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EX-10.1 - EXHIBIT 10.1 - REGENCY CENTERS CORPex-101lineofcredit4thamend.htm

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

For the quarterly period ended June 30, 2016
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             

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

REGENCY CENTERS CORPORATION
REGENCY CENTERS, L.P.
(Exact name of registrant as specified in its charter)
FLORIDA (REGENCY CENTERS CORPORATION)
 
59-3191743
DELAWARE (REGENCY CENTERS, L.P)
59-3429602
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
One Independent Drive, Suite 114
Jacksonville, Florida 32202
(904) 598-7000
(Address of principal executive offices) (zip code)
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Regency Centers Corporation              YES  x    NO  o                     Regency Centers, L.P.              YES  x    NO  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Regency Centers Corporation              YES  x    NO  o                     Regency Centers, L.P.              YES  x    NO  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Regency Centers Corporation:
Large accelerated filer
x
 
Accelerated filer
o
Non-accelerated filer
o
 
Smaller reporting company
o
Regency Centers, L.P.:
Large accelerated filer
o
  
Accelerated filer
x
Non-accelerated filer
o
  
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Regency Centers Corporation              YES  o    NO   x                    Regency Centers, L.P.              YES  o    NO  x
The number of shares outstanding of the Regency Centers Corporation’s common stock was 104,489,542 as of August 3, 2016.
 





EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the quarter ended June 30, 2016 of Regency Centers Corporation and Regency Centers, L.P. Unless stated otherwise or the context otherwise requires, references to “Regency Centers Corporation” or the “Parent Company” mean Regency Centers Corporation and its controlled subsidiaries; and references to “Regency Centers, L.P.” or the “Operating Partnership” mean Regency Centers, L.P. and its controlled subsidiaries. The term “the Company” or “Regency” means the Parent Company and the Operating Partnership, collectively.
The Parent Company is a real estate investment trust (“REIT”) and the general partner of the Operating Partnership. The Operating Partnership's capital includes general and limited common Partnership Units (“Units”). As of June 30, 2016, the Parent Company owned approximately 99.8% of the Units in the Operating Partnership and the remaining limited Units are owned by investors. The Parent Company owns all of the Series 6 and 7 Preferred Units of the Operating Partnership. As the sole general partner of the Operating Partnership, the Parent Company has exclusive control of the Operating Partnership's day-to-day management.
The Company believes combining the quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into this single report provides the following benefits:
 
Enhances investors' understanding of the Parent Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;  

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

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

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









TABLE OF CONTENTS
 
 
 
Form 10-Q
Report Page
 
 
 
PART I - FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements
 
 
 
 
Regency Centers Corporation:
 
 
 
 
 
Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015
 
 
 
 
Consolidated Statements of Operations for the periods ended June 30, 2016 and 2015
 
 
 
 
Consolidated Statements of Comprehensive Income for the periods ended June 30, 2016 and 2015
 
 
 
 
Consolidated Statements of Equity for the periods ended June 30, 2016 and 2015
 
 
 
 
Consolidated Statements of Cash Flows for the periods ended June 30, 2016 and 2015
 
 
 
Regency Centers, L.P.:
 
 
 
 
 
Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015
 
 
 
 
Consolidated Statements of Operations for the periods ended June 30, 2016 and 2015
 
 
 
 
Consolidated Statements of Comprehensive Income for the periods ended June 30, 2016 and 2015
 
 
 
 
Consolidated Statements of Capital for the periods ended June 30, 2016 and 2015
 
 
 
 
Consolidated Statements of Cash Flows for the periods ended June 30, 2016 and 2015
 
 
 
 
Notes to Consolidated Financial Statements
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
 
 
Item 4.
Controls and Procedures
 
 
 
PART II - OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
 
 
 
Item 1A.
Risk Factors
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
Item 5.
Other Information
 
 
 
Item 6.
Exhibits
 
 
 
SIGNATURES
 
 
 
 
 
 





PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
REGENCY CENTERS CORPORATION
Consolidated Balance Sheets
June 30, 2016 and December 31, 2015
(in thousands, except share data)
 
 
2016
 
2015
Assets
 
(unaudited)
 
 
Real estate investments at cost:
 
 
 
 
Land, including amounts held for future development
$
1,639,958

 
1,479,814

Buildings and improvements
 
3,044,793

 
2,896,396

Properties in development
 
137,562

 
169,690

 
 
4,822,313

 
4,545,900

Less: accumulated depreciation
 
1,079,448

 
1,043,787

 
 
3,742,865

 
3,502,113

Properties held for sale
 
29,365

 

Investments in real estate partnerships
 
279,270

 
306,206

Net real estate investments
 
4,051,500

 
3,808,319

Cash and cash equivalents
 
24,939

 
36,856

Restricted cash
 
3,505

 
3,767

Accounts receivable, net of allowance for doubtful accounts of $5,534 and $5,295 at June 30, 2016 and December 31, 2015, respectively
 
27,765

 
32,292

Straight-line rent receivable, net of reserve of $2,961 and $1,365 at June 30, 2016 and December 31, 2015, respectively
 
66,291

 
63,392

Notes receivable
 
10,480

 
10,480

Deferred leasing costs, less accumulated amortization of $80,816 and $76,823 at June 30, 2016 and December 31, 2015, respectively
 
68,297

 
66,367

Acquired lease intangible assets, less accumulated amortization of $50,553 and $45,639 at June 30, 2016 and December 31, 2015, respectively
 
124,325

 
105,380

Trading securities held in trust, at fair value
 
29,939

 
29,093

Other assets
 
29,561

 
26,935

Total assets
$
4,436,602

 
4,182,881

Liabilities and Equity
 
 
 
 
Liabilities:
 
 
 
 
Notes payable
$
1,674,631

 
1,699,771

Unsecured credit facilities
 
309,585

 
164,514

Accounts payable and other liabilities
 
165,611

 
164,515

Acquired lease intangible liabilities, less accumulated accretion of $20,240 and $17,555 at June 30, 2016 and December 31, 2015, respectively
 
57,776

 
42,034

Tenants’ security, escrow deposits and prepaid rent
 
26,974

 
29,427

Total liabilities
 
2,234,577

 
2,100,261

Commitments and contingencies (note 11)
 

 

Equity:
 
 
 
 
Stockholders’ equity:
 
 
 
 
Preferred stock, $0.01 par value per share, 30,000,000 shares authorized; 13,000,000 Series 6 and 7 shares issued and outstanding at June 30, 2016 and December 31, 2015, with liquidation preferences of $25 per share
 
325,000

 
325,000

Common stock, $0.01 par value per share,150,000,000 shares authorized; 99,486,537 and 97,212,638 shares issued at June 30, 2016 and December 31, 2015, respectively
 
995

 
972

Treasury stock at cost, 343,951 and 417,862 shares held at June 30, 2016 and December 31, 2015, respectively
 
(16,843
)
 
(19,658
)
Additional paid in capital
 
2,888,583

 
2,742,508

Accumulated other comprehensive loss
 
(80,038
)
 
(58,693
)
Distributions in excess of net income
 
(950,941
)
 
(936,020
)
Total stockholders’ equity
 
2,166,756

 
2,054,109

Noncontrolling interests:
 
 
 
 
Exchangeable operating partnership units, aggregate redemption value of $12,909 and $10,502 at June 30, 2016 and December 31, 2015, respectively
 
(2,013
)
 
(1,975
)
Limited partners’ interests in consolidated partnerships
 
37,282

 
30,486

Total noncontrolling interests
 
35,269

 
28,511

Total equity
 
2,202,025

 
2,082,620

Total liabilities and equity
$
4,436,602

 
4,182,881

See accompanying notes to consolidated financial statements.

1





REGENCY CENTERS CORPORATION
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Revenues:
 
 
 
 
 
 
 
 
Minimum rent
$
109,945

 
102,390

$
217,619

 
203,695

Percentage rent
 
453

 
300

 
2,156

 
2,108

Recoveries from tenants and other income
 
35,874

 
32,431

 
69,362

 
63,479

Management, transaction, and other fees
 
6,140

 
6,008

 
12,904

 
12,246

Total revenues
 
152,412

 
141,129

 
302,041

 
281,528

Operating expenses:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
40,299

 
36,225

 
79,015

 
72,218

Operating and maintenance
 
23,709

 
20,185

 
46,394

 
41,358

General and administrative
 
16,350

 
15,099

 
32,649

 
31,477

Real estate taxes
 
16,769

 
15,667

 
32,639

 
30,798

Other operating expenses
 
2,440

 
1,779

 
4,747

 
2,943

Total operating expenses
 
99,567

 
88,955

 
195,444

 
178,794

Other expense (income):
 
 
 
 
 
 
 
 
Interest expense, net
 
24,401

 
26,675

 
48,544

 
53,308

Provision for impairment
 

 

 
1,666

 

Early extinguishment of debt
 

 

 

 
(61
)
Net investment income, including unrealized losses (gains) of ($275) and $892, and ($505) and $475 for the three and six months ended June 30, 2016 and 2015, respectively
 
(602
)
 
(367
)
 
(446
)
 
(1,000
)
Total other expense
 
23,799

 
26,308

 
49,764

 
52,247

Income from operations before equity in income of investments in real estate partnerships
 
29,046

 
25,866

 
56,833

 
50,487

Equity in income of investments in real estate partnerships
 
11,050

 
6,757

 
23,971

 
12,324

Income from operations
 
40,096

 
32,623

 
80,804

 
62,811

Gain on sale of real estate
 
548

 
5,657

 
13,417

 
6,460

Net income
 
40,644

 
38,280

 
94,221

 
69,271

Noncontrolling interests:
 
 
 
 
 
 
 
 
Exchangeable operating partnership units
 
(64
)
 
(61
)
 
(150
)
 
(110
)
Limited partners’ interests in consolidated partnerships
 
(504
)
 
(473
)
 
(853
)
 
(977
)
Income attributable to noncontrolling interests
 
(568
)
 
(534
)
 
(1,003
)
 
(1,087
)
Net income attributable to the Company
 
40,076

 
37,746

 
93,218

 
68,184

Preferred stock dividends
 
(5,266
)
 
(5,266
)
 
(10,531
)
 
(10,531
)
Net income attributable to common stockholders
$
34,810

 
32,480

$
82,687

 
57,653


 
 
 
 
 
 
 
 
Income per common share - basic
$
0.36

 
0.35

$
0.85

 
0.61

Income per common share - diluted
$
0.35

 
0.34

$
0.84

 
0.61

See accompanying notes to consolidated financial statements.

2




REGENCY CENTERS CORPORATION
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Net income
$
40,644

 
38,280

$
94,221

 
69,271

Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
Effective portion of change in fair value of derivative instruments:
 
 
 
 
 
 
 
 
Effective portion of change in fair value of derivative instruments
 
(9,846
)
 
18,376

 
(26,631
)
 
4,494

Less: reclassification adjustment of derivative instruments included in net income
 
2,500

 
2,250

 
4,952

 
4,500

Unrealized gain (loss) on available-for-sale securities
 
73

 
(30
)
 
37

 
(30
)
Other comprehensive (loss) income
 
(7,273
)
 
20,596

 
(21,642
)
 
8,964

Comprehensive income
 
33,371

 
58,876

 
72,579

 
78,235

Less: comprehensive income (loss) attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
 
568

 
534

 
1,003

 
1,087

Other comprehensive (loss) income attributable to noncontrolling interests
 
(128
)
 
119

 
(297
)
 
15

Comprehensive income attributable to noncontrolling interests
 
440

 
653

 
706

 
1,102

Comprehensive income attributable to the Company
$
32,931

 
58,223

$
71,873

 
77,133

See accompanying notes to consolidated financial statements.


3





REGENCY CENTERS CORPORATION
Consolidated Statements of Equity
For the six months ended June 30, 2016 and 2015
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interests
 
 
 
 
Preferred
Stock
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Distributions
in Excess of
Net Income
 
Total
Stockholders’
Equity
 
Exchangeable
Operating
Partnership
Units
 
Limited
Partners’
Interest  in
Consolidated
Partnerships
 
Total
Noncontrolling
Interests
 
Total
Equity
Balance at December 31, 2014
 
$
325,000

 
941

 
(19,382
)
 
2,540,153

 
(57,748
)
 
(882,372
)
 
1,906,592

 
(1,914
)
 
31,804

 
29,890

 
1,936,482

Net income
 

 

 

 

 

 
68,184

 
68,184

 
110

 
977

 
1,087

 
69,271

Other comprehensive loss
 

 

 

 

 
8,949

 

 
8,949

 
15

 

 
15

 
8,964

Deferred compensation plan, net
 

 

 
(8
)
 
8

 

 

 

 

 

 

 

Restricted stock issued, net of amortization
 

 
3

 

 
7,001

 

 

 
7,004

 

 

 

 
7,004

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

 
(1
)
 

 
(9,792
)
 

 

 
(9,793
)
 

 

 

 
(9,793
)
Common stock issued for dividend reinvestment plan
 

 

 

 
683

 

 

 
683

 

 

 

 
683

Common stock issued for stock offerings, net of issuance costs
 

 

 

 
955

 

 

 
955

 

 

 

 
955

Contributions from partners
 

 

 

 

 

 

 

 

 
256

 
256

 
256

Distributions to partners
 

 

 

 

 

 

 

 

 
(1,965
)
 
(1,965
)
 
(1,965
)
Cash dividends declared:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
 

 

 

 

 

 
(10,531
)
 
(10,531
)
 

 

 

 
(10,531
)
Common stock/unit ($0.97 per share)
 

 

 

 

 

 
(91,308
)
 
(91,308
)
 
(151
)
 

 
(151
)
 
(91,459
)
Balance at June 30, 2015
 
$
325,000

 
943

 
(19,390
)
 
2,539,008

 
(48,799
)
 
(916,027
)
 
1,880,735

 
(1,940
)
 
31,072

 
29,132

 
1,909,867

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
 
$
325,000

 
972

 
(19,658
)
 
2,742,508

 
(58,693
)
 
(936,020
)
 
2,054,109

 
(1,975
)
 
30,486

 
28,511

 
2,082,620

Net income
 

 

 

 

 

 
93,218

 
93,218

 
150

 
853

 
1,003

 
94,221

Other comprehensive loss
 

 

 

 

 
(21,345
)
 

 
(21,345
)
 
(34
)
 
(263
)
 
(297
)
 
(21,642
)
Deferred compensation plan, net
 

 

 
2,815

 
(2,815
)
 

 

 

 

 

 

 

Restricted stock issued, net of amortization
 

 
2

 

 
6,802

 

 

 
6,804

 

 

 

 
6,804

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

 

 

 
(7,876
)
 

 

 
(7,876
)
 

 

 

 
(7,876
)
Common stock issued for dividend reinvestment plan
 

 

 

 
547

 

 

 
547

 

 

 

 
547

Common stock issued for stock offerings, net of issuance costs
 

 
21

 

 
149,767

 

 

 
149,788

 

 

 

 
149,788

Contributions from partners
 

 

 

 

 

 

 

 

 
8,600

 
8,600

 
8,600

Distributions to partners
 

 

 

 
(350
)
 

 

 
(350
)
 

 
(2,394
)
 
(2,394
)
 
(2,744
)
Cash dividends declared:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
 

 

 

 

 

 
(10,531
)
 
(10,531
)
 

 

 

 
(10,531
)
Common stock/unit ($1.00 per share)
 

 

 

 

 

 
(97,608
)
 
(97,608
)
 
(154
)
 

 
(154
)
 
(97,762
)
Balance at June 30, 2016
 
$
325,000

 
995

 
(16,843
)
 
2,888,583

 
(80,038
)
 
(950,941
)
 
2,166,756

 
(2,013
)
 
37,282

 
35,269

 
2,202,025

See accompanying notes to consolidated financial statements.


4





REGENCY CENTERS CORPORATION
Consolidated Statements of Cash Flows
For the six months ended June 30, 2016 and 2015
(in thousands)
(unaudited)
 
 
2016
 
2015
Cash flows from operating activities:
 
 
 
 
Net income
$
94,221

 
69,271

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
79,015

 
72,218

Amortization of deferred loan cost and debt premium
 
4,831

 
5,058

(Accretion) and amortization of above and below market lease intangibles, net
 
(1,176
)
 
(936
)
Stock-based compensation, net of capitalization
 
5,189

 
5,620

Equity in income of investments in real estate partnerships
 
(23,971
)
 
(12,324
)
Gain on sale of real estate
 
(13,417
)
 
(6,460
)
Provision for impairment
 
1,666

 

Early extinguishment of debt
 

 
(61
)
Distribution of earnings from operations of investments in real estate partnerships
 
26,159

 
22,719

Deferred compensation expense
 
429

 
581

Realized and unrealized loss (gain) on investments
 
(446
)
 
(1,000
)
Changes in assets and liabilities:
 
 
 
 
Restricted cash
 
(31
)
 
1,587

Accounts receivable, net
 
(6,841
)
 
(5,895
)
Straight-line rent receivables, net
 
(3,071
)
 
(3,552
)
Deferred leasing costs
 
(5,386
)
 
(5,470
)
Other assets
 
(1,718
)
 
(3,209
)
Accounts payable and other liabilities
 
(9,447
)
 
(12,004
)
Tenants’ security, escrow deposits and prepaid rent
 
(2,693
)
 
1,270

Net cash provided by operating activities
 
143,313

 
127,413

Cash flows from investing activities:
 
 
 
 
Acquisition of operating real estate
 
(297,448
)
 

Advance deposits on acquisition of operating real estate
 
(1,500
)
 
(4,500
)
Real estate development and capital improvements
 
(75,320
)
 
(109,118
)
Proceeds from sale of real estate investments
 
36,751

 
26,567

Investments in real estate partnerships
 
(3,823
)
 
(1,344
)
Distributions received from investments in real estate partnerships
 
25,746

 
15,014

Dividends on investment securities
 
137

 
87

Acquisition of securities
 
(46,306
)
 
(20,581
)
Proceeds from sale of securities
 
45,739

 
17,169

Net cash used in investing activities
 
(316,024
)
 
(76,706
)
Cash flows from financing activities:
 
 
 
 
Net proceeds from common stock issuance
 
149,788

 
955

Proceeds from sale of treasury stock
 
904

 

Distributions to limited partners in consolidated partnerships, net
 
(2,214
)
 
(1,722
)
Distributions to exchangeable operating partnership unit holders
 
(154
)
 
(151
)
Dividends paid to common stockholders
 
(97,061
)
 
(90,625
)
Dividends paid to preferred stockholders
 
(10,531
)
 
(10,531
)
Proceeds from unsecured credit facilities
 
295,000

 
85,000

Repayment of unsecured credit facilities
 
(150,000
)
 
(40,000
)
Proceeds from notes payable
 
20,000

 
2,399

Repayment of notes payable
 
(41,584
)
 
(76,027
)
Scheduled principal payments
 
(3,062
)
 
(2,921
)
Payment of loan costs
 
(292
)
 
(3,746
)
Net cash provided by (used in) financing activities
 
160,794

 
(137,369
)
Net decrease in cash and cash equivalents
 
(11,917
)
 
(86,662
)
Cash and cash equivalents at beginning of the period
 
36,856

 
113,776

Cash and cash equivalents at end of the period
$
24,939

 
27,114


5





REGENCY CENTERS CORPORATION
Consolidated Statements of Cash Flows
For the six months ended June 30, 2016, and 2015
(in thousands)
(unaudited)
 
 
2016
 
2015
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest (net of capitalized interest of $1,766 and $4,015 in 2016 and 2015, respectively)
$
44,153

 
53,458

Cash paid for income taxes
$

 
697

Supplemental disclosure of non-cash transactions:
 
 
 
 
Change in fair value of derivative instruments
$
(26,630
)
 
4,494

Common stock issued for dividend reinvestment plan
$
547

 
683

Stock-based compensation capitalized
$
1,723

 
1,493

Contributions from limited partners in consolidated partnerships, net
$
8,420

 
13

Common stock issued for dividend reinvestment in trust
$
384

 
432

Contribution of stock awards into trust
$
1,488

 
1,475

Distribution of stock held in trust
$
4,060

 
1,898

Change in fair value of securities available-for-sale
$
37

 
(30
)
See accompanying notes to consolidated financial statements.



6





REGENCY CENTERS, L.P.
Consolidated Balance Sheets
June 30, 2016 and December 31, 2015
(in thousands, except unit data)
    
 
 
2016
 
2015
Assets
 
(unaudited)
 
 
Real estate investments at cost:
 
 
 
 
Land, including amounts held for future development
$
1,639,958

 
1,479,814

Buildings and improvements
 
3,044,793

 
2,896,396

Properties in development
 
137,562

 
169,690

 
 
4,822,313

 
4,545,900

Less: accumulated depreciation
 
1,079,448

 
1,043,787

 
 
3,742,865

 
3,502,113

Properties held for sale
 
29,365

 

Investments in real estate partnerships
 
279,270

 
306,206

Net real estate investments
 
4,051,500

 
3,808,319

Cash and cash equivalents
 
24,939

 
36,856

Restricted cash
 
3,505

 
3,767

Accounts receivable, net of allowance for doubtful accounts of $5,534 and $5,295 at June 30, 2016 and December 31, 2015, respectively
 
27,765

 
32,292

Straight-line rent receivable, net of reserve of $2,961 and $1,365 at June 30, 2016 and December 31, 2015, respectively
 
66,291

 
63,392

Notes receivable
 
10,480

 
10,480

Deferred leasing costs, less accumulated amortization of $80,816 and $76,823 at June 30, 2016 and December 31, 2015, respectively
 
68,297

 
66,367

Acquired lease intangible assets, less accumulated amortization of $50,553 and $45,639 at June 30, 2016 and December 31, 2015, respectively
 
124,325

 
105,380

Trading securities held in trust, at fair value
 
29,939

 
29,093

Other assets
 
29,561

 
26,935

Total assets
$
4,436,602

 
4,182,881

Liabilities and Capital
 
 
 
 
Liabilities:
 
 
 
 
Notes payable
$
1,674,631

 
1,699,771

Unsecured credit facilities
 
309,585

 
164,514

Accounts payable and other liabilities
 
165,611

 
164,515

Acquired lease intangible liabilities, less accumulated accretion of $20,240 and $17,555 at June 30, 2016 and December 31, 2015, respectively
 
57,776

 
42,034

Tenants’ security, escrow deposits and prepaid rent
 
26,974

 
29,427

Total liabilities
 
2,234,577

 
2,100,261

Commitments and contingencies (note 11)
 


 


Capital:
 
 
 
 
Partners’ capital:
 
 
 
 
Preferred units of general partner, $0.01 par value per unit, 13,000,000 units issued and outstanding at March 31, 2016 and December 31, 2015, liquidation preference of $25 per unit
 
325,000

 
325,000

General partner; 99,486,537 and 97,212,638 units outstanding at March 31, 2016 and December 31, 2015, respectively
 
1,921,794

 
1,787,802

Limited partners; 154,170 units outstanding at March 31, 2016 and December 31, 2015
 
(2,013
)
 
(1,975
)
Accumulated other comprehensive loss
 
(80,038
)
 
(58,693
)
Total partners’ capital
 
2,164,743

 
2,052,134

Noncontrolling interests:
 
 
 
 
Limited partners’ interests in consolidated partnerships
 
37,282

 
30,486

Total noncontrolling interests
 
37,282

 
30,486

Total capital
 
2,202,025

 
2,082,620

Total liabilities and capital
$
4,436,602

 
4,182,881

See accompanying notes to consolidated financial statements.

7





REGENCY CENTERS, L.P.
Consolidated Statements of Operations
(in thousands, except per unit data)
(unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Revenues:
 
 
 
 
 
 
 
 
Minimum rent
$
109,945

 
102,390

$
217,619

 
203,695

Percentage rent
 
453

 
300

 
2,156

 
2,108

Recoveries from tenants and other income
 
35,874

 
32,431

 
69,362

 
63,479

Management, transaction, and other fees
 
6,140

 
6,008

 
12,904

 
12,246

Total revenues
 
152,412

 
141,129

 
302,041

 
281,528

Operating expenses:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
40,299

 
36,225

 
79,015

 
72,218

Operating and maintenance
 
23,709

 
20,185

 
46,394

 
41,358

General and administrative
 
16,350

 
15,099

 
32,649

 
31,477

Real estate taxes
 
16,769

 
15,667

 
32,639

 
30,798

Other operating expenses
 
2,440

 
1,779

 
4,747

 
2,943

Total operating expenses
 
99,567

 
88,955

 
195,444

 
178,794

Other expense (income):
 
 
 
 
 
 
 
 
Interest expense, net
 
24,401

 
26,675

 
48,544

 
53,308

Provision for impairment
 

 

 
1,666

 

Early extinguishment of debt
 

 

 

 
(61
)
Net investment income, including unrealized losses (gains) of ($275) and $892, and ($505) and $475 for the three and six months ended June 30, 2016 and 2015, respectively
 
(602
)
 
(367
)
 
(446
)
 
(1,000
)
Total other expense
 
23,799

 
26,308

 
49,764

 
52,247

Income from operations before equity in income of investments in real estate partnerships
 
29,046

 
25,866

 
56,833

 
50,487

Equity in income of investments in real estate partnerships
 
11,050

 
6,757

 
23,971

 
12,324

Income from operations
 
40,096

 
32,623

 
80,804

 
62,811

Gain on sale of real estate
 
548

 
5,657

 
13,417

 
6,460

Net income
 
40,644

 
38,280

 
94,221

 
69,271

Limited partners’ interests in consolidated partnerships
 
(504
)
 
(473
)
 
(853
)
 
(977
)
Net income attributable to the Partnership
 
40,140

 
37,807

 
93,368

 
68,294

Preferred unit distributions
 
(5,266
)
 
(5,266
)
 
(10,531
)
 
(10,531
)
Net income attributable to common unit holders
$
34,874

 
32,541

$
82,837

 
57,763


 
 
 
 
 
 
 
 
Income per common unit - basic
$
0.36

 
0.35

$
0.85

 
0.61

Income per common unit - diluted
$
0.35

 
0.34

$
0.84

 
0.61

See accompanying notes to consolidated financial statements.

8




REGENCY CENTERS, L.P.
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Net income
$
40,644

 
38,280

$
94,221

 
69,271

Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
Effective portion of change in fair value of derivative instruments:
 
 
 
 
 
 
 
 
Effective portion of change in fair value of derivative instruments
 
(9,846
)
 
18,376

 
(26,631
)
 
4,494

Less: reclassification adjustment of derivative instruments included in net income
 
2,500

 
2,250

 
4,952

 
4,500

Unrealized gain (loss) on available-for-sale securities
 
73

 
(30
)
 
37

 
(30
)
Other comprehensive (loss) income
 
(7,273
)
 
20,596

 
(21,642
)
 
8,964

Comprehensive income
 
33,371

 
58,876

 
72,579

 
78,235

Less: comprehensive income (loss) attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
 
504

 
473

 
853

 
977

Other comprehensive income (loss) attributable to noncontrolling interests
 
(117
)
 
86

 
(263
)
 

Comprehensive income attributable to noncontrolling interests
 
387

 
559

 
590

 
977

Comprehensive income attributable to the Partnership
$
32,984

 
58,317

$
71,989

 
77,258

See accompanying notes to consolidated financial statements.


9





REGENCY CENTERS, L.P.
Consolidated Statements of Capital
For the six months ended June 30, 2016 and 2015
 (in thousands)
(unaudited)
 
 
General Partner
Preferred and
Common Units
 
Limited
Partners
 
Accumulated
Other
Comprehensive Loss
 
Total
Partners’
Capital
 
Noncontrolling
Interests in
Limited Partners’
Interest in
Consolidated
Partnerships
 
Total
Capital
Balance at December 31, 2014
$
1,964,340

 
(1,914
)
 
(57,748
)
 
1,904,678

 
31,804

 
1,936,482

Net income
 
68,184

 
110

 

 
68,294

 
977

 
69,271

Other comprehensive loss
 

 
15

 
8,949

 
8,964

 

 
8,964

Contributions from partners
 

 

 

 

 
256

 
256

Distributions to partners
 
(91,308
)
 
(151
)
 

 
(91,459
)
 
(1,965
)
 
(93,424
)
Preferred unit distributions
 
(10,531
)
 

 

 
(10,531
)
 

 
(10,531
)
Restricted units issued as a result of amortization of restricted stock issued by Parent Company
 
7,004

 

 

 
7,004

 

 
7,004

Common units redeemed as a result of common stock redeemed by Parent Company, net of issuances
 
(8,155
)
 

 

 
(8,155
)
 

 
(8,155
)
Balance at June 30, 2015
 
1,929,534

 
(1,940
)
 
(48,799
)
 
1,878,795

 
31,072

 
1,909,867

 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
 
2,112,802

 
(1,975
)
 
(58,693
)
 
2,052,134

 
30,486

 
2,082,620

Net income
 
93,218

 
150

 

 
93,368

 
853

 
94,221

Other comprehensive loss
 

 
(34
)
 
(21,345
)
 
(21,379
)
 
(263
)
 
(21,642
)
Contributions from partners
 

 

 

 

 
8,600

 
8,600

Distributions to partners
 
(97,958
)
 
(154
)
 

 
(98,112
)
 
(2,394
)
 
(100,506
)
Preferred unit distributions
 
(10,531
)
 

 

 
(10,531
)
 

 
(10,531
)
Restricted units issued as a result of amortization of restricted stock issued by Parent Company
 
6,804

 

 

 
6,804

 

 
6,804

Common units issued as a result of common stock issued by Parent Company, net of repurchases
 
142,459

 

 

 
142,459

 

 
142,459

Balance at June 30, 2016
$
2,246,794

 
(2,013
)
 
(80,038
)
 
2,164,743

 
37,282

 
2,202,025

See accompanying notes to consolidated financial statements.


10





REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the six months ended June 30, 2016 and 2015
(in thousands)
(unaudited)
 
 
2016
 
2015
Cash flows from operating activities:
 
 
 
 
Net income
$
94,221

 
69,271

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

 

Depreciation and amortization
 
79,015

 
72,218

Amortization of deferred loan cost and debt premium
 
4,831

 
5,058

(Accretion) and amortization of above and below market lease intangibles, net
 
(1,176
)
 
(936
)
Stock-based compensation, net of capitalization
 
5,189

 
5,620

Equity in income of investments in real estate partnerships
 
(23,971
)
 
(12,324
)
Gain on sale of real estate
 
(13,417
)
 
(6,460
)
Provision for impairment
 
1,666

 

Early extinguishment of debt
 

 
(61
)
Distribution of earnings from operations of investments in real estate partnerships
 
26,159

 
22,719

Deferred compensation expense
 
429

 
581

Realized and unrealized loss (gain) on investments
 
(446
)
 
(1,000
)
Changes in assets and liabilities:
 

 

Restricted cash
 
(31
)
 
1,587

Accounts receivable, net
 
(6,841
)
 
(5,895
)
Straight-line rent receivables, net
 
(3,071
)
 
(3,552
)
Deferred leasing costs
 
(5,386
)
 
(5,470
)
Other assets
 
(1,718
)
 
(3,209
)
Accounts payable and other liabilities
 
(9,447
)
 
(12,004
)
Tenants’ security, escrow deposits and prepaid rent
 
(2,693
)
 
1,270

Net cash provided by operating activities
 
143,313

 
127,413

Cash flows from investing activities:
 
 
 
 
Acquisition of operating real estate
 
(297,448
)
 

Advance deposits on acquisition of operating real estate
 
(1,500
)
 
(4,500
)
Real estate development and capital improvements
 
(75,320
)
 
(109,118
)
Proceeds from sale of real estate investments
 
36,751

 
26,567

Investments in real estate partnerships
 
(3,823
)
 
(1,344
)
Distributions received from investments in real estate partnerships
 
25,746

 
15,014

Dividends on investment securities
 
137

 
87

Acquisition of securities
 
(46,306
)
 
(20,581
)
Proceeds from sale of securities
 
45,739

 
17,169

Net cash used in investing activities
 
(316,024
)
 
(76,706
)
Cash flows from financing activities:
 
 
 
 
Net proceeds from common units issued as a result of common stock issued by Parent Company
 
149,788

 
955

Proceeds from sale of treasury stock
 
904

 

Distributions (to) from limited partners in consolidated partnerships, net
 
(2,214
)
 
(1,722
)
Distributions to partners
 
(97,215
)
 
(90,776
)
Distributions to preferred unit holders
 
(10,531
)
 
(10,531
)
Proceeds from unsecured credit facilities
 
295,000

 
85,000

Repayment of unsecured credit facilities
 
(150,000
)
 
(40,000
)
Proceeds from notes payable
 
20,000

 
2,399

Repayment of notes payable
 
(41,584
)
 
(76,027
)
Scheduled principal payments
 
(3,062
)
 
(2,921
)
Payment of loan costs
 
(292
)
 
(3,746
)
Net cash provided by (used in) financing activities
 
160,794

 
(137,369
)
Net decrease in cash and cash equivalents
 
(11,917
)
 
(86,662
)
Cash and cash equivalents at beginning of the period
 
36,856

 
113,776

Cash and cash equivalents at end of the period
$
24,939

 
27,114




11





REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the six months ended June 30, 2016, and 2015
(in thousands)
(unaudited)
 
 
2016
 
2015
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest (net of capitalized interest of $1,766 and $4,015 in 2016 and 2015, respectively)
$
44,153

 
53,458

Cash paid for income taxes
$

 
697

Supplemental disclosure of non-cash transactions:
 
 
 
 
Initial fair value of non-controlling interest recorded at acquisition
$

 

Change in fair value of derivative instruments
$
(26,630
)
 
4,494

Common stock issued by Parent Company for dividend reinvestment plan
$
547

 
683

Stock-based compensation capitalized
$
1,723

 
1,493

Contributions from limited partners in consolidated partnerships, net
$
8,420

 
13

Common stock issued for dividend reinvestment in trust
$
384

 
432

Contribution of stock awards into trust
$
1,488

 
1,475

Distribution of stock held in trust
$
4,060

 
1,898

Change in fair value of securities available-for-sale
$
37

 
(30
)
See accompanying notes to consolidated financial statements.



12




REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016

1.
Organization and Principles of Consolidation
General
Regency Centers Corporation (the “Parent Company”) began its operations as a Real Estate Investment Trust (“REIT”) in 1993 and is the general partner of Regency Centers, L.P. (the “Operating Partnership”). The Parent Company engages in the ownership, management, leasing, acquisition, and development of retail shopping centers through the Operating Partnership, and has no other assets or liabilities other than through its investment in the Operating Partnership. The Parent Company currently owns approximately 99.8% of the outstanding common Partnership Units of the Operating Partnership. As of June 30, 2016, the Parent Company, the Operating Partnership, and their controlled subsidiaries on a consolidated basis (the "Company” or “Regency”) directly owned 199 retail shopping centers and held partial interests in an additional 112 retail shopping centers through investments in real estate partnerships (also referred to as "joint ventures" or "investment partnerships").

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

Consolidation
The Company consolidates properties that are wholly owned or properties where it owns less than 100%, but which it controls. Control is determined using an evaluation based on accounting standards related to the consolidation of voting interest entities and variable interest entities ("VIEs"). For joint ventures that are determined to be a VIE, the Company consolidates the entity where it is deemed to be the primary beneficiary. Determination of the primary beneficiary is based on whether an entity has (1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. The Company's determination of the primary beneficiary considers all relationships between it and the VIE, including management agreements and other contractual arrangements.
Ownership of the Operating Partnership
The Operating Partnership’s capital includes general and limited common Partnership Units. As of June 30, 2016, the Parent Company owned approximately 99.8% of the outstanding common Partnership Units of the Operating Partnership with the remaining limited Partnership Units held by third parties (“Exchangeable operating partnership units” or “EOP units”). The Parent Company serves as general partner of the Operating Partnership. The EOP unit holders have limited rights over the Operating Partnership such that they do not have characteristics of a controlling financial interest. As such, the Operating Partnership is considered a variable interest entity, and the Parent Company is the primary beneficiary which consolidates it. The Parent Company’s only investment is the Operating Partnership.
Real Estate Partnerships
Regency owns 112 properties through partnerships with institutional investors, other real estate developers and/or operators, and individual parties who help Regency source transactions for development and investment ("the Partners", "limited partners"). Regency has a variable interest in these entities through its equity interests. As managing member, Regency maintains the books and records and typically provides leasing and property management to the partnerships. The partners’ level of involvement varies from protective decisions (debt, bankruptcy, selling primary asset(s) of business) to involvement in approving leases, operating budgets, and capital budgets.
Those partnerships for which the partners only have protective rights are considered VIEs under ASC 810, Consolidation. Regency is the primary beneficiary of these VIEs as Regency has power over these partnerships and they operate primarily for the benefit of Regency. As such, Regency consolidates these entities and reports the limited partners’ interest as noncontrolling interests.


13



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016

The majority of the operations of the VIEs are funded with cash flows generated by the properties, or in the case of developments, with capital contributions or third party construction loans. Regency does not provide financial support to the VIEs.
The major classes of assets, liabilities, and non-controlling equity interests held by these VIEs are as follows:
(in thousands)
June 30, 2016
December 31, 2015
Assets
(1) 
 
Real estate assets, net
$
252,114

81,424

Cash and cash equivalents
10,822

790

Liabilities
 
 
Notes payable
17,578

17,948

Equity
 
 
Limited partners’ interests in consolidated partnerships
19,208

11,058

(1) As discussed in note 2, during the six months ended June 30, 2016, the Company acquired a controlling interest in two partnerships; one was formed to develop a shopping center and the second to acquire a mixed-use retail operating center. The structure of both partnerships is considered a VIE with Regency as the primary beneficiary.
Those partnerships for which the partners are involved in the day to day decisions and do not have any other aspects that would cause them to be considered VIEs, are evaluated for consolidation using the voting interest model.

Those partnerships which Regency has a controlling financial interest are consolidated and the limited partners’ ownership interest and share of net income is recorded as noncontrolling interest.

Those partnerships which Regency does not have a controlling financial interest are accounted for using the equity method and its ownership interest is recognized through single-line presentation as Investments in Real Estate Partnerships, in the Consolidated Balance Sheet, and Equity in Income of Investments in Real Estate Partnerships, in the Consolidated Statements of Operations. Distributions received from these partnerships are accounted for using the look-through method with returns of capital from property sales or debt financing considered investing cash flows and the remaining distributions generally considered operating cash flows.

The assets of these partnerships are restricted to the use of the partnerships and cannot be used by general creditors of the Company. And similarly, the obligations of these partnerships can only be settled by the assets of these partnerships.

Reclassifications
During the six months ended June 30, 2016, the Company reclassified its land held for future development from Properties in development to Land within the accompanying Consolidated Balance Sheets. The Company reclassified prior period amounts of $47.3 million to conform to current period presentation.

14



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016

Recent Accounting Pronouncements
The following table provides a brief description of recent accounting pronouncements and expected impact on our financial statements:
Standard
 
Description
 
Date of adoption
 
Effect on the financial statements or other significant matters
Recently adopted:
 
 
 
 
 
 
ASU 2015-02, February 2015, Consolidation (Topic 810): Amendments to the Consolidation Analysis 
 
ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership, and affects the consolidation analysis of reporting entities that are involved with VIEs.
 
January 2016
 
The adoption of this standard resulted in five additional investment partnerships being considered variable interest entities due to the limited partners' lack of substantive participation in the partnerships. This did not result in any impact to the Company's Consolidated Balance Sheets, Statements of Operations, or Cash Flows, but did result in additional disclosures about its relationships with and exposure to variable interest entities.
 
 
 
 
 
 
 
ASU 2015-03, April 2015, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs

 
ASU 2015-03 simplifies the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.


 
January 2016
 
The adoption and implementation of this standard has resulted in the retrospective presentation of debt issuance costs associated with the Company's notes payable and term loans as a direct deduction from the carrying amount of the related debt instruments (previously, included in deferred costs in the consolidated balance sheets).
Unamortized debt issuance costs of $8.2 million has been reclassified to offset the related debt as of December 31, 2015.
 
 
 
 
 
 
 
ASU 2015-15, August 2015, Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
 
ASU 2015-15 clarifies that debt issuance costs related to line-of-credit arrangements may be deferred and presented as an asset, amortized over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings.

 
January 2016
 
The adoption of this standard resulted in debt issuance costs related to the Line of credit ("Line") to continue being presented as an asset in the Consolidated Balance Sheets, previously within deferred costs, and now presented within other assets.
 
 
 
 
 
 
 

15



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016

Standard
 
Description
 
Date of adoption
 
Effect on the financial statements or other significant matters
Not yet adopted:
 
 
 
 
 
 
ASU 2014-15, August 2014, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
 
The standard requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued.
 
December 2016
 
The Company does not expect the adoption of this standard to have an impact on its Consolidated Balance Sheets, Statements of Operations, or Cash Flows but will result in more disclosure surrounding the Company's plans around significant debt maturities.

 
 
 
 
 
 
 
ASU 2016-09, March 2016, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
 
This ASU affects entities that issue share-based payment awards to their employees. The ASU is designed to simplify several aspects of accounting for share-based payment award transactions including income tax consequences, classification of awards as either equity or liabilities, an option to recognize stock compensation forfeitures as they occur, and changes to classification on the statement of cash flows.
 
January 2017
 
We are currently evaluating the alternative methods of adoption and the impact it may have on the Company's financial statements and related disclosures.

 
 
 
 
 
 
 
Revenue from Contracts with Customers (Topic 606):

ASU 2014-09, May 2014, Revenue from Contracts with Customers (Topic 606)

ASU 2016-08, March 2016, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations

ASU 2016-10, April 2016, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing

ASU 2016-12, May 2016, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients


 
The standard will replace existing revenue recognition standards and significantly expand the disclosure requirements for revenue arrangements. It may be adopted either retrospectively or on a modified retrospective basis to new contracts and existing contracts with remaining performance obligations as of the effective date.














 
January 2018
 
The Company is currently evaluating the alternative methods of adoption and the impact it may have on its financial statements and related disclosures.


 
 
 
 
 
 
 

16



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016

Standard
 
Description
 
Date of adoption
 
Effect on the financial statements or other significant matters
ASU 2016-01, January 2016, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
 
The standard amends the guidance to classify equity securities with readily-determinable fair values into different categories and requires equity securities to be measured at fair value with changes in the fair value recognized through net income. Equity investments accounted for under the equity method are not included in the scope of this amendment. Early adoption of this amendment is not permitted.

 
January 2018
 
The Company does not expect the adoption and implementation of this standard to have a material impact on its results of operations, financial condition or cash flows.

 
 
 
 
 
 
 
ASU 2016-02, February 2016, Leases (Topic 842)
 
The standard amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets. It also makes targeted changes to lessor accounting, including a change to the treatment of initial direct leasing costs, which no longer considers fixed internal leasing salaries as capitalizable costs.

Early adoption of this standard is permitted to coincide with adoption of ASU 2014-09. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief.
 
January 2019
 
The Company is currently evaluating the alternative methods of adoption and the impact it will have on its financial statements and related disclosures.


 
 
 
 
 
 
 
ASU 2016-13, June 2016, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
 
The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

 
January 2020
 
The Company is currently evaluating the alternative methods of adoption and the impact it will have on its financial statements and related disclosures.





17



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016


2.
Real Estate Investments

The following table details the shopping centers acquired or land acquired for development during the six months ended June 30, 2016. There were no shopping centers or land acquired during the six months ended June 30, 2015.
(in thousands)
 
Six months ended June 30, 2016
Date Purchased
 
Property Name
 
City/State
 
Property Type
 
Ownership
 
Purchase Price
 
Intangible Assets
 
Intangible Liabilities
2/22/16
 
Garden City Park
 
Garden City Park, NY
 
Operating
 
100%
 
$17,300
 
10,171
 
2,940
3/4/16
 
The Market at Springwoods Village (1)
 
Houston, TX
 
Development
 
53%
 
17,994
 
 
5/16/16
 
Market Common Clarendon (2)
 
Arlington, VA
 
Operating
 
100%
 
280,500
 
15,428
 
15,662
Total property acquisitions
 
 
 
 
 
$315,794
 
25,599
 
18,602

(1) Regency acquired a 53% controlling interest in the Market at Springwoods Village partnership to develop a shopping center on land contributed by the partner. As a result of consolidation, the Company recorded the partner's non-controlling interest of $8.4 million.

(2) Market Common Clarendon is a mixed-use center containing retail, residential and office space, along with income producing parking garages. The residential component is owned by a third party who contributes its share of the costs to maintain common areas.


The results of operations from the acquisition of Market Common Clarendon are included in the Consolidated Statements of Operations beginning on the acquisition date and resulted in the following impact to Revenues and Net income attributable to common stockholders for the three and six months ended June 30, 2016, as follows:
 
 
June 30, 2016
(in thousands)
 
Three months ended
 
Six months ended
Increase in total revenues
 
$
2,287

 
2,287

Decrease in net income attributable to common stockholders (1)
 
1,299

 
1,619


(1) Includes $1.1 million and $1.4 million of transaction costs during the three and six months ended June 30, 2016, respectively, which are recorded in Other operating expenses in the accompanying Consolidated Statements of Operations.



18



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016


The following unaudited pro forma financial data includes the incremental revenues, operating expenses, depreciation and amortization, and costs of financing the Market Common Clarendon acquisition as if it had occurred on January 1, 2015:
 
 
(Pro Forma)
 
(Pro Forma)
 
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands, except per share data)
 
2016
 
2015
 
2016
 
2015
Total revenues
 
$
155,285

 
146,091

 
309,794

 
291,365

Income from operations
(1) 
42,290

 
33,718

 
84,210

 
63,545

Net income attributable to common stockholders
(1) 
37,004

 
33,575

 
86,093

 
58,388

Income per common share - basic
 
$
0.37

 
0.35

 
0.87

 
0.61

Income per common share - diluted
 
0.37

 
0.35

 
0.86

 
0.61


(1) The pro forma earnings for the three and six months ended June 30, 2016 were adjusted to exclude $1.1 million and $1.4 million, respectively, of acquisition costs, while 2015 pro forma earnings were adjusted to include those costs during the first quarter of 2015.

The pro forma financial data is not necessarily indicative of what the actual results of operations would have been assuming the transaction had been completed as set forth above, nor does it purport to represent the results of operations for future periods.

The following table details the weighted average amortization and net accretion periods, in years, of the major classes of intangible assets and intangible liabilities arising from the Market Common Clarendon acquisition:
 
 
Six months ended
(in years)
 
June 30, 2016
Assets:
 
 
In-place leases
 
7.4
 
 
 
Liabilities:
 
 
Acquired lease intangible liabilities
 
7.9


3.    Property Dispositions

Dispositions

The following table provides a summary of shopping centers and land parcels disposed of:
 
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
 
2016
 
2015
 
2016
 
2015
Net proceeds from sale of real estate investments
 
$
4,384

 
$
22,968

 
$
38,705

 
$
26,382

Gain on sale of real estate
 
$
548

 
$
5,657

 
$
13,417

 
$
6,460

Provision for impairment
 
$

 
$

 
$
(1,666
)
 

Number of operating properties sold
 
1
 
1
 
4
 
2
Number of land parcels sold
 
5
 
 
10
 
Percent interest sold
 
100
%
 
100
%
 
100
%
 
100
%
Held for Sale

At June 30, 2016, the Company was under contract to sell three operating properties. The assets associated with these properties have been classified as Properties held for sale in the accompanying Consolidated Balance Sheets.

19



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016


4.    Notes Payable and Unsecured Credit Facilities
The Company’s outstanding debt consisted of the following: 
(in thousands)
June 30, 2016
 
December 31, 2015
Notes payable:
 
 
 
Fixed rate mortgage loans
$
429,273

 
475,214

Variable rate mortgage loans
54,154

(1) 
34,154

Fixed rate unsecured loans
1,191,204

 
1,190,403

Total notes payable
1,674,631

 
1,699,771

Unsecured credit facilities:
 
 
 
Line of Credit (the "Line")
145,000

 

Term Loan
164,585

 
164,514

Total unsecured credit facilities
309,585

 
164,514

Total debt outstanding
$
1,984,216

 
1,864,285


(1) As of June 30, 2016, the amount consists of two mortgages with variable interest rates of one month LIBOR plus 150 basis points and which mature on October 16, 2020 and April 1, 2023, respectively. Interest rate swaps are in place fixing the interest rates at 3.696% on $28.1 million and 2.803% on $20.0 million, respectively, of these two variable rate mortgages. See note 5.

As of June 30, 2016 , the key interest rates of the Company's notes payables and credit facilities were as follows:
 
 
June 30, 2016
 
 
Weighted Average Effective Rate
 
Weighted Average Contractual Rate
Mortgage loans
 
6.1%
 
6.1%
Fixed rate unsecured loans
 
5.5%
 
4.8%
Unsecured credit facilities
 
1.5%
(1) 
1.4%
(1) Weighted average effective rate for the unsecured credit facilities is calculated based on a fully drawn Line balance.
Significant financing activity since December 31, 2015 includes the following:
The Company has repaid three mortgages totaling $41.6 million that were scheduled to mature during 2016.
The Company issued new variable rate mortgage debt of $20.0 million, related to one of the mortgages that matured during 2016.
The Company borrowed on the Line to fund its acquisition of Market Common Clarendon during the three months ended June 30, 2016.
Financing - Subsequent Events
Subsequent to June 30, 2016, the Company amended its existing Term Loan, which increased the facility size by $100.0 million to $265.0 million, extended the maturity date to January 5, 2022 and reduced the applicable interest rate. The Term Loan now bears interest at LIBOR plus a ratings based margin of 0.95% per annum, subject to adjustment from time to time based on changes to the Company's corporate credit rating. At closing, the Company executed interest rate swaps for the full notional amount of the Term Loan, which fixed the interest rate at 2.0% through maturity. Proceeds from the expanded Term Loan facility were used to repay part of the Line balance.
Subsequent to June 30, 2016, the Company provided 30 days notice to redeem the entirety of its $300 million of 5.875% senior unsecured notes due June 15, 2017 funded from proceeds from an equity offering, as discussed in note 7. The redemption will include a $13.2 million make-whole premium, which will be paid and expensed in August 2016.

20



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016


As of June 30, 2016, scheduled principal payments and maturities on notes payable were as follows: 
(in thousands)
June 30, 2016
Scheduled Principal Payments and Maturities by Year:
Scheduled
Principal
Payments
 
Mortgage Loan
Maturities
 
Unsecured
Maturities (1)
 
Total
2016
$
2,963

 

 

 
2,963

2017
5,778

 
117,298

 
300,000

(2) 
423,076

2018
5,103

 
57,358

 


62,461

2019
4,393

 
106,000

 
310,000

(3) 
420,393

2020
4,349

 
84,011

 
150,000

 
238,360

Beyond 5 Years
13,184

 
76,792

 
750,000

 
839,976

Unamortized debt premium/(discount) and issuance costs

 
6,198

 
(9,211
)
 
(3,013
)
Total
$
35,770

 
447,657

 
1,500,789

 
1,984,216

(1) Includes unsecured public debt and unsecured credit facilities.
(2) The 2017 unsecured debt will be redeemed in August 2016 with proceeds from an equity offering.
(3) In July 2016, the Term Loan was amended to mature in January 2022.

The Company was in compliance as of June 30, 2016 with the financial and other covenants under its unsecured public debt and unsecured credit facilities.



21



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016


5.    Derivative Financial Instruments
The following table summarizes the terms and fair values of the Company's derivative financial instruments, as well as their classification on the Consolidated Balance Sheets: 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value
(in thousands)
 
 
 
 
 
 
 
 
 
Liabilities (2)
Effective Date
 
Maturity Date
 
Early Termination Date (1)
 
Notional Amount
 
Bank Pays Variable Rate of
 
Regency Pays Fixed Rate of
 
June 30, 2016
 
December 31, 2015
10/16/13
 
10/16/20
 
N/A
 
$
28,100

 
1 Month LIBOR
 
2.196%
 
$
(1,643
)
 
(898
)
4/7/16
 
4/1/23
 
N/A
 
20,000

 
1 Month LIBOR
 
1.303%
 
(383
)
 

6/15/17
 
6/15/27
 
12/15/17
 
20,000

 
3 Month LIBOR
 
3.488%
(3) 
(3,746
)
 
(1,798
)
6/15/17
 
6/15/27
 
12/15/17
 
100,000

 
3 Month LIBOR
 
3.480%
(3) 
(18,660
)
 
(8,922
)
6/15/17
 
6/15/27
 
12/15/17
 
100,000

 
3 Month LIBOR
 
3.480%
(3) 
(18,660
)
 
(8,921
)
Total derivative financial instruments
 
$
(43,092
)
 
(20,539
)
(1) Represents the date specified in the agreement for either optional or mandatory early termination by the counterparty, which will result in cash settlement. The Company has the option to terminate and settle at any date prior to this.
(2) Derivatives in an asset position are included within Other assets in the accompanying Consolidated Balance Sheets, while those in a liability position are included within Accounts payable and other liabilities.
(3) In 2014, the Company entered into $220 million of forward starting interest rate swaps to hedge the interest rate on new fixed rate ten year debt that the Company expected to issue in June 2017 for the specific purpose of repaying at maturity the $300 million of 5.875% senior unsecured notes due June 15, 2017. These interest rate swaps locked in a weighted average fixed rate of 3.48%, before the Company's credit spread. These swaps were settled subsequent to June 30, 2016, as further described below.
These derivative financial instruments are all interest rate swaps, which are designated and qualify as cash flow hedges. The Company does not use derivatives for trading or speculative purposes and, as of June 30, 2016, does not have any derivatives that are not designated as hedges. The Company has master netting agreements; however, the Company does not have multiple derivatives subject to a single master netting agreement with the same counterparties. Therefore, none are offset in the accompanying Consolidated Balance Sheets.

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


22



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016

The following table represents the effect of the derivative financial instruments on the accompanying consolidated financial statements:
Derivatives in FASB
ASC Topic 815 Cash
Flow Hedging
Relationships:
Amount of Gain (Loss)
Recognized in OCI on
Derivative (Effective
Portion)
 
Location and Amount of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
 
Location and Amount of Gain or
(Loss) Recognized in
Income on  Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
 
Three months ended June 30,
 
 
 
Three months ended June 30,
 
 
 
Three months ended June 30,
(in thousands)
2016
 
2015
 
 
 
2016
 
2015
 
 
 
2016
 
2015
Interest rate swaps
$
(9,846
)
 
18,376

 
Interest
expense
 
$
(2,500
)
 
(2,250
)
 
Other expenses
 
$

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives in FASB
ASC Topic 815 Cash
Flow Hedging
Relationships:
Amount of Gain (Loss)
Recognized in OCI on
Derivative (Effective
Portion)
 
Location and Amount of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
 
Location and Amount of Gain or
(Loss) Recognized in
Income on  Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
 
Six months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
Six months ended June 30,
(in thousands)
2016
 
2015
 
 
 
2016
 
2015
 
 
 
2016
 
2015
Interest rate swaps
$
(26,631
)
 
4,494

 
Interest
expense
 
$
(4,952
)
 
(4,500
)
 
Other expenses
 
$

 


As of June 30, 2016, the Company expects $10.0 million of net deferred losses on derivative instruments accumulated in Other comprehensive income to be reclassified into earnings during the next 12 months, of which $8.4 million is related to previously settled swaps.
Hedge Settlement - Subsequent Event

Subsequent to June 30, 2016, the Company initiated and completed a $400 million equity offering, as further described in note 7, for the primary purpose of funding the early redemption of $300 million of 5.875% senior unsecured notes due on June 15, 2017.  The Company also used $40.6 million from the net offering proceeds to settle $220 million of forward starting swaps related to new debt expected to be issue in 2017 to repay the notes at maturity.  As a result of the equity offering, the Company now believes that the issuance of new fixed rate debt within the remaining period of the forward starting swaps is probable not to occur.  Accordingly, the Company will cease hedge accounting and reclassify the amount paid to settle the forward starting swaps from Accumulated other comprehensive loss to earnings during the third quarter of 2016.




6.    Fair Value Measurements

(a) Disclosure of Fair Value of Financial Instruments

All financial instruments of the Company are reflected in the accompanying Consolidated Balance Sheets at amounts which, in management's estimation, reasonably approximate their fair values, except for the following:
 
June 30, 2016
 
December 31, 2015
(in thousands)
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Financial assets:
 
 
 
 
 
 
 
Notes receivable
$
10,480

 
10,500

 
$
10,480

 
10,620

Financial liabilities:
 
 
 
 
 
 
 
Notes payable
$
1,674,631

 
1,796,400

 
$
1,699,771

 
1,793,200

Unsecured credit facilities
$
309,585

 
309,800

 
$
164,514

 
165,300


The above fair values represent management's estimate of the amounts that would be received from selling those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants as of June 30,

23



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016

2016 and December 31, 2015. These fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company's own judgments about the assumptions that market participants would use in pricing the asset or liability.

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

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

Notes Receivable

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

Notes Payable

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

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

Unsecured Credit Facilities

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

The following interest rate ranges were used by the Company to estimate the fair value of its financial instruments:
 
 
June 30, 2016
 
December 31, 2015
 
 
Low
 
High
 
Low
 
High
Notes receivable
 
6.7%
 
6.7%
 
6.3%
 
6.3%
Notes payable
 
2.5%
 
3.5%
 
2.8%
 
4.2%
Unsecured credit facilities
 
1.4%
 
1.4%
 
1.1%
 
1.1%

(b) Fair Value Measurements

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

Trading Securities Held in Trust

The Company has investments in marketable securities, which are assets of the non-qualified deferred compensation plan ("NQDCP"), that are classified as trading securities held in trust on the accompanying Consolidated Balance Sheets. The fair value of the Trading securities held in trust was determined using

24



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016

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

Available-for-Sale Securities

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

Interest Rate Derivatives
The fair value of the Company's interest rate derivatives is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its interest rate swaps. As a result, the Company determined that its interest rate swaps valuation in its entirety is classified in Level 2 of the fair value hierarchy.
The following tables present the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis:
 
Fair Value Measurements as of June 30, 2016
(in thousands)
 
 
Quoted Prices in Active Markets for Identical Assets
 
Significant Other Observable Inputs
 
Significant Unobservable Inputs
Assets:
Balance
 
(Level 1)
 
(Level 2)
 
(Level 3)
Trading securities held in trust
$
29,939

 
29,939

 

 

Available-for-sale securities
7,990

 

 
7,990

 

Total
$
37,929

 
29,939

 
7,990

 

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Interest rate derivatives
$
(43,092
)
 

 
(43,092
)
 

 
Fair Value Measurements as of December 31, 2015
(in thousands)
 
 
Quoted Prices in Active Markets for Identical Assets
 
Significant Other Observable Inputs
 
Significant Unobservable Inputs
Assets:
Balance
 
(Level 1)
 
(Level 2)
 
(Level 3)
Trading securities held in trust
$
29,093

 
29,093

 

 

Available-for-sale securities
7,922

 

 
7,922

 

Total
$
37,015

 
29,093

 
7,922

 

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Interest rate derivatives
$
(20,539
)
 

 
(20,539
)
 


25



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016


There were no assets measured at fair value on a nonrecurring basis as of June 30, 2016 or December 31, 2015.


7.    Equity and Capital

Common Stock of the Parent Company

Issuances:

At the Market ("ATM") Program

The current ATM equity offering program authorizes the Parent Company to sell up to $200 million of common stock at prices determined by the market at the time of sale. As of June 30, 2016, $70.8 million of common stock remained available for issuance under this ATM equity program.

There were no shares issued under the ATM equity program during the three months ended June 30, 2016 or 2015. The following table presents the shares that were issued under the ATM equity program during the six months ended June 30, 2016 and 2015:
 
 
Six months ended June 30,
(dollar amounts are in thousands, except price per share data)
 
2016
 
2015
Shares issued (1)
 
182,787

 
18,125

Weighted average price per share
 
$
68.85

 
64.72

Gross proceeds
 
$
12,584

 
1,173

Commissions
 
$
157

 
15

(1) Reflects shares traded in December and settled in January each year.

Forward Equity Offering

In March 2016, the Parent Company entered into a forward sale agreement (the "Forward Equity Offering") with respect to 3.10 million shares of its common stock at an offering price of $75.25 per share before any underwriting discount and offering expenses.

In June 2016, the Parent Company partially settled its forward equity offering by delivering 1.85 million shares of newly issued common stock, receiving $137.5 million of net proceeds, which were used to repay the Line balance created from the acquisition of Market Common Clarendon.

The remaining 1.25 million shares may be settled under the forward sale agreement prior to June 23, 2017.

Equity Offering - Subsequent Event

Subsequent to June 30, 2016, the Parent Company issued 5.0 million shares of common stock at $79.78 per share resulting in net proceeds of $400.1 million, used to (i) redeem, in August, the entire $300 million of 5.875% senior unsecured notes due June 15, 2017, including a make-whole payment, (ii) settle forward interest rate swaps, and (iii) fund investment activities, and for general corporate purposes. The Parent Company agreed to a 60 day lock-up period, whereby it will not sell any shares of its common stock or any other derived form of transferring ownership of the company, except with respect to the 1.25 million shares that may be settled under the forward equity offering.


Common Units of the Operating Partnership

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

26



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016


Accumulated Other Comprehensive Loss

The following tables present changes in the balances of each component of AOCI:
 
Controlling Interest
 
Noncontrolling Interest
 
Total
(in thousands)
Cash Flow Hedges
 
Unrealized gain (loss) on Available-For-Sale Securities
 
AOCI
 
Cash Flow Hedges
 
Unrealized gain (loss) on Available-For-Sale Securities
 
AOCI
 
AOCI
Balance as of December 31, 2014
$
(57,748
)
 

 
(57,748
)
 
(750
)
 

 
(750
)
 
(58,498
)
Other comprehensive income before reclassifications
4,558

 
(30
)
 
4,528

 
(64
)
 

 
(64
)
 
4,464

Amounts reclassified from accumulated other comprehensive income
4,421

 

 
4,421

 
79

 

 
79

 
4,500

Current period other comprehensive income, net
8,979

 
(30
)
 
8,949

 
15

 

 
15

 
8,964

Balance as of June 30, 2015
$
(48,769
)
 
(30
)
 
(48,799
)
 
(735
)
 

 
(735
)
 
(49,534
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Controlling Interest
 
Noncontrolling Interest
 
Total
(in thousands)
Cash Flow Hedges
 
Unrealized gain (loss) on Available-For-Sale Securities
 
AOCI
 
Cash Flow Hedges
 
Unrealized gain (loss) on Available-For-Sale Securities
 
AOCI
 
AOCI
Balance as of December 31, 2015
$
(58,650
)
 
(43
)
 
(58,693
)
 
(785
)
 

 
(785
)
 
(59,478
)
Other comprehensive income before reclassifications
(26,256
)
 
37

 
(26,219
)
 
(375
)
 

 
(375
)
 
(26,594
)
Amounts reclassified from accumulated other comprehensive income
4,874

 

 
4,874

 
78

 

 
78

 
4,952

Current period other comprehensive income, net
(21,382
)
 
37

 
(21,345
)
 
(297
)
 

 
(297
)
 
(21,642
)
Balance as of June 30, 2016
$
(80,032
)
 
(6
)
 
(80,038
)
 
(1,082
)
 

 
(1,082
)
 
(81,120
)

The following represents amounts reclassified out of AOCI into income:
AOCI Component
Amount Reclassified from AOCI into income
 
Affected Line Item Where Net Income is Presented
 
Three months ended June 30,
 
Six months ended June 30,
 
 
(in thousands)
2016
 
2015
 
2016
 
2015
 
 
Interest rate swaps
$
2,500

 
2,250

 
$
4,952

 
4,500

 
Interest expense


27



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016


8.    Stock-Based Compensation

The Company recorded stock-based compensation in General and administrative expenses in the accompanying Consolidated Statements of Operations. During 2016, the Company granted 191,128 shares of restricted stock with a weighted-average grant-date fair value of $79.40 per share.


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

The Company maintains a NQDCP which allows select employees and directors to defer part or all of their cash bonus, director fees, and restricted stock awards. All contributions into the participants' accounts are fully vested upon contribution to the NQDCP and are deposited in a Rabbi trust.

The following table reflects the balances of the assets held in the Rabbi trust and the participant account obligations in the accompanying Consolidated Balance Sheets:
Non-Qualified Deferred Compensation Plan Component (1)
(in thousands)
June 30, 2016
 
December 31, 2015
Assets:
 
 
 
Trading securities held in trust
$
29,939

 
29,093

Liabilities:
 
 
 
Accounts payable and other liabilities
$
29,500

 
28,632

(1) The assets and liabilities presented include the trading securities held in the Rabbi trust and the related participant obligations. The Company's common stock held in the Rabbi trust, and the related participant obligation, is presented within Stockholders' equity in the accompanying Consolidated Balance Sheets as Treasury stock and part of Additional paid in capital, respectively.



28



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016

10.    Earnings per Share and Unit
Parent Company Earnings per Share
The following summarizes the calculation of basic and diluted earnings per share: 
 
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands, except per share data)
 
2016
 
2015
 
2016
 
2015
Numerator:
 
 
 
 
 
 
 
 
Income from operations attributable to common stockholders - basic
 
$
34,810

 
32,480

 
$
82,687

 
57,653

Income from operations attributable to common stockholders - diluted
 
$
34,810

 
32,480

 
$
82,687

 
57,653

Denominator:
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for basic EPS
 
97,657

 
94,136

 
97,588

 
94,036

Weighted average common shares outstanding for diluted EPS (1)
 
98,218

 
94,503

 
98,075

 
94,392


 
 
 
 
 
 
 
 
Income per common share – basic
 
$
0.36

 
0.35

 
$
0.85

 
0.61

Income per common share – diluted
 
$
0.35

 
0.34

 
$
0.84

 
0.61

(1) Includes the dilutive impact of unvested restricted stock and shares issuable under the forward equity offering using the treasury stock method.
Income allocated to noncontrolling interests of the Operating Partnership has been excluded from the numerator and exchangeable Operating Partnership units have been omitted from the denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the numerator and denominator would have no impact. Weighted average exchangeable Operating Partnership units outstanding for the three and six months ended June 30, 2016 and 2015 were 154,170.
Operating Partnership Earnings per Unit
The following summarizes the calculation of basic and diluted earnings per unit: 
 
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands, except per share data)
 
2016
 
2015
 
2016
 
2015
Numerator:
 
 
 
 
 
 
 
 
Income from operations attributable to common unit holders - basic
 
$
34,874

 
32,541

 
$
82,837

 
57,763

Income from operations attributable to common unit holders - diluted
 
$
34,874

 
32,541

 
$
82,837

 
57,763

Denominator:
 
 
 
 
 
 
 
 
Weighted average common units outstanding for basic EPU
 
97,811

 
94,290

 
97,742

 
94,190

Weighted average common units outstanding for diluted EPU (1)
 
98,372

 
94,658

 
98,229

 
94,546


 
 
 
 
 
 
 
 
Income per common unit – basic
 
$
0.36

 
0.35

 
$
0.85

 
0.61

Income per common unit – diluted
 
$
0.35

 
0.34

 
$
0.84

 
0.61

(1) Includes the dilutive impact of unvested restricted stock and forward equity offering using the treasury stock method.

Subsequent to June 30, 2016, the Parent Company issued 5.0 million shares of common stock pursuant to the Company's shelf registration statement. For details of the offering transaction, refer to Note 7.

29



REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Consolidated Financial Statements
June 30, 2016

11.    Commitments and Contingencies

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

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

The Company has the right to issue letters of credit under the Line up to an amount not to exceed $50.0 million, which reduces the credit availability under the Line. These letters of credit are primarily issued as collateral on behalf of its captive insurance program and to facilitate the construction of development projects. As of June 30, 2016 and December 31, 2015, the Company had $5.8 million and $5.9 million, respectively, in letters of credit outstanding. 



30





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

Forward-Looking Statements    

In addition to historical information, the following information contains forward-looking statements as defined under federal securities laws. These forward-looking statements include statements about anticipated changes in our revenues, the size of our development and redevelopment program, earnings per share and unit, returns and portfolio value, and expectations about our liquidity. These statements are based on current expectations, estimates and projections about the real estate industry and markets in which the Company operates, and management's beliefs and assumptions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, changes in national and local economic conditions, financial difficulties of tenants, competitive market conditions, including timing and pricing of acquisitions and sales of properties and building pads ("out-parcels"), changes in leasing activity and market rents, timing of development starts, meeting development schedules, natural disasters in geographic areas in which we operate, cost of environmental remediation, our inability to exercise voting control over the co-investment partnerships through which we own many of our properties, and technology disruptions. For additional information, see “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2015. The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto of Regency Centers Corporation and Regency Centers, L.P. appearing elsewhere herein. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or uncertainties after the date hereof or to reflect the occurrence of uncertain events.

Defined Terms

We use certain non-GAAP performance measures, in addition to the required GAAP presentations, as we believe these measures improve the understanding of the Company's operational results. We manage our entire real estate portfolio without regard to ownership structure, although certain decisions impacting properties owned through partnerships require partner approval. Therefore, we believe presenting our pro-rata share of operating results regardless of ownership structure, along with other non-GAAP measures, makes comparisons of other REITs' operating results to the Company's more meaningful. We continually evaluate the usefulness, relevance, limitations, and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change.

The following terms, as defined, are commonly used by management and the investing public to understand and evaluate our operational results:

Same Property information is provided for operating properties that were owned and operated for the entirety of both calendar year periods being compared and excludes Non-Same Properties and Properties in Development.

A Non-Same Property is a property acquired, sold, or a development completion during either calendar year period being compared. Corporate activities, including the captive insurance company, are part of Non-Same Property.

Property In Development is a property owned and intended to be developed, including partially operating properties acquired specifically for redevelopment and excluding land held for future development.

Development Completion is a project in development that is deemed complete upon the earliest of: (i) 90% of total estimated net development costs have been incurred and percent leased equals or exceeds 95%, or (ii) the project features at least two years of anchor operations, or (iii) three years have passed since the start of construction. Once deemed complete, the property is termed an Operating Property.

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

The pro-rata information is prepared on a basis consistent with the comparable consolidated amounts and is intended to more accurately reflect our proportionate economic interest in the operating results of properties in our portfolio. We do not control the unconsolidated investment partnerships, and the pro-rata presentations of the assets and liabilities, and revenues and expenses do not represent our legal claim to such items. The partners are entitled to profit or loss allocations and distributions of cash flows according to the operating agreements, which provide for such allocations according to their invested capital. Our share of invested capital establishes the ownership interests we use to prepare our pro-rata Balance Sheets and Statements of Operations.
The presentation of pro-rata information has limitations which include, but are not limited to, the following:

31





The amounts shown on the individual line items were derived by applying our overall economic ownership interest percentage determined when applying the equity method of accounting or allocating noncontrolling interests, and do not necessarily represent our legal claim to the assets and liabilities, or the revenues and expenses; and

Other companies in our industry may calculate their pro-rata interest differently, limiting the usefulness as a comparative measure.

Because of these limitations, the pro-rata financial information should not be considered independently or as a substitute for our financial statements as reported under GAAP. We compensate for these limitations by relying primarily on our GAAP financial statements, using the pro-rata financial information as a supplement.
Core EBITDA is defined as earnings before interest, taxes, depreciation and amortization, real estate gains and losses, and development and acquisition pursuit costs.

Fixed Charge Coverage Ratio is defined as Core EBITDA divided by the sum of the gross interest and scheduled mortgage principal paid to our lenders plus dividends paid to our preferred stockholders.

Net Operating Income ("NOI") is the sum of minimum rent, percentage rent and recoveries from tenants and other income, less operating and maintenance, real estate taxes, and provision for doubtful accounts. NOI excludes straight-line rental income, above and below market rent amortization and other fees. The Company also provides disclosure of NOI excluding termination fees, which excludes both termination fee income and expenses.

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

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


    




32






Overview of Our Strategy

Regency Centers began its operations as a publicly-traded REIT in 1993, and currently owns direct or partial interests in 311 shopping centers, the majority of which are grocery-anchored community and neighborhood centers. Our centers are located in the top markets of 26 states and the District of Columbia, and contain 37.9 million square feet ("SF") of gross leasable area ("GLA"). All of our operating, investing, and financing activities are performed through the Operating Partnership, its wholly-owned subsidiaries, and through its investment partnerships. The Parent Company currently owns approximately 99.8% of the outstanding common partnership units of the Operating Partnership.
Our mission is to be the preeminent grocery-anchored shopping center owner and developer through:
First-rate performance of our exceptionally merchandised and located national portfolio;
Value-enhancing services of the best team of professionals in the business; and
Creation of superior growth in shareholder value.

Our strategy is:
Sustain average annual 3% NOI growth from a high-quality, growing portfolio of thriving community and neighborhood shopping centers;
Develop new, and redevelop existing, high quality shopping centers at attractive returns on investment from a disciplined development program;
Maintain our strong balance sheet to provide financial flexibility, to cost effectively fund uses of capital, and to weather economic downturns; and
Engage a talented and dedicated team with high standards of integrity that operates efficiently and is recognized as a leader in the real estate industry.

Executing on our Strategy

During the six months ended June 30, 2016, we executed on our strategic objectives to further solidify Regency’s position as a leader among shopping center REITs:
Sustain average annual 3% NOI growth from a high-quality, growing portfolio of thriving community and neighborhood shopping centers.
We earn revenues and generate cash flow by leasing space in our shopping centers to grocery stores, major retail anchors, restaurants, side-shop retailers, and service providers, as well as ground leasing or selling out-parcels to these same types of tenants. We experience growth in revenues by increasing occupancy and rental rates in our existing shopping centers, by acquiring and developing new shopping centers, and by redeveloping shopping centers within our portfolio. Noteworthy milestones and achievements during 2016 include:
We achieved pro-rata same property NOI growth, excluding termination fees, of 3.7% during the six months ended June 30, 2016.
We increased our pro-rata same property percent leased to 96.3% at June 30, 2016 from 96.2% at December 31, 2015.
We grew rental rates 13.7% on new and renewal leases of comparable size space during the six months ended June 30, 2016.
We invested in the acquisition of two operating properties.

Develop new, high quality shopping centers and redevelop existing centers at attractive returns on investment from a disciplined development program.
We capitalize on our development capabilities, market presence, and anchor relationships by investing in new developments and redevelopments of existing centers.
During the six months ended June 30, 2016, we started $54.5 million of development and redevelopment projects with a weighted average projected return of 8.1%, net of partner funding requirements.
As of June 30, 2016, we have five ground-up developments in process, with total expected net development costs of $89.2 million, projected returns on capital of 7.9%, and are currently 87.7% leased. We also have 17 redevelopments of existing centers in process with total expected net redevelopment costs of $117.2 million, with $72.0 million of costs to complete, and projected incremental returns ranging from 7.0% - 10.0%.


33





Maintain our strong balance sheet to provide financial flexibility, to cost effectively fund uses of capital, and to weather economic downturns.
We fund acquisitions and development activities from various capital sources including operating cash flow, property sales through a disciplined match-funding strategy of selling low growth assets, equity offerings, new debt financing, and capital from our co-investment partners.
At June 30, 2016, our net debt-to-core EBITDA ratio on a pro-rata basis for the trailing twelve months was 5.3x versus 5.2x at December 31, 2015. We had $24.9 million of cash and $145.0 million outstanding balance on our $800.0 million Line.
In March 2016, we sold 3.1 million shares of common stock at an offering price of $75.25 per share through our forward equity offering, to be settled by June 2017. In June 2016, we settled 1.85 million shares of the forward equity offering resulting in net proceeds of $137.5 million, which was used to repay the Line balance created from funding the acquisition of Market Common Clarendon.
Subsequent to June 30, 2016, we amended our existing Term Loan, which increased the facility size by $100.0 million to $265.0 million, extended the maturity date to January 5, 2022 and fixed the interest rate at 2.00%. Proceeds from the expanded Term Loan facility were used to repay our Line that was used to partially fund the acquisition of Market Common Clarendon.
Subsequent to June 30, 2016, we issued 5.0 million shares of common stock resulting in net proceeds of $400.1 million, used to (i) repay in full our outstanding $300 million of 5.875% senior unsecured notes due June 15, 2017, including a make-whole payment, (ii) settle the forward interest rate swap, and (iii) fund investment activities and for general corporate purposes.
 

Shopping Center Portfolio

The following table summarizes general information related to the Consolidated Properties in our shopping center portfolio:
(GLA in thousands)
 
June 30, 2016
 
December 31, 2015
Number of Properties
 
199
 
200
Properties in Development
 
5
 
7
GLA
 
23,822
 
23,280
% Leased – Operating and Development
 
95.8%
 
95.4%
% Leased – Operating
 
96.0%
 
95.9%
Weighted average annual effective rent per square foot ("PSF"), net of tenant concessions.
 
$19.36
 
$18.95
 
 
 
 
 

The following table summarizes general information related to the Unconsolidated Properties owned in co-investment partnerships in our shopping center portfolio:
(GLA in thousands)
 
June 30, 2016
 
December 31, 2015
Number of Properties
 
112
 
118
GLA
 
14,042
 
14,755
% Leased – Operating
 
96.3%
 
96.3%
Weighted average annual effective rent PSF, net of tenant concessions
 
$19.25
 
$18.81

For the purpose of the following disclosures of occupancy and leasing activity, anchor space is considered space greater than or equal to 10,000 SF and shop space is less than 10,000 SF. The following table summarizes pro-rata occupancy rates of our combined Consolidated and Unconsolidated shopping center portfolio:
 
 
June 30, 2016
 
December 31, 2015
% Leased – Operating
 
96.0%
 
95.9%
Anchor
 
98.3%
 
98.5%
Shop space
 
92.3%
 
91.7%

34






    

The following table summarizes leasing activity, including Regency's pro-rata share of activity within the portfolio of our co-investment partnerships:
 
 
Six months ended June 30, 2016
 
 
Leasing Transactions (1)
 
SF (in thousands)
 
Base Rent PSF
 (2)
 
Tenant Improvements PSF
 (2)
 
Leasing Commissions PSF
 (2)
Anchor Leases
 

 

 

 

 

New
 
8
 
235
 
$
12.76

 
$
5.64

 
$
3.07

Renewal
 
36
 
885
 
$
12.12

 
$
0.51

 
$
1.43

Total Anchor Leases (1)
 
44
 
1,120
 
$
12.25

 
$
1.59

 
$
1.77

Shop Space
 

 

 


 


 


New
 
209
 
376
 
$
28.85

 
$
13.00

 
$
13.16

Renewal
 
455
 
704
 
$
30.57

 
$
1.78

 
$
3.88

Total Shop Space Leases (1)
 
664
 
1,080
 
$
29.97

 
$
5.68

 
$
7.11

Total Leases
 
708
 
2,200
 
$
20.95

 
$
3.60

 
$
4.39

 
 
Six months ended June 30, 2015
 
 
Leasing Transactions (1)
 
SF (in thousands)
 
Base Rent PSF
 (2)
 
Tenant Improvements PSF
 (2)
 
Leasing Commissions PSF
 (2)
Anchor Leases
 
 
 
 
 
 
 
 
 
 
New
 
2
 
37
 
$
14.79

 
$

 
$
2.71

Renewal
 
20
 
579
 
$
11.21

 
$
0.02

 
$
1.04

Total Anchor Leases (1)
 
22
 
616
 
$
11.42

 
$
0.02

 
$
1.14

Shop Space
 
 
 
 
 
 
 
 
 
 
New
 
228
 
375
 
$
31.06

 
$
10.27

 
$
13.83

Renewal
 
469
 
704
 
$
30.93

 
$
0.92

 
$
3.87

Total Shop Space Leases (1)
 
697
 
1,079
 
$
30.98

 
$
4.17

 
$
7.34

Total Leases
 
719
 
1,695
 
$
23.87

 
$
2.66

 
$
5.09

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

For the six months ended June 30, 2016 we completed 2.2 million SF of new and renewal leasing at average base rent PSF of $20.95. Total average base rent signed on our shop space leases of $29.97 decreased slightly in 2016 compared to 2015; however, it exceeds the average annual base rent of all shop space leases due to expire during the next twelve months of $27.29 PSF, by 9.8%.










35





Significant Tenants and Concentrations of Risk

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

 
 
June 30, 2016
Grocery Anchor
 
Number of
Stores (1)
 
Percentage of
Company-
owned GLA (2)
 
Percentage  of
Annualized
Base Rent (2) 
Kroger
 
58
 
9.1%
 
4.6%
Publix
 
45
 
6.4%
 
3.5%
Safeway
 
49
 
4.8%
 
2.8%
Whole Foods
 
20
 
2.3%
 
2.3%
 
 
 
 
 
 
 
(1) Includes stores owned by grocery anchors that are attached to our centers.
(2) Includes Regency's pro-rata share of Unconsolidated Properties and excludes those owned by anchors.

Bankruptcies

Although base rent is supported by long-term lease contracts, tenants who file bankruptcy may have the legal right to reject any or all of their leases and close related stores. In the event that a tenant with a significant number of leases in our shopping centers files bankruptcy and cancels its leases, we could experience a significant reduction in our revenues. We monitor the operating performance and rent collections of all tenants in our shopping centers, especially those tenants with operating retail formats that are experiencing significant changes in competition, business practice, and store closings in other locations. However, no tenant represents more than 5% of our annual base rent on a pro-rata basis.

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

During March 2016, Sports Authority filed for Chapter 11 bankruptcy protection, at which time we had three leases in our portfolio. One of those leases has been assumed by another retailer and the remaining two have been rejected. Those remaining two locations currently represent $2.1 million, or 0.4%, of total annualized base rent on a pro-rata basis.

During February 2016, Sears Holdings announced that it planned to accelerate the closing of a number of unprofitable stores due to continued poor sales. Sears continues to report significant declines in operating revenues and performance, and its ability to continue operating stores in our shopping centers is uncertain. We have four Sears or Kmart leases in our portfolio, which currently represent $3.0 million, or 0.5%, of total annualized base rent on a pro-rata basis.     






36





Results from Operations

Comparison of the three months ended June 30, 2016 to 2015:

Our revenues increased as summarized in the following table: 
 
 
Three months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Minimum rent
 
$
109,945

 
102,390

 
7,555

Percentage rent
 
453

 
300

 
153

Recoveries from tenants
 
32,414

 
30,421

 
1,993

Other income
 
3,460

 
2,010

 
1,450

Management, transaction, and other fees
 
6,140

 
6,008

 
132

Total revenues
 
$
152,412

 
141,129

 
11,283


Minimum rent increased as follows:

$4.0 million increase from rent commencing at development properties;

$3.8 million increase due to acquisitions of operating properties; and

$1.4 million increase in minimum rent from same properties, reflecting a $2.5 million increase from redevelopments, rental rate growth on new and renewal leases, and contractual rent steps, offset by a $1.1 million charge to straight line rent related to expected early terminations;

reduced by $1.7 million from the sale of operating properties.

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

$865,000 increase from rent commencing at development properties;

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

$820,000 increase from same properties associated with higher recoverable costs;

reduced by $703,000 from the sale of operating properties.

Other income, which consists of incidental income earned at our centers, increased $1.5 million primarily as a result of easement fees, settlements, and parking income earned at our properties during the three months ended June 30, 2016.

We earned fees, at market-based rates, for asset management, property management, leasing, acquisition, and financing services that we provided to our co-investment partnerships and third parties as follows:
    
 
 
Three months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Asset management fees
 
$
1,616

 
1,562

 
54

Property management fees
 
3,277

 
3,312

 
(35
)
Leasing commissions and other fees
 
1,247

 
1,134

 
113

Total management, transaction, and other fees
 
$
6,140

 
6,008

 
132

    
    

        

37






Changes in our operating expenses are summarized in the following table: 
 
 
Three months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Depreciation and amortization
 
$
40,299

 
36,225

 
4,074

Operating and maintenance
 
23,709

 
20,185

 
3,524

General and administrative
 
16,350

 
15,099

 
1,251

Real estate taxes
 
16,769

 
15,667

 
1,102

Other operating expenses
 
2,440

 
1,779

 
661

Total operating expenses
 
$
99,567

 
88,955

 
10,612

    
Depreciation and amortization costs increased as follows:
$1.5 million increase as we began depreciating costs at development properties where tenant spaces were completed and became available for occupancy;
$1.4 million increase due to acquisitions of operating properties and corporate assets; and
$1.8 million increase at same properties, attributable to recent capital improvements and redevelopments;
reduced by $573,000 from the sale of operating properties.

Operating and maintenance costs increased as follows:
$684,000 increase related to operations commencing at development properties;
$1.9 million increase related to acquisitions of operating properties; and
$1.4 million increase at same properties in recoverable costs;
reduced by $443,000 from the sale of operating properties.
    
General and administrative expenses increased as follows:
$206,000 of lower development overhead capitalization due to the timing of project starts; and
$637,000 increase from the change in the value of participant obligations within the deferred compensation plan.

Real estate taxes increased as follows:
$384,000 increase related to development properties where capitalization ceased as tenant spaces became available for occupancy;
$768,000 increase related to acquisitions of operating properties; and
$419,000 increase at same properties from increased tax assessments;
reduced by $468,000 from sold properties.
    
Other operating expenses increased $661,000 primarily due to higher transaction costs associated with property acquisitions and pursuit costs.

    










38





The following table presents the components of other expense (income):
 
 
Three months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Interest expense, net
 
 
 
 
 
 
Interest on notes payable
 
$
21,819

 
25,856

 
(4,037
)
Interest on unsecured credit facilities
 
1,357

 
786

 
571

Capitalized interest
 
(793
)
 
(1,956
)
 
1,163

Hedge expense
 
2,269

 
2,252

 
17

Interest income
 
(251
)
 
(263
)
 
12

Interest expense, net
 
24,401

 
26,675

 
(2,274
)
Net investment loss (income)
 
(602
)
 
(367
)
 
(235
)
     Total other expense (income)
 
$
23,799

 
26,308

 
(2,509
)
    
The $2.3 million decrease in total interest expense is due to:

$4.0 million decrease in lower interest rates from refinancing our long-term debt during 2015 and lower outstanding balances on notes payable; offset by,

$571,000 increase in interest expense related to higher average balances on unsecured credit facilities during the three months ended June 30, 2016,

$1.2 million less of interest capitalized on development and redevelopment projects.

Net investment income increased $235,000, driven by realized gains from the non-qualified deferred compensation plan.

Our equity in income of investments in real estate partnerships increased as follows: 
 
 
 
Three months ended June 30,
 
 
(in thousands)
Ownership
 
2016
 
2015
 
Change
GRI - Regency, LLC (GRIR)
40.00%
 
$
6,341

 
5,336

 
1,005

Columbia Regency Retail Partners, LLC (Columbia I)
20.00%
 
1,881

 
380

 
1,501

Columbia Regency Partners II, LLC (Columbia II)
20.00%
 
1,393

 
142

 
1,251

Cameron Village, LLC (Cameron)
30.00%
 
173

 
216

 
(43
)
RegCal, LLC (RegCal)
25.00%
 
250

 
100

 
150

US Regency Retail I, LLC (USAA)
20.01%
 
242

 
191

 
51

Other investments in real estate partnerships
50.00%
 
770

 
392

 
378

Total equity in income of investments in real estate partnerships
 
$
11,050

 
6,757

 
4,293

    
The $4.3 million increase in our equity in income in investments in real estate partnerships is largely attributed to (i) an increase in the gain on sales of real estate within our GRIR, Columbia I, and Columbia II partnerships; and (ii) interest expense savings within GRIR resulting from decreased debt balances and refinancing activity at lower interest rates.


39





The following represents the remaining components that comprised net income attributable to the common stockholders and unit holders:
 
 
Three months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Income from operations
 
$
40,096

 
32,623

 
7,473

Gain on sale of real estate
 
548

 
5,657

 
(5,109
)
Income attributable to noncontrolling interests
 
(568
)
 
(534
)
 
(34
)
Preferred stock dividends
 
(5,266
)
 
(5,266
)
 

Net income attributable to common stockholders
 
$
34,810

 
32,480

 
2,330

Net income attributable to exchangeable operating partnership units
 
64

 
61

 
3

Net income attributable to common unit holders
 
$
34,874

 
32,541

 
2,333


During the three months ended June 30, 2016, we sold one operating property and five land parcels for gains totaling $0.5 million, as compared to a gain of $5.7 million from the sale of one operating property during the three months ended June 30, 2015.


40






Comparison of the six months ended June 30, 2016 to 2015:

Our revenues increased as summarized in the following table: 
 
 
Six months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Minimum rent
 
$
217,619

 
203,695

 
13,924

Percentage rent
 
2,156

 
2,108

 
48

Recoveries from tenants
 
63,240

 
59,356

 
3,884

Other income
 
6,122

 
4,123

 
1,999

Management, transaction, and other fees
 
12,904

 
12,246

 
658

Total revenues
 
$
302,041

 
281,528

 
20,513

        
Minimum rent increased as follows:

$7.6 million increase from rent commencing at development properties;

$5.7 million increase due to acquisitions of operating properties; and

$3.9 million increase in minimum rent from same properties, reflecting a $5.5 million increase from redevelopments, rental rate growth on new and renewal leases, and contractual rent steps, offset by a $1.6 million charge to straight line rent primarily attributable to expected early terminations;

reduced by $3.3 million from the sale of operating properties.

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

$1.7 million increase from rent commencing at development properties;

$1.6 million increase due to acquisitions of operating properties; and

$2.0 million increase from same properties associated with higher recoverable costs;

reduced by $1.4 million from the sale of operating properties.

Other income, which consists of incidental income earned at our centers, increased $2.0 million primarily as a result of a lease termination fee, easement fees, and parking income earned at our properties during 2016.

We earned fees, at market-based rates, for asset management, property management, leasing, acquisition, and financing services that we provided to our co-investment partnerships and third parties as follows:
 
 
Six months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Asset management fees
 
$
3,324

 
3,121

 
203

Property management fees
 
6,622

 
6,631

 
(9
)
Leasing commissions and other fees
 
2,958

 
2,494

 
464

Total management, transaction, and other fees
 
$
12,904

 
12,246

 
658


Asset management fees increased due to higher property values in our investment partnerships. Leasing commissions and other fees increased during 2016 due to a greater number of leasing transactions.




    

41






Changes in our operating expenses are summarized in the following table: 
 
 
Six months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Depreciation and amortization
 
$
79,015

 
72,218

 
6,797

Operating and maintenance
 
46,394

 
41,358

 
5,036

General and administrative
 
32,649

 
31,477

 
1,172

Real estate taxes
 
32,639

 
30,798

 
1,841

Other operating expenses
 
4,747

 
2,943

 
1,804

Total operating expenses
 
$
195,444

 
178,794

 
16,650


Depreciation and amortization costs increased as follows:
$2.8 million increase as we began depreciating costs at development properties where tenant spaces were completed and became available for occupancy;
$2.3 million increase due to acquisitions of operating properties and corporate assets; and
$2.9 million increase at same properties, attributable to recent capital improvements and redevelopments;
reduced by $1.2 million from the sale of operating properties.

Operating and maintenance costs increased as follows:
$1.3 million increase related to operations commencing at development properties;
$3.0 million increase related to acquisitions of operating properties; and
$1.5 million increase in recoverable costs at same properties;
reduced by $823,000 from the sale of operating properties.

General and administrative expenses increased as follows:
$537,000 of higher compensation costs; and
$830,000 of lower development overhead capitalization based on timing of project starts;
reduced by, $141,000 decrease in the value of participant obligations within the deferred compensation plan.

Real estate taxes increased as follows:
$641,000 increase related to development properties where capitalization ceased as tenant spaces became available for occupancy;
$1.1 million increase related to acquisitions of operating properties; and
$952,000 increase at same properties from increased tax assessments;
reduced by $893,000 from sold properties.

Other operating expenses increased $1.8 million primarily due to higher transaction costs associated with property acquisitions and pursuit costs.


42





The following table presents the components of other expense (income):
 
 
Six months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Interest expense, net
 
 
 
 
 
 
Interest on notes payable
 
$
44,071

 
51,748

 
(7,677
)
Interest on unsecured credit facilities
 
2,273

 
1,602

 
671

Capitalized interest
 
(1,766
)
 
(4,015
)
 
2,249

Hedge expense
 
4,499

 
4,502

 
(3
)
Interest income
 
(534
)
 
(529
)
 
(5
)
Interest expense, net
 
48,543

 
53,308

 
(4,765
)
Provision for impairment
 
1,666

 

 
1,666

Early extinguishment of debt
 

 
(61
)
 
61

Net investment loss (income)
 
(446
)
 
(1,000
)
 
554

     Total other expense (income)
 
$
49,763

 
52,247

 
(2,484
)

The $4.8 million decrease in total interest expense is due to:
$7.7 million decrease in lower interest rates from refinancing our long-term debt during 2015 and lower outstanding balances on notes payable; offset by,

$671,000 increase in interest expense related to higher average balances on unsecured credit facilities during the six months ended June 30, 2016, and

$2.2 million less of interest capitalized on development and redevelopment projects.

During the six months ended June 30, 2016, we recognized a $1.7 million impairment loss on one operating property and one parcel of land that have since been sold. We did not recognize any impairments for the six months ended June 30, 2015.

Net investment income decreased $554,000, driven by realized gains from the non-qualified deferred compensation plan during the six months ended June 30, 2015 exceeding realized gains during the six months ended June 30, 2016.






43






Our equity in income of investments in real estate partnerships increased as follows: 
 
 
 
Six months ended June 30,
 
 
(in thousands)
Ownership
 
2016
 
2015
 
Change
GRI - Regency, LLC (GRIR)
40.00%
 
$
17,113

 
9,330

 
7,783

Columbia Regency Retail Partners, LLC (Columbia I)
20.00%
 
2,243

 
750

 
1,493

Columbia Regency Partners II, LLC (Columbia II)
20.00%
 
1,870

 
294

 
1,576

Cameron Village, LLC (Cameron)
30.00%
 
337

 
362

 
(25
)
RegCal, LLC (RegCal)
25.00%
 
479

 
234

 
245

US Regency Retail I, LLC (USAA)
20.01%
 
512

 
408

 
104

Other investments in real estate partnerships
50.00%
 
1,417

 
946

 
471

Total equity in income of investments in real estate partnerships
 
$
23,971

 
12,324

 
11,647

    
The $11.6 million increase in our equity in income in investments in real estate partnerships is largely attributed to (i) an increase in our share of the gain on sales of real estate within our GRIR, Columbia I, and Columbia II partnerships; (ii)interest expense savings within GRIR resulting from decreased debt balances and refinancing activity at lower interest rates; and (iii) a reduction in deprecation expense within GRIR as a result of planned redevelopment activity.

The following represents the remaining components that comprise net income attributable to the common stockholders and unit holders:
 
 
Six months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Income from operations
 
$
80,804

 
62,811

 
17,993

Gain on sale of real estate
 
13,417

 
6,460

 
6,957

Income attributable to noncontrolling interests
 
(1,003
)
 
(1,087
)
 
84

Preferred stock dividends
 
(10,531
)
 
(10,531
)
 

Net income attributable to common stockholders
 
$
82,687

 
57,653

 
25,034

Net income attributable to exchangeable operating partnership units
 
150

 
110

 
40

Net income attributable to common unit holders
 
$
82,837

 
57,763

 
25,074


During the six months ended June 30, 2016, we sold four operating properties and 10 land parcels resulting in a gain of $13.4 million, compared to a gain of $6.5 million from the sale of two operating properties during 2015.

    





44





Supplemental Earnings Information

We use certain non-GAAP performance measures, in addition to the required GAAP presentations, as we believe these measures improve the understanding of the Company's operational results. We manage our entire real estate portfolio without regard to ownership structure, although certain decisions impacting properties owned through partnerships require partner approval. Therefore, we believe presenting our pro-rata share of operating results regardless of ownership structure, along with other non-GAAP measures, makes comparisons of other REITs' operating results to the Company's more meaningful. We continually evaluate the usefulness, relevance, limitations, and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change.

Pro-Rata Same Property NOI:    
Our pro-rata same property NOI, excluding termination fees, grew from the following major components:
 
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
 
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Base rent
 
$
123,490

 
120,109

 
3,381

 
$
246,273

 
239,101

 
7,172

Percentage rent
 
872

 
737

 
135

 
3,114

 
3,137

 
(23
)
Recovery revenue
 
37,380

 
37,335

 
45

 
73,838

 
73,469

 
369

Other income
 
3,106

 
1,691

 
1,415

 
5,794

 
3,391

 
2,403

Operating expenses
 
45,197

 
44,104

 
1,093

 
90,302

 
89,494

 
808

Pro-rata same property NOI (1)
 
119,651

 
115,768

 
3,883

 
$
238,717

 
229,604

 
9,113

Less: Termination fees
 
95

 
104

 
(9
)
 
839

 
248

 
591

Pro-rata same property NOI excluding termination fees
 
$
119,556

 
115,664

 
3,892

 
$
237,878

 
229,356

 
8,522

Growth
 
 
 
 
 
3.4
%
 
 
 
 
 
3.7
%
(1) See the end of the Supplemental Earnings Information section for a reconciliation to the nearest GAAP measure.


Pro-rata same property base rent increased $3.4 million and $7.2 million during the three and six months ended June 30, 2016, respectively, driven by increases in rental rate growth on new and renewal leases and contractual rent steps in our existing leases, with occupancy remaining flat.

Pro-rata same property other income increased $1.4 million and $2.4 million during the three and six months ended June 30, 2016, respectively, as a result of lease termination fees, easement sales, and settlements in 2016.    

Pro-rata same property operating expenses increased $1.1 million and $0.8 million during the three and six months ended June 30, 2016, respectively, primarily driven by increases in real estate taxes, with some additional impacts seen from tenant reimbursable services, property management fees, and snow removal costs.


45





Same Property Rollforward:
Our same property pool includes the following property count, pro-rata GLA, and changes therein:
 
Three months ended June 30,
 
2016
 
2015
(GLA in thousands)
Property Count
GLA
 
Property Count
GLA
Beginning same property count
302

27,057

 
304

26,730

Acquired properties owned for entirety of comparable periods


 


Developments that reached completion by beginning of earliest comparable period presented


 


Disposed properties
(4
)
(105
)
 
(1
)
(54
)
SF adjustments (1)

12

 

6

Ending same property count
298

26,964

 
303

26,682

 
 
 
 
 
 
 
Six months ended June 30,
 
2016
 
2015
(GLA in thousands)
Property Count
GLA
 
Property Count
GLA
Beginning same property count
300

26,508

 
298

25,526

Acquired properties owned for entirety of comparable periods
6

443

 
4

427

Developments that reached completion by beginning of earliest comparable period presented
2

342

 
3

790

Disposed properties
(10
)
(365
)
 
(2
)
(75
)
SF adjustments (1)

36

 

14

Ending same property count
298

26,964

 
303

26,682

(1) SF adjustments arise from remeasurements or redevelopments.





46





NAREIT FFO and Core FFO:    
Our reconciliation of net income attributable to common stock and unit holders to NAREIT FFO and Core FFO is as follows:
 
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands, except share information)
 
2016
 
2015
 
2016
 
2015
Reconciliation of Net income to NAREIT FFO
 
 
 
 
 
 
 
 
Net income attributable to common stockholders
 
$
34,810

 
32,480

 
$
82,687

 
57,653

Adjustments to reconcile to NAREIT FFO:(1)
 
 
 
 
 
 
 
 
Depreciation and amortization
 
48,130

 
45,293

 
95,545

 
90,385

Provision for impairment
 

 

 
659

 

Gain on sale of operating properties, net of tax
 
(3,308
)
 
(6,792
)
 
(14,948
)
 
(7,475
)
Exchangeable operating partnership units
 
64

 
61

 
150

 
110

NAREIT FFO attributable to common stock and unit holders
 
$
79,696

 
71,042

 
$
164,093

 
140,673

Reconciliation of NAREIT FFO to Core FFO
 
 
 
 
 
 
 
 
NAREIT FFO
 
$
79,696

 
71,042

 
$
164,093

 
140,673

Adjustments to reconcile to Core FFO:(1)
 
 
 
 
 
 
 
 
Development and acquisition pursuit costs
 
1,451

 
484

 
2,433

 
523

Gain on sale of land
 
(148
)
 
43

 
(7,258
)
 
(68
)
Provision for impairment to land
 

 

 
512

 

Interest rate swap ineffectiveness
 
1

 
1

 
3

 
4

Early extinguishment of debt
 
14

 

 
14

 
(61
)
Dividends from investments
 

 
(417
)
 

 
(417
)
Core FFO attributable to common stock and unit holders
 
$
81,014

 
71,153

 
$
159,797

 
140,654

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













47






Reconciliation of Same Property NOI to Nearest GAAP Measure:

Our reconciliation of property revenues and property expenses to Same Property NOI, on a pro-rata basis, is as follows:
 
 
Three months ended June 30,
 
 
2016
 
2015
(in thousands)
 
Same Property
 
Other (1)
 
Total
 
Same Property
 
Other (1)
 
Total
Income from operations
 
$
65,420

 
(25,324
)
 
40,096

 
$
60,945

 
(28,322
)
 
32,623

Less:
 
 
 
 
 
 
 
 
 
 
 
 
Management, transaction, and other fees
 

 
6,140

 
6,140

 

 
6,008

 
6,008

Other (2)
 
525

 
3,059

 
3,584

 
1,748

 
1,870

 
3,618

Plus:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
36,023

 
4,276

 
40,299

 
34,207

 
2,018

 
36,225

General and administrative
 

 
16,350

 
16,350

 

 
15,099

 
15,099

Other operating expense, excluding provision for doubtful accounts
 
301

 
1,644

 
1,945

 
(15
)
 
1,237

 
1,222

Other expense (income)
 
6,656

 
17,143

 
23,799

 
7,258

 
19,050

 
26,308

Equity in income (loss) of investments in real estate excluded from NOI (3)
 
11,776

 
232

 
12,008

 
15,121

 
766

 
15,887

Pro-rata NOI
 
$
119,651

 
5,122

 
124,773

 
$
115,768

 
1,970

 
117,738

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30,
 
 
2016
 
2015
(in thousands)
 
Same Property
 
Other (1)
 
Total
 
Same Property
 
Other (1)
 
Total
Income from operations
 
$
133,760

 
(52,956
)
 
80,804

 
$
119,963

 
(57,152
)
 
62,811

Less:
 
 
 
 
 
 
 
 
 
 
 
 
Management, transaction, and other fees
 

 
12,904

 
12,904

 

 
12,246

 
12,246

Other(2)
 
2,175

 
5,317

 
7,492

 
4,103

 
3,415

 
7,518

Plus:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
71,440

 
7,575

 
79,015

 
68,527

 
3,691

 
72,218

General and administrative
 

 
32,649

 
32,649

 

 
31,477

 
31,477

Other operating expense, excluding provision for doubtful accounts
 
893

 
2,953

 
3,846

 
(13
)
 
1,678

 
1,665

Other expense (income)
 
13,685

 
36,079

 
49,764

 
14,412

 
37,835

 
52,247

Equity in income (loss) of investments in real estate excluded from NOI (3)
 
21,114

 
683

 
21,797

 
30,818

 
1,769

 
32,587

Pro-rata NOI
 
$
238,717

 
8,762

 
247,479

 
$
229,604

 
3,637

 
233,241

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










48





Liquidity and Capital Resources

General

We utilize cash flows generated from operating, investing, and financing activities to strengthen our balance sheet and reduce risk, finance our development and redevelopment projects, fund our targeted investments, and maintain financial flexibility. We continuously monitor the capital markets and evaluate our ability to issue new debt or equity to repay maturing debt or fund our capital commitments.

Our Parent Company has no capital commitments other than its guarantees of the commitments of our Operating Partnership. The Parent Company will from time to time access the capital markets for the purpose of issuing new equity and will simultaneously contribute all of the offering proceeds to the Operating Partnership in exchange for additional partnership units. All debt is held by our Operating Partnership or by our co-investment partnerships. Based upon our available sources of capital, our current credit ratings, and the number of high quality, unencumbered properties we own, we believe our available capital resources are sufficient to meet our expected capital needs. The following table represents our available sources of capital:

(in thousands)
 
June 30, 2016
ATM equity program
 
 
Original offering amount
 
$
200,000

Available capacity
 
$
70,800

 
 
 
Forward Equity Offering
 
 
Original offering amount
 
$
233,300

Available equity offering to settle (1)
 
$
94,063

 
 
 
Line of Credit
 
 
Total commitment amount
 
$
800,000

Available capacity (2)
 
$
649,200

Maturity (3)
 
May 13, 2019
 
 
 
(1) Available shares may be settled prior to June 23, 2017
 
 
(2) Net of letters of credit. Subsequent to June 30, 2016, the Company repaid the entire Line balance from its Term Loan proceeds and property sales, resulting in available capacity of $794.2 million.
(3) The Company has the option to extend the maturity for two additional six-month periods.
    
We operate our business such that we expect net cash provided by operating activities will provide the necessary funds to pay our distributions to our common and preferred share and unit holders, which were $107.7 million and $101.3 million for the six months ended June 30, 2016 and 2015, respectively. Our dividend distribution policy is set by our Board of Directors, who monitors our financial position. Our Board of Directors recently declared our common stock quarterly dividend of $0.50 per share, payable on August 31, 2016. Future dividends will be declared at the discretion of our Board of Directors and will be subject to capital requirements and availability. We plan to continue paying an aggregate amount of distributions to our stock and unit holders that, at a minimum, meet the requirements to continue qualifying as a REIT for Federal income tax purposes.

During the next twelve months, we estimate that we will require approximately $578.8 million of cash, including $124.9 million to complete in-process developments and redevelopments, $431.6 million to repay maturing debt including the redemption referred to below, and $22.3 million to fund our pro-rata share of estimated capital contributions to our co-investment partnerships for repayment of debt. If we start new developments or redevelop additional shopping centers, our cash requirements will increase.

We endeavor to maintain a high percentage of unencumbered assets. At June 30, 2016, 82.5% of our wholly-owned real estate assets were unencumbered. Such assets allow us to access the secured and unsecured debt markets and to maintain availability on the Line. Our coverage ratio, including our pro-rata share of our partnerships, was 3.0 times and 2.6 times for the trailing four quarters ended June 30, 2016 and 2015, respectively. We define our coverage ratio as earnings before interest, taxes, investment transaction profits net of deal costs, depreciation and amortization (“Core EBITDA”) divided by the sum of the gross interest and scheduled mortgage principal paid to our lenders plus dividends paid to our preferred stockholders.


49





Our Line, Term Loan, and unsecured loans require that we remain in compliance with various covenants, which are described in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. We are in compliance with these covenants at June 30, 2016 and expect to remain in compliance.

Subsequent Events    

In July 2016, we amended our existing senior unsecured Term Loan facility. The amendment established a new Term Loan of $265 million, which increased the existing loan by $100 million, extended the maturity date to January 5, 2022, and reduced the applicable interest rate. The new Term Loan bears interest at LIBOR plus a ratings based margin of 0.95% per annum, subject to adjustment from time to time based on changes to our corporate credit rating. In connection with the amendment, we executed interest rate swaps for the full notional amount of $265 million, fixing the interest rate at 2.00% through maturity. We utilized the additional $100.0 million to pay down our Line, which we used as a funding component for the acquisition of Market Common Clarendon.

Also in July 2016, we initiated and completed an equity offering with respect to 5.0 million shares of our common stock at an offering price of $79.98 per share, which resulted in gross proceeds of approximately $400 million before offering expenses. We plan to use a portion of the proceeds to redeem our outstanding $300 million 5.875% senior unsecured notes due June 2017 in August 2016. The redemption price will be determined in accordance with the applicable indenture and is expected to be $316 million, including $3 million of accrued and unpaid interest through the proposed redemption date and a $13 million make-whole amount, which will be expensed in the third quarter of 2016. Additionally, we used $40.6 million of the net proceeds to settle in full the 3.48% $220 million forward starting swaps. As a result of the equity offering, we now believe that the issuance of new fixed rate debt within the remaining period of the forward starting swaps is probable not to occur.  Accordingly, we will cease hedge accounting and reclassify the amount paid to settle the forward starting swaps from Accumulated other comprehensive loss to earnings during the third quarter of 2016.

We intend to use the remaining portion of the net proceeds to fund investment activities and for general corporate purposes. As part of the equity offering, we agreed to a 60 day lock-up period from settlement, whereby we will not sell any shares of our common stock or any other derived form of transferring ownership of the company, except with respect to the 1.25 million shares of common stock that may be settled under the forward equity offering.
  
Summary of Cash Flow Activity

The following table summarizes net cash flows related to operating, investing, and financing activities of the Company: 
 
 
Six months ended June 30,
 
 
 (in thousands)
 
2016
 
2015
 
Change
Net cash provided by operating activities
 
$
143,313

 
127,413

 
15,900

Net cash used in investing activities
 
(316,024
)
 
(76,706
)
 
(239,318
)
Net cash provided by (used in) financing activities
 
160,794

 
(137,369
)
 
298,163

Net decrease in cash and cash equivalents
 
$
(11,917
)
 
(86,662
)
 
74,745

Total cash and cash equivalents
 
$
24,939

 
27,114

 
(2,175
)
    
Net cash provided by operating activities:

Net cash provided by operating activities increased $15.9 million due to:
$14.0 million increase in cash from operating income; and,
$3.4 million increase in operating cash flow distributions from our unconsolidated real estate partnerships as several redevelopment projects were completed and began generating operating cash flows; reduced by
$1.5 million net decrease in cash due to timing of cash receipts and payments related to operating activities.

50






Net cash used in investing activities:

Net cash used in investing activities increased by $239.3 million as follows:
 
 
Six months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Cash flows from investing activities:
 
 
 
 
 
 
Acquisition of operating real estate
 
$
(297,448
)
 

 
(297,448
)
Advance deposits on acquisition of operating real estate
 
(1,500
)
 
(4,500
)
 
3,000

Real estate development and capital improvements
 
(75,320
)
 
(109,118
)
 
33,798

Proceeds from sale of real estate investments
 
36,751

 
26,567

 
10,184

Investments in real estate partnerships
 
(3,823
)
 
(1,344
)
 
(2,479
)
Distributions received from investments in real estate partnerships
 
25,746

 
15,014

 
10,732

Dividends on investment securities
 
137

 
87

 
50

Acquisition of securities
 
(46,306
)
 
(20,581
)
 
(25,725
)
Proceeds from sale of securities
 
45,739

 
17,169

 
28,570

Net cash used in investing activities
 
$
(316,024
)
 
(76,706
)
 
(239,318
)

Significant changes in investing activities include:

We acquired two operating properties during 2016 for $297.5 million and no operating properties in 2015.

We invested $33.8 million less in 2016 than 2015 on real estate development and capital improvements, as further detailed in a table below.

We received proceeds of $36.8 million from the sale of four shopping centers and ten land parcels in 2016, compared to $26.6 million for two shopping centers in 2015.

We invested $3.8 million in our real estate partnerships during 2016 to fund our share of maturing mortgage debt and redevelopment activity, compared to $1.3 million during 2015 to fund redevelopment activities.

Distributions from our unconsolidated real estate partnerships include return of capital from sales or financing proceeds. The $25.7 million received in 2016 is primarily driven by proceeds from the sale of six shopping centers within the partnerships. During 2015, we received $15.0 million, primarily attributable to $12.7 million of proceeds from the sale of one shopping center with a co-investment partner and $2.3 million of financing proceeds.

Acquisition of securities and proceeds from sale of securities pertain to equity and debt securities held by our captive insurance company and our deferred compensation plan. The majority of our investing activity during 2016 relates to reallocation of plan assets.

        

51





We plan to continue developing and redeveloping shopping centers for long-term investment. We deployed capital of $75.3 million for the development, redevelopment, and improvement of our real estate properties, comprised of the following:
 
 
Six months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Capital expenditures:
 
 
 
 
 
 
Building and tenant improvements
 
13,068

 
13,106

 
(38
)
Redevelopment costs
 
20,529

 
24,351

 
(3,822
)
Development costs
 
32,883

 
59,494

 
(26,611
)
Capitalized interest
 
1,766

 
4,015

 
(2,249
)
Capitalized direct compensation
 
7,074

 
8,152

 
(1,078
)
Real estate development and capital improvements
 
$
75,320

 
109,118

 
(33,798
)


Building and tenant improvements increased during 2016 primarily related to timing of capital projects.

Redevelopment expenditures are lower in 2016 due to the timing, magnitude, and number of projects currently in process. We intend to continuously improve our portfolio of shopping centers through redevelopment which can include adjacent land acquisition, existing building expansion, new out-parcel building construction, and tenant improvement costs.  The size and magnitude of each redevelopment project varies with each redevelopment plan. 

Development expenditures are lower in 2016 due to the progress towards completion of our development projects currently in process. At June 30, 2016 and December 31, 2015, we had five and seven development projects, respectively, that were either under construction or in lease up. See the tables below for more details about our development projects.

Interest is capitalized on our development and redevelopment projects and is based on cumulative actual development costs expended. We cease interest capitalization when the property is no longer being developed or is available for occupancy upon substantial completion of tenant improvements but in no event would we capitalize interest on the project beyond 12 months after the anchor opens for business. Capitalized interest decreased in 2016 as compared to 2015 as our development or redevelopment projects neared substantial completion and we commenced fewer new projects.

We have a staff of employees who directly support our development and redevelopment program. Internal compensation costs directly attributable to these activities are capitalized as part of each project. Changes in the level of future development and redevelopment activity could adversely impact results of operations by reducing the amount of internal costs for development and redevelopment projects that may be capitalized. A 10% reduction in development and redevelopment activity without a corresponding reduction in the compensation costs directly related to our development and redevelopment activities could result in an additional charge to net income of $1.4 million per year.


52





The following table details our development projects in process:
(in thousands, except cost PSF)
 
 
 
 
 
June 30, 2016
Property Name
 
Location
 
Start Date
 
Estimated /Actual Anchor Opening
 
Estimated Net Development Costs (1)
 
% of Costs Incurred (1)
 
GLA
 
Cost PSF of GLA (1)
Brooklyn Station on Riverside
 
Jacksonville, FL
 
Q4-13
 
Oct-14
 
$
15,067

 
98%
 
50
 
$
301

Willow Oaks Crossing
 
Concord, NC
 
Q2-14
 
Dec-15
 
13,849

 
97%
 
69
 
201

CityLine Market Ph II
 
Richardson, TX
 
Q4-15
 
June-16
 
6,172

 
69%
 
22
 
281

Northgate Marketplace Ph II
 
Medford, OR
 
Q4-15
 
Oct-16
 
39,165

 
35%
 
176
 
223

The Market at Springwoods Village (2)
 
Houston , TX
 
Q1-16
 
May-17
 
28,192

 
29%
 
167
 
169

Total
 
 
 
 
 
 
 
$
102,445

 
54%
 
484
 
$
212

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes leasing costs and is net of tenant reimbursements.
(2)  Estimated Net Development Costs are reported at full project cost. Our ownership interest in this consolidated property is 53%.

The following table summarizes our completed development projects:
(in thousands, except cost PSF)
 
Six months ended June 30, 2016
Property Name
 
Location
 
Completion Date
 
Net Development
Costs (1)
 
GLA
 
Cost PSF
of GLA (1)
Belmont Chase
 
Ashburn, VA
 
Q1-16
 
$
28,308

 
91
 
$
311

CityLine Market
 
Richardson, TX
 
Q1-16
 
27,861

 
80
 
348

Village at La Floresta
 
Brea, CA
 
Q2-16
 
32,451

 
87
 
373

 
 
 
 
 
 
$
88,620

 
258
 
$
343

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


Net cash provided by (used in) financing activities:

Net cash flows provided by (used in) financing activities increased by $298.2 million during 2016 ,as follows:
 
 
Six months ended June 30,
 
 
(in thousands)
 
2016
 
2015
 
Change
Cash flows from financing activities:
 
 
 
 
 
 
Equity issuances
 
$
149,788

 
955

 
148,833

Distributions to limited partners in consolidated partnerships, net
 
(2,214
)
 
(1,722
)
 
(492
)
Dividend payments
 
(107,746
)
 
(101,307
)
 
(6,439
)
Unsecured credit facilities, net
 
145,000

 
41,254

 
103,746

Debt issuance, net
 
19,708

 
2,399

 
17,309

Debt repayment
 
(44,646
)
 
(78,948
)
 
34,302

Proceeds from sale of treasury stock, net
 
904

 

 
904

Net cash provided by (used in) financing activities
 
$
160,794

 
(137,369
)
 
298,163

    





    

53





Significant financing activities during the six months ended June 30, 2016 and 2015 include the following:


During 2016, we issued 182,787 shares of common stock through our ATM program at an average price of $68.85 per share resulting in net proceeds of $12.4 million. In addition, we settled 1,850,000 shares under our forward equity offering at an average price of $74.32 per share resulting in proceeds of $137.5 million. During 2015, we issued 18,125 shares of common stock through our ATM program at an average price of $64.72 per share resulting in net proceeds of $1.0 million.

During 2016, our dividend payments increased as a result of the greater number of common shares outstanding and an increase in our dividend rate.

We borrowed $145.0 million on our Line, net of repayments, during 2016 to partially fund the acquisition of Market Common Clarendon, as compared to $45.0 million in 2015 for working capital purposes. The remaining $145.0 million Line balance was repaid during July from the expanded Term Loan and proceeds from property sales.

We received $19.7 million of mortgage proceeds, net of issuance costs, in 2016 upon the encumbrance of three operating properties.

During 2016, we used $44.6 million for scheduled principal payments and to repay three mortgages compared to $78.9 million for scheduled principal payments and to repay three mortgages during 2015.



Investments in Real Estate Partnerships

At June 30, 2016 and December 31, 2015, we had investments in real estate partnerships of $279.3 million and $306.2 million, respectively. The following table is a summary of the unconsolidated combined assets and liabilities of these co-investment partnerships and our pro-rata share:
 
 
Combined
 
Regency's Share (1)
(dollars in thousands)
 
June 30, 2016
 
December 31, 2015
 
June 30, 2016
 
December 31, 2015
Number of Co-investment Partnerships
 
11

 
11

 
 
 
 
Regency’s Ownership
 
 20%-50%

 
 20%-50%

 
 
 
 
Number of Properties
 
112

 
118

 
 
 
 
Assets
 
$
2,561,561

 
2,675,385

 
$
902,259

 
936,066

Liabilities
 
1,468,905

 
1,491,864

 
514,714

 
521,385

Equity
 
1,092,656

 
1,183,521

 
387,545

 
414,681

less: Impairment of investment in real estate partnerships
 
 
 
 
 
(1,300
)
 
(1,300
)
less: Ownership percentage or Restricted Gain Method deferral
 
 
 
 
 
(28,772
)
 
(28,972
)
less: Net book equity in excess of purchase price
 
 
 
 
 
(78,203
)
 
(78,203
)
Investments in real estate partnerships
 
 
 
 
 
$
279,270

 
306,206

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



54





Our equity method investments in real estate partnerships consist of the following: 
(in thousands)
Regency's Ownership
 
June 30, 2016
 
December 31, 2015
GRI - Regency, LLC (GRIR)
40.00%
 
$
202,928

 
220,099

Columbia Regency Retail Partners, LLC (Columbia I)
20.00%
 
12,376

 
15,255

Columbia Regency Partners II, LLC (Columbia II)
20.00%
 
2,354

 
8,496

Cameron Village, LLC (Cameron)
30.00%
 
11,816

 
11,857

RegCal, LLC (RegCal)
25.00%
 
17,595

 
17,967

US Regency Retail I, LLC (USAA)
20.01%
 
(174
)
 
161

Other investments in real estate partnerships
50.00%
 
32,375

 
32,371

    Total investment in real estate partnerships
 
 
$
279,270

 
306,206




Notes Payable - Investments in Real Estate Partnerships

Scheduled principal repayments on notes payable held by our investments in real estate partnerships were as follows: 
(in thousands)
 
June 30, 2016
Scheduled Principal Payments and Maturities by Year:
 
Scheduled
Principal
Payments
 
Mortgage  Loan
Maturities
 
Unsecured
Maturities
 
Total
 
Regency’s
Pro-Rata
Share
2016
 
$
8,413

 
40,375

 

 
48,788

 
11,970

2017
 
17,517

 
66,885

 
9,760

 
94,162

 
21,774

2018
 
18,696

 
67,022

 

 
85,718

 
27,655

2019
 
17,934

 
65,939

 

 
83,873

 
21,618

2020
 
14,826

 
222,199

 

 
237,025

 
85,506

Beyond 5 Years
 
20,001

 
810,424

 

 
830,425

 
315,357

Net unamortized loan costs, debt premium / (discount)
 

 
(9,307
)
 

 
(9,307
)
 
(3,428
)
Total
 
$
97,387

 
1,263,537

 
9,760

 
1,370,684

 
480,452

 
 
 
 
 
 
 
 
 
 
 

At June 30, 2016, our investments in real estate partnerships had notes payable of $1.4 billion maturing through 2031, of which 99.3% had a weighted average fixed interest rate of 4.9%. The remaining notes payable float over LIBOR and had a weighted average variable interest rate of 2.0%. These notes payable are all non-recourse, and our pro-rata share was $480.5 million as of June 30, 2016. As notes payable mature, we expect they will be repaid from proceeds from new borrowings and/or partner capital contributions. We are obligated to contribute our pro-rata share to fund maturities if they are not refinanced. We believe that our partners are financially sound and have sufficient capital or access thereto to fund future capital requirements.  In the event that a co-investment partner was unable to fund its share of the capital requirements of the co-investment partnership, we would have the right, but not the obligation, to loan the defaulting partner the amount of its capital call. 

Management fee income

In addition to earning our pro-rata share of net income or loss in each of these co-investment partnerships, we receive fees, as shown below:
 
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
 
2016
 
2015
 
2016
 
2015
Asset management, property management, leasing, and investment and financing services
 
$
5,981

 
5,856

 
12,594

 
11,993







55






Recent Accounting Pronouncements

See note 1 to Consolidated Financial Statements.



56





Environmental Matters

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

As of June 30, 2016 we had accrued liabilities of $9.1 million for our pro-rata share of environmental remediation. We believe that the ultimate disposition of currently known environmental matters will not have a material effect on our financial position, liquidity, or results of operations; however, we can give no assurance that existing environmental studies on our shopping centers have revealed all potential environmental liabilities; that any previous owner, occupant or tenant did not create any material environmental condition not known to us; that the current environmental condition of the shopping centers will not be affected by tenants and occupants, by the condition of nearby properties, or by unrelated third parties; or that changes in applicable environmental laws and regulations or their interpretation will not result in additional environmental liability to us.


Inflation/Deflation

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


57






Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes from the quantitative and qualitative disclosures about market risk disclosed in item 7A of Part II of our Form 10-K for the year ended December 31, 2015.

Item 4. Controls and Procedures

Controls and Procedures (Regency Centers Corporation)

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

There have been no changes in our internal controls over financial reporting identified in connection with this evaluation that occurred during the second quarter of 2016 and that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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

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

There have been no changes in our internal controls over financial reporting identified in connection with this evaluation that occurred during the second quarter of 2016 and that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.


58





PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in item 1A. of Part I of our Form 10-K for the year ended December 31, 2015.

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

There were no unregistered sales of equity securities during the quarter ended June 30, 2016.  

There were no purchases by the Parent Company of its common stock during the three month period ended June 30, 2016.


Item 3.    Defaults Upon Senior Securities
    
None.

Item 4.    Mine Safety Disclosures
    
None.

Item 5. Other Information
None.

59





Item 6. Exhibits

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

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

60





101.PRE        XBRL Taxonomy Extension Presentation Linkbase Document
__________________________
*
Furnished, not filed.

61






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
August 5, 2016
REGENCY CENTERS CORPORATION
 
By:

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

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



August 5, 2016
REGENCY CENTERS, L.P.
 
By:
Regency Centers Corporation, General Partner
 
By:

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

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

62