REG 10-Q 06.30.13
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             

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

REGENCY CENTERS CORPORATION
REGENCY CENTERS, L.P.
(Exact name of registrant as specified in its charter)
FLORIDA (REGENCY CENTERS CORPORATION)
 
59-3191743
DELAWARE (REGENCY CENTERS, L.P)
 
59-3429602
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
One Independent Drive, Suite 114
Jacksonville, Florida 32202
 
(904) 598-7000
(Address of principal executive offices) (zip code)
 
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Regency Centers Corporation              YES  x    NO  o                     Regency Centers, L.P.              YES  x    NO  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Regency Centers Corporation              YES  x    NO  o                     Regency Centers, L.P.              YES  x    NO  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Regency Centers Corporation:
Large accelerated filer
x
 
Accelerated filer
o
Non-accelerated filer
o
 
Smaller reporting company
o
Regency Centers, L.P.:
Large accelerated filer
o
  
Accelerated filer
x
Non-accelerated filer
o
  
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Regency Centers Corporation              YES  o    NO   x                    Regency Centers, L.P.              YES  o    NO  x
The number of shares outstanding of the Regency Centers Corporation’s voting common stock was 92,291,029 as of August 1, 2013.
 





EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the quarter ended June 30, 2013 of Regency Centers Corporation and Regency Centers, L.P. Unless stated otherwise or the context otherwise requires, references to “Regency Centers Corporation” or the “Parent Company” mean Regency Centers Corporation and its controlled subsidiaries; and references to “Regency Centers, L.P.” or the “Operating Partnership” mean Regency Centers, L.P. and its controlled subsidiaries. The term “the Company” or “Regency” means the Parent Company and the Operating Partnership, collectively.
The Parent Company is a real estate investment trust (“REIT”) and the general partner of the Operating Partnership. The Operating Partnership's capital includes general and limited common Partnership Units (“Units”). As of June 30, 2013, the Parent Company owned approximately 99.8% of the Units in the Operating Partnership and the remaining limited Units are owned by investors. The Parent Company owns all of the Series 6 and 7 Preferred Units of the Operating Partnership. As the sole general partner of the Operating Partnership, the Parent Company has exclusive control of the Operating Partnership's day-to-day management.
The Company believes combining the quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into this single report provides the following benefits:
 
enhances investors' understanding of the Parent Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;  

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

creates time and cost efficiencies through the preparation of one combined report instead of two separate reports. 
Management operates the Parent Company and the Operating Partnership as one business. The management of the Parent Company consists of the same individuals as the management of the Operating Partnership. These individuals are officers of the Parent Company and employees of the Operating Partnership.
The Company believes it is important to understand the few differences between the Parent Company and the Operating Partnership in the context of how the Parent Company and the Operating Partnership operate as a consolidated company. The Parent Company is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership. As a result, the Parent Company does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership. The Parent Company does not hold any indebtedness, but guarantees all of the unsecured public debt and approximately 16% of the secured debt of the Operating Partnership. The Operating Partnership holds all the assets of the Company and retains the ownership interests in the Company's joint ventures. Except for net proceeds from public equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates all remaining capital required by the Company's business. These sources include the Operating Partnership's operations, its direct or indirect incurrence of indebtedness, and the issuance of partnership units.
Stockholders' equity, partners' capital, and noncontrolling interests are the main areas of difference between the consolidated financial statements of the Parent Company and those of the Operating Partnership. The Operating Partnership's capital includes general and limited common Partnership Units, Series 6 and 7 Preferred Units owned by the Parent Company. The limited partners' units in the Operating Partnership owned by third parties are accounted for in partners' capital in the Operating Partnership's financial statements and outside of stockholders' equity in noncontrolling interests in the Parent Company's financial statements. The Series 6 and 7 Preferred Units owned by the Parent Company are eliminated in consolidation in the accompanying consolidated financial statements of the Parent Company and are classified as preferred units of general partner in the accompanying consolidated financial statements of the Operating Partnership.
In order to highlight the differences between the Parent Company and the Operating Partnership, there are sections in this report that separately discuss the Parent Company and the Operating Partnership, including separate financial statements, controls and procedures sections, and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure for the Parent Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. 

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




TABLE OF CONTENTS
 
 
 
Form 10-Q
Report Page
 
 
 
PART I - FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements
 
 
 
 
Regency Centers Corporation:
 
 
 
 
 
Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012
 
 
 
 
Consolidated Statements of Operations for the periods ended June 30, 2013 and 2012
 
 
 
 
Consolidated Statements of Comprehensive Income for the periods ended June 30, 2013 and 2012
 
 
 
 
Consolidated Statements of Equity for the periods ended June 30, 2013 and 2012
 
 
 
 
Consolidated Statements of Cash Flows for the periods ended June 30, 2013 and 2012
 
 
 
Regency Centers, L.P.:
 
 
 
 
 
Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012
 
 
 
 
Consolidated Statements of Operations for the periods ended June 30, 2013 and 2012
 
 
 
 
Consolidated Statements of Comprehensive Income for the periods ended June 30, 2013 and 2012
 
 
 
 
Consolidated Statements of Capital for the periods ended June 30, 2013 and 2012
 
 
 
 
Consolidated Statements of Cash Flows for the periods ended June 30, 2013 and 2012
 
 
 
 
Notes to Consolidated Financial Statements
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
 
 
Item 4.
Controls and Procedures
 
 
 
PART II - OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
 
 
 
Item 1A.
Risk Factors
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
Item 5.
Other Information
 
 
 
Item 6.
Exhibits
 
 
 
SIGNATURES
 
 
 
 
 
 





PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
REGENCY CENTERS CORPORATION
Consolidated Balance Sheets
June 30, 2013 and December 31, 2012
(in thousands, except share data)
 
 
2013
 
2012
Assets
 
(unaudited)
 
 
Real estate investments at cost:
 
 
 
 
Land
$
1,193,500

 
1,215,659

Buildings and improvements
 
2,502,979

 
2,502,186

Properties in development
 
246,990

 
192,067

 
 
3,943,469

 
3,909,912

Less: accumulated depreciation
 
823,601

 
782,749

 
 
3,119,868

 
3,127,163

Operating properties held for sale
 
15,961

 

Investments in real estate partnerships
 
428,606

 
442,927

Net real estate investments
 
3,564,435

 
3,570,090

Cash and cash equivalents
 
59,143

 
22,349

Restricted cash
 
5,354

 
6,472

Accounts receivable, net of allowance for doubtful accounts of $3,766 and $3,915 at June 30, 2013 and December 31, 2012, respectively
 
21,824

 
26,601

Straight-line rent receivable, net of reserve of $566 and $870 at June 30, 2013 and December 31, 2012, respectively
 
50,258

 
49,990

Notes receivable
 
18,502

 
23,751

Deferred costs, less accumulated amortization of $72,758 and $69,224 at June 30, 2013 and December 31, 2012, respectively
 
68,141

 
69,506

Acquired lease intangible assets, less accumulated amortization of $21,860 and $19,148 at June 30, 2013 and December 31, 2012, respectively
 
41,331

 
42,459

Trading securities held in trust, at fair value
 
24,457

 
23,429

Other assets
 
46,458

 
18,811

Total assets
$
3,899,903

 
3,853,458

Liabilities and Equity
 
 
 
 
Liabilities:
 
 
 
 
Notes payable
$
1,767,124

 
1,771,891

Unsecured credit facilities
 
125,000

 
170,000

Accounts payable and other liabilities
 
131,181

 
127,185

Acquired lease intangible liabilities, less accumulated accretion of $8,245 and $6,636 at June 30, 2013 and December 31, 2012, respectively
 
26,337

 
20,325

Tenants’ security and escrow deposits and prepaid rent
 
14,229

 
18,146

Total liabilities
 
2,063,871

 
2,107,547

Commitments and contingencies (note 12)
 

 

Equity:
 
 
 
 
Stockholders’ equity:
 
 
 
 
Preferred stock, $0.01 par value per share, 30,000,000 shares authorized; 13,000,000 Series 6 and 7 shares issued and outstanding at June 30, 2013 and December 31, 2012, with liquidation preferences of $25 per share
 
325,000

 
325,000

Common stock $0.01 par value per share,150,000,000 shares authorized; 92,279,321 and 90,394,486 shares issued at June 30, 2013 and December 31, 2012, respectively
 
923

 
904

Treasury stock at cost, 365,303 and 335,347 shares held at June 30, 2013 and December 31, 2012, respectively
 
(16,352
)
 
(14,924
)
Additional paid in capital
 
2,416,632

 
2,312,310

Accumulated other comprehensive loss
 
(31,319
)
 
(57,715
)
Distributions in excess of net income
 
(871,266
)
 
(834,810
)
Total stockholders’ equity
 
1,823,618

 
1,730,765

Noncontrolling interests:
 
 
 
 
Exchangeable operating partnership units, aggregate redemption value of $9,002 and $8,348 at June 30, 2013 and December 31, 2012, respectively
 
(1,165
)
 
(1,153
)
Limited partners’ interests in consolidated partnerships
 
13,579

 
16,299

Total noncontrolling interests
 
12,414

 
15,146

Total equity
 
1,836,032

 
1,745,911

Total liabilities and equity
$
3,899,903

 
3,853,458

See accompanying notes to consolidated financial statements.

1



REGENCY CENTERS CORPORATION
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2013
 
2012
 
2013
 
2012
Revenues:
 
 
 
 
 
 
 
 
Minimum rent
$
89,611

 
90,164

$
178,333

 
179,533

Percentage rent
 
298

 
398

 
1,846

 
1,558

Recoveries from tenants and other income
 
29,192

 
29,734

 
55,877

 
55,918

Management, transaction, and other fees
 
6,741

 
6,469

 
13,502

 
13,618

Total revenues
 
125,842

 
126,765

 
249,558

 
250,627

Operating expenses:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
31,930

 
31,737

 
63,871

 
63,108

Operating and maintenance
 
17,982

 
17,421

 
35,563

 
35,572

General and administrative
 
14,966

 
14,020

 
32,942

 
30,142

Real estate taxes
 
14,204

 
13,799

 
27,883

 
28,740

Other expenses
 
1,580

 
1,111

 
3,083

 
2,447

Total operating expenses
 
80,662

 
78,088

 
163,342

 
160,009

Other expense (income):
 
 
 
 
 
 
 
 
Interest expense, net of interest income of $292 and $377, and $751 and $913 for the three and six months ended June 30, 2013 and 2012, respectively
 
27,781

 
28,377

 
55,613

 
57,335

Provision for impairment
 

 
19,008

 

 
19,008

Net investment loss (income) from deferred compensation plan, including unrealized gains (loss) of $17 and ($499), and $848 and $725 for the three and six months ended June 30, 2013 and 2012, respectively
 
38

 
444

 
(1,034
)
 
(1,084
)
Total other expense
 
27,819

 
47,829

 
54,579

 
75,259

Income before equity in income of investments in real estate partnerships
 
17,361

 
848

 
31,637

 
15,359

Equity in income of investments in real estate partnerships
 
6,012

 
10,804

 
11,888

 
13,770

Income from continuing operations before tax
 
23,373

 
11,652

 
43,525

 
29,129

Income tax benefit of taxable REIT subsidiary
 

 
(840
)
 

 
(608
)
Income from continuing operations
 
23,373

 
12,492

 
43,525

 
29,737

Discontinued operations, net:
 
 
 
 
 
 
 
 
Operating income (loss)
 
969

 
(3,427
)
 
1,951

 
(2,073
)
Gain on sale of operating properties, net
 
11,410

 
2,304

 
11,410

 
8,605

Income (loss) from discontinued operations
 
12,379

 
(1,123
)
 
13,361

 
6,532

Income before gain (loss) on sale of real estate
 
35,752

 
11,369

 
56,886

 
36,269

Gain (loss) on sale of real estate
 
1,717

 
(21
)
 
1,717

 
1,814

Net income
 
37,469

 
11,348

 
58,603

 
38,083

Noncontrolling interests:
 
 
 
 
 
 
 
 
Preferred units
 

 

 

 
629

Exchangeable operating partnership units
 
(70
)
 
(23
)
 
(109
)
 
(77
)
Limited partners’ interests in consolidated partnerships
 
(270
)
 
(232
)
 
(545
)
 
(424
)
(Income) loss attributable to noncontrolling interests
 
(340
)
 
(255
)
 
(654
)
 
128

Net income attributable to the Company
 
37,129

 
11,093

 
57,949

 
38,211

Preferred stock dividends
 
(5,265
)
 
(5,396
)
 
(10,531
)
 
(19,333
)
Net income attributable to common stockholders
$
31,864

 
5,697

$
47,418

 
18,878

Income per common share - basic:
 
 
 
 
 
 
 
 
Continuing operations
$
0.21

 
0.07

$
0.37

 
0.14

Discontinued operations
 
0.14

 
(0.01
)
 
0.15

 
0.07

Net income attributable to common stockholders
$
0.35

 
0.06

$
0.52

 
0.21

Income per common share - diluted:
 
 
 
 
 
 
 
 
Continuing operations
$
0.21

 
0.07

$
0.37

 
0.14

Discontinued operations
 
0.14

 
(0.01
)
 
0.15

 
0.07

Net income attributable to common stockholders
$
0.35

 
0.06

$
0.52

 
0.21

See accompanying notes to consolidated financial statements.

2


REGENCY CENTERS CORPORATION
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2013
 
2012
 
2013
 
2012
Net income
$
37,469

 
11,348

$
58,603

 
38,083

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Loss on settlement of derivative instruments:
 
 
 
 
 
 
 
 
Amortization of loss on settlement of derivative instruments recognized in net income
 
2,366

 
2,366

 
4,733

 
4,733

Effective portion of change in fair value of derivative instruments:
 
 
 
 
 
 
 
 
Effective portion of change in fair value of derivative instruments
 
18,332

 
(26
)
 
21,704

 
(60
)
Less: reclassification adjustment for change in fair value of derivative instruments included in net income
 
8

 
7

 
16

 
9

Other comprehensive income
 
20,706

 
2,347

 
26,453

 
4,682

Comprehensive income
 
58,175

 
13,695

 
85,056

 
42,765

Less: comprehensive income (loss) attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Net income (loss) attributable to noncontrolling interests
 
340

 
255

 
654

 
(128
)
Other comprehensive income (loss) attributable to noncontrolling interests
 
43

 
(6
)
 
57

 
(16
)
Comprehensive income (loss) attributable to noncontrolling interests
 
383

 
249

 
711

 
(144
)
Comprehensive income attributable to the Company
$
57,792

 
13,446

$
84,345

 
42,909

See accompanying notes to consolidated financial statements.


3




REGENCY CENTERS CORPORATION
Consolidated Statements of Equity
For the six months ended June 30, 2013 and 2012
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interests
 
 
 
 
Preferred
Stock
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Distributions
in Excess of
Net Income
 
Total
Stockholders’
Equity
 
Preferred Units
 
Exchangeable
Operating
Partnership
Units
 
Limited
Partners’
Interest  in
Consolidated
Partnerships
 
Total
Noncontrolling
Interests
 
Total
Equity

Balance at December 31, 2011
$
275,000

 
899

 
(15,197
)
 
2,281,817

 
(71,429
)
 
(662,735
)
 
1,808,355

 
49,158

 
(963
)
 
13,104

 
61,299

 
1,869,654

Net income
 

 

 

 

 

 
38,211

 
38,211

 
(629
)
 
77

 
424

 
(128
)
 
38,083

Other comprehensive income (loss)
 

 

 

 

 
4,698

 

 
4,698

 

 
9

 
(25
)
 
(16
)
 
4,682

Deferred compensation plan, net
 

 

 
405

 
(405
)
 

 

 

 

 

 

 

 

Amortization of restricted stock issued
 

 

 

 
5,726

 

 

 
5,726

 

 

 

 

 
5,726

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

 

 

 
(1,548
)
 

 

 
(1,548
)
 

 

 

 

 
(1,548
)
Common stock issued for dividend reinvestment plan
 

 

 

 
495

 

 

 
495

 

 

 

 

 
495

Redemption of preferred units
 

 

 

 

 

 

 

 
(48,125
)
 

 

 
(48,125
)
 
(48,125
)
Issuance of preferred stock, net of issuance costs
 
250,000

 

 

 
(8,614
)
 

 

 
241,386

 

 

 

 

 
241,386

Redemption of preferred stock
 
(200,000
)
 

 

 
6,993

 

 
(6,993
)
 
(200,000
)
 

 

 

 

 
(200,000
)
Contributions from partners
 

 

 

 

 

 

 

 

 

 
3,317

 
3,317

 
3,317

Distributions to partners
 

 

 

 

 

 

 

 

 

 
(576
)
 
(576
)
 
(576
)
Cash dividends declared:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock/unit
 

 

 

 

 

 
(12,340
)
 
(12,340
)
 
(404
)
 

 

 
(404
)
 
(12,744
)
Common stock/unit ($0.925 per share)
 

 

 

 

 

 
(82,587
)
 
(82,587
)
 

 
(164
)
 

 
(164
)
 
(82,751
)
Balance at June 30, 2012
$
325,000

 
899

 
(14,792
)
 
2,284,464

 
(66,731
)
 
(726,444
)
 
1,802,396

 

 
(1,041
)
 
16,244

 
15,203

 
1,817,599


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

4



REGENCY CENTERS CORPORATION
Consolidated Statements of Equity
For the six months ended June 30, 2013 and 2012
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interests
 
 
 
 
Preferred
Stock
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Distributions
in Excess of
Net Income
 
Total
Stockholders’
Equity
 
Preferred Units
 
Exchangeable
Operating
Partnership
Units
 
Limited
Partners’
Interest  in
Consolidated
Partnerships
 
Total
Noncontrolling
Interests
 
Total
Equity

Balance at December 31, 2012
$
325,000

 
904

 
(14,924
)
 
2,312,310

 
(57,715
)
 
(834,810
)
 
1,730,765

 

 
(1,153
)
 
16,299

 
15,146

 
1,745,911

Net income
 

 

 

 

 

 
57,949

 
57,949

 

 
109

 
545

 
654

 
58,603

Other comprehensive income
 

 

 

 

 
26,396

 

 
26,396

 

 
50

 
7

 
57

 
26,453

Deferred compensation plan, net
 

 

 
(1,428
)
 
1,428

 

 

 

 

 

 

 

 

Amortization of restricted stock issued
 

 

 

 
6,978

 

 

 
6,978

 

 

 

 

 
6,978

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

 

 

 
(2,921
)
 

 

 
(2,921
)
 

 

 

 

 
(2,921
)
Common stock issued for dividend reinvestment plan
 

 

 

 
578

 

 

 
578

 

 

 

 

 
578

Common stock issued for stock offerings, net of issuance costs
 

 
19

 

 
98,259

 

 

 
98,278

 

 

 

 

 
98,278

Issuance of preferred stock, net of issuance costs
 

 

 

 

 

 

 

 

 

 

 

 

Contributions from partners
 

 

 

 

 

 

 

 

 

 
39

 
39

 
39

Distributions to partners
 

 

 

 

 

 

 

 

 

 
(3,311
)
 
(3,311
)
 
(3,311
)
Cash dividends declared:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock/unit
 

 

 

 

 

 
(10,531
)
 
(10,531
)
 

 

 

 

 
(10,531
)
Common stock/unit ($0.925 per share)
 

 

 

 

 

 
(83,874
)
 
(83,874
)
 

 
(171
)
 

 
(171
)
 
(84,045
)
Balance at June 30, 2013
$
325,000

 
923

 
(16,352
)
 
2,416,632

 
(31,319
)
 
(871,266
)
 
1,823,618

 

 
(1,165
)
 
13,579

 
12,414

 
1,836,032

See accompanying notes to consolidated financial statements.


5



REGENCY CENTERS CORPORATION
Consolidated Statements of Cash Flows
For the six months ended June 30, 2013 and 2012
(in thousands)
(unaudited)
 
 
2013
 
2012
Cash flows from operating activities:
 
 
 
 
Net income
$
58,603

 
38,083

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
65,170

 
66,062

Amortization of deferred loan cost and debt premium
 
6,175

 
6,461

Accretion of above and below market lease intangibles, net
 
(1,042
)
 
(437
)
Stock-based compensation, net of capitalization
 
6,159

 
4,903

Equity in income of investments in real estate partnerships
 
(11,888
)
 
(13,770
)
Net gain on sale of properties
 
(13,127
)
 
(10,419
)
Provision for impairment
 

 
23,508

Distribution of earnings from operations of investments in real estate partnerships
 
24,376

 
17,580

Loss on derivative instruments
 
(9
)
 
(13
)
Deferred compensation expense
 
1,051

 
1,073

Realized and unrealized gains on trading securities held in trust
 
(1,051
)
 
(1,083
)
Changes in assets and liabilities:
 
 
 
 
Restricted cash
 
1,118

 
(25
)
Accounts receivable
 
(328
)
 
(3,084
)
Straight-line rent receivables, net
 
(2,612
)
 
(3,365
)
Deferred leasing costs
 
(4,212
)
 
(6,146
)
Other assets
 
(3,175
)
 
(2,227
)
Accounts payable and other liabilities
 
(17,286
)
 
(6,393
)
Tenants’ security and escrow deposits and prepaid rent
 
(3,846
)
 
563

Net cash provided by operating activities
 
104,076

 
111,271

Cash flows from investing activities:
 
 
 
 
Acquisition of operating real estate
 
(26,676
)
 
(586
)
Development of real estate, including acquisition of land
 
(78,951
)
 
(79,755
)
Proceeds from sale of real estate investments
 
84,699

 
48,927

Collection (issuance) of notes receivable
 
6,025

 
(666
)
Investments in real estate partnerships
 
(8,060
)
 
(53,587
)
Distributions received from investments in real estate partnerships
 
11,457

 
12,495

Dividends on trading securities held in trust
 
70

 
77

Acquisition of securities
 
(15,679
)
 
(11,120
)
Proceeds from sale of securities
 
10,632

 
11,385

Net cash used in investing activities
 
(16,483
)
 
(72,830
)
Cash flows from financing activities:
 
 
 
 
Net proceeds from common stock issuance
 
98,278

 

Net proceeds from issuance of preferred stock
 

 
241,386

Proceeds from sale of treasury stock
 
34

 
339

Acquisition of treasury stock
 

 
(4
)
Redemption of preferred stock and partnership units
 

 
(248,125
)
Distributions (to) from limited partners in consolidated partnerships, net
 
(3,272
)
 
1,801

Distributions to exchangeable operating partnership unit holders
 
(171
)
 
(164
)
Distributions to preferred unit holders
 

 
(404
)
Dividends paid to common stockholders
 
(83,296
)
 
(82,093
)
Dividends paid to preferred stockholders
 
(5,265
)
 
(6,943
)
Proceeds from unsecured credit facilities
 
77,000

 
450,000

Repayment of unsecured credit facilities
 
(122,000
)
 
(185,000
)
Proceeds from notes payable
 
8,250

 

Repayment of notes payable
 
(16,349
)
 
(192,375
)
Scheduled principal payments
 
(3,893
)
 
(3,513
)
Payment of loan costs
 
(115
)
 
(1,718
)
Net cash used in financing activities
 
(50,799
)
 
(26,813
)
Net increase in cash and cash equivalents
 
36,794

 
11,628

Cash and cash equivalents at beginning of the period
 
22,349

 
11,402

Cash and cash equivalents at end of the period
$
59,143

 
23,030


6



REGENCY CENTERS CORPORATION
Consolidated Statements of Cash Flows
For the six months ended June 30, 2013, and 2012
(in thousands)
(unaudited)
 
 
2013
 
2012
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest (net of capitalized interest of $2,305 and $1,246 in 2013 and 2012, respectively)
$
54,670

 
61,901

Supplemental disclosure of non-cash transactions:
 
 
 
 
Preferred unit and stock distribution declared and not paid
$
5,266

 
5,397

Real estate received through distribution in kind
$
7,576

 

Mortgage loans assumed through distribution in kind
$
7,500

 

Mortgage loans assumed for the acquisition of real estate
$

 
11,710

Real estate acquired through elimination of note receivable
$

 
12,585

Change in fair value of derivative instruments
$
21,720

 
(49
)
Common stock issued for dividend reinvestment plan
$
578

 
495

Stock-based compensation capitalized
$
948

 
960

Contributions from limited partners in consolidated partnerships, net
$

 
940

Common stock issued for dividend reinvestment in trust
$
320

 
287

Contribution of stock awards into trust
$
1,504

 
806

Distribution of stock held in trust
$
201

 
1,191

See accompanying notes to consolidated financial statements.



7



REGENCY CENTERS, L.P.
Consolidated Balance Sheets
June 30, 2013 and December 31, 2012
(in thousands, except unit data)
    
 
 
2013
 
2012
Assets
 
(unaudited)
 
 
Real estate investments at cost:
 
 
 
 
Land
$
1,193,500

 
1,215,659

Buildings and improvements
 
2,502,979

 
2,502,186

Properties in development
 
246,990

 
192,067

 
 
3,943,469

 
3,909,912

Less: accumulated depreciation
 
823,601

 
782,749

 
 
3,119,868

 
3,127,163

Operating properties held for sale
 
15,961

 

Investments in real estate partnerships
 
428,606

 
442,927

Net real estate investments
 
3,564,435

 
3,570,090

Cash and cash equivalents
 
59,143

 
22,349

Restricted cash
 
5,354

 
6,472

Accounts receivable, net of allowance for doubtful accounts of $3,766 and $3,915 at June 30, 2013 and December 31, 2012, respectively
 
21,824

 
26,601

Straight-line rent receivable, net of reserve of $566 and $870 at June 30, 2013 and December 31, 2012, respectively
 
50,258

 
49,990

Notes receivable
 
18,502

 
23,751

Deferred costs, less accumulated amortization of $72,758 and $69,224 at June 30, 2013 and December 31, 2012, respectively
 
68,141

 
69,506

Acquired lease intangible assets, less accumulated amortization of $21,860 and $19,148 at June 30, 2013 and December 31, 2012, respectively
 
41,331

 
42,459

Trading securities held in trust, at fair value
 
24,457

 
23,429

Other assets
 
46,458

 
18,811

Total assets
$
3,899,903

 
3,853,458

Liabilities and Capital
 
 
 
 
Liabilities:
 
 
 
 
Notes payable
$
1,767,124

 
1,771,891

Unsecured credit facilities
 
125,000

 
170,000

Accounts payable and other liabilities
 
131,181

 
127,185

Acquired lease intangible liabilities, less accumulated accretion of $8,245 and $6,636 at June 30, 2013 and December 31, 2012, respectively
 
26,337

 
20,325

Tenants’ security and escrow deposits and prepaid rent
 
14,229

 
18,146

Total liabilities
 
2,063,871

 
2,107,547

Commitments and contingencies (note 12)
 


 


Capital:
 
 
 
 
Partners’ capital:
 
 
 
 
Preferred units of general partner, $0.01 par value per unit, 13,000,000 units issued and outstanding at June 30, 2013 and December 31, 2012, liquidation preference of $25 per unit
 
325,000

 
325,000

General partner; 92,279,321 and 90,394,486 units outstanding at June 30, 2013 and December 31, 2012, respectively
 
1,529,937

 
1,463,480

Limited partners; 177,164 units outstanding at June 30, 2013 and December 31, 2012
 
(1,165
)
 
(1,153
)
Accumulated other comprehensive loss
 
(31,319
)
 
(57,715
)
Total partners’ capital
 
1,822,453

 
1,729,612

Noncontrolling interests:
 
 
 
 
Limited partners’ interests in consolidated partnerships
 
13,579

 
16,299

Total noncontrolling interests
 
13,579

 
16,299

Total capital
 
1,836,032

 
1,745,911

Total liabilities and capital
$
3,899,903

 
3,853,458

See accompanying notes to consolidated financial statements.

8



REGENCY CENTERS, L.P.
Consolidated Statements of Operations
(in thousands, except per unit data)
(unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2013
 
2012
 
2013
 
2012
Revenues:
 
 
 
 
 
 
 
 
Minimum rent
$
89,611

 
90,164

$
178,333

 
179,533

Percentage rent
 
298

 
398

 
1,846

 
1,558

Recoveries from tenants and other income
 
29,192

 
29,734

 
55,877

 
55,918

Management, transaction, and other fees
 
6,741

 
6,469

 
13,502

 
13,618

Total revenues
 
125,842

 
126,765

 
249,558

 
250,627

Operating expenses:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
31,930

 
31,737

 
63,871

 
63,108

Operating and maintenance
 
17,982

 
17,421

 
35,563

 
35,572

General and administrative
 
14,966

 
14,020

 
32,942

 
30,142

Real estate taxes
 
14,204

 
13,799

 
27,883

 
28,740

Other expenses
 
1,580

 
1,111

 
3,083

 
2,447

Total operating expenses
 
80,662

 
78,088

 
163,342

 
160,009

Other expense (income):
 
 
 
 
 
 
 
 
Interest expense, net of interest income of $292 and $377, and $751 and $913 for the three and six months ended June 30, 2013 and 2012, respectively
 
27,781

 
28,377

 
55,613

 
57,335

Provision for impairment
 

 
19,008

 

 
19,008

Net investment loss (income) from deferred compensation plan, including unrealized gains (loss) of $17 and ($499), and $848 and $725 for the three and six months ended June 30, 2013 and 2012, respectively
 
38

 
444

 
(1,034
)
 
(1,084
)
Total other expense
 
27,819

 
47,829

 
54,579

 
75,259

Income before equity in income of investments in real estate partnerships
 
17,361

 
848

 
31,637

 
15,359

Equity in income of investments in real estate partnerships
 
6,012

 
10,804

 
11,888

 
13,770

Income from continuing operations before tax
 
23,373

 
11,652

 
43,525

 
29,129

Income tax benefit of taxable REIT subsidiary
 

 
(840
)
 

 
(608
)
Income from continuing operations
 
23,373

 
12,492

 
43,525

 
29,737

Discontinued operations, net:
 
 
 
 
 
 
 
 
Operating income (loss)
 
969

 
(3,427
)
 
1,951

 
(2,073
)
Gain on sale of operating properties, net
 
11,410

 
2,304

 
11,410

 
8,605

Income (loss) from discontinued operations
 
12,379

 
(1,123
)
 
13,361

 
6,532

Income before gain (loss) on sale of real estate
 
35,752

 
11,369

 
56,886

 
36,269

Gain (loss) on sale of real estate
 
1,717

 
(21
)
 
1,717

 
1,814

Net income
 
37,469

 
11,348

 
58,603

 
38,083

Noncontrolling interests:
 
 
 
 
 
 
 
 
Limited partners’ interests in consolidated partnerships
 
(270
)
 
(232
)
 
(545
)
 
(424
)
Income attributable to noncontrolling interests
 
(270
)
 
(232
)
 
(545
)
 
(424
)
Net income attributable to the Partnership
 
37,199

 
11,116

 
58,058

 
37,659

Preferred unit distributions
 
(5,265
)
 
(5,396
)
 
(10,531
)
 
(18,704
)
Net income attributable to common unit holders
$
31,934

 
5,720

$
47,527

 
18,955

Income per common unit - basic:
 
 
 
 
 
 
 
 
Continuing operations
$
0.21

 
0.07

$
0.37

 
0.14

Discontinued operations
 
0.14

 
(0.01
)
 
0.15

 
0.07

Net income attributable to common unit holders
$
0.35

 
0.06

$
0.52

 
0.21

Income per common unit - diluted:
 
 
 
 
 
 
 
 
Continuing operations
$
0.21

 
0.07

$
0.37

 
0.14

Discontinued operations
 
0.14

 
(0.01
)
 
0.15

 
0.07

Net income attributable to common unit holders
$
0.35

 
0.06

$
0.52

 
0.21

See accompanying notes to consolidated financial statements.

9


REGENCY CENTERS, L.P.
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2013
 
2012
 
2013
 
2012
Net income
$
37,469

 
11,348

$
58,603

 
38,083

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Loss on settlement of derivative instruments:
 
 
 
 
 
 
 
 
Amortization of loss on settlement of derivative instruments recognized in net income
 
2,366

 
2,366

 
4,733

 
4,733

Effective portion of change in fair value of derivative instruments:
 
 
 
 
 
 
 
 
Effective portion of change in fair value of derivative instruments
 
18,332

 
(26
)
 
21,704

 
(60
)
Less: reclassification adjustment for change in fair value of derivative instruments included in net income
 
8

 
7

 
16

 
9

Other comprehensive income
 
20,706

 
2,347

 
26,453

 
4,682

Comprehensive income
 
58,175

 
13,695

 
85,056

 
42,765

Less: comprehensive income (loss) attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
 
270

 
232

 
545

 
424

Other comprehensive income (loss) attributable to noncontrolling interests
 
4

 
(10
)
 
7

 
(25
)
Comprehensive income attributable to noncontrolling interests
 
274

 
222

 
552

 
399

Comprehensive income attributable to the Partnership
$
57,901

 
13,473

$
84,504

 
42,366

See accompanying notes to consolidated financial statements.


10



REGENCY CENTERS, L.P.
Consolidated Statements of Capital
For the six months ended June 30, 2013 and 2012
 (in thousands)
(unaudited)
 
 
Preferred
Units
 
General Partner
Preferred and
Common Units
 
Limited
Partners
 
Accumulated
Other
Comprehensive Loss
 
Total
Partners’
Capital
 
Noncontrolling
Interests in
Limited Partners’
Interest in
Consolidated
Partnerships
 
Total
Capital
Balance at December 31, 2011
$
49,158

 
1,879,784

 
(963
)
 
(71,429
)
 
1,856,550

 
13,104

 
1,869,654

Net income
 
(629
)
 
38,211

 
77

 

 
37,659

 
424

 
38,083

Other comprehensive income (loss)
 

 

 
9

 
4,698

 
4,707

 
(25
)
 
4,682

Contributions from partners
 

 

 

 

 

 
3,317

 
3,317

Distributions to partners
 

 
(82,587
)
 
(164
)
 

 
(82,751
)
 
(576
)
 
(83,327
)
Redemption of preferred units
 
(48,125
)
 
(200,000
)
 

 

 
(248,125
)
 

 
(248,125
)
Preferred unit distributions
 
(404
)
 
(12,340
)
 

 

 
(12,744
)
 

 
(12,744
)
Restricted units issued as a result of amortization of restricted stock issued by Parent Company
 

 
5,726

 

 

 
5,726

 

 
5,726

Preferred units issued as a result of preferred stock issued by Parent Company, net of issuance costs
 

 
241,386

 

 

 
241,386

 

 
241,386

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

 
(1,053
)
 

 

 
(1,053
)
 

 
(1,053
)
Balance at June 30, 2012
 

 
1,869,127

 
(1,041
)
 
(66,731
)
 
1,801,355

 
16,244

 
1,817,599

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2012
 

 
1,788,480

 
(1,153
)
 
(57,715
)
 
1,729,612

 
16,299

 
1,745,911

Net income
 

 
57,949

 
109

 

 
58,058

 
545

 
58,603

Other comprehensive income
 

 

 
50

 
26,396

 
26,446

 
7

 
26,453

Contributions from partners
 

 

 

 

 

 
39

 
39

Distributions to partners
 

 
(83,874
)
 
(171
)
 

 
(84,045
)
 
(3,311
)
 
(87,356
)
Preferred unit distributions
 

 
(10,531
)
 

 

 
(10,531
)
 

 
(10,531
)
Restricted units issued as a result of amortization of restricted stock issued by Parent Company
 

 
6,978

 

 

 
6,978

 

 
6,978

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

 
95,935

 

 

 
95,935

 

 
95,935

Balance at June 30, 2013
$

 
1,854,937

 
(1,165
)
 
(31,319
)
 
1,822,453

 
13,579

 
1,836,032

See accompanying notes to consolidated financial statements.


11



REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the six months ended June 30, 2013, and 2012
(in thousands)
(unaudited)
 
 
2013
 
2012
Cash flows from operating activities:
 
 
 
 
Net income
$
58,603

 
38,083

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

 

Depreciation and amortization
 
65,170

 
66,062

Amortization of deferred loan cost and debt premium
 
6,175

 
6,461

Accretion of above and below market lease intangibles, net
 
(1,042
)
 
(437
)
Stock-based compensation, net of capitalization
 
6,159

 
4,903

Equity in income of investments in real estate partnerships
 
(11,888
)
 
(13,770
)
Net gain on sale of properties
 
(13,127
)
 
(10,419
)
Provision for impairment
 

 
23,508

Distribution of earnings from operations of investments in real estate partnerships
 
24,376

 
17,580

Loss on derivative instruments
 
(9
)
 
(13
)
Deferred compensation expense
 
1,051

 
1,073

Realized and unrealized gains on trading securities held in trust
 
(1,051
)
 
(1,083
)
Changes in assets and liabilities:
 

 

Restricted cash
 
1,118

 
(25
)
Accounts receivable
 
(328
)
 
(3,084
)
Straight-line rent receivables, net
 
(2,612
)
 
(3,365
)
Deferred leasing costs
 
(4,212
)
 
(6,146
)
Other assets
 
(3,175
)
 
(2,227
)
Accounts payable and other liabilities
 
(17,286
)
 
(6,393
)
Tenants’ security and escrow deposits and prepaid rent
 
(3,846
)
 
563

Net cash provided by operating activities
 
104,076

 
111,271

Cash flows from investing activities:
 
 
 
 
Acquisition of operating real estate
 
(26,676
)
 
(586
)
Development of real estate, including acquisition of land
 
(78,951
)
 
(79,755
)
Proceeds from sale of real estate investments
 
84,699

 
48,927

Collection (issuance) of notes receivable
 
6,025

 
(666
)
Investments in real estate partnerships
 
(8,060
)
 
(53,587
)
Distributions received from investments in real estate partnerships
 
11,457

 
12,495

Dividends on trading securities held in trust
 
70

 
77

Acquisition of securities
 
(15,679
)
 
(11,120
)
Proceeds from sale of securities
 
10,632

 
11,385

Net cash used in investing activities
 
(16,483
)
 
(72,830
)
Cash flows from financing activities:
 
 
 
 
Net proceeds from common units issued as a result of common stock issued by Parent Company
 
98,278

 

Net proceeds from preferred units issued as a result of preferred stock issued by Parent Company
 

 
241,386

Proceeds from sale of treasury stock
 
34

 
339

Acquisition of treasury stock
 

 
(4
)
Redemption of preferred partnership units
 

 
(248,125
)
Distributions (to) from limited partners in consolidated partnerships, net
 
(3,272
)
 
1,801

Distributions to partners
 
(83,467
)
 
(82,257
)
Distributions to preferred unit holders
 
(5,265
)
 
(7,347
)
Proceeds from unsecured credit facilities
 
77,000

 
450,000

Repayment of unsecured credit facilities
 
(122,000
)
 
(185,000
)
Proceeds from notes payable
 
8,250

 

Repayment of notes payable
 
(16,349
)
 
(192,375
)
Scheduled principal payments
 
(3,893
)
 
(3,513
)
Payment of loan costs
 
(115
)
 
(1,718
)
Net cash used in financing activities
 
(50,799
)
 
(26,813
)
Net increase in cash and cash equivalents
 
36,794

 
11,628

Cash and cash equivalents at beginning of the period
 
22,349

 
11,402

Cash and cash equivalents at end of the period
$
59,143

 
23,030




12



REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the six months ended June 30, 2013, and 2012
(in thousands)
(unaudited)
 
 
2013
 
2012
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest (net of capitalized interest of $2,305 and $1,246 in 2013 and 2012, respectively)
$
54,670

 
61,901

Supplemental disclosure of non-cash transactions:
 
 
 
 
Preferred unit and stock distribution declared and not paid
$
5,266

 
5,397

Real estate received through distribution in kind
$
7,576

 

Mortgage loans assumed through distribution in kind
$
7,500

 

Mortgage loans assumed for the acquisition of real estate
$

 
11,710

Real estate acquired through elimination of note receivable
$

 
12,585

Change in fair value of derivative instruments
$
21,720

 
(49
)
Common stock issued for dividend reinvestment plan
$
578

 
495

Stock-based compensation capitalized
$
948

 
960

Contributions from limited partners in consolidated partnerships, net
$

 
940

Common stock issued for dividend reinvestment in trust
$
320

 
287

Contribution of stock awards into trust
$
1,504

 
806

Distribution of stock held in trust
$
201

 
1,191

See accompanying notes to consolidated financial statements.



13


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2013

1.
Organization and Principles of Consolidation
General
Regency Centers Corporation (the “Parent Company”) began its operations as a Real Estate Investment Trust (“REIT”) in 1993 and is the general partner of Regency Centers, L.P. (the “Operating Partnership”). The Parent Company currently owns approximately 99.8% of the outstanding common Partnership Units of the Operating Partnership. The Parent Company engages in the ownership, management, leasing, acquisition, and development of retail shopping centers through the Operating Partnership, and has no other assets or liabilities other than through its investment in the Operating Partnership. As of June 30, 2013, the Parent Company, the Operating Partnership and their controlled subsidiaries on a consolidated basis (the "Company” or “Regency”) directly owned 204 retail shopping centers and held partial interests in an additional 139 retail shopping centers through investments in real estate partnerships (also referred to as "joint ventures" or "co-investment partnerships").

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

Recently Adopted Accounting Pronouncements

On January 1, 2013, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities ("ASU 2011-11") and ASU No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. These new standards retain the existing offsetting models under U.S. GAAP but require new disclosure requirements for derivatives, including bifurcated embedded derivatives, repurchase and reverse repurchase agreements, and securities lending transactions that are either offset in the Consolidated Balance Sheets or subject to an enforceable master netting arrangement or similar agreement. Retrospective application is required. While the Company does have master netting agreements, it does not have multiple derivatives with the same counterparties subject to a single master netting agreement to offset, therefore no additional disclosures are necessary.

2.
Real Estate Investments

The following table details the shopping center acquired during the six months ended June 30, 2013 (in thousands). There were no shopping centers acquired through our co-investment partnerships during the six months ended June 30, 2013.
Date Purchased
Property Name
City/State
Co-investment Partner
Ownership
Purchase Price
Debt Assumed, Net of Premiums
Intangible Assets
Intangible Liabilities
5/30/2013
Preston Oaks
Dallas, TX
N/A
100%
$
27,000

$

$
3,396

$
7,597


In addition, on March 20, 2013, the Company entered into a liquidation agreement with Macquarie Countrywide (US) No. 2, LLC ("CQR") to redeem its 24.95% interest through dissolution of the Macquarie CountryWide-Regency III, LLC (MCWR III) co-investment partnership through a distribution-in-kind ("DIK"). The assets of the partnership were distributed as 100% ownership interests to CQR and Regency after a selection process, as provided for by the agreement. Regency selected one asset, Hilltop Village, which was recorded at the carrying value of the Company's equity investment in MCWR III, net of deferred gain, on the date of dissolution of $7.6 million, including a $7.5 million mortgage assumed.



14

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2013


3.    Discontinued Operations

Dispositions

The following table provides a summary of shopping centers disposed of during the three and six months ended June 30, 2013 and 2012 (in thousands):
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2013
 
2012
 
2013
 
2012
Net proceeds
$
82,634

 
17,600

$
82,634

 
39,200

Gain on sale of properties
$
11,410

 
2,304

$
11,410

 
8,605

Number of properties sold
 
4
 
2
 
4
 
4
Percent interest sold
 
100%
 
100%
 
100%
 
100%

The following table provides a summary of revenues and expenses from properties included in discontinued operations for three and six months ended June 30, 2013 and 2012 (in thousands):
 
 
Three months ended June 30,
 
Six months ended June 30,

 
2013
 
2012
 
2013
 
2012
Revenues
$
1,584

 
3,295

$
3,976

 
7,137

Operating expenses
 
615

 
2,173

 
2,025

 
4,723

Provision for impairment
 

 
4,500

 

 
4,500

Income tax benefit (1)
 

 
49

 

 
(13
)
Operating income from discontinued operations
$
969

 
(3,427
)
$
1,951

 
(2,073
)

(1) The operating income and gain on sales of properties included in discontinued operations are reported net of income taxes, if the property is sold by Regency Realty Group, Inc., a wholly owned subsidiary of the Operating Partnership, which is a Taxable REIT subsidiary as defined by in Section 856(1) of the Internal Revenue Code.

4.    Income Taxes
    
Income tax expense (benefit) is separately presented on the face of the Consolidated Statement of Operations, if the related income is from continuing operations, or is included in operating income from discontinued operations, if from discontinued operations. There was no income tax expense (benefit) for the three and six months ended June 30, 2013. Income tax expense (benefit) was as follows for the three and six months ended June 30, 2013 and 2012 (in thousands):
    
 
 
Three months ended June 30,
 
Six months ended June 30,
Income tax expense (benefit) from:
 
2013
 
2012
 
2013
 
2012
Continuing operations
$

 
(840
)
$

 
(608
)
Discontinued operations
 

 
671

 

 
608

Total income tax expense
$

 
(169
)
$

 




15

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2013


5.    Notes Payable and Unsecured Credit Facilities
The Company’s debt outstanding as of June 30, 2013 and December 31, 2012 consists of the following (in thousands): 
 
 
2013
 
2012
Notes payable:
 
 
 
 
Fixed rate mortgage loans
$
457,071

 
461,914

Variable rate mortgage loans
 
11,909

 
12,041

Fixed rate unsecured loans
 
1,298,144

 
1,297,936

Total notes payable
 
1,767,124

 
1,771,891

Unsecured credit facilities
 
 
 
 
Line
 
25,000

 
70,000

Term Loan
 
100,000

 
100,000

Total unsecured credit facilities
 
125,000

 
170,000

Total debt outstanding
$
1,892,124

 
1,941,891


Fixed rate mortgage loans decreased $4.8 million primarily due to the following:
The Company paid off the $16.3 million maturing balance of 7.1% secured borrowings on May 1, 2013.
On March 4, 2013, the Company entered into an interest only mortgage for $8.3 million on a recently completed development property at a fixed rate of 3.3%, maturing on April 1, 2020.
The Company assumed debt of $7.5 million with the DIK of Hilltop Village on March 20, 2013, which is interest only with a fixed rate of 5.57% and matures on April 6, 2016.
Further, since December 31, 2012, the Company has repaid $45.0 million, net of borrowings, on its $800.0 million Line of Credit (the "Line").

As of June 30, 2013, scheduled principal payments and maturities on notes payable were as follows (in thousands): 
Scheduled Principal Payments and Maturities by Year:
 
Scheduled
Principal
Payments
 
Mortgage Loan
Maturities
 
Unsecured
Maturities (1)
 
Total
2013
$
3,877

 

 

 
3,877

2014
 
7,383

 
26,853

 
150,000

 
184,236

2015
 
5,747

 
62,435

 
350,000

 
418,182

2016
 
5,487

 
21,661

 
125,000

 
152,148

2017
 
4,584

 
84,593

 
400,000

 
489,177

Beyond 5 Years
 
20,021

 
220,993

 
400,000

 
641,014

Unamortized debt (discounts) premiums, net
 

 
5,346

 
(1,856
)
 
3,490

Total
$
47,099

 
421,881

 
1,423,144

 
1,892,124


(1) Includes unsecured public debt and unsecured credit facilities.

The Company believes it was in compliance as of June 30, 2013 with the financial and other covenants under its unsecured public debt and unsecured credit facilities.



16

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2013


6.    Derivative Financial Instruments
The following table summarizes the terms and fair values of the Company's derivative financial instruments, as well as their classification on the Consolidated Balance Sheets, as of June 30, 2013 and December 31, 2012 (in thousands): 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value
 
Effective Date
 
Maturity Date
 
Early Termination Date (1)
 
Counterparty
 
Notional Amount
 
Bank Pays Variable Rate of
 
Regency Pays Fixed Rate of
 
2013
 
2012
Assets:
 
4/15/14
 
4/15/24
 
10/15/14
 
JPMorgan Chase Bank, N.A.
$
75,000

 
3 Month LIBOR
 
2.087%
$
6,210

 
1,022

 
4/15/14
 
4/15/24
 
10/15/14
 
Bank of America, N.A.
 
50,000

 
3 Month LIBOR
 
2.088%
 
4,130

 
672

 
8/1/15
 
8/1/25
 
2/1/16
 
US Bank National Association
 
75,000

 
3 Month LIBOR
 
2.479%
 
6,760

 
1,131

 
8/1/15
 
8/1/25
 
2/1/16
 
Royal Bank of Canada
 
50,000

 
3 Month LIBOR
 
2.479%
 
4,419

 
729

 
8/1/15
 
8/1/25
 
2/1/16
 
PNC Bank, N.A.
 
50,000

 
3 Month LIBOR
 
2.479%
 
4,492

 
753

Other Assets
 
 
 
 
 
 
 
 
$
26,011

 
4,307

Liabilities:
 
10/1/11
 
9/1/14
 
N/A
 
PNC Bank, N.A.
$
9,000

 
1 Month LIBOR
 
0.760%
$
(51
)
 
(76
)
Accounts payable and other liabilities
 
$
(51
)
 
(76
)
(1) Represents the date specified in the agreement for either optional or mandatory early termination which will result in cash settlement.
These derivative financial instruments are all interest rate swaps, which are designated and qualify as cash flow hedges. The Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges. The Company has master netting agreements, however the Company does not have multiple derivatives subject to a single master netting agreement with the same counterparties, therefore none are offset in the accompanying Consolidated Balance Sheet.
The Company has $150.0 million of unsecured long-term debt that matures in 2014 and $350.0 million of unsecured long-term debt that matures in 2015. In order to mitigate the risk of interest rates rising before new unsecured borrowings are obtained, the Company entered into five forward-starting interest rate swaps during December 2012, for the same ten year periods expected for the future borrowings. These swaps total $300.0 million of notional value, as shown above. The Company will settle these swaps upon the early termination date, which is expected to coincide with the date new unsecured borrowings are obtained, and will begin amortizing the gain or loss realized from the swap settlement over the ten year period expected for the new borrowings; resulting in a modified effective interest rate on those borrowings.
The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive income (loss) and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings as a gain or loss on derivative instruments.


17

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2013


The following tables represents the effect of the derivative financial instruments on the accompanying consolidated financial statements for the three and six months ended June 30, 2013 and 2012 (in thousands):
 
Derivatives in FASB
ASC Topic 815 Cash
Flow Hedging
Relationships:
Amount of Gain (Loss)
Recognized in OCI on
Derivative (Effective
Portion)
 
Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
 
Amount of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective
Portion)
 
Location of Gain or
(Loss) Recognized in
Income on  Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
 
Amount of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
 
Three months ended June 30,
 
 
 
Three months ended June 30,
 
 
 
Three months ended June 30,
 
2013
 
2012
 
 
 
2013
 
2012
 
 
 
2013
 
2012
Interest rate swaps
$
18,332

 
(26
)
 
Interest
expense
 
$
(2,366
)
 
(2,366
)
 
Other expenses
 
$

 


Derivatives in FASB
ASC Topic 815 Cash
Flow Hedging
Relationships:
Amount of Gain (Loss)
Recognized in OCI on
Derivative (Effective
Portion)
 
Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
 
Amount of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective
Portion)
 
Location of Gain or
(Loss) Recognized in
Income on  Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
 
Amount of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
 
Six months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
Six months ended June 30,
 
2013
 
2012
 
 
 
2013
 
2012
 
 
 
2013
 
2012
Interest rate swaps
$
21,704

 
(60
)
 
Interest
expense
 
$
(4,732
)
 
(4,729
)
 
Other expenses
 
$

 
(3
)

As of June 30, 2013, the Company expects $9.8 million of deferred losses (gains) on derivative instruments accumulated in other comprehensive income to be reclassified into earnings during the next 12 months, of which $9.3 million is related to previously settled swaps.

7.    Fair Value Measurements

(a) Disclosure of Fair Value of Financial Instruments

All financial instruments of the Company are reflected in the accompanying Consolidated Balance Sheets at amounts which, in management's estimation, reasonably approximate their fair values, except for the following as of June 30, 2013 and December 31, 2012 (in thousands):

 
 
2013
 
2012
 
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Financial assets:
 
 
 
 
 
 
 
 
Notes receivable
$
18,502

 
18,153

$
23,751

 
23,677

Financial liabilities:
 
 
 
 
 
 
 
 
Notes payable
$
1,767,124

 
1,924,578

$
1,771,891

 
2,000,000

Unsecured credit facilities
$
125,000

 
125,240

$
170,000

 
170,200


The table above reflects carrying amounts in the accompanying Consolidated Balance Sheets under the indicated captions. The above fair values represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants as of June 30, 2013 and December 31, 2012. These fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company's own judgments about the assumptions that market participants would use in pricing the asset or liability.

The Company develops its judgments based on the best information available at the measurement date, including expected cash flows, appropriately risk-adjusted discount rates, and available observable and unobservable inputs. Service providers involved in fair value measurements are evaluated for competency and qualifications on an ongoing basis. The Company's valuation policies and procedures are determined by its Finance Group, which reports to the Chief Financial Officer, and the results of significant fair value measurements are discussed with the Audit Committee of the Board of Directors on a quarterly basis. As considerable judgment is often necessary to estimate the fair value

18

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2013


of these financial instruments, the fair values presented above are not necessarily indicative of amounts that will be realized upon disposition of the financial instruments.

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

Notes Receivable

The fair value of the Company's notes receivable is estimated by calculating the present value of future contractual cash flows discounted at interest rates available for notes of the same terms and maturities, adjusted for counter-party specific credit risk. The interest rates range from 7.1% to 7.7% as of June 30, 2013, based on the Company's estimates. The fair value of notes receivable was determined primarily using Level 3 inputs of the fair value hierarchy, which considered counter-party credit risk and loan to value ratio on the underlying property securing the note receivable.

Notes Payable

The fair value of the Company's notes payable is estimated by discounting future cash flows of each instrument at rates that reflect the current market rates available to the Company for debt of the same terms and maturities. These rates range from 2.7% to 3.7% as of June 30, 2013, based on the Company's estimates. Fixed rate loans assumed in connection with real estate acquisitions are recorded in the accompanying consolidated financial statements at fair value at the time the property is acquired. The fair value of the notes payable was determined using Level 2 inputs of the fair value hierarchy.

Unsecured Credit Facilities

The fair value of the Company's unsecured credit facilities is estimated based on the interest rates currently offered to the Company by financial institutions, which is estimated to be 1.6% as of June 30, 2013. The fair value of the credit facilities was determined using Level 2 inputs of the fair value hierarchy.

(b) Fair Value Measurements

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

Trading Securities Held in Trust

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

Interest Rate Derivatives
The fair value of the Company's interest rate derivatives is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments on the overall valuation adjustments are not significant to the overall valuation of its interest rate swaps. As a result, the Company determined that its interest rate swaps valuation in its entirety is classified in Level 2 of the fair value hierarchy.

19

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2013


The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2013 and December 31, 2012 (in thousands):
 
 
Fair Value Measurements as of June 30, 2013
 
 
 
 
Quoted Prices in Active Markets for Identical Assets
 
Significant Other Observable Inputs
 
Significant Unobservable Inputs
Assets
 
Balance
 
(Level 1)
 
(Level 2)
 
(Level 3)
Trading securities held in trust
$
24,457

 
24,457

 

 

Interest rate derivatives
 
26,011

 

 
26,011

 

Total
$
50,468

 
24,457

 
26,011

 

 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
Interest rate derivatives
$
(51
)
 

 
(51
)
 

 
 
Fair Value Measurements as of December 31, 2012
 
 
 
 
Quoted Prices in Active Markets for Identical Assets
 
Significant Other Observable Inputs
 
Significant Unobservable Inputs
Assets
 
Balance
 
(Level 1)
 
(Level 2)
 
(Level 3)
Trading securities held in trust
$
23,429

 
23,429

 

 

Interest rate derivatives
 
4,307

 

 
4,307

 

Total
$
27,736

 
23,429

 
4,307

 

 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
Interest rate derivatives
$
(76
)
 

 
(76
)
 


There were no fair value measurements recorded on a nonrecurring basis as of June 30, 2013. The following table presents fair value measurements that were measured at fair value on a nonrecurring basis as of December 31, 2012 (in thousands):

 
 
Fair Value Measurements as of December 31, 2012
 
 
 
 
Quoted Prices in Active Markets for Identical Assets
 
Significant Other Observable Inputs
 
Significant Unobservable Inputs
 
Total Gains (Losses) (1)
Assets
 
Balance
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Long-lived assets held and used
 
 
 
 
 
 
 
 
 
 
Operating and development properties
$
49,673

 

 

 
49,673

 
(54,500
)

(1) Excludes impairments for properties sold during the year ended December 31, 2012.
Long-lived assets held and used are comprised primarily of real estate. The Company recognized a $54.5 million impairment loss related to two operating properties during the year ended December 31, 2012. The majority of this impairment, $50.0 million, related to one operating property, which the Company determined was more likely than not to be sold before the end of its previously estimated hold period, which led to the impairment during the fourth quarter of 2012. The Company subsequently sold this property in May of 2013. The other operating property exhibited weak operating fundamentals, including low economic occupancy for an extended period of time, which led to a $4.5 million impairment during the second quarter of 2012. The Company subsequently sold this property in June of 2013.

20

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2013


Fair value for the long-lived assets held and used measured using Level 3 inputs was determined through the use of an income approach. The income approach estimates an income stream for a property (typically 10 years) and discounts this income plus a reversion (presumed sale) into a present value at a risk adjusted rate. Yield rates and growth assumptions utilized in this approach are derived from property specific information, market transactions, and other financial and industry data. The terminal cap rate and discount rate are significant inputs to this valuation. The following are ranges of key inputs used in determining the fair value of real estate measured using Level 3 inputs as of December 31, 2012:

 
 
2012
 
 
Low
 
High
Overall cap rates
 
8.3
 %
 
8.5
%
Rental growth rates
 
(8.3
)%
 
2.5
%
Discount rates
 
10.5
 %
 
10.5
%
Terminal cap rates
 
8.8
 %
 
8.8
%

Changes in these inputs could result in a significant change in the valuation of the real estate and a change in the impairment loss recognized during the period.

8.    Equity and Capital

Common Stock of the Parent Company

Issuances:

On August 10, 2012, the Parent Company entered into at the market ("ATM") equity distribution agreements in which we may from time to time offer and sell up to $150.0 million of our common stock. The net proceeds are expected to fund potential acquisition opportunities, fund development or redevelopment activities, repay amounts outstanding under our revolving credit facility and/or for general corporate purposes. As of June 30, 2013, $28.2 million in common stock remained available for issuance under its ATM equity program. During the three and six months ended June 30, 2013, the following shares were issued under the ATM equity program (in thousands, except share data):

 
 
Three months ended June 30, 2013
 
Six months ended June 30, 2013
Shares issued
 
873

 
1,869

Weighted average price per share
$
54.22

$
53.37

Total proceeds
$
47,377

$
99,774

Commissions
$
709

$
1,496


Common Units of the Operating Partnership

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


21

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2013


Accumulated Other Comprehensive Loss

The following table presents changes in the balances of each component of accumulated other comprehensive loss for the six months ended June 30, 2013 (in thousands):

 
 
Loss on Settlement of Derivative Instruments
 
Fair Value of Derivative Instruments
 
Accumulated Other Comprehensive Income (Loss)
Beginning balance at December 31, 2012
$
(61,991
)
 
4,276

 
(57,715
)
Net gain on cash flow derivative instruments
 

 
21,664

 
21,664

Amounts reclassified from other comprehensive income
 
4,724

 
8

 
4,732

Current period other comprehensive income, net
 
4,724

 
21,672

 
26,396

Ending balance at June 30, 2013
$
(57,267
)
 
25,948

 
(31,319
)
The following represents amounts reclassified out of accumulated other comprehensive loss into earnings during the three and six months ended June 30, 2013 and 2012, respectively:
Details about Accumulated Other Comprehensive Loss Components
 
Amount Reclassified from Accumulated Other Comprehensive Loss
 
Affected Line Item in the Statement of Operations
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
 
 
2013
 
2012
 
2013
 
2012
 
 
Gains / (Losses) on cash flow hedges
 
 
 
 
 
 
 
 
 
 
Interest rate derivative contracts
$
(2,366
)
 
(2,366
)
$
(4,732
)
 
(4,729
)
 
Interest expense

9.    Stock-Based Compensation

The Company recorded stock-based compensation in general and administrative expenses in the accompanying Consolidated Statements of Operations, the components of which are further described below for the three and six months ended June 30, 2013 and 2012 (in thousands):
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2013
 
2012
 
2013
 
2012
Restricted stock
$
3,622

 
2,863

$
6,978

 
5,726

Directors' fees paid in common stock
 
70

 
75

 
129

 
137

Capitalized stock-based compensation
 
(557
)
 
(482
)
 
(948
)
 
(960
)
Total
$
3,135

 
2,456

$
6,159

 
4,903

The recorded amounts of stock-based compensation expense represent amortization of the grant date fair value of restricted stock awards over the respective vesting periods. Compensation expense specifically identifiable to development and leasing activities is capitalized and included above.

During 2013, the Company granted approximately 248,000 shares of non-vested restricted stock awards with a weighted-average grant-date fair value of $52.80 per share.

10.    Non-Qualified Deferred Compensation Plan

The Company maintains a non-qualified deferred compensation plan (“NQDCP”) which allows select employees and directors to defer part or all of their salary, cash bonus, and restricted stock awards. All contributions into the participants' accounts are fully vested upon contribution to the NQDCP and are deposited into a Rabbi trust. The participants' deferred compensation liability is included within accounts payable and other liabilities in the accompanying Consolidated Balance Sheets and was $23.9 million and $22.8 million at June 30, 2013 and December 31, 2012, respectively.


22

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2013


11.    Earnings per Share and Unit
Parent Company Earnings per Share
The following summarizes the calculation of basic and diluted earnings per share for the periods ended June 30, 2013 and 2012, respectively (in thousands except per share data): 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2013
 
2012
 
2013
 
2012
Numerator:
 
 
 
 
 
 
 
 
Continuing Operations
 
 
 
 
 
 
 
 
Income from continuing operations
$
23,373

 
12,492

$
43,525

 
29,737

Gain (loss) on sale of real estate
 
1,717

 
(21
)
 
1,717

 
1,814

Less: income (loss) attributable to noncontrolling interests
 
316

 
257

 
629

 
(140
)
Income from continuing operations attributable to the Company
 
24,774

 
12,214

 
44,613

 
31,691

Less: preferred stock dividends
 
5,265

 
5,396

 
10,531

 
19,333

Less: dividends paid on unvested restricted stock
 
185

 
206

 
369

 
411

Income from continuing operations attributable to common stockholders - basic
 
19,324

 
6,612

 
33,713

 
11,947

Add: dividends paid on Treasury Method restricted stock
 
30

 
23

 
52

 
35

Income from continuing operations attributable to common stockholders - diluted
 
19,354

 
6,635

 
33,765

 
11,982

Discontinued Operations
 
 
 
 
 
 
 
 
Income (loss) from discontinued operations
 
12,379

 
(1,123
)
 
13,361

 
6,532

Less: income from discontinued operations attributable to noncontrolling interests
 
24

 
(2
)
 
25

 
12

Income from discontinued operations attributable to the Company
 
12,355

 
(1,121
)
 
13,336

 
6,520

Net Income
 
 
 
 
 
 
 
 
Net income attributable to common stockholders - basic
 
31,679

 
5,491

 
47,049

 
18,467

Net income attributable to common stockholders - diluted
$
31,709

 
5,514

$
47,101

 
18,502

Denominator:
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for basic EPS
 
91,422

 
89,489

 
90,742

 
89,462

Incremental shares to be issued under unvested restricted stock
 
64

 
51

 
56

 
37

Weighted average common shares outstanding for diluted EPS
 
91,486

 
89,540

 
90,798

 
89,499

Income per common share – basic
 
 
 
 
 
 
 
 
Continuing operations
$
0.21

 
0.07

$
0.37

 
0.14

Discontinued operations
 
0.14

 
(0.01
)
 
0.15

 
0.07

Net income attributable to common stockholders
$
0.35

 
0.06

$
0.52

 
0.21

Income per common share – diluted
 
 
 
 
 
 
 
 
Continuing operations
$
0.21

 
0.07

$
0.37

 
0.14

Discontinued operations
 
0.14

 
(0.01
)
 
0.15

 
0.07

Net income attributable to common stockholders
$
0.35

 
0.06

$
0.52

 
0.21

Income allocated to noncontrolling interests of the Operating Partnership has been excluded from the numerator and exchangeable Operating Partnership units have been omitted from the denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the numerator and denominator would have no impact. Weighted average exchangeable Operating Partnership units outstanding for the three and six months ended June 30, 2013 and 2012 were 177,164.
    
    

23

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2013


Operating Partnership Earnings per Unit
The following summarizes the calculation of basic and diluted earnings per unit for the periods ended June 30, 2013 and 2012, respectively (in thousands except per unit data): 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2013
 
2012
 
2013
 
2012
Numerator:
 
 
 
 
 
 
 
 
Continuing Operations
 
 
 
 
 
 
 
 
Income from continuing operations
$
23,373

 
12,492

$
43,525

 
29,737

Gain (loss) on sale of real estate
 
1,717

 
(21
)
 
1,717

 
1,814

Less: income attributable to noncontrolling interests
 
246

 
234

 
520

 
412

Income from continuing operations attributable to the Partnership
 
24,844

 
12,237

 
44,722

 
31,139

Less: preferred unit distributions
 
5,265

 
5,396

 
10,531

 
18,704

Less: dividends paid on unvested restricted units
 
185

 
206

 
369

 
411

Income from continuing operations attributable to common unit holders - basic
 
19,394

 
6,635

 
33,822

 
12,024

Add: dividends paid on Treasury Method restricted units
 
30

 
23

 
52

 
35

Income from continuing operations attributable to common unit holders - diluted
 
19,424

 
6,658

 
33,874

 
12,059

Discontinued Operations
 
 
 
 
 
 
 
 
Income (loss) from discontinued operations
 
12,379

 
(1,123
)
 
13,361

 
6,532

Less: income from discontinued operations attributable to noncontrolling interests
 
24

 
(2
)
 
25

 
12

Income from discontinued operations attributable to the Partnership
 
12,355

 
(1,121
)
 
13,336

 
6,520

Net Income
 
 
 
 
 
 
 
 
Net income attributable to common unit holders - basic
 
31,749

 
5,514

 
47,158

 
18,544

Net income attributable to common unit holders - diluted
$
31,779

 
5,537

$
47,210

 
18,579

Denominator:
 
 
 
 
 
 
 
 
Weighted average common units outstanding for basic EPU
 
91,600

 
89,666

 
90,920

 
89,639

Incremental units to be issued under unvested restricted stock
 
64

 
51

 
56

 
37

Weighted average common units outstanding for diluted EPU
 
91,664

 
89,717

 
90,976

 
89,676

Income (loss) per common unit – basic
 
 
 
 
 
 
 
 
Continuing operations
$
0.21

 
0.07

$
0.37

 
0.14

Discontinued operations
 
0.14

 
(0.01
)
 
0.15

 
0.07

Net income (loss) attributable to common unit holders
$
0.35

 
0.06

$
0.52

 
0.21

Income (loss) per common unit – diluted
 
 
 
 
 
 
 
 
Continuing operations
$
0.21

 
0.07

$
0.37

 
0.14

Discontinued operations
 
0.14

 
(0.01
)
 
0.15

 
0.07

Net income (loss) attributable to common unit holders
$
0.35

 
0.06

$
0.52

 
0.21



24

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2013


12.    Commitments and Contingencies

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

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

The Company has the right to issue letters of credit under the Line up to an amount not to exceed $80.0 million, which reduces the credit availability under the Line. The Company also has stand alone letters of credit with other banks. These letters of credit are primarily issued as collateral to facilitate the construction of development projects. As of June 30, 2013 and December 31, 2012, the Company had $19.3 million and $20.8 million letters of credit outstanding, respectively. 


25



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

Forward-Looking Statements    

In addition to historical information, the following information contains forward-looking statements as defined under federal securities laws. These forward-looking statements include statements about anticipated changes in our revenues, the size of our development and redevelopment program, earnings per share and unit, returns and portfolio value, and expectations about our liquidity. These statements are based on current expectations, estimates and projections about the real estate industry and markets in which the Company operates, and management's beliefs and assumptions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, changes in national and local economic conditions; financial difficulties of tenants; competitive market conditions, including timing and pricing of acquisitions and sales of properties and building pads ("out-parcels"); changes in leasing activity and market rents; timing of development starts; meeting development schedules; natural disasters in geographic areas in which we operate; cost of environmental remediation; our inability to exercise voting control over the co-investment partnerships through which we own many of our properties; and technology disruptions. For additional information, see “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2012. The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto of Regency Centers Corporation and Regency Centers, L.P. appearing elsewhere herein. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or uncertainties after the date hereof or to reflect the occurrence of uncertain events.

Overview of Our Strategy

Regency Centers Corporation began its operations as a REIT in 1993 and is the managing general partner of Regency Centers, L.P. We endeavor to be the preeminent, best-in-class national shopping center company, distinguished by sustaining growth in shareholder value and compounding total shareholder return in excess of our peers. We work to achieve these goals through reliable growth in net operating income from a portfolio of dominant, infill shopping centers, balance sheet strength, value-added development and redevelopment capabilities, and an engaged team of talented and dedicated people. All of our operating, investing, and financing activities are performed through the Operating Partnership, its wholly-owned subsidiaries, and through its co-investment partnerships. The Parent Company currently owns approximately 99.8% of the outstanding common partnership units of the Operating Partnership.

At June 30, 2013, we directly owned 204 shopping centers (the “Consolidated Properties”) located in 23 states representing 22.5 million square feet of gross leasable area (“GLA”). Through co-investment partnerships, we own partial ownership interests in 139 shopping centers (the “Unconsolidated Properties”) located in 24 states and the District of Columbia representing 17.3 million square feet of GLA.

We earn revenues and generate cash flow by leasing space in our shopping centers to grocery stores, major retail anchors, restaurants, side-shop retailers, and service providers, as well as ground leasing or selling out-parcels to these same types of tenants. We experience growth in revenues by increasing occupancy and rental rates in our existing shopping centers and by acquiring and developing new shopping centers. At June 30, 2013, the consolidated shopping centers were 94.2% leased, as compared to 92.5% at June 30, 2012 and 94.1% at December 31, 2012.

We grow our shopping center portfolio through acquisitions of operating centers and new shopping center development. We will continue to use our development capabilities, market presence, and anchor relationships to invest in value-added new developments and redevelopments of existing centers. 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 retailers, resulting in modern shopping centers with long-term anchor leases that produce attractive returns on our invested capital. This development process typically requires two to three years once construction has commenced, but can vary subject to the size and complexity of the project. We fund our acquisition and development activity from various capital sources including property sales, equity offerings, and new debt.

Co-investment partnerships provide us with an additional capital source for shopping center acquisitions, developments, and redevelopments, as well as the opportunity to earn fees for asset management, property management, and other investing and financing services. As an 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 as those applied to the portfolio that we wholly-own. Co-investment partnerships grow their shopping center investments through acquisitions from third parties, direct purchases from us, and developments. Although selling properties to co-investment partnerships reduces our direct ownership interest, it provides a source of capital that further strengthens our balance sheet, while we continue to share, to the

26



extent of our ownership interest, in the risks and rewards of shopping centers that meet our high quality standards and long-term investment strategy.

Shopping Center Portfolio

The following table summarizes general information related to the Consolidated Properties in our shopping center portfolio (GLA in thousands):

 
 
June 30,
2013
 
December 31,
2012
Number of Properties
 
204
 
204
Properties in Development
 
6
 
4
Gross Leasable Area
 
22,505
 
22,532
% Leased – Operating and Development
 
94.2%
 
94.1%
% Leased – Operating
 
94.5%
 
94.4%
Weighted average annual effective rent per square foot (1)
$
17.18
 
16.95
(1) Net of tenant concessions.
 
 
 
 

The following table summarizes general information related to the Unconsolidated Properties owned in co-investment partnerships in our shopping center portfolio, excluding the assets and liabilities held by BRE Throne, LLC ("BRET") as the property holdings of BRET do not impact the rate of return on Regency's preferred investment (GLA in thousands):

 
 
June 30,
2013
 
December 31,
2012
Number of Properties
 
139
 
144
Gross Leasable Area
 
17,338
 
17,762
% Leased – Operating
 
94.9%
 
95.2%
Weighted average effective annual rent per square foot (1)
$
17.28
 
17.03
(1) Net of tenant concessions.
 
 
 
 
    
The following table summarizes leasing activity for the six months ended June 30, 2013, including Regency's pro-rata share of activity within the portfolio of our co-investment partnerships, excluding the BRET portfolio:

 
 
Leasing Transactions
 
GLA (in thousands)
 
Base Rent / SF
 
Tenant Improvements / SF
 
Leasing Commissions / SF
New leases
 
275
 
677
 
$
20.81

 
$
9.44

 
$
8.43

Renewals
 
488
 
1,198
 
$
20.26

 
$
0.33

 
$
2.28

Total
 
763
 
1,875
 
$
20.46

 
$
3.62

 
$
4.50


We seek to reduce our operating and leasing risks through geographic diversification, avoiding dependence on any single property, market, or tenant, and owning a portion of our shopping centers through co-investment partnerships. The following table summarizes our three most significant tenants, each of which is a grocery tenant, occupying our shopping centers at June 30, 2013: 

Grocery Anchor
 
Number of
Stores (1)
 
Percentage of
Company-
owned GLA (2)
 
Percentage  of
Annualized
Base Rent (2) 
Publix
 
52
 
6.9%
 
4.4%
Kroger
 
48
 
7.6%
 
4.4%
Safeway
 
50
 
5.3%
 
3.1%
 
 
 
 
 
 
 
(1) Includes stores owned by grocery anchors that are attached to our centers.
(2) Includes Regency's pro-rata share of Unconsolidated Properties and excludes those owned by anchors.


27



In July 2013, Kroger announced its plan to buy Harris Teeter Supermarkets, Inc. Although Kroger's acquisition is expected to expand its presence in the southeastern United States, there is a possibility that Kroger may identify stores in which it has a presence in the same local market as Harris Teeter, which could result in store closures. We currently have nine stores leased by Harris Teeter, which represents 0.8% of annualized base rent on a pro-rata basis.

Although base rent is supported by long-term lease contracts, tenants who file bankruptcy may have the legal right to reject any or all of their leases and close related stores. In the event that a tenant with a significant number of leases in our shopping centers files bankruptcy and cancels its leases, we could experience a significant reduction in our revenues. We monitor the operating performance and rent collections of all tenants in our shopping centers, especially those tenants operating retail formats that are experiencing significant changes in competition, business practice, and store closings in other locations. We also evaluate consumer preferences, shopping behaviors, and demographics to anticipate both challenges and opportunities in the changing retail industry that may affect our tenants. As a result of our findings, we may reduce new leasing, suspend leasing, or curtail the allowance for the construction of leasehold improvements within a certain retail category or to a specific retailer. We are not currently aware of the pending bankruptcy or announced store closings of any tenants in our shopping centers that would individually cause a material reduction in our revenues, and no tenant represents more than 5% of our annual base rent on a pro-rata basis.

Liquidity and Capital Resources

Our Parent Company has no capital commitments other than its guarantees of the commitments of our Operating Partnership. The Parent Company will from time to time access the capital markets for the purpose of issuing new equity and will simultaneously contribute all of the offering proceeds to the Operating Partnership in exchange for additional partnership units. All debt is issued by our Operating Partnership or by our co-investment partnerships. The following table represents the remaining available capacity under our ATM equity program and Line as of June 30, 2013 (in thousands):

 
 
June 30, 2013
ATM equity program
 
 
Total capacity
$
150,000

Remaining capacity
$
28,200

 
 
 
Line
 
 
Total capacity
$
800,000

Remaining capacity (1)
$
755,700

Maturity
 
September 2016
(1) Net of letters of credit.
 
 

The following table summarizes net cash flows related to operating, investing, and financing activities of the Company for the six months ended June 30, 2013 and 2012 (in thousands): 

 
 
2013
 
2012
 
Change
Net cash provided by operating activities
$
104,076

 
111,271

 
(7,195
)
Net cash used in investing activities
 
(16,483
)
 
(72,830
)
 
56,347

Net cash used in financing activities
 
(50,799
)
 
(26,813
)
 
(23,986
)
Net increase in cash and cash equivalents
$
36,794

 
11,628

 
25,166

Total cash and cash equivalents
$
59,143

 
23,030

 
36,113

    
Net cash provided by operating activities:

Cash provided by operating activities during the six months ended June 30, 2013 was $7.2 million less than the six months ended June 30, 2012 primarily due to the increased 2013 payout for incentive compensation based on improved Company performance in 2012. We operate our business such that we expect net cash provided by operating activities will provide the necessary funds to pay our distributions to our common and preferred share and unit holders included in Net cash used in financing activities, above, which were $88.7 million and $89.6 million for the six months ended June 30, 2013 and 2012, respectively. Our dividend distribution policy is set by our Board of Directors who monitor our financial position. Our Board of Directors recently declared our common stock quarterly dividend of $0.4625 per share, payable on August 28, 2013. Our dividend has remained unchanged since May 2009 and future dividends will be declared at the discretion of our Board of

28



Directors and will be subject to capital requirements and availability. We plan to continue paying an aggregate amount of distributions to our stock and unit holders that, at a minimum, meet the requirements to continue qualifying as a REIT for Federal income tax purposes.

Net cash used in investing activities:

Cash used in investing activities during the six months ended June 30, 2013 was $56.3 million less than the six months ended June 30, 2012 as we were a net property seller during 2013. We will continue evaluating opportunities to acquire shopping centers that meet our standards. This may be accomplished through acquisitions of individual properties or a portfolio of properties.

Significant investing activities during the six months ended June 30, 2013 included:

We received proceeds of $84.7 million from the sale of real estate investments, including four shopping centers and four out-parcels;

We paid $26.7 million for the acquisition of the Preston Oaks shopping center; and

We paid $79.0 million for the development, redevelopment, improvement and leasing of our real estate properties as comprised of the following (in thousands):

 
 
Six months ended June 30,
 
 
 
 
2013
 
2012
 
Change
Capital expenditures:
 
 
 
 
 
 
Acquisition of land for development / redevelopment
$
106

 
27,100

 
(26,994
)
Building improvements and other
 
11,945

 
14,472

 
(2,527
)
Tenant allowances
 
2,618

 
5,506

 
(2,888
)
Redevelopment costs
 
3,837

 
8,793

 
(4,956
)
Development costs
 
55,546

 
17,345

 
38,201

Capitalized interest
 
2,305

 
1,246

 
1,059

Capitalized direct compensation
 
2,594

 
5,293

 
(2,699
)
Real estate development and capital improvements
$
78,951

 
79,755

 
(804
)

During the six months ended June 30, 2012, we acquired five land parcels for $27.1 million, compared to two land parcels for approximately $106,000 during the six months ended June 30, 2013.

Occupancy increased 10 basis points for the six months ended June 30, 2013, compared to 30 basis points for the six months ended June 30, 2012, which resulted in the decrease in tenant allowances over the prior year.

Building improvements and other decreased due to the timing of normal ongoing capitalizable improvements to our existing centers.

Redevelopment costs decreased primarily due to two redevelopment projects that started towards the end of 2011 and incurred the majority of expenditures during the first half of 2012.

Although the number of development projects remained relatively consistent during the six months ended June 30, 2013, as compared to the six months ended June 30, 2012, development costs increased primarily due to the size of the current projects under construction during the six months ended June 30, 2013. East Washington Place and Grand Ridge Plaza, which are projected to have estimated net development costs of $148.1 million upon completion, are progressing and represent $42.3 million of 2013 development costs.
Further, the majority of the direct compensation associated with a development or redevelopment project is recorded at project start or soon thereafter. Thus, although overall development costs increased, capitalized direct compensation decreased, since there were only two starts in the six months ended June 30, 2013 as compared to four starts in the six months ended June 30, 2012. Note that there were no development project completions during the six months ended June 30, 2013 and two completions during the six months ended June 30, 2012.


29



Capitalized interest increases as development costs accumulate during the construction period, which is why more interest costs were capitalized during 2013 than 2012.
    
At June 30, 2013, we had six development projects that were either under construction or in lease up, compared to four such development projects at December 31, 2012. The following table details our development projects as of June 30, 2013 (in thousands, except cost per square foot):

Property Name
 
Start Date
 
Estimated /Actual Anchor Opening
 
Estimated Net Development Costs After Partner Participation (1)
 
Estimated Net Costs to Complete (1)
 
Company Owned GLA
 
Cost per square foot of GLA (1)
 
East Washington Place
 
Q4-11
 
Jun-13
$
59,312

$
13,196

 
203

$
292

 
Southpark at Cinco Ranch
 
Q1-12
 
Oct-12
 
31,522

 
5,605

 
243

 
130

 
Grand Ridge Plaza
 
Q2-12
 
Jul-13
 
88,764

 
33,900

 
325

 
273

 
Shops at Erwin Mill
 
Q2-12
 
Dec-13
 
14,581

 
4,032

 
90

 
162

 
Juanita Tate Marketplace
 
Q2-13
 
Mar-14
 
17,189

 
15,273

 
77

 
223

 
Shops on Main
 
Q2-13
 
Apr-14
 
29,424

 
11,859

 
155

 
190

 
Total
 
 
 
 
$
240,792

$
83,865

 
1,093

$
220

(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  Amount represents costs, including leasing costs, net of tenant reimbursements.
 
(2)  Amount represents a weighted average.
 

There were no development projects completed during the six months ended June 30, 2013.

We plan to continue developing and redeveloping projects for long-term investment purposes and have a staff of employees who directly support our development and redevelopment program. Internal costs attributable to these development and redevelopment activities are capitalized as part of each project. During the six months ended June 30, 2013, we capitalized $2.3 million of interest expense and $2.6 million of internal costs for salaries and related benefits for development and redevelopment activity. Changes in the level of future development and redevelopment activity could adversely impact results of operations by reducing the amount of internal costs for development and redevelopment projects that may be capitalized. A 10% reduction in development and redevelopment activity without a corresponding reduction in the compensation costs directly related to our development and redevelopment activities could result in an additional charge to net income of approximately $831,000.

Net cash used in financing activities:

Significant financing activities during the six months ended June 30, 2013 include:

The Parent Company issued 1.9 million shares of common stock through our ATM program resulting in net proceeds of $98.3 million;

We repaid $45.0 million, net, on our Line and $16.3 million of fixed rate mortgage loans; and

We paid dividends to our common and preferred stockholders of $83.3 million and $5.3 million, respectively.

We endeavor to maintain a high percentage of unencumbered assets. At June 30, 2013, 77.5% of our wholly-owned real estate assets were unencumbered. Such assets allow us to access the secured and unsecured debt markets and to maintain significant availability on the Line. Our coverage ratio, including our pro-rata share of our partnerships, was 2.4 times for the six months ended June 30, 2013 and 2012. We define our coverage ratio as earnings before interest, taxes, investment transaction profits net of deal costs, depreciation and amortization (“Core EBITDA”) divided by the sum of the gross interest and scheduled mortgage principal paid to our lenders plus dividends paid to our preferred stockholders.

Through the remainder of 2013, we estimate that we will require approximately $111.7 million, including $110.8 million to complete currently in-process developments and redevelopments and approximately $922,000 to fund our pro-rata share of estimated capital contributions to our co-investment partnerships for repayment of debt. If we start new developments or redevelop additional shopping centers, our cash requirements will increase. At June 30, 2013, our joint ventures had $3.7 million of scheduled secured mortgage loans and credit lines maturing through 2013. To meet our cash requirements, we will

30



utilize cash generated from operations, borrowings from our Line, proceeds from the sale of real estate, and when the capital markets are favorable, proceeds from the sale of common equity and the issuance of debt.

We have $150.0 million and $350.0 million of fixed rate, unsecured debt maturing in April 2014 and August 2015, respectively.  As the economy improves, long term interest rates will likely continue to increase.  In order to mitigate the risk of interest rate volatility, we entered into $300.0 million of forward starting interest rate swaps for new debt issues occurring through August 1, 2016.  These interest rate swaps locked in a weighted average fixed rate of 2.32% plus a credit spread based upon the Company's credit rating at the time of the debt issuance.

Investments in Real Estate Partnerships

At June 30, 2013 and December 31, 2012, we had investments in real estate partnerships of $428.6 million and $442.9 million, respectively. The following table is a summary of the unconsolidated combined assets and liabilities of these co-investment partnerships and our pro-rata share at June 30, 2013 and December 31, 2012 (dollars in thousands): 

 
 
2013
 
2012
Number of Co-investment Partnerships
 
18

 
19

Regency’s Ownership
 
 20%-50%

 
 20%-50%

Number of Properties
 
139

 
144

Combined Assets (1)
$
3,316,398

 
3,434,954

Combined Liabilities (1)
$
1,867,635

 
1,933,488

Combined Equity (3)
$
1,448,763

 
1,501,466

Regency’s Share of (1)(2)(3):
 
 
 
 
Assets
$
1,118,881

 
1,154,387

Liabilities
$
619,762

 
635,882


(1) Excludes the assets and liabilities of BRET as the property holdings of BRET do not impact the rate of return on Regency's preferred stock investment.

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

(3) The difference between Regency's share of the net assets of the co-investment partnerships and the Company's investments in real estate partnerships per the accompanying Consolidated Balance Sheets relates primarily to differences in inside/outside basis.

Investments in real estate partnerships are primarily composed of co-investment partnerships in which we currently invest with five co-investment partners and a closed-end real estate fund (“Regency Retail Partners” or the “Fund”), as further summarized below. In addition to earning our pro-rata share of net income or loss in each of these co-investment partnerships, we receive recurring market-based fees for asset management, property management, and leasing as well as fees for investment and financing services, which were $6.5 million and $6.1 million, and $13.1 million and $13.1 million for the three and six months ended June 30, 2013 and 2012, respectively.


31



Our equity method investments in real estate partnerships as of June 30, 2013 and December 31, 2012 consist of the following (in thousands): 
 
Regency's Ownership
 
2013
 
2012
GRI - Regency, LLC (GRIR)
40.00%
$
259,718

 
272,044

Macquarie CountryWide-Regency III, LLC (MCWR III) (1)
24.95%
 

 
29

Columbia Regency Retail Partners, LLC (Columbia I)
20.00%
 
16,666

 
17,200

Columbia Regency Partners II, LLC (Columbia II)
20.00%
 
10,131

 
8,660

Cameron Village, LLC (Cameron)
30.00%
 
16,378

 
16,708

RegCal, LLC (RegCal)
25.00%
 
15,167

 
15,602

Regency Retail Partners, LP (the Fund) (2)
20.00%
 
14,636

 
15,248

US Regency Retail I, LLC (USAA)
20.01%
 
1,754

 
2,173

BRE Throne Holdings, LLC (BRET)
47.80%
 
48,743

 
48,757

Other investments in real estate partnerships
50.00%
 
45,413

 
46,506

    Total (3)
 
$
428,606

 
442,927


(1) On March 20, 2013, the Company entered into a liquidation agreement with Macquarie Countrywide (US) No. 2, LLC ("CQR") to redeem its 24.95% interest through dissolution of the Macquarie CountryWide-Regency III, LLC ("MCWR III") co-investment partnership through a distribution-in-kind ("DIK"). The assets of the partnership were distributed as 100% ownership interests to CQR and Regency after a selection process, as provided for by the agreement. Regency selected one asset, Hilltop Village, which was recorded at the carrying value of the Company's equity investment in MCWR III on the date of dissolution of approximately $100,000, net of liabilities assumed.

(2) On April 11, 2013, we announced that, together with our partners, we have elected to sell all of the assets (the “Portfolio”) owned in Regency Retail Partners, LP (the “Fund”). The Portfolio is under contract and once the transaction closes, the Fund will be dissolved. The disposition is expected to occur by the end of the third quarter of 2013.

(3) The difference between Regency's share of the net assets of the co-investment partnerships and the Company's investments in real estate partnerships per the accompanying Consolidated Balance Sheets relates primarily to differences in inside/outside basis.

Notes Payable - Investments in Real Estate Partnerships

At June 30, 2013, our investments in real estate partnerships, excluding BRET, had notes payable of $1.8 billion maturing through 2028, of which 98.7% had a weighted average fixed interest rate of 5.5%, and the remaining notes payable had a weighted average variable interest rate of 3.0%, which is based on a spread over LIBOR. These loans are all non-recourse and our pro-rata share was $583.8 million.

As of June 30, 2013, scheduled principal repayments on notes payable held by our investments in real estate partnerships, excluding BRET, were as follows (in thousands): 

Scheduled Principal Payments and Maturities by Year:
 
Scheduled
Principal
Payments (1)
 
Mortgage  Loan
Maturities (1)
 
Unsecured
Maturities (1)
 
Total (1)
 
Regency’s
Pro-Rata
Share (1)
2013
$
10,121

 
3,678

 

 
13,799

 
4,510

2014
 
21,289

 
53,015

 
11,160

 
85,464

 
25,154

2015
 
21,895

 
130,796

 

 
152,691

 
49,619

2016
 
19,139

 
366,757

 

 
385,896

 
126,017

2017
 
18,437

 
164,179

 

 
182,616

 
42,543

Beyond 5 Years
 
80,265

 
857,454

 

 
937,719

 
336,072

Unamortized debt premiums, net
 

 
1,203

 

 
1,203

 
(157
)
Total
$
171,146

 
1,577,082

 
11,160

 
1,759,388

 
583,758

 
 
 
 
 
 
 
 
 
 
 
(1) Excludes BRET.
 
 
 
 
 
 
 
 
 
 

32



Recent Accounting Pronouncements

See note 1 to Consolidated Financial Statements.

Results from Operations

Comparison of the three months ended June 30, 2013 to 2012:

Our revenues decreased slightly during the three months ended June 30, 2013, as compared to the three months ended June 30, 2012, as summarized in the following table (in thousands): 

 
 
2013
 
2012
 
Change
Minimum rent
$
89,611

 
90,164

 
(553
)
Percentage rent
 
298

 
398

 
(100
)
Recoveries from tenants and other income
 
29,192

 
29,734

 
(542
)
Management, transaction, and other fees
 
6,741

 
6,469

 
272

Total revenues
$
125,842

 
126,765

 
(923
)
    
Fluctuations in our revenues are driven by the following primary factors (GLA in thousands):

 
2013
 
2012
 
Change
Average occupancy (1)
 
94.1
%
 
92.4
%
 
1.7
%
Average gross leasable area (1)
 
22,236

 
23,344

 
(1,108
)
Average base rent per square foot (1)
$
17.22

 
16.76

 
0.46


(1) These factors relate to the Consolidated Properties in our shopping center portfolio and are adjusted to exclude the factors from properties whose operations are classified as discontinued operations in the Consolidated Statements of Operations.

Minimum rent decreased during 2013 as compared to 2012 due to acquisitions, dispositions, and changes in overall occupancy and average base rent for our same properties, as follows:

$7.9 million decrease due to the sale of a 15-property portfolio on July 25, 2012; offset by

$5.4 million increase due to the acquisition of seven operating properties and operations beginning at four development properties during 2012 and 2013 and

$2.0 million increase in minimum rent from same properties, which was driven by rental rate and occupancy growth and increases from contractual rent steps in existing leases.

Recoveries from tenants represent reimbursements from tenants for their pro-rata share of the operating, maintenance, and real estate tax expenses that we incur to operate our shopping centers. Recoveries from tenants decreased during 2013 as compared to 2012 due to the following:

$2.2 million decrease due to the sale of a 15-property portfolio on July 25, 2012; offset by

$1.3 million increase due to the acquisition of seven operating properties and operations beginning at four development properties during 2012 and 2013 and

$3.8 million increase in recoveries at same properties, which was driven by an increase in our recovery ratio of 154 basis points, due to improvements in occupancy and market recovery rates.

Other income decreased $3.4 million due primarily to the timing of our captive insurance distribution, which was received during the second quarter of 2012.

    

33



We earned fees, at market-based rates, for asset management, property management, leasing, acquisition, and financing services that we provided to our co-investment partnerships and third parties as follows (in thousands):     

 
 
2013
 
2012
 
Change
Asset management fees
$
1,653

 
1,616

 
37

Property management fees
 
3,606

 
3,604

 
2

Leasing commissions and other fees
 
1,482

 
1,249

 
233


$
6,741

 
6,469

 
272


Our operating expenses increased during the three months ended June 30, 2013, as compared to the three months ended June 30, 2012, as summarized in the following table (in thousands): 

 
 
2013
 
2012
 
Change
Depreciation and amortization
$
31,930

 
31,737

 
193

Operating and maintenance
 
17,982

 
17,421

 
561

General and administrative
 
14,966

 
14,020

 
946

Real estate taxes
 
14,204

 
13,799

 
405

Other expenses
 
1,580

 
1,111

 
469

Total operating expenses
$
80,662

 
78,088

 
2,574

    
Depreciation and amortization, operating and maintenance expenses, and real estate taxes increased due the impact of acquisitions, development operations, and dispositions during 2012 and 2013, as follows:

$6.8 million decrease due to the sale of a 15-property portfolio on July 25, 2012; offset by

$4.6 million increase due to the acquisition of seven operating properties and operations beginning at four development properties during 2012 and 2013 and

$3.4 million increase at same properties, primarily due to incremental operating expenses associated with winter weather and to increases in real estate tax assessments.

In addition, general and administrative expenses increased primarily due to lower amounts of development overhead capitalized during 2013, as compared to 2012, due to the timing of development project starts. Other expenses increased due to additional acquisition costs during 2013.
    
The following table presents the components of other expense (income) (in thousands):
 
 
2013
 
2012
 
Change
Interest expense, net
$
27,781

 
28,377

 
(596
)
Provision for impairment
 

 
19,008

 
(19,008
)
Net investment income from deferred compensation plan
 
38

 
444

 
(406
)
 
$
27,819

 
47,829

 
(20,010
)
    
The following table presents the change in interest expense (in thousands): 
 
 
2013
 
2012
 
Change
Interest on notes payable
$
25,992

 
25,708

 
284

Interest on unsecured credit facilities
 
950

 
1,547

 
(597
)
Capitalized interest
 
(1,243
)
 
(875
)
 
(368
)
Hedge interest
 
2,374

 
2,374

 

Interest income
 
(292
)
 
(377
)
 
85

 
$
27,781

 
28,377

 
(596
)

Our interest expense decreased primarily due to paying down our unsecured credit facilities and to higher amounts of interest capitalized on development projects, driven by the increase in development activity over the prior year.

34



    
Our equity in income of investments in real estate partnerships decreased during the three months ended June 30, 2013, as compared to the three months ended June 30, 2012 as follows (in thousands): 

 
Ownership
 
2013
 
2012
 
Change
GRI - Regency, LLC (GRIR)
40.00%
$
3,557

 
2,649

 
908

Macquarie CountryWide-Regency III, LLC (MCWR III) (1)
—%
 
4

 
12

 
(8
)
Columbia Regency Retail Partners, LLC (Columbia I)
20.00%
 
315

 
7,197

 
(6,882
)
Columbia Regency Partners II, LLC (Columbia II)
20.00%
 
140

 
123

 
17

Cameron Village, LLC (Cameron)
30.00%
 
152

 
156

 
(4
)
RegCal, LLC (RegCal)
25.00%
 
93

 
91

 
2

Regency Retail Partners, LP (the Fund)
20.00%
 
123

 
52

 
71

US Regency Retail I, LLC (USAA)
20.01%
 
104

 
118

 
(14
)
BRE Throne Holdings, LLC (BRET)
47.80%
 
1,243

 

 
1,243

Other investments in real estate partnerships
50.00%
 
281

 
406

 
(125
)
    Total
 
$
6,012

 
10,804

 
(4,792
)
 
 
 
 
 
 
 
 
(1) As of June 30, 2012, our ownership interest in MCWR III was 24.95%. The liquidation of MCWR III was complete effective March 20, 2013.
    
The $4.8 million decrease in our equity in income in investments in real estate partnerships for 2013, as compared to 2012, is primarily due to the following:

$908,000 increase from the GRIR partnership due to following:

The acquisition of Lake Grove shopping center in January 2012, which incurred acquisition costs in 2012,

Increased tenant percentage rent, based on improved tenant sales,

Increased tenant recovery revenue rates, and

Lower interest expense as a result of paying off debt in the second quarter of 2012 that the GRIR partnership did not refinance.

$6.9 million decrease from the Columbia I partnership due to our share of a $34.5 million gain on sale of an operating property that was sold in April 2012, and

$1.2 million increase from our ownership interest retained in BRET, as part of the 15-property portfolio sale completed in July 2012, which we may redeem beginning in the third quarter of 2013.
        
The following represents the remaining components that comprised net income attributable to the common stockholders and unit holders for the three months ended June 30, 2013, as compared to the three months ended June 30, 2012 (in thousands):
 
 
2013
 
2012
 
Change
Income from continuing operations before tax
$
23,373

 
11,652

 
11,721

Income tax benefit of taxable REIT subsidiary
 

 
(840
)
 
840

Income (loss) from discontinued operations
 
12,379

 
(1,123
)
 
13,502

Gain (loss) on sale of real estate
 
1,717

 
(21
)
 
1,738

(Income) attributable to noncontrolling interests
 
(340
)
 
(255
)
 
(85
)
Preferred stock dividends
 
(5,265
)
 
(5,396
)
 
131

Net income attributable to common stockholders
$
31,864

 
5,697

 
26,167

Net income attributable to exchangeable operating partnership units
 
70

 
23

 
47

Net income attributable to common unit holders
$
31,934

 
5,720

 
26,214


35



    
Income from discontinued operations of $12.4 million for the three months ended June 30, 2013 included $11.4 million of gains, net of taxes, from the sale of four operating properties, their operating income, and the operating income of two operating properties held for sale at June 30, 2013. Loss from discontinued operations of $1.1 million for the three months ended June 30, 2012 included $2.3 million of gains, net of taxes, from the sale of two operating properties and their operating losses, including $4.5 million of impairment losses.

During the three months ended June 30, 2013, we had a gain of $1.7 million, which includes gains from the sale of three out-parcels, compared to three out-parcel sales for an approximately $21,000 loss during the the three months ended June 30, 2012.

Related to our Parent Company's results, our net income attributable to common stockholders increased $26.2 million during 2013 as compared to 2012 primarily from gains on the sale of real estate, including discontinued operating centers, and the lack of impairments in 2013, offset by the decrease in our equity in income in investments in real estate partnerships from 2012 to 2013, as discussed above. Our diluted net income per share was $0.35 for the three months ended June 30, 2013 as compared to diluted net income per share of $0.06 for the three months ended June 30, 2012.

Related to our Operating Partnership results, our net income attributable to common unit holders increased $26.2 million during 2013 as compared to 2012 for the same reasons stated above. Our diluted net income per unit was $0.35 for the three months ended June 30, 2013 as compared to net income per unit of $0.06 for the three months ended June 30, 2012.

Results from Operations

Comparison of the six months ended June 30, 2013 to 2012:

Our revenues decreased slightly in the six months ended June 30, 2013, as compared to the six months ended June 30, 2012, as summarized in the following table (in thousands): 

 
 
2013
 
2012
 
Change
Minimum rent
$
178,333

 
179,533

 
(1,200
)
Percentage rent
 
1,846

 
1,558

 
288

Recoveries from tenants and other income
 
55,877

 
55,918

 
(41
)
Management, transaction, and other fees
 
13,502

 
13,618

 
(116
)
Total revenues
$
249,558

 
250,627

 
(1,069
)
        
Fluctuations in our revenues are driven by the following primary factors (GLA in thousands):

 
2013
 
2012
 
Change
Average occupancy (1)
 
94.2
%
 
91.7
%
 
2.5
%
Average gross leasable area (1)
 
22,236

 
23,177

 
(941
)
Average base rent per square foot (1)
$
17.20

 
16.74

 
0.46


(1) These factors relate to the Consolidated Properties in our shopping center portfolio and are adjusted to exclude the factors from properties whose operations are classified as discontinued operations in the Consolidated Statements of Operations.

Minimum rent decreased during 2013 as compared to 2012 due to acquisitions, dispositions, and changes in overall occupancy and average base rent for our same properties, as follows:

$15.7 million decrease due to the sale of a 15-property portfolio on July 25, 2012; offset by

$10.2 million increase due to the acquisition of seven operating properties and operations beginning at four development properties during 2012 and 2013 and

$4.3 million increase in minimum rent from same properties, which was driven by rental rate and occupancy growth and increases from contractual rent steps in existing leases.

Recoveries from tenants decreased slightly during 2013 as compared to 2012 due to the following:


36



$4.6 million decrease due to the sale of a 15-property portfolio on July 25, 2012; offset by

$2.1 million increase due to the acquisition of seven operating properties and operations beginning at four development properties during 2012 and 2013 and

$4.3 million increase in recoveries at same properties, which was driven by an increase in our recovery ratio of 179 basis points, due to improvements in occupancy and market recovery rates.

Other income decreased $1.8 million due primarily to the timing of our captive insurance distribution, which was received during the second quarter of 2012.

We earned fees, at market-based rates, for asset management, property management, leasing, acquisition, and financing services that we provided to our co-investment partnerships and third parties as follows (in thousands): 
    
 
 
2013
 
2012
 
Change
Asset management fees
$
3,291

 
3,252

 
39

Property management fees
 
7,223

 
7,146

 
77

Leasing commissions and other fees
 
2,988

 
3,220

 
(232
)

$
13,502

 
13,618

 
(116
)
        
Our operating expenses remained relatively consistent in the six months ended June 30, 2013, as compared to the six months ended June 30, 2012, as summarized in the following table (in thousands): 

 
 
2013
 
2012
 
Change
Depreciation and amortization
$
63,871

 
63,108

 
763

Operating and maintenance
 
35,563

 
35,572

 
(9
)
General and administrative
 
32,942

 
30,142

 
2,800

Real estate taxes
 
27,883

 
28,740

 
(857
)
Other expenses
 
3,083

 
2,447

 
636

Total operating expenses
$
163,342

 
160,009

 
3,333


Depreciation and amortization, operating and maintenance expenses, and real estate taxes changed due the impact of acquisitions, development operations, and dispositions during 2012 and 2013, as follows

$14.1 million decrease due to the sale of a 15-property portfolio on July 25, 2012; offset by

$8.9 million increase due to the acquisition of seven operating properties and operations beginning at four development properties during 2012 and 2013, and

$5.3 million increase at same properties, primarily due to incremental operating expenses associated with winter weather and to increases in real estate tax assessments.

In addition, general and administrative expense increased primarily due to $3.8 million less of development and leasing overhead capitalized during 2013, as compared to 2012, due to the timing of development project starts and a reduction in leasing activity. These costs were offset by $1.9 million of reduced incentive compensation expense during 2013, as compared to 2012, due to the timing of development project completions. Incentive compensation related to development projects is paid upon completion; there were no development project completions in the current year, compared two completions in the prior year. Other expenses increased due to additional acquisition costs during 2013.

The following table presents the components of other expense (income) (in thousands):
 
 
2013
 
2012
 
Change
Interest expense, net
$
55,613

 
57,335

 
(1,722
)
Provision for impairment
 

 
19,008

 
(19,008
)
Net investment income from deferred compensation plan
 
(1,034
)
 
(1,084
)
 
50

 
$
54,579

 
75,259

 
(20,680
)

37



    
The following table presents the change in interest expense (in thousands): 

 
 
2013
 
2012
 
Change
Interest on notes payable
$
51,810

 
52,043

 
(233
)
Interest on unsecured credit facilities
 
2,110

 
2,707

 
(597
)
Capitalized interest
 
(2,305
)
 
(1,246
)
 
(1,059
)
Hedge interest
 
4,749

 
4,744

 
5

Interest income
 
(751
)
 
(913
)
 
162

 
$
55,613

 
57,335

 
(1,722
)
    
Our interest expense decreased primarily due to paying down our unsecured credit facilities and due to higher amounts of interest capitalized on development projects, driven by the increase in development activity over the prior year.
    
Our equity in income of investments in real estate partnerships decreased during the six months ended June 30, 2013, as compared to the six months ended June 30, 2012 as follows (in thousands): 

 
Ownership
 
2013
 
2012
 
Change
GRI - Regency, LLC (GRIR)
40.00%
$
6,529

 
4,271

 
2,258

Macquarie CountryWide-Regency III, LLC (MCWR III) (1)
—%
 
48

 
(12
)
 
60

Columbia Regency Retail Partners, LLC (Columbia I)
20.00%
 
566

 
7,584

 
(7,018
)
Columbia Regency Partners II, LLC (Columbia II)
20.00%
 
277

 
165

 
112

Cameron Village, LLC (Cameron)
30.00%
 
351

 
363

 
(12
)
RegCal, LLC (RegCal)
25.00%
 
208

 
181

 
27

Regency Retail Partners, LP (the Fund)
20.00%
 
186

 
188

 
(2
)
US Regency Retail I, LLC (USAA)
20.01%
 
211

 
154

 
57

BRE Throne Holdings, LLC (BRET)
47.80%
 
2,473

 

 
2,473

Other investments in real estate partnerships
50.00%
 
1,039

 
876

 
163

    Total
 
$
11,888

 
13,770

 
(1,882
)
 
 
 
 
 
 
 
 
(1) As of June 30, 2012, our ownership interest in MCWR III was 24.95%. The liquidation of MCWR III was complete effective March 20, 2013.
    
The $1.9 million decrease in our equity in income in investments in real estate partnerships for 2013, as compared to 2012, is primarily due to the following:

$2.3 million increase from the GRIR partnership due to the following:

The acquisition of Lake Grove shopping center in January 2012, which incurred acquisition costs in 2012,

Increased tenant percentage rent, based on improved tenant sales,

Increased tenant recovery revenue rates, and

Lower interest expense as a result of paying off debt in the second quarter of 2012 that the GRIR partnership did not refinance.

$7.0 million decrease from the Columbia I partnership due to our share of a $34.5 million gain on sale of an operating property that was sold in April 2012, and

$2.5 million increase from our ownership interest retained in BRET, as part of the 15-property portfolio sale completed in July 2012, which we may redeem beginning in the third quarter of 2013.

    
    

38



The following represents the remaining components that comprise net income attributable to the common stockholders and unit holders for the six months ended June 30, 2013, as compared to the six months ended June 30, 2012 (in thousands):
 
 
2013
 
2012
 
Change
Income from continuing operations before tax
$
43,525

 
29,129

 
14,396

Income tax benefit of taxable REIT subsidiary
 

 
(608
)
 
608

Income (loss) from discontinued operations
 
13,361

 
6,532

 
6,829

Gain (loss) on sale of real estate
 
1,717

 
1,814

 
(97
)
(Income) loss attributable to noncontrolling interests
 
(654
)
 
128

 
(782
)
Preferred stock dividends
 
(10,531
)
 
(19,333
)
 
8,802

Net income attributable to common stockholders
$
47,418

 
18,878

 
28,540

Net income attributable to exchangeable operating partnership units
 
109

 
77

 
32

Net income attributable to common unit holders
$
47,527

 
18,955

 
28,572

    
Income from discontinued operations of $13.4 million for the six months ended June 30, 2013 included $11.4 million of gains, net of taxes, from the sale of four operating properties, their operating income, and the operating income of two operating properties held for sale at June 30, 2013. Income from discontinued operations of $6.5 million for the six months ended June 30, 2012 included $8.6 million of gains, net of taxes, from the sale of four operating properties and their operating losses, including $4.5 million of impairment losses.

During the six months ended June 30, 2013, we had a gain of $1.7 million, which includes gains from the sale of four out-parcels, compared to five out-parcel sales for a gain of $1.8 million during the six months ended June 30, 2012.

Preferred stock dividends decreased $8.8 million, which is attributable to the $7.0 million non-cash charge for stock issuance costs recognized upon redemption of the Series 3 and 4 Preferred Stock on March 31, 2012 as well as a $1.8 million reduction in dividends based on the change in preferred stock that was outstanding during the six months ended June 30, 2013.

Related to our Parent Company's results, our net income attributable to common stockholders increased $28.5 million during 2013 as compared to 2012 primarily from the decrease in preferred stock dividends, the lack of any impairments during 2013, offset by reductions in revenues and equity in income of investments in real estate partnerships from 2012 to 2013, as discussed above. Our diluted net income per share was $0.52 for the six months ended June 30, 2013 as compared to diluted net income per share of $0.21 for the six months ended June 30, 2012.

Related to our Operating Partnership results, our net income attributable to common unit holders increased $28.6 million during 2013 as compared to 2012 for the same reasons stated above. Our diluted net income per unit was $0.52 for the six months ended June 30, 2013 as compared to net income per unit of $0.21 for the six months ended June 30, 2012.



39



Supplemental Earnings Information

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

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

Ÿ
Same Property NOI includes only the net operating income of comparable operating properties that were owned and operated for the entirety of both periods being compared and excludes all Properties in Development and Non-Same Properties. A Non-Same Property is a property acquired during either period being compared or a development completion that is less than 90% funded or features less than two years of anchor operations. In no event can a development completion be termed a non-same property for more than two years. As such, Same Property NOI assists in eliminating disparities in net income due to the development, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent performance measure for the comparison of our properties.

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

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

Ÿ
Core FFO is an additional performance measure we use as the computation of FFO includes certain non-cash and non-comparable items that affect our period-over-period performance. Core FFO excludes from FFO, but is not limited to, transaction profits, income or expense, gains or losses from the early extinguishment of debt and other non-core items. We provide a reconciliation of FFO to Core FFO as shown below.
    
    

40



The Company's reconciliation of property revenues and property expenses to Same Property NOI for the periods ended June 30, 2013 to 2012 is as follows (in thousands):
 
 
Three months ended June 30,
 
 
2013
 
2012
 
 
Same Property
 
Other (1)
 
Total
 
Same Property
 
Other (1)
 
Total
Income from continuing operations before tax
$
49,809

 
(26,436
)
 
23,373

 
46,715

 
(35,063
)
 
11,652

Less:
 
 
 
 
 
 
 
 
 
 
 
 
Management, transaction, and other fees
 

 
6,741

 
6,741

 

 
6,469

 
6,469

Other (2)
 
804

 
1,079

 
1,883

 
1,265

 
1,073

 
2,338

Plus:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
27,463

 
4,467

 
31,930

 
26,603

 
5,134

 
31,737

General and administrative
 

 
14,966

 
14,966

 

 
14,020

 
14,020

Other operating expense, excluding provision for doubtful accounts
 
18

 
1,107

 
1,125

 
(666
)
 
1,016

 
350

Other expense
 
7,397

 
20,422

 
27,819

 
7,532

 
40,297

 
47,829

Equity in income (loss) of investments in real estate excluded from NOI (3)
 
18,172

 
(330
)
 
17,842

 
18,128

 
(5,743
)
 
12,385

NOI from properties sold
 

 
1,270

 
1,270

 

 
2,396

 
2,396

NOI
$
102,055

 
7,646

 
109,701

 
97,047

 
14,515

 
111,562


 
 
Six months ended June 30,
 
 
2013
 
2012
 
 
Same Property
 
Other (1)
 
Total
 
Same Property
 
Other (1)
 
Total
Income from continuing operations before tax
$
99,546

 
(56,021
)
 
43,525

 
99,712

 
(70,583
)
 
29,129

Less:
 
 
 
 
 
 
 
 
 
 
 
 
Management, transaction, and other fees
 

 
13,502

 
13,502

 

 
13,618

 
13,618

Other (2)
 
1,668

 
2,390

 
4,058

 
2,276

 
1,590

 
3,866

Plus:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
55,044

 
8,827

 
63,871

 
52,752

 
10,356

 
63,108

General and administrative
 

 
32,942

 
32,942

 

 
30,142

 
30,142

Other operating expense, excluding provision for doubtful accounts
 
74

 
2,017

 
2,091

 
(560
)
 
1,812

 
1,252

Other expense (income)
 
14,738

 
39,841

 
54,579

 
15,094

 
60,165

 
75,259

Equity in income (loss) of investments in real estate excluded from NOI (3)
 
35,449

 
(79
)
 
35,370

 
28,825

 
3,235

 
32,060

NOI from properties sold
 

 
3,003

 
3,003

 

 
5,279

 
5,279

NOI
$
203,183

 
14,638

 
217,821

 
193,547

 
25,198

 
218,745


(1) Includes revenues and expenses attributable to non-same property, development, and corporate activities. 

(2) Includes straight-line rental income, net of reserves, above and below market rent amortization, banking charges, and other fees.

(3) Excludes non-operating related expenses. 

    

41



The Company's reconciliation of net income available to common shareholders to FFO and Core FFO for the periods ended June 30, 2013 to 2012 is as follows (in thousands, except share information):
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2013
 
2012
 
2013
 
2012
Reconciliation of Net income to FFO
 
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
31,864

 
5,697

$
47,418

 
18,878

Adjustments to reconcile to FFO:
 
 
 
 
 
 
 
 
Depreciation and amortization - consolidated
 
26,711

 
28,210

 
53,854

 
56,249

Depreciation and amortization - unconsolidated
 
10,971

 
10,778

 
21,588

 
21,878

Consolidated joint venture partners' share of depreciation
 
(215
)
 
(182
)
 
(423
)
 
(362
)
Provision for impairment (1)
 

 
22,509

 

 
22,509

Amortization of leasing commissions and intangibles
 
4,820

 
4,027

 
9,549

 
8,039

Gain on sale of operating properties, net of tax (1)
 
(12,099
)
 
(9,778
)
 
(12,099
)
 
(16,079
)
Noncontrolling interest of exchangeable partnership units
 
70

 
23

 
109

 
77

FFO
$
62,122

 
61,284

$
119,996

 
111,189

Reconciliation of FFO to Core FFO
 
 
 
 
 
 
 
 
FFO
$
62,122

 
61,284

$
119,996

 
111,189

Adjustments to reconcile to Core FFO:
 
 
 
 
 
 
 
 
Transaction profits, net of dead deal costs and tax (1)
 
(305
)
 
108

 
136

 
(1,221
)
Provision for impairment to land and out-parcels (1)
 

 
999

 

 
999

Provision for hedge ineffectiveness (1)
 
(27
)
 
15

 
(20
)
 
11

Loss on early debt extinguishment (1)
 

 
4

 

 
4

Original preferred stock issuance costs expensed
 

 

 

 
7,835

Gain on redemption of preferred units
 

 

 

 
(1,875
)
One-time additional preferred dividend payment
 

 

 

 
1,750

Core FFO
$
61,790

 
62,410

$
120,112

 
118,692

(1) Includes Regency's pro-rata share of unconsolidated co-investment partnerships.



42



Environmental Matters

We are subject to numerous environmental laws and regulations as they apply to our shopping centers pertaining to chemicals used by the dry cleaning industry, the existence of asbestos in older shopping centers, and underground petroleum storage tanks. We believe that the tenants who currently operate dry cleaning plants or gas stations do so in accordance with current laws and regulations. Generally, we use all legal means to cause tenants to remove dry cleaning plants from our shopping centers or convert them to more environmentally friendly systems. Where available, we have applied and been accepted into state-sponsored environmental programs. We have a blanket environmental insurance policy for third-party liabilities and remediation costs on shopping centers that currently have no known environmental contamination. We have also placed environmental insurance, where possible, on specific properties with known contamination, in order to mitigate our environmental risk. We monitor the shopping centers containing environmental issues and in certain cases voluntarily remediate the sites. We also have legal obligations to remediate certain sites and we are in the process of doing so. We believe that the ultimate disposition of currently known environmental matters will not have a material effect on our financial position, liquidity, or results of operations; however, we can give no assurance that existing environmental studies on our shopping centers have revealed all potential environmental liabilities; that any previous owner, occupant or tenant did not create any material environmental condition not known to us; that the current environmental condition of the shopping centers will not be affected by tenants and occupants, by the condition of nearby properties, or by unrelated third parties; or that changes in applicable environmental laws and regulations or their interpretation will not result in additional environmental liability to us.

Inflation/Deflation

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


43




Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes from the quantitative and qualitative disclosures about market risk disclosed in item 7A of Part II of our Form 10-K for the year ended December 31, 2012.

Item 4. Controls and Procedures

Controls and Procedures (Regency Centers Corporation)

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

There have been no changes in our internal controls over financial reporting identified in connection with this evaluation that occurred during the second quarter of 2013 and that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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

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

There have been no changes in our internal controls over financial reporting identified in connection with this evaluation that occurred during the second quarter of 2013 and that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.


44



PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in item 1A. of Part I of our Form 10-K for the year ended December 31, 2012.

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

There were no unregistered sales of equity securities during the quarter ended June 30, 2013.

The following table represents information with respect to purchases by the Parent Company of its common stock during the monthly periods ended June 30, 2013.

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
April 1 through April 30, 2013
$

$

May 1 through May 31, 2013
1,010
$
58.39

$

June 1 through June 30, 2012
$

$


(1) Represents shares delivered in payment of withholding taxes in connection with options exercised by a participant under Regency's Long-Term Omnibus Plan.

Item 3.    Defaults Upon Senior Securities
    
None.

Item 4.    Mine Safety Disclosures
    
None.

Item 5. Other Information
None.

45



Item 6. Exhibits

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

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. We acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, we are responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this report not misleading. Additional information about the Company may be found elsewhere in this report and the Company's other public files, which are available without charge through the SEC's website at http://www.sec.gov.
Unless otherwise indicated below, the Commission file number to the exhibit is No. 001-12298.
Ex #    Description
3.1
Restated Articles of Incorporation of Regency Centers Corporation (incorporated by reference to Form 8-K filed on June 5, 2013).
10.1
Amended and Restated Severance and Change of Control Agreement between Regency Centers Corporation and Lisa Palmer (incorporated by reference to Form 8-K filed on May 13, 2013).
31.    Rule 13a-14(a)/15d-14(a) Certifications.
31.1    Rule 13a-14 Certification of Chief Executive Officer for Regency Centers Corporation.
31.2    Rule 13a-14 Certification of Chief Financial Officer for Regency Centers Corporation.
31.3    Rule 13a-14 Certification of Chief Executive Officer for Regency Centers, L.P.
31.4    Rule 13a-14 Certification of Chief Financial Officer for Regency Centers, L.P.
32.    Section 1350 Certifications.
32.1*    18 U.S.C. § 1350 Certification of Chief Executive Officer for Regency Centers Corporation.
32.2*    18 U.S.C. § 1350 Certification of Chief Financial Officer for Regency Centers Corporation.
32.3*    18 U.S.C. § 1350 Certification of Chief Executive Officer for Regency Centers, L.P.
32.4*    18 U.S.C. § 1350 Certification of Chief Financial Officer for Regency Centers, L.P.

46



101.    Interactive Data Files
101.INS        XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    XBRL Taxonomy Definition Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE        XBRL Taxonomy Extension Presentation Linkbase Document
__________________________
*
Furnished, not filed.



47




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.
August 2, 2013
REGENCY CENTERS CORPORATION
 
By:

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

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



August 2, 2013
REGENCY CENTERS, L.P.
 
By:
Regency Centers Corporation, General Partner
 
By:
/s/ Lisa Palmer     
Lisa Palmer, Executive Vice President, Chief Financial Officer (Principal Financial Officer)
 
 
 
 
By:

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

48