued)

           

Houston

           

Alden Bridge

  2002   1998   138,953   100.0 %   Kroger   Walgreens

Atascocita Center

  2002   2003   97,240   87.7 %   Kroger  

Cochran’s Crossing

  2002   1994   138,192   96.5 %   Kroger   CVS

Fort Bend Center

  2000   2000   30,164   79.0 %   (Kroger)  

Highland Knoll (4)

  2007   1998   87,470   97.0 %   Randalls Food  

Indian Springs Center (4)

  2002   2003   136,625   100.0 %   H.E.B.  

Kleinwood Center (4)

  2002   2003   148,964   91.6 %   H.E.B.   (Walgreens)

Kleinwood Center II

  2005   2005   45,001   100.0 %     LA Fitness

Memorial Collection Shopping Center (4)

  2005   1974   103,330   97.5 %   Randalls Food   Walgreens

Panther Creek

  2002   1994   165,560   100.0 %   Randalls Food   CVS, Sears Paint & Hardware

South Shore (3)

  2005   2005   27,939   72.7 %   (Kroger)  

Sterling Ridge

  2002   2000   128,643   100.0 %   Kroger   CVS

Sweetwater Plaza (4)

  2001   2000   134,045   99.0 %   Kroger   Walgreens

Waterside Marketplace (3)

  2007   2007   24,520   19.2 %   (Kroger)  

Weslayan Plaza East (4)

  2005   1969   169,693   99.1 %     Berings, Ross Dress for Less, Michaels, Linens-N-Things, Berings Warehouse, Chuck E Cheese, Next Level

Weslayan Plaza West (4)

  2005   1969   185,834   95.9 %   Randalls Food   Walgreens, PETCO, Jo Ann’s

Westwood Village (3)

  2006   2006   184,176   76.9 %     (Target)

Woodway Collection (4)

  2005   1974   111,165   98.2 %   Randalls Food   Eckerd
                 

Subtotal/Weighted Average (TX)

      4,524,621   90.7 %    
                 

VIRGINIA

           

Richmond

           

Gayton Crossing (4)

  2005   1983   156,917   95.1 %   Ukrop’s  

Glen Lea Centre (4)

  2005   1969   78,494   54.3 %     Eckerd

Hanover Village (4)

  2005   1971   96,146   86.5 %     Rite Aid

Laburnum Park Shopping Center (4)

  2005   1977   64,992   96.8 %   (Ukrop’s)   Rite Aid

Village Shopping Center (4)

  2005   1948   111,177   100.0 %   Ukrop’s   CVS

 

21


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

VIRGINIA (Continued)

           

Other Virginia

           

601 King Street (4)

  2005   1980   8,349   95.9 %    

Ashburn Farm Market Center

  2000   2000   91,905   94.3 %   Giant Food  

Ashburn Farm Village Center (4)

  2005   1996   88,897   98.7 %   Shoppers Food Warehouse  

Braemar Shopping Center (4)

  2004   2004   96,439   95.9 %   Safeway  

Brafferton Center (4)

  2005   1997   97,872   95.9 %    

Brookville Plaza (4)

  2005   1996   104,155   98.8 %   Shoppers Food Warehouse   Sears

Centre Ridge Marketplace (4)

  2000   2000   97,156   97.0 %   Safeway   PETCO

Cheshire Station

  2006   2006   93,368   68.5 %     PetSmart, Staples, (Target)

Culpeper Colonnade (3)

  2007   1955   85,482   92.0 %     Parvizian Masterpiece

Fairfax Shopping Center

  2005   1990   165,130   97.4 %   Shoppers Food Warehouse  

Festival at Manchester Lakes (4)

  2004   2004   90,131   96.1 %   Shoppers Food Warehouse   (Target), Rite Aid

Fortuna Center Plaza (4)

  2005   1977   103,269   100.0 %   Giant Food  

Fox Mill Shopping Center (4)

  2005   1972   345,935   97.4 %   Giant Food   CVS, HMY Roomstore, Total Beverage, Ross Dress for Less, Marshalls, PETCO

Greenbriar Town Center (4)

  2005   1960   71,825   100.0 %     Borders Books

Hollymead Town Center

  2005   1966   74,703   100.0 %   Giant Food   CVS

Kamp Washington Shopping Center (4)

  2006   2005   132,445   100.0 %   Shoppers Food Warehouse   Advanced Design Group

Kings Park Shopping Center (4)

  2006   2005   64,437   86.5 %    

Lorton Station Marketplace (4)

  2003   2003   149,791   95.7 %   Safeway   Boat U.S., USA Discounters

Lorton Town Center (4)

  2005   1977   101,587   100.0 %   Giant Food  

Market at Opitz Crossing

  2005   2005   96,696   102.5 %   Harris Teeter  

Saratoga Shopping Center (4)

  2003   2004   95,172   96.2 %   Shoppers Food Warehouse  

Shops at County Center

  2007   2007   318,682   76.4 %   Wegmans   Staples, Ross Dress For Less, Bed Bath & Beyond, Michaels

Signal Hill

  2005   1980   190,069   100.0 %   Giant Food   Washington Sports Club, Party Depot

 

22


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

VIRGINIA (Continued)

           

Statler Square Phase I

  2002   1991   298,282   95.8 %   Shoppers Food Warehouse   CVS, Advance Auto Parts, Chuck E. Cheese, Gold’s Gym, PETCO, Staples, The Thrift Store

Stonewall (3)

  2005   1952   105,376   97.1 %     CVS, Balleys Health Care

Town Center at Sterling Shopping Center (4)

  2005   1986   127,449   97.5 %   Safeway  

Village Center at Dulles (4)

  1998   1991   63,665   100.0 %   Kroger  

Willston Centre I (4)

  2003   2004   153,739   97.0 %   Harris Teeter   (Target), Petsmart

Willston Centre II (4)

  1998   1996   133,660   90.2 %   Kroger   Staples
                 

Subtotal/Weighted Average (VA)

      4,153,392   93.8 %    
                 

ILLINOIS

           

Chicago

           

Baker Hill Center (4)

  2004   1998   135,285   83.2 %   Dominick’s  

Brentwood Commons (4)

  2005   1962   125,585   87.8 %   Dominick’s   Dollar Tree

Civic Center Plaza (4)

  2005   1989   264,973   89.9 %   Dominick’s (5)   Petsmart, Murray’s Discount Auto, Home Depot

Deer Grove Center (4)

  2004   1996   239,356   95.9 %   Dominick’s   (Target), Linen’s-N-Things, Michaels, PETCO, Factory Card Outlet, Dress Barn, Staples

Frankfort Crossing Shpg Ctr

  2003   1992   114,534   89.8 %   Jewel / OSCO   Ace Hardware

Geneva Crossing (4)

  2004   1997   123,182   93.9 %   Dominick’s   John’s Christian Stores

Heritage Plaza—Chicago (4)

  2005   2005   128,871   97.3 %   Jewel / OSCO   Ace Hardware

Hinsdale

  1998   1986   178,960   98.4 %   Dominick’s   Ace Hardware, Murray’s Party Time Supplies

McHenry Commons Shopping Center (4)

  2005   1988   100,526   96.2 %   Dominick’s  

Oaks Shopping Center (4)

  2005   1983   135,006   91.2 %   Dominick’s  

Riverside Sq & River’s Edge (4)

  2005   1986   169,435   100.0 %   Dominick’s   Ace Hardware, Party City

Riverview Plaza (4)

  2005   1981   139,256   97.8 %   Dominick’s   Walgreens, Toys “R” Us

Shorewood Crossing (4)

  2004   2001   87,705   94.8 %   Dominick’s  

Shorewood Crossing II (4)

  2007   2005   86,276   98.1 %     Babies R Us, Staples, PETCO, Factory Card

Stearns Crossing (4)

  2004   1999   96,613   98.6 %   Dominick’s  

 

23


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

ILLINOIS (Continued)

           

Stonebrook Plaza Shopping Center (4)

  2005   1984   95,825   97.7 %   Dominick’s  

Westbrook Commons

  2001   1984   121,502   85.3 %   Dominick’s  

Champaign/Urbana

           

Champaign Commons (4)

  2007   1990   88,105   92.3 %   Schnucks  

Urbana Crossing (4)

  2007   1997   85,196   98.4 %   Schnucks  

Springfield

           

Montvale Commons (4)

  2007   1996   73,937   100.0 %   Schnucks  

Other Illinois

           

Carbondale Center (4)

  2007   1997   59,726   100.0 %   Schnucks  

Country Club Plaza (4)

  2007   2001   86,866   100.0 %   Schnucks  

Granite City (4)

  2007   2004   46,237   100.0 %   Schnucks  

Swansea Plaza (4)

  2007   1988   118,892   97.1 %   Schnucks   Fashion Bug
                 

Subtotal/Weighted Average (IL)

      2,901,849   94.5 %    
                 

GEORGIA

           

Atlanta

           

Ashford Place

  1997   1993   53,450   88.7 %    

Briarcliff La Vista

  1997   1962   39,204   100.0 %     Michaels

Briarcliff Village

  1997   1990   187,156   89.8 %   Publix   La-Z-Boy Furniture Galleries, Office Depot, Party City, PETCO, TJ Maxx

Buckhead Court

  1997   1984   48,338   100.0 %    

Buckhead Crossing (4)

  2004   1989   221,874   98.4 %     Office Depot, HomeGoods, Marshalls, Michaels, Hancock Fabrics, Ross Dress for Less

Cambridge Square Shopping Ctr

  1996   1979   71,474   98.7 %   Kroger  

Chapel Hill (3)

  2005   2005   66,970   89.5 %    

Coweta Crossing (4)

  2004   1994   68,489   95.5 %   Publix  

Cromwell Square

  1997   1990   70,283   91.5 %     CVS, Hancock Fabrics, Haverty’s-Antiques & Interiors of Sandy Springs

Delk Spectrum

  1998   1991   100,539   90.7 %   Publix  

Dunwoody Hall

  1997   1986   89,351   94.2 %   Publix   Eckerd

Dunwoody Village

  1997   1975   120,598   93.0 %   Fresh Market   Walgreens, Dunwoody Prep

 

24


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

GEORGIA (Continued)

           

Howell Mill Village (4)

  2004   1984   97,990   97.8 %   Publix   Eckerd

King Plaza (4)

  2007   1998   81,432   94.3 %   Publix  

Lindbergh Crossing (4)

  2004   1998   27,059   96.0 %     CVS

Loehmanns Plaza Georgia

  1997   1986   137,139   100.0 %     Loehmann’s, Dance 101

Lost Mountain Shopping Center (4)

  2007   1994   72,568   93.2 %   Publix  

Northlake Promenade (4)

  2004   1986   25,394   90.7 %    

Orchard Square (4)

  1995   1987   93,222   81.1 %   Publix   Harbor Freight Tools, Remax Elite

Paces Ferry Plaza

  1997   1987   61,697   93.5 %     Harry Norman Realtors

Powers Ferry Kroger (4)

  2004   1983   45,528   100.0 %   Kroger  

Powers Ferry Square

  1997   1987   95,704   99.0 %     CVS, Pearl Arts & Crafts

Powers Ferry Village

  1997   1994   78,996   99.9 %   Publix   CVS, Mardi Gras

Rivermont Station

  1997   1996   90,267   76.8 %   Kroger  

Rose Creek (4)

  2004   1993   69,790   94.8 %   Publix  

Roswell Crossing (4)

  2004   1999   201,979   95.8 %   Trader Joe’s   PetSmart, Office Max, Pike Nursery, Party City, Walgreens, LA Fitness

Russell Ridge

  1994   1995   98,559   87.5 %   Kroger  

Thomas Crossroads (4)

  2004   1995   84,928   96.3 %   Kroger  

Trowbridge Crossing (4)

  2004   1998   62,558   100.0 %   Publix  

Woodstock Crossing (4)

  2004   1994   66,122   96.2 %   Kroger  
                 

Subtotal/Weighted Average (GA)

      2,628,658   94.0 %    
                 

COLORADO

           

Colorado Springs

           

Cheyenne Meadows (4)

  1998   1998   89,893   100.0 %   King Soopers  

Falcon Marketplace (3)

  2005   2005   22,491   58.7 %   (Wal-Mart Supercenter)  

Marketplace at Briargate

  2006   2006   29,075   100.0 %   (King Soopers)  

Monument Jackson Creek

  1998   1999   85,263   100.0 %   King Soopers  

Woodmen Plaza

  1998   1998   116,233   90.2 %   King Soopers  

Denver

           

Applewood Shopping Center (4)

  2005   1956   375,622   94.2 %   King Soopers   Applejack Liquors, PetSmart, Wells Fargo Bank, Wal-Mart

Arapahoe Village (4)

  2005   1957   159,237   92.8 %   Safeway   Jo-Ann Fabrics, PETCO, Pier 1 Imports

 

25


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

COLORADO (Continued)

           

Belleview Square

  2004   1978   117,335   100.0 %   King Soopers  

Boulevard Center

  1999   1986   88,512   86.9 %   (Safeway)   One Hour Optical

Buckley Square

  1999   1978   116,146   97.2 %   King Soopers   True Value Hardware

Centerplace of Greeley (4)

  2002   2003   148,575   100.0 %   Safeway   Ross Dress For Less, Famous Footwear

Centerplace of Greeley Phase III (3)

  2007   2007   119,014   60.6 %    

Cherrywood Square (4)

  2005   1978   86,161   100.0 %   King Soopers  

Crossroads Commons (4)

  2001   1986   105,041   79.2 %   Whole Foods   Barnes & Noble, Mann Theatres, Bicycle Village

Fort Collins Center

  2005   2005   99,359   100.0 %     JC Penney

Hilltop Village (4)

  2002   2003   100,029   97.3 %   King Soopers  

South Lowry Square

  1999   1993   119,916   95.4 %   Safeway  

Littleton Square

  1999   1997   94,257   91.3 %   King Soopers   Walgreens

Lloyd King Center

  1998   1998   83,326   100.0 %   King Soopers  

Loveland Shopping Center (3)

  2005   2005   93,142   44.7 %     Murdoch’s Ranch

Ralston Square Shopping Center (4)

  2005   1977   82,750   98.2 %   King Soopers  

Stroh Ranch

  1998   1998   93,436   98.5 %   King Soopers  
                 

Subtotal/Weighted Average (CO)

      2,424,813   91.4 %    
                 

OHIO

           

Cincinnati

           

Beckett Commons

  1998   1995   121,498   100.0 %   Kroger   Stein Mart

Cherry Grove

  1998   1997   195,512   93.8 %   Kroger   Hancock Fabrics, Shoe Carnival, TJ Maxx

Hyde Park

  1997   1995   397,893   98.0 %   Kroger, Biggs   Walgreens, Jo-Ann Fabrics, Famous Footwear, Michaels, Staples

Indian Springs Market Center (4)

  2005   2005   146,258   100.0 %     Kohl’s, Office Depot

Red Bank Village (3)

  2006   2006   215,219   86.4 %    

Regency Commons

  2004   2004   30,770   72.7 %    

Regency Milford Center (4)

  2001   2001   108,923   91.7 %   Kroger   (CVS)

Shoppes at Mason

  1998   1997   80,800   100.0 %   Kroger  

Westchester Plaza

  1998   1988   88,182   96.9 %   Kroger  

 

26


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

OHIO (Continued)

           

Columbus

           

East Pointe

  1998   1993   86,503   100.0 %   Kroger  

Kingsdale Shopping Center

  1997   1999   266,878   44.5 %   Giant Eagle  

Kroger New Albany Center

  1999   1999   91,722   91.7 %   Kroger  

Maxtown Road (Northgate)

  1998   1996   85,100   98.4 %   Kroger   (Home Depot)

Park Place Shopping Center

  1998   1988   106,833   58.9 %     Big Lots

Windmiller Plaza Phase I

  1998   1997   141,110   100.0 %   Kroger   Sears Orchard

Wadsworth Crossing (3)

  2005   2005   107,731   71.3 %     Office Max, Bed, Bath & Beyond, MC Sports, PETCO, (Kohl’s), (Lowe’s), (Target)
                 

Subtotal/Weighted Average (OH)

      2,270,932   86.7 %    
                 

MISSOURI

           

St. Louis

           

Affton Plaza (4)

  2007   2000   67,760   100.0 %   Schnucks  

Bellerive Plaza (4)

  2007   2000   115,208   90.8 %   Schnucks  

Brentwood Plaza (4)

  2007   2002   60,452   100.0 %   Schnucks  

Bridgeton (4)

  2007   2005   70,762   100.0 %   Schnucks  

Butler Hill Centre (4)

  2007   1987   90,889   100.0 %   Schnucks  

City Plaza (4)

  2007   1998   80,149   100.0 %   Schnucks  

Crestwood Commons (4)

  2007   1994   67,285   100.0 %   Schnucks  

Dardenne Crossing (4)

  2007   1996   67,430   100.0 %   Schnucks  

Dorsett Village (4)

  2007   1998   104,217   98.7 %   Schnucks   Walgreens

Kirkwood Commons (4)

  2007   2000   467,703   100.0 %     TJ Maxx, Homegoods, Famous Footwear

Lake St. Louis (4)

  2007   2004   75,643   100.0 %   Schnucks  

O’Fallon Centre (4)

  2007   1984   71,300   91.7 %   Schnucks  

Plaza 94 (4)

  2007   2005   66,555   100.0 %   Schnucks  

Richardson Crossing (4)

  2007   2000   82,994   98.6 %   Schnucks  

Shackelford Center (4)

  2007   2006   49,635   97.4 %   Schnucks  

Sierra Vista Plaza (4)

  2007   1993   74,666   98.4 %   Schnucks  

Twin Oaks (4)

  2007   2006   71,682   100.0 %   Schnucks  

University City Square (4)

  2007   1997   79,280   98.2 %   Schnucks  

Washington Crossing (4)

  2007   1999   117,626   100.0 %   Schnucks   Michaels, Altemueller Jewelry

 

27


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

MISSOURI (Continued)

           

Wentzville Commons (4)

  2007   2000   74,205   100.0 %   Schnucks  

Wildwood Crossing (4)

  2007   1997   108,200   85.4 %   Schnucks  

Zumbehl Commons (4)

  2007   1990   116,682   94.2 %   Schnucks   Westlakes Ace

Other Missouri

           

Capital Crossing (4)

  2007   2002   85,149   98.6 %   Schnucks  
                 

Subtotal/Weighted Average (MO)

      2,265,472   97.9 %    
                 

NORTH CAROLINA

           

Charlotte

           

Carmel Commons

  1997   1979   132,651   98.4 %   Fresh Market   Chuck E. Cheese, Party City, Eckerd

Cochran Commons (4)

  2007   2003   66,020   100.0 %   Harris Teeter  

Greensboro

           

Harris Crossing (3)

  2007   2007   76,818   69.5 %   Harris Teeter  

Kernersville Plaza

  1998   1997   72,590   95.0 %   Harris Teeter  

Raleigh / Durham

           

Bent Tree Plaza (4)

  1998   1994   79,503   98.5 %   Kroger  

Cameron Village (4)

  2004   1949   635,918   91.4 %   Harris Teeter, Fresh Market   Eckerd, Talbots, Wake County Public Library, Great Outdoor Provision Co., Blockbuster Video, York Properties, Carolina Antique Mall, The Junior League of Raleigh, K&W Cafeteria, Johnson-Lambe Sporting Goods, Home Economics, Pier 1 Imports

Fuquay Crossing (4)

  2004   2002   124,774   93.5 %   Kroger   Gold’s Gym, Dollar Tree

Garner

  1998   1998   221,776   98.8 %   Kroger   Office Max, Petsmart, Shoe Carnival, (Target), United Artist Theater, (Home Depot)

Glenwood Village

  1997   1983   42,864   94.4 %   Harris Teeter  

Lake Pine Plaza

  1998   1997   87,691   100.0 %   Kroger  

Maynard Crossing

  1998   1997   122,782   91.9 %   Kroger  

Middle Creek Commons (3)

  2006   2006   73,635   78.0 %   Lowes Foods  

Shoppes of Kildaire (4)

  2005   1986   148,204   87.0 %   Trader Joe’s   Athletic Clubs Inc, Home Comfort Furniture, Gold’s Gym, Staples

Southpoint Crossing

  1998   1998   103,128   96.6 %   Kroger  

 

28


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

NORTH CAROLINA (Continued)

         

Sutton Square (4)

  2006   1985   101,846   90.4 %   Harris Teeter   Eckerd

Woodcroft Shopping Center

  1996   1984   89,833   96.8 %   Food Lion   True Value Hardware
                 

Subtotal/Weighted Average (NC)

      2,180,033   92.7 %    
                 

MARYLAND

           

Baltimore

           

Elkridge Corners (4)

  2005   1990   73,529   100.0 %   Super Fresh   Rite Aid

Festival at Woodholme (4)

  2005   1986   81,027   98.0 %   Trader Joe’s  

Lee Airport (3)

  2005   2005   129,340   77.3 %   (Giant Food)  

Northway Shopping Center (4)

  2005   1987   98,016   98.5 %   Shoppers Food Warehouse   Goodwill Industries

Parkville Shopping Center (4)

  2005   1961   162,435   99.6 %   Super Fresh   Rite Aid, Parkville Lanes, Castlewood Realty

Southside Marketplace (4)

  2005   1990   125,146   96.5 %   Shoppers Food Warehouse   Rite Aid

Valley Centre (4)

  2005   1987   247,920   96.8 %     TJ Maxx, Sony Theatres, Ross Dress for Less, Homegoods, Staples, Annie Sez

Other Maryland

           

Bowie Plaza (4)

  2005   1966   104,037   89.0 %   Giant Food   CVS

Clinton Park (4)

  2003   2003   206,050   98.8 %   Giant Food   Sears, GCO Carpet Outlet, (Toys “R” Us)

Cloppers Mill Village (4)

  2005   1995   137,035   97.2 %   Shoppers Food Warehouse   CVS

Firstfield Shopping Center (4)

  2005   1978   22,328   100.0 %    

Goshen Plaza (4)

  2005   1987   45,654   94.3 %     CVS

King Farm Apartments (4)

  2004   2001   64,775   72.2 %    

King Farm Village Center (4)

  2004   2001   120,326   99.0 %   Safeway  

Mitchellville Plaza (4)

  2005   1991   156,125   92.9 %   Food Lion  

Takoma Park (4)

  2005   1960   106,469   100.0 %   Shoppers Food Warehouse  

Watkins Park Plaza (4)

  2005   1985   113,443   97.1 %   Safeway   CVS

Woodmoor Shopping Center (4)

  2005   1954   64,682   94.0 %     CVS
                 

Subtotal/Weighted Average (MD)

      2,058,337   95.0 %    
                 

 

29


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

PENNSYLVANIA

           

Allentown / Bethlehem

           

Allen Street Shopping Center (4)

  2005   1958   46,420   90.2 %   Ahart Market   Eckerd

Lower Nazareth
Commons (3)

  2007   2007   106,462   0.0 %    

Stefko Boulevard Shopping Center (4)

  2005   1976   133,824   91.7 %   Valley Farm Market  

Harrisburg

           

Silver Spring Square (3)

  2005   2005   188,122   84.8 %   Wegmans   Ross Dress For Less, Bed Bath and Beyond, Best Buy, Office Max, Ulta

Philadelphia

           

City Avenue Shopping Center (4)

  2005   1960   159,669   96.3 %     Ross Dress for Less, TJ Maxx, Sears

Gateway Shopping Center

  2004   1960   219,337   95.4 %   Trader Joe’s   Gateway Pharmacy, Staples, TJ Maxx, Famous Footwear, JoAnn Fabrics

Kulpsville Village Center (3)

  2006   2006   14,820   100.0 %     Walgreens

Mayfair Shopping Center (4)

  2005   1988   112,276   92.7 %   Shop ’N Bag   Eckerd, Dollar Tree

Mercer Square Shopping Center (4)

  2005   1988   91,400   100.0 %   Genuardi’s  

Newtown Square Shopping Center (4)

  2005   1970   146,893   92.0 %   Acme Markets   Eckerd

Towamencin Village Square (4)

  2005   1990   122,916   95.9 %   Genuardi’s   Eckerd, Sears, Dollar Tree

Warwick Square Shopping (4)

  2005   1999   89,680   96.5 %   Genuardi’s  

Other Pennsylvania

           

Kenhorst Plaza (4)

  2005   1990   159,150   95.7 %   Redner’s Market   Rite Aid, Sears, US Post Office

Hershey

  2000   2000   6,000   100.0 %    
                 

Subtotal/Weighted Average (PA)

      1,596,969   87.4 %    
                 

WASHINGTON

           

Portland

           

Orchards Market Center I (4)

  2002   2004   100,663   100.0 %     Sportsman’s Warehouse, Jo-Ann Fabrics, PETCO

Orchards Market Center II (3)

  2005   2005   77,478   89.9 %     Wallace Theaters, Office Depot

 

30


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

WASHINGTON (Continued)

           

Seattle

           

Aurora Marketplace (4)

  2005   1991   106,921   98.3 %   Safeway   TJ Maxx

Cascade Plaza (4)

  1999   1999   211,072   99.0 %   Safeway   Bally Total Fitness, Fashion Bug, Jo-Ann Fabrics, Longs Drug, Ross Dress For Less

Eastgate Plaza (4)

  2005   1956   78,230   100.0 %   Albertsons   Rite Aid

Inglewood Plaza

  1999   1985   17,253   100.0 %    

James Center (4)

  1999   1999   140,240   94.7 %   Fred Myer   Rite Aid

Lynnwood—Meryvns (3)

  2007   2007   77,028   100.0 %   H Mart  

Overlake Fashion Plaza (4)

  2005   1987   80,555   100.0 %     Marshalls, (Sears)

Pine Lake Village

  1999   1989   102,953   100.0 %   Quality Foods   Rite Aid

Puyallup—Meryvns (3)

  2007   2007   76,682   100.0 %    

Sammamish Highland

  1999   1992   101,289   100.0 %   (Safeway)   Bartell Drugs, Ace Hardware

Southcenter

  1999   1990   58,282   98.2 %     (Target)

Thomas Lake

  1999   1998   103,872   100.0 %   Albertsons   Rite Aid
                 

Subtotal/Weighted Average (WA)

      1,332,518   98.5 %    
                 

OREGON

           

Portland

           

Cherry Park Market (4)

  1999   1997   113,518   90.0 %   Safeway  

Greenway Town Center (4)

  2005   1979   93,101   100.0 %   Unified Western Grocers   Rite Aid, Dollar Tree

Hillsboro Market Center (4)

  2000   2000   148,051   98.1 %   Albertsons   Petsmart, Marshalls

Hillsboro—Mervyns (3)

  2006   2006   76,844   100.0 %    

Murrayhill Marketplace

  1999   1988   148,967   100.0 %   Safeway   Segal’s Baby News

Sherwood Crossroads

  1999   1999   87,966   100.0 %   Safeway  

Sherwood Market Center

  1999   1995   124,259   100.0 %   Albertsons  

Sunnyside 205

  1999   1988   52,710   100.0 %    

Tanasbourne Market

  2006   2006   71,000   100.0 %   Whole Foods  

Walker Center

  1999   1987   89,610   95.7 %     Sportmart

Other Oregon

           

Corvallis Market Center (3)

  2006   2006   82,671   81.2 %     TJ Maxx, Michael’s
                 

Subtotal/Weighted Average (OR)

      1,088,697   96.9 %    
                 

 

31


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

NEVADA

           

Anthem Highland Shopping Center (3)

  2004   2004   119,313   89.7 %   Albertsons   Sav-On Drugs

Centennial Crossroads (4)

  2007   2002   99,064   98.9 %   Von’s Food & Drug  

Deer Springs Town Center (3)

  2007   2007   556,359   24.0 %    
                 

Subtotal/Weighted Average (NV)

      774,736   43.7 %    
                 

DELAWARE

           

Dover

           

White Oak—Dover, DE

  2000   2000   10,908   100.0 %     Eckerd

Wilmington

           

First State Plaza (4)

  2005   1988   164,668   86.6 %   Shop Rite   Cinemark

Newark Shopping Center (4)

  2005   1987   183,017   75.7 %     Blue Hen Lanes, Cinema Center, Dollar Express, La Tolteca Restaurant, Goodwill Industries

Pike Creek

  1998   1981   229,510   99.6 %   Acme Markets   K-Mart, Eckerd

Shoppes of Graylyn (4)

  2005   1971   66,676   100.0 %     Rite Aid
                 

Subtotal/Weighted Average (DE)

      654,779   89.7 %    
                 

TENNESSEE

           

Memphis

           

Collierville Crossing (4)

  2007   2004   86,065   98.8 %   Schnucks  

Nashville

           

Harding Place

  2004   2004   7,348   24.9 %     (Wal-Mart)

Lebanon Center (3)

  2006   2006   63,802   78.1 %   Publix  

Harpeth Village Fieldstone

  1997   1998   70,091   100.0 %   Publix  

Nashboro

  1998   1998   86,811   100.0 %   Kroger   (Walgreens)

Northlake Village I & II

  2000   1988   141,685   96.8 %   Kroger   CVS, PETCO

Peartree Village

  1997   1997   109,904   100.0 %   Harris Teeter   Eckerd, Office Max

Other Tennessee

           

Dickson Tn

  1998   1998   10,908   100.0 %     Eckerd
                 

Subtotal/Weighted Average (TN)

      576,614   95.7 %    
                 

 

32


Table of Contents
Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

MASSACHUSETTS

           

Boston

           

Shops at Saugus (3)

  2006   2006   94,194   40.6 %     La-Z-Boy

Speedway Plaza (4)

  2006   1988   185,279   100.0 %   Stop & Shop   BJ’s Wholesale

Twin City Plaza

  2006   2004   281,703   92.4 %   Shaw’s   Brooks Pharmacy, K&G Fashion, Dollar Tree, Gold’s Gym, Marshall’s
                 

Subtotal/Weighted Average (MA)

      561,176   86.2 %    
                 

SOUTH CAROLINA

           

Charleston

           

Merchants Village (4)

  1997   1997   79,724   97.5 %   Publix  

Orangeburg

  2006   2006   14,820   100.0 %     Walgreens

Queensborough (4)

  1998   1993   82,333   100.0 %   Publix  

Columbia

           

Murray Landing (4)

  2002   2003   64,359   97.8 %   Publix  

Rosewood Shopping Center (4)

  2001   2001   36,887   94.3 %   Publix  

Greenville

           

Fairview Market (4)

  2004   1998   53,888   100.0 %   Publix  

Pelham Commons

  2002   2003   76,541   93.7 %   Publix  

Other South Carolina

           

Buckwalter Village (3)

  2006   2006   79,302   61.0 %   Publix  

Surfside Beach Commons (4)

  2007   1999   59,881   100.0 %   Bi-Lo  
                 

Subtotal/Weighted Average (SC)

      547,735   92.5 %    
                 

ARIZONA

           

Phoenix

           

Anthem Marketplace

  2003   2000   113,292   100.0 %   Safeway  

Palm Valley Marketplace (4)

  2001   1999   107,633   98.1 %   Safeway  

Pima Crossing

  1999   1996   239,438   99.3 %     Bally Total Fitness, Chez Antiques, E & J Designer Shoe Outlet, Paddock Pools Store, Pier 1 Imports, Stein Mart

Shops at Arizona

  2003   2000   35,710   94.1 %     Ace Hardware
                 

Subtotal/Weighted Average (AZ)

      496,073   98.8 %    
                 

 

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Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

MINNESOTA

           

Apple Valley Square (4)

  2006   1998   184,841   95.2 %   Rainbow Foods   PETCO

Colonial Square (4)

  2005   1959   93,200   97.9 %   Lund’s  

Rockford Road Plaza (4)

  2005   1991   205,897   96.3 %   Rainbow Foods   PetSmart, Homegoods, TJ Maxx
                 

Subtotal/Weighted Average (MN)

      483,938   96.2 %    
                 

KENTUCKY

           

Franklin Square (4)

  1998   1988   203,318   93.9 %   Kroger   Rite Aid, Chakeres Theatre, JC Penney, Office Depot

Silverlake (4)

  1998   1988   99,352   96.7 %   Kroger  

Walton Towne Center (3)

  2007   2007   23,122   0.0 %   (Kroger)  
                 

Subtotal/Weighted Average (KY)

      325,792   88.1 %    
                 

MICHIGAN

           

Independence Square

  2003   2004   89,083   98.0 %   Kroger  

Fenton Marketplace

  1999   1999   97,224   92.9 %   Farmer Jack   Michaels

State Street Crossing (3)

  2006   2006   21,049   35.0 %     (Wal-Mart)

Waterford Towne Center

  1998   1998   96,101   90.3 %   Kroger  
                 

Subtotal/Weighted Average (MI)

      303,457   89.6 %    
                 

INDIANA

           

Chicago

           

Airport Crossing (3)

  2006   2006   11,922   0.0 %    

Augusta Center

  2006   2006   14,537   60.4 %   (Menards)  

Evansville

           

Evansville West Center (4)

  2007   1989   79,885   93.7 %   Schnucks  

Indianapolis

           

Greenwood Springs

  2004   2004   28,028   55.1 %   (Wal-Mart Supercenter)   (Gander Mountain)

Willow Lake Shopping Center (4)

  2005   1987   85,923   85.1 %   (Kroger)   Factory Card Outlet

Willow Lake West Shopping Center (4)

  2005   2001   52,961   97.3 %   Trader Joe’s  
                 

Subtotal/Weighted Average (IN)

      273,256   81.9 %    
                 

 

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Index to Financial Statements

Property Name

  Year
Acquired
  Year
Constructed (1)
  Gross
Leasable
Area

(GLA)
  Percent
Leased (2)
   

Grocery Anchor

 

Drug Store & Other Anchors
> 10,000 Sq Ft

WISCONSIN

           

Racine Centre Shopping Center (4)

  2005   1988   135,827   98.2 %   Piggly Wiggly   Office Depot, Factory Card Outlet, Dollar Tree

Whitnall Square Shopping Center (4)

  2005   1989   133,301   97.2 %   Pick ‘N’ Save   Harbor Freight Tools, Dollar Tree
                 

Subtotal/Weighted Average (WI)

      269,128   97.7 %    
                 

ALABAMA

           

Southgate Village Shopping Ctr (4)

  2001   1988   75,092   96.7 %   Publix   Pet Supplies Plus

Valleydale Village Shop Center (4)

  2002   2003   118,466   75.1 %   Publix  
                 

Subtotal/Weighted Average (AL)

      193,558   83.5 %    
                 

CONNECTICUT

           

Corbin’s Corner (4)

  2005   1962   179,860   100.0 %   Trader Joe’s   Toys “R” Us, Best Buy, Old Navy, Office Depot, Pier 1 Imports
                 

Subtotal/Weighted Average (CT)

      179,860   100.0 %    
                 

NEW JERSEY

           

Haddon Commons (4)

  2005   1985   52,640   93.4 %   Acme Markets   CVS

Plaza Square (4)

  2005   1990   103,842   96.1 %   Shop Rite  
                 

Subtotal/Weighted Average (NJ)

      156,482   95.2 %    
                 

NEW HAMPSHIRE

           

Merrimack Shopping Center (3)

  2004   2004   91,692   74.8 %   Shaw’s  
                 

Subtotal/Weighted Average (NH)

      91,692   74.8 %    
                 

DISTRICT OF COLUMBIA

           

Shops at The Columbia (4)

  2006   2006   22,812   82.3 %   Trader Joe’s  

Spring Valley Shopping Center (4)

  2005   1930   16,834   75.3 %     CVS
                 

Subtotal/Weighted Average (DC)

      39,646   79.4 %    
                 

Total Weighted Average

      51,106,824   91.7 %    
                 

 

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Index to Financial Statements

 

(1) Or latest renovation.
(2) Includes development properties. If development properties are excluded, the total percentage leased would be 95.2% for Company shopping centers.
(3) Property under development or redevelopment.
(4) Owned by a co-investment partnership with outside investors in which RCLP or an affiliate is the general partner.
(5) Dark Grocer

Note: Shadow anchor is indicated by parentheses.

Item 3. 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 4. Submission of Matters to a Vote of Security Holders

No matters were submitted for stockholder vote during the fourth quarter of 2007.

 

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “REG”. We currently have approximately 26,000 stockholders. The following table sets forth the high and low prices and the cash dividends declared on our common stock by quarter for 2007 and 2006.

 

     2007    2006

Quarter Ended

   High
Price
   Low
Price
   Cash
Dividends
Declared
   High
Price
   Low
Price
   Cash
Dividends
Declared

March 31

   $ 93.48    75.90    .66    69.00    58.64    .595

June 30

     85.30    67.64    .66    67.99    59.18    .595

September 30

     77.00    61.99    .66    69.06    60.86    .595

December 31

     80.68    61.41    .66    81.42    67.59    .595

We intend to pay regular quarterly distributions to our common stockholders. Future distributions will be declared and paid at the discretion of our Board of Directors, and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, and such other factors as our Board of Directors deem relevant. Distributions by us to the extent of our current and accumulated earnings and profits for federal income tax purposes will be taxable to stockholders as either ordinary dividend income or capital gain income if so declared by us. Distributions in excess of earnings and profits generally will be treated as a non-taxable return of capital. Such distributions have the effect of deferring taxation until the sale of a stockholder’s common stock. In order to maintain our qualification as a REIT, we must make annual distributions to stockholders of at least 90% of our taxable income. Under certain circumstances, which we do not expect to occur, we could be required to make distributions in excess of cash available for distributions in order to meet such requirements. We currently maintain the Regency Centers Corporation Dividend Reinvestment and Stock Purchase Plan which enables our stockholders to automatically reinvest distributions, as well as make voluntary cash payments towards the purchase of additional shares.

Under the loan agreement of our line of credit, in the event of any monetary default, we may not make distributions to stockholders except to the extent necessary to maintain our REIT status.

We sold the following equity securities during the quarter ended December 31, 2007 that we did not report on Form 8-K because they represent in the aggregate less than 1% of our outstanding common stock. All shares were issued to one accredited investor, an unrelated party, in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, in exchange for an equal number of common units of our operating partnership, Regency Centers, L.P.

 

Date

   Number of Shares

11/20/07

   8,500

The following table provides information about the Company’s purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the quarter ended December 31, 2007:

 

Period

  Total number
of shares
purchased (1)
  Average price
paid per
share
  Total number of
shares purchased as
part of publicly announced
plans or programs
  Maximum number or
approximate dollar
value of shares that may yet
be purchased under the
plans or programs

October 1 through October 31, 2007

  —       —     —     —  

November 1 through November 30, 2007

  87   $ 71.20   —     —  

December 1 through December 31, 2007

      —       —     —     —  
             

Total

  87   $ 71.20   —     —  
             

 

(1) Represents shares delivered in payment of withholding taxes in connection with restricted stock vesting by a participant under Regency’s Long-Term Omnibus Plan.

 

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Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (Continued)

 

The following graph compares Regency’s cumulative total stockholder return since December 31, 2002

LOGO

 

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Item 6. Selected Financial Data (in thousands, except per share data and number of properties)

The following table sets forth Selected Financial Data for Regency on a historical basis for the five years ended December 31, 2007. This information should be read in conjunction with the consolidated financial statements of Regency (including the related notes thereto) and Management’s Discussion and Analysis of the Financial Condition and Results of Operations, each included elsewhere in this Form 10-K. This historical Selected Financial Data has been derived from the audited consolidated financial statements and restated for discontinued operations.

 

     2007    2006    2005     2004    2003

Operating Data:

             

Revenues

   $ 451,508    416,968    383,623     346,947    321,575

Operating expenses

     256,764    239,360    205,259     194,939    174,328

Other expenses (income)

     30,279    14,170    67,559     40,802    33,545

Minority interests

     6,139    10,633    10,338     22,028    32,461

Equity in income (loss) of investments in real estate partnerships

     18,093    2,580    (2,908 )   10,194    11,276

Income from continuing operations

     176,419    155,385    97,559     99,373    92,517

Income from discontinued operations

     27,232    63,126    65,088     36,955    38,272

Net income

     203,651    218,511    162,647     136,327    130,789

Preferred stock dividends

     19,675    19,675    16,744     8,633    4,175

Net income for common stockholders

     183,976    198,836    145,903     127,694    126,614

Income per common share—diluted:

             

Income from continuing operations

   $ 2.26    1.97    1.23     1.56    1.58

Net income for common stockholders

   $ 2.65    2.89    2.23     2.08    2.12

Balance Sheet Data:

             

Real estate investments before accumulated depreciation

   $ 4,398,195    3,901,633    3,775,433     3,332,671    3,166,346

Total assets

     4,143,012    3,671,785    3,616,215     3,243,824    3,098,229

Total debt

     2,007,975    1,575,386    1,616,386     1,493,090    1,452,777

Total liabilities

     2,194,244    1,734,572    1,739,225     1,610,743    1,562,530

Minority interests

     78,382    83,896    88,165     134,364    254,721

Stockholders’ equity

     1,870,386    1,853,317    1,788,825     1,498,717    1,280,978

Other Information:

             

Common dividends declared per share

   $ 2.64    2.38    2.20     2.12    2.08

Common stock outstanding including exchangeable operating partnership units

     70,112    69,759    69,218     64,297    61,227

Combined Basis gross leasable area (GLA)

     51,107    47,187    46,243     33,816    30,348

Combined Basis number of properties owned

     451    405    393     291    265

Ratio of earnings to fixed charges

     2.1    2.3    2.1     2.1    1.7

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview and Operating Philosophy

Regency is a qualified real estate investment trust (“REIT”), which began operations in 1993. Our primary operating and investment goal is long-term growth in earnings per share and total shareholder return, which we work to achieve by focusing on a strategy of owning, operating and developing high-quality community and neighborhood shopping centers that are tenanted by market-dominant grocers, category-leading anchors, specialty retailers and restaurants located in areas with above average household incomes and population densities. All of our operating, investing and financing activities are performed through our operating partnership, Regency Centers, L.P. (“RCLP”), RCLP’s wholly owned subsidiaries, and through its investments in co-investment partnerships with third parties. Regency currently owns 99% of the outstanding operating partnership units of RCLP.

 

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At December 31, 2007, we directly owned 232 shopping centers (the “Consolidated Properties”) located in 23 states representing 25.7 million square feet of gross leasable area (“GLA”). Our cost of these shopping centers is $4.0 billion before depreciation. Through co-investment partnerships, we own partial interests in 219 shopping centers (the “Unconsolidated Properties”) located in 27 states and the District of Columbia representing 25.4 million square feet of GLA. Our investment in the partnerships that own the Unconsolidated Properties is $432.9 million. Certain portfolio information described below is presented (a) on a Combined Basis, which is a total of the Consolidated Properties and the Unconsolidated Properties, (b) for our Consolidated Properties only and (c) for the Unconsolidated Properties that we own through co-investment partnerships. We believe that presenting the information under these methods provides a more complete understanding of the properties that we wholly-own versus those that we partially-own, but for which we provide asset management, property management, leasing, investing and financing services. The shopping center portfolio that we manage, on a Combined Basis, represents 451 shopping centers located in 29 states and the District of Columbia and contains 51.1 million square feet of GLA.

We earn revenues and generate cash flow by leasing space in our shopping centers to market-leading grocers, major retail anchors, specialty side-shop retailers, and restaurants, including ground leasing or selling building pads (out-parcels) to these potential tenants. We experience growth in revenues by increasing occupancy and rental rates at currently owned shopping centers, and by acquiring and developing new shopping centers. Community and neighborhood shopping centers generate substantial daily traffic by conveniently offering daily necessities and services. This high traffic generates increased sales, thereby driving higher occupancy and rental-rate growth, which we expect will sustain our growth in earnings per share and increase the value of our portfolio over the long term.

We seek a range of strong national, regional and local specialty retailers, for the same reason that we choose to anchor our centers with leading grocers and major retailers who provide a mix of goods and services that meet consumer needs. We have created a formal partnering process—the Premier Customer Initiative (“PCI”)—to promote mutually beneficial relationships with our specialty retailers. The objective of PCI is for Regency to build a base of specialty tenants who represent the “best-in-class” operators in their respective merchandising categories. Such retailers reinforce the consumer appeal and other strengths of a center’s anchor, help to stabilize a center’s occupancy, reduce re-leasing downtime, reduce tenant turnover and yield higher sustainable rents.

We grow our shopping center portfolio through acquisitions of operating centers and new shopping center development, where we acquire the land and construct the building. Development is customer driven, meaning we generally have an executed lease from the anchor before we start construction. Developments serve the growth needs of our anchors and specialty retailers, resulting in modern shopping centers with long-term anchor leases that produce attractive returns on our invested capital. This development process generally requires three to four years from initial land or redevelopment acquisition through construction, lease-up and stabilization of rental income, but can take longer depending upon the size of the project. Generally, anchor tenants begin operating their stores prior to the completion of construction of the entire center, resulting in rental income during the development phase.

We intend to maintain a conservative capital structure to fund our growth program, which should preserve our investment-grade ratings. Our approach is founded on our self-funding business model. This model utilizes center “recycling” as a key component, which requires ongoing monitoring of each center to ensure that it continues to meet our investment standards. We sell the operating properties that no longer measure up to our standards. We also develop certain retail centers because of their attractive profit margins with the intent of selling them to co-investment partnerships or other third parties upon completion. These sale proceeds are re-deployed into new, higher-quality developments and acquisitions that are expected to generate sustainable revenue growth and more attractive returns.

Joint venturing of shopping centers also provides us with a capital source for new developments and acquisitions, as well as the opportunity to earn fees for asset and property management services. As asset manager, we are engaged by our partners to apply similar operating, investment, and capital strategies to the portfolios owned by the co-investment partnerships. Co-investment partnerships grow their shopping center investments through acquisitions from third parties or direct purchases from Regency. Although selling properties to co-investment partnerships reduces our ownership interest, we continue to share in the risks and rewards of centers that meet our high quality standards and long-term investment strategy. We currently have no obligations or liabilities of the co-investment partnerships beyond our economic ownership interest.

 

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We have identified certain significant risks and challenges affecting our industry, and we are addressing them accordingly. The current economic downturn could result in a decline in occupancy levels at our shopping centers, which would reduce our rental revenues. We believe that our investment focus on neighborhood and community shopping centers that conveniently provide daily necessities should minimize the current economy’s negative impact to our shopping centers, although we may incur slower income growth and potentially no growth depending upon the severity of the economic downturn. Increased competition and the slowing economy could result in higher than usual retailer store closings. We are closely monitoring the operating performance and tenants’ sales in our shopping centers including those tenants operating retail formats that are experiencing significant changes in competition or business practice. We also continue to monitor retail trends and market our shopping centers based on consumer demand. In the current environment retailers are reducing their demand for new stores. A significant slowdown in retailer new store demand could cause a corresponding reduction in our shopping center development program that would reduce our future rental revenues and profits from development sales. A significant reduction in our development program including future developments being pursued could reduce our net income as a result of (i) potentially higher write-offs of pre-development costs on new development pursuits, (ii) lower capitalized interest from not converting land currently owned and held for future development into an active development or stopping development of a current project, and (iii) reduced capitalized employee costs (See Critical Accounting Policies and Estimates—Capitalization of Costs described further below). Based upon our current pipeline of development projects undergoing due diligence, which is our best indication of retailer expansion plans, the presence of our development teams in key markets in combination with their excellent relationships with leading anchor tenants, we remain cautiously optimistic about our development program. However, if economic growth stalls, our volume of new development activity may be less than that of historical levels until the economy returns to its historical levels of growth.

Shopping Center Portfolio

The following tables summarize general operating statistics related to our shopping center portfolio, which we use to evaluate and monitor our performance.

 

     December 31,
2007
    December 31,
2006
 

Number of Properties (a)

   451     405  

Number of Properties (b)

   232     218  

Number of Properties (c)

   219     187  

Properties in Development (a)

   49     47  

Properties in Development (b)

   48     43  

Properties in Development (c)

   1     4  

Gross Leasable Area (a)

   51,106,824     47,187,462  

Gross Leasable Area (b)

   25,722,665     24,654,082  

Gross Leasable Area (c)

   25,384,159     22,533,380  

Percent Leased (a)

   91.7 %   91.0 %

Percent Leased (b)

   88.1 %   87.3 %

Percent Leased (c)

   95.2 %   95.0 %

We seek to reduce our operating and leasing risks through diversification which we achieve by geographically diversifying our shopping centers; avoiding dependence on any single property, market, or tenant, and owning a portion of our shopping centers through co-investment partnerships.

 

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The following summarizes the four largest grocery tenants occupying our shopping centers at December 31, 2007:

 

Grocery Anchor

   Number of
Stores (a)
   Percentage of
Company-
owned GLA (b)
    Percentage of
Annualized

Base Rent (b)
 

Kroger

   68    8.9 %   5.9 %

Publix

   66    6.7 %   4.3 %

Safeway

   65    5.3 %   3.5 %

Super Valu

   35    3.2 %   2.5 %

 

(a) For the Combined Properties including stores owned by grocery anchors that are attached to our centers.
(b) GLA and annualized base rent include the Consolidated Properties plus Regency’s pro-rata share of the Unconsolidated Properties.

Although base rent is supported by long-term lease contracts, tenants who file bankruptcy are given the right to cancel any or all of their leases and close related stores, or to continue to operate. 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 continually monitor industry trends and sales data to help us identify declines in retail categories or tenants who might be experiencing financial difficulties especially in light of the current downturn in the economy. We continue to monitor the video rental industry while its operators transition to different rental formats including on-line rental programs. At December 31, 2007, we had leases with 123 video rental stores representing $8.9 million of annual rental income to the Consolidated Properties and our pro-rata share of the Unconsolidated Properties.

In October 2007, Movie Gallery filed for Chapter 11 bankruptcy protection. Movie Gallery has closed six stores and has served notice of five additional store closings. The annual base rent on a pro-rata basis is approximately $860,000 or .24% associated with these eleven stores. Subsequent to these closings, we expect that Movie Gallery will continue to operate 21 stores with annual base rent on a pro-rata basis of approximately $950,000 or .26%.

We are not aware at this time of the current or pending bankruptcy of any other tenants that would cause a significant reduction in our revenues, and no tenant represents more than 6% of the total of our annual base rental revenues and our pro-rata share of the base revenues of the Unconsolidated Properties.

Liquidity and Capital Resources

We expect that cash generated from operating activities combined with gains on the sale of development properties will provide the necessary funds to pay our operating expenses, interest expense, scheduled principal payments on outstanding indebtedness, capital expenditures necessary to maintain and improve our shopping centers, and dividends to stockholders. Net cash provided by operating activities was $224.3 million, $216.8 million, and $205.4 million, and gains from the sale of real estate were $79.6 million, $124.8 million, and $76.7 million, for the years ended December 31, 2007, 2006 and 2005, respectively. During 2007, 2006, and 2005, we incurred capital expenditures to improve our shopping centers of $15.1 million, $14.0 million, and $14.4 million, we paid scheduled principal payments of $4.5 million, $4.5 million, and $5.5 million to our lenders on mortgage loans, and we paid dividends to our stockholders and unit holders of $204.3 million, $185.2 million, and $167.4 million, respectively. The increase in dividends during 2007 relates to a 10.9% increase in our annual dividend per common share.

We intend to continue to grow our portfolio by investing in shopping centers through ground up development of new centers or acquisition of existing centers. Because development and acquisition activities are discretionary in nature, they are not expected to burden the capital resources we have currently available for liquidity requirements. However, our development program continues to be a significant part of our business model and we expect to continue to start new development projects each year based upon retailer store demand, capital availability, and adequate investment returns. We expect to meet our long-term capital investment requirements for development, acquisitions, and maturing secured mortgage loans primarily from: (i) residual cash generated from operating activities after the payments described above, (ii) draws on our line of credit, and (iii) proceeds from the sale or joint venturing of real estate. We would expect that maturing unsecured public debt would be repaid from the proceeds of similar new issues

 

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in the future. Although we have no maturing public debt in 2008, we do have $50 million and $160 million maturing in 2009 and 2010, respectively. Although common or preferred equity raised in the public markets is a funding option, and we consider our access to these markets to be good, we do not currently anticipate issuing equity to fund our development program or repay maturing debt. We would consider issuing equity as part of a financing plan to maintain our leverage ratios at acceptable levels as determined by our Board of Directors. At December 31, 2007, we had an unlimited amount available under our shelf registration for equity securities and RCLP had $200 million available for debt under its shelf registration.

The following table summarizes net cash flows related to operating, investing and financing activities (in thousands):

 

     2007     2006     2005  

Net cash provided by operating activities

   $ 224,297     216,815     205,403  

Net cash (used in) provided by investing activities

     (418,291 )   38,231     (484,778 )

Net cash provided by (used in) financing activities

     178,616     (263,458 )   226,513  
                    

Net decrease in cash and equivalents

   $ (15,378 )   (8,412 )   (52,862 )
                    

At December 31, 2007 we had 49 properties under construction or undergoing major renovations on a Combined Basis, which when completed, will represent a net investment of $1.1 billion after projected sales of adjacent land and out-parcels. This compares to 47 properties that were under construction at the end of 2006 representing an investment of $1.1 billion upon completion. We estimate that we will earn an average return on our investment from our current development projects of 8.39% on a fully allocated basis including direct internal costs and the cost to acquire any residual interests held by minority development partners. Average returns have declined over previous years primarily the result of higher costs associated with the acquisition of land and construction. We believe that our development returns are sufficient on a risk adjusted basis. Costs necessary to complete the current development projects, net of projected land sales, are estimated to be $447.4 million and will likely be expended through 2011. The costs to complete these developments will be funded from our $600.0 million line of credit, which had $392.0 million of available funding at December 31, 2007, and from expected proceeds from the future sale of shopping centers as part of the capital recycling program described above.

During 2007, we acquired five shopping centers for a purchase price of $106.0 million, which included the assumption of $42.3 million in debt, net of a $1.2 million discount. In accordance with Statement 141, acquired lease intangible assets and acquired lease intangible liabilities of $9.3 million and $4.7 million, respectively were recorded for these acquisitions. The acquisitions were accounted for as a purchase business combination and the results of their operations are included in the consolidated financial statements from the date of acquisition.

Investments in Unconsolidated Real Estate Partnerships (Co-investment partnerships)

At December 31, 2007, we had investments in unconsolidated real estate partnerships of $432.9 million. The following table is a summary of unconsolidated combined assets and liabilities of these co-investment partnerships and our pro-rata share (see note below) at December 31, 2007 and 2006 (dollars in thousands):

 

     2007     2006  

Number of Joint Ventures

     19       18  

Regency’s Ownership

     16.35%-50 %     20%-50 %

Number of Properties

     219       187  

Combined Assets

   $ 4,767,553     $ 4,365,675  

Combined Liabilities

     2,889,238       2,574,860  

Combined Equity

     1,878,315       1,790,815  

Regency’s Share of (1):

    

Assets

   $ 1,151,872     $ 1,106,803  

Liabilities

     692,804       646,346  

 

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

We account for all investments in real estate partnerships in which we own 50% or less and do not have a controlling financial interest using the equity method. We have determined that these investments are not variable interest entities as defined in Financial Accounting Standards Board (“FASB”) Interpretation No. 46(R) “Consolidation of Variable Interest Entities” (“FIN 46(R)”) and do not require consolidation under Emerging Issues Task Force Issue No. 04-5 “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-5”) or the American Institute of Certified Public Accountants’ (AICPA) Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures” (“SOP 78-9”), and therefore are subject to the voting interest model in determining our basis of accounting. Major decisions, including property acquisitions not meeting pre-established investment criteria, dispositions, financings, annual budgets and dissolution of the ventures are subject to the approval of all partners. Investments in real estate partnerships are primarily composed of co-investment partnerships where we invest with three co-investment partners and an open-end real estate fund (“Regency Retail Partners” or the “Fund”), as further described below. In addition to earning our pro-rata share of net income or loss in each of these partnerships, we receive fees for asset management, property management, leasing, investment and financing services. During 2007, 2006 and 2005, we received fees from these co-investment partnerships of $32.3 million, $30.9 million, and $26.8 million, respectively. Our investments in real estate partnerships as of December 31, 2007 and 2006 consist of the following (in thousands):

 

     Ownership     2007    2006

Macquarie CountryWide-Regency (MCWR I)

   25.00 %   $ 40,557    60,651

Macquarie CountryWide Direct (MCWR I)

   25.00 %     6,153    6,822

Macquarie CountryWide-Regency II (MCWR II)

   24.95 %     214,450    234,378

Macquarie CountryWide-Regency III (MCWR II)

   24.95 %     812    1,140

Macquarie CountryWide-Regency-DESCO (MCWR-DESCO)

   16.35 %     29,478    —  

Columbia Regency Retail Partners (Columbia)

   20.00 %     33,801    36,096

Cameron Village LLC (Columbia)

   30.00 %     20,364    20,826

Columbia Regency Partners II (Columbia)

   20.00 %     20,326    11,516

RegCal, LLC (RegCal)

   25.00 %     17,110    18,514

Regency Retail Partners (the Fund) (1)

   20.00 %     13,296    5,139

Other investments in real estate partnerships

   50.00 %     36,563    39,008
             

Total

     $ 432,910    434,090
             

 

(1) At December 31, 2006, our ownership interest in Regency Retail Partners was 26.8%.

We co-invest with the Oregon Public Employees Retirement Fund in three co-investment partnerships (collectively “Columbia”), in which we have ownership interests of 20% or 30%. As of December 31, 2007, Columbia owned 28 shopping centers, had total assets of $648.2 million, and net income of $12.7 million for the year ended. Our share of Columbia’s total assets and net income was $142.1 million and $2.6 million, respectively which represents 3.4% of our total assets and 1.4% of our net income available for common stockholders. During 2007, Columbia acquired eight shopping centers from unrelated parties for a purchase price of $88.7 million, net of $15.2 million of assumed debt and $31.1 million in financing obtained by Columbia. We contributed $9.3 million to Columbia for our pro-rata share of the purchase price.

We co-invest with the California State Teachers’ Retirement System (“CalSTRS”) in a joint venture (“RegCal”) in which we have a 25% ownership interest. As of December 31, 2007, RegCal owned eight shopping centers, had total assets of $167.3 million, and had net income of $2.8 million for the year ended. Our share of RegCal’s total assets and

 

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net income was $41.8 million and $662,217, respectively which represents 1.0% of our total assets and less than 1.0% of our net income available for common stockholders, respectively. During 2007, CalSTRS sold one shopping center to an unrelated party for $13.2 million for a gain of $1.4 million.

We co-invest with Macquarie CountryWide Trust of Australia (“MCW”) in five co-investment partnerships, two in which we have an ownership interest of 25% (“MCWR I”), two in which we have an ownership interest of 24.95% (“MCWR II), and one in which we have an ownership interest of 16.35% (“MCWR-DESCO”).

As of December 31, 2007, MCWR I owned 42 shopping centers, had total assets of $612.0 million, and net income of $32.7 million for the year ended. Our share of MCWR I’s total assets and net income was $153.1 million and $10.3 million, respectively. During 2007, MCWR I sold nine shopping centers for $137.4 million to unrelated parties for a gain of $22.6 million. During 2007 MCWR I acquired one shopping center from an unrelated party for a purchase price of $23.0 million, which included the assumption of $10.8 million of debt. We contributed $2.2 million to MCWR I for our pro-rata share of the purchase price.

As of December 31, 2007, MCWR II owned 96 shopping centers, had total assets of $2.6 billion and recorded a net loss of $13.1 million for the year ended. Our share of MCWR II’s total assets and net loss was $651.0 million and $3.2 million, respectively. As a result of the significant amount of depreciation and amortization expense recorded by MCWR II in connection with the acquisition of the First Washington Portfolio in 2005, the joint venture may continue to report a net loss in future years, but is expected to produce positive cash flow from operations. During 2007, MCWR II sold one shopping center to an unrelated party for $13.5 million for a gain of $560,169. We have the ability to receive an acquisition fee of approximately $5.2 million (the “Contingent Acquisition Fee”) deferred from the original acquisition date of the First Washington Portfolio which is subject to achieving cumulative targeted income levels through 2008. The Contingent Acquisition Fee will only be recognized if earned, and the recognition of income will be limited to that percentage of MCWR II, or 75.05%, of the joint venture not owned by us.

On August 10, 2007, MCWR-DESCO closed on the acquisition of 32 retail centers for a purchase price of approximately $396.2 million including debt of approximately $209.5 million. We contributed $29.7 million to the venture for our pro-rata share of the purchase price for our 16.35% equity ownership. The acquisition was accounted for as a purchase business combination by MCWR-DESCO. As of December 31, 2007, MCWR-DESCO had total assets of $419.9 million and recorded a net loss of $3.3 million since inception primarily related to depreciation and amortization expense, but is expected to produce positive cash flow from operations. Our share of the venture’s total assets and net loss was $68.7 million and $465,028, respectively.

Our investment in the five co-investment partnerships with MCW totals $291.5 million and represents 7.0% of our total assets at December 31, 2007. Our pro-rata share of the assets and net income of these ventures was $872.8 million and $6.7 million, respectively, which represents 21.1% and 3.6% of our total assets and net income available for common stockholders, respectively.

In December, 2006, we formed Regency Retail Partners, LP (the “Fund”), an open-end, infinite-life investment fund with an ownership interest of 26.8%. During the first quarter of 2007, we reduced our ownership interest to 20% with the admission of additional partners into the Fund and recognized a gain of $2.2 million that had previously been deferred. The Fund has the right to acquire all future Regency-developed large format community centers, upon stabilization, that meet the Fund’s investment criteria subject to the Fund’s capital availability. A community center is generally defined as a shopping center with at least 250,000 square feet of GLA including tenant-owned GLA. As of December 31, 2007, the Fund owned seven shopping centers, had total assets of $209.0 million and net income of $1.2 million for the year ended. Our share of the Fund’s total assets and net income was $41.7 million and $325,861, respectively. Our share of the Fund represents 1.0% of our total assets and less than 1.0% of our net income available for common stockholders, respectively. During 2007, the Fund acquired six community shopping centers from us for a sales price of $126.4 million or $102.8 million on a net basis. As part of the transaction we provided a short-term note receivable to the Fund of $12.1 million, which the Fund repaid to us in January 2008. We recognized a gain of $42.8 million after excluding our ownership interest.

 

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Recognition of gains from sales to co-investment partnerships is recorded on only that portion of the sales not attributable to our ownership interest. The gains and operations are not recorded as discontinued operations because of our continuing involvement in these shopping centers. Columbia, RegCal, the co-investment partnerships with MCW, and the Fund intend to continue to acquire retail shopping centers, some of which they may acquire directly from us. For those properties acquired from unrelated parties, we are required to contribute our pro-rata share of the purchase price to the partnerships.

Contractual Obligations

We have debt obligations related to our mortgage loans, unsecured notes, and our unsecured line of credit as described further below. We have shopping centers that are subject to non-cancelable long-term ground leases where a third party owns and has leased the underlying land to us to construct and/or operate a shopping center. In addition, we have non-cancelable operating leases pertaining to office space from which we conduct our business. The table excludes obligations for approximately $3.4 million related to environmental remediation as discussed below under Environmental Matters as the timing of the remediation is not currently known. The table also excludes obligations related to construction or development contracts because payments are only due upon the satisfactory performance under the contract. Costs necessary to complete the 49 development projects currently in process are estimated to be $447.4 million and will likely be expended through 2011. The following table summarizes our debt maturities including interest, (excluding recorded debt premiums that are not obligations), and obligations under non-cancelable operating leases as of December 31, 2007 including our pro-rata share of obligations within unconsolidated co-investment partnerships (in thousands):

 

Contractual Obligations

   2008    2009    2010    2011    2012    Beyond
5 years
   Total

Notes Payable:

                    

Regency (1)

   $ 148,910    183,154    276,551    537,089    310,882    1,079,838    2,536,424

Regency’s share of JV

     21,882    63,776    165,775    129,388    90,569    179,883    651,273

Operating Leases:

                    

Regency

     5,197    5,129    5,131    5,107    4,659    17,221    42,444

Regency’s share of JV

     —      —      —      —      —      —      —  

Ground Leases:

                    

Regency

     210    210    217    218    229    2,827    3,911

Regency’s share of JV

     262    262    270    269    269    13,114    14,446
                                    

Total

   $ 176,461    252,531    447,944    672,071    406,608    1,292,883    3,248,498
                                    

 

(1) Amounts include interest payments based on contractual terms and current interest rates for variable rate debt.

Notes Payable

Outstanding debt at December 31, 2007 and 2006 consists of the following (in thousands):

 

     2007    2006

Notes Payable:

     

Fixed rate mortgage loans

   $ 196,915    186,897

Variable rate mortgage loans

     5,821    68,662

Fixed rate unsecured loans

     1,597,239    1,198,827
           

Total notes payable

     1,799,975    1,454,386

Unsecured Line of Credit

     208,000    121,000
           

Total

   $ 2,007,975    1,575,386
           

 

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Mortgage loans are secured and may be prepaid, but could be subject to yield maintenance premiums. Mortgage loans are generally due in monthly installments of principal and interest, and mature over various terms through 2018. We intend to repay mortgage loans at maturity from proceeds from our unsecured line of credit (the “Line”). Fixed interest rates on mortgage loans range from 5.22% to 8.95% and average 6.37%. We have one variable rate mortgage loan with an interest rate equal to LIBOR plus a spread of 100 basis points.

On June 5, 2007, RCLP completed the sale of $400.0 million of ten-year senior unsecured notes. The 5.875% notes are due June 15, 2017 and were priced at 99.527% to yield 5.938%. The net proceeds were used to reduce the Line.

In February 2007, we entered into a new loan agreement under the Line which increased the commitment to $600.0 million with the right to increase the facility size an additional $150.0 million subject to additional lender syndication. The Line has a four-year term which expires in 2011 with a one-year extension at our option and the interest rate was reduced to LIBOR plus .55%. Contractual interest rates were 5.425% at December 31, 2007 and 6.125% at December 31, 2006 based on LIBOR plus .55% and .75%, respectively. The balance on the Line was $208.0 million at December 31, 2007.

The spread on the Line is dependent upon maintaining specific investment-grade ratings. We are also required to comply, and are in compliance, with certain financial covenants such as Minimum Net Worth, Total Liabilities to Gross Asset Value (“GAV”), Recourse Secured Debt to GAV, Fixed Charge Coverage and other covenants customary with this type of unsecured financing. The Line is used primarily to finance the development and acquisition of real estate, but is also available for general working-capital purposes. On December 5, 2007, Standard and Poor’s Rating Services raised Regency’s corporate credit and senior unsecured ratings to BBB+ from BBB. As a result of this upgrade, the interest rate on the Line was reduced to LIBOR plus .40% effective January 1, 2008.

As of December 31, 2007, scheduled principal repayments on notes payable and the Line were as follows (in thousands):

 

Scheduled Principal Payments by Year:

   Scheduled
Principal
Payments
   Term Loan
Maturities
    Total
Payments
 

2008

   $ 4,270    19,402     23,672  

2009

     4,079    58,606     62,685  

2010

     4,038    176,971     181,009  

2011 (includes the Line)

     3,830    459,133     462,963  

2012

     4,043    249,850     253,893  

Beyond 5 Years

     9,549    1,014,705     1,024,254  

Unamortized debt discounts, net

     —      (501 )   (501 )
                   

Total

   $ 29,809    1,978,166     2,007,975  
                   

Our investments in real estate partnerships had notes and mortgage loans payable of $2.7 billion at December 31, 2007, which mature through 2028. Our pro-rata share of these loans was $653.3 million, of which 93.6% had weighted average fixed interest rates of 5.3% and the remaining had variable interest rates based on LIBOR plus a spread in a range of 50 to 100 basis points. The loans are primarily non-recourse, but for those that are guaranteed by a joint venture, our liability does not extend beyond our economic interest in the joint venture.

We are exposed to capital market risk such as changes in interest rates. In order to manage the volatility related to interest-rate risk, we originate new debt with fixed interest rates, or we may enter into interest-rate hedging arrangements. We do not utilize derivative financial instruments for trading or speculative purposes. We engage outside experts who evaluate and make recommendations about hedging strategies when appropriate. We account for derivative instruments under Statement of Financial Accounting Standards SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended (“Statement 133”). On March 10, 2006, we entered into four forward-starting interest rate swaps totaling $396.7 million with fixed rates of 5.399%, 5.415%, 5.399% and 5.415%. We

 

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designated these swaps as cash flow hedges to fix the rate on $400.0 million of new financing expected to occur in 2010 and 2011, and these proceeds will be used to repay maturing debt at that time. The change in fair value of these swaps from inception was a liability of $9.8 million at December 31, 2007, and is recorded in accounts payable and other liabilities in the accompanying consolidated balance sheet and in accumulated other comprehensive income (loss) in the consolidated statement of stockholders’ equity and comprehensive income (loss).

At December 31, 2007, 89.4% of our total debt had fixed interest rates, compared with 88.0% at December 31, 2006. We intend to limit the percentage of variable interest-rate debt to be no more than 30% of total debt, which we believe to be an acceptable risk. Currently, our variable rate debt represents 10.7% of our total debt. Based upon the variable interest-rate debt outstanding at December 31, 2007, if variable interest rates were to increase by 1%, our annual interest expense would increase by $2.1 million.

On February 26, 2008, we were notified by Wells Fargo Bank that they had received commitments from a group of banks, which in combination with their commitment will provide us with an estimated $341.5 million, three-year term loan facility (the “Term Facility”). The Term Facility will include a term loan amount of $227.7 million that will fund at closing plus a $113.8 million revolver component that is accessible by us at our discretion. The Term Facility will be subject to similar loan covenants that are contained within the Line and our other unsecured fixed rate loans. The term loan has a variable interest rate equal to LIBOR plus 105 basis points, and the revolver has a variable interest rate equal to LIBOR plus 110 basis points, both of which are subject to our current debt ratings. The Term Facility does not affect the Company’s existing $600.0 million Line commitment. The proceeds from the funding of the Term Facility will be used for general working capital purposes including the reduction of any debt balances, at our discretion. The Term Facility is expected to close during March 2008 subject to final terms and conditions.

Equity Transactions

From time to time, we issue equity in the form of exchangeable operating partnership units or preferred units of RCLP, or in the form of common or preferred stock of Regency Centers Corporation. As previously discussed, these sources of long-term equity financing allow us to fund our growth while maintaining a conservative capital structure.

Preferred Units

We have issued Preferred Units in various amounts since 1998, the net proceeds of which were used to reduce the balance of the Line. We issue Preferred Units primarily to institutional investors in private placements. Generally, the Preferred Units may be exchanged by the holders for Cumulative Redeemable Preferred Stock after a specified date at an exchange rate of one share for one unit. The Preferred Units and the related Preferred Stock are not convertible into Regency common stock. At December 31, 2007 and 2006, only the Series D Preferred Units were outstanding with a face value of $50.0 million and a fixed distribution rate of 7.45%. These Units may be called by us in 2009, and have no stated maturity or mandatory redemption. Included in the Series D Preferred Units are original issuance costs of $842,023 that will be expensed if they are redeemed in the future.

Preferred Stock

As of December 31, 2007 we had three series of Preferred stock outstanding, two of which underlie depositary shares held by the public. The depositary shares each represent 1/10th of a share of the underlying preferred stock and have a liquidation preference of $25 per depository share. In 2003, we issued 7.45% Series 3 Cumulative Redeemable Preferred Stock underlying three million depositary shares. In 2004, we issued 7.25% Series 4 Cumulative Redeemable preferred stock underlying five million depositary shares. In 2005, we issued three million shares, or $75.0 million of 6.70% Series 5 Preferred Stock, with a liquidation preference of $25 per share. All series of Preferred Stock are perpetual, are not convertible into common stock of the Company and are redeemable at par upon our election beginning five years after the issuance date. The terms of the Preferred Stock do not contain any unconditional obligations that would require us to redeem the securities at any time or for any purpose.

On January 1, 2008, the Company split each share of existing Series 3 and Series 4 Preferred Stock each having a liquidation preference of $250 per share and a redemption price of $250 per share into ten shares of Series 3 and Series 4 Stock, respectively, each having a liquidation preference of $25 per share and a redemption price of $25 per

 

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share. The Company then exchanged each Series 3 and 4 Depository Share into shares of New Series 3 and 4 Stock, respectively, which have the same dividend rights and other rights and preferences identical to the depositary shares.

Common Stock

On April 5, 2005, we entered into an agreement to sell 4,312,500 shares of common stock to an affiliate of Citigroup Global Markets Inc. (“Citigroup”) at $46.60 per share, in connection with a forward sale agreement (the “Forward Sale Agreement”). On August 1, 2005, we issued 3,782,500 shares to Citigroup for net proceeds of approximately $175.5 million and on September 7, 2005, the remaining 530,000 shares were issued for net proceeds of $24.4 million. The proceeds from the sales were used to reduce the Line and redeem the Series E and F Preferred Units.

Critical Accounting Policies and Estimates

Knowledge about our accounting policies is necessary for a complete understanding of our financial results, and discussion and analysis of these results. The preparation of our financial statements requires that we make certain estimates that impact the balance of assets and liabilities at a financial statement date and the reported amount of income and expenses during a financial reporting period. These accounting estimates are based upon, but not limited to, our judgments about historical results, current economic activity, and industry accounting standards. They are considered to be critical because of their significance to the financial statements and the possibility that future events may differ from those judgments, or that the use of different assumptions could result in materially different estimates. We review these estimates on a periodic basis to ensure reasonableness. However, the amounts we may ultimately realize could differ from such estimates.

Revenue Recognition and Tenant Receivables—Tenant receivables represent revenues recognized in our financial statements, and include base rent, percentage rent, and expense recoveries from tenants for common area maintenance costs, insurance and real estate taxes. We analyze tenant receivables, historical bad debt levels, customer creditworthiness and current economic trends when evaluating the adequacy of our allowance for doubtful accounts. In addition, we analyze the accounts of tenants in bankruptcy, and we estimate the recovery of pre-petition and post-petition claims. Our reported net income is directly affected by our estimate of the recoverability of tenant receivables.

Recognition of Gains from the Sales of Real Estate—We account for profit recognition on sales of real estate in accordance with SFAS Statement No. 66, “Accounting for Sales of Real Estate.” Profits from sales of real estate will not be recognized under the full accrual method by us unless (i) a sale has been consummated; (ii) the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property; (iii) we have transferred to the buyer the usual risks and rewards of ownership; and (iv) we do not have significant continuing involvement with the property. Recognition of gains from sales to co-investment partnerships is recorded on only that portion of the sales not attributable to our ownership interest.

Capitalization of Costs—We capitalize the acquisition of land, the construction of buildings and other specifically identifiable development costs incurred by recording them into “Properties in Development” on our consolidated balance sheets and account for them in accordance with SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects” (SFAS 67) and EITF Issue No. 97-11, “Accounting for Internal Costs Relating to Real Estate Property Acquisitions”. In summary, SFAS 67 establishes that a rental project changes from nonoperating to operating when it is substantially completed and held available for occupancy. At that time, costs should no longer be capitalized. Other development costs include pre-development costs essential to the development of the property, as well as, interest, real estate taxes, and direct employee costs incurred during the development period. Pre-development costs are incurred prior to land acquisition during the due diligence phase and include contract deposits, legal, engineering and other professional fees related to evaluating the feasibility of developing a shopping center. If we determine that the development of a specific project undergoing due diligence was no longer probable, we would immediately expense all related capitalized pre-development costs not considered recoverable. At December 31, 2007 we had $22.7 million of capitalized pre-development costs and during 2007 we expensed $5.3 million related to developments that were no longer considered probable. Interest costs are capitalized into each development project

 

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based on applying our weighted average borrowing rate to that portion of the actual development costs expended. We generally cease interest cost capitalization when the property is available for occupancy upon substantial completion of tenant improvements, but in no event would we capitalize interest on the project beyond 12 months after substantial completion of the building shell. During 2007 we capitalized interest on our development projects of $35.4 million. We have a large staff of employees who support the due diligence, land acquisition, construction, anchor leasing, and financial analysis (the “Investment Group”) of our development program. All direct internal costs related to these development activities are capitalized as part of each development project. During 2007 we capitalized $39.0 million of direct costs incurred by the Investment Group. If future accounting standards were to limit the amount of internal costs that may be capitalized, or if our development activity were to decline significantly without a proportionate decrease in internal costs, we could incur a significant increase in our operating expenses and a reduction in net income.

Real Estate Acquisitions—Upon acquisition of operating real estate properties, we estimate the fair value of acquired tangible assets (consisting of land, building and improvements), and identified intangible assets, liabilities (consisting of above- and below-market leases, in-place leases and tenant relationships) and assumed debt in accordance with SFAS No. 141, “Business Combinations” (“Statement 141”). Based on these estimates, we allocate the purchase price to the applicable assets acquired and liabilities assumed. We utilize methods similar to those used by independent appraisers in estimating the fair value of acquired assets and liabilities. We evaluate the useful lives of amortizable intangible assets each reporting period and account for any changes in estimated useful lives over the revised remaining useful life.

Valuation of Real Estate Investments—Our long-lived assets, primarily real estate held for investment, are carried at cost unless circumstances indicate that the carrying value of the assets may not be recoverable. We review long-lived assets for impairment whenever events or changes in circumstances indicate such an evaluation is warranted. The review involves a number of assumptions and estimates used to determine whether impairment exists. Depending on the asset, we use varying methods to determine fair value of the asset such as i) estimating discounted future cash flows, ii) determining resale values by market, or iii) applying a capitalization rate to net operating income using prevailing rates in a given market. These methods of determining fair value can fluctuate significantly as a result of a number of factors, including changes in the general economy of those markets in which we operate, tenant credit quality and demand for new retail stores. Capitalization rates may change and could rise above existing levels causing our real estate values to decline. If we determine that the carrying amount of a property is not recoverable and exceeds its fair value, we will write down the asset to fair value for “held-and-used” assets and to fair value less costs to sell for “held-for-sale” assets.

Discontinued Operations—The application of current accounting principles that govern the classification of any of our properties as held-for-sale on the balance sheet, or the presentation of results of operations and gains on the sale of these properties as discontinued, requires management to make certain significant judgments. In evaluating whether a property meets the criteria set forth by SFAS No. 144 “Accounting for the Impairment and Disposal of Long-Lived Assets” (“Statement 144”), we make a determination as to the point in time that it is probable that a sale will be consummated. Given the nature of all real estate sales contracts, it is not unusual for such contracts to allow potential buyers a period of time to evaluate the property prior to formal acceptance of the contract. In addition, certain other matters critical to the final sale, such as financing arrangements often remain pending even upon contract acceptance. As a result, properties under contract may not close within the expected time period, or may not close at all. Due to these uncertainties, it is not likely that we can meet the criteria of Statement 144 prior to the sale formally closing. Therefore, any properties categorized as held-for-sale represent only those properties that management has determined are probable to close within the requirements set forth in Statement 144. Prior to sale, we evaluate the extent of involvement and significance of cash flows it will have with a property subsequent to its sale, in order to determine if the results of operations and gain on sale should be reflected as discontinued. Consistent with Statement 144, any property sold in which we have significant continuing involvement or cash flows (most often sales to co-investment partnerships) is not considered to be discontinued. In addition, any property which we sell to an unrelated third party, but we retain a property or asset management function, is not considered discontinued. Therefore, based on our evaluation of Statement 144, only properties sold, or to be sold, to unrelated third parties, where we will have no significant continuing involvement or significant cash flows are classified as discontinued.

 

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Investments in Real Estate Co-Investment Partnerships—In addition to owning real estate directly, we invest in real estate through our co-investment partnerships (also referred to as joint ventures). Joint venturing provides us with a capital source to acquire real estate, and to earn our pro-rata share of the net income from the co-investment partnerships in addition to fees for services. As asset and property manager, we conduct the business of the Unconsolidated Properties held in the co-investment partnerships in the same way that we conduct the business of the Consolidated Properties that are wholly-owned; therefore, the Critical Accounting Policies as described are also applicable to our investments in the co-investment partnerships. We account for all investments in which we do not have a controlling financial interest using the equity method. We have determined that these investments are not variable interest entities as defined in the FIN 46(R) and do not require consolidation under EITF 04-5 or SOP 78-9, and therefore, are subject to the voting interest model in determining our basis of accounting. Major decisions, including property acquisitions and dispositions, financings, annual budgets and dissolution of the ventures are subject to the approval of all partners, or in the case of the Fund, its advisory committee.

Income Tax Status—The prevailing assumption underlying the operation of our business is that we will continue to operate in order to qualify as a REIT, as defined under the Internal Revenue Code. We are required to meet certain income and asset tests on a periodic basis to ensure that we continue to qualify as a REIT. As a REIT, we are allowed to reduce taxable income by all or a portion of our distributions to stockholders. We evaluate the transactions that we enter into and determine their impact on our REIT status. Determining our taxable income, calculating distributions, and evaluating transactions requires us to make certain judgments and estimates as to the positions we take in our interpretation of the Internal Revenue Code. Because many types of transactions are susceptible to varying interpretations under federal and state income tax laws and regulations, our positions are subject to change at a later date upon final determination by the taxing authorities.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements” (“Statement 160”). This Statement, among other things, establishes accounting and reporting standards for a parent company’s interest in a subsidiary. This Statement is effective for financial statements issued for fiscal years beginning on or after December 15, 2008. We are currently evaluating the impact of adopting the statement.

In December 2007, the FASB issued SFAS No. 141(R) “Business Combinations” (“Statement 141(R)”). This Statement, among other things, establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. This Statement also establishes disclosure requirements of the acquirer to enable users of the financial statements to evaluate the effect of the business combination. This Statement is effective for financial statements issued for fiscal years beginning on or after December 15, 2008. We are currently evaluating the impact of adopting the statement.

In November 2007, the EITF issued Issue No. 07-6 “Accounting for the Sale of Real Estate to the Requirements of FASB Statement No. 66, Accounting for the Sales of Real Estate, When the Agreement Includes a Buy-Sell Clause” (“EITF 07-6”). EITF 07-6 is applicable to investors who enter into an arrangement to create a jointly owned entity, one investor sells real estate to that entity, and a buy-sell clause is included. This EITF is effective for new arrangements entered into in fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. We are currently evaluating the impact of adopting the EITF.

In February 2007, the FASB Issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“Statement 159”). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The Statement also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. Statement 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, although early adoption is allowed. We do not believe that the adoption of Statement 159 will have a material effect on our consolidated financial statements.

 

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In September 2006, the FASB issued Statement No. 157 “Fair Value Measurements” (“Statement 157”). This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies to accounting pronouncements that require or permit fair value measurements, except for share-based payment transactions under FASB Statement No. 123(R). This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. In February 2008, the FASB amended Statement 157 with FASB Staff Position “Effective Date of FASB Statement No. 157” (“FSP 157-2”) to delay the effective date of Statement 157 for nonfinancial assets and nonfinancial liabilities to be effective for financial statements issued for fiscal years beginning after November 15, 2008. Although Statement 157 will require remeasurements of the derivative financial instruments, the Company does not believe adoption of this Statement will have a material effect on its consolidated financial statements for either financial or nonfinancial assets or liabilities

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. This Interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. Under FIN 48, tax positions shall initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. We adopted this Interpretation effective January 1, 2007. We do not have any material unrecognized tax benefits; therefore, the adoption of FIN 48 did not have a material impact on our consolidated financial statements. We believe that we have appropriate support for the income tax positions taken and to be taken on our tax returns and that our accruals for tax liabilities are adequate for all open years (after 2003 for federal and state) based on an assessment of many factors including past experience and interpretations of tax laws applied to the facts of each matter.

Results from Operations

Comparison of the years ended December 31, 2007 to 2006:

At December 31, 2007, on a Combined Basis, we were operating or developing 451 shopping centers, as compared to 405 shopping centers at the end of 2006. We identify our shopping centers as either development properties or operating properties. Development properties are defined as properties that are in the construction or initial lease-up process and have not reached their initial full occupancy (reaching full occupancy generally means achieving at least 93% leased and rent paying on newly constructed or renovated GLA). At December 31, 2007, on a Combined Basis, we were developing 49 properties, as compared to 47 properties at the end of 2006.

Our revenues increased by $34.5 million, or 8% to $451.5 million in 2007 as summarized in the following table (in thousands):

 

     2007    2006    Change

Minimum rent

   $ 320,323    294,728    25,595

Percentage rent

     4,661    4,428    233

Recoveries from tenants

     93,460    86,007    7,453

Management, acquisition, and other fees

     33,064    31,805    1,259
                

Total revenues

   $ 451,508    416,968    34,540
                

The increase in revenues was primarily related to higher minimum rent from (i) growth in rental rates from renewing expiring leases or re-leasing vacant space in the operating properties, (ii) new minimum rent generated from recent shopping center acquisitions, and (iii) recently completed shopping center developments commencing operations in the current year net of properties sold. In addition to collecting minimum rent from our tenants, we also collect percentage rent based upon their sales volumes. Recoveries from tenants represents reimbursements from

 

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tenants for their pro-rata share of the operating, maintenance, and real estate tax expenses that we incur to operate our shopping centers. Recoveries increased as a result of an increase in our operating expenses.

We earn fees for asset management, property management, leasing, acquisition and financing services that we provide to our co-investment partnerships and third parties summarized as follows (in thousands):

 

     2007    2006    Change  

Asset management fees

   $ 11,021    5,977      5,044  

Property management fees

     13,865      11,041    2,824  

Leasing commissions

     2,319    2,210    109  

Acquisition and financing fees

     5,055    11,683    (6,628 )

Other fees

     804    894    (90 )
                  
   $ 33,064    31,805    1,259  
                  

Property management fees increased in 2007 as a result of providing property management services to MCWR-DESCO and the Fund. Asset management fees were higher in 2007 because the agreement to provide asset management services to MCWR II did not commence until December 2006; and the closing and related commencement of the agreements with the Fund did not occur until December 2006. Acquisition and financing fees earned in 2007 include a $3.2 million acquisition fee from MCWR-DESCO related to the acquisition of 32 retail centers described above. Acquisition and financing fees earned in 2006 include fees earned as part of the acquisition of the First Washington portfolio by MCWR II.

Our operating expenses increased by $17.4 million, or 7%, to $256.8 million in 2007 related to increased operating and maintenance costs, general and administrative costs and depreciation expense, as further described below. The following table summarizes our operating expenses (in thousands):

 

     2007    2006    Change  

Operating, maintenance and real estate taxes

   $ 102,846    93,777    9,069  

General and administrative

     50,580    45,495    5,085  

Depreciation and amortization

     93,257    84,160    9,097  

Other expenses, net

     10,081    15,928    (5,847 )
                  

Total operating expenses

   $ 256,764    239,360    17,404  
                  

The increase in operating, maintenance, and real estate taxes was primarily due to acquisitions and recently completed developments commencing operations in the current year, and to general price increases incurred by the operating properties, net of properties sold. On average, approximately 80% of these costs are recovered from our tenants through reimbursements included in our revenues.

The increase in general and administrative expense is related to annual salary increases and higher costs associated with incentive compensation, in addition to, increased staffing and recruiting costs to manage the growth in our shopping center development program.

The increase in depreciation and amortization expense is primarily related to acquisitions and recently completed developments commencing operations in the current year, net of properties sold.

The decrease in other expenses is related to lower income tax expense incurred by Regency Realty Group, Inc. (“RRG”), our taxable REIT subsidiary. RRG is subject to federal and state income taxes and files separate tax returns.

 

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The following table presents the change in interest expense from 2007 to 2006 (in thousands):

 

     2007     2006     Change  

Interest on the Line

   $ 10,117     7,557     2,560  

Interest on notes payable

     110,880     100,397     10,483  

Capitalized interest

     (35,424 )   (23,952 )   (11,472 )

Interest income

     (3,079 )   (4,232 )   1,153  
                    
   $ 82,494     79,770     2,724  
                    

Interest expense on the Line and notes payable increased during 2007 by $13.0 million due to higher outstanding debt balances including the issuance of $400.0 million of unsecured debt in June 2007, increased development activity and the acquisition of shopping centers. The increase in development activity also resulted in an increase in capitalized interest.

Our equity in income (loss) of investments in real estate partnerships (co-investment partnerships or joint ventures) increased $15.5 million during 2007 as follows (in thousands):

 

     Ownership     2007     2006     Change  

Macquarie CountryWide-Regency (MCWR I)

   25.00 %   $ 9,871     4,747     5,124  

Macquarie CountryWide Direct (MCWR I)

   25.00 %     457     615     (158 )

Macquarie CountryWide-Regency II (MCWR II)

   24.95 %     (3,236 )   (7,005 )   3,769  

Macquarie CountryWide-Regency III (MCWR II)

   24.95 %     67     (38 )   105  

Macquarie CountryWide-Regency-DESCO (MCWR-DESCO)

   16.35 %     (465 )   —       (465 )

Columbia Regency Retail Partners (Columbia)

   20.00 %     2,440     2,350     90  

Cameron Village LLC (Columbia)

   30.00 %     (74 )   (119 )   45  

Columbia Regency Partners II (Columbia)

   20.00 %     189     62     127  

RegCal, LLC (RegCal)

   25.00 %     662     517     145  

Regency Retail Partners (the Fund)

   20.00 %     326     7     319  

Other investments in real estate partnerships

   50.00 %     7,856     1,444     6,412  
                      

Total

     $ 18,093     2,580     15,513  
                      

The increase in our equity in income (loss) of investments in real estate partnerships is primarily related to growth in rental income generally realized in all of the joint venture portfolios and higher gains from the sale of shopping centers sold by MCWR I, as well as, the sale of a shopping center owned by a joint venture classified above in Other investments.

Gains from the sale of real estate were $52.2 million in 2007 as compared to $65.6 million in 2006. Included in 2007 gains are $8.9 million in gains from the sale of 28 out-parcels for net proceeds of $59.2 million, $42.8 million from the sale of six properties in development to a joint venture for net proceeds of $102.8 million; and a $2.2 million gain related to the partial sale of our interest in the Fund as discussed previously. Included in 2006 gains are $20.2 million in gains from the sale of 30 out-parcels for net proceeds of $53.5 million, $35.9 million from the sale of six shopping centers to co-investment partnerships for net proceeds of $122.7 million; as well as a $9.5 million gain related to the partial sale of our interest in MCWR II as previously discussed. These gains are included in continuing operations rather than discontinued operations because they were either properties that had no operating income, or they were properties sold to co-investment partnerships where we have continuing involvement through our equity investment.

Income from discontinued operations was $27.2 million for the year ended December 31, 2007 related to two operating properties and four development properties sold to unrelated parties for net proceeds of $109.0 million. Income from discontinued operations was $63.1 million for the year ended December 31, 2006 related to eight operating properties and three development properties sold to unrelated parties for net proceeds of $149.6 million and to the operations of shopping centers sold or classified as held-for-sale in 2006 and 2007. In compliance with Statement 144, if we sell an asset in the current year, we are required to re-present its operations into discontinued

 

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operations for all prior periods. This practice results in a re-presentation of amounts previously reported as continuing operations into discontinued operations. Our income from discontinued operations is shown net of minority interest of exchangeable operating partnership units totaling $225,833 and $830,793 for the years ended December 31, 2007 and 2006, respectively, and income taxes totaling $2.0 million for the year ended December 31, 2007.

Net income for common stockholders decreased $14.9 million to $184.0 million in 2007 as compared with $198.8 million in 2006 primarily related to lower gains recognized from the sale of real estate in 2007. Diluted earnings per share was $2.65 in 2007 as compared to $2.89 in 2006 or 8% lower.

Results from Operations

Comparison of the years ended December 31, 2006 to 2005:

At December 31, 2006, on a Combined Basis, we were operating or developing 405 shopping centers, as compared to 393 shopping centers at the end of 2005. At December 31, 2006, on a Combined Basis, we were developing 47 properties, as compared to 31 properties at the end of 2005.

Our revenues increased by $33.3 million, or 9%, to $417.0 million in 2006 as summarized in the following table (in thousands):

 

     2006    2005    Change

Minimum rent

   $ 294,728    273,382    21,346

Percentage rent

     4,428    4,364    64

Recoveries from tenants

     86,007    77,858    8,149

Management, acquisition, and other fees

     31,805    28,019    3,786
                

Total revenues

   $ 416,968    383,623    33,345
                

The increase in revenues was primarily related to higher minimum rent from growth in rental rates from renewing expiring leases or re-leasing vacant space in the operating properties, and from new minimum rent generated from recently completed developments commencing operations in the current year net of properties sold. Recoveries from tenants, which represent reimbursements from tenants for their pro-rata share of the operating expenses that we incur to operating our shopping centers, increased 10.5% during 2006 directly related to a 16.6% increase in our operating expenses.

We earn fees for asset management, property management, leasing, investing, and financing services that we provide to our co-investment partnerships and third parties summarized as follows (in thousands):

 

     2006    2005    Change  

Asset management fees

   $ 5,977    5,106    871  

Property management fees

     11,041    7,283    3,758  

Leasing commissions

     2,210    —      2,210  

Acquisition and financing fees

     11,683    14,430    (2,747 )

Other fees

     894    1,200    306  
                  
   $ 31,805    28,019    3,786  
                  

Property management fees increased in 2006 as a result of managing the First Washington Portfolio acquisition for MCWR II for an entire 12 months during 2006 as compared to seven months during 2005. This also resulted in higher leasing commissions earned during 2006. Acquisition and financing fees were lower in 2006 due to a lower level of acquisition activity in 2006 as compared to 2005. Fees earned in 2005 were primarily related to the acquisition of the First Washington Portfolio by MCWR II. During 2006, we earned additional fees from MCWR II for achieving certain income performance results related to the First Washington Portfolio.

 

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Our operating expenses increased by $34.1 million, or 17%, to $239.4 million in 2006 related to increased operating and maintenance costs, general and administrative costs and depreciation expense, as further described below. The following table summarizes our operating expenses (in thousands):

 

     2006    2005    Change

Operating, maintenance and real estate taxes

   $ 93,777    87,987    5,790

General and administrative

     45,495    37,815    7,680

Depreciation and amortization

     84,160    76,698    7,462

Other expenses, net

     15,928    2,759    13,169
                

Total operating expenses

   $ 239,360    205,259    34,101
                

The increase in operating, maintenance, and real estate taxes was primarily due to shopping center developments that were recently completed and did not incur operating expenses for a full 12 months during the previous year, and to general price increases incurred by the operating properties, net of properties sold. On average, approximately 80% of these costs are recovered from our tenants as expense reimbursements and included in our revenues.

The increase in general and administrative expense is related to additional salary costs for new employees hired to manage the First Washington Portfolio under a property management agreement with MCWR II, as well as, staffing increases related to increases in our shopping center development program.

The increase in depreciation and amortization expense is primarily related to new development properties recently completed and placed in service in the current year, net of properties sold, or if placed in service in the previous year, were not operational for a full 12 months.

The increase in other expenses pertains to an increase in the income tax provision of RRG, our taxable REIT subsidiary, from $4.1 million in 2005 to $11.8 million in 2006. RCLP also incurred intangible taxes of $1.8 million in 2006 as compared to $352,416 in 2005.

The following table presents the change in interest expense from 2006 to 2005:

 

     2006     2005     Change  

Interest on the Line

   $ 7,557     8,633     (1,076 )

Interest on notes payable

     100,397     92,658       7,739  

Capitalized interest

     (23,952 )   (12,400 )   (11,552 )

Interest income

     (4,232 )   (2,361 )   (1,871 )
                    
   $ 79,770       86,530     (6,760 )
                    

Interest expense on the Line and notes payable increased due to higher outstanding balances on the Line during the year associated with an increase in properties in development and the acquisitions purchased in 2006. The increase in development activity also resulted in an increase in capitalized interest.

 

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Our equity in income (loss) of investments in real estate partnerships (co-investment partnerships or joint ventures) increased $5.5 million to $2.6 million in 2006 as follows (in thousands):

 

     Ownership     2006     2005     Change  

Macquarie CountryWide-Regency (MCWR I)

   25.00 %   $ 4,747     1,601     3,146  

Macquarie CountryWide Direct (MCWR I)

   25.00 %     615     578     37  

Macquarie CountryWide-Regency II (MCWR II)

   24.95 %     (7,005 )   (11,228 )   4,223  

Macquarie CountryWide-Regency III (MCWR II)

   24.95 %     (38 )   (47 )   9  

Columbia Regency Retail Partners (Columbia)

   20.00 %     2,350     4,241     (1,891 )

Cameron Village LLC (Columbia)

   30.00 %     (119 )   (98 )   (21 )

Columbia Regency Partners II (Columbia)

   20.00 %     62     63     (1 )

RegCal, LLC (RegCal)

   25.00 %     517     609     (92 )

Regency Retail Partners (the Fund)

   20.00 %     7     —       7  

Other investments in real estate partnerships

   50.00 %     1,444     1,373     71  
                      

Total

     $ 2,580     (2,908 )   5,488  
                      

The increase was primarily a result of MCWR II earning revenues for a full year from the First Washington Portfolio as compared to seven months during 2005. MCWR I recorded higher gains from the sale of real estate during 2006 as compared to 2005. Columbia recorded lower gains from the sale of real estate during 2006 as compared to 2005.

Gains from the sale of real estate were $65.6 million in 2006 as compared to $19.0 million in 2005. Included in 2006 are gains of $20.2 million from the sale of 30 out-parcels for net proceeds of $53.5 million, $35.9 million from the sale of six shopping centers to co-investment partnerships for net proceeds of $122.7 million; and a $9.5 million gain related to the partial sale of our interest in MCWR II as discussed previously. Included in 2005 are gains of $8.7 million in gains from the sale of 26 out-parcels for net proceeds of $29.0 million and $10.3 million in gains related to the sale of three development properties and one operating property. These gains are included in continuing operations rather than discontinued operations because they were either properties that had no operating income, or they were properties sold to co-investment partnerships where we have continuing involvement through our equity investment.

We review our real estate portfolio for impairment whenever events or changes in circumstances indicate that we may not be able to recover the carrying amount of an asset. We determine whether impairment has occurred by comparing the property’s carrying value to an estimate of fair value based upon methods described in our Critical Accounting Policies. In the event a property is impaired, we write down the asset to fair value for “held-and-used” assets and to fair value less costs to sell for “held-for- sale” assets. During 2006 and 2005 we established provisions for loss of $500,000 and $550,000 respectively, to adjust operating properties to their estimated fair values.

Income from discontinued operations was $63.1 million in 2006 related to eight operating and three development properties sold to unrelated parties for net proceeds of $149.6 million. Income from discontinued operations was $65.1 million in 2005 related to nine operating and five development properties sold to unrelated parties for net proceeds of $175.2 million and to the operations of shopping centers sold or classified as held-for-sale in 2006 and 2005. In compliance with Statement 144, if we sell an asset in the current year, we are required to reclassify its operating income into discontinued operations for all prior periods. This practice results in a reclassification of amounts previously reported as continuing operations into discontinued operations. Our income from discontinued operations is shown net of minority interest of exchangeable operating partnership units totaling $830,793 and $1.3 million, for the years ended December 31, 2006 and 2005, respectively, and income taxes totaling $3.6 million for the year ended December 31, 2005.

Minority interest of preferred units declined $4.4 million to $3.7 million in 2006 as a result of redeeming $125.0 million of preferred units in 2005. Preferred stock dividends increased $2.9 million to $19.7 million in 2006 as a result of the issuance of $75.0 million of preferred stock in 2005.

 

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Net income for common stockholders increased $52.9 million to $198.8 million in 2006 as compared with $145.9 million in 2005 primarily related to increases in revenues described above and higher gains recognized from sale of real estate. Diluted earnings per share was $2.89 in 2006 as compared to $2.23 in 2005 or 30% higher.

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 (UST’s). 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 non-chlorinated solvent systems. Where available, we have applied and been accepted into state-sponsored environmental programs. We have a blanket environmental insurance policy that covers us against 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. We estimate the cost associated with these legal obligations to be approximately $3.4 million, all of which has been reserved. We believe that the ultimate disposition of currently known environmental matters will not have a material affect on our financial position, liquidity, or operations; however, we can give no assurance that existing environmental studies with respect to 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

Inflation has been historically low and has had a minimal impact on the operating performance of our shopping centers; however, more recently inflation has been increasing and may become a greater concern within the current economy. Substantially all of our long-term leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling us to receive percentage rent based on tenants’ gross sales, which generally increase as prices rise; and/or escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses are often related to increases in the consumer price index or similar inflation indices. In addition, many of our leases are for terms of less than ten years, which permits us to seek increased rents upon re-rental at market rates. 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.

 

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market Risk

We are exposed to two components of interest-rate risk. Our Line has a variable interest rate that is based upon LIBOR plus a spread of 55 basis points. LIBOR rates charged on the Line change monthly. Based upon our current Line balance, a 1% increase in LIBOR would equate to an additional $2.1 million of interest costs per year. The spread on the Line is dependent upon maintaining specific credit ratings. If our credit ratings were downgraded, the spread on the Line would increase resulting in higher interest costs. We are also exposed to higher interest rates when we refinance our existing long-term fixed rate debt. The objective of our interest-rate risk management is to limit the impact of interest-rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we borrow primarily at fixed interest rates and may enter into derivative financial instruments such as interest-rate swaps, caps or treasury locks in order to mitigate our interest-rate risk on a related financial instrument. We do not enter into derivative or interest-rate transactions for speculative purposes. We have approximately $428.1 million of fixed rate debt maturing in 2010 and 2011, which includes $400.0 million of unsecured long-term debt. During 2006 we entered into four forward-starting interest rate swaps totaling $396.7 million with fixed rates of 5.399%, 5.415%, 5.399% and 5.415%. We designated these swaps as cash flow hedges to fix the future interest rates on the $400.0 million of financing expected to occur in 2010 and 2011.

Our interest-rate risk is monitored using a variety of techniques. The table below presents the principal cash flows (in thousands), weighted average interest rates of remaining debt, and the fair value of total debt (in thousands) as of December 31, 2007, by year of expected maturity to evaluate the expected cash flows and sensitivity to interest-rate changes.

 

     2008     2009     2010     2011     2012     Thereafter     Total    Fair
Value

Fixed rate debt

   $ 23,510     57,026     181,009     254,963     253,893     1,024,254     1,794,655    1,288,052

Average interest rate for all fixed rate debt

     6.42 %   6.37 %   6.14 %   5.80 %   5.57 %   5.54 %   —      —  

Variable rate LIBOR debt

   $ 162     5,659     —       208,000     —       —       213,821    213,821

Average interest rate for all variable rate debt

     5.41 %   5.41 %   5.41 %   —       —       —       —      —  

As the table incorporates only those exposures that exist as of December 31, 2007, it does not consider those exposures or positions that could arise after that date. Moreover, because firm commitments are not presented in the table above, the information presented above has limited predictive value. As a result, our ultimate realized gain or loss with respect to interest-rate fluctuations will depend on the exposures that arise during the period, our hedging strategies at that time, and actual interest rates.

 

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Item 8. Consolidated Financial Statements and Supplementary Data

Regency Centers Corporation

Index to Financial Statements

 

Regency Centers Corporation

  

Reports of Independent Registered Public Accounting Firm

   61

Consolidated Balance Sheets as of December 31, 2007 and 2006

   63

Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005

   64

Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss) for the years ended December 31, 2007, 2006 and 2005

   65

Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005

   66

Notes to Consolidated Financial Statements

   68

Financial Statement Schedule

  

Schedule III—Regency Centers Corporation Combined Real Estate and Accumulated Depreciation—December 31, 2007

   93

All other schedules are omitted because of the absence of conditions under which they are required, materiality or because information required therein is shown in the consolidated financial statements or notes thereto.

 

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Index to Financial Statements

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Regency Centers Corporation:

We have audited the accompanying consolidated balance sheets of Regency Centers Corporation and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2007. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedule III. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Regency Centers Corporation and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Regency Centers Corporation’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 27, 2008 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/    KPMG LLP

Certified Public Accountants

Jacksonville, Florida

February 27, 2008

 

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Index to Financial Statements

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Regency Centers Corporation:

We have audited Regency Centers Corporation’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Regency Centers Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Regency Centers Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Regency Centers Corporation as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2007, and our report dated February 27, 2008, expressed an unqualified opinion on those consolidated financial statements.

/s/    KPMG LLP

Certified Public Accountants

Jacksonville, Florida

February 27, 2008

 

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Index to Financial Statements

REGENCY CENTERS CORPORATION

Consolidated Balance Sheets

December 31, 2007 and 2006

(in thousands, except share data)

 

     2007     2006  

Assets

    

Real estate investments at cost (notes 2, 3, 4 and 12):

    

Land

   $ 968,859     862,851  

Buildings and improvements

     2,090,497     1,963,634  
              
     3,059,356     2,826,485  

Less: accumulated depreciation

     497,498     427,389  
              
     2,561,858     2,399,096  

Properties in development

     905,929     615,450  

Operating properties held for sale, net

     —       25,608  

Investments in real estate partnerships

     432,910     434,090  
              

Net real estate investments

     3,900,697     3,474,244  

Cash and cash equivalents

     18,668     34,046  

Notes receivable (note 5)

     44,543     19,988  

Tenant receivables, net of allowance for uncollectible accounts of $2,482 and $3,532 at December 31, 2007 and 2006, respectively

     75,441     67,162  

Deferred costs, less accumulated amortization of $43,470 and $36,227 at December 31, 2007 and 2006, respectively

     52,784     40,989  

Acquired lease intangible assets, less accumulated amortization of $14,914 and $10,511 at December 31, 2007 and 2006, respectively (note 6)

     17,228     12,315  

Other assets

     33,651     23,041  
              
   $ 4,143,012     3,671,785  
              

Liabilities and Stockholders’ Equity

    

Liabilities:

    

Notes payable (note 7)

   $ 1,799,975     1,454,386  

Unsecured line of credit (note 7)

     208,000     121,000  

Accounts payable and other liabilities

     164,479     140,940  

Acquired lease intangible liabilities, less accumulated accretion of $6,371 and $4,331 at December 31, 2007 and 2006, respectively (note 6)

     10,354     7,729  

Tenants’ security and escrow deposits

     11,436     10,517  
              

Total liabilities

     2,194,244     1,734,572  
              

Preferred units (note 9)

     49,158     49,158  

Exchangeable operating partnership units, aggregate redemption value of $30,543 at December 31, 2007

     10,832     16,941  

Limited partners’ interest in consolidated partnerships

     18,392     17,797  
              

Total minority interest

     78,382     83,896  
              

Commitments and contingencies (notes 12 and 13)

    

Stockholders’ equity (notes 8, 9, 10, and 11):

    

Preferred stock, $.01 par value per share, 30,000,000 shares authorized; 3,000,000 Series 5 and 800,000 Series 3 and 4 shares issued and outstanding at both December 31, 2007 and 2006 with liquidation preferences of $25 and $250 per share, respectively

     275,000     275,000  

Common stock $.01 par value per share, 150,000,000 shares authorized; 75,168,662 and 74,431,787 shares issued at December 31, 2007 and 2006, respectively

     752     744  

Treasury stock at cost, 5,530,025 and 5,413,792 shares held at December 31, 2007 and 2006, respectively

     (111,414 )   (111,414 )

Additional paid in capital

     1,766,280     1,744,201  

Accumulated other comprehensive income (loss)

     (18,916 )   (13,317 )

Distributions in excess of net income

     (41,316 )   (41,897 )
              

Total stockholders’ equity

     1,870,386     1,853,317  
              
   $ 4,143,012     3,671,785  
              

See accompanying notes to consolidated financial statements.

 

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Index to Financial Statements

REGENCY CENTERS CORPORATION

Consolidated Statements of Operations

For the years ended December 31, 2007, 2006 and 2005

(in thousands, except per share data)

 

     2007     2006     2005  

Revenues:

      

Minimum rent (note 12)

   $ 320,323     294,728     273,382  

Percentage rent

     4,661     4,428     4,364  

Recoveries from tenants

     93,460     86,007     77,858  

Management, acquisition and other fees

     33,064     31,805     28,019  
                    

Total revenues

     451,508     416,968     383,623  
                    

Operating expenses:

      

Depreciation and amortization

     93,257     84,160     76,698  

Operating and maintenance

     56,930     50,981     49,429  

General and administrative

     50,580     45,495     37,815  

Real estate taxes

     45,916     42,796     38,558  

Other expenses

     10,081     15,928     2,759  
                    

Total operating expenses

     256,764     239,360     205,259  
                    

Other expense (income):

      

Interest expense, net of interest income of $3,079, $4,232 and $2,361 in 2007, 2006 and 2005, respectively

     82,494     79,770     86,530  

Gain on sale of operating properties and properties in development

     (52,215 )   (65,600 )   (18,971 )
                    

Total other expense (income)

     30,279     14,170     67,559  
                    

Income before minority interests and equity in income (loss) of investments in real estate partnerships

     164,465     163,438     110,805  

Minority interest of preferred units

     (3,725 )   (3,725 )   (8,105 )

Minority interest of exchangeable operating partnership units

     (1,424 )   (2,045 )   (1,970 )

Minority interest of limited partners

     (990 )   (4,863 )   (263 )

Equity in income (loss) of investments in real estate partnerships (note 4)

     18,093     2,580     (2,908 )
                    

Income from continuing operations

     176,419     155,385     97,559  

Discontinued operations, net (note 3):

      

Operating income from discontinued operations

     1,947     4,759     11,848  

Gain on sale of operating properties and properties in development

     25,285     58,367     53,240  
                    

Income from discontinued operations

     27,232     63,126     65,088  
                    

Net income

     203,651     218,511     162,647  

Preferred stock dividends

     (19,675 )   (19,675 )   (16,744 )
                    

Net income for common stockholders

   $ 183,976     198,836     145,903  
                    

Income per common share—basic (note 11):

      

Continuing operations

   $ 2.26     1.98     1.24  

Discontinued operations

     0.39     0.93     1.01  
                    

Net income for common stockholders per share

   $ 2.65     2.91     2.25  
                    

Income per common share—diluted (note 11):

      

Continuing operations

   $ 2.26     1.97     1.23  

Discontinued operations

     0.39     0.92     1.00  
                    

Net income for common stockholders per share

   $ 2.65     2.89     2.23  
                    

See accompanying notes to consolidated financial statements.

 

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Index to Financial Statements

REGENCY CENTERS CORPORATION

Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss)

For the years ended December 31, 2007, 2006 and 2005

(in thousands, except per share data)

 

    Preferred
Stock
  Common
Stock
  Treasury
Stock
    Additional
Paid In
Capital
    Restricted
Stock
Deferred
Compensation
    Accumulated
Other
Comprehensive
Income (Loss)
    Distributions
in Excess of
Net Income
    Total
Stockholders’
Equity
 

Balance at December 31, 2004

  $ 200,000   680   (111,414 )   1,511,156     (16,844 )   (5,291 )   (79,570 )   1,498,717  

Comprehensive Income (note 8):

               

Net income

    —     —     —       —       —       —       162,647     162,647  

Loss on settlement of derivative instruments

    —     —     —       —       —       (7,310 )   —       (7,310 )

Amortization of loss on derivative instruments

    —     —     —       —       —       909     —       909  
                   

Total comprehensive income

                156,246  

Reclassification of unearned deferred compensation upon adoption of FAS 123(R)

    —     —     —       (16,844 )   16,844     —       —       —    

Restricted stock issued, net of amortization (note 10)

    —     4   —       16,951     —       —       —       16,955  

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

    —     3   —       1,484     —       —       —       1,487  

Tax benefit for issuance of stock options

    —     —     —       305     —       —       —       305  

Common stock issued for partnership units exchanged

    —     3   —       6,383     —       —       —       6,386  

Common stock issued for stock offering (note 9)

    —     43   —       199,632     —       —       —       199,675  

Series 5 preferred stock issued (note 9)

    75,000   —     —       (2,284 )   —       —       —       72,716  

Reallocation of minority interest

    —     —     —       (3,163 )   —       —       —       (3,163 )

Cash dividends declared:

               

Preferred stock

    —     —     —       —       —       —       (16,744 )   (16,744 )

Common stock ($2.20 per share)

    —     —     —       —       —       —       (143,755 )   (143,755 )
                                             

Balance at December 31, 2005

  $ 275,000   733   (111,414 )   1,713,620     —       (11,692 )   (77,422 )   1,788,825  

Comprehensive Income (note 8):

               

Net income

    —     —     —       —       —       —       218,511     218,511  

Amortization of loss on derivative instruments

    —     —     —       —       —       1,306     —       1,306  

Change in fair value of derivative instruments

    —     —     —       —       —       (2,931 )   —       (2,931 )
                   

Total comprehensive income

                216,886  

Restricted stock issued, net of amortization (note 10)

    —     3   —       16,581     —       —       —       16,584  

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

    —     3   —       1,169     —       —       —       1,172  

Tax benefit for issuance of stock options

    —     —     —       1,624     —       —       —       1,624  

Common stock issued for partnership units exchanged

    —     5   —       21,490     —       —       —       21,495  

Reallocation of minority interest

    —     —     —       (10,283 )   —       —       —       (10,283 )

Cash dividends declared:

               

Preferred stock

    —     —     —       —       —       —       (19,675 )   (19,675 )

Common stock ($2.38 per share)

    —     —     —       —       —       —       (163,311 )   (163,311 )
                                             

Balance at December 31, 2006

  $ 275,000   744   (111,414 )   1,744,201     —       (13,317 )   (41,897 )   1,853,317  

Comprehensive Income (note 8):

               

Net income

    —     —     —       —       —       —       203,651     203,651  

Amortization of loss on derivative instruments

    —     —     —       —       —       1,306     —       1,306  

Change in fair value of derivative instruments

    —     —     —       —       —       (6,905 )   —       (6,905 )
                   

Total comprehensive income

                198,052  

Restricted stock issued, net of amortization (note 10)

    —     2   —       17,723     —       —       —       17,725  

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

    —     3   —       (3,738 )   —       —       —       (3,735 )

Tax benefit for issuance of stock options

    —     —     —       1,909     —       —       —       1,909  

Common stock issued for partnership units exchanged

    —     3   —       8,604     —       —       —       8,607  

Reallocation of minority interest

    —     —     —       (2,419 )   —       —       —       (2,419 )

Cash dividends declared:

               

Preferred stock

    —     —     —       —       —       —       (19,675 )   (19,675 )

Common stock ($2.64 per share)

    —     —     —       —       —       —       (183,395 )   (183,395 )
                                             

Balance at December 31, 2007

  $ 275,000   752   (111,414 )   1,766,280     —       (18,916 )   (41,316 )   1,870,386  
                                             

See accompanying notes to consolidated financial statements.

 

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Index to Financial Statements

REGENCY CENTERS CORPORATION

Consolidated Statements of Cash Flows

For the years ended December 31, 2007, 2006 and 2005

(in thousands)

 

     2007     2006     2005  

Cash flows from operating activities:

      

Net income

   $ 203,651     218,511     162,647  

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

      

Depreciation and amortization

     93,508     87,413     84,449  

Deferred loan cost and debt premium amortization

     3,249     4,411     2,740  

Stock based compensation

     19,138     17,950     18,755  

Minority interest of preferred units

     3,725     3,725     8,105  

Minority interest of exchangeable operating partnership units

     1,650     2,876     3,284  

Minority interest of limited partners

     990     4,863     263  

Equity in (income) loss of investments in real estate partnerships

     (18,093 )   (2,580 )   2,908  

Net gain on sale of properties

     (79,627 )   (124,781 )   (76,664 )

Provision for loss on operating properties

     —       500     550  

Distribution of earnings from operations of investments in real estate partnerships

     30,547     28,788     28,661  

Hedge settlement

     —       —       (7,310 )

Changes in assets and liabilities:

      

Tenant receivables

     (10,040 )   (10,284 )   (1,186 )

Deferred leasing costs

     (9,562 )   (7,285 )   (6,829 )

Other assets

     (15,861 )   (3,508 )   (13,426 )

Accounts payable and other liabilities

     2,101     (2,638 )   (818 )

Above and below market lease intangibles, net

     (1,926 )   (1,387 )   (954 )

Tenants’ security and escrow deposits

     847     241     228  
                    

Net cash provided by operating activities

     224,297     216,815     205,403  
                    

Cash flows from investing activities:

      

Acquisition of operating real estate

     (63,117 )   (19,337 )   —    

Development of real estate including acquisition of land

     (625,412 )   (404,836 )   (326,662 )

Proceeds from sale of real estate investments

     270,981     455,972     237,135  

Repayment (issuance) of notes receivable, net

     545     14,770     (8,456 )

Investments in real estate partnerships

     (42,660 )   (21,790 )   (417,713 )

Distributions received from investments in real estate partnerships

     41,372     13,452     30,918  
                    

Net cash (used in) provided by investing activities

     (418,291 )   38,231     (484,778 )
                    

Cash flows from financing activities:

      

Net proceeds from common stock issuance

     2,383     5,994     205,601  

Net proceeds from issuance of preferred stock

     —       —       72,716  

Redemption of preferred units

     —       —       (54,000 )

Distributions to limited partners in consolidated partnerships, net

     (4,632 )   (2,619 )   (50 )

Distributions to exchangeable operating partnership unit holders

     (1,572 )   (2,270 )   (2,918 )

Distributions to preferred unit holders

     (3,725 )   (3,725 )   (6,709 )

Dividends paid to common stockholders

     (179,325 )   (159,507 )   (141,003 )

Dividends paid to preferred stockholders

     (19,675 )   (19,675 )   (16,744 )

Repayment of fixed rate unsecured notes

     —       —       (100,000 )

Proceeds from issuance of fixed rate unsecured notes

     398,108     —       349,505  

Proceeds (repayment) of unsecured line of credit, net

     87,000     (41,000 )   (38,000 )

Proceeds from notes payable

     —       —       10,000  

Repayment of notes payable

     (89,719 )   (36,131 )   (43,169 )

Scheduled principal payments

     (4,545 )   (4,516 )   (5,499 )

Deferred loan costs

     (5,682 )   (9 )   (3,217 )
                    

Net cash provided by (used in) financing activities

     178,616     (263,458 )   226,513  
                    

Net decrease in cash and cash equivalents

     (15,378 )   (8,412 )   (52,862 )

Cash and cash equivalents at beginning of the year

     34,046     42,458     95,320  
                    

Cash and cash equivalents at end of the year

   $ 18,668     34,046     42,458  
                    

 

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REGENCY CENTERS CORPORATION

Consolidated Statements of Cash Flows—(Continued)

For the years ended December 31, 2007, 2006 and 2005

(in thousands)

 

     2007     2006     2005

Supplemental disclosure of cash flow information:

      

Cash paid for interest (net of capitalized interest of $35,424, $23,952, and $12,400 in 2007, 2006, and 2005, respectively)

   $ 82,833     82,285     84,839
                  

Common stock issued for partnership units exchanged

   $ 8,607     21,495     6,386
                  

Mortgage loans assumed for the acquisition of real estate, at fair value

   $ 42,272     44,000     —  
                  

Real estate contributed as investments in real estate partnerships

   $ 11,007     15,967     10,715
                  

Notes receivable taken in connection with sales of properties in development and out-parcels

   $ 25,099     490     12,370
                  

Change in fair value of derivative instruments

   $ (6,905 )   (2,931 )   —  
                  

Common stock issued for dividend reinvestment plan

   $ 4,070     3,804     2,752
                  

 

See accompanying notes to consolidated financial statements.

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements

December 31, 2007

1. Summary of Significant Accounting Policies

(a) Organization and Principles of Consolidation

General

Regency Centers Corporation (“Regency” or the “Company”) began its operations as a Real Estate Investment Trust (“REIT”) in 1993, and is the managing general partner of its operating partnership, Regency Centers, L.P. (“RCLP” or the “Partnership”). Regency currently owns approximately 99% of the outstanding common partnership units (“Units”) of the Partnership. Regency engages in the ownership, management, leasing, acquisition, and development of retail shopping centers through the Partnership, and has no other assets or liabilities other than through its investment in the Partnership. At December 31, 2007, the Partnership directly owned 232 retail shopping centers and held partial interests in an additional 219 retail shopping centers through investments in joint ventures.

Consolidation

The accompanying consolidated financial statements include the accounts of the Company, the Partnership, its wholly owned subsidiaries, and joint ventures in which the Partnership has a controlling interest. The equity interests of third parties held in the Partnership or its controlled joint ventures are included in the consolidated financial statements as preferred units, exchangeable operating partnership units, or limited partners’ interest in consolidated partnerships. All significant inter-company balances and transactions have been eliminated in the consolidated financial statements.

Investments in real estate partnerships not controlled by the Company (“Unconsolidated Joint Ventures”) are accounted for under the equity method. The Company has evaluated its investment in the Unconsolidated Joint Ventures and has concluded that they are not variable interest entities as defined in Financial Accounting Standards Board (“FASB”) Interpretation No. 46(R) “Consolidation of Variable Interest Entities” (“FIN 46(R)”). Further, the venture partners in the Unconsolidated Joint Ventures have significant ownership rights, including approval over operating budgets and strategic plans, capital spending, sale or financing, and admission of new partners; therefore, the Company has concluded that the equity method of accounting is appropriate for these interests and they do not require consolidation under Emerging Issues Task Force Issue No. 04-5 “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-5”) or the American Institute of Certified Public Accountants’ (“AICPA”) Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures” (“SOP 78-9”). Under the equity method of accounting, investments in the Unconsolidated Joint Ventures are initially recorded at cost, and subsequently increased for additional contributions and allocations of income and reduced for distributions received and allocation of losses. These investments are included in the consolidated financial statements as Investments in real estate partnerships.

Ownership of the Company

Regency has a single class of common stock outstanding and three series of preferred stock outstanding (“Series 3, 4, and 5 Preferred Stock”). The dividends on the Series 3, 4, and 5 Preferred Stock are cumulative and payable in arrears on the last day of each calendar quarter. The Company owns corresponding Series 3, 4, and 5 preferred unit interests (“Series 3, 4, and 5 Preferred Units”) in the Partnership that entitle the Company to income and distributions from the Partnership in amounts equal to the dividends paid on the Company’s Series 3, 4, and 5 Preferred Stock.

Ownership of the Operating Partnership

The Partnership’s capital includes general and limited common Partnership Units, Series 3, 4, and 5 Preferred Units owned by the Company, and Series D Preferred Units owned by institutional investors.

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

 

(a) Organization and Principles of Consolidation (continued)

At December 31, 2007, the Company owned approximately 99% or 69,638,637 Partnership Units of the total 70,112,248 Partnership Units outstanding. Each outstanding common Partnership Unit not owned by the Company is exchangeable for one share of Regency common stock. The Company revalues the minority interest associated with the Partnership Units each quarter to maintain a proportional relationship between the book value of equity associated with common stockholders relative to that of the Partnership Unit holders since both have equivalent rights and the Partnership Units are convertible into shares of common stock on a one-for-one basis.

Net income and distributions of the Partnership are allocable first to the Preferred Units, and the remaining amounts to the general and limited Partnership Units in accordance with their ownership percentage. The Series 3, 4, and 5 Preferred Units owned by the Company are eliminated in consolidation.

(b) Revenues

The Company leases space to tenants under agreements with varying terms. Leases are accounted for as operating leases with minimum rent recognized on a straight-line basis over the term of the lease regardless of when payments are due. Accrued rents are included in tenant receivables. The Company makes estimates of the collectibility of the accounts receivable related to base rents, straight-line rents, expense reimbursements, and other revenue taking into consideration the Company’s experience in the retail sector, available internal and external tenant credit information, payment history, industry trends, tenant credit-worthiness, and remaining lease terms. In some cases, primarily relating to straight-line rents, the collection of these amounts extends beyond one year. As part of the leasing process, the Company may provide the lessee with an allowance for the construction of leasehold improvements. These leasehold improvements are capitalized as part of the building, recorded as tenant improvements, and depreciated over the shorter of the useful life of the improvements or the lease term. If the allowance represents a payment for a purpose other than funding leasehold improvements, or in the event the Company is not considered the owner of the improvements, the allowance is considered to be a lease incentive and is recognized over the lease term as a reduction of rental revenue. Factors considered during this evaluation include, among others, who holds legal title to the improvements as well as other controlling rights provided by the lease agreement (e.g. unilateral control of the tenant space during the build-out process). Determination of the appropriate accounting for the payment of a tenant allowance is made on a lease-by-lease basis, considering the facts and circumstances of the individual tenant lease.

Recognition of lease revenue commences when the lessee is given possession of the leased space upon completion of tenant improvements when the Company is the owner of the leasehold improvements. However, when the leasehold improvements are owned by the tenant, the lease inception date is when the tenant obtains possession of the leased space for purposes of constructing its leasehold improvements.

Substantially all of the lease agreements contain provisions that provide for additional rents based on tenants’ sales volume (percentage rent) and reimbursement of the tenants’ share of real estate taxes, insurance, and common area maintenance (“CAM”) costs. Percentage rents are recognized when the tenants achieve the specified targets as defined in their lease agreements. Recovery of real estate taxes, insurance, and CAM costs are recognized as the respective costs are incurred in accordance with the lease agreements.

The Company accounts for profit recognition on sales of real estate in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 66, “Accounting for Sales of Real Estate” (“Statement 66”). In summary, profits from sales will not be recognized under the full accrual method by the Company unless a sale is consummated; the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property; the Company’s receivable, if applicable, is not subject to future subordination; the Company has transferred to the buyer the usual risks and rewards of ownership; and the Company does not have substantial continuing involvement with the property.

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

(b) Revenues (Continued)

 

The Company has been engaged by joint ventures under agreements to provide asset management, property management, leasing, investing, and financing services for such ventures’ shopping centers. The fees are market-based and generally calculated as a percentage of either revenues earned or the estimated values of the properties managed, and are recognized as services are rendered, when fees due are determinable, and collectibility is reasonably assured.

(c) Real Estate Investments

Land, buildings, and improvements are recorded at cost. All specifically identifiable costs related to development activities are capitalized into properties in development on the consolidated balance sheets and are accounted for in accordance with SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects” (“Statement 67”). In summary, Statement 67 establishes that a rental project changes from nonoperating to operating when it is substantially completed and held available for occupancy. At that time, costs should no longer be capitalized. The capitalized costs include pre-development costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, and direct employee costs incurred during the period of development.

The Company incurs costs prior to land acquisition including contract deposits, as well as legal, engineering, and other external professional fees related to evaluating the feasibility of developing a shopping center. These pre-development costs are included in properties in development. If the Company determines that the development of a particular shopping center is no longer probable, any related pre-development costs previously capitalized are immediately expensed. At December 31, 2007 and 2006, the Company had capitalized pre-development costs of $22.7 million and $23.3 million, respectively of which $10.8 million and $10.0 million, respectively were refundable deposits.

The Company’s method of capitalizing interest is based upon applying its weighted average borrowing rate to that portion of the actual development costs expended. The Company generally ceases interest cost capitalization when the property is available for occupancy upon substantial completion of tenant improvements, but in no event would the Company capitalize interest on the project beyond 12 months after substantial completion of the building shell.

Maintenance and repairs that do not improve or extend the useful lives of the respective assets are recorded in operating and maintenance expense.

Depreciation is computed using the straight-line method over estimated useful lives of up to 40 years for buildings and improvements, the shorter of the useful life or the lease term for tenant improvements, and three to seven years for furniture and equipment.

The Company and the unconsolidated joint ventures allocate the purchase price of assets acquired (net tangible and identifiable intangible assets) and liabilities assumed based on their relative fair values at the date of acquisition pursuant to the provisions of SFAS No. 141, “Business Combinations” (“Statement 141”). Statement 141 provides guidance on the allocation of a portion of the purchase price of a property to intangible assets. The Company’s methodology for this allocation includes estimating an “as-if vacant” fair value of the physical property, which is allocated to land, building, and improvements. The difference between the purchase price and the “as-if vacant” fair value is allocated to intangible assets. There are three categories of intangible assets to be considered: (i) value of in-place leases, (ii) above and below-market value of in-place leases, and (iii) customer relationship value.

The value of in-place leases is estimated based on the value associated with the costs avoided in originating leases compared to the acquired in-place leases as well as the value associated with lost rental and recovery revenue during the assumed lease-up period. The value of in-place leases is recorded to amortization expense over the remaining initial term of the respective leases.

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

(c) Real Estate Investments (Continued)

 

Above-market and below-market in-place lease values for acquired properties are recorded based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the comparable in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The value of above-market leases is amortized as a reduction of minimum rent over the remaining terms of the respective leases. The value of below- market leases is accreted as an increase to minimum rent over the remaining terms of the respective leases, including below-market renewal options, if applicable. The Company does not allocate value to customer relationship intangibles if it has pre-existing business relationships with the major retailers in the acquired property since they do not provide incremental value over the Company’s existing relationships.

The Company follows the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“Statement 144”). In accordance with Statement 144, the Company classifies an operating property or a property in development as held-for-sale when the Company determines that the property is available for immediate sale in its present condition, the property is being actively marketed for sale, and management believes it is probable that a sale will be consummated. Given the nature of all real estate sales contracts, it is not unusual for such contracts to allow prospective buyers a period of time to evaluate the property prior to formal acceptance of the contract. In addition, certain other matters critical to the final sale, such as financing arrangements, often remain pending even upon contract acceptance. As a result, properties under contract may not close within the expected time period, or may not close at all. Due to these uncertainties, it is not likely that the Company can meet the criteria of Statement 144 prior to the sale formally closing. Therefore, any properties categorized as held-for-sale represent only those properties that management has determined are probable to close within the requirements set forth in Statement 144. Operating properties held-for-sale are carried at the lower of cost or fair value less costs to sell. Depreciation and amortization are suspended during the held-for-sale period.

In accordance with Statement 144, when the Company sells a property or classifies a property as held-for-sale and will not have significant continuing involvement in the operation of the property, the operations and cash flows of the property are eliminated from ongoing operations. Its operations, including any mortgage interest and gain on sale, are reported in discontinued operations so that the operations and cash flows are clearly distinguished. Once classified in discontinued operations, these properties are eliminated from ongoing operations. Prior periods are also re-presented to reflect the operations of these properties as discontinued operations. When the Company sells operating properties to its joint ventures or to third parties, and will have continuing involvement, the operations and gains on sales are included in income from continuing operations.

The Company reviews its real estate portfolio for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable based upon expected undiscounted cash flows from the property. The Company determines impairment by comparing the property’s carrying value to an estimate of fair value based upon varying methods such as i) estimating future discounted cash flows, ii) determining resale values by market, or iii) applying a capitalization rate to net operating income using prevailing rates in a given market. These methods of determining fair value can fluctuate significantly as a result of a number of factors, including changes in the general economy of those markets in which the Company operates, tenant credit quality, and demand for new retail stores. In the event that the carrying amount of a property is not recoverable and exceeds its fair value, the Company will write down the asset to fair value for “held-and-used” assets and to fair value less costs to sell for “held-for-sale” assets. During 2006 and 2005, the Company established a provision for loss of $500,000 and $550,000 based upon the criteria described above. If there was an impairment recorded on properties subsequently sold to third parties it would be included in operating income from discontinued operations.

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

 

(d) Income Taxes

The Company believes it qualifies, and intends to continue to qualify, as a REIT under the Internal Revenue Code (the “Code”). As a REIT, the Company will generally not be subject to federal income tax, provided that distributions to its stockholders are at least equal to REIT taxable income.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which these temporary differences are expected to be recovered or settled.

Earnings and profits, which determine the taxability of dividends to stockholders, differs from net income reported for financial reporting purposes primarily because of differences in depreciable lives and cost bases of the shopping centers, as well as other timing differences.

The net book basis of real estate assets exceeds the tax basis by approximately $161.2 million and $158.4 million at December 31, 2007 and 2006, respectively, primarily due to the difference between the cost basis of the assets acquired and their carryover basis recorded for tax purposes.

The following summarizes the tax status of dividends paid during the respective years:

 

     2007     2006     2005  

Dividend per share

   $ 2.64     2.38     2.20  

Ordinary income

     85 %   64 %   79 %

Capital gain

     11 %   21 %   11 %

Unrecaptured Section 1250 gain

     4 %   15 %   10 %

Regency Realty Group, Inc. (“RRG”), a wholly-owned subsidiary of RCLP, is a Taxable REIT Subsidiary as defined in Section 856(l) of the Code. RRG is subject to federal and state income taxes and files separate tax returns. Income tax expense consists of the following for the years ended December 31, 2007, 2006 and 2005 (in thousands):

 

     2007    2006    2005  

Income tax expense

        

Current

   $ 5,069    10,256    4,980  

Deferred

     530    1,516    (891 )
                  

Total income tax expense

   $ 5,599    11,772    4,089  
                  

Income tax expense is included in either other expenses if the related income is from continuing operations or discontinued operations on the consolidated statements of operations as follows for the years ended December 31, 2007, 2006, and 2005 (in thousands):

 

     2007    2006    2005

Income tax expense from:

        

Continuing operations

   $ 3,597    11,772    494

Discontinued operations

     2,002    —      3,595
                

Total income tax expense

   $ 5,599    11,772    4,089
                

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

(d) Income Taxes (Continued)

 

Income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 35% to pretax income for the years ended December 31, 2007 and 2006, respectively and 34% for the year ended December 31, 2005 as follows (in thousands):

 

     2007    2006    2005

Computed expected tax expense

   $ 3,974    4,094    3,304

Increase in income tax resulting from state taxes

     443    456    368

All other items

     1,182    7,222    417
                

Total income tax expense

   $ 5,599    11,772    4,089
                

All other items principally represent the tax effect of gains associated with the sale of properties to unconsolidated ventures.

RRG had net deferred tax assets of $8.8 million and $9.7 million at December 31, 2007 and 2006, respectively. The majority of the deferred tax assets relate to deferred interest expense and tax costs capitalized on projects under development. No valuation allowance was provided and the Company believes it is more likely than not that the future benefits associated with these deferred tax assets will be realized.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. This Interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. Under FIN 48, tax positions shall initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company adopted this Interpretation effective January 1, 2007. The Company does not have any material unrecognized tax benefits; therefore, the adoption of FIN 48 did not have a material impact on the Company’s consolidated financial statements. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open years (after 2003 for federal and state) based on an assessment of many factors including past experience and interpretations of tax laws applied to the facts of each matter.

(e) Deferred Costs

Deferred costs include leasing costs and loan costs, net of accumulated amortization. Such costs are amortized over the periods through lease expiration or loan maturity, respectively. Deferred leasing costs consist of internal and external commissions associated with leasing the Company’s shopping centers. Net deferred leasing costs were $41.2 million and $33.3 million at December 31, 2007 and 2006, respectively. Deferred loan costs consist of initial direct and incremental costs associated with financing activities. Net deferred loan costs were $11.6 million and $7.7 million at December 31, 2007 and 2006, respectively.

(f) Earnings per Share and Treasury Stock

The Company calculates earnings per share in accordance with SFAS No. 128, “Earnings per Share” (“Statement 128”). Basic earnings per share of common stock is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the conversion of obligations and the assumed

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

(f) Earnings per Share and Treasury Stock (Continued)

 

exercises of securities including the effects of shares issuable under the Company’s share-based payment arrangements, if dilutive. See Note 11 for the calculation of earnings per share (“EPS”).

Repurchases of the Company’s common stock are recorded at cost and are reflected as Treasury stock in the consolidated statements of stockholders’ equity and comprehensive income (loss). Outstanding shares do not include treasury shares.

(g) Cash and Cash Equivalents

Any instruments which have an original maturity of 90 days or less when purchased are considered cash equivalents. At December 31, 2007 and 2006, $8.0 million and $2.3 million of the cash available was restricted, respectively.

(h) Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(i) Stock-Based Compensation

Regency grants stock-based compensation to its employees and directors. When Regency issues common shares as compensation, it receives a comparable number of common units from the Partnership including stock options. Regency is committed to contribute to the Partnership all proceeds from the exercise of stock options or other share-based awards granted under Regency’s Long-Term Omnibus Plan (the “Plan”). Accordingly, Regency’s ownership in the Partnership will increase based on the amount of proceeds contributed to the Partnership for the common units it receives. As a result of the issuance of common units to Regency for stock-based compensation, the Partnership accounts for stock-based compensation in the same manner as Regency.

The Company recognizes stock-based compensation in accordance with SFAS No. 123(R) “Share-Based Payment” (“Statement 123(R)”). The Company adopted Statement 123(R) effective January 1, 2005 by applying the “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of Statement 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of Statement 123 for all awards granted to employees prior to the effective date of Statement 123(R) that remain unvested on the effective date. See Note 10 for further discussion.

(j) Segment Reporting

The Company’s business is investing in retail shopping centers through direct ownership or through joint ventures. The Company actively manages its portfolio of retail shopping centers and may from time to time make decisions to sell lower performing properties or developments not meeting its long-term investment objectives. The proceeds from sales are reinvested into higher quality retail shopping centers through acquisitions or new developments, which management believes will meet its planned rate of return. It is management’s intent that all retail shopping centers will be owned or developed for investment purposes; however, the Company may decide to sell all or a portion of a development upon completion. The Company’s revenue and net income are generated from the operation of its investment portfolio. The Company also earns fees from third parties for services provided to manage and lease retail shopping centers owned through joint ventures.

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

(j) Segment Reporting (Continued)

 

The Company’s portfolio is located throughout the United States; however, management does not distinguish or group its operations on a geographical basis for purposes of allocating resources or measuring performance. The Company reviews operating and financial data for each property on an individual basis; therefore, the Company defines an operating segment as its individual properties. No individual property constitutes more than 10% of the Company’s combined revenue, net income or assets, and thus the individual properties have been aggregated into one reportable segment based upon their similarities with regard to both the nature and economics of the centers, tenants and operational processes, as well as long-term average financial performance. In addition, no single tenant accounts for 6% or more of revenue and none of the shopping centers are located outside the United States.

(k) Derivative Financial Instruments

The Company adopted SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“Statement 133”) as amended by SFAS No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”. Statement 133 requires that all derivative instruments, whether designated in hedging relationships or not, be recorded on the balance sheet at their fair value. Gains or losses resulting from changes in the values of those derivatives are accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The Company’s use of derivative financial instruments is normally to mitigate its interest rate risk on a related financial instrument or forecasted transaction through the use of interest rate swaps. The Company designates these interest rate swaps as cash flow hedges.

Statement 133 requires that changes in fair value of derivatives that qualify as cash flow hedges be recognized in other comprehensive income (“OCI”) while the ineffective portion of the derivative’s change in fair value be recognized in the income statement as interest expense. Upon the settlement of a hedge, gains and losses associated with the transaction are recorded in OCI and amortized over the underlying term of the hedge transaction. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking various hedge transactions. The Company assesses, both at inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged items.

In assessing the hedge, the Company uses standard market conventions and techniques such as discounted cash flow analysis, option pricing models, and termination costs at each balance sheet date. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized. See Note 8 for further discussion.

(l) Redeemable Minority Interests

EITF D-98 “Classification and Measurement of Redeemable Securities,” clarifies Rule 5-02.28 of Regulation S-X. This rule requires securities that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable for (i) at a fixed or determinable price on a fixed or determinable date; (ii) at the option of the holder; or (iii) upon the occurrence of an event that is not solely within the control of the issuer. Minority interest in the operating partnership is classified as minority interest of exchangeable operating partnership units (“OP Units”) in the accompanying balance sheets. These OP Units are redeemable at the option of the holder for a like number of shares of common stock of Regency or cash, at the Company’s discretion. As of December 31, 2007 and 2006, there were 473,611 and 740,826 redeemable OP Units outstanding, respectively. The redemption value of the redeemable OP Units is based on the closing market price of Regency Centers Corporation common stock, which was $64.49 per share as of December 31, 2007 and $78.17 per share as of December 31, 2006 and aggregated $30.5 million and $57.9 million, respectively.

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

 

(m) Financial Instruments with Characteristics of Both Liabilities and Equity

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“Statement 150”). Statement 150 affects the accounting for certain financial instruments, which requires companies having consolidated entities with specified termination dates to treat minority owners’ interests in such entities as liabilities in an amount based on the fair value of the entities. Although Statement 150 was originally effective July 1, 2003, the FASB has indefinitely deferred certain provisions related to classification and measurement requirements for mandatory redeemable financial instruments that become subject to Statement 150 solely as a result of consolidation, including minority interests of entities with specified termination dates.

At December 31, 2007, the Company held a majority interest in four consolidated entities with specified termination dates through 2049. The minority owners’ interests in these entities will be settled upon termination by distribution or transfer of either cash or specific assets of the underlying entities. The estimated fair value of minority interests in entities with specified termination dates was approximately $10.2 million at December 31, 2007. Their related carrying value is $5.7 million and $1.3 million as of December 31, 2007 and 2006, respectively which is included within limited partners’ interest in consolidated partnerships in the accompanying consolidated balance sheets. The Company has no other financial instruments that are affected by Statement 150.

(n) Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements” (“Statement 160”). This Statement, among other things, establishes accounting and reporting standards for a parent company’s interest in a subsidiary. This Statement is effective for financial statements issued for fiscal years beginning on or after December 15, 2008. The Company is currently evaluating the impact of adopting the statement.

In December 2007, the FASB issued SFAS No. 141(R) “Business Combinations” (“Statement 141(R)”). This Statement, among other things, establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. This Statement also establishes disclosure requirements of the acquirer to enable users of the financial statements to evaluate the effect of the business combination. This Statement is effective for financial statements issued for fiscal years beginning on or after December 15, 2008. The impact on the Company will be reflected at the time of any acquisition which meets the requirement.

In November 2007, the EITF issued Issue No. 07-6 “Accounting for the Sale of Real Estate to the Requirements of FASB Statement No. 66, Accounting for the Sales of Real Estate, When the Agreement Includes a Buy-Sell Clause” (“EITF 07-6”). EITF 07-6 is applicable to investors who enter into an arrangement to create a jointly owned entity, one investor sells real estate to that entity, and a buy-sell clause is included. This EITF is effective for new arrangements entered into in fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this EITF.

In February 2007, the FASB Issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“Statement 159”). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The Statement also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. Statement 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, although early application is allowed. The Company does not believe that the adoption of Statement 159 will have a material effect on its consolidated financial statements.

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

(n) Recent Accounting Pronouncements (Continued)

 

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements” (“Statement 157”). This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies to accounting pronouncements that require or permit fair value measurements, except for share-based payments transactions under Statement 123(R). This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. In February 2008, the FASB amended Statement 157 with FASB Staff Position “Effective Date of FASB Statement No. 157” (“FSP 157-2”) to delay the effective date of Statement 157 for nonfinancial assets and nonfinancial liabilities to be effective for financial statements issued for fiscal years beginning after November 15, 2008. Although Statement 157 will require remeasurements of the derivative financial instruments, the Company does not believe adoption of this Statement will have a material effect on its consolidated financial statements for either financial or nonfinancial assets or liabilities.

(o) Reclassifications

Certain reclassifications have been made to the 2006 and 2005 amounts to conform to classifications adopted in 2007.

2. Real Estate Investments

During 2007, the Company acquired five shopping centers for a purchase price of $106.0 million which included the assumption of $42.3 million in debt, recorded net of a $1.2 million debt discount. Acquired lease intangible assets and acquired lease intangible liabilities of $9.3 million and $4.7 million, respectively, were recorded for these acquisitions. During 2006, the Company acquired one shopping center for a purchase price of $63.1 million which included the assumption of $44.0 million in debt. In accordance with Statement 141, acquired lease intangible assets and acquired lease intangible liabilities of $6.1 million and $5.0 million, respectively were recorded for this acquisition. The acquisitions in 2007 and 2006 were accounted for as purchase business combinations and their results of operations are included in the consolidated financial statements from the date of acquisition.

3. Discontinued Operations

Regency maintains a conservative capital structure to fund its growth program without compromising its investment-grade ratings. This approach is founded on a self-funding business model which utilizes center “recycling” as a key component and requires ongoing monitoring of each center to ensure that it meets Regency’s investment standards. This recycling strategy calls for the Company to sell properties that do not measure up to its standards and re-deploy the proceeds into new, higher-quality developments and acquisitions that are expected to generate sustainable revenue growth and more attractive returns.

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

3. Discontinued Operations (Continued)

 

During 2007, the Company sold 100% of its interest in six properties for net proceeds of $109.0 million. The combined operating income and gain from these properties were reclassified to discontinued operations. The revenues from properties included in discontinued operations, includes properties sold in 2007, 2006, and 2005, and operating properties held-for-sale, were $4.4 million, $15.4 million, and $32.7 million, for the three years ended December 31, 2007, 2006, and 2005, respectively. As of December 31, 2007, the Company did not have any properties classified as held-for-sale. The operating income and gains from properties included in discontinued operations are reported net of minority interest of exchangeable operating partnership units and income taxes, if the property is sold by RRG and, are summarized as follows for the years ended December 31, 2007, 2006, and 2005 (in thousands):

 

     2007    2006    2005
     Operating
Income
   Gain on
sale of
Properties
   Operating
Income
   Gain on
sale of
Properties
   Operating
Income
   Gain on
sale of
Properties

Operations and gain

   $ 2,048    27,411    4,775    59,181    12,304    57,693

Less: Minority interest

     16    209    16    814    273    1,041

Less: Income taxes

     85    1,917    —      —      183    3,412
                               

Discontinued operations, net

   $ 1,947    25,285    4,759    58,367    11,848    53,240
                               

4. Investments in Real Estate Partnerships

The Company accounts for all investments in which it owns 50% or less and does not have a controlling financial interest using the equity method. The Company has determined that these investments are not variable interest entities as defined in FIN 46(R) and do not require consolidation under EITF 04-5 or SOP 78-9, and therefore are subject to the voting interest model in determining its basis of accounting. Major decisions, including property acquisitions and dispositions, financings, annual budgets, and dissolution of the ventures are subject to the approval of all partners. The Company’s investment in these partnerships was $432.9 million and $434.1 million at December 31, 2007 and 2006, respectively. The difference between the carrying amount of these investments and the underlying equity in net assets was $17.8 million and $18.1 million at December 31, 2007 and 2006, respectively. This amount is accreted to equity in income of investments in real estate partnerships over the expected useful lives of the properties and other intangible assets which range in lives from 10 to 40 years. Net income or loss from these partnerships, which includes all operating results and gains on sales of properties within the joint ventures, is allocated to the Company in accordance with the respective partnership agreements. Such allocations of net income or loss are recorded in equity in income (loss) of investments in real estate partnerships in the accompanying consolidated statements of operations.

Cash distributions of normal operating earnings from investments in real estate partnerships are presented in cash flows from operations in the consolidated statements of cash flows. Cash distributions from the sale of a property or loan proceeds received from the placement of debt on a property included in investments in real estate partnerships are presented in cash flows from investing activities in the consolidated statements of cash flows.

Investments in real estate partnerships are comprised primarily of joint ventures with three unrelated co-investment partners and a recently formed open-end real estate fund (“Regency Retail Partners” or the “Fund”), as further described below. In addition to the Company earning its pro-rata share of net income (loss) in each of the partnerships, these partnerships pay the Company fees for asset management, property management, leasing, investing, and financing services. During 2007, 2006 and 2005, the Company recorded fees from these joint ventures of $32.3 million, $30.9 million and $26.8 million, respectively.

 

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Table of Contents
Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

4. Investments in Real Estate Partnerships (Continued)

 

The Company co-invests with the Oregon Public Employees Retirement Fund in three joint ventures (collectively “Columbia”) in which the Company has ownership interests of 20% or 30%. As of December 31, 2007, Columbia owned 28 shopping centers, had total assets of $648.2 million and net income of $12.7 million for the year then ended of which the Company’s share of the venture’s total assets and net income was $142.1 million and $2.6 million, respectively. During 2007, Columbia acquired eight shopping centers from third parties for $88.7 million. The Company contributed $9.3 million for its proportionate share of the purchase price, which was net of $15.2 million of assumed mortgage debt and $31.1 million in financing obtained by Columbia. During 2006 Columbia acquired four shopping centers from third parties for $97.0 million. The Company contributed $9.6 million for its proportionate share of the purchase price, which was net of $36.4 million of assumed mortgage debt and $13.3 million of financing obtained by Columbia.

The Company co-invests with the California State Teachers’ Retirement System (“CalSTRS”) in a joint venture (“RegCal”) in which the Company has an ownership interest of 25%. As of December 31, 2007, RegCal owned eight shopping centers, had total assets of $167.3 million and net income of $2.8 million for the year then ended of which the Company’s share of the venture’s total assets and net income was $41.8 million and $662,217, respectively. During 2007, CalSTRS sold one shopping center to an unrelated party for $13.2 million for a gain of $1.4 million. During 2006, RegCal acquired two shopping centers from unrelated parties for a purchase price of $37.3 million. The Company contributed $4.1 million for its proportionate share of the purchase price, which was net of financing obtained by RegCal.

The Company co-invests with Macquarie CountryWide Trust of Australia (“MCW”) in five joint ventures, two in which the Company has an ownership interest of 25% (collectively, “MCWR I”), two in which it has an ownership interest of 24.95% (collectively, “MCWR II”), and one in which it has an ownership interest of 16.35% (“MCWR-DESCO”).

As of December 31, 2007, MCWR I owned 42 shopping centers, had total assets of $612.0 million, and net income of $32.7 million for the year then ended of which the Company’s share of the venture’s total assets and net income was $153.1 million and $10.3 million, respectively. During 2007, MCWR I purchased one shopping center from a third party for $23.0 million, net of $10.8 million of assumed mortgage debt, and the Company contributed $2.2 million for its pro-rata share of the purchase price. During 2007, MCWR I sold nine shopping centers to unrelated parties for $137.4 million for a gain of $22.6 million. During 2006 MCWR I purchased one shopping center from a third party for $25.0 million. The Company contributed $748,466 for its proportionate share of the purchase price, which was net of $12.5 million of assumed mortgage debt and $10.4 million in 1031 proceeds. During 2006, MCWR I sold two shopping centers to unrelated parties for $28.0 million for a gain of $7.8 million.

On June 1, 2005, MCWR II closed on the acquisition of a retail shopping center portfolio (the “First Washington Portfolio”) for a purchase price of approximately $2.8 billion, including the assumption of approximately $68.6 million of mortgage debt and the issuance of approximately $1.6 billion of new mortgage loans on the properties acquired. The First Washington Portfolio acquisition was accounted for as a purchase business combination by MCWR II. At December 31, 2005, MCWR II was owned 64.95% by an affiliate of MCW, 34.95% by Regency and 0.1% by Macquarie-Regency Management, LLC (“US Manager”). US Manager is owned 50% by Regency and 50% by an affiliate of Macquarie Bank Limited. On January 13, 2006, the Company sold a portion of its investment in MCWR II to MCW which reduced its ownership interest from 35% to 24.95% for net cash of $113.2 million which is reflected in proceeds from sale of real estate investments in the consolidated statements of cash flows. The proceeds from the sale were used to reduce the unsecured line of credit.

 

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Table of Contents
Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

4. Investments in Real Estate Partnerships (Continued)

 

Regency has the ability to receive additional acquisition fees of approximately $5.2 million (the “Contingent Acquisition Fees”) deferred from the original acquisition date that are subject to achieving cumulative targeted income levels through 2008. The Contingent Acquisition Fees will only be recognized if earned, and the recognition of income will be limited to that percentage of MCWR II, or 75.05%, of the joint venture not owned by the Company.

As of December 31, 2007, MCWR II owned 96 shopping centers, had total assets of $2.6 billion and recorded a net loss of $13.1 million for the year ended and the Company’s share of the venture’s total assets and net loss was $651.0 million and $3.2 million, respectively. As a result of the significant amount of depreciation and amortization expense recorded by MCWR II in connection with the acquisition of the First Washington Portfolio, the joint venture may continue to report a net loss in future years, but is expected to produce positive cash flow from operations. During 2007, MCWR II sold one shopping center to an unrelated party for $13.5 million and recognized a gain of $560,169. During 2006, MCWR II acquired four development properties from the Company for a net sales price of $62.4 million and Regency received cash of $58.4 million. During 2006, MCWR II sold eight shopping centers for $122.4 million to unrelated parties for a gain of $1.5 million.

On August 10, 2007, MCWR-DESCO closed on the acquisition of 32 retail centers for a purchase price of approximately $396.2 million including debt of approximately $209.5 million. The Company contributed $29.7 million to the venture for its pro-rata share of the purchase price for its 16.35% equity ownership. MCWR-DESCO had total assets of $419.9 million and a net loss of $3.3 million since inception, primarily related to depreciation and amortization expense. The Company’s share of the venture’s total assets and net loss was $68.7 million and $465,028, respectively.

In December 2006, Regency formed Regency Retail Partners (the “Fund”), an open-end, infinite-life investment fund in which its ownership interest was 26.8%. During the first quarter, the Company reduced its ownership interest to 20% with the admission of additional partners into the Fund and recognized a gain of $2.2 million that had previously been deferred. The Fund has the exclusive right to acquire all Regency-developed large format community centers upon stabilization that meet the Fund’s investment criteria. As of December 31, 2007, the Fund owned seven shopping centers, had total assets of $209.0 million and recorded net income of $1.2 million for the year ended of which the Company’s share of the venture’s total assets and net income was $41.7 million and $325,861, respectively. During 2007, the Fund acquired six community shopping centers from the Company for a sales price of $126.4 million or $102.8 million on a net basis. As part of the transaction the Company provided a short-term note receivable to the Fund of $12.1 million, which the Fund repaid in January 2008. The Company recognized a gain of $42.8 million after excluding its ownership interest.

Recognition of gains from sales to joint ventures is recorded on only that portion of the sales not attributable to the Company’s ownership interest. The gains, operations and cash flows are not recorded as discontinued operations because of Regency’s substantial continuing involvement in these shopping centers. Columbia, RegCal, and the joint ventures with MCW and the Fund intend to continue to acquire retail shopping centers, some of which they may acquire directly from the Company. For those properties acquired from third parties, the Company is required to contribute its pro-rata share of the purchase price to the joint ventures.

 

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Table of Contents
Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

4. Investments in Real Estate Partnerships (Continued)

 

Our investments in real estate partnerships as of December 31, 2007 and 2006 consist of the following (in thousands):

 

     Ownership     2007    2006

Macquarie CountryWide-Regency (MCWR I)

   25.00 %   $ 40,557    60,651

Macquarie CountryWide Direct (MCWR I)

   25.00 %     6,153    6,822

Macquarie CountryWide-Regency II (MCWR II)

   24.95 %     214,450    234,378

Macquarie CountryWide-Regency III (MCWR II)

   24.95 %     812    1,140

Macquarie CountryWide-Regency-DESCO (MCWR-DESCO)

   16.35 %     29,478    —  

Columbia Regency Retail Partners (Columbia)

   20.00 %     33,801    36,096

Cameron Village LLC (Columbia)

   30.00 %     20,364    20,826

Columbia Regency Partners II (Columbia)

   20.00 %     20,326    11,516

RegCal, LLC (RegCal)

   25.00 %     17,110    18,514

Regency Retail Partners (the Fund) (1)

   20.00 %     13,296    5,139

Other investments in real estate partnerships

   50.00 %     36,563    39,008
             

Total

     $ 432,910    434,090
             

 

(1) At December 31, 2006, Regency’s ownership interest in the Fund was 26.8%.

Summarized financial information for the unconsolidated investments on a combined basis, is as follows (in thousands):

 

     December 31,
2007
   December 31,
2006

Investment in real estate, net

   $ 4,422,533    4,029,389

Acquired lease intangible assets, net

     197,495    200,835

Other assets

     147,525    135,451
           

Total assets

     4,767,553    4,365,675
           

Notes payable

     2,719,473    2,435,229

Acquired lease intangible liabilities, net

     86,031    69,336

Other liabilities

     83,734    70,295

Members’ capital

     1,878,315    1,790,815
           

Total liabilities and equity

   $ 4,767,553    4,365,675
           

Unconsolidated investments in real estate partnerships had notes payable of $2.7 billion and $2.4 billion as of December 31, 2007 and 2006, respectively and the Company’s proportionate share of these loans was $653.3 million and $610.8 million, respectively. The loans are primarily non-recourse, but for those that are guaranteed by a joint venture, Regency’s liability does not extend beyond its ownership percentage of the joint venture.

 

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Table of Contents
Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

4. Investments in Real Estate Partnerships (Continued)

 

The revenues and expenses for the unconsolidated investments on a combined basis for the years ended December 31, 2007, 2006, and 2005 are summarized as follows (in thousands):

 

     2007     2006     2005  

Total revenues

   $ 452,068     413,642     303,448  
                    

Operating expenses:

      

Depreciation and amortization

     176,597     173,812     145,669  

Operating and maintenance

     64,917     57,844     42,206  

General and administrative

     9,893     6,839     6,119  

Real estate taxes

     53,845     48,983     33,726  
                    

Total operating expenses

     305,252     287,478     227,720  
                    

Other expense (income):

      

Interest expense, net

     135,760     125,378     83,352  

Gain on sale of real estate

     (38,165 )   (9,225 )   (9,499 )

Other loss (income)

     138     162     (356 )
                    

Total other expense (income)

     97,733     116,315     73,497  
                    

Net income

   $ 49,083     9,849     2,231  
                    

5. Notes Receivable

The Company has notes receivable outstanding of $44.5 million and $20.0 million at December 31, 2007 and 2006, respectively. The notes bear interest ranging from LIBOR plus 175 basis points to 8.50% with maturity dates through November 2014. Of the $44.5 million notes receivable outstanding as of December 31, 2007, $12.1 million was outstanding to the “Fund” in which the Company owns 20%. The loan was provided to the Fund in order to facilitate the Company’s sale of a shopping center to the Fund during December 2007. The loan represented 60% of the sales price of the shopping center sold and the Fund was in receipt of a permanent loan commitment from a third party lender at the sale date. On January 28, 2008, the Fund repaid the note in full.

6. Acquired Lease Intangibles

The Company has acquired lease intangible assets of $17.2 million and $12.3 million at December 31, 2007 and 2006, respectively, of which $16.7 million and $11.7 million, respectively relates to in-place leases. These in-place leases have a remaining weighted average amortization period of 7.5 years and the aggregate amortization expense recorded for these in-place leases was $4.3 million, $3.8 million, and $4.0 million for the years ended December 31, 2007, 2006, and 2005, respectively. The Company has above-market lease intangible assets of $554,849 and $623,130 at December 31, 2007 and 2006, respectively. The remaining weighted average amortization period is 5.3 years and the aggregate amortization expense recorded as a reduction to minimum rent for these above-market leases was $114,623 and $81,753 for the years ended December 31, 2007 and 2006, respectively.

The Company has acquired lease intangible liabilities of $10.4 million and $7.7 million as of December 31, 2007 and 2006, respectively. The remaining weighted average accretion period is 8.2 years and the aggregate amount accreted as an increase to minimum rent for these below-market rents was $2.0 million, $1.5 million, and $953,964 for the years ended December 31, 2007, 2006 and 2005, respectively.

 

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Table of Contents
Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

6. Acquired Lease Intangibles (Continued)

 

The estimated aggregate amortization and net accretion amounts from acquired lease intangibles for each of the next five years are as follows (in thousands):

 

Year Ending December 31,

   Amortization
Expense
   Minimum
Rent, Net

2008

   $ 2,929    1,570

2009

     2,826    1,561

2010

     2,580    1,021

2011

     1,932    993

2012

     1,836    930

7. Notes Payable and Unsecured Line of Credit

The Company’s outstanding debt at December 31, 2007 and 2006 consists of the following (in thousands):

 

     2007    2006

Notes Payable:

     

Fixed rate mortgage loans

   $ 196,915    186,897

Variable rate mortgage loans

     5,821    68,662

Fixed rate unsecured loans

     1,597,239    1,198,827
           

Total notes payable

     1,799,975    1,454,386

Unsecured Line of Credit

     208,000    121,000
           

Total

   $ 2,007,975    1,575,386
           

On June 5, 2007, RCLP completed the sale of $400.0 million of ten-year senior unsecured notes. The 5.875% notes are due June 15, 2017 and were priced at 99.527% to yield 5.938%. The net proceeds were used to reduce the unsecured line of credit (the “Line”).

On February 12, 2007, Regency entered into a new loan agreement under the Line with a commitment of $600.0 million and the right to expand the Line by an additional $150.0 million subject to additional lender syndication. The Line has a four-year term which expires in 2011 with a one-year extension at the Company’s option and the interest rate was reduced to LIBOR plus .55%. Contractual interest rates were 5.425% at December 31, 2007 and 6.125% at December 31, 2006 based on LIBOR plus .55% and .75%, respectively. The balance on the Line was $208.0 million and $121.0 million at December 31, 2007 and 2006, respectively. The spread paid on the Line is dependent upon the Company maintaining specific investment-grade ratings.

On December 5, 2007, Standard and Poor’s Rating Services raised Regency’s corporate credit and senior unsecured ratings to BBB+ from BBB. As a result of this upgrade, the interest rate on the Line was reduced to LIBOR plus .40% effective January 1, 2008.

The Company is also required to comply, and is in compliance, with certain financial covenants such as Minimum Net Worth, Total Liabilities to Gross Asset Value (“GAV”) and Recourse Secured Debt to GAV, Fixed Charge Coverage, and other covenants customary with this type of unsecured financing. The Line is used primarily to finance the acquisition and development of real estate, but is also available for general working-capital purposes.

Mortgage loans are secured and may be prepaid, but could be subject to yield maintenance premiums. Mortgage loans are generally due in monthly installments of principal and interest, and mature over various terms through 2018.

 

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Table of Contents
Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

7. Notes Payable and Unsecured Line of Credit (Continued)

 

We intend to repay mortgage loans at maturity from proceeds from the Line. Fixed interest rates on mortgage loans range from 5.22% to 8.95% and average 6.37%. The Company has one variable rate mortgage loan with an interest rate equal to LIBOR plus a spread of 100 basis points.

The fair value of the Company’s variable rate notes payable and the Line are considered to approximate fair value, since the interest rates on such instruments re-price based on current market conditions. The fair value of fixed rate loans are estimated using cash flows discounted at current market rates available to the Company for debt with similar terms and maturities. Fixed rate loans assumed in connection with real estate acquisitions are recorded in the accompanying consolidated financial statements at fair value. Based on the estimates used by the Company, the fair value of notes payable and the Line is approximately $1.5 billion at December 31, 2007.

As of December 31, 2007, scheduled principal repayments on notes payable and the Line were as follows (in thousands):

 

Scheduled Principal Payments by Year:

   Scheduled
Principal
Payments
   Term Loan
Maturities
    Total
Payments
 

2008

   $ 4,270    19,402     23,672  

2009

     4,079    58,606     62,685  

2010

     4,038    176,971     181,009  

2011 (includes the Line)

     3,830    459,133     462,963  

2012

     4,043    249,850     253,893  

Beyond 5 Years

     9,549    1,014,705     1,024,254  

Unamortized debt discounts, net

     —      (501 )   (501 )
                   

Total

   $ 29,809    1,978,166     2,007,975  
                   

On February 26, 2008, the Company was notified by Wells Fargo Bank that they had received commitments from a group of banks, which in combination with their commitment will provide the Company with an estimated $341.5 million, three-year term loan facility (the “Term Facility”). The Term Facility will include a term loan amount of $227.7 million that will fund at closing plus a $113.8 million revolver component that is accessible by the Company at its discretion. The Term Facility will be subject to similar loan covenants that are contained within the Line and the Company’s other unsecured fixed rate loans. The term loan has a variable interest rate equal to LIBOR plus 105 basis points, and the revolver has a variable interest rate equal to LIBOR plus 110 basis points, both of which are subject to the Company’s current debt ratings. The Term Facility does not affect our existing $600.0 million Line commitment. The proceeds from the funding of the Term Facility will be used for general working capital purposes including the reduction of any debt balances, at our discretion. The Term Facility is expected to close during March 2008 subject to final terms and conditions.

8. Derivative Financial Instruments

The Company uses derivative instruments primarily to manage exposures to interest rate risks. In order to manage the volatility relating to interest rate risk, the Company may enter into interest rate hedging arrangements from time to time. None of the Company’s derivatives are designated as fair value hedges and the Company does not utilize derivative financial instruments for trading or speculative purposes.

On March 10, 2006, the Company entered into four forward-starting interest rate swaps totaling $396.7 million with fixed rates of 5.399%, 5.415%, 5.399%, and 5.415%. The Company designated these swaps as cash flow hedges to fix $400 million fixed rate financing expected to occur in 2010 and 2011. The change in fair value of these swaps from inception generated a liability of $9.8 million and $2.9 million at December 31, 2007 and 2006, respectively, which is recorded in accounts payable and other liabilities in the accompanying consolidated balance sheets.

 

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Table of Contents
Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

8. Derivative Financial Instruments (Continued)

 

On April 1, 2005, the Company entered into three forward-starting interest rate swaps totaling $196.7 million with fixed rates of 5.029%, 5.05%, and 5.05% to fix the rate on unsecured notes issued in July 2005. On July 13, 2005, the Company settled the swaps with a payment to the counter-parties for $7.3 million. During 2003, the Company entered into two forward-starting interest rate swaps totaling $144.2 million to fix the rate on a refinancing in April 2004. On March 31, 2004, the Company settled these swaps with a payment to the counter-party for $5.7 million. The adjustment to interest expense recorded in 2007, 2006 and 2005 related to the settlement of these swaps is $1.3 million, $1.3 million and $908,311. The unamortized balance at December 31, 2007 is $9.1 million.

All of these swaps qualify for hedge accounting under Statement 133. Realized losses associated with the swaps settled in 2005 and 2004 and unrealized gains or losses associated with the swaps entered into in 2006 have been included in accumulated other comprehensive income (loss) in the consolidated statements of stockholders’ equity and comprehensive income (loss). The unamortized balance of the realized losses is being amortized as additional interest expense over the ten year terms of the hedged loans. Unrealized gains or losses will not be amortized until such time that the expected debt issuance is completed in 2010 and 2011 as long as the swaps continue to qualify for hedge accounting.

9. Stockholders’ Equity and Minority Interest

(a) Preferred Units

At December 31, 2007 and 2006, the face value of the Series D Preferred Units was $50.0 million with a fixed distribution rate of 7.45% and recorded on the accompanying consolidated balance sheets net of original issuance costs.

Terms and conditions for the Series D Preferred Units outstanding as of December 31, 2007 are summarized as follows:

 

Units
Outstanding

  

Amount
Outstanding

  

Distribution
Rate

   

Callable
by Company

  

Exchangeable
by Unit holder

500,000    $ 50,000,000    7.45 %   09/29/09    01/01/16

The Preferred Units, which may be called by RCLP at par beginning September 29, 2009, have no stated maturity or mandatory redemption and pay a cumulative, quarterly dividend at a fixed rate. The Preferred Units may be exchanged by the holder for Cumulative Redeemable Preferred Stock (“Preferred Stock”) at an exchange rate of one share for one unit. The Preferred Units and the related Preferred Stock are not convertible into common stock of the Company.

(b) Preferred Stock

Terms and conditions of the three series of Preferred stock outstanding as of December 31, 2007 are summarized as follows:

 

Series

   Shares
Outstanding
   Depositary
Shares
   Liquidation
Preference
   Distribution
Rate
    Callable
By Company

Series 3

   300,000    3,000,000    $ 75,000,000    7.45 %   04/03/08

Series 4

   500,000    5,000,000      125,000,000    7.25 %   08/31/09

Series 5

   3,000,000    —        75,000,000    6.70 %   08/02/10
                     
   3,800,000    8,000,000    $ 275,000,000     
                     

 

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Table of Contents
Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

(b) Preferred Stock (Continued)

 

In 2005, the Company issued three million shares, or $75.0 million, of 6.70% Series 5 Preferred Stock with a liquidation preference of $25 per share of which the proceeds were used to reduce the balance of the Line. The Series 3 and 4 depositary shares, which have a liquidation preference of $25, and the Series 5 preferred shares are perpetual, are not convertible into common stock of the Company, and are redeemable at par upon Regency’s election five years after the issuance date. None of the terms of the Preferred Stock contain any unconditional obligations that would require the Company to redeem the securities at any time or for any purpose.

On January 1, 2008, the Company split each share of existing Series 3 and Series 4 Preferred Stock, each having a liquidation preference of $250 per share, and a redemption price of $250 per share into ten shares of Series 3 and Series 4 Stock, respectively, each having a liquidation preference of $25 per share and a redemption price of $25 per share. The Company then exchanged each Series 3 and 4 Depository Share into shares of New Series 3 and 4 Stock, respectively, which have the same dividend rights and other rights and preferences identical to the depositary shares.

(c) Common Stock

On April 5, 2005, the Company entered into an agreement to sell 4,312,500 shares of its common stock to an affiliate of Citigroup Global Markets Inc. (“Citigroup”) at $46.60 per share, in connection with a forward sale agreement (the “Forward Sale Agreement”). On August 1, 2005, the Company issued 3,782,500 shares to Citigroup for net proceeds of approximately $175.5 million and on September 7, 2005, the remaining 530,000 shares were issued for net proceeds of $24.4 million. The proceeds from the sales were used to reduce the Line and redeem the Series E and Series F Preferred Units.

10. Stock-Based Compensation

The Company recorded stock-based compensation in general and administrative expenses in the consolidated statements of operation for the years ended December 31, 2007, 2006 and 2005 as follows, the components of which are further described below (in thousands):

 

       2007      2006      2005

Restricted stock

     $ 17,725      16,584      16,955

Stock options

       1,024      960      1,440

Directors’ fees paid in common stock

       389      406      360
                      

Total

     $ 19,138      17,950      18,755
                      

The recorded amounts of stock-based compensation expense represent amortization of deferred compensation related to share based payments in accordance with Statement 123(R). During the three years ended December 31, 2007, 2006, and 2005 compensation expense of $7.6 million, $6.9 million, and $6.9 million, respectively which is included above, specifically identifiable to development and leasing activities was capitalized.

The Company established the Plan under which the Board of Directors may grant stock options and other stock-based awards to officers, directors, and other key employees. The Plan allows the Company to issue up to 5.0 million shares in the form of common stock or stock options, but limits the issuance of common stock excluding stock options to no more than 2.75 million shares. At December 31, 2007, there were approximately 2.4 million shares available for grant under the Plan either through options or restricted stock. The Plan also limits outstanding awards to no more than 12% of outstanding common stock.

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

10. Stock-Based Compensation (Continued)

 

Stock options are granted under the Plan with an exercise price equal to the stock’s price at the date of grant. All stock options granted have ten-year lives, contain vesting terms of one to five years from the date of grant and some have dividend equivalent rights. Stock options granted prior to 2005 also contained “reload” rights, which allowed an option holder the right to receive new options each time existing options were exercised if the existing options were exercised under specific criteria provided for in the Plan. In January 2005, the Company acquired the “reload” rights of existing employees’ stock options from the option holders by granting 771,645 options for an exercise price of $51.36, the fair value on the date of grant, and granted 7,906 restricted shares representing value of $363,664, substantially canceling all of the “reload” rights on existing stock options. In March 2007, the Company acquired the “reload” rights of existing directors’ stock options from the option holders by granting 13,353 options for an average exercise price of $89.95, the fair value on the date of grant, and granted 1,654 restricted shares representing value of $148,725, therefore canceling all of their “reload” rights. These stock options and restricted shares vest 25% per year and are expensed ratably over a four-year period beginning in year of grant in accordance with Statement 123(R). Options granted under the reload buy-out plan do not earn dividend equivalents.

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton closed-form (“Black Scholes”) option valuation model that uses the assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company’s stock and other factors. The Company uses historical data and other factors to estimate option exercises and employee terminations within the valuation model. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The Company believes that the use of the Black-Scholes model meets the fair value measurement objectives of Statement 123(R) and reflects all substantive characteristics of the instruments being valued. The following table represents the assumptions used for the Black-Scholes option-pricing model for options granted in the respective year:

 

       2007     2006     2005  

Per share weighted average value of stock options

     $ 8.27     8.35     5.91  

Expected dividend yield

       3.0 %   3.8 %   4.3 %

Risk-free interest rate

       4.7 %   4.9 %   3.7 %

Expected volatility

       19.8 %   20.0 %   18.0 %

Expected term in years

       2.4     2.1     4.4  

The following table reports stock option activity during the year ended December 31, 2007:

 

     Number of
Options
    Weighted
Average
Exercise
Price
   Remaining
Contractual
Term

(in years)
   Aggregate
Intrinsic
Value

(in thousands)

Outstanding—December 31, 2006

   1,195,551     $ 48.90      

Granted

   17,793       88.49      

Exercised

   (479,862 )     48.54      

Forfeited

   (15,537 )     51.36      

Expired

   (384 )     72.19      
                  

Outstanding—December 31, 2007

   717,561     $ 50.05    6.9    $ 10,362
                        

Vested and expected to vest—December 31, 2007

   703,065     $ 50.08    6.9    $ 10,128
                        

Exercisable—December 31, 2007

   325,027     $ 46.88    6.9    $ 5,722
                        

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

10. Stock-Based Compensation (Continued)

 

The total intrinsic value of options exercised during the years ended December 31, 2007, 2006 and 2005 was $20.2 million, $17.3 million, and $7.2 million, respectively. As of December 31, 2007, there was $1.1 million of unrecognized compensation cost related to non-vested stock options granted under the Plan expected to be recognized through 2008. The Company received cash proceeds for stock option exercises of $2.4 million, $6.0 million, and $6.1 million for the years ended December 31, 2007, 2006, and 2005, respectively The Company issues new shares to fulfill option exercises from its authorized shares available.

The following table presents information regarding unvested option activity during the period ended December 31, 2007:

 

     Non-vested
Number of
Options
    Weighted
Average
Grant-Date
Fair Value

Non-vested at January 1, 2007

   568,771     $ 5.90

Granted

   17,793       8.78

2007 Vesting

   (194,030 )     6.00
        

Non-vested at December 31, 2007

   392,534     $ 6.04
        

The Company grants restricted stock under the Plan to its employees as a form of long-term compensation and retention. The terms of each grant vary depending upon the participant’s responsibilities and position within the Company. The Company’s stock grants to date can be categorized into three types: (a) 4-year vesting, (b) performance-based vesting, and (c) 8-year cliff vesting.

 

   

The 4-year vesting grants vest 25% per year beginning in the year of grant. These grants are not subject to future performance measures, and if such performance criteria are not met, the compensation cost previously recognized would be reversed.

 

   

Performance-based vesting grants are earned subject to future performance measurements, which include individual performance measures, annual growth in earnings, compounded three-year growth in earnings, and a three-year total shareholder return peer comparison (“TSR Grant”). Once the performance criteria are met and the actual number of shares earned is determined, certain shares will vest immediately while others will vest over an additional service period.

 

   

The 8-year cliff vesting grants fully vest at the end of the eighth year from the date of grant; however, as a result of the achievement of future performance, primarily growth in earnings, the vesting of these grants may be accelerated over a shorter term.

Performance-based vesting grants and 8-year cliff vesting grants are currently only granted to the Company’s senior management. The Company considers the likelihood of meeting the performance criteria based upon management’s estimates and analysis of future earnings growth from which it determines the amounts recognized as expense on a periodic basis. The Company determines the grant date fair value of TSR Grants based upon a Monte Carlo Simulation model. Compensation expense is measured at the grant date and recognized over the vesting period.

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

10. Stock-Based Compensation (Continued)

 

The following table reports restricted stock activity during the period ended December 31, 2007:

 

     Number of
Shares
    Intrinsic
Value

(in thousands)
   Weighted
Average
Grant
Price

Unvested at December 31, 2006

   779,060        $ 51.67

Shares Granted

   231,688          84.52

Shares Vested and Distributed

   (368,235 )        80.58

Shares Forfeited

   (43,845 )        66.90
           

Unvested at December 31, 2007

   598,668     $ 38,608    $ 64.49
           

The weighted-average grant price for restricted stock granted during the years 2007, 2006 and 2005 was $84.52, $63.75 and $51.38, respectively. The total intrinsic value of restricted stock vested during the years ended December 31, 2007, 2006 and 2005 was $29.7 million, $26.3 million and $16.5 million, respectively. As of December 31, 2007, there was $21.7 million of unrecognized compensation cost related to non-vested restricted stock granted under the Plan, which is recorded when recognized in additional paid in capital of the consolidated statements of stockholders’ equity and comprehensive income (loss). This unrecognized compensation cost is expected to be recognized over the next four years, through 2011. The Company issues new restricted stock from its authorized shares available.

The Company maintains a 401 (k) retirement plan covering substantially all employees, which permits participants to defer up to the maximum allowable amount determined by the IRS of their eligible compensation. This deferred compensation, together with Company matching contributions equal to 100% of employee deferrals up to a maximum of $3,500 of their eligible compensation, is fully vested and funded as of December 31, 2007. Costs related to the matching portion of the plan were approximately $1.3 million, $1.1 million, and $603,415 for the years ended December 31, 2007, 2006 and 2005, respectively.

 

89


Table of Contents
Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

 

11. Earnings per Share

The following summarizes the calculation of basic and diluted earnings per share for the three years ended December 31, 2007, 2006, and 2005, respectively (in thousands except per share data):

 

     2007    2006    2005

Numerator:

        

Income from continuing operations

   $ 176,419    155,385    97,559

Discontinued operations

     27,232    63,126    65,088
                

Net income

     203,651    218,511    162,647

Less: Preferred stock dividends

     19,675    19,675    16,744
                

Net income for common stockholders

     183,976    198,836    145,903

Less: Dividends paid on unvested restricted stock

     842    978    1,109
                

Net income for common stockholders—basic

     183,134    197,858    144,794

Add: Dividends paid on Treasury Method restricted stock

     49    164    216
                

Net income for common stockholders—diluted

   $ 183,183    198,022    145,010
                

Denominator:

        

Weighted average common shares outstanding for basic EPS

     68,954    68,037    64,459

Incremental shares to be issued under common stock options using the Treasury method

     226    326    226

Incremental shares to be issued under unvested restricted stock
using the Treasury method

     18    69    98

Incremental shares to be issued under Forward

        

Equity Offering using the Treasury method

     —      —      149
                

Weighted average common shares outstanding for diluted EPS

     69,198    68,432    64,932
                

Income per common share—basic

        

Income from continuing operations

   $ 2.26    1.98    1.24

Discontinued operations

     0.39    0.93    1.01
                

Net income for common stockholders per share

   $ 2.65    2.91    2.25
                

Income per common share—diluted

        

Income from continuing operations

   $ 2.26    1.97    1.23

Discontinued operations

     0.39    0.92    1.00
                

Net income for common stockholders per share

   $ 2.65    2.89    2.23
                

The exchangeable operating partnership units were anti-dilutive to diluted EPS for the three years ended December 31, 2007, 2006, and 2005 and therefore, the units and the related minority interest of exchangeable operating partnership units are excluded from the calculation of diluted EPS.

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

 

12. Operating Leases

Future minimum rents under noncancelable operating leases as of December 31, 2007, excluding both tenant reimbursements of operating expenses and additional percentage rent based on tenants’ sales volume, are as follows (in thousands):

 

Year Ending December 31,

   Amount

2008

   $ 317,669

2009

     299,663

2010

     263,884

2011

     225,945

2012

     182,281

Thereafter

     1,265,317
      

Total

   $ 2,554,759
      

The shopping centers’ tenant base includes primarily national and regional supermarkets, drug stores, discount department stores and other retailers and, consequently, the credit risk is concentrated in the retail industry. There were no tenants that individually represented more than 6% of the Company’s annualized future minimum rents.

The Company has shopping centers that are subject to non-cancelable long-term ground leases where a third party owns and has leased the underlying land to Regency to construct and/or operate a shopping center. In addition, the Company has non-cancelable operating leases pertaining to office space from which it conducts its business. Leasehold improvements are capitalized, recorded as tenant improvements, and depreciated over the shorter of the useful life of the improvements or the lease term. The following table summarizes the future obligations under non-cancelable operating leases as of December 31, 2007 (in thousands):

 

Year Ending December 31,

   Amount

2008

   $ 5,407

2009

     5,339

2010

     5,348

2011

     5,325

2012

     4,888

Thereafter

     20,048
      

Total

   $ 46,355
      

13. 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. 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 (UST’s). The Company believes that the tenants who currently operate dry cleaning plants or gas stations do so in accordance with current laws and regulations. The Company has placed environmental insurance, when possible, on specific properties with known contamination, in order to mitigate its environmental risk. The Company monitors the shopping centers containing environmental issues and in certain cases voluntarily remediates the sites. The Company

 

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Index to Financial Statements

Regency Centers Corporation

Notes to Consolidated Financial Statements—(Continued)

December 31, 2007

13. Commitments and Contingencies (Continued)

 

also has legal obligations to remediate certain sites and is in the process of doing so. The Company estimates the cost associated with these legal obligations to be approximately $3.4 million, all of which has been reserved. 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.

14. Summary of Quarterly Financial Data (Unaudited)

Presented below is a summary of the consolidated quarterly financial data for the years ended December 31, 2007 and 2006 (in thousands except per share data):

 

     First
Quarter
    Second
Quarter
    Third
Quarter
    Fourth
Quarter
 

2007:

        

Revenues as originally reported

   $ 106,715     108,760     116,980     119,796  

Reclassified to discontinued operations

     (301 )   (229 )   (213 )   —    
                          

Adjusted Revenues

   $ 106,414     108,531     116,767     119,796  
                          

Net income for common stockholders

   $ 52,069     44,365     36,980     50,562  
                          

Net income per share:

        

Basic

   $ 0.75     0.64     0.53     0.73  
                          

Diluted

   $ 0.75     0.64     0.53     0.72  
                          

2006:

        

Revenues as originally reported

   $ 103,314     109,163     105,054     109,463  

Reclassified to discontinued operations

     (3,524 )   (3,763 )   (2,437 )   (302 )
                          

Adjusted Revenues

   $ 99,790     105,400     102,617     109,161  
                          

Net income for common stockholders

   $ 65,856     32,128     39,392     61,460  
                          

Net income per share:

        

Basic

   $ 0.97     0.47     0.57     0.89  
                          

Diluted

   $ 0.97     0.47     0.57     0.89  
                          

 

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Index to Financial Statements

REGENCY CENTERS CORPORATION

Combined Real Estate and Accumulated Depreciation

December 31, 2007

(in thousands)

 

    Initial Cost   Cost Capitalized
Subsequent to
Acquisition (a)
    Total Cost   Accumulated
Depreciation
  Total Cost
Net of
Accumulated
Depreciation
  Mortgages
    Land   Building &
Improvements
    Land   Building &
Improvements
  Properties held
for Sale
  Total      

4S COMMONS TOWN CENTER

  28,009   32,692   6,003     30,760   35,944   —     66,704   1,819   64,885   —  

ALDEN BRIDGE

  12,937   10,146   1,917     13,810   11,190   —     25,000   2,955   22,045   9,528

ANTHEM MARKETPLACE

  6,846   13,563   (58 )   6,714   13,637   —     20,351   2,081   18,270   —  

ASHBURN FARM MARKET CENTER

  9,869   4,747   (11 )   9,835   4,770   —     14,605   1,584   13,021   —  

ASHFORD PLACE

  2,804   9,944   (324 )   2,584   9,840   —     12,424   3,533   8,891   3,315

ATASCOCITA CENTER

  1,008   2,237   6,560     3,997   5,808   —     9,805   821   8,984   —  

AUGUSTA CENTER

  5,141   2,438   —       5,141   2,438   —     7,579   34   7,545   —  

AVENTURA SHOPPING CENTER

  2,751   9,318   1,134     2,751   10,452   —     13,203   6,868   6,335   —  

BECKETT COMMONS

  1,625   5,845   5,082     1,625   10,927   —     12,552   2,401   10,151   —  

BELLEVIEW SQUARE

  8,132   8,610   773     8,132   9,383   —     17,515   1,429   16,086   9,038

BENEVA VILLAGE SHOPS

  2,484   8,851   1,186     2,484   10,037   —     12,521   2,577   9,944   —  

BERKSHIRE COMMONS

  2,295   8,151   649     2,295   8,800   —     11,095   3,341   7,754   —  

BETHANY PARK PLACE

  4,605   5,792   (189 )   4,290   5,918   —     10,208   2,843   7,365   —  

BLOOMINGDALE

  3,862   14,101   859     3,940   14,882   —     18,822   4,072   14,750   —  

BLOSSOM VALLEY

  7,804   10,321   521     7,804   10,842   —     18,646   2,551   16,095   —  

BOULEVARD CENTER

  3,659   9,658   958     3,659   10,616   —     14,275   2,591   11,684   —  

BOYNTON LAKES PLAZA

  2,783   10,043   950     2,628   11,148   —     13,776   3,076   10,700   —  

BRIARCLIFF LA VISTA

  694   2,463   829     694   3,292   —     3,986   1,476   2,510   —  

BRIARCLIFF VILLAGE

  4,597   16,304   8,514     4,597   24,818   —     29,415   8,960   20,455   —  

BUCKHEAD COURT

  1,738   6,163   926     1,417   7,410   —     8,827   2,905   5,922   —  

BUCKLEY SQUARE

  2,970   5,126   796     2,970   5,922   —     8,892   1,602   7,290   —  

CAMBRIDGE SQUARE SHOPPING CTR

  792   2,916   1,413     774   4,347   —     5,121   1,357   3,764   —  

CARMEL COMMONS

  2,466   8,903   3,551     2,466   12,454   —     14,920   3,563   11,357   —  

CARRIAGE GATE

  741   2,495   2,517     833   4,920   —     5,753   2,520   3,233   —  

CHASEWOOD PLAZA

  1,675   11,391   12,347     4,612   20,801   —     25,413   8,371   17,042   —  

CHERRY GROVE

  3,533   12,710   2,915     3,533   15,625   —     19,158   3,938   15,220   —  

CHESHIRE STATION

  10,182   8,443   (411 )   9,896   8,318   —     18,214   3,200   15,014   —  

CLAYTON VALLEY

  22,826   31,423   —       22,826   31,423   —     54,249   2,904   51,345   —  

CLOVIS COMMONS

  11,097   22,699   3,829     11,100   26,525   —     37,625   1,537   36,088   —  

 

93


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Index to Financial Statements

REGENCY CENTERS CORPORATION

Combined Real Estate and Accumulated Depreciation—(Continued)

December 31, 2007

(in thousands)

 

    Initial Cost   Cost Capitalized
Subsequent to
Acquisition (a)
    Total Cost   Accumulated
Depreciation
  Total Cost
Net of
Accumulated
Depreciation
  Mortgages
    Land   Building &
Improvements
    Land   Building &
Improvements
  Properties held
for Sale
  Total      

COCHRAN’S CROSSING

  13,154   10,066   2,243     13,154   12,309   —     25,463   3,121   22,342   —  

COOPER STREET

  2,079   10,682   498     2,079   11,180   —     13,259   2,447   10,812   —  

CORKSCREW VILLAGE

  7,436   8,904   71     8,407   8,004   —     16,411   188   16,223   9,473

COSTA VERDE

  12,740   25,261   1,280     12,740   26,541   —     39,281   7,378   31,903   —  

COURTYARD SHOPPING CENTER

  1,762   4,187   (78 )   5,867   4   —     5,871   —     5,871   —  

CROMWELL SQUARE

  1,772   6,285   643     1,772   6,928   —     8,700   2,433   6,267   —  

DELK SPECTRUM

  2,985   11,049   757     2,985   11,806   —     14,791   3,076   11,715   —  

DIABLO PLAZA

  5,300   7,536   541     5,300   8,077   —     13,377   1,998   11,379   —  

DICKSON TN

  675   1,568   —       675   1,568   —     2,243   322   1,921   —  

DUNWOODY HALL

  1,819   6,451   5,782     2,529   11,523   —     14,052   3,828   10,224   —  

DUNWOODY VILLAGE

  2,326   7,216   9,623     3,342   15,823   —     19,165   5,052   14,113   —  

EAST POINTE

  1,868   6,743   219     1,730   7,100   —     8,830   2,193   6,637   —  

EAST PORT PLAZA

  3,257   11,611   (1,573 )   3,257   10,038   —     13,295   2,058   11,237   —  

EAST TOWNE SHOPPING CENTER

  2,957   4,881   57     2,957   4,938   —     7,895   999   6,896   —  

EL CAMINO

  7,600   10,852   679     7,600   11,531   —     19,131   2,854   16,277   —  

EL NORTE PKWY PLAZA

  2,834   6,332   964     2,833   7,296   —     10,129   1,819   8,311   —  

ENCINA GRANDE

  5,040   10,379   997     5,040   11,376   —     16,416   2,714   13,702   —  

FAIRFAX SHOPPING CENTER

  15,193   11,260   127     15,239   11,341   —     26,580   495   26,085   —  

FENTON MARKETPLACE

  3,020   10,153   (627 )   2,298   10,248   —     12,546   1,656   10,890   —  

FLEMING ISLAND

  3,077   6,292   5,156     3,077   11,448   —     14,525   2,618   11,907   2,076

FOLSOM PRAIRIE CITY CROSSING

  3,944   11,258   1,968     4,164   13,006   —     17,170   2,189   14,981   —  

FORT BEND CENTER

  6,966   4,197   (4,588 )   2,375   4,200   —     6,575   1,141   5,434   —  

FORT COLLINS CENTER

  2,716   4,854   —       2,716   4,854   —     7,570   183   7,387   —  

FORTUNA

  2,025   —     —       2,025   —     —     2,025   —     2,025   —  

FRANKFORT CROSSING SHPG CTR

  8,325   6,067   735     7,417   7,710   —     15,127   2,190   12,937   —  

FRENCH VALLEY

  11,792   16,919   —       11,792   16,919   —     28,711   1,134   27,577   —  

FRIARS MISSION

  6,660   27,277   732     6,660   28,009   —     34,669   6,192   28,477   875

GARDEN SQUARE

  2,074   7,615   672     2,136   8,225   —     10,361   2,247   8,114   —  

GARNER

  5,591   19,897   2,037     5,591   21,934   —     27,525   5,135   22,390   —  

 

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Index to Financial Statements

REGENCY CENTERS CORPORATION

Combined Real Estate and Accumulated Depreciation—(Continued)

December 31, 2007

(in thousands)

 

    Initial Cost   Cost Capitalized
Subsequent to
Acquisition (a)
    Total Cost   Accumulated
Depreciation
  Total Cost
Net of
Accumulated
Depreciation
  Mortgages
    Land   Building &
Improvements
    Land   Building &
Improvements
  Properties held
for Sale
  Total      

GATEWAY SHOPPING CENTER

  51,719   4,545   2,421     52,610   6,075   —     58,685   2,455   56,230   20,766

GELSON’S WESTLAKE MARKET PLAZA

  2,332   8,316   3,531     3,157   11,022   —     14,179   1,624   12,555   —  

GLENWOOD VILLAGE

  1,194   4,235   1,083     1,194   5,318   —     6,512   1,977   4,535   —  

GRANDE OAK

  5,569   5,900   (429 )   5,091   5,949   —     11,040   1,631   9,409   —  

GREENWOOD SPRINGS

  2,720   3,043   —       2,720   3,043   —     5,763   312   5,451   —  

HANCOCK

  8,232   24,249   3,880     8,232   28,129   —     36,361   6,935   29,426   —  

HARDING PLACE

  545   567   —       545   567   —     1,112   28   1,084   —  

HARPETH VILLAGE FIELDSTONE

  2,284   5,559   3,884     2,284   9,443   —     11,727   2,359   9,368   —  

HASLEY CANYON VILLAGE

  6,163   6,569   1,094     6,180   7,646   —     13,826   1,039   12,787   —  

HERITAGE LAND

  12,390   —     —       12,390   —     —     12,390   —     12,390   —  

HERITAGE PLAZA

  —     23,676   2,186     —     25,862   —     25,862   6,449   19,413   —  

HERSHEY

  7   807   1     7   808   —     815   145   670   —  

HILLCREST VILLAGE

  1,600   1,798   84     1,600   1,882   —     3,482   431   3,051   —  

HINSDALE

  4,218   15,040   3,180     5,734   16,704   —     22,438   4,030   18,408   —  

HOLLYMEAD

  12,781   16,989   1,112     13,126   17,756   —     30,882   1,680   29,202   —  

HYDE PARK

  9,240   33,340   6,964     9,809   39,735   —     49,544   10,957   38,587   —  

INDEPENDENCE SQUARE

  4,963   7,911   130     4,981   8,023   —     13,004   1,429   11,575   —  

INGLEWOOD PLAZA

  1,300   1,862   297     1,300   2,159   —     3,459   542   2,917   —  

JOHN’S CREEK SHOPPING CENTER

  5,480   7,758   192     5,489   7,941   —     13,430   1,267   12,163   —  

KELLER TOWN CENTER

  2,294   12,239   516     2,294   12,755   —     15,049   2,922   12,127   —  

KERNERSVILLE PLAZA

  1,742   6,081   558     1,742   6,639   —     8,381   1,656   6,725   —  

KINGSDALE SHOPPING CENTER

  3,867   14,020   6,438     4,027   20,297   —     24,324   5,612   18,713   —  

KLEINWOOD II

  3,569   5,015   —       3,569   5,015   —     8,584   187   8,397   —  

KROGER NEW ALBANY CENTER

  2,770   6,379   1,286     3,844   6,591   —     10,435   2,321   8,114   5,821

LAKE PINE PLAZA

  2,008   6,909   723     2,008   7,632   —     9,640   1,908   7,732   —  

LEBANON/LEGACY CENTER

  3,906   7,391   441     3,913   7,825   —     11,738   1,863   9,875   —  

LITTLETON SQUARE

  2,030   8,255   483     2,030   8,738   —     10,768   1,952   8,816   —  

LLOYD KING CENTER

  1,779   8,855   1,177     1,779   10,032   —     11,811   2,423   9,388   —  

LOEHMANNS PLAZA CALIFORNIA

  5,420   8,679   649     5,420   9,328   —     14,748   2,300   12,448   —  

 

95


Table of Contents
Index to Financial Statements

REGENCY CENTERS CORPORATION

Combined Real Estate and Accumulated Depreciation—(Continued)

December 31, 2007

(in thousands)

 

    Initial Cost   Cost Capitalized
Subsequent to
Acquisition (a)
    Total Cost   Accumulated
Depreciation
  Total Cost
Net of
Accumulated
Depreciation
  Mortgages
    Land   Building &
Improvements
    Land   Building &
Improvements
  Properties held
for Sale
  Total      

LOEHMANNS PLAZA GEORGIA

  3,982   14,118   4,304     3,983   18,421   —     22,404   5,679   16,725   —  

MACARTHUR PARK REPURCHASE

  1,930   —     (758 )   1,172   —     —     1,172   —     1,172   —  

MARKET AT OPITZ CROSSING

  9,902   8,339   831     9,902   9,170   —     19,072   2,172   16,900   11,887

MARKET AT PRESTON FOREST

  4,400   10,753   213     4,400   10,966   —     15,366   2,409   12,957   —  

MARKET AT ROUND ROCK

  2,000   9,676   372     2,000   10,048   —     12,048   2,329   9,719   —  

MARKETPLACE AT BRIARGATE

  1,625   4,289   —       1,625   4,288   —     5,913   74   5,840   —  

MARKETPLACE ST PETE

  1,287   4,663   803     1,287   5,466   —     6,753   1,758   4,995   —  

MARTIN DOWNS VILLAGE CENTER

  2,000   5,133   4,410     2,438   9,105   —     11,543   4,547   6,996   —  

MARTIN DOWNS VILLAGE SHOPPES

  700   1,208   3,781     817   4,872   —     5,689   1,905   3,784   —  

MAXTOWN ROAD (NORTHGATE)

  1,753   6,244   411     1,769   6,639   —     8,408   1,708   6,700   —  

MAYNARD CROSSING

  4,066   14,084   1,468     4,066   15,552   —     19,618   3,895   15,723   —  

MILLHOPPER

  1,073   3,594   1,735     1,073   5,329   —     6,402   3,290   3,112   —  

MOCKINGBIRD COMMON

  3,000   9,676   891     3,000   10,567   —     13,567   2,654   10,913   —  

MONUMENT JACKSON CREEK

  2,999   6,476   160     2,999   6,636   —     9,635   2,189   7,446   —  

MORNINGSIDE PLAZA

  4,300   13,120   676     4,300   13,796   —     18,096   3,182   14,914   —  

MURRAYHILL MARKETPLACE

  2,600   15,753   2,526     2,670   18,209   —     20,879   4,672   16,207   8,448

NAPLES WALK

  16,377   15,000   272     18,173   13,476   —     31,649   220   31,429   17,969

NASHBORO

  1,824   7,168   503     1,824   7,671   —     9,495   1,691   7,804   —  

NEWBERRY SQUARE

  2,341   8,467   1,731     2,412   10,127   —     12,539   4,421   8,118   —  

NEWLAND CENTER

  12,500   12,221   (1,531 )   12,500   10,690   —     23,190   3,035   20,155   —  

NORTH HILLS

  4,900   18,972   390     4,900   19,362   —     24,262   4,352   19,910   5,613

NORTHGATE SQUARE

  3,688   9,951   59     5,011   8,687   —     13,698   163   13,535   6,716

NORTHLAKE VILLAGE I

  2,662   9,685   1,556     2,662   11,241   —     13,903   2,254   11,649   —  

OAKBROOK PLAZA

  4,000   6,366   302     4,000   6,668   —     10,668   1,745   8,923   —  

OLD ST AUGUSTINE PLAZA

  2,047   7,355   4,173     2,368   11,207   —     13,575   3,269   10,306   —  

ORANGEBURG & CENTRAL

  2,067   2,355   —       2,067   2,355   —     4,422   8   4,414   —  

PACES FERRY PLAZA

  2,812   9,968   2,594     2,812   12,562   —     15,374   4,290   11,084   —  

PANTHER CREEK

  14,414   12,079   2,620     14,414   14,699   —     29,113   3,739   25,374   9,974

PARK PLACE SHOPPING CENTER

  2,232   7,974   1,513     2,232   9,487   —     11,719   2,414   9,305   —  

 

96


Table of Contents
Index to Financial Statements

REGENCY CENTERS CORPORATION

Combined Real Estate and Accumulated Depreciation—(Continued)

December 31, 2007

(in thousands)

 

    Initial Cost   Cost Capitalized
Subsequent to
Acquisition (a)
    Total Cost   Accumulated
Depreciation
  Total Cost
Net of
Accumulated
Depreciation
  Mortgages
    Land   Building &
Improvements
    Land   Building &
Improvements
  Properties held
for Sale
  Total      

PEARTREE VILLAGE

  5,197   8,733   11,013     5,197   19,746   —     24,943   5,549   19,394   10,657

PELHAM COMMONS

  3,714   5,436   92     3,714   5,528   —     9,242   1,359   7,883   —  

PHENIX CROSSING

  1,544   —     —       1,544   —     —     1,544   —     1,544   —  

PIKE CREEK

  5,077   18,860   1,749     5,077   20,609   —     25,686   5,461   20,225   —  

PIMA CROSSING

  5,800   24,892   2,898     5,800   27,790   —     33,590   6,205   27,385   —  

PINE LAKE VILLAGE

  6,300   10,522   159     6,300   10,681   —     16,981   2,414   14,567   —  

PINE TREE PLAZA

  539   1,996   4,353     668   6,220   —     6,888   1,521   5,367   —  

PLAZA HERMOSA

  4,200   9,370   650     4,200   10,020   —     14,220   2,301   11,919   —  

POWELL STREET PLAZA

  8,248   29,279   1,310     8,248   30,589   —     38,837   4,578   34,259   —  

POWERS FERRY SQUARE

  3,608   12,791   5,067     3,687   17,779   —     21,466   6,167   15,299   —  

POWERS FERRY VILLAGE

  1,191   4,224   332     1,191   4,556   —     5,747   1,623   4,124   2,514

PRESTON PARK

  6,400   46,896   7,079     6,400   53,975   —     60,375   12,307   48,068   —  

PRESTONBROOK

  4,704   10,762   200     7,069   8,597   —     15,666   3,022   12,644   —  

PRESTONWOOD PARK

  8,077   14,938   (264 )   7,399   15,352   —     22,751   3,768   18,983   —  

REGENCY COMMONS

  3,917   3,584   —       3,917   3,584   —     7,501   420   7,081   —  

REGENCY SQUARE BRANDON

  578   18,157   11,074     4,770   25,039   —     29,809   13,262   16,547   —  

RIVERMONT STATION

  2,887   10,445   197     2,887   10,642   —     13,529   2,854   10,675   —  

RONA PLAZA

  1,500   4,356   737     1,500   5,093   —     6,593   1,067   5,526   —  

RUSSELL RIDGE

  2,153   —     6,979     2,233   6,898   —     9,131   2,341   6,791   5,531

SAMMAMISH HIGHLAND

  9,300   7,553   411     9,300   7,964   —     17,264   1,812   15,452   —  

SAN LEANDRO

  1,300   7,891   315     1,300   8,206   —     9,506   1,964   7,542   —  

SANTA ANA DOWNTOWN

  4,240   7,319   1,195     4,240   8,514   —     12,754   2,261   10,493   —  

SANTA MARIA COMMONS

  2,370   3,214   —       2,370   3,214   —     5,584   204   5,380   —  

SEQUOIA STATION

  9,100   17,900   344     9,100   18,244   —     27,344   4,119   23,225   —  

SHERWOOD CROSSROADS

  2,731   3,612   2,708     2,731   6,320   —     9,051   871   8,180   —  

SHERWOOD MARKET CENTER

  3,475   15,898   381     3,475   16,279   —     19,754   3,826   15,928   —  

SHILOH SPRINGS

  4,968   7,859   4,531     5,739   11,619   —     17,358   5,113   12,245   —  

SHOPPES AT MASON

  1,577   5,358   194     1,577   5,552   —     7,129   1,404   5,725   —  

SHOPS AT ARIZONA

  3,293   2,320   772     3,173   3,212   —     6,385   663   5,722   —  

 

97


Table of Contents
Index to Financial Statements

REGENCY CENTERS CORPORATION

Combined Real Estate and Accumulated Depreciation—(Continued)

December 31, 2007

(in thousands)

 

    Initial Cost   Cost Capitalized
Subsequent to
Acquisition (a)
    Total Cost   Accumulated
Depreciation
  Total Cost
Net of
Accumulated
Depreciation
  Mortgages
    Land   Building &
Improvements
    Land   Building &
Improvements
  Properties held
for Sale
  Total      

SHOPS AT COUNTY CENTER

  9,766   10,863   —       9,766   10,863   —     20,629   266   20,363   —  

SHOPS AT JOHN’S CREEK

  1,863   2,015   —       1,863   2,015   —     3,878   201   3,677   —  

SIGNAL HILL

  7,287   10,084   (172 )   7,098   10,101   —     17,199   1,499   15,700   —  

SIGNATURE PLAZA

  2,055   4,159   55     2,396   3,873   —     6,269   607   5,662   —  

SOUTH MOUNTAIN

  934   —     (788 )   146   —     —     146   —     146   —  

SILVER SPRING SQUARE

  30,868   30,975   —       30,868   30,975   —     61,843   805   61,038   —  

SOUTHCENTER

  1,300   12,251   417     1,300   12,668   —     13,968   2,859   11,109   —  

SOUTHPOINT CROSSING

  4,399   11,116   1,011     4,399   12,127   —     16,526   2,860   13,666   —  

SOUTH LOWRY SQUARE

  3,420   9,934   528     3,434   10,448   —     13,882   2,377   11,505   —  

STARKE

  71   1,674   9     71   1,683   —     1,754   299   1,455   —  

STATLER SQUARE PHASE I

  2,228   7,480   851     2,228   8,331   —     10,559   2,172   8,387   —  

STERLING RIDGE

  12,846   10,085   2,052     12,846   12,136   —     24,982   3,069   21,914   10,090

STRAWFLOWER VILLAGE

  4,060   7,233   725     4,060   7,958   —     12,018   1,914   10,104   —  

STROH RANCH

  4,138   7,111   1,096     4,280   8,065   —     12,345   2,596   9,749   —  

SUNNYSIDE 205

  1,200   8,703   635     1,200   9,338   —     10,538   2,196   8,342   —  

TASSAJARA CROSSING

  8,560   14,900   391     8,560   15,291   —     23,851   3,413   20,438   —  

THOMAS LAKE

  6,000   10,302   294     6,000   10,596   —     16,596   2,464   14,132   —  

TOWN CENTER AT MARTIN DOWNS

  1,364   4,985   176     1,364   5,161   —     6,525   1,465   5,060   —  

TOWN SQUARE

  438   1,555   7,015     883   8,125   —     9,008   2,215   6,793   —  

TRACE CROSSING

  4,356   4,896   (8,973 )   279   —     —     279   —     279   —  

TROPHY CLUB

  2,595   10,467   426     2,595   10,893   —     13,488   2,349   11,139   —  

TWIN CITY PLAZA

  17,174   44,849   (638 )   17,245   44,140   —     61,385   2,377   59,008   44,000

TWIN PEAKS

  5,200   25,120   474     5,200   25,594   —     30,794   5,780   25,014   —  

VALENCIA CROSSROADS

  17,913   17,357   237     17,921   17,586   —     35,507   5,025   30,482   —  

VENTURA VILLAGE

  4,300   6,351   244     4,300   6,595   —     10,895   1,543   9,352   —  

VILLAGE CENTER 6

  3,885   10,799   3,275     3,885   14,074   —     17,959   4,137   13,822   —  

VISTA VILLAGE IV

  2,281   2,712   —       2,281   2,712   —     4,993   193   4,800   —  

WALKER CENTER

  3,840   6,418   499     3,840   6,917   —     10,757   1,694   9,063   —  

WATERFORD TOWNE CENTER

  5,650   6,844   1,980     6,430   8,044   —     14,474   2,987   11,487   —  

 

98


Table of Contents
Index to Financial Statements

REGENCY CENTERS CORPORATION

Combined Real Estate and Accumulated Depreciation—(Continued)

December 31, 2007

(in thousands)

 

    Initial Cost   Cost Capitalized
Subsequent to
Acquisition (a)
    Total Cost   Accumulated
Depreciation
  Total Cost
Net of
Accumulated
Depreciation
  Mortgages
    Land   Building &
Improvements
    Land   Building &
Improvements
  Properties held
for Sale
  Total      

WELLEBY

  1,496   5,372   2,295     1,496   7,667   —     9,163   3,254   5,909   —  

WELLINGTON TOWN SQUARE

  1,914   7,198   4,959     2,041   12,030   —     14,071   2,972   11,099   —  

WEST PARK PLAZA

  5,840   4,992   406     5,840   5,398   —     11,238   1,265   9,973   —  

WESTBROOK COMMONS

  3,366   11,928   1,107     3,366   13,034   —     16,400   2,401   14,000   —  

WESTCHASE

  4,390   9,119   66     5,302   8,273   —     13,575   149   13,426   8,948

WESTCHESTER PLAZA

  1,857   6,456   1,087     1,857   7,543   —     9,400   2,474   6,926   —  

WESTLAKE VILLAGE CENTER

  7,043   25,744   1,338     7,043   27,082   —     34,125   6,814   27,311   —  

WESTRIDGE

  9,516   10,789   621     9,529   11,397   —     20,926   1,978   18,948   —  

WHITE OAK—DOVER, DE

  2,147   2,927   139     2,144   3,069   —     5,213   1,429   3,784   —  

WILLA SPRINGS SHOPPING CENTER

  2,004   9,267   (26 )   2,144   9,101   —     11,245   2,032   9,213   —  

WINDMILLER PLAZA PHASE I

  2,620   11,191   2,058     2,638   13,231   —     15,869   3,296   12,573   —  

WOODCROFT SHOPPING CENTER

  1,419   5,212   968     1,419   6,180   —     7,599   1,956   5,643   —  

WOODMAN VAN NUYS

  5,500   6,835   344     5,500   7,179   —     12,679   1,771   10,908   —  

WOODMEN PLAZA

  6,014   10,078   2,474     7,621   10,945   —     18,566   4,476   14,090   —  

WOODSIDE CENTRAL

  3,500   8,846   312     3,500   9,158   —     12,658   2,062   10,596   —  

OPERATING BUILD TO SUIT PROPERTIES

  —     14,446   —       —     14,446   —     14,446   4,284   10,162   —  
                                         
  945,120   1,849,762   264,474     968,859   2,090,497   —     3,059,356   497,498   2,561,858   203,239
                                         

 

(a) The negative balance for costs capitalized subsequent to acquisition could include out-parcels sold, provision for loss recorded and development transfers subsequent to the initial costs.

 

99


Table of Contents
Index to Financial Statements

REGENCY CENTERS CORPORATION

Combined Real Estate and Accumulated Depreciation—(Continued)

December 31, 2007

(in thousands)

 

Depreciation and amortization of the Company’s investment in buildings and improvements reflected in the statements of operation is calculated over the estimated useful lives of the assets as follows:

Buildings and improvements up to 40 years

The aggregate cost for Federal income tax purposes was approximately $2.4 billion at December 31, 2007.

The changes in total real estate assets for the years ended December 31, 2007, 2006 and 2005:

 

     2007     2006     2005  

Balance, beginning of year

   $ 2,852,093     2,816,139     2,726,778  

Developed or acquired properties

     255,335     233,138     303,303  

Sale of properties

     (66,094 )   (209,396 )   (221,188 )

Provision for loss on operating properties

     —       (500 )   (550 )

Reclass properties held for sale

     —       (29,772 )   (43,661 )

Improvements

     18,022     16,876     14,890  
                    

Balance, end of year

   $ 3,059,356     2,826,485     2,779,572  
                    

The changes in accumulated depreciation for the years ended December 31, 2007, 2006 and 2005:

 

     2007     2006     2005  

Balance, beginning of year

   $ 427,389     380,613     338,609  

Sale of properties

     (5,960 )   (20,908 )   (21,182 )

Reclass accumulated depreciation related to properties held for sale

     —       (4,164 )   (7,094 )

Depreciation for year

     76,069     71,848     70,280  
                    

Balance, end of year

   $ 497,498        427,389        380,613  
                    

 

100


Table of Contents
Index to Financial Statements

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer, chief operating officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our chief executive officer, chief operating officer and our chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report on Form 10-K to ensure information required to be disclosed in the reports that we file or submit 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 us in the reports we file or submit is accumulated and communicated to management, including our chief executive officer, chief operating officer and our chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our chief executive officer, chief operating officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2007.

KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this annual report on Form 10-K and, as part of their audit, has issued a report, included herein, on the effectiveness of our internal control over financial reporting.

Regency’s system of internal control over financial reporting was designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements in accordance with accounting principles generally accepted in the United States. All internal control systems, no mater how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Controls

There have been no changes in the Company’s internal controls over financial reporting identified in connection with this evaluation that occurred during the fourth quarter of 2007 and that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Item 9B. Other Information

Not applicable

 

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information concerning the directors of Regency is incorporated herein by reference to Regency’s definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its 2008 Annual Meeting of Stockholders.

Information regarding executive officers is included in Part I of this Form 10-K as permitted by General Instruction G(3).

Audit Committee, Independence, Financial Experts. Incorporated herein by reference to Regency’s definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its 2008 Annual Meeting of Stockholders.

Compliance with Section 16(a) of the Exchange Act. Information concerning filings under Section 16(a) of the Exchange Act by the directors or executive officers of Regency is incorporated herein by reference to Regency’s definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its 2008 Annual Meeting of Stockholders.

Code of Ethics. We have adopted a code of ethics applicable to our Board of Directors, principal executive officers, principal financial officer, principal accounting officer and persons performing similar functions. The text of this code of ethics may be found on our web site at “www.regencycenters.com.” We intend to post notice of any waiver from, or amendment to, any provision of our code of ethics on our web site.

Item 11. Executive Compensation

Incorporated herein by reference to Regency’s definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its 2008 Annual Meeting of Stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information

 

     (a)    (b)    (c)

Plan Category

   Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
   Weighted-average
exercise price of
outstanding options,
warrants and rights (1)
   Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))

Equity compensation plans approved by security holders

   717,561    $ 50.05   

Equity compensation plans not approved by security holders

   N/A      N/A    N/A
                

Total

   717,561    $ 50.05   
                

 

(1) The weighted average exercise price excludes stock rights awards, which we sometimes refer to as unvested restricted stock.
(2) Our Long Term Omnibus Plan, as amended and approved by stockholders at our 2003 annual meeting, provides for the issuance of up to 5.0 million shares of common stock or stock options for stock compensation; however, outstanding unvested grants plus vested but unexercised options cannot exceed 12% of our outstanding common stock and common stock equivalents (excluding options and other stock equivalents outstanding under the plan). The plan permits the grant of any type of share-based award but limits restricted stock awards, stock rights awards, performance shares, dividend equivalents settled in stock and other forms of stock grants to 2.75 million shares, of which 940,466 shares were available at December 31, 2007 for future issuance.

 

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (Continued)

 

Information about security ownership is incorporated herein by reference to Regency’s definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its 2008 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Incorporated herein by reference to Regency’s definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its 2008 Annual Meeting of Stockholders.

Item 14. Principal Accountant Fees and Services

Incorporated herein by reference to Regency’s definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its 2008 Annual Meeting of Stockholders.

 

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Index to Financial Statements

PART IV

Item 15. Exhibits and Financial Statement Schedules

 

   (a)    Financial Statements and Financial Statement Schedules:
      Regency’s 2007 financial statements and financial statement schedule, together with the reports of KPMG LLP are listed on the index immediately preceding the financial statements in Item 8, Consolidated Financial Statements and Supplemental Data.
   (b)    Exhibits:

2.

   (a)    Purchase and Sale Agreement among Macquarie CountryWide-Regency II, LLC, Macquarie CountryWide Trust, Regency Centers Corporation, USRP Texas GP, LLC, Eastern Shopping Center Holdings, LLC, First Washington Investment I, LLC and California Public Employees’ Retirement System dated February 14, 2005 (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed May 10, 2005)

3.

   Articles of Incorporation and Bylaws
     

(i)     Restated Articles of Incorporation of Regency Centers Corporation incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed February 19, 2008.

     

(ii)    Amended and Restated Bylaws of Regency Centers Corporation (incorporated by reference to Exhibit 3.1 of the Company’s Form 10-Q filed May 8, 2006).

4.

   (a)    See exhibits 3(i) and 3(ii) for provisions of the Articles of Incorporation and Bylaws of Regency Centers Corporation defining rights of security holders.
   (b)    Indenture dated March 9, 1999 between Regency Centers, L.P., the guarantors named therein and First Union National Bank, as trustee (incorporated by reference to Exhibit 4.1 to the registration statement on Form S-3 of Regency Centers, L.P., No. 333-72899).
   (c)    Indenture dated December 5, 2001 between Regency Centers, L.P., the guarantors named therein and First Union National Bank, as trustee (incorporated by referenced to Exhibit 4.4 of Form 8-K of Regency Centers, L.P. filed December 10, 2001, File No. 0-24763).
   (d)    Indenture dated July 18, 2005 between Regency Centers, L.P., the guarantors named therein and Wachovia Bank, National Association, as trustee (incorporated by referenced to Exhibit 4.1 of Form S-4 of Regency Centers, L.P. filed August 5, 2005, No. 333-127274).

10.

   Material Contracts
   (a)   

Regency Centers Corporation Amended and Restated Long Term Omnibus Plan (incorporated by reference to Appendix 1 to Regency’s 2003 annual meeting proxy statement filed April 3, 2003).

     

(i)     Amendment No. 1 to Regency Centers Corporation Long Term Omnibus Plan (incorporated by reference to Exhibit 10(a)(i) to the Company’s Form 10-K filed March 12, 2004).

     

(ii)    Amendment to Regency Centers Corporation Long Term Omnibus Plan (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed May 8, 2006).

~

   (b)    Form of Stock Rights Award Agreement (incorporated by reference to Exhibit 10(b) to the Company’s Form 10-K filed March 10, 2006).

 

 

~ Management contract or compensatory plan or arrangement filed pursuant to S-K 601(10)(iii)(A).
* Included as an exhibit to Pre-effective Amendment No. 2 to the Company’s registration statement on Form S-11 filed October 5, 1993 (33-67258), and incorporated herein by reference.

 

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~

   (c)    Form of Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10(c) to the Company’s Form 10-K filed March 10, 2006).

~

   (d)    Stock Rights Award Agreement dated as of December 17, 2002 between the Company and Martin E. Stein, Jr. (incorporated by reference to Exhibit 10(d) to the Company’s Form 10-K filed March 12, 2004).

~

   (e)    Stock Rights Award Agreement dated as of December 17, 2002 between the Company and Mary Lou Fiala (incorporated by reference to Exhibit 10(e) to the Company’s Form 10-K filed March 12, 2004).

~

   (f)    Stock Rights Award Agreement dated as of December 17, 2002 between the Company and Bruce
M. Johnson (incorporated by reference to Exhibit 10(f) to the Company’s Form 10-K filed March 12, 2004).

~*

   (i)    Form of Director/Officer Indemnification Agreement.

~

   (j)    Amended and Restated Deferred Compensation Plan dated May 6, 2003 (incorporated by reference to Exhibit 10(k) to the Company’s Form 10-K filed March 12, 2004).
   (l)    Fourth Amended and Restated Agreement of Limited Partnership of Regency Centers, L.P., as amended (incorporated by reference to Exhibit 10(m) to the Company’s Form 10-K filed March 12, 2004).
     

(i)     Amendment to Fourth Amended and Restated Agreement of Limited Partnership of Regency Centers, L.P. relating to 6.70% Series 5 Cumulative Redeemable Preferred Units, effective as of July 28, 2005 (incorporated by reference to Exhibit 3.3 to the Company’s Form 8-K filed August 1, 2005).

     

(ii)    Amended and Restated Amendment dated January 1, 2008 to Fourth Amended and Restated Agreement of Limited Partnership Relating to 7.45% Series 3 Cumulative Redeemable Preferred Units (incorporated by reference to Exhibit 10.1 of Regency Centers, L.P.’s Form 8-K filed January 7, 2008).

     

(iii)   Amended and Restated Amendment dated January 1, 2008 to Fourth Amended and Restated Agreement of Limited Partnership Relating to 7.25% Series 4 Cumulative Redeemable Preferred Units (incorporated by reference to Exhibit 10.1 of Regency Centers, L.P.’s Form 8-K filed January 7, 2008).

   (m)    Second Amended and Restated Credit Agreement dated as of February 9, 2007 by and among Regency Centers, L.P., Regency, each of the financial institutions initially a signatory thereto, and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.1 of the Company’s Form 10-Q filed May 9, 2007).

~

   (n)    2008 Amended and Restated Severance and Change of Control Agreement dated as of January 1, 2008 by and between the Company and Martin E. Stein, Jr. (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed January 7, 2008).

~

   (o)    2008 Amended and Restated Severance and Change of Control Agreement dated as of January 1, 2008 by and between the Company and Mary Lou Fiala (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed January 7, 2008).

~

   (p)    2008 Amended and Restated Severance and Change of Control Agreement dated as of January 1, 2008 by and between the Company and Bruce M. Johnson (incorporated by reference to Exhibit 10.3 of the Company’s Form 8K filed January 7, 2008).

~

   (q)    2008 Amended and Restated Severance and Change of Control Agreement effective January 1, 2008 by and between the Company and Brian M. Smith (incorporated by reference to Exhibit 10.4 of the Company’s Form 8-K filed January 7, 2008).

~

   (r)    Regency Centers Corporation 2005 Deferred Compensation Plan (incorporated by reference to Exhibit 10(s) to the Company’s Form 8-K filed December 21, 2004).
     

(i)     First Amendment to Regency Centers Corporation 2005 Deferred Compensation Plan dated December, 2005 (incorporated by reference to Exhibit 10(q)(i) to the Company’s Form 10-K filed March 10, 2006).

 

 

~ Management contract or compensatory plan or arrangement filed pursuant to S-K 601(10)(iii)(A).
* Included as an exhibit to Pre-effective Amendment No. 2 to the Company’s registration statement on Form S-11 filed October 5, 1993 (33-67258), and incorporated herein by reference.

 

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(s)

   Regency Centers Corporation 2005 Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed August 8, 2005).
  

(t)

   Amended and Restated Limited Liability Company Agreement of Macquarie CountryWide-Regency II, LLC dated as of June 1, 2005 by and among Regency Centers, L.P., Macquarie CountryWide (US) No. 2 LLC, Macquarie-Regency Management, LLC, Macquarie CountryWide (US) No. 2 Corporation and Macquarie CountryWide Management Limited (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q filed August 8, 2005).
  

(u)

   Purchase Agreement and Amendment to Amended and Restated Limited Liability Agreement relating to Macquarie CountryWide-Regency II, L.L.C. dated as of January 13, 2006 among Macquarie CountryWide (U.S.) No. 2 LLC, Regency Centers, L.P., and Macquarie-Regency Management, LLC (incorporated by reference to Exhibit 10.1 to Form 10-Q filed May 8, 2006).
  

(v)

   Limited Partnership Agreement dated as of December 21, 2006 of RRP Operating, LP.

 

21. Subsidiaries of the Registrant.

 

23. Consent of KPMG LLP.

 

31.1 Rule 13a-14 Certification of Chief Executive Officer.

 

31.2 Rule 13a-14 Certification of Chief Financial Officer.

 

31.3 Rule 13a-14 Certification of Chief Operating Officer.

 

32 Section 1350 Certifications of Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer.

 

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SIGNATURES

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

 

   REGENCY CENTERS CORPORATION
February 27, 2008   

/s/    Martin E. Stein, Jr.        

Martin E. Stein, Jr., Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

February 27, 2008

  

/s/    Martin E. Stein, Jr.        

Martin E. Stein, Jr., Chairman of the Board and Chief Executive Officer

February 27, 2008

  

/s/    Mary Lou Fiala        

Mary Lou Fiala, President, Chief Operating Officer and Director

February 27, 2008

  

/s/    Bruce M. Johnson        

Bruce M. Johnson, Managing Director, Chief Financial Officer (Principal Financial Officer)

and Director

February 27, 2008

  

/s/    J. Christian Leavitt        

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

February 27, 2008

  

/s/    Raymond L. Bank        

Raymond L. Bank, Director

February 27, 2008

  

/s/    C. Ronald Blankenship        

C. Ronald Blankenship, Director

February 27, 2008

  

/s/    A. R. Carpenter        

A. R. Carpenter, Director

February 27, 2008

  

/s/    J. Dix Druce

J. Dix Druce, Director

February 27, 2008

  

/s/    Douglas S. Luke        

Douglas S. Luke, Director

February 27, 2008

  

/s/    John C. Schweitzer        

John C. Schweitzer, Director

February 27, 2008

  

/s/    Thomas G. Wattles        

Thomas G. Wattles, Director

February 27, 2008

  

/s/    Terry N. Worrell        

Terry N. Worrell, Director

 

107