UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

Commission File No. 001-13499

EQUITY ONE, INC.

(Exact name of registrant as specified in its charter)

Maryland		52-1794271
(State or other jurisdiction of incorporation		(I.R.S. Employer Identification No.)
or organization)
1600 N.E. Miami Gardens Drive
N. Miami Beach, Florida		33179
(Address of principal executive offices)		(Zip Code)

(305) 947-1664

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.

Yes þ     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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ     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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer þ		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).

Yes o     No þ

Applicable only to Corporate Issuers:

As of August 2, 2011, the number of outstanding shares of Common Stock, par value $0.01 per share, of the Registrant was 114,654,390.

 

 

EQUITY ONE, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED JUNE 30, 2011

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2011 and December 31, 2010			1
Condensed Consolidated Statements of Income (unaudited) for the three and six months ended June 30, 2011 and 2010			2
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended June 30, 2011 and 2010			3
Condensed Consolidated Statement of Stockholders’ Equity (unaudited) for the six months ended June 30, 2011			4
Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2011 and 2010			5
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			41
Item 3. Quantitative and Qualitative Disclosures about Market Risks			55
Item 4. Controls and Procedures			55
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			56
Item 1A. Risk Factors			56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			56
Item 3. Defaults Upon Senior Securities			56
Item 4. (Removed and Reserved)			56
Item 5. Other Information			56
Item 6. Exhibits			57
Signatures			58
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

Item 1.		Financial Statements

EQUITY ONE, INC. AND SUBSIDIARIES

		June 30,				December 31,
		2011				2010
ASSETS
Properties:
Income producing		$	3,159,282			$	2,643,871
Less: accumulated depreciation			(317,785	)			(288,613	)
Income producing properties, net			2,841,497				2,355,258
Construction in progress and land held for development			76,509				74,870
Properties held for sale			37,217				—
Properties, net			2,955,223				2,430,128
Cash and cash equivalents			17,176				38,333
Accounts and other receivables, net			12,564				15,181
Investments in and advances to unconsolidated joint ventures			121,183				59,736
Goodwill			10,645				10,790
Other assets			179,641				127,696
TOTAL ASSETS		$	3,296,432			$	2,681,864
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Notes payable:
Mortgage notes payable		$	658,273			$	533,660
Unsecured senior notes payable			691,136				691,136
Unsecured revolving credit facilities			63,500				—
			1,412,909				1,224,796
Unamortized discount on notes payable, net			(16,592	)			(21,923	)
Total notes payable			1,396,317				1,202,873
Other liabilities:
Accounts payable and accrued expenses			38,669				32,885
Tenant security deposits			9,791				8,907
Deferred tax liabilities, net			45,354				46,523
Other liabilities			122,987				96,971
Total liabilities			1,613,118				1,388,159
Redeemable noncontrolling interests			3,851				3,864
Commitments and contingencies			—				—
Stockholders’ equity:
Preferred stock, $0.01 par value — 10,000 shares authorized but unissued			—				—
Common stock, $0.01 par value — 150,000 shares authorized, 112,532 and 102,327 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively			1,125				1,023
Additional paid-in capital			1,584,418				1,391,762
Distributions in excess of earnings			(88,131	)			(105,309	)
Accumulated other comprehensive loss			(1,443	)			(1,569	)
Total stockholders’ equity of Equity One, Inc.			1,495,969				1,285,907
Noncontrolling interests			183,494				3,934
Total stockholders’ equity			1,679,463				1,289,841
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	3,296,432			$	2,681,864

See accompanying notes to condensed consolidated financial statements.

EQUITY ONE, INC. AND SUBSIDIARIES

		Three months ended June 30,								Six months ended June 30,
		2011				2010				2011				2010
REVENUE:
Minimum rent		$	67,364			$	54,732			$	132,735			$	108,428
Expense recoveries			19,586				15,761				37,967				30,600
Percentage rent			660				313				2,126				1,358
Management and leasing services			641				399				1,107				772
Total revenue			88,251				71,205				173,935				141,158
COSTS AND EXPENSES:
Property operating			24,702				20,152				49,190				39,912
Rental property depreciation and amortization			24,351				16,755				46,786				33,043
General and administrative			13,335				11,741				25,312				21,828
Total costs and expenses			62,388				48,648				121,288				94,783
INCOME BEFORE OTHER INCOME AND EXPENSE, TAX AND DISCONTINUED OPERATIONS			25,863				22,557				52,647				46,375
OTHER INCOME AND EXPENSE:
Investment income			969				489				1,662				648
Equity in income (loss) in unconsolidated joint ventures			177				(42	)			811				(82	)
Other income			41				103				170				156
Interest expense			(21,246	)			(19,335	)			(42,532	)			(39,243	)
Amortization of deferred financing fees			(562	)			(454	)			(1,105	)			(900	)
Gain on bargain purchase			—				—				53,467				—
Gain on sale of real estate			4,606				440				4,606				440
Gain on extinguishment of debt			213				63				255				63
Other expense			(145	)			—				(145	)			—
INCOME FROM CONTINUING OPERATIONS BEFORE TAX AND DISCONTINUED OPERATIONS			9,916				3,821				69,836				7,457
Income tax benefit of taxable REIT subsidiaries			553				926				1,118				1,994
INCOME FROM CONTINUING OPERATIONS			10,469				4,747				70,954				9,451
DISCONTINUED OPERATIONS:
Operations of income producing properties sold or held for sale			390				24				774				115
(Loss) gain on disposal of income producing properties			(13	)			1,458				(13	)			1,458
Impairment loss on income producing properties held for sale			(1,277	)			—				(1,277	)			—
(LOSS) INCOME FROM DISCONTINUED OPERATIONS			(900	)			1,482				(516	)			1,573
NET INCOME			9,569				6,229				70,438				11,024
Net (income) loss attributable to noncontrolling interests			(2,135	)			10				(4,517	)			647
NET INCOME ATTRIBUTABLE TO EQUITY ONE, INC.		$	7,434			$	6,239			$	65,921			$	11,671
EARNINGS PER COMMON SHARE — BASIC:
Continuing operations		$	0.07			$	0.05			$	0.61			$	0.11
Discontinued operations			(0.01	)			0.02				—				0.02
		$	0.07			$	0.07			$	0.61			$	0.13
Number of Shares Used in Computing Basic Earnings per Share			108,942				92,141				107,605				89,939
EARNINGS PER COMMON SHARE — DILUTED:
Continuing operations		$	0.07			$	0.05			$	0.59			$	0.11
Discontinued operations			(0.01	)			0.02				—				0.02
		$	0.07			$	0.07			$	0.59			$	0.13
Number of Shares Used in Computing Diluted Earnings per Share			109,112				92,255				118,875				90,198

See accompanying notes to the condensed consolidated financial statements.

Note: Basic and Diluted EPS for the three months ended June 30, 2011 do not foot due to the rounding of the individual calculations.

EQUITY ONE, INC. AND SUBSIDIARIES

		Three months ended								Six months ended
		June 30,								June 30,
		2011				2010				2011				2010
NET INCOME		$	9,569			$	6,229			$	70,438			$	11,024
OTHER COMPREHENSIVE INCOME (LOSS):
Net unrealized holding gain on securities available for sale			—				—				—				14
Reclassification adjustment for gain on sale of securities included in net income			—				(359	)			—				(359	)
Net amortization of interest rate contracts included in net income			16				16				32				31
Net unrealized gain (loss) on interest rate swap			13				(163	)			94				(1,175	)
Other comprehensive income (loss) adjustment			29				(506	)			126				(1,489	)
COMPREHENSIVE INCOME			9,598				5,723				70,564				9,535
Comprehensive (income) loss attributable to noncontrolling interests			(2,135	)			10				(4,517	)			647
COMPREHENSIVE INCOME ATTRIBUTABLE TO EQUITY ONE, INC.		$	7,463			$	5,733			$	66,047			$	10,182

See accompanying notes to the condensed consolidated financial statements.

EQUITY ONE, INC. AND SUBSIDIARIES

																		Accumulated				Total
										Additional				Distributions in				Other				Stockholders’								Total
		Common Stock								Paid-In				Excess of				Comprehensive				Equity of Equity				Noncontrolling				Stockholders’
		Shares				Amount				Capital				Earnings				Loss				One, Inc.				Interests				Equity
BALANCE, DECEMBER 31, 2010			102,327			$	1,023			$	1,391,762			$	(105,309	)		$	(1,569	)		$	1,285,907			$	3,934			$	1,289,841
Issuance of common stock			6,144				61				116,556				—				—				116,617				—				116,617
Stock issuance costs			—				—				(982	)			—				—				(982	)			—				(982	)
Share-based compensation expense			—				—				3,425				—				—				3,425				—				3,425
Net income			—				—				—				65,921				—				65,921				4,517				70,438
Net loss attributable to redeemable noncontrolling interest			—				—				—				—				—				—				13				13
Dividends paid on common stock			—				—				—				(48,743	)			—				(48,743	)			—				(48,743	)
Distributions to noncontrolling interests			—				—				—				—				—				—				(4,523	)			(4,523	)
Conversion of Class A share by LIH			10				—				—				—				—				—				—				—
Acquisition of C&C (US) No. 1			4,051				41				73,657				—				—				73,698				179,795				253,493
Purchase of subsidiary shares from noncontrolling interests			—				—				—				—				—				—				(242	)			(242	)
Other comprehensive income adjustment			—				—				—				—				126				126				—				126
BALANCE, JUNE 30, 2011			112,532			$	1,125			$	1,584,418			$	(88,131	)		$	(1,443	)		$	1,495,969			$	183,494			$	1,679,463

See accompanying notes to the condensed consolidated financial statements.

EQUITY ONE, INC. AND SUBSIDIARIES

		Six months ended June 30,
		2011				2010
OPERATING ACTIVITIES:
Net income		$	70,438			$	11,024
Adjustments to reconcile net income to net cash provided by operating activities:
Straight line rent adjustment			(1,808	)			(1,016	)
Accretion of below market lease intangibles, net			(5,007	)			(3,905	)
Equity in (income) loss in unconsolidated joint ventures			(811	)			82
Gain on bargain purchase			(53,467	)			—
Income tax benefit of taxable REIT subsidiaries			(1,118	)			(1,994	)
Provision for losses on accounts receivable			1,573				1,146
Amortization of discount on notes payable, net			667				1,403
Amortization of deferred financing fees			1,105				900
Depreciation and amortization			48,274				33,973
Share-based compensation expense			3,322				3,142
Amortization of derivatives			32				31
Gain on sale of real estate			(4,606	)			(1,898	)
Gain on extinguishment of debt			(255	)			(63	)
Gain on sale of securities			—				(366	)
Operating distributions from joint ventures			513				241
Impairment loss on income producing properties held for sale			1,277				—
Goodwill impairment			145				—
Changes in assets and liabilities, net of effects of acquisitions and disposals:
Accounts and other receivables			1,685				272
Other assets			(4,789	)			(9,345	)
Accounts payable and accrued expenses			4,047				8,136
Tenant security deposits			13				(168	)
Other liabilities			(1,908	)			(2,702	)
Net cash provided by operating activities		$	59,322			$	38,893
INVESTING ACTIVITIES:
Acquisition of income producing properties		$	(100,472	)		$	(33,278	)
Additions to income producing properties			(6,660	)			(3,835	)
Additions to and purchases of land held for development			—				(1,337	)
Additions to construction in progress			(7,503	)			(5,249	)
Proceeds from sale of real estate and rental properties			42,052				2,433
Increase in deferred leasing costs and lease intangibles			(3,531	)			(1,884	)
Investment in joint ventures			(9,769	)			(118	)
Investment in consolidated subsidiary			(242	)			(12,635	)
Advances to joint ventures			—				(1,000	)
Proceeds from sale of securities			—				841
Net cash used in investing activities		$	(86,125	)		$	(56,062	)

(Continued)

See accompanying notes to the condensed consolidated financial statements.

EQUITY ONE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2011 and 2010
(Unaudited)
(In thousands)

		Six months ended June 30,
		2011				2010
FINANCING ACTIVITIES:
Repayments of mortgage notes payable		$	(143,383	)		$	(68,177	)
Net borrowings under revolving credit facilities			63,500				—
Proceeds from issuance of common stock			116,617				99,959
Payment of deferred financing costs			(252	)			(427	)
Stock issuance costs			(982	)			(1,292	)
Dividends paid to stockholders			(48,743	)			(40,694	)
Distributions to noncontrolling interests			(4,523	)			—
Net cash used in financing activities			(17,766	)			(10,631	)
Net decrease in cash and cash equivalents			(44,569	)			(27,800	)
Cash and cash equivalents obtained through acquisition			23,412				—
Cash and cash equivalents at beginning of the period			38,333				47,970
Cash and cash equivalents at end of the period		$	17,176			$	20,170
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest (net of capitalized interest of $1,028 and $1,061 in 2011 and 2010, respectively)		$	42,151			$	38,821
We acquired upon acquisition of certain rental properties:
Income producing properties		$	123,533			$	56,517
Intangible and other assets			8,570				7,014
Intangible and other liabilities			(20,528	)			(10,456	)
Assumption of mortgage notes payable			(11,103	)			(19,797	)
Cash paid for rental properties		$	100,472			$	33,278
Net cash paid for the acquisition of C&C (US) No. 1 is as follows:
Income producing properties		$	461,516			$	—
Intangible and other assets			108,031				—
Intangible and other liabilities			(24,186	)			—
Assumption of mortgage notes payable			(261,813	)			—
Issuance of Equity One common stock			(73,698	)			—
Noncontrolling interest in C&C (US) No. 1			(179,795	)			—
Gain on bargain purchase			(53,467	)			—
Cash acquired upon acquisition of C&C (US) No. 1			23,412				—
Net cash paid for acquisition of C&C (US) No. 1		$	—			$	—
Net cash paid for acquisition of rental properties		$	100,472			$	33,278

(Concluded)

See accompanying notes to the condensed consolidated financial statements.

EQUITY ONE, INC. AND SUBSIDIARIES

1. Organization and Basis of Presentation

Organization

We are a real estate investment trust, or REIT, that owns, manages, acquires, develops and redevelops neighborhood and community shopping centers. We were organized as a Maryland corporation in 1992, completed our initial public offering in May 1998, and have elected to be taxed as a REIT since 1995.

As of June 30, 2011, our consolidated property portfolio comprised 199 properties totaling approximately 20.7 million square feet of gross leasable area, or GLA, and included 176 shopping centers, ten development or redevelopment properties, eight non-retail properties and five land parcels. As of June 30, 2011, our core portfolio was 90.2% leased and included national, regional and local tenants. Additionally, we had joint venture interests in 16 shopping centers, three office buildings and one apartment building totaling approximately 3.2 million square feet.

On January 4, 2011, we closed on the acquisition of C&C (US) No. 1, Inc., which we refer to as CapCo, through a joint venture with Liberty International Holdings Limited, or LIH. At the time of acquisition, CapCo owned a portfolio of 13 properties in California totaling approximately 2.6 million square feet of GLA. The results of CapCo have been included in our financial statements as of the date of acquisition. A more complete description of this acquisition is provided in Note 3 below.

Basis of Presentation

The condensed consolidated financial statements include the accounts of Equity One, Inc. and its wholly-owned subsidiaries and those other entities where we have a controlling financial interest including where we have been determined to be a primary beneficiary of a variable interest entity (“VIE”) in accordance with the Accounting Standards Codification (“ASC”). Equity One, Inc. and its subsidiaries are hereinafter referred to as “the consolidated companies”, the “Company”, “we”, “our”, “us” or similar terms. All significant intercompany transactions and balances have been eliminated in consolidation. Certain prior-period data have been reclassified to conform to the current period presentation.

The provisions of the Consolidations Topic of the Financial Accounting Standards Board (“FASB”) ASC (the “FASB ASC”) are being applied prospectively, except for the provisions related to the presentation and disclosure of noncontrolling interests, which have been applied retrospectively. Redeemable noncontrolling interests are classified in the mezzanine section of the condensed consolidated balance sheets as a result of their redemption features.

The condensed consolidated financial statements included in this report are unaudited. In our opinion, all adjustments considered necessary for a fair presentation have been included. The results of operations for the six month periods ended June 30, 2011 and 2010 are not necessarily indicative of the results that may be expected for a full year.

Our unaudited condensed consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions of Form 10-Q. Accordingly, these unaudited condensed consolidated financial statements do not contain certain information included in our annual financial statements and notes. The condensed consolidated balance sheet as of December 31, 2010 was derived from audited financial statements included in our 2010 Annual Report on Form 10-K, but does not include all disclosures required under GAAP. These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission (the “SEC”) on March 11, 2011.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

Properties

Income producing properties are stated at cost, less accumulated depreciation and amortization. Costs include those related to acquisition, development and construction, including tenant improvements, interest incurred during development, costs of predevelopment and certain direct and indirect costs of development. Costs related to business combinations are expensed as incurred.

Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations and improvements that improve or extend the useful lives of assets are capitalized.

Cash and Cash Equivalents

We consider liquid investments with a purchase date life to maturity of three months or less to be cash equivalents.

Construction in Progress and Land Held for Development

Properties also include construction in progress and land held for development. These properties are carried at cost and no depreciation is recorded. Properties undergoing significant renovations and improvements are considered under development. All direct and indirect costs related to development activities, are capitalized into construction in progress and land held for development on our consolidated balance sheets except certain demolition costs, which are expensed as incurred. Costs incurred include predevelopment expenditures directly related to a specific project including development and construction costs, interest, insurance and real estate taxes. Indirect development costs include employee salaries and benefits, travel and other related costs that are directly associated with the development of the property. Our method of calculating capitalized interest is based upon applying our weighted average borrowing rate to the actual costs incurred. The capitalization of such expenses ceases when the property is ready for its intended use, but no later than one-year from substantial completion of major construction activity. If we determine that a project is no longer viable, all predevelopment project costs are immediately expensed. Similar costs related to properties not under development are expensed as incurred.

Business Combinations

We allocate the purchase price of acquired properties to land, building, improvements and intangible assets and liabilities in accordance with the Business Combinations Topic of the FASB ASC. We allocate the initial purchase price of assets acquired (net tangible and identifiable intangible assets) and liabilities assumed based on their relative fair values at the date of acquisition. There are four categories of intangible assets and liabilities to be considered: (1) in-place leases; (2) above and below-market value of in-place leases; (3) lease origination costs and (4) customer relationships. The aggregate value of other acquired intangible assets, consisting of in-place leases, is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fair value of the property as-if-vacant, determined as set forth above. The value of in-place leases exclusive of the value of above-market and below-market in-place leases is amortized to depreciation expense over the estimated remaining term of the respective leases. The value of above-market and below-market in-place leases is amortized to rental revenue over the estimated remaining term of the leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written off.

The results of operations of acquired properties are included in our financial statements as of the dates they are acquired. The intangible assets and liabilities associated with property acquisitions are included in other assets and other liabilities in our consolidated balance sheets.

Investments in Joint Ventures

We analyze our joint ventures under the FASB ASC Topics of Consolidation and Real Estate-General in order to determine whether the entity should be consolidated. If it is determined that these investments do not require consolidation because the entities are not VIEs in accordance with the Consolidation Topic of the FASB ASC, we are not considered the primary beneficiary of the entities determined to be VIEs, we do not have voting control, and/or the limited partners (or non-managing

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

members) have substantive participatory rights, then the selection of the accounting method used to account for our investments in unconsolidated joint ventures is generally determined by our voting interests and the degree of influence we have over the entity. Management uses its judgment when determining if we are the primary beneficiary of, or have a controlling interest in, an entity in which we have a variable interest. Factors considered in determining whether we have the power to direct the activities that most impact the entity’s economic performance include risk and reward sharing, experience and financial condition of the other partners, voting rights, involvement in day-to-day capital and operating decisions and the extent of our involvement in the entity.

We use the equity method of accounting for investments in unconsolidated joint ventures when we own more than 20% but less than 50% of the voting interests and have significant influence but do not have a controlling financial interest, or if we own less than 20% of the voting interests but have determined that we have significant influence. Under the equity method, we record our investments in and advances to these entities in our consolidated balance sheets and our proportionate share of earnings or losses earned by the joint venture is recognized in equity in income (loss) of unconsolidated joint ventures in the accompanying consolidated statements of income. We derive revenue through our involvement with unconsolidated joint ventures in the form of management and leasing services and interest earned on loans and advances. We account for these revenues gross of our ownership interest in each respective joint venture and record our proportionate share of related expenses in equity in income (loss) of unconsolidated joint ventures.

The cost method of accounting is used for unconsolidated entities in which we do not have the ability to exercise significant influence and we have virtually no influence over partnership operating and financial policies. Under the cost method, income distributions from the partnership are recognized in investment income. Distributions that exceed our share of earnings are applied to reduce the carrying value of our investment and any capital contributions will increase the carrying value of our investment. The fair value of a cost method investment is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment.

On a periodic basis, we evaluate our investments in unconsolidated entities for impairment in accordance with the Investments-Equity Method and Joint Ventures Topic of the FASB ASC. We assess whether there are any indicators, including underlying property operating performance and general market conditions, that the value of our investments in unconsolidated joint ventures may be impaired. An investment in a joint venture is considered impaired only if we determine that its fair value is less than the net carrying value of the investment in that joint venture on an other-than-temporary basis. Cash flow projections for the investments consider property level factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. We consider various qualitative factors to determine if a decrease in the value of our investment is other-than-temporary. These factors include age of the venture, our intent and ability to retain our investment in the entity, financial condition and long-term prospects of the entity and relationships with our partners and banks. If we believe that the decline in the fair value of the investment is temporary, no impairment charge is recorded. If our analysis indicates that there is an other-than-temporary impairment related to the investment in a particular joint venture, the carrying value of the venture will be adjusted to an amount to reflect the estimated fair value of the investment.

Long-lived Assets

We evaluate the carrying value of long-lived assets, including definite-lived intangible assets, when events or changes in circumstances indicate that the carrying value may not be recoverable in accordance with the Property, Plant and Equipment Topic of the FASB ASC. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. For long-lived assets to be held and used, the fair value of fixed (tangible) assets and definite-lived intangible assets is determined primarily using either internal projected cash flows discounted at a rate commensurate with the risk involved or an external appraisal. For long-lived assets to be disposed of by sale or other than by sale, fair value is determined in a similar manner, except that fair values are reduced for disposal costs.

Properties Held for Sale

The application of current accounting principles that govern the classification of any of our properties as held-for-sale on the consolidated balance sheet, or the presentation of results of operations and gains or losses on the sale of these properties as discontinued, requires management to make certain significant judgments. In evaluating whether a property meets the criteria set

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

forth by the Property, Plant and Equipment Topic of the FASB ASC, we make a determination as to the point in time that it is probable that a sale will be consummated. Given the nature of all real estate sales contracts, it is not unusual for such contracts to allow potential buyers a period of time to evaluate the property prior to formal acceptance of the contract. In addition, certain other matters critical to the final sale, such as financing arrangements often remain pending even upon contract acceptance. As a result, properties under contract may not close within the expected time period, or may not close at all. Due to these uncertainties, it is not likely that we can meet the criteria under the Property, Plant and Equipment Topic of the FASB ASC prior to the sale formally closing. Therefore, any properties categorized as held-for-sale represent only those properties that management has determined are probable to close within the requirements set forth in the Property, Plant and Equipment Topic of the FASB ASC. Prior to sale, we evaluate the extent of involvement with, and the significance to us of cash flows from a property subsequent to its sale, in order to determine if the results of operations and gain or loss on sale should be reflected as discontinued. Consistent with the Property, Plant and Equipment Topic of the FASB ASC, any property sold in which we have significant continuing involvement or cash flows (most often sales to co-investment partnerships) is not considered to be discontinued. In addition, any property which we sell to an unrelated third party, but in which we retain a property or asset management function, is not considered discontinued. Therefore, based on our evaluation of the Property, Plant and Equipment Topic of the FASB ASC only properties sold, or to be sold, to unrelated third parties where we will have no significant continuing involvement or significant cash flows are classified as discontinued operations.

Accounts Receivable

Accounts receivable includes amounts billed to tenants and accrued expense recoveries due from tenants. We make estimates of the uncollectability of our accounts receivable using the specific identification method. We analyze accounts receivable and historical bad debt levels, tenant credit-worthiness, payment history and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Accounts receivable are written-off when they are deemed to be uncollectable and we are no longer actively pursuing collection. Our reported net income is directly affected by management’s estimate of the collectability of accounts receivable.

Goodwill

Goodwill reflects the excess of the fair value of the acquired business over the fair value of net identifiable assets acquired in various business acquisitions. We account for goodwill in accordance with the Intangibles — Goodwill and Other Topic of the FASB ASC.

We are required to perform annual, or more frequently in certain circumstances, impairment tests of our goodwill. We have elected to test for goodwill impairment in November of each year. The goodwill impairment test is a two-step process that requires us to make decisions in determining appropriate assumptions to use in the calculation. The first step consists of estimating the fair value of each reporting unit and comparing those estimated fair values with the carrying values, which include the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment, if any, by determining an “implied fair value” of goodwill. The determination of each reporting unit’s (each property is considered a reporting unit) implied fair value of goodwill requires us to allocate the estimated fair value of the reporting unit to its assets and liabilities. Any unallocated fair value represents the implied fair value of goodwill which is compared to its corresponding carrying amount. During the three and six months ended June 30, 2011, we recognized a goodwill impairment loss of $145,000. See Note 14.

Deferred Costs and Intangibles

Deferred costs, intangible assets included in other assets, and intangible liabilities included in other liabilities consist of loan origination fees, leasing costs and the value of intangible assets and liabilities when a property was acquired. Loan and other fees directly related to rental property financing with third parties are amortized over the term of the loan using the effective interest method. Direct salaries, third-party fees and other costs incurred by us to originate a lease are capitalized and are being amortized against the respective leases using the straight-line method over the term of the related leases. Intangible assets consist of in-place lease values, tenant origination costs and above-market rents that were recorded in connection with the acquisition of the properties. Intangible liabilities consist of below-market rents that are also recorded in connection with the acquisition of properties. Both intangible assets and liabilities are amortized and accreted using the straight-line method over the term of the related leases. When a lease is terminated early, any remaining unamortized or unaccreted balances under lease intangible assets or liabilities are charged to earnings.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

Noncontrolling Interests

Noncontrolling interests generally represent the portion of equity that we do not own in those entities that we consolidate. We account for and report our noncontrolling interests in accordance with the provisions required under the Consolidation Topic of the FASB ASC.

Revenue Recognition

Revenue includes minimum rents, expense recoveries, percentage rental payments and management and leasing services. Minimum rents are recognized on an accrual basis over the terms of the related leases on a straight-line basis. As part of the leasing process, we may provide the lessee with an allowance for the construction of leasehold improvements. Leasehold improvements are capitalized and recorded as tenant improvements and depreciated over the shorter of the useful life of the improvements or the lease term. If the allowance represents a payment for a purpose other than funding leasehold improvements, or in the event we are not considered the owner of the improvements, the allowance is considered a lease incentive and is recognized over the lease term as a reduction to revenue. Factors considered during this evaluation include, among others, the type of improvements made, who holds legal title to the improvements, and other controlling rights provided by the lease agreement. Lease revenue recognition commences when the lessee is given possession of the leased space, when the asset is substantially complete in the case of leasehold improvements, and there are no contingencies offsetting the lessee’s obligation to pay rent.

Many of the lease agreements contain provisions that require the payment of additional rents based on the respective tenants’ sales volume (contingent or percentage rent) and substantially all contain provisions that require reimbursement of the tenants’ allocable real estate taxes, insurance and common area maintenance costs, or CAM. Revenue based on percentage of tenants’ sales is recognized only after the tenant exceeds its sales breakpoint. Revenue from tenant reimbursements of taxes, CAM and insurance is recognized in the period that the applicable costs are incurred in accordance with the lease agreements.

Earnings Per Share

Under the Earnings Per Share Topic of the FASB ASC, unvested share-based payment awards that entitle their holders to receive non-forfeitable dividends, such as our restricted stock awards, are classified as “participating securities.” As participating securities, our shares of restricted stock will be included in the calculation of basic and diluted earnings per share. Because the awards are considered participating securities under provisions of the Earnings Per Share Topic of the FASB ASC, we are required to apply the two-class method of computing basic and diluted earnings per share. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common stockholders. Under the two-class method, earnings for the period are allocated between common stockholders and other security holders, based on their respective rights to receive dividends.

Share-Based Payment

Share-based compensation expense charged against earnings is summarized as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
		(In thousands)								(In thousands)
Restricted stock expense		$	1,417			$	1,025			$	2,706			$	2,109
Stock option expense			375				579				711				1,067
Employee stock purchase plan discount			4				1				8				3
Total equity-based expense			1,796				1,605				3,425				3,179
Restricted stock classified as liability			13				—				20				—
Total expense			1,809				1,605				3,445				3,179
Less amount capitalized			(67	)			(11	)			(123	)			(37	)
Net share-based compensation expense		$	1,742				1,594			$	3,322			$	3,142

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

Segment Information

We invest in retail shopping centers through direct ownership or through joint ventures. It is our intent that all retail shopping centers will be owned or developed for investment purposes; however, we may decide to sell all or a portion of a development upon completion. Our revenue and net income are generated from the operation of our investment portfolio. We also earn fees from third parties for services provided to manage and lease retail shopping centers owned through joint ventures or by third parties.

Our portfolio is primarily located throughout the southeastern United States; however, we do not distinguish or group our operations on a geographical basis for purposes of allocating resources or measuring performance. We review operating and financial data for each property on an individual basis; therefore, each of our individual properties is a separate operating segment. No individual property constitutes more than 10% of our revenue, net income or assets, and thus the individual properties have been aggregated into one reportable segment based upon their similarities with regard to both the nature and economics of the centers, tenants and operational processes, as well as long-term average financial performance. In addition, none of the shopping centers is located outside the United States.

Concentration of Credit Risk

A concentration of credit risk arises in our business when a national or regionally based tenant occupies a substantial amount of space in multiple properties owned by us. In that event, if the tenant suffers a significant downturn in its business, it may become unable to make its contractual rent payments to us, exposing us to potential losses in rental revenue, expense recoveries, and percentage rent. Further, the impact may be magnified if the tenant is renting space in multiple locations. Generally, we do not obtain security from our nationally-based or regionally-based tenants in support of their lease obligations to us. We regularly monitor our tenant base to assess potential concentrations of credit risk. As of June 30, 2011, Publix Super Markets is our largest tenant and accounted for approximately 2.7 million square feet, or approximately 13.7% of our gross leasable area, and approximately $23.1 million, or 9.8%, of our annual minimum rent. As of June 30, 2011, we had outstanding receivables from Publix Super Markets of approximately $350,000. No other tenant accounted for over 4% of our annual minimum rent.

Recent Accounting Pronouncements

In December 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts” (“ASU 2010-28”), which requires a public entity to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists, effective for fiscal years and interim periods within those years beginning after December 15, 2010. In determining whether it is more likely than not that goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that impairment may exist. The qualitative factors are consistent with the existing guidance and examples in FASB Topic 350 Intangibles — Goodwill and Others, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The adoption had no material effect on our consolidated financial statements.

In December 2010, the FASB issued ASU No. 2010-29, “Disclosure of Supplementary Pro Forma Information for Business Combinations” (“ASU 2010-29”), which requires a public entity to disclose pro forma information for business combinations that occurred in the current reporting period, effective for fiscal years and interim periods within those years beginning on or after December 15, 2010. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. We have incorporated the required disclosures within this Quarterly Report on Form 10-Q where deemed applicable.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRSs”).” Under ASU 2011-04, the guidance amends certain accounting and disclosure requirements related to fair value measurements to ensure that fair value has the same meaning in U.S. GAAP and in IFRS and that their respective fair value measurement and disclosure requirements are the same.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

This guidance contains certain updates to the measurement guidance as well as enhanced disclosure requirements. The most significant change in disclosures is an expansion of the information required for “Level 3” measurements including enhanced disclosure for: (1) the valuation processes used by the reporting entity and (2) the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any. This guidance is effective for interim and annual periods beginning on or after December 15, 2011, with early adoption prohibited. We do not believe that the adoption of the ASU will have a material impact on our consolidated results of operation and financial condition.

3. Acquisitions and Dispositions

Acquisitions

The following table provides a summary of income producing property acquisition activity (other than CapCo which is discussed below) during the six months ended June 30, 2011:

												Purchase				Mortgage
Date Purchased		Property Name		City		State		Square Feet				Price				Assumed
												(in thousands)
May 16, 2011		161 W. 16th Street		New York		NY			56,870			$	55,000			$	—
March 16, 2011		Vons Circle Center		Long Beach		CA			148,000				37,000				11,500
March 15, 2011		Circle Center West		Long Beach		CA			64,000				20,000				—
												$	112,000			$	11,500

In conjunction with the above property acquisitions, we entered into reverse Section 1031 like-kind exchange agreements with third party intermediaries which are for a maximum of 180 days and allow us, for tax purposes, to defer gains on sale of other properties identified and sold within this period. Until the earlier of termination of the exchange agreements or 180 days after the respective acquisition dates, the third party intermediaries are the legal owner of each respective property; however, we control the activities that most significantly impact the property and retain all of the economic benefits and risks associated with the property. Therefore, we have determined we are the primary beneficiary of these VIEs and consolidated the properties and their operations as of each respective acquisition date noted above.

During the three and six months ended June 30, 2011, we expensed approximately $2.5 million and $2.6 million, respectively, of acquisition-related costs in connection with these property acquisitions which are included in general and administrative expenses in the condensed consolidated statements of income. The purchase price related to these acquisitions was funded by the use of our line of credit, cash on hand, and assumption of a mortgage with a principal balance of approximately $11.5 million which matures on October 10, 2028 and bears interest at 5.2%.

Acquisition of a Controlling Interest in CapCo

On January 4, 2011, we acquired a controlling ownership interest in CapCo through a joint venture with LIH. CapCo, which was previously wholly-owned by LIH, owns a portfolio of 13 properties in California totaling approximately 2.6 million square feet of GLA, including Serramonte Shopping Center in Daly City, Plaza Escuela in Walnut Creek, The Willows Shopping Center in Concord, 222 Sutter Street in San Francisco, and The Marketplace Shopping Center in Davis. LIH is a subsidiary of Capital Shopping Centres Group PLC, a United Kingdom real estate investment trust. The results of CapCo’s operations have been included in our condensed consolidated financial statements from the date of acquisition. Our initial fair value purchase price allocations may be refined as additional information regarding fair values of the assets acquired and liabilities assumed is received.

At the closing of the transaction, LIH contributed all of the outstanding shares of CapCo’s common stock to the joint venture in exchange for Class A Shares in the joint venture, representing an approximate 22% interest in the joint venture and we contributed a shared appreciation promissory note to the joint venture in the amount of $600.0 million and an additional $84.3 million in exchange for an approximate 78% interest in the joint venture, which consists of approximately 70% of the Class A joint venture shares and all of the Class B joint venture shares. The initial Class B joint venture shares are entitled to a preferred return of 1.5% per quarter. The actual payment of such amounts is limited to the extent that there is available cash remaining in any given period (subsequent to the payment of dividend equivalents to the holders of the Class A joint venture shares). Any remaining available cash after the preferred return is paid in a given period may be distributed, in an elective distribution, among the Class A and Class B joint venture shares, with 83.333% attributable to the Class B joint venture shares and 16.667% to the Class A joint venture shares on a pro-rata basis among the holders of such joint venture shares. Based on the respective ownership percentages held by Equity One and LIH, this allocation provides for, to the extent distributions in excess of available cash are distributed to the joint venture partners in the attribution of approximately 95% of such residual amounts to Equity One and the remaining 5% to LIH.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

In addition, at the closing, LIH transferred and assigned to us an outstanding promissory note of CapCo in the amount of $67.0 million in exchange for 4.1 million shares of our common stock and one share of our newly-established Class A common stock, that (i) is convertible into 10,000 shares of our common stock in certain circumstances and (ii) subject to certain limitations, entitles LIH to voting rights with respect to a number of shares of our common stock determined with reference to the number of joint venture shares held by LIH from time to time. Effective June 29, 2011, the one share of Class A common stock was converted in accordance with its terms into 10,000 shares of our common stock.

The joint venture shares received by LIH are redeemable for cash or, solely at our option, our common stock on a one-for-one basis, subject to certain adjustments. LIH’s ability to participate in earnings of CapCo is limited to their right to receive distributions payable on their joint venture shares. These non-elective distributions are designed to mirror dividends paid on our common stock. As such, earnings attributable to the noncontrolling interest as reflected in our condensed consolidated statement of income will be limited to distributions made to LIH on its joint venture shares. Distributions to LIH in the three and six months ended June 30, 2011 were $2.1 million and $4.5 million, respectively, which were equivalent to the per share dividends declared on our common stock, adjusted for certain prorations as stipulated by the terms of the transaction.

In connection with the CapCo transaction, we also executed an Equityholders Agreement, among us, Capital Shopping Centers plc (“CSC”), LIH, Gazit-Globe Ltd. (“Gazit”), MGN (USA) Inc., Gazit (1995), Inc., MGN America, LLC, Silver Maple (2001), Inc. and Ficus, Inc. Pursuant to the Equityholders Agreement, we increased the size of our board of directors by one seat, effective January 4, 2011, and appointed David Fischel, a designee of CSC, to the board. Subject to its continuing to hold a minimum number of shares of our common stock (on a fully diluted basis), CSC has the right to nominate one candidate for election to our board of directors at each annual meeting of our stockholders at which directors are elected.

Also in connection with the CapCo transaction, we amended our charter to (i) reclassify and designate one authorized but unissued share of our common stock as one share of a newly-established class of our capital stock, denominated as Class A Common Stock, (ii) add foreign ownership limits and (iii) modify the existing ownership limits for individuals (as defined for purposes of certain provisions of the Internal Revenue Code of 1986, as amended, or the Code). The foreign ownership limits provide that, subject to certain exceptions, a foreign person may not acquire, beneficially or constructively, any shares of our capital stock, if immediately following the acquisition of such shares, the fair market value of the shares of our capital stock owned, directly and indirectly, by all foreign persons (other than LIH and its affiliates) would comprise 29% or more of the fair market value of the issued and outstanding shares of our capital stock.

The ownership limits for individuals in our charter were amended to provide that, subject to exceptions, no person (as such term is defined in our charter), other than an individual (who will be subject to the more restrictive limits discussed below), may own, or be deemed to own, directly and by virtue of certain constructive ownership provisions of the Code, more than 9.9% in value of the outstanding shares of our capital stock in the aggregate or more than 9.9%, in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock, and no individual may own, or be deemed to own, directly and by virtue of certain constructive ownership provisions of the Code, more than 5.0% in value of the outstanding shares of our capital stock in the aggregate or more than 5.0%, in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock.

Under our charter, the board of directors may increase the ownership limits. In addition, our board of directors, in its sole discretion, may exempt a person from the ownership limits and may establish a new limit applicable to that person if that person submits to the board of directors certain representations and undertakings, including representations that demonstrate, to the reasonable satisfaction of the board, that such ownership would not jeopardize our status as a REIT under the Code.

The fair value of the 4.1 million shares of common stock transferred of $73.7 million was based on the closing market price of our common stock on the closing date of $18.15 per share.

We expensed approximately $7.1 million of acquisition-related costs in connection with the CapCo transaction of which $35,000 and $1.8 million was recorded in general and administrative expenses in the accompanying condensed consolidated statements of income during the three and six months ended June 30, 2011, respectively, and approximately $2.4 million and $3.3 million was recorded in general and administrative expenses for the three and six months ended June 30, 2010, respectively.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. See “Business Combinations” in Note 2 for the methods used to fair value the income producing properties and the related lease intangibles:

		Estimated Fair Value
		(In thousands)
Assets acquired:
Income producing properties		$	425,199
Properties held for sale			36,317
Construction in progress			1,530
Cash and cash equivalents			23,412
Accounts and other receivables			663
Investments in and advances to joint ventures			48,092
Above-market leases			11,153
Other assets(1)			46,593
Total assets acquired		$	592,959
Liabilities assumed:
Mortgage notes payable		$	256,467
Unamortized premium on notes payable, net			5,346
Accrued expenses			8,957
Below-market leases			12,797
Tenant security deposits			871
Other liabilities			1,561
Total liabilities assumed		$	285,999
Estimated fair value of net assets acquired		$	306,960

Simultaneous with the closing of the transaction, we contributed an additional $84.3 million to the joint venture in exchange for additional Class B joint venture shares, which amount was used to repay the remaining principal amount due on the mortgage loan secured by the Serramonte Shopping Center. Although the mortgage loan was paid off at closing, the liability is reflected in the fair value of net assets acquired above since the obligation became ours upon closing.

The fair values of the acquired intangible assets and liabilities, all of which have definite lives and are amortized, were assigned as follows:

						Remaining Weighted-
		Fair Value				Average Useful Life
		(in thousands)				(in years)
In-place leases		$	38,222				6.2
Above-market leases			11,153				7.2
Lease commissions			4,583				7.8
Lease origination costs			992				6.0
Below-market leases			12,797				6.8

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

As of the acquisition date, we classified three properties with fair values totaling approximately $36.3 million as held for sale. We report the operating results of properties classified as held for sale as discontinued operations. Results of these held for sale properties are included in a separate component of income on the condensed consolidated statement of income under the caption “operations of income producing properties sold or held for sale.”

The fair values of the mortgage notes payable were determined by use of present value techniques and appropriate market interest rates on a loan by loan basis. In valuing the mortgage notes at each property, we considered the loan-to-value (“LTV”) ratio, maturity date and other pertinent factors related to the loan as well as occupancy level, market location, physical property condition, asset class, cash flow and other factors related to collateral. At the time of valuation, the range of possible borrowings varied by property from 5% to 7%.

The fair value of the noncontrolling interest in CapCo was estimated by reference to the amount that LIH would be entitled to receive upon a redemption of its Class A joint venture shares, which is equal to the value of the same number of shares of Equity One common stock plus any accrued but unpaid quarterly distributions with respect to the Class A joint venture shares. As a result, the approximately 11.4 million joint venture shares were valued based on the closing price of Equity One common stock on January 4, 2011. We engaged a third party valuation firm to independently value the joint venture shares considering the economic risks and rewards that are unique to a holder of such joint venture shares. In this case, consideration was given to the restriction on transferability and the probability that such joint venture shares would not be redeemed for shares of our stock for at least five years due to the tax obligations that LIH would incur upon their conversion. A 12.8% discount to the January 4, 2011 stock price was used to value these joint venture shares using the Finnerty Model, a prominent valuation model used by valuation experts to approximate the value of non-marketable investments. The fair value of the joint venture shares held by LIH was estimated at $15.83 per share, or $179.8 million in aggregate.

The fair value of the identifiable assets acquired and liabilities assumed exceeded the sum of the fair value of the consideration transferred and the fair value of the noncontrolling interest. The fair value of the assets acquired significantly increased from the date the original purchase terms were agreed upon until the closing of the transaction on January 4, 2011. In addition, as discussed above, the fair value of the consideration paid reflected a 12.8% discount applicable to the noncontrolling interest. As a result, we recognized a gain of approximately $53.5 million which is included in the line item entitled “gain on bargain purchase” in the condensed consolidated statement of income for the six months ended June 30, 2011. The following table provides a reconciliation of the gain on bargain purchase:

		(In thousands)
Fair value of net assets acquired		$	306,960
Fair value of consideration transferred			(73,698	)
Fair value of noncontrolling interest			(179,795	)
Gain on bargain purchase		$	53,467

The amounts of revenues and earnings of CapCo included in our condensed consolidated statements of income from the acquisition date are as follows:

		Three Months ended				Six Months ended
		June 30, 2011				June 30, 2011
		(In thousands)
Revenues		$	15,145			$	27,439
Net loss attributable to Equity One, Inc.		$	(756	)		$	(2,284	)

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

The accompanying unaudited pro forma information for the three and six months ended June 30, 2011 and 2010 is presented as if the acquisition of CapCo on January 4, 2011 had occurred on January 1, 2010. This pro forma information is based upon the historical financial statements and should be read in conjunction with the condensed consolidated financial statements and notes thereto. This unaudited pro forma information does not purport to represent what the actual results of our operations would have been had the above occurred, nor do they purport to predict the results of operations of future periods. The unaudited pro forma information for the three and six months ended June 30, 2011 was adjusted to exclude $0 and $53.5 million of gain on bargain purchase, $35,000 and $1.8 million of acquisition related costs, and $318,000 and $868,000 of reorganization costs related to the acquisition, respectively. The unaudited pro forma information for the three and six months ended June 30, 2010 was adjusted to include $0 and $53.5 million of gain on bargain purchase and adjusted to exclude $2.4 million and $3.3 million of acquisition related costs, respectively.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
		(in thousands)
Revenues		$	88,251			$	85,156			$	173,935			$	168,268
Net income (loss) attributable to Equity One, Inc.		$	7,787			$	6,318			$	15,141			$	64,950

Property Dispositions

In June 2011, we sold one outparcel for gross proceeds of approximately $1.3 million and recognized a gain of approximately $59,000, which is included in gain on sale of real estate in the accompanying condensed consolidated statements of income for the three and six months ended June 30, 2011. We also sold an operating property for gross proceeds of approximately $1.3 million and recognized a loss of $13,000, which is included in loss on disposal of income producing properties in the accompanying condensed consolidated statements of income for the three and six months ended June 30, 2011.

In June 2011, we recognized a gain on the sale of an outparcel to our GRI-EQY I, LLC joint venture as the contingencies related to the original sale in April 2008 were met. The gain of $3.6 million, net of a deferred amount of approximately $400,000 due to our continuing involvement, is included in gain on sale of real estate in the accompanying condensed consolidated statements of income for the three and six months ended June 30, 2011.

In May 2011, we sold two operating properties to a newly formed joint venture between us and New York State Common Retirement Fund (“CRF”) for gross proceeds of approximately $39.2 million. We recognized a gain of approximately $943,000, net of the deferred amount of approximately $404,000 due to our continuing involvement in the joint venture, which is included in gain on sale of real estate in the accompanying condensed consolidated statements of income for the three and six months ended June 30, 2011. See Note 4 below for a description of the CRF joint venture.

As part of our strategy to upgrade and diversify our portfolio and recycle our existing capital, we evaluate opportunities to sell assets or otherwise contribute assets to existing or new joint ventures with third parties. If the market values of these assets are below their carrying values, it is possible that the disposition or contribution of these assets could result in impairments or other losses. Depending on the prevailing market conditions and historical carrying values, these impairments and losses could be material.

Discontinued Operations

We report as discontinued operations, properties held-for-sale and operating properties sold in the current period. The results of these discontinued operations are included in a separate component of income on the condensed consolidated statements of income under the caption discontinued operations. This reporting has resulted in certain reclassifications of financial statement amounts.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

In June 2011, we recognized an impairment loss of $1.3 million relating to our investment in two properties that are held for sale.

The components of income and expense relating to discontinued operations for the three and six months ended June 30, 2011 and 2010 are shown below. These include the results of operations through the date of each respective sale for properties sold during 2011 and 2010 and the operations for the applicable period for those assets classified as held for sale as of June 30, 2011:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
		(In thousands)								(In thousands)
Rental revenue		$	1,135			$	132			$	2,211			$	316
Expenses:
Property operating expenses			409				65				768				113
Rental property depreciation and amortization			37				43				77				88
General and administrative expenses			19				—				35				—
Operations of income producing property			670				24				1,331				115
Interest expense			(280	)			—				(559	)			—
(Loss) gain on disposal of income producing properties			(13	)			1,458				(13	)			1,458
Impairment loss on income producing properties held for sale			(1,277	)			—				(1,277	)			—
Other income			—				—				2				—
(Loss) income from discontinued operations		$	(900	)		$	1,482			$	(516	)		$	1,573

4. Investments in Joint Ventures

In May 2011, we sold two operating properties, Country Walk Plaza in Miami, FL and Veranda Shoppes in Plantation, FL to a newly formed joint venture between us and CRF for gross proceeds of approximately $39.2 million. CRF holds a 70% interest in the joint venture and we own a 30% interest. We will perform the day to day accounting and property management functions for the joint venture and, as such, will earn a management fee for the services provided. Our ownership interest in this joint venture is accounted for under the equity method.

In December 2010, we acquired ownership interests in three properties through joint ventures. Two of the properties are located in California and were acquired through partnerships (the “Equity One/Vestar JVs”) with Vestar Development Company (“Vestar”). In both of these joint ventures, we hold a 95% interest, and they are consolidated. Each Equity One/Vestar JV holds a 50.5% ownership interest in each of the California properties through two separate joint ventures with Rockwood Capital (the “Rockwood JVs”). The Equity One/Vestar JVs’ ownership interests in the properties are accounted for under the equity method. Included in our investment are two bridge loans with an aggregate balance of $35.0 million, secured by the properties, made by the Equity One/Vestar JVs to the Rockwood JVs as short-term financing until longer-term mortgage financing can be obtained. If the Rockwood JVs are unable to obtain financing, the Equity One/Vestar JVs may be contractually required to convert all or a portion of the bridge loans to equity or purchase some or all of Rockwood’s remaining ownership interest. On August 2, 2011, one of the bridge loans and related accrued interest was repaid to us with proceeds from a new mortgage entered into by the JV.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

The Rockwood JVs are considered VIEs for which the Equity One/Vestar JVs, which we control, are not the primary beneficiary. The Rockwood JVs were primarily established to own and operate real estate and were deemed VIEs because the initial equity investment at risk may not be sufficient to permit the entities to finance their activities without additional financial support. Additional equity may be required from the partners if the ventures are unable to refinance with longer term mortgage debt in excess of the $35.0 million bridge loans. We determined that the Equity One/Vestar JVs are not the primary beneficiaries of these VIEs based on shared control of the VIEs and the lack of controlling financial interest.

Our aggregate investment in these VIEs was approximately $46.7 million as of June 30, 2011, which is included in investments in and advances to joint ventures in the accompanying condensed consolidated balance sheets. Our maximum exposure to loss as a result of our involvement with these VIEs is estimated to be $46.7 million, which primarily represents our current investment and estimated future funding commitments and buyout provisions. We have not provided financial support to these VIEs, other than as contractually required, and all future funding will be provided in the form of capital contributions by Rockwood and the Equity One/Vestar JVs in accordance with the respective ownership percentages.

In connection with the CapCo acquisition on January 4, 2011, we acquired ownership interests in three properties located in California through joint ventures, tenants-in-common or other shared ownership. The joint ventures include Pacific Financial Center, Parnassus Heights Medical Center, and Trio Apartments. The aggregate fair value of these joint ventures as of January 4, 2011 was $48.1 million. Our ownership interests in these properties are accounted for under the equity method.

In addition, in connection with our acquisition of CapCo, we acquired a special purpose entity which holds a 58% controlling interest in the Senator office building located in Sacramento, California. At the time of our acquisition, the special purpose entity and the other co-owners in the Senator building were in default of a $38.3 million loan secured by the property. The loan is non-recourse, other than for certain customary carve-outs which are also guaranteed by Equity One Realty & Management CA, Inc., the entity formerly known as Capital & Counties USA, Inc. As a result of the continuing default, the lender and special servicer have accelerated the loan and have commenced foreclosure proceedings with respect to our interest in the property. It has been our intention since the date we acquired our interest in the property to cooperate with the special servicer and lender to relinquish title. Accordingly, we recently consented to the lender’s appointment of a receiver to manage the property and we have agreed not to obstruct the the lender and special servicer’s efforts to consummate the foreclosure. Although we and the other co-owners continued to hold title to the property as of June 30, 2011, we have assigned no value to our interest in this special purpose entity and we recorded a liability of $3.4 million for costs related to the disposition of this property which is included in other liabilities in the condensed consolidated balance sheet at June 30, 2011. There can be no assurance that we will be able to resolve this matter in a short period of time.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

As of June 30, 2011, our investments in and advances to unconsolidated joint ventures was composed of the following:

														Investment Balance
		Number of												June 30,				December 31,
Joint Venture		Properties				Location				Ownership				2011				2010
														(In thousands)
Investments in unconsolidated joint ventures:
GRI-EQY I, LLC (1)		10				GA, SC, FL				10.0%				$	6,672			$	7,046
G&I Investment South Florida Portfolio, LLC		3				FL				20.0%					3,357				3,109
Madison 2260, Realty, LLC		1				NY				8.6%					1,066				1,066
Madison 1235, Realty, LLC		1				NY				20.1%					1,000				1,000
Talega Village Center JV, LLC (2)		1				CA				50.5%					3,822				3,916
Vernola Marketplace JV, LLC (2)		1				CA				50.5%					7,868				8,127
Parnassus Heights Medical Center		1				CA				50.0%					14,261				—
621 Colorado Associates, LLC (3)		1				CA				68.2%					26,235				—
Pacific Financial Center, LLC		1				CA				50.0%					9,397				—
Equity One JV Portfolio, LLC (4)		2				FL				30.0%					7,376				—
Total															81,054				24,264
Advances to unconsolidated joint ventures (5)															40,129				35,472
Investments in and advances to unconsolidated joint ventures														$	121,183			$	59,736

Equity in income (loss) in unconsolidated joint ventures totaled approximately $177,000 and $811,000 for the three and six months ended June 30, 2011, respectively, and totaled $(42,000) and $(82,000), respectively, for the same periods in 2010. Fees paid to us associated with these joint ventures, which are included in management and leasing services revenue in the accompanying condensed consolidated statements of income, totaled approximately $547,000 and $914,000 for the three and six months ended June 30, 2011, respectively, and $381,000 and $741,000, respectively, for the three and six months ended June 30, 2010.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

5. Other Assets

The following is a summary of the composition of the other assets in the condensed consolidated balance sheets:

		June 30,				December 31,
		2011				2010
		(In thousands)
Lease intangible assets, net		$	100,316			$	60,603
Leasing commissions, net			27,318				23,124
Straight-line rent receivable, net			18,922				17,186
Deposits and mortgage escrow			16,198				17,964
Prepaid and other expenses			9,988				1,413
Deferred financing costs, net			5,017				5,998
Furniture and fixtures, net			1,882				1,408
Total other assets		$	179,641			$	127,696

6. Borrowings

Mortgage Notes Payable

The following table is a summary of our mortgage notes payable balances in the condensed consolidated balance sheets:

Mortgage Notes Payable		June 30, 2011				December 31, 2010
		(In thousands)
Fixed rate mortgage notes		$	658,273			$	533,660
Unamortized discount, net			(14,036	)			(19,168	)
Total		$	644,237			$	514,492
Weighted average-interest rate of fixed rate mortgage notes			6.17	%			6.26	%

Each of the existing mortgage loans is secured by a mortgage on one or more of our properties. Certain mortgage loans with an aggregate principal balance of $211.7 million contain prohibitions on transfers of ownership which may have been violated by our previous issuances of common stock or in connection with past acquisitions and may be violated by transactions involving our capital stock in the future. If a violation were established, it could serve as a basis for a lender to accelerate amounts due under the affected mortgage. To date, no lender has notified us that it intends to accelerate its mortgage. In the event that the mortgage holders declare defaults under the mortgage documents we will, if required, repay the remaining mortgage from existing resources, refinancing of such mortgages, borrowings under our revolving lines of credit or other sources of financing. Based on discussions with various lenders, current credit market conditions and other factors, we believe that the mortgages will not be accelerated. Accordingly, we believe that the violations of these prohibitions will not have a material adverse impact on our results of operations or financial condition or cash flows.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

During the three and six months ended June 30, 2011, we prepaid, without penalty, $6.7 million and $37.7 million in mortgage loans with a weighted-average interest rate of 9.19% and 7.54%, respectively, and $29.7 million and $61.2 million in mortgage loans with a weighted-average interest rate of 8.05% and 8.32%, respectively, for the three and six months ended June 30, 2010.

In connection with our acquisition of CapCo, we assumed mortgage indebtedness of $172.0 million with a weighted average interest rate of 6.18% and maturity dates through November 15, 2019. Additionally, we assumed a mortgage with a principal balance of approximately $11.5 million related to our acquisition of Vons Circle Center. This mortgage matures on October 10, 2028 with payments based on a 25-year amortization schedule at a fixed interest rate of 5.20%.

Unsecured Senior Notes

Our outstanding unsecured senior notes payable in the condensed consolidated balance sheets consisted of the following:

		June 30,				December 31,
Unsecured Senior Notes Payable		2011				2010
		(In thousands)
7.84% Senior Notes, due 1/23/12		$	10,000			$	10,000
6.25% senior notes, due 12/15/14			250,000				250,000
5.375% Senior Notes, due 10/15/15			107,505				107,505
6.0% Senior Notes, due 9/15/16			105,230				105,230
6.25% Senior Notes, due 1/15/17			101,403				101,403
6.0% Senior Notes, due 9/15/17			116,998				116,998
Total Unsecured Senior Notes			691,136				691,136
Unamortized discount, net			(2,556	)			(2,755	)
Total		$	688,580			$	688,381
Weighted-average interest rate, net of discount adjustment			6.06	%			6.06	%

The indentures under which our unsecured senior notes were issued have several covenants which limit our ability to incur debt, require us to maintain an unencumbered asset to unencumbered debt ratio above a specified level and limit our ability to consolidate, sell, lease, or convey substantially all of our assets to, or merge with, any other entity. These notes have also been guaranteed by many of our subsidiaries.

Unsecured Revolving Credit Facilities

Our primary credit facility is with a syndicate of banks and provides $400.0 million of unsecured revolving credit, which we increased during 2010 from $227.0 million through the addition of six new lenders and the exercise of the facility’s accordion feature. The amended facility bears interest at our option at (i) applicable LIBOR plus 1.00% to 1.70%, depending on the credit ratings of our senior unsecured notes, or (ii) daily LIBOR plus 3.0%. The amended facility also includes a competitive bid option which allows us to conduct auctions among the participating banks for borrowings at any one time outstanding up to 50% of the lender commitments, a $35.0 million swing line facility for short term borrowings and a $20.0 million letter of credit commitment. The facility expires on October 17, 2011, with a one year extension option. In addition, the facility contains customary covenants, including financial covenants regarding debt levels, total liabilities, interest coverage, fixed charge coverage ratios, unencumbered properties, permitted investments and others. If a default under the facility were to arise, our ability to pay dividends is limited to the amount necessary to maintain our status as a REIT unless the default is a payment default or bankruptcy event in which case we are prohibited from paying any dividends. As of June 30, 2011, we had drawn $63.5 million against the credit facility, which bore interest at 1.59%. There was no outstanding balance as of December 31, 2010.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

We also have a $15.0 million unsecured credit facility with City National Bank of Florida, for which there was no outstanding balance as of June 30, 2011 and December 31, 2010. This facility provides for the issuance of up to $15.0 million in outstanding letters of credit. The facility bears interest at the rate of LIBOR plus 140 basis points and expires on May 8, 2012.

As of June 30, 2011, the maximum availability under these credit facilities was approximately $256.0 million, net of outstanding letters of credit and subject to the covenants in the loan agreements.

7. Other Liabilities

The following is a summary of the composition of other liabilities in the condensed consolidated balance sheets:

		June 30,				December 31,
		2011				2010
		(In thousands)
Lease intangible liabilities, net		$	113,346			$	90,428
Prepaid rent			7,414				6,436
Other			2,227				107
Total other liabilities		$	122,987			$	96,971

8. Income Taxes

We elected to be taxed as a REIT under the Internal Revenue Code (“Code”), commencing with our taxable year ended December 31, 1995. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we currently distribute at least 90% of our REIT taxable income to our stockholders. The difference between net income available to common stockholders for financial reporting purposes and taxable income before dividend deductions relates primarily to temporary differences, such as real estate depreciation and amortization, deduction of deferred compensation and deferral of gains on sold properties utilizing like kind exchanges. Also, at least 95% of our gross income in any year must be derived from qualifying sources. It is our intention to adhere to these requirements and maintain our REIT status. As a REIT, we generally will not be subject to corporate level federal income tax, provided that distributions to our stockholders equal at least the amount of our REIT taxable income as defined under the Code. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to state income or franchise taxes in certain states in which some of our properties are located and excise taxes on our undistributed taxable income. We are required to pay U.S. federal and state income taxes on our net taxable income, if any, from the activities conducted by our taxable REIT subsidiaries (“TRSs”). Accordingly, the only provision for federal income taxes in our consolidated financial statements relates to our consolidated TRSs. We recorded an income tax benefit during the three months ended June 30, 2011 and 2010 of approximately $553,000 and $926,000, respectively, and for the six months ended June 30, 2011 and 2010 of approximately $1.1 million and $2.0 million, respectively. These benefits are primarily attributable to the net operating losses generated by DIM Vastgoed, N.V. (“DIM”), a Dutch company in which we acquired a controlling interest in the first quarter of 2009. Although DIM is organized under the laws of the Netherlands, it pays U.S. corporate income tax based on its operations in the United States. Pursuant to the tax treaty between the U.S. and the Netherlands, DIM is entitled to the avoidance of double taxation on its U.S. income. Thus, it pays virtually no taxes in the Netherlands. In 2010, DIM did not pay any U.S. income tax, which reflected the benefit of net operating loss carry forwards (“NOLs”) in previous years. As of June 30, 2011, DIM had federal and state NOLs of approximately $24.1 million and $25.9 million remaining, respectively. These carry forwards begin to expire in 2027.

We believe that we have appropriate support for the tax positions taken on our tax returns and that our accruals for income tax liabilities are adequate for all years still subject to tax audit after 2006.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

9. Noncontrolling Interests

Noncontrolling interest represents the portion of equity that we do not own in those entities that we consolidate. We account for and report our noncontrolling interest in accordance with the provisions under the Consolidation Topic of the FASB ASC.

We are involved in the following investment activities in which we have a controlling interest:

On January 1, 1999, Equity One (Walden Woods) Inc., a wholly-owned subsidiary of ours, formed a limited partnership as a general partner. Walden Woods Village, an income producing shopping center, was contributed by its owners (the “Noncontrolling Partners”), and we contributed 93,656 shares of our common stock to the limited partnership at an agreed-upon price of $10.30 per share. Under the terms of the agreement, the Noncontrolling Partners do not share in any earnings of the partnership, except to the extent of dividends received by the partnership for the shares originally contributed by us. Based on the per-share price and the net value of property contributed by the Noncontrolling Partners, the limited partners received 93,656 partnership units. We have entered into a redemption agreement with the Noncontrolling Partners whereby the Noncontrolling Partners can request that we purchase their partnership units at a price of $10.30 per unit at any time before January 1, 2014. In accordance with the Distinguishing Liabilities subtopic from the Equity Topic of the FASB ASC, the value of the redeemable noncontrolling interest of $989,000 is included in the mezzanine section of our consolidated balance sheet, separate from permanent equity, until the earlier of January 1, 2014 or upon election by the Noncontrolling Partners to redeem their partnership units. We have also entered into a conversion agreement with the Noncontrolling Partners pursuant to which, following notice, the Noncontrolling Partners can convert their partnership units into our common stock. The Noncontrolling Partners have not exercised their redemption or conversion rights, and their noncontrolling interest remains valued at $989,000.

We have controlling interests in two joint ventures that, together, own our Sunlake development project. We have funded all of the acquisition costs, are required to fund any necessary development and operating costs, receive an 8% preferred return on our advances, have reimbursement rights of all capital outlays upon disposition of the property, and are entitled to 60% of the profits thereafter. The minority partners are not required to make contributions and, to date, have not contributed any capital. Noncontrolling interest will not be recorded until the equity in the property surpasses our capital expenditures and cumulative preferred return.

On January 14, 2009, we acquired a controlling interest in DIM which required us to consolidate DIM’s results as of the acquisition date. Upon consolidation, we recorded $25.8 million of noncontrolling interest which represented the fair value of the portion of DIM’s equity that we did not own upon acquisition. Subsequent changes to the noncontrolling interest in stockholders’ equity result from the allocation of losses, and additional shares purchased from the noncontrolling interests. Our ownership in DIM as of June 30, 2011 was 97.8%.

The following table shows the effects on our equity resulting from the changes in our ownership interest in DIM:

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
		(In thousands)								(In thousands)
Net income attributable to Equity One, Inc.		$	7,434			$	6,239			$	65,921			$	11,671
Increase in our paid-in capital for purchase of 32,713 and 253,982 DIM ordinary shares for the three months ended June 30, 2011 and 2010, respectively and 33,213 and 2,527,013 shares for the six months ended June 30, 2011 and 2010, respectively			—				211				—				7,500
Net transfers from noncontrolling interest			—				211				—				7,500
Change from net income attributable to Equity One, Inc. and transfers from noncontrolling interest		$	7,434			$	6,450			$	65,921			$	19,171

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

In December 2010, we acquired controlling interests in three joint ventures with Vestar which required us to consolidate their results as of the acquisition date. Upon consolidation, we recorded $5.2 million of noncontrolling interest which represented the fair value of the portion of the joint venture equity that we did not own upon acquisition. For the Equity One/Vestar JVs, $2.4 million of noncontrolling interest is recorded in permanent equity in our condensed consolidated balance sheet at June 30, 2011 and December 31, 2010. The Vestar Arizona JV contains certain provisions which may require us to redeem the noncontrolling interest at fair market value at Vestar’s option. Due to the redemption feature, we have recorded the $2.9 million of noncontrolling interest associated with this venture in the mezzanine section of our condensed consolidated balance sheet at June 30, 2011 and December 31, 2010, which approximates redemption value. The carrying amount of Vestar’s redeemable noncontrolling interest will be increased by periodic accretions, which shall be recognized against paid-in capital, such that the carrying amount of the noncontrolling interest will equal the mandatory redemption amount.

Additionally, we acquired a controlling interest in CapCo on January 4, 2011 which required us to consolidate CapCo’s results as of the acquisition date. We recorded $179.8 million of noncontrolling interest upon consolidation, which represented the fair value of the portion of CapCo’s equity that we did not own upon acquisition. The $179.8 million of noncontrolling interest is reflected in the stockholders’ equity section of our condensed consolidated balance sheet as permanent equity at June 30, 2011. Since LIH, the noncontrolling party, only participates in the earnings of CapCo to the extent of dividends declared on our common stock and considering that dividends are generally declared and paid in the same quarter, subsequent changes to the noncontrolling interest will only occur if dividends are declared but not paid, or if we acquire all or a portion of LIH’s interest or if its LLC shares in CapCo are converted into our common stock. See note 3 above for a discussion of the CapCo joint venture.

10. Stockholders’ Equity and Earnings Per Share

In May 2011, we completed an underwritten public offering and concurrent private placement of approximately 6.0 million shares of our common stock at a price to the public and in the private placement of $19.42 per share. In the concurrent private placement, an aggregate of 1.0 million shares were purchased by MGN (USA), Inc. an affiliate of our largest stockholder, Gazit-Globe, Ltd., which may be deemed to be controlled by Chaim Katzman, the Chairman of our Board of Directors. The offerings generated proceeds to us of approximately $115.7 million, net of stock issuance costs and underwriting discounts of $858,000.

At the closing of the CapCo acquisition on January 4, 2011, LIH contributed all of the outstanding shares of CapCo’s common stock to a joint venture between us and LIH in exchange for approximately 11.4 million Class A joint venture shares. The Class A joint venture shares are redeemable by the joint venture upon LIH’s option until the tenth anniversary of the closing of the CapCo transaction for cash or, solely at our option, shares of our common stock on a one-for-one basis, subject to certain adjustments.

Also in connection with the CapCo acquisition on January 4, 2011, LIH transferred and assigned to us an outstanding promissory note of CapCo in the amount of $67.0 million in exchange for 4.1 million shares of our common stock and one share of a newly-established class of our capital stock, Class A common stock, that (i) is convertible into 10,000 shares of our common stock in certain circumstances, and (ii) subject to certain limitations, entitles LIH to voting rights with respect to a number of shares of our common stock determined with reference to the number of joint venture shares held by LIH from time to time. Effective June 29, 2011, the one share of Class A common stock was converted in accordance with its terms into 10,000 shares of our common stock.

In March 2010, we completed an underwritten public offering and concurrent private placement of approximately 5.4 million shares of our common stock at a price to the public and in the private placement of $18.40 per share. In the concurrent private placement, an aggregate of 600,000 shares were purchased by MGN America, LLC and Silver Maple (2001), Inc., affiliates of our largest stockholder, Gazit-Globe, Ltd. The offerings generated proceeds to us of approximately $98.9 million, net of stock issuance costs of $1.0 million.

EQUITY ONE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

Earnings per Share

The following summarizes the calculation of basic EPS and provides a reconciliation of the amounts of net income available to common stockholders and shares of common stock used in calculating basic EPS:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
		(Dollars in thousands, except per share amounts)
Income from continuing operations		$	10,469			$	4,747			$	70,954			$	9,451
Net (income) loss attributable to noncontrolling interests			(2,135	)			10				(4,517	)			647
Income from continuing operations attributable to Equity One, Inc.			8,334				4,757				66,437				10,098
Allocation of continuing income to restricted stock awards and Class A common stockholder			(295	)			(76	)			(818	)			(152	)
Income from continuing operations attributable to common stockholders			8,039				4,681				65,619				9,946
(Loss) income from discontinued operations attributable to common stockholders			(900	)			1,482				(516	)			1,573
Allocation of discontinued loss to restricted share awards and Class A common stockholder			—				(6	)			—				(3	)
(Loss) income from discontinued operations attributable to common stockholders			(900	)			1,476				(516	)			1,570
Net income available to common stockholders		$	7,139			$	6,157			$	65,103			$	11,516
Weighted average shares outstanding — Basic			108,942				92,141				107,605				89,939
Basic earnings per share attributable to the common stockholders:
Basic earnings per share from continuing operations		$	0.07			$	0.05			$	0.61			$	0.11
Basic earnings (loss) per share from discontinued operations			(0.01	)			0.02				—				0.02
Earnings per common share — Basic		$	0.07	*		$	0.07			$	0.61			$	0.13