AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1998
REGISTRATION NO. 333-63723
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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REGENCY CENTERS, L.P.
(EXACT NAME OF PRIMARY REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 6500 59-3429602
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification No.)
of incorporation) Classification Code)
REGENCY REALTY
CORPORATION Florida 6798 59-3191743
REGENCY OFFICE
PARTNERSHIP, L.P. Delaware 6500 59-3402467
RRC OPERATING
PARTNERSHIP OF
GEORGIA, L.P. Georgia 6500 59-3363127
RRC FL FIVE, INC. Florida 6500 59-3248289
RRC ACQUISITIONS, INC. Florida 6500 59-3210155
(Exact Name of (State of Incorporation of (IRS Employer
Additional Registrants Additional Registrants) Identification No.)
as specified in their (Primary Standard Industrial
Charters) Classification Code)
121 WEST FORSYTH STREET, SUITE 200
JACKSONVILLE, FLORIDA 32202
(904) 356-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
EACH REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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MARTIN E. STEIN, JR.,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
121 WEST FORSYTH STREET, SUITE 200
JACKSONVILLE, FLORIDA 32202
(904) 356-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
CHARLES E. COMMANDER III
LINDA Y. KELSO
FOLEY & LARDNER
200 LAURA STREET
JACKSONVILLE, FLORIDA 32202
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE +
+SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 18, 1998
PROSPECTUS
REGENCY CENTERS, L.P.
OFFER TO EXCHANGE
$100,000,000
REDEEMABLE 7 1/8% NOTES DUE 2005 WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 FOR ANY AND ALL OUTSTANDING REDEEMABLE 7 1/8% NOTES DUE
2005
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1999, UNLESS EXTENDED
Regency Centers, L.P., a Delaware limited partnership, hereby offers, upon
the terms and subject to the conditions set forth in this prospectus and the
accompanying Letter of Transmittal, to exchange up to $100,000,000 aggregate
principal amount of its redeemable 7 1/8% Notes due 2005 which have been
registered under the Securities Act of 1933, as amended (the "New Notes") for a
like principal amount of its issued and outstanding redeemable 7 1/8% Notes due
2005 (the "Old Notes" and, together with the New Notes, the "Notes"). Pursuant
to the exchange offer, Regency Realty Corporation, a Florida corporation,
Regency Office Partnership, L.P., a Delaware limited partnership, RRC Operating
Partnership of Georgia, L.P., a Georgia limited partnership, RRC FL Five, Inc.,
a Florida corporation, and RRC Acquisitions, Inc., a Florida corporation, are
also exchanging their guarantee of the payment of the Old Notes for a like
guarantee of the New Notes. As of the date of this prospectus, $100,000,000
aggregate principal amount of Old Notes is outstanding. The terms of the New
Notes are identical in all material respects to the Old Notes, except that the
New Notes (together with the new guarantees) have been registered under the
Securities Act of 1933, as amended. The New Notes evidence the same debt as the
Old Notes and will be issued and entitled to the same benefits under the
indenture relating to the Old Notes.
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SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF MATERIAL RISKS
THAT SHOULD BE CONSIDERED BY HOLDERS BEFORE DECIDING WHETHER OR NOT TO TENDER
THEIR OLD NOTES IN THE EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this prospectus is , 1999.
(Cover continued from previous page)
Interest on the Notes is payable semiannually on January 15 and July 15 of
each year, commencing January 15, 1999. Holders who exchange their Old Notes
for New Notes in this exchange offer will receive interest accrued on their
Old Notes from January 15, 1999 to the date of issuance of the New Notes
together with the accrued interest on their New Notes in one interest payment,
payable on July 15, 1999. The Notes are redeemable, in whole or in part, at
the option of the issuer at any time at a redemption price equal to the sum of
(i) the principal amount of the Notes or portion thereof being redeemed plus
accrued and unpaid interest thereon to the date of redemption and (ii) an
amount, computed based on the average of the most recent published yields for
Treasury constant maturities plus 0.25%, intended to compensate the holder for
any loss of interest over the term of the Notes due to the redemption of the
Notes. The Notes are senior unsecured obligations of the issuer and are
entitled to the same priority in payment with each other and with the issuer's
other unsecured and unsubordinated indebtedness. The issuer's obligations
under the Notes are unconditionally guaranteed by the guarantors named above.
Because the holders of secured debt may foreclose on the assets of the issuer
which secure such debt, thereby reducing the cash flow available for payment
of the issuer's unsecured indebtedness, and because the holders of secured
debt would have priority over unsecured creditors in the event of the issuer's
liquidation, the Notes are effectively subordinated to mortgages and other
secured indebtedness of the issuer. As of September 30, 1998, the issuer had
outstanding $167.4 million of unsecured, unsubordinated indebtedness including
the Notes, all of which ranks without preference, and had $216.8 million of
secured indebtedness (including mortgage indebtedness). The issuer has no debt
which is subordinated to the Notes.
The Old Notes originally were issued and sold on July 20, 1998 in a
transaction not registered under the Securities Act of 1933, in reliance on
the exemptions provided in Section 4(2) of and Rule 144A under the Securities
Act of 1933. The issuer is making the exchange offer in reliance on positions
of the staff of the Securities and Exchange Commission set forth in certain
interpretive letters issued to other parties in other transactions. The issuer
has not sought its own interpretive letter, however, and there can be no
assurance that the staff of the Securities and Exchange Commission would make
a similar determination with respect to this exchange offer. Based upon such
positions of the Securities and Exchange Commission staff, the issuer believes
that the New Notes issued in this exchange offer in exchange for Old Notes may
be offered for resale, resold and otherwise transferred by the holders thereof
(other than a holder that is a broker-dealer, as set forth below, or an
"affiliate" of the issuer within the meaning of Rule 405 under the Securities
Act of 1933) without compliance with the registration and prospectus delivery
provisions of the Securities Act of 1933, provided that such New Notes are
acquired in the ordinary course of such holder's business and such holder is
not participating, and has no arrangement or understanding with any person to
participate, in a distribution of such New Notes. Holders of Old Notes
accepting the exchange offer are required to represent to the issuer in the
Letter of Transmittal that such conditions have been met. Each broker-dealer
that receives New Notes for its own account pursuant to this exchange offer
must acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933. This prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection with resales
of New Notes received in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities. The issuer will use its reasonable best efforts to
make this prospectus available to any such broker-dealer, and to update this
prospectus for use in connection with any such resale for such period of time
as broker-dealers must deliver a prospectus, up to 180 days after the
consummation of the exchange offer.
The New Notes are new securities for which there currently is no trading
market. The issuer does not intend to apply for listing of the New Notes on
any securities exchange or for quotation through the Nasdaq quotation system.
Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated and PaineWebber
Incorporated have advised the issuer that they currently intend to make a
market in the New Notes after this exchange offer as permitted by applicable
laws and regulations, although they are not obligated to do so and may
discontinue any market making activity at any time without notice.
Accordingly, there can be no assurance that a trading market
i
for the New Notes will develop or, if one does develop, that it will be
sustained. If an active trading market for the New Notes fails to develop or
be sustained, the trading price of the New Notes could be materially adversely
affected.
Any Old Notes not tendered and accepted in this exchange offer will remain
subject to the existing restrictions on transfer of the Old Notes, and the
issuer will have no further obligations to the holders of such Old Notes to
provide for their registration under the Securities Act of 1933, as amended
(except as otherwise described herein). It is not expected that a trading
market in the Old Notes will develop while they are subject to restrictions on
transfer. In addition, a holder's ability to sell untendered Old Notes could
be adversely affected to the extent that Old Notes are tendered and accepted
in this exchange offer.
The issuer will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or before 5:00 p.m., New York City time, on the
date the exchange offer expires, which will be , 1999, unless the
exchange offer is extended by the issuer in its sole discretion. Tenders of
Old Notes may be withdrawn at any time before 5:00 p.m., New York City time,
on the date the exchange offer expires, as it may be extended. The exchange
offer is not conditioned upon any minimum amount of Old Notes being tendered
for exchange, but the exchange offer is subject to certain terms and
conditions. Old Notes may be tendered only in denominations of $1,000 and
integral multiples thereof. The issuer has agreed to pay all of the expenses
incurred by it in connection with the exchange offer.
This prospectus, together with the Letter of Transmittal, is being first
sent to all registered holders of Old Notes on or about , 1999.
ii
INFORMATION INCORPORATED BY REFERENCE
The documents listed below have been filed by Regency Centers, L.P. or
Regency Realty Corporation with the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended, and are incorporated herein
by reference:
1. Regency Centers, L.P.'s Registration Statement on Form 10 filed August 7,
1998 (Commission File No. 0-24763) as amended by Form 10/A filed October 20,
1998 and by Form 10/A-2 filed November 25, 1998;
2. Regency Centers, L.P.'s Quarterly Reports on Form 10-Q for the quarters
ended June 30, 1998 (Commission File No. 1-12298) as amended by Form 10-Q/A
filed October 20, 1998, and September 30, 1998 (Commission File No. 0-24763);
3. Regency Realty Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 (Commission File No. 1-12298);
4. Regency Realty Corporation's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998
(Commission File No. 1-12298);
5. Regency Realty Corporation's Current Report on Form 8-K dated January 12,
1998, as amended by Form 8-K/A dated March 11, 1998 (Commission File No. 1-
12298);
6. Regency Realty Corporation's Current Report on Form 8-K dated January 14,
1998 (Commission File No. 1-12298);
7. Regency Realty Corporation's Current Report on Form 8-K dated and filed
September 24, 1998 (Commission File No. 1-12298); and
8. Regency Realty Corporation's Current Report on Form 8-K dated and filed
October 7, 1998 (Commission File No. 1-12298).
All documents filed with the Securities and Exchange Commission after the
filing of this prospectus by each of the issuer and any guarantor pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, and
before termination of this exchange offer shall be deemed to be incorporated
by reference in this prospectus and be a part hereof from the time of filing
of such document.
Any statement in this prospectus or in a document incorporated or deemed to
be incorporated by reference in this prospectus shall be deemed to be modified
or superseded for purposes of this prospectus to the extent that another
statement in a subsequently filed document that is incorporated or deemed to
be incorporated by reference in this prospectus modifies or supersedes the
first statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus. Subject to the foregoing, all information appearing in this
prospectus is qualified in its entirety by the information appearing in the
documents incorporated by reference.
AVAILABLE INFORMATION
Regency Centers, L.P. and Regency Realty Corporation will provide without
charge to any person to whom a copy of this prospectus is delivered, upon
their written or oral request, a copy of any or all of the documents
incorporated by reference in this prospectus (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference in
such documents). Written requests for such copies should be addressed to Ms.
Lesley Stocker, Shareholder Communications, 121 West Forsyth Street, Suite
200, Jacksonville, Florida 32202 (telephone: (904) 356-7000).
Regency Centers, L.P. and Regency Realty Corporation are subject to the
informational requirements of the Securities Exchange Act of 1934, and, in
accordance therewith, file quarterly and annual reports and other information
with the Securities and Exchange Commission. Such reports and other
information can be inspected
iii
at the Public Reference Rooms maintained by the Securities and Exchange
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
the following regional offices of the Securities and Exchange Commission: 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such information
can be obtained from the Public Reference Section of the Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Information on the operation of the Public Reference Room
may be obtained by calling the Securities and Exchange Commission at 1-800-
SEC-0330. Certain of such information may be accessed electronically at the
Securities and Exchange Commission's World Wide Web site at
http://www.sec.gov. In addition, Regency Realty Corporation's common stock is
listed on the New York Stock Exchange and its reports filed with the
Securities and Exchange Commission and other information concerning Regency
Realty Corporation can be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. Regency Realty
Corporation also maintains a Web site at www.regencyrealty.com.
The issuer and the guarantors have filed with the Securities and Exchange
Commission a registration statement on Form S-4, of which this prospectus is a
part, under the Securities Act of 1933, as amended, with respect to the
securities offered hereby. This prospectus does not contain all of the
information set forth in registration statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Securities
and Exchange Commission. Statements contained in this prospectus as to the
contents of any contract or other document are not necessarily complete and,
in each instance, reference is made to the copy of such contract or document
filed as an exhibit to such registration statement, each such statement being
qualified in all respects by such reference and the exhibits and schedules
thereto. For further information regarding the issuer and the securities
offered hereby, reference is hereby made to such registration statement and
such exhibits and schedules, which may be obtained from the Securities and
Exchange Commission at its principal office in Washington, D.C. upon payment
of the fees prescribed by the Securities and Exchange Commission and accessed
electronically at the Securities and Exchange Commission's World Wide Web site
at the address set forth in the previous paragraph.
iv
SUMMARY
The following is a summary of certain material information in this
prospectus. This summary is qualified in its entirety by the detailed
information appearing elsewhere in this prospectus or incorporated herein by
reference.
THE COMPANY AND THE PARTNERSHIP
Regency Centers, L.P., the issuer of the Notes, is a limited partnership
which acquires, owns, develops and manages neighborhood and community shopping
centers in the eastern half of the United States. As a result of the formation
of Regency Centers, L.P. in 1996 and the subsequent consolidation of
substantially all of its neighborhood and community shopping centers in early
1998, Regency Centers, L.P. is the primary entity through which Regency Realty
Corporation owns its properties and through which Regency Realty Corporation
intends to expand its ownership and operation of properties. Regency Realty
Corporation is a real estate investment trust, the common stock of which is
traded on the New York Stock Exchange.
RECENT DEVELOPMENTS
On September 23, 1998, Regency Realty Corporation agreed to merge with
Pacific Retail Trust, a real estate investment trust owning 67 grocery and drug
store anchored shopping centers in the western United States. Security Capital
Holdings S.A., Regency's largest shareholder, owns 69.9% of Pacific Retail
Trust and will own a majority of Regency after the merger.
On December , 1998, RRC FL Seven, Inc. and RRC Acquisitions, Two, Inc. were
merged into RRC Acquisitions, Inc., Regency Retail Centers of Ohio, Inc. was
merged into Regency Realty Corporation, and Hyde Park Partners, L.P. was merged
into Regency Centers, L.P. The obligations of RRC FL Seven, Inc., RRC
Acquisitions Two, Inc., Regency Retail Centers of Ohio, Inc. and Hyde Park
Partners, L.P. as guarantors of the Old Notes were assumed by RRC Acquisitions,
Inc. and Regency Realty Corporation.
RISK FACTORS
Holders of Old Notes who do not exchange their Old Notes for New Notes in
this exchange offer will remain subject to the existing restrictions on
transfer of the Old Notes and may have more difficulty selling such untendered
Old Notes.
Holders of Notes are also subject to the risks that (i) there is no
established trading market for the Notes, (ii) the creditworthiness of the
Notes may be adversely affected by a highly leveraged transaction or a change
in control of the issuer or Regency Realty Corporation, and (iii) the holders
of secured indebtedness of the issuer could foreclose on the assets securing
such indebtedness and thereby reduce the cash flow available for payment of the
Notes.
1
THE EXCHANGE OFFER
THE EXCHANGE OFFER............. The issuer is offering to exchange up to $100,000,000
aggregate principal amount of its redeemable 7 1/8% Notes
due 2005 which have been registered under the Securities
Act of 1933 for a like aggregate principal amount of its
outstanding redeemable 7 1/8% Notes due 2005.
PROCEDURES FOR TENDERING OLD
NOTES.......................... See "The Exchange Offer--Procedures for Tendering Old
Notes."
CONDITIONS TO THE EXCHANGE
OFFER.......................... The exchange offer is subject to certain conditions. The
exchange offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for
exchange, but Old Notes may be tendered only in
denominations of $1,000 or integral multiples thereof.
EXPIRATION DATE................ The exchange offer will expire at 5:00 p.m., New York
City time, on , 1999, or such later date and time to
which it is extended. Any Old Notes not accepted for
exchange for any reason will be returned without expense
to the tendering holder thereof as promptly as
practicable after the expiration or termination of the
exchange offer.
WITHDRAWAL RIGHTS.............. A tender of Old Notes in the exchange offer may be
withdrawn at any time before the expiration of the
exchange offer by delivering a written notice of such
withdrawal to First Union National Bank, as exchange
agent, in conformity with certain procedures set forth
below under "The Exchange Offer--Withdrawal Rights."
EXCHANGE AGENT................. First Union National Bank is serving as exchange agent in
connection with the exchange offer.
EFFECT ON HOLDERS OF OLD NOTES. Upon the acceptance of Old Notes for exchange in the
exchange offer, holders of Old Notes will have no further
registration or other rights, except in certain limited
circumstances, under the Registration Rights Agreement
dated July 15, 1998 among the issuer, the guarantors,
Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated
and PaineWebber Incorporated. Holders of Old Notes who do
not tender them in the exchange offer will continue to be
entitled to all the rights applicable thereto (other than
the right to additional interest upon the occurrence of
certain defaults under the registration rights agreement
referenced above) under the Indenture dated as of July
20, 1998 among the issuer, the guarantors and First Union
National Bank, as trustee, which relates to both the Old
Notes and the New Notes, but will continue to be subject
to the restrictions on transfer of the Old Notes provided
for in the Old Notes and in such indenture. See "Risk
Factors--Failure to Exchange Old Notes May Adversely
Affect Holders due to Transfer Restrictions and Lack of
Liquidity."
2
THE NEW NOTES
The terms of the New Notes will be identical in all material respects
(including principal amount, interest rate, maturity and ranking) to the terms
of the Old Notes for which they are exchanged, except that the New Notes will
be freely transferable except as described herein. See "The Exchange Offer--
Purpose and Effect of the Exchange Offer" and "Description of Notes."
NOTES OFFERED.................. Up to $100,000,000 aggregate principal amount of
redeemable 7 1/8% Notes due July 15, 2005 registered
under the Securities Act of 1933.
MATURITY....................... The New Notes will mature on July 15, 2005.
SCHEDULED INTEREST PAYMENT
DATES.......................... January 15 and July 15 of each year, commencing January
15, 1999 for the Old Notes. Holders whose Old Notes are
accepted for exchange will receive interest on such Old
Notes accrued from January 15, 1999, to the date of
issuance of the New Notes with such interest payable with
the first interest payment on the New Notes on July 15,
1999. Consequently, holders who exchange their Old Notes
for New Notes will receive the same interest payment
payable on July 15, 1999 that they would have received
had they not accepted the exchange offer.
OPTIONAL REDEMPTION............ The New Notes will be redeemable, in whole or in part, at
the option of the issuer at any time at a redemption
price equal to the sum of (i) the principal amount of the
Notes or portions thereof being redeemed plus accrued and
unpaid interest thereon and (ii) a Make-Whole Amount.
The "Make-Whole Amount" is equal to the excess, if any,
of (i) the aggregate present value as of the date of
redemption or accelerated payment of each dollar of
principal being redeemed or paid and the amount of
interest (exclusive of interest accrued to the date of
redemption or accelerated payment) that would have been
payable in respect of each such dollar if such redemption
or accelerated payment had not been made, determined by
discounting, on a semi-annual basis, such principal and
interest at the reinvestment rate described herein from
the respective dates on which such principal and interest
would have been payable if such redemption or accelerated
payment had not been made, over (ii) the aggregate
principal amount of the Notes being redeemed or paid. See
"Description of Notes--Optional Redemption" and "--
Certain Definitions."
RANKING........................ The New Notes will be senior unsecured obligations of the
issuer and are entitled to the same priority in payment
with each other Note and with the issuer's other
unsecured and unsubordinated indebtedness.
CERTAIN COVENANTS.............. The indenture for the Notes contains various covenants,
including the following:
(1) Neither the issuer nor any subsidiary will incur any
indebtedness if, immediately after giving effect thereto,
the aggregate principal amount of all outstanding
indebtedness of the issuer and its subsidiaries on a
consolidated basis is greater than 50% of the sum of (i)
total assets (excluding intangibles and accounts
receivable) as of the end of the most recent fiscal
quarter and (ii) the purchase price of any
3
real estate assets or mortgages receivable acquired and
the amount of any securities offering proceeds received
(to the extent that such proceeds were not used to
acquire real estate assets or mortgages receivable or
used to reduce indebtedness) by the issuer or any
subsidiary since the end of such calendar quarter,
including those proceeds obtained in connection with the
incurrence of such additional indebtedness.
(2) Neither the issuer nor any subsidiary will incur any
indebtedness secured by any encumbrance on the property
of the issuer or any subsidiary if, immediately after
giving effect to the incurrence of the additional
indebtedness, the aggregate amount of all outstanding
indebtedness of the issuer and its subsidiaries on a
consolidated basis which is secured by an encumbrance on
property of the issuer or any subsidiary is greater than
40% of the sum of (i) total assets (excluding intangibles
and accounts receivable) as of the end of the most recent
fiscal quarter and (ii) the purchase price of any real
estate assets or mortgages receivable acquired and the
amount of any securities offering proceeds received (to
the extent that such proceeds were not used to acquire
real estate assets or mortgages receivable or used to
reduce indebtedness) by the issuer or any subsidiary
since the end of such calendar quarter, including those
proceeds obtained in connection with the incurrence of
such additional indebtedness.
(3) Neither the issuer nor any subsidiary will incur any
indebtedness if consolidated income available for debt
service for the four consecutive fiscal quarters most
recently ended prior to the date of the incurrence of the
indebtedness, on a pro forma basis, would be less than
1.5 times the annual interest expense on all indebtedness
outstanding immediately after the incurrence of the
indebtedness.
(4) The issuer and its subsidiaries will not at any time
own total unencumbered assets equal to less than 150% of
the aggregate outstanding principal amount of the
unsecured indebtedness of the issuer and its subsidiaries
on a consolidated basis.
GUARANTEES........... The New Notes will be unconditionally guaranteed by
Regency Realty Corporation, which is the sole general
partner of the issuer and the owner of approximately 96%
of the interests in the issuer as of September 30, 1998.
The Notes are also jointly and severally guaranteed by
Regency Office Partnership, L.P., RRC Operating
Partnership of Georgia, L.P., RRC FL Five, Inc., and RRC
Acquisitions, Inc., each of which is an affiliate of the
issuer. The obligations of each guarantor under its
guarantee will be limited so as to avoid it being
considered as a fraudulent conveyance under applicable
bankruptcy or fraudulent transfer law. See "Description
of Notes--Guarantees".
4
RISK FACTORS
The following contains a description of the material risks involved in
owning Notes and failing to tender Old Notes for exchange. Holders of Old
Notes, before deciding whether or not to tender their Old Notes in the
exchange offer, and purchasers of Old Notes pursuant to this prospectus,
before purchasing any such Old Notes, should carefully consider the matters
described below.
FAILURE TO EXCHANGE OLD NOTES MAY ADVERSELY AFFECT HOLDERS DUE TO TRANSFER
RESTRICTIONS AND LACK OF LIQUIDITY
Holders of Old Notes who do not exchange their Old Notes for New Notes in
the exchange offer will continue to be subject to the existing restrictions on
transfer of the Old Notes as set forth in the legend thereon, and, except in
certain limited circumstances applying to Goldman, Sachs & Co., Morgan Stanley
& Co. Incorporated and PaineWebber Incorporated only, the issuer will have no
further obligations to provide for the registration of the Old Notes under the
Securities Act of 1933. In general, the Old Notes may not be offered or sold,
unless registered under the Securities Act of 1933, except pursuant to an
exemption from, or in a transaction not subject to, the registration
provisions of the Securities Act of 1933, as amended, and applicable state
securities laws. The issuer does not intend to register the Old Notes under
the Securities Act of 1933 (except in such limited circumstances, if
applicable).
To the extent that Old Notes are tendered and accepted in the exchange
offer, a holder's ability to sell untendered Old Notes could be adversely
affected. The tender of Old Notes pursuant to the exchange offer will reduce
the principal amount of Old Notes outstanding, which may have an adverse
effect upon, and increase the volatility of, the market price of the
untendered Old Notes due to a reduction of liquidity.
ABSENCE OF PUBLIC MARKET COULD ADVERSELY AFFECT RESALE AND PRICE OF NOTES
The New Notes constitute a new issue of securities with no established
trading market. The issuer does not intend to apply for listing of the New
Notes on any securities exchange or for quotation through the Nasdaq quotation
system. Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated and
PaineWebber Incorporated have advised the issuer that they currently intend to
make a market in the New Notes after the exchange offer as permitted by
applicable law and regulations, although they are not obligated to do so and
may discontinue any market making activity at any time without notice.
Accordingly, there can be no assurance that a market for the New Notes will
develop or, if one does develop, that it will be sustained. If an active
trading market for the New Notes fails to develop or be sustained, the trading
price of the New Notes could be materially adversely affected.
DEBT FINANCING AND LEVERAGE BY PARTNERSHIP MAY REDUCE CASH FLOW AVAILABLE FOR
PAYMENT OF NOTES
The issuer is subject to the risks associated with debt financing, including
the risk that the cash provided by the issuer's operating activities will be
insufficient to meet required payments of principal and interest, the risk of
rising interest rates on the issuer's floating rate debt that is not hedged,
and the risk that the issuer will not be able to repay or refinance existing
indebtedness or that the terms of such refinancing will not be as favorable as
the terms of existing indebtedness. The issuer does not expect to generate
sufficient funds from operations to make balloon principal payments when due
on its indebtedness, including the Notes. In the event the issuer is unable to
secure refinancing of such indebtedness on acceptable terms, the issuer might
be forced to dispose of properties, which might result in losses to the
issuer, or to obtain financing at unfavorable terms, either of which might
adversely affect the cash flow available to meet debt service obligations. In
addition, if a property or properties are mortgaged to secure payment of
indebtedness and the issuer is unable to meet required mortgage payments, the
mortgage securing the property could be foreclosed upon by, or the property
could be otherwise transferred to, the mortgagee with a consequent loss of
cash flow to meet debt service obligations.
5
Neither Regency Realty Corporation's nor the issuer's organizational
documents limit the amount of debt that may be incurred. Regency Realty
Corporation has established a policy limiting total indebtedness to 50% of
total assets at cost and maintaining a minimum debt service coverage ratio of
2:1. The board of directors of Regency Realty Corporation may amend this
policy at any time without the approval of its shareholders or the issuer's
limited partners.
The indenture for the Notes will permit the issuer to incur additional
indebtedness, subject to certain limits. The degree to which the issuer is
leveraged could have important consequences to holders of the Notes, including
affecting the issuer's ability to obtain additional financing in the future to
repay the Notes or for working capital, capital expenditures, acquisitions,
development or other general corporate purposes and making the issuer more
vulnerable to a downturn in its business or the economy generally. The
indenture contains financial and operating covenants including, among other
things, limitations on the ability of the issuer and its subsidiaries to incur
other indebtedness, pay distributions, engage in transactions with affiliates,
sell assets and engage in mergers and consolidations and certain acquisitions.
If the issuer fails to comply with these covenants, the holders of the Notes
will be able to accelerate the maturity of the applicable indebtedness. See
"Description of Notes".
As of September 30, 1998, 36.1% of the issuer's properties were encumbered
by debt in the amount of $216.8 million. The issuer also had $167.4 million of
unsecured debt outstanding as of September 30, 1998. Substantially all of the
issuer's debt is cross-defaulted, but not cross-collateralized. The issuer's
line of credit also imposes certain covenants which limit the issuer's
flexibility in obtaining other financing, such as limitations on floating rate
debt and a prohibition on negative pledge agreements.
INCREASED INTEREST RATES MAY REDUCE PARTNERSHIP'S CASH FLOW
The issuer is obligated on floating rate debt. If the issuer does not
eliminate its exposure to increases in interest rates through interest rate
protection or cap agreements, such increases may reduce cash flow and the
issuer's ability to service its debt. As of September 30, 1998, the issuer had
outstanding debt of $58.6 million subject to floating interest rates, or 15.2%
of its total indebtedness as of that date. The issuer was a party to
30-day LIBOR contracts with respect to $45.9 million of this floating rate
debt, which matures on December 31, 1998. In the event of a significant
increase in interest rates, the issuer would consider entering into interest
rate swap or cap agreements with respect to all or a portion of its remaining
floating rate debt. Additionally, the issuer is prohibited by the terms of its
unsecured line of credit from incurring other floating rate debt in excess of
25% of the gross asset value of its assets unless it obtains interest rate
swaps, caps or collars which prevent the effective interest rate on the
portion of such other debt in excess of 25% from increasing above 9% per year.
Although swap agreements would enable the issuer to convert floating rate
liabilities to fixed rate liabilities and cap agreements would enable the
issuer to cap its maximum interest rate, they would expose the issuer to the
risk that the counterparties to such hedge agreements may not perform, which
could increase the issuer's exposure to rising interest rates. Generally,
however, the counterparties to the issuer's hedging agreements would be major
financial institutions. If the issuer enters into any swap agreements in the
future, decreases in interest rates thereafter would increase the issuer's
interest expense as compared to the underlying floating rate debt and could
result in the issuer's making payments to unwind such agreements, such as in
connection with a prepayment of the floating rate debt. Cap agreements would
not protect the issuer from increases up to the capped rate.
LOSS OF REVENUES FROM MAJOR TENANT COULD REDUCE FUTURE CASH FLOW OF
PARTNERSHIP
The issuer derives significant revenues from certain anchor tenants that
occupy more than one center. The issuer could be adversely affected in the
event of the bankruptcy or insolvency of, or a downturn in the business of,
any of it major tenants, or in the event that any such tenant does not renew
its leases as they expire or renews at lower rental rates. Vacated anchor
space not only would reduce rental revenues if not retenanted at the same
rental rates but also could adversely affect the entire shopping center
because of the loss of the departed anchor
6
tenant's customer drawing power. Loss of customer drawing power also can occur
through the exercise of the right that most anchors have to vacate and prevent
retenanting by paying rent for the balance of the lease term, or the departure
of an anchor tenant that owns its own property. In addition, in the event that
certain major tenants cease to occupy a property, such an action may result in
certain other tenants having the right to terminate their leases at the
affected property, which could adversely affect the future income from such
property.
Tenants may seek the protection of the bankruptcy laws, which could result
in the rejection and termination of their leases and thereby cause a reduction
in the cash flow available for debt service by the issuer. Such reduction
could be material if a major tenant files bankruptcy.
PARTNERSHIP COULD BE ADVERSELY AFFECTED BY POOR MARKET CONDITIONS WHERE
PROPERTIES ARE GEOGRAPHICALLY CONCENTRATED
As of September 30, 1998, 62.0% of the issuer-owned GLA was located in
Florida and Georgia. The issuer's performance is therefore dependent on the
economic conditions in such markets. The issuer could be adversely affected by
such geographic concentration if market conditions, such as an oversupply of
space or a reduction in demand for real estate, in such areas become more
competitive relative to other geographic areas.
RAPID GROWTH THROUGH ACQUISITIONS PLACES STRAIN ON PARTNERSHIP'S RESOURCES
The issuer has pursued extensive growth opportunities. The issuer invested
$346.0 million in acquisitions during 1997 and has invested an additional
$317.2 million as of September 30, 1998. This expansion has placed significant
demands on its operational, administrative and financial resources. At the
time of its initial public offering in 1993, Regency Realty Corporation had
102 employees and assets of $150 million. However, as of December 31, 1997,
Regency, through the issuer, had 360 employees, an increase of 350%, and
assets of $827 million, an increase of 550%.
In addition, the acquisition of properties using borrowed funds increases
the issuer's ratio of total indebtedness to total assets at cost, although the
issuer has historically maintained a ratio of less than 50% in accordance with
its internal policy. You can expect the continued growth of the issuer's real
estate portfolio to continue to place a significant strain on the issuer's
operational, administrative and financial resources. The issuer's future
performance and its ability to repay the Notes depends in part on its ability
to successfully attract and retain qualified management personnel to manage
its growth and operations.
PARTNERSHIP STRUCTURE MAY LIMIT FLEXIBILITY TO MANAGE ASSETS
The issuer is Regency Realty Corporation's primary property-owning vehicle.
From time to time, the issuer acquires properties in exchange for limited
partnership interests. This acquisition structure may permit limited partners
who contribute properties to the partnership to defer some, if not all, of the
income tax that they would incur if they sold the property. Properties
contributed to the issuer may have unrealized gain attributable to the
difference between the fair market value and adjusted tax basis in such
properties prior to contribution. As a result, the sale of such properties
could cause adverse tax consequences to the limited partners who contributed
such properties. Generally, the issuer has no obligation to consider the tax
consequences of its actions to any limited partner. However, the issuer may
acquire properties in the future subject to material restrictions on
refinancing or resale designed to minimize the adverse tax consequences to the
limited partners who contribute such properties. These restrictions could
significantly reduce the issuer's flexibility to manage its assets by
preventing it from reducing mortgage debt or selling a property when such a
transaction might be in the issuer's best interest in order to reduce interest
costs or dispose of an under-performing property.
7
REAL ESTATE INVESTMENTS ARE SUBJECT TO RISKS WHICH MAY REDUCE CASH FLOW
VALUE OF REAL ESTATE DEPENDENT ON NUMEROUS FACTORS. Real property
investments are subject to varying degrees of risk. Real estate values are
affected by a number of factors, including changes in the general economic
climate, local conditions (such as an oversupply of space or a reduction in
demand for real estate in an area), the quality and philosophy of management,
competition from other available space, and the ability of the owner to
provide adequate maintenance and insurance and to control variable operating
costs. Shopping centers, in particular, may be affected by changing
perceptions of retailers or shoppers regarding the safety, convenience and
attractiveness of the shopping center and by the overall climate for the
retail industry generally. Real estate values are also affected by such
factors as government regulations, interest rate levels, the availability of
financing and potential liability under, and changes in, environmental,
zoning, tax and other laws. As substantially all of the issuer's income is
derived from rental income from real property, the issuer's income and cash
flow would be adversely affected if a significant number of the issuer's
tenants were unable to meet their obligations to the issuer, or if the issuer
were unable to lease on economically favorable terms a significant amount of
space in its properties. In the event of default by a tenant, the issuer may
experience delays in enforcing, and incur substantial costs to enforce, its
rights as landlord.
Equity real estate investments are relatively illiquid and therefore may
tend to limit the ability of the issuer to react promptly in response to
changes in economic or other conditions. In addition, certain significant
expenditures associated with each equity investment (such as mortgage
payments, real estate taxes and maintenance costs) are generally not reduced
when circumstances cause a reduction in income from the investment.
If the issuer's cash flow is adversely affected by reduced real estate
values, the issuer may not have the ability to satisfy its obligations under
the Notes.
DIFFICULTIES AND COSTS ASSOCIATED WITH RENTING UNLEASED AND VACATED
SPACE. The ability of the issuer to rent unleased or vacated space will be
affected by many factors, including certain covenants restricting the use of
other space at a property found in certain leases with shopping center
tenants. If the issuer is able to relet vacated space, there is no assurance
that rental rates will be equal to or in excess of current rental rates. In
addition, the issuer may incur substantial costs in obtaining new tenants,
including leasing commissions and tenant improvements. The issuer also may
have difficulty maintaining existing or obtaining new tenants if other space
at a property is vacated.
If the issuer is unable to rent unleased or vacated space, the issuer's cash
flow, and consequently its ability to pay the Notes, may be adversely
affected.
RESTRICTIONS ON, AND RISKS OF, UNSUCCESSFUL DEVELOPMENT ACTIVITIES. The
issuer intends to selectively pursue development activities as opportunities
arise. Such development activities generally require various government and
other approvals, the receipt of which cannot be assured. The issuer will incur
risks associated with any such development activities. These risks include the
risk that development opportunities explored by the issuer may be abandoned;
the risk that construction costs of a project may exceed original estimates,
possibly making the project unprofitable; lack of cash flow during the
construction period; and the risk that occupancy rates and rents at a
completed project will not be sufficient to make the project profitable. In
case of an unsuccessful development project, the issuer's loss could exceed
its investment in the project. Also, there are competitors seeking properties
for development, some of which may have greater resources than the issuer.
If the issuer sustains material losses due to an unsuccessful development
project, its cash flow will be reduced and the creditworthiness of the Notes
may be adversely affected.
UNINSURED LOSS MAY ADVERSELY AFFECT PARTNERSHIP'S ABILITY TO PAY NOTES
The issuer carries comprehensive liability, fire, flood, extended coverage
and rental loss insurance with respect to its properties with policy
specifications and insured limits customarily carried for similar properties.
8
The issuer believes that the insurance carried on its properties is adequate
in accordance with industry standards. There are, however, certain types of
losses (such as from hurricanes, wars or earthquakes) which may be
uninsurable, or the cost of insuring against such losses may not be
economically justifiable. Should an uninsured loss occur, the issuer could
lose both the invested capital in and anticipated revenues from the property,
and would continue to be obligated to repay any recourse mortgage indebtedness
on the property. In that event, the issuer's cash flow available to pay the
Notes could be reduced.
REGENCY FACES COMPETITION FROM NUMEROUS SOURCES
The ownership of shopping centers is highly fragmented, with less than 10%
owned by real estate investment trusts. Regency Realty Corporation faces
competition from other real estate investment trusts in the acquisition,
ownership and leasing of shopping centers as well as from numerous small
owners. Regency competes in the development of shopping centers with other
real estate investment trusts engaged in development activities as well as
with local, regional and national real estate developers.
Regency competes in the acquisition of properties through proprietary
research that identifies opportunities in markets with high barriers to entry
and higher-than-average population growth and household income. Regency seeks
to maximize rents per square foot by establishing relationships with
supermarket chains that are first or second in their markets and leasing non-
anchor space in multiple centers to national or regional tenants. Regency
competes in the development of properties by applying its proprietary research
methods to identify development and leasing opportunities and by pre-leasing
an average of 85% of a center before beginning construction.
There can be no assurance, however, that other real estate owners or
developers will not utilize similar research methods and target the same
markets and anchor tenants that Regency targets, and that such entities may
successfully control these markets and tenants to the exclusion of Regency. If
Regency cannot successfully compete in its targeted markets, its cash flow,
and therefore its ability to pay the Notes, may be adversely affected.
HIGHLY LEVERAGED TRANSACTION OR CHANGE IN CONTROL MAY ADVERSELY AFFECT
CREDITWORTHINESS OF NOTES
The indenture for the Notes contains provisions that are intended to protect
holders of the Notes against adverse effects on the creditworthiness of the
Notes in the event of a highly leveraged transaction or a significant
corporate transaction (such as the acquisition of securities, merger, the sale
of assets or otherwise) involving the issuer or Regency Realty Corporation.
However, the indenture does not contain provisions which protect holders of
Notes against adverse effects of a change in control per se, such as the sale
of Regency stock or the election of directors of Regency. Accordingly, there
can be no assurance that the issuer or Regency will not enter into such a
transaction and thereby adversely affect the issuer's ability to meet its
obligations under the Notes or Regency's obligation under its guarantee.
Moreover, there can be no assurance that a significant corporate transaction
such as an acquisition which complies with the indenture provisions will not
adversely affect the creditworthiness of the Notes.
EFFECTIVE SUBORDINATION OF NOTES MAY REDUCE AMOUNTS AVAILABLE FOR PAYMENT OF
NOTES
The Notes will be unsecured. Because the holders of secured debt may
foreclose on the assets of the issuer which secure such debt, thereby reducing
the cash flow available for payment of the issuer's unsecured indebtedness,
and because the holders of secured debt would have priority over unsecured
creditors in the event of the issuer's liquidation, the Notes will be
effectively subordinated to any secured indebtedness of the issuer. The
indenture for the Notes permits the issuer to enter into additional mortgages
and incur secured indebtedness provided certain conditions are met. See
"Description of Notes--Covenants". Consequently, in the event of a bankruptcy,
liquidation, dissolution, reorganization or similar proceeding with respect to
the issuer, the holders
9
of any mortgages and secured indebtedness will be entitled to proceed against
the collateral that secures such secured indebtedness, and such collateral
will not be available for satisfaction of any amounts owed under the issuer's
unsecured indebtedness, including the Notes.
The guarantees of the Notes by the guarantors are unsecured obligations of
the guarantors, and (i) are effectively subordinated to mortgage and other
secured indebtedness of the guarantors and (ii) rank equally with the
guarantors' other unsecured and unsubordinated indebtedness.
MANAGEMENT OF PARTNERSHIP BY REGENCY MAY REDUCE CREDITWORTHINESS OF NOTES
The issuer must rely upon Regency Realty Corporation as general partner to
manage the affairs and business of the issuer. In addition to the risks
described above that relate to the issuer, Regency is subject to certain other
risks that may affect its financial and other conditions, including
particularly adverse consequences if Regency fails to qualify as a real estate
investment trust for federal income tax purposes. The powers of Regency as
general partner of the issuer include the power to cause the issuer to take
actions which help Regency maintain its qualification as a real estate
investment trust even though such actions may adversely affect the
creditworthiness of the Notes, including for example, causing the issuer to
incur indebtedness to enable Regency to fulfill the shareholder distribution
requirements necessary to maintain its real estate investment trust
qualification. The powers of Regency as general partner of the issuer also
include the power to determine whether and when to sell any property owned by
the issuer, subject to any specific agreements limiting the power of sale that
the issuer may have entered into with the contributor or contributors of such
properties. If Regency fails to qualify as a real estate investment trust, the
adverse tax consequences could also reduce its ability to satisfy its
obligations under its guarantee.
CONCENTRATION OF OWNERSHIP OF REGENCY COMMON STOCK MAY ADVERSELY IMPACT
REGENCY'S OPERATIONS
Security Capital Holdings S.A. (together with its parent company, Security
Capital U.S. Realty, "SC-USREALTY") owned 11,720,216 shares of common stock of
Regency Realty Corporation as of September 30, 1998, constituting 37.5%
(including convertible securities on a fully diluted basis) of Regency's
common stock outstanding on that date. SC-USREALTY is Regency's single largest
shareholder and has participation rights entitling it to maintain its
percentage ownership of the common stock. SC-USREALTY has the right to
nominate a proportionate number of the directors of Regency's board of
directors, rounded down to the nearest whole number, based upon its ownership
of outstanding shares of common stock, but not to exceed 49% of the board.
Although certain standstill provisions preclude SC-USREALTY from increasing
its percentage interest in Regency for a period of at least five years
(subject to certain exceptions) and SC-USREALTY is subject to certain
limitations on its voting rights with respect to its shares of common stock
during that time, SC-USREALTY nonetheless has substantial influence over
Regency's affairs. If the standstill period or any standstill extension term
terminates, SC-USREALTY could be in a position to control the election of the
board or the outcome of any corporate transaction or other matter submitted to
the shareholders for approval.
Regency has agreed with SC-USREALTY to certain limitations on Regency's
operations, including restrictions relating to (i) incurrence of total
indebtedness exceeding 60% of the gross book value of Regency's consolidated
assets, (ii) investments in properties other than certain shopping centers in
specified states in the eastern United States, and (iii) certain other
matters, including limitations on (a) the amount of assets that it owns
indirectly through other entities, (b) the amount of assets managed by third
parties, (c) the amount of passive income produced by Regency and (d) entering
into joint ventures or similar arrangements. These restrictions, which are
intended to permit SC-USREALTY to comply with certain requirements of the
Internal Revenue Code of 1986, as amended, and other countries' tax laws
applicable to foreign investors, limit somewhat Regency's flexibility to
structure transactions that might otherwise be advantageous to Regency or the
issuer. Although Regency does not believe that the limitations imposed on its
activities will materially impair its ability to conduct its business, there
can be no assurance that these limitations will not adversely affect Regency's
or the issuer's operations, including causing a reduction in the cash flow
available for payment of the Notes, in the future.
10
Upon consummation of the merger of Pacific Retail Trust into Regency, SC-
USREALTY will own 52.3% of Regency's common stock on a fully diluted basis. A
proposed amendment to Regency's Articles of Incorporation will permit SC-
USREALTY to increase its ownership of Regency common stock after the merger to
up to 60% on a fully diluted basis. See "--Prohibitions on Investments by Non-
U.S. Investors Limits Ability to Raise Capital."
PROHIBITIONS ON INVESTMENTS BY NON-U.S. INVESTORS LIMITS ABILITY TO RAISE
CAPITAL
Section 5.14 of the Articles of Incorporation of Regency Realty Corporation
presently invalidates any issuance or transfer of shares that would (1) result
in 5% or more of the fair market value of Regency's outstanding capital stock
being held by non-U.S. persons (as defined in Regency's Articles of
Incorporation), excluding SC-USREALTY and its affiliates, or (2) result in 50%
or more of such fair market value being held by non-U.S. persons, including
SC-USREALTY and its affiliates. SC-USREALTY has the right to waive any of
these restrictions. At the request of SC-USREALTY, Regency's Board of
Directors has proposed amendments to Section 5.14, subject to consummation of
the Pacific Retail Trust merger, to expressly permit SC-USREALTY and its
affiliates to increase their ownership limit to 60% of Regency's common stock
on a fully diluted basis, even though Regency will cease to be a domestically
controlled real estate investment trust as a result of the merger. In order to
enable continuing maintenance of Regency's status as a domestically controlled
real estate investment trust in the future once ownership by non-U.S. persons
drops below 50% by value of Regency's outstanding capital stock, the proposed
amendments to Section 5.14 of Regency's Articles also will invalidate
issuances and transfers of shares thereafter by persons other than SC-USREALTY
and its affiliates that would (1) result in 4.9% or more of the fair market
value of Regency's outstanding capital stock being held by non-U.S. persons,
other than SC-USREALTY and its affiliates, or (2) result in 50% or more of
such fair market value being held by non-U.S. persons, including SC-USREALTY
and its affiliates (who will be presumed to be non-U.S. persons).
The transfer restrictions summarized above will limit Regency's ability to
raise capital from non-U.S. persons and therefore may reduce the capital
available for payment of the Notes.
COSTS OF ENVIRONMENTAL REMEDIATION COULD REDUCE PARTNERSHIP'S CASH FLOW
Under various federal, state and local laws, ordinances and regulations, an
owner or manager of real estate may be liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
Such laws often impose such liability without regard to whether the owner knew
of, or was responsible for, the presence of such hazardous or toxic
substances. The cost of any required remediation and the owner's liability
therefor could exceed the value of the property and/or the aggregate assets of
the owner. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's ability to sell or
rent such property or borrow using such property as collateral. Any of these
developments could reduce the cash flow available for payment of the Notes.
The issuer has approximately 22 properties and three guarantors of the Notes
own an aggregate of 4 additional properties that will require or are currently
undergoing varying levels of environmental remediation. These remediations are
not expected to have a material financial effect on the issuer or the
guarantors due to financial statement reserves and various state-regulated
programs that shift the responsibility and cost for remediation to the state.
CONSOLIDATED RATIOS OF
EARNINGS TO FIXED CHARGES
The issuer's ratios of earnings to fixed charges for the nine months ended
September 30, 1998 and the years ended December 31, 1997, 1996, 1995 and 1994
were 2.2, 2.4, 1.7, 1.0 and 1.0 respectively.
11
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For purposes of computing these ratios, earnings have been
calculated by adding fixed charges (excluding capitalized interest) to net
income from operations, excluding non-recurring gains and losses from the sale
of operating real estate. Fixed charges consist of interest costs (whether
expensed or capitalized) and amortization of deferred debt costs.
Prior to Regency Realty Corporation's initial public offering in November
1993, Regency's predecessor, The Regency Group, Inc., was privately held, and
its properties were encumbered by significantly higher levels of indebtedness
bearing interest at higher rates than the levels and rates applicable to
Regency and the issuer. Regency's predecessor had net losses for the period
from January 1, 1993 to November 4, 1993, and for the years ended December 31,
1992, 1991 and 1990, and earnings were not adequate to cover fixed charges
during such periods. The ratios of earnings to fixed charges for such periods
are not meaningful in light of the equity provided by Regency's initial public
offering and the concurrent refinancing of the predecessor's mortgage debt.
THE PARTNERSHIP AND THE COMPANY
Regency Centers, L.P. ("the Partnership") is a limited partnership which
acquires, owns, develops and manages neighborhood and community shopping
centers in targeted infill markets in the eastern half of the United States.
As a result of the formation of the Partnership in 1996 and the subsequent
consolidation of substantially all of its neighborhood and community shopping
centers in early 1998, the Partnership is the primary entity through which
Regency Realty Corporation ("Regency" or the "Company") owns its properties
and through which the Company intends to expand its ownership and operation of
properties. Regency is a real estate investment trust, the common stock of
which is traded on the New York Stock Exchange.
USE OF PROCEEDS
The Partnership will not receive any cash proceeds from the issuance of the
New Notes in this exchange offer. The Partnership received net proceeds of
$98.8 million from the sale of the Old Notes which were used to retire the
outstanding indebtedness under the Partnership's line of credit. The line of
credit accrues interest at a rate equal to the London Interbank Offered Rate
plus 0.875% and, subject to extension or renewal, matures in May 2000.
12
SELECTED FINANCIAL DATA
The following table sets forth Selected Financial Data on a historical basis
for the nine months ended September 30, 1998 and September 30, 1997 and for
the five years ended December 31, 1997, and on a pro forma basis for the nine
months ended September 30, 1998, and the year ended December 31, 1997. for the
Partnership and the commercial real estate business of The Regency Group, Inc.
("TRG" or "Regency Properties"), the predecessor of the Company. This
information should be read in conjunction with the Consolidated Financial
Statements of the Partnership (including the related notes thereto)
incorporated by reference in this Prospectus. The historical Selected
Financial Data for the Regency Properties as of November 5, 1993 has been
derived from audited financial statements. The data presented for the nine-
month periods ended September 30, 1998 and September 30, 1997 are derived from
unaudited financial statements and include, in the opinion of management, all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly the data for such periods. The results for the nine-month
period ended September 30, 1998 are not necessarily indicative of the results
to be expected for the full fiscal year.
REGENCY CENTERS, L.P.
-------------------------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31, PERIOD
------------------------------ -------------------------------------------------------------- ENDED
PRO FORMA PRO FORMA DEC. 31,
1998 1998 1997 1997 1997 1996 1995 1994 1993
---------- -------- -------- --------- ------------ ------------ ------------ ----------- --------
(UNAUDITED) (UNAUDITED)
----------- -----------
(IN THOUSANDS OF DOLLARS, EXCEPT PER UNIT DATA)
OPERATING DATA:
Revenues:
Rental revenue.... $ 179,321 $ 73,695 $ 47,177 $223,863 $ 67,221 $ 24,899 $ 14,362 $ 10,209 $ 954
Management,
leasing &
brokerage fees... 8,068 8,023 6,289 9,449 7,997 3,444 2,426 2,332 534
Equity in income
of investments in
real estate
partnerships .... 511 511 20 33 33 70 4 17 3
---------- -------- -------- -------- ------------ ------------ ------------ ----------- -------
Total revenues.. 187,900 82,229 53,486 233,345 75,251 28,413 16,792 12,558 1,491
---------- -------- -------- -------- ------------ ------------ ------------ ----------- -------
Operating expenses:
Operating,
maintenance &
real estate
taxes............ 41,532 17,036 12,033 52,187 17,139 7,211 4,130 3,279 406
General and
administrative... 18,222 10,638 7,761 20,398 9,964 6,049 4,895 4,531 736
Depreciation and
amortization .... 34,760 14,068 8,408 41,178 11,905 4,345 2,573 1,895 167
---------- -------- -------- -------- ------------ ------------ ------------ ----------- -------
Total operating
expenses....... 94,514 41,742 28,202 113,763 39,008 17,605 11,598 9,705 1,309
---------- -------- -------- -------- ------------ ------------ ------------ ----------- -------
Interest expense,
net of interest
income........... 28,841 13,183 9,728 63,000 12,679 5,866 4,398 2,276 (74)
---------- -------- -------- -------- ------------ ------------ ------------ ----------- -------
Income (loss)
before minority
interest and gain
on sale of real
estate
investments...... 64,545 27,304 15,556 56,582 23,564 4,942 796 577 256
Minority interest.. (808) (390) (566) (1,236) (505) -- -- -- --
Gain on sale of
real estate
investments and
other income...... 1,401 10,737 -- -- 451 -- -- -- --
---------- -------- -------- -------- ------------ ------------ ------------ ----------- -------
Net income........ 65,138 37,651 14,990 55,346 23,510 4,942 796 577 256
Preferred
distributions.... (6,639) (1,733) -- (8,695) -- -- -- -- --
---------- -------- -------- -------- ------------ ------------ ------------ ----------- -------
Net income for
unit holders..... $ 58,499 $ 35,918 $ 14,990 $ 46,651 $ 23,510 $ 4,942 $ 796 $ 577 $ 256
========== ======== ======== ======== ============ ============ ============ =========== =======
Earnings per unit:
Basic............ $ .96 $ 1.34 $ 0.67 $ 1.12 $ 1.20 $ 0.19 $ 0.04 $ 0.09 $ 0.07
========== ======== ======== ======== ============ ============ ============ =========== =======
Diluted.......... $ .95 $ 1.31 $ 0.63 $ 1.09 $ 1.12 $ 0.19 $ 0.04 $ 0.09 $ 0.07
========== ======== ======== ======== ============ ============ ============ =========== =======
OTHER DATA:
Consolidated ratio
of earnings to
fixed charges..... 3.0 2.2 2.2 1.7 2.4 1.7 1.0 1.0 n/a
BALANCE SHEET DATA:
Real estate
investments at
cost.............. $2,079,156 $966,658 n/a n/a $ 636,787 $ 257,066 $ 149,735 $ 92,649 $41,484
Total assets....... 2,090,226 972,235 n/a n/a 641,149 258,184 145,997 90,404 40,262
Total debt......... 711,973 384,210 n/a n/a 193,587 107,982 55,686 56,998 2,521
REGENCY
PROPERTIES
----------
PERIOD
ENDED
NOV. 5,
1993(1)
----------
OPERATING DATA:
Revenues:
Rental revenue.... $ 3,938
Management,
leasing &
brokerage fees... 2,247
Equity in income
of investments in
real estate
partnerships .... 18
----------
Total revenues.. 6,203
----------
Operating expenses:
Operating,
maintenance &
real estate
taxes............ 2,275
General and
administrative... 2,835
Depreciation and
amortization .... 963
----------
Total operating
expenses....... 6,073
----------
Interest expense,
net of interest
income........... 1,766
----------
Income (loss)
before minority
interest and gain
on sale of real
estate
investments...... (1,636)
Minority interest.. 126
Gain on sale of
real estate
investments and
other income...... 2,725
----------
Net income........ 1,215
Preferred
distributions.... --
----------
Net income for
unit holders..... $ 1,215
==========
Earnings per unit:
Basic............ n/a
==========
Diluted.......... n/a
==========
OTHER DATA:
Consolidated ratio
of earnings to
fixed charges..... n/a
BALANCE SHEET DATA:
Real estate
investments at
cost.............. n/a
Total assets....... n/a
Total debt......... n/a
- -------
(1) Such Combined Financial Statements have been prepared to reflect the
historical combined operations of the Regency Properties associated with
the ownership of the properties and the management, leasing, acquisition,
development and brokerage business acquired by the Company from TRG on
November 5, 1993 in connection with Regency's initial public offering
completed November 5, 1993.
13
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Partnership and the
guarantors of the Notes (the "Issuers") entered into the Registration Rights
Agreement dated July 15, 1998 (the "Registration Rights Agreement") among the
Issuers and Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated and
PaineWebber Incorporated (the "Initial Purchasers") pursuant to which the
Issuers agreed, among other things, to file and to use their reasonable
efforts to cause to become effective with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to the
exchange of the Old Notes for notes with terms identical in all material
respects to the terms of the Old Notes.
The exchange offer is being made to satisfy the contractual obligations of
the Issuers under the Registration Rights Agreement. The form and terms of the
New Notes are the same as the form and terms of the Old Notes except that the
New Notes have been registered under the Securities Act of 1933, as amended
(the "Securities Act") and therefore will not be subject to certain
restrictions on transfer applicable to the Old Notes and will not provide for
any additional interest in connection therewith. In that regard, the
Registration Rights Agreement provides that, if the exchange offer is not
consummated by March 17, 1999, then the per annum interest rate applicable to
the Old Notes will increase by 0.5% for the period from the occurrence of such
registration default until such time as the default is cured. Upon
consummation of the exchange offer, holders of Old Notes will not be entitled
to any additional interest with respect thereto or any further registration
rights under the Registration Rights Agreement, except under limited
circumstances. See "Risk Factors--Failure to Exchange Old Notes May Adversely
Affect Holders due to Transfer Restrictions and Lack of Liquidity."
The exchange offer is not being made to, nor will the Issuers accept tenders
for exchange from, holders of Old Notes in any jurisdiction in which the
exchange offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
exchange offer means any person whose Old Notes are held of record by The
Depository Trust Company ("DTC") who desires to deliver such Old Notes by
book-entry transfer at DTC.
NO BOARD OF DIRECTORS OF ANY ISSUER MAKES ANY RECOMMENDATION TO HOLDERS OF
OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION
OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS
BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD NOTES MUST
MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AFTER
READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH
THEIR ADVISERS BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
"Exchange Offer"), the Issuers will accept for exchange Old Notes that are
validly tendered on or before the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on , 1999; provided, however, that if the Issuers,
in their sole discretion, have extended the period of time for which the
Exchange Offer is open, the term "Expiration Date" means the latest time and
date to which the Exchange Offer is extended.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about the date set forth on the cover
page to all holders of Old Notes at the addresses set forth in the security
register with respect to Old Notes maintained by First Union National Bank, as
trustee (the "Trustee"). The Issuers' obligation to accept Old Notes for
exchange in the Exchange Offer is subject to certain conditions as set forth
under "Certain Conditions to the Exchange Offer" below.
14
The Issuers expressly reserve the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open for up to
an additional 30 days, and thereby delay acceptance of any Old Notes, by
giving oral or written notice of such extension to First Union National Bank,
as the exchange agent (the "Exchange Agent") and notice of such extension to
the holders as described below. During any such extension, all Old Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Issuers (subject to the rights of holders to
withdraw their tendered Old Notes). Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering holders
thereof as promptly as practicable after the expiration or termination of the
Exchange Offer. The Issuers also expressly reserve the right to amend or
terminate the Exchange Offer, and not to accept for exchange any Old Notes not
theretofore accepted for exchange, upon the occurrence of any of the
conditions of the Exchange Offer specified below under "Certain Conditions to
the Exchange Offer." The Issuers will give oral or written notice of any
extension, amendment, non-acceptance or termination to the holders of the Old
Notes as promptly as practicable, such notice in the case of any extension to
be issued by means of a press release or other public announcement no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. The Issuers intend to conduct the Exchange
Offer in accordance with the applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules and
regulations of the Commission thereunder.
PROCEDURES FOR TENDERING OLD NOTES
Book-Entry Transfer
In order for Old Notes to be validly tendered in the Exchange Offer, a
tendering holder that is a participant in the DTC system may utilize DTC's
Automated Tender Offer Program ("ATOP") to tender Old Notes. The Exchange
Agent will establish an account with respect to the Old Notes at DTC for
purposes of the Exchange Offer promptly after the date of this Prospectus.
Financial institution participants in DTC's system may make book-entry
delivery of Old Notes by causing DTC to transfer such Old Notes into the
Exchange Agent's account in accordance with DTC's procedures for transfer. The
exchange for the Old Notes so tendered will only be made, however, after
timely book-entry confirmation (as defined in the next paragraph) of such
transfer of Old Notes into the Exchange Agent's account, and timely receipt by
the Exchange Agent of an Agent's Message (as defined in the next paragraph) or
a properly completed and duly executed Letter of Transmittal and any other
documents required by the Letter of Transmittal on or before the Expiration
Date.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Old Notes into the Exchange Agent's account at DTC. The term
"Agent's Message" means a message transmitted by DTC to, and received by, the
Exchange Agent and forming a part of a book-entry confirmation, which states
that DTC has received an express acknowledgement from the tendering
participant, which acknowledgement states that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal and that the
Issuers may enforce the Letter of Transmittal against such participant.
Procedures Other than Book-Entry Transfer
If any Old Notes have been reissued in certificated form, then in order for
certificated Old Notes to be validly tendered in the Exchange Offer, the
Exchange Agent must receive (i) a properly completed and duly executed Letter
of Transmittal (or facsimile thereof), together with any required signature
guarantees and other required documents, and (ii) the certificates of such Old
Notes at one of the addresses set forth below under "Exchange Agent." THE
METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF EACH HOLDER. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT
TO THE ISSUERS.
15
Signature guarantees on a Letter of Transmittal are unnecessary unless (i) a
certificate for the Old Notes is registered in a name other than that of the
person surrendering the certificate or (ii) such registered holder completes
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal. In the case of (i) or (ii) above,
the endorsement or signature on the Letter of Transmittal must be guaranteed
by a firm or other entity identified in Commission Rule 17Ad-15 as an
"eligible guarantor institution," including (as such terms are defined
therein), (i) a bank; (ii) a broker, dealer, municipal securities broker or
dealer or government securities broker or dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities association or clearing
agency; or (v) a savings association that is a participant in a Securities
Transfer Association (each an "Eligible Institution"), unless surrendered on
behalf of an Eligible Institution.
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Issuers in their sole discretion, which determination shall be final
and binding. The Issuers reserve the absolute right to reject any and all
tenders of any particular Old Notes not properly tendered or to not accept any
particular Old Notes the acceptance of which might, in the judgment of the
Issuers or their counsel, be unlawful. The Issuers also reserve the absolute
right in their sole discretion to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Old Notes either before
or after the Expiration Date (including the right to waive the ineligibility
of any holder who seeks to tender Old Notes in the Exchange Offer). The
interpretation of the terms and conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
Letter of Transmittal and the instructions thereto) by the Issuers shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with the tenders of Old Notes for exchange must be cured within
such reasonable period of time as the Issuers determine. Neither the Issuers,
the Exchange Agent nor any other person is under any duty to give notification
of any defect or irregularity with respect to any tender of Old Notes for
exchange, nor will any of them incur any liability for failure to give such
notification.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
If the Letter of Transmittal or any Old Notes or separate written
instruments of transfer or exchange are signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and, unless waived by the Issuers, submit proper
evidence satisfactory to the Issuers of the person's authority to so act.
Representations of Tendering Participants
By tendering, each holder will represent to the Issuers that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, (ii) neither the holder nor
any other person has an arrangement or understanding with any person to
participate in a distribution of such New Notes, (iii) if the holder is not a
broker-dealer, or is a broker-dealer but will not receive New Notes for its
own account in exchange for Old Notes, neither the holder nor any other person
is engaged in or intends to participate in a distribution of such New Notes
and (iv) neither the holder nor any other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of either of the Issuers. If the
tendering holder is a broker-dealer (whether or not it is also an "affiliate")
that will receive New Notes for its own account in exchange for Old Notes that
were acquired as a result of market-making activities or other trading
activities, it will be required to acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes. By acknowledging that it will deliver and by
delivering a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes, the holder will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
16
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time on or before the
Expiration Date. For a withdrawal to be effective, a written notice (which may
be a facsimile transmission) of withdrawal must be received by the Exchange
Agent at the address set forth in the Letter of Transmittal. Any such notice
of withdrawal must specify the name of the person who tendered the Old Notes
to be withdrawn, identify the Old Notes to be withdrawn (including the
principal amount of such Old Notes), include a statement that such holder is
withdrawing its election to have such Old Notes exchanged and the name of the
registered holder of such Old Notes, and must be signed by the holder in the
same manner as the original signature on the Letter of Transmittal (including
any required signature guarantees) or be accompanied by evidence satisfactory
to the Issuers that the person withdrawing the tender has succeeded to the
beneficial ownership of the Old Notes being withdrawn. If certificates for Old
Notes have been delivered or otherwise identified to the Exchange Agent, then,
before the release of such certificates, the withdrawing holder must also
submit the serial numbers of the particular certificates to be withdrawn and a
signed notice of withdrawal with signatures guaranteed by an Eligible
Institution unless such holder is an Eligible Institution. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the DTC
account to be credited with the withdrawn Old Notes and otherwise comply with
the procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Issuers, whose determination shall be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes that have been
tendered for exchange but that are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer, such Old Notes will be credited to
an account maintained with such book-entry transfer facility for the Old
Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "Procedures for
Tendering Old Notes" above at any time on or before the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Issuers will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of
the Old Notes. See "Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Issuers will be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Issuers have
given oral or written notice thereof to the Exchange Agent.
In all cases, delivery of New Notes in exchange for Old Notes that are
tendered and accepted for exchange in the Exchange Offer will be made only
after timely receipt by the Exchange Agent of (i) Old Notes or a book-entry
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at DTC, (ii) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) or Agent's Message in lieu thereof, and
(iii) any other documents required by the Letter of Transmittal. If any
tendered Old Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if certificates representing Old Notes are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or non-exchanged Old Notes will be returned without expense to
the tendering holder thereof (or, in the case of Old Notes tendered by book-
entry transfers into the Exchange Agent's account at DTC, such non-exchanged
Old Notes will be credited to an account maintained with DTC for the benefit
of the holder of such Old Note) as promptly as practicable after the
expiration or termination of the Exchange Offer.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, the Issuers will
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the
New Notes for such Old Notes, such acceptance or issuance would violate
applicable law or any interpretation of the staff of the Commission.
17
In addition, the Issuers will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order is threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the indenture governing the Notes under the Trust Indenture
Act of 1939, as amended.
If the Issuers determine in their sole and absolute discretion that any of
the foregoing events or conditions has occurred or exists, the Issuers may,
subject to applicable law, terminate the Exchange Offer (whether or not any
Old Notes have theretofore been accepted for exchange).
EXCHANGE AGENT
First Union National Bank has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at the address set forth in the Letter of Transmittal.
Questions, requests for assistance, and requests for additional copies of this
Prospectus or of the Letter of Transmittal should be directed to the Exchange
Agent, addressed as set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH IN THE LETTER OF TRANSMITTAL
OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH IN THE
LETTER OF TRANSMITTAL DOES NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The principal solicitation of acceptances of the Exchange Offer is being
made by mail; however, additional solicitations may be made by telecopy,
telephone, in person or by other means by officers and regular employees of
the Issuers and their affiliates. No additional compensation will be paid to
any such officers and employees who engage in soliciting tenders. The Issuers
will not make any payment to brokers, dealers, or others soliciting
acceptances of the Exchange Offer. The Issuers, however, will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse it for
its reasonable out-of-pocket expenses in connection therewith.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Issuers.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct
the Issuers to register New Notes in the name of, or request that Old Notes
not tendered or not accepted in the Exchange Offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax thereon.
18
DESCRIPTION OF NOTES
The Old Notes have been issued and the New Notes are to be issued under an
Indenture, to be dated as of July 20, 1998 (the "Indenture"), among the
Partnership, the Guarantors and the Trustee. The statements under this caption
relating to the Notes and the Indenture are summaries and do not purport to be
complete, and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indenture, including the definitions of certain
terms therein. The Indenture is by its terms subject to and governed by the
Trust Indenture Act of 1939, as amended. Unless otherwise indicated,
references under this caption to sections, "(S)" or articles are references to
the Indenture. Where reference is made to particular provisions of the
Indenture or to defined terms not otherwise defined herein, such provisions or
defined terms are incorporated herein by reference. The Indenture has been
filed as an exhibit to the Partnership's Registration Statement on Form 10 and
is incorporated by reference herein. Copies of the Indenture are also
available at the corporate trust office of the Trustee.
GENERAL
The Notes (including the Old Notes and the New Notes) will be unsecured
obligations of the Partnership, are limited to $100.0 million aggregate
principal amount and will mature on July 15, 2005. The Notes bear interest at
7 1/8% per annum from their original date of issue or from the most recent
Interest Payment Date to which interest has been paid or provided for, payable
semi-annually on January 15 and July 15 of each year, commencing January 15,
1999, to the Person in whose name the Note (or any predecessor Note) is
registered at the close of business on the preceding January 1 or July 1, as
the case may be. The Notes will bear interest on overdue principal and
premium, if any, and, to the extent permitted by law, overdue interest at the
rate per annum shown above plus 2%. Interest on the Notes will be computed on
the basis of a 360-day year of twelve 30-day months. ((S)(S) 301, 308 and 311)
The New Notes will bear interest from their date of issuance. The
Partnership will issue the New Notes promptly after expiration of the Exchange
Offer and acceptance of the Old Notes tendered for the New Notes. Holders of
Old Notes whose Old Notes are accepted for exchange will receive interest on
such Old Notes accrued from January 15, 1999 to the date of issuance of the
New Notes, with such interest payable with the first interest payment on the
New Notes. Consequently, holders who exchange their Old Notes for New Notes
will receive the same interest payment on July 15, 1999 (the first interest
payment date with respect to the New Notes) that they would have received had
they not accepted the Exchange Offer.
The New Notes will, to the extent described herein, be fully and
unconditionally guaranteed by Regency Realty Corporation, Regency Office
Partnership, L.P., RRC Operating Partnership of Georgia, L.P., RRC FL Five,
Inc., and RRC Aquisitions, Inc. (the "Guarantors"). Such guarantees of the New
Notes (the "New Guarantees") will be unsecured and unsubordinated obligations
of the Guarantors.
Principal of and premium, if any, and interest on the Notes will be payable,
and the Notes may be presented for registration of transfer and exchange, at
the office or agency of the Partnership maintained for that purpose in the
Borough of Manhattan, The City of New York, provided that at the option of the
Partnership, payment of interest on the Notes may be made by check mailed to
the address of the Person entitled thereto as it appears in the Note Register.
Until otherwise designated by the Partnership, such office or agency will be
the corporate trust office of the Trustee, as Paying Agent and Registrar.
((S)(S) 301, 305 and 1002)
Payments by the Partnership in respect of the Notes (including principal,
premium, if any, and interest) will be made in immediately available funds.
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
Notes will be issued only in fully registered form, without interest
coupons, in denominations of $1,000 and integral multiples thereof. Notes will
not be issued in bearer form.
Global Notes. The New Notes will be represented by one or more Notes in
registered, global form without interest coupons (collectively, the "Global
Note"). The Global Note will be deposited upon issuance with the
19
Trustee as custodian for The Depository Trust Company ("DTC"), in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC as described
below.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for
Notes in certificated form except in the limited circumstances described below
under "--Exchanges of Book-Entry Notes for Certificated Notes."
Exchanges of Book-Entry Notes for Certificated Notes. A beneficial interest
in a Global Note may not be exchanged for a Note in certificated form unless
(i) DTC (x) notifies the Partnership that it is unwilling or unable to
continue as Depositary for the Global Note or (y) has ceased to be a clearing
agency registered under the Exchange Act, and in either case the Partnership
thereupon fails to appoint a successor Depositary, (ii) the Partnership, at
its option, notifies the Trustee in writing that it elects to cause the
issuance of the Notes in certificated form or (iii) there shall have occurred
and be continuing an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in accordance with
its customary procedures). Any certificated Note issued in exchange for an
interest in a Global Note will bear the legend restricting transfers that is
borne by such Global Note. Any such exchange will be effected through the DWAC
System and an appropriate adjustment will be made in the records of the Note
Registrar to reflect a decrease in the principal amount of the relevant Global
Note.
Certain Book-Entry Procedures. The descriptions of the operations and
procedures of DTC that follow are provided solely as a matter of convenience.
These operations and procedures are solely within the control of such
settlement system and are subject to changes by it from time to time. The
Partnership takes no responsibility for these operations and procedures and
urges investors to contact the system or their participants directly to
discuss these matters.
DTC has advised the Partnership as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("participants") and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies
and clearing corporations and may include certain other organizations.
Indirect access to the DTC system is available to other entities such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
DTC has advised the Partnership that its current practice, upon the issuance
of the Global Note, is to credit, on its internal system, the respective
principal amount of the individual beneficial interests represented by such
Global Note to the accounts with DTC of the participants through which such
interests are to be held. Ownership of beneficial interests in the Global
Notes will be shown on, and the transfer of that ownership will be effected
only through, records maintained by DTC or its nominees (with respect to
interests of participants) and the records of participants and indirect
participants (with respect to interests of persons other than participants).
AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL NOTE,
DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE OWNER AND
HOLDER OF THE NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL PURPOSES UNDER THE
INDENTURE AND THE NOTES. Except in the limited circumstances described above
under "--Exchanges of Book-Entry Notes for Certificated Notes", owners of
beneficial interests in a Global Note will not be entitled to have any
portions of such Global Note registered in their names, will not receive or be
entitled to receive physical delivery of Notes in definitive form and will not
be considered the owners or Holders of the Global Note (or any Note
represented thereby) under the Indenture or the Notes.
20
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons may be limited
to that extent. Because DTC can act only on behalf of its participants, which
in turn act on behalf of indirect participants and certain banks, the ability
of a person having a beneficial interest in a Global Note to pledge such
interest to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interest, may be affected by the
lack of a physical certificate evidencing such interest.
Payments of the principal of, premium, if any, and interest on Global Notes
will be made to DTC or its nominee as the registered owner thereof. Neither
the Partnership, the Guarantors, the Trustee nor any of their respective
agents will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Global Notes or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Partnership expects that DTC or its nominee, upon receipt of any payment
of principal or interest in respect of a Global Note representing any Notes
held by it or its nominee, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Note for such Notes as shown on the
records of DTC or its nominee. The Partnership also expects that payments by
participants to owners of beneficial interests in such Global Note held
through such participants will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers registered in "street name". Such payment will be the responsibility
of such participants.
Interests in the Global Note will trade in DTC's settlement system and
secondary market trading activity in such interests will therefore settle in
immediately available funds, subject in all cases to the rules and procedures
of DTC and its participants. Transfers between participants in DTC will be
effected in accordance with DTC's procedures, and will be settled in same-day
funds.
DTC has advised the Partnership that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account with DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such participant or participants has or have given such direction.
However, if there is an Event of Default (as defined below) under the Notes,
the Global Notes will be exchanged for legended Notes in certificated form and
distributed to DTC's participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the Global Notes among
participants of DTC it is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
None of the Partnership, the Guarantors, the Trustee nor any of their
respective agents will have any responsibility for the performance by DTC,
their participants or indirect participants of their respective obligations
under the rules and procedures governing their operations, including
maintaining, supervising or reviewing the records relating to, or payments
made on account of, beneficial ownership interests in Global Notes.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time, at the option of the Partnership, in
whole or in part from time to time, at a redemption price (the "Redemption
Price") equal to the sum of (i) the principal amount of the Notes (or portion
thereof) being redeemed plus accrued interest thereon to the redemption date
and (ii) the Make-Whole Amount, if any, with respect to such Notes (or portion
thereof). ((S) 1101)
If notice has been given as provided in the Indenture and funds for the
redemption of any Note (or any portion thereof) called for redemption shall
have been made available on the redemption date referred to in such notice,
such Notes (or any portion thereof) will cease to bear interest on the date
fixed for such redemption specified in such notice and the only right of the
Holders of such Note will be to receive payment of the Redemption Price. ((S)
1107)
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Notice of any optional redemption of any Note (or any portion thereof) will
be given to Holders at their addresses, as shown in the security register for
such Notes, not more than 60 nor less than 30 days prior to the date fixed for
redemption. The notice of redemption will specify, among other items, the
Redemption Price and the principal amount of the Notes held by such Holder to
be redeemed. ((S) 1105)
The Partnership will notify the Trustee at least 60 days prior to giving
notice of redemption (or such shorter period as is satisfactory to the
Trustee) of the aggregate principal amount of such Notes to be redeemed and
their redemption date. If less than all of the Notes are to be redeemed at the
option of the Partnership, the Trustee shall select, in such manner as it
shall deem fair and appropriate, such Notes to be redeemed in whole or in
part. ((S)(S) 1103 and 1104)
All Notes redeemed in full by the Partnership as aforesaid shall be canceled
forthwith and may not be reissued or resold.
GUARANTEES
The Guarantors will, jointly and severally, on an unsubordinated basis,
unconditionally guarantee the due and punctual payment of principal of (and
premium, if any) and interest on the New Notes, when and as the same shall
become due and payable, whether at the maturity date, by declaration of
acceleration, call for redemption or otherwise. If the Partnership defaults in
the payment of the principal of (and premium, if any) or interest on, the New
Notes, the Guarantors shall be required promptly to make such payment in full,
without the necessity of action by the Trustee or the holder of any Notes. In
the event of a guarantor insolvency, a creditor may avoid an intercorporate
guarantee in its entirety under federal and state bankruptcy and fraudulent
transfer law if the guarantee impaired the guarantor's financial condition and
was given without receiving reasonably equivalent value in return. The
indenture limits recovery under each Guarantee to the highest amount that
would not render the Guarantee void against creditors under such laws.
Accordingly, in the event of a Guarantor insolvency, recovery against an
individual Guarantor other than Regency is unlikely.
The New Guarantees are unsecured obligations of the Guarantors and will be
effectively subordinated to mortgage and other secured indebtedness of the
Guarantors.
The Indenture provides that no Guarantor may, in a single transaction or a
series of related transactions, (i) consolidate with or merge into any other
Person or permit any other Person to consolidate with or merge into such
Guarantor or (ii) directly or indirectly, transfer, sell, lease or otherwise
dispose of all or substantially all of its assets, unless: (1) in a
transaction in which such Guarantor does not survive or in which such
Guarantor sells, leases or otherwise disposes of all or substantially all of
its assets, the successor entity to such Guarantor is organized under the laws
of the United States of America or any State thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture executed and
delivered to the Trustee in form satisfactory to the Trustee, all of such
Guarantor's obligations under the Indenture; (2) immediately before and after
giving effect to such transaction and treating any Indebtedness which becomes
an obligation of such Guarantor or a subsidiary thereof as a result of such
transaction as having been Incurred by such Guarantor or such subsidiary
thereof at the time of the transaction, no Event of Default or event that with
the passing of time or the giving of notice, or both, would constitute an
Event of Default shall have occurred and be continuing; and (3) certain other
conditions are met.
The New Guarantees will remain in effect with respect to each Guarantor
until the entire principal of, premium, if any, and interest on the Notes
shall have been paid in full or the New Notes shall have been defeased and
discharged as described under Clause (A) under "--Defeasance".
COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON INDEBTEDNESS
The Partnership will not, and will not permit any Subsidiary to, incur any
Indebtedness, if, immediately after giving effect to the incurrence of such
additional Indebtedness and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Indebtedness of the Partnership
and its Subsidiaries on a consolidated basis determined in accordance with
GAAP is greater than 60% of the sum of (without duplication)
22
(i) Total Assets as of the end of the calendar quarter covered in the
Partnership's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as
the case may be, most recently filed with the Trustee (or such reports of the
Company if filed by the Partnership with the Trustee in lieu of filing its own
reports) prior to the incurrence of such additional Indebtedness and (ii) the
purchase price of any real estate assets or mortgages receivable acquired and
the amount of any securities offering proceeds received (to the extent that
the proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Indebtedness) by the Partnership or any
Subsidiary since the end of the calendar quarter, including those proceeds
obtained in connection with the incurrence of the additional Indebtedness.
((S) 1008)
In addition to the foregoing limitation on the incurrence of Indebtedness,
neither the Partnership nor any Subsidiary may incur any Indebtedness secured
by any Encumbrance upon any of the property of the Partnership or any
Subsidiary if, immediately after giving effect to the incurrence of the
additional Indebtedness and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Indebtedness of the Partnership
and its Subsidiaries on a consolidated basis which is secured by any
Encumbrance on property of the Partnership or any Subsidiary is greater than
40% of the sum of (without duplication) (i) the Total Assets of the
Partnership and its Subsidiaries as of the end of the calendar quarter covered
in the Partnership's Annual Report on Form 10-K or Quarterly Report on Form
10-Q, as the case may be, most recently filed with the Trustee (or such
reports of the Company if filed by the Partnership with the Trustee in lieu of
filing its own reports) prior to the incurrence of the additional Indebtedness
and (ii) the purchase price of any real estate assets or mortgages receivable
acquired and the amount of any securities offering proceeds received (to the
extent that the proceeds were not used to acquire real estate assets or
mortgages receivable or used to reduce Indebtedness) by the Partnership or any
Subsidiary since the end of the calendar quarter, including those proceeds
obtained in connection with the incurrence of the additional Indebtedness.
((S) 1008)
The Partnership and its Subsidiaries may not at any time own Total
Unencumbered Assets equal to less than 150% of the aggregate outstanding
principal amount of the Unsecured Indebtedness of the Partnership and its
Subsidiaries on a consolidated basis. ((S) 1008)
In addition to the foregoing limitations on the incurrence of Indebtedness,
the Partnership will not, and will not permit any Subsidiary to, incur any
Indebtedness if the ratio of Consolidated Income Available for Debt Service to
the Annual Service Charge for the four consecutive fiscal quarters most
recently ended prior to the date on which such additional Indebtedness is to
be incurred shall have been less than 1.5 to 1, on a pro forma basis, after
giving effect to the incurrence of such Indebtedness and to the application of
the proceeds therefrom and calculated on the assumption that (i) such
indebtedness and any other Indebtedness incurred by the Partnership or its
Subsidiaries since the first day of such four-quarter period and the
application of the proceeds therefrom, including Indebtedness to refinance
other Indebtedness, had occurred at the beginning of such period, (ii) the
repayment or retirement of any other Indebtedness by the Partnership or its
Subsidiaries since the first day of such four-quarter period had been
incurred, repaid or retired at the beginning of such period (except that, in
making such computation, the amount of Indebtedness under any revolving credit
facility shall be computed based upon the average daily balance of such
Indebtedness during such period), (iii) in the case of Acquired Indebtedness
or Indebtedness incurred in connection with any acquisition since the first
day of the four-quarter period, the related acquisition had occurred as of the
first day of the period with appropriate adjustments with respect to the
acquisition being included in the pro forma calculation, and (iv) in the case
of any acquisition or disposition by the Partnership or any Subsidiary of any
asset or group of assets since the first day of such four-quarter period,
including, without limitation, by merger, stock purchase or sale, or asset
purchase or sale, such acquisition or disposition or any related repayment
Indebtedness had occurred as of the first day of such period with appropriate
adjustments with respect to such acquisition or disposition being included in
such pro forma calculation. ((S) 1008)
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Indebtedness, Indebtedness shall be deemed to be "incurred" by
the Partnership or a Subsidiary whenever the Partnership and its Subsidiary
shall create, assume, guarantee or otherwise become liable in respect thereof.
23
PROVISION OF FINANCIAL INFORMATION
Whether or not the Partnership is required to be subject to Section 13(a) or
15(d) of the Exchange Act or any successor provision thereto, the Partnership
shall file with the Commission the annual reports, quarterly reports and other
documents which the Partnership would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) or any successor provision
thereto if the Partnership were so required, such documents to be filed with
the Commission on or prior to the respective dates (the "Required Filing
Dates") by which the Partnership would have been required so to file such
documents if the Partnership were so required. The Partnership shall also in
any event (a) within 15 days of each Required Filing Date (i) transmit by mail
to all Holders, as their names and addresses appear in the Note Register,
without cost to such Holders, and (ii) file with the Trustee, copies of the
annual reports, quarterly reports and other documents which the Partnership
files with the Commission pursuant to such Section 13(a) or 15(d) or any
successor provision thereto or would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) or any successor provisions
thereto if the Partnership were required to be subject to such Sections and
(b) if filing such documents by the Partnership with the Commission is not
permitted under the Exchange Act, promptly upon written request supply copies
of such documents to any prospective Holder. ((S) 1010)
EXISTENCE
Except as permitted under "--Merger, Consolidation or Sale", the Partnership
and the Guarantors will be required to do or cause to be done all things
necessary to preserve and keep in full force and effect their respective
existence, rights and franchises; provided, however, that the Partnership and
the Guarantors shall not be required to preserve any right or franchise if the
Partnership or the Guarantors, as applicable, determine that the preservation
thereof is no longer desirable in the conduct of their business and that the
loss thereof is not disadvantageous in any material respect to the holders of
the Notes. ((S) 1004)
MAINTENANCE OF PROPERTIES
The Partnership and the Guarantors will be required to cause all properties
used or useful in the conduct of their respective businesses or the business
of any subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and to cause to be
made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Partnership or the
Guarantor, as applicable, may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all
times; provided, however, that the Partnership and the Guarantors shall not be
prevented from discontinuing the operation or maintenance of any of their
respective properties if such discontinuance is, in the judgment of the
Partnership or the applicable Guarantor, desirable in the conduct of its
business or the business of any Subsidiary and not disadvantageous in any
material respect to the holders of the Notes. ((S) 1005)
INSURANCE
The Partnership and the Guarantors will be required to, and to cause each of
their respective subsidiaries to, keep all of their insurable properties
insured against loss or damage with insurers of recognized responsibility in
commercially reasonable amounts and types. ((S) 1007)
PAYMENT OF TAXES AND OTHER CLAIMS
The Partnership and the Guarantors will be required to pay or discharge or
cause to be paid or discharged, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges levied or imposed upon the
Partnership, any Guarantor or any subsidiary or upon the income, profits or
property of the Partnership, any Guarantor or any subsidiary, and (ii) all
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Partnership, any Guarantor or any
subsidiary; provided, however, that neither the Partnership nor any Guarantor
shall be required to pay or discharge or cause to be paid
24
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings. ((S) 1006)
MERGER, CONSOLIDATION OR SALE
The Partnership may not, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or permit
any other Person to consolidate with or merge into the Partnership, (ii)
directly or indirectly, transfer, convey, sell, lease or otherwise dispose of
all or substantially all of its assets, (iii) acquire, or permit any
Subsidiary to acquire, directly or indirectly, Capital Stock or other
ownership interests of any other Person such that such Person becomes a
Subsidiary of the Partnership and (iv) purchase, lease or otherwise acquire,
or permit any Subsidiary to purchase, lease or otherwise acquire, (a) all or
substantially all of the property and assets of any Person as an entirety or
(b) any existing business (whether existing as separate entity, subsidiary,
division, unit or otherwise) of any Person, unless: (1) in a transaction in
which the Partnership does not survive or in which the Partnership sells,
leases or otherwise disposes of all or substantially all of its assets, the
successor entity to the Partnership is organized under the laws of the United
States of America or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture executed and delivered to the
Trustee in form satisfactory to the Trustee, all of the Partnership's
obligations under the Indenture; (2) immediately before and after giving
effect to such transaction and treating any Indebtedness which becomes an
obligation of the Partnership or a Subsidiary as a result of such transaction
as having been Incurred by the Partnership or such Subsidiary at the time of
the transaction, no Event of Default or event that with the passing of time or
the giving of notice, or both, would constitute an Event of Default shall have
occurred and be continuing; (3) immediately after giving effect to such
transaction, the Consolidated Net Worth of the Partnership (or other successor
entity to the Partnership) is equal to or greater than that of the Partnership
immediately prior to the transaction; and (4) certain other conditions are
met. ((S) 801)
PAYING AGENTS
The Partnership has initially appointed the Trustee, acting through its
corporate trust office in Jacksonville, Florida, as Paying Agent. The
Partnership may vary or terminate the appointment of any paying agent,
including the Paying Agent, and/or appoint additional Paying Agents, provided
that as long as any Notes remain outstanding, the Partnership will maintain a
Paying Agent and a transfer agent in Jacksonville, Florida, or the Borough of
Manhattan, The City of New York. The Partnership will cause the Trustee to
notify the holders of Notes, in the manner described under "--Notices" below,
of any variation or termination of any Paying Agent and of any changes in the
specified offices.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided. ((S) 101)
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time the Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from the Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, the Person becoming a
Subsidiary or that acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or
the date the acquired Person becomes a Subsidiary.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
25
"Annual Service Charge" for any period means the aggregate interest expense
for the period in respect of, and the amortization during the period of any
original issue discount of, Indebtedness of the Partnership and its
Subsidiaries and the amount of dividends which are payable during the period
in respect of any Disqualified Stock.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of the Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any period means
Earnings from Operations of the Partnership and its Subsidiaries plus amounts
which have been deducted, and minus amounts which have been added, for the
following (without duplication): (i) interest expense on Indebtedness of the
Partnership and its Subsidiaries; (ii) provision for taxes of the Partnership
and its Subsidiaries based on income; (iii) amortization of debt discount;
(iv) provisions for gains and losses on properties and property depreciation
and amortization; (v) the effect of any noncash charge resulting from a change
in accounting principles in determining Earnings from Operations for the
period; and (vi) amortization of deferred charges.
"Consolidated Net Worth" of any Person means the consolidated equity of such
Person, determined on a consolidated basis in accordance with GAAP, less
amounts attributable to Disqualified Stock of such Person; provided that, with
respect to the Partnership, adjustments following the date of the Indenture to
the accounting books and records of the Partnership in accordance with
Accounting Principles Board Opinions Nos. 16 and 17 (or successor opinions
thereto) or otherwise resulting from the acquisition of control of the
Partnership by another Person shall not be given effect to.
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
the Person which by the terms of that Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock), (ii) is convertible into or exchangeable or exercisable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part (other than Capital Stock which is
redeemable solely in exchange for Capital Stock which is not Disqualified
Stock or the redemption price of which may, at the option of that Person, be
paid in Capital Stock which is not Disqualified Stock), in each case on or
prior to the Stated Maturity of the Notes; provided, however, that equity
interests whose holders have (or will have after the expiration of an initial
holding period) the right to have such equity interests redeemed for cash in
an amount determined by the value of the Common Stock do not constitute
Disqualified Stock.
"Earnings from Operations" for any period means net earnings excluding gains
and losses on sales of investments, extraordinary items and property valuation
losses, net, as reflected in the financial statements of the Partnership and
its Subsidiaries for the period determined on a consolidated basis in
accordance with GAAP.
"Encumbrance" means any mortgage, lien, charge, pledge or security interest
of any kind, except any mortgage, lien, charge, pledge or security interest of
any kind which secures debt of any Guarantor owed to the Partnership.
"Indebtedness" of the Partnership or any Subsidiary means any indebtedness
of the Partnership or such Subsidiary, as applicable, whether or not
contingent, in respect of (i) borrowed money or indebtedness evidenced by
bonds, notes, debentures or similar instruments, (ii) borrowed money or
indebtedness evidenced by bonds, notes, debentures or similar instruments
secured by any Encumbrance existing on property owned by the Partnership or
any Subsidiary, (iii) reimbursement obligations in connection with any letters
of credit actually issued or amounts representing the balance deferred and
unpaid of the purchase price of any property or services, except any such
balance that constitutes an accrued expense or trade payable, or all
conditional sale obligations
26
or obligations under any title retention agreement, (iv) the amount of all
obligations of the Partnership or any Subsidiary with respect to redemption,
repayment or other repurchase of any Disqualified Stock and (v) any lease of
property by the Partnership or any Subsidiary as lessee which is reflected on
the Partnership's consolidated balance sheet as a capitalized lease in
accordance with GAAP, to the extent, in the case of items of indebtedness
under (i) through (iv) above, that any such items (other than letters of
credit) would appear as a liability on the Partnership's consolidated balance
sheet in accordance with GAAP, and also includes, to the extent not otherwise
included, any obligation of the Partnership or any Subsidiary to be liable
for, or to pay, as obligor, guarantor or otherwise (other than for purposes of
collection in the ordinary course of business), Indebtedness of another person
(other than the Partnership or any Subsidiary) (it being understood that
Indebtedness shall be deemed to be incurred by the Partnership or any
Subsidiary whenever the Partnership or the Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Notes, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
(exclusive of interest accrued to the date of redemption or accelerated
payment) that would have been payable in respect of each such dollar if such
redemption or accelerated payment had not been made, determining by
discounting, on a semi-annual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date
such notice of redemption is given or declaration of acceleration is made)
from the respective dates on which such principal and interest would have been
payable if such redemption or accelerated payment had not been made, over (ii)
the aggregate principal amount of the Notes being redeemed or paid.
"Person" means any individual, corporation, limited liability company, joint
venture, partnership, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Reinvestment Rate" means 0.25% plus the arithmetic mean of the yields under
the respective heading "Week Ending" published in the most recent Statistical
Release under the caption "Treasury Constant Maturities" for the maturity
(rounded to the nearest month) corresponding to the remaining life to
maturity, as of the payment date of the principal being redeemed or paid. If
no maturity exactly corresponds to such maturity, yields for the two published
maturities most closely corresponding to such maturity shall be calculated
pursuant to the immediately preceding sentence and the Reinvestment Rate shall
be interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of such relevant periods to the nearest month. For the
purposes of calculating the Reinvestment Rate, the most recent Statistical
Release published prior to the date of determination of the Make-Whole Amount
shall be used.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States
government securities adjusted to constant maturities, or, if such statistical
release is not published at the time of any determination under the Indenture,
then such other reasonably comparable index which shall be designated by the
Partnership.
"Subsidiary" means a corporation, partnership or other entity a majority of
the voting power of the voting equity securities or the outstanding equity
interests of which are owned, directly or indirectly, by the Partnership or by
one or more other Subsidiaries of the Partnership. For the purposes of this
definition, "voting equity securities" means equity securities having voting
power for the election of directors, whether at all times or only so long as
no senior class of security has such voting power by reason of any
contingency.
"Total Assets" as of any date means the sum of (i) Undepreciated Real Estate
Assets and (ii) all other assets of the Partnership and its Subsidiaries on a
consolidated basis determined in accordance with GAAP (but excluding
intangibles and accounts receivable).
27
"Total Unencumbered Assets" means the sum of (i) those Undepreciated Real
Estate Assets not subject to an Encumbrance for borrowed money and (ii) all
other assets of the Partnership and its Subsidiaries not subject to an
Encumbrance for borrowed money determined in accordance with GAAP (but
excluding intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Partnership and
its Subsidiaries on such date, before depreciation and amortization,
determined on a consolidated basis in accordance with GAAP.
"Unsecured Indebtedness" means Indebtedness which is (i) not subordinated to
any other Indebtedness and (ii) not secured by any Encumbrance upon any of the
properties of the Partnership or any Subsidiary.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture: (a) failure to pay
principal of (or premium, if any, on) any Note when due; (b) failure to pay
any interest on any Note when due, continued for 30 days; (c) failure to
perform or comply with the provisions described under "--Merger, Consolidation
or Sale"; (d) failure to perform any other covenant or agreement of the
Partnership or the Guarantors under the Indenture or the Notes continued for
60 days after written notice to Holders by the Trustee or Holders of at least
25% in aggregate principal amount of Outstanding Notes; (e) default under the
terms of any instrument evidencing or securing Indebtedness by the Partnership
or any Guarantor having an outstanding principal amount of $5.0 million
individually or in the aggregate, which default results in the acceleration of
the payment of such indebtedness or constitutes the failure to pay such
indebtedness when due; (f) the rendering of a final judgment or judgments (not
subject to appeal) against the Partnership or any Guarantor in an amount in
excess of $5.0 million which remains undischarged or unstayed for a period of
60 days after the date on which the right to appeal has expired; and (g)
certain events of bankruptcy, insolvency or reorganization affecting the
Partnership or any Guarantor. ((S) 501) Subject to the provisions of the
Indenture relating to the duties of the Trustee, in case an Event of Default
(as defined) shall occur and be continuing, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. ((S) 603) Subject to such
provisions for the indemnification of the Trustee, the Holders of a majority
in aggregate principal amount of the Outstanding Notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee. ((S) 512)
If an Event of Default (other than an Event of Default described in Clause
(g) above) shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Notes may
accelerate the maturity of all Notes; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of Outstanding Notes may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the non-payment of accelerated principal, have been
cured or waived as provided in the Indenture. If an Event of Default specified
in Clause (g) above occurs, the Outstanding Notes will ipso facto become
immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder. ((S) 502) For information as to waiver of
defaults, see "--Modification and Waiver".
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder
shall have previously given to the Trustee written notice of a continuing
Event of Default (as defined) and unless also the Holders of at least 25% in
aggregate principal amount of the Outstanding Notes shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the Outstanding Notes a
direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. ((S) 507) However, such limitations do not
apply to a suit instituted by a Holder of a Note for enforcement of payment of
the principal of and premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note. ((S) 508)
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The Partnership will be required to furnish to the Trustee quarterly a
statement as to the performance by the Partnership of certain of its
obligations under the Indenture and as to any default in such performance.
((S) 1011)
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect as to all outstanding Notes
(except as to (i) rights of registration of transfer and exchange and the
Partnership's right of optional redemption, (ii) substitution of apparently
mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of Holders
to receive payment of principal and interest on the Notes, (iv) rights,
obligations and immunities of the Trustee under the Indenture and (v) rights
of the Holders of the Notes as beneficiaries of the Indenture with respect to
any property deposited with the Trustee payable to all or any of them), if (x)
the Partnership will have paid or caused to be paid the principal of and
interest on the Notes as and when the same will have become due and payable or
(y) all outstanding Notes (except lost, stolen or destroyed Notes which have
been replaced or paid) have been delivered to the Trustee for cancellation.
DEFEASANCE
The Indenture provides that, at the option of the Partnership, (A) if
applicable, the Partnership will be discharged from any and all obligations in
respect of the Outstanding Notes or (B) if applicable, the Partnership may
omit to comply with certain restrictive covenants, that such omission shall
not be deemed to be an Event of Default under the Indenture and the Notes, in
either case (A) or (B) upon irrevocable deposit with the Trustee, in trust, of
money and/or U.S. government obligations which will provide money in an amount
sufficient in the opinion of a nationally recognized firm of independent
certified public accountants to pay the principal of and premium, if any, and
each installment of interest, if any, on the Outstanding Notes. With respect
to Clause (B), the obligations under the Indenture other than with respect to
such covenants and the Events of Default other than the Events of Default
relating to such covenants above shall remain in full force and effect. Such
trust may only be established if, among other things (i) with respect to
Clause (A), the Partnership has received from, or there has been published by,
the Internal Revenue Service a ruling or there has been a change in law, which
in the Opinion of Counsel provides that Holders of the Notes will not
recognize gain or loss for Federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to Federal income tax on
the same amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred; or, with
respect to Clause (B), the Partnership has delivered to the Trustee an Opinion
of Counsel to the effect that the Holders of the Notes will not recognize gain
or loss for Federal income tax purposes as a result of such deposit and
defeasance and will be subject to Federal income tax on the same amount, in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred; (ii) no Event of Default or event
that with the passing of time or the giving of notice, or both, shall
constitute an Event of Default shall have occurred or be continuing; (iii) the
Partnership has delivered to the Trustee an Opinion of Counsel to the effect
that such deposit shall not cause the Trustee or the trust so created to be
subject to the Investment Company Act of 1940; and (iv) certain other
customary conditions precedent are satisfied. (Article Thirteen)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the
Partnership, the Guarantors and the Trustee with the consent of the Holders of
a majority in aggregate principal amount of the Outstanding Notes; provided,
however, that no such modification or amendment may, without the consent of
the Holder of each Outstanding Note affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of interest on, any Note, (b)
reduce the principal amount of (or the premium), or interest on, any Note, (c)
change the place or currency of payment of principal of (or premium), or
interest on, any Note, (d) impair the right to institute suit for the
enforcement of any payment on, or with respect to, any Note, (e) reduce the
above-stated percentage of Outstanding Notes necessary to modify or amend the
Indenture, (f) reduce the percentage of aggregate principal amount of
Outstanding Notes necessary for waiver of compliance with certain provisions
of
29
the Indenture or for waiver of certain defaults, or (g) modify any provisions
of the Indenture relating to the modification and amendment of the Indenture
or the waiver of past defaults or covenants, except as otherwise specified.
((S) 902)
The Holders of a majority in aggregate principal amount of the Outstanding
Notes, on behalf of all Holders of Notes, may waive compliance by the
Partnership with certain restrictive provisions of the Indenture. ((S) 1012)
Subject to certain rights of the Trustee, as provided in the Indenture, the
Holders of a majority in aggregate principal amount of the Outstanding Notes,
on behalf of all Holders of Notes, may waive any past default under the
Indenture, except a default in the payment of principal, premium or interest
or a default arising from failure to purchase any Note tendered pursuant to an
Offer to Purchase. ((S) 513)
NOTICES
The Trustee will cause all notices to the holders of the Notes to be mailed
by first class mail, postage prepaid to the address of each holder as it
appears in the register of Notes. Any notice so mailed will be conclusively
presumed to have been received by the holders of the Notes. PROSPECTIVE
PURCHASERS SHOULD NOTE THAT UNDER NORMAL CIRCUMSTANCES DTC WILL BE THE ONLY
"HOLDER" OF THE NOTES AS THAT TERM IS USED HEREIN AND IN THE INDENTURE. See
"--Form, Denomination, Transfer, Exchange and Book-Entry Procedures".
GOVERNING LAW
The Indenture and the Notes are governed by the laws of the State of New
York.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. ((S)(S) 601 and 603)
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Partnership, to obtain payment of claims in certain
cases or to realize on certain property received by it in respect of any such
claim as security or otherwise. The Trustee is permitted to engage in other
transactions with the Partnership or any affiliate; provided, however, that if
it acquires any conflicting interest (as defined in the Indenture or in the
Trust Indenture Act), it must eliminate such conflict or resign. ((S) 608)
INFORMATION WITH RESPECT TO THE GUARANTORS
Regency, a Florida corporation, commenced operations as a real estate
investment trust in 1993 with the completion of its initial public offering,
and was the successor to the real estate business of The Regency Group, Inc.
which had operated since 1963. Regency is the sole general partner of the
Partnership and owned approximately 96% of the interest in the Partnership as
of September 30, 1998. As of September 30, 1998, Regency was obligated on
$311.3 million secured debt and $167.4 million unsecured debt.
RRC FL Five, Inc., a Florida corporation, is a wholly-owned subsidiary of
Regency which owns a single shopping center with 102,876 square feet of GLA.
RRC FL Five, Inc. was formed in June 1994. As of September 30, 1998, RRC FL
Five, Inc. was obligated on $8.6 million of secured debt.
RRC Acquisitions, Inc., a Florida corporation formed in November 1993, is a
wholly-owned subsidiary of Regency. RRC Acquisitions, Inc. owns two shopping
centers with an aggregate of 436,273 square feet of GLA and also holds
acquisition contracts for Regency and the Partnership. As of September 30,
1998, RRC Acquisitions, Inc. had no long-term debt.
30
RRC Operating Partnership of Georgia, L.P. is a Georgia limited partnership
formed in February 1996 to own a single shopping center with 94,290 square
feet of GLA. The Partnership is the sole general partner of RRC Operating
Partnership of Georgia, L.P. and has a 16% general partnership interest in RRC
Operating Partnership of Georgia, L.P. As of September 30, 1998, RRC Operating
Partnership of Georgia, L.P. was obligated on $3.5 million of unsecured debt.
Regency Office Partnership, L.P. is a Delaware limited partnership formed in
November 1996, in which Regency owns a 1% limited partner's interest and the
Partnership owns a 99% general partner's interest. Regency Office Partnership,
L.P. owns two shopping centers with an aggregate of 454,010 square feet of
GLA. As of September 30, 1998, Regency Office Partnership, L.P. had no long
term debt.
Each of the Guarantors is also a guarantor of the Partnership's $300 million
unsecured line of credit.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material U.S. federal income tax
considerations applicable to the Notes and to the exchange of Old Notes for
New Notes as well as a general summary of certain of the material federal
income tax considerations regarding Regency. To the extent that the following
discussion constitutes matters of law of legal conclusions, they are based
upon the opinion of Foley & Lardner. This summary is based on current law, is
for general information only and is not tax advice. This discussion does not
purport to deal with all aspects of taxation that may be relevant to
particular investors in light of their personal investment or tax
circumstances, or to certain types of holders (including insurance companies,
tax-exempt organizations, financial institutions or broker-dealers, foreign
corporations, persons who are not citizens or residents of the United States ,
persons who own Notes as part of a conversion transaction, as part of a
hedging transaction or as a position in a straddle for tax purposes and
persons who own 10% or more of the stock of Regency ) subject to special
treatment under the federal income tax laws. This summary does not give a
detailed discussion of any state, local, or foreign tax considerations. This
summary is qualified in its entirety by the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the rules and
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as of the date hereof and all of which are
subject to change (which change may apply retroactively).
As used in this section, the term "Company" refers to Regency and all
qualified subsidiaries (a wholly-owned subsidiary which is not treated as a
separate entity for federal income tax purposes) but excludes Regency Realty
Group, Inc. and its subsidiaries (the "Management Company") (which are treated
as separate entities for federal income tax purposes, although their results
are consolidated with those of Regency for financial reporting purposes).
EXCHANGE OF NOTES
It is the opinion of Foley & Lardner that the exchange of Old Notes for New
Notes in the Exchange Offer should not be treated as an "exchange" for U.S.
federal income tax purposes because the New Notes should not be considered to
differ materially in kind or extent from the Old Notes and because the
exchange will occur by operation of the terms of the Old Notes. As a result,
there should be no federal income tax consequences to holders exchanging Old
Notes for New Notes in the Exchange Offer, and a holder will have the same
adjusted basis and holding period in the New Notes as it had in the Old Notes
immediately before the exchange.
EACH HOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR IN DETERMINING THE
FEDERAL, STATE, LOCAL AND ANY OTHER TAX CONSEQUENCES TO THE PARTICULAR HOLDER
OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES.
31
UNITED STATES HOLDERS
Payments of Interest
Interest on a Note will be taxable to a United States Holder as ordinary
income at the time it is received or accrued, depending on the holder's method
of accounting for tax purposes. A United States Holder is a beneficial owner
that is (i) a citizen or resident of the United States, (ii) a domestic
corporation, (iii) an estate the income of which is subject to United States
federal income tax without regard to its source or (iv) a trust if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust.
Purchase, Sale and Retirement of the Notes
A United States Holder's tax basis in a Note will generally be its cost.
Upon the sale or retirement of a Note, a United States Holder will generally
recognize gain or loss on the sale or retirement of a Note equal to the
difference between the amount realized (not including any amounts attributable
to accrued and unpaid interest) and the holder's tax basis of the Note. Long-
term capital gain of a non-corporate United States Holder is generally subject
to a maximum tax rate of 20% in respect of property held for more than one
year.
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
holder of a Note who is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership or estate or trust, in either case not subject to
United States federal income tax on a net income basis in respect of income or
gain from a Note.
Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below:
(i) payments of principal and interest by the Partnership or any of its
paying agents to any holder of a Note that is a United States Alien Holder
will not be subject to United States federal withholding tax if, in the
case of interest, (a) the beneficial owner of the Note does not actually or
constructively own 10% or more of the capital or profits interest of the
Partnership, (b) the beneficial owner of the Note is not a controlled
foreign corporation that is related to the Partnership through stock
ownership, and (c) either (A) the beneficial owner of the Note certifies to
the Partnership or its agent, under penalties of perjury, that it is not a
United States Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Note certifies to the Partnership or
its agent under penalties of perjury that such statement has been received
from the beneficial owner by it or by a financial institution between it
and the beneficial owner and furnishes the payor with a copy thereof;
(ii) a United States Alien Holder of a Note will not be subject to United
States federal withholding tax on any gain realized on the sale of a Note;
and
(iii) a Note held by an individual who at death is not a citizen or
resident of the United States will not be includible in the individual's
gross estate for purposes of the United States federal estate tax as a
result of the individual's death if (a) the individual did not actually or
constructively own 10% or more of the capital or profits interest of the
Partnership and (b) the income on the Note would not have been effectively
connected with a United States trade or business of the individual at the
individual's death.
Recently finalized Treasury regulations (the "Final Withholding
Regulations"), that are generally effective with respect to payments after
December 31, 1999, would provide alternative methods for satisfying the
certification requirement described in clause (i)(c) above. The Final
Withholding Regulations also would require, in the case of Notes held by a
foreign partnership, that (x) the certification described in clause (i)(c)
above be provided by the partners rather than by the foreign partnership and
(y) the partnership provide certain information, including a United States
taxpayer identification number. A look-through rule would apply in the case of
tiered partnerships.
32
BACKUP WITHHOLDING AND INFORMATION REPORTING
United States Holders
In general, information reporting requirements will apply to payments of
principal and interest on a Note and the proceeds of the sale of a Note before
maturity within the United States to non-corporate United States Holders, and
"backup withholding" at a rate of 31% will apply to such payments if the
United States Holder fails to provide an accurate taxpayer identification
number or is notified by the IRS that it has failed to report all interest and
dividends required to be shown on its federal income tax returns.
United States Alien Holders
Under current law, information reporting on IRS Form 1099 and backup
withholding will not apply to payments of principal and interest made by the
Partnership or a paying agent to a United States Alien Holder on a Note;
provided, the certification described in clause (i)(c) under "United States
Alien Holders" above is received and provided further that the payor does not
have actual knowledge that the holder is a United States person. The
Partnership or a paying agent, however, may report (on IRS Form 1042S)
payments of interest on Notes. See the discussion above with respect to the
rules under the Final Withholding Regulations.
Payments of the proceeds from the sale by a United States Alien Holder of a
Note made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is (i)
a United States person, (ii) a controlled foreign corporation for United
States tax purposes, (iii) a foreign person 50% or more of whose gross income
is effectively connected with a United States trade or
business for a specified three-year period or (iv) with respect to payments
made after December 31, 1999, a foreign partnership, if at any time during its
tax year one or more of its partners are U.S. persons (as defined in U.S.
Treasury regulations) who in the aggregate hold more than 50% of the income or
capital interest in the partnership or if, at any time during its tax year,
such foreign partnership is engaged in a United States trade or business,
information reporting may apply to such payments. Payments of the proceeds
from the sale of a Note to or through the United States office of a broker is
subject to information reporting and backup withholding unless the holder or
beneficial owner certifies as to its non-United States status or otherwise
establishes an exemption from information reporting and backup withholding.
TAX CONSIDERATIONS REGARDING REGENCY
Regency made an election to be taxed as a real estate investment trust
("REIT") under Sections 856 through 860 of the Code commencing with its
taxable year ending December 31, 1993. Regency believes that it has been
organized and operated in such a manner as to qualify for taxation as a REIT
under the Code for such taxable year and all subsequent taxable years to date,
and Regency intends to continue to operate in such a manner in the future.
However, no assurance can be given that Regency will operate in a manner so as
to qualify or remain qualified as a REIT.
33
The following sets forth only a summary of the material aspects of the Code
sections that govern the federal income tax treatment of a REIT and its
shareholders.
A REIT is defined in the Code as a corporation, trust or association: (1)
which is managed by one or more trustees or directors; (2) the beneficial
ownership of which is evidenced by transferable shares or by transferable
certificates of beneficial interest; (3) which would be taxable as a domestic
corporation, but for Sections 856 through 859 of the Code; (4) which is
neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) the beneficial ownership of which is held by 100
or more persons (determined without reference to any rules of attribution);
(6) not more than 50% in value of the outstanding stock of which is owned
during the last half of each taxable year, directly or indirectly, by or for
"five or fewer" individuals (as defined in the Code to include certain
entities); and (7) which meets certain income and asset tests. Conditions (1)
to (4), inclusive, must be met during the entire taxable year and condition
(5) must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months.
QUALIFICATION AS A REIT
It is the opinion of Foley & Lardner that (1) Regency has qualified as a
REIT for its taxable years ended December 31, 1993 through December 31, 1997,
(2) Regency has been organized in conformity with the requirements for
qualification and taxation as a REIT and (3) Regency's method of operation has
enabled it and will continue to enable it to meet the requirements for
qualification and taxation as a REIT under the Code. It must be emphasized
that this opinion is based on various assumptions and is conditioned upon
certain representations made by Regency as to factual matters including, but
not limited to, those concerning its business and properties, and certain
matters relating to Regency's manner of operation. Foley & Lardner is not
aware of any facts or circumstances that are inconsistent with these
representations and assumptions. The qualification and taxation as a REIT
depends upon Regency's ability to meet, through actual annual operating
results, the various income, asset, distribution, stock ownership and other
tests for qualification as a REIT set forth in the Code, the results of which
will not be reviewed by nor be under the control of Foley & Lardner.
Accordingly, no assurance can be given that the actual results of Regency's
operation for any particular taxable year will satisfy the requirements under
the Code for qualification and taxation as a REIT. For a discussion of the tax
consequences of failure to qualify as a real estate investment trust, see "--
Failure to Qualify."
TAXATION OF REGENCY
As a REIT, Regency generally is not subject to federal corporate income tax
on its net income that is currently distributed to shareholders. This
treatment substantially eliminates the "double taxation" (at the corporate and
shareholder levels) that generally results from an investment in a
corporation. However, Regency will be subject to federal income tax in the
following circumstances. First, Regency will be taxed at regular corporate
rates on any undistributed REIT taxable income, including undistributed net
capital gains. Second, under certain circumstances, Regency may be subject to
the "corporate alternative minimum tax" on its items
of tax preference. Third, if Regency has (i) net income from the sale or other
disposition of "foreclosure property" (which is, in general, property acquired
by Regency by foreclosure or otherwise on default of a loan secured by the
property) which is held primarily for sale to customers in the ordinary course
of business or (ii) other non-qualifying net income from foreclosure property,
it will be subject to tax on such income at the highest corporate rate.
Fourth, if Regency has net income from "prohibited transactions" (which are,
in general, certain sales or other dispositions of property held primarily for
sale to customers in the ordinary course of business other than foreclosure
property), such income will be subject to a 100% tax. Fifth, if Regency should
fail to satisfy the 75% gross income test or the 95% gross income test (as
discussed below), and has nonetheless maintained its qualification as a REIT
because certain other requirements have been met, it will be subject to a 100%
tax on the net income attributable to the greater of the amount by which
Regency fails the 75% or 95% test, multiplied by a fraction intended to
reflect Regency's profitability. Sixth, if Regency should fail to distribute
during each calendar year at least the sum of (i) 85% of its REIT ordinary
income for such year, (ii) 95% of its REIT capital gain net income for such
year, and (iii) any undistributed taxable income from prior years, it will be
subject to a 4% excise tax on the excess of such required distribution over
the amounts actually distributed. Seventh, if during the 10-year period (the
"Recognition Period") beginning on the first day of the first taxable year for
which Regency qualified as a REIT, Regency recognizes gain on the disposition
of any asset held by
34
Regency as of the beginning of such Recognition Period, then, to the extent of
the excess of (a) the fair market value of such asset as of the beginning of
such Recognition Period over (b) Regency's adjusted basis in such asset as of
the beginning of such Recognition Period (the "Built-in Gain"), such gain will
be subject to tax at the highest regular corporate rate. Because Regency
initially acquired its properties in connection with its initial public
offering in fully taxable transactions, it is not anticipated that Regency
will own any assets with substantial Built-in Gain. Eighth, if Regency
acquires any asset from a C corporation (i.e., generally a corporation subject
to full corporate-level tax) in a transaction in which the basis of the asset
in Regency's hands is determined by reference to the basis of the asset (or
any other property) in the hands of the C corporation ("carry-over basis"),
and Regency recognizes gain on the disposition of such asset during the
Recognition Period beginning on the date on which such asset was acquired by
Regency, then, to the extent of the Built-in Gain, such gain will be subject
to tax at the highest regular corporate rate. The result described above with
respect to the recognition of Built-in Gain during the Recognition Period
assumes Regency will make an election in accordance with Notice 88-19 issued
by the Internal Revenue Service ("IRS").
In addition, the Management Company is taxed on its income at regular
corporate rates.
FAILURE TO QUALIFY
If Regency fails to qualify for taxation as a REIT in any taxable year, and
the relief provisions do not apply, Regency will be subject to tax (including
any applicable corporate alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders in any year in which
Regency fails to qualify will not be deductible by Regency nor will they be
required to be made. Unless entitled to relief under specific statutory
provisions, Regency will also be disqualified from taxation as a REIT for the
four taxable years following the year during which qualification was lost. It
is not possible to state whether Regency would be entitled to such statutory
relief.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in the
Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making or other trading
activities. The Issuers will make this Prospectus, as amended or supplemented,
available to any such broker-dealer for use in connection with any such resale
for a period of up to 180 days after the consummation of the Exchange Offer.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own accounts
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or in a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resales may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
35
For period of 180 days after the consummation of the Exchange Offer the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal.
The Company has agreed in the Registration Rights Agreement to indemnify
each broker-dealer reselling New Notes pursuant to this Prospectus, and their
officers, directors and controlling persons, against certain liabilities in
connection with the offer and sale of the New Notes, including liabilities
under the Securities Act, or to contribute to payments that such broker-
dealers may be required to make in respect thereof.
LEGAL MATTERS
The legality of the securities offered hereby and certain tax matters
described under "Federal Income Tax Consequences" have been passed upon by
Foley & Lardner, Jacksonville, Florida.
EXPERTS
The consolidated financial statements of the Partnership as of December 31,
1997 and 1996 and for each of the three years in the three-year period ended
December 31, 1997, the consolidated financial statements of Regency Realty
Corporation as of December 31, 1997 and 1996, and for each of the years in the
three-year period ended December 31, 1997, and the financial statements of
each of RRC Operating Partnership of Georgia, L.P., Regency Office
Partnership, L.P., RRC Acquisition, Inc., and RRC FL Five, Inc. as of December
31, 1997 and 1996, and for each of the years in the three-year period ended
December 31, 1997 (or the period beginning at inception, if shorter) have been
incorporated by reference or included herein and in the Registration Statement
in reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference or included herein, and upon the
authority of said firm as experts in accounting and auditing.
The financial statements of Pacific Retail as of December 31, 1997 and 1996,
and for each of the years in the two-year period ended December 31, 1997, and
the period from Pacific Retail's inception through December 31, 1995 and the
financial statement schedule included in the Registration Statement on Form S-
4 filed by Regency Centers, L.P. have been so included in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
36
REGENCY CENTERS, L.P.
INDEX TO
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Pro forma Condensed Consolidated Balance Sheet as of September 30, 1998... P-3
Notes to Pro Forma Condensed Consolidated Balance Sheet................... P-4
Pro Forma Consolidated Statements of Operations for the nine month period
ended September 30, 1998 and the year ended December 31, 1997............ P-6
Notes to Pro Forma Consolidated Statements of Operations.................. P-8
PACIFIC RETAIL TRUST: UNAUDITED PRO FORMA FINANCIAL INFORMATION
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1998... P-15
Pro Forma Condensed Consolidated Statements of Operations for the nine
months ended September 30, 1998.......................................... P-16
Pro Forma Condensed Consolidated Statements of Operations for the year
ended December 31, 1997.................................................. P-17
Notes to Pro Forma Condensed Consolidated Statements of Operations........ P-18
P-1
REGENCY CENTERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet is
based upon the September 30, 1998 historical consolidated balance sheet of
Regency Centers, L.P. (the Partnership), incorporated by reference herein, and
the pro forma consolidated balance sheet of Pacific Retail Trust (Pacific
Retail) contained elsewhere herein. The pro forma balance sheet is presented
as if Regency Realty Corporation had completed its merger with Pacific Retail
subsequent to period end, and concurrently contributed all of Pacific Retail's
assets to the Partnership in exchange for general partnership units. In
addition, the pro forma balance sheet considers that the Partnership had
completed the acquisition of one additional shopping center subsequent to
period end.
The following unaudited pro forma consolidated statements of operations are
based upon the historical consolidated statements of operations for the nine-
month period ended September 30, 1998 and the year ended December 31, 1997 of
the Partnership, incorporated by reference herein, and Pacific Retail
contained elsewhere herein. These statements are presented as if Regency
Realty Corporation had completed its merger with Pacific Retail, and as if the
Partnership had acquired all of its properties as of January 1, 1997. These
unaudited pro forma condensed consolidated financial statements should be read
in conjunction with the Partnership's registration statement on Form 10 and
quarterly report on Form 10-Q filed for the period ended September 30, 1998
and also in conjunction with the Pacific Retail financial statements included
elsewhere herein.
The unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of what the actual financial position or results of
operations of the Partnership would have been at September 30, 1998 or
December 31, 1997 assuming the transactions had been completed as set forth
above, nor does it purport to represent the financial position or results of
operations of the Partnership in future periods.
P-2
REGENCY CENTERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
(IN THOUSANDS)
PARTNERSHIP PACIFIC RETAIL
HISTORICAL PRO FORMA ADJUSTMENTS PRO FORMA
----------- -------------- ----------- ---------
ASSETS
Real estate investments, at
cost....................... $917,898 1,059,083 19,200 (a)
12,558 (b) 2,008,739
Construction in progress.... 23,947 21,657 -- 45,604
Less: accumulated
depreciation............. 30,092 35,942 35,942 (b) 30,092
-------- --------- -------- ---------
Real estate rental
property, net.......... 911,753 1,044,798 67,700 2,024,251
-------- --------- -------- ---------
Investments in real estate
partnerships............... 24,813 -- -- 24,813
-------- --------- -------- ---------
Net real estate
investments.............. 936,566 1,044,798 67,700 2,049,064
-------- --------- -------- ---------
Cash and cash equivalents... 13,069 389 (7,500)(b) 5,958
Tenant receivables, net of
allowance for uncollectible
accounts................... 13,331 12,604 -- 25,935
Deferred costs, less
accumulated amortization... 3,721 5,317 (5,317)(c) 3,721
Other assets................ 5,548 10,529 (10,529)(c) 5,548
-------- --------- -------- ---------
Total Assets............ $972,235 1,073,637 44,354 2,090,226
======== ========= ======== =========
LIABILITIES AND PARTNERS'
CAPITAL
Notes payable............... $338,279 97,063 -- 435,342
Acquisition and development
line of credit............. 45,931 211,500 19,200 (a) 276,631
-------- --------- -------- ---------
Total debt................ 384,210 308,563 19,200 711,973
Accounts payable and other
liabilities................ 23,726 16,188 -- 39,914
Tenant's security and escrow
deposits................... 2,419 3,408 -- 5,827
-------- --------- -------- ---------
Total liabilities......... 410,355 328,159 19,200 757,714
-------- --------- -------- ---------
Limited partners' interest
in consolidated
partnerships............... 7,470 -- -- 7,470
-------- --------- -------- ---------
Series A preferred units.... 78,800 -- -- 78,800
Total stockholders' equity.. -- 726,132 (726,132)(b) --
General and Limited
partnership units.......... 475,610 19,346 751,286 (b) 1,246,242
-------- --------- -------- ---------
Total partners' capital... 554,410 745,478 25,154 1,325,042
-------- --------- -------- ---------
Total liabilities and
partners' capital...... $972,235 1,073,637 44,354 2,090,226
======== ========= ======== =========
See accompanying notes to pro forma condensed consolidated balance sheet.
P-3
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
(IN THOUSANDS)
(a) Acquisitions of Shopping Centers:
In January 1998, the Partnership entered into an agreement to acquire 32
shopping centers from various entities comprising the Midland Group. The
Partnership has acquired 20 Midland shopping centers fee simple and 12
through joint ventures prior to September 30, 1998 containing 2.2 million
square feet for approximately $220.4 million. Those shopping centers are
included in the Partnership's September 30, 1998 balance sheet.
Subsequent to September 30, 1998, the Partnership expects to acquire the
un-owned interests in two of the joint venture properties for $20.7
million. In addition, during 1998, the Partnership expects to pay $4.6
million in additional costs related to joint venture investments and other
transaction costs related to acquiring the various shopping centers from
Midland, and during 1999 and 2000 expects to pay contingent consideration
of $23.0 million. The following table represents the properties under
development which the Partnership expects to acquire from Midland upon
completion of construction during 1998. These properties are not included
in these pro forma condensed consolidated financial statements.
EXPECTED
ACQUISITION PURCHASE
DATE PRICE
----------- --------
Nashboro............................................. December-98 $ 7,260
Crooked Creek........................................ December-98 13,471
-------
$20,731
=======
In addition, the Partnership acquired one other shopping center for an
aggregate purchase price of $19.2 million which is reflected in the pro
forma balance sheet. The shopping center, Hinsdale Lake Commons, was
acquired on October 21, 1998 using funds drawn on the Line.
(b) Merger of Pacific Retail and Regency Realty Corporation
Pacific Retail will be merged with and into Regency Realty Corporation
(Regency), with Regency being the surviving entity. Each issued and
outstanding Pacific Retail Common Share will be exchanged for 0.48 shares
of Regency Common Stock, and each issued and outstanding Pacific Retail
Preferred Share will be converted into 0.48 shares of a corresponding
series of Regency Preferred Stock. Concurrent with that merger Regency will
contribute all the acquired properties to the Partnership in exchange for
general partnership units.
The total cost to acquire Pacific Retail is $1,106,291 based on the value
of Regency shares and partnership units expected to be issued including the
assumption of $328,159 outstanding debt and other liabilities of Pacific
Retail, and estimated closing costs of $7,500. The price per share and
partnership unit used to determine the purchase price is $23.325 based upon
the five day average of the closing stock price of Regency's common stock
as listed on the New York Stock Exchange immediately before, during and
after the date the terms of the merger were agreed to and announced to the
public.
P-4
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
(IN THOUSANDS)
The following summarizes the total costs expected to be paid by Regency
related to the merger:
PACIFIC RETAIL
SHARES AND REGENCY SHARES REGENCY
UNITS EXCHANGE AND UNITS VALUE ACQUISITION
OUTSTANDING RATIO ISSUED PER SHARE COSTS
-------------- -------- -------------- --------- -----------
Common stock............ 64,059 0.48 30,748 $23.325 $ 717,205
Preferred stock......... 3,130 0.48 1,502 $23.325 35,043
Partnership units....... 1,641 0.48 788 $23.325 18,373
------ ------ ----------
68,830 33,038 770,621
====== ======
Pacific Retail outstanding debt assumed.................................. 308,563
Other Pacific Retail liabilities assumed................................. 19,596
Estimated closing costs.................................................. 7,500
----------
Total acquisition costs.................................................. $1,106,280
==========
The following summarizes the adjustment necessary to record the merger of
Pacific Retail and Regency under purchase accounting, followed by the
concurrent contribution of assets to the Partnership.
ASSETS
Pacific Retail assets at historical cost....................... $1,073,637
Adjust Pacific Retail real estate investments to fair value.... 12,558
Remove Pacific Retail accumulated depreciation................. 35,942
Adjust Pacific Retail other assets under purchase accounting... (15,846)
----------
Total purchase price.......................................... 1,106,291
Adjust for cash paid for closing costs......................... (7,500)
----------
$1,098,791
==========
LIABILITIES AND PARTNERS' CAPITAL
Pacific Retail liabilities and stockholders' equity at
historical cost............................................... $1,073,637
Remove Pacific Retail stockholders' equity..................... (726,132)
Adjust for general partnership units issued to Regency......... 751,286
----------
$1,098,791
==========
(c) To adjust deferred and other assets under purchase accounting.
P-5
REGENCY CENTERS, L.P.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
----------------------------------------------------------------------
MIDLAND ACQUISITION PACIFIC OTHER PRO
HISTORICAL PROPERTIES PROPERTIES RETAIL ADJUSTMENTS FORMA
---------- ---------- ----------- ------- ----------- -------
Revenues: (e) (f)
Minimum rent........... $59,556 3,960 4,503 75,393 (697) (j) 142,715
Percentage rent........ 714 -- 179 1,002 (8) (j) 1,887
Recoveries from
tenants............... 13,425 549 1,107 19,705 (67) (j) 34,719
Management, leasing and
brokerage fees........ 8,023 -- 45 -- 8,068
Equity in income of
investments in real
estate partnerships... 511 -- -- -- -- 511
------- ----- ----- ------ ------ -------
82,229 4,509 5,789 96,145 (772) 187,900
------- ----- ----- ------ ------ -------
Operating expenses:
Depreciation and
amortization.......... 14,068 817 (g) 1,345 (g) 18,074 (453) (j)
909 (m) 34,760
Operating and
maintenance........... 10,025 286 569 12,087 (122) (j) 22,845
General and
administrative........ 10,638 233 277 7,099 (25) (j) 18,222
Real estate taxes...... 7,010 494 641 10,623 (81) (j) 18,687
------- ----- ----- ------ ------ -------
41,741 1,830 2,832 47,883 228 94,514
------- ----- ----- ------ ------ -------
Interest expense
(income):
Interest expense....... 14,523 2,646 (h) 3,206 (i) 15,216 (4,830) (k) 30,761
Interest income........ (1,339) -- -- (581) -- (1,920)
------- ----- ----- ------ ------ -------
13,184 2,646 3,206 14,635 (4,830) 28,841
------- ----- ----- ------ ------ -------
Income before minority
interest and gain on
sale of real estate
investments........... 27,304 33 (249) 33,627 3,830 64,545
Gain on sale of real
estate investments..... 10,737 -- -- -- (9,336) (j) 1,401
Minority interest....... (390) -- -- (427) 9 (808)
------- ----- ----- ------ ------ -------
Net income............. 37,651 33 (249) 33,200 (5,497) 65,138
Preferred distributions. (1,733) -- -- (1,764) (3,142) (l) (6,639)
------- ----- ----- ------ ------ -------
Net income for unit
holders............... $35,918 33 (249) 31,436 (8,639) 58,499
======= ===== ===== ====== ====== =======
Net income per unit
(note (n)):
Basic.................. $ 1.34 $ 0.96
======= =======
Diluted................ $ 1.31 $ 0.95
======= =======
See accompanying notes to pro forma consolidated statements of operations.
P-6
REGENCY CENTERS, L.P.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------------------
BRANCH MIDLAND ACQUISITION PACIFIC OTHER
HISTORICAL PROPERTIES PROPERTIES PROPERTIES RETAIL ADJUSTMENTS PRO FORMA
---------- ---------- ---------- ----------- ------- ----------- ---------
Revenues: (d) (e) (f)
Minimum rent........... $53,330 3,596 16,482 14,482 93,199 (4,136)(j) 176,953
Percentage rent........ 898 167 -- 377 1,233 -- 2,675
Recoveries from
tenants............... 12,993 751 2,240 3,628 25,171 (548)(j) 44,235
Management, leasing and
brokerage fees........ 7,997 1,060 -- -- 392 -- 9,449
Equity in income of
investments in real
estate partnerships... 33 -- -- -- -- -- 33
------- ----- ------ ------ ------- ------ -------
75,251 5,574 18,722 18,487 119,995 (4,684) 233,345
------- ----- ------ ------ ------- ------ -------
Operating expenses:
Depreciation &
amortization.......... 11,905 972 2,994 (g) 3,881 (g) 21,069 (855)(j)
1,212 (m) 41,178
Operating and
maintenance........... 10,688 595 1,194 2,072 15,698 (1,260)(j) 28,987
General and
administrative........ 9,964 683 1,042 968 7,790 (49)(j) 20,398
Real estate taxes...... 6,451 404 1,635 2,076 13,081 (447)(j) 23,200
------- ----- ------ ------ ------- ------ -------
39,008 2,654 6,865 8,997 57,638 (1,399) 113,763
------- ----- ------ ------ ------- ------ -------
Interest expense
(income):
Interest expense....... 13,614 1,517 10,353 (h) 9,862 (i) 35,542 (6,439)(k) 64,449
Interest income........ (935) (33) -- -- (481) -- (1,449)
------- ----- ------ ------ ------- ------ -------
12,679 1,484 10,353 9,862 35,061 (6,439) 63,000
------- ----- ------ ------ ------- ------ -------
Income before minority
interest and gain on
sale of real estate
investments........... 23,564 1,436 1,504 (372) 27,296 3,154 56,582
Gain on sale of real
estate investments..... 451 -- -- -- -- (451)(j) --
Minority interest....... (505) (313) -- -- (430) 12 (1,236)
------- ----- ------ ------ ------- ------ -------
Net income............. 23,510 1,123 1,504 (372) 26,866 2,715 55,346
Preferred distributions. -- -- -- -- (2,195) (6,500)(l) (8,695)
------- ----- ------ ------ ------- ------ -------
Net income for unit
holders............... $23,510 1,123 1,504 (372) 24,671 (3,785) 46,651
======= ===== ====== ====== ======= ====== =======
Net income per unit
(note (n)):
Basic.................. $ 1.20 $ 1.12
======= =======
Diluted................ $ 1.12 $ 1.09
======= =======
See accompanying notes to pro forma consolidated statements of operations.
P-7
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(d) Reflects pro forma results of operations for the Branch Properties for the
period from January 1, 1997 to March 7, 1997 (acquisition date).
(e) Reflects revenues and certain expenses for the Midland Properties for the
period from January 1, 1998 to the earlier of the respective acquisition
date of the property or September 30, 1998 and for the year ended December
31, 1997.
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
------------------------------------------------------
OPERATING REAL
ACQUISITION MINIMUM RECOVERIES AND ESTATE GENERAL AND
PROPERTY NAME DATE RENT FROM TENANTS MAINTENANCE TAXES ADMINISTRATIVE
------------- ----------- ------- ------------ ----------- ------ --------------
Garner Festival (1)..... 9/30/98 $ -- $-- $-- $-- $--
Windmiller Farms........ 7/15/98 621 97 37 77 34
Franklin Square......... 4/29/98 414 56 52 31 32
St. Ann Square.......... 4/17/98 217 44 18 35 12
East Point Crossing..... 4/29/98 268 52 16 35 17
North Gate Plaza........ 4/29/98 234 33 18 27 10
Worthington Park........ 4/29/98 281 68 22 40 19
Beckett Commons......... 3/1/98 113 7 6 14 4
Cherry Grove Plaza...... 3/1/98 239 11 13 22 21
Bent Tree Plaza......... 3/1/98 137 11 7 59 8
West Chester Plaza...... 3/1/98 130 12 13 42 7
Brookville Plaza........ 3/1/98 95 5 5 8 4
Lake Shores Plaza....... 3/1/98 123 10 5 16 6
Evans Crossing.......... 3/1/98 116 4 5 8 6
Statler Square.......... 3/1/98 164 15 13 1 8
Kernersville Plaza...... 3/1/98 120 4 8 8 8
Maynard Crossing........ 3/1/98 272 38 13 15 15
Shoppes at Mason........ 3/1/98 116 27 15 33 6
Lake Pine Plaza......... 3/1/98 152 13 10 8 9
Hamilton Meadows........ 3/1/98 148 42 10 15 7
------ ---- ---- ---- ----
$3,960 $549 $286 $494 $233
====== ==== ==== ==== ====
--------
(1) The property was under development until the date of acquisition, thus
there are no revenues and expenses to be recorded in the statement of
operations.
P-8
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
FOR THE YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------
RECOVERIES OPERATING REAL
ACQUISITION MINIMUM FROM AND ESTATE GENERAL AND
PROPERTY NAME DATE RENT TENANTS MAINTENANCE TAXES ADMINISTRATIVE
------------- ----------- ------- ---------- ----------- ------ --------------
Garner Festival (1)..... 9/30/98 $ -- $ -- $ -- $ -- $ --
Windmiller Farms........ 7/15/98 1,157 181 69 143 64
Franklin Square......... 4/29/98 1,270 171 158 94 98
St. Ann Square.......... 4/17/98 741 149 60 119 42
East Point Crossing..... 4/29/98 821 159 50 107 51
North Gate Plaza........ 4/29/98 718 100 56 84 32
Worthington Park........ 4/29/98 862 208 67 124 59
Beckett Commons......... 3/1/98 687 140 38 83 47
Cherry Grove Plaza...... 3/1/98 1,445 175 85 131 105
Bent Tree Plaza......... 3/1/98 786 130 64 59 48
West Chester Plaza...... 3/1/98 807 70 72 84 45
Brookville Plaza........ 3/1/98 571 42 34 50 30
Lake Shores Plaza....... 3/1/98 759 156 55 96 32
Evans Crossing.......... 3/1/98 613 84 34 50 33
Statler Square.......... 3/1/98 913 76 43 54 60
Kernersville Plaza...... 3/1/98 605 58 29 51 33
Maynard Crossing........ 3/1/98 1,367 133 78 95 104
Shoppes at Mason........ 3/1/98 644 56 61 65 38
Lake Pine Plaza......... 3/1/98 827 93 54 51 46
Hamilton Meadows........ 3/1/98 889 59 87 95 75
------- ------ ------ ------ ------
$16,482 $2,240 $1,194 $1,635 $1,042
======= ====== ====== ====== ======
--------
(1) The property was under development until the date of acquisition, thus
there are no revenues and expenses to be recorded in the statement of
operations.
P-9
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(f) Reflects revenue and certain expenses of the Acquisition Properties for
the periods from January 1, 1998 and 1997 to the respective acquisition
date of the property.
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
---------------------------------------------------------------
RECOVERIES OPERATING REAL
ACQUISITION MINIMUM PERCENTAGE FROM AND ESTATE GENERAL AND
PROPERTY NAME DATE RENT RENT TENANTS MAINTENANCE TAXES ADMINISTRATIVE
------------- ----------- ------- ---------- ---------- ----------- ------ --------------
Bloomingdale Square..... 2/11/98 $ 214 $ 5 $ 53 $ 25 $ 24 $ 21
Silverlake.............. 6/3/98 346 -- 60 36 36 18
Highland Square......... 6/17/98 516 51 86 46 79 60
Shoppes @104............ 6/19/98 620 -- 133 72 79 28
Fleming Island.......... 6/30/98 346 -- 288 39 192 36
Pike Creek.............. 8/4/98 1,172 116 108 135 83 47
Hinsdale Lake Commons... 10/21/98 1,289 7 379 216 148 67
------- ----- ------ ------ ------ ----
$ 4,503 $ 179 $1,107 $ 569 $ 641 $277
======= ===== ====== ====== ====== ====
FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------
RECOVERIES OPERATING REAL
ACQUISITION MINIMUM PERCENTAGE FROM AND ESTATE GENERAL AND
PROPERTY NAME DATE RENT RENT TENANTS MAINTENANCE TAXES ADMINISTRATIVE
------------- ----------- ------- ---------- ---------- ----------- ------ --------------
Oakley Plaza............ 3/14/97 $ 142 $ -- $ 14 $ 13 $ 13 $ 8
Mariner's Village....... 3/25/97 185 6 37 45 33 7
Carmel Commons.......... 3/28/97 297 11 63 38 35 22
Mainstreet Square....... 4/15/97 193 -- 34 42 30 15
East Port Plaza......... 4/25/97 543 -- 107 96 65 33
Rivermont Station....... 6/30/97 642 -- 124 65 56 34
Lovejoy Station......... 6/30/97 306 -- 63 36 29 9
Tamiami Trails.......... 7/10/97 508 -- 163 124 66 30
Garden Square........... 9/19/97 671 -- 232 144 99 50
Boynton Lakes Plaza..... 12/1/97 1,159 -- 391 267 250 80
Pinetree Plaza.......... 12/23/97 279 -- 51 50 37 21
Bloomingdale Square..... 2/11/98 1,863 43 459 215 209 184
Silverlake.............. 6/3/98 819 -- 142 85 85 43
Highland Square......... 6/17/98 1,122 111 187 99 171 130
Shoppes @104............ 6/19/98 1,332 -- 285 154 170 60
Fleming Island.......... 6/30/98 698 -- 581 79 388 72
Pike Creek.............. 8/4/98 1,980 196 182 228 140 80
Hinsdale Lake Commons... 10/21/98 1,743 10 513 292 200 90
------- ----- ------ ------ ------ ----
$14,482 $ 377 $3,628 $2,072 $2,076 $968
======= ===== ====== ====== ====== ====
P-10
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(g) Depreciation expense is based on the estimated useful life of the
properties acquired. For properties under construction, depreciation
expense is calculated from the date the property is placed in service
through the end of the period. In addition, the nine month period ended
September 30, 1998 and year ended December 31, 1997 calculations reflect
depreciation expense on the properties from January 1, 1997 to the earlier
of the respective acquisition date of the property or September 30, 1998.
BUILDING AND YEAR BUILDING DEPRECIATION
PROPERTY NAME IMPROVEMENTS BUILT/RENOVATED USEFUL LIFE ADJUSTMENT
------------- ------------ --------------- ------------ ------------
Bloomingdale Square..... $ 13,189 1987 30 $ 51
Silverlake Shopping
Center................. 7,584 1988 31 103
Highland Square......... 9,049 1960 20 208
Shoppes @104............ 6,439 1990 33 91
Fleming Island.......... 4,773 1994 37 64
Pike Creek.............. 18,082 1981 24 446
Hinsdale Lake Commons... 14,976 1986 29 382
------
Acquisition Properties
pro forma depreciation
adjustment............. $1,345
======
Ranging from Ranging from
Midland Properties...... $151,636 1986 to 1996 29 to 40 $ 817
======
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------
BUILDING AND YEAR BUILDING DEPRECIATION
PROPERTY NAME IMPROVEMENTS BUILT/RENOVATED USEFUL LIFE ADJUSTMENT
------------- ------------ --------------- ------------ ------------
Oakley Plaza............ $ 6,428 1988 31 $ 41
Mariner's Village....... 5,979 1986 29 47
Carmel Commons.......... 9,335 1979 22 101
Mainstreet Square....... 4,581 1988 31 43
East Port Plaza......... 8,179 1991 34 76
Rivermont Station....... 9,548 1996 39 121
Lovejoy Station......... 5,560 1995 38 73
Tamiami Trails.......... 7,598 1987 30 133
Garden Square........... 7,151 1991 34 151
Boynton Lakes Plaza..... 9,618 1993 36 244
Pinetree Plaza.......... 3,057 1982 25 120
Bloomingdale Square..... 13,189 1987 30 440
Silverlake Shopping
Center................. 7,584 1988 31 245
Highlands Square........ 9,049 1960 20 452
Shoppes @104............ 6,439 1990 33 195
Fleming Island.......... 4,773 1994 37 129
Pike Creek.............. 18,082 1981 24 753
Hinsdale Lake Commons... 14,976 1986 29 516
------
Acquisition Properties
pro forma depreciation
adjustment............. $3,881
======
Ranging from Ranging from
Midland Properties...... $151,636 1986 to 1996 29 to 40 $2,994
======
P-11
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(h) To reflect interest expense on the Line required to complete the
acquisition of the Midland Properties at the interest rate afforded the
Partnership at September 30, 1998 (6.525%) and the assumption of $97.0
million of debt. For properties under construction, interest expense is
calculated from the date the property is placed in service through the end
of the period.
Pro forma interest adjustment for the three month period ended
September 30, 1998................................................ $ 2,646
=======
Pro forma interest adjustment for the year ended December 31, 1997. $10,353
=======
(i) To reflect interest expense on the Line required to complete the
acquisition of the Acquisition Properties at the interest rate afforded
the Partnership at September 30, 1998 (6.525%). The nine month period
ended September 30, 1998 and year ended December 31, 1997 calculation
reflects interest expense on the properties from January 1, 1997 to the
respective acquisition date of the property.
Pro forma interest adjustment for the nine-month period ended
September 30, 1998................................................. $3,206
======
Pro forma interest adjustment for the year ended December 31, 1997.. $9,862
======
(j) In December, 1997, the Partnership sold one office building for $2.6
million and recognized a gain on the sale of $451,000. During the first
quarter of 1998, the Partnership sold three office buildings and a parcel
of land for $26.7 million, and recognized a gain on the sale of $9.3
million. The adjustments to the pro forma statements of operations reflect
the reversal of the revenues and expenses from the office buildings
generated during 1997 and 1998, including the gains on the sale of the
office buildings as if the sales had been completed on January 1, 1997.
The Partnership believes that excluding the results of operations and
gains related to the office buildings sold is necessary for an
understanding of the continuing operations of the Partnership.
(k) To reflect (i) interest expense and loan cost amortization on the $100
million debt offering offset by (ii) the reduction of interest expense on
the Line and mortgage loans from the proceeds of the debt offering, the
issuance of the preferred units and the proceeds from the sale of the
office buildings referred to in note (j).
Pro forma interest adjustment for the nine-month period ended
September 30, 1998............................................... $(4,830)
=======
Pro forma interest adjustment for the year ended December 31,
1997............................................................. $(6,439)
=======
(l) To reflect the distribution on the offering of preferred units at an
assumed annual rate of 8.125% for the nine-month period ended September
30, 1998 and year ended December 31, 1997.
(m) To increase depreciation expense as a result of the adjustment of real
estate investments to fair market value for Pacific Retail merger:
FOR THE NINE FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
Adjustment to record real estate
investments at fair market value..... $48,500 48,500
Allocation to land.................... (9,700) (9,700)
------- ------
Allocation to building................ 38,800 38,800
Estimated useful life in years........ 32 32
------- ------
Depreciation expense.................. $ 909 1,212
======= ======
P-12
REGENCY CENTERS, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(n) The following summarizes the calculation of basic and diluted earnings per
unit for the nine-month period ended September 30, 1998 and the year ended
December 31, 1997:
FOR THE NINE FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
Basic Earnings Per Unit (EPU)
Calculation:
Weighted average common units
outstanding
Partnership........................ 23,872 15,327
Partnership units issued to Regency
for contribution of Pacific Retail
assets............................ 33,039 21,573
------- -------
Total Basic Units.................... 56,911 36,900
======= =======
Net income for unit holders.......... $58,499 $46,651
Less: dividends paid on Class B
common stock........................ 4,033 5,140
------- -------
Net income for Basic and Diluted EPU. $54,466 $41,511
======= =======
Basic EPU.............................. $ 0.96 $ 1.12
======= =======
Diluted Earnings Per Unit (EPU)
Calculation:
Weighted average common units
outstanding for Basic EPU............. 56,911 36,900
Incremental units to be issued under
common stock options using the
Treasury method....................... -- 80
Contingent units for the acquisition of
real estate........................... 418 955
------- -------
Total Diluted Units................ 57,329 37,935
======= =======
Diluted EPU............................ $ 0.95 $ 1.09
======= =======
P-13
PACIFIC RETAIL TRUST
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet is
based upon the historical consolidated balance sheet of Pacific Retail Trust
(the Company) as of September 30, 1998. The following unaudited pro forma
condensed consolidated statements of operations of the Company are based upon
the historical consolidated statements of operations for the nine-month period
ended September 30, 1998 and the year ended December 31, 1997. These
statements are presented as if the Company had acquired all of its properties
as of January 1, 1997.
The unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of what the actual financial position or results of
operations of the Company would have been at September 30, 1998 or December
31, 1997 assuming the transactions had been completed as set forth above, nor
does it purport to represent the financial position or results of operations
of the Company in future periods.
P-14
PACIFIC RETAIL TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
(IN THOUSANDS)
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
ASSETS
------
Real estate investments, at cost........... $1,059,083 -- 1,059,083
Construction in progress................... 21,657 -- 21,657
Less: accumulated depreciation........... 35,942 -- 35,942
---------- --- ----------
Real estate rental property, net....... 1,044,798 -- 1,044,798
---------- --- ----------
Cash and cash equivalents.................. 389 -- 389
Tenant receivables, net of allowance for
uncollectible accounts.................... 12,604 -- 12,604
Deferred costs, less accumulated amortiza-
tion...................................... 5,317 -- 5,317
Other assets............................... 10,529 -- 10,529
---------- --- ----------
Total assets........................... $1,073,637 -- $1,073,637
========== === ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Mortgage loans payable..................... $ 97,063 -- 97,063
Acquisition and development line of credit. 211,500 -- 211,500
---------- --- ----------
Total debt............................. 308,563 -- 308,563
Accounts payable and other liabilities..... 16,188 -- 16,188
Tenant's security and escrow deposits...... 3,408 -- 3,408
---------- --- ----------
Total liabilities...................... 328,159 -- 328,159
---------- --- ----------
Minority interest.......................... 19,346 -- 19,346
---------- --- ----------
Preferred stock............................ 31,303 -- 31,303
Common stock and additional paid in capi-
tal....................................... 706,086 -- 706,086
Distributions in excess of net income...... (11,257) -- (11,257)
---------- --- ----------
Total stockholders' equity............. 726,132 -- 726,132
---------- --- ----------
Total liabilities and stockholders'
equity.............................. $1,073,637 -- 1,073,637
========== === ==========
P-15
PACIFIC RETAIL TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
------------------------------------------------------------
ACQUISITION
HISTORICAL PROPERTIES PRO FORMA
----------------- ----------------- ----------------
Revenues:
Minimum rent.......... $ 70,735 4,658 (a) 75,393
Percentage rent....... 1,002 -- 1,002
Recoveries from
tenants.............. 18,764 941 (a) 19,705
Management, leasing
and brokerage fees... 45 -- 45
----------------- --------------- ----------------
90,546 5,599 96,145
----------------- --------------- ----------------
Operating expenses:
Depreciation and
amortization......... 17,058 1,016 (b) 18,074
Operating and
maintenance.......... 11,198 889 (a) 12,087
General and
administrative....... 6,937 162 (a) 7,099
Real estate taxes..... 10,194 429 (a) 10,623
----------------- --------------- ----------------
45,387 2,496 47,883
----------------- --------------- ----------------
Interest expense (in-
come):
Interest expense...... 11,594 3,622 (c) 15,216
Interest income....... (581) -- (581)
----------------- --------------- ----------------
11,013 3,622 14,635
----------------- --------------- ----------------
Income before minority
interest............. 34,146 (519) 33,627
Minority interest....... (579) 152 (427)
----------------- --------------- ----------------
Net income............ 33,567 (367) 33,200
Preferred distributions. (1,764) -- (1,764)
----------------- --------------- ----------------
Net income for common
shareholders......... $ 31,803 (367) 31,436
================= =============== ================
Net income per share
(note (e)):
Basic................. $ 0.50 $ 0.49
================= ================
Diluted............... $ 0.49 $ 0.48
================= ================
See accompanying notes to pro forma consolidated statements of operations.
P-16
PACIFIC RETAIL TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE YEAR
ENDED DECEMBER 31, 1997
--------------------------------
ACQUISITION PRO
HISTORICAL PROPERTIES FORMA
---------- ----------- -------
Revenues:
Minimum rent................................. $60,869 32,330 (a) 93,199
Percentage rent.............................. 1,233 -- 1,233
Recoveries from tenants...................... 16,899 8,272 (a) 25,171
Management, leasing and brokerage fees....... 392 -- 392
------- ------ -------
79,393 40,602 119,995
------- ------ -------
Operating expenses:
Depreciation and amortization................ 14,715 6,354 (b) 21,069
Operating and maintenance.................... 9,727 5,971 (a) 15,698
General and administrative................... 6,542 1,248 (a) 7,790
Real estate taxes............................ 10,012 3,069 (a) 13,081
------- ------ -------
40,996 16,642 57,638
------- ------ -------
Interest expense (income):
Interest expense............................. 11,667 23,875 (c) 35,542
Interest income.............................. (481) -- (481)
------- ------ -------
11,186 23,875 35,061
------- ------ -------
Income before minority interest.............. 27,211 85 27,296
Minority interest.............................. (490) 60 (430)
------- ------ -------
Net income..................................... 26,721 145 26,866
Preferred distributions........................ (2,195) -- (2,195)
------- ------ -------
Net income for common shareholders............. $24,526 145 24,671
======= ====== =======
Net income per share (note (e)):
Basic........................................ $ 0.61 $ 0.61
======= =======
Diluted...................................... $ 0.61 $ 0.60
======= =======
See accompanying notes to pro forma consolidated statements of operations.
P-17
PACIFIC RETAIL TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(a) Reflects revenues and certain expenses for the Acquisition Properties
for the period from January 1, 1998 to the earlier of the respective
acquisition date of the property or September 30, 1998, and for the year ended
December 31, 1997.
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
---------------------------------------
PROPERTY ACQUISITION MINIMUM RECOVERIES OPERATING AND REAL GENERAL AND
NAME DATE RENT FROM TENANTS MAINTENANCE ESTATE TAXES ADMINISTRATIVE
-------- ----------- -------- ------------ ------------- ------------ --------------
Twin Peaks.............. 1/15/98 $ 231 $ 32 $ 25 $ 8 $ 8
Woodman--Van Nuys....... 1/30/98 78 10 22 12 5
Pine Lake Village....... 3/6/98 327 62 47 24 12
Sammamish Highlands..... 3/6/98 348 100 71 31 14
Inglewood Plaza......... 3/6/98 71 19 15 6 2
Oakbrook Plaza.......... 3/30/98 180 44 10 14 9
Diablo Plaza............ 5/14/98 434 191 69 76 29
Thomas Lake............. 5/21/98 400 65 26 37 7
Sherwood Market Center.. 7/15/98 700 157 97 83 20
Murrayhill Marketplace.. 7/15/98 878 93 280 51 22
Cherry Park Market...... 7/15/98 518 77 97 30 15
Sunnside 205............ 7/15/98 493 91 130 57 19
-------- ------- ------- ------- -------
$ 4,658 $ 941 $ 889 $ 429 $ 162
======== ======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------
PROPERTY ACQUISITION MINIMUM RECOVERIES OPERATING AND REAL GENERAL AND
NAME DATE RENT FROM TENANTS MAINTENANCE ESTATE TAXES ADMINISTRATIVE
-------- ----------- -------- ------------ ------------- ------------ --------------
Market @ Preston Forest. 3/11/97 $ 259 $ 90 $ 49 $ 51 $ 21
North Hills............. 4/7/97 619 133 89 127 29
West Park Plaza......... 4/9/97 219 72 49 32 9
Woodside Central........ 4/9/97 344 99 64 24 13
South Point Plaza....... 4/9/97 410 174 125 55 18
Walker Center........... 4/9/97 293 104 61 29 12
Heritage Plaza.......... 7/1/97 1,196 259 296 123 44
Friars Mission.......... 7/31/97 1,531 314 140 71 74
Morningside Plaza....... 8/1/97 930 146 44 48 4
Pima Crossing........... 9/22/97 2,031 578 312 252 53
El Camino............... 9/29/97 1,259 401 129 143 49
San Leandro............. 10/1/97 726 240 138 46 43
Rona Plaza.............. 10/10/97 479 81 76 24 25
Sequoia Station......... 11/19/97 3,244 743 442 292 4
Loehmann's Plaza........ 12/18/97 1,206 325 348 137 75
Arden Square............ 12/23/97 1,219 276 189 80 43
Newland Center.......... 12/30/97 2,092 435 424 167 90
Plaza Hermosa........... 1/1/98 1,113 658 291 107 72
Twin Peaks.............. 1/15/98 2,678 386 313 100 95
Woodman--Van Nuys....... 1/30/98 1,092 362 772 166 73
Pine Lake Village....... 3/6/98 1,259 321 154 165 59
Sammamish Highlands..... 3/6/98 1,380 491 193 190 70
Inglewood Plaza......... 3/6/98 324 94 43 38 13
Oakbrook Plaza.......... 3/30/98 636 136 112 27 33
Diablo Plaza............ 5/14/98 1,266 449 263 223 124
Thomas Lake............. 5/21/98 359 31 41 4 6
Sherwood Market Center.. 7/15/98 1,283 297 150 158 34
Murrayhill Marketplace.. 7/15/98 1,769 360 444 101 25
Cherry Park Market...... 7/15/98 131 20 17 1 3
Sunnside 205............ 7/15/98 983 197 203 88 35
-------- ------- ------- ------- -------
$ 32,330 $ 8,272 $ 5,971 $ 3,069 $ 1,248
======== ======= ======= ======= =======
P-18
PACIFIC RETAIL TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(b) Depreciation expense is based on an estimated life of up to forty years
for the buildings and ten years for the improvements of the properties
acquired. In addition, the nine month period ended September 30, 1998 and year
ended December 31, 1997 calculations reflect depreciation expense on the
properties from January 1, 1997 to the earlier of the respective acquisition
date of the property or September 30, 1998.
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
-----------------------------------------
PROPERTY BUILDING AND YEAR BUILDING DEPRECIATION
NAME IMPROVEMENTS BUILT/RENOVATED ADJUSTMENT
-------- ------------ --------------- ------------
Twin Peaks............................ $ 24,726 1988 $ 16
Woodman--Van Nuys..................... 5,920 1992 14
Pine Lake Village..................... 10,326 1989 47
Sammamish Highlands................... 7,391 1992 36
Inglewood Plaza....................... 1,830 1985 8
Oakbrook Plaza........................ 5,926 1982 42
Diablo Plaza.......................... 7,362 1982 71
Thomas Lake........................... 9,940 1998 103
Sherwood Market Center................ 14,860 1995 187
Murrayhill Marketplace................ 14,664 1988 183
Cherry Park Market.................... 15,934 1997 201
Sunnside 205.......................... 8,585 1988 108
-------
Acquisition Properties pro forma de-
preciation adjustment.............. $ 1,016
=======
FOR THE YEAR ENDED DECEMBER 31, 1997
-----------------------------------------
PROPERTY BUILDING AND YEAR BUILDING DEPRECIATION
NAME IMPROVEMENTS BUILT/RENOVATED ADJUSTMENT
-------- ------------ --------------- ------------
Market @ Preston Forest............... $ 10,645 1990 $ 50
North Hills........................... 18,540 1995 135
West Park Plaza....................... 4,619 1996 36
Woodside Central...................... 8,624 1993 62
South Point Plaza..................... 9,753 1997 68
Walker Center......................... 6,244 1987 52
Heritage Plaza........................ 25,672 1981 305
Friars Mission........................ 25,781 1989 405
Morningside Plaza..................... 12,832 1996 246
Pima Crossing......................... 24,341 1996 511
El Camino............................. 9,675 1995 259
San Leandro........................... 7,724 1982 164
Rona Plaza............................ 4,243 1989 86
Sequoia Station....................... 17,709 1996 403
Loehmann's Plaza...................... 8,225 1983 228
Arden Square.......................... 7,290 1994 226
Newland Center........................ 11,704 1985 341
Plaza Hermosa......................... 9,255 1984 247
Twin Peaks............................ 24,726 1988 393
Woodman--Van Nuys..................... 5,920 1992 166
Pine Lake Village..................... 10,326 1989 285
Sammamish Highlands................... 7,391 1992 213
Inglewood Plaza....................... 1,830 1985 50
Oakbrook Plaza........................ 5,926 1982 170
Diablo Plaza.......................... 7,362 1982 212
Thomas Lake........................... 9,940 1998 51
Sherwood Market Center................ 14,860 1995 374
Murrayhill Marketplace................ 14,664 1988 366
Cherry Park Market.................... 15,934 1997 34
Sunnside 205.......................... 8,585 1988 216
-------
Acquisition Properties pro forma de-
preciation adjustment.............. $ 6,354
=======
P-19
PACIFIC RETAIL TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(c) To reflect interest expense on the Line required to complete the
acquisition of the Acquisition Properties at the interest rate afforded the
Company at September 30, 1998 (6.87%). The nine month period ended September
30, 1998 and year ended December 31, 1997 calculation reflects interest
expense on the properties from January 1, 1997 to the respective acquisition
date of the property.
Pro forma interest adjustment for the nine-month period ended
September 30, 1998............................................... $ 3,622
========
Pro forma interest adjustment for the year ended December 31,
1997............................................................. $ 23,875
========
(d) The following summarizes the calculation of basic and diluted earnings
per share for the nine-month period ended September 30, 1998 and the year
ended December 31, 1997:
FOR THE NINE FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
Basic Earnings Per Share (EPS) Calcula-
tion:
Weighted average common shares outstand-
ing.................................... 64,045 40,173
======== ========
Proforma net income for Basic EPS....... $ 31,436 $ 24,671
======== ========
Basic EPS................................. $ 0.49 $ 0.61
======== ========
Proforma net income for Basic EPS....... 31,436 24,671
Add: minority interest for operating
partnership units...................... 427 430
-------- --------
Proforma net income for Diluted EPS..... 31,863 25,101
======== ========
Diluted Earnings Per Share (EPS) Calcula-
tion:
Weighted average common shares outstand-
ing for Basic EPS...................... 64,045 40,173
Operating partnership units............. 1,641 1,641
Incremental shares to be issued under
common stock options using the Treasury
method................................. 215 95
-------- --------
Total Diluted Shares.................. 65,901 41,909
======== ========
Diluted EPS............................... $ 0.48 $ 0.60
======== ========
P-20
INDEX TO FINANCIAL STATEMENTS
RRC OPERATING PARTNERSHIP OF GEORGIA, L.P.
Introduction ............................................................. F-3
Independent Auditors' Report.............................................. F-4
Balance Sheets as of September 30, 1998 (unaudited) and December 31, 1997
and 1996................................................................. F-5
Statements of Operations for the nine months ended September 30, 1998 and
1997 (unaudited) and the
year ended December 31, 1997 and for the period from February 22, 1996
(inception) to December 31, 1996 ........................................ F-6
Statements of Changes in Partners' Capital for the nine months ended
September 30, 1998 (unaudited) and the year ended December 31, 1997 and
for the period from February 22, 1996 (inception) to December 31, 1996... F-7
Statements of Cash Flows for the nine months ended September 30, 1998 and
1997 (unaudited) and the
year ended December 31, 1997 and for the period from February 22, 1996
(inception) to December 31, 1996......................................... F-8
Notes to Financial Statements............................................. F-9
REGENCY OFFICE PARTNERSHIP, L.P.
Independent Auditors' Report.............................................. F-11
Balance Sheets as of September 30, 1998 (unaudited) and December 31, 1997
and 1996................................................................. F-12
Statements of Operations for the nine months ended September 30, 1998 and
1997 (unaudited) and the years ended December 31, 1997, 1996, and 1995 .. F-13
Statements of Changes in Partners' Capital for the nine months ended
September 30, 1998 (unaudited) and the years ended December 31, 1997,
1996, and 1995........................................................... F-14
Statements of Cash Flows for the nine months ended September 30, 1998 and
1997 (unaudited) and the years ended December 31, 1997, 1996, and 1995... F-15
Notes to Financial Statements............................................. F-16
RRC FL FIVE, INC.
Independent Auditors Report............................................... F-19
Balance Sheets as of September 30, 1998 (unaudited) and December 31, 1997
and 1996................................................................. F-20
Statements of Operations for the nine months ended September 30, 1998 and
1997 (unaudited) and the years ended December 31, 1997, 1996 and 1995.... F-21
Statements of Stockholder's Equity for the nine months ended September 30,
1998 (unaudited) and the years ended December 31, 1997, 1996 and 1995.... F-22
Statements of Cash Flows for the nine months ended September 30, 1998 and
1997 (unaudited) and the years ended December 31, 1997, 1996 and 1995.... F-23
Notes to Financial Statements............................................. F-24
RRC ACQUISITIONS, INC.
Independent Auditors Report............................................... F-27
Balance Sheets as of September 30, 1998 (unaudited) and December 31, 1997. F-28
F-1
Statements of Operations for the nine months ended September 30, 1998
(unaudited) and the year ended December 31, 1997......................... F-29
Statements of Stockholder's Equity for the nine months ended September 30,
1998 (unaudited) and the year ended December 31, 1997.................... F-30
Statements of Cash Flows for the nine months ended September 30, 1998
(unaudited) and the year ended December 31, 1997......................... F-31
Notes to Financial Statements............................................. F-32
PACIFIC RETAIL TRUST: CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants......................................... F-34
Consolidated Balance Sheets as of December 31, 1997 and 1996.............. F-35
Consolidated Statements of Operations for the years ended December 31,
1997 and 1996............................................................ F-36
Consolidated Statements of Changes in Shareholders' Equity for the years
ended December 31, 1997 and 1996......................................... F-37
Consolidated Statements of Cash Flows for the years ended December 31,
1997 and 1996............................................................ F-38
Notes to Consolidated Financial Statements................................ F-39
Report of Independent Accountants......................................... F-51
Balance Sheet as of December 31, 1995..................................... F-52
Statement of Operations for the period from April 27, 1995 (Inception) to
December 31, 1995........................................................ F-53
Statement of Shareholders' Equity for the period from April 27, 1995
(Inception) to December 31, 1995......................................... F-54
Statement of Cash Flows for the period from April 27, 1995 (Inception) to
December 31, 1995........................................................ F-55
Notes to Financial Statements ............................................ F-56
Consolidated Balance Sheet as of September 30, 1998 (Unaudited)........... F-64
Consolidated Statements of Operations for the nine months ended September
30, 1998 and 1997 (Unaudited)............................................ F-65
Consolidated Statement of Changes in Shareholders' Equity for the nine
months ended September 30, 1998 (Unaudited).............................. F-66
Consolidated Statements of Cash Flows for the nine months ended September
30, 1998 and 1997 (Unaudited)............................................ F-67
Notes to Consolidated Financial Statements................................ F-68
F-2
INTRODUCTION
The accompanying financial statements of RRC Operating Partnership of
Georgia, L.P., a 16%-owned subsidiary of the Issuer ("RRC Operating"), Regency
Office Partnership, L.P., a 99%-owned subsidiary of the Issuer ("Regency
Office"), and RRC FL, Inc. ("FL Five") and RRC Acquisitions, Inc.
("Acquisitions"), both of which are wholly-owned subsidiaries of Regency, are
included herein. RRC Operating, Regency Office FL Five Acquisitions are
Guarantors of the Notes.
The financial statements of Regency are incorporated herein by reference.
F-3
INDEPENDENT AUDITORS' REPORT
The Partners
RRC Operating Partnership of Georgia, L.P.:
We have audited the accompanying balance sheets of RRC Operating Partnership
of Georgia, L.P. as of December 31, 1997 and 1996, and the related statements
of operations, partners' capital, and cash flows for the year ended December
31, 1997, and for the period from February 22, 1996 (inception) to December
31, 1996. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RRC Operating Partnership
of Georgia, L.P. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the year ended December 31, 1997, and for
the period from February 22, 1996 (inception) to December 31, 1996, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Jacksonville, Florida
September 15, 1998
F-4
RRC OPERATING PARTNERSHIP OF GEORGIA, L.P.
BALANCE SHEETS
DECEMBER 31,
-------------------
SEPTEMBER 30, 1998 1997 1996
------------------ --------- ---------
(UNAUDITED)
ASSETS
Cash and cash equivalents, restricted
for tenants' security deposits......... $ 21,441 17,178 18,401
Property and buildings, at cost
Land.................................. 1,123,200 1,123,200 1,123,200
Buildings and improvements............ 4,424,504 4,399,773 4,341,599
---------- --------- ---------
5,547,704 5,522,973 5,464,799
Less accumulated depreciation......... 290,700 206,224 90,882
---------- --------- ---------
Net property and buildings.......... 5,257,004 5,316,749 5,373,917
---------- --------- ---------
Other assets:
Accounts receivable and other assets.. 46,808 51,375 49,406
Deferred leasing costs, less
accumulated amortization............. 25,655 6,800 --
---------- --------- ---------
Total other assets.................. 72,463 58,175 49,406
---------- --------- ---------
$5,350,908 5,392,102 5,441,724
========== ========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Notes payable (note 3)................ $3,484,916 3,484,916 4,436,737
Accounts payable and other
liabilities.......................... 341,011 229,887 198,676
Tenants' security deposits............ 21,441 17,178 18,401
---------- --------- ---------
Total liabilities................... 3,847,368 3,731,981 4,653,814
Partners' capital (note 2).............. 1,503,540 1,660,121 787,910
---------- --------- ---------
$5,350,908 5,392,102 5,441,724
========== ========= =========
See accompanying notes to financial statements.
F-5
RRC OPERATING PARTNERSHIP OF GEORGIA, L.P.
STATEMENTS OF OPERATIONS
NINE MONTHS
ENDED SEPTEMBER PERIOD FROM
30, YEAR ENDED FEBRUARY 22,
----------------- DECEMBER 31, TO DECEMBER 31,
1998 1997 1997 1996
--------- ------- ------------ ---------------
(UNAUDITED)
Revenues:
Rental income................. $ 511,089 512,280 682,922 565,040
Tenant reimbursements and
other income................. 87,343 76,874 102,778 107,200
--------- ------- ------- -------
Total revenues.............. 598,432 589,154 785,700 672,240
--------- ------- ------- -------
Expenses:
Depreciation and amortization. 88,761 86,399 115,342 90,882
Direct operating expenses
(note 5)..................... 71,198 93,231 126,252 95,210
Real estate taxes............. 45,753 43,356 59,823 51,653
Interest...................... 164,924 195,038 276,652 257,540
--------- ------- ------- -------
Total expenses.............. 370,636 418,024 578,069 495,285
--------- ------- ------- -------
Net income.................. $ 227,796 171,130 207,631 176,955
========= ======= ======= =======
See accompanying notes to financial statements.
F-6
RRC OPERATING PARTNERSHIP OF GEORGIA, L.P.
STATEMENTS OF PARTNERS' CAPITAL
LIMITED REGENCY
PARTNERS CENTERS, L.P. TOTAL
--------- ------------- ---------
Balance at February 22, 1996 (inception) $ -- $ -- $ --
Contribution of real estate................ 525,333 -- 525,333
Net contributions (distributions).......... (16,845) 102,467 85,622
Net income................................. -- 176,955 176,955
--------- --------- ---------
Balance, December 31, 1996................. 508,488 279,422 787,910
Net contributions (distributions).......... (48,467) 713,047 664,580
Net income................................. -- 207,631 207,631
--------- --------- ---------
Balance, December 31, 1997................. 460,021 1,200,100 1,660,121
Net contributions (distributions)
(unaudited)............................... (38,079) (346,298) (384,377)
Net income (unaudited)..................... -- 227,796 227,796
--------- --------- ---------
Balance, September 30, 1998 (unaudited).... $ 421,942 1,081,598 1,503,540
========= ========= =========
See accompanying notes to financial statements.
F-7
RRC OPERATING PARTNERSHIP OF GEORGIA, L.P.
STATEMENTS OF CASH FLOWS
NINE MONTHS PERIOD FROM
ENDED SEPTEMBER 30, YEAR ENDED FEBRUARY 22, TO
-------------------- DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
-------- ---------- ------------ ---------------
(UNAUDITED)
Cash flows from operating
activities:
Net income................. $227,796 171,130 207,631 176,955
Adjustments to reconcile net
income to
net cash provided by
operating activities:
Depreciation and
amortization.............. 88,761 86,399 115,342 90,882
Deferred leasing costs..... (23,140) (2,900) (6,800) --
Changes in assets and
liabilities:
Accounts receivable and
other assets............. 4,567 22,063 (1,969) (47,248)
Accounts payable and other
liabilities.............. 111,124 (10,782) 31,211 109,760
Cash restricted for
tenants security
deposits................. (4,263) 41 1,223 (1,116)
Tenants' security
deposits................. 4,263 (41) (1,223) 1,116
-------- ---------- ---------- --------
Net cash provided by
operating activities... 409,108 265,910 345,415 330,349
-------- ---------- ---------- --------
Cash flows from investing
activities--additions to
property and buildings..... (24,731) (58,174) (58,174) (306,513)
-------- ---------- ---------- --------
Cash flows from financing
activities:
Principal payments on notes
payable................... -- (3,801,821) (3,801,821) (109,458)
Borrowings on notes
payable................... -- 2,850,000 2,850,000 --
Net contributions
(distributions)........... (384,377) 744,151 664,580 85,622
-------- ---------- ---------- --------
Net cash used in
financing activities... (384,377) (207,670) (287,241) (23,836)
-------- ---------- ---------- --------
Net change in cash and
cash equivalents....... -- 66 -- --
Cash and cash equivalents at
beginning of period........ -- -- -- --
-------- ---------- ---------- --------
Cash and cash equivalents at
end of period.............. $ -- 66 -- --
======== ========== ========== ========
Supplemental disclosure of
cash flow information:
Cash paid for interest..... $ -- 181,947 215,088 269,200
======== ========== ========== ========
See accompanying notes to financial statements.
F-8
RRC OPERATING PARTNERSHIP OF GEORGIA, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Formation of Partnership
RRC Operating Partnership of Georgia, L.P. (the Partnership) was formed on
February 22, 1996 as a Georgia limited partnership for the purpose of
acquiring, leasing and operating Parkway Station Shopping Center, a 94,290
square foot shopping center located in Warner-Robins, Georgia, for
approximately $5.4 million. Parkway Station, which was constructed during
1983, has an aggregate cost, for federal income tax purposes, of
approximately $2.1 million at December 31, 1997.
The Partnership interest is held 16% by Regency Centers, L.P., a Delaware
limited partnership (RCLP), as general partner, and 84% by various
individuals (Limited Partners). The Partnership will terminate on December
31, 2050 or earlier upon the occurrence of certain events specified in the
Partnership agreement.
(b) Method of Accounting
The accompanying financial statements were prepared on the accrual basis of
accounting. No provision for income taxes is made because any liability for
income taxes is that of the individual Partners and not that of the
Partnership.
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Partnership's management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
(d) Property and Buildings
Property and building are recorded at cost. Major additions and
improvements to property and buildings are capitalized to the property
accounts, while replacements, maintenance, and repairs which do not improve
or extend the useful lives of the respective assets are reflected in
operations. Depreciation is computed using the straight-line method over
the estimated useful lives of the property and buildings, which is 39 years
for buildings and improvements and the life of the lease term for tenant
improvements.
(e) Revenue Recognition
The Partnership leases space to tenants under agreements with varying
terms. Leases are accounted for as operating leases with minimum rent
recognized on a straight-line basis over the term of the lease regardless
of when payments are due. Contingent rentals are included in income in the
period earned.
(f) Deferred Costs
Deferred costs consist of costs associated with leasing the property. Such
costs are deferred and amortized using the straight-line method over the
terms of the respective leases.
(g) Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Partnership considers
all instruments with a maturity of 90 days or less at purchase to be cash
equivalents.
(h) Impairment of Long-Lived Assets
The Partnership follows the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of." This Statement requires that long-
lived assets be reviewed for impairment whenever events or changes in
F-9
RRC OPERATING PARTNERSHIP OF GEORGIA, L.P.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying amounts of the assets exceed their fair value less costs
to sell.
(i) Interim Unaudited Financial Statements
The accompanying interim financial statements have been prepared by the
Partnership, without audit, and in the opinion of management reflect all
normal recurring adjustments necessary for a fair presentation of the
results for the unaudited periods presented. Certain information in
footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted.
(2) PARTNERS' CAPITAL
The Partnership Agreement provides, among other provisions, that (1) 100%
of the net income shall be allocated to RCLP, (2) RCLP has complete
discretion as to the operations of Parkway Station Shopping Center, and to
its ultimate disposal, and (3) the Limited Partners receive distributions
in an amount equal to the dividends paid to RCLP's parent company's
(Regency Realty Corporation) stockholders.
(3) NOTES PAYABLE
The Partnership has two notes payable to RCLP, which total $3,484,916 and
$4,436,737 at December 31, 1997 and 1996, respectively. The notes pay
interest only annually at 6.73%, and are due in full August 28, 2012.
(4) LEASES
The Partnership has various tenant leases with terms that expire through
2003. Future minimum rental payments under noncancelable operating leases
as of December 31, 1997, including renewed terms and new tenants, are as
follows:
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ----------
1998....................................................... $ 644,208
1999....................................................... 546,171
2000....................................................... 495,409
2001....................................................... 344,228
2002....................................................... 99,641
Thereafter................................................. 2,400
----------
$2,132,057
==========
Most tenants are responsible for payment or reimbursement of their
proportionate share of taxes, insurance, and common area expenses.
During each of 1997 and 1996, one tenant, Kroger Supermarkets, paid minimum
rent totaling $264,576, which exceeded 10% of the total minimum rent earned
by the Partnership.
(5) RELATED PARTY TRANSACTIONS
The Partnership paid fees for property management to RCLP of $30,872 and
$26,127 for the periods ended December 31, 1997 and 1996, respectively.
The Partnership paid tenant lease commissions to RCLP of $6,800 for the
year ended December 31, 1997. No leasing commissions were paid during 1996.
Such payments have been recorded as deferred leasing costs in the
accompanying balance sheets.
F-10
INDEPENDENT AUDITORS' REPORT
The Partners
Regency Office Partnership, L.P.:
We have audited the accompanying balance sheets of Regency Office
Partnership, L.P. as of December 31, 1997 and 1996, and the related statements
of operations, partners' capital, and cash flows for each of the years in the
three-year period ended December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Regency Office
Partnership, L.P. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Jacksonville, Florida
September 16, 1998
F-11
REGENCY OFFICE PARTNERSHIP, L.P.
BALANCE SHEETS
DECEMBER 31,
---------------------
SEPTEMBER
30, 1998 1997 1996
------------ ---------- ----------
(UNAUDITED)
ASSETS
Cash restricted for tenants' security
deposits................................... $ 50,191 62,852 51,234
Property and buildings, at cost (note 2):
Land...................................... 7,394,905 -- 3,624,212
Buildings and improvements................ 26,764,821 -- 22,963,443
------------ ---------- ----------
34,159,726 -- 26,587,655
Less accumulated depreciation............. 393,344 -- 5,028,158
------------ ---------- ----------
Net property and buildings.............. 33,766,382 -- 21,559,497
------------ ---------- ----------
Office buildings held for sale (note 2)..... -- 19,258,232 --
------------ ---------- ----------
Other assets:
Accounts receivable and other assets...... 250,177 41,894 62,057
Deferred leasing costs, less accumulated
amortization............................. 9,008 278,771 249,917
------------ ---------- ----------
Total other assets...................... 259,185 320,665 311,974
------------ ---------- ----------
$ 34,075,758 19,641,749 21,922,705
============ ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage loan payable..................... $ -- -- 5,256,760
Accounts payable and other liabilities.... 238,557 87,142 20,372
Tenants' security deposits................ 50,191 62,852 51,234
------------ ---------- ----------
Total liabilities....................... 288,748 149,994 5,328,366
------------ ---------- ----------
Partners' capital........................... 33,787,010 19,491,755 16,594,339
------------ ---------- ----------
$ 34,075,758 19,641,749 21,922,705
============ ========== ==========
See accompanying notes to financial statements.
F-12
REGENCY OFFICE PARTNERSHIP, L.P.
STATEMENTS OF OPERATIONS
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- -----------------------------
1998 1997 1997 1996 1995
----------- --------- --------- --------- ---------
(UNAUDITED)
Revenues:
Rental income......... $ 2,567,782 3,101,897 4,136,367 4,026,288 3,740,148
Tenant reimbursements. 364,560 361,327 496,029 443,574 415,095
Other income.......... 6,662 5,047 52,597 28,486 25,561
----------- --------- --------- --------- ---------
Total revenues...... 2,939,004 3,468,271 4,684,993 4,498,348 4,180,804
----------- --------- --------- --------- ---------
Expenses:
Operating and
maintenance.......... 210,130 483,236 661,970 610,493 618,728
Depreciation and
amortization......... 548,492 560,621 855,039 733,121 677,303
General and
administrative....... 108,311 247,364 309,874 240,471 254,038
Utilities............. 74,328 343,680 472,036 492,209 472,737
Real estate taxes..... 244,816 342,818 447,478 440,128 452,954
Interest.............. -- 239,730 290,127 444,666 444,233
----------- --------- --------- --------- ---------
Total expenses...... 1,186,077 2,217,449 3,036,524 2,961,088 2,919,993
----------- --------- --------- --------- ---------
Net income before
gain on sale of
real estate........ 1,752,927 1,250,822 1,648,469 1,537,260 1,260,811
Gain on sale of real
estate (note 2)........ 10,451,794 -- 450,902 -- --
----------- --------- --------- --------- ---------
Net income.......... $12,204,721 1,250,822 2,099,371 1,537,260 1,260,811
=========== ========= ========= ========= =========
See accompanying notes to financial statements.
F-13
REGENCY OFFICE PARTNERSHIP, L.P.
STATEMENTS OF PARTNERS' CAPITAL
TOTAL PARTNERS'
CAPITAL
---------------
Balance at December 31, 1994.............................. $ 17,258,776
Net contributions (distributions)......................... (1,634,500)
Net income................................................ 1,260,811
------------
Balance at December 31, 1995.............................. 16,885,087
Net contributions (distributions)......................... (1,828,008)
Net income................................................ 1,537,260
------------
Balance at December 31, 1996.............................. 16,594,339
Net contributions (distributions)......................... 798,045
Net income................................................ 2,099,371
------------
Balance at December 31, 1997.............................. 19,491,755
Net contributions (distributions) (unaudited)............. 2,090,534
Net income (unaudited).................................... 12,204,721
------------
Balance at September 30, 1998 (unaudited)................. $ 33,787,010
============
See accompanying notes to financial statements.
F-14
REGENCY OFFICE PARTNERSHIP, L.P.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------ ----------------------------------
1998 1997 1997 1996 1995
------------ ---------- ---------- ---------- ----------
(UNAUDITED)
Cash flows from
operating activities:
Net income............. $ 12,204,721 1,250,822 2,099,371 1,537,260 1,260,811
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization.......... 548,492 560,621 855,039 733,121 677,303
Deferred leasing costs. (39,457) (155,269) (208,305) (116,563) (97,618)
Gain on sale of real
estate................ (10,451,794) -- (450,902) -- --
Changes in assets and
liabilities:
Accounts receivable
and other
assets............... (208,283) 2,979 20,163 (20,594) 211,303
Accounts payable and
other
liabilities.......... 151,415 461,845 66,770 (36,369) (96,197)
Cash restricted for
tenants' security
deposits............. 12,661 (4,881) (11,618) (623) 388
Tenants' security
deposits............. (12,661) 4,881 11,618 623 (388)
------------ ---------- ---------- ---------- ----------
Net cash provided by
operating
activities......... 2,205,094 2,120,998 2,382,136 2,096,855 1,955,602
------------ ---------- ---------- ---------- ----------
Cash flows from
investing activities:
Proceeds from sale of
real estate........... 29,864,098 -- 2,645,229 -- --
Purchase of and
additions to property
and buildings......... (34,159,726) (415,479) (568,650) (250,430) (235,528)
------------ ---------- ---------- ---------- ----------
Net cash used in
investing
activities......... (4,295,628) (415,479) (2,076,579) (250,430) (235,528)
------------ ---------- ---------- ---------- ----------
Cash flows from
financing activities:
Principal payments on
mortgage loan......... -- (2,296,902) (5,256,760) 60,768 (51,121)
Net contributions
(distributions)....... 2,090,534 591,383 798,045 (1,828,008) (1,634,500)
------------ ---------- ---------- ---------- ----------
Net cash provided by
(used in) financing
activities......... 2,090,534 (1,705,519) (4,458,715) (1,888,776) (1,685,621)
------------ ---------- ---------- ---------- ----------
Net change in cash
and cash
equivalents........ -- -- -- (42,351) 34,453
Cash and cash equiva-
lents at beginning of
period................. -- -- -- 42,351 7,898
------------ ---------- ---------- ---------- ----------
Cash and cash equiva-
lents at end of
period................. $ -- -- -- -- 42,351
============ ========== ========== ========== ==========
Supplemental disclosure
of cash flow
information:
Cash paid for interest. $ -- 239,730 302,627 444,666 444,233
============ ========== ========== ========== ==========
See accompanying notes to financial statements.
F-15
REGENCY OFFICE PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996, AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Partnership Structure
Regency Office Partnership, L.P. (the Partnership) was formed as a
Florida partnership for the purpose of acquiring, leasing and operating
shopping centers and office buildings.
The Partnership interest is currently held 99% by Regency Centers, L.P.,
a Delaware limited partnership (RCLP), as general partner, and 1% by
Regency Realty Corporation, RCLP's parent. Prior to February 23, 1998, the
Partnership was owned 100% by two wholly owned subsidiaries of Regency
Realty Corporation.
(b) Method of Accounting
The accompanying financial statements were prepared on the accrual basis
of accounting. No provision for income taxes is made because any liability
for income taxes is that of the individual Partners and not that of the
Partnership.
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Partnership's management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
(d) Property and Buildings
Property and building are recorded at cost. Major additions and
improvements to property and buildings are capitalized to the property
accounts, while replacements, maintenance, and repairs which do not improve
or extend the useful lives of the respective assets are reflected in
operations. Depreciation is computed using the straight-line method over
the estimated useful lives of the property and buildings, which is 39 years
for buildings and improvements and the life of the lease term for tenant
improvements. The aggregate cost, for federal income tax purposes was
approximately $20.1 million at December 31, 1997.
(e) Revenue Recognition
The Partnership leases space to tenants under agreements with varying
terms. Leases are accounted for as operating leases with minimum rent
recognized on a straight-line basis over the term of the lease regardless
of when payments are due. During 1996 and 1995, the Partnership collected
cash of $28,128 and $207,780, respectively, in excess of minimum rent
recorded related to the impact of recognizing rent on a straight-line
basis. Contingent rentals are included in income in the period earned.
(f) Deferred Costs
Deferred costs consist of costs associated with leasing the property.
Such costs are deferred and amortized using the straight-line method over
the terms of the respective leases.
(g) Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Partnership
considers all instruments with a maturity of 90 days or less at purchase to
be cash equivalents.
F-16
REGENCY OFFICE PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(h) Impairment of Long-Lived Assets
The Partnership follows the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed Of". This Statement requires
that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverablility of assets to be held and used is
measured by comparison of the carrying amount of an asset to future net
cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amounts of the assets exceed their fair
value, less costs to sell.
(i) Interim Unaudited Financial Statements
The accompanying interim financial statements have been prepared by the
Partnership, without audit, and in the opinion of management reflect all
normal recurring adjustments necessary for a fair presentation of the
results for the unaudited periods presented. Certain information in
footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted.
(2) SALE OF OFFICE BUILDINGS AND PURCHASE OF SHOPPING CENTERS
During 1997, 1996 and 1995, the operations of the Partnership were
generated from the rental of four office properties. Those properties were
(1) Quadrant, a 188,502 square foot property located in Jacksonville,
Florida, constructed and acquired in 1985 for approximately $17.9 million,
(2) Paragon Cable Building, a 40,298 square foot property located in Tampa,
Florida, constructed and acquired in 1993 for approximately $3.0 million,
(3) Westland One, a 36,304 square foot property located in Jacksonville,
Florida, constructed and acquired in 1988 for approximately $2.0 million,
and (4) Fairway Executive Center, a 33,135 square foot property located in
Fort Lauderdale, Florida. On December 22, 1997 the Partnership sold Fairway
Executive Center for $2,645,229 which resulted in a gain of $450,902.
In December 1997, the Partnership classified all of its office buildings
as held for sale. Accordingly, no depreciation has been recorded on such
properties from that point forward. During the first six months of 1998 the
Partnership sold the remaining three office properties for a net sales
price of $29,864,098, and recorded a gain of $10,451,794. Subsequent to the
sales of the office properties, the Partnership purchased two shopping
centers, Cherry Grove, a 186,040 square foot property located in
Cincinnati, Ohio, and Bloomingdale Square, a 267,935 square foot property
located in Tampa, Florida, for a total purchase price of $33,635,875.
(3) LEASES
The Partnership has various tenant leases with terms that expire through
2021. Based on the sales and subsequent purchases of rental property
described in note 2, the following future minimum rental payments reflect
the leases related to the Partnership's current rental properties only,
Cherry Grove and Bloomingdale Square:
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ -----------
1998...................................................... $ 3,432,045
1999...................................................... 3,369,109
2000...................................................... 3,126,854
2001...................................................... 2,792,840
2002...................................................... 2,369,348
Thereafter................................................ 16,406,402
-----------
$31,496,598
===========
F-17
REGENCY OFFICE PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Most tenants are responsible for payment or reimbursement of their
proportionate share of taxes, insurance, and common area expenses.
During each of 1997, 1996, and 1995, two office building tenants, paid
minimum rents totaling $1,228,764, which exceeded 10% of the total minimum
rent earned by the Partnership.
(4) Related Party Transactions
The Partnership paid fees for property management to RCLP of $172,194,
$166,172 and $129,636 for the years ended December 31, 1997, 1996, and
1995, respectively. In addition, during 1996 and 1995 the Partnership paid
RRG, an affiliate of RCLP, $45,000 and $120,000, respectively for asset
management services.
The Partnership paid tenant lease commissions to RCLP of $208,305,
$116,563, and $97,618 for the years ended December 31, 1997, 1996, and
1995, respectively. Such payments have been recorded as deferred leasing
costs in the accompanying balance sheets.
F-18
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Regency Realty Corporation and
RRC FL Five, Inc. :
We have audited the accompanying balance sheets of RRC FL Five, Inc. as of
December 31, 1997 and 1996, and the related statements of operations,
stockholder's equity, and cash flows for each of the years in the three-year
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RRC FL Five, Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1997,
in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Jacksonville, Florida
December 11, 1998
F-19
RRC FL FIVE, INC.
BALANCE SHEETS
DECEMBER 31,
SEPTEMBER ----------------------
30, 1998 1997 1996
------------ ---------- ----------
(UNAUDITED)
ASSETS
------
Cash..................................... $ 187,429 64,252 44,542
Cash restricted for tenants' security
deposits................................ 73,860 48,653 48,439
Property and buildings, at cost (note 2):
Land................................... 2,751,094 2,751,094 2,751,094
Buildings and improvements............. 9,474,520 9,435,081 9,427,833
------------ ---------- ----------
12,225,614 12,186,175 12,178,927
Less accumulated depreciation.......... 1,992,106 1,635,974 1,165,150
------------ ---------- ----------
Net property and buildings........... 10,233,508 10,550,201 11,013,777
------------ ---------- ----------
Other assets:
Accounts receivable and other assets... 140,638 238,530 226,993
Deferred leasing costs, less
accumulated amortization.............. 239,752 230,481 234,328
------------ ---------- ----------
Total other assets................... 380,390 469,011 461,321
------------ ---------- ----------
$ 10,875,187 11,132,117 11,568,079
============ ========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Liabilities:
Mortgage loan payable (note 2)......... $ 8,633,856 8,713,253 8,823,403
Accounts payable and other liabilities. 287,303 5,241 20,373
Tenants' security deposits............. 73,860 48,653 48,439
------------ ---------- ----------
Total liabilities.................... 8,995,019 8,767,147 8,892,215
------------ ---------- ----------
Stockholder's equity
Common stock $.01 par value per share:
10,000 shares authorized, issued and
outstanding........................... 100 100 100
Additional paid in capital............. 3,125,591 3,250,449 3,065,296
Accumulated deficit.................... (1,245,523) (885,579) (389,532)
------------ ---------- ----------
Total stockholder's equity........... 1,880,168 2,364,970 2,675,864
------------ ---------- ----------
$ 10,875,187 11,132,117 11,568,079
============ ========== ==========
See accompanying notes to financial statements.
F-20
RRC FL FIVE, INC.
STATEMENTS OF OPERATIONS
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- -------------------------------
1998 1997 1997 1996 1995
---------- --------- --------- --------- ---------
(UNAUDITED)
Revenues:
Rental income......... $ 771,116 774,221 1,035,342 1,048,489 1,194,189
Tenant reimbursements. 254,515 235,303 305,979 381,809 466,375
Other income.......... 40,027 36,272 54,143 109,289 39,561
---------- --------- --------- --------- ---------
Total revenues...... 1,065,658 1,045,796 1,395,464 1,539,587 1,700,125
---------- --------- --------- --------- ---------
Expenses:
Operating and
maintenance.......... 187,032 194,961 255,702 267,789 249,821
Depreciation and
amortization......... 397,599 390,220 520,571 514,085 500,510
General and
administrative....... 42,801 40,856 55,456 70,329 88,889
Real estate taxes..... 179,913 174,393 226,336 233,880 235,989
Interest.............. 618,257 626,113 833,446 843,036 728,738
---------- --------- --------- --------- ---------
Total expenses...... 1,425,602 1,426,543 1,891,511 1,929,119 1,803,947
---------- --------- --------- --------- ---------
Net loss............ $ (359,944) (380,747) (496,047) (389,532) (103,822)
========== ========= ========= ========= =========
See accompanying notes to financial statements.
F-21
RRC FL FIVE, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
ADDITIONAL TOTAL
COMMON PAID IN ACCUMULATED STOCKHOLDER'S
STOCK CAPITAL DEFICIT EQUITY
------ ---------- ----------- -------------
Balance at December 31, 1994...... 100 11,858,590 489,674 $12,348,364
Dividends......................... -- (8,614,148) (385,852) (9,000,000)
Additional paid in capital
(dividends), net................. -- (61,091) -- (61,091)
Net loss.......................... -- -- (103,822) (103,822)
---- ---------- ---------- -----------
Balance at December 31, 1995...... 100 3,183,351 -- 3,183,451
Additional paid in capital
(dividends), net................. -- (118,055) -- (118,055)
Net loss.......................... -- -- (389,532) (389,532)
---- ---------- ---------- -----------
Balance at December 31, 1996...... 100 3,065,296 (389,532) 2,675,864
Additional paid in capital
(dividends), net................. -- 185,153 -- 185,153
Net loss.......................... -- -- (496,047) (496,047)
---- ---------- ---------- -----------
Balance at December 31, 1997...... 100 3,250,449 (885,579) 2,364,970
Additional paid in capital
(dividends), net (unaudited)..... -- (124,858) -- (124,858)
Net Loss (unaudited).............. -- -- (359,944) (359,944)
---- ---------- ---------- -----------
Balance at September 30, 1998
(unaudited)...................... $100 3,125,591 (1,245,523) 1,880,168
==== ========== ========== ===========
See accompanying notes to financial statements.
F-22
RRC FL FIVE, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
1998 1997 1997 1996 1995
--------- -------- -------- -------- ----------
(UNAUDITED)
Cash flows from operating
activities:
Net loss................. $(359,944) (380,747) (496,047) (389,532) (103,822)
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and
amortization........... 397,599 390,220 520,571 514,085 500,510
Deferred costs.......... (50,738) (7,312) (45,900) (26,145) (17,919)
Changes in assets and
liabilities:
Accounts receivable and
other assets.......... 97,892 23,501 (11,537) 121,458 (117,179)
Accounts payable and
other liabilities..... 282,062 143,391 (15,132) 21,066 (18,181)
Cash restricted for
tenants' security
deposits.............. (25,207) (1,192) (214) 27,075 6,667
Tenants' security
deposits.............. 25,207 1,192 214 (27,075) (6,667)
--------- -------- -------- -------- ----------
Net cash provided by
(used in)
Operating activities. 366,871 169,053 (48,045) 240,932 243,409
--------- -------- -------- -------- ----------
Cash flows from investing
activities:
Additions to property and
buildings............... (39,439) (7,248) (7,248) (42,437) (62,546)
--------- -------- -------- -------- ----------
Cash flows from financing
activities:
Proceeds from mortgage
loan.................... -- -- -- -- 9,000,000
Dividends from
refinancing proceeds.... -- -- -- -- (9,000,000)
Principal payments on
mortgage loan........... (79,397) (81,584) (110,150) (108,009) (68,588)
Additional paid in
capital (dividends),
net..................... (124,858) 103,249 185,153 (118,055) (61,091)
--------- -------- -------- -------- ----------
Net cash provided by
(used in) financing
activities........... (204,255) 21,665 75,003 (226,064) (129,679)
--------- -------- -------- -------- ----------
Net change in cash.... 123,177 183,470 19,710 (27,569) 51,184
Cash at beginning of
period................... 64,252 44,542 44,542 72,111 20,927
--------- -------- -------- -------- ----------
Cash at end of period..... $ 187,429 228,012 64,252 44,542 72,111
========= ======== ======== ======== ==========
Supplemental disclosure of
cash flow information:
Cash paid for interest... $ 618,257 626,113 833,446 843,036 728,738
========= ======== ======== ======== ==========
See accompanying notes to financial statements.
F-23
RRC FL FIVE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)Company Structure
RRC FL Five, Inc. (the Company) was formed as a Florida corporation for
the purpose of acquiring, leasing and operating Aventura Shopping Center a
102,876 square foot shopping center located in Miami, Florida. The Company
is 100% owned by Regency Realty Corporation (RRC). Aventura, which was
constructed during 1974, was acquired in 1994 for approximately $12.1
million. At December 31, 1997, its aggregate cost, for federal income tax
purposes was approximately $2.6 million.
(b)Method of Accounting
The accompanying financial statements were prepared on the accrual basis
of accounting. No provision for income taxes is made because the Company is
a qualified REIT subsidiary of RRC, and accordingly such subsidiaries are
not subject to income taxes under the Internal Revenue Code.
(c)Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
(d)Property and Buildings
Property and building are recorded at cost. Major additions and
improvements to property and buildings are capitalized to the property
accounts, while replacements, maintenance, and repairs which do not improve
or extend the useful lives of the respective assets are reflected in
operations. Depreciation is computed using the straight-line method over
the estimated useful lives of the property and buildings, which is 39 years
for buildings and improvements and the life of the lease term for tenant
improvements.
(e)Revenue Recognition
The Company leases space to tenants under agreements with varying terms.
Leases are accounted for as operating leases with minimum rent recognized
on a straight-line basis over the term of the lease regardless of when
payments are due. Contingent rentals are included in income in the period
earned.
(f)Deferred Costs
Deferred costs consist of costs associated with leasing the property.
Such costs are deferred and amortized using the straight-line method over
the terms of the respective leases.
(g)Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers
all instruments with a maturity of 90 days or less at purchase to be cash
equivalents.
(h)Impairment of Long-Lived Assets
The Company follows the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of". This Statement requires that long-
lived assets be reviewed for impairment whenever events or changes in
F-24
RRC FL FIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverablility of assets to be held and used is measured by
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying amounts of the assets exceed their fair value, less
costs to sell.
(i)Interim Unaudited Financial Statements
The accompanying interim financial statements have been prepared by the
Company, without audit, and in the opinion of management reflect all normal
recurring adjustments necessary for a fair presentation of the results for
the unaudited periods presented. Certain information in footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted.
(2)MORTGAGE LOAN PAYABLE
Mortgage note payable to a bank, bearing interest at 9.5% per annum,
payable in monthly installments of $78,633, including principal and
interest, maturing on March 1, 2002. The mortgage loan is secured by the
property and buildings of the Company.
Principal maturities on the mortgage loan is as follows:
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ----------
1998........................................................ $ 120,062
1999........................................................ 131,978
2000........................................................ 145,076
2001........................................................ 159,475
2002........................................................ 8,156,662
----------
$8,713,253
==========
(3)LEASES
The Company has various tenant leases with terms that expire through
2009. Future minimum rental payments under noncancelable operating leases
as of December 31, 1997, including renewed terms and new tenants, are as
follows:
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ----------
1998........................................................ $ 948,894
1999........................................................ 1,011,365
2000........................................................ 944,773
2001........................................................ 899,212
2002........................................................ 870,641
Thereafter.................................................. 2,557,965
----------
$7,232,850
==========
Most tenants are responsible for payment or reimbursement of their
proportionate share of taxes, insurance, and common area expenses.
During each of 1997, 1996, and 1995, one tenant, Publix Supermarkets,
paid minimum rents totaling $107,724, which exceeded 10% of the total
minimum rent earned by the Company.
F-25
RRC FL FIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(4)RELATED PARTY TRANSACTIONS
The Company paid fees for property management to RRC of $55,252, $60,170,
and $29,372 for the years ended December 31, 1997, 1996, and 1995,
respectively. In addition, during 1996 and 1995 the Company paid RRG, an
affiliate of RRC, $9,000 and $12,000, respectively, for asset management
services.
The Company paid tenant lease commissions to RRC of $45,900, $26,145 and
$17,919 for the years ended December 31, 1997, 1996, and 1995,
respectively. Such payments have been recorded as deferred leasing costs in
the accompanying balance sheets.
F-26
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Regency Realty Corporation and
RRC Acquisitions, Inc.:
We have audited the accompanying balance sheets of RRC Acquisitions, Inc. as
of December 31, 1997, and the related statements of operations, stockholder's
equity, and cash flows for the year ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RRC Acquisitions, Inc. as
of December 31, 1997, and the results of its operations and its cash flows for
the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Jacksonville, Florida
December 11, 1998
F-27
RRC ACQUISITIONS, INC.
BALANCE SHEETS
SEPTEMBER DECEMBER 31,
30, 1998 1997
------------ ------------
(UNAUDITED)
ASSETS
------
Cash restricted for tenants' security deposits....... $ 29,914 30,714
Property and buildings, at cost:
Land............................................... 3,866,500 3,866,500
Buildings and improvements......................... 14,166,106 14,019,614
------------ ----------
18,032,606 17,886,114
Less accumulated depreciation...................... 353,450 86,841
------------ ----------
Net property and buildings....................... 17,679,156 17,799,273
------------ ----------
Other assets:
Accounts receivable and other assets............... 230,932 93,413
Deferred leasing costs, less accumulated
amortization...................................... 51,251 7,411
------------ ----------
Total other assets............................... 282,183 100,824
------------ ----------
$ 17,991,253 17,930,811
============ ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Liabilities:
Accounts payable and other liabilities............. 144,767 188,264
Tenants' security deposits......................... 29,914 30,714
------------ ----------
Total liabilities................................ 174,681 218,978
------------ ----------
Stockholder's equity
Common stock $.01 par value per share:
10,000 shares authorized, issued and outstanding.. 100 100
Additional paid in capital......................... 17,425,605 17,425,605
Retained earnings.................................. 390,867 286,128
------------ ----------
Total stockholder's equity....................... 17,816,572 17,711,833
------------ ----------
$ 17,991,253 17,930,811
============ ==========
See accompanying notes to financial statements.
F-28
RRC ACQUISITIONS, INC.
STATEMENTS OF OPERATIONS
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(UNAUDITED)
Revenues:
Rental income...................................... $ 1,377,387 393,892
Tenant reimbursements and other income............. 427,645 113,528
----------- -------
Total revenues................................... 1,805,032 507,420
----------- -------
Expenses:
Operating and maintenance.......................... 121,885 25,875
Depreciation and amortization...................... 271,613 87,277
General and administrative......................... 179,850 44,082
Real estate taxes.................................. 217,846 64,058
----------- -------
Total expenses................................... 791,194 221,292
----------- -------
Net income........................................ $ 1,013,838 286,128
=========== =======
See accompanying notes to financial statements.
F-29
RRC ACQUISITIONS, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
ADDITIONAL TOTAL
COMMON PAID IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- --------- -------------
Balance at December 31, 1996........ $100 -- -- 100
Additional paid in capital.......... -- 17,425,605 -- 17,425,605
Net income.......................... -- -- 286,128 286,128
---- ---------- --------- -----------
Balance at December 31, 1997........ 100 17,425,605 286,128 17,711,833
Additional paid in capital
(dividends), net (unaudited)....... -- -- (909,099) (909,099)
Net income (unaudited).............. -- -- 1,013,838 1,013,838
---- ---------- --------- -----------
Balance at September 30, 1998
(unaudited)........................ $100 17,425,605 390,867 17,816,572
==== ========== ========= ===========
See accompanying notes to financial statements.
F-30
RRC ACQUISITIONS, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS YEAR ENDED
ENDED DECEMBER
SEPTEMBER 30, 31,
1998 1997
------------- -----------
(UNAUDITED)
Cash flows from operating activities:
Net income......................................... $1,013,838 286,128
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 271,613 87,277
Deferred costs.................................... (48,844) (7,847)
Changes in assets and liabilities:
Accounts receivable and other assets............. (137,519) (86,907)
Accounts payable and other liabilities........... (43,497) (40,263)
Cash restricted for tenants' security deposits... 800 --
Tenants' security deposits....................... (800) --
---------- -----------
Net cash provided by operating activities....... 1,055,591 238,388
---------- -----------
Cash flows from investing activities--purchase of
and additions to property and buildings............ (146,492) (17,663,993)
---------- -----------
Cash flows from financing activities--additional
paid in capital (dividends), net................... (909,099) 17,425,605
---------- -----------
Net change in cash.............................. -- --
Cash at beginning of period......................... -- --
---------- -----------
Cash at end of period............................... $ -- --
========== ===========
Supplemental disclosure of non-cash transactions
liabilities assumed in the acquisition of property
and buildings...................................... $ -- 222,121
========== ===========
See accompanying notes to financial statements.
F-31
RRC ACQUISITIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)Company Structure
RRC Acquisitions, Inc. (the Company) was formed as a Florida corporation
on November 16, 1993 for the purpose of acquiring, leasing and operating
shopping centers . The Company was inactive, and thus had no operations,
until November 10, 1997 when it purchased Kingsdale Shopping Center, a
255,177 square foot shopping center located in Columbus, Ohio, for
approximately $17.9 million. Kingsdale, which was constructed during 1997,
has an aggregate cost, for federal income tax purposes, of approximately
$17.9 million at December 31, 1997. The Company is 100% owned by Regency
Realty Corporation (RRC).
(b)Method of Accounting
The accompanying financial statements were prepared on the accrual basis
of accounting. No provision for income taxes is made because the Company is
a qualified REIT subsidiary of RRC, and accordingly such subsidiaries are
not subject to income taxes under the Internal Revenue Code.
(c)Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
(d)Property and Buildings
Property and building are recorded at cost. Major additions and
improvements to property and buildings are capitalized to the property
accounts, while replacements, maintenance, and repairs which do not improve
or extend the useful lives of the respective assets are reflected in
operations. Depreciation is computed using the straight-line method over
the estimated useful lives of the property and buildings, which is 39 years
for buildings and improvements and the life of the lease term for tenant
improvements.
(e)Revenue Recognition
The Company leases space to tenants under agreements with varying terms.
Leases are accounted for as operating leases with minimum rent recognized
on a straight-line basis over the term of the lease regardless of when
payments are due. Contingent rentals are included in income in the period
earned.
(f)Deferred Costs
Deferred costs consist of costs associated with leasing the property.
Such costs are deferred and amortized using the straight-line method over
the terms of the respective leases.
(g)Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers
all instruments with a maturity of 90 days or less at purchase to be cash
equivalents.
F-32
RRC ACQUISITIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(h)Impairment of Long-Lived Assets
The Company follows the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of". This Statement requires that long-
lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying amounts of the assets exceed their fair value, less
costs to sell.
(i)Interim Unaudited Financial Statements
The accompanying interim financial statements have been prepared by the
Company, without audit, and in the opinion of management reflect all normal
recurring adjustments necessary for a fair presentation of the results for
the unaudited periods presented. Certain information in footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted.
(2)LEASES
The Company has various tenant leases with terms that expire through
2005. Future minimum rental payments under noncancelable operating leases
as of December 31, 1997, including renewed terms and new tenants, are as
follows:
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ----------
1998........................................................ $1,705,882
1999........................................................ 1,482,964
2000........................................................ 1,368,729
2001........................................................ 998,212
2002........................................................ 767,701
Thereafter.................................................. 1,052,275
----------
$7,375,763
==========
Most tenants are responsible for payment or reimbursement of their
proportionate share of taxes, insurance, and common area expenses.
(3)RELATED PARTY TRANSACTIONS
The Company paid fees for property management to RRC of $19,640 for the
year ended December 31, 1997. No such fees were paid in 1996, and 1995,
respectively.
The Company paid tenant lease commissions to RRC of $7,847 for the year
ended December 31, 1997. No such commissions were paid in 1996, and 1995,
respectively. Such payments have been recorded as deferred leasing costs in
the accompanying balance sheets.
F-33
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Pacific Retail Trust
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in shareholders' equity and
of cash flows present fairly, in all material respects, the financial position
of Pacific Retail Trust and its consolidated investments at December 31, 1997
and 1996, and results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Dallas, Texas
January 23, 1998
F-34
PACIFIC RETAIL TRUST
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
ASSETS
------
Real estate investments................................. $851,458,212 $380,070,040
Less: accumulated depreciation.......................... (19,680,694) (5,358,128)
------------ ------------
831,777,518 374,711,912
------------ ------------
Cash and cash equivalents............................... 4,496,896 1,954,131
Accounts receivable, net................................ 7,814,026 2,979,600
Escrow deposits......................................... 2,582,250 16,669,667
Other assets, net....................................... 10,573,762 3,860,612
------------ ------------
Total assets.......................................... $857,244,452 $400,175,922
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Lines of credit....................................... $ 13,600,000 $ 75,000,000
Bridge loan........................................... -- 26,500,000
Notes payable......................................... 84,943,050 11,393,978
Accounts payable and accrued expenses................. 8,140,425 3,982,168
Accrued real estate taxes............................. 6,859,847 3,762,617
Deferred income....................................... 1,820,900 667,091
Tenant security deposits.............................. 2,653,923 1,281,817
Other liabilities..................................... 95,388 48,798
------------ ------------
Total liabilities................................... 118,113,533 122,636,469
Commitments and contingencies (Note 9)
Minority interest....................................... 7,681,400 7,709,527
Shareholders' equity:
Shares of beneficial interest, $0.01 par value;
150,000,000 shares authorized
Series A preferred shares (1,130,276 authorized,
issued and outstanding; stated liquidation
preference of $10 per share plus declared and
unpaid dividends).................................. 11,302,760 11,302,760
Series B preferred shares (6,130,276 authorized;
2,000,000 issued and outstanding; stated
liquidation preference of $10 per share plus
declared and unpaid dividends)..................... 20,000,000 20,000,000
Common shares (64,022,671 shares issued and
outstanding at December 31, 1997; 23,959,979 shares
issued and outstanding at December 31, 1996)....... 640,227 239,598
Additional paid-in capital........................... 713,511,243 240,013,905
Employee share notes................................. (7,930,780) --
Distributions in excess of net earnings.............. (6,073,931) (1,726,337)
------------ ------------
Total shareholders' equity.......................... 731,449,519 269,829,926
------------ ------------
Total liabilities and shareholders' equity......... $857,244,452 $400,175,922
------------ ------------
See accompanying notes to financial statements.
F-35
PACIFIC RETAIL TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996
----------- -----------
Income:
Rental income......................................... $78,985,279 $27,512,702
Interest and other income............................. 889,477 168,659
----------- -----------
79,874,756 27,681,361
----------- -----------
Expenses:
Rental expenses....................................... 8,569,986 2,712,809
Depreciation and amortization......................... 14,715,334 5,082,601
General and administrative............................ 6,541,521 3,566,528
Interest.............................................. 11,667,415 2,249,507
Insurance and real estate taxes....................... 11,169,298 4,005,949
----------- -----------
52,663,554 17,617,394
----------- -----------
Earnings from operations............................ 27,211,202 10,063,967
Minority interest....................................... 490,173 192,637
----------- -----------
Net earnings............................................ 26,721,029 9,871,330
Less: Series A preferred share dividends.............. 755,024 646,518
Series B preferred share dividends................. 1,440,000 530,609
----------- -----------
Net earnings attributable to common shares.......... $24,526,005 $ 8,694,203
=========== ===========
Weighted average common shares outstanding............ 40,173,476 16,041,024
=========== ===========
Weighted average diluted common shares outstanding.... 40,268,452 16,049,423
=========== ===========
Basic earnings per share............................ $ 0.61 $ 0.54
Diluted earnings per share.......................... $ 0.61 $ 0.54
See accompanying notes to financial statements.
F-36
PACIFIC RETAIL TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
SHARES OF BENEFICIAL INTEREST
(150,000,000 SHARES AUTHORIZED) RETAINED
------------------------------------ EARNINGS
SERIES A SERIES B COMMON EMPLOYEE ADDITIONAL (DISTRIBUTIONS TOTAL
PREFERRED PREFERRED SHARES SHARES PAID-IN IN EXCESS OF SHAREHOLDERS'
SHARES SHARES AT PAR VALUE NOTES CAPITAL EARNINGS) EQUITY
----------- ----------- ------------ ----------- ------------ -------------- -------------
Balance at December 31,
1995................... $11,302,760 -- $ 54,001 -- $ 53,928,999 $ (311,009) $ 64,974,751
Sale of shares, net..... $20,000,000 185,597 186,084,906 206,270,503
Shareholder
distributions.......... (11,286,658) (11,286,658)
Net earnings............ 9,871,330 9,871,330
----------- ----------- -------- ----------- ------------ ------------ ------------
Balance at December 31,
1996................... 11,302,760 20,000,000 239,598 -- 240,013,905 (1,726,337) 269,829,926
----------- ----------- -------- ----------- ------------ ------------ ------------
Sale of shares, net..... 400,629 $(7,934,400) 473,497,338 465,963,567
Shareholder
distributions.......... 3,620 (31,068,623) (31,065,003)
Net earnings............ 26,721,029 26,721,029
----------- ----------- -------- ----------- ------------ ------------ ------------
Balance at December 31,
1997................... $11,302,760 $20,000,000 $640,227 $(7,930,780) $713,511,243 $ (6,073,931) $731,449,519
=========== =========== ======== =========== ============ ============ ============
See accompanying notes to financial statements.
F-37
PACIFIC RETAIL TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996
------------- ------------
Operating activities
Net earnings.................................... $ 26,721,029 $ 9,871,330
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization................. 14,715,334 5,082,601
Minority interest............................. (28,127) 192,637
Changes in operating assets and liabilities:
Accounts receivable......................... (4,834,426) (2,119,330)
Escrow deposits............................. 14,087,417 (16,419,567)
Other assets................................ (7,105,918) (2,841,000)
Accounts payable and accrued expenses....... 4,158,257 3,246,573
Accrued real estate taxes................... 3,097,230 2,473,505
Deferred income............................. 1,153,809 604,074
Tenant security deposits.................... 1,372,106 1,118,930
Other liabilities........................... 46,590 (710,251)
------------- ------------
Net cash provided by operating activities....... 53,383,301 499,502
------------- ------------
Investing activities:
Construction of and acquisition of real estate
investments.................................... (396,469,436) (297,204,259)
------------- ------------
Net cash used in investing activities........... (396,469,436) (297,204,259)
------------- ------------
Financing activities:
Principal payments on notes payable............. (1,369,664) (31,350)
Proceeds from line of credit.................... -- 74,398,960
Payments on lines of credit..................... (61,400,000) --
Proceeds from bridge loan....................... -- 26,500,000
Payments on bridge loan......................... (26,500,000) --
Proceeds from sales of shares, net of expenses.. 473,897,967 206,270,503
Employee share notes............................ (7,934,400) --
Payments on employee share notes................ 3,620 --
Distributions paid to shareholders.............. (31,068,623) (11,286,658)
------------- ------------
Net cash provided by financing activities....... 345,628,900 295,851,455
------------- ------------
Not increase (decrease) in cash and cash
equivalents...................................... 2,542,765 (853,302)
Cash and cash equivalents at beginning of period.. 1,954,131 2,807,433
------------- ------------
Cash and cash equivalents at end of period........ $ 4,496,896 $ 1,954,131
------------- ------------
Supplemental cash flow information:
Interest paid................................... $ 11,123,133 $ 1,848,451
------------- ------------
Noncash investing and financing activities:
Acquisition of real estate for assumption of
notes payable.................................. $ 74,918,736 $ 11,425,329
------------- ------------
Acquisition of real estate for minority interest
partnership units (Note 4)..................... $ -- $ 7,650,000
------------- ------------
See accompanying notes to financial statements.
F-38
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Formation
Pacific Retail Trust ("Pacific Retail") was organized as a Maryland real
estate investment trust on April 27, 1995 (originally named Southwest Retail
Trust) for the purpose of acquiring, developing, managing and owning
neighborhood infill retail properties in a nine state region of the western
United States. On August 23, 1995 the Declaration of Trust was amended and
restated to change the name to Pacific Retail Trust. At December 31, 1997,
69.2% of Pacific Retail's outstanding shares of beneficial interest are
constructively owned by Security Capital Holdings, S.A. ("HOLDINGS"), a
wholly-owned subsidiary of Security Capital U.S. Realty ("USREALTY").
Opportunity Capital Partners Limited Partnership ("OCP"), through its
partnership Madison Property I, LP (MPI), acquired preferred shares of Pacific
Retail as partial consideration for a pool of properties sold to Pacific
Retail by MPI on October 20, 1995. At December 31, 1997, OCP owned 6.1% of
Pacific Retail's outstanding shares of beneficial interest.
Principles of Consolidation
The consolidated financial statements include the accounts of Pacific
Retail, its 81.6% ownership in Retail Property Partners Limited Partnership
and its 95% ownership in PRT Development Corporation (Note 4).
Revenue Recognition
Minimum rents are recognized on a straight-line basis; as such, the rental
revenues for leases which contain rent abatements and contractual increases
are recognized on a straight-line basis over the initial term of the related
lease. Property operating cost recoveries from tenants of common area
maintenance, real estate taxes and other recoverable costs, are recognized in
the period when the recoveries are earned. In addition, certain tenants pay
percentage rental amounts based upon their sales volume and these percentage
rents are recognized when billed.
Real Estate Assets and Related Depreciation
Costs related directly to the acquisition, development and improvement of
real estate, including tenant improvements, are capitalized; ordinary repairs
and maintenance are expensed as incurred. Costs incurred in connection with
unsuccessful acquisitions are expensed at the time acquisition efforts are
terminated. Depreciation is computed on a straight-line basis over the
expected economic useful lives, which are principally 10 to 40 years for
buildings and improvements.
Pacific Retail has adopted Statement of Financial Accounting Standards No.
121 ("SFAS 121"). Under SFAS 121, Pacific Retail recognizes impairment losses
on property whenever events and changes in circumstances indicate that the
carrying amount of long-lived assets, on an individual property basis, may not
be recoverable through undiscounted future cash flows. Such losses are
determined by comparing the sum of the expected future discounted net cash
flows to the carrying amount of the asset. Impairment losses are recognized in
operating income as they are determined. As of December 31, 1997 no impairment
losses have been incurred.
Interest
Pacific Retail capitalizes interest as part of the cost of real estate
projects during construction periods. During the years ended December 31, 1997
and 1996, $1,567,444 and $317,563, respectively, in interest was capitalized.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and cash equivalent investments
with original maturities of three months or less.
F-39
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred Loan Fees
Included in other assets as of December 31, 1997 and 1996 are net costs of
$1,668,710 and $924,680, respectively, associated with obtaining financing.
Deferred loan fees are amortized to interest expense over the life of the loan
and extensions, which is currently three years, using the straight-line
method. Amortization of deferred loan fees for the years ended December 31,
1997 and 1996 were $773,952 and $270,345, respectively.
Income Taxes
Pacific Retail elected real estate investment trust ("REIT") status in 1995
under the Internal Revenue Code of 1986, as amended. REITs are not required to
pay federal income taxes if minimum distribution, income, asset and
shareholder tests are met and, accordingly, no provision has been made for
federal income taxes in the accompanying financial statements. PRT Development
Corporation will be taxed as a separate entity.
Earnings per Share
Pacific Retail has adopted Statement of Financial Accounting Standards No.
128 ("SFAS 128"), which establishes standards for computing and presenting
earnings per share (EPS). Basic EPS excludes the effect of potentially
dilutive securities while diluted EPS reflects the potential dilution that
would occur if dilutive securities or other contracts to issue common shares
were exercised, converted into, or resulted in the issuance of common shares
that then shared in the earnings of the company. The following table
summarizes the information required under SFAS 128:
FOR THE YEAR ENDED DECEMBER 31,
1997
-----------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------ ---------
BASIC EPS
Net earnings attributable to common
shares.................................. $24,526,005 40,173,476 $0.61
----------- ---------- -----
EFFECT OF DILUTIVE SECURITIES
Options.................................. 93,583
Deferred trustee shares.................. 1,393
----------
DILUTED EPS
Income available to common shares and
assumed conversions..................... $24,526,005 40,268,452 $0.61
----------- ---------- -----
FOR THE YEAR ENDED DECEMBER 31,
1996
-----------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------ ---------
BASIC EPS
Net earnings attributable to common
shares.................................. $ 8,694,203 16,041,024 $0.54
----------- ---------- -----
EFFECT OF DILUTIVE SECURITIES
Options.................................. 8,399
----------
DILUTED EPS
Income available to common shares and
assumed conversions..................... $ 8,694,203 16,049,423 $0.54
----------- ---------- -----
F-40
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The assumed conversion of Series A preferred shares of beneficial interest,
Series B preferred shares of beneficial interest and minority interest are not
dilutive and have therefore been excluded from the calculation. Options to
purchase 326,923 common shares at $13 per share were outstanding during the
fourth quarter of 1997 but were not included in the computation of diluted EPS
because the options' exercise price was greater than the estimated fair market
value of the common shares. The options, which expire 10 years from the date
of grant, or earlier upon termination of employment or death, were outstanding
at December 31, 1997.
Use of Estimates
Pacific Retail has made a number of estimates and assumptions relating to
the reporting of assets and liabilities and the disclosure of contingent
assets and liabilities to prepare these financial statements in accordance
with generally accepted accounting principles. Actual results could differ
from those estimates.
Fair value
Pacific Retail has estimated the fair value of its financial instruments at
December 31, 1997 and 1996 as required by Statement of Financial Accounting
Standards No. 107. The Company believes the carrying values of the Company's
financial instruments are reasonable estimates of their fair values.
2. REAL ESTATE INVESTMENTS
As of December 31, 1997, Pacific Retail owned fifty-six properties. Twenty
properties are located in three major metropolitan markets in Texas: the
Dallas-Fort Worth metroplex, Austin and Houston. Shopping centers in the
Dallas-Fort Worth metroplex generated approximately 40% of the total revenues
of the portfolio for the year ended December 31, 1997. Twenty-five shopping
centers are located in California and comprise approximately 39% of the total
revenues for the year ended December 31, 1997. The remaining properties are
located in Arizona, Colorado, Washington, and Oregon.
The following summarizes real estate investments:
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
Improved land....................................... $229,092,191 $107,247,415
Land held for development........................... 1,062,657 233,770
Land under development.............................. 12,544,434 --
Buildings and improvements.......................... 549,244,562 243,925,431
Land improvements and parking lots.................. 46,348,990 27,532,794
Properties under development........................ 13,165,378 1,130,630
------------ ------------
Total real estate investments..................... 831,458,212 380,070,040
Less accumulated depreciation..................... (19,680,694) (5,538,128)
------------ ------------
Net real estate investments..................... $831,777,518 $374,711,912
============ ============
Properties Under Development
In July 1996, Pacific Retail acquired Hancock Center in Austin, Texas for
the purpose of redeveloping it as a grocery anchored infill shopping center.
Pacific Retail immediately embarked upon the redevelopment program. As of
December 31, 1997 and 1996, Pacific Retail has incurred $8,447,883 and
$846,000, respectively, in design and demolition costs and construction
associated with the redevelopment.
F-41
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In June 1996, Pacific Retail acquired Valley Ranch Shopping Center in
Coppell, Texas. A tract of undeveloped land was included as part of this
purchase. As of December 31, 1997, the land was being developed into
approximately 6,000 square feet of retail space at a cost of approximately
$570,890, including tenant improvement costs.
Land Held for Development
In March 1996, Pacific Retail acquired Harwood Hills Shopping Center in
Bedford, Texas. Between March and November of 1996, Pacific Retail completed
the construction of an additional 20,300 square feet of retail space at a cost
of approximately $1,857,000. As of December 31, 1997 and December 31, 1996,
approximately 2.9 acres of land remained for additional development.
In January 1997, Pacific Retail acquired Plaza de Hacienda in La Puenta,
California. Associated with this shopping center were approximately 3.63 acres
of land for additional development. As of December 31, 1997, no development
has taken place.
Land Under Development
In August 1997, Pacific Retail acquired Prestonwood Park which consists of
24.55 acres of land in Dallas, Texas for future development into a grocery
anchored shopping center. As of December 31, 1997, construction has not
commenced.
In November 1997, PRT Development Corporation acquired Hebron Park which
consists of 7.77 acres of land in Carrollton, Texas for development into a
grocery anchored shopping center. As of December 31, 1997, construction has
not commenced.
3. BORROWINGS
Lines of Credit--Secured
On December 27, 1995, Pacific Retail entered into a credit agreement with a
group of lenders to provide a secured line of credit up to a maximum of $50
million. On July 17,1996, the credit agreement was amended to increase the
secured line of credit to a maximum of $75 million. The lenders determine the
secured net borrowing base by using the lesser of 65% of the lenders'
appraised value on ten of the properties or the permanent loan estimate for
each property. As of December 31, 1997, the secured net borrowing base was
$75 million. On November 14, 1997, the secured line of credit agreement was
amended. Under the amended credit agreement, borrowings bear interest at the
greater of prime or federal funds rate plus .50% or, at Pacific Retail's
option, LIBOR plus a margin of 1.25%, if the ratio of total liabilities to
gross asset value is less than .35 to one, or 1.40% if the ratio of total
liabilities to gross asset value is greater than or equal to .35 to one.
Additionally, there is a fee of .125% per annum of the average daily unfunded
line of credit balance, or a fee of .25% per annum of the average daily
unfunded line of credit balance if the average daily balance for both the
secured and unsecured lines of credit is greater than $100 million. Interest
is paid monthly based on the unpaid principal balance. The weighted average
interest rates for the years ended December 31, 1997 and 1996 were 7.4% and
7.9%, respectively. The interest rates at December 31, 1997 and 1996 were 8.5%
and 7.9%, respectively.
The amended termination date of the credit agreement is March 28, 1999, but
it may be extended for successive one-year periods, if acceptable to the
lenders, for a .10% extension fee. All debt incurrences are subject to
covenants, as more fully described in the credit agreement. Pacific Retail has
utilized the line of credit to help finance the acquisition and development of
neighborhood shopping centers and for general working capital purposes during
1997 and 1996.
F-42
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Lines of Credit--Unsecured
On March 28, 1997, Pacific Retail entered into a credit agreement with a
group of lenders to provide an unsecured line of credit up to a maximum of $75
million. On November 14, 1997, the unsecured line of credit was increased to a
maximum of $125 million. Borrowings bear interest at the greater of prime or
federal funds rate plus .50% or, at Pacific Retail's option, LIBOR plus a
margin of 1.25%, if the ratio of total liabilities to gross asset value is
less than .35 to one, or 1.40% if the ratio of total liabilities to gross
asset value is greater than or equal to .35 to one. Interest is paid monthly
based on the unpaid principal balance. The weighted average interest rate for
the period from March 28, 1997 to December 31, 1997 was 7.7%. There were no
borrowings outstanding under the unsecured line of credit at December 31,
1997.
The termination date of the credit agreement is March 28, 1999, but it may
be extended for successive one-year periods, if acceptable to the lenders, for
a .10% extension fee. All debt incurrences are subject to covenants, as more
fully described in the credit agreement. Pacific Retail has utilized the
unsecured line of credit to help finance the acquisition of neighborhood
shopping centers and for general working capital purposes during 1997.
Bridge Loan
On December 19, 1996, Pacific Retail entered into a credit agreement
("Bridge Loan") with a group of lenders. The agreement, amended on December
27, 1996, provided for an unsecured line of credit up to $32,500,000.
Borrowings under the Bridge Loan bore interest at the same rate as the
original secured line of credit. Pacific Retail entered into a "negative
pledge" agreement whereby it pledged not to encumber certain of its properties
with any debt until after the repayment of the funds borrowed under the Bridge
Loan. The interest rate at December 31, 1996 was 8.0%. The Bridge Loan was
repaid in January 1997.
Notes Payable
In March 1996, Pacific Retail acquired Harwood Hills Village Shopping Center
subject to an existing note payable of $6,900,000. The note bears interest at
8.58% and payments are interest only until maturity on July 1, 1998.
In September 1996, Pacific Retail acquired Paseo Village subject to an
existing note payable of $4,525,329. The note bears interest at 7.5% and
payments of principal and interest in the amount of $38,668 are due monthly
until the note matures on May 1, 2001.
In January 1997, Pacific Retail acquired Mills Pointe and Preston Park
Village subject to an existing note payable of $32,750,000. The note bears
interest at 7.23% and payments of principal and interest in the amount of
$264,578 are due monthly until the note matures on July 1, 2000.
In January 1997, Pacific Retail acquired Plaza de Hacienda subject to an
existing note payable of $6,842,984. The note bears interest at 9% and
payments of principal and interest in the amount of $57,128 are due monthly
until the note matures on June 10, 2012.
In February 1997, Pacific Retail acquired Market at Round Rock subject to an
existing note payable of $7,617,490. The note bears interest at 8.625% and
payments of principal and interest in the amount of $63,059 are due monthly
until maturity in December 2005.
In April 1997, Pacific Retail acquired North Hills Town Center subject to an
existing note payable of $9,372,661. The note bears interest at 7.37% and
payments of principal and interest in the amount of $76,974 are due monthly
until maturity on January 1, 2014.
F-43
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In July 1997, Pacific Retail acquired Friar's Mission subject to an existing
note payable of $16,990,218 and capital improvement municipal tax bonds
payable totaling $1,345,366. The note bears interest at 9.5% and payments of
principal and interest in the amount of $152,006 are due monthly until
maturity on June 10, 2005. The tax bonds bear interest at rates between 7.3%
and 7.9% with annual payments from $161,177 to $168,131 in two installments on
March 2 and September 2 through September 2, 2015.
Principal repayments of notes payable are due approximately as follows:
1998................................................................ $ 8,518,951
1999................................................................ 1,877,173
2000................................................................ 31,225,210
2001................................................................ 4,834,124
2002................................................................ 981,541
2003 and after...................................................... 37,506,051
-----------
$84,943,050
===========
4. MINORITY INTEREST
Minority interest represents limited partners' interests in Retail Property
Partners Limited Partnership (the Partnership), a limited partnership
controlled by Pacific Retail, and PRT Development Corporation (PRT
Development), a Delaware corporation controlled by Pacific Retail.
Retail Property Partners Limited Partnership
In September 1996, Pacific Retail formed the Partnership by contributing
cash to the Partnership in exchange for a 50.2% controlling general
partnership interest in the Partnership, which invested in two retail centers
in Dallas, Texas. On December 1, 1996, Pacific Retail contributed the Blossom
Valley Shopping Center in Mountain View, California to the Partnership. The
assets and liabilities of Blossom Valley were transferred at book value as the
transfer was between entities under common control. The value of the
contributed property was $17,354,543, which increased Pacific Retail's
investment in the Partnership to 76.6%.
On July 31, 1997, Pacific Retail contributed $8.9 million to the
Partnership. With this contribution, Pacific Retail's investment in the
Partnership increased to 81.6%. The Partnership used this contribution to
purchase the Heritage Plaza land. Limited partners are entitled to exchange
each partnership unit for one common share of beneficial interest in Pacific
Retail beginning in August 1998. As of December 31, 1997 and December 31, 1996
there were 765,000 limited partnership units outstanding in the Partnership.
The limited partners' interests will be reflected as minority interest in the
consolidated financial statements until the units are exchanged for Pacific
Retail shares.
PRT Development Corporation
On November 20, 1997, PRT Development Corporation was organized as a
Delaware corporation for the purpose of acquiring land and developing and
selling the developed neighborhood infill retail shopping centers. The
authorized capital of PRT Development consists of 2,000,000 shares of common
stock. 100,000 of the shares will be issued as Class A voting shares. The
remaining 1,900,000 shares will be Class B nonvoting. As of December 31, 1997,
3,250 shares of Class A common stock were issued and outstanding. All of the
Class A common stock is constructively owned by USREALTY, and is represented
in minority interest. Pacific Retail owned 61,750 shares of Class B common
stock issued and outstanding at December 31, 1997. The Class B common stock is
generally entitled to 95% of all distributions made by PRT Development, and
the
F-44
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Class A common stock is generally entitled to 5% of all distributions made by
PRT Development. Pacific Retail has consolidated the operations of PRT
Development based on the control exerted in the ordinary course of business
over the operating decisions of PRT Development.
5. SHAREHOLDERS' EQUITY
Offerings
Between October 20, 1995 and July 16, 1996, Pacific Retail closed on a
series of private offerings to HOLDINGS which resulted in the sale of 20
million common shares of beneficial interest at $10 per share for a total
amount of $200 million.
On October 20, 1995, as a partial acquisition price for five properties
acquired from OCP, Pacific Retail issued 1,130,276 Series A preferred shares
of beneficial interest to MPI at a stated liquidation preference of $10 per
share plus declared and unpaid dividends resulting in outstanding Series A
Preferred shares valued at $11,302,760.
On December 22, 1995, Pacific Retail completed an offering of 100,000 common
shares at a price of $10 per share. Net proceeds, after offering costs, to
Pacific Retail were $982,000.
On August 6, 1996, OCP acquired 2,000,000 shares of Series B preferred
shares of beneficial interest at a stated liquidation preference of $10 per
share plus declared and unpaid dividends resulting in Series B preferred
shares valued at $20 million.
On August 30. 1996, OCP acquired one million common shares of beneficial
interest in Pacific Retail at $10 per share for a total of $10 million.
On August 31, 1996, Pacific Retail completed a private offering of
18,182,305 common shares of beneficial interest at $11 per share resulting in
a total equity investment of $200,005,350. The first funding call took place
on September 16, 1996 resulting in 2,860,197 shares being issued for net
proceeds of $29,414,529. On January 9, 1997 and January 27, 1997, two funding
calls took place resulting in a total of 10,214,738 shares being issued for
net proceeds of $112,355,838. The final funding call took place on May 15,
1997 resulting in 5,107,370 shares being issued for net proceeds of
$56,181,060.
On April 30, 1997, Pacific Retail completed a private offering of 12,500,000
common shares of beneficial interest at $12 per share resulting in a total
expected equity investment of $150,000,000. The first funding call took place
on May 15, 1997 resulting in 1,898,100 shares being issued for net proceeds of
$21,277,205. The second funding call took place on September 18, 1997
resulting in 3,180,570 shares being issued for net proceeds of $38,158,904. On
October 1, November 11, and November 28, three funding calls took place
resulting in a total of 4,342,300 shares being issued for net proceeds of
$52,107,598. The final funding call took place on December 26, 1997 resulting
in 3,079,030 shares being issued for net proceeds of $36,948,358.
On December 29, 1997, Pacific Retail completed and fully funded a private
offering of 11,538,462 common shares of beneficial interest at $13 per share
for net proceeds of $148,474,528.
Trustee Compensation
On March 11, 1997, Pacific Retail granted 4,305 shares to the board of
trustees as part of their compensation.
F-45
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Effective March 14, 1997, Pacific Retail adopted the Deferred Fee Plan for
nonemployee trustees. Under this plan, trustees can defer receipt of cash and
equity compensation otherwise payable to the trustee by Pacific Retail.
Interest and dividends are earned on the deferred compensation. An election
must be made by each trustee to defer their compensation, and this election
shall remain in effect until modified or revoked by the trustee. Each trustee
must specify when the payment of deferred compensation is to take place. The
compensation may be deferred to a specific date of at least two years past the
time the compensation is earned, or the compensation may become payable on the
last day of the calendar year in which the trustee terminates service with
Pacific Retail, or the compensation can become payable on the earlier of such
dates.
As of December 31, 1997, 4,825 shares have been deferred under this plan.
Shares of Beneficial Interest
As of December 31, 1997, 150,000,000 shares of beneficial interest, $.01 par
value per share, were authorized. Pacific Retail's board of trustees is
authorized to issue, from the authorized but unissued shares of Pacific
Retail, preferred shares in series and to establish from time to time the
number of preferred shares to be included in such series and to fix the
designation and any preferences, conversion and other rights, voting powers,
restrictions, limitations as to distributions, qualifications and terms and
conditions of redemptions of the shares of such series.
Common Shares
The outstanding common shares ("Shares") do not have redemption or
conversion rights or the benefit of any sinking fund. In the event of
liquidation, dissolution or winding up of Pacific Retail, the holders of
Shares are entitled to receive ratably the assets remaining after satisfaction
of all liabilities and payment of preferences and accrued dividends, if any,
on Pacific Retail's shares ranking senior to the Shares (including the
preferred shares). The rights of holders of Shares are subject to the rights
and preferences established by Pacific Retail's board of trustees for any
preferred shares which have been or may subsequently be issued.
Preferred Shares
The Series A preferred shares, the Series B preferred shares (together
referred to as "Preferred Shares") and Shares vote together as a single class
with respect to all matters presented to Pacific Retail's shareholders for a
vote. If twelve consecutive quarterly dividends on the Preferred Shares are in
arrears, the holders of Preferred Shares will be entitled to nominate and
elect an additional trustee until such time as all arrearages have been paid.
The Preferred Shares are entitled to a liquidation preference of $10 per share
plus an amount equal to all dividends declared but unpaid to the date of final
distribution. Pacific Retail may redeem the Preferred Shares any time after
October 20, 2010 at a price of $10 per share, plus all declared but unpaid
dividends.
Series A Preferred Shares
Series A preferred shares are convertible into Series B preferred shares on
a one-for-one basis and contain provisions for adjustment to prevent dilution.
For fiscal years beginning before January 1, 1997, the Series A preferred
shares were entitled to a quarterly dividend in an amount equal to the greater
of (i) $0.10 per share or (ii) $0.013 less than the dividend on the Shares.
For fiscal years beginning on or after January 1, 1997, Series A preferred
shares are entitled to quarterly dividends in an amount equal to the greater
of (1) $0.10 per share, (ii) 65% of the highest funds from operations per
Share for any preceding fiscal year and (iii) $0.013 less than
F-46
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the dividend on the Shares. Dividends on the Series A preferred shares are
cumulative from the original issue date. Pacific Retail is restricted from
paying any dividends on any Shares or shares ranking on a parity with, or
ranking junior to, the Series A preferred shares, unless all cumulative
dividends are simultaneously paid on the Series A preferred shares.
Series B Preferred Shares
The board of trustees has authorized up to 6,130,276 Series B preferred
shares for issuance. Series B preferred shares are convertible into Shares on
a one-for-one basis and contain provisions for adjustment to prevent dilution.
For fiscal years beginning before January 1, 1997, the Series B preferred
shares were entitled to a quarterly dividend in an amount equal to the greater
of (i) $0.10 per share or (ii) the dividend on the Shares. For fiscal years
beginning on and after January 1, 1997, Series B preferred shares are entitled
to quarterly dividends in an amount equal to the greater of (i) $0.10 per
share, (ii) 65% of the highest funds from operations per Share for any
preceding fiscal year or (iii) the dividend on the Shares. Dividends on the
Series B preferred shares are cumulative from the original issue date. Pacific
Retail is restricted from paying any dividends on any Shares or shares ranking
on a parity with, or ranking junior to, the Series B preferred shares, unless
all cumulative dividends are simultaneously paid on the Series B preferred
shares.
Investor Agreement
On October 20, 1995, HOLDINGS, and Pacific Retail entered into an investor
agreement whereby HOLDINGS agreed to purchase up to 20 million Shares at $10
per share, net of the original shares purchased, before October 20, 1997. As
of December 31, 1996, HOLDINGS had completed the purchase of 20 million
Shares. As long as HOLDINGS owns at least 25% of the outstanding common shares
of Pacific Retail it will have certain rights regarding appointment of
trustees to the board of trustees and regarding approval of budgets, property
operations, property acquisitions, changes in executive officers and sales of
shares.
Shareholders' Agreement
On October 20, 1995, OCP entered into a shareholders' agreement with
HOLDINGS and Pacific Retail. Among other provisions of the agreement, OCP was
to acquire two million shares of Series B preferred shares at $10 per share at
its own request or if required by Pacific Retail. On August 6, 1996, OCP
purchased the two million shares of Series B preferred shares.
As part of the August 9, 1996 amendment to the shareholders' agreement,
HOLDINGS and OCP shall each have the right to participate pro rata, based upon
percentage ownership of the Shares on a fully diluted basis, in any offerings
by Pacific Retail of any capital shares or securities convertible into capital
shares on the same terms and at the same time as other offerees. The
respective rights terminate at such time as the holder shall own less than 10%
of the Shares on a fully diluted basis.
Shareholder Ownership Limitations
Pacific Retail's Declaration of Trust seeks to preserve its REIT status by
restricting any shareholder from owning more than 9.8% of Pacific Retail's
shares of beneficial interest, other than HOLDINGS or OCP. Pacific Retail
intends to adopt a shareholder rights plan pursuant to which one purchase
right will be issued as a dividend for each outstanding Share. Each purchase
right will entitle the holder to purchase one share at a fixed exercise price
and, under certain circumstances, to purchase at the exercise price shares or
securities of an acquiring company having a market value equal to some
multiple of the exercise price. The purchase rights would be exercisable only
upon the occurrence of certain triggering events and purchase rights held by
the acquiring person would not be exercisable. HOLDINGS and OCP would be
exempted from this shareholder rights plan.
F-47
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCENTIVE STOCK PROGRAMS
Pacific Retail has authorized 1,875,000 Shares for a share incentive plan
(the "Plan"). On September 24, 1997 the Plan was amended to increase the
number of shares authorized to 5,250,000. Additionally, the Plan was amended
to award "dividend equivalent units" with all option grants (other than
matching options). Participants who are awarded dividend equivalent units will
be credited with these units annually based on a calculated dividend yield,
multiplied by the number of options outstanding. Matching options and a loan
provision have also been added to the common share purchase portion of the
Plan. This provision allows the compensation committee to award, for each
common share purchased, one or more matching options. Matching options do not
receive dividend equivalent units. Further, Pacific Retail may offer
participants loans for the entire purchase price of any common shares
purchased under the share purchase program. Any loans will be fully recourse
to the participant and be for a maximum of 10 years, subject to an
acceleration in the event of termination of employment or sale of the common
shares. Participants will be required to pledge any common shares to secure
the loan from Pacific Retail. Under all plans, the option exercise price
represents the estimated fair market value at the date of grant. Vesting of
the options commences no more than two years from grant date and options are
fully vested no more than five year from grant date. Options expire in 10
years from the date of grant or earlier upon termination of employment or
death.
On October 30, 1997, 696,000 Shares at a price of $12 per share were issued
under the amended Plan. Loans were issued for 95% of the total purchase amount
and the remaining 5% was received in cash from the participants.
On August 6, 1996, the board of trustees adopted the 1996 Trustees Plan (the
"Trustees Plan"). Under the Trustees Plan, nonemployee trustees received
options to purchase Shares at an exercise price equal to the market price on
the date of the grant. Options granted under the Trustees Plan are immediately
vested. These options expire in 5 years from the date of grant or earlier upon
resignation from the board of trustees or death.
Pacific Retail applies APB Opinion No. 25 and related Interpretations in
accounting for the Plan. No compensation has been recognized for the Plan as
Pacific Retail has issued the options at an exercise price which represents
the fair market value at the date of grant. Had compensation cost for the Plan
been determined based on the fair market value at the grant dates for awards,
consistent with the method provided by Statement of Financial Accounting
Standards No. 123 (SFAS No. 123), the Company's pro forma net earnings for the
years ended December 31, 1997 and 1996 would have been:
FOR THE FOR THE YEAR
YEAR ENDED ENDED
DECEMBER DECEMBER 31,
31, 1997 1996
----------- ------------
Net earnings.............................. As reported $26,721,029 $9,871,330
Pro Forma $26,641,918 9,806,206
Per share net earnings attributable to
common shares............................ As reported $ 0.61 $ 0.54
Pro forma $ 0.61 $ 0.54
The fair value of each option grant is estimated on the date of grant using
the "minimum value" calculation stipulated by SFAS No. 123 for nonpublic
companies. Pacific Retail has assumed the following in estimating the fair
value of the options:
1997 1996
---- ----
Expected life (years)................................................ 5 5
Risk-free rate....................................................... 5.8% 6.1%
Dividend yield....................................................... 5.0% 5.0%
F-48
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes activity under all programs:
WEIGHTED
AVERAGE
EXERCISE PRICE SHARES
-------------- ---------
Outstanding at January 1, 1996....................... -- --
Granted............................................ $10.04 327,282
------ ---------
Outstanding at December 31, 1996..................... $10.04 327,282
Granted............................................ 11.98 2,149,863
Exercised.......................................... (11.00) (2,000)
Canceled........................................... (10.57) (11,273)
------ ---------
Outstanding at December 31, 1997..................... $11.73 2,463,872
------ ---------
Options exercisable at December 31, 1997............. $10.26 118,282
------ ---------
Weighted average fair value of options granted during
1997................................................ $ 2.25
------
7. OPERATING LEASES
Pacific Retail receives rental income from the properties under operating
leases with terms ranging from less than one year to 24 years. The minimum
future rental under operating leases as of December 31, 1997 are as follows:
1998.............................................................. $ 70,672,996
1999.............................................................. 64,320,969
2000.............................................................. 56,303,689
2001.............................................................. 47,212,842
2002.............................................................. 40,144,332
Thereafter........................................................ 248,609,475
-------------
$ 527,264,303
=============
F-49
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A regional grocery chain leases space in nine of the retail centers. As of
December 31, 1997, minimum future rentals under current lease agreements with
this tenant account for $52,779,529 or 10% of the contracted minimum future
rentals shown above. No other tenant account for more than 10% of the
contracted minimum future rentals beginning in 1998.
8. COMMITMENTS AND CONTINGENCIES
Pacific Retail is subject to environmental regulations related to the
ownership, operation, development and acquisition of real estate properties.
As part of due diligence procedures, Pacific Retail has obtained or conducted
Phase I environmental assessments on each property prior to acquisition.
Pacific Retail is not aware of any environmental condition on any of its
properties which is likely to have a materially adverse effect on Pacific
Retail's financial condition or results of operations.
9. SUBSEQUENT EVENTS
In January 1998, primarily using proceeds from the lines of credit, Pacific
Retail and PRT Development acquired separate parcels of Twin Peaks in Poway,
California, for a total purchase price of $29,750,000, In addition, Pacific
Retail acquired Plaza Hermosa in Hermosa Beach, California for a total
purchase price of $13,335,000.
Also in January 1998, PRT Development purchased approximately 38.2 acres of
undeveloped land. The purchase price of approximately $11,646,000 includes
$2,087,230 placed in escrow for future development on the purchased land.
F-50
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Pacific Retail Trust
In our opinion, the accompanying balance sheet and the related statements of
operations, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Pacific Retail Trust at December
31, 1995 and the results of its operations and its cash flows for the period
from April 27, 1995 (Inception) to December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
February 9, 1996
Dallas, Texas
F-51
PACIFIC RETAIL TRUST
BALANCE SHEET
DECEMBER
ASSETS 31, 1995
------ -----------
Real estate....................................................... $63,790,452
Less accumulated depreciation..................................... (344,043)
-----------
63,446,409
Cash and cash equivalents......................................... 2,807,433
Accounts receivable............................................... 860,270
Other assets...................................................... 1,338,229
-----------
Total assets.................................................... $68,452,341
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Note payable.................................................... $ 601,040
Accounts payable and accrued expenses........................... 1,891,597
Deferred income................................................. 63,017
Tenant security deposits........................................ 162,887
Other liabilities............................................... 759,049
-----------
Total liabilities............................................. 3,477,590
Commitments and contingencies
Shareholders' Equity:
Shares of beneficial interest, $0.01 par value;
150,000,000 shares authorized
Common shares (5,400,100 authorized and issued)............... 54,001
Series A preferred shares (1,130,276 authorized and issued;
stated liquidation preference of $10 per share plus declared
and unpaid dividends)........................................ 11,302,760
Series B preferred shares (6,130,276 authorized; none issued). --
Additional paid-in-capital...................................... 53,928,999
Distributions in excess of net earnings......................... (311,009)
-----------
Total shareholders' equity.................................... 64,974,751
-----------
Total liabilities and shareholders' equity.................... $68,452,341
===========
See accompanying notes to financial statements.
F-52
PACIFIC RETAIL TRUST
STATEMENT OF OPERATIONS
PERIOD FROM APRIL 27, 1995 (INCEPTION) TO DECEMBER 31, 1995
Income:
Rental income..................................................... $1,816,684
Interest and other income......................................... 40,718
----------
Total income.................................................... 1,857,402
----------
Expenses:
Rental expenses................................................... 153,672
Depreciation and amortization..................................... 349,599
General and administrative........................................ 511,528
Interest.......................................................... 128,770
Insurance and real estate taxes................................... 319,333
----------
1,462,902
----------
Net earnings.................................................... 394,500
Less: Series A preferred share dividends.......................... 111,897
----------
Net earnings attributable to common shares...................... $ 282,603
==========
Weighted average common shares outstanding........................ 1,536,245
==========
Weighted average diluted common shares outstanding................ 1,536,245
==========
Basic earnings per share........................................ $ 0.18
Diluted earnings per share...................................... $ 0.18
See accompanying notes to financial statements.
F-53
PACIFIC RETAIL TRUST
STATEMENT OF SHAREHOLDERS' EQUITY
PERIOD FROM APRIL 27, 1995 (INCEPTION) TO DECEMBER 31, 1995
SHARES OF
BENEFICIAL INTEREST
(150,000,000 SHARES
AUTHORIZED)
-------------------
SERIES A
PREFERRED
SHARES AT COMMON DISTRIBUTIONS
AGGREGATE SHARES ADDITIONAL IN EXCESS OF TOTAL
LIQUIDATION AT PAR PAID-IN NET SHAREHOLDERS'
PREFERENCE VALUE CAPITAL EARNINGS EQUITY
----------- ------- ----------- ------------- -------------
Balance at April 27,
1995 (Inception).......
Sale of shares for
initial capitalization. $53,001 $52,947,999 $53,001,000
Issuance of shares in
partial payment of
property acquisition... $11,302,760 11,302,760
Sale of shares on
December 22, 1995...... 1,000 981,000 982,000
Cash distributions...... $(705,509) (705,509)
Net earnings............ 394,500 394,500
----------- ------- ----------- --------- -----------
Balance at December 31,
1995................... $11,302,760 $54,001 $53,928,999 $(311,009) $64,974,751
=========== ======= =========== ========= ===========
See accompanying notes to financial statements.
F-54
PACIFIC RETAIL TRUST
STATEMENT OF CASH FLOWS
PERIOD FROM APRIL 27, 1995 (INCEPTION) TO DECEMBER 31, 1995
Operating Activities:
Net income....................................................... $ 394,500
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 349,599
Straightline rent............................................... (38,187)
Changes in operating assets and liabilities:
Accounts receivable............................................ (860,270)
Other assets................................................... (1,305,596)
Accounts payable and accrued expenses.......................... 1,891,597
Deferred income................................................ 63,017
Other liabilities.............................................. 759,049
Tenant security deposits....................................... 162,887
-----------
Net cash provided by operating activities......................... 1,416,596
-----------
Investing Activities:
Acquisition of real estate....................................... (52,487,694)
-----------
Net cash used in investing activities............................. (52,487,694)
-----------
Financing Activities:
Proceeds from line of credit..................................... 601,040
Proceeds from sale of shares, net of expenses.................... 53,983,000
Distributions paid to shareholders............................... (705,509)
-----------
Net cash provided by financing activities......................... 53,878,531
-----------
Net increase in cash and cash equivalents......................... 2,807,433
Cash and cash equivalents at beginning of period.................. --
-----------
Cash and cash equivalents at end of period........................ $22,807,433
-----------
Supplemental cash flow information:
Interest paid................................................... $ 128,770
------------
Noncash investing and financing activities:
Acquisition of real estate for Series A preferred shares........ $(11,302,760)
------------
Issuance of shares as partial acquisition price.................. $ 11,302,760
------------
See accompanying notes to financial statements.
F-55
PACIFIC RETAIL TRUST
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Formation
Pacific Retail Trust ("Pacific Retail") was organized as a Maryland real
estate investment trust on April 27, 1995 as Southwest Retail Trust for the
purpose of acquiring, developing, managing and owning neighborhood infill
retail properties in a nine state region of the western United States. On
August 23, 1995 the Declaration of Trust was amended and restated to change
the name to Pacific Retail Trust. Pacific Retail intends to elect tax status
as a real estate investment trust for 1995. Currently, 81% of Pacific Retail's
outstanding shares of beneficial interest are constructively owned by Security
Capital Holdings, S.A. ("HOLDINGS"), a wholly-owned subsidiary of Security
Capital U.S. Realty ("USREALTY"). Opportunity Capital Partners Limited
Partnership ("OCP"), through its partnership Madison Property I, LP (MPI),
acquired 17% of the outstanding shares as partial consideration for a pool of
properties sold to Pacific Retail by MPI on October 20, 1995 (Note 5). Pacific
Retail intends to acquire additional shopping centers with proceeds from
additional capital contributions and borrowings. As of December 31, 1995
Pacific Retail had signed contracts and deposited earnest money for the
acquisition of one neighborhood center in the Dallas area and two neighborhood
centers in California and was involved in the final due diligence analysis
prior to closing on the purchase of the centers (Note 9).
For financial reporting purposes, the properties acquired were recorded by
Pacific Retail at their acquisition costs which represents fair market value
at the time of acquisition.
Revenue Recognition
Minimum rents are recognized on a straight-line basis; as such, the rental
revenues for leases which contain rent abatements and contractual increases
are recognized on a straight-line basis over the initial term of the related
lease. Property operating cost recoveries from tenants of common area
maintenance, real estate taxes and other recoverable costs, are recognized in
the period when the recoveries are earned. In addition, certain tenants pay
percentage rental amounts based upon their sales volume and these percentage
rents are recognized when billed.
Real Estate Assets and Related Depreciation
Costs related directly to the acquisition, development and improvement of
real estate are capitalized. Interest costs incurred during construction
periods are capitalized. There was no interest capitalized during the period
from April 27, 1995 to December 31, 1995. Costs incurred with regard to
unsuccessful acquisitions are expensed at the time such acquisition is deemed
terminated.
Pacific Retail has adopted Statement of Financial Accounting Standards No.
121 ("SFAS 121"). Under SFAS 121, Pacific Retail recognizes impairment losses
on property whenever events and changes in circumstances indicate that the
carrying amount of long-lived assets, on an individual property basis, may not
be recoverable through undiscounted future cash flows. Such losses are
determined by comparing the sum of the expected future discounted net cash
flows to the carrying amount of the asset. Impairment losses are recognized in
operating income as they are determined. As of December 31, 1995, no
impairment losses had been incurred.
Ordinary repairs and maintenance are expensed as incurred; major
replacements and betterments are capitalized and depreciated over their
estimated useful lives. Depreciation is computed on a straight-line basis over
the expected economic useful lives, which are principally 10 to 40 years for
buildings and improvements.
F-56
PACIFIC RETAIL TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cash and Cash Equivalents
Cash and cash equivalents include all cash and cash equivalent investments
with original maturities of three months or less.
Deferred Loan Fees
Included in other assets as of December 31, 1995 are costs of $613,808
associated with obtaining financing (Note 3) which have been capitalized.
Deferred loan fees are amortized to interest expense over the life of the loan
and extensions which is currently three years using the straight-line method.
There was no amortization of the capitalized costs in 1995 as the loan and
associated costs were not entered into until December 27, 1995.
Income Taxes
Pacific Retail intends to elect real estate investment trust ("REIT") status
for 1995 under the Internal Revenue Code of 1986, as amended. REIT's are not
required to pay federal income taxes if minimum distribution and income, asset
and shareholder tests are met and, accordingly, no provision has been made for
federal income taxes in the accompanying financial statements.
Earnings per Share
Pacific Retail has adopted Statement of Financial Accounting Standards No.
128 ("SFAS 128"), which establishes standards for computing and presenting
earnings per share (EPS). Basic EPS excludes the effect of potentially
dilutive securities while diluted EPS reflects the potential dilution that
would occur if dilutive securities or other contracts to issue common shares
were exercised, converted into, or resulted in the issuance of common shares
that then shared in the earnings of the company. The following table
summarizes the information required under SFAS 128:
FOR THE PERIOD FROM APRIL 27, 1995
(INCEPTION) TO DECEMBER 31, 1995
-----------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Basic EPS
Net earnings attributable to common
shares................................... $282,603 1,536,245 $0.18
-------- --------- -----
Diluted EPS
Income available to common shares and
assumed conversions...................... $282,603 1,536,245 $0.18
-------- --------- -----
The assumed conversion of Series A preferred shares of beneficial interest are
not dilutive and have therefore been excluded from the calculation.
2. REAL ESTATE INVESTMENTS
Pacific Retail acquired the following properties between August 30 and
October 20, 1995, all of which are located within 100 miles of the Dallas-Ft.
Worth area:
GROSS
LEASABLE
SQUARE
RETAIL CENTER LOCATION FEET
- ------------- -------- --------
Arapaho Village South............................... Richardson, Texas 108,816
Ridglea Plaza....................................... Fort Worth, Texas 197,627
Southpark Shopping Center........................... Tyler, Texas 146,225
The Village Shopping Center......................... Duncanville, Texas 95,208
Cooper Street Plaza................................. Arlington, Texas 133,288
Northview Plaza..................................... Dallas, Texas 117,034
F-57
PACIFIC RETAIL TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following summarizes real estate investments as of December 31, 1995:
Land............................................................... $10,148,477
Buildings and improvements......................................... 47,377,965
Land improvements and parking lots................................. 6,264,010
-----------
Total real estate................................................ 63,790,452
Less accumulated depreciation.................................... (344,043)
-----------
Net real estate................................................ $63,446,409
===========
3. LINE OF CREDIT
On December 27, 1995 Pacific Retail entered into a credit agreement with
Wells Fargo Realty Advisors Funding, Incorporated, as agent for a group of
lenders, to provide a secured line of credit up to a maximum of $50 million.
As of December 31, 1995, the secured net borrowing base was $29,865,000. The
lenders determine the secured net borrowing base by using 65% of the lenders'
appraised value on five of the properties, excluding Cooper Street Plaza, less
an $880,000 reserve for the repair work to be done to the Ridglea Plaza roof
(Notes 4 and 10). Borrowings bear interest at the greater of prime or federal
funds rate plus 1/2% or at Pacific Retail's option, LIBOR plus 1.75%.
Additionally, there is a fee of .125% per annum of the unfunded line of credit
balance.
The termination date of the credit agreement is December 27, 1998, but it
may be extended for successive one year periods if acceptable to the lenders,
for a .25% extension fee. All debt incurrences are subject to covenants, as
more fully described in the credit agreement. The only borrowings made under
the credit line in 1995 were for the lender fees.
A summary of Pacific Retail's line of credit borrowings is as follows:
Total line of credit............................................... $50,000,000
Net borrowing base available....................................... $29,866,000
Borrowings outstanding at December 31, 1995........................ $ 601,040
Weighted average interest rate at December 31, 1995................ 8.5%
4. OTHER LIABILITIES
Other liabilities include $669,549 of insurance proceeds for repair of a
hail damaged roof on the Ridglea Plaza Shopping Center. Repair work has not
been commenced on the roof. It is anticipated that these insurance proceeds
will be sufficient to cover the costs of the necessary repairs. Additional
other liabilities include escrow holdbacks set up at the acquisition of two of
the retail properties for additional repairs.
5. SHAREHOLDERS' EQUITY
Offerings
On December 22, 1995 Pacific Retail completed an offering of 100,000 shares
of beneficial interest at a price of $10 per share. Net proceeds, after
offering costs, to Pacific Retail were $982,000.
On October 20, 1995 Pacific Retail closed a private offering to HOLDINGS of
5,300,000 shares of beneficial interest at $10 per share for a total amount of
$53,000,000.
On October 20, 1995, as a partial acquisition price for five properties
acquired from OCP, Pacific Retail issued 1,130,276 Series A Preferred shares
of beneficial interest to MPI at a stated liquidation preference of $10 per
share plus declared and unpaid dividends resulting in outstanding Series A
Preferred shares valued at $11,302,760.
F-58
PACIFIC RETAIL TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Shares of Beneficial Interest
As of December 31, 1995, 150,000,000 Shares of Beneficial Interest, $.01 par
value per share, were authorized. Pacific Retail's Board of Trustees is
authorized to issue, from the authorized but unissued shares of Pacific
Retail, preferred shares in series and to establish from time to time the
number of preferred shares to be included in such series and to fix the
designation and any preferences, conversion and other rights, voting powers,
restrictions, limitations as to distributions, qualifications and terms and
conditions of redemptions of the shares of such series.
Common Shares
The outstanding common shares ("Shares") do not have redemption or
conversion rights or the benefit of any sinking fund. In the event of
liquidation, dissolution or winding up of Pacific Retail, the holders of
Shares are entitled to receive ratably the assets remaining after satisfaction
of all liabilities and payment of preferences and accrued dividends, if any,
on Pacific Retail's shares ranking senior to the Shares (including the
Preferred Shares). The rights of holders of Shares are subject to the rights
and preferences established by Pacific Retail's Board of Trustees for any
preferred shares which have been or may subsequently be issued.
Preferred Shares
The Series A Preferred Shares, the Series B Preferred Shares (together
referred to as "Preferred Shares") and Shares vote together as a single class
with respect to all matters presented to Pacific Retail's shareholders for a
vote. If twelve consecutive quarterly dividends on the Preferred Shares are in
arrears, the holders of Preferred Shares will be entitled to nominate and
elect an additional trustee until such time as all arrearages have been paid.
The Preferred Shares are entitled to a liquidation preference of $10.00 per
share plus an amount equal to all dividends declared but unpaid to the date of
final distribution. Pacific Retail may redeem the Preferred Shares any time
after October 20, 2010 at a price of $10.00 per share, plus all accrued and
unpaid dividends.
Series A Preferred Shares
Series A Preferred Shares are convertible into Series B Preferred Shares on
a one-for-one basis and contain provisions for adjustment to prevent dilution.
For fiscal years beginning before January 1, 1997, the Series A Preferred
Shares are entitled to a quarterly dividend in an amount equal to the greater
of (i) $0.10 per share and (ii) $0.013 less than the dividend on the Shares.
For fiscal years beginning on or after January 1, 1997, Series A Preferred
Shares are entitled to quarterly dividends in an amount equal to the greater
of (i) $0.10 per share, (ii) 65% of the highest funds from operations per
Share for any preceding fiscal year and (iii) $0.013 less than the dividend on
the Shares. Dividends on the Series A Preferred Shares are cumulative from the
original issue date. Pacific Retail is restricted from paying any dividends on
any Shares or shares ranking on a parity with, or ranking junior to, the
Series A Preferred Shares, unless all cumulative dividends are simultaneously
paid on the Series A Preferred Shares.
Series B Preferred Shares
The Board of Trustees has authorized up to 6,130,276 Series B Preferred
Shares for issuance. Series B Preferred Shares are convertible into Shares on
a one-for-one basis and contain provisions for adjustment to prevent dilution.
For fiscal years beginning before January 1, 1997, the Series B Preferred
Shares are entitled to a quarterly dividend in an amount equal to the greater
of (i) $0.10 per share and (ii) the dividend on the Shares.
For fiscal years beginning on and after January 1, 1997, Series B Preferred
Shares are entitled to quarterly dividends in an amount equal to the greater
of (i) $0.10 per share, (ii) 65% of the highest funds from operations per
Share for any preceding fiscal year and (iii) the dividend on the Shares.
Dividends on the Series B Preferred
F-59
PACIFIC RETAIL TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Shares are cumulative from the original issue date. Pacific Retail is
restricted from paying any dividends on any Shares or shares ranking on a
parity with, or ranking junior to, the Series B Preferred Shares, unless all
cumulative dividends are simultaneously paid on the Series B Preferred Shares.
No Series B Preferred Shares are currently issued or outstanding.
Investor Agreement
On October 20, 1995 HOLDINGS and Pacific Retail entered into an investor
agreement whereby HOLDINGS agreed to purchase up to 20 million Shares at $10
per share, net of the original shares purchased, before October 20, 1997. As
long as HOLDINGS owns at least 25% of the outstanding common shares of Pacific
Retail it will have certain rights regarding appointment of trustees to the
Board of Trustees and regarding approval of budgets, property operations,
property acquisitions, changes in executive officers and sales of shares.
Shareholders' Agreement
On October 20, 1995 OCP entered into a shareholders' agreement with HOLDINGS
and Pacific Retail. Among other provisions of the agreement, OCP is to acquire
an additional 2 million shares of Series B Preferred Shares at $10 per share
at its own request or if required by Pacific Retail. In the event neither
party requests the additional capital call, this provision expires on October
20, 1996. Pacific Retail intends to make an equity call for the entire $20
million before October 20, 1996. As long as OCP owns at least 10% of the
outstanding common shares of Pacific Retail, it will have the right to
nominate one Trustee.
OCP has also agreed to attempt to sell the remaining three properties it
owns and to utilize the proceeds for additional share acquisitions. If a sale
of the properties is consummated before March 31, 1996, all proceeds will be
used to acquire Series B Preferred Shares at $10 per share. Subsequent to
March 31, 1996 but prior to December 7, 1996, the proceeds of a sale shall be
used to acquire common shares at the fair market value, as defined, at the
time of acquisition.
Under the shareholders' agreement OCP has the right to have Pacific Retail
return the properties acquired from OCP in the event that either (i) Pacific
Retail has not acquired total real estate assets totaling $200 million by
October 20, 1999, or (ii) prior to achieving $200 million in total real estate
assets, Pacific Retail registers its Shares pursuant to Section 12(b) or 12(g)
of the Exchange Act. In the event OCP does exercise its option to reacquire
the properties, it will surrender its share holdings and $42,100,000, plus the
cost of all capital improvements made to the properties which have been
approved by OCP's nominee to the Board of Trustees.
OCP also has the right to purchase up to a total of 5 million Series B
Preferred Shares at $10 per share, including any shares issued in conjunction
with the sale of its three remaining properties and the shares issued upon
funding of its equity commitment of 1,130,276 Series A Preferred Shares. This
right expires on March 31, 1996.
OCP also has the option to acquire up to 5 million common shares at $10 per
share, including any shares issued in conjunction with the sale of its three
remaining properties and the shares issued upon funding of its equity
commitment of 1,130,276 Series A Preferred Shares. This option expires on the
earlier of (i) the date HOLDINGS' equity commitment is fully funded or (ii)
October 20, 1997.
Shareholder Ownership Limitations
Pacific Retail's Declaration of Trust seeks to preserve its anticipated REIT
status by restricting any shareholder from owning more than 9.8% of Pacific
Retail's shares of beneficial interest, other than
F-60
PACIFIC RETAIL TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
HOLDINGS or OCP. Pacific Retail intends to adopt a shareholder rights plan
prior to becoming a public company pursuant to which one purchase right will
be issued as a dividend for each outstanding Share. Each purchase right will
entitle the holder to purchase one Share at a fixed exercise price and, under
certain circumstances, to purchase at the exercise price Shares or securities
of an acquiring company having a market value equal to some multiple of the
exercise price. The purchase rights would be exercisable only upon the
occurrence of certain triggering events and purchase rights held by the
acquiring person would not be exercisable. HOLDINGS and OCP would be exempted
from this shareholder rights plan.
6. OPERATING LEASES
Pacific Retail receives rental income from the properties under operating
leases with terms ranging from less than one year to eighteen years. The
minimum future rentals under operating leases as of December 31, 1995, are as
follows:
1996................................................................ $ 5,998,000
1997................................................................ 5,541,000
1998................................................................ 4,938,000
1999................................................................ 4,368,000
2000................................................................ 3,831,000
Thereafter.......................................................... 25,388,000
-----------
$50,064,000
===========
Tom Thumb Food Stores (Tom Thumb), a regional grocery chain, leases space in
three of the retail centers owned by Pacific Retail. Beginning in 1996 minimum
future rentals under current lease agreements with Tom Thumb (one expiring in
2007 and two expiring in 2010) will account for $17,212,000 or 34.4% of the
contracted minimum future rentals shown above. No other tenant accounts for
more than 15% of the minimum future rentals beginning in 1996. Pacific Retail
anticipates that due to acquisitions to be made during the next twelve months,
no single tenant will account for more than 10% of minimum future rentals
beginning in 1997.
F-61
PACIFIC RETAIL TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. FAIR VALUE
Pacific Retail has estimated the fair value of its financial instruments at
December 31, 1995 as required by Statement of Financial Accounting Standards
No. 107. The carrying values of the Company's financial instruments are
reasonable estimates of their fair values.
8. COMMITMENTS AND CONTINGENCIES
Pacific Retail is subject to environmental regulations related to the
ownership, operation, development and acquisition of real estate properties.
As part of due diligence procedures, Pacific Retail has acquired or conducted
Phase I environmental assessments on each property prior to acquisition.
Pacific Retail is not aware of any environmental condition on any of its
properties which is likely to have a material adverse effect on Pacific
Retail's financial condition or results of operations.
9. SUBSEQUENT EVENTS
On January 16, 1996, utilizing $14,457,000 of its credit line, Pacific
Retail acquired The Promenade, a neighborhood infill retail center in
Sacramento, California. The Promenade contains 136,022 square feet and is 95%
leased. The acquisition will increase the secured net borrowing base, but the
amount of the increase has not yet been determined by the lenders.
In January 1996, Cooper Street Plaza was approved by the lender to be added
to the secured net borrowing base. With the addition of Cooper Street Plaza,
the secured net borrowing base increased to $37,145,000.
F-62
PACIFIC RETAIL TRUST
CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
F-63
PACIFIC RETAIL TRUST
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30,
--------------
1998
--------------
(UNAUDITED)
ASSETS
------
Real estate investments........................................ $1,080,739,840
Less: accumulated depreciation................................. (35,941,954)
--------------
1,044,797,886
Cash and cash equivalents...................................... 388,870
Accounts receivable, net....................................... 8,600,273
Escrow deposits................................................ 4,319,177
Other assets, net.............................................. 15,530,465
--------------
Total assets................................................. $1,073,636,671
==============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Lines of credit............................................... $ 211,500,000
Notes payable................................................. 97,062,997
Accounts payable and accrued expenses......................... 8,051,085
Accrued real estate taxes..................................... 7,439,065
Deferred income............................................... 659,426
Tenant security deposits...................................... 3,407,801
Other liabilities............................................. 38,737
--------------
Total liabilities............................................ 328,159,111
Commitments and contingencies (Note 10)........................
Minority interest.............................................. 19,346,292
Shareholders' equity:
Shares of beneficial interest, $0.01 par value;
150,000,000 shares authorized
Series A preferred shares (1,130,276 authorized, issued and
outstanding;
stated liquidation preference of $10 per share plus declared
and unpaid dividends)....................................... 11,302,760
Series B preferred shares (6,130,276 authorized; 2,000,000
issued and
outstanding; stated liquidation preference of $10 per share
plus declared and unpaid dividends)......................... 20,000,000
Common shares (64,058,952 shares issued and outstanding at
September 30, 1998)......................................... 640,589
Additional paid-in capital.................................... 713,892,877
Employee share notes.......................................... (8,447,524)
Distributions in excess of net earnings....................... (11,257,434)
--------------
Total shareholders' equity................................... 726,131,268
--------------
Total liabilities and shareholders' equity.................. $1,073,636,671
==============
See accompanying notes to financial statements.
F-64
PACIFIC RETAIL TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1998 1997
----------- -----------
(UNAUDITED)
Income:
Minimum rent....................................... $70,734,572 $42,331,227
Percentage rent.................................... 1,001,725 577,749
Recoveries from tenants............................ 18,763,861 11,183,597
Management, leasing and brokerage fees............. 45,536 351,658
----------- -----------
90,545,694 54,444,231
----------- -----------
Operating Expenses:
Operating and maintenance.......................... 11,197,977 6,277,508
Depreciation and amortization...................... 17,058,178 10,210,065
General and administrative......................... 6,937,115 4,767,096
Real estate taxes.................................. 10,193,588 7,107,638
----------- -----------
45,386,858 28,362,307
----------- -----------
Interest expense (income):
Interest expense................................... 11,594,080 7,803,632
Interest income.................................... (580,677) (223,664)
----------- -----------
11,013,403 7,579,968
----------- -----------
Earnings before minority interest and gain on sale
of real estate investments........................ 34,145,433 18,501,956
Gain on sale of real estate investments.............. -- --
Minority interest.................................... (578,510) (353,573)
----------- -----------
Net earnings......................................... 33,566,923 18,148,383
Less:
Series A preferred share dividends............... 608,658 566,268
Series B preferred share dividends............... 1,155,000 1,080,000
----------- -----------
Net earnings attributable to common shares......... $31,803,265 $16,502,115
=========== ===========
Weighted average common shares outstanding......... 64,044,753 37,373,491
=========== ===========
Weighted average diluted common shares outstanding. 64,259,819 37,451,707
=========== ===========
Basic earnings per share......................... $ .50 $ .44
Diluted earnings per share....................... $ .49 $ .44
See accompanying notes to financial statements.
F-65
PACIFIC RETAIL TRUST
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SHARES OF BENEFICIAL INTEREST
(150,000,000 SHARES AUTHORIZED)
------------------------------------
RETAINED
EARNINGS
SERIES A SERIES B COMMON ADDITIONAL (DISTRIBUTIONS TOTAL
PREFERRED PREFERRED SHARES EMPLOYEE PAID-IN IN EXCESS OF SHAREHOLDERS'
SHARES SHARES AT PAR VALUE SHARE NOTES CAPITAL EARNINGS) EQUITY
----------- ----------- ------------ ----------- ------------ -------------- -------------
Balance at December 31,
1997................... 11,302,760 20,000,000 640,227 (7,930,780) 713,511,243 (6,073,931) 731,449,519
Sale of shares, net..... 1,546 (1,909,500) 1,979,390 71,436
Redemption of shares.... (1,184) 1,345,263 (1,597,756) (253,677)
Shareholder
distributions.......... 47,493 (38,750,426) (38,702,933)
Net earnings............ 33,566,923 33,566,923
----------- ----------- -------- ----------- ------------ ------------ ------------
Balance at September 30,
1998 (Unaudited)....... $11,302,760 $20,000,000 $640,589 $(8,447,524) $713,892,877 $(11,257,434) $726,131,268
See accompanying notes to financial statements.
F-66
PACIFIC RETAIL TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997
------------ ------------
(UNAUDITED)
Operating activities
Net earnings..................................... $ 33,566,923 $ 18,148,383
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization.................. 17,058,178 10,210,065
Minority interest.............................. 278,860 (59,527)
Changes in operating assets and liabilities:
Accounts receivable.......................... (786,247) (2,650,168)
Escrow deposits.............................. (1,736,927) 15,542,081
Other assets................................. (5,753,621) (3,428,104)
Accounts payable and accrued expenses........ (89,340) 373,543
Accrued real estate taxes.................... 579,218 2,614,787
Deferred income.............................. (1,161,474) 293,677
Tenant security deposits..................... 753,878 1,084,693
Other liabilities............................ (56,651) 17,754
------------ ------------
Net cash provided by investing activities........ 42,652,797 42,147,184
------------ ------------
Investing activities:
Construction of and acquisition of real estate
investments..................................... (197,443,350) (293,660,395)
------------ ------------
Net cash used in investing activities............ (197,443,350) (293,660,395)
------------ ------------
Financing activities:
Principal payments on notes payable.............. (8,332,299) (940,403)
Proceeds from line of credit..................... 197,900,000 73,900,000
Payments on lines of credit...................... -- --
Payments on bridge loan.......................... -- (26,500,000)
Proceeds from sales of shares, net of expenses... 71,436 228,015,482
Redemption of shares............................. (253,677) --
Distributions paid to shareholders............... (38,702,933) (21,806,268)
------------ ------------
Net cash provided by financing activities........ 150,682,527 252,668,811
------------ ------------
Net (decrease) increase in cash and cash
equivalents....................................... (4,108,026) 1,155,600
Cash and cash equivalents at beginning of period... 4,496,896 1,954,131
------------ ------------
Cash and cash equivalents at end of period......... $ 388,870 $ 3,109,731
============ ============
Supplemental cash flow information:
Interest paid.................................... $ 11,577,427 $ 7,272,919
============ ============
Noncash investing and financing activities:
Acquisition of real estate for assumption of
notes payable................................... $ 20,452,246 $ 74,918,736
============ ============
Acquisition of real estate in exchange for
minority interest partnership units............. $ 11,386,032 $ --
============ ============
Exchange of employee share notes for shares...... $ 1,909,500 $ --
============ ============
Payments on employee shares notes from
shareholder distributions....................... $ 47,493 $ --
============ ============
Redemption of employee share notes............... $ 1,345,263 $ --
============ ============
See accompanying notes to financial statements.
F-67
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and formation
Pacific Retail Trust ("Pacific Retail") was organized as a Maryland real
estate investment trust on April 27, 1995 (originally named Southwest Retail
Trust) for the purpose of acquiring, developing, managing and owning
neighborhood infill retail properties in a nine state region of the western
United States. On August 23, 1995, the Declaration of Trust was amended and
restated to change the name to Pacific Retail Trust. At September 30, 1998,
69.9% of Pacific Retail's outstanding shares of beneficial interest are
constructively owned by Security Capital Holdings S.A. ("HOLDINGS"), a wholly-
owned subsidiary of Security Capital U.S. Realty ("USRealty"). Opportunity
Capital Partners Limited Partnership ("OCP"), through its partnership Madison
Property I, LP (MPI), acquired preferred shares of Pacific Retail as partial
consideration for a pool of properties sold to Pacific Retail by MPI on
October 20, 1995. At September 30, 1998, OCP owned 6.0% of Pacific Retail's
outstanding shares of beneficial interest.
Principles of consolidation
The consolidated financial statements include the accounts of Pacific
Retail, its 81.9% ownership in Retail Property Partners Limited Partnership
and its 95% ownership in PRT Development Corporation (Note 4).
Revenue recognition
Minimum rents are recognized on a straight-line basis; as such, the rental
revenues for leases, which contain rent abatements and contractual increases
are recognized on a straight-line basis over the initial terms of the related
leases. Property operating cost recoveries from tenants of common area
maintenance, real estate taxes and other recoverable costs, are recognized in
the period when the recoveries are earned.
Real estate assets and related depreciation
Costs related directly to the development and improvement of real estate,
including tenant improvements, are capitalized; ordinary repairs and
maintenance are expensed as incurred. Depreciation is computed on a straight-
line basis over the expected economic useful lives, which are principally 10
to 40 years for buildings and improvements.
Pacific Retail has adopted Statement of Financial Accounting Standards No.
121 ("SFAS 121"). Under SFAS 121, Pacific Retail recognizes impairment losses
on property whenever events and changes in circumstances indicate that the
carrying amount of long-lived assets, on an individual property basis, may not
be recoverable through undiscounted future cash flows. Such losses are
determined by comparing the sum of the expected future discounted net cash
flows to the carrying amount of the asset. Impairment losses are recognized in
operating income as they are determined. As of September 30, 1998, no
impairment losses have been incurred.
Adoption of recent accounting pronouncement
In March 1998, the Emerging Issues Task Force (EITF) finalized Issue 97-11,
requiring all internal costs associated with acquiring operating properties to
be expensed as incurred. Pacific Retail has applied this policy prospectively.
In July 1998, the EITF finalized Issue 98-9, requiring contingent rent based
on the lessee's sales volume to be recognized when specified targets are met.
Pacific Retail has applied this policy prospectively since May 1998.
F-68
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Interest
Pacific Retail capitalizes interest as part of the cost of real estate
projects during construction periods. During the nine months ended September
30, 1998 and 1997, $2,205,621 and $971,736, respectively, in interest was
capitalized.
Cash and cash equivalents
Cash and cash equivalents include all cash and cash equivalent investments
with original maturities of three months or less.
Reclassification
Certain reclassifications have been made to prior year financial statements
to conform to current year presentation.
Deferred loan fees
Included in other assets as of September 30, 1998 are net costs of
$1,291,585 associated with obtaining financing. Deferred loan fees are
amortized to interest expense over the life of the loan and extensions, which
is currently three years, using the straight-line method. Amortization of
deferred loan fees for the nine months ended September 30, 1998 and 1997 was
$539,581, and $368,477, respectively.
Income taxes
Pacific Retail elected real estate investment trust ("REIT") status in 1995
under the Internal Revenue Code of 1986, as amended. REITs are not required to
pay federal income taxes if minimum distribution, income, asset and
shareholder tests are met and, accordingly, no provision has been made for
federal income taxes in the accompanying financial statements. PRT Development
Corporation and Retail Property Partners Limited Partnership are taxed as
separate entities.
F-69
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Earnings per share
Pacific Retail has adopted Statement of Financial Accounting Standards No.
128 ("SFAS" 128"), which establishes standards for computing and presenting
earnings per share (EPS). Basic EPS excludes the effect of potentially
dilutive securities while diluted EPS reflects the potential dilution that
would occur if dilutive securities or other contracts to issue common shares
were exercised, converted into, or resulted in the issuance of common shares
that then shared in the earnings of the Company. The following tables
summarize the information required under SFAS 128:
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
(UNAUDITED)
--------------------------------
PER SHARE
INCOME SHARES AMOUNT
----------- ---------- ---------
BASIC EPS
Net earnings attributable to common shares.. $31,803,265 64,044,753 $0.50
-----
EFFECT OF DILUTIVE SECURITIES
Options..................................... -- 208,348
Deferred trustee shares..................... -- 6,718
----------- ----------
DILUTED EPS
Income available to common shares and
assumed conversions........................ $31,803,265 64,259,819 $0.49
=========== ========== =====
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
(UNAUDITED)
--------------------------------
PER SHARE
INCOME SHARES AMOUNT
----------- ---------- ---------
BASIC EPS
Net earnings attributable to common shares.. $16,502,115 37,373,491 $0.44
-----
EFFECT OF DILUTIVE SECURITIES
Options..................................... -- 77,622
Deferred trustee shares..................... -- 594
----------- ----------
DILUTED EPS
Income available to common shares and
assumed conversions........................ $16,502,115 37,451,707 $0.44
=========== ========== =====
F-70
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The assumed conversion of Series A preferred shares of beneficial interest,
Series B preferred shares of beneficial interest and minority interest are not
dilutive and have therefore been excluded from the calculation of diluted EPS.
Options to purchase 625,078 common shares at $13 per share were outstanding
during the third quarter of 1998 and options to purchase 41,667 common shares
at $12 per share were outstanding during the third quarter of 1997, but were
not included in the computation of diluted EPS because the options' exercise
price was greater than or equal to the estimated fair market value of the
common shares. The options expire 10 years from the date of grant, or earlier
upon termination of employment or death.
Use of estimates
Pacific Retail has made a number of estimates and assumptions relating to
the reporting of assets and liabilities and the disclosure of contingent
assets and liabilities, and related revenues and expenses, to prepare these
financial statements in accordance with generally accepted accounting
principles. Actual results could differ from those estimates.
Fair value
Pacific Retail has estimated the fair value of its financial instruments at
September 30, 1998 as required by Statement of Financial Accounting Standards
No. 107. The Company believes the carrying values of the Company's financial
instruments are reasonable estimates of their fair values.
2. REAL ESTATE INVESTMENTS
As of September 30, 1998, Pacific Retail owned seventy-one properties.
Twenty-one properties are located in three major metropolitan markets in
Texas: the Dallas-Fort Worth metroplex, Austin and Houston. Shopping centers
in the Dallas-Fort Worth metroplex generated approximately 23% of the total
revenues of the portfolio for the nine months ended September 30, 1998.
Thirty-three shopping centers are located in California and comprise
approximately 49% of the total revenues for the nine months ended September
30, 1998. The remaining properties are located in Arizona, Colorado,
Washington, and Oregon.
The following summarizes real estate investments:
SEPTEMBER 30,
1998
--------------
(UNAUDITED)
Improved land................................................... $ 272,059,415
Land held for development....................................... 1,062,657
Land under development.......................................... 28,190,273
Buildings and improvements...................................... 677,672,174
Land improvements and parking lots.............................. 47,823,281
Construction in process......................................... 21,656,899
Redevelopment properties........................................ 32,275,141
--------------
Total real estate investments................................. 1,080,739,840
Less accumulated depreciation................................. (35,941,954)
--------------
Net real estate investments................................. $1,044,797,886
==============
F-71
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Land held for development
In March 1996, Pacific Retail acquired Harwood Hills Shopping Center in
Bedford, Texas. Between March and November of 1996, Pacific Retail completed
the construction of an additional 20,300 square feet of retail space at a cost
of approximately $1,857,000. As of September 30, 1998, approximately 2.9 acres
of land remained for additional development.
In January 1997, Pacific Retail acquired Plaza de Hacienda in La Puenta,
California. Associated with this shopping center were approximately 3.63 acres
of land for additional development. As of September 30, 1998, no development
has taken place.
Land under development
In August 1997, Pacific Retail acquired Prestonwood Park, which consists of
24.55 acres of land in Dallas, Texas for future development into a grocery
anchored shopping center. As of September 30, 1998, construction has not
commenced.
In November 1997, PRT Development Corporation acquired Hebron Parkway Plaza,
which consists of 7.77 acres of land in Carrollton, Texas for development into
a grocery anchored shopping center. As of September 30, 1998, construction has
not commenced.
In January 1998, PRT Development Corporation acquired MacArthur Park, which
consists of 38.2 acres of land in Irving, Texas for development into a
shopping center. As of September 30, 1998, PRT Development Corporation has
incurred $4,418,993 in design and construction costs associated with the
development, which is included in construction in process.
In March 1998, Pacific Retail acquired Hawthorne Plaza in Hawthorne,
California, which consists of 10.4 acres of land and an existing shopping
center. Pacific Retail plans to demolish the existing structure and rebuild a
grocery anchored shopping center. As of September 30, 1998, Pacific Retail has
incurred $986,735 in development costs associated with the development, which
is included in construction in process.
Redevelopment properties
In July 1996, Pacific Retail acquired Hancock Center in Austin, Texas for
the purpose of redeveloping it as a grocery anchored infill shopping center.
Pacific Retail immediately embarked upon the redevelopment program. On April
1, 1998, a portion of the project representing $7,322,949 in redevelopment
costs was completed and capitalized. As of September 30, 1998, $6,672,175 in
design and demolition costs and construction associated with the redevelopment
remained in construction in process.
In November 1997, Pacific Retail acquired Bristol & Warner Shopping Center
in Santa Ana, California. During 1998, significant rehabilitation work began
on the property. As of September 30, 1998, Pacific Retail has incurred
$4,130,826 in design, demolition and construction costs.
3. BORROWINGS
Lines of credit--secured
On December 27, 1995, Pacific Retail entered into a credit agreement with a
group of lenders to provide a secured line of credit up to a maximum of $50
million. On July 17, 1996, the credit agreement was amended to
F-72
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
increase the secured line of credit to a maximum of $75 million. The lenders
determine the secured net borrowing base by using the lesser of 65% of the
lenders' appraised value on ten of the properties or the permanent loan
estimate for each property. As of December 31, 1997, the secured net borrowing
base was $75 million. On November 14, 1997, the secured line of credit
agreement was amended. Under the amended credit agreement, borrowings bear
interest at the greater of prime or federal funds rate plus .50% or, at
Pacific Retail's option, LIBOR plus a margin of 1.25%, if the ratio of total
liabilities to gross asset value is less than .35 to one, or 1.40% if the
ratio of total liabilities to gross asset value is greater than or equal to
.35 to one. Additionally, there is a fee of .125% per annum of the average
daily unfunded line of credit balance, or a fee of .25% per annum of the
average daily unfunded line of credit balance if the average daily balance for
both the secured and unsecured lines of credit is greater than $100 million.
Interest is paid monthly based on the unpaid principal balance. On May 18,
1998, the credit agreement was amended; the secured line of credit was paid in
full and terminated through the use of funds from the unsecured line of
credit. The weighted averaged interest rate for the period from January 1,
1998 to May 18, 1998 was 7.1%.
Lines of credit--unsecured
On March 28, 1997, Pacific Retail entered into a credit agreement with a
group of lenders to provide an unsecured line of credit up to a maximum of $75
million. On November 14, 1997, the unsecured line of credit was increased to a
maximum of $125 million. On May 18, 1998, the credit agreement was amended and
the unsecured line of credit was increased to $350 million. Borrowings bear
interest at the greater of prime or federal funds rate plus .50% or, at
Pacific Retail's option, LIBOR plus a margin of 1.25%, if the ratio of total
liabilities to gross asset value is less than .35 to one, or 1.40% if the
ratio of total liabilities to gross asset value is greater than or equal to
.35 to one and less than .5 to one. Additionally, there is a fee of .125% per
annum of the average daily unfunded line of credit balance, or a fee of .25%
per annum of the average daily unfunded line of credit balance if the average
daily balance is greater than $175 million. Interest is paid monthly based on
the unpaid principal balance. The weighted average interest rate for the nine
months ended September 30, 1998 was 7.01%. The interest rate at September 30,
1998 was 6.87%.
The termination date of the amended credit agreement is March 28, 2000, but
it may be extended for successive one-year periods, if acceptable to the
lenders, for a .10% extension fee. All debt incurrences are subject to
covenants, as more fully described in the credit agreement. Pacific Retail has
utilized the unsecured line of credit to help finance the acquisition of
neighborhood shopping centers and for general working capital purposes during
the nine months ended September 30, 1998.
F-73
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Notes payable
Notes payable consisted of the following at September 30, 1998 (unaudited):
PRINCIPAL
INTEREST MATURITY PAYMENTS/ BALANCE AT
MARKET RATE DATE PERIOD 9/30/98
---------- -------- -------- --------- -----------
Mortgage Notes Payable:
Paseo Village........... Arizona 7.50 5/1/01 $ 38,668(2) $ 4,257,322
Mills Pointe & Preston
Park Village(4)........ Texas 7.23 7/1/00 264,578(2) 31,324,957
Plaza de Hacienda....... California 9.00 6/10/12 57,128(2) 6,704,676
Market at Round Rock.... Texas 8.63 12/31/05 63,059(2) 7,439,467
North Hills Town Center. Texas 7.37 1/1/14 76,974(2) 9,004,416
Friar's Mission......... California 9.50 6/10/05 152,006(2) 16,712,657
Woodman Van-Nuys........ California 8.80 9/15/15 57,745(2) 6,100,577
Sunnyside 205........... Oregon 9.38 1/15/00 52,401(2) 5,792,294
Murryhill Marketplace... Oregon 8.05 5/1/19 69,762(2) 8,404,932
Municipal Tax Bonds
Payable:
Friar's Mission......... California 7.30- 9/2/15 161,177- 1,321,699
7.90 168,131(3)
-----------
$97,062,997
-----------
- --------
(1) Payments are interest only payable monthly with the full principal balance
due at maturity.
(2) Payments are interest and principal payable monthly.
(3) Annual payments of principal and interest payable in two semiannual
installments. Amount disclosed is the applicable annual payment range.
(4) Mills Pointe & Preston Park Village are subject to one mortgage note
payable.
Principal repayments of notes payable are due approximately as follows:
Three months remaining in 1998..................................... $ 399,328
1999............................................................... 2,303,848
2000............................................................... 37,268,527
2001............................................................... 5,230,349
2002............................................................... 1,412,470
2003 and after..................................................... 50,448,475
-----------
$97,062,997
===========
4. MINORITY INTEREST
Minority interest represents limited partners' interests in Retail Property
Partners Limited Partnership (the Partnership), a limited partnership
controlled by Pacific Retail, and PRT Development Corporation (PRT
Development), a Delaware corporation controlled by Pacific Retail.
Retail Property Partners Limited Partnership
In September 1996, Pacific Retail formed the Partnership by contributing
cash to the Partnership in exchange for a 50.2% controlling general
partnership interest in the Partnership, which invested in two retail
F-74
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
centers in Dallas, Texas. On December 1, 1996, Pacific Retail contributed the
Blossom Valley Shopping Center in Mountain View, California to the
Partnership. The assets and liabilities of Blossom Valley were transferred at
book value as the transfer was between entities under common control. The
value of the contributed property was $17,354,543, which increased Pacific
Retail's investment in the Partnership to 76.6%.
On July 31, 1997, Pacific Retail contributed $8.9 million to the
Partnership. With this contribution, Pacific Retail's investment in the
Partnership increased to 81.6%. The Partnership used this contribution to
purchase the Heritage Plaza land. On May 21, 1998, Pacific Retail contributed
$14,273,244 to the Partnership. With this contribution, Pacific Retail's
investment in the Partnership increased to 84.2%. The Partnership used this
contribution to purchase the Thomas Lake property in May 1998.
On July 10, 1998, Pacific Retail contributed $37,026,419 to the Partnership.
The partnership used this contribution to purchase the Sherwood Market Center,
Murrayhill Marketplace, Cherry Park Market and Sunnyside 205 properties in
July 1998. Pacific Retail's investment in the Partnership at September 30,
1998 was 81.9%.
Limited partners are entitled to exchange each partnership unit for one
common share of beneficial interest in Pacific Retail beginning in August
1998. As of December 31, 1997, there were 765,000 limited partnership units
outstanding in the Partnership. On May 21, 1998, an additional 115,385
partnership units were issued in association with the acquisition of Thomas
Lake. On July 10, 1998, an additional 760,464 partnership units were issued in
association with the acquisitions of the Sherwood Market Center, Murrayhill
Marketplace, Cherry Park Market and Sunnyside 205 properties. The limited
partners' interests will be reflected as minority interest in the consolidated
financial statements until the units are exchanged for Pacific Retail shares.
On July 10, 1998, the Partnership formed a limited liability company called
PRT Sunnyside LLC for the purpose of owning, holding, managing, operating,
leasing, or selling the property commonly referred to as Sunnyside 205. The
property was purchased by the Partnership and then conveyed to PRT Sunnyside
LLC subject to a note payable in the amount of $5,806,994.
PRT Development Corporation
On November 20, 1997, PRT Development Corporation was organized as a
Delaware corporation for the purpose of acquiring land and developing and
selling the developed property. The authorized capital of PRT Development
consists of 2,000,000 shares of common stock. 100,000 of the shares will be
issued as Class A voting shares. The remaining 1,900,000 shares will be Class
B nonvoting. As of September 30, 1998 and December 31, 1997, 33,892 and 3,250
shares, respectively, of Class A common stock were issued and outstanding. All
of the Class A common stock is constructively owned by USRealty, and is
represented in minority interest. Pacific Retail owned 643,958 and 61,750
shares of Class B common stock issued and outstanding at September 30, 1998
and December 31, 1997, respectively. The Class B common stock is generally
entitled to 95% of all distributions made by PRT Development, and the Class A
common stock is generally entitled to 5% of all distributions made by PRT
Development. Pacific Retail has consolidated the operations of PRT Development
based on the control exerted in the ordinary course of business over the
operating decisions of PRT Development.
5. SHAREHOLDERS' EQUITY
Offerings
Between October 20, 1995 and July 16, 1996, Pacific Retail closed on a
series of private offerings to HOLDINGS which resulted in the sale of 20
million common shares of beneficial interest at $10 per share for a total
amount of $200 million.
F-75
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On October 20, 1995, as a partial acquisition price for five properties
acquired from OCP, Pacific Retail issued 1,130,276 Series A preferred shares
of beneficial interest to MPI at a stated liquidation preference of $10 per
share plus declared and unpaid dividends resulting in outstanding Series A
preferred shares valued at $11,302,760.
On December 22, 1995, Pacific Retail completed an offering of 100,000 common
shares at a price of $10 per share. Net proceeds, after offering costs, to
Pacific Retail were $982,000.
On August 6, 1996, OCP acquired 2,000,000 shares of Series B preferred
shares of beneficial interest at a stated liquidation preference of $10 per
share plus declared and unpaid dividends resulting in Series B preferred
shares valued at $20 million.
On August 30, 1996, OCP acquired 1,000,000 common shares of beneficial
interest in Pacific Retail at $10 per share for a total of $10 million.
On August 31, 1996, Pacific Retail completed a private offering of
18,182,305 common shares of beneficial interest at $11 per share resulting in
a total equity investment of $200,005,350. The first funding call took place
on September 16, 1996 resulting in 2,860,197 shares being issued for net
proceeds of $29,414,529. On January 9, 1997 and January 27, 1997, two funding
calls took place resulting in a total of 10,214,738 shares being issued for
net proceeds of $112,355,838. The final funding call took place on May 15,
1997 resulting in 5,107,370 shares being issued for net proceeds of
$56,181,060.
On April 30, 1997, Pacific Retail completed a private offering of 12,500,000
common shares of beneficial interest at $12 per share resulting in a total
expected equity investment of $150,000,000. The first funding call took place
on May 15, 1997 resulting in 1,898,100 shares being issued for net proceeds of
$21,277,205. The second funding call took place on September 18, 1997
resulting in 3,180,570 shares being issued for net proceeds of $38,158,904. On
October 1, November 11, and November 28, three funding calls took place
resulting in a total of 4,342,300 shares being issued for net proceeds of
$52,107,598. The final funding call took place on December 26, 1997 resulting
in 3,079,030 shares being issued for net proceeds of $36,948,358.
On December 29, 1997, Pacific Retail completed and fully funded a private
offering of 11,538,462 common shares of beneficial interest at $13 per share
for net proceeds of $148,474,528.
Trustee compensation
On March 11, 1997, Pacific Retail granted 4,305 shares to the board of
trustees as part of their compensation.
Effective March 14, 1997, Pacific Retail adopted the Deferred Fee Plan for
nonemployee trustees. Under this plan, trustees can defer receipt of cash and
equity compensation otherwise payable to the trustee by Pacific Retail.
Interest and dividends are earned on the deferred compensation. An election
must be made by each trustee to defer their compensation, and this election
shall remain in effect until modified or revoked by the trustee. Each trustee
must specify when the payment of deferred compensation is to take place. The
compensation may be deferred to a specific date of at least two years past the
time the compensation is earned, or the compensation may become payable on the
last day of the calendar year in which the trustee terminates service with
Pacific Retail, or the compensation can become payable on the earlier of such
dates.
As of September 30, 1998 and December 31, 1997, 9,668 and 4,825 shares,
respectively, have been deferred under this plan.
F-76
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Shares of beneficial interest
As of September 30, 1998 and December 31, 1997, 150,000,000 shares of
beneficial interest, $.01 par value per share, were authorized. Pacific
Retail's board of trustees is authorized to issue, from the authorized but
unissued shares of Pacific Retail, preferred shares in series and to establish
from time to time the number of preferred shares to be included in such series
and to fix the designation and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to distributions, qualifications
and terms and conditions of redemption's of the shares of such series.
Common shares
The outstanding common shares ("Shares") do not have redemption or
conversion rights or the benefit of any sinking fund. In the event of
liquidation, dissolution or winding up of Pacific Retail, the holders of
Shares are entitled to receive ratably the assets remaining after satisfaction
of all liabilities and payment of preferences and accrued dividends, if any,
on Pacific Retail's shares ranking senior to the Shares (including the
preferred shares). The rights of holders of Shares are subject to the rights
and preferences established by Pacific Retail's board of trustees for any
preferred shares, which have been or may subsequently be issued.
Preferred shares
The Series A preferred shares, the Series B preferred shares (together
referred to as "Preferred Shares") and Shares vote together as a single class
with respect to all matters presented to Pacific Retail's shareholders for a
vote. If twelve consecutive quarterly dividends on the Preferred Shares are in
arrears, the holders of Preferred Shares will be entitled to nominate and
elect an additional trustee until such time as all arrearages have been paid.
The Preferred Shares are entitled to a liquidation preference of $10 per share
plus an amount equal to all dividends declared but unpaid to the date of final
distribution. Pacific Retail may redeem the Preferred Shares any time after
October 20, 2010 at a price of $10 per share, plus all declared but unpaid
dividends.
Series A preferred shares
Series A preferred shares are convertible into Series B preferred shares on
a one-for-one basis and contain provisions for adjustment to prevent dilution.
For fiscal years beginning before January 1, 1997, the Series A preferred
shares were entitled to a quarterly dividend in an amount equal to the greater
of (i) $0.10 per share or (ii) $0.013 less than the dividend on the Shares.
For fiscal years beginning on or after January 1, 1997, Series A preferred
shares are entitled to quarterly dividends in an amount equal to the greater
of (i) $0.10 per share, (ii) 65% of the highest funds from operations per
Share for any preceding fiscal year and (iii) $0.013 less than the dividend on
the Shares. Dividends on the Series A preferred shares are cumulative from the
original issue date. Pacific Retail is restricted from paying any dividends on
any Shares or shares ranking on a parity with, or ranking junior to, the
Series A preferred shares, unless all cumulative dividends are simultaneously
paid on the Series A preferred shares.
Series B preferred shares
The board of trustees has authorized up to 6,130,276 Series B preferred
shares for issuance. Series B preferred shares are convertible into Shares on
a one-for-one basis and contain provisions for adjustment to prevent dilution.
For fiscal years beginning before January 1, 1997, the Series B preferred
shares were entitled to a quarterly dividend in an amount equal to the greater
of (i) $0.10 per share or (ii) the dividend on the Shares. For fiscal years
beginning on and after January 1, 1997, Series B preferred shares are entitled
to quarterly dividends in an amount equal to the greater of (i) $0.10 per
share, (ii) 65% of the highest funds from operations per Share for any
preceding fiscal year or (iii) the dividend on the Shares. Dividends on the
Series B preferred
F-77
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
shares are cumulative from the original issue date. Pacific Retail is
restricted from paying any dividends on any Shares or shares ranking on a
parity with, or ranking junior to, the Series B preferred shares, unless all
cumulative dividends are simultaneously paid on the Series B preferred shares.
Investor agreement
On October 20, 1995, HOLDINGS, and Pacific Retail entered into an investor
agreement whereby HOLDINGS agreed to purchase up to 20 million Shares at $10
per share, net of the original shares purchased, before October 20, 1997. As
of December 31, 1996, HOLDINGS had completed the purchase of 20 million
Shares. As long as HOLDINGS owns at least 25% of the outstanding common shares
of Pacific Retail it will have certain rights regarding appointment of
trustees to the board of trustees and regarding approval of budgets, property
operations, property acquisitions, changes in executive officers and sales of
shares.
Shareholders' agreement
On October 20, 1995, OCP entered into a shareholders' agreement with
HOLDINGS and Pacific Retail. Among other provisions of the agreement, OCP was
to acquire two million shares of Series B preferred shares at $10 per share at
its own request or if required by Pacific Retail. On August 6, 1996, OCP
purchased the two million shares of Series B preferred shares.
As part of the August 9, 1996 amendment to the shareholders' agreement,
HOLDINGS and OCP shall each have the right to participate pro rata, based upon
percentage ownership of the Shares on a fully diluted basis, in any offerings
by Pacific Retail of any capital shares or securities convertible into capital
shares on the same terms and at the same time as other offerees. The
respective rights terminate at such time as the holder shall own less than 10%
of the Shares on a fully diluted basis.
Shareholder ownership limitations
Pacific Retail's Declaration of Trust seeks to preserve its REIT status by
restricting any shareholder from owning more than 9.8% of Pacific Retail's
shares of beneficial interest, other than HOLDINGS or OCP. Pacific Retail
intends to adopt a shareholder rights plan pursuant to which one purchase
right will be issued as a dividend for each outstanding Share. Each purchase
right will entitle the holder to purchase one share at a fixed exercise price
and, under certain circumstances, to purchase at the exercise price shares or
securities of an acquiring company having a market value equal to some
multiple of the exercise price. The purchase rights would be exercisable only
upon the occurrence of certain triggering events and purchase rights held by
the acquiring person would not be exercisable. HOLDINGS and OCP would be
exempted from this shareholder rights plan.
6. MERGER
On September 23, 1998, Pacific Retail entered into a merger agreement with
Regency Realty Corporation (Regency), a publicly owned real estate investment
trust. The merger, already approved by the board of trustees of Pacific Retail
and the board of directors of Regency, would result in the acquisition of
Pacific Retail by Regency with Regency being the surviving entity. The merger
is expected to close on December 31, 1998. Each outstanding Common and
Preferred share of Pacific Retail would be converted into 0.48 shares of
Regency Common and Preferred stock, respectively.
Regency commenced operations as a real estate investment trust in 1993 with
the completion of its initial public offering. It succeeded to the real estate
business operations of The Regency Group, Inc., which began operations in
1963. Regency acquires, owns, develops and manages neighborhood shopping
centers in targeted infill markets primarily in the eastern half of the United
States. The merged company would have a total market
F-78
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
capitalization of approximately $2.2 billion, owning over 195 shopping
centers, consisting of approximately 22.5 million square feet in 22 states and
Washington, D.C., including 13 shopping centers under development.
USRealty is the largest shareholder of Regency, owning approximately 46.0%
of the outstanding Regency Common Stock. USRealty has already approved the
merger and will vote for the merger when both companies have their respective
shareholder meetings. Those shareholders meetings and accompanying vote with
regard to the merger are expected to occur in mid-December 1998. After the
merger USRealty will own approximately 59.3% of the outstanding Regency Common
Stock (52.5% on a fully diluted basis). It is anticipated that after the
merger Regency will continue to be taxed as a real estate investment trust
under the Internal Revenue Code and continue to be organized as a corporation
under the laws of the state of Florida. Regency's headquarters are in
Jacksonville, Florida.
7. INCENTIVE STOCK PROGRAMS
Pacific Retail has authorized 1,875,000 shares for a share incentive plan
(the "Plan"). On September 24, 1997, the Plan was amended to increase the
number of shares authorized to 5,250,000. Additionally, the Plan was amended
to award "dividend equivalent units" with all option grants (other than
matching options). Participants who are awarded dividend equivalent units will
be credited with these units annually based on a calculated dividend yield,
multiplied by the number of options outstanding. Matching options and a loan
provision have also been added to the common share purchase portion of the
Plan. This provision allows the compensation committee to award, for each
common share purchased, one or more matching options. Matching options do not
receive dividend equivalent units. Further, Pacific Retail may offer
participants loans for the entire purchase price of any common shares
purchased under the share purchase program. Any loans will be fully recourse
to the participant and be for a maximum of 10 years, subject to an
acceleration in the event of termination of employment or sale of the common
shares. Participants will be required to pledge any common shares to secure
the loan from Pacific Retail. Under all plans, the option exercise price
represents the estimated fair market value at the date of grant. Vesting of
the options commences no more than two years from grant date and options are
fully vested no more than five years from grant date. Options expire in 10
years from the date of grant or earlier upon termination of employment or
death.
On August 6, 1996, the board of trustees adopted the 1996 Trustees Plan (the
"Trustees Plan"). Under the Trustees Plan, nonemployee trustees received
options to purchase Shares at an exercise price equal to the market price on
the date of the grant. Options granted under the Trustees Plan are immediately
vested. These options expire in five years from the date of grant or earlier
upon resignation from the board of trustees or death.
F-79
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Pacific Retail applies APB Opinion No. 25 and related Interpretations in
accounting for both the Trustees Plan and the employee share incentive plan.
No compensation has been recognized for the plans as Pacific Retail has issued
the options at an exercise price, which represents the fair market value at
the date of grant. Had compensation cost for the plans been determined based
on the fair market value at the grant dates for awards, consistent with the
method provided by Statement of Financial Accounting Standards No. 123 (SFAS
No. 123), the Company's pro forma net earnings for the nine months ended
September 30, 1998 and 1997 would have been:
FOR THE FOR THE
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER SEPTEMBER
30, 1998 30, 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
Net earnings...................... As reported $33,566,923 $18,148,383
Pro forma (unaudited) $32,788,374 $18,045,954
Per share net earnings............ As reported $ .50 $ .44
attributable to common shares.... Pro forma (unaudited) $ .48 $ .44
Diluted per share net earnings.... As reported $ .49 $ .44
attributable to common shares.... Pro forma (unaudited) $ .48 $ .44
The fair value of each option grant is estimated on the date of grant using
the "minimum value" calculation stipulated by SFAS No. 123 for nonpublic
companies. Pacific Retail has assumed the following in estimating the fair
value of the options: expected lives of five years, dividend yield of 5%,
expected volatility of 0%, and risk-free interest rates ranging from 6.56% to
5.48%.
The following table summarizes activity under all programs:
WEIGHTED
AVERAGE
EXERCISE NUMBER OF
PRICE OPTIONS
-------- ---------
Outstanding at December 31, 1997............................ $ 11.73 2,463,872
Granted.................................................... 13.00 348,155
Exercised.................................................. -- --
Cancelled.................................................. (11.88) (406,668)
------- ---------
Outstanding at September 30, 1998........................... 11.87 2,405,359
======= =========
Options exercisable at September 30, 1999................... $ 10.51 130,282
======= =========
Weighted average net value of options granted during 1998... $ 3.20
=======
8. OPERATING LEASES
Pacific Retail receives rental income from the properties under operating
leases with terms ranging from less than one year to 24 years. The minimum
future rentals under operating leases as of September 30, 1998 are as follows:
Three months remaining in 1998.................................... $ 24,289,843
1999.............................................................. 90,904,809
2000.............................................................. 80,548,312
2001.............................................................. 68,759,426
2002.............................................................. 59,220,811
Thereafter........................................................ 377,360,451
------------
$701,083,652
============
F-80
PACIFIC RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. COMMITMENTS AND CONTINGENCIES
Pacific Retail is subject to environmental regulations related to the
ownership, operation, development and acquisition of real estate properties.
As part of due diligence procedures, Pacific Retail has obtained or conducted
Phase I environmental assessments on each property prior to acquisition.
Pacific Retail is not aware of any environmental condition on any of its
properties which is likely to have a materially adverse effect on Pacific
Retail's financial condition or results of operations.
F-81
PACIFIC RETAIL TRUST
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
COSTS GROSS AMOUNT AT WHICH CARRIED AT
INITIAL COSTS CAPITALIZED DECEMBER 31, 1997
------------------- SUBSEQUENT ------------------------------------- YEAR
ENCUM- BUILDINGS & TO BUILDINGS & ACCUMULATED CONSTRUCTED/
PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED
---------- ------- ------ ------------ ----------- ---------- -------------------------- ------------ ------------
OPERATING
PROPERTIES
Austin, Texas Area:
Market @ Round
Rock............ $ 7,523 $2,000 $ 8,978 $ 9 $ 2,000 $ 8,988 $ 10,988 $ (236) 1997
North Hills...... 9,194 4,900 18,484 56 4,900 18,540 23,440 (406) 1997
Dallas/Ft. Worth
Area:
Arapaho Village
South........... 837 7,083 328 837 7,411 8,248 (569) 1995
Casa Linda Plaza. 4,515 23,190 4,260 4,515 27,450 31,965 (1,120) 1996
Cooper Street
Plaza........... 2,079 10,419 78 2,079 10,497 12,576 (690) 1995
Harwood Hills
Phase I & II.... 6,900 2,618 6,475 2,004 2,618 8,478 11,096 (692) 1996,1996
Hillcrest
Village......... 1,600 1,752 1,600 1,752 3,352 (65) 1996
Market @ Preston
Forest.......... 4,400 10,643 4,400 10,643 15,043 (248) 1997
Mills Pointe..... 6,078 2,000 11,432 177 2,000 11,610 13,610 (334) 1997
Mockingbird
Commons......... 3,000 9,335 32 3,000 9,367 12,367 (398) 1996
Northview Plaza.. 1,957 7,999 263 1,957 8,262 10,219 (627) 1995
Preston Park
Village......... 25,910 6,400 45,957 9 6,400 45,966 52,366 (1,143) 1997
Ridglea Plaza.... 1,675 12,609 71 1,675 12,680 14,355 (978) 1995
Southpark Center. 3,078 8,720 38 3,078 8,758 11,836 (662) 1995
Valley Ranch
Phase I & II.... 2,593 6,276 3,989 3,021 9,837 12,858 (414) 1996,1996
The Village...... 522 6,809 38 522 6,847 7,369 (520) 1995
Denver Area:
Boulevard Center. 3,659 9,382 47 3,659 9,429 13,088 (375) 1996
Buckley Square... 3,270 4,248 (265)(b) 2,970 4,283 7,253 (180) 1996
Leetsdale Center. 3,420 9,150 432 3,420 9,582 13,002 (417) 1996
Littleton Square. 2,030 8,060 58 2,030 8,118 10,148 (241) 1996
Houston Area:
Champion Forest.. 2,666 7,943 22 2,666 7,965 10,631 (258) 1997
Los Angeles County
Area:
El Camino........ 7,600 9,671 7,600 9,671 17,271 (86) 1997
S-1
PACIFIC RETAIL TRUST
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION--CONTINUED
DECEMBER 31, 1997
(IN THOUSANDS)
COSTS GROSS AMOUNT AT WHICH CARRIED AT
INITIAL COSTS CAPITALIZED DECEMBER 31, 1997
-------------------- SUBSEQUENT ------------------------------------ YEAR
ENCUM- BUILDINGS & TO BUILDINGS & ACCUMULATED CONSTRUCTED/
PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED
---------- ------- ------- ------------ ----------- ---------- ------------------------- ------------ ------------
OPERATING
PROPERTIES
Plaza de
Hacienda....... $ 6,764 $ 4,230 $ 9,744 $ 3 $ 4,230 $ 9,747 $ 13,977 $ (349) 1997
Redondo Village. 1,313 3,810 1,313 3,810 5,123 (252) 1996
Ventura Village. 4,300 6,135 32 4,300 6,167 10,467 (311) 1996
Orange County
Area:
Heritage Plaza.. 8,907 25,732 46 8,907 25,778 34,685 (370) 1997
Morningside
Plaza.......... 4,300 12,819 3 4,300 12,823 17,123 (176) 1997
Newland Center.. 12,500 11,686 12,500 11,686 24,186 1997
Rona Plaza...... 1,500 4,239 2 1,500 4,240 5,740 (29) 1997
Santa Ana
Downtown Plaza. 4,240 7,105 13 4,240 7,118 11,358 (369) 1996
Phoenix Area:
Paseo Village... 4,363 2,550 6,652 100 2,550 6,752 9,302 (284) 1996
Pima Crossing... 5,800 24,208 98 5,800 24,306 30,106 (181) 1997
Portland Area:
Walker Center... 3,840 6,244 3,840 6,244 10,084 (155) 1997
Sacramento Area:
Arden Square.... 3,140 7,271 3,140 7,271 10,411 1997
The Promenade... 2,526 12,244 18 2,526 12,263 14,789 (664) 1996
San Diego County
Area:
Costa Verde..... 12,740 21,991 261 12,740 22,253 34,993 (1,249) 1996
El Norte Parkway
Plaza.......... 2,834 6,121 1 2,834 6,122 8,956 (431) 1996
Friars Mission.. 18,213 6,660 25,754 6,660 25,754 32,414 (289) 1997
San Francisco Bay
Area:
Blossom Valley.. 7,804 9,848 31 7,804 9,880 17,683 (451) 1996
Country Club
Village........ 3,000 11,117 170 3,000 11,287 14,287 (353) 1996
Encina Grande... 5,040 10,117 6 5,040 10,123 15,163 (306) 1997
Loehmann's
Plaza.......... 5,420 8,044 5,420 8,044 13,464 1997
San Leandro..... 1,300 7,689 1,300 7,689 8,989 (55) 1997
Sequoia Station. 9,100 17,697 9,100 17,697 26,797 1997
Strawflower
Village........ 4,060 6,867 15 4,060 6,882 10,943 (301) 1996
Tassajara
Crossing....... 8,560 14,526 47 8,560 14,573 23,133 (766) 1996
Westpark Plaza.. 5,840 4,398 37 5,840 4,434 10,274 (109) 1997
Woodside Central
Plaza.......... 3,500 8,623 3,500 8,623 12,123 (187) 1997
S-2
PACIFIC RETAIL TRUST
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION--CONTINUED
DECEMBER 31, 1997
(IN THOUSANDS)
GROSS AMOUNT AT WHICH CARRIED AT
INITIAL COSTS COSTS DECEMBER 31, 1997
--------------------- CAPITALIZED ----------------------------------- YEAR
ENCUM- BUILDINGS & SUBSEQUENT BUILDINGS & ACCUMULATED CONSTRUCTED/
PROPERTIES BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED
---------- ------- -------- ------------ -------------- ---------- ------------------------ ------------ ------------
OPERATING PROPERTIES
Seattle Area:
Lake Meridian
Marketplace....... $ 6,510 $ 11,557 $ 119 $ 6,510 $ 11,676 $ 18,186 $ (355) 1996
South Point Plaza. 5,000 9,697 37 5,000 9,735 14,735 (205) 1997
Southcenter Plaza. 1,300 12,022 74 1,300 12,096 13,396 (357) 1996
Totem Hill Plaza.. 1,100 3,124 15 1,100 3,139 4,239 (105) 1997
-------- -------- ------- ---------- ---------- ---------- --------
TOTAL OPERATING
PROPERTIES.......... $84,943 215,732 571,699 12,773 215,861 584,347 800,205 (19,315)
------- -------- -------- ------- ---------- ---------- ---------- --------
REDEVELOPMENT
PROPERTIES
Austin, Texas Area:
Hancock Center.... 8,232 4,150 4 8,232 4,154 12,386 (348) 1996
Orange County Area:
Bristol and
Warner............ 5,000 7,095 5,000 7,095 12,095 (18) 1997
------- -------- -------- ------- ---------- ---------- ---------- --------
TOTAL REDEVELOPMENT
PROPERTIES.......... -- 13,232 11,245 4 13,232 11,249 24,481 (366)
------- -------- -------- ------- ---------- ---------- ---------- --------
LAND UNDER
DEVELOPMENT
Dallas/Ft. Worth
Area:
Hebron Parkway
Plaza............. 2,378 2,378 2,378 1997
Prestonwood Park.. 10,166 10,166 10,166 1997
-------- -------- ------- ---------- ---------- ---------- --------
TOTAL LAND UNDER
DEVELOPMENT......... 12,543 -- -- 12,544 -- 12,544 --
-------- -------- ------- ---------- ---------- ---------- --------
LAND HELD FOR
DEVELOPMENT
Dallas/Ft. Worth
Area:
Harwood Hills..... 234 1 235 235 1996
Los Angeles Area:
Plaza de Hacienda. 770 58 828 828 1997
-------- -------- ------- ---------- ---------- ---------- --------
TOTAL LAND HELD FOR
DEVELOPMENT......... 1,004 -- 59 1,063 -- 1,063 --
-------- -------- ------- ---------- ---------- ---------- --------
GRAND TOTAL..... $84,943 $242,512 $582,944 $12,837 $ 242,700 $ 595,596 $ 838,293 $(19,681)
======= ======== ======== ======= ========== ========== ========== ========
(a) Reconciliation of total cost to balance sheet caption at December 31, 1997
(in thousands):
Total per Schedule III............................................. $838,293
Construction in process............................................ 13,165
--------
Total real estate.................................................. $851,458
========
(b) Pad site was sold in 1997 to the tenant under a right of first refusal
existing at time center was purchased. Sales price was $300,000 which was
equal to the cost of the pad site.
S-3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO, DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CRE-
ATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICI-
TATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
----------------
TABLE OF CONTENTS
PAGE
----
Summary.................................................................... 1
The Company and the Partnership............................................ 1
The Exchange Offer......................................................... 2
The New Notes.............................................................. 3
Risk Factors............................................................... 5
Consolidated Ratios of Earnings to Fixed Charges........................... 11
The Partnership and the Company............................................ 12
Use of Proceeds............................................................ 12
Selected Financial Data.................................................... 13
The Exchange Offer......................................................... 14
Description of Notes....................................................... 19
Information with Respect to the Guarantors................................. 30
Certain Federal Income Tax Consequences.................................... 31
Plan of Distribution....................................................... 35
Legal Matters.............................................................. 36
Experts.................................................................... 36
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OFFER TO EXCHANGE
$100,000,000
REGENCY CENTERS, L.P.
7 1/8% NOTES DUE JULY 15, 2005
----------------
----------------
PROSPECTUS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Regency's officers and directors are and will be indemnified under Florida
and Delaware law, the charter and by-laws of Regency, and the partnership
agreement of Regency Centers, L.P.
The Florida Business Corporation Act (the "Florida Act"), under which
Regency, RRC FL Five, Inc. and RRC Acquisitions, Inc. are organized, permits a
Florida corporation to indemnify a present or former director or officer of the
corporation (and certain other persons serving at the request of the corporation
in related capacities) for liabilities, including legal expenses, arising by
reason of service in such capacity if such person shall have acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and in any criminal proceeding if such person had
no reasonable cause to believe his conduct was unlawful. However, in the case of
actions brought by or in the right of the corporation, no indemnification may be
made with respect to any matter as to which such director or officer shall have
been adjudged liable, except in certain limited circumstances.
The partnership agreement of Regency Centers, L.P. also provides for
indemnification of Regency and its officers and directors against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, settlements, and other amounts
arising from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, that relate to the operations of the
partnership as set forth in the partnership agreement in which any indemnitee
may be involved, or is threatened to be involved, unless it is established that
(i) the act or omission of the indemnitee was material to the matter giving rise
to the proceeding and either was committed in bad faith or was the result of
active and deliberate dishonesty, (ii) the indemnitee actually received an
improper personal benefit in money, property or services, or (iii) in the case
of a criminal proceeding, the indemnitee had cause to believe that the act or
omission was unlawful. The termination of any proceeding by judgment, order or
settlement does not create a presumption that the indemnitee did not meet the
requisite standard of conduct set forth in the respective partnership agreement
section on indemnification. The termination of any proceeding by conviction or
upon a plea of nolo contendere or its equivalent, or an entry of an order of
probation before judgment creates a rebuttable presumption that the indemnitee
acted in a manner contrary to that specified in the indemnification section of
the partnership agreement. Any indemnification pursuant to the Regency Centers,
L.P. partnership agreement may only be made out of the assets of the
partnership.
The Agreement of Limited Partnership of Regency Office Partnership, L.P., a
Delaware limited partnership and the Agreement of Limited Partnership of RRC
Operating Partnership of Georgia, L.P., a Georgia limited partnership,
each provide that neither its general partner, nor any affiliate, nor any
shareholder, officer, director, partner or employee of such general partner or
any affiliate shall be liable, responsible or accountable in damages or
otherwise to any of the limited partners or to such Partnership for any act or
omission performed or omitted by them in good faith, provided that they were not
guilty of gross negligence or willful misconduct. Except for actions or
omissions constituting gross negligence or willful misconduct, each Partnership
Agreement provides that such respective Partnership shall indemnify its general
partner, each affiliate and each shareholder, officer, director, partner and
employee of such general partner or any affiliate, for any loss, liability,
damage, or expense incurred by them on behalf of the Partnership or in
furtherance of the Partnership's interests, including reasonable attorneys' fees
and expenses.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
The exhibits to this Registration Statement are listed in the
Exhibit Index, which appears immediately after the signature page
and is incorporated herein by this reference.
(b) Financial Statement Schedules
(i) The Consolidated Real Estate and Accumulated Depreciation
Schedule of the Partnership as of December 31, 1997 is
found at page S-2 of the Partnership's registration
statement on Form 10 and incorporated herein by reference.
(ii) The Independent Auditors' Report on the above-referenced
schedule of the Partnership is found at page S-1 of the
Partnership's registration statement on Form 10 and
incorporated herein by reference.
(iii) The Consolidated Real Estate and Accumulated Depreciation
Schedule of Regency as of December 31, 1997 is found at
page S-2 of Regency's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 and incorporated
herein by reference.
(iv) The Independent Auditors' Report on the above-referenced
schedule of Regency is found at page S-1 of Regency's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and incorporated herein by reference.
(v) All other schedules are omitted because they are not
applicable, or because the required information is
included in the financial statements of the Partnership or
Regency or notes thereto incorporated herein by reference.
(vi) Schedule III of Pacific Retail; Real Estate and
Accumulated Depreciation as of December 31, 1997 on page
S-1 of this Registration Statement.
(viii) All other schedules are omitted because they are not
applicable, or because the required information is
included in the financial statements of Pacific Retail or
notes thereto included elsewhere in this Registration
Statement.
(c) Reports, Opinions and Appraisals
Not Applicable.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrants hereby undertake that, for the purposes of
determining any liability under the Securities Act of 1933, each
filing of the annual report of a registrant pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrants pursuant to the provisions
discussed in Item 20 or otherwise, the registrants have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
each of the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(d) The undersigned registrants hereby undertake to respond to requests
for information that is incorporated by reference into the Prospectus
pursuant to Item 4, 10(b), 11, or 13 of this Form within one business
day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes
information contained in documents filed after the effective date of
this Registration Statement through the date of responding to the
request.
(e) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject
of and included in this Registration Statement when it became
effective.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this amended Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jacksonville, State of
Florida, on December 15, 1998.
REGENCY CENTERS, L.P.
By: Regency Realty Corporation, General Partner
By: /s/ Martin E. Stein, Jr.
-----------------------------
Martin E. Stein, Jr., Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
amended Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: December 15, 1998 /s/ Martin E. Stein, Jr.
-------------------------------- ------------------------
Martin E. Stein, Jr., Chairman of
the Board, President and Chief
Executive Officer
Date: December 15, 1998 /s/ Bruce M. Johnson
-------------------------------- ------------------------
Bruce M. Johnson, Managing Director
and Principal Financial Officer
Date: December 15, 1998 /s/ J. Christian Leavitt
-------------------------------- ------------------------
J. Christian Leavitt, Vice
President, Secretary, Treasurer and
Principal Accounting Officer
Date: December 15, 1998 *
-------------------------------- ------------------------
Joan W. Stein, Chairman Emeritus and
Director
Date: December 15, 1998 *
-------------------------------- ------------------------
Richard W. Stein, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Edward L. Baker, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Raymond L. Bank, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
J. Alexander Branch III, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
A.R. Carpenter, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
J. Dix Druce, Jr., Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Albert Ernest, Jr., Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Douglas S. Luke, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Mary Lou Rogers, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Jonathan Smith, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Lee S. Wielansky, Director
* /s/ J. Christian Leavitt
------------------------------------
J. Christian Leavitt
Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this amended Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jacksonville, State of
Florida, on December 15, 1998.
REGENCY REALTY CORPORATION
By: /s/ Martin E. Stein, Jr.
-------------------------
Martin E. Stein, Jr., Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: December 15, 1998 /s/ Martin E. Stein, Jr.
-------------------------------- ---------------------------------
Martin E. Stein, Jr., Chairman of
the Board, President and Chief
Executive Officer
Date: December 15, 1998 /s/ Bruce M. Johnson
-------------------------------- ---------------------------------
Bruce M. Johnson, Managing Director
and Principal Financial Officer
Date: December 15, 1998 /s/ J. Christian Leavitt
-------------------------------- ---------------------------------
J. Christian Leavitt, Vice
President, Secretary, Treasurer and
Principal Accounting Officer
Date: December 15, 1998 *
-------------------------------- ---------------------------------
Joan W. Stein, Chairman Emeritus and
Director
Date: December 15, 1998 *
-------------------------------- ---------------------------------
Richard W. Stein, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Edward L. Baker, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Raymond L. Bank, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
J. Alexander Branch III, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
A.R. Carpenter, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
J. Dix Druce, Jr., Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Albert Ernest, Jr., Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Douglas S. Luke, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Mary Lou Rogers, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Jonathan Smith, Director
Date: December 15, 1998 *
-------------------------------- ----------------------------------
Lee S. Wielansky, Director
* /s/ J. Christian Leavitt
-----------------------------------
J. Christian Leavitt
Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this amended Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jacksonville, State of
Florida, on December 15, 1998.
REGENCY OFFICE PARTNERSHIP, L.P.
By: Regency Centers, L.P., General Partner
By: Regency Realty Corporation, General Partner
By: /s/ Martin E. Stein, Jr.
-----------------------------
Martin E. Stein, Jr., Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: December 15, 1998 /s/ Martin E. Stein, Jr.
------------------ ------------------------
Martin E. Stein, Jr., Chairman of
the Board, President and Chief
Executive Officer
Date: December 15, 1998 /s/ Bruce M. Johnson
------------------ --------------------
Bruce M. Johnson, Managing Director
and Principal Financial Officer
Date: December 15, 1998 /s/ J. Christian Leavitt
------------------ ------------------------
J. Christian Leavitt, Vice
President, Secretary, Treasurer and
Principal Accounting Officer
Date: December 15, 1998 *
------------------ -----------------
Joan W. Stein, Chairman Emeritus and
Director
Date: December 15, 1998 *
------------------ --------------------
Richard W. Stein, Director
Date: December 15, 1998 *
------------------ -------------------
Edward L. Baker, Director
Date: December 15, 1998 *
------------------ -------------------
Raymond L. Bank, Director
Date: December 15, 1998 *
------------------ ---------------------------
J. Alexander Branch III, Director
Date: December 15, 1998 *
------------------ ------------------
A.R. Carpenter, Director
Date: December 15, 1998 *
------------------ ---------------------
J. Dix Druce, Jr., Director
Date: December 15, 1998 *
------------------ ----------------------
Albert Ernest, Jr., Director
Date: December 15, 1998 *
------------------ -------------------
Douglas S. Luke, Director
Date: December 15, 1998 *
------------------ -------------------
Mary Lou Rogers, Director
Date: December 15, 1998 *
------------------ ------------------
Jonathan Smith, Director
Date: December 15, 1998 *
------------------ --------------------
Lee S. Wielansky, Director
* /s/ J. Christian Leavitt
----------------------------
J. Christian Leavitt
Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this amended Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Jacksonville, State
of Florida, on December 15, 1998.
-----------------
RRC OPERATING PARTNERSHIP OF GEORGIA, L.P.
By: Regency Centers, L.P., General Partner
By: Regency Realty Corporation, General Partner
By: /s/ Martin E. Stein, Jr.
-----------------------------
Martin E. Stein, Jr., Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: December 15, 1998 /s/ Martin E. Stein, Jr.
------------------ ------------------------
Martin E. Stein, Jr., Chairman of
the Board, President and Chief
Executive Officer
Date: December 15, 1998 /s/ Bruce M. Johnson
------------------ --------------------
Bruce M. Johnson, Managing Director
and Principal Financial Officer
Date: December 15, 1998 /s/ J. Christian Leavitt
------------------ ------------------------
J. Christian Leavitt, Vice
President, Secretary, Treasurer and
Principal Accounting Officer
Date: December 15, 1998 *
------------------ -----------------
Joan W. Stein, Chairman Emeritus and
Director
Date: December 15, 1998 *
------------------ --------------------
Richard W. Stein, Director
Date: December 15, 1998 *
------------------ -------------------
Edward L. Baker, Director
Date: December 15, 1998 *
------------------ -------------------
Raymond L. Bank, Director
Date: December 15, 1998 *
------------------ ---------------------------
J. Alexander Branch III, Director
Date: December 15, 1998 *
------------------ ------------------
A.R. Carpenter, Director
Date: December 15, 1998 *
------------------ ---------------------
J. Dix Druce, Jr., Director
Date: December 15, 1998 *
------------------ ----------------------
Albert Ernest, Jr., Director
Date: December 15, 1998 *
------------------ -------------------
Douglas S. Luke, Director
Date: December 15, 1998 *
------------------ -------------------
Mary Lou Rogers, Director
Date: December 15, 1998 *
------------------ ------------------
Jonathan Smith, Director
Date: December 15, 1998 *
------------------ --------------------
Lee S. Wielansky, Director
* /s/ J. Christian Leavitt
----------------------------
J. Christian Leavitt
Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this amended Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Jacksonville, State
of Florida, on December 15, 1998.
-----------------
RRC FL FIVE, INC.
By: /s/ Martin E. Stein, Jr.
-----------------------------
Martin E. Stein, Jr., President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
amended Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: December 15, 1998 /s/ Martin E. Stein, Jr.
------------------ ------------------------
Martin E. Stein, Jr., Chairman of
the Board, President and Chief
Executive Officer
Date: December 15, 1998 /s/ Bruce M. Johnson
------------------ --------------------
Bruce M. Johnson, Managing Director
and Principal Financial Officer
Date: December 15, 1998 /s/ J. Christian Leavitt
------------------ ------------------------
J. Christian Leavitt, Vice
President, Secretary, Treasurer and
Principal Accounting Officer
Date: December 15, 1998 /s/ Richard W. Stein
------------------ --------------------
Richard W. Stein, Director
Date: December 15, 1998 /s/ Jonathan L. Smith
------------------ ---------------------
Jonathan L. Smith, Director
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this amended Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Jacksonville, State
of Florida, on December 15, 1998.
-----------------
RRC ACQUISITIONS, INC.
By: /s/ Martin E. Stein, Jr.
------------------------
Martin E. Stein, Jr., President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: December 15, 1998 /s/ Martin E. Stein, Jr.
------------------ ------------------------
Martin E. Stein, Jr., Chairman of
the Board, President and Chief
Executive Officer
Date: December 15, 1998 /s/ Bruce M. Johnson
------------------ --------------------
Bruce M. Johnson, Managing Director
and Principal Financial Officer
Date: December 15, 1998 /s/ J. Christian Leavitt
------------------ ------------------------
J. Christian Leavitt, Vice
President, Secretary, Treasurer and
Principal Accounting Officer
Date: December 15, 1998 /s/ Richard W. Stein
------------------ --------------------
Richard W. Stein, Director
Date: December 15, 1998 /s/ Jonathan L. Smith
------------------ ---------------------
Jonathan L. Smith, Director
EXHIBIT INDEX
EXHIBIT PAGINATION/
NUMBER EXHIBIT DESIGNATION NUMBERING SYSTEM
4.1 Indenture dated as of July 20, 1998 (incorporated by reference
among Regency Centers, L.P., the to Exhibit 10.2 to Regency
Guarantors named therein and First Centers, L.P.'s Registration
Union National Bank, as trustee Statement on Form 10)
4.2 Exchange and Registration Rights (incorporated by reference
Agreement dated as of July 15, 1998 to Exhibit 10.3 to Regency
among Regency Centers, L.P., the Centers, L.P.'s Registration
Guarantors named therein and the Statement on Form 10)
Purchasers named therein
4.3* Form of New Note
5.1 Opinion of Foley & Lardner as to the
validity of the New Notes and the New
Guarantees.
8.1 Opinion of Foley & Lardner as to
tax matters and REIT status
12 Statement regarding computation of
Ratio of Earnings to Fixed Charges.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of PricewaterhouseCoopers
23.3 Consent of Foley & Lardner, counsel to
the Issuers (included in Exhibits 5.1
and 8.1).
25* Statement of Eligibility of Trustee.
27.1 Financial Data Schedule for Regency Office Partnership, L.P.
27.2 Financial Data Schedule for RRC Operating Partnership of Georgia, L.P.
27.3 Financial Data Schedule for RRC FL Five, Inc.
27.4 Financial Data Schedule for RRC Acquisitions, Inc.
99.1 Form of Letter of Transmittal.
99.2* Form of Exchange Agency Agreement.
___________________________
* Previously filed
Exhibit 5.1
December 15, 1998
Regency Centers, L.P.
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
Re: Registration Statement on Form S-4
Gentlemen:
This opinion is being furnished in connection with the Registration
Statement on Form S-4 of Regency Centers, L.P. (the "Issuer") and the guarantors
named therein ("Guarantors"), under the Securities Act of 1933, as amended (the
"Securities Act"), for the registration of up to (a) $100,000,000 aggregate
principal amount of 7-1/8% Notes Due July 15, 2005 of the Issuer (the "New
Notes") and (b) the guarantee of the Guarantors with respect to the New Notes
(the "New Guarantees"), to be issued in exchange for a like principal amount of
outstanding 7-1/8% Notes Due July 15, 2005 of the Issuer (the "Old Notes") and
the existing like guarantees thereof (the "Old Guarantees"), respectively, which
have not been registered under the Securities Act. The Registration Statement
filed concurrently herewith is referred to herein as the "Registration
Statement."
In connection with the issuance of such securities, we have examined and
are familiar with: (a) the agreements of limited partnership of the Issuer and
of each Guarantor which is a limited partnership, each as presently in effect,
(b) the articles of incorporation and bylaws of each Guarantor which is a
corporation, each as presently in effect, (c) the proceedings of and actions
taken by the Board of Directors of Regency Realty Corporation ("Regency"), as
general partner of the Issuer, in connection with the issuance and sale of the
New Notes, (d) the proceedings of and actions taken by the Board of Directors of
each Guarantor in connection with the issuance of the New Guarantees and (e)
such other records, certificates and documents as we have considered necessary
or appropriate for purposes of this opinion.
1. The New Notes have been duly authorized, and when duly executed,
authenticated, issued and delivered in exchange for a like principal amount of
Old Notes, will constitute valid and legally binding obligations of the Issuer
enforceable in accordance with their terms, subject, as to enforcement, to
bankruptcy, fraudulent transfer, equitable subordination, fair dealing,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
2. The New Guarantees have been duly authorized, and when duly executed,
issued and delivered by the Guarantors in exchange for the Old Guarantees, and
when the New Notes have been issued and authenticated, will constitute valid and
legally binding obligations of the Guarantors enforceable in accordance with
their terms, subject, as to enforcement, to
Regency Centers, L.P.
December 15, 1998
Page 2
bankruptcy, fraudulent transfer, equitable subordination, fair dealing,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
We assume no obligation to supplement this opinion letter if any
applicable law changes after the date hereof or if we become aware of any fact
that might change the opinions expressed herein after the date hereof.
We hereby consent to the inclusion of this opinion as Exhibit 5.1 in said
Registration Statement and to the reference to this firm under the
caption "Legal Matters" in the Prospectus. In giving this consent we do not
hereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
or regulations of the Securities and Exchange Commission promulgated thereunder.
Sincerely,
FOLEY & LARDNER
By:/s/ Linda Y. Kelso
------------------------
Linda Y. Kelso
[LETTERHEAD OF FOLEY & LARDNER APPEARS HERE]
EXHIBIT 8.1
December 15, 1998
Regency Centers, L.P.
Regency Realty Corporation
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
REGENCY REALTY CORPORATION
--------------------------
QUALIFICATION AS
----------------
REAL ESTATE INVESTMENT TRUST
----------------------------
Ladies and Gentlemen:
You have requested our opinions as tax counsel to Regency Centers, L.P.
(the "Partnership") and Regency Realty Corporation (the "Company") concerning
the federal income tax consequences in connection with the registration
statement on Form S-4, originally filed with the Securities and Exchange
Commission on September 18, 1998 under registration number 333-63723 (which
registration statement, as amended, is hereinafter referred to as the
"Registration Statement") and with respect to qualification of the Company as a
real estate investment trust (a "REIT") for federal income tax purposes.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Registration Statement.
In connection with the opinions rendered below, we have reviewed the
Registration Statement, the agreement of limited partnership of the Partnership,
the articles of incorporation and bylaws of the Company and such other documents
that we deemed relevant. The opinions expressed in this letter are based upon
certain factual representations set forth in the Registration Statement and in
certificates of officers of the Company.
Regency Centers, L.P.
December 15, 1998
Page 2
In connection with the opinions rendered below, we have assumed generally
that:
1. each of the documents referred to above has been duly authorized,
executed, and delivered; is authentic, if an original, or is accurate, if a
copy; and has not been amended;
2. during its short taxable year ended December 31, 1993 and subsequent
taxable years, the Company has operated and will continue to operate in such a
manner that makes and will continue to make the representations contained in a
certificate, dated as of the date hereof and executed by a duly appointed
officer of the Company (the "Officer's Certificate"), true for such years;
3. the Company will not make any amendments to its organizational documents
or to the organizational documents of Regency Realty Group, Inc., a Florida
corporation ("Management Company"), or the Partnership, after the date of this
opinion that would affect its qualification as a REIT for any taxable year;
4. no actions will be taken by the Company or Management Company after the
date hereof that would have the effect of altering the facts upon which the
opinion set forth below is based.
In connection with the opinions rendered below, we also have relied upon
the correctness of the factual representations contained in the Officer's
Certificate.
Based solely on the documents and assumptions set forth above and the
factual representations set forth in the Officer's Certificate, and without
further investigation, we are of the opinion that:
1. The exchange of Old Notes for New Notes in the Exchange Offer should not
be treated as an "exchange" for U.S. federal income tax purposes because the New
Notes should not be considered to differ materially in kind or extent from the
Old Notes and because the exchange will occur by operation of the terms of the
Old Notes. As a result, there should be no federal income tax consequences to
holders exchanging Old Notes for New Notes in the Exchange Offer, and a holder
will have the same adjusted basis and holding period in the New Notes as it had
in the Old Notes immediately before the exchange.
2. Interest on a Note will be taxable to a United States Holder as ordinary
income at the time it is received or accrued, depending on the holder's method
of accounting for tax purposes. A United States Holder is a beneficial owner
that is (i) a citizen or resident of the United States, (ii) a domestic
corporation, (iii) an estate the income of which is subject to United States
federal income tax without regard to its source or (iv) a trust if a court
within the United States is able to exercise primary supervision over the
administration of the trust and
Regency Centers, L.P.
December 15, 1998
Page 3
one or more United States persons have the authority to control all substantial
decisions of the trust.
3. A United States Holder's tax basis in a Note will generally be its cost.
Upon the sale or retirement of a Note, a United States Holder will generally
recognize gain or loss on the sale or retirement of a note equal to the
difference between the amount realized (not including any amounts attributable
to accrued and unpaid interest) and the holder's tax basis of the Note. Long-
term capital gain of a non-corporate United States Holder is generally subject
to a maximum tax rate of 20% in respect of property held for more than one year.
4. Under present United States federal income and estate tax law, and
subject to the discussion of backup withholding below:
(i) payments of principal and interest by the Partnership or any of its
paying agents to any holder of a Note that is a United States Alien
Holder(1) will not be subject to United States federal withholding tax if,
in the case of interest, (a) the beneficial owner of the Note does not
actually or constructively own 10% or more of the capital or profits
interest of the Partnership, (b) the beneficial owner of the Note is not a
controlled foreign corporation that is related to the Partnership through
stock ownership, and (c) either (A) the beneficial owner of the Note
certifies to the Partnership or its agent, under penalties of perjury, that
it is not a United States Holder and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
(a "financial institution") and holds the Note certifies to the partnership
or its agent under penalties of perjury that such statement has been
received from the beneficial owner by it or by a financial institution
between it and the beneficial owner and furnishes the payor with a copy
thereof:
(ii) a United States Alien Holder of a Note will not be subject to
United States federal withholding tax on any gain realized on the sale of a
Note; and
(iii) a Note held by an individual who at death is not a citizen or
resident of the United States will not be includible in the individual's
gross estate for purposes of the United States federal estate tax as a
result of the individual's death if (a) the individual did not actually or
constructively own 10% or more of the capital or profits interest of the
Partnership and (b) the income on the Note would not have been effectively
connected with a United States trade or business of the individual at the
individual's death.
- ----------
(1) For purposes of this discussion, a "United States Alien Holder" is any
holder of a Note who is (i) a nonresident alien individual or (ii) a
foreign corporation, partnership or estate or trust, in either case
not subject to United States federal income tax on a net income basis
in respect of income or gain from a Note.
Regency Centers, L.P.
December 15, 1998
Page 4
Recently finalized Treasury regulations (the "Final Withholding
Regulations"), that are generally effective with respect to payments after
December 31, 1999, would provide alternative methods for satisfying the
certification requirement described in clause (i)(c) above. The Final
Withholding Regulations also would require in the case of Notes held by a
foreign partnership, that (x) the certification described in clause (i)(c) above
be provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships.
5. In general, information reporting requirements will apply to payments of
principal and interest on a Note and the proceeds of the sale of a Note before
maturity within the United States to non-corporate United States Holders, and
"backup withholding" at a rate of 31% will apply to such payments if the United
States Holder fails to provide an accurate taxpayer identification number or is
notified by the IRS that it has failed to report all interest and dividends
required to be shown on its federal income tax returns.
6. Under current law, information reporting on IRS Form 1099 and backup
withholding will not apply to payments of principal and interest made by the
Partnership or a paying agent to a United States Alien Holder on a Note;
provided, the certification described in clause (i)(c) under paragraph 4 above
is received and provided further that the payor does not have actual knowledge
that the holder is a United States person. The partnership or a paying agent,
however, may report (on IRS Form 1042S) payments of interest on Notes.
7. Payments of the proceeds from the sale by a United States Alien Holder
of a Note made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is (i) a
United States person, (ii) a controlled foreign corporation for United States
tax purposes, (iii) a foreign person 50% or more of whose gross income is
effectively connected with a United States trade or business for a specified
three-year period or (iv) with respect to payments made after December 31, 1999,
a foreign partnership, if at any time during its tax year one or more of its
partners are U.S. persons (as defined in U.S. Treasury regulations) who in the
aggregate hold more than 50% of the income or capital interest in the
partnership or if, at any time during its tax year, such foreign partnership is
engaged in a United States trade or business, information reporting may apply to
such payments. Payments of the proceeds from the sale of a Note to or through
the United States office of a broker is subject to information reporting and
backup withholding unless the holder of beneficial owner certifies as to its
non-United States status or otherwise establishes an exemption from information
reporting and backup withholding.
Regency Centers, L.P.
December 15, 1998
Page 5
8. The Company has qualified to be taxed as a REIT pursuant to sections 856
through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), for
its taxable years ended December 31, 1993 through December 31, 1997, and the
Company's organization and current and proposed method of operation has enabled
it and will continue to enable it to continue to satisfy the requirements for
qualification as a REIT provided the Company meets and continues to meet the
asset composition, source of income, shareholder diversification, distributions
and other requirements of the Code necessary for the Company to qualify as a
REIT. We have performed no due diligence and have made no efforts to verify the
accuracy and genuineness of the documents and assumptions set forth above, and
the representations set forth in the Officer's Certificate. We will not review
on a continuing basis the Company's compliance with such documents, assumptions
or representations. Accordingly, no assurance can be given that the actual
results of the Company's operations for its 1998 and subsequent taxable years
will satisfy the requirements for qualification and taxation as a REIT.
This opinion does not purport to deal with all aspects of taxation that may
be relevant to particular investors in light of their personal investment or
tax circumstances, or to certain types of holders (including insurance
companies, tax-exempt organizations, financial institutions or brokers-dealers,
foreign corporations, persons who are not citizens or residents of the United
States, persons who own Notes as part of a conversion transaction, as part of a
hedging transaction or as a position in a straddle for tax purposes and persons
who own 10% or more of the stock of Regency) subject to special treatment under
the federal income tax laws. This opinion does not give a detailed discussion of
any state, local or foreign tax consideration.
The foregoing opinions are based on current provisions of the Code and the
Treasury regulations thereunder (the "Regulations"), published administrative
interpretations thereof, and published court decisions, all of which are subject
to change either prospectively or retroactively. The Internal Revenue Service
has not issued Regulations or administrative interpretations with respect to
various provisions of the Code relating to REIT qualification. No assurance can
be given that the law will not change in a way that will prevent the Company
from qualifying as a REIT or that may change the other legal conclusions stated
herein.
The foregoing opinion is limited to the U.S. federal income tax matters
addressed herein, and no other opinions are rendered with respect to other
federal tax matters or to any issues arising under the tax laws of any other
country, or any state or locality. We undertake no obligation to update the
opinion expressed herein after the date of this letter.
We hereby consent to the inclusion of this opinion as Exhibit 8.1 in said
Registration Statement and to the reference to this firm under the captions
"Federal Income Tax Consequences" and "Legal Matters" in the Prospectus. In
giving this consent we do not hereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules or regulations of the Securities and Exchange
Commission promulgated thereunder.
Sincerely,
FOLEY & LARDNER
EXHIBIT 12
Ratio of Earnings to Fixed Charges
Sept-98 1997 1996 1995 1994
-------- ------- ------- ------ ------
Pretax net income 35,918 23,510 4,942 796 554
Plus fixed charges 17,970 15,510 6,915 5,676 3,137
Less gain on sale (10,737) (451) - - -
Less preferred stock dividend - - (58) (591) (283)
Less capitalized interest (3,447) (1,896) (381) (285) (216)
------- ------ ------ ----- -----
Earnings 39,704 36,673 11,418 5,596 3,192
Preferred stock dividend - - 58 591 283
Interest expense 14,523 13,614 6,476 4,800 2,638
Capitalized interest 3,447 1,896 381 285 216
------- ------ ------ ----- -----
Total fixed charges 17,970 15,510 6,915 5,676 3,137
Ratio 2.2 2.4 1.7 1.0 1.0
EXHIBIT 23.1
Accountants' Consent
--------------------
The Board of Directors
Regency Centers, L.P.:
We consent to the use of our reports included herein, and incorporated herein by
reference, and to the reference to our firm under the heading "Experts" in the
Prospectus.
KPMG PEAT MARWICK LLP
Jacksonville, Florida
December 17, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Regency Centers, L.P. of our reports
dated January 23, 1998 relating to the financial statements of Pacific Retail
Trust for the years ended December 31, 1997 and 1996 and dated February 9,
1996 relating to the financial statements of Pacific Retail Trust for the
period from April 27, 1995 (Inception) to December 31, 1995, which appear in
such Prospectus. We also consent to the application of the report dated
January 23, 1998 to the Financial Statement Schedule for the year ended
December 31, 1997 listed under Item 21(b) of this Registration Statement when
such schedule is read in conjunction with the financial statements referred to
in our report. The audits referred to in such report also included this
schedule. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
PricewaterhouseCoopers LLP
Dallas, Texas
December 17, 1998
5
0001066252
REGENCY OFFICE PARTNERSHIP, L.P.
1
YEAR 9-MOS
DEC-31-1997 DEC-31-1998
JAN-01-1997 JAN-01-1998
DEC-31-1997 SEP-30-1998
62,852 50,191
0 0
41,894 250,177
0 0
0 0
0 0
24,248,802 34,159,726
4,990,570 393,344
19,641,749 34,075,758
0 0
0 0
0 0
0 0
0 0
19,491,755 33,787,010
19,641,749 34,075,758
0 0
4,684,993 2,939,004
0 0
1,581,484 529,274
855,039 548,492
0 0
290,127 0
2,099,371 12,204,721
0 0
2,099,371 12,204,721
0 0
0 0
0 0
2,099,371 12,204,721
0 0
0 0
5
0001066253
RRC OPERATING PARTNERSHIP OF GA., L.P.
1
9-MOS YEAR
DEC-31-1998 DEC-31-1997
JAN-01-1998 JAN-01-1997
SEP-30-1998 DEC-31-1997
21,441 17,178
0 0
46,808 51,375
0 0
0 0
0 0
5,547,704 5,522,973
290,700 206,224
5,350,908 5,392,102
0 0
0 0
0 0
0 0
0 0
1,503,540 1,660,121
5,350,908 5,392,102
0 0
598,432 785,700
0 0
116,951 186,075
88,761 115,342
0 0
164,924 276,652
227,796 207,631
0 0
227,796 207,631
0 0
0 0
0 0
227,796 207,631
0 0
0 0
5
0001066248
RRC FL FIVE, INC.
1
YEAR 9-MOS
DEC-31-1997 DEC-31-1998
JAN-01-1997 JAN-01-1998
DEC-31-1997 SEP-30-1998
64,252 187,429
0 0
238,530 140,638
0 0
0 0
0 0
12,186,175 12,225,614
1,635,974 1,992,106
11,132,117 10,875,187
0 0
0 0
0 0
0 0
100 100
2,364,870 1,880,068
11,132,117 10,875,187
0 0
1,395,464 1,065,658
0 0
482,038 366,945
520,571 397,599
0 0
833,446 618,257
(496,047) (359,944)
0 0
(496,047) (359,944)
0 0
0 0
0 0
(496,047) (359,944)
0 0
0 0
5
0001066250
RRC ACQUISITIONS, INC.
1
9-MOS YEAR
DEC-31-1998 DEC-31-1997
JAN-01-1998 JAN-01-1997
SEP-30-1998 DEC-31-1997
29,914 30,714
0 0
230,932 93,413
0 0
0 0
0 0
18,032,606 17,886,114
353,450 86,841
17,991,253 17,930,811
0 0
0 0
0 0
0 0
100 100
17,816,472 17,711,733
17,991,253 17,930,811
0 0
1,805,032 507,420
0 0
339,731 89,933
271,613 87,277
0 0
0 0
1,013,838 286,128
0 0
1,013,838 286,128
0 0
0 0
0 0
1,013,838 286,128
0 0
0 0
EXHIBIT 99.1
LETTER OF TRANSMITTAL
REGENCY CENTERS, L.P.
OFFER TO EXCHANGE ITS
7 1/8% NOTES DUE JULY 15, 2005
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
7 1/8% NOTES DUE JULY 15, 2005
PURSUANT TO THE PROSPECTUS
DATED _______, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1999, UNLESS THE OFFER IS EXTENDED.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
FIRST UNION NATIONAL BANK
BY MAIL/OVERNIGHT DELIVERY/HAND DELIVERY:
FIRST UNION NATIONAL BANK (3C3)
1525 WEST W. T. HARRIS BLVD.
CHARLOTTE, NORTH CAROLINA 28262
ATTN: CORPORATE ACTIONS
TO CONFIRM BY TELEPHONE OR FOR INFORMATION REGARDING
THE PROCEDURES FOR TENDERING OLD NOTES:
(704) 590-7413
MARCIA RICE
FACSIMILE TRANSMISSIONS:
(704) 590-7628
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Old Notes (as
defined below) either (a) if Old Notes are to be forwarded herewith or (b) if
tenders of Old Notes are to be made by book-entry transfer to an account
maintained by First Union National Bank (the "Exchange Agent") at The
Depository Trust Company ("DTC") pursuant to the procedures set forth in "The
Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus and an
Agent's Message (as defined below) is not delivered. Certificates, as well as
this Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth above on or prior to the Expiration Date. Tenders by
book-entry transfer may also be made by delivering an Agent's Message in lieu
of this Letter of Transmittal on or prior to the Expiration Date. The term
"book-entry confirmation" means a confirmation of a book-entry transfer of Old
Notes into the Exchange Agent's account at DTC. The term "Agent's Message"
means a message, transmitted by DTC to and received by the Exchange Agent and
forming a part of a book-entry confirmation, which states that DTC has
received an express acknowledgement from the tendering participant, which
acknowledgement states that such participant has received and agrees to be
bound by this Letter of Transmittal and that the Partnership and Regency may
enforce this Letter of Transmittal against such participant.
DELIVERY OF DOCUMENTS TO DTC
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURE MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX
DESCRIPTION OF OLD NOTES TENDERED
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF OLD NOTES NUMBER OF
OLD NOTES TENDERED BENEFICIAL
PLEASE PRINT NAME AND TENDERED (IF PRINCIPAL HOLDERS
ADDRESS OF REGISTERED (ATTACH AMOUNT OF FOR WHOM
HOLDER ADDITIONAL LIST OLD NOTES LESS OLD NOTES
(PLEASE COMPLETE IF BLANK) CERTIFICATE NUMBER(S)* IF NECESSARY) THAN ALL)** ARE HELD
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
TOTAL AMOUNT TENDERED:
* Need not be completed by book-entry holders.
** All Old Notes held shall be deemed tendered unless a lesser number is
specified in this column.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution __________________________________________________
DTC Account Number _____________________________________________________________
Transaction Code Number ________________________________________________________
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: __________________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________
City State Zip Code
- 2 -
Ladies and Gentlemen:
The undersigned hereby tenders to Regency Centers, L.P., a Delaware limited
partnership (the "Partnership"), and Regency Realty Corporation, a Florida
corporation ("Regency"), the above described aggregate principal amount of the
Partnership's 7 1/8% Notes due July 15, 2005 (the "Old Notes") in exchange for
a like aggregate principal amount of the Partnership's 7 1/8% Notes due July
15, 2005 (the "New Notes") which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), upon the terms and subject to the
conditions set forth in the Prospectus dated , 1998 (as the same may
be amended or supplemented from time to time, the "Prospectus"), receipt of
which is hereby acknowledged, and in this Letter of Transmittal (which,
together with the Prospectus, constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Partnership all right, title and interest in and to such Old Notes as are
being tendered herewith. The undersigned hereby irrevocable constitutes and
appoints the Exchange Agent as its agent and attorney-in-fact (with full
knowledge that the Exchange Agent is also acting as agent of Regency and the
Partnership in connection with the Exchange Offer) with respect to the
tendered Old Notes, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), subject
only to the right of withdrawal described in the Prospectus, to (i) deliver
Certificates for Old Notes to the Partnership together with all accompanying
evidences of transfer and authenticity to, or upon the order of, the
Partnership, upon receipt by the Exchange Agent, as the undersigned's agent,
of the New Notes to be issued in exchange for such Old Notes or to effectuate
such transfer using the book-entry transfer procedure described in the
Prospectus, (ii) present Certificates for such Old Notes for transfer or
evidence of book-entry transfer of such Old Notes and to transfer the Old
Notes on the books of the Partnership, and (iii) receive for the account of
the Partnership all benefits and otherwise exercise all rights of beneficial
ownership of such Old Notes, all in accordance with the terms and conditions
of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE
PARTNERSHIP WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE
AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE
OLD NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES.
THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL
DOCUMENTS DEEMED BY REGENCY, THE PARTNERSHIP OR THE EXCHANGE AGENT TO BE
NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF
THE OLD NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS
OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ
AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the Exchange Offer
for any reason, or if the Certificates are submitted for more Old Notes than
are tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered
by book-entry transfer, such Old Notes will be credited to an account
maintained at DTC), without expense to the tendering holder, promptly
following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any one of
the procedures described in "The Exchange Offer--Procedures for Tendering Old
Notes" in the Prospectus and in the instructions hereto
- 3 -
will, upon Regency's and the Partnership's acceptance for exchange of such
tendered Old Notes, constitute a binding agreement between the undersigned,
Regency and the Partnership upon the terms and subject to the conditions of
the Exchange Offer. The undersigned recognizes that, under certain
circumstances set forth in the Prospectus, Regency and the Partnership may not
be required to accept for exchange any of the Old Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be
issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Old Notes, that such New Notes be credited to the account
indicated above maintained at DTC. If applicable, substitute Certificates
representing Old Notes not tendered or not accepted for exchange will be
issued to the undersigned or, in the case of a book-entry transfer of Old
Notes, will be credited to the account indicated above maintained at DTC.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please deliver New Notes to the undersigned at the address shown below the
undersigned's signature.
The undersigned is aware that any security holder using the Exchange Offer
to participate in a distribution of New Notes (1) cannot rely on the position
of the staff of the Division of Corporation Finance of the Securities and
Exchange Commission enunciated in Exxon Capital Holdings Corporation
(available May 13, 1998) and similar interpretive letters and (2) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale of the New Notes.
ACCORDINGLY, BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF
TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) NEITHER THE
UNDERSIGNED NOR ANY BENEFICIAL OWNER IS AN "AFFILIATE" OF REGENCY OR THE
PARTNERSHIP, (II) ANY NEW NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING
ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS OR THE BUSINESS OF ANY
BENEFICIAL OWNER, (III) THE UNDERSIGNED AND EACH BENEFICIAL OWNER HAVE NO
ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION
(WITHIN THE MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE RECEIVED IN THE
EXCHANGE OFFER, AND (IV) IF THE UNDERSIGNED OR ANY BENEFICIAL OWNER IS NOT A
BROKER-DEALER, THE UNDERSIGNED AND ANY SUCH BENEFICIAL OWNER IS NOT ENGAGED
IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF
THE SECURITIES ACT) OF SUCH NEW NOTES. BY TENDERING OLD NOTES PURSUANT TO THE
EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF OLD NOTES
WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN
INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION
FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A)
SUCH OLD NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (B)
SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, IT WILL
DELIVER A PROSPECTUS MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN
CONNECTION WITH ANY RESALE OF SUCH NEW NOTES AND IT IS AWARE THAT IT MAY BE
DEEMED A STATUTORY UNDERWRITER (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY
DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT
IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
Regency and the Partnership have agreed that, subject to the provisions of
the Registration Rights Agreement and the limitations described in the
Prospectus, the Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer (as defined below) in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such Participating Broker-Dealer for its own
account as a result of market-making activities or other trading activities,
for a period ending 180 days after the Expiration Date (subject to extension
under certain limited circumstances described in the Prospectus) or, if
earlier, when all such New Notes have been disposed of by such Participating
Broker-Dealer. In that regard, each broker-dealer who acquired Old Notes for
its own account as a result of
- 4 -
market-making or other trading activities (a "Participating Broker-Dealer"),
by tendering such Old Notes and executing this Letter Of Transmittal or
effecting delivery of an Agent's Message in lieu thereof, agrees that, upon
receipt of notice from Regency or the Partnership of the occurrence of any
event or the discovery of any fact which makes any statement contained or
incorporated by reference in the Prospectus untrue in any material respect or
which causes the Prospectus to omit to state a material fact necessary in
order to make the statements contained or incorporated by referenced therein,
in light of the circumstances under which they were made, not misleading or of
the occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of New Notes
pursuant to the Prospectus until Regency and the Partnership have amended or
supplemented the Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to the
Participating Broker-Dealer or Regency or the Partnership has given notice
that the sale of the New Notes may be resumed, as the case may be.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
- 5 -
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 FOLLOWING THE
INSTRUCTIONS TO THIS LETTER OF TRANSMITTAL)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Old Notes hereby tendered or on a security position
listing, or by any person(s) authorized to become the registered holder(s)
by endorsements and documents transmitted herewith (including such
opinions of counsel, certifications and other information as may be
required by Regency, the Partnership or the Exchange Agent for the Old
Notes to comply with the restrictions on transfer applicable to the Old
Notes). If signature is by an attorney-in-fact, executor, administrator,
trustee, guardian, officer of a corporation or another acting in a
fiduciary capacity or representative capacity, please set forth the
signer's full title. See Instruction 5.
(SIGNATURE(S) OF HOLDER(S))
Date , 199
Name(s) __________________________________________________________
__________________________________________________________
(PLEASE PRINT)
Capacity (Full Title)
__________________________________________________________
Address __________________________________________________________
__________________________________________________________
__________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number ____________________________________________
---------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
(AUTHORIZED SIGNATURE)
Date , 199
Name of Firm __________________________________________________________
Capacity (Full Title)
__________________________________________________________
(PLEASE PRINT)
Address __________________________________________________________
__________________________________________________________
__________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number ____________________________________________
- 6 -
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New Notes or any Old Notes that are not
tendered are to be issued in the name of someone other than the registered
holder of the Old Notes whose name appears above.
Issue [_] New Notes [_] Old Notes not tendered
To
Name(s) _____________________________________________________________________
Address
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
---------------------------------------------------
- --------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes or any Old Notes that are not tendered
are to be sent to someone other than the registered holder of the Old Notes
whose name appears above, or such registered holder at an address other than
that shown above.
Issue [_] New Notes [_] Old Notes not tendered
To
Name(s) _____________________________________________________________________
Address
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
---------------------------------------------------
- --------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
- 7 -
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES.
This Letter of Transmittal is to be completed either if (a) Certificates are
to be forwarded herewith or (b) tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth in "The Exchange
Offer--Procedures for Tendering Old Notes" in the Prospectus and an Agent's
Message is not delivered. Certificates, as well as this Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any
required signature guarantees, a substitute Form W-9 (or facsimile thereof)
and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at its address set forth above on or prior to
the Expiration Date; provided, however, that book-entry transfers of Old Notes
may be effected in accordance with the procedures mandated by DTC's Automated
Tender Offer Program ("ATOP"). Although delivery of Old Notes may be effected
through ATOP, this Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message in lieu of this Letter of Transmittal, and any other required
documents, must in any case be delivered to and received by the Exchange Agent
at its address set forth above on or prior to the Expiration Date.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS TO BE BY MAIL, THE USE OF REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Neither Regency nor the Partnership will accept any alternative, conditional
or contingent tenders. Each tendering holder, by execution of a Letter of
Transmittal (or facsimile thereof) or delivery of an Agent's Message in lieu
thereof, waives any right to receive any notice of the acceptance of such
tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC
whose name appears on a security position listing as the owner of the Old
Notes) of Old Notes tendered herewith, unless such holder(s) has completed
either the box entitled "Special Issuance Instructions" or the box entitled
"Special Delivery Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE.
If the space provided in the box captioned "Description of Old Notes" is
inadequate, the Certificate number(s) and/or the principal amount of Old Notes
and any other required information should be listed on a separate signed
schedule which is attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS.
If less than all the Old Notes evidenced by any Certificate submitted are to
be tendered, fill in the principal amount of Old Notes to be tendered in the
box entitled "Principal Amount of Old Notes Tendered (if less than all)." In
such case, new Certificates for the remainder of the Old Notes that were
evidenced by your old Certificates will only be sent to the holder of the Old
Capital Security, or, in the case of book-entry transfer, will be credited to
an account maintained at DTC, promptly after the Expiration Date. All Old
Notes presented by Certificates delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated.
- 8 -
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date. In order for a withdrawal to
be effective on or prior to that time, a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth above on or prior to the
Expiration Date. Any such notice of withdrawal must specify the name of the
person who tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), include a
statement that such holder is withdrawing its election to have such Old Notes
exchanged and the name of the registered holder of such Old Notes, and must be
signed by the holder in the same manner as the original signature on the
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Partnership that the Person
withdrawing the tender has succeeded to the beneficial ownership of the Old
Notes being withdrawn. If Certificates for the Old Notes have been delivered
or otherwise identified to the Exchange Agent, then prior to the physical
release of such Certificates for the Old Notes, the tendering holder must
submit the serial numbers shown on the particular Certificates for the Old
Notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes
tendered for the account of an Eligible Institution. If Old Notes have been
tendered pursuant to the procedures for book-entry transfer set forth in "The
Exchange Offer--Procedures for Tendering Old Notes," the notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawal of Old Notes, in which case a notice of withdrawal will be
effective if delivered to the Exchange Agent by written or facsimile
transmission and otherwise comply with the procedures of that facility.
Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly
withdrawn will not be deemed validly tendered for purposes of the Exchange
Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described in the Prospectus
under "The Exchange Offer--Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by Regency and the
Partnership whose determination shall be final and binding on all parties.
Regency and the Partnership, any affiliates or assigns of Regency and the
Partnership, the Exchange Agent or any other person shall not be under any
duty to give any notification of any irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Any Old Notes which have been tendered but which are withdrawn will be
returned to the holder thereof without cost to such holder after withdrawal
(or in the case of Old Notes tendered by book-entry transfer, such Old Notes
will be credited to an account maintained with DTC for the Old Notes) as soon
as practicable.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holders of the Old
Notes tendered hereby, the signatures must correspond exactly with the names
as written on the face of the Certificates without alteration, enlargement or
any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in any different names on several
Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing and must submit proper evidence
satisfactory to Regency and the Partnership, in their sole discretion, of such
persons' authority to so act.
When this Letter of Transmittal is signed by the registered owners of the
Old Notes listed and transmitted hereby, no endorsements of Certificates or
separate bond powers are required unless New Notes are to be issued in the
name of a person other than the registered holders. Signatures on such
Certificates or bond powers must be guaranteed by an Eligible Institution.
- 9 -
If this Letter of Transmittal is signed by a person other than the
registered owners of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owners appear on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information
as Regency or the Partnership may require in accordance with the restrictions
on transfer applicable to the Old Notes. Signatures on such Certificates or
bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
If New Notes are to be issued in the name of a person other than the signer
of this Letter of Transmittal, or if New Notes are to be sent to someone other
than the signer of this Letter of Transmittal or to an address other than that
shown above, the appropriate boxes on this Letter of Transmittal should be
completed. Certificates for Old Notes not exchanged will be returned by mail
or, if tendered by book-entry transfer, by crediting the account indicated
above maintained at DTC. See Instruction 4.
7. IRREGULARITIES.
Regency and the Partnership will determine, in their sole discretion, all
questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Old Notes, which
determination shall be final and binding on all parties. Regency and the
Partnership reserve the absolute right to reject any and all tenders
determined by either of them not to be in proper form or the acceptance of
which, or exchange for, may, in the view of counsel to Regency and the
Partnership, be unlawful. Regency and the Partnership also reserve the
absolute right, subject to applicable law, to waive any of the conditions of
the Exchange Offer set forth in the Prospectus or any conditions or
irregularity in any tender of Old Notes of any particular holder whether or
not similar conditions or irregularities are waived in the case of other
holders. Regency's and the Partnership's interpretation of the terms and
conditions of the Exchange Offer (including this Letter of Transmittal and the
instructions hereto) will be final and binding. No tender of Old Notes will be
deemed to have been validly made until all irregularities with respect to such
tender have been cured or waived. Regency, the Partnership, any affiliates or
assigns of Regency, the Partnership, the Exchange Agent, or any other person
shall not be under any duty to give notification of any irregularities in
tenders or incur any liability for failure to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES.
Questions regarding the procedures for tender or withdrawal of Old Notes may
be directed to the Exchange Agent at its address and telephone number set
forth on the front of this Letter of Transmittal.
Other questions, requests for assistance, and requests for additional copies
of the Prospectus and this Letter of Transmittal should be directed to Regency
as follows:
Regency Realty Corporation
121 Forsyth Street, Suite 200
Jacksonville, Florida 32202
Telephone: 904-356-7000
Attention:
Additional copies of the Prospectus and this Letter of Transmittal may also
be obtained from your broker, dealer, commercial bank, trust company or other
nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9.
Under U.S. Federal income tax law, a holder whose tendered Old Notes are
accepted for exchange is required to provide the Exchange Agent with such
holder's correct taxpayer identification number ("TIN") on Substitute Form W-9
below. If the Exchange Agent is not provided with the correct TIN, the
Internal Revenue
- 10 -
Service (the "IRS") may subject the holder or other payee to a $50 penalty. In
addition, payments to such holders or other payees with respect to Old Notes
exchanged pursuant to the Exchange Offer may be subject to 31% backup
withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the tendering
holder has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part 2 is checked, the holder or
other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN
is provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-
9. If the holder furnishes the Exchange Agent with its TIN within 60 days
after the date of the Substitute Form W-9, the amounts retained during the 60
day period will be remitted to the holder and no further amounts shall be
retained or withheld from payments made to the holder thereafter. If, however,
the holder has not provided the Exchange Agent with its TIN within such 60 day
period, amounts withheld will be remitted to the IRS as backup withholding. In
addition, 31% of all payments made thereafter will be withheld and remitted to
the IRS until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Notes or of the last transferee appearing on the transfers attached
to, or endorsed on, the Old Notes. If the Old Notes are registered in more
than one name or are not in the name of the actual owner, the Exchange Agent
will provide upon request "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the
face thereof, to avoid possible erroneous backup withholding. A foreign person
may qualify as an exempt recipient by submitting a properly completed IRS Form
W-8, signed under penalties of perjury, attesting to that holder's exempt
status. The Exchange Agent will provide upon request "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather, the
U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. LOST, DESTROYED OR STOLEN CERTIFICATES.
If any Certificates representing Old Notes have been lost, destroyed or
stolen, the holder should promptly notify the Exchange Agent. The holder will
then be instructed as to the steps that must be taken in order to replace the
Certificates. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Certificates have been followed.
11. SECURITY TRANSFER TAXES.
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith. If, however, New Notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered, or if a transfer tax is imposed
for any reason other than the exchange of Old Notes in connection with the
Exchange Offer, then the amount of any such transfer tax (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) OR AN AGENT'S
MESSAGE IN LIEU THEREOF AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
- 11 -
TO BE COMPLETED BY ALL
TENDERING SECURITY HOLDERS
(SEE INSTRUCTION 9)
PAYER'S NAME: FIRST UNION NATIONAL BANK
- --------------------------------------------------------------------------------
PART 1 -- PLEASE PROVIDE
YOUR TIN ON THE LINE AT TIN ______________
RIGHT AND CERTIFY BY SIGNING Social security
AND DATING BELOW. number or Employer
identification number
SUBSTITUTE Name ------------------------------------
PART
2 --
(Please Print) Awaiting
Address TIN [_]
FORM W-9 ------------------------------------
-----------------------------------------------------
------------------------------------
DEPARTMENT OF THE City State Zip Code
TREASURY INTERNAL -----------------------------------------------------
REVENUE SERVICE
PART 3 -- CERTIFICATION -- Under the penalties of
perjury, I certify that (1) the number shown on
this form is my correct taxpayer identification
number (or I am waiting for a number to be issued
to me), (2) I am not subject to backup withholding
either because (i) I am exempt from backup
withholding, (ii) I have not been notified by the
Internal Revenue Service ("IRS") that I am subject
to backup withholding as a result of a failure to
report all interest or dividends, or (iii) the IRS
has notified me that I am no longer subject to
backup withholding, and (3) any other information
provided on this form is true and correct.
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN)
AND CERTIFICATION
The Internal Revenue Service does not require your
consent to any provision of this document other
than certifications required to avoid backup
withholding.
Signature _____________________ Date ___________
- --------------------------------------------------------------------------------
You must cross out item (2) in Part (3) above if you have been notified by
the IRS that you are subject to backup withholding because of underreporting
interest or dividends on you tax return and you have not been notified by
the IRS that you are no longer subject to backup withholding.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO
THE EXCHANGE OFFER. THE EXCHANGE AGENT WILL PROVIDE "GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9"
UPON REQUEST IF YOU REQUIRE ADDITIONAL DETAILS.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all payments to me on account of the New Notes shall
be retained until I provide a taxpayer identification number to the Exchange
Agent and that, if I do not provide my taxpayer identification number within
60 days, such retained amounts shall be remitted to the Internal Revenue
Service as backup withholding and 31% of all reportable payments made to me
thereafter will be withheld and remitted to the Internal Revenue Service
until I provide a taxpayer identification number.
The Internal Revenue Service does not require your consent to any
provision of this document other than certifications required to avoid
backup withholding.
Signature ______________________________________
Date _______ , 1999
- 12 -
