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REG Regency Centers

Filed: 6 Nov 20, 12:19pm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2020

or

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

For the transition period from             to             

 

Commission File Number 1-12298 (Regency Centers Corporation)

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

 

REGENCY CENTERS CORPORATION

REGENCY CENTERS, L.P.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

florida (REGENCY CENTERS CORPORATION)

59-3191743

Delaware (REGENCY CENTERS, L.P)

59-3429602

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

One Independent Drive, Suite 114

Jacksonville, Florida 32202

(904) 598-7000

(Address of principal executive offices) (zip code)

 

(Registrant's telephone number, including area code)

 

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

Regency Centers Corporation

 

 

 

 

 

 

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, $.01 par value

 

REG

 

The Nasdaq Stock Market LLC

Regency Centers, L.P.

 

 

 

 

 

 

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

None

 

N/A

 

N/A

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Regency Centers Corporation              YES       NO                        Regency Centers, L.P.              YES       NO  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Regency Centers Corporation              YES       NO                        Regency Centers, L.P.              YES       NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Regency Centers Corporation:

 

Large accelerated filer

Accelerated filer

Emerging growth company

Non-accelerated filer

Smaller reporting company

 

 

Regency Centers, L.P.:

 

Large accelerated filer

Accelerated filer

Emerging growth company

Non-accelerated filer

Smaller reporting company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Regency Centers Corporation              YES       NO                       Regency Centers, L.P.              YES       NO  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Regency Centers Corporation              YES       NO                       Regency Centers, L.P.              YES       NO  

The number of shares outstanding of Regency Centers Corporation’s common stock was 169,680,132 as of November 5, 2020.

 

 


 

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 2020, of Regency Centers Corporation and Regency Centers, L.P. Unless stated otherwise or the context otherwise requires, references to “Regency Centers Corporation” or the “Parent Company” mean Regency Centers Corporation and its controlled subsidiaries; and references to “Regency Centers, L.P.” or the “Operating Partnership” mean Regency Centers, L.P. and its controlled subsidiaries. The term “the Company”, “Regency Centers” or “Regency” means the Parent Company and the Operating Partnership, collectively.

The Parent Company is a real estate investment trust (“REIT”) and the general partner of the Operating Partnership. The Operating Partnership's capital includes general and limited common Partnership Units (“Units”). As of September 30, 2020, the Parent Company owned approximately 99.6% of the Units in the Operating Partnership. The remaining limited Units are owned by investors. As the sole general partner of the Operating Partnership, the Parent Company has exclusive control of the Operating Partnership's day-to-day management.

The Company believes combining the quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into this single report provides the following benefits:

 

 

Enhances investors’ understanding of the Parent Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

 

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

 

Creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

Management operates the Parent Company and the Operating Partnership as one business. The management of the Parent Company consists of the same individuals as the management of the Operating Partnership. These individuals are officers of the Parent Company and employees of the Operating Partnership.

The Company believes it is important to understand the key differences between the Parent Company and the Operating Partnership in the context of how the Parent Company and the Operating Partnership operate as a consolidated company. The Parent Company is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership. As a result, the Parent Company does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership. Except for $200 million of unsecured private placement debt, the Parent Company does not hold any indebtedness, but guarantees all of the unsecured debt of the Operating Partnership. The Operating Partnership is also the co-issuer and guarantees the $200 million of Parent Company debt. The Operating Partnership holds all the assets of the Company and retains the ownership interests in the Company’s joint ventures. Except for net proceeds from public equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates all remaining capital required by the Company’s business. These sources include the Operating Partnership’s operations, its direct or indirect incurrence of indebtedness, and the issuance of partnership units.

Stockholders’ equity, partners’ capital, and noncontrolling interests are the main areas of difference between the consolidated financial statements of the Parent Company and those of the Operating Partnership. The Operating Partnership’s capital includes general and limited common Partnership Units. The limited partners’ units in the Operating Partnership owned by third parties are accounted for in partners’ capital in the Operating Partnership’s financial statements and outside of stockholders’ equity in noncontrolling interests in the Parent Company’s financial statements.

In order to highlight the differences between the Parent Company and the Operating Partnership, there are sections in this report that separately discuss the Parent Company and the Operating Partnership, including separate financial statements, controls and procedures sections, and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure for the Parent Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company.

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

 


 

TABLE OF CONTENTS

 

 

 

 

 

 

 

Form 10-Q

Report Page

PART I - FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

Regency Centers Corporation:

 

 

 

 

 

Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

1

 

 

 

 

Consolidated Statements of Operations for the periods ended September 30, 2020 and 2019

2

 

 

 

 

Consolidated Statements of Comprehensive Income for the periods ended September 30, 2020 and 2019

3

 

 

 

 

Consolidated Statements of Equity for the periods ended September 30, 2020 and 2019

4

 

 

 

 

Consolidated Statements of Cash Flows for the periods ended September 30, 2020 and 2019

6

 

 

 

Regency Centers, L.P.:

 

 

 

 

 

Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

8

 

 

 

 

Consolidated Statements of Operations for the periods ended September 30, 2020 and 2019

9

 

 

 

 

Consolidated Statements of Comprehensive Income for the periods ended September 30, 2020 and 2019

10

 

 

 

 

Consolidated Statements of Capital for the periods ended September 30, 2020 and 2019

11

 

 

 

 

Consolidated Statements of Cash Flows for the periods ended September 30, 2020 and 2019

13

 

 

 

 

Notes to Consolidated Financial Statements

15

 

 

 

Item 2.

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

30

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

56

 

 

 

Item 4.

Controls and Procedures

56

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

57

 

 

 

Item 1A.

Risk Factors

57

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

58

 

 

 

Item 3.

Defaults Upon Senior Securities

58

 

 

 

Item 4.

Mine Safety Disclosures

58

 

 

 

Item 5.

Other Information

58

 

 

 

Item 6.

Exhibits

59

 

 

 

SIGNATURES

60

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

REGENCY CENTERS CORPORATION

Consolidated Balance Sheets

September 30, 2020 and December 31, 2019

(in thousands, except share data)

 

 

 

2020

 

 

2019

 

Assets

 

(unaudited)

 

 

 

 

 

Real estate assets, at cost

 

$

11,154,800

 

 

 

11,095,294

 

Less: accumulated depreciation

 

 

1,954,181

 

 

 

1,766,162

 

Real estate assets, net

 

 

9,200,619

 

 

 

9,329,132

 

Investments in real estate partnerships

 

 

474,308

 

 

 

469,522

 

Properties held for sale

 

 

51,332

 

 

 

45,565

 

Cash, cash equivalents, and restricted cash, including $4,325 and $2,542 of restricted cash at September 30, 2020 and December 31, 2019, respectively

 

 

280,876

 

 

 

115,562

 

Tenant and other receivables

 

 

159,137

 

 

 

169,337

 

Deferred leasing costs, less accumulated amortization of $113,650 and $108,381 at September 30, 2020 and December 31, 2019, respectively

 

 

70,499

 

 

 

76,798

 

Acquired lease intangible assets, less accumulated amortization of $279,139 and $259,310 at September 30, 2020 and December 31, 2019, respectively

 

 

201,472

 

 

 

242,822

 

Right of use assets, net

 

 

288,138

 

 

 

292,786

 

Other assets

 

 

260,258

 

 

 

390,729

 

Total assets

 

$

10,986,639

 

 

 

11,132,253

 

Liabilities and Equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Notes payable

 

$

3,723,923

 

 

 

3,435,161

 

Unsecured credit facilities

 

 

264,605

 

 

 

484,383

 

Accounts payable and other liabilities

 

 

222,375

 

 

 

213,705

 

Acquired lease intangible liabilities, less accumulated amortization of $145,513 and $131,676 at September 30, 2020 and December 31, 2019, respectively

 

 

390,399

 

 

 

427,260

 

Lease liabilities

 

 

220,082

 

 

 

222,918

 

Tenants’ security, escrow deposits and prepaid rent

 

 

52,132

 

 

 

58,865

 

Total liabilities

 

 

4,873,516

 

 

 

4,842,292

 

Commitments and contingencies

 

 

 

 

 

0

 

Equity:

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value per share, 220,000,000 shares authorized; 169,677,302 and 167,571,218 shares issued at September 30, 2020 and December 31, 2019, respectively

 

 

1,697

 

 

 

1,676

 

Treasury stock at cost, 469,860 and 440,574 shares held at September 30, 2020 and December 31, 2019, respectively

 

 

(24,687

)

 

 

(23,199

)

Additional paid-in-capital

 

 

7,789,142

 

 

 

7,654,930

 

Accumulated other comprehensive loss

 

 

(23,220

)

 

 

(11,997

)

Distributions in excess of net income

 

 

(1,703,338

)

 

 

(1,408,062

)

Total stockholders’ equity

 

 

6,039,594

 

 

 

6,213,348

 

Noncontrolling interests:

 

 

 

 

 

 

 

 

Exchangeable operating partnership units, aggregate redemption value of 29,087 and 47,092 at September 30, 2020 and December 31, 2019, respectively

 

 

35,987

 

 

 

36,100

 

Limited partners’ interests in consolidated partnerships

 

 

37,542

 

 

 

40,513

 

Total noncontrolling interests

 

 

73,529

 

 

 

76,613

 

Total equity

 

 

6,113,123

 

 

 

6,289,961

 

Total liabilities and equity

 

$

10,986,639

 

 

 

11,132,253

 

 

See accompanying notes to consolidated financial statements.

1


 

REGENCY CENTERS CORPORATION

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease income

 

$

234,541

 

 

 

272,143

 

 

$

731,630

 

 

 

815,682

 

Other property income

 

 

2,261

 

 

 

2,780

 

 

 

7,001

 

 

 

6,956

 

Management, transaction, and other fees

 

 

6,142

 

 

 

7,353

 

 

 

19,084

 

 

 

21,768

 

Total revenues

 

 

242,944

 

 

 

282,276

 

 

 

757,715

 

 

 

844,406

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

84,808

 

 

 

91,856

 

 

 

259,161

 

 

 

282,639

 

Operating and maintenance

 

 

41,345

 

 

 

41,695

 

 

 

123,746

 

 

 

125,092

 

General and administrative

 

 

19,582

 

 

 

16,705

 

 

 

54,489

 

 

 

56,722

 

Real estate taxes

 

 

35,938

 

 

 

33,601

 

 

 

108,618

 

 

 

101,263

 

Other operating expenses

 

 

1,208

 

 

 

1,819

 

 

 

5,025

 

 

 

4,486

 

Total operating expenses

 

 

182,881

 

 

 

185,676

 

 

 

551,039

 

 

 

570,202

 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

40,794

 

 

 

38,253

 

 

 

118,605

 

 

 

113,178

 

Goodwill impairment

 

 

 

 

 

 

 

 

132,128

 

 

 

 

Provision for impairment of real estate, net of tax

 

 

 

 

 

(14

)

 

 

1,014

 

 

 

12,099

 

Gain on sale of real estate, net of tax

 

 

(3,237

)

 

 

(887

)

 

 

(48,690

)

 

 

(17,819

)

Early extinguishment of debt

 

 

19,358

 

 

 

1,391

 

 

 

19,358

 

 

 

11,982

 

Net investment (income) loss

 

 

(2,046

)

 

 

(370

)

 

 

(1,482

)

 

 

(3,690

)

Total other expense (income)

 

 

54,869

 

 

 

38,373

 

 

 

220,933

 

 

 

115,750

 

Income (loss) from operations before equity in income of investments in real estate partnerships

 

 

5,194

 

 

 

58,227

 

 

 

(14,257

)

 

 

158,454

 

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

 

 

8,116

 

 

 

(283

)

 

 

22,358

 

 

 

43,673

 

Net income

 

 

13,310

 

 

 

57,944

 

 

 

8,101

 

 

 

202,127

 

Noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchangeable operating partnership units

 

 

(57

)

 

 

(157

)

 

 

(29

)

 

 

(456

)

Limited partners’ interests in consolidated partnerships

 

 

(565

)

 

 

(822

)

 

 

(1,670

)

 

 

(2,532

)

Income attributable to noncontrolling interests

 

 

(622

)

 

 

(979

)

 

 

(1,699

)

 

 

(2,988

)

Net income attributable to common stockholders

 

$

12,688

 

 

 

56,965

 

 

$

6,402

 

 

 

199,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share - basic

 

$

0.07

 

 

 

0.34

 

 

$

0.04

 

 

 

1.19

 

Income per common share - diluted

 

$

0.07

 

 

 

0.34

 

 

$

0.04

 

 

 

1.19

 

 

See accompanying notes to consolidated financial statements.

2


 

REGENCY CENTERS CORPORATION

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

13,310

 

 

 

57,944

 

 

$

8,101

 

 

 

202,127

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective portion of change in fair value of derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective portion of change in fair value of derivative instruments

 

 

(666

)

 

 

(3,851

)

 

 

(19,187

)

 

 

(18,567

)

Reclassification adjustment of derivative instruments included in net income

 

 

2,570

 

 

 

1,677

 

 

 

6,479

 

 

 

2,085

 

Unrealized gain on available-for-sale debt securities

 

 

53

 

 

 

169

 

 

 

379

 

 

 

429

 

Other comprehensive income (loss)

 

 

1,957

 

 

 

(2,005

)

 

 

(12,329

)

 

 

(16,053

)

Comprehensive income (loss)

 

 

15,267

 

 

 

55,939

 

 

 

(4,228

)

 

 

186,074

 

Less: comprehensive income attributable to noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interests

 

 

622

 

 

 

979

 

 

 

1,699

 

 

 

2,988

 

Other comprehensive income (loss) attributable to noncontrolling interests

 

 

42

 

 

 

(287

)

 

 

(1,106

)

 

 

(1,176

)

Comprehensive income attributable to noncontrolling interests

 

 

664

 

 

 

692

 

 

 

593

 

 

 

1,812

 

Comprehensive income (loss) attributable to the Company

 

$

14,603

 

 

 

55,247

 

 

$

(4,821

)

 

 

184,262

 

 

See accompanying notes to consolidated financial statements.

 

 

 

3


 

REGENCY CENTERS CORPORATION

Consolidated Statements of Equity

For the three months ended September 30, 2020 and 2019

(in thousands, except per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling Interests

 

 

 

 

 

 

 

Common

Stock

 

 

Treasury

Stock

 

 

Additional

Paid In

Capital

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Distributions

in Excess of

Net Income

 

 

Total

Stockholders’

Equity

 

 

Exchangeable

Operating

Partnership

Units

 

 

Limited

Partners’

Interest  in

Consolidated

Partnerships

 

 

Total

Noncontrolling

Interests

 

 

Total

Equity

 

Balance at June 30, 2019

 

$

1,676

 

 

 

(22,536

)

 

 

7,645,065

 

 

 

(14,086

)

 

 

(1,309,278

)

 

 

6,300,841

 

 

 

10,528

 

 

 

41,479

 

 

 

52,007

 

 

 

6,352,848

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

56,965

 

 

 

56,965

 

 

 

157

 

 

 

822

 

 

 

979

 

 

 

57,944

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before reclassification

 

 

 

 

 

 

 

 

 

 

 

(3,406

)

 

 

 

 

 

(3,406

)

 

 

(13

)

 

 

(263

)

 

 

(276

)

 

 

(3,682

)

Amounts reclassified from accumulated other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

1,688

 

 

 

 

 

 

1,688

 

 

 

5

 

 

 

(16

)

 

 

(11

)

 

 

1,677

 

Deferred compensation plan, net

 

 

 

 

 

(322

)

 

 

322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock issued, net of amortization

 

 

 

 

 

 

 

 

4,224

 

 

 

 

 

 

 

 

 

4,224

 

 

 

 

 

 

 

 

 

 

 

 

4,224

 

Common stock issued for stock based compensation, net

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

 

 

 

 

 

 

100

 

Common stock issued under dividend reinvestment plan

 

 

 

 

 

 

 

 

345

 

 

 

 

 

 

 

 

 

345

 

 

 

 

 

 

 

 

 

 

 

 

345

 

Contributions from partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

103

 

 

 

103

 

 

 

103

 

Issuance of exchangeable operating partnership units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,869

 

 

 

 

 

 

25,869

 

 

 

25,869

 

Distributions to partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,358

)

 

 

(1,358

)

 

 

(1,358

)

Cash dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock/unit ($0.585 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(98,018

)

 

 

(98,018

)

 

 

(205

)

 

 

 

 

 

(205

)

 

 

(98,223

)

Balance at September 30, 2019

 

$

1,676

 

 

 

(22,858

)

 

 

7,650,056

 

 

 

(15,804

)

 

 

(1,350,331

)

 

 

6,262,739

 

 

 

36,341

 

 

 

40,767

 

 

 

77,108

 

 

 

6,339,847

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2020

 

$

1,697

 

 

 

(24,597

)

 

 

7,785,095

 

 

 

(25,135

)

 

 

(1,615,077

)

 

 

6,121,983

 

 

 

36,376

 

 

 

38,843

 

 

 

75,219

 

 

 

6,197,202

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,688

 

 

 

12,688

 

 

 

57

 

 

 

565

 

 

 

622

 

 

 

13,310

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before reclassification

 

 

 

 

 

 

 

 

 

 

 

(551

)

 

 

 

 

 

(551

)

 

 

(2

)

 

 

(60

)

 

 

(62

)

 

 

(613

)

Amounts reclassified from accumulated other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

2,466

 

 

 

 

 

 

2,466

 

 

 

11

 

 

 

93

 

 

 

104

 

 

 

2,570

 

Deferred compensation plan, net

 

 

 

 

 

(90

)

 

 

297

 

 

 

 

 

 

 

 

 

207

 

 

 

 

 

 

 

 

 

 

 

 

207

 

Restricted stock issued, net of amortization

 

 

 

 

 

 

 

 

3,372

 

 

 

 

 

 

 

 

 

3,372

 

 

 

 

 

 

 

 

 

 

 

 

3,372

 

Common stock issued for stock based compensation, net of common stock redeemed for taxes withheld

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

3

 

Common stock issued under dividend reinvestment plan

 

 

 

 

 

 

 

 

382

 

 

 

 

 

 

 

 

 

382

 

 

 

 

 

 

 

 

 

 

 

 

382

 

Common stock issued, net of issuance costs

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

 

 

 

 

 

 

(7

)

Contributions from partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

312

 

 

 

312

 

 

 

312

 

Issuance of exchangeable operating partnership units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions to partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,211

)

 

 

(2,211

)

 

 

(2,211

)

Cash dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock/unit ($0.595 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(100,949

)

 

 

(100,949

)

 

 

(455

)

 

 

 

 

 

(455

)

 

 

(101,404

)

Balance at September 30, 2020

 

$

1,697

 

 

 

(24,687

)

 

 

7,789,142

 

 

 

(23,220

)

 

 

(1,703,338

)

 

 

6,039,594

 

 

 

35,987

 

 

 

37,542

 

 

 

73,529

 

 

 

6,113,123

 

 

See accompanying notes to consolidated financial statements.

 

 

4


REGENCY CENTERS CORPORATION

Consolidated Statements of Equity

For the nine months ended September 30, 2020 and 2019

(in thousands, except per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling Interests

 

 

 

 

 

 

 

Common

Stock

 

 

Treasury

Stock

 

 

Additional

Paid In

Capital

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Distributions

in Excess of

Net Income

 

 

Total

Stockholders’

Equity

 

 

Exchangeable

Operating

Partnership

Units

 

 

Limited

Partners’

Interest  in

Consolidated

Partnerships

 

 

Total

Noncontrolling

Interests

 

 

Total

Equity

 

Balance at December 31, 2018

 

$

1,679

 

 

 

(19,834

)

 

 

7,672,517

 

 

 

(927

)

 

 

(1,255,465

)

 

 

6,397,970

 

 

 

10,666

 

 

 

41,532

 

 

 

52,198

 

 

 

6,450,168

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

199,139

 

 

 

199,139

 

 

 

456

 

 

 

2,532

 

 

 

2,988

 

 

 

202,127

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before reclassification

 

 

 

 

 

 

 

 

 

 

 

(17,020

)

 

 

 

 

 

(17,020

)

 

 

(42

)

 

 

(1,076

)

 

 

(1,118

)

 

 

(18,138

)

Amounts reclassified from accumulated other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

2,143

 

 

 

 

 

 

2,143

 

 

 

6

 

 

 

(64

)

 

 

(58

)

 

 

2,085

 

Deferred compensation plan, net

 

 

 

 

 

(3,024

)

 

 

3,024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock issued, net of amortization

 

 

2

 

 

 

 

 

 

12,125

 

 

 

 

 

 

 

 

 

12,127

 

 

 

 

 

 

 

 

 

 

 

 

12,127

 

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

 

 

 

 

 

 

 

 

(5,857

)

 

 

 

 

 

 

 

 

(5,857

)

 

 

 

 

 

 

 

 

 

 

 

(5,857

)

Common stock repurchased and retired

 

 

(5

)

 

 

 

 

 

(32,772

)

 

 

 

 

 

 

 

 

(32,777

)

 

 

 

 

 

 

 

 

 

 

 

(32,777

)

Common stock issued under dividend reinvestment plan

 

 

 

 

 

 

 

 

1,085

 

 

 

 

 

 

 

 

 

1,085

 

 

 

 

 

 

 

 

 

 

 

 

1,085

 

Contributions from partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,999

 

 

 

1,999

 

 

 

1,999

 

Issuance of exchangeable operating partnership units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,869

 

 

 

 

 

 

25,869

 

 

 

25,869

 

Distributions to partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,222

)

 

 

(4,222

)

 

 

(4,222

)

Reallocation of limited partner's interest

 

 

 

 

 

 

 

 

(66

)

 

 

 

 

 

 

 

 

(66

)

 

 

 

 

 

66

 

 

 

66

 

 

 

 

Cash dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock/unit ($1.755 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(294,005

)

 

 

(294,005

)

 

 

(614

)

 

 

 

 

 

(614

)

 

 

(294,619

)

Balance at September 30, 2019

 

$

1,676

 

 

 

(22,858

)

 

 

7,650,056

 

 

 

(15,804

)

 

 

(1,350,331

)

 

 

6,262,739

 

 

 

36,341

 

 

 

40,767

 

 

 

77,108

 

 

 

6,339,847

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

$

1,676

 

 

 

(23,199

)

 

 

7,654,930

 

 

 

(11,997

)

 

 

(1,408,062

)

 

 

6,213,348

 

 

 

36,100

 

 

 

40,513

 

 

 

76,613

 

 

 

6,289,961

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,402

 

 

 

6,402

 

 

 

29

 

 

 

1,670

 

 

 

1,699

 

 

 

8,101

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before reclassification

 

 

 

 

 

 

 

 

 

 

 

(17,505

)

 

 

 

 

 

(17,505

)

 

 

(79

)

 

 

(1,224

)

 

 

(1,303

)

 

 

(18,808

)

Amounts reclassified from accumulated other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

6,282

 

 

 

 

 

 

6,282

 

 

 

28

 

 

 

169

 

 

 

197

 

 

 

6,479

 

Deferred compensation plan, net

 

 

 

 

 

(1,488

)

 

 

1,695

 

 

 

 

 

 

 

 

 

207

 

 

 

 

 

 

 

 

 

 

 

 

207

 

Restricted stock issued, net of amortization

 

 

2

 

 

 

 

 

 

10,962

 

 

 

 

 

 

 

 

 

10,964

 

 

 

 

 

 

 

 

 

 

 

 

10,964

 

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

 

 

 

 

 

 

 

 

(5,172

)

 

 

 

 

 

 

 

 

(5,172

)

 

 

 

 

 

 

 

 

 

 

 

(5,172

)

Common stock issued under dividend reinvestment plan

 

 

 

 

 

 

 

 

1,138

 

 

 

 

 

 

 

 

 

1,138

 

 

 

 

 

 

 

 

 

 

 

 

1,138

 

Common stock issued, net of issuance costs

 

 

19

 

 

 

 

 

 

125,589

 

 

 

 

 

 

 

 

 

125,608

 

 

 

 

 

 

 

 

 

 

 

 

125,608

 

Contributions from partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

443

 

 

 

443

 

 

 

443

 

Issuance of exchangeable operating partnership units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,275

 

 

 

 

 

 

1,275

 

 

 

1,275

 

Distributions to partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,029

)

 

 

(4,029

)

 

 

(4,029

)

Cash dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock/unit ($1.785 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(301,678

)

 

 

(301,678

)

 

 

(1,366

)

 

 

 

 

 

(1,366

)

 

 

(303,044

)

Balance at September 30, 2020

 

$

1,697

 

 

 

(24,687

)

 

 

7,789,142

 

 

 

(23,220

)

 

 

(1,703,338

)

 

 

6,039,594

 

 

 

35,987

 

 

 

37,542

 

 

 

73,529

 

 

 

6,113,123

 

 

See accompanying notes to consolidated financial statements.

 

 

5


 

REGENCY CENTERS CORPORATION

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2020 and 2019

(in thousands)

(unaudited)

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

8,101

 

 

 

202,127

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

259,161

 

 

 

282,639

 

Amortization of deferred loan costs and debt premiums

 

 

7,566

 

 

 

8,533

 

(Accretion) and amortization of above and below market lease intangibles, net

 

 

(29,847

)

 

 

(30,196

)

Stock-based compensation, net of capitalization

 

 

10,654

 

 

 

10,716

 

Equity in income of investments in real estate partnerships

 

 

(22,358

)

 

 

(43,673

)

Gain on sale of real estate, net of tax

 

 

(48,690

)

 

 

(17,819

)

Provision for impairment of real estate, net of tax

 

 

1,014

 

 

 

12,099

 

Goodwill impairment

 

 

132,128

 

 

 

 

Early extinguishment of debt

 

 

19,358

 

 

 

11,982

 

Distribution of earnings from investments in real estate partnerships

 

 

32,659

 

 

 

41,427

 

Settlement of derivative instruments

 

 

 

 

 

(6,870

)

Deferred compensation expense

 

 

1,381

 

 

 

3,551

 

Realized and unrealized gain on investments

 

 

(1,427

)

 

 

(3,634

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Tenant and other receivables

 

 

4,072

 

 

 

520

 

Deferred leasing costs

 

 

(4,999

)

 

 

(4,695

)

Other assets

 

 

(7,670

)

 

 

(7,182

)

Accounts payable and other liabilities

 

 

20,223

 

 

 

14,886

 

Tenants’ security, escrow deposits and prepaid rent

 

 

(6,737

)

 

 

(5,055

)

Net cash provided by operating activities

 

 

374,589

 

 

 

469,356

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of operating real estate

 

 

(16,867

)

 

 

(222,230

)

Advance deposits refunded (paid) on acquisition of operating real estate

 

 

100

 

 

 

(600

)

Real estate development and capital improvements

 

 

(149,293

)

 

 

(128,085

)

Proceeds from sale of real estate investments

 

 

125,539

 

 

 

98,006

 

Issuance of notes receivable

 

 

(551

)

 

 

 

Investments in real estate partnerships

 

 

(47,957

)

 

 

(57,333

)

Return of capital from investments in real estate partnerships

 

 

23,235

 

 

 

46,740

 

Dividends on investment securities

 

 

193

 

 

 

400

 

Acquisition of investment securities

 

 

(10,580

)

 

 

(17,955

)

Proceeds from sale of investment securities

 

 

10,659

 

 

 

14,748

 

Net cash used in investing activities

 

 

(65,522

)

 

 

(266,309

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net proceeds from common stock issuance

 

 

125,608

 

 

 

 

Repurchase of common shares in conjunction with equity award plans

 

 

(5,512

)

 

 

(6,165

)

Common shares repurchased through share repurchase program

 

 

 

 

 

(32,777

)

Proceeds from sale of treasury stock

 

 

269

 

 

 

9

 

Distributions to limited partners in consolidated partnerships, net

 

 

(2,193

)

 

 

(2,223

)

Distributions to exchangeable operating partnership unit holders

 

 

(1,366

)

 

 

(614

)

Dividends paid to common stockholders

 

 

(300,538

)

 

 

(292,921

)

Repayment of fixed rate unsecured notes

 

 

(300,000

)

 

 

(250,000

)

Proceeds from issuance of fixed rate unsecured notes, net

 

 

598,830

 

 

 

723,571

 

Proceeds from unsecured credit facilities

 

 

610,000

 

 

 

450,000

 

Repayment of unsecured credit facilities

 

 

(830,000

)

 

 

(710,000

)

Repayment of notes payable

 

 

(3,891

)

 

 

(55,030

)

Scheduled principal payments

 

 

(8,149

)

 

 

(6,960

)

Payment of loan costs

 

 

(5,063

)

 

 

(7,019

)

Early redemption costs

 

 

(21,748

)

 

 

(10,647

)

Net cash used in financing activities

 

 

(143,753

)

 

 

(200,776

)

Net increase in cash and cash equivalents and restricted cash

 

 

165,314

 

 

 

2,271

 

Cash and cash equivalents and restricted cash at beginning of the period

 

 

115,562

 

 

 

45,190

 

Cash and cash equivalents and restricted cash at end of the period

 

$

280,876

 

 

 

47,461

 

 

See accompanying notes to consolidated financial statements.

6


REGENCY CENTERS CORPORATION

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2020 and 2019

(in thousands)

(unaudited)

 

 

 

 

2020

 

 

2019

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest (net of capitalized interest of $3,590 and $3,089 in 2020 and 2019, respectively)

 

$

121,307

 

 

 

112,055

 

Cash paid for income taxes, net of refunds

 

$

898

 

 

 

778

 

Supplemental disclosure of non-cash transactions:

 

 

 

 

 

 

 

 

Acquisition of real estate previously held within investments in real estate partnerships

 

$

5,986

 

 

 

 

Mortgage loan assumed with the acquisition of real estate

 

$

16,359

 

 

 

26,152

 

Mortgage loan assumed by purchaser with the sale of real estate

 

$

8,250

 

 

 

 

Exchangeable operating partnership units issued for acquisition of real estate

 

$

1,275

 

 

 

25,869

 

Change in accrued capital expenditures

 

$

16,276

 

 

 

3,185

 

Common stock issued under dividend reinvestment plan

 

$

1,138

 

 

 

1,085

 

Stock-based compensation capitalized

 

$

650

 

 

 

1,719

 

(Distributions to) contributions from limited partners in consolidated partnerships, net

 

$

(1,420

)

 

 

66

 

Common stock issued for dividend reinvestment in trust

 

$

819

 

 

 

732

 

Contribution of stock awards into trust

 

$

1,439

 

 

 

2,496

 

Distribution of stock held in trust

 

$

442

 

 

 

197

 

Change in fair value of securities

 

$

288

 

 

 

509

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

7


 

REGENCY CENTERS, L.P.

Consolidated Balance Sheets

September 30, 2020 and December 31, 2019

(in thousands, except unit data)

 

 

 

2020

 

 

2019

 

Assets

 

(unaudited)

 

 

 

 

 

Real estate assets, at cost

 

$

11,154,800

 

 

 

11,095,294

 

Less: accumulated depreciation

 

 

1,954,181

 

 

 

1,766,162

 

Real estate assets, net

 

 

9,200,619

 

 

 

9,329,132

 

Investments in real estate partnerships

 

 

474,308

 

 

 

469,522

 

Properties held for sale

 

 

51,332

 

 

 

45,565

 

Cash, cash equivalents, and restricted cash, including $4,325 and $2,542 of restricted cash at September 30, 2020 and December 31, 2019, respectively

 

 

280,876

 

 

 

115,562

 

Tenant and other receivables

 

 

159,137

 

 

 

169,337

 

Deferred leasing costs, less accumulated amortization of $113,650 and $108,381 at September 30, 2020 and December 31, 2019, respectively

 

 

70,499

 

 

 

76,798

 

Acquired lease intangible assets, less accumulated amortization of $279,139 and $259,310 at September 30, 2020 and December 31, 2019, respectively

 

 

201,472

 

 

 

242,822

 

Right of use assets, net

 

 

288,138

 

 

 

292,786

 

Other assets

 

 

260,258

 

 

 

390,729

 

Total assets

 

$

10,986,639

 

 

 

11,132,253

 

Liabilities and Capital

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Notes payable

 

$

3,723,923

 

 

 

3,435,161

 

Unsecured credit facilities

 

 

264,605

 

 

 

484,383

 

Accounts payable and other liabilities

 

 

222,375

 

 

 

213,705

 

Acquired lease intangible liabilities, less accumulated amortization of $145,513 and $131,676 at September 30, 2020 and December 31, 2019, respectively

 

 

390,399

 

 

 

427,260

 

Lease liabilities

 

 

220,082

 

 

 

222,918

 

Tenants’ security, escrow deposits and prepaid rent

 

 

52,132

 

 

 

58,865

 

Total liabilities

 

 

4,873,516

 

 

 

4,842,292

 

Commitments and contingencies

 

 

 

 

 

 

Capital:

 

 

 

 

 

 

 

 

Partners’ capital:

 

 

 

 

 

 

 

 

General partner; 169,677,302 and 167,571,218 units outstanding at September 30, 2020 and December 31, 2019, respectively

 

 

6,062,814

 

 

 

6,225,345

 

Limited partners; 765,046 and 746,433 units outstanding at September 30, 2020 and December 31, 2019, respectively

 

 

35,987

 

 

 

36,100

 

Accumulated other comprehensive (loss)

 

 

(23,220

)

 

 

(11,997

)

Total partners’ capital

 

 

6,075,581

 

 

 

6,249,448

 

Noncontrolling interest: Limited partners’ interests in consolidated partnerships

 

 

37,542

 

 

 

40,513

 

Total capital

 

 

6,113,123

 

 

 

6,289,961

 

Total liabilities and capital

 

$

10,986,639

 

 

 

11,132,253

 

 

See accompanying notes to consolidated financial statements.

8


 

REGENCY CENTERS, L.P.

Consolidated Statements of Operations

(in thousands, except per unit data)

(unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease income

 

$

234,541

 

 

 

272,143

 

 

$

731,630

 

 

 

815,682

 

Other property income

 

 

2,261

 

 

 

2,780

 

 

 

7,001

 

 

 

6,956

 

Management, transaction, and other fees

 

 

6,142

 

 

 

7,353

 

 

 

19,084

 

 

 

21,768

 

Total revenues

 

 

242,944

 

 

 

282,276

 

 

 

757,715

 

 

 

844,406

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

84,808

 

 

 

91,856

 

 

 

259,161

 

 

 

282,639

 

Operating and maintenance

 

 

41,345

 

 

 

41,695

 

 

 

123,746

 

 

 

125,092

 

General and administrative

 

 

19,582

 

 

 

16,705

 

 

 

54,489

 

 

 

56,722

 

Real estate taxes

 

 

35,938

 

 

 

33,601

 

 

 

108,618

 

 

 

101,263

 

Other operating expenses

 

 

1,208

 

 

 

1,819

 

 

 

5,025

 

 

 

4,486

 

Total operating expenses

 

 

182,881

 

 

 

185,676

 

 

 

551,039

 

 

 

570,202

 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

40,794

 

 

 

38,253

 

 

 

118,605

 

 

 

113,178

 

Goodwill impairment

 

 

 

 

 

 

 

 

132,128

 

 

 

 

Provision for impairment of real estate, net of tax

 

 

 

 

 

(14

)

 

 

1,014

 

 

 

12,099

 

Gain on sale of real estate, net of tax

 

 

(3,237

)

 

 

(887

)

 

 

(48,690

)

 

 

(17,819

)

Early extinguishment of debt

 

 

19,358

 

 

 

1,391

 

 

 

19,358

 

 

 

11,982

 

Net investment (income) loss

 

 

(2,046

)

 

 

(370

)

 

 

(1,482

)

 

 

(3,690

)

Total other expense (income)

 

 

54,869

 

 

 

38,373

 

 

 

220,933

 

 

 

115,750

 

Income (loss) from operations before equity in income of investments in real estate partnerships

 

 

5,194

 

 

 

58,227

 

 

 

(14,257

)

 

 

158,454

 

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

 

 

8,116

 

 

 

(283

)

 

 

22,358

 

 

 

43,673

 

Net income

 

 

13,310

 

 

 

57,944

 

 

 

8,101

 

 

 

202,127

 

Limited partners’ interests in consolidated partnerships

 

 

(565

)

 

 

(822

)

 

 

(1,670

)

 

 

(2,532

)

Net income attributable to common unit holders

 

$

12,745

 

 

 

57,122

 

 

$

6,431

 

 

 

199,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per common unit - basic

 

$

0.07

 

 

 

0.34

 

 

$

0.04

 

 

 

1.19

 

Income per common unit - diluted

 

$

0.07

 

 

 

0.34

 

 

$

0.04

 

 

 

1.19

 

 

See accompanying notes to consolidated financial statements.

9


 

REGENCY CENTERS, L.P.

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

13,310

 

 

 

57,944

 

 

$

8,101

 

 

 

202,127

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective portion of change in fair value of derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective portion of change in fair value of derivative instruments

 

 

(666

)

 

 

(3,851

)

 

 

(19,187

)

 

 

(18,567

)

Reclassification adjustment of derivative instruments included in net income

 

 

2,570

 

 

 

1,677

 

 

 

6,479

 

 

 

2,085

 

Unrealized gain on available-for-sale debt securities

 

 

53

 

 

 

169

 

 

 

379

 

 

 

429

 

Other comprehensive income (loss)

 

 

1,957

 

 

 

(2,005

)

 

 

(12,329

)

 

 

(16,053

)

Comprehensive income (loss)

 

 

15,267

 

 

 

55,939

 

 

 

(4,228

)

 

 

186,074

 

Less: comprehensive income attributable to noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interests

 

 

565

 

 

 

822

 

 

 

1,670

 

 

 

2,532

 

Other comprehensive income (loss) attributable to noncontrolling interests

 

 

33

 

 

 

(279

)

 

 

(1,055

)

 

 

(1,140

)

Comprehensive income attributable to noncontrolling interests

 

 

598

 

 

 

543

 

 

 

615

 

 

 

1,392

 

Comprehensive income (loss) attributable to the Partnership

 

$

14,669

 

 

 

55,396

 

 

$

(4,843

)

 

 

184,682

 

 

See accompanying notes to consolidated financial statements.

 

 

 

10


 

REGENCY CENTERS, L.P.

Consolidated Statements of Capital

For the three months ended September 30, 2020 and 2019

(in thousands)

(unaudited)

 

 

 

General Partner Preferred

and Common Units

 

 

Limited

Partners

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Total

Partners’

Capital

 

 

Noncontrolling Interests in

Limited Partners’ Interest in

Consolidated Partnerships

 

 

Total

Capital

 

Balance at June 30, 2019

 

$

6,314,927

 

 

 

10,528

 

 

 

(14,086

)

 

 

6,311,369

 

 

 

41,479

 

 

 

6,352,848

 

Net income

 

 

56,965

 

 

 

157

 

 

 

 

 

 

57,122

 

 

 

822

 

 

 

57,944

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before reclassification

 

 

 

 

 

(13

)

 

 

(3,406

)

 

 

(3,419

)

 

 

(263

)

 

 

(3,682

)

Amounts reclassified from accumulated other comprehensive loss

 

 

 

 

 

5

 

 

 

1,688

 

 

 

1,693

 

 

 

(16

)

 

 

1,677

 

Contributions from partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

103

 

 

 

103

 

Issuance of exchangeable operating partnership units

 

 

 

 

 

25,869

 

 

 

 

 

 

25,869

 

 

 

 

 

 

25,869

 

Distributions to partners

 

 

(98,018

)

 

 

(205

)

 

 

 

 

 

(98,223

)

 

 

(1,358

)

 

 

(99,581

)

Reallocation of limited partner's interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted units issued as a result of restricted stock issued by Parent Company, net of amortization

 

 

4,224

 

 

 

 

 

 

 

 

 

4,224

 

 

 

 

 

 

4,224

 

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

 

 

445

 

 

 

 

 

 

 

 

 

445

 

 

 

 

 

 

445

 

Balance at September 30, 2019

 

$

6,278,543

 

 

 

36,341

 

 

 

(15,804

)

 

 

6,299,080

 

 

 

40,767

 

 

 

6,339,847

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2020

 

$

6,147,118

 

 

 

36,376

 

 

 

(25,135

)

 

 

6,158,359

 

 

 

38,843

 

 

 

6,197,202

 

Net income

 

 

12,688

 

 

 

57

 

 

 

 

 

 

12,745

 

 

 

565

 

 

 

13,310

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before reclassification

 

 

 

 

 

(2

)

 

 

(551

)

 

 

(553

)

 

 

(60

)

 

 

(613

)

Amounts reclassified from accumulated other comprehensive loss

 

 

 

 

 

11

 

 

 

2,466

 

 

 

2,477

 

 

 

93

 

 

 

2,570

 

Deferred compensation plan, net

 

 

207

 

 

 

 

 

 

 

 

 

207

 

 

 

 

 

 

207

 

Contributions from partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

312

 

 

 

312

 

Issuance of exchangeable operating partnership units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions to partners

 

 

(100,949

)

 

 

(455

)

 

 

 

 

 

(101,404

)

 

 

(2,211

)

 

 

(103,615

)

Restricted units issued as a result of restricted stock issued by Parent Company, net of amortization

 

 

3,372

 

 

 

 

 

 

 

 

 

3,372

 

 

 

 

 

 

3,372

 

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

 

 

378

 

 

 

 

 

 

 

 

 

378

 

 

 

 

 

 

378

 

Balance at September 30, 2020

 

$

6,062,814

 

 

 

35,987

 

 

 

(23,220

)

 

 

6,075,581

 

 

 

37,542

 

 

 

6,113,123

 

 

See accompanying notes to consolidated financial statements.

 

 

11


 

REGENCY CENTERS, L.P.

Consolidated Statements of Capital

For the nine months ended September 30, 2020 and 2019

(in thousands)

(unaudited)

 

 

 

General Partner Preferred

and Common Units

 

 

Limited

Partners

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Total

Partners’

Capital

 

 

Noncontrolling Interests in

Limited Partners’ Interest in

Consolidated Partnerships

 

 

Total

Capital

 

Balance at December 31, 2018

 

$

6,398,897

 

 

 

10,666

 

 

 

(927

)

 

 

6,408,636

 

 

 

41,532

 

 

 

6,450,168

 

Net income

 

 

199,139

 

 

 

456

 

 

 

 

 

 

199,595

 

 

 

2,532

 

 

 

202,127

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before reclassification

 

 

 

 

 

(42

)

 

 

(17,020

)

 

 

(17,062

)

 

 

(1,076

)

 

 

(18,138

)

Amounts reclassified from accumulated other comprehensive loss

 

 

 

 

 

6

 

 

 

2,143

 

 

 

2,149

 

 

 

(64

)

 

 

2,085

 

Contributions from partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,999

 

 

 

1,999

 

Issuance of exchangeable operating partnership units

 

 

 

 

 

25,869

 

 

 

 

 

 

25,869

 

 

 

 

 

 

25,869

 

Distributions to partners

 

 

(294,005

)

 

 

(614

)

 

 

 

 

 

(294,619

)

 

 

(4,222

)

 

 

(298,841

)

Reallocation of limited partner's interest

 

 

(66

)

 

 

 

 

 

 

 

 

(66

)

 

 

66

 

 

 

 

Restricted units issued as a result of restricted stock issued by Parent Company, net of amortization

 

 

12,128

 

 

 

 

 

 

 

 

 

12,128

 

 

 

 

 

 

12,128

 

Common units repurchased and retired as a result of common stock repurchased and retired by Parent Company

 

 

(32,778

)

 

 

 

 

 

 

 

 

(32,778

)

 

 

 

 

 

(32,778

)

Common units redeemed as a result of common stock redeemed by Parent Company, net of issuances

 

 

(4,772

)

 

 

 

 

 

 

 

 

(4,772

)

 

 

 

 

 

(4,772

)

Balance at September 30, 2019

 

$

6,278,543

 

 

 

36,341

 

 

 

(15,804

)

 

 

6,299,080

 

 

 

40,767

 

 

 

6,339,847

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

$

6,225,345

 

 

 

36,100

 

 

 

(11,997

)

 

 

6,249,448

 

 

 

40,513

 

 

 

6,289,961

 

Net income

 

 

6,402

 

 

 

29

 

 

 

 

 

 

6,431

 

 

 

1,670

 

 

 

8,101

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before reclassification

 

 

 

 

 

(79

)

 

 

(17,505

)

 

 

(17,584

)

 

 

(1,224

)

 

 

(18,808

)

Amounts reclassified from accumulated other comprehensive loss

 

 

 

 

 

28

 

 

��

6,282

 

 

 

6,310

 

 

 

169

 

 

 

6,479

 

Deferred compensation plan, net

 

 

207

 

 

 

 

 

 

 

 

 

207

 

 

 

 

 

 

207

 

Contributions from partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

443

 

 

 

443

 

Issuance of exchangeable operating partnership units

 

 

 

 

 

1,275

 

 

 

 

 

 

1,275

 

 

 

 

 

 

1,275

 

Distributions to partners

 

 

(301,678

)

 

 

(1,366

)

 

 

 

 

 

(303,044

)

 

 

(4,029

)

 

 

(307,073

)

Restricted units issued as a result of restricted stock issued by Parent Company, net of amortization

 

 

10,964

 

 

 

 

 

 

 

 

 

10,964

 

 

 

 

 

 

10,964

 

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

 

 

125,608

 

 

 

 

 

 

 

 

 

125,608

 

 

 

 

 

 

125,608

 

Common units redeemed as a result of common stock redeemed by Parent Company, net of issuances

 

 

(4,034

)

 

 

 

 

 

 

 

 

(4,034

)

 

 

 

 

 

(4,034

)

Balance at September 30, 2020

 

$

6,062,814

 

 

 

35,987

 

 

 

(23,220

)

 

 

6,075,581

 

 

 

37,542

 

 

 

6,113,123

 

 

See accompanying notes to consolidated financial statements.

 

 

12


 

REGENCY CENTERS, L.P.

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2020 and 2019

(in thousands)

(unaudited)

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

8,101

 

 

 

202,127

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

259,161

 

 

 

282,639

 

Amortization of deferred loan costs and debt premiums

 

 

7,566

 

 

 

8,533

 

(Accretion) and amortization of above and below market lease intangibles, net

 

 

(29,847

)

 

 

(30,196

)

Stock-based compensation, net of capitalization

 

 

10,654

 

 

 

10,716

 

Equity in income of investments in real estate partnerships

 

 

(22,358

)

 

 

(43,673

)

Gain on sale of real estate, net of tax

 

 

(48,690

)

 

 

(17,819

)

Provision for impairment of real estate, net of tax

 

 

1,014

 

 

 

12,099

 

Goodwill impairment

 

 

132,128

 

 

 

 

Early extinguishment of debt

 

 

19,358

 

 

 

11,982

 

Distribution of earnings from investments in real estate partnerships

 

 

32,659

 

 

 

41,427

 

Settlement of derivative instruments

 

 

 

 

 

(6,870

)

Deferred compensation expense

 

 

1,381

 

 

 

3,551

 

Realized and unrealized gain on investments

 

 

(1,427

)

 

 

(3,634

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Tenant and other receivables

 

 

4,072

 

 

 

520

 

Deferred leasing costs

 

 

(4,999

)

 

 

(4,695

)

Other assets

 

 

(7,670

)

 

 

(7,182

)

Accounts payable and other liabilities

 

 

20,223

 

 

 

14,886

 

Tenants’ security, escrow deposits and prepaid rent

 

 

(6,737

)

 

 

(5,055

)

Net cash provided by operating activities

 

 

374,589

 

 

 

469,356

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of operating real estate

 

 

(16,867

)

 

 

(222,230

)

Advance deposits refunded (paid) on acquisition of operating real estate

 

 

100

 

 

 

(600

)

Real estate development and capital improvements

 

 

(149,293

)

 

 

(128,085

)

Proceeds from sale of real estate investments

 

 

125,539

 

 

 

98,006

 

Issuance of notes receivable

 

 

(551

)

 

 

 

Investments in real estate partnerships

 

 

(47,957

)

 

 

(57,333

)

Return of capital from investments in real estate partnerships

 

 

23,235

 

 

 

46,740

 

Dividends on investment securities

 

 

193

 

 

 

400

 

Acquisition of investment securities

 

 

(10,580

)

 

 

(17,955

)

Proceeds from sale of investment securities

 

 

10,659

 

 

 

14,748

 

Net cash used in investing activities

 

 

(65,522

)

 

 

(266,309

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net proceeds from common stock issuance

 

 

125,608

 

 

 

 

Repurchase of common shares in conjunction with equity award plans

 

 

(5,512

)

 

 

(6,165

)

Common units repurchased through share repurchase program

 

 

 

 

 

(32,777

)

Proceeds from sale of treasury stock

 

 

269

 

 

 

9

 

Distributions to limited partners in consolidated partnerships, net

 

 

(2,193

)

 

 

(2,223

)

Distributions to partners

 

 

(301,904

)

 

 

(293,535

)

Repayment of fixed rate unsecured notes

 

 

(300,000

)

 

 

(250,000

)

Proceeds from issuance of fixed rate unsecured notes, net

 

 

598,830

 

 

 

723,571

 

Proceeds from unsecured credit facilities

 

 

610,000

 

 

 

450,000

 

Repayment of unsecured credit facilities

 

 

(830,000

)

 

 

(710,000

)

Repayment of notes payable

 

 

(3,891

)

 

 

(55,030

)

Scheduled principal payments

 

 

(8,149

)

 

 

(6,960

)

Payment of loan costs

 

 

(5,063

)

 

 

(7,019

)

Early redemption costs

 

 

(21,748

)

 

 

(10,647

)

Net cash used in financing activities

 

 

(143,753

)

 

 

(200,776

)

Net increase in cash and cash equivalents and restricted cash

 

 

165,314

 

 

 

2,271

 

Cash and cash equivalents and restricted cash at beginning of the period

 

 

115,562

 

 

 

45,190

 

Cash and cash equivalents and restricted cash at end of the period

 

$

280,876

 

 

 

47,461

 

 

See accompanying notes to consolidated financial statements.

13


REGENCY CENTERS, L.P.

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2020 and 2019

(in thousands)

(unaudited)

 

 

 

2020

 

 

2019

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest (net of capitalized interest of $3,590 and $3,089 in 2020 and 2019, respectively)

 

$

121,307

 

 

 

112,055

 

Cash paid for income taxes, net of refunds

 

$

898

 

 

 

778

 

Supplemental disclosure of non-cash transactions:

 

 

 

 

 

 

 

 

Acquisition of real estate previously held within investments in real estate partnerships

 

$

5,986

 

 

 

 

Mortgage loan assumed with the acquisition of real estate

 

$

16,359

 

 

 

26,152

 

Mortgage loan assumed by purchaser with the sale of real estate

 

$

8,250

 

 

 

 

Exchangeable operating partnership units issued for acquisition of real estate

 

$

1,275

 

 

 

25,869

 

Change in accrued capital expenditures

 

$

16,276

 

 

 

3,185

 

Common stock issued by Parent Company for dividend reinvestment plan

 

$

1,138

 

 

 

1,085

 

Stock-based compensation capitalized

 

$

650

 

 

 

1,719

 

(Distributions to) contributions from limited partners in consolidated partnerships, net

 

$

(1,420

)

 

 

66

 

Common stock issued for dividend reinvestment in trust

 

$

819

 

 

 

732

 

Contribution of stock awards into trust

 

$

1,439

 

 

 

2,496

 

Distribution of stock held in trust

 

$

442

 

 

 

197

 

Change in fair value of securities

 

$

288

 

 

 

509

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

14


 

REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

 

1.

Organization and Significant Accounting Policies

General

Regency Centers Corporation (the “Parent Company”) began its operations as a Real Estate Investment Trust (“REIT”) in 1993 and is the general partner of Regency Centers, L.P. (the “Operating Partnership”). The Parent Company primarily engages in the ownership, management, leasing, acquisition, and development and redevelopment of shopping centers through the Operating Partnership, and has no other assets other than through its investment in the Operating Partnership, and its only liabilities are $200 million of unsecured private placement notes, which are co-issued and guaranteed by the Operating Partnership. The Parent Company guarantees all of the unsecured debt of the Operating Partnership.

As of September 30, 2020, the Parent Company, the Operating Partnership, and their controlled subsidiaries on a consolidated basis owned 299 properties and held partial interests in an additional 115 properties through unconsolidated Investments in real estate partnerships (also referred to as “joint ventures” or “investment partnerships”).

The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented.  These adjustments are considered to be of a normal recurring nature, except for the goodwill impairment, discussed in Note 4, resulting from the market and economic impacts of the COVID-19 pandemic.

COVID-19 Pandemic

On March 11, 2020, the novel coronavirus disease (“COVID-19”) was declared a pandemic (“COVID-19 pandemic”) by the World Health Organization as the disease spread throughout the world.  During the ongoing COVID-19 pandemic, U.S. federal, state, and local governments have continued to mandate various actions to reduce or prevent the spread of COVID-19, which continues to directly impact many of the Company’s tenants whose businesses may be considered non-essential.  While essential businesses, such as grocery stores that anchor over 80% of the Company’s operating centers, have thus far been able to continue to operate and serve their customers, non-essential businesses continue to experience significant declines in customer traffic, when compared to previous years, or have temporarily closed their stores in reaction to legally enforceable governmental orders or overall efforts to support social distancing.  As a result, many retailers have had to evaluate alternative means of providing their goods and services to their customers or, in the case of many non-essential tenants, to close.  

The COVID-19 pandemic continues to evolve, making the broader implications on the Company’s future results of operations and overall financial performance uncertain at this time.  While much of the Company’s lease income is derived from contractual rent payments, the tenants’ ability to meet their lease obligations have been negatively impacted by the disruptions and uncertainties of the COVID-19 pandemic.  The tenants’ ability to respond to these disruptions, including changes in their customers’ shopping habits and behaviors, will influence the tenants’ ability to survive and ultimately fulfill their lease obligations.  Although many of the Company’s tenants have reported initially improved sales results upon reopening, the risk of diminished sales and future closures exists as the virus remains active and continues to spread which could result in a resurgence in COVID-19 cases and reinstituted government mandated closures.  

Due to the COVID-19 pandemic, certain tenants have requested rent concessions or have sought to renegotiate future rents based on changes to the economic environment. Other tenants have chosen not to reopen or honor the terms of their existing lease agreements.  The Company is closely monitoring its cash collections from tenants which, for many businesses classified as non-essential, have significantly declined since the start of the COVID-19 pandemic and resulting restrictions.  Approximately 86% of pro-rata base rent billed for the three months ended September 30, 2020, has been collected through October 31, 2020.  Since the COVID-19 pandemic began, the Company has executed approximately 1,300 rent deferral agreements within its consolidated real estate portfolio and its unconsolidated real estate investment partnerships.  This deferred rent represents, on a weighted average basis, deferral periods of approximately 3 months, with repayment periods of approximately 9.2 months beginning in December 2020.  The Company expects to continue to work with other tenants, which may result in further rent deferrals, concessions or abatements.  As a result, there can be no assurance that cash flows from operations will be sufficient to fund the Company’s dividend payments without the benefit of other sources of capital or changes to its current dividend policy.  

New leasing activity has declined and is expected to remain at lower levels into 2021 as businesses delay executing leases amidst the immediate and uncertain future economic impacts of the COVID-19 pandemic.  This, coupled with tenant failures, may result in decreased demand for space in our centers, which could result in pricing pressure on rents.  Additionally, with delays in construction for tenant improvements due to the impacts of the pandemic, it may take longer before new tenants are able to open and commence rent payments.

15


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

The Company’s ability to successfully start or complete tenant buildouts, new ground up development, or redevelopment of existing properties was adversely impacted by governmental orders shutting down construction activities. The Company also experienced impacts on its ability to source materials for construction and labor shortages impacting its ability to complete construction projects on anticipated schedules.  In the event a surge in new cases resulting in additional lockdowns occurs, similar impacts to the Company’s supply chain may arise which could have a material adverse effect on the Company’s business, financial condition and results of operation.  The Company continues to closely monitor and assess the capital requirements of all in process and planned developments, redevelopments, and capital expenditures. The Company is carefully proceeding in a targeted manner on a project-by-project basis which has resulted in delaying, phasing or curtailing certain in-process and planned development, redevelopment and capital expenditure projects.

On March 30, 2020, the Company withdrew its fiscal 2020 guidance previously provided.  The duration and severity of the health crisis in the United States and the speed at which the country, states and localities are able to safely reopen and remain open, will continue to materially impact the overall economy, retail tenants, and therefore the Company’s results of operations, financial condition and cash flows.  As such, the impact from the COVID-19 pandemic may not be fully reflected in the Company’s results of operations and overall financial position until future periods and could result in a further materially adverse impact to the Company’s financial condition and results of operations.  

The Company has long had a business continuity and disaster recovery plan which has been successfully implemented in the past. This experience enabled the Company to continue operating productively during the COVID-19 pandemic while its employees work safely from home, as roles permit, during the early stages of the COVID-19 pandemic.  The Company has maintained, and expects to continue to maintain, its financial reporting systems as well as its internal controls over financial reporting and disclosure controls and procedures.  The Company has since developed and executed its office reopening plan allowing employees, in the current stage, the option to work from home or the office. The Company has implemented CDC recommended protocols and developed detailed plans to prioritize the well-being of its employees, and encourages its tenants to similarly follow all rules and guidelines.  All Company employees are required to complete training before returning to the office.    

Consolidation

The Company consolidates properties that are wholly-owned and properties where it owns less than 100%, but which it has control over the activities most important to the overall success of the partnership. Control is determined using an evaluation based on accounting standards related to the consolidation of Variable Interest Entities ("VIEs") and voting interest entities.

Ownership of the Operating Partnership

The Operating Partnership’s capital includes general and limited common Partnership Units. As of September 30, 2020, the Parent Company owned approximately 99.6% of the outstanding common Partnership Units of the Operating Partnership, with the remaining limited common Partnership Units held by third parties (“Exchangeable operating partnership units” or “EOP units”). Each EOP unit is exchangeable for cash or one share of common stock of the Parent Company, at the discretion of the Parent Company, and the unit holder cannot require redemption in cash or other assets.  The Parent Company has evaluated the conditions as specified under Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity as it relates to exchangeable operating partnership units outstanding and concluded that it has the right to satisfy the redemption requirements of the units by delivering unregistered common stock.  Accordingly, the Parent Company classifies EOP units as permanent equity in the accompanying Consolidated Balance Sheets and Consolidated Statements of Equity and Comprehensive Income. The Parent Company serves as general partner of the Operating Partnership. The EOP unit holders have limited rights over the Operating Partnership such that they do not have the power to direct the activities of the Operating Partnership. As such, the Operating Partnership is considered a VIE, and the Parent Company, which consolidates it, is the primary beneficiary. The Parent Company’s only investment is the Operating Partnership. Net income and distributions of the Operating Partnership are allocable to the general and limited common Partnership Units in accordance with their ownership percentages.

Real Estate Partnerships

As of September 30, 2020, Regency had a partial ownership interest in 125 properties through partnerships, of which 10 are consolidated. Regency's partners include institutional investors and other real estate developers and/or operators (the “Partners” or “limited partners”). Regency has a variable interest in these entities through its equity interests, with Regency the primary beneficiary in certain of these real estate partnerships. As such, Regency consolidates the partnerships for which it is the primary beneficiary and reports the limited partners’ interests as Noncontrolling interests. For those partnerships which Regency is not the primary beneficiary and does not control, but has significant influence, Regency recognizes its investment in them using the equity method of accounting.

16


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

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

The major classes of assets, liabilities, and non-controlling equity interests held by the Company's consolidated VIEs, exclusive of the Operating Partnership, are as follows:

 

(in thousands)

 

September 30, 2020

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Net real estate investments (1)

 

$

129,881

 

 

 

325,464

 

Cash, cash equivalents and restricted cash (1)

 

 

5,456

 

 

 

57,269

 

Liabilities

 

 

 

 

 

 

 

 

Notes payable

 

 

7,329

 

 

 

17,740

 

Equity

 

 

 

 

 

 

 

 

Limited partners’ interests in consolidated partnerships

 

 

28,827

 

 

 

30,655

 

 

 

 

(1)

Included in the December 31, 2019, balances were real estate assets and cash held in Section 1031 like-kind exchanges, of which none remained at September 30, 2020.  

 

Revenues and Other Receivables

Other property income includes incidental income from the properties and is generally recognized at the point in time that the performance obligation is met. All income from contracts with the Company's real estate partnerships is included within Management, transaction and other fees on the Consolidated Statements of Operations. The primary components of these revenue streams, the timing of satisfying the performance obligations, and amounts recognized are as follows:

 

 

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

(in thousands)

 

Timing of

satisfaction of

performance

obligations

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Other property income

 

Point in time

 

$

2,261

 

 

 

2,780

 

 

$

7,001

 

 

 

6,956

 

Management, transaction and other fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property management services

 

Over time

 

 

3,598

 

 

 

3,648

 

 

 

10,830

 

 

 

11,076

 

Asset management services

 

Over time

 

 

1,657

 

 

 

1,803

 

 

 

5,250

 

 

 

5,341

 

Leasing services

 

Point in time

 

 

708

 

 

 

1,239

 

 

 

1,948

 

 

 

2,702

 

Other transaction fees

 

Point in time

 

 

179

 

 

 

663

 

 

 

1,056

 

 

 

2,649

 

Total management, transaction, and other fees

 

 

 

$

6,142

 

 

 

7,353

 

 

$

19,084

 

 

 

21,768

 

 

The accounts receivable for management services, which are included within Tenant and other receivables in the accompanying Consolidated Balance Sheets, are $9.8 million and $11.6 million, as of September 30, 2020 and December 31, 2019, respectively.  

17


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

Recent Accounting Pronouncements

The following table provides a brief description of recent accounting pronouncements and expected impact on our financial statements:

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements or other significant matters

Recently adopted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounting Standards Update (“ASU”) 2016-13, June 2016, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

 

 

 

This ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

 

This ASU applies to how the Company evaluates impairments of any available-for-sale debt securities and any non-operating lease receivables, including lease receivables arising from leases classified as sales-type or direct finance leases.

 

January 2020

 

The Company has completed its evaluation and adoption of this standard, which resulted in changes in evaluating impairment of its available-for-sale debt securities.  Declines in fair value below amortized cost resulting from credit related factors will be reflected in earnings, within Net investment income in the accompanying Consolidated Statements of Operations. Changes in value from market related factors continue to be recognized in Other comprehensive income (“OCI”).  

 

The Company’s investments in available-for-sale debt securities are invested in investment grade quality holdings or U.S. government backed securities, and are well diversified.  During the nine months ended September 30, 2020, the Company did not recognize any allowance for credit loss.  

 

Additionally, the Company’s non-operating lease receivables experienced no credit losses during the nine months ended September 30, 2020, and the Company has no other financial instruments, such as lease receivables arising from sales-type or direct finance leases, subject to this ASU.  

 

 

 

 

 

 

 

ASU 2018-19, November 2018, Codification Improvements to Topic 326, Financial Instruments - Credit Losses

 

This ASU clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases.

 

January 2020

 

The Company has completed its evaluation and adoption of this standard with no additional changes in its accounting for operating leases and related receivables.    

 

 

 

 

 

 

 

ASU 2018-13, August 2018, Fair Value Measurements (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

 

This ASU modifies the disclosure requirements for fair value measurements within the scope of Topic 820, Fair Value Measurements, including the removal and modification of certain existing disclosures, and the addition of new disclosures.

 

January 2020

 

The Company has completed its evaluation and adoption of this new standard. The Company does not have any assets or liabilities measured to fair value requiring modified disclosures at September 30, 2020.  

 

 

 


18


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

Standard

 

Description

 

Date of adoption

 

Effect on the financial statements or other significant matters

ASU 2018-15, August 2018, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.

 

The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).  The ASU provides further clarification of the appropriate presentation of capitalized costs, the period over which to recognize the expense, the presentation within the Statements of Operations and Statements of Cash Flows, and disclosure requirements.

 

January 2020

 

The Company has completed its evaluation and adoption of this standard.  Qualifying implementation costs incurred in a cloud computing arrangement that is a service contract are no longer expensed as incurred but rather are deferred within Other assets and amortized to earnings, within General and administrative expense in the accompanying Consolidated Statements of Operations, over the term of the arrangement.  Cash flows attributable to the service arrangements, including implementation thereof, are reflected as Operating cash flows within the Consolidated Statements of Cash Flows.

 

 

 

 

 

 

 

 

ASU 2020-04, Reference Rate Reform (Topic 848):  Facilitation of the Effects of Reference Rate Reform on Financial Reporting

 

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts.   The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

 

 

March 2020 through December 31, 2022

 

The Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation.  As additional index changes in the market occur, the Company will evaluate the impact of the guidance and may apply other elections as applicable.  

 

 

 

 

 

 

 

Not yet adopted:

 

 

 

 

 

 

 

 

 

 

 

 

 

ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

 

The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, Income Taxes, and also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.  

 

Notable changes of potential impact include income-based franchise taxes and interim period recognition of enacted changes in tax laws or rates.  

 

January 2021

 

The Company is evaluating this update and does not expect it to have a material impact to its financial condition, results of operations, cash flows or related footnote disclosures.  

 

 

 

 

19


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

2.

Real Estate Investments

The following tables detail consolidated shopping centers acquired or land acquired for development or redevelopment for the periods set forth below:

 

(in thousands)

 

Nine months ended September 30, 2020

 

Date Purchased

 

Property Name

 

City/State

 

Property Type

 

Ownership

 

 

Purchase

Price

 

 

Debt

Assumed,

Net of

Premiums

 

 

Intangible

Assets

 

 

Intangible

Liabilities

 

1/1/20

 

Country Walk Plaza (1)

 

Miami, FL

 

Operating

 

100%

 

 

$

39,625

 

 

 

16,359

 

 

 

3,294

 

 

 

2,452

 

 

(1)

The purchase price presented above reflects the purchase price for 100% of the property, of which the Company previously owned a 30% equity interest prior to acquiring the other partner’s interest and gaining control.  

 

(in thousands)

 

Nine months ended September 30, 2019

 

Date Purchased

 

Property Name

 

City/State

 

Property Type

 

Ownership

 

 

Purchase

Price

 

 

Debt

Assumed,

Net of

Premiums

 

 

Intangible

Assets

 

 

Intangible

Liabilities

 

1/8/19

 

Pablo Plaza (1)

 

Jacksonville, FL

 

Operating

 

100%

 

 

$

600

 

 

 

 

 

 

 

 

 

 

2/8/19

 

Melrose Market

 

Seattle, WA

 

Operating

 

100%

 

 

 

15,515

 

 

 

 

 

 

941

 

 

 

358

 

6/18/19

 

The Field at Commonwealth Ph II (2)

 

Chantilly, VA

 

Development

 

100%

 

 

 

4,083

 

 

 

 

 

 

 

 

 

 

6/21/19

 

Culver Public Market

 

Culver City, CA

 

Development

 

100%

 

 

 

1,279

 

 

 

 

 

 

 

 

 

 

6/28/19

 

6401 Roosevelt

 

Seattle, WA

 

Operating

 

100%

 

 

 

3,550

 

 

 

 

 

 

 

 

 

 

7/1/19

 

The Pruneyard Shopping Center

 

Campbell, CA

 

Operating

 

100%

 

 

 

212,500

 

 

 

 

 

 

16,991

 

 

 

5,833

 

9/17/19

 

Circle Marina Center

 

Long Beach, CA

 

Operating

 

100%

 

 

 

50,000

 

 

 

 

 

 

3,717

 

 

 

962

 

Total property acquisitions

 

 

 

 

 

 

 

 

 

$

287,527

 

 

 

 

 

 

21,649

 

 

 

7,153

 

 

(1)

The Company purchased a 0.17 acre land parcel adjacent to the Company's existing operating Pablo Plaza for redevelopment.

 

(2)

The Company purchased The Field at Commonwealth Ph II, which is land adjacent to an existing operating property, for future development.

 

3.

Property Dispositions

The following table provides a summary of consolidated shopping centers and land parcels sold during the periods set forth below:

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

(in thousands, except number sold data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net proceeds from sale of real estate investments

 

$

9,925

 

 

 

14,546

 

 

$

125,539

 

(1)

 

98,006

 

Gain on sale of real estate, net of tax

 

 

3,237

 

 

 

887

 

 

 

48,690

 

 

 

17,819

 

Provision for impairment of real estate sold

 

 

 

 

 

194

 

 

 

571

 

 

 

1,860

 

Number of operating properties sold

 

 

 

 

 

1

 

 

 

3

 

 

 

5

 

Number of land parcels sold

 

 

4

 

 

 

2

 

 

 

8

 

 

 

5

 

Percent interest sold

 

70% - 100%

 

 

100%

 

 

50% - 100%

 

 

100%

 

 

 

(1)

Includes proceeds from repayment of a short-term note on the sale of one of the properties, issued at closing and repaid during the same three months ended March 31, 2020.  

 

At September 30, 2020, the Company also had 3 operating properties and 1 land parcel classified within Properties held for sale on the Consolidated Balance Sheets.

20


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

4.

Other Assets

The following table represents the components of Other assets in the accompanying Consolidated Balance Sheets as of the dates set forth below:

 

(in thousands)

 

September 30, 2020

 

 

December 31, 2019

 

Goodwill, net

 

$

174,794

 

 

 

307,434

 

Investments

 

 

51,995

 

 

 

50,354

 

Prepaid and other

 

 

24,019

 

 

 

18,169

 

Derivative assets

 

 

 

 

 

2,987

 

Furniture, fixtures, and equipment, net

 

 

6,385

 

 

 

7,098

 

Deferred financing costs, net

 

 

3,065

 

 

 

4,687

 

Total other assets

 

$

260,258

 

 

 

390,729

 

 

The following table presents the goodwill balances and activity during the year to date periods ended:

 

 

 

September 30, 2020

 

 

December 31, 2019

 

(in thousands)

 

Goodwill

 

 

Accumulated

Impairment

Losses

 

 

Total

 

 

Goodwill

 

 

Accumulated

Impairment

Losses

 

 

Total

 

Beginning of year balance

 

$

310,388

 

 

 

(2,954

)

 

 

307,434

 

 

 

316,858

 

 

 

(2,715

)

 

 

314,143

 

Goodwill allocated to Provision for impairment

 

 

0

 

 

 

(132,179

)

 

 

(132,179

)

 

 

0

 

 

 

(2,954

)

 

 

(2,954

)

Goodwill allocated to Properties held for sale

 

 

(963

)

 

 

963

 

 

 

0

 

 

 

(2,472

)

 

 

0

 

 

 

(2,472

)

Goodwill associated with disposed reporting units:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill allocated to Provision for impairment

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(1,779

)

 

 

1,779

 

 

 

0

 

Goodwill allocated to Gain on sale of real estate

 

 

(461

)

 

 

0

 

 

 

(461

)

 

 

(2,219

)

 

 

936

 

 

 

(1,283

)

End of period balance

 

$

308,964

 

 

 

(134,170

)

 

 

174,794

 

 

 

310,388

 

 

 

(2,954

)

 

 

307,434

 

 

As the Company identifies properties (“reporting units”) that no longer meet its investment criteria, it will evaluate the property for potential sale. A decision to sell a reporting unit results in the need to evaluate its goodwill for recoverability and may result in impairment. Additionally, other changes impacting a reporting unit may be considered a triggering event.  If events occur that trigger an impairment evaluation at multiple reporting units, a goodwill impairment may be significant.  

During the three months ended March 31, 2020, the Company recognized $132.2 million of Goodwill impairment.  The market disruptions related to the significant economic impacts of the COVID-19 pandemic triggered evaluation of reporting unit fair values for goodwill impairment. The Company’s reporting units are at the individual property level. The carrying value of long-lived assets of the reporting units were first tested for recoverability with no resulting impairments.  Next, the fair value of each reporting unit was compared to its carrying value, including goodwill.  Of the 269 reporting units with goodwill, 87 of those were determined to have fair values lower than carrying value.  As such, goodwill impairment losses totaling $132.2 million were recognized for the amount that the carrying amount of the reporting unit, including goodwill, exceeded its fair value, limited to the total amount of goodwill allocated to that reporting unit.  Fair values of the reporting units were determined using a discounted cash flow approach, including current market cash flow assumptions for impacts to existing tenant contractual rent as well as prospective future rent and occupancy changes and related capital and operating expenditures.  The cap rates and discount rates used in the analysis reflect management’s best estimate of market rates adjusted for the current environment.  NaN additional Goodwill impairments were recognized after March 31, 2020.   

21


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

5.

Notes Payable and Unsecured Credit Facilities

The Company’s outstanding debt, net of unamortized debt premium (discount) and debt issuance costs, consisted of the following:

 

(in thousands)

 

Weighted

Average

Contractual

Rate

 

 

Weighted

Average

Effective

Rate

 

 

September 30, 2020

 

 

December 31, 2019

 

Notes payable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate mortgage loans

 

4.4%

 

 

3.9%

 

 

$

338,024

 

 

 

342,020

 

Variable rate mortgage loans (1)

 

2.8%

 

 

2.9%

 

 

 

147,385

 

 

 

148,389

 

Fixed rate unsecured debt

 

3.8%

 

 

4.0%

 

 

 

3,238,514

 

 

 

2,944,752

 

Total notes payable

 

 

 

 

 

 

 

 

 

 

3,723,923

 

 

 

3,435,161

 

Unsecured credit facilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Line of Credit (the "Line") (2)

 

1.0%

 

 

1.4%

 

 

 

 

 

 

220,000

 

Term loans

 

2.0%

 

 

2.1%

 

 

 

264,605

 

 

 

264,383

 

Total unsecured credit facilities

 

 

 

 

 

 

 

 

 

 

264,605

 

 

 

484,383

 

Total debt outstanding

 

 

 

 

 

 

 

 

 

$

3,988,528

 

 

 

3,919,544

 

 

 

(1)

Includes six mortgages with interest rates that vary on LIBOR based formulas. Four of these variable rate loans have interest rate swaps in place to fix the interest rates.  The effective fixed rates of the loans range from 2.5% to 4.1%.

 

 

(2)

Weighted average effective rate for the Line is calculated based on a fully drawn Line balance.

 

Significant financing activity during 2020 includes:

 

 

On May 11, 2020, the Company issued $600 million of 3.70% senior unsecured public notes, which priced at 99.805%, and mature on June 15, 2030.  Portions of the net proceeds were used to repay the outstanding balance on the Line and to redeem, on September 2, 2020, the entire $300 million outstanding of 3.75% Notes due 2022.  The Company paid $325.1 million to redeem the notes, including $25.1 million for accrued interest and a make-whole premium.  The remainder of the proceeds are held in cash and are expected to be used for general working capital purposes, potentially including repayment of indebtedness.

As of September 30, 2020, the Company has access to a remaining borrowing capacity on the Line of $1.2 billion, which matures in March 2022 and is subject to two additional six-month extensions at the Company’s election.

Scheduled principal payments and maturities on notes payable and unsecured credit facilities were as follows:

 

(in thousands)

 

September 30, 2020

 

Scheduled Principal Payments and Maturities by Year:

 

Scheduled

Principal

Payments

 

 

Mortgage

Loan

Maturities

 

 

Unsecured

Maturities (1)

 

 

Total

 

2020 (2)

 

$

3,065

 

 

 

27,000

 

 

 

0

 

 

 

30,065

 

2021

 

 

11,598

 

 

 

74,101

 

 

 

0

 

 

 

85,699

 

2022

 

 

11,797

 

 

 

5,848

 

 

 

265,000

 

 

 

282,645

 

2023

 

 

10,124

 

 

 

59,374

 

 

 

0

 

 

 

69,498

 

2024

 

 

5,301

 

 

 

90,744

 

 

 

250,000

 

 

 

346,045

 

Beyond 5 Years

 

 

21,712

 

 

 

161,303

 

 

 

3,025,000

 

 

 

3,208,015

 

Unamortized debt premium/(discount) and issuance costs

 

 

0

 

 

 

3,442

 

 

 

(36,881

)

 

 

(33,439

)

Total

 

$

63,597

 

 

 

421,812

 

 

 

3,503,119

 

 

 

3,988,528

 

 

 

(1)

Includes unsecured public and private debt and unsecured credit facilities.

 

 

(2)

Reflects scheduled principal payments for the remainder of the year.

 

The Company was in compliance as of September 30, 2020, with the financial and other covenants under its unsecured public and private placement debt and unsecured credit facilities, and expects to remain in compliance for the next twelve months and thereafter.

22


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

6.

Derivative Financial Instruments

The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors, and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

 

The following table summarizes the terms and fair values of the Company's derivative financial instruments, as well as their classification on the Consolidated Balance Sheets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets (Liabilities) (1)

 

Effective

Date

 

Maturity

Date

 

Notional

Amount

 

 

Receive

Variable Rate of

 

Pay

Fixed Rate of

 

 

September 30, 2020

 

 

December 31, 2019

 

8/1/16

 

1/5/22

 

$

265,000

 

 

1 Month LIBOR with Floor

 

1.053%

 

 

$

(2,999

)

 

 

2,674

 

4/7/16

 

4/1/23

 

 

19,497

 

 

1 Month LIBOR

 

1.303%

 

 

 

(553

)

 

 

148

 

12/1/16

 

11/1/23

 

 

32,517

 

 

1 Month LIBOR

 

1.490%

 

 

 

(1,300

)

 

 

84

 

9/17/19

 

3/17/25

 

 

24,000

 

 

1 Month LIBOR

 

1.542%

 

 

 

(1,411

)

 

 

81

 

6/2/17

 

6/2/27

 

 

36,736

 

 

1 Month LIBOR with Floor

 

2.366%

 

 

 

(4,154

)

 

 

(1,515

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(10,417

)

 

 

1,472

 

 

(1)

Derivatives in an asset position are included within Other assets in the accompanying Consolidated Balance Sheets, while those in a liability position are included within Accounts payable and other liabilities.

These derivative financial instruments are all interest rate swaps, which are designated and qualify as cash flow hedges. The Company does not use derivatives for trading or speculative purposes and, as of September 30, 2020, does not have any derivatives that are not designated as hedges.

The changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in Accumulated Other Comprehensive Loss (“AOCI”) and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

The following table represents the effect of the derivative financial instruments on the accompanying consolidated financial statements:

 

Location and Amount of Gain (Loss) Recognized in OCI on Derivative

 

 

Location and Amount of Gain (Loss) Reclassified from AOCI into Income

 

 

Total amounts presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded

 

 

 

Three months ended September 30,

 

 

 

 

Three months ended September 30,

 

 

 

 

Three months ended September 30,

 

(in thousands)

 

2020

 

 

2019

 

 

 

 

2020

 

 

2019

 

 

 

 

2020

 

 

2019

 

Interest rate swaps

 

$

(666

)

 

 

(3,851

)

 

Interest expense

 

$

2,570

 

 

 

1,677

 

 

Interest expense, net

 

$

40,794

 

 

 

38,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

 

 

Nine months ended September 30,

 

 

 

 

Nine months ended September 30,

 

(in thousands)

 

2020

 

 

2019

 

 

 

 

2020

 

 

2019

 

 

 

 

2020

 

 

2019

 

Interest rate swaps

 

$

(19,187

)

 

 

(18,567

)

 

Interest expense

 

$

6,479

 

 

 

2,085

 

 

Interest expense, net

 

$

118,605

 

 

 

113,178

 

 

23


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

As of September 30, 2020, the Company expects approximately $6.1 million of accumulated comprehensive losses on derivative instruments in AOCI, including the Company's share from its Investments in real estate partnerships, to be reclassified into earnings during the next 12 months.

7.

Leases

All of the Company’s leases are classified as operating leases.  The Company's Lease income is comprised of both fixed and variable income.  Fixed and in-substance fixed lease income includes stated amounts per the lease contract, which are primarily related to base rent, and in some cases stated amounts for common area maintenance (“CAM”), real estate taxes, and insurance. Income for these amounts is recognized on a straight-line basis.

Variable lease income includes the following two main items in the lease contracts:

(i) Recoveries from tenants represents amounts tenants are contractually obligated to reimburse the Company for the tenants’ portion of actual Recoverable Costs incurred. Generally the Company’s leases provide for the tenants to reimburse the Company based on the tenants’ share of the actual costs incurred in proportion to the tenants’ share of leased space in the property.

(ii) Percentage rent represents amounts billable to tenants based on the tenants' actual sales volume in excess of levels specified in the lease contract.

The following table provides a disaggregation of lease income recognized as either fixed or variable lease income based on the criteria specified in ASC Topic 842:

 

(in thousands)

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating lease income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed and in-substance fixed lease income

 

$

200,020

 

 

 

204,686

 

 

$

607,429

 

 

 

607,758

 

Variable lease income

 

 

60,535

 

 

 

59,872

 

 

 

186,952

 

 

 

185,317

 

Other lease related income, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Above/below market rent and tenant rent inducement amortization, net

 

 

7,811

 

 

 

11,086

 

 

 

31,107

 

 

 

31,334

 

Uncollectible straight line rent

 

 

(7,678

)

 

 

(1,279

)

 

 

(27,867

)

 

 

(5,060

)

Uncollectible amounts billable in lease income

 

 

(26,147

)

 

 

(2,222

)

 

 

(65,991

)

 

 

(3,667

)

Total lease income

 

$

234,541

 

 

 

272,143

 

 

$

731,630

 

 

 

815,682

 

 

Lease income for operating leases with fixed payment terms is recognized on a straight-line basis over the expected term of the lease for all leases for which collectibility is considered probable at the commencement date.  At lease commencement, the Company generally expects that collectibility is probable due to the Company’s credit checks on tenants and other creditworthiness analysis undertaken before entering into a new lease; therefore, income from most operating leases is initially recognized on a straight-line basis.  For operating leases in which collectibility of Lease income is not considered probable, Lease income is recognized on a cash basis and all previously recognized straight-line rent receivables are reversed in the period in which the Lease income is determined not to be probable of collection.  In addition to the lease-specific collectibility assessment performed under Topic 842, the Company also recognizes a general reserve, as a reduction to Lease income, for its portfolio of operating lease receivables which are not expected to be fully collectible based on the Company’s historical collection experience.  

During the nine months ended September 30, 2020, the Company experienced a significantly higher rate of uncollectible lease income driven by changes in expectations of collectibility of both past due rents and recoveries and future rent steps given the impact of the COVID-19 pandemic on our tenants.

Additionally, certain tenants experiencing economic difficulties during this pandemic have sought rent concessions, which in some cases the Company has granted, to date, primarily in the form of rent deferrals.  In April 2020, the FASB issued interpretive guidance relating to the accounting for lease concessions provided as a result of COVID-19.  In this guidance, entities can elect not to apply lease modification accounting with respect to such lease concessions, and instead, treat the concession as if it was a part of the existing contract.  This guidance is only applicable to COVID-19 related lease concessions that do not result in a substantial increase in the right of the lessor or the obligations of the lessee.  The Company has elected to treat concessions that satisfy this criteria as though the concession was part of the existing contract and therefore not treated like a lease modification.  Beginning during the second quarter of 2020, the Company has executed approximately 1,300 rent deferral agreements

24


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

representing $30.6 million of rent or 3.5% of annual base rent, within its consolidated real estate portfolio and our unconsolidated real estate investment partnerships.  This deferred rent represents, on a weighted average basis, deferral periods of approximately 3 months, with repayment periods of approximately 9.2 months beginning in December 2020.  The Company will continue to negotiate with other tenants, which may result in further rent concessions as determined necessary and appropriate.  Collectibility of these concessions generally includes consideration of the tenants’ business performance, ability to sustain their business in the current environment, as well as an assessment of their credit worthiness and ability to repay such amounts in the future.    

The following table represents the components of Tenant and other receivables in the accompanying Consolidated Balance Sheets:

 

(in thousands)

 

September 30, 2020

 

 

December 31, 2019

 

Tenant receivables (1)

 

$

50,290

 

 

$

35,526

 

Straight-line rent receivables

 

 

91,019

 

 

 

107,087

 

Other receivables (2)

 

 

17,828

 

 

 

26,724

 

Total tenant and other receivables

 

$

159,137

 

 

$

169,337

 

 

(1)

Tenant receivables include $15.5 million of lease payments due under rent deferral agreements executed as of September 30, 2020.  

 

(2)

Other receivables include construction receivables, insurance receivables, and amounts due from real estate partnerships for Management, transaction and other fee income.

8.

Fair Value Measurements

(a) Disclosure of Fair Value of Financial Instruments

All financial instruments of the Company are reflected in the accompanying Consolidated Balance Sheets at amounts which, in management's estimation, reasonably approximate their fair values, except for the following:

 

 

 

September 30, 2020

 

 

December 31, 2019

 

(in thousands)

 

Carrying

Amount

 

 

Fair Value

 

 

Carrying

Amount

 

 

Fair Value

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable

 

$

3,723,923

 

 

 

4,072,114

 

 

 

3,435,161

 

 

 

3,688,604

 

Unsecured credit facilities

 

$

264,605

 

 

 

264,075

 

 

 

484,383

 

 

 

489,496

 

 

The above fair values represent management's estimate of the amounts that would be received from selling those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants as of September 30, 2020 and December 31, 2019, respectively. These fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company's own judgments about the assumptions that market participants would use in pricing the asset or liability.

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

(b) Fair Value Measurements

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

Securities

The Company has investments in marketable securities that are included within Other assets on the accompanying Consolidated Balance Sheets. The fair value of the securities was determined using quoted prices in active markets, which are considered Level 1 inputs of the fair value hierarchy. Changes in the value of securities are recorded within Net investment (income) loss in the accompanying Consolidated Statements of Operations, and include unrealized gains of $1.3 million and unrealized losses of $15,000 during the three months ended September 30, 2020 and 2019, respectively, and unrealized gains of $251,000 and $2.7 million for the nine months ended September 30, 2020 and 2019, respectively.

25


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

Available-for-Sale Debt Securities

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

Interest Rate Derivatives

The fair value of the Company's interest rate derivatives is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its interest rate swaps. As a result, the Company determined that its interest rate swaps valuation in its entirety is classified in Level 2 of the fair value hierarchy.

The following tables present the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis:

 

 

Fair Value Measurements as of September 30, 2020

 

 

 

 

 

 

Quoted Prices in Active Markets for Identical Assets

 

 

Significant Other Observable Inputs

 

 

Significant Unobservable Inputs

 

(in thousands)

Balance

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities

$

40,849

 

 

 

40,849

 

 

 

 

 

 

 

Available-for-sale debt securities

 

11,146

 

 

 

 

 

 

11,146

 

 

 

 

Interest rate derivatives

 

 

 

 

 

 

 

 

 

 

 

Total

$

51,995

 

 

 

40,849

 

 

 

11,146

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate derivatives

$

(10,417

)

 

 

 

 

 

(10,417

)

 

 

 

 

 

Fair Value Measurements as of December 31, 2019

 

 

 

 

 

 

Quoted Prices in Active Markets for Identical Assets

 

 

Significant Other Observable Inputs

 

 

Significant Unobservable Inputs

 

(in thousands)

Balance

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities

$

39,599

 

 

 

39,599

 

 

 

 

 

 

 

Available-for-sale debt securities

 

10,755

 

 

 

 

 

 

10,755

 

 

 

 

Interest rate derivatives

 

2,987

 

 

 

 

 

 

2,987

 

 

 

 

Total

$

53,341

 

 

 

39,599

 

 

 

13,742

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate derivatives

$

(1,515

)

 

 

 

 

 

(1,515

)

 

 

 

 

26


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

There were no assets measured at fair value on a nonrecurring basis as of September 30, 2020.  The following tables present the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a nonrecurring basis as of December 31, 2019:

 

 

Fair Value Measurements as of December 31, 2019

 

 

 

 

 

 

Quoted Prices in Active Markets for Identical Assets

 

 

Significant Other Observable Inputs

 

 

Significant Unobservable Inputs

 

 

Total Gains

 

(in thousands)

Balance

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

(Losses)

 

Operating properties

$

71,131

 

 

 

 

 

 

28,131

 

 

 

43,000

 

 

 

(50,553

)

 

9.

Equity and Capital

Common Stock of the Parent Company

At the Market (“ATM”) Program

Under the Parent Company's ATM equity offering program, the Parent Company may sell up to $500 million of common stock at prices determined by the market at the time of sale. There were 0 shares issued under the ATM equity program during the nine months ended September 30, 2020. As of September 30, 2020, all $500 million of common stock authorized under the ATM program remained available for issuance.  

Under a previous ATM equity program which expired on March 31, 2020, the Company sold shares through forward sale agreements, which the Company settled during March 2020.  At settlement, the Company issued 1,894,845 shares of its common stock, receiving $125.8 million of net proceeds which were used for working capital and general corporate purposes.

Share Repurchase Program

On February 4, 2020, the Company's Board authorized a common share repurchase program under which the Company may purchase, from time to time, up to a maximum of $250 million shares of its outstanding common stock through open market purchases or in privately negotiated transactions. Any shares purchased, if not retired, will be treated as treasury shares. The program is set to expire on February 5, 2021, but may be modified or terminated at the discretion of the Board. The timing and actual number of shares purchased under the program depend upon marketplace conditions, liquidity needs, and other factors. Through September 30, 2020, 0 shares have been repurchased under this program.

Common Units of the Operating Partnership

Common units of the operating partnership are issued or redeemed and retired for each of the shares of Parent Company common stock issued or repurchased and retired, as described above.

In January 2020, the Operating Partnership issued 18,613 exchangeable operating partnership units, valued at $1.3 million, as partial purchase price consideration for the acquisition of an additional 16.62% interest in an operating shopping center.

10.

Stock-Based Compensation

During the nine months ended September 30, 2020, the Company granted 262,426 shares of restricted stock with a weighted-average grant-date fair value of $64.14 per share. The Company records stock-based compensation expense within General and administrative expenses in the accompanying Consolidated Statements of Operations.

11.

Non-Qualified Deferred Compensation Plan (“NQDCP”)

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

27


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

The following table reflects the balances of the assets and deferred compensation liabilities of the Rabbi trust and related participant account obligations in the accompanying Consolidated Balance Sheets, excluding Regency stock:

 

(in thousands)

 

September 30, 2020

 

 

December 31, 2019

 

 

Location in Consolidated

Balance Sheets

Assets:

 

 

 

 

 

 

 

 

 

 

Securities

 

$

37,656

 

 

 

36,849

 

 

Other assets

Liabilities:

 

 

 

 

 

 

 

 

 

 

Deferred compensation obligation

 

$

37,653

 

 

 

36,755

 

 

Accounts payable and other liabilities

 

12.

Earnings per Share and Unit

Parent Company Earnings per Share

The following summarizes the calculation of basic and diluted earnings per share:

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

(in thousands, except per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income attributable to common stockholders - basic

 

$

12,688

 

 

 

56,965

 

 

$

6,402

 

 

 

199,139

 

Income attributable to common stockholders - diluted

 

$

12,688

 

 

 

56,965

 

 

$

6,402

 

 

 

199,139

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding for basic EPS

 

 

169,671

 

 

 

167,559

 

 

 

169,081

 

 

 

167,512

 

Weighted average common shares outstanding for diluted EPS

 

 

169,970

 

 

 

167,944

 

 

 

169,356

 

 

 

167,834

 

Income per common share – basic

 

$

0.07

 

 

 

0.34

 

 

$

0.04

 

 

 

1.19

 

Income per common share – diluted

 

$

0.07

 

 

 

0.34

 

 

$

0.04

 

 

 

1.19

 

 

Income allocated to noncontrolling interests of the Operating Partnership has been excluded from the numerator and exchangeable Operating Partnership units have been omitted from the denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the numerator and denominator would be anti-dilutive. Weighted average exchangeable Operating Partnership units outstanding for the three months ended September 30, 2020 and 2019, was 765,046 and 405,934, respectively.  Weighted average exchangeable Operating Partnership units outstanding for the nine months ended September 30, 2020 and 2019, was 765,046 and 368,854, respectively.  

Operating Partnership Earnings per Unit

The following summarizes the calculation of basic and diluted earnings per unit:

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

(in thousands, except per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income attributable to common unit holders - basic

 

$

12,745

 

 

 

57,122

 

 

$

6,431

 

 

 

199,595

 

Income attributable to common unit holders - diluted

 

$

12,745

 

 

 

57,122

 

 

$

6,431

 

 

 

199,595

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common units outstanding for basic EPU

 

 

170,436

 

 

 

167,965

 

 

 

169,846

 

 

 

167,881

 

Weighted average common units outstanding for diluted EPU

 

 

170,735

 

 

 

168,350

 

 

 

170,121

 

 

 

168,203

 

Income per common unit – basic

 

$

0.07

 

 

 

0.34

 

 

$

0.04

 

 

 

1.19

 

Income per common unit – diluted

 

$

0.07

 

 

 

0.34

 

 

$

0.04

 

 

 

1.19

 

 

28


REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.

Notes to Unaudited Consolidated Financial Statements

September 30, 2020

 

13.

Commitments and Contingencies

Litigation

The Company is involved in litigation on a number of matters and is subject to certain claims, which arise in the normal course of business, none of which, in the opinion of management, is expected to have a material adverse effect on the Company's consolidated financial position, results of operations, or liquidity. However, no assurances can be given as to the outcome of any threatened or pending legal proceedings.  Legal fees are expensed as incurred.  

Environmental

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

Letters of Credit

The Company has the right to issue letters of credit under the Line up to an amount not to exceed $50.0 million, which reduces the credit availability under the Line. These letters of credit are primarily issued as collateral on behalf of its captive insurance program and to facilitate the construction of development projects. As of September 30, 2020 and December 31, 2019, the Company had $9.8 million and $12.5 million, respectively, in letters of credit outstanding.

 

 

 

 

29


 

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

Forward-Looking Statements

Certain statements in this document regarding anticipated financial, business, legal or other outcomes including business and market conditions, outlook and other similar statements relating to Regency’s future events, developments, or financial or operational performance or results, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” “will,” “should,” “expect,” “estimate,” “believe,” “intend,” “forecast,” “anticipate,” “guidance,” and other similar language. However, the absence of these or similar words or expressions does not mean a statement is not forward-looking. While we believe these forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance these expectations will be attained, and it is possible actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties.

Our operations are subject to a number of risks and uncertainties including, but not limited to, those listed below. When considering an investment in our securities, you should carefully read and consider these risks, together with all other information in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and our other filings and submissions to the SEC, which provide much more information and detail on the risks described below. If any of the events described in the following risk factors actually occur, our business, financial condition or operating results, as well as the market price of our securities, could be materially adversely affected. Forward-looking statements are only as of the date they are made, and Regency undertakes no duty to update its forward-looking statements except as required by law. These risks and events include, without limitation:

Risk Factors Related to the COVID-19 Pandemic

 

Pandemics or other health crises, such as the COVID-19 pandemic, may adversely affect our tenants’ financial condition, the profitability of our properties, our access to the capital markets and could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Risk Factors Related to the Retail Industry

 

Economic and market conditions may adversely affect the retail industry and consequently reduce our revenues and cash flow, and increase our operating expenses.

 

Shifts in retail sales and delivery methods between brick and mortar stores, e-commerce, home delivery, and curbside pick-up may adversely impact our revenues and cash flows.

 

Changing economic and detail market conditions in geographic areas where our properties are concentrated may reduce our revenues and cash flow.

 

Our success depends on the success and continued presence of our “anchor” tenants.

 

A significant percentage of our revenues are derived from smaller “shop space” tenants and our net income may be adversely impacted if our smaller shop tenants are not successful.

 

We may be unable to collect balances due from tenants in bankruptcy.

Risk Factors Related to Real Estate Investments and Operations

 

We are subject to numerous laws and regulations that may adversely affect our operations or expose us to liability.

 

Our real estate assets may decline in value and be subject to impairment losses which may reduce our net income.

 

We face risks associated with development, redevelopment and expansion of properties.

 

We face risks associated with the development of mixed-use commercial properties.

 

We face risks associated with the acquisition of properties.

 

We face risks if we expand into new markets.

 

We may be unable to sell properties when desired because of market conditions.

 

Certain of the properties in our portfolio are subject to ground leases; if we are unable to renew a ground lease, purchase the fee simple interest, or are found to be in breach of a ground lease, we may be adversely affected.

 

Climate change may adversely impact our properties directly and may lead to additional compliance obligations and costs as well as additional taxes and fees.

 

Geographic concentration of our properties makes our business more vulnerable to natural disasters, severe weather conditions and climate change.

 

An uninsured loss or a loss that exceeds the insurance coverage on our properties may subject us to loss of capital and revenue on those properties

 

Loss of our key personnel may adversely affect our business and operations.

 

We face competition from numerous sources, including other REITs and other real estate owners.

 

Costs of environmental remediation may reduce our cash flow available for distribution to stock and unit holders.

 

Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unexpected expenditures.

30


 

 

The unauthorized access, use, theft or destruction of tenant or employee personal, financial or other data or of Regency’s proprietary or confidential information stored in our information systems or by third parties on our behalf could impact our reputation and brand and expose us to potential liability and loss of revenues.

Risk Factors Related to Our Partnership and Joint Ventures

 

We do not have voting control over all of the properties owned in our co-investment partnerships and joint ventures, so we are unable to ensure that our objectives will be pursued.

 

The termination of our partnerships may adversely affect our cash flow, operating results, and our ability to make distributions to stock and unit holders.

Risk Factors Related to Funding Strategies and Capital Structure

 

Our ability to sell properties and fund acquisitions and developments may be adversely impacted by higher market capitalization rates and lower NOI at our properties which may dilute earnings.

 

We may acquire properties or portfolios of properties through tax-deferred contribution transactions, which may result in stockholder dilution and limit our ability to sell such assets.

 

We depend on external sources of capital, which may not be available in the future on favorable terms or at all.

 

Our debt financing may adversely affect our business and financial condition.

 

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

 

Increases in interest rates would cause our borrowing costs to rise and negatively impact our results of operations.

 

Hedging activity may expose us to risks, including the risks that a counterparty will not perform and that the hedge will not perform and that the hedge will not yield the economic benefits we anticipate, which may adversely affect us.

 

The interest rates on our Unsecured Credit facilities as well as on our variable rate mortgages and interest rate swaps might change based on changes to the method in which LIBOR or its replacement rate is determined.

Risk Factors Related to our Company and the Market Price for Our Securities

 

Changes in economic and market conditions may adversely affect the market price of our securities.

 

There is no assurance that we will continue to pay dividends at historical rates.

 

Enhanced focus on corporate responsibility and sustainability, specifically related to environmental, social and governance matters, may impose additional costs and expose us to new risks.

Risk Factors Related to Laws and Regulations

 

If the Parent Company fails to qualify as a REIT for federal income tax purposes, it would be subject to federal income tax at regular corporate rates.

 

Recent changes to the U.S. tax laws may have a significant negative impact on the overall economy, our tenants, our investors, and our business.

 

Dividends paid by REITs generally do not qualify for reduced tax rates.

 

Certain foreign stockholders may be subject to U.S. federal income tax on gain recognized on a disposition of our common stock if we do not qualify as a “domestically controlled” REIT.

 

Legislative or other actions affecting REITs may have a negative effect on us.

 

Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.

 

Restrictions on the ownership of the Parent Company's capital stock to preserve its REIT status may delay or prevent a change in control.

 

The issuance of the Parent Company's capital stock may delay or prevent a change in control.

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Non-GAAP Measures

In addition to the required Generally Accepted Accounting Principles (“GAAP”) presentations, we use certain non-GAAP performance measures as we believe these measures improve the understanding of the Company's operational results. We believe these non-GAAP measures provide useful information to our Board of Directors, management and investors regarding certain trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, purposes of determining management incentive compensation and budgeting, forecasting and planning purposes.  We continually evaluate the usefulness, relevance, limitations, and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change.

We do not consider non-GAAP measures an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is they may exclude significant expense and income items that are required by GAAP to be recognized in our consolidated financial statements. In addition, they reflect the exercise of management’s judgment about which expense and income items are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, reconciliations of the non-GAAP financial measures we use to their most directly comparable GAAP measures are provided. Non-GAAP financial measures should not be relied upon in evaluating the financial condition, results of operations or future prospects of the Company.

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

 

 

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

 

Fixed Charge Coverage Ratio is defined as Operating EBITDAre divided by the sum of the gross interest and scheduled mortgage principal paid to our lenders.

 

Nareit EBITDAre is a measure of REIT performance, which the National Association of Real Estate Investment Trusts (“Nareit”) defines as net income, computed in accordance with GAAP, excluding (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) gains on sales of real estate, (v) impairments of real estate, and (vi) adjustments to reflect the Company's share of unconsolidated partnerships and joint ventures.

 

Nareit Funds from Operations (“Nareit FFO”) is a commonly used measure of REIT performance, which Nareit defines as net income, computed in accordance with GAAP, excluding gains on sales and impairments of real estate, net of tax, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. We compute Nareit FFO for all periods presented in accordance with Nareit's definition.

Companies use different depreciable lives and methods, and real estate values historically fluctuate with market conditions. Since Nareit FFO excludes depreciation and amortization and gains on sale and impairments of real estate, it provides a performance measure that, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, acquisition and development activities, and financing costs. This provides a perspective of our financial performance not immediately apparent from net income determined in accordance with GAAP. Thus, Nareit FFO is a supplemental non-GAAP financial measure of our operating performance, which does not represent cash generated from operating activities in accordance with GAAP; and, therefore, should not be considered a substitute measure of cash flows from operations. We provide a reconciliation of Net Income Attributable to Common Stockholders to Nareit FFO.

 

Net Operating Income (“NOI”) is the sum of base rent, percentage rent, recoveries from tenants, other lease income, and other property income, less operating and maintenance expenses, real estate taxes, ground rent, and uncollectible lease income. NOI excludes straight-line rental income and expense, above and below market rent and ground rent amortization, tenant lease inducement amortization, and other fees. We also provide disclosure of NOI excluding termination fees, which excludes both termination fee income and expenses.

 

A Non-Same Property is any property, during either calendar year period being compared, that was acquired, sold, a Property in Development, a Development Completion, or a property under, or being positioned for, significant redevelopment that distorts comparability between periods.  Non-retail properties and corporate activities, including the captive insurance program, are part of Non-Same Property.

 

Operating EBITDAre begins with Nareit EBITDAre and excludes certain non-cash components of earnings derived from above and below market rent amortization and straight-line rents.  We provide a reconciliation of Net income to Nareit EBITDAre to Operating EBITDAre.

32


 

 

Pro-Rata information includes 100% of our consolidated properties plus our economic share (based on our ownership interest) in our unconsolidated real estate investment partnerships.

We provide Pro-rata financial information because we believe it assists investors and analysts in estimating our economic interest in our consolidated and unconsolidated partnerships, when read in conjunction with the Company’s reported results under GAAP.  We believe presenting our Pro-rata share of assets, liabilities, operating results, and certain metrics, along with other non GAAP measures, makes comparisons of other REITs' operating results to ours more meaningful.  The Pro-rata information provided is not, nor is it intended to be, presented in accordance with GAAP.  The Pro-rata supplemental details of assets and liabilities and supplemental details of operations reflect our proportionate economic ownership of the assets, liabilities, and operating results of the properties in our portfolio.

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

The presentation of Pro-rata information has limitations which include, but are not limited to, the following:

 

o

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

 

o

Other companies in our industry may calculate their Pro-rata interest differently, limiting the comparability of Pro-rata information.

Because of these limitations, the Pro-rata financial information should not be considered independently or as a substitute for our financial statements as reported under GAAP. We compensate for these limitations by relying primarily on our GAAP financial statements, using the Pro-rata information as a supplement.

 

Property In Development includes properties in various stages of ground-up development.

 

Property In Redevelopment includes Retail Operating Properties under redevelopment or being positioned for redevelopment.  Unless otherwise indicated, a Property in Redevelopment is included in the Same Property pool.

 

Retail Operating Property is any retail property not termed a Property in Development. A retail property is any property where the majority of the income is generated from retail uses.

 

Same Property is a Retail Operating Property that was owned and operated for the entirety of both calendar year periods being compared. This term excludes Properties in Development, prior year Development Completions, and Non-Same Properties.  Properties in Redevelopment are included unless otherwise indicated.

33


 

Overview of Our Strategy

Regency Centers Corporation began its operations as a publicly-traded REIT in 1993, and as of September 30, 2020, had full or partial ownership interests in 414 retail properties primarily anchored by market leading grocery stores. Our properties are principally located in affluent and infill trade areas of the United States, and contain 52,155 million square feet (“SF”) of gross leasable area (“GLA”). All of our operating, investing, and financing activities are performed through our Operating Partnership, Regency Centers, L.P., our wholly-owned subsidiaries, and through our co-investment partnerships.

As of September 30, 2020, the Parent Company owns approximately 99.6% of the outstanding common partnership units of the Operating Partnership.

Our mission is to be the preeminent national owner, operator, and developer of shopping centers, creating places that provide a thriving environment for outstanding retailers and service providers to connect with the surrounding neighborhoods and communities.

Our goals are to:

 

Own and manage a portfolio of high-quality neighborhood and community shopping centers anchored by market leading grocers and located in affluent suburban and near urban trade areas in the country’s most desirable metro areas. We expect that this combination will produce highly desirable and attractive centers with best-in-class retailers. These centers should command higher rental and occupancy rates resulting in excellent prospects to grow NOI;

 

Maintain an industry leading and disciplined development and redevelopment platform to deliver exceptional retail centers at higher returns as compared to acquisitions;

 

Support our business activities with a conservative capital structure, including a strong balance sheet;

 

Attain best-in-class environmental, social, and governance practices;

 

Engage an exceptional and diverse team that is guided by our strong values and special culture, while fostering an environment of innovation and continuous improvement; and

 

Increase earnings per share and dividends and generate total returns at or near the top of our shopping center peers.

COVID-19 Pandemic

On March 11, 2020, a novel coronavirus disease (“COVID-19”) was declared a pandemic (“COVID-19 pandemic”) by the World Health Organization as the disease spread throughout the world.  During the ongoing COVID-19 pandemic, U.S. federal, state, and local governments have continued to mandate various actions to reduce or prevent the spread of COVID-19 which continues to directly impact many of our tenants whose businesses may be considered non-essential.  While essential businesses, such as grocery stores that anchor over 80% of our operating centers, have thus far been able to continue operating and serving their customers, non-essential businesses are experiencing significant declines in customer traffic when compared to previous years, or have temporarily closed their stores in reaction to legally enforceable governmental orders or overall efforts to support social distancing.  As a result, many retailers have had to evaluate alternative means of providing their goods and services to their customers or, in the case of many non-essential tenants, to close.  The COVID-19 pandemic continues to evolve, making the broader implications on our future results of operations and overall financial performance uncertain at this time.  While much of our lease income is derived from contractual rent payments, our tenants’ ability to meet their lease obligations have been negatively impacted by the disruptions and uncertainties of the COVID-19 pandemic. Our tenants’ ability to respond to these disruptions, including changes in their customers’ shopping habits and behaviors, will influence the tenants’ ability to survive and ultimately fulfill their lease obligations.  Although many of our tenants have reported initially improved sales results upon reopening, the risk of diminished sales and future closures exists as the virus remains active and continues to spread which could result in a resurgence in COVID-19 cases and reinstituted government mandated closures.  

Due to the COVID-19 pandemic, certain tenants have requested rent concessions or have sought to renegotiate future rents based on changes to the economic environment. Other tenants have chosen not to reopen or honor the terms of their existing lease agreements. We are closely monitoring our cash collections from tenants which, for many businesses classified as non-essential, have significantly declined since the start of the COVID-19 pandemic and resulting restrictions.  Approximately 86% of pro-rata base rent billed for the three months ended September 30, 2020, has been collected through October 31, 2020.  Since the COVID-19 pandemic began, we have executed approximately 1,300 rent deferral agreements within our consolidated real estate portfolio and our unconsolidated real estate investment partnerships.  This deferred rent represents, on a weighted average basis, deferral periods of approximately 3 months, with repayment periods of approximately 9.2 months beginning in December 2020. We expect to continue to work with other tenants, which may result in further rent deferrals, concessions or abatements.  As a result, there can be no assurance that our cash flows from operations will be sufficient to fund our dividend payments without the benefit of other sources of capital or changes to our current dividend policy.   

34


 

New leasing activity has declined and is expected to remain at lower levels into 2021 as businesses delay executing leases amidst the immediate and uncertain future economic impacts of the COVID-19 pandemic.  This, coupled with tenant failures, may result in decreased demand for retail space in our centers, which could result in pricing pressure on rents.  Additionally, with delays in construction for tenant improvements due to the impacts of the pandemic, it may take longer before new tenants are able to open and commence rent payments.

Our ability to successfully start or complete tenant buildouts, new ground up development or redevelopment of existing properties was adversely impacted by governmental orders shutting down construction activities. We also experienced impacts on our ability to source materials for construction and labor shortages impacting our ability to complete construction projects on anticipated schedules.  In the event a surge in new cases resulting in additional lockdowns occurs, similar impacts to our supply chain may arise which could have a material adverse effect on our business, financial condition and results of operation.  We continue to closely monitor and assess the capital requirements of all in process and planned developments, redevelopments, and capital expenditures.   We are carefully proceeding in a targeted manner on a project-by-project basis which has resulted in delaying, phasing or curtailing certain in-process and planned development, redevelopment and capital expenditure projects.

On March 30, 2020, we withdrew our fiscal 2020 guidance previously provided.  The duration and severity of the health crisis in the United States and the speed at which the country, states and localities are able to safely reopen and remain open, will continue to materially impact the overall economy, our retail tenants, and therefore our results of operations, financial condition and cash flows.  As such, the impact from the COVID-19 pandemic may not be fully reflected in our results of operations and overall financial position until future periods and could result in a further materially adverse impact to our financial condition and results of operations. See also Part II, Item 1A. Risk Factors for further discussion.  

We have long had a business continuity and disaster recovery plan which has been successfully implemented in the past.  This experience enabled us to continue operating productively during the COVID-19 pandemic while our employees work safely from home, as their roles permit, during the early stages of the COVID-19 pandemic.  We have maintained, and expect to continue to maintain, our financial reporting systems as well as our internal controls over our financial reporting and disclosure controls and procedures.  We have since developed and executed our office reopening plan allowing employees, in our current stage, the option to work from home or the office. We have implemented CDC recommended protocols and developed detailed plans to prioritize the well-being of our employees, and encourage our tenants to similarly follow all rules and guidelines.  All employees are required to complete training before returning to the office.

Executing on our Strategy

During the nine months ended September 30, 2020 we had Net income attributable to common stockholders of $6.4 million, including a $132.1 million Goodwill impairment charge, as compared to Net income attributable to common stockholders of $199.1 million during the nine months ended September 30, 2019.

During the nine months ended September 30, 2020:

 

Our pro-rata same property NOI, excluding termination fees, declined 11.9%, primarily attributable to uncollectible Lease income in this current COVID-19 pandemic environment.  However, as of October 31, 2020, we experienced improvements in collections with approximately 86% collection of pro-rata base rent billed for the three months ended September 30, 2020, as compared to 77% for the three months ended June 30, 2020.

 

We executed 1,010 new and renewal leasing transactions representing 4.8 million pro-rata SF, with trailing twelve month rent spreads of 5.7% on comparable retail operating property spaces.

 

At September 30, 2020, our total property portfolio was 92.9% leased, while our same property portfolio was 93.4% leased, as compared to 94.8% leased and 95.1% leased, respectively, at December 31, 2019.  The decrease in occupancy is primarily driven by bankruptcies and other COVID-19 related tenant move-outs.    

We continued our development and redevelopment of high quality shopping centers:

 

We currently have a total of 14 properties in process of development or redevelopment.  

 

Due to the impacts of the COVID-19 pandemic, in-process projects have stopped or slowed significantly while we evaluate current market conditions and assess the feasibility of these projects.  

We maintained a conservative balance sheet providing liquidity and financial flexibility to respond to these uncertain economic times and to cost effectively fund investment opportunities and debt maturities:

 

During March of 2020, we settled forward equity sales under our ATM program that we entered into during 2019 by delivering 1,894,845 shares of common stock and receiving $125.8 million in net proceeds.  We used these proceeds for

35


 

 

working capital and general corporate purposes.  Under our current ATM equity offering program, we may sell up to $500 million of common stock at prices determined by the market at the time of sale.  

 

On May 11, 2020, we issued $600 million of 10 year senior unsecured public notes at 3.70%, which priced at 99.805%.  The proceeds of the offering were used to increase liquidity, including redeeming public notes and repaying the outstanding balance on our Line, and for general working capital purposes.  

 

On September 2, 2020, we redeemed the entire $300 million outstanding of 3.75% Notes due 2022 for a redemption price of $325.1 million, including accrued and unpaid interest through the redemption date and a make-whole amount.

 

As of September 30, 2020, we have a borrowing capacity of $1.2 billion on our Line.

 

At September 30, 2020, our pro-rata net debt-to-operating EBITDAre ratio on a trailing twelve month basis was 5.9x.

Property Portfolio

The following table summarizes general information related to the Consolidated Properties in our portfolio:

 

(GLA in thousands)

September 30, 2020

 

 

December 31, 2019

 

Number of Properties

299

 

 

303

 

Properties in Development and Redevelopment

11

 

 

16

 

GLA

 

37,202

 

 

 

37,556

 

% Leased – Operating and Development

92.7%

 

 

94.7%

 

% Leased – Operating

92.9%

 

 

94.9%

 

Weighted average annual effective rent per square foot ("PSF"), net of tenant concessions.

$22.85

 

 

$22.38

 

 

The following table summarizes general information related to the Unconsolidated Properties owned in co-investment partnerships in our portfolio:

 

(GLA in thousands)

September 30, 2020

 

 

December 31, 2019

 

Number of Properties

 

115

 

 

 

116

 

Properties in Development and Redevelopment

 

3

 

 

 

6

 

GLA

 

14,953

 

 

 

15,050

 

% Leased – Operating and Development

94.2%

 

 

95.2%

 

% Leased –Operating

94.2%

 

 

95.2%

 

Weighted average annual effective rent PSF, net of tenant concessions

$21.77

 

 

$21.69

 

 

For the purpose of the following disclosures of occupancy and leasing activity, “anchor space” is considered space greater than or equal to 10,000 SF and “shop space” is less than 10,000 SF. The following table summarizes pro-rata occupancy rates of our combined Consolidated and Unconsolidated shopping center portfolio:

 

September 30, 2020

 

 

December 31, 2019

 

% Leased – All Properties

92.9%

 

 

94.8%

 

Anchor space

95.7%

 

 

97.3%

 

Shop space

88.2%

 

 

90.6%

 

During the COVID-19 pandemic, a number of tenants at our properties either were required or elected to temporarily close.  Some of these tenants may be unable to sustain their business models in this environment and may fail in the presence of COVID-19 restrictions and concerns.  As such, our occupancy rates could decline further in future periods as the pandemic continues to impact our tenants.  If conditions do not sufficiently and sustainably improve for these tenants, they may be unable to pay deferred or future contractual base rent and recoveries owed to us when due or otherwise. Given the decline in employment and gross domestic product, many retail tenants will experience economic challenges beyond those caused by COVID-19 pandemic restrictions that may leave them unable to pay rent or renew leases.  In addition, if any of our tenants are unable to continue as going concerns as a result of the current economic conditions, we may lose existing tenants which will result in reduced lease income and occupancy at our centers.  We also may be unable to find suitable replacement tenants for an extended period or at all, and the terms of our leases with those replacement tenants may not be as favorable to us as the terms of our agreements with our existing tenants.  

36


 

The following table summarizes leasing activity, including our pro-rata share of activity within the portfolio of our co-investment partnerships:

 

 

 

Nine months ended September 30, 2020

 

 

 

Leasing

Transactions

 

 

SF (in

thousands)

 

 

Base Rent

PSF

 

 

Tenant

Allowance

and Landlord

Work PSF

 

 

Leasing

Commissions

PSF

 

Anchor Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New

 

 

10

 

 

 

192

 

 

$

13.47

 

 

$

12.40

 

 

$

4.99

 

Renewal

 

 

77

 

 

 

2,075

 

 

 

13.11

 

 

 

0.45

 

 

 

0.29

 

Total Anchor Leases

 

 

87

 

 

 

2,267

 

 

$

13.14

 

 

$

1.46

 

 

$

0.69

 

Shop Space

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New

 

 

239

 

 

 

365

 

 

$

37.35

 

 

$

33.71

 

 

$

11.30

 

Renewal

 

 

684

 

 

 

1,269

 

 

 

32.36

 

 

 

2.00

 

 

 

0.54

 

Total Shop Space Leases

 

 

923

 

 

 

1,634

 

 

$

33.48

 

 

$

9.08

 

 

$

2.94

 

Total Leases

 

 

1,010

 

 

 

3,901

 

 

$

21.66

 

 

$

4.65

 

 

$

1.63

 

 

 

 

Nine months ended September 30, 2019

 

 

 

Leasing

Transactions

 

 

SF (in

thousands)

 

 

Base Rent

PSF

 

 

Tenant

Allowance

and Landlord

Work PSF

 

 

Leasing

Commissions

PSF

 

Anchor Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New

 

 

17

 

 

 

302

 

 

$

20.91

 

 

$

49.89

 

 

$

6.21

 

Renewal

 

 

82

 

 

 

2,125

 

 

 

12.85

 

 

 

0.64

 

 

 

0.11

 

Total Anchor Leases

 

 

99

 

 

 

2,427

 

 

$

13.85

 

 

$

6.77

 

 

$

0.87

 

Shop Space

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New

 

 

385

 

 

 

692

 

 

$

33.42

 

 

$

30.21

 

 

$

9.77

 

Renewal

 

 

753

 

 

 

1,283

 

 

 

32.66

 

 

 

0.97

 

 

 

0.62

 

Total Shop Space Leases

 

 

1,138

 

 

 

1,975

 

 

$

32.93

 

 

$

11.22

 

 

$

3.83

 

Total Leases

 

 

1,237

 

 

 

4,402

 

 

$

22.41

 

 

$

8.77

 

 

$

2.20

 

 

While new and renewal rent spreads were positive as compared to prior rents on these same spaces, future rent spreads could be negatively impacted if the COVID-19 pandemic results in oversupply of vacant retail in the markets in which we operate.  The weighted average base rent per square foot on signed shop space leases during 2020 was $33.48, which is slightly higher than the weighted average annual base rent per square foot of all shop space leases due to expire during the next 12 months of $33.30. As a result of the COVID-19 pandemic, new leasing activity has significantly declined as many businesses delay executing leases amidst the immediate and uncertain future economic impacts.  This, coupled with potential retail failures, may result in decreased demand for retail space in our centers, which could result in pricing pressure on rents.  Additionally, delays in construction of tenant improvements due to shelter-in-place orders continues in certain markets, and it may take longer before new tenants are able to open and commence rent payments.  

Significant Tenants and Concentrations of Risk

We seek to reduce our operating and leasing risks through geographic diversification and by avoiding dependence on any single property, market, or tenant. Based on percentage of annualized base rent, the following table summarizes our most significant tenants, of which the top four are grocers and considered essential businesses in this current COVID-19 pandemic environment:

 

 

September 30, 2020

 

Tenant

 

Number of

Stores

 

 

Percentage of

Company-

owned GLA (1)

 

 

Percentage  of

Annualized

Base Rent (1)

 

Publix

 

 

68

 

 

6.6%

 

 

3.3%

 

Kroger

 

 

54

 

 

6.6%

 

 

3.0%

 

Albertsons Companies

 

 

46

 

 

4.3%

 

 

2.9%

 

Whole Foods

 

 

34

 

 

2.5%

 

 

2.6%

 

TJX Companies

 

 

63

 

 

3.2%

 

 

2.6%

 

 

 

(1)

Includes Regency's pro-rata share of Unconsolidated Properties and excludes those owned by anchors.

 

37


 

Bankruptcies and Credit Concerns

The impact of bankruptcies may increase significantly if tenants occupying our centers are unable to withstand and recover from the disruptions caused by the COVID-19 pandemic, which could materially adversely impact Lease income and could result in greater legal expenses within General and administrative expenses.  Since the pandemic began, we have seen an increase in the number of tenants filing for bankruptcy.  Our management team devotes significant time to researching and monitoring retail trends, consumer preferences, customer shopping behaviors, changes in retail delivery methods, shifts to e-commerce, and changing demographics in order to anticipate the challenges and opportunities impacting the retail industry. Due to the COVID-19 pandemic there has been and continues to be a greater focus on whether tenants are considered essential or non-essential retail, which may directly impact the retailer’s ability to operate and generate sufficient cash flows to meet their operating expenses, including lease payments.  Unemployment levels could negatively impact consumer spending and, along with large-scale business failures, have an adverse effect on our results from operations. We seek to mitigate these potential impacts through tenant diversification, replacing weaker tenants with stronger operators, anchoring our centers with market leading grocery stores that drive customer traffic, and maintaining a presence in affluent suburbs and dense infill trade areas.

Since the COVID-19 pandemic began, the Company has been closely monitoring its cash collections which had significantly declined in the initial months of the pandemic, most notably from tenants whose businesses are classified as non-essential.  Cash collections through October 31, 2020 have improved over initial pandemic levels with approximately 86% of billed base rent collected for the three months ended September 30, 2020 as compared to 77% for the three months ended June 30, 2020.  The COVID-19 pandemic has continued to result in certain tenants requesting concessions from rent obligations, including deferrals, abatements and requests to negotiate future rents, while some tenants have been unable to reopen or have not honored the terms of their existing lease agreements.  The Company has entered into approximately 1,300 agreements, representing $30.6 million of pro-rata base rent or 3.5% of our total annual base rent, with tenants within our consolidated real estate portfolio and our unconsolidated real estate investment partnerships, enabling them to defer a portion of their rental payments and repay them over future periods.  The Company expects to continue to work with other tenants, which may result in further rent concessions or legal actions as determined to be necessary and appropriate.  Due to the uncertainty surrounding the COVID-19 pandemic, there can be no assurances that all such deferred rent will ultimately be collected, or collected within the timeframes agreed upon.  

We closely monitor the operating performance of tenants in our shopping centers as well as those retailers experiencing significant changes to their business models, such as reduced customer traffic in their stores.  Retailers who are unable to withstand these and other business pressures, such as significant cash flow declines or debt maturities, may file for bankruptcy. As a result of our research and findings, we may reduce new leasing, suspend leasing, or curtail allowances for construction of leasehold improvements within certain retail categories or to a specific retailer in order to reduce our risk of loss from bankruptcies and store closings.  

Although base rent is supported by long-term lease contracts, tenants who file bankruptcy generally have the legal right to reject any or all of their leases and close related stores. Any unsecured claim we hold against a bankrupt tenant for unpaid rent might be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. As a result, it is likely that we would recover substantially less than the full value of any unsecured claims we hold. Additionally, we may incur significant expense to adjudicate our claim and to release the vacated space. In the event that a tenant with a significant number of leases in our shopping centers files bankruptcy and cancels its leases, we could experience a significant reduction in our revenues. As of September 30, 2020, tenants who are currently in bankruptcy and continue to occupy space in our shopping centers represent an aggregate of 1.6% of our annual base rent on a pro-rata basis.  We anticipate tenant bankruptcies will continue to increase in future periods depending on the length and severity of the COVID-19 pandemic impacts.    

38


 

Comparison of the three months ended September 30, 2020 and 2019:

Our revenues changed as summarized in the following table:

 

 

 

Three months ended September 30,

 

 

 

 

 

(in thousands)

 

2020

 

 

2019

 

 

Change

 

Lease income

 

$

234,541

 

 

 

272,143

 

 

 

(37,602

)

Other property income

 

 

2,261

 

 

 

2,780

 

 

 

(519

)

Management, transaction, and other fees

 

 

6,142

 

 

 

7,353

 

 

 

(1,211

)

Total revenues

 

$

242,944

 

 

 

282,276

 

 

 

(39,332

)

 

Lease income decreased $37.6 million, driven by the following contractually billable components of rent to the tenants per the lease agreements:

$30.3 million decrease from recognizing additional Uncollectible lease income, consisting of $6.4 million increase from uncollectible Straight-line rent receivables and $23.9 million increase from uncollectible billable tenant receivables.  The COVID-19 pandemic has been most impactful to those tenants considered non-essential by governmental authorities. The current economic environment has resulted in changes in our expectations of collecting certain tenant receivables and their related future rent steps previously recognized through straight-line rent.

$4.8 million decrease from billable Base rent, as follows:

 

$558,000 increase from rent commencing at development properties and from acquisitions of operating properties; offset by

 

$2.5 million net decrease from same properties due to the loss of rents from tenant move-outs and bankruptcies, offset by increases from rent steps in existing leases and rental rate growth, and

 

$2.9 million decrease from the sale of operating properties.

$3.3 million net decrease in Above and below market rent primarily from same properties driven by timing of lease term modifications.

$195,000 increase from billable Recoveries from tenants, which represent amounts contractually billable to tenants per the terms of the lease for their reimbursements to us for the tenants’ pro-rata share of the operating, maintenance, insurance and real estate tax expenses that we incur to operate our shopping centers.  Recoveries from tenants increased, on a net basis, primarily from the following:

 

$931,000 net increase from same properties due to greater insurance and real estate tax recoveries, driven by an increase in insurance premiums and real estate tax assessments, respectively, offset by a decrease in CAM recoveries driven by a decrease in property operating costs during the pandemic; offset by

 

$770,000 decrease from the sale of operating properties.

$579,000 remaining net increase driven primarily by an increase in termination fees in 2020.

Future lease income could be impacted by ongoing negotiations to assist tenants with their ability to remain operational as this pandemic subsides.  These may impact the timing and collectibility of income and take the form of rent deferrals, concessions, or abatements, among other possible agreements.  Approximately 86% of the base rent billed for the three months ended September 30, 2020, has been collected through October 31, 2020.  

Other property income decreased $519,000 primarily from settlements received during 2019 and a decrease in parking income due to reduced usage during the pandemic.

Management, transaction, and other fees decreased $1.2 million primarily from decreases in property management, development fees, and leasing commissions from projects within our unconsolidated partnerships.  Decreases in property receipts and leasing activity during this pandemic have negatively impacted our property management and leasing fee income earned from our unconsolidated partnerships, and are expected to continue while the depressed economic impact of the pandemic continues.  

39


 

Changes in our operating expenses are summarized in the following table:

 

 

 

Three months ended September 30,

 

 

 

 

 

(in thousands)

 

2020

 

 

2019

 

 

Change

 

Depreciation and amortization

 

$

84,808

 

 

 

91,856

 

 

 

(7,048

)

Operating and maintenance

 

 

41,345

 

 

 

41,695

 

 

 

(350

)

General and administrative

 

 

19,582

 

 

 

16,705

 

 

 

2,877

 

Real estate taxes

 

 

35,938

 

 

 

33,601

 

 

 

2,337

 

Other operating expenses

 

 

1,208

 

 

 

1,819

 

 

 

(611

)

Total operating expenses

 

$

182,881

 

 

 

185,676

 

 

 

(2,795

)

 

Depreciation and amortization costs decreased, on a net basis, as follows:

 

$345,000 net increase from acquisitions of operating properties, development properties, and corporate assets; offset by

 

$6.4 million decrease from same properties, primarily attributable to additional 2019 depreciation and amortization at redevelopment properties and early tenant move-outs; and

 

$1.0 million decrease from the sale of operating properties.

General and administrative costs increased, on a net basis, as follows:

 

$2.0 million increase due to less development overhead capitalization based on the status and progress on development and redevelopment projects during the year coupled with delays in new developments during the pandemic; and

 

$1.6 million increase in the value of participant obligations within the deferred compensation plan, attributable to changes in market values of those investments, reflected within Net investment income; offset by

 

$342,000 decrease in compensation costs primarily driven by $1.2 million of lower incentive compensation offset by $897,000 in higher salary expense; and

 

$325,000 decrease related to reduced travel costs amidst the pandemic.

Real estate taxes increased, on a net basis, as follows:

 

$137,000 increase from acquisitions of operating properties and from development properties where capitalization ceased as tenant spaces became available for occupancy; and

 

$2.6 million increase within the same property portfolio from changes in assessed values across our portfolio; offset by

 

$390,000 decrease from the sale of operating properties.

Other operating expenses decreased $611,000, attributable to decreased development pursuit costs during 2020 and favorable state tax rate changes resulting in an income tax benefit.

The following table presents the components of other expense (income):

 

 

 

Three months ended September 30,

 

 

 

 

 

(in thousands)

 

2020

 

 

2019

 

 

Change

 

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

Interest on notes payable

 

$

39,238

 

 

 

32,799

 

 

 

6,439

 

Interest on unsecured credit facilities

 

 

1,929

 

 

 

5,117

 

 

 

(3,188

)

Capitalized interest

 

 

(1,141

)

 

 

(1,093

)

 

 

(48

)

Hedge expense

 

 

1,023

 

 

 

1,650

 

 

 

(627

)

Interest income

 

 

(255

)

 

 

(220

)

 

 

(35

)

Interest expense, net

 

$

40,794

 

 

 

38,253

 

 

 

2,541

 

Provision for impairment of real estate, net of tax

 

 

 

 

 

(14

)

 

 

14

 

Gain on sale of real estate, net of tax

 

 

(3,237

)

 

 

(887

)

 

 

(2,350

)

Early extinguishment of debt

 

 

19,358

 

 

 

1,391

 

 

 

17,967

 

Net investment income

 

 

(2,046

)

 

 

(370

)

 

 

(1,676

)

Total other expense (income)

 

$

54,869

 

 

 

38,373

 

 

 

16,496

 

 

40


 

The $2.5 million net increase in Interest expense is driven by the following changes:

 

$6.4 million increase in Interest on notes payable from the issuance of senior unsecured notes, including the issuance of $600 million senior unsecured notes in May 2020; offset by

 

$3.2 million decrease in Interest on unsecured credit facilities primarily related to the 2019 repayment of a $300 million term loan, net of additional interest in 2020 on short-term borrowings on the Line in advance of the new senior unsecured note issued in May; and

 

$627,000 decrease in Hedge expense as one of our previously settled forward swaps hedging our senior unsecured notes reached maturity in 2020.  

During the three months ended September 30, 2020, we recognized gains on sale of $3.2 million for four land parcels and the receipt of property insurance proceeds.  During the three months ended September 30, 2019, we recognized gains on sale of $887,000 from one land parcel, one operating property, and receipt of property insurance proceeds.

During the three months ended September 30, 2020, we redeemed our $300 million 3.75% notes due to mature in 2022, resulting in $19.4 million of debt extinguishment costs.  During the three months ended September 30, 2019, we repaid a $300 million term loan that was due to mature in 2020, and the related interest rate swap, resulting in $1.4 million of debt extinguishment costs.

Net investment income increased $1.7 million primarily driven by changes in unrealized gains and losses of plan assets held in the non-qualified deferred compensation plan.  There is an offsetting adjustment in General and administrative costs related to participant obligations within the deferred compensation plans.

Our equity in income of investments in real estate partnerships decreased as follows:

 

 

 

 

 

 

 

Three months ended September 30,

 

 

 

 

 

(in thousands)

 

Regency's

Ownership

 

 

2020

 

 

2019

 

 

Change

 

GRI - Regency, LLC (GRIR)

 

40.00%

 

 

$

5,796

 

 

 

7,931

 

 

 

(2,135

)

New York Common Retirement Fund (NYC)

 

30.00%

 

 

 

285

 

 

 

(10,795

)

 

 

11,080

 

Columbia Regency Retail Partners, LLC (Columbia I)

 

20.00%

 

 

 

266

 

 

 

465

 

 

 

(199

)

Columbia Regency Partners II, LLC (Columbia II)

 

20.00%

 

 

 

248

 

 

 

442

 

 

 

(194

)

Cameron Village, LLC (Cameron)

 

30.00%

 

 

 

(41

)

 

 

206

 

 

 

(247

)

RegCal, LLC (RegCal)

 

25.00%

 

 

 

341

 

 

 

365

 

 

 

(24

)

US Regency Retail I, LLC (USAA)

 

20.01%

 

 

 

208

 

 

 

271

 

 

 

(63

)

Other investments in real estate partnerships (1)

 

35.00% - 50.00%

 

 

 

1,013

 

 

 

832

 

 

 

181

 

Total equity in income of investments in real estate partnerships

 

 

$

8,116

 

 

 

(283

)

 

 

8,399

 

 

(1)

Includes our investment in the Town and Country shopping center, which we owned 18.38% during 2019.  In January 2020, we purchased an additional 16.62% interest, bringing our total ownership interest to 35%.

 

 

The $8.4 million increase in our equity in income of investments in real estate partnerships is largely attributable to the following:

 

$11.1 million increase within NYC primarily due to the $10.9 million provision for impairment of real estate recognized in 2019; and

 

All of our investments in real estate partnerships experienced higher amounts of uncollectible lease income, negatively impacting our equity in income.

The following represents the remaining components that comprised net income attributable to the common stockholders and unit holders:

 

 

 

Three months ended September 30,

 

 

 

 

 

(in thousands)

 

2020

 

 

2019

 

 

Change

 

Net income

 

$

13,310

 

 

 

57,944

 

 

 

(44,634

)

Income attributable to noncontrolling interests

 

 

(622

)

 

 

(979

)

 

 

357

 

Net income attributable to common stockholders

 

$

12,688

 

 

 

56,965

 

 

 

(44,277

)

Net income attributable to exchangeable operating partnership units

 

 

(57

)

 

 

(157

)

 

 

100

 

Net income attributable to common unit holders

 

$

12,745

 

 

 

57,122

 

 

 

(44,377

)

 

41


 

Comparison of the nine months ended September 30, 2020 and 2019:

Our revenues changed as summarized in the following table:

 

 

 

Nine months ended September 30,

 

 

 

 

 

(in thousands)

 

2020

 

 

2019

 

 

Change

 

Lease income

 

$

731,630

 

 

 

815,682

 

 

 

(84,052

)

Other property income

 

 

7,001

 

 

 

6,956

 

 

 

45

 

Management, transaction, and other fees

 

 

19,084

 

 

 

21,768

 

 

 

(2,684

)

Total revenues

 

$

757,715

 

 

 

844,406

 

 

 

(86,691

)

 

Lease income decreased $84.1 million, driven by the following contractually billable components of rent to the tenants per the lease agreements:

$85.1 million decrease from recognizing additional Uncollectible lease income consisting of $22.8 million increase from uncollectible Straight-line rent receivables and $62.3 million increase from uncollectible billable tenant receivables.  The COVID-19 pandemic has been most impactful to those tenants considered non-essential by governmental authorities, even more so to those struggling before the pandemic.  The current economic environment has resulted in changes in our expectations of collecting certain tenant receivables and their related future rent steps previously recognized through straight-line rent.  

$1.3 million decrease from billable Base rent, as follows:

 

$1.5 million increase from rent commencing at development properties;

 

$5.8 million increase from acquisitions of operating properties; and

 

$519,000 net increase from same properties due to increases from rent steps in existing leases and rental rate growth offset by the loss of rents from bankruptcies and tenant move-outs, offset by

 

$9.1 million decrease from the sale of operating properties.

$2.7 million net increase from billable Recoveries from tenants, which represent amounts contractually billable to tenants per the terms of the lease for their reimbursements to us for the tenants’ pro-rata share of the operating, maintenance, insurance and real estate tax expenses that we incur to operate our shopping centers.  Recoveries from tenants increased, on a net basis, as follows:

 

$1.2 million increase from rent commencing at development properties;

 

$2.1 million increase from acquisitions of operating properties; and

 

$1.8 million increase from same properties due to an increase in insurance and real estate tax recoveries, driven by an increase in insurance premiums and real estate tax assessments, offset by a decrease in CAM recoveries driven by a decrease in recoverable operating costs during the pandemic; offset by

 

$2.4 million decrease from the sale of operating properties.

Other lease income increased $1.2 million primarily from an increase in termination fees collected in 2020.

$1.5 million net decrease in Above and below market rents, Percentage rent, and Straight-line rent.

Future lease income could be impacted by ongoing negotiations to assist tenants with their ability to remain operational as this pandemic subsides.  These may impact the timing of collection and the collectibility of tenant receivables and take the form of additional rent deferrals or rent abatements.  Approximately 86% of the base rent billed for the three months ended September 30, 2020, has been collected through October 31, 2020. Further, tenants that cannot sustain their business may be unable to pay rent or renew leases, which may not be as readily replaceable as the pool of potential future tenants also deteriorates in this economic environment.  Future declines in occupancy would result in reduced lease income from both lower base rent and recoveries from tenants of CAM, real estate taxes and insurance costs at our centers.  

Management, transaction, and other fees decreased $2.7 million primarily from decreases in development, construction management and property management fees, and leasing commissions from projects within our unconsolidated partnerships.  Decreases in property receipts and leasing activity during this pandemic have negatively impacted our property management and leasing fee income earned from our unconsolidated partnerships, and are expected to continue while the depressed economic impact of the pandemic continues.  

42


 

Changes in our operating expenses are summarized in the following table:

 

 

 

Nine months ended September 30,

 

 

 

 

 

(in thousands)

 

2020

 

 

2019

 

 

Change

 

Depreciation and amortization

 

$

259,161

 

 

 

282,639

 

 

 

(23,478

)

Operating and maintenance

 

 

123,746

 

 

 

125,092

 

 

 

(1,346

)

General and administrative

 

 

54,489

 

 

 

56,722

 

 

 

(2,233

)

Real estate taxes

 

 

108,618

 

 

 

101,263

 

 

 

7,355

 

Other operating expenses

 

 

5,025

 

 

 

4,486

 

 

 

539

 

Total operating expenses

 

$

551,039

 

 

 

570,202

 

 

 

(19,163

)

 

Depreciation and amortization costs decreased, on a net basis, as follows:

 

$1.7 million increase as we began depreciating costs at development properties where tenant spaces were completed and became available for occupancy; and

 

$2.3 million increase from acquisitions of operating properties and corporate assets; offset by

 

$22.9 million decrease from same properties, primarily attributable to additional 2019 depreciation and amortization at redevelopment properties and for early tenant move-outs; and

 

$4.6 million decrease from the sale of operating properties.

Operating and maintenance costs decreased, on a net basis, as follows:

 

$1.1 million increase from operations commencing at development properties; and

 

$1.5 million increase from acquisitions of operating properties; offset by

 

$2.3 million net decrease from same properties driven primarily by decreases in common area maintenance costs incurred during the pandemic shutdowns, coupled with a decrease in lease termination expense, offset by increases in insurance premiums; and

 

$1.6 million decrease from the sale of operating properties.

General and administrative costs decreased, on a net basis, as follows:

 

$2.2 million decrease in the value of participant obligations within the deferred compensation plan, attributable to changes in market values of those investments, reflected within Net investment income;

 

$1.9 million net decrease in compensation costs primarily driven by $4.0 million lower incentive compensation offset by $2.1 million increase in salary expense; and

 

$2.1 million decrease in other expenses related to lower travel and conference costs amidst the pandemic; offset by

 

$4.0 million increase due to less development overhead capitalization based on the status and progress on development and redevelopment projects during the year coupled with delays in new developments during the pandemic.

Real estate taxes increased, on a net basis, as follows:

 

$1.1 million increase from development properties where capitalization ceased as tenant spaces became available for occupancy;

 

$1.1 million increase from acquisitions of operating properties; and

 

$6.5 million increase within the same property portfolio from changes in assessed values across our portfolio; offset by

 

$1.3 million decrease from the sale of operating properties.

43


 

The following table presents the components of other expense (income):

 

 

 

Nine months ended September 30,

 

 

 

 

 

(in thousands)

 

2020

 

 

2019

 

 

Change

 

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

Interest on notes payable

 

$

111,297

 

 

 

96,786

 

 

 

14,511

 

Interest on unsecured credit facilities

 

 

8,051

 

 

 

14,435

 

 

 

(6,384

)

Capitalized interest

 

 

(3,590

)

 

 

(3,089

)

 

 

(501

)

Hedge expense

 

 

4,219

 

 

 

5,914

 

 

 

(1,695

)

Interest income

 

 

(1,372

)

 

 

(868

)

 

 

(504

)

Interest expense, net

 

$

118,605

 

 

 

113,178

 

 

 

5,427

 

Goodwill impairment

 

 

132,128

 

 

 

 

 

 

132,128

 

Provision for impairment of real estate, net of tax

 

 

1,014

 

 

 

12,099

 

 

 

(11,085

)

Gain on sale of real estate, net of tax

 

 

(48,690

)

 

 

(17,819

)

 

 

(30,871

)

Early extinguishment of debt

 

 

19,358

 

 

 

11,982

 

 

 

7,376

 

Net investment loss (income)

 

 

(1,482

)

 

 

(3,690

)

 

 

2,208

 

Total other expense (income)

��

$

220,933

 

 

 

115,750

 

 

 

105,183

 

 

Interest expense, net, changed $5.4 million primarily from the following:

 

$14.5 million net increase in Interest on notes payable results from the issuance of $600 million senior unsecured notes in May 2020, $425 million senior unsecured notes in August 2019, and $300 million senior unsecured notes in March 2019, partially offset by the redemption of $300 million senior unsecured notes in September 2020 and $250 million senior unsecured notes in April 2019, and mortgage payoffs at several properties during 2019; partially offset by

 

$6.4 million decrease in Interest on unsecured credit facilities results from the 2019 repayment of a $300 million term loan using proceeds from a $300 million senior unsecured note issuance; and

 

$1.7 million decrease in Hedge expense resulting from the maturity of a forward swap hedging senior unsecured notes in 2020 and one in 2019.

During the nine months ended September 30, 2020, we recognized $132.1 million of Goodwill impairment, due to the significant market and economic impacts of the COVID-19 pandemic.  The market disruptions triggered evaluation of reporting unit fair values for goodwill impairment.  Of our 269 reporting units with goodwill, 87 reporting units were determined to have fair values lower than carrying value.  As such, goodwill impairment losses totaling $132.1 million were recognized for the amount that the carrying amount of the reporting unit, including goodwill, exceeded its fair value, limited to the total amount of goodwill allocated to that reporting unit.

During the nine months ended September 30, 2020, we recognized $1.0 million resulting from impairment of one operating property and the sale of one land parcel.  During the nine months ended September 30, 2019, we recognized $12.1 million of impairment losses on four operating properties.

During the nine months ended September 30, 2020, we recognized gains of $48.7 million from the sale of seven land parcels, three operating properties, receipt of property insurance proceeds, and the re-measurement gain from the acquisition of controlling interest in a previously held equity investment.  During the nine months ended September 30, 2019, we recognized gains of $17.8 million from the sale of three operating properties and one land parcel.

During the nine months ended September 30, 2020, we redeemed our $300 million 3.75% notes due to mature in 2022, resulting in $19.4 million of debt extinguishment costs. During the nine months ended September 30, 2019, we redeemed unsecured notes and repaid one mortgage, all prior to original maturity, resulting in $12.0 million of debt extinguishment costs.

Net investment loss (income) changed by $2.2 million primarily driven by changes in unrealized gains and losses of plan assets held in the non-qualified deferred compensation plan.  There is an offsetting adjustment in General and administrative costs related to participant obligations within the deferred compensation plans.

44


 

The following table presents the components of Equity in income of investments in real estate partnerships:

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

 

 

 

(in thousands)

 

Regency's

Ownership

 

 

2020

 

 

2019

 

 

Change

 

GRI - Regency, LLC (GRIR)

 

40.00%

 

 

$

15,995

 

 

 

28,964

 

 

 

(12,969

)

New York Common Retirement Fund (NYC)

 

30.00%

 

 

 

532

 

 

 

(10,159

)

 

 

10,691

 

Columbia Regency Retail Partners, LLC (Columbia I)

 

20.00%

 

 

 

745

 

 

 

1,196

 

 

 

(451

)

Columbia Regency Partners II, LLC (Columbia II)

 

20.00%

 

 

 

779

 

 

 

1,282

 

 

 

(503

)

Cameron Village, LLC (Cameron)

 

30.00%

 

 

 

481

 

 

 

766

 

 

 

(285

)

RegCal, LLC (RegCal)

 

25.00%

 

 

 

879

 

 

 

3,329

 

 

 

(2,450

)

US Regency Retail I, LLC (USAA)

 

20.01%

 

 

 

604

 

 

 

749

 

 

 

(145

)

Other investments in real estate partnerships

 

35.00% - 50.00%

 

 

 

2,343

 

 

 

17,546

 

 

 

(15,203

)

Total equity in income of investments in real estate partnerships

 

 

 

 

 

$

22,358

 

 

 

43,673

 

 

 

(21,315

)

 

(1)

Includes our investment in the Town and Country shopping center, which we owned 18.38% during 2019.  In January 2020, we purchased an additional 16.62% interest, bringing our total ownership interest to 35%.

 

The $21.3 million decrease in our equity in income of investments in real estate partnerships is largely attributed to the following:

 

$13.0 million decrease within GRI primarily due to the following:

 

o

$5.0 million decrease driven by additional gains recognized during 2019 on the sale of operating real estate;

 

o

$8.6 million decrease from higher uncollectible lease income attributable to the expected impact of the COVID-19 pandemic on tenants.  

 

$10.7 million increase within NYC primarily due to the $10.9 million provision for impairment of real estate recognized in 2019;  offset by

 

$2.5 million decrease within RegCal primarily due to a $2.5 million gain recognized during 2019 on the sale of an operating property within the partnership;

 

$15.2 million decrease within Other investments in real estate partnerships primarily due to a $15.0 million gain recognized during 2019 on the sale of a single operating property; and

 

All of our investments in real estate partnerships experienced higher amounts of uncollectible lease income, negatively impacting our equity in income.

The following represents the remaining components that comprised net income attributable to the common stockholders and unit holders:

 

 

 

Nine months ended September 30,

 

 

 

 

 

(in thousands)

 

2020

 

 

2019

 

 

Change

 

Net income

 

$

8,101

 

 

 

202,127

 

 

 

(194,026

)

Income attributable to noncontrolling interests

 

 

(1,699

)

 

 

(2,988

)

 

 

1,289

 

Net income attributable to common stockholders

 

$

6,402

 

 

 

199,139

 

 

 

(192,737

)

Net income attributable to exchangeable operating partnership units

 

 

(29

)

 

 

(456

)

 

 

427

 

Net income attributable to common unit holders

 

$

6,431

 

 

 

199,595

 

 

 

(193,164

)

 

Supplemental Earnings Information

We use certain non-GAAP performance measures, in addition to certain performance metrics determined under GAAP, as we believe these measures improve the understanding of the Company's operating results. We believe these non-GAAP measures provide useful information to our Board of Directors, management and investors regarding certain trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, purposes of determining management incentive compensation and budgeting, forecasting and planning purposes.  We provide Pro-rata financial information because we believe it assists investors and analysts in estimating our economic interest in our consolidated and unconsolidated partnerships, when read in conjunction with the Company’s reported results under GAAP.  We believe presenting our Pro-rata share of operating results, along with other non-GAAP measures, may assist in comparing the

45


 

Company’s operating results to other REITs.  We continually evaluate the usefulness, relevance, limitations, and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change.  See “Non-GAAP Measures” at the beginning of this Management's Discussion and Analysis.

We do not consider non-GAAP measures an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is they may exclude significant expense and income items that are required by GAAP to be recognized in our consolidated financial statements. In addition, they reflect the exercise of management’s judgment about which expense and income items are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, reconciliations of the non-GAAP financial measures we use to their most directly comparable GAAP measures are provided. Non-GAAP financial measures should not be relied upon in evaluating the financial condition, results of operations or future prospects of the Company.

Pro-Rata Same Property NOI:

Our pro-rata same property NOI, excluding termination fees, changed from the following major components:

 

 

 

Three months ended September 30,

 

 

 

 

 

 

Nine months ended

September 30,

 

 

 

 

 

(in thousands)

 

2020

 

 

2019

 

 

Change

 

 

2020

 

 

2019

 

 

Change

 

Base rent (1)

 

$

206,983

 

 

 

209,777

 

 

 

(2,794

)

 

$

627,685

 

 

 

627,585

 

 

 

100

 

Recoveries from tenants (1)

 

 

65,912

 

 

 

64,945

 

 

 

967

 

 

 

200,923

 

 

 

199,452

 

 

 

1,471

 

Percentage rent (1)

 

 

1,098

 

 

 

1,503

 

 

 

(405

)

 

 

5,908

 

 

 

6,914

 

 

 

(1,006

)

Termination fees (1)

 

 

1,307

 

 

 

406

 

 

 

901

 

 

 

5,457

 

 

 

2,367

 

 

 

3,090

 

Uncollectible lease income

 

 

(26,078

)

 

 

(2,505

)

 

 

(23,573

)

 

 

(68,796

)

 

 

(3,888

)

 

 

(64,908

)

Other lease income (1)

 

 

2,392

 

 

 

2,771

 

 

 

(379

)

 

 

7,066

 

 

 

7,447

 

 

 

(381

)

Other property income

 

 

1,522

 

 

 

2,479

 

 

 

(957

)

 

 

4,677

 

 

 

5,836

 

 

 

(1,159

)

Total real estate revenue

 

 

253,136